Tri-State Generation and Transmission Association Inc.
05/08/2026 | Press release | Distributed by Public on 05/08/2026 08:35
Quarterly Report for Quarter Ending March 31, 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 percentage 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 4.1 million MWhs for the three months ended March 31, 2026, of which 77.5 percent was to Utility Members. Total revenue from electric sales was $317.7 million for the three months ended March 31, 2026 of which 82.1 percent was from Utility Member sales. Tri-State's results for the three months ended March 31, 2026 were primarily impacted by lower natural gas and market electric energy prices, an unseasonably warmer winter and running Craig Generating Station Unit 3 in anticipation of the need for the unit to be available for the Southwest Power Pool regional transmission organization integration.
•Utility Member electric sales increased $4.9 million, or 1.9 percent, due to a 7.3 percent increase in the formulary rate charged to Utility Members offset by a decrease in load volume for the three months ended March 31, 2026 compared to the same period in 2025.
•Non-member electric sales increased $8.4 million, or 17.3 percent, due to higher long-term sales.
•Rate stabilization represents recognition of income from withdrawal of former Utility Members from membership in Tri-State that was previously deferred. Tri-State recognized $24.8 million of previously deferred membership withdrawal income for the three months ended March 31, 2026 compared to $44.9 million for the same period in 2025 as part of its rate stabilization measures.
•Fuel expense decreased $7.4 million, or 14.3 percent, primarily due to a lower generation at Tri-State's coal and natural gas-fired 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 will be revised related to Utility Member self-supply projects in the Eastern Interconnection.
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 methodology tariff on file with FERC as Rate Schedule 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 Rate Schedule No. 281 terminated its wholesale electric service contract with Tri-State. LPEA's contract termination payment amount was $208 million prior to any adjustments for discounted patronage capital, regulatory liabilities credit or LPEA's pro rata share of Tri-State's power purchase obligations in the Western Interconnection. LPEA's final payment amount was $159 million after adjusting for LPEA's discounted patronage, regulatory liabilities credit, and the parties' agreed-to LPEA share of Tri-State's power purchase obligations in the Western Interconnection. Tri-State's Board deferred a portion of the contract termination payment and a portion was deferred as a transmission credit as required by Rate Schedule No. 281. 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. 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, provided Tri-State a non-conditional notice to withdraw from membership in Tri-State, with an April 1, 2028, withdrawal effective date. Tri-State cannot predict if any of these six Utility Members will actually withdraw from membership in Tri-State. These six Utility Members comprised 5.9 percent of Tri-State's Utility Member revenue for the three months ended March 31, 2026 and 6.8 percent of Tri-State's Utility Member revenue for the year ended December 31, 2025.
On February 1, 2025, MPEI withdrew from membership in us and pursuant to Rate Schedule 281 and a Membership Withdrawal Agreement terminated its wholesale electric service contract with Tri-State. MPEI's contract termination payment amount was $86 million. Tri-State's Board deferred a portion of the contract termination payment and a portion was related to a transmission credit that was deferred as required by FERC's orders on Tri-State's Rate Schedule 281.
Certain elements of Rate Schedule No. 281 remain subject to ongoing proceedings at the Tenth Circuit Court of Appeals and D.C. Circuit Court of Appeals. See Note 19 to the Unaudited Consolidated Financial Statements in Item 1 for further information.
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 from MPEI and LPEA 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-Stated filed an update on Phase II with the COPUC, identifying that two of the Phase II preferred portfolio resource bids were no longer moving forward - a 200 MW wind bid and a 307 MW gas bid. The filing also noted that Tri-State is delaying pursuit of approved back-up bids for those resources until further certainty regarding New ERA Program funding is attained. For further information regarding Tri-State's 2023 ERP, see "Item 1 - BUSINESS - POWER SUPPLY RESOURCES - Resource Planning" in Tri-State's annual report on Form 10-K for the year ended December 31, 2025.
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. Tri-State anticipates a FERC decision on the filing by the end of May 2026.
On March 30, 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 Station Unit 1 be available to operate for 90 days, and for SPP to employ economic dispatch of Craig Station Unit 1 to minimize costs to ratepayers.
On April 1, 2026, certain of Tri-State's load and transmission facilities in the Western Interconnection became part of SPP's expansion of its regional transmission organization into the Western Interconnection. Tri-State's load and generating facilities participate in SPP's Integrated Marketplace, which includes both real-time and day-ahead markets.
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.
In February 2026, the EPA published an extension rule and in April 2026 the EPA published draft amendments applicable to coal combustion residual management units. Tri-State is evaluating to determine if there are any material impacts to its facilities. Depending on the final amendment language, changes to the applicable asset retirement obligations may be required. As of March 31, 2026, no changes to recorded asset retirement or environmental remediation obligations have been recognized.
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.
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 March 31, 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 March 31, 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. As of December 31, 2025, Tri-State's DSR was 1.46 and its ECR was 23.4 percent. 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 will determine whether to retire any 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 used to offset future costs to its Utility Members. Extraordinary revenue 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 $24.8 million of previously deferred membership withdrawal income during the three months ended March 31, 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.
