Tri-State Generation and Transmission Association Inc.
08/07/2026 | Press release | Distributed by Public on 08/07/2026 08:11
Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
Tri-State is a taxable wholesale electric power generation and transmission cooperative operating on a not-for-profit basis. Tri-State was formed by its Utility Members for the purpose of providing wholesale power and transmission services to its Utility Members (which are distribution electric cooperatives and public power districts) for their resale of the power to their retail consumers. Utility Members serve large portions of Colorado, Nebraska, New Mexico and Wyoming. Tri-State also sells a portion of its generated power to other utilities pursuant to long-term contracts and short-term sale arrangements. Utility Members provide retail electric service to suburban and rural residences, farms and ranches, cities, towns and communities, as well as large and small businesses and industries.
Tri-State is owned entirely by its forty-two Members of which thirty-nine are Utility Members. Thirty-five of the Utility Members are not-for-profit, electric distribution cooperative associations. Four Utility Members are public power districts, which are political subdivisions of the State of Nebraska. Tri-State also has three Non-Utility Members. Tri-State is regulated as a public utility under Part II of the FPA.
Tri-State supplies and transmits its Utility Members' power requirements through a portfolio of resources, including generation and transmission facilities, long-term purchase contracts and short-term energy purchases. Tri-State owns, leases, has undivided interests in, or long-term purchase contracts with respect to various generating facilities. Tri-State's diverse generation portfolio has a maximum available power of 4,948 MWs, of which approximately 1,959 MWs comes from renewables.
Tri-State sold 8.4 million MWhs for the six months ended June 30, 2026, of which 76.0 percent was to Utility Members. Total revenue from electric sales was $643.6 million for the six months ended June 30, 2026 of which 82.6 percent was from Utility Member sales. Tri-State's results for the six months ended June 30, 2026 were primarily impacted by warmer than average temperatures, lower natural gas prices and strong seasonal demand for power that enabled Tri-State to sell surplus energy through bilateral sales and organized wholesale electricity markets, including SPP.
•Utility Member electric sales increased $17.7 million, or 3.5 percent, due to Utility Member load growth and a 7.0 percent increase in the formulary rate charged to Utility Members.
•Non-member electric sales increased $19.3 million, or 20.7 percent, due to higher long-term and short-term market sales.
•Rate stabilization represents recognition of previously deferred income from withdrawal of former Utility Members from membership in Tri-State. Tri-State recognized $34.2 million of rate stabilization revenue for the six months ended June 30, 2026 compared to $88.1 million for the same period in 2025.
•Other operating revenues increased $37.3 million, or 55.0 percent, due to higher transmission revenue and higher lease revenue related to a tolling agreement for one combustion turbine unit that began in January 2026.
•Fuel expense decreased $15.9 million, or 18.0 percent, primarily due to a lower generation at Tri-State's coal-fired generating facilities.
Wholesale Electric Service Contracts
Tri-State's Bylaws require each Utility Member, unless otherwise specified in a written agreement or the terms of the Bylaws, to purchase from Tri-State power and energy as provided in the Utility Member's all-requirements wholesale electric service contract with Tri-State. Each contract obligates Tri-State to sell and deliver to the Utility Member, and the Utility Member to purchase and receive from Tri-State, all energy and capacity required for the operation of the Utility Member's system, as modified by two programs accepted by FERC (a self-supply percentage and the BYOR Program). See also "Item 1 - BUSINESS - MEMBERS" in Tri-State's annual report on Form 10-K for the year ended December 31, 2025.
Thirty-two Utility Members have wholesale electric service contracts with an initial expiration date of December 31, 2066. Seven Utility Members have wholesale electric service contracts with an initial expiration date of December 31, 2050.
In June 2025, Tri-State filed with FERC Tri-State's revised wholesale electric service contracts and Tri-State's Board Policy for Member System Distributed Resource Policy, which FERC accepted in August 2025 and set them for settlement and hearing procedures. In March 2026, Tri-State filed an uncontested settlement agreement with FERC to resolve all issues set for
settlement related to such documents. As part of the settlement, Tri-State's Board Policy was revised related to Utility Member self-supply projects in the Eastern Interconnection. On May 26, 2026, FERC approved the settlement agreement.
Member Withdrawals and Relationship with Members
Pursuant to Tri-State's Bylaws, a Member may only withdraw from membership in Tri-State upon compliance with such equitable terms and conditions as Tri-State's Board may prescribe provided, however, that no Member shall be permitted to withdraw until it has met all its contractual obligations to Tri-State. Tri-State's contract termination payment tariff on file with FERC as Rate Schedule No. 281 provides a process should a Utility Member elect to withdraw from membership in Tri-State and terminate its wholesale electric service contract. The tariff process includes requirements for a two-year notice and the payment to Tri-State of a contract termination payment. See also "Item 1 - BUSINESS - MEMBERS - Contract Termination Payment and Relationship with Members" in Tri-State's annual report on Form 10-K for the year ended December 31, 2025.
