MINUTES SOUTHSIDE ELECTRIC COOPERATIVE MEETING OF …southside.coopwebbuilder2.com/sites/southside/files... · GUESTS: Jason Loehr, Controller John Cheatham of Adams, Jenkins & Cheatham

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MINUTES SOUTHSIDE ELECTRIC COOPERATIVE

MEETING OF THE BOARD OF DIRECTORS MARCH 22, 2018 @ 1:30 P.M. HEADQUARTERS BOARD ROOM

PRESENT: Frank W. Bacon (Chair) Earl C. Currin, Jr. (Vice Chair) Paul S. Bennett (Secretary) Charles J. Friedl (Treasurer) Brenda H. Johnson

Kristie Martin-Wallace Clive C. Pettis, Sr. William T. White Frank F. Rennie (General Counsel) Christine Marston (Minute Taker)

STAFF: Jeffrey S. Edwards, President/CEO Bradley V. Furr, VP of Operations George A. Felts, VP of Engineering Ronald O. White, VP of Public & Member Relations GUESTS: Jason Loehr, Controller John Cheatham of Adams, Jenkins & Cheatham Chris Yeatman of Adams, Jenkins & Cheatham

Dr. Frank Bacon presided. Ron White gave the invocation.

AUDIT REVIEW Frank Bacon introduced John Cheatham and Chris Yeatman of Adams, Jenkins

& Cheatham to present the SEC 2017 Year-End Audit. A detailed and thorough review

of the audit was given in the following areas:

Management cover letter outlining specifics of the audit Financial statements including the following:

Independent Auditors’ Report; Balance Sheets; Statements of Operations; Statements of Equities; Statements of Cash Flows; Notes to Financial Statements; and Internal Control over Financial Reporting.

Clean Audit and unmodified Opinion No adjustments were made to the financial statements Electric plant increased 1.57%:

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− $15.5 million decrease in Work in Process o Powhatan to Amelia transmission project o Western District Office construction project o Ponton substation project

Accounts Receivable increased 18.71%: − $2.8 million increase in ODEC capital credit retirements and margin

stabilization Debt:

− Borrowed $6.0 million on lines of credit − Borrowed $6.0 million from Cooperative Financial Corporation (4.10%) − Curtailed $9.0 million

Net Margins: − $6.5 million in 2017 − $4.0 million in 2016

Gross profit percentage: − 44% of sales in 2017 − 41% of sales in 2016

Operating expenses less cost of power: − $44.3 million in 2017 − $44.7 million in 2016 − Decreased $399,000

Equity as a percentage of assets: − 31% in 2017 − 30% in 2016 − 31% in 2015

2017 included: − $6.5 million in assignable margins − $2.8 million in capital credit retirements − $6.4 million added to total assets

Positive cash flows from Operations Cash outflows for investing activities Cash provided by financing activities Upon completion of the review of the audit details, the auditor entertained

questions from the Board.

A copy of the audit will be attached to and made a part of the minutes. On motion

made and seconded:

“The 2017 Year-End Audit presented by Adams, Jenkins & Cheatham is approved as presented.”

MOTION CARRIED

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PREVIOUS MINUTES On motion made and seconded:

The Minutes of the February 15, 2018 Board Meeting are approved. MOTION CARRIED

ODEC REPORT The ODEC report was given by Earl Currin.

PRESIDENT/CEO’S REPORT 1. The SEC Financial and Statistical report for February 2017 was reviewed and is

attached to and made a part of the Minutes.2. The Board was provided information regarding cybersecurity events during the

month of February 2018.3. The Institute of Electrical & Electronics Engineers (IEEE) outage data and safety

report for February 2018 were reviewed in detail:IEEE Outage Data

a. System Average Interruption Duration Index (SAIDI), System AverageInterruption Frequency Index (SAIFI) and Customer Average InterruptionDuration Index (CAIDI) were below historical values for the month.

b. There were no Appalachian Power Company (APCO) or SEC supplyoutages for the month.

c. There were three Dominion Energy (DE) supply outages on February 15th.The outages occurred at Fort Pickett and Wellville substations and thedelivery to the military base at Fort Pickett. These events were all related toa momentary outage that DE took to make an emergency repair to a switchon their transmission system.

d. No major event days occurred during the month.Safety Report

a. There were no lost-time or recordable injuries in February.b. As of February 28th, employees have worked 222 days without a lost time

injury.c. Ian Hix, the newly hired Safety Director, began working on February 22nd.

His background is in construction safety and has formal education in athletictraining.

4. Operations Update:a. New overhead (OH) construction work orders:

New service activity was down 19.7% for the month Central and Eastern districts had no OH Northern and Western districts had near normal numbers

b. New underground (UG) construction work orders: Central had normal number of UG work orders

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Eastern district had fewer than normal UG work orders Western and Northern Districts had about twice the normal number

of UG work orders c. Service order activity was in line with historical numbers for the month. d. Outage activity with major event days removed:

Central – OH 3,142 members & UG 483 members Eastern – OH 1,426 members & UG 483 members Northern – OH 863 members & UG 521 members Western – OH 1,909 members & UG 502 members

e. Customer Minutes of Interruption – Working vs. non-working hours: Approximately 27% of the time each month is outside working

hours Experienced a smaller than average number of customer minutes

out during normal working hours this month f. January outage causes

Power Supply 0% Planned 2% Fault/Failure 18% Decay/Age 14% Trees 32% Weather 1% Animals 14% Public 8% Other 0% Unknown 11%

g. Monthly switching savings: One minute of SAIDI time saved by performing manual switching in

February No SAIDI time saved during by performing distribution automation

(SCADA) switching Saved 23.93 minutes this year by switching before making repairs

h. Fleet expense: Includes labor and parts for employees and third parties Excludes vehicle sales, fuel, depreciation and insurance January fleet costs were about 20% higher than January of 2017

i. Fleet cost per mile by fleet asset type: Line Trucks = $5.68/mile (due to remote control retrofit) Underground = $1.29/mile Large Buckets = $2.39/mile Service Trucks = $0.66/mile

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Small Buckets = $1.78/mile Pickups/SUVs = $0.34/mile

j. The VCU hospital in South Hill experienced another outage which occurred on March 12th at 4:23 p.m. A two-way feed pole was hit by a vehicle and broke in four places. The duration of the outage was 1 hour and 23 minutes.

5. The Board was provided information on SEC’s Action Committee for Rural Electrification (ACRE) Program. ACRE campaign dates are:

a. June 6th @ 7 a.m. – Northern District Conference Room, Powhatan, VA b. June 6th @ Noon – Eastern District Conference Room, Dinwiddie, VA c. June 7th @ Noon – Western District Conference Room, Altavista, VA d. June 8th @ 10 a.m. & Noon – Central District Training Center, Crewe, VA e. A new Leadership Level is available for contributions of $1,000

6. The National Rural Electric Cooperative Association (NRECA) Governance Report was provided to the Board for their review. Discussion will be held at next month’s meeting.

