15c

• Board Meeting Date: 7/11/2007
• Description: CF Section - New Project Loans - Montezuma Valley Irrigation Company - May Lateral Pipeline Project
• Board Meetings - Doc Type: Memo

Montezuma Valley Irrigation Company
July 2, 2007
Page 3 of 4

Agenda Item 15c

continue to fail. Alternative NO.3 was ruled out because of cost-benefit analysis and it does not
address the issues along the entire canal. Alternative NO.4 was selected, since it is considered
to be the most reliable means of delivery of water to shareholders.

The selected alternative, Alternative No.4, involves construction of a 5 mile long pipeline. This
pipeline will follow the existing ditch except in a few locations.

Total Project cost estimate is:

Total

$4,730,000
$760,000
$330,000
$5,820,000

Construction
Contingency (16%)
Planning/Engineering

The loan request is based on the total design and construction cost estimate for the Project.
Construction is expected to begin November 2007 and to be completed in two phases during
the fall/winter of 07/08 and 08/09.

Financial Analvsis

Table 1 shows a summary of the financial aspects of the Project for the current loan request. A
CWCB Loan of $5,240,000 will have an annual debt service obligation of $266,200 ($242,000
for annual loan payment and $24,200 for the 10% reserve funding) for the loan terms of 2.25%
for 30 years. Financial Policy #7 requires the interest rate to be blended based on the ownership
of company shares. Since over 99% of the Company's shares are owned by agricultural
producers (City of Cortez owns less than one percent), the blended interest rate remains at the
30-year agricultural interest rate of 2.25%.

Table 1. Financial Summary

Total Project Cost $5,820,000
CWCB Loan (90% of Total Project Cost) $5,240,000
CWCB Annual Loan Payment $242,000
CWCB Loan Obligation (including 10% debt reserve funding) $266,200
Before After
Annual Assessments per share (based on 33,284 shares) $14.50 $14.50 *

* Company plans to repay the loan without raising current assessments

Creditworthiness: The Company currently has a contract with the Dolores Water Conservancy
District to pay for a portion of the stored project water in the McPhee Reservoir. The payment is
applied to the District's repayment obligation to the Bureau of Reclamation for construction of
the reservoir. The Company's annual payment to the District of $76,800 lasts through 2038.

The Company has nearly $2.5 million in investments which generates approximately $100,000
in revenue from interest. This revenue was considered in the Company's financial analysis and
shows a strong ability to repay the CWCB loan.