On April 1, 2026, LPEA withdrew from membership in Tri-State and pursuant to Tri-State's contract termination payment tariff on file with FERC and a membership withdrawal agreement, terminated its wholesale electric service contract with Tri-State. In accordance with the membership withdrawal agreement, LPEA paid Tri-State a final payment of $159.3 million, consisting of a total contract termination payment of $208.4 million, less a $49.1 million credit for the discounted value of LPEA's patronage capital in Tri-State. Of the total contract termination payment, $88.9 million was deferred as a regulatory liability for future transmission service as required by the contract termination payment tariff. The remaining $119.5 million membership withdrawal income was deferred as a regulatory liability for future rate stabilization. Tri-State and LPEA also entered into a purchase and sales contract to sell LPEA certain assets for $7.3 million that closed on April 24, 2026.
In December 2024, NRPPD, which is electrically served in the Eastern Interconnection, provided Tri-State a non-conditional notice to withdraw from membership in Tri-State, with a January 1, 2027, withdrawal effective date. On August 4, 2026, Tri-State filed with FERC an unexecuted Membership Withdrawal Agreement with NRPPD because the parties were not able to agree on all terms. See "OTHER INFORMATION."
In November 2025, three Nebraska Utility Members provided Tri-State non-conditional notices to withdraw from membership in Tri-State, including CRPPD, which is electrically served in both the Eastern and Western Interconnections; PREMA, which is electrically served in the Eastern Interconnection; and RPPD, which is electrically served in the Western Interconnection, each with a December 1, 2027, withdrawal effective date. In March 2026, WBPPD, which is electrically served in both the Eastern and Western Interconnections, and Jemez, which is electrically served in the Western Interconnection, each provided Tri-State a non-conditional notice to withdraw from membership in Tri-State, with an April 1, 2028, withdrawal effective date. In May 2026, MECC, which is electrically served in the Eastern Interconnection, provided Tri-State a non-conditional notice to withdraw from membership in Tri-State, with a June 1, 2028, withdrawal effective date.
Tri-State cannot predict if any of these seven Utility Members will actually withdraw from membership in Tri-State. These seven Utility Members comprised 8.6 percent of Tri-State's Utility Member revenue for the six months ended June 30, 2026 and 8.7 percent of Tri-State's Utility Member revenue for the year ended December 31, 2025.
Certain elements of Tri-State's contract termination payment tariff remain subject to ongoing proceedings at the Tenth Circuit Court of Appeals and D.C. Circuit Court of Appeals. See Note 18 to the Unaudited Consolidated Financial Statements in Item 1 for further information and Item 1 - BUSINESS - MEMBERS - Contract Termination Payment and Relationship with Members" in Tri-State's annual report on Form 10-K for the year ended December 31, 2025.
Consistent with prior withdrawals of Utility Members, Tri-State anticipates that some or all of contract termination payments received may be deferred as regulatory liabilities, subject to Tri-State's Board's discretion, and the contract termination payments may be recognized as revenue in future periods to offset the revenue otherwise recoverable from Utility Members. See also "Item 1 - BUSINESS - MEMBERS - Contract Termination Payment and Relationship with Members" and "RISK FACTORS - Members and Regulatory Risks" in Tri-State's annual report on Form 10-K for the year ended December 31, 2025.
Recent Developments
In March 2026, Tri-State filed with FERC a new tariff and pro forma agreement to create a repeatable process to address requests to serve high impact loads that have large load requirements, including data centers. In May 2026, FERC issued a deficiency letter and requested additional information. In June 2026, Tri-State filed a response with additional information with FERC. Tri-State anticipates a FERC decision on the filing in August 2026.
On June 26, 2026, Tri-State, the other owners, and SPP received an emergency order from the Department of Energy under Section 202(c) of the FPA directing that Craig Generating Station Unit 1 be available to operate for 90 days, and for SPP to employ economic dispatch of Craig Generating Station Unit 1 to minimize costs to ratepayers.
Changing Environmental Regulations
Tri-State is subject to various federal, state and local laws, rules and regulations with regard to air quality, including greenhouse gases, water quality and other environmental matters. These environmental laws, rules and regulations are complex and change frequently.
