Corn belt power Cooperative

2 010 a n n ua l r e p ort

The events of 2010 challenged

Corn Belt Power Cooperative.

Weather extremes tested us through

each season with snow, ice, wind,

tornadoes, heavy rains, floods and

high temperatures.

Political and regulatory developments

continued to assault affordable baseload

generation, culminating in numerous

new Environmental Protection Agency

regulations.

However, throughout every test – both

real and political – Corn Belt Power

actively worked to fulfill its mission

to enhance the quality of life for the

people we serve.

Through our efforts to complete

storm repair work, strengthen system

reliability and communicate about

keeping rates affordable, we at Corn

Belt Power are truly the “authors of

our co-op’s story” – ensuring that today’s

and tomorrow’s members will continue

to have reliable, affordable and safe

electricity to power their lives.

ou r s T ory ’ s

authors of ourco-op s story

theme

Cover photo: Corn Belt Power linemen move a broken pole in a section of the Diamond Lake-Montgomery

transmission line after a July 17 storm. High winds downed 27 poles west of Spirit Lake.

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that provides peaking power. Work began during the year on the Deer Creek station, a combined cycle plant that will be available to back up wind turbines.

During the year, Basin Electric continued construction on the Dry Fork Station, a coal-fired power plant that will come online in 2011 and provide needed baseload generation. In 2010, Basin Electric brought on new wind energy purchased from NextEra Energy resources and continued construction on the Crow Lake wind project, which will be the largest wind project owned solely by a cooperative in the united states.

Although new generating plants cost more to build today and new construction costs put more pressure on cooperatives’ rates, we will be well-positioned to meet future growth in demand for energy because we have these resources available.

A highlight in the area of power supply came at the end of the year when the Nuclear regulatory Commission announced its approval of a 20-year extension for the Duane Arnold Energy Center operating license. DAEC is an important source of baseload, emissions-free generation for our members. It is a well-run plant and we are pleased that we will continue to provide nuclear-powered energy until 2034.

Mother Nature was tough on Iowans in 2010. We experienced all she had to offer, from ice and snow, to high winds and tornadoes, to heavy rains, flooding and high temperatures. Time after time our crews came through the storm repair with flying colors as they got the lights back on in the minimum amount of time.

We found that our past efforts to reinforce transmission lines were rewarded in Carroll County when a recently

Corn Belt Power Cooperative implemented several strategies to respond to challenges and opportunities throughout 2010. The efforts

and endeavors put forth by both the board of directors and Corn Belt Power employees resulted in a stronger, more efficient cooperative – making all of us involved the “authors of our co-op’s story.”

2010 marked the first full year that Corn Belt Power operated as a Class A member of Basin Electric Power Cooperative. To ensure that we have an adequate power supply far into the future, the Corn Belt Power board elected to join Basin Electric as a Class A member in 2009. Through our membership, we are participating in the addition of several new generating sources. In 2010, Basin Electric completed the Culbertson Generation station, a natural gas plant

reportexecutiveDonald Feldman

President Corn Belt Power Board of Directors

Kenneth H. Kuyper

Executive Vice President

and General Manager

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rebuilt line stood up to ice and wind. We continued to improve our system throughout the year, with helicopter line patrols, addition of spoilers to conductors, and installation of new equipment and wildlife protection devices in substations. This ongoing line maintenance and system improvement will pay off in the future when we will inevitably be tested again by severe weather.

Also in 2010, we constructed 30 miles of transmission line from Milford to Wallingford and built the 161 kV Bremer County switching station. Both of these projects improved system reliability for our member co-ops.

yet another way we were authors of our co-op’s story can be seen in our ongoing economic development efforts. In 2010, Corn Belt Power and its members continued to support local businesses and community projects with rural Economic Development Loans and Grants, helping start-up or existing companies by providing low-cost financing. Even through a national economic recession, we set an all-time-high record for kilowatt-hours sold and saw sales grow approximately 1.3 percent in 2010. We are encouraged by the positive news we hear of expansion in the agricultural and manufacturing sectors.

When it comes to energy efficiency, we can see once again how co-ops write their own story. In 2010, Corn Belt Power and its members expanded the energy-efficiency programs they offer. ENErGy sTAr® appliance rebates, insulation and weatherization rebates and old appliance recycling incentives were added to long-time programs that encourage the installation of energy-efficient heat pumps and water heaters.

Working with the Cooperative research Network, we are taking advantage of stimulus dollars to implement smart metering technology. Load management programs will offer future opportunities for our member co-ops to save money.

Average REC member system cost, including substation charge; calculated average REC rate reflects power sold to municipals and others served by RECs.

