Tri-State Generation and Transmission Association Inc.

03/06/2026 | Press release | Distributed by Public on 03/06/2026 11:25

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

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-three Members of which forty are Utility Members. Thirty-six 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 provides it with maximum available power of 4,948 MWs, of which approximately 1,959 MWs comes from renewables.
In 2025, Tri-State sold 16.6 million MWhs, of which 82.0 percent was to Utility Members. Total revenue from electric sales was $1.2 billion for the year ended December 31, 2025, of which 84.3 percent was from Utility Member sales. Tri-State's results for the year ended December 31, 2025 were primarily impacted by Utility Member withdraws and declining market energy prices. In addition, weather contributed to decreased energy and demand during June through October and increased energy and demand through the winter months.
•Utility Member electric sales decreased $51.7 million, or 4.7 percent, primarily due to a decrease of 1,354,286 MWhs sold, or 9.1 percent, during 2025 compared to the same period in 2024 due to the withdrawal of two former Utility Members. The impact of these withdrawals was partially offset by increased sales to Tri-State's remaining Utility Members due to load growth and other factors.
•Rate stabilization represents recognition of income from withdrawal of former Utility Members from membership in Tri-State that was previously deferred. Tri-State recognized $214.1 million of previously deferred membership withdrawal income during 2025 compared to $211.2 million of previously deferred membership withdrawal income during 2024 as part of its rate stabilization measures.
•Fuel expense decreased $59.9 million, or 25.7 percent, primarily due to a decrease in generation at Tri-State's facilities.
Wholesale Electric Service Contracts
Tri-State's Bylaws require each Utility Member, unless otherwise specified in a written agreement or the terms of its 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 filed with FERC (a self-supply percentage and the BYOR Program). See "Item 1 - BUSINESS - MEMBERS" for additional discussion regarding the wholesale electric service contract and these two programs.
Thirty-two Utility Members have wholesale electric service contractswith an initial expiration date of December 31, 2066. Eight Utility Members have wholesale electric service contractswith an initial expiration date of December 31, 2050. Four of these eight Utility Members haveprovided Tri-State a notice of intent to withdraw from membership. These thirty-two Utility Members with 2066 initial expiration dates contracts comprised 89.7 percent of Tri-State's Utility Member revenue for the year ended December 31, 2025, excluding former Utility Members and Utility Members that have provided a notice of intent to withdraw from membership.
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 "BUSINESS - MEMBERS - Contract Termination Payment and Relationship with Members and "Note 14-Commitments and Contingencies-Legal" to the Consolidated Financial Statements in Item 8 for further information.
On February 1, 2025, MPEI withdrew from membership in Tri-State and pursuant to Rate Schedule 281 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 deferred as a transmission credit as required by Rate Schedule 281.
In March 2024, LPEA provided Tri-State a non-conditional notice to withdraw from membership in Tri-State, with an April 1, 2026, withdrawal effective date. LPEA's contract termination payment based upon Rate Schedule 281 is $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 after adjusting for LPEA's discounted patronage, regulatory liabilities credit, and the parties agreed to LPEA's share of Tri-State's power purchase obligations in the Western Interconnection is $159 million.
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, 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, provided Tri-State a non-conditional notice to withdraw from membership in Tri-State, with a December 1, 2027, withdrawal effective date. Tri-State cannot predict if any of these five Utility Members will withdraw from Tri-State. These fiveUtility Members, with MPEI, comprised 9.1 percent of Tri-State's Utility Member revenue for the year ended December 31, 2025.
Certain elements of Rate Schedule 281 remain subject to ongoing proceedings at the Tenth Circuit Court of Appeals and D.C. Circuit Court of Appeals. See "Note 14-Commitments and Contingencies-Legal" to the Consolidated Financial Statements in Item 8 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.
Colorado Electric Resource Plan
Tri-State is required to file every four years and obtain COPUC approval of its electric resource plan. The process includes a Phase I and Phase II process. In 2023, Tri-State filed Phase I of its 2023 ERP with the COPUC, which included retirement of Craig Station Unit 3 by January 1, 2028 and, if Tri-State receives certain federal funding and reaches agreements with the applicable parties, retirement of Springerville Unit 3 by March 1, 2031. Tri-State entered into and the COPUC approved a 2024 Settlement Agreement related to Phase I of Tri-State's 2023 ERP.
