Big Rivers is “Wired for Success,” knowing that 2018’s actions prepare us to meet future challenges and embrace progress.
Big Rivers Electric Corporation is founded on a powerful mission of safety, service, and performance. The company seeks to produce competitive and reliable power, prepare for a strong financial future, and provide the desired services for our three Member-Owners—Jackson Purchase Energy Corporation, Kenergy Corp, and Meade County Rural Electric Cooperative Corporation. Regardless of the opportunity or obstacle, these fundamentals will always drive our direction. We are proud to report that 2018’s direction was one of planning and progress, with crucial steps taken to further strengthen Big Rivers’ operations and position the company for future success.
Employees remain our company’s most valuable assets, and this core belief continues to motivate our priority on safety. Big Rivers added to its statewide recognition by receiving its 48th Governor’s Safety and Health Award in 2018 and retaining its record as the most decorated entity in Kentucky. Kentucky Employers’ Mutual Insurance (KEMI) also recognized Big Rivers’ dedication to employee safety by selecting the company for its third consecutive Destiny Award in 2018. Beyond pushing ourselves to reach higher safety goals, Big Rivers’ recordable incident rate excels when compared to the nation’s highest performing generation and transmission cooperatives. Most importantly, Big Rivers’ achieved the tremendous milestone of two years without a lost-time incident in 2018.
Big Rivers’ workforce underwent a significant transition in 2018, as the company initiated the needed measures to end an unprofitable power contract in early 2019. In August, the Kentucky Public Service Commission ruled in favor of Big Rivers’ request to end its operation of Henderson Municipal Power & Light (HMP&L) Station Two, determining that the plant was “no longer economically viable.” While the ruling represented one of the final steps in terminating the more than 40-year agreement with the city of Henderson, Big Rivers’ leadership had been intensely preparing for the move for years. Big Rivers understood that ceasing operation of Station Two would require a workforce reduction, and the company finalized a careful plan of hiring freezes, attrition, and volunteers in late 2018 to minimize the impact of early 2019 job losses.
While no job loss is desirable, the contract termination is expected to enhance the company’s economic profile moving forward. Big Rivers continues to make strides in strengthening its financial profile, an effort that’s now being recognized by the major credit rating agencies. In July 2018, Fitch upgraded Big Rivers two levels to an investment-grade rating of BBB-, which opens new doors to lending and allows the company to save significant money on borrowing. Fitch based its increase on the company’s solid 2017 financial results, fulfillment of the risk mitigation plan, management of long-term power supply, and successful power contracts. Moody’s issued its own ratings increase a few weeks later, raising its rating to one level below investment grade. The improved financials were further bolstered by an RUS loan in April 2018, granting the company the ability to prepay an existing, higher rate RUS note thereby resulting in an annual interest rate savings of $2.5 million.
Big Rivers’ dedication to securing long-term power contracts came to fruition in 2018, as the company began serving its first Nebraska customers in January. The 2013 agreement with three wholesale Nebraska customers will require 85 MW during the next eight years. In addition, Big Rivers began final preparations for the 2019 launch of a 100 MW, ten-year power contract with the Kentucky Municipal Power Agency executed back in 2016. In June 2018, the company added a significant contract with Owensboro Municipal Utilities. This full requirement, six and half-year contract will start in 2020 and further reduce Big Rivers’ capacity exposure to market prices. These contracts represent a major accomplishment for our company and a successful implementation of our mitigation plan. Although our plan was initially described as overly optimistic, these executed contracts have exceeded our goals to stabilize power prices in less than five years. With Big Rivers’ generation capacity now better aligned with our load, the company will be shifting focus in 2019 to maximizing margins on its current agreements.
Recent years have transformed the size and makeup of Big Rivers, but our mission and vision remain the same.
Big Rivers and its employees are prioritizing safety in our power production and delivery. New technologies are building an even more reliable transmission system, increasing the level of service to our Member-Owners.
We are implementing creative solutions to enhance our financial position. Big Rivers is “Wired for Success,” knowing that 2018’s actions prepare us to meet future challenges and embrace progress.
Paul Edd Butler
Chair, Board of Directors
Robert W. Berry
President and CEO