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2010 was a good year financially for Corn Belt Power. The staff worked diligently to find cost savings in all departments. Due to these savings and lower-than-anticipated interest rates and expenses, we realized a healthy margin in 2010 that was partially deferred to 2011 and 2012. These deferrals will help keep rates from climbing as sharply as originally projected.

A challenge that Corn Belt Power and its member co-ops will continue to face in the future stems from the federal Environmental Protection Agency and its efforts to impose regulations on greenhouse gases, coal ash and other environmental emissions from coal plants. We will continue to be in touch with our federal legislators and explain to them how using the Clean Air Act to regulate in ways never intended will have drastic consequences affecting the affordability of electricity.

As we write our future story, we are going to need to change some of the ways we do business. Funds from the rural utilities service – our traditional source of financing – are getting harder to access for generation projects. We will need to explore different sources of financing as we continue to serve our members.

Certainly, though, parts of our story will not change. We will still need to deliver our product as efficiently and affordably as we can. We will still operate as a not-for-profit organization governed by elected representatives. We will continue to make decisions that enhance the quality of life for our members, employees and communities.

We will, in effect, continue to be the authors of our co-op’s story.

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ToTal salesTotal sales include rural electric cooperatives, North Iowa Municipal Electric Cooperative Association, Webster City and sales to others.

ou r s t ory ’ s

tested byweather

Photo above Corn Belt Power crews work late into the night Jan. 22,

repairing the system after an ice storm.

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H-framed structure right out of the ground. The storm broke 27 transmission poles and left several more leaning in its aftermath.

Mid-year brought soggy weather to Iowans, who experienced the fifth wettest July in 138 years of record keeping. With the addition of heavy August rainfall, the summer of 2010 ended up as the wettest summer ever, surpassing the infamous flood year totals of 1993 and 2008.

rounds of thunder, lightning and heavy rain rolled across Iowa and caused two outages Aug. 8. High winds blew roof tin from nearby turkey barns into Corn Belt Power’s 69 kV line north of schaller in the western part of the system. The same storm produced straight-line winds gusting 60 to 80 mph that damaged the cooling tower at Wisdom station, spencer.

A winter storm that started early Jan. 20 relentlessly attacked power lines for more than six days. After freezing rain coated transmission and distribution lines with thick layers of ice, warmer temperatures melted the ice off bottom phases, causing them to rise to the level of the still-sagging top phases. The line contact caused trips in the system, burned conductors and brought down sections of line near sac City, Lake City and Glidden. The storm’s assault continued with a blast of snow and high-speed winds.

summer delivered a different set of weather challenges. High winds gusting 70 to 80 mph lashed Corn Belt Power’s Diamond Lake-to-Montgomery transmission line and its Diamond Lake tap near Spirit Lake July 17, strewing conductors across the road, cracking and splintering poles and sucking an entire two-pole

some of the most memorable stories of 2010 were written by Mother Nature. Iowans experienced a year of dramatic and destructive weather

conditions, starting with heavy ice and snowfall in the winter, continuing with high heat and record-setting rainfall in the summer and concluding with high winds and tornadoes in several areas of the Corn Belt Power Cooperative system later in the year.

tested byweather

Photo above Wall Lake Substation, near Clarion,

lies flooded after heavy rains from several consecutive

August storms. Other than making the substation less

accessible, the flooding caused no additional problems

and the substation remained in service.

Corn Belt Power’s system peak, with estimated losses, reached 327 megawatts. That day, the Corn Belt Power control center charts showed a high temperature of 94 degrees with high humidity, which calculated to a heat index of 114 degrees. Typical August weather edged the next month’s peak close to the July total.

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Heavy rains from several consecutive storms flooded the East substation, near rockwell City, and the Wall Lake substation, near Clarion. other than reducing substation access, the flooding caused no additional problems and the substations remained in service.

High heat and humidity pushed Corn Belt Power’s summer peak demand to a new record high in July. At 2:30 p.m. July 14, following an exceptionally warm and muggy night and morning,

Photos below (Left) Dean Jensen, line foreman, drills

a transmission pole to attach a crossarm after a January

storm that blasted the Corn Belt Power system with ice

and snow. (Middle top) Crews repair damage from high-

speed winds that blew roof tin from nearby turkey barns

into Corn Belt Power’s 69 kV transmission line north

of Schaller during an Aug. 8 storm. (Middle bottom)

Chris Soyer, first class lineman, Raccoon Valley Electric

Cooperative, displays a conductor covered with ice in

rural Carroll County after a Jan. 20 storm. (Right) Corn

Belt Power crews knock ice off power lines southeast of

Sac City Jan. 22.

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High heat and humidity pushed Corn Belt Power’s summer peak demand to a new record high in July.

