BOARD01808

• Board Meeting Date: 11/19/2001
• Description: CF Section - Lake Henry Reservoir Company
• Board Meetings - Doc Type: Memo

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lake Henry Reservoir Co.
November 19-20, 2001

Agenda Item 22g.

Financial Analvsis
The total estimated cost of the project ;s $653,000, and the water is used primarily for municipal
purposes, with some agricultural use. Staff is recommending a 30-year loan in maximum
amount of $490K (approximately 75% of the estimated total project cost.)

801 of the LHRC shares are owned and used for agricultural purposes, with this use expected
to continue for the foreseeable future. The remaining 8,167 shares are currently, or will soon
be, used for municipal or domestic purposes. Table 2 shows the calculation of the interest rate
for this project:

Table 2: LHRC Share Ownership and Interest Rate

Shareholder Rate Cateaorv Year 2001 Rate # Shares LHRC Rate x Shares
AOricultural fi.ciricultural 3.25% 801 26
Municipal Municipal 5% 1164 58
(Aurora\ Hiah Income
Municipal Municipal 4.5% 6923 312
(Colorado Snrinns\ Middle Income
Municipal Municipal 3.75% 80 3
(Suaar Citvl Low Income
Totals 8968 399
4.45 %
30-year blended rate for LHRC Blended Rate = 399/8968 shares (Round to 4.5 %)

Alternative financing sources: The Company actively sought alternative financing but was
not able find such. They requested a loan from their local bank (The First National Bank of
Ordway) but the bank does not provide long-term fixed rate financing for agricultural projects.
The Bank was able to commit to provide financing during construction, if needed, and to
provide financing of the Company's 25% cost share at typical bank terms.

Table 3 is a summary of the financial aspects of the project. A CWCB Loan of $490K would
have an annual payment of $33,090 (including the 10% reserve requirement) at the loan terms
of 4.5% for 30 years. This represents $3.48 per acre-foot, based on a reservoir capacity of
9,500 acre-feet.

Table 3. Financial Summary

$653,000
12
8968
$490,000
$33,090
$7.75
$11.44
$3.48

Credit worthiness: The LHRC has no existing debt. Table 4 shows the Financial Ratios for the
LHRC and indicates average to strong ability to repay the $490K CWCB loan with the project in
place. The financial evaluation assumes the Company obtains a bank loan for their cost share
at terms of 8% for 10 years, with an annual payment of $24,329.

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