Page 1

LET THERE BE LIGHT

2016 ANNUAL REPORT


TABLE OF CONTENTS

5 6 8 District Map

Balance Sheets

1

CEO letter to Members

Purpose & Core Values

Statements of Revenues and Patronage Capital

9

Board of Trustees

7

4

Auditors’ Letter

10

Statements of Cash Flows


LETTER TO THE MEMBERS Dear SECO Energy Members, From the torch, to the oil lamp, to the Edison incandescent, to the CFL and LED, lighting has changed dramatically with the times. To “let there be light” today, SECO Energy must also change with the evolution of our industry, control costs and provide a high level of customer service. That’s what you expect and deserve, and we stand ready to serve your energy needs. Another year has come and gone, and I am proud and humbled to share strong fiscal results. Staying ahead of growing power demand is a challenge that is capital and expense intensive and a delicate balance of design, construction, maintenance and vegetation management. Illuminating your homes and powering your appliances and electronics is a 24/7 responsibility. “Storm Ready” is SECO’s motto when Hurricane Season converges on The Sunshine State on June 1. If a storm blows through and the lights do go out, you can bet that our crews and contractors are staged and on the move to restore power as soon as it’s safe. You can bet that your lights will be back on before any other utility in the state. Our Emergency Restoration Plan and investments in storm preparation ensure that you will not go without power for an extended period of time - sans truly catastrophic damage. Our dedication to you over the last decade of service improvements has manifested in SECO Energy earning two consecutive J.D. Power awards for highest customer satisfaction in the nation in our segment. The cooperative’s ACSI score improved this year to 89 – an outstanding rating, especially when compared to investor-owned and municipal utilities. What distinguishes SECO from other providers is called the cooperative difference and is made possible by our Board of Trustees’ governance, our executive team’s leadership and, most important, the dedication and hard work of the 400+ SECO Energy employees. Thank you, members, for rating SECO so highly and for your loyal patronage of our company. We are humbled and privileged to serve as your Central Florida energy provider.

Jim Duncan, CEO SECO ENERGY 2016 ANNUAL REPORT | 1


“ HIGHEST IN CUSTOMER

SATISFACTION IN 2015 AMONG MIDSIZE UTILITIES IN THE SOUTH AND HIGHEST IN CUSTOMER SATISFACTION IN 2016 AMONG COOPERATIVES NATIONWIDE ” For J.D. Power award information, visit jdpower.com.

2 | SECO ENERGY 2016 ANNUAL REPORT


20% 0

Customer Satisfaction Rating

72 Municipal Utilities

40%

76 Investor-owned Utilities

60%

77 Cooperative Utilities

80%

$113.50

$112.60

Oct 2016

$115.60

Dec 2015

June 2016

$116.20

Oct 2015

$117.20

$118.20

$120.70

$127.75

Aug 2015

$106

June 2015

$112

$100

89 SECO Energy

100%

$118

Nov 2014

It’s clear there is a difference when serving members in a not-for-profit environment – and it’s the SECO Energy cooperative difference.

$124

*Cost per 1,000 kilowatt hours

Jan 2014

CUSTOMER SATISFACTION

$130

LOWERING ENERGY COSTS Over the last three years, SECO has lowered the cost of energy 12 percent. In January 2014, 1,000 kilowatt hours cost a member $127.75. As of our last decrease on October 2016, members pay only $112.60 per 1,000 kilowatt hours. Learn more about SECO Energy rates at SECOEnergy.com>My Account. SECO ENERGY 2016 ANNUAL REPORT | 3


BOARD OF TRUSTEES

Scott D. Boyatt District 1

Dillard B. Boyatt District 2

Earl Muffett District 6

Richard J. Belles District 3

Richard Dennison District 4

Ray F. Vick District 5 President

Rob Henion District 7 Secretary-Treasurer

Bill James District 8

Jerry D. Hatfield District 9 Vice President

4 | SECO ENERGY 2016 ANNUAL REPORT


DISTRICT MAP

27

Levy

41

40

Ocala

200

75

Lake Weir 19

Marion

District 1 S Boyatt District 2 D Boyatt District 3 Belles District 4 Dennison District 5 Vick District 6 Muffett District 7 Henion District 8 James District 9 Hatfield

Citrus

Umatilla

301

44

Wildwood

Lake Griffin 441

Lake Panasoffkee

41

Lake

Leesburg

44

Lake Eustis

Lake Harris

Corporate Headquarters Sumterville

48

Lake Apopka 301

50

Hernando

Clermont 471

Pasco

Sumter

33

27

SECO ENERGY 2016 ANNUAL REPORT | 5


EXECUTIVE LEADERSHIP

OUR PURPOSE

To provide exceptional service to our customers, co-workers and communities.