Photo above Tin debris lies

tangled in Corn Belt Power’s

69 kV transmission line after

an August tornado. 2010 was

a year of extreme weather that

tested the strength of the Corn

Belt Power system.

challenged by new

ou r s t ory ’ s

regulations

Photo above Cooperative representatives gather before meeting with their senators and members of

Congress. 2010 included two trips to Washington, D.C., to explain to legislators how Environmental

Protection Agency regulations will negatively affect co-op members’ power bills.

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2011 as a utility Maximum Achievable Control Technology standard.

Most power plants use water from lakes or rivers to cool generating equipment. The federal Clean Water Act section 316(b) sets standards for cooling water intake structures, requiring plant operators to use “best available technologies” to protect the environment. The EPA began reviewing the standards in 2010, launching a cost-benefit analysis of imposing stricter regulations. The North American Electric reliability Corporation estimates this EPA rule may require retirement of one-third of u.s. electricity capacity.

To ensure safer disposal of fly ash and other residues produced by coal-fired power plants, the EPA is considering designating the byproducts as hazardous waste, which could cost billions and force increases in electricity rates. More than 10,000 co-op consumers sent letters to the EPA in 2010 voicing their concern and asking the EPA not to brand coal ash as hazardous.

Clean Air Act was never intended to regulate carbon dioxide – it was enacted to fight smog and acid rain with proven technologies; no viable, commercially tested solution exists to remove carbon dioxide emissions from power plants.

Even if Congress grants a reprieve on greenhouse gas regulations, red tape from other EPA and various government rulemaking efforts – the Clean Air Transport rule, hazardous air pollutant regulations, cooling water intake requirements and a decision on treating coal ash as hazardous waste – will trigger higher electric bills.

released in 2010, the EPA’s Clean Air Transport rule aims to cap emissions of sulfur dioxide and nitrogen oxides from power plants across 31 eastern states, including Iowa.

The EPA is working toward more stringent hazardous air pollutant regulations for coal- and oil-fired generating plants. These regulations are expected to be proposed in

Throughout 2010, co-op representatives met with legislators, wrote letters to newspapers and sent numerous e-mails communicating

concerns about the u.s. Environmental Protection Agency using its authority under the federal Clean Air Act to regulate six greenhouse gases – including carbon dioxide – blamed for contributing to climate change. since Corn Belt Power and Basin Electric use coal to generate much of the electricity they sell, these EPA regulations will certainly negatively affect co-op members’ power bills.

Legislative activities in 2010 included a welcome-back reception for state legislators, lobbying trips to Washington, D.C., in May and september, rEC Day on the Hill at the state Capitol in March and local meetings with state legislators in November.

By failing to pass legislation addressing carbon dioxide and greenhouse gases, Congress essentially left the decision making up to the EPA. Co-ops argued that the

Photo above State Rep. Mark Kuhn, second from left, a member of Butler County REC, meets with, from left, Bob Bauman, general manager, Butler County REC; Ken Kuyper, executive vice

president and general manager, Corn Belt Power; and John Klahsen, director, Butler County REC, during the legislative welcome back reception held Jan. 12 in Des Moines.

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environMenTal regulaTory TiMeline

CAMR & Delisting Rule vacated

HAPs MACT Proposed Rule

HAPs MACT Final Rule expected HAPs MACT Compliance 3 yrs after Final Rule

CAIR Vacated

PM2.5 SIPs due (’97)

Beginning CAIR Phase II Annual SO2 & NOx Caps

Beginning CAIR Phase II Seasonal NOx Cap

Next Ozone NAAQS Revision

Effluent Guidelines Final Rule expected

Revised Ozone NAAQS

CO2 Regulation

316(b) Final Rule expected

Effluent Guidelines Proposed Rule expected

Reconsidered Ozone NAAQS

SO2 Primary NAAQS

Proposed Rules for CCBs Management

Final Rules for CCBs Mgmt

Begin CAIR Phase I Annual NOx Cap

Next PM2.5 NAAQS Revision

PM2.5 SIPs due (‘06)

New PM2.5 NAAQS Designations

Begin CAIR Phase I Annual SO2 Cap

CAIR Remanded

Proposed CAIR Replacement Rule expected

Final CAIR Replacement Rule expected

Final EPA Nonattainment Designations

316(b) Proposed Rule expected

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NO2 Primary NAAQS

Beginning Phase I CAIR Seasonal NOx Cap

’08 ’09 ’11 ’12 ’13’10 ’14 ’15 ’16 ’17

Begin Compliance Requirements under Final CCB Rules (ground water monitoring, double monitors, closure, dry ash conversion)