For a discussion regarding potential effects on Tri-State's business from environmental regulations, see "Item 1 - BUSINESS - ENVIRONMENTAL REGULATION" and "Item 1 - RISK FACTORS" in Tri-State's annual report on Form 10-K for the year ended December 31, 2025 and "Item 2- MANAGEMENT'S DISCUSSION AND ANALYSIS" in Tri-State's quarterly report on Form 10-Q for the quarter ended March 31, 2026.
Critical Accounting Policies
The preparation of Tri-State's financial statements in conformity with GAAP requires that its management make estimates and assumptions that affect the amounts reported in its consolidated financial statements. Tri-State based these estimates and assumptions on information available as of the date of the financial statements and they are not necessarily indicative of the results to be expected for the year. As of June 30, 2026, there were no material changes in Tri-State's critical accounting policies as disclosed in its annual report on Form 10-K for the year ended December 31, 2025.
Factors Affecting Results
Master Indenture
As of June 30, 2026, Tri-State had approximately $2.9 billion of secured indebtedness outstanding under its Master Indenture. Substantially all of Tri-State's tangible assets and certain of its intangible assets are pledged as collateral under its Master Indenture. Tri-State's Master Indenture requires Tri-State to establish rates annually that are reasonably expected to achieve a DSR of at least 1.10 on an annual basis and permits Tri-State to incur additional secured obligations as long as, after giving effect to the additional secured obligation, it will continue to meet the DSR requirement on both a historical and pro forma basis. Tri-State's Master Indenture also requires Tri-State to maintain an ECR of at least 18 percent at the end of each fiscal year. Pursuant to Tri-State's Master Indenture, the DSR and ECR are calculated based on unconsolidated Tri-State financials and calculated in accordance with the system of accounts proscribed by FERC, not GAAP.
Margins and Patronage Capital
Tri-State operates on a cooperative basis and, accordingly, seeks only to generate revenues sufficient to recover its cost of service and to generate margins sufficient to meet certain financial requirements and to establish reasonable reserves. Revenues in excess of current period costs in any year are designated as net margins in Tri-State's consolidated statements of operations. Net margins are treated as advances of capital by the Members and are allocated to its Utility Members on the basis of revenue from electricity purchases from Tri-State and to the Non-Utility Members as provided in their respective membership agreement.
Tri-State's Board Policy for Financial Goals and Capital Credits, approved and subject to change by Tri-State's Board and acceptance by FERC, sets guidelines to achieve margins and retain patronage capital sufficient to maintain a sound financial position and to allow for the orderly retirement of capital credits allocated to the Members. On a periodic basis, Tri-State's Board determines whether to retire patronage capital, and in what amounts, to its Members.
Tri-State's Board Policy for Financial Goals and Capital Credits includes three financial ratio goals for which Tri-State sets rates: (i) a minimum DSR of at least 1.15, (ii) a minimum ECR of at least 20 percent, and (iii) a minimum net margin attributable to Tri-State in each fiscal year of at least $20 million. Tri-State's Board Policy also provides that any extraordinary funds, such as contract termination payments, received by Tri-State will be recorded (a) in the year received to increase net margins, subject to loan agreement restrictions, (b) in the year received with the same amount of regulatory assets written off in the same fiscal year, resulting in no net change in net margins, or (c) deferred as a regulatory liability in the year received and recognized as revenue in future period or periods, with the oldest vintage year used first. Tri-State recognized $45.4 million of previously deferred membership withdrawal income during the six months ended June 30, 2026.
Rates and Regulation
Tri-State's electric sales revenues are derived from wholesale electric service sales to the Utility Members and non-member purchasers. Revenues from power sales to the Utility Members are primarily from Tri-State's Class A wholesale rate schedule filed with FERC. Revenues from wholesale power sales to Tri-State's non-member purchasers are primarily pursuant to Tri-State's market-based rate authority.
Tri-State's Class A wholesale rate schedule (A-41) for power sales to its Utility Members on file with FERC is a postage stamp rate, with the same rate components for all Utility Members, and incorporates a formulary rate, which can be adjusted annually based on the budget approved by Tri-State's Board, including an annual true-up mechanism. The A-41 rate components are both energy-based and demand-based. For further information, see "Item 1 - BUSINESS - RATE REGULATION" in Tri-State's annual report on Form 10-K for the year ended December 31, 2025.
In June 2026, FERC approved Tri-State's proposal to record unrealized gains and losses due to changes in fair market value of hedging instruments as a regulatory asset or liability and to recover realized gains and losses through Tri-State's A-41 rate.
Tri-State's Board may, from time to time, subject to FERC approval, create new regulatory assets or liabilities or modify the expected recovery period through rates of existing regulatory assets or liabilities.