7. The safety video shown at the NRECA Annual Meeting will be shown at next month’s meeting.

8. A Cost of Service Study is currently being completed. The results of this study will be presented at a future Board meeting.

9. Governor Northam visited the Southside Virginia Community College (SVCC) Powerline Workers Program (PLW). Workforce Credential Grants are no longer available to the participants of this program. The Go Virginia Initiative has taken these grants. Governor Northam has offered his assistance to the PLW program.

10. Staff met with outside personnel to answer any concerns they may have regarding management and employment at SEC.

11. The Board reviewed the Cooperative’s Terms & Conditions and Line Extension Policy in detail. Directors determined they would continue those practices that are in the best interest of the membership.

12. Line Retirement: a. SEC will assess and consider the retirement of any idle facility after the

following items are met: The line is idle for three years; or The line is idle for less than three years and the member indicates

there is no opportunity for re-energization of the service being served by the line; or The line is idle for less than three years and based on SEC’s

judgment, the line needs to be removed. b. Once removed, the Cooperative will reconstruct the primary line facilities

removed based on the following:

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A new service is constructed (other than a non-standard service as identified in the Terms & Conditions). The retired primary line would have allowed service to be extended

to the new service. If such construction takes place within seven years of the line

retirement, then SEC will rebuild the retired primary (in the exact location retired) at no cost to the member. This construction will not include the costs of transformers or service conductors. Any costs to extend the final primary and service from the primary

facilities rebuilt will be considered as part of the Cooperative’s normal line extension practices found in the Terms & Conditions at the time of the request. If easements were recorded prior to the line retirement, then SEC

will rebuild the line without any additional easements. If no easements were recorded prior to the line retirement, then the member will be expected to secure new, recordable easements for the retired line route.

On motion made and seconded:

Changes to idle line retirement are approved as presented MOTION CARRIED

13. Cooperative staff visited Prince George Electric Cooperative (PGEC) to review and discuss their plan of providing broadband to their membership. PGEC was awarded $1.25 million from the Tobacco Commission and given funds from the Prince George County to assist in providing this service to its community.

14. Central Virginia Electric Cooperative (CVEC) is offering fiber to the premises and expect to complete their build out over five years. CVEC has also received $1.0 million from the Tobacco Commission for this project.

15. The CEO evaluation will be conducted during the April Board meeting. The Board is to provide Dr. Bacon with their completed evaluation forms by April 6th. These forms can be found in the BoardPaq library.

NEW BUSINESS NRECA’s updated director compensation survey has not yet been received.

Director compensation will remain the same until this information is available for review.

A determination will be made at that time.

UNFINISHED BUSINESS All IRS Form 990 Questionnaires were turned in by the Board to Dan Hammond

for accounting purposes.

LEGAL REPORT 1. Center Star – no additional information has been received nor have the other parties

involved responded to SEC’s inquiries.

Southside Electric Cooperative, Inc. Financial Statements December 31, 2017 and 2016

Contents Financial Statements Independent Auditor’s Report ......................................................................................................... Page 1 - 2 Balance Sheets ................................................................................................................................ 3 - 4 Statements of Operations ................................................................................................................ 5

Statements of Equities ..................................................................................................................... 6 Statements of Cash Flows ............................................................................................................... 7 - 8 Notes to Financial Statements ......................................................................................................... 9 - 20 Supplemental Matters Required by the Rural Utilities Service Independent Auditor’s Report on Internal Control Over Financial Reporting and on

Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ................................................................... 21 - 22

Independent Auditor’s Report on Compliance With Aspects of Contractual Agreements and Regulatory Requirements for Electric Borrowers ............................................... 23 - 24

Independent Auditor’s Report

The Board of Directors Southside Electric Cooperative, Inc. Crewe, Virginia

Report on the Financial Statements

We have audited the accompanying financial statements of Southside Electric Cooperative, Inc. (the “Cooperative”) which comprise the balance sheets as of December 31, 2017 and 2016 and the related statements of operations, equities 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.

Auditor’s 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 auditor’s 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 Cooperative’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 Cooperative’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.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Southside Electric Cooperative, Inc. as of December 31, 2017 and 2016, 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 of America.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated February 26, 2018 on our consideration of Southside Electric Cooperative, Inc’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grants 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 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.

Richmond, Virginia February 26, 2018

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Balance Sheets

Southside Electric Cooperative, Inc.

2017 2016

Assets

Electric plant Electric plant 364,417,536$ 358,784,822$ Less accumulated provision for depreciation 107,636,079 101,522,808

256,781,457 257,262,014

Other property and investments Investments in associated organizations 50,000,146 49,044,394 Other investments 697,188 841,308

50,697,334 49,885,702

Current assets Cash and cash equivalents 4,360,479 2,216,594 Accounts receivable, net 23,929,343 20,157,570 Materials and supplies 2,169,365 1,084,524 Other current assets 204,974 202,276

30,664,161 23,660,964

Deferred charges and regulatory assets 4,380,010 5,269,228

342,522,962$ 336,077,908$

December 31,

See Independent Auditor’s Report and Notes to Financial Statements

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2017 2016

Equities and Liabilities

Equities Patronage capital 103,363,175$ 99,998,786$ Memberships 232,490 231,060 Other equities 1,242,768 980,852

104,838,433 101,210,698

Noncurrent liabilities Long-term debt 189,204,922 192,365,377 Other 115,058 115,058

189,319,980 192,480,435

Current liabilities Accounts payable 9,679,487 10,095,305 Lines of credit 21,500,000 15,000,000 Current maturities of long-term debt 8,251,180 7,813,673 Consumer deposits 2,192,691 2,312,940 Other current and accrued liabilities 1,413,988 1,381,415

43,037,346 36,603,333

Deferred credits and regulatory liabilities 5,327,203 5,783,442

342,522,962$ 336,077,908$

December 31,

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Statements of Operations


Year Ended December 31,2017 2016

Operating revenues 108,770,569$ 116,039,703$

Operating expensesCost of power 61,138,533 68,659,413Transmission 58,545 78,108Distribution - operation 5,626,491 5,682,868Distribution - maintenance 10,823,864 10,682,832Consumer accounts 1,993,434 2,005,430Customer service and informational 2,702,377 2,564,499Administrative and general 6,195,781 7,266,462Depreciation and amortization 10,488,513 10,509,743Taxes 39,632 31,049Interest on long-term debt 6,211,842 5,778,079Other 124,383 65,139

105,403,395 113,323,622Operating Margins Before

Patronage Allocations 3,367,174 2,716,081

Patronage allocationsGeneration and transmission 2,221,015 1,526,784Other 715,226 497,013

