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<br />Elk River <br />Municipal Utilities <br />13069 Orono Parkway • P.O. Box 430 <br />Elk River, MN 55330-0430 <br />May 5, 2009 <br />To: Elk River Municipal Utilities Commission <br />John Dietz <br />Jerry Gumphrey <br />Daryl Thompson. <br />From: Theresa Slominski <br />Subject: Cash. Flow Projections <br />51 <br />Phone: 763.441.2020 <br />Fax: 763.441.8099 <br />At last months' commission meeting, our auditors presented the results of their annual utility audit. <br />Historically, the cash flow studies have been reviewed twice annually, once after the audit and again <br />during the budgeting process. These studies project future revenues and expenses to ensure we have <br />adequate financial resources to carry on business. Attached for your review are the updated Springstad <br />cash flow studies for both the electric and water departments. <br />The result of this study is consistent with past studies, that being; our cash reserve continues to rise with <br />time for both departments. The trend is in the right direction. If this trend is correct, we will be able to <br />start funding from cash reserves for some of our larger projects instead of bonding. <br />Our goal in the electric department is to get our restricted account (line 57) to the $3,500,000 for three <br />months operating reserves. This does not occur until the 2011 time frame with a number of critical <br />assumptions which include: <br />1) Passing on Great River Energy's wholesale rate increases; 10% 2010, and 6% thereafter. <br />2) Customer growth rate of 5%-6% and projected consumption of data centers. <br />3) No other unexpected large loads requiring large capital expenditures. <br />4) No factors specific to commitments with power supply negotiations have been factored in. <br />This could be as much as 3,500,000 in the next year of which 500,000 would most likely <br />have to come directly from reserves. <br />Our goal in the water department is to maintain a $2,000,000 reserves made up of emergency, unrestricted <br />and cash (line 53). Depending upon the speed of our growth, water production facilities may vary from <br />the assumed three to four year interval. Water main replacements due to the street rehabilitation projects <br />are having a significant influence on future cash reserves and must be watched. <br />