Tax Status
Tri-State is a taxable cooperative subject to federal and state taxation. As a taxable electric cooperative, Tri-State is allowed a tax exclusion for margins allocated as patronage capital. Tri-State utilizes the liability method of accounting for income taxes which requires that deferred tax assets and liabilities be determined based on the expected future income tax consequences of events that have been recognized in the consolidated financial statements. Tri-State and its subsidiaries use the flow-through method for recognizing deferred income taxes whereby changes in deferred tax assets or liabilities result in the establishment of a regulatory asset or liability, as approved by Tri-State's Board. A regulatory asset or liability associated with deferred income taxes generally represents the future increase or decrease in income taxes payable that will be settled or received through future rate revenues.
Results of Operations
General
Tri-State's electric sales revenues are derived from wholesale electric service sales to its Utility Members and non-member purchasers. See "Factors Affecting Results - Rates and Regulation" for a description of Tri-State's energy and demand rates to its Utility Members. Long-term contract sales to non-members generally include energy and demand components. Short-term sales to non-members are sold at market prices after consideration of incremental production costs. Demand billings to non-members are typically billed per kilowatt of capacity reserved or committed to that customer.
Weather has a significant effect on the peak demand and total usage of electricity and consequently, on revenues. Relatively higher summer or colder winter temperatures tend to increase the usage of electricity for heating, air conditioning and irrigation. Mild weather generally reduces the usage of electricity. The amount of precipitation during the growing season (generally May through September) impacts irrigation use. Other factors affecting the Utility Members' usage of electricity include:
•the amount, size and usage of machinery and electronic equipment;
•the expansion or contraction of operations among the Utility Members' commercial and industrial customers;
•the general growth in population; and
•economic conditions.
Other Impacts
Tri-State's ability to meet its Utility Members' power requirements and complete its capital projects is dependent on maintaining an efficient supply chain. The procurement and delivery of materials and equipment have been impacted by domestic and global supply chain disruptions. Tri-State is experiencing longer lead-times on procurement of certain materials and equipment. Supply chain inflation and tariffs have contributed to higher prices for materials and equipment. Tariffs are far reaching, widespread, and changing, making it difficult for Tri-State and its suppliers to plan for, avoid or mitigate the impacts of higher costs throughout the supply chain. Tri-State continues to monitor potential impacts to its operations and estimated capital expenditures and timing of projects related to inflationary pressures, tariffs, and supply chain disruptions.
Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025
Operating Revenues
Tri-State's operating revenues are primarily derived from power sales to its Utility Members and non-member purchasers. Other operating revenue consists primarily of transmission and lease revenue. The following is a comparison of Tri-State's operating revenues and energy sales in MWh by type of purchaser for the three months ended June 30, 2026 and 2025 (dollars in thousands):
| Three Months Ended June 30, | Period-to-period Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | Percent | ||||||||||||||||||||
| Operating revenues | |||||||||||||||||||||||
| Utility Member electric sales | $ | 270,463 | $ | 257,649 | $ | 12,814 | 5.0 | % | |||||||||||||||
| Non-member electric sales | 55,377 | 44,497 | 10,880 | 24.5 | % | ||||||||||||||||||
| Rate stabilization | 9,369 | 43,183 | (33,814) | (78.3) | % | ||||||||||||||||||
| Provision for rate refunds | (11,573) | 5,273 | (16,846) | 100.0 | % | ||||||||||||||||||
| Other | 72,817 | 39,525 | 33,292 | 84.2 | % | ||||||||||||||||||
| Total operating revenues | $ | 396,453 | $ | 390,127 | $ | 6,326 | 1.6 | % | |||||||||||||||
| Energy sales (in MWh): | |||||||||||||||||||||||
| Utility Member electric sales | 3,201,814 | 3,231,954 | (30,140) | (0.9) | % | ||||||||||||||||||
| Non-member electric sales | 1,096,886 | 693,077 | 403,809 | 58.3 | % | ||||||||||||||||||
| 4,298,700 | 3,925,031 | 373,669 | 9.5 | % | |||||||||||||||||||
•Excluding LPEA, Utility Member load increased 162,266 MWhs during the three months ended June 30, 2026 compared to the same period in 2025. Additionally, there was a 6.0 percent increase in the average rates charged to Utility Members, which resulted in an overall increase in Utility Member electric sales revenue of $12.8 million for the three months ended June 30, 2026 compared to the same period in 2025.
•Non-member electric sales revenue increased primarily due to higher long-term sales. Long-term sales increased 178,653 MWhs to 648,386 MWhs for the three months ended June 30, 2026 compared to 469,733 MWhs for the same period in 2025. Sales of excess power to non-members after membership withdrawals contributed significantly to the increase in non-member electric sales.