2,936,241 2,023,797

6,303,415 4,739,878

Nonoperating income (expense)Investment income, net 111,052 112,282Other 86,779 4,396Loss on disposition of property (20,286) (800,762)

177,545 (684,084)

6,480,960$ 4,055,794$

Net Operating Margins

Net Margins


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Statements of Equities


Years Ended December 31, 2017 and 2016

Patronage Other Capital Equities Memberships Total

Balance, December 31, 2015 99,177,422$ 92,923$ 229,400$ 99,499,745$

Net margins 4,055,794 4,055,794

Retirement of capital credits (3,327,353) 980,852 (2,346,501)

Reallocated gains 92,923 (92,923)

Net change in memberships 1,660 1,660

Balance, December 31, 2016 99,998,786 980,852 231,060 101,210,698

Net margins 6,480,960 6,480,960

Retirement of capital credits (3,213,190) 358,535 (2,854,655)

Reallocated gains 96,619 (96,619)

Net change in memberships 1,430 1,430

Balance, December 31, 2017 103,363,175$ 1,242,768$ 232,490$ 104,838,433$


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Statements of Cash Flows



Cash Flows from Operating ActivitiesCash received from members 109,500,281$ 116,551,825$ Cash paid to suppliers and employees (85,847,091) (96,292,771) Interest received 111,052 112,282 Interest paid (6,223,069) (5,785,378)

17,541,173 14,585,958

Cash Flows from Investing ActivitiesExtension and replacement of plant (17,870,097) (28,180,325) Plant removal costs (1,625,656) (2,423,447) Contributions in aid of construction 1,946,101 308,360 Proceeds from retirement of investments in CTC's 17,207 45,275 Proceeds from the sale of plant 88,239 198,980

(17,444,206) (30,051,157)

Cash Flows from Financing ActivitiesProceeds from line of credit 6,500,000 25,000,000 Payments on line of credit (18,000,000) Proceeds from long-term debt 6,000,000 17,281,000 Principal payments of long-term debt (8,722,948) (7,953,078) Capital credits paid to members, net (2,615,146) (2,346,501) Proceeds from capital credits and other investments 1,003,831 181,102 Net change in member deposits (120,249) (163,967) Net change in memberships 1,430 1,660

2,046,918 14,000,216

2,143,885 (1,464,983)

Cash and cash equivalents - beginning of year 2,216,594 3,681,577

4,360,479$ 2,216,594$

Net Cash Provided by Operating Activities

Net Cash Used byInvesting Activities

Cash and Cash Equivalents

Equivalents - End of YearCash and Cash

Net Cash Provided byFinancing Activities

Net Increase (Decrease) in

See Independent Auditor’s Report and Notes to Financial Statements - 7 -


Net margins 6,480,960$ 4,055,794$

Adjustments to reconcile net margins to net cash provided by operating activities:

Depreciation and amortization 10,488,513 10,509,743 Net change in life insurance benefit 144,119 Loss on disposition of plant 20,746 1,107,162 Special equipment installation costs (54,187) (154,200) Noncash capital credits received (2,936,241) (2,023,797)(Increase) decrease in:

Accounts receivable 1,260,374 827,990 Other current assets (622,557) (8,034) Deferred charges 889,218 1,021,691

Increase (decrease) in:Accounts payable 984,184 358,868 Other current and accrued liabilities 12,679 86,965 Deferred credits 873,365 (1,196,224)

17,541,173$ 14,585,958$ Net Cash Provided by

Operating Activities

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Notes to Financial Statements


December 31, 2017 and 2016

Note A - Significant Accounting Policies

Nature of Operations

Southside Electric Cooperative, Inc. (the “Cooperative”) is a member owned, nonprofit Cooperative organized to provide electric service to its members residing in eighteen counties, five towns and one city in the Commonwealth of Virginia. The Cooperative’s main office is located in Crewe, Virginia.

Basis of Presentation

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), including GAAP for regulated operations. The system of accounts of the Cooperative are maintained in accordance with the Uniform System of Accounts as prescribed by the Federal Energy Regulatory Commission (FERC) for Class A and B electric utilities modified for electric borrowers of the Rural Utilities Service (RUS).

Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Cash and Cash Equivalents

The Cooperative considers all highly liquid investments with a maturity of three months or less to be cash equivalents.

Income Taxes

The Cooperative has been granted exemption from income tax under Internal Revenue Service Code Section 501(c)(12) of the Internal Revenue Code. The Cooperative evaluates the components of the annual test for compliance to maintain its filing status as a tax exempt entity. In accordance with Accounting Standards Codification (“ASC”) Topic 740 for “uncertain tax positions”, the Cooperative had determined that it is more likely than not that their tax positions will be sustained upon examination by the Internal Revenue Service. Tax years ending on or after December 31, 2014 remain subject to examination by federal and state taxing authorities.

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Notes to Financial Statements Southside Electric Cooperative, Inc. December 31, 2017 and 2016 Note A - Significant Accounting Policies - Continued Electric Plant Electric plant is stated at the original cost of construction, which includes the cost of contracted services, direct labor, materials and overhead items. Contributions from others toward the construction of electric plant are credited to the applicable plant accounts. When property, which represents a retirement unit, is replaced or removed, the average cost of such property as determined from the continuing property records is credited to electric plant and such cost, together with cost of removal less salvage is charged to the accumulated provision for depreciation. Maintenance and repairs, including the renewal of minor items of plant not comprising a retirement unit, are charged to the appropriate maintenance accounts, except that repairs of transportation and service equipment are charged to clearing accounts and redistributed to operating expenses and other accounts. Depreciation Provision for depreciation has been made by application of the straight-line method to the original cost, by groups of depreciable properties in service. Current depreciation rates, which are estimated to amortize the cost of plant over the service lives, were as follows at December 31, 2017 and 2016:

Transmission plant 2.75%Distribution plant 2.70 - 5.30%Load management equipment 11.00%General plant 3.00 - 25.00%

Materials and supplies Inventories are generally used for construction, operation and maintenance work, and are not for resale. They are valued at the lower of moving average unit cost or market. Accounts Receivable The Cooperative provides for the uncollectible accounts monthly, based on a percentage of sales which past experience has indicated will be uncollectible. When accounts are deemed to be uncollectible, they are charged against the provision for uncollectible accounts. Revenues The Cooperative records electric revenues as energy is delivered to consumers on a monthly basis. The billing rate schedules of the Cooperative contain provisions to either increase or decrease the consumers’ billing from the base level billing schedules dependent upon the cost of the wholesale power for electrical energy purchased for resale. Any amounts collected over or under the Cooperative’s monthly power costs are recorded as a deferred credit or deferred charge as applicable.