The 2026 budget approved by Tri-State's Board resulted in a 7.5 percent increase in the wholesale rate to the Utility Members for 2026.
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. In September 2025, Tri-State recorded a regulatory asset to defer certain asset retirement obligation adjustments related to the transition of the Colowyo Mine from mining to full reclamation in October 2025. This regulatory asset, which has been approved by FERC, will be amortized to depreciation, amortization and depletion expense over its original expected useful life beginning in January 2026 and ending in December 2044 and recovered from the Utility Members through rates.
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 are 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 March 31, 2026 Compared to Three Months Ended March 31, 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 March 31, 2026 and 2025 (dollars in thousands):
| Three Months Ended March 31, | Period-to-period Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | Percent | ||||||||||||||||||||
| Operating revenues | |||||||||||||||||||||||
| Utility Member electric sales | $ | 260,922 | $ | 256,000 | $ | 4,922 | 1.9 | % | |||||||||||||||
| Non-member electric sales | 56,790 | 48,406 | 8,384 | 17.3 | % | ||||||||||||||||||
| Rate stabilization | 24,840 | 44,943 | (20,103) | (44.7) | % | ||||||||||||||||||
| Other | 32,448 | 28,405 | 4,043 | 14.2 | % | ||||||||||||||||||
| Total operating revenues | $ | 375,000 | $ | 375,200 | $ | (200) | (0.1) | % | |||||||||||||||
| Energy sales (in MWh): | |||||||||||||||||||||||
| Utility Member electric sales | 3,208,659 | 3,378,839 | (170,180) | (5.0) | % | ||||||||||||||||||
| Non-member electric sales | 929,251 | 762,727 | 166,524 | 21.8 | % | ||||||||||||||||||
| 4,137,910 | 4,141,566 | (3,656) | (0.1) | % | |||||||||||||||||||
•Excluding MPEI, Utility Member load decreased 123,886 MWhs, or 3.7 percent, during the three months ended March 31, 2026 compared to the same period in 2025. This decrease was offset by a 7.3 percent increase in the average rates charged to Utility Members, which resulted in an overall increase in Utility Member electric sales revenue of $4.9 million for the three months ended March 31, 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 140,468 MWhs to 671,490 MWhs for the three months ended March 31, 2026 compared to 531,022 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 $24.8 million of previously deferred membership withdrawal income during the three months ended March 31, 2026 compared to $44.9 million of deferred membership withdrawal income being recognized 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
Tri-State's operating expenses are primarily comprised of the costs that we incur 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 March 31, 2026 and 2025 (dollars in thousands):
| Three Months Ended March 31, | Period-to-period Change | ||||||||||||||||||||||
| 2026 | 2025 | Amount | Percent | ||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Purchased power | $ | 111,119 | $ | 97,144 | $ | 13,975 | 14.4 | % | |||||||||||||||
| Fuel | 44,423 | 51,800 | (7,377) | (14.2) | % | ||||||||||||||||||
| Production | 43,623 | 36,494 | 7,129 | 19.5 | % | ||||||||||||||||||
| Transmission | 41,867 | 44,090 | (2,223) | (5.0) | % | ||||||||||||||||||
| General and administrative | 46,413 | 39,301 | 7,112 | 18.1 | % | ||||||||||||||||||
| Depreciation, amortization and depletion | 48,764 | 72,781 | (24,017) | (33.0) | % | ||||||||||||||||||
| Coal mining | 4,197 | (6,358) | 10,555 | (166.0) | % | ||||||||||||||||||
| Other | 2,623 | 3,010 | (387) | (12.9) | % | ||||||||||||||||||
| Total operating expenses | $ | 343,029 | $ | 338,262 | $ | 4,767 | 1.4 | % | |||||||||||||||
•Purchased power expense increased during the three months ended March 31, 2026 compared to the same period in 2025 primarily due to higher average costs of purchased power of 7.8 percent and higher energy purchases of 157,455 MWh, or 6.7 percent.
•Fuel expense was lower during the three months ended March 31, 2026 compared to the same period in 2025 primarily due to a decrease of 112,795 MWh in generation by Tri-State's natural gas-fired generating facilities and a decrease of 218,331 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 $26.6 million in the first quarter of 2026 compared to the same period in 2025.
Financial Condition as of March 31, 2026 Compared to December 31, 2025
The principal changes in Tri-State's financial condition from December 31, 2025 to March 31, 2026 were due to increases and decreases in the following:
Assets
•Construction work in progress increased $28.5 million, or 19.8 percent, to $172.4 million as of March 31, 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.
•Restricted cash and investments-current increased $16.9 million to $18.0 million as of March 31, 2026 compared to $1.1 million as of December 31, 2025. The increase was primarily due to $16.9 million that was deposited with Tri-State's Master Indenture trustee in March 2026 in advance of April 1, 2026 debt service payments for the First Mortgage Obligations, Series 2014B and Moffat County Pollution Control Bonds. In accordance with the Master Indenture, Tri-State is required to fund the account one day prior to debt service payments.
