Moody’s Update Affirms Positive Credit Rating Outlook

Big Rivers Electric Corporation: Update following outlook change to positive

CREDIT OPINION: August 17, 2017

Full Big Rivers Credit Opinion Update

Big Rivers Electric Corporation (Big Rivers, Ba2 positive) has good prospects for achieving
stronger financial metrics that is providing positive momentum for the cooperative’s credit
quality despite its substantial excess generation capacity, which represents a primary credit
constraint along with execution risk while management further implements its load loss
mitigation strategies. Big Rivers is demonstrating a good track record since 2013 to combat
the significant load loss. For example, sizable rate increases approved by the Kentucky Public
Service Commission (KPSC) and cost saving initiatives, among other steps are helping to
compensate for the load loss and maintain the cooperative’s viable financial performance.
The regulatory support should help its funds from operations (FFO) coverage of interest and
debt strengthen over the next 12-18 months closer to 4% and 2.0x, respectively, compared
to 2.2% and 1.5x, respectively, for FY 2016, and should result in the utility being free cash
flow positive for the next three years. Big Rivers maintains ample liquidity with a $130 million
bank line which supplements internal cash flow generation.