OUR VALUES

• Commitment to the Cooperative Purpose • Honesty & Integrity • Safety STANDING (L to R)

John LaSelva, VP of Operations; Nora Brown, Sr. Executive Assistant; Kathryn Gloria, VP of Corporate Communications & Energy Services; Gene Kanikovsky, Chief Financial Officer SITTING (L to R)

Ben Brickhouse, VP of Engineering; Jim Duncan, Chief Executive Officer; Gregg Morrell, VP of Corporate Services & Human Resources

6 | SECO ENERGY 2016 ANNUAL REPORT

• Strong Work Ethic • Team Oriented • Open Communication


INDEPENDENT AUDITORS’ REPORT

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. INDEPENDENT AUDITORS’ REPORT Board of Directors Sumter Electric Cooperative, Inc. Sumterville, Florida Report on the Financial Statements We have audited the accompanying financial statements of Sumter Electric Cooperative, Inc. (the Cooperative), which comprise the balance sheets as of December 31, 2016 and 2015, and the related statements of revenues and patronage capital, and cash flows for the years then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Cooperative, as of December 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 13, 2017, on our consideration of the Cooperative's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Cooperative’s internal control over financial reporting and compliance. Other Reporting Required by 7 CFR Part 1773 In accordance with 7 CFR Part 1773, Policy on Audits of Rural Utilities Service Borrowers, §1773.33 and clarified in the RUS policy memorandum dated February 7, 2014 (the regulatory requirements for electric borrowers), we have also issued our report dated February 13, 2017, on our consideration of the Cooperative's compliance with the terms, covenants, provisions, or conditions of their loan, grant, and security instruments as set forth in the regulatory requirements for electric borrowers, insofar as they relate to accounting matters enumerated therein. The purpose of that report is to describe the scope of our testing of the Cooperative’s compliance with the regulatory requirements for electric borrowers and the results of that testing, and not to provide an opinion on the Cooperative’s compliance with the regulatory requirements for electric borrowers. That report is an integral part of an audit in considering the Cooperative’s internal control over financial reporting and compliance.

SECO ENERGY 2016 ANNUAL REPORT | 7


BALANCE SHEETS | DECEMBER 31, 2016 AND 2015 ASSETS

2016 2015

Electric Plant

Distribution, Transmission, and General Plant

2016

2015

869,835

852,235

240,133,131

233,902,330

3,677,479

3,011,677

244,680,445

237,766,242

412,687,235

404,581,883

1,618,985

1,001,878

818,320

661,885

415,124,540

406,245,646

18,370,167

14,509,260

431,287

179,576

Accounts Payable

23,187,940

32,810,144

Consumer Deposits

15,617,677

14,901,953

Other Current or Accrued Liabilities

15,622,356

8,486,189

73,229,427

70,887,122

10,062,150

9,810,734

$743,096,562

$724,709,744

Equities $775,318,760

$742,178,283

23,109,232

32,886,891

798,427,992

775,065,174

(173,316,057)

(166,792,787)

625,111,935

608,272,387

Construction Work in Progress Total Electric Plant

(Accumulated Provision for Depreciation and Amortization)

EQUITIES AND LIABILITIES

Total Electric Plant - Cost Less Depreciation and Amortization

Current Assets

Cash and Cash Equivalents

76,901,990

71,197,453

3,295,403

2,217,998

Accounts Receivable - Consumers (Less Provision for Doubtful Accounts 2016 - $1,011,038, and 2015 -1,367,924)

9,482,401

9,549,371

Other Receivables

2,878,539

2,669,564

Unbilled Electric Revenues

3,076,251

6,489,472

14,254,802

15,442,853

204,525

166,895

33,191,921

36,536,153

7,890,716

8,703,751

743,096,562

724,709,744

Inventories Prepayments and Other Current Assets

Total Assets

8 | SECO ENERGY 2016 ANNUAL REPORT

Other Equities Total Equities Noncurrent Liabilities Long-term Debt

Capital Lease Obligation Total Noncurrent Liabilities

Investments in Associated Organizations and Other Special Funds

Deferred Charges

Patronage Capital

Deferred Compensation Liability

Investments

Total Current Assets

Memberships

Current Liabilities

Long-term Debt - Portion Due Within One Year Capital Lease Obligation - Portion Due Within One Year

Total Current Liabilities Deferred Credits

Total Equities and Liabilities


STATEMENTS OF REVENUES AND PATRONAGE CAPITAL | DECEMBER 31, 2016 AND 2015 Operating Revenues Operating Expenses

2016 2015 $362,719,481

$374,436,200

246,703,836

261,329,112

396,369

364,064

Distribution Expense - Operations

16,237,784

15,118,744

Distribution Expense - Maintenance

28,029,177

22,287,657

Consumer Accounts Expense

11,164,827

11,704,114

1,876,032

1,493,882

Administrative, General, and Other Expense

15,679,518

14,343,236

Depreciation Expense

23,845,708

22,674,846

Taxes - Expense

66,965

68,396

Other Expense

458,527

619,528

(344,458,743)

(350,003,579)

Cost of Power

Transmission Expense

Customer Service and Informational Expense

(Total Operating Expenses) Operating Margins Before Fixed Charges Fixed Charges

Interest on Long-term Debt

Operating Margins After Fixed Charges

18,260,738

24,432,621

(13,852,371)

(13,254,866)