In September 2024, Phase II of Tri-State's 2023 ERP began with Tri-State issuing requests for proposals. In April 2025, Tri-State filed its 2023 ERP implementation report with the COPUC identifying Tri-State's preferred portfolio of resources to be acquired during the period of 2026-2031. Tri-State's preferred portfolio forecasted the need for approximately 1,657 MWs of new resources during the resource acquisition period of 2026 to 2031. In October 2025, the COPUC approval of Tri-State's preferred portfolio became effective. As part of Phase II, for which resource acquisition is ongoing, Tri-State has entered into 850 MWs of contracts for resources. For further information regarding Tri-State's 2023 ERP, see "Item 1 - BUSINESS - POWER SUPPLY RESOURCES - Resource Planning."
Solar Projects Update
The 145 MW Axial Basin Solar facility, located in Moffat County, Colorado, and the 110 MW Dolores Canyon Solar
facility, located in Dolores County, Colorado, were placed in service in October 2025. During 2025, Tri-State recorded an investment tax credit as a reduction to electric plant in service of $130.5 million and an intangible asset of $130.5 million. Tri-State intends to claim the investment tax credit on each solar facility through the IRS's direct pay program. Direct pay allows qualified entities to receive certain clean energy tax credits as a direct payment from the IRS to the extent it exceeds their income tax liability.
Colowyo Mine Transition
Colowyo Coal's Colowyo Mine transitioned from mining to full reclamation in October 2025. Tri-State has contracted with a third party to perform the reclamation work. The work is scheduled to be completed by the end of 2029. During 2025, Tri-State accelerated approximately $72.6 million in depreciation and amortization related to asset retirement obligations, development costs and depletion of coal reserves. Tri-State recognized deferred membership withdrawal income in an amount equal to such expenses resulting in no impact to its Utility Member's wholesale rate for 2025.
Environmental Regulations
Tri-State is subject to extensive federal, state and local environmental requirements. Tri-State is tracking environmental and permitting policy and proposed regulatory changes. To evaluate relevance, risk and impact to Tri-State's operations and plans, Tri-State is evaluating several recent developments including those described in "BUSINESS - ENVIRONMENTAL REGULATION." See also "RISK FACTORS - Environmental Risks."
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. Tri-State considers the following accounting policies to be critical accounting policies due to the estimation involved or due to the particular significance they have on its consolidated financial statements.
Accounting for Rate Regulation. Tri-State is a rate-regulated entity and, as a result, is subject to the accounting requirements of Accounting for Regulated Operations. In accordance with these accounting requirements, some revenues and expenses have been deferred at the discretion of Tri-State's Board, subject to FERC approval, if it is probable that these amounts will be refunded or recovered through future rates. Regulatory assets are costs Tri-State expects to recover from Utility Members through future rates approved by the applicable authority. Regulatory liabilities represent probable future reductions in rates associated with amounts that are expected to be refunded to Utility Members as approved by the applicable authority. Amounts that are no longer expected to be refunded to the Utility Members are recognized in margins. Estimates of recovering deferred costs and returning deferred credits are based on specific ratemaking decisions by FERC or precedent for each item. Tri-State recognizes regulatory assets as expenses and regulatory liabilities as operating revenue, other income, or a reduction in expenses concurrent with their recovery in rates.
Asset Retirement and Environmental Remediation Obligations. Tri-State accounts for current obligations associated with the future retirement of tangible long-lived assets and environmental remediation in accordance with the accounting guidance relating to asset retirement and environmental obligations. This guidance requires that legal obligations associated with the retirement of long-lived assets be recognized at fair value at the time the liability is incurred and capitalized as part of the related long-lived asset. Over time, the liability is adjusted to its present value by recognizing accretion expense, and the capitalized cost of the long-lived asset is depreciated in a manner consistent with the depreciation of the underlying physical asset. In the absence of quoted market prices, Tri-State determines fair value by using present value techniques in which estimates of future cash flows associated with retirement activities are discounted using a credit adjusted risk-free rate and market risk premium. Upon settlement of an asset retirement obligation, Tri-State applies payments against the estimated liability and recognizes a gain or loss if actual retirement costs differ from the estimated recorded liability.
Environmental remediation costs are accrued based on management's best estimate at the end of each period of the costs expected to be incurred. Such cost estimates may include ongoing care, maintenance and monitoring costs. Changes in remediation estimates are reflected in earnings in the period an estimate is revised. Estimates of future expenditures for environmental remediation obligations are not discounted.
