SOURCE: National Rural Utilities Cooperative Finance Corporation (NRUCFC)

National Rural Utilities Cooperative Finance Corporation (NRUCFC)

August 03, 2009 10:10 ET

Update: Electric Distribution Cooperatives Report Strong Financial Results During Economic Downturn

HERNDON, VA--(Marketwire - August 3, 2009) - National Rural Utilities Cooperative Finance Corporation (National Rural) (NYSE: NRU) (NYSE: NRN) (NYSE: NRC) announced today final results from its annual Key Ratio Trend Analysis (KRTA), an annual assessment of financial trends among electric distribution cooperatives nationwide. This year's KRTA shows that distribution cooperatives maintained their overall financial strength during challenging economic times.

"The nation's electric distribution cooperatives again reported strong financial results. They did a good job of piloting their systems through difficult economic waters in 2008. Revenue kept pace with higher costs and margins remained strong, keeping financial ratios stable," said National Rural Governor and CEO Sheldon C. Petersen.

The KRTA report is based on data submitted by 819 distribution cooperatives for the year ending Dec. 31, 2008. Petersen identified three major findings in the data:

--  Revenues kept pace with rising fuel costs in 2008. Total operating
    revenue per kilowatt hour (kwh) sold shows a nearly 6.5-percent increase
    compared with 2007, an indication that distribution cooperatives are taking
    the necessary steps -- using fuel adjustments or increasing rates -- to
    meet expenses.
    During 2008, distribution cooperative wholesale power and other costs
    increased, with power costs per kwh sold increasing 7.2 percent over
    the prior year while total operating expenses per kwh sold went up 2.9
    percent. "Overall, revenue increases were sufficient to overcome rising
    costs," Petersen said.
--  Primary financial ratios -- such as equity as a percent of assets,
    times interest earned ratio (TIER), modified debt service coverage (MDSC) -
    and aggregate cash and cash equivalent numbers remained stable. The equity
    as a percent of assets median ratio for 2008 remained healthy at 40.62
    TIER was up slightly at 2.27; this is well above the 1.25 TIER required
    by systems that borrow from the USDA Rural Utilities Service. MDSC,
    National Rural's primary coverage ratio, was 1.82, well above the 1.35
    level required by National Rural.
    In addition, the aggregate cash and cash equivalents for distribution
    cooperatives totaled a strong $2.8 billion at Dec. 31, 2008. "The
    primary financial ratios and total cash levels remained healthy and
    stable," Petersen said.
--  Median growth -- in terms of both consumers and kwh sales -- remained
    positive in 2008, and consumers were paying their bills on time. The
    consumer growth rate -- the number of new consumers -- was nearly 1 percent
    for distribution cooperatives. As a result, the consumer growth rate for
    distribution cooperatives remained nearly double that of municipal and
    investor-owned utilities, according to information from the U.S. Energy
    Information Administration. While electricity demand fluctuates in the
    short term in response to business cycles, weather events and prices, the
    median growth rate for kwh sales also remained positive in 2008 at 1.22
    Although the United States was in recession in 2008, distribution
    cooperative consumers continued to pay their bills. According to data
    from the KRTA information, the number of accounts receivable written
    off as a percentage of operating revenue was only 0.18 percent --
    unchanged from the previous year. Moreover, the number of accounts
    receivable past due more than 60 days as percentage of operating
    revenue actually declined slightly from the prior year to 0.17 percent.

Other key findings in the 2008 financial highlights of electric distribution cooperatives include the following KRTA composite numbers:

--  The aggregate total megawatt hour (mwh) sales of all 819 rural
    electric distribution systems grew 1.91 percent in 2008 to reach
    396,832,711 mwh.
--  In 2008, total mwh sales by class of service showed residential
    consumers at 56 percent, commercial accounts at 19 percent, industrial
    accounts at 20 percent, irrigation at about 2 percent and other at about 2
--  Distribution cooperatives added a total of 267,042 new residential
    households in 2008.
--  Distribution cooperatives' gross utility plant investment totaled more
    than $78 billion in 2008.

The following median numbers also are included in the 2008 KRTA data:

--  Total operating revenue per kwh sold in 2008 increased to 97.15 mills.
    (One mill equals one-tenth of one cent.)
--  Total operating expenses per kwh sold in 2008 rose slightly to 19.60
--  Total margins per kwh sold in 2008 rose slightly to 6.13 mills.

National Rural is a cooperative that serves the nation's rural utility systems, the majority of which are electric cooperatives. With approximately $20 billion in assets, National Rural provides its member-owners with an assured source of market-priced capital and financial products and services.

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