Executive Vice President and Chief Financial Officer
A Message from the Chief Financial Officer
Managing the financial strength of a successful company is difficult because you must inject innovation without jeopardizing stability. Arkansas Electric Cooperative Corporation (AECC) and its member electric cooperatives are highly successful by a multitude of standards, but especially from a financial perspective. AECC has a long history of successfully implementing innovative financial solutions to leverage economic signals or hedge risks to ensure stability for our members. The ability to structure Arkansas’ cooperative system so we can push forward aggressively to capture value, as well as limit loss of value, is what sets AECC apart from other entities.
Positioning the company to operate conservatively during the past five years with low load growth, while continuing to earn significant returns in excess of “AA” target metrics for Margins For Interest, Debt Service Coverage and Times Interest Earned Ratio is a testament to AECC’s board of directors and management team. Taking actions such as increasing rates, implementing a transmission rider to capture increasing Regional Transmission Organization costs and curtailing patronage retirements send signals to our lenders, members and vendors that AECC will make tough decisions when needed.
Through strong financial partners like the Rural Utilities Service, National Rural Utilities Cooperative Financial Corporation, CoBank and commercial banks, AECC has financial resources to move on opportunities quickly when they arise. We value our relationship with each and every entity. AECC has strong long-term credit ratings of AA, Aa3 and AA- by Standard & Poor’s, Moody’s Investors and Fitch Ratings respectively. AECC also has short-term credit ratings of A-1+, Prime-1 and F-1+ by the aforementioned rating agencies. Each shows AECC with a stable financial outlook.
AECC’s primary goal is to provide reliable, affordable and responsible energy to its members. We believe this goal enhances the quality of life of the retail members in Arkansas. AECC provides some of the lowest wholesale electric rates by generation and transmission cooperatives in the nation. This is a huge accomplishment during a period of low growth. In addition, AECC has resumed retiring capital credits in the past four years after curtailing in 2014. Affordable rates plus cash back for an electric cooperative means success.
During 2017 and 2018, AECC achieved strong revenue growth of 8.37 percent and 3.94 percent. The kilowatt hour sales grew by 9.32 percent during 2018. With the slight improvement in economic conditions, AECC is well-positioned to prepare for future opportunities to benefit our members. We will focus on generation opportunities/transitions, transmission strategies, rate structures and other factors to ensure we capture value and shield the cooperatives from disruptive technologies. Knowing how to recognize change and benefitting our members is the balancing challenge of injecting innovation at the proper time.
With the support of our member cooperatives and financial partners, AECC will provide best in class services for many years to come.
Michael W. Henderson
Executive Vice President & Chief Financial Officer