Factors Affecting Results
Master Indenture
Tri-State's Master Indenture requires Tri-State to establish, subject to necessary regulatory approvals, rates 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 historic and pro forma basis. Tri-State's DSR is calculated by dividing (x) its Net Margins Available for Debt Service (as defined in the Master Indenture), which is equal to Tri-State's net margins for a period plus amounts deducted for the period to pay or make provision for interest on debt (including capitalized interest other than Allowance for Funds Used During Construction), lease expense, income tax expense, amortization of debt discount or premium, and depreciation and certain other non-cash items by (y) Tri-State's Annual Debt Service Requirement (as defined in the Master Indenture), which is generally equal to the principal of, premium, if any, and interest (whether capitalized or expensed) on all of Tri-State's debt and lease payments that become due in the applicable fiscal year or 12-month period at maturity or stated maturity, subject to special calculation rules applicable to specific types of debt (such as balloon debt). For purposes of the DSR calculation, Tri-State is permitted to exclude from the Annual Debt Service Requirement defeasance obligations as provided in the Master Indenture. Tri-State's failure to achieve the required DSR is not a default under its Master Indenture as long as a plan is timely adopted and being implemented and no payment default has occurred. However, subject to certain limited exceptions, Tri-State cannot issue additional secured obligations under its Master Indenture unless the DSR for the prior fiscal year (or period of prior 12 consecutive months) is at least 1.10 and the estimated DSR for the current and next two years (or, if applicable, two years following the anticipated commercial operation date of the assets being financed) is at least 1.10. A DSR below 1.025 under Tri-State's Master Indenture would require it to transfer all cash to a special fund managed by the trustee of Tri-State's Master Indenture until its DSR is at least 1.025. Tri-State estimates that its DSR for the twelve months ended December 31, 2025 was 1.46.
Tri-State's Master Indenture also requires it to maintain an ECR at the end of each fiscal year of at least 18 percent. Tri-State's ECR equals its equity divided by the sum of its debt plus equity. Equity primarily consists of Tri-State's aggregate net margins that it has not distributed in cash to the Members. Debt includes Tri-State's indebtedness for borrowed money but excludes defeasance obligations as provided in the Master Indenture. Tri-State's failure to maintain the ECR at the end of any given fiscal year would result in a default under its Master Indenture and restrict Tri-State's ability to issue additional secured obligations under its Master Indenture. Tri-Stateestimates that as of December 31, 2025, its ECRwas 23.4 percent.
As of December 31, 2025, Tri-State had approximately $3.0 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. 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. The DSR and ECR calculated in accordance with FERC's system of accounts are not finalized and are subject to final adjustment.
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 it 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. As of December 31, 2025, Tri-State has retired in aggregate approximately $669.1 million of patronage capital to its Utility 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 $214.1 million of previously deferred membership withdrawal income during 2025.
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. See "BUSINESS - RATE REGULATION."
In September 2025, Tri-State's Board approved its 2026 operating budget, which results 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. Pending approval from FERC, which has been requested, this regulatory asset will be amortized to depreciation, amortization and depletion expense over the original expected useful life of the mine ending in 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 generally sold at market prices after consideration of incremental production costs. Demand billing 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 warmer summer or colder winter temperatures tend to increase the usage of electricity for heating, air conditioning and irrigation. Mild weather generally reduces 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.
Year ended December 31, 2025 compared to year ended December 31, 2024
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, coal sales, and lease revenue. The following is a comparison of Tri-State's operating revenues and energy sales in MWhs by type of purchaser for 2025 and 2024 (dollars in thousands):
Year Ended December 31, Period-to-Period Change
2025 2024 Amount Percent
Operating revenues
Utility Member electric sales $ 1,054,007 $ 1,105,701 $ (51,694) (4.7) %
Non-member electric sales 195,160 196,561 (1,401) (0.7) %
Rate stabilization 214,121 211,232 2,889 1.4 %
Provision for rate refunds 2,719 (6,556) 9,275 (141.5) %
Other 135,558 105,452 30,106 28.5 %
Total operating revenues $ 1,601,565 $ 1,612,390 $ (10,825) (0.7) %
Energy sales (in MWh):
Utility Member electric sales 13,604,873 14,959,159 (1,354,286) (9.1) %
Non-member electric sales 2,985,104 2,838,291 146,813 5.2 %
16,589,977 17,797,450 (1,207,473) (6.8) %
•The decrease in Utility Member electric sales is primarily due to the withdrawals of two former Utility Members. Excluding those two former Utility Members, Utility Member electric sales revenue increased $46.1 million, or 4.6 percent, and Utility Member load growth increased 17,510 MWh from 2024 to 2025.
