BOARD01958

• Board Meeting Date: 7/20/2004
• Description: CF Section - New Loans - Smart Brothers, Inc. - Groundwater Recharge Project
• Board Meetings - Doc Type: Memo

Smart Bros. Inc.
July 20-21, 2004

Agenda Item 14a

Financial Analvsis

The total estimated cost of the project is $266,500. Staff is recommending a maximum loan amount
of $239,850 (90% of the estimated project cost) for 30 years at an interest rate of 2.5%. SBI will
provide the additional $26,650.

Table 1 is a summary of the financial aspects of the project. A CWCB Loan of $239,850 would
have an annual payment of $12,605 (including the 10% reserve requirement) at the loan terms of
2.5% for 30 years. The loan payment of $12,605 amounts to approximately $8.40 to $12.61 per
acre foot of water diverted into recharge, depending on the amount diverted.

Table 1. Financial Summa

Pro' ect Cost
CWCB Loan Amount 30 ears
CWCB Loan Pa ment includes 10% reserve
Annual Cost of Loan per AF (rechar e diversions of 1000 - 1500 ac-ft.

$266,500
$239,850
$12,605
$8.40 - 12.61

Current market value for augmentation water in that portion of the river is approximately $20 per
acre-foot. The loan payment will be offset with savings from a reduction in LWU assessments and
the revenue generated from the lease of any excess augmentation credits from the project.

Creditworthiness: SB! obtains their annual operating loan from The Cooperative Finance
Association (CFA) in Kansas City, Missouri. They also have $202,500 equipment loan with CFA
with an annual payment of $62,000 through 2010. In addition, they have $979,670 land loan with
Premier Farm Credit in Sterling, with annual payments (P & I) of $92,288 through 2022.

Table 2 shows the Financial Ratios for SBI and indicates average to strong ability overall to repay
the $239,850 CWCS loan.

Table 2. Financial Ratios

Financial Ratio Without With completed
the project project
(Aver. 2001.03) (Future Year)
Operating Ratio (revenue/expense)
weak: less than 100% 119% 119%
average: 100% - 120% (aver.) (aver.)
strano: oreater than 120%
Debt Service Coverage Ratio
(revenues-expenses)/debt service 225% 208%
weak: less than 100% (strong) (strong)
average: 100% - 125%
strong: greater than 125%
Cash Reserves to Current Expense
weak: less than 50% 23% 10%
average: 50% - 100% (weak) (weak)
strono: oreaterthan 100%
Annual Operating Cost per Acre-Ft. (1215AF
weak: greater than $20 Depletions) $21 $22
average: $10 - $20 (weak) (weak)
strono: less than $10

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