BOARD02622

• Board Meeting Date: 7/25/2006
• Description: CF Section - Revisions to Existing Loans - Consolidated Mutual Water Company - Loan Payment Deferral Request
• Board Meetings - Doc Type: Memo

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Consolidated Mutual Water Company
July 17. 2006
Page 3 of 4

Agenda Item 9a

Discussion

The Board has the statutory authority under Section 37-60-120 (3), CRS to make loan deferments
provided the borrower has encountered significant and unexpected financial difficulties, and that it
has been duly diligent in its efforts to comply with the repayment provisions of its contract with the
Board. The Board's Financial Policy #10 (attached) clearly provides guidance in the resolution of
this request.

The deferral is based on the Board's finding that the Company has encountered financial hardships
beyond its control, and that it has been duly diligent in its efforts to comply with the repayment
provisions of its contracts with the Board. The restructuring of the Company's loan repayment
schedule allows the loan to remain with CWCB and also allows Consolidated Mutual Water
Company relief from its current financial hardship.

Creditworthiness: The Company has five year history of prompt loan repayment to CWCB. The
Company is required to maintain a reserve account during the life of the loan. The Company has
placed six installments (1/20'h of a annual payment or $133.520) in the account. The Company
carries a $250,000 unsecured line of credit with a local bank. The Company has recently raised
water rates each year about 5% to 6%. This is primarily a result of increases in the cost of water
from the Denver Water Board. As of January 2006, the Company had $9.7 million in cash and cash
equivalents. Repayment of the revised loan will be accomplished utilizing the current assessments.

Table 4 shows the Financial Ratios for the Company before, during and after the deferral years.

Table 4. Financial Ratios

Financial Ratio 2006 2007-2011 2012&2013
Operating Ratio (revenues/expenses) 136% 130% 128%
tweak: <100% I-I average: 100% -120% I-I strong: >120%1 (Strong) (Strong) (Strong)
Debt Service Coverage Ratio 161% 128% 82%
(revenues-expenses)/debt service
I weak: <100% , -I average: 100% -120% I-I strong: >120%1 (Strong) (Strong) (Weak)
Debt Service per Tap $134 $153 $247
(20,840 taps)
f.veak: >$5,000 1- I average: $5.000 - $2.500 1- I strong: <$2.5001 (Strong) (Strong) (Strong)
Cash Reserves to Current Expenses 56% 95% 148%
) weak: <50% I-I average: 50% - 100% 1- I strong: >100%1 (Weak) (Average) (Strong)