•Tri-State recognized $9.4 million of previously deferred membership withdrawal income during the three months ended June 30, 2026 compared to $43.2 million of deferred membership withdrawal income being recognized during the same period in 2025 as part of its rate stabilization measures.
•Provision for rate refunds reduced revenues during the three months ended June 30, 2026 compared to the same period in 2025 due to the recording of estimated amounts that are subject to refund to transmission customers. Tri-State is subject to ongoing proceedings at FERC regarding inputs used in transmission rates of transmission owners under SPP's OATT related to the expansion of SPP's regional transmission organization into the Western Interconnection. FERC accepted proposed rates subject to refund and established hearing and settlement procedures. These settlement discussions are ongoing and the matter has not been fully resolved.
•Other operating revenue increased primarily due to higher transmission revenue and an increase in lease revenue related to a tolling agreement for one combustion turbine unit that began in January 2026.
Operating Expenses
Tri-State's operating expenses are primarily comprised of the costs that Tri-State incurs to supply and transmit its Utility Members' power requirements through a portfolio of resources, including generation and transmission facilities, long-term purchase contracts and short-term energy purchases and the costs associated with any sales of power to non-members.
The following is a summary of the components of Tri-State's operating expenses for the three months ended June 30, 2026 and 2025 (dollars in thousands):
| Three Months Ended June 30, | Period-to-period Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | Percent | ||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Purchased power | $ | 124,293 | $ | 110,405 | $ | 13,888 | 12.6 | % | |||||||||||||||
| Fuel | 28,023 | 36,543 | (8,520) | (23.3) | % | ||||||||||||||||||
| Production | 50,621 | 37,686 | 12,935 | 34.3 | % | ||||||||||||||||||
| Transmission | 48,401 | 41,869 | 6,532 | 15.6 | % | ||||||||||||||||||
| General and administrative | 40,763 | 39,977 | 786 | 2.0 | % | ||||||||||||||||||
| Depreciation, amortization and depletion | 47,972 | 71,154 | (23,182) | (32.6) | % | ||||||||||||||||||
| Coal mining | 5,951 | 13,530 | (7,579) | (56.0) | % | ||||||||||||||||||
| Other | 3,246 | 2,032 | 1,214 | 59.7 | % | ||||||||||||||||||
| Total operating expenses | $ | 349,270 | $ | 353,196 | $ | (3,926) | (1.1) | % | |||||||||||||||
•Purchased power expense increased during the three months ended June 30, 2026 compared to the same period in 2025 primarily due to higher average costs of purchased power of 3.4 percent and higher energy purchases of 299,367 MWh, or 11.3 percent.
•Fuel expense was lower during the three months ended June 30, 2026 compared to the same period in 2025 primarily due to a decrease of 299,483 MWh in generation by Tri-State's coal-fired generating facilities.
•Depreciation, amortization and depletion expense decreased primarily due to Colowyo Mine related assets reaching the end of their useful lives which reduced depreciation, amortization and depletion expense by $24.5 million in the second quarter of 2026 compared to the same period in 2025.
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
Operating Revenues
The following is a comparison of Tri-State's operating revenues and energy sales in MWh by type of purchaser for the six months ended June 30, 2026 and 2025 (dollars in thousands):
| Six Months Ended June 30, | Period-to-period Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | Percent | ||||||||||||||||||||
| Operating revenues | |||||||||||||||||||||||
| Utility Member electric sales | $ | 531,385 | $ | 513,649 | $ | 17,736 | 3.5 | % | |||||||||||||||
| Non-member electric sales | 112,167 | 92,903 | 19,264 | 20.7 | % | ||||||||||||||||||
| Rate stabilization | 34,209 | 88,126 | (53,917) | (61.2) | % | ||||||||||||||||||
| Provision for rate refunds | (11,573) | 2,719 | (14,292) | 100.0 | % | ||||||||||||||||||
| Other | 105,265 | 67,930 | 37,335 | 55.0 | % | ||||||||||||||||||
| Total operating revenues | 771,453 | 765,327 | $ | 6,126 | 0.8 | % | |||||||||||||||||
| Energy sales (in MWh): | |||||||||||||||||||||||
| Utility Member electric sales | 6,410,473 | 6,610,793 | (200,320) | (3.0) | % | ||||||||||||||||||
| Non-member electric sales | 2,026,137 | 1,455,804 | 570,333 | 39.2 | % | ||||||||||||||||||
| 8,436,610 | 8,066,597 | 370,013 | 4.6 | % | |||||||||||||||||||
•Excluding two former Utility Members, Utility Member load growth increased 64,946 MWhs during the six months ended June 30, 2026 compared to the same period in 2025. Additionally, there was a 7.0 percent increase in the average rates charged to Utility Members, which resulted in an overall increase in Utility Member electric sales revenue of $17.7 million for the six months ended June 30, 2026 compared to the same period in 2025.