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Note A - Significant Accounting Policies - Continued

Regulatory Assets and Liabilities

The Cooperative currently complies with accounting guidance set forth by the ASC Topic 980 regarding accounting for the effect of certain types of regulation. This guidance allows a regulated cooperative to record certain costs or credits that have been or are expected to be allowed in the ratemaking process in a period different from the period in which the costs would be charged to expense or income by a non-regulated enterprise. Accordingly, the Cooperative records certain assets and liabilities that result from the regulated ratemaking process that would not be recorded under GAAP for non-regulated entities.

Advertising Costs

Advertising costs were expensed as incurred.

Subsequent Events

Subsequent events have been evaluated through February 26, 2018, which is the date the financial statements were available to be issued.

Note B - Assets Pledged

All assets are pledged as security for the long-term debt to National Rural Utilities Cooperative Finance Corporation (CFC), Federal Financing Bank (FFB) and CoBank.

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Note C - Electric Plant

Listed below are the major classes of electric plant: December 31,

2017 2016

Distribution plant 297,208,463$ 294,665,878$ General plant 43,773,262 29,581,500Transmission plant 18,471,197 14,035,617

Electric plant in service 359,452,922 338,282,995 Construction work in progress 4,964,614 20,501,827

364,417,536$ 358,784,822$

In accordance with the guidance for asset retirement obligations, as set forth in the ASC Topic 410 – Asset Retirement and Environmental Obligations, and FERC Order 631 as adopted by the RUS, the Cooperative has determined that it had no legal asset retirement obligations as of December 31, 2017 and 2016. Regarding non-legal retirement costs, the Cooperative follows the regulatory principle of inter-generational cost allocation by including net salvage (gross salvage less cost of removal) as a component of depreciation rates. For the years ended December 31, 2017 and 2016, the Cooperative followed the RUS prescribed rates for depreciation and therefore, collections for net salvage and differences in timing of recognition of period costs associated with non-legal retirement obligations had not been specifically identified.

Note D - Concentrations of Credit Risk

The Cooperative places its cash on deposit with financial institutions located in the United States of America, which are insured by the Federal Deposit Insurance Corporation (FDIC). The FDIC provides insurance coverage for up to $250,000 of cash held by the Cooperative in each separate FDIC insured bank and savings institution. From time to time, the Cooperative may have amounts on deposit in excess of the insured limits. As of December 31, 2017, the Cooperative had approximately $901,000 of deposits that exceed the insured limits.

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Note E - Investments in Associated Organizations

Investments in associated organizations consisted of the following: December 31,

2017 2016

Patronage capital:Old Dominion Electric Cooperative (ODEC) 44,166,170$ 43,537,556$ CFC 1,825,020 1,694,325 Tarheel Electric Membership Corp. (TEMA) 614,399 512,060 Federated Rural Electric Insurance Corp. 381,882 348,336 Other 136,701 112,161

47,124,172 46,204,438Capital Term Certificates (CTC):

Subscriptions (SCTC's) 1,552,277 1,552,277Loan (LCTC's) 367,050 367,050Loan (ZCTC's) 233,830 251,034

2,153,157 2,170,361 Other:

TEC Trading, Inc. 622,500 622,500 Membership fees 49,251 2,000 Other 51,066 45,095

722,817 669,595

50,000,146$ 49,044,394$

The capital term certificates invested in CFC are unsecured and subordinated. The SCTC’s bear interest at an annual rate of 5% payable semiannually and the LCTC’s bear interest at an annual rate of 3% payable semiannually. The ZCTC’s are non-interest bearing.

The investment in TEC Trading, Inc. represents an unconsolidated joint venture with other members of ODEC. The Cooperative has a non-controlling ownership interest that has been accounted for under the cost method.

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Note F - Accounts Receivable

Accounts receivable consisted of the following: December 31,

2017 2016

Unbilled revenue 8,777,582$ 8,157,723$ Other accounts receivable 7,979,948 4,885,130Consumer accounts receivable 7,251,693 7,199,658

24,009,223 20,242,511Less provision for uncollectible accounts 79,880 84,941

23,929,343$ 20,157,570$

Note G - Deferred Charges and Regulatory Assets

Deferred charges and regulatory assets consisted of the following: December 31,

2017 2016

Regulatory assets:NRECA prepayment (Note K) 4,334,775$ 5,201,730$ Deferred SERP cost 67,498

Survey and Investigation - preliminary 45,235

4,380,010$ 5,269,228$

Note H - Patronage Capital

Patronage capital consisted of the following: December 31,

2017 2016

Assigned 96,882,215$ 95,942,992$ Assignable 6,480,960 4,055,794

103,363,175$ 99,998,786$

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Notes to Financial Statements Southside Electric Cooperative, Inc. December 31, 2017 and 2016 Note H - Patronage Capital - Continued Under provisions of the long-term debt agreements and Title 7 of the Code of Federal Regulations (Part 1717.617), the Cooperative may refund capital to patrons without limitation if total equity is equal to or greater than 30% of total assets and there are no instances of default. If equities are between 20% and 30% of total assets, general refunds are limited to 25% (adjusted for returns to estates, which are not limited) of patronage capital or margins received in the next preceding year. Total equities and margins amounted to approximately 31% and 30% of total assets for 2017 and 2016, respectively.

Note I - Long-Term Debt Long-term debt consisted of the following:

December 31,2017 2016

FFB Mortgage notes, fixed 126,501,172$ 130,283,700$ CFC Mortgage notes, fixed 55,271,439 53,357,929 CoBank Mortgage note, fixed 15,683,491 16,537,421

197,456,102 200,179,050 Less current maturities 8,251,180 7,813,673

189,204,922$ 192,365,377$

The long-term debt payable to CoBank is represented by a mortgage note with an interest rate of 3.79%. The note matures in December 2031. Principal and interest installments were due monthly in the amount of approximately $137,000. Long-term debt payable to CFC is represented by mortgage notes with rates ranging from 2.85% to 7.15%. The notes generally have 35-year maturity periods and are payable on an installment basis. The notes mature at various dates between March 2018 and September 2047. Principal and interest installments were due quarterly in the amount of approximately $1,765,000. The Cooperative had unadvanced loan funds from CFC of approximately $8,830,000 at December 31, 2017.

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Note I - Long-Term Debt - Continued

The long-term debt payable to FFB is represented by mortgage notes with interest rates ranging from 1.07% to 5.86%. The notes mature at various dates between January 2018 and December 2048. Principal and interest installments were due quarterly in the amount of approximately $1,596,000. The Cooperative had unadvanced loan funds from FFB of $6,400,000 at December 31, 2017.

Approximate future maturities of long-term debt were estimated as follows:

CoBANK CFC FFB Total

2018 941,695$ 3,526,957$ 3,782,528$ 8,251,180$ 2019 971,392 4,009,596 3,881,040 8,862,028 2020 1,000,628 4,196,065 3,950,192 9,146,885 2021 1,033,587 4,391,870 4,019,337 9,444,794 2022 1,066,174 4,461,439 4,095,480 9,623,093

2023 and thereafter 10,670,015 34,685,512 106,772,595 152,128,122

15,683,491$ 55,271,439$ 126,501,172$ 197,456,102$

Under the terms of the loan agreements with RUS and CFC, there are certain restrictions, which include requirements to maintain a TIER (times interest earned ratio) of 1.25 and DSC (debt service coverage) of 1.25. There were also restrictions on the return of capital to patrons as discussed in (Note H). As of December 31, 2017 and 2016, the Cooperative was in compliance with all restrictions.

