§ 1710.300 General. ( a ) RUS encourages borrowers to maintain a current long-range financial forecast. The forecast should be used by the board of directors and the manager to guide the system towards its financial goals.
( b ) A borrower must prepare, for RUS review and approval, a long-range financial forecast in support of its loan application. The forecast must demonstrate that the borrower's system is economically viable and that the proposed loan is financially feasible. Loan feasibility will be assessed based on the criteria set forth in § 1710.112.
( c ) The financial forecast and related projections submitted in support of a loan application shall include: ( 1 ) The projected results of future actions planned by the borrower's board of directors;
( 2 ) The financial goals established for margins, TIER, DSC, equity, and levels of general funds to be invested in plant;
( 3 ) A pro forma balance sheet, statement of operations, and general funds summary projected for each year during the forecast period;
( 4 ) A full explanation of the assumptions, supporting data, and analysis used in the forecast, including the methodology used to project loads, rates, revenue, power costs, operating expenses, plant additions, and other factors having a material effect on the balance sheet and on financial ratios such as equity, TIER, and DSC;
( 5 ) Current and projected cash flows;
( 6 ) Projections of future borrowings and the associated interest and principal expenses required to meet the projected investment requirements of the system;
( 7 ) Current and projected kW and kWh energy sales;
( 8 ) Current and projected unit prices of significant variables such as retail and wholesale power prices, average labor costs, and interest;
( 9 ) Current and projected system operating costs, including, but not limited to, wholesale power costs, depreciation expenses, labor costs, and debt service costs;
( 10 ) Current and projected revenues from sales of electric power and energy;
( 11 ) Current and projected non-operating income and expense;
( 12 ) A discussion of the historical experience of the borrower, and in the case of a power supply borrower its member systems as appropriate, with respect to the borrower's market competitiveness as it relates to the rates charged for electricity, competition from other fuels, and other factors. Additional data and analysis may be required by RUS on a case by case basis to assess the probable future competitiveness of those borrowers that have a history of serious competitive problems; and
( 13 ) An analysis of the effects of major factors, such as projected increases in rates charged for electricity, on the ability of the borrower, and in the case of a power supply borrower its member systems, to compete with neighboring utilities and other energy sources.
( d ) The following plans, studies and assumptions shall be used in developing the financial forecast: ( 1 ) The RUS-approved CWP;
( 2 ) RUS-approved power requirements data;
( 3 ) RUS-approved EE Program work plan;
( 4 ) The current rate schedules or new rates;
( 5 ) Future plant additions and operating expenses projected at anticipated future cost levels rather than in constant dollars, with the annual rate of inflation for major items specified; and
( 6 ) A sensitivity analysis may be required by RUS on a case-by-case basis taking into account such factors as the number and type of large power loads, projections of future borrowings and the associated interest, projected loads, projected revenues, and the probable future competitiveness of the borrower. When RUS determines that a sensitivity analysis is necessary for distribution borrowers, the variables to be tested will be determined by the General Field Representative in consultation with the borrower and the regional office. The regional office will consult with the Power Supply Division in the case of generation projects for distribution borrowers. For power supply borrowers, the variables to be tested will be determined by the borrower and the Power Supply Division.
( e ) The financial forecast shall use the accrual method, as approved by RUS, for analyzing costs and revenues, and, as applicable, compare the economic results of the various alternatives on a present value basis.
[57 FR 1053, Jan. 9, 1992, as amended at 63 FR 53277, Oct. 5, 1998; 78 FR 73366, Dec. 5, 2013; 84 FR 32612, July 9, 2019]