•Non-member electric sales revenue increased primarily due to higher long-term and short-term market sales. Long-term sales increased 319,121 MWhs to 1,319,876 MWhs for the six months ended June 30, 2026 compared to the same period in 2025. Short-term market sales increased 236,179 MWhs to 472,332 MWhs for the six months ended June 30, 2026 compared to the same period in 2025. The ability to sell excess power to non-members after Utility Member membership withdrawals contributed significantly to the increase in non-member electric sales.
•Tri-State recognized $34.2 million of deferred membership withdrawal income during the six months ended June 30, 2026 compared to $88.1 million of deferred membership withdrawal during the same period in 2025 as part of its rate stabilization measures.
•Other operating revenue increased primarily due to higher transmission revenue and an increase in lease revenue related to a tolling agreement for one combustion turbine unit that began in January 2026.
Operating Expenses
The following is a summary of the components of Tri-State's operating expenses for the six months ended June 30, 2026 and 2025 (dollars in thousands):
| Six Months Ended June 30, | Period-to-period Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | Percent | ||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Purchased power | 235,412 | 207,549 | $ | 27,863 | 13.4 | % | |||||||||||||||||
| Fuel | 72,446 | 88,343 | (15,897) | (18.0) | % | ||||||||||||||||||
| Production | 94,244 | 74,180 | 20,064 | 27.0 | % | ||||||||||||||||||
| Transmission | 90,268 | 85,959 | 4,309 | 5.0 | % | ||||||||||||||||||
| General and administrative | 87,176 | 79,278 | 7,898 | 10.0 | % | ||||||||||||||||||
| Depreciation, amortization and depletion | 96,736 | 143,935 | (47,199) | (32.8) | % | ||||||||||||||||||
| Coal mining | 10,148 | 7,172 | 2,976 | 41.5 | % | ||||||||||||||||||
| Other | 5,870 | 5,042 | 828 | 16.4 | % | ||||||||||||||||||
| Total operating expenses | $ | 692,300 | $ | 691,458 | $ | 842 | 0.1 | % | |||||||||||||||
•Purchased power expense increased during the six months ended June 30, 2026 compared to the same period in 2025 primarily due to higher average costs of 5.4 percent and higher energy purchases of 456,822 MWh, or 9.1 percent.
•Fuel expense decreased during the six months ended June 30, 2026 compared to the same period in 2025 primarily due to a decrease of 517,814 MWh in generation by Tri-State's coal-fired generating facilities.
•Production expense increased during the six months ended June 30, 2026 compared to the same period in 2025 primarily due to increased maintenance expenses at Tri-State's coal-fired generating facilities.
•Depreciation, amortization and depletion expense decreased primarily due to Colowyo Mine related assets reaching the end of their useful lives which reduced depreciation, amortization and depletion expense by $51.1 million for the six months ended June 30, 2026 compared to the same period in 2025.
Financial Condition as of June 30, 2026 Compared to December 31, 2025
The principal changes in Tri-State's financial condition from December 31, 2025 to June 30, 2026 were due to increases and decreases in the following:
Assets
•Construction work in progress increased $66.0 million to $209.9 million as of June 30, 2026 compared to $143.9 million as of December 31, 2025. The increase was primarily due to capital expenditures for various transmission and generation projects.
Liabilities
•Short-term borrowings increased $211.6 million to $211.7 million as of June 30, 2026 compared to $0.1 million as of December 31, 2025. The increase was due to issuance of commercial paper to support capital expenditures and to repay the $160 million balance on Tri-State's 2022 Revolving Credit Agreement.
•Regulatory liabilities increased $157.7 million, or 44.0 percent, to $516.1 million as of June 30, 2026 compared to $358.4 million as of December 31, 2025. The increase was primarily due to LPEA's withdrawal from membership in Tri-State and the termination of its wholesale electric service contract with Tri-State. Regulatory liabilities was also impacted by the recognition of deferred membership withdrawal income of $34.2 million and amortization of transmission credit from former Utility Members of $4.7 million during the six month period ended June 30, 2026.