4,408,367

11,177,755

2016 2015

Other Margins

G&T Cooperative Capital Credits

4,800,000

6,650,621

Other Capital Credits and Margins

1,320,964

1,569,487

6,120,964

8,220,108

10,529,331

19,397,863

Interest Income

819,088

728,422

Other Nonoperating (Expense) Income

(31,853)

113,917

787,235

842,339

11,316,566

20,240,202

233,902,330

218,247,571

(Retirement of Capital Credits)

(5,085,765)

(4,585,443)

Patronage Capital, End of Year

$240,133,131

$233,902,330

Total Other Margins Net Operating Margins Nonoperating Margins

Total Nonoperating Margins Net Margins Patronage Capital, Beginning of Year

SECO ENERGY 2016 ANNUAL REPORT | 9


STATEMENTS OF CASH FLOWS | DECEMBER 31, 2016 AND 2015 Cash Flows from Operating Activities Net Margins

2016 2015

$11,316,566

$20,240,202

Adjustments to Reconcile Net Margins to Net Cash Provided by (Used in) Operations:

2016 2015

Proceeds from Redemption of Patronage Capital Certificate

372,003

671,265

Proceeds from Redemption of Other Investments

60,431

58,116

(16,006)

74,718 (49,918,717)

Purchase of Other Investments

Capital Credits and Patronage Dividend Certificates Assigned (6,120,964)

(8,220,108)

Extension and Replacement of Plant (45,733,812)

Depreciation

25,416,233

24,575,062

Plant Removal Cost

Provision for Uncollectible Accounts

(259,880)

378,400

Amortization of Prepaid Pension

1,148,029

1,148,029

Changes in Assets - Decrease (Increase) and Liabilities - Increase (Decrease): Accounts Receivable

(4,435,924)

(3,530,281)

(39,403,387)

(52,240,902)

0

(24,140,686)

Proceeds on Long-term Debt

131,886,392

60,000,000

Payments on Long-term Debt

(115,828,276)

(13,882,483)

Payment to Cushion of Credit

(4,091,857)

(1,735,019)

(379,099)

(109,838)

665,803

372,821

17,600

22,245

Retirement of Capital Credits

(5,085,765)

(4,585,443)

Net Cash Provided by (Used in) Financing Activities

7,184,798

15,941,597

Net Cash Provided by (Used in) Investing Activities Cash Flows from Financing Activities Line of Credit (Net)

3,531,096

2,766,736

(37,630)

32,500

(334,994)

(23,093)

(9,622,204)

(1,441,719)

715,724

962,444

7,136,167

(3,358,873)

Deferred Compensation Liability

156,435

(74,718)

Deferred Credits

251,416

(1,734,683)

21,979,428

15,009,977

33,295,994

35,250,179

Net Increase (Decrease) in Cash and Cash Equivalents

1,077,405

(1,049,126)

Change in Inventory - Net of Salvage

1,188,051

(3,343,724)

Contributions in Aid of Construction Received

Cash and Cash Equivalents, Beginning of Year

2,217,998

3,267,124

8,855,308

3,490,233

306,562

257,488

Cash and Cash Equivalents, End of Year

$3,295,403

$2,217,998

Prepayments and Other Current Assets Deferred Charges Accounts Payable Consumer Deposits Other Current Liabilities

Total Adjustments Net Cash Provided by (Used in) Operating Activities Cash Flows from Investing Activities

Proceeds from Disposition of Property

10 | SECO ENERGY 2016 ANNUAL REPORT

Payments on Capital Lease Obligation Other Equities Membership Fees


STATEMENTS OF CASH FLOWS | DECEMBER 31, 2016 AND 2015

2016 2015

Supplemental Disclosures of Cash Flow Information Cash Paid During the Year for: Interest

$12,111,345

$13,281,329

Supplemental Schedule of Noncash Investing and Financing Activities The Cooperative Retired Certain Assets from its Plant Records as Follows: $17,553,657

$12,434,856

Plant Removal Costs

4,435,924

3,530,281

Material Salvaged

1,532,710

1,538,969

$23,522,291

$17,504,106

Cost of Assets Retired

Net Reduction in Accumulated Depreciation

The Cooperative Financed Certain Equipment Using a Capital Lease: Amounts not Included in Proceeds from Capital Lease Obligation

$1,247,916

$842,674

Amounts not Included in Extension and Replacement of Plant

1,247,916

842,674

SECO ENERGY 2016 ANNUAL REPORT | 11


J.D. POWER AWARDS – EARNED BY THE EMPLOYEES OF SECO ENERGY

“HIGHEST IN CUSTOMER SATISFACTION IN 2015 AMONG MIDSIZE UTILITIES IN THE SOUTH AND HIGHEST IN CUSTOMER SATISFACTION IN 2016 AMONG COOPERATIVES NATIONWIDE” For J.D. Power award information, visit jdpower.com. 12 | SECO ENERGY 2016 ANNUAL REPORT


RE A DY SECO Energy is an equal opportunity provider and employer.

2016 Annual Report  
2016 Annual Report