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The Ultimate Impulse Purchase

2012 Annual Report

CIPCO 2012 Annual Report

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Table of Contents A Message From the CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Electricity: The Ultimate Impulse Purchase . . . . . . . . . . . . . . . . . . . . . . . 7 CIPCO’s Wind Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Dennis Murdock Serves as ABI Board Chair . . . . . . . . . . . . . . . . . . . . . . 9 CIPCO Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 CIPCO Proposes $20 Million Allocation to Members . . . . . . . . . . . . . . . 13 2012 Year in Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 CIPCO Member Systems Service Territory . . . . . . . . . . . . . . . . . . . . . . 16 CIPCO Member System Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 CIPCO at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Financial Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

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T he pow e r t o c onne c t . Communic a t ing w it h our me mbe r com m uni ti es .

CIPCO 2012 Annual Report

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Table of Contents A Message From the CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Electricity: The Ultimate Impulse Purchase . . . . . . . . . . . . . . . . . . . . . . . 7 CIPCO’s Wind Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Dennis Murdock Serves as ABI Board Chair . . . . . . . . . . . . . . . . . . . . . . 9 CIPCO Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 CIPCO Proposes $20 Million Allocation to Members . . . . . . . . . . . . . . . 13 2012 Year in Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 CIPCO Member Systems Service Territory . . . . . . . . . . . . . . . . . . . . . . 16 CIPCO Member System Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 CIPCO at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Financial Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

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T he pow e r t o c onne c t . Communic a t ing w it h our me mbe r com m uni ti es .

CIPCO 2012 Annual Report

3


A Message From the CEO

The presidential election seemed to dominate much of 2012. The campaigns crept into every news outlet, every method of advertising, and even many business conversations. Yet, after all of the political rhetoric and anticipation, the result was that very little changed on Election Day. Much like the unrelenting political messaging during campaign season, we also can’t seem to escape a far-reaching government progression. In the last year, we’ve seen new federal rules on health care, banking and finance, environmental regulation, and a host of other constraints on the private sector. CIPCO’s challenge is to stay on top of how hyper-government activity is changing our ability to successfully run the business and adapt our approach. I’d say we fared well in 2012 in accomplishing our objectives amidst growing government presence along the way. Like any electric utility, CIPCO’s success can be measured by our ability to deliver safe, reliable, and affordable electricity to our members. Employees had the best statistical safety year since we started keeping records in the mid-80s. We experienced the lowest average transmission outage time since 2005 with a rate of 0.45 hours per customer, which is well below our five-year average of 3.06 hours. We were on track to reach an alltime low until the December 20th snowstorm. And, CIPCO’s wholesale power rates remain competitive and relatively stable.

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One of the year’s biggest decisions involved the future of Fair Station. After careful review of options, the decision was made to retire the coal plant in 2013. Fair Station has been a reliable source of electric generation for CIPCO since we purchased it in 1982. But the reality is the 52-year old plant is no longer efficient to operate given today’s energy markets and regulatory climate. CIPCO’s generation portfolio continues to be balanced and diverse. Wind energy contracts added in 2012 pushed our total generation portfolio amount of carbon-free and emissions-free resources above the 50 percent mark. Resource diversity and generation asset ownership remain key strategies for CIPCO to maintain greater control over price. CIPCO continues to perform as a leader within our industry on any number of measures. We remain engaged in our communities and networked with the world around us. That is how we continue to deliver greater value to our membership. Once again, I am proud to sign my name to another year’s annual report for this exceptional electric cooperative.

Dennis L. Murdock Executive Vice President and CEO

CIPCO 2012 Annual Report

5


A Message From the CEO

The presidential election seemed to dominate much of 2012. The campaigns crept into every news outlet, every method of advertising, and even many business conversations. Yet, after all of the political rhetoric and anticipation, the result was that very little changed on Election Day. Much like the unrelenting political messaging during campaign season, we also can’t seem to escape a far-reaching government progression. In the last year, we’ve seen new federal rules on health care, banking and finance, environmental regulation, and a host of other constraints on the private sector. CIPCO’s challenge is to stay on top of how hyper-government activity is changing our ability to successfully run the business and adapt our approach. I’d say we fared well in 2012 in accomplishing our objectives amidst growing government presence along the way. Like any electric utility, CIPCO’s success can be measured by our ability to deliver safe, reliable, and affordable electricity to our members. Employees had the best statistical safety year since we started keeping records in the mid-80s. We experienced the lowest average transmission outage time since 2005 with a rate of 0.45 hours per customer, which is well below our five-year average of 3.06 hours. We were on track to reach an alltime low until the December 20th snowstorm. And, CIPCO’s wholesale power rates remain competitive and relatively stable.

4

One of the year’s biggest decisions involved the future of Fair Station. After careful review of options, the decision was made to retire the coal plant in 2013. Fair Station has been a reliable source of electric generation for CIPCO since we purchased it in 1982. But the reality is the 52-year old plant is no longer efficient to operate given today’s energy markets and regulatory climate. CIPCO’s generation portfolio continues to be balanced and diverse. Wind energy contracts added in 2012 pushed our total generation portfolio amount of carbon-free and emissions-free resources above the 50 percent mark. Resource diversity and generation asset ownership remain key strategies for CIPCO to maintain greater control over price. CIPCO continues to perform as a leader within our industry on any number of measures. We remain engaged in our communities and networked with the world around us. That is how we continue to deliver greater value to our membership. Once again, I am proud to sign my name to another year’s annual report for this exceptional electric cooperative.

Dennis L. Murdock Executive Vice President and CEO

CIPCO 2012 Annual Report

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2012 cipco annual report 3