Basin Electric’s financial strength and stability carried the cooperative and its members through the second year of a global pandemic and a winter weather event that impacted the entire central corridor of the United States.
The cooperative managed Winter Storm Uri in February 2021 well as a result of a diversified generation portfolio along with other tools available to mitigate risk, such as an amortization of deferred revenue.
Commodity prices increased significantly in 2021, resulting in revenue at Dakota Gas being more than $200 million higher than in 2020. The largest increases in revenue came from synthetic natural gas, fertilizers, and diesel exhaust fluid. Average synthetic natural gas prices in 2021 were more than double the price in 2020. While sales volumes for fertilizers were lower than in 2020, prices were significantly higher, with urea being more than 80% higher and ammonia 55% higher. For diesel exhaust fluid, sales volumes in 2021 were more than 60% higher than in 2020, and pricing was higher as well.
As Basin Electric’s rates were held steady in 2021, sizeable margins were used to accelerate the early amortization of $77.2 million of Basin Electric’s loss on its investment in Dakota Gasification Company. The expense deferral was initially made in 2018 following a write down of the non-fertilizer assets at Dakota Gas. When the board approved the deferral, they authorized the amortization, or recording of the deferred loss over 20 years, with the option for early amortization. With their action to accelerate, the deferred loss is amortized in its entirety.
Basin Electric was ranked among the nation’s top cooperatives by the National Cooperative Bank in its annual NCB Co-op 100 list, which names the nation’s top 100 revenue-earning cooperative businesses. According to the report, these businesses posted revenue totaling approximately $226 billion. Basin Electric was ranked #1 in the energy industry and #20 overall.
Two of the three ratings agencies, Standard & Poor’s and Moody’s Investors Service, affirmed Basin Electric’s long-term and short-term ratings in 2021. The agencies pointed to Basin Electric’s performance as the cooperative transitions into regulation of the wholesale power rate by the Federal Energy Regulatory Commission, and also the cooperative’s strong membership relationships which support the long-term wholesale power contracts. Basin Electric’s revenue deferral program and strong liquidity were also noted. Fitch Ratings published its affirmation of Basin Electric’s credit rating of A and a stable outlook in February 2022. Basin Electric has maintained close contact with the ratings agencies throughout the COVID-19 global pandemic through regular virtual updates.
Basin Electric’s Information Systems and Telecommunications division and Security Operations Center understand the gravity of protecting the cooperative, including its people, members, and assets.
Cybersecurity threats continue to grow with increasing geopolitical tensions, cybercrime, extremist activism, and the reliance on information and operational technology. Basin Electric puts in place several controls to prevent, detect, respond, and recover from cyberattacks.
In November, Basin Electric tested controls in GridEx VI, a North America-wide exercise sponsored and administered by the North American Electric Reliability Corporation. The exercise simulated an attack on the electric grid, and more than 50 Basin Electric employees from across the cooperative participated.
2021 FINANCIAL SERVICES ACTIVITIES
ELECTRIC RATES – During 2021, Basin Electric’s average Class A rate was 60.1 mills per kilowatt-hour.
SENIOR SECURED BOND RATINGS – Moody’s Investors Service affirmed its A3 rating with a stable outlook, while Fitch Ratings and Standard & Poor’s Rating Services affirmed their A ratings with a stable outlook.
SHORT-TERM RATINGS – Basin Electric’s short-term ratings are F1+ from Fitch, A1 from S&P, and P-2 from Moody’s. Basin Electric uses short-term commercial paper for short-term operating needs and as a source of bridge financing until long-term financing can be secured.
LIQUIDITY – On Dec. 31, 2021, cash and cash equivalents and short-term investments, including restricted and designated cash, totaled $682.9 million. Basin Electric had additional liquidity of $785.8 million in unused lines of credit, for total available liquidity in excess of $1.4 billion.
CONSOLIDATED RESULTS – Basin Electric’s financial statements are consolidated with those of its subsidiaries. For the year ending Dec. 31, 2021, the consolidated net margin and earnings was $76.5 million. This is $1.3 million more than the 2020 consolidated net margin and earnings of $75.2 million.
ELECTRIC – Basin Electric’s total utility operating revenue for 2021 was $2.0 billion, an increase of $343.5 million from 2020. Revenue from member systems totaled $1.7 billion in 2021, an increase of $40.9 million from 2020. Revenue from non-member sales totaled $323.6 million in 2021. The 2021 non-member sales were $193.7 million more than the 2020 non-member sales before revenue deferral activity. Total 2021 sales were $234.6 million more than the 2020 sales before revenue deferral activity. Total utility operating expenses plus interest and other charges before income taxes for 2021 were $2.0 billion, which is $453.8 million more than in 2020. Basin Electric’s margin before income taxes, combined with Basin Cooperative Services’ net operating results, yielded a combined margin of $57.9 million to be allocated to members.
SUBSIDIARY RESULTS – Dakota Gas had a net loss of $1.5 million during 2021, and Dakota Coal had net income of $16.6 million.
ASSETS – The total assets of Basin Electric and its subsidiaries as of Dec. 31, 2021, were $7.9 billion, an increase of $269.0 million from a year earlier.
MEMBER INVESTMENT PROGRAM – Basin Electric’s Member Investment Program ended the year with $302.9 million. The program offers members an additional investment source at a competitive rate of return while providing Basin Electric with an additional source of liquidity.
UTILITY DEBT – As of Dec. 31, 2021, Basin Electric had approximately $4.5 billion of debt outstanding including Member Investment Program obligations and outstanding advances on
lines of credit, at a weighted average interest rate of 4.13%.
EQUITY POSITION – At year-end 2021, Basin Electric had total equity of $1.6 billion, an increase of $56.2 million from 2020. At the end of 2021, equity represented 27.5% of Basin Electric’s total capitalization. As of Dec. 31, 2021, Basin Electric had an equity-to-asset ratio
CAPITAL CREDIT ALLOCATIONS AND RETIREMENTS – In March 2022, Basin Electric allocated $57.9 million to its patrons. Since 1966, Basin Electric has allocated $1.5 billion in patronage capital credits to its members. During 2021, Basin Electric returned $34.5 million of previously allocated capital credits to its members. Basin Electric has retired $378.4 million of allocated patronage capital credits over the history of the cooperative.
RETURN OF CASH TO MEMBERS – Since 2000, Basin Electric has returned nearly $817.2 million to the membership through patronage capital retirements, bill credits, and power cost adjustments.