Liquidity and Capital Resources
Tri-State finances its operations, working capital needs and capital expenditures from operating revenues and issuance of short-term and long-term borrowings. As of June 30, 2026, Tri-State had $182.6 million in cash and cash equivalents. Tri-State's committed credit arrangement as of June 30, 2026 is as follows (dollars in thousands):
|
Authorized Amount |
Available June 30, 2026 |
|||||||||||||
| 2026 Credit Agreement | $ | 650,000 | $ | 429,977 | (1) | |||||||||
(1)The portion of this facility that was unavailable as of June 30, 2026 was $220 million which was dedicated to support outstanding commercial paper and letters of credit.
On April 21, 2026, Tri-State entered into the 2026 Credit Agreement that amended and restated the 2022 Revolving Credit Agreement with aggregate commitments of $650 million. The 2026 Credit Agreement has a maturity date of April 21, 2031, unless extended as provided therein. The 2026 Credit Agreement includes swingline loan and letter of credit sublimits of $150 million each, of which $150 million of the swingline loan sublimit and $142 million of the letter of credit sublimit remained available as of June 30, 2026.
The 2026 Credit Agreement is secured under Tri-State's Master Indenture. Funds advanced under the 2026 Credit Agreement bear interest either at Term SOFR rates or alternate base rates, at Tri-State's option. The Term SOFR rate is the Term SOFR rate for the term of the advance plus a margin (1.250 percent as of June 30, 2026) based on Tri-State's credit ratings. Base rate loans bear interest at the alternate base rate plus a margin (0.250 percent as of June 30, 2026) based on Tri-State's credit ratings. The alternate base rate is the highest of (a) the federal funds rate plus 0.50 percent, (b) the prime rate, and (c) the Term SOFR rate plus 1.00 percent.
Tri-State has a commercial paper program under which it issues unsecured commercial paper. Under Tri-State's commercial paper program, the commercial paper aggregate amounts outstanding shall not exceed the lesser of $500 million or the amount available under the 2026 Credit Agreement, thereby providing 100 percent dedicated support for any commercial paper outstanding. As of June 30, 2026, Tri-State had $212 million commercial paper outstanding. Tri-State's Board has authorized an increase in the commercial paper program to $600 million, subject to receiving updated credit ratings and other customary requirements, which remain pending. See Note 8 to the Unaudited Consolidated Financial Statements in Item 1 for further information.
Tri-State has a secured Renewable Revolving Credit Agreement with CoBank as lead arranger and CFC as administrative agent, in the amount of $250 million. The proceeds from this facility are required to be used for eligible green investments, as defined in the Renewable Revolving Credit Agreement. As of June 30, 2026, Tri-State had borrowed $189 million in adjusted Term SOFR rate loans under such facility and $61 million of availability remained. Tri-State is required to use any investment tax credits received from the green investments to pay down amounts outstanding on this facility.
The Renewable Revolving Credit Agreement is secured under the Master Indenture and has a maturity date of June 18, 2030. The adjusted Term SOFR rate is the Term SOFR rate for the term of the advance plus 0.10 percent plus a margin (1.200 percent as of June 30, 2026) based on Tri-State's credit ratings. Base rate loans bear interest at the alternate base rate plus a margin (0.125 percent as of June 30, 2026) based on Tri-State's credit ratings. The alternate base rate is the highest of (a) the federal funds rate plus 0.50 percent, (b) the prime rate, and (c) the adjusted Term SOFR rate plus 1.00 percent.
The 2026 Credit Agreement and Renewable Revolving Credit Agreement contain customary representations, warranties, covenants, events of default and acceleration, including financial DSR and ECR requirements in line with the covenants contained in the Master Indenture. A violation of these covenants would result in the inability to borrow under the facilities.
In September 2023, Tri-State submitted a Letter of Interest to apply for a funding award of low-cost loans and grants
through the New ERA Program, a $9.7 billion USDA program funded by the IRA. Tri-State's portfolio proposed in its Letter of
Interest was the result of resource and financial modeling performed in connection with Tri-State's preferred IRA scenario as
part of Phase I of its 2023 ERP. Tri-State has signed award commitment letters from USDA related to low-cost loans and grants
through the New ERA Program. There is no guarantee as to the scope, amounts of funds, and the timing of such disbursements,
if any.
Tri-State has previously purchased outstanding debt through cash purchases in open market purchases. In the future, Tri-State may from time to time purchase additional outstanding debt through cash purchases and/or exchanges for other securities, in open market purchases, privately negotiated transactions or otherwise and may continue to seek to retire or purchase outstanding debt. Such repurchases or exchanges, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. Tri-State are mindful of its debt and its maturities, and continually evaluates options to ensure that the balance sheet and capital structure are aligned with the business and the long-term health of the cooperative.
