C150264 Feasibility Study

• Contract/PO #: C150264
• Contractor Name: Lower Latham Reservoir Company
• Contract Type: Loan
• Water District: 0
• County: Weld
• Loan Projects - Doc Type: Feasibility Study

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The estimated total project cost is $737,817, including the water rights purchase, engineering and
management fees, and bridge loan expenses. We understand that the CWCB would offer LLRC a
loan at 90 percent, resulting in a total loan amount of$664,035. The term and rate for the CWCB
loan is requested to be 30 years at two and one-quarter percent (2.25%). At this rate, annual
payments for the $664,035 loan would be $30,678. This amount does not include the 10 percent
reserve required by the CWCB to be set aside for the first ten years of loan repayment. The 10
percent reserve will set aside for the first ten years will add an annual payment of$3,078, resulting in
a total annual payment of $33,746 for the first ten years.

LLRC's existing loan with CWCB under Contract No. C 150253 includes an annual payment of
$92,149. Combining the above described loan with the LLRC's existing CWCB loan results in an
annual payment of $122,827, excluding reserve payments.

The LLRC has historically operated without debt, or assessment income. Revenue generated from
oil and gas royalties have greatly exceeded operating expenses for many years. LLRC proposes to
utilize the LLRC oil and gas royalties to repay the CWCB loan. In addition, oil and gas operators
have recently notified LLRC that a total of 18 new oil and gas wells will be drilled over the next 12
months that LLRC will receive royalty revenue from. Currently, LLRC draws royalty income from a
total of 52 wells. The additional 18 wells could conceivably increase royalty income by at least 35
percent within the next 12 months. Appendix E includes copies of the financial statements and
budgets for the LLRC for the past three years, verifying the income needed to repay the subject
CWCB loan and balances remaining on the above described bridge loans.

XII. COLATERAL

As security of the loan the LLRC will pledge the project water rights (two shares ofLLDC currently
issued under stock certificate number 1541), and assessment income if needed.

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