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MEMORANDUM TO: Mike Serlet and Tim Feehan FROM: Bill Green DATE: June 19,2001 SUBJECT: Consolidated Mutual Financials It is my understanding that the Consolidated Mutual Water Company is requesting an additional $4.60 million to cover cost overruns on the Fortune Reservoir Project. I have updated the financial analyses for Con Mutual as summarized below. Cash Flow John Boyle of Con Mutual provided me with an updated cash flow analysis for the historical period 1998 to 2000 and for projected cash flows for the years 2001 through 2016 (copy attached). The analysis indicates adequate funds in each year ofCWCB loan repayment, which is 2003 through 2012. Financial Ratios I calculated four of the financial ratios (as recommended in Board lending policy no. 4) for the year 2003, which is the first year ofloan repayment. The results are summarized in the attached table. The calculations were based on the following assumptions: A total loan of$20.9 million for 10 years with a combined lending rate of5.00 percent for all three increments of funding, Annual payments will amount to about $2,706,600 for 10 years, and Revenues, expenses and cash reserves are as shown for 2003 in the cash flow projection. Three ofthe ratios: the operating ratio, debt service coverage and debt per tap are all in the strong category. Cash reserves to current expense is in the average (acceptable) category. No problems here. Collateral Board approval of the initial increment of financing for the Fortune Reservoir Project was contingent upon a pledge of revenues by the Company and the conveyance of a security interest in collateral that is equivalent in value to the principal amount of the loan. As security for the loan, the Company has pledged revenues from service charges and stock sales as well as the Company's shares in the Agricultural Ditch on Clear Creek.