•Non-member electric sales revenue was impacted by lower market sales offset by higher long-term sales in both dollars and MWhs. Short-term market sales decreased 364,420 MWhs to 515,767 MWhs in 2025 compared to 880,187 MWhs for the same period in 2024. Long-term sales increased 525,337 MWhs to 1,967,141 MWhs in 2025 compared to 1,441,804 MWhs for the same period in 2024. Tri-State expects long-term sales to further increase in 2026.
•Tri-State recognized $214.1 million of deferred membership withdrawal income during 2025 compared to $211.2 million of deferred membership withdrawal income during the same period in 2024 as part of its rate stabilization measures.
•Other operating revenue increased primarily due to higher transmission revenue, an increase in lease revenue related to a tolling agreement for one of the units at the Pyramid Generating Station and higher coal sales to third parties.
Operating Expenses
Tri-State's operating expenses are primarily comprised of the costs that it 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 2025 and 2024 (dollars in thousands):
Year Ended December 31, Period-to-Period Change
2025 2024 Amount Percent
Operating expenses
Purchased power $ 445,756 $ 408,796 $ 36,960 9.0 %
Fuel 173,471 233,347 (59,876) (25.7) %
Production 161,075 171,879 (10,804) (6.3) %
Transmission 177,738 180,616 (2,878) (1.6) %
General and administrative 162,068 115,739 46,329 40.0 %
Depreciation, amortization and depletion 278,634 219,144 59,490 27.1 %
Coal mining 24,752 41,525 (16,773) (40.4) %
Goodwill impairment - 68,223 (68,223) 100.0 %
Other 7,421 10,420 (2,999) (28.8) %
Total operating expenses $ 1,430,915 $ 1,449,689 $ (18,774) (1.3) %
•Fuel expense decreased primarily due to 499,427 MWh, or 32.0 percent, lower generation from gas-fired generating facilities and 206,929 MWh, or 3.6 percent, lower generation from coal-fired generating facilities.
•General and administrative expense increased primarily due to lower recoveries of general and administrative costs from joint project activities, additional general plant maintenance expenses and an overall increase in expenses related to general and administrative labor and benefits.
•Depreciation, amortization and depletion expense increased primarily due to accelerated depreciation and amortization from the transition from mining to reclamation at Colowyo Mine as of October 2025. Additionally, depreciation, amortization and depletion was higher in 2025 due to a full year of depreciation rates that went into effect August 1, 2024 after FERC's acceptance of Tri-State's A-41 wholesale rate schedule.
•Goodwill impairment in 2024 was due to the write-off of acquisition costs/goodwill at the J.M. Shafer Generating Station and Colowyo Coal.
Year ended December 31, 2024 compared to year ended December 31, 2023
For discussion of Tri-State's results of operations comparing the year ended December 31, 2024 to the year ended December 31, 2023, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of Tri-State's 2024 Annual Report on Form 10-K, filed with the SEC on March 19, 2025.
Financial Condition as of December 31, 2025 compared to December 31, 2024
Assets
Construction work in progress decreased $224.6 million, or 60.9 percent, to $143.9 million as of December 31, 2025 compared to $368.5 million as of December 31, 2024. The decrease was primarily due to placing the Axial Basin Solar and the Dolores Canyon Solar facilities into service during 2025. These decreases were partially offset by capital expenditures for various transmission and generation projects.
Regulatory assets increased $52.6 million, or 6.4 percent, to $869.1 million as of December 31, 2025 compared to $816.5 million as of December 31, 2024. The increase was due to recording a regulatory asset of $79.9 million for Colowyo Mine asset retirement obligation adjustments related to the transition from mining to full reclamation partially offset by amortization of regulatory assets of $30.1 million.
