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FINANCIAL FEASIBILITY ANALYSIS LOAN AMOUNT The RGCWUA is considering requesting between $275,500 and $495,900 in a low interest loan from the CWCB, depending on two factors. First if a favorable power purchase agreement can be negotiated as described below and second if the DOE grant is awarded next year. It is expected that this money will be loaned at 2% for hydropower specific projects. FINANCING SOURCES The entire project is estimated to cost $551,000. The remaining project cost will be met with both cash reserves and possibly a grant from the DOE and/or the Rio Grande Basin Roundtable. The RGCWUA is considering submitting an application to the Rio Grande Basin Roundtable subsequent to finalizing a loan source. REVENUE AND EXPENDITURE PROJECTIONS Xcel Energy is the utility with which a power purchase agreement could be made. Using information from other hydropower projects across the state, we have conservatively estimated that Xcel will be willing to pay about $0.045 per kWhr of energy produced. At this rate, and requesting 90% funding from the CWCB, a 1.5 debt service ratio is not maintained. In order to maintain a 1.5 debt service ratio, the power must be sold at a rate of at least $0.056 per kWhr. A rate of $0.056 per kWhr is a reasonable price for a utility to purchase renewable energy. We are assuming that this purchase would include both the value of the energy and the renewable energy credits (RECs). Currently Xcel is paying between $0.11 and $0.15 per kWhr for only the RECs associated with solar projects of a similar size (between 100 and 500 kV1�. It is not unreasonable to expect Xcel to purchase the power from a hydropower facility at or above $0.056 per kWhr. Annual expenditures for this project include operation and maintenance expenses. We do not expect that this project will reyuire additional staffing at the RGCWUA. Any operational duties can be fulfilled by the existing staff, as minimal oversight of these plants is required on a daily basis. There are maintenance procedures that need to be undertaken annually, including bearing maintenance and replacement. A total of $13,000, escalating at 2% annually has been included in the budget for all operational and maintenance requirements. A pro forma showing annual expense, revenue and net cash flow at both $0.045 and $0.056 per kWhr is included in Appendix C. LOAN REPAYMENT SOURCES As shown in the pro forma, this project generates sufficient revenue to repay the loan. Because of the uncertainty involved with the generation of electricity, both hydrological and mechanical, we understand that the CWCB would expect other more reliable sources of revenue to be pledged for repayment. The RGCWUA are prepared to pledge assessments for the repayment of this loan. Rio Grande Canal Water Users Association � Financial Feasibility Analysis