The Cooperative had a $15,000,000 line of credit with CFC at a variable interest rate (2.35% at December 31, 2017), of which $14,500,000 and $10,000,000 was outstanding at December 31, 2017 and 2016, respectively. The line of credit is secured by substantially all of the Cooperative’s assets and renews annually.

The Cooperative had a $8,000,000 line of credit with First Citizens Bank at a variable interest rate (3.82% at December 31, 2017), of which there was no balance outstanding at December 31, 2017 or 2016, respectively. The line of credit is unsecured and will expire in June 2018.

The Cooperative has a $10,000,000 line of credit with CoBank at variable rates (3.67% at December 31, 2017), of which $7,000,000 and $5,000,000 was outstanding at December 31, 2017 and 2016 respectively. The line of credit is unsecured and will expire in September 2018.

- 16 -

Notes to Financial Statements Southside Electric Cooperative, Inc. December 31, 2017 and 2016 Note J - Deferred Credits and Regulatory Liabilities Deferred credits and regulatory liabilities consisted of the following:

2017 2016Regulatory liabilities:

Deferred power costs 5,195,126$ 2,414,847$ Deferred special equipment labor 113,092 244,073

Other 18,985 29,132 Consumer advances 3,095,390

5,327,203$ 5,783,442$

December 31,

Note K - Retirement Plans

Pension Plan

The retirement Security Plan (RS Plan), sponsored by the National Rural Electric Cooperative Association (NRECA) is a defined benefit pension plan qualified under Section 401 and tax-exempt under Section 501(a) of the Internal Revenue Code. It is considered a multiemployer plan under the accounting standards. The plan sponsor’s Employer Identification Number is 53-0116145 and the Plan Number is 333. A unique characteristic of a multiemployer plan compared to a single employer plan is that all plan assets are available to pay benefits of any plan participant. Separate asset accounts are not maintained for participating employers. This means that assets contributed by one employer may be used to provide benefits to employees of other participating employers.

The Cooperative’s contributions to the RS Plan in 2017 and in 2016 represented less than 5 percent of the total contributions made to the RS Plan by all participating employers. The Cooperative made contributions to the RS Plan of approximately $3,093,000 and $2,976,000 in 2017 and 2016, respectively. There have been no significant changes that affect the comparability of 2017 and 2016 contributions. For the RS Plan, a “zone status” determination is not required, and therefore not determined, under the Pension Protection Act (PPA) of 2006. In addition, the accumulated benefit obligations and plan assets are not determined or allocated separately by individual employer. In total, the RS Plan was over 80 percent funded at January 1, 2017 and over 80 percent funded on January 1, 2016 based on the PPA funding target and PPA actuarial value of assets on those dates. Because the provisions of the PPA do not apply to the RS Plan, funding improvement plans and surcharges are not applicable. Future contribution requirements are determined each year as part of the actuarial valuation of the plan and may change as a result of plan experience.

- 17 -

Notes to Financial Statements Southside Electric Cooperative, Inc. December 31, 2017 and 2016 Note K - Retirement Plans – Continued At its December 2012 meeting, the I&FS Committee of the NRECA Board of Directors approved an option to allow participating cooperatives in the RS Plan to make a contribution prepayment and reduce future required contributions. The prepayment amount is a cooperative’s share, as of January 1, 2013, of future contributions required to fund the RS Plan’s unfunded value of benefits earned to date using RS Plan actuarial valuation assumptions. The prepayment amount will typically equal approximately 2.5 times a cooperative’s annual RS Plan required contribution as of January 1, 2013. After making the prepayment, the billing rate for most co-ops is reduced by approximately 25%, retroactive to the January 1 of the year in which the amount is paid to the RS Plan. The 25% differential in billing rates is expected to continue for approximately 15 years from January 1, 2013. However, unexpected changes in interest rates, asset returns and other plan experience, plan assumption changes and other factors may have an impact on the differential in billing rates and the 15-year period. On April 29, 2013 the Cooperative made a prepayment of $8,669,550 to the NRECA RS Plan. The Cooperative elected to finance the prepayment through a 10 year term loan with a fixed interest rate of 2.85%. The Cooperative is amortizing the prepayment to expense over 10 years with the balance represented as a part of deferred charges.

Deferred Income Plan In addition to the NRECA RS Plan, substantially all employees of the Cooperative are eligible to participate in the NRECA SelectRE pension plan (the “Plan”), a defined contribution multi-employer deferred income plan qualified under Section 401(k) of the Internal Revenue Code. The Cooperative’s required contribution to the Plan and its net pension cost was approximately $424,000 and $420,000 for the years ended December 31, 2017 and 2016, respectively. Note L - Financial Instruments Carried at Cost The Cooperative has recorded all financial instruments based on the carrying amount (book value) in the financial statements in accordance with ASC Topic 825. According to this guidance, the Cooperative is required to disclose the fair value of those financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using discounted cash flow analysis. This technique involves subjective judgment and is significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. As a result, the derived fair value estimates cannot be substantiated by comparison to independent markets, and in many cases, could not be realized in immediate settlement of the instrument. Accordingly, the following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it was practicable to estimate that value. Cash and Cash Equivalents

The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of these instruments.

- 18 -

Notes to Financial Statements Southside Electric Cooperative, Inc. December 31, 2017 and 2016 Note L - Financial Instruments Carried at Cost - Continued Accounts Receivable

The carrying amount of accounts receivable approximates fair value due to the short period of time amounts are outstanding.

Investments in Associated Organizations Investments in associated organizations are primarily composed of patronage capital assigned from associated organizations. These investments are recorded at costs plus allocated equities.

Fair value of capital term certificates was determined by computing the present value of estimated future cash flows, discounted at the long-term treasury rate of 2.74% and 3.06% for the years ended December 31, 2017 and 2016, respectively. The fair value of patronage capital is not determinable since no legal obligation exists to retire capital credits. The fair value of the cost method investment is not estimated since there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value and it is not practicable to estimate fair value. The carrying value of memberships approximates fair value. Accounts Payable The carrying amount of accounts payable approximates fair value due to the short period of time amounts are outstanding. Long-Term Debt The carrying amount of the Cooperative’s fixed long-term debt includes certain interest rates that are below quoted market prices for the same or similar issues. Therefore, the fair value of fixed long-term debt is estimated based on current market prices for the same or similar issues offered for debt of the same and remaining maturities which was 5.50% and 5.85% for the years ended December 31, 2017 and 2016, respectively. The carrying amount of lines of credit approximates fair value due to the short maturity of the instruments.