Equity and Liabilities
Long-term debt increased $235.9 million, or 8.3 percent, to $3.093 billion as of December 31, 2025 compared to $2.857 billion as of December 31, 2024 and current maturities of long-term debt decreased $8.6 million, or 9.7 percent, to $80.1 million as of December 31, 2025 compared to $88.7 million as of December 31, 2024. The total increase of $227.3 million was primarily due to draws of $187 million on Tri-State's Renewable Revolving Credit Agreement and $160 million on Tri-State's 2022 Revolving Credit Agreement, primarily to fund capital expenditures. These increases in long-term debt were partially offset by debt service payments of $120.2 million, including $96.2 million for CoBank and CFC debt and $24 million for the First Mortgage Obligations, Series 2017A.
Member advances increased $5.3 million, or 102.5 percent, to $10.4 million as of December 31, 2025 compared to $5.1 million as of December 31, 2024. Member advances represents the principle amount of funds received from Utility Members for prepayment of their monthly power bills. The balance varies depending on the amount Utility Members elect to apply to their power bill each month and or to roll to a future month. Utility Member prepaid balances earn a stated rate of interest.
Regulatory liabilities decreased $138.6 million, or 27.9 percent, to $358.4 million as of December 31, 2025 compared to $497.0 million as of December 31, 2024. The decrease was primarily due to the recognition of deferred membership withdrawal income of $214.1 million and amortization of former Utility Member's transmission credits of $10.1 million during 2025 partially offset by MPEI's $86.0 million contract termination payment.
Asset retirement obligations increased $64.9 million to $336.8 million as of December 31, 2025 compared to $271.9 million as of December 31, 2024. The increase was primarily due to the timing of reclamation activities related to Colowyo Mine's transition from mining to full reclamation in October 2025 and revised reclamation cost estimates at New Horizon Mine and Colowyo Mine in 2025.
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 December 31, 2025, Tri-State had $177.6 million in cash and cash equivalents. Tri-State's committed credit arrangement as of December 31, 2025 is as follows (dollars in thousands):
Authorized
Amount
Available
December 31, 2025
2022 Revolving Credit Agreement $ 520,000 (1) $ 356,605
(1)The amount of this facility that can be used to support commercial paper is limited to $500 million.
Tri-State has a secured 2022 Revolving Credit Agreement with aggregate commitments of $520 million. The 2022 Revolving Credit Agreement includes a swingline 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 sublimit, $72 million of the letter of credit sublimit, and $357 million of the commercial paper back-up sublimit remained available as of December 31, 2025. As of December 31, 2025, Tri-State had $357 million of availability under the 2022 Revolving Credit Agreement.
The 2022 Revolving Credit Agreement is secured under Tri-State's Master Indenture and has a maturity date of April 25, 2027, unless extended as provided therein. Tri-State expects to amend, extend, and potentially increase the size of the 2022 Revolving Credit Agreement in the second quarter of 2026 for a period between three to five years. Funds advanced under the 2022 Revolving Credit Agreement bear interest either at adjusted Term SOFR rates or alternative base rates, at Tri-State's option. The adjusted Term SOFR rate is the Term SOFR rate for the term of the advance plus a margin (1.25 percent as of December 31, 2025) based on Tri-State's credit ratings. Base rate loans bear interest at the alternate base rate plus a margin (0.25 percent as of December 31, 2025) 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 and plus a margin (1.25 percent as of December 31, 2025) based on Tri-State's credit ratings.
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 under the 2022 Revolving Credit Agreement, which was $500 million as of December 31, 2025, thereby providing 100 percent dedicated support for any commercial paper outstanding. As of December 31, 2025, Tri-State had no commercial paper outstanding and $357 million available on the commercial paper back-up sublimit.
On April 7, 2025, Tri-State used a portion of MPEI's contract termination payment proceeds to repay the $40 million balance on the 2020 variable interest rate term loan with CFC.
On June 18, 2025, Tri-State entered into the secured Renewable Revolving Credit Agreement 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, and bear interest at adjusted Term SOFR rates or alternative base rates, at Tri-State's option. As of December 31, 2025, Tri-State had borrowed $187 million in adjusted Term SOFR rate loans and $63 million of availability remained. Tri-State is required to use any investment tax credits received for 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 a margin (1.200 percent as of December 31, 2025) 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 December 31, 2025) 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 2022 Revolving 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 is mindful of its debt and 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's material cash requirements include the following contractual and other obligations.
Debt.As of December 31, 2025, Tri-State had $3.2 billion in outstanding obligations, including approximately $3.0 billion of debt outstanding under the Master Indenture, with $80 million payable in 2026. Tri-State has total future interest payments of $1.7 billion, with $138.2 million payable in 2026.