Tri-State believes it has sufficient liquidity to fund operations and capital financing needs from projected cash on hand, the commercial paper program, the 2026 Credit Agreement, and expected contract termination payments from withdrawing Utility Members.
Cash Flow
Cash is provided by operating activities and issuance of debt. Capital expenditures comprise a significant use of cash.
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
Operating activities. Net cash provided by operating activities was $205.3 million for the six months ended June 30, 2026 compared to $107.1 million for the same period in 2025, an increase in net cash provided by operating activities of $98.2 million. The increase in net cash provided by operating activities was due to LPEA's final payment of $159.3 million. Additionally, cash provided by operating activities was impacted by the timing of cash collected from Utility Member and nonmember accounts receivable and the payment of trade payables and accrued expenses.
Investing activities. Net cash used in investing activities was $119.1 million for the six months ended June 30, 2026 compared to $182.2 million for the same period in 2025, a decrease in net cash used in investing activities of $63.1 million. The decrease in net cash used in investing activities was due to lower capital expenditures in the current year compared to prior year. The higher capital expenditures during 2025 were primarily related to construction of the Axial Basin and Dolores Canyon solar facilities. Capital expenditures during the six months ended June 30, 2026 related to various transmission and generation projects.
Financing activities. Net cash used in financing activities was $81.6 million for the six months ended June 30, 2026 compared to net cash provided by financing activities of $26.7 million for the same period in 2025, a decrease in net cash provided by financing activities of $108.3 million. The decrease was primarily due to payments of long-term debt of $246.2 million including $160 million for Tri-State's 2022 Revolving Credit Agreement and retirement of patronage capital of $49.1 million related to the April 1, 2026 LPEA withdrawal from membership. These decreases were partially offset by the issuance of commercial paper to support capital expenditures and to repay the $160 million balance on Tri-State's 2022 Revolving Credit Agreement.
Capital Expenditures
Tri-State forecasts capital expenditures annually as part of its long-term planning, and its annual capital budget is approved by Tri-State's Board and long-term capital plan is reviewed by the Board. Tri-State regularly reviews these projections to update calculations to reflect changes in its future plans, facility closures, facility costs, market factors and other items affecting its forecasts. In the years 2026 through 2028, Tri-State's Board-reviewed capital plan forecasts that Tri-State may invest approximately $1.31 billion in new facilities and upgrades to existing facilities.
Tri-State's Board-reviewed capital plan for 2026 to 2028 includes approximately $523 million, including $172 million
in 2026, for a new natural gas generating facility for which significant activities have not commenced. Other capital projects
include several transmission facilities to improve reliability and load-serving capability throughout the Utility Members' service
territories and investments in other generation facilities.
Tri-State's actual capital expenditures depend on a variety of factors, including assumptions related to Tri-State's 2023 ERP, Utility Member load growth, Utility Member withdraws, BYOR Program, availability of necessary permits, regulatory changes, environmental requirements, inflation, tariffs, construction delays and costs, receipt of federal funding, and ability to access capital in credit markets. Thus, actual capital expenditures may vary significantly from Tri-State's capital budget forecasts.
Rating Triggers
Tri-State's current senior secured ratings are "Baa2 (stable outlook)" by Moody's, "BBB (stable outlook)" by S&P, and "BBB+ (stable outlook)" by Fitch. Tri-State's current short-term ratings are "A-2" by S&P and "F1" by Fitch.
Tri-State's 2026 Credit Agreement includes a pricing grid related to the Term SOFR spread, commitment fee and letter of credit fees due under the facility. Tri-State's Renewable Revolving Credit Agreement includes a pricing grid related to the Term SOFR spread and commitment fee. Certain of Tri-State's other loan agreements also include a pricing grid related to the Term SOFR spread. A downgrade of Tri-State's senior secured ratings could result in an increase in each of these pricing components. Tri-State does not believe that any such increase would have a material adverse effect on the financial condition or future results of operations. However, a downgrade of Tri-State's senior secured ratings could impact the costs associated with incurring additional debt and could make accessing the debt markets on favorable terms more difficult.
Tri-State currently have contracts and other obligations that require adequate assurance of performance. These include organized markets contracts, power contracts, natural gas supply contracts and financial risk management contracts. Some of the contracts are directly tied to Tri-State maintaining investment grade credit ratings by S&P and Moody's. Tri-State may enter into additional contracts which may contain adequate assurance requirements. If Tri-State is required to provide adequate assurances, it may impact Tri-State's liquidity and the amount of adequate assurance required will be dependent on Tri-State's credit ratings.
Tri-State Generation and Transmission Association Inc. published this content on August 07, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on August 07, 2026 at 14:12 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]