Consumer Deposits The carrying amount approximates fair value due to the relatively short maturity of the deposits.

- 19 -




Note L - Financial Instruments Carried at Cost - Continued

The estimated fair value of the Cooperative’s financial instruments were as follows:

Carrying Fair Carrying Fair Value Value Value Value

Assets:Capital term certificates 2,153,157$ 3,200,000$ 2,170,361$ 3,030,000$

Liabilities:Long-term debt, including

mortgage notes andcapital lease obligation 197,456,102$ 164,670,000$ 200,179,050$ 164,790,000$

December 31,2017 2016

Note M - Commitments and Contingencies

Purchased Power

The Cooperative, as a member of ODEC, an organization composed of electric cooperatives in Virginia, Maryland and Delaware, has entered into a long-term contract with ODEC for the acquisition of wholesale power through ODEC as have other members of the organization. The cost of wholesale power purchases through ODEC may increase or decrease based upon rates established by the Board of Directors of ODEC.

Other

From time to time, the Cooperative becomes involved in litigation in the ordinary course of business. In management’s opinion, the ultimate resolution of these matters will not have a material adverse effect on the Cooperative’s financial position, results of operations or cash flows.

Note N - Related Party Transactions

The Cooperative is a member of the following organizations and conducted business transactions during the current and prior years as set forth below:

The Cooperative is a member of CFC (Notes E and I), a national financing organization, and had investment assets and mortgage notes payable at various interest rates and maturities.

The Cooperative, as a member of the ODEC, has entered into a contract for the acquisition of wholesale power.

The Cooperative is a shareholder of Federated Rural Electric Insurance Corporation (Note E), and purchases its general property and liability coverage from this organization.

The Cooperative, as a member of TEMA (Note E), purchased materials and supplies for construction and maintenance of the utility assets.

- 20 -

Supplemental Matters Required by the

Rural Utilities Service

Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on

an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

The Board of Directors Southside Electric Cooperative, Inc. Crewe, Virginia We have audited, in accordance with the 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, the financial statements of Southside Electric Cooperative, Inc. (the “Cooperative”), which comprise the balance sheets as of December 31, 2017 and 2016, and the related statements of operations, equities and cash flows for the years then ended, and the related notes to the financial statements, and have issued our report thereon dated February 26, 2018. Internal Control Over Financial Reporting In planning and performing our audits of the financial statements, we considered the Cooperative’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Cooperative’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Cooperative’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audits we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

- 21 -

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Cooperative’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audits, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

We noted certain matters that we reported to management of Southside Electric Cooperative, Inc. in a separate letter dated February 26, 2018.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Cooperative’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Governmental Auditing Standards in considering the Cooperative’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.


- 22 -

Independent Auditor’s Report on Compliance With Aspects of Contractual Agreements and Regulatory

Requirements for Electric Borrowers The Board of Directors Southside Electric Cooperative, Inc. Crewe, Virginia We have audited, 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, the financial statements of Southside Electric Cooperative, Inc. (the “Cooperative”), which comprise the balance sheet as of December 31, 2017, and the related statements of operations, equities, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated February 26, 2018. In accordance with Government Auditing Standards, we have also issued a report dated February 26, 2018 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. No reports other than the reports referred to above have been furnished to management. In connection with our audit, nothing came to our attention that caused us to believe that the Cooperative failed to comply with the terms, covenants, provisions, or conditions of their loan, grant, and security instruments as set forth in 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, insofar as they relate to accounting matters as enumerated below. However, our audit was not directed primarily toward obtaining knowledge of noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the Cooperative’s noncompliance with the above-referenced terms, covenants, provisions, or conditions of the contractual agreements and regulatory requirements, insofar as they related to accounting matters. In connection with our audit, we noted no matters regarding the Cooperative’s accounting and records to indicate that the Cooperative did not:

Maintain adequate and effective accounting procedures;

Utilize adequate and fair methods for accumulating and recording labor, material, and overhead costs, and the distribution of these costs to construction, retirement, and maintenance or other expense accounts;

Reconcile continuing property records to the controlling general ledger plant accounts;

Clear construction accounts and accrue depreciation on completed construction;

Record and properly price the retirement of plant;

Seek approval of the sale, lease or transfer of capital assets and disposition of proceeds for the sale or

lease of plant, material, or scrap;

- 23 -

Maintain adequate control over materials and supplies;

Prepare accurate and timely Financial and Operating Reports;

Obtain written RUS approval to enter into any contract for the management, operations, or maintenanceof the borrower’s system if the contract covers all or substantially all of the electric system;

Disclose material related party transactions in the financial statements, in accordance with requirementsfor related parties in generally accepted accounting principles;

Record depreciation in accordance with RUS requirements (See RUS Bulletin 183-1, Depreciation Ratesand Procedures);

Comply with the requirements for the detailed schedule of deferred debits and deferred credits; and

Comply with the requirements for the detailed schedule of investments.

This report is intended solely for the information and use of the board of directors, management, and the RUS and supplemental lenders and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record and its distribution is not limited.


- 24 -

General FundCash in Banks 7,703,694.42

General Funds Invested CFC - CTC's 2,134,773.85 CFC - Patronage Capital 2,565,152.61 Federated Insurance Corporation 381,882.00 TEC Trading Incorporated 622,500.00 Town of Hurt 1,000.00

Notes and Accounts Receivable Electric Consumer 10,815,996.53 Other Accounts Receivable 5,090,157.35

29,315,156.76 Material and Supplies in Stock 2,050,729.51

Construction Work in Progress to be Paid from Construction Funds 0.00

TOTAL 31,365,886.27

Construction Funds Available First Citizens Bank 0.00

CFC RUS & FFB COBANK

Balance Available for Advance 15,500,000.00

Gross Obligations 61,771,438.93 126,501,171.78 15,429,466.93 17,500,000.00

Interest Paid This Year 0.00 0.00 97,491.64 29,909.45

NOTES STATISTICS

STATEMENT OF GENERAL FUNDS AND OTHER ASSETSFebruary 28, 2018

CFC, COBANK & FIRST CITIZENS BANK

Page 1 of 6

Comparative Operating Statistics

88 104 52392 333 167301 246 141

4,020 3,539 3,539323 78 34

55,831 56,338 56,3388,264 8,272 8,272

Meters Installed - New Services

2013 2014 2015 2016 2017 2018January 38 28 45 49 38 52February 39 25 37 33 50 52March 30 27 44 53 59April 33 42 47 44 62May 37 41 54 37 59June 41 58 46 67 69July 46 50 60 53 57August 57 76 72 69 57September 55 45 53 43 46October 54 54 53 62 61November 95 48 41 70 52December 45 56 45 39 44Total 570 550 597 619 654 104