Construction Obligations.As of December 31, 2025, Tri-State had $131.7 million in contractual obligations to complete certain construction projects associated with the generating facilities and transmission system, with $69.2 million payable in 2026.
Coal Purchase Obligations.As of December 31, 2025, Tri-State had $150.8 million in contractual obligations to purchase coal for the generating facilities under long-term contracts that expire between 2027 and 2041, including $17.5 million payable in 2026. These contracts require Tri-State to purchase a minimum quantity of coal at prices that are subject to escalation clauses that reflect cost increases incurred by the suppliers and market conditions. This does not include any coal purchase obligations with Tri-State's subsidiaries.
Energy Storage Agreements: As of December 31, 2025, Tri-State had $1.6 billion in contractual obligations related to agreements for 500 MWs of stand-alone electric storage capacity with commercial operation dates starting from 2027 to 2030 and terminating by 2052. These agreements include a fixed capacity price for the right to use the storage capacity of the facilities.
Tri-State believes it has sufficient liquidity to fund operations and capital financing needs from projected cash on hand, the commercial paper program, the 2022 Revolving Credit Agreement, and expected contract termination payments from withdrawing Utility Members. See "- Member Withdrawals and Relationship with Members."
Cash Flow
Cash is provided by operating activities and issuance of debt. Capital expenditures comprise a significant use of cash.
Year ended December 31, 2025 compared to year ended December 31, 2024
Operating activities. Net cash provided by operating activities was $88.2 million in 2025 compared to $841.9 million in 2024, a decrease of $753.7 million. The decrease in net cash provided by operating activities was primarily due to the timing of cash collected from Member accounts receivable and payment of trade payable and accrued expenses. Additionally net cash provided by operating activities during 2025 was impacted by MPEI's contract termination payment of $86.0 million. Tri-State
used a portion of MPEI's contract termination payment proceeds to pay down debt. Cash provided by operating activities was higher in 2024 compared to 2025 primarily due to United Power's contract termination payment of $709.4 million. Tri-State used a portion of United Power's contract termination payment to pay down debt and short-term borrowings.
Investing activities. Net cash used in investing activities was $349.3 million in 2025 compared to $246.0 million in 2024, an increase in net cash used in investing activities of $103.3 million. The increase in net cash used in investing activities was primarily due to by construction costs for the Axial Basin Solar and Dolores Canyon Solar facilities and capital expenditures for various transmission and generation projects. Additionally, on February 1, 2025, Tri-State sold to MPEI certain assets for $5.9 million that were primarily used to serve MPEI's load.
Financing activities. Net cash provided by financing activities was $208.4 million in 2025 compared to cash used in financing activities of $472.3 million in 2024, an increase in net cash provided by financing activities of $680.7 million. The increase in net cash provided by financing activities was primarily due higher proceeds from issue of debt, lower debt service payments and patronage capital retirements in 2025 compared to 2024. The issuance of long-term debt during 2025 was for draws of $187 million on the Renewable Revolving Credit Agreement and $160 million on the 2022 Revolving Credit Agreement. Debt service payments were higher in 2024 compared to 2025 due to using some of United Power's contract termination payment to pay off the 2023 multiple advance rate term loan and also paying down short-term borrowings. Additionally, financing activities was impacted in 2024 by a patronage capital retirement of $82.2 million resulting from United Power's withdrawal, with the amount of the discounted patronage capital credit applied to United Power's contract termination payment.
Year ended December 31, 2024 compared to year ended December 31, 2023
For discussion of Tri-State's cash flow comparing 2024 to 2023, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Cash Flow" in Item 7 of Tri-State's 2024 Annual Report on Form 10-K, filed with the SEC on March 19, 2025.
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 as described below (dollars in thousands):
2026 2027 2028 Total
Generation $ 233,761 $ 261,477 $ 118,438 $ 613,676
Transmission 188,498 197,141 139,731 525,370
General Plant 61,098 62,504 51,661 175,263
Total Capital Expenditures $ 483,357 $ 521,122 $ 309,830 $ 1,314,309
Tri-State's Board-reviewed capital plan for 2026 to 2028 includes approximately $543 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 the 2023 ERP, Utility Member load growth, Utility Member withdrawals, 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 2022 Revolving 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 has 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 March 06, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 06, 2026 at 17:26 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]