BOARD00065 ‎(2)‎

• Board Meeting Date: 11/13/2006
• Description: CF Section - Construction Fund and Severance Tax Trust Fund Perpetual Base Account New Loans - Headgate 396 Lateral Corp., LLC - 396 Lateral Pipeline Project
• Board Meetings - Doc Type: Memo

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Headgate 396 Lateral Corporation
November 6, 2006
Page 3 of 4

Agenda Item 10f

Financial Analysis

Table 1 shows a summary of the funding sources for the project. The total estimated cost of the
project is $230,000. The construction will be funded by NRCS at 75% of NRCS unit costs. NRCS
funds are provided after the Project is completed. Therefore, the initial loan amount (during
construction) is $230,000, based on 100% of the estimated total Project cost (Per Policy #11).
The loan will be reduced to $134,000 after the Project is complete and the Corporation receives
funds from NRCS.

Table 1. Project Funding Sources

Funding Source Grant Loan
Initial Loan Phase
NRCS Construction Cost Share - -
CWCB Loan - $230,000
Corporation - -
Total ($230,000) $ $230,000
Post-Construction Loan Phase
NRCS Construction Cost Share $96,000* -
CWCB Loan $134,000
Corporation - -
Total ($230,000) $96,000 $134,000

* Received after construction is complete from NRCS.

Table 2 shows a summary of the financial aspects of the Project. A CWCB Loan of $134,000 will
have an annual payment of $8,530 ($6,400 for the annual loan payment and $2,130 for the
reserve account during the first three years - see loan conditions below) under the loan terms of
2.50% per annum for 30-years. Not considering the loan reserve, the annual loan payment
represents a loan cost of $3.37 per acre-foot for the Project based on an average annual delivery
of 1,900 acre-feet of water. Since all other funding for the Project is in the form of NRCS grants,
the Corporation would have no other debt service on this Project.

Table 2. Financial Summary of Project

Total Project Cost $230,000
CWCB Post-construction Loan Amount $134,000
Annual Loan Payment Amount $6,400
Annual Loan Obligation (including debt reserve funding) $8,530
Annual Project Cost per acre-foot (based on 1900 acre-ft) $3. 37/ac-ft

Creditworthiness: The Corporation was incorporated in September of 2005 for the purpose of
undertaking the Project and therefore has very little financial history and no existing debt. The
members gathered $50,000 ($5,000 x 10 members) for a previous phase of construction, which
was constructed in 2005. Repayment of the CWCB loan for the current project will be
accomplished by annual member assessments according to the Corporation's Funding
Agreement.

Table 3 shows the Financial Ratios for the Corporation. The Corporation proposes to assess the
eleven members equal amounts of $1 ,OOO/member to cover the CWCB Loan and operations &
maintenance costs (estimated at $2,500).