Southside Electric CooperativeFor the Month Ending February 2018

New Services ConnectedMeters RemovedMeters Reinstalled

Y-T-D 2018

Services Idle, Excluding SeasonalNumber of Services RetiredTotal Consumers Receiving ServiceTotal Miles Energized

Y-T-D 2017

February 2018

Page 2 of 6

Revision: 87794

General LedgerFinancial And Operating Report Electric Distribution

Page: 18:36:01 am03/15/2018

SOUTHSIDE ELECTRIC COOPERATIVE

Item Last Year This Year

----------------------------------Year - To - Date -------------------------------

Budget Current------------- Period - To - Date -----------------

Budget

INCOME STATEMENT FOR FEB 2018

19,522,871.56 23,348,231.40 23,556,426.21 9,287,672.24 10,790,436.88 1. Operating Revenue and Patronage Capital0.00 0.00 0.00 0.00 0.00 2. Power Production Expense

11,435,376.92 13,744,535.73 14,136,657.43 5,474,018.76 6,468,192.02 3. Cost of Purchased Power343.58 7,923.00 0.00 2,286.88 0.00 4. Transmission Expense

0.00 0.00 0.00 0.00 0.00 5. Regional Market Expense795,546.51 560,985.46 799,136.34 183,880.40 368,487.67 6. Distribution Expense - Operation

1,466,590.54 1,622,939.87 1,809,085.16 723,264.12 871,815.58 7. Distribution Expense - Maintenance326,454.79 400,763.80 383,074.24 189,246.58 177,901.17 8. Customer Accounts Expense480,031.95 451,447.59 542,059.42 199,405.15 231,757.00 9. Customer Service and Informational Expense82,646.61 103,527.74 92,219.00 48,742.46 51,109.5010. Sales Expense

1,085,783.62 896,370.74 1,093,736.00 439,686.06 520,418.5011. Administrative and General Expense15,672,774.52 17,788,493.93 18,855,967.59 7,260,530.41 8,689,681.4412. Total Operation & Maintenance Expense (2 thru 11)

1,381,133.81 1,905,237.12 1,986,897.66 954,072.13 993,448.8313. Depreciation & Amortization Expense275,500.00 293,006.00 293,006.00 146,503.00 146,503.0014. Tax Expense - Property & Gross Receipts

0.00 0.00 0.00 0.00 0.0015. Tax Expense - Other1,128,159.55 1,023,401.09 1,052,219.84 502,793.02 526,109.9216. Interest on Long-Term Debt

0.00 0.00 0.00 0.00 0.0017. Interest Charged to Construction - Credit1,910.31 3,967.43 1,666.70 1,982.03 833.3318. Interest Expense - Other5,092.78 8,033.73 12,500.00 3,327.78 6,250.0019. Other Deductions

18,464,570.97 21,022,139.30 22,202,257.79 8,869,208.37 10,362,826.5220. Total Cost of Electric Service (12 thru 19)

1,058,300.59 2,326,092.10 1,354,168.42 418,463.87 427,610.3621. Patronage Capital & Operating Margins (1 minus 20)18,156.28 19,400.80 20,500.00 10,146.20 10,250.0022. Non Operating Margins - Interest

0.00 0.00 0.00 0.00 0.0023. Allowance for Funds Used During Construction0.00 0.00 0.00 0.00 0.0024. Income (Loss) from Equity Investments

-452.76 -1,723.57 -583.32 -602.58 -291.6625. Non Operating Margins - Other120,000.00 120,000.00 120,000.00 60,000.00 60,000.0026. Generation and Transmission Capital Credits

0.00 0.00 0.00 0.00 0.0027. Other Capital Credits and Patronage Dividends0.00 0.00 0.00 0.00 0.0028. Extraordinary Items

1,196,004.11 2,463,769.33 1,494,085.10 488,007.49 497,568.7029. Patronage Capital or Margins (21 thru 28)

1,196,004.11 2,463,769.33 1,494,085.10 488,007.49 497,568.70Operating - Margin0.00 0.00 0.00 0.00 0.00Non Operating - Margin1.94 3.27Times Interest Earned Ratio - Operating2.06 3.41Times Interest Earned Ratio - Net1.95 3.29Times Interest Earned Ratio - Modified

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Page: 18:36:02 am03/15/2018

Revision: 89113SOUTHSIDE ELECTRIC COOPERATIVE

This YearLast Year Variance

BALANCE SHEET FOR FEB 2018

ASSETS AND OTHER DEBITS 1. Total Utility Plant in Service 360,232,648.97 19,941,936.34340,290,712.63 2. Construction Work in Progress 4,915,471.28 -12,740,307.1617,655,778.44 3. Total Utility Plant (1 + 2) 365,148,120.25 7,201,629.18357,946,491.07 4. Accum. Provision for Depreciation and Amort. 109,213,241.80 7,093,113.66102,120,128.14 5. Net Utility Plant (3 - 4) 255,934,878.45 108,515.52255,826,362.93 6. Non-Utility Property (Net) 25,207.74 -1,173.5326,381.27 7. Invest. in Subsidiary Companies 0.00 0.000.00 8. Invest. in Assoc. Org. - Patronage Capital 47,547,931.35 929,614.9846,618,316.37 9. Invest. in Assoc. Org. - Other - General Funds 2,517,655.85 15,163.032,502,492.82 10. Invest. in Assoc. Org. - Other - Nongeneral Funds 0.00 0.000.00 11. Invest. in Economic Development Projects 0.00 0.000.00 12. Other Investments 697,187.59 -144,120.15841,307.74 13. Special Funds 0.00 0.000.00 14. Total Other Property & Investments (6 thru 13) 50,787,982.53 799,484.3349,988,498.20 15. Cash - General Funds 7,703,694.42 2,746,686.124,957,008.30 16. Cash - Construction Funds - Trustee 0.00 0.000.00 17. Special Deposits 0.00 0.000.00 18. Temporary Investments 0.00 0.000.00 19. Notes Receivable (Net) 0.00 0.000.00 20. Accounts Receivable - Sales of Energy (Net) 10,815,996.53 1,626,761.659,189,234.88 21. Accounts Receivable - Other (Net) 5,090,157.35 181,509.244,908,648.11 22. Renewable Energy Credits 0.00 0.000.00 23. Material and Supplies - Electric & Other 2,050,729.51 -119,662.602,170,392.11 24. Prepayments 560,792.89 55,958.61504,834.28 25. Other Current and Accrued Assets 5,412,605.74 -438,389.075,850,994.81 26. Total Current and Accrued Assets (15 thru 25) 31,633,976.44 4,052,863.9527,581,112.49 27. Regulatory Assets 0.00 -53,541.9553,541.95 28. Other Deferred Debits 4,235,516.80 -821,720.705,057,237.50 29. Total Assets and Other Debits (5 + 14 + 26 thru 28) 342,592,354.22 4,085,601.15338,506,753.07