Liabilities
•Short-term borrowings increased $204.2 million to $204.3 million as of March 31, 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 pay off the $160 million balance on Tri-State's 2022 Revolving Credit Agreement.
•Accrued interest increased $18.7 million, or 82.3 percent, to $41.3 million as of March 31, 2026 compared to $22.6 million as of December 31, 2025. The increase was due to accruals for interest due in future periods of $39.5 million partially offset by interest payments of $20.8 million.
•Regulatory liabilities decreased $27.3 million, or 4.9 percent, to $331.1 million as of March 31, 2026 compared to $358.4 million as of December 31, 2025. The decrease was primarily due to the recognition of deferred membership withdrawal income of $24.8 million and amortization of transmission credit from former Utility Members of $2.1 million during the three month period ended March 31, 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 March 31, 2026, Tri-State had $144.1 million in cash and cash equivalents. Tri-State's committed credit arrangement as of March 31, 2026 is as follows (dollars in thousands):
|
Authorized Amount |
Available March 31, 2026 |
|||||||||||||
| 2022 Revolving Credit Agreement | $ | 520,000 | (1) | $ | 308,414 | (2) | ||||||||
(1)The amount of this facility that can be used to support commercial paper is limited to $500 million.
(2)The portion of this facility that was unavailable as of March 31, 2026 was $212 million which was dedicated to support outstanding commercial paper and letters of credit.
As of March 31, 2026, Tri-State had a secured 2022 Revolving Credit Agreement with aggregate commitments of $520 million. The 2022 Revolving Credit Agreement included a swingline loan sublimit of $125 million, a letter of credit sublimit of $75 million, and a commercial paper back-up sublimit of $500 million, of which $125 million of the swingline loan sublimit, $68 million of the letter of credit sublimit, and $296 million of the commercial paper back-up sublimit remained available as of March 31, 2026. As of March 31, 2026, Tri-State had $308.4 million of availability under the 2022 Revolving Credit Agreement.
As of March 31, 2026, the 2022 Revolving Credit Agreement was secured under Tri-State's Master Indenture and had a maturity date of April 25, 2027. Funds advanced under the 2022 Revolving Credit Agreement bore interest either at adjusted Term SOFR rates or alternative base rates, at Tri-State's option. The adjusted Term SOFR rate was the Term SOFR rate for the term of the advance plus a margin (1.250 percent as of March 31, 2026) based on Tri-State's credit ratings. Base rate loans bore interest at the alternate base rate plus a margin (0.250 percent as of March 31, 2026) based on Tri-State's credit ratings. The alternate base rate was 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.
On April 21, 2026, Tri-State entered into the 2026 Credit Agreement that amended and restated the 2022 Credit Agreement in the amount of $650 million. The 2026 Credit Agreement has a maturity date of April 21, 2031, unless extended as provided therein, and includes swingline loan and letter of credit sublimits of $150 million each. The 2026 Credit Agreement contains interest rate options, financial covenants, including DSR and ECR requirements, similar to the 2022 Revolving Credit Agreement.
Under Tri-State's commercial paper program, Tri-State's Board authorized the issuance of commercial paper in amounts that do not exceed the commercial paper back-up sublimit, if any, under Tri-State's credit agreement, which was $500 million as of March 31, 2026, thereby providing 100 percent dedicated support for any commercial paper outstanding. As of March 31, 2026, Tri-State had $204 million commercial paper outstanding and $296 million available on the commercial paper back-up sublimit. See Note 8 to the Unaudited Consolidated Financial Statements in Item 1 for further information.
We have 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 March 31, 2026, we 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 March 31, 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 March 31, 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.
Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025
Operating activities. Net cash used in operating activities was $1.6 million for the three months ended March 31, 2026 compared to net cash provided by operating activities of $120.8 million for the same period in 2025, a decrease in net cash provided by operating activities of $122.4 million. The decrease in net cash provided by operating activities was due to an increase in asset retirement obligation settlement activity, primarily as Colowyo Mine had transitioned from mining to full reclamation, an increase in project costs related to transmission interconnection projects and timing of cash collected from Utility Member accounts receivable and the payment of trade payables and accrued expenses. Net cash provided by operating activities for the three months ended March 31, 2025 was impacted by MPEI's contract termination payment of $86.0 million.
Investing activities. Net cash used in investing activities was $57.0 million for the three months ended March 31, 2026 compared to $89.0 million for the same period in 2025, a decrease in net cash used in investing activities of $32.0 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 three months ended March 31, 2026 related to various transmission and generation projects.
Financing activities. Net cash provided by financing activities was $41.9 million for the three months ended March 31, 2026 compared to $21.6 million for the same period in 2025, an increase in net cash provided by financing activities of $20.3 million. The increase in net cash provided by financing activities was primarily due to issuance of commercial paper to support capital expenditures and to pay off 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 May 08, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 08, 2026 at 14:36 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]