Integrated Financial Model & Evaluation of Financial Impact of Capital Projects

Location: Anadarko, Okla.

Client: Western Farmers Electric Co-op

Burns & McDonnell developed an integrated financial model for Western Farmers Electric Co-op (WFEC). Burns & McDonnell is using this integrated financial model to assist WFEC to evaluating the impact of new capital projects. The integrated financial model provided WFEC with an income statement, balance sheet and statement of sources and uses of cash for the next 20 years. Graphs and summary tables were provided to allow WFEC to understand the key drivers to costs and revenue for each new capital project.

The integrated financial model consists of two major components: the revenue forecast and the cost forecast. The revenue forecast component projects the usage and estimated bills for each member system and large customer on a monthly basis for a 20-year time frame. The revenue forecast utilizes historical usage by customer, WFEC’s power requirements study and escalation rates in its projections. The revenue forecast can be modified to evaluate different billing determinants in the future years. The revenue forecast reflects Western Farmers’ current practices and maintains the flexibility to analyze completely new, and yet undefined, expansion plans and pricing policies.

The cost forecast component incorporates WFEC’s historical operating and fixed costs, the production cost model output, and escalation rates to develop a 20-year forecast of expenses. The cost forecast was developed with enough detail to identify the specific costs for each of the existing generation facilities, any new generation facilities, transmission, distribution, and general and administrative expenditures. A concise summary of costs is generated with detailed backup tables supporting and explaining the basis of the cost projections.