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Page: 28:36:02 am03/15/2018

Revision: 89113SOUTHSIDE ELECTRIC COOPERATIVE

This YearLast Year Variance

BALANCE SHEET FOR FEB 2018

LIABILITIES AND OTHER CREDITS 30. Memberships 232,540.00 1,420.00231,120.00 31. Patronage Capital 103,159,763.14 3,291,222.2099,868,540.94 32. Operating Margins - Prior Years 0.00 0.000.00 33. Operating Margins - Current Year 2,463,769.33 1,267,765.221,196,004.11 34. Non-Operating Margins 0.00 0.000.00 35. Other Margins and Equities 1,294,461.65 278,163.261,016,298.39 36. Total Margins & Equities (30 thru 35) 107,150,534.12 4,838,570.68102,311,963.44 37. Long-Term Debt - RUS (Net) 0.00 0.000.00 38. Long-Term Debt - FFB - RUS Guaranteed 122,718,643.78 -3,691,959.27126,410,603.05 39. Long-Term Debt - Other - RUS Guaranteed 0.00 0.000.00 40. Long-Term Debt - Other (Net) 72,732,253.86 6,998,590.2565,733,663.61 41. Long-Term Debt - RUS Econ. Devel. (Net) 0.00 0.000.00 42. Payments - Unapplied 0.00 0.000.00 43. Total Long-Term Debt (37 thru 41 - 42) 195,450,897.64 3,306,630.98192,144,266.66 44. Obligations Under Capital Leases - Noncurrent 0.00 0.000.00 45. Accumulated Operating Provisions 100,197.47 -14,860.39115,057.86 46. Total Other Noncurrent Liabilities (44 + 45) 100,197.47 -14,860.39115,057.86 47. Notes Payable 17,500,000.00 -2,000,000.0019,500,000.00 48. Accounts Payable 7,874,514.25 1,098,358.776,776,155.48 49. Consumers Deposits 2,185,099.00 -103,780.102,288,879.10 50. Current Maturities Long-Term Debt 8,251,180.00 437,507.007,813,673.00 51. Current Maturities Long-Term Debt - Econ. Devel. 0.00 0.000.00 52. Current Maturities Capital Leases 0.00 0.000.00 53. Other Current and Accrued Liabilities 2,982,789.14 -85,329.633,068,118.77 54. Total Current & Accrued Liabilities (47 thru 53) 38,793,582.39 -653,243.9639,446,826.35 55. Regulatory Liabilities 0.00 0.000.00 56. Other Deferred Credits 1,097,142.60 -3,391,496.164,488,638.76 57. Total Liab. & Other Credits (36+43+46+54 thru 56) 342,592,354.22 4,085,601.15338,506,753.07

0.820.70Current Assets To Current Liabilities to 1 to 130.22 31.28 % %Margins and Equities To Total Assets

53.5353.68 %Long-Term Debt To Total Utility Plant %

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Statements of Cash Flows

Southside Electric Cooperative

Period ended Period ended

Februrary 28, 2018 Februrary 28, 2017

Cash flows from operating activities

Electric revenue received 23,580,702$ 20,126,459$

Power supply paid (15,179,689) (13,197,203)

Operating expenses paid (4,856,889) (4,508,709)

Interest received 19,401 18,156

Interest paid (131,368) (128,268)

Cash flows provided by operating activities 3,432,157 2,310,435

Cash flows from investing activities

Investment in electric plant,net (1,984,778) (3,362,126)

Installment loans issued (220,233) (385,191)

Proceeds from retirement of CTC's 18,383 17,207

Cash flows used in investing activities (2,186,628) (3,730,110)

Cash flows from financing activities

Proceeds from lines of credit ‐ 4,500,000

Payments on lines of credit (4,000,000) ‐

Proceeds from long term debt 6,500,000 ‐

Principal payments on long term debt (254,024) (221,110)

Capital credits paid to members, net (151,718) (94,801)

Proceeds from capital credits 10,967 ‐

Deposits collected from customers (7,592) (24,061)

Net change in memberships 50 60

Cash flows provided by financing activities 2,097,683 4,160,088

Net change in cash 3,343,212 2,740,413

Cash at December 31, 2017 and 2016 4,360,481 2,216,595

Cash at February 28, 2018 and 2017 7,703,693$ 4,957,008$

No. Receiving Service

a.

No. Minimum Bills d.

Avg. No. Receiving Service

e.

kWh Sold Cumulative

f.

Amount Cumulative

g.1. Residential Sales (excl seas.) 53,996 22 53,996 186,209,684 20,390,4192. Residential Sales Seasonal3. Irrigation Sales4. Comm. & Ind 1000 KVA or Less 1,935 22 1,932 10,223,084 948,8295. Comm. & Ind Over 1000 KVA 16 0 16 13,942,989 937,3276. Public St. & Highway Lighting 3917. Other Sales to Public Authority 391 5 0 10,366,110 893,7328. Sales for Resale - REA Borr.9. Sales for Resale - Other

10.

(1 thru 9) 56,338 49 56,335 220,741,867 23,170,30611. Other Electric Revenue xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx 177,92512. Total (10 + 11) xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx 23,348,231

THIS MONTH a.

THIS MONTH a.

YEAR-TO-DATE b.

1. Net kWh Generated . . . . . . . . 342,062 671,4092. kWh Purchased . . . . . . . . . . . 79,528,2353. Interchange kWh - Net . . . . . . 4. Total kWh (1 thru 3) . . . . . . . . 79,528,235 (30.56) (7.89)

251,084 345,487January 2018

PART D. CONSUMER SALES AND REVENUE DATA February 2018

CLASS OF SERVICEkWh Sold

b.Amount

c.

(16,184,963)

86,067,190

5,032,765

PART D. CONSUMER SALES AND REVENUE DATA

7,221,661

7,864,605

xxxxxxxxxxxx

9,192,08295,590

9,287,672xxxxxxxxxxxx103,493,250

415,901

ITEM ITEM

8. Percent System Loss (7/4)x100 . .

YEAR-TO-DATE b.

5. Total kWh - Sold . . . . . . . . . . . . 103,493,2509. Maximum Demand (kW) . . . .

205,228,313

205,228,313

220,741,867 10. Month When Maximum Demand Occurred . . .

6. Office Use . . . . . . . . . . . . . . .7. Total unaccounted For

(4 less 5 & 6), . . . . . . . . . . (24,307,077)

YEAR-TO-DATETHIS MONTH

452,620

5,171,634

458,957

Page 6 of 6

Documents

MINUTES SOUTHSIDE ELECTRIC COOPERATIVE MEETING OF …southside.coopwebbuilder2.com/sites/southside/files... · GUESTS: Jason Loehr, Controller John Cheatham of Adams, Jenkins & Cheatham