Compliance with CAIR Replacement Rule

316(b) Compliance 3-4 yrs after Final Rule

Effluent Guidelines Compliance 3-5 yrs after Final Rule

SO2/NO2 Secondary NAAQS

Ozo

ne

Adapted from Wegman (EPA 2003)

For Coal uniTs

CAIR Clean Air Interstate Rule; has been replaced with Clean Air Transport Rule CAMR Clean Air Mercury Rule; has been replaced by MACTCCBs Coal Combustion ByproductsCO2 Carbon DioxideEPA Environmental Protection AgencyHg/HAPs/MACT Mercury/Hazardous Air Pollutants/ Maximum Achievable Control TechnologyNAAQS National Ambient Air Quality StandardsNO2 Nitrogen DioxideNOx Nitrogen OxidesPM2.5 Particulate Matter; NAAQS updatedSIPs State Implementation PlanSO2 Sulfur Dioxide

ACRONYM KEY

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The NERC contends that ⅓ of U.S. electricity capacity may need to be retired if proposed EPA rules are implemented.

Photos above (Left) From left, Member

Service Representatives Mike Moran, Calhoun

County REC, and Don Kammrad, Prairie

Energy Cooperative, discuss compact fluores-

cent lamps with Rep.-Elect Stew Iverson at a

legislative meeting Nov. 18 in Fort Dodge.

(Right) U.S. Secretary of Agriculture Tom

Vilsack, right, speaks with representatives

of Iowa’s electric cooperatives who were in

Washington, D.C., attending the NRECA

Legislative Rally May 3-5. Sec. Vilsack talked

about how continued biofuels development can

benefit Iowa farmers.

Photo above The Emmetsburg transmission crew discusses how to proceed

to straighten leaning poles in a transmission line near Ayrshire. Muddy

conditions kept crews out of the field for more than a month after heavy rain

hit the area in July.

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The NrC approval came just over two years after DAEC’s joint owners entered the extremely rigorous and comprehensive license extension process. DAEC’s initial 40-year operating license, granted in 1974, was set to expire in 2014. Like it did for all nuclear power plant licenses, the NrC issued DAEC’s license for 40 years based on accounting estimates of the time required to recover plant construction costs. The DAEC application covered the environmental impact of an additional 20 years of operation and evaluated the station’s maintenance and engineering programs.

Also at DAEC, a planned refueling outage began oct. 23. Crews replaced one-third of the fuel in the reactor during this outage. The outage process required approximately 990 additional workers to assist with maintenance and repairs.

At Corn Belt Power’s Wisdom station, crews installed new equipment and completed maintenance projects. In the plant’s control room, employees added new digital data recorders that offer numerous options for displaying and manipulating operating data.

in preparation to meet future power needs, Basin Electric Power Cooperative, power supplier to Corn Belt Power, added several new generating sources

to its power supply in 2010 (see sidebar story page 14).

During the summer, representatives of Corn Belt Power participated in three-day educational power supply tours of Basin Electric’s and Western Area Power Administration’s generating facilities, sponsored by Northwest Iowa Power Cooperative.

In July, directors from the Corn Belt Power and Basin Electric boards toured the Duane Arnold Energy Center prior to a joint board meeting in Cedar rapids. NextEra Energy hosted the group of 48 visitors, providing tour guides, simulator demonstrations and additional security personnel.

In December 2010, the Nuclear regulatory Commission announced that it approved relicensing the Duane Arnold Energy Center for an additional 20 years, until 2034. Corn Belt Power, Central Iowa Power Cooperative and NextEra Energy resources jointly own DAEC, Iowa’s only nuclear power plant.

Wisdom unit 2 underwent a borescope inspection as part of routine maintenance to look for damaged compressor or turbine blades.

A contractor performed a sandblasting process on the water tower at Wisdom station that resulted in a newly sealed internal tank and a lengthened lifespan. Crews replaced the main structural beam of the track hopper used for coal receiving. They also sandblasted and painted the new and remaining beams to delay corrosion.

In september, Wisdom station hosted a tour of spencer High school students studying electricity generation.

In 2010, the Corn Belt Power board approved 23 small-renewable wind energy contracts ranging in size from 2.7 kilowatts to 130 kilowatts.

Photo above Cody Montgomery, tractor operator,

sandblasts rusty coal pit beams at Wisdom Station.

Basin ElEctric PoWer CooPeraTivenew generating sources:

culBErtson GEnEration station The $100 million natural-gas-fueled peaking unit is located eight miles northeast of Culbertson, Mont. Culbertson Generation Station has 95 megawatts of capacity. Officials held dedication ceremonies Aug. 13, 2010.

Dry Fork station With construction started in 2007 and operation projected in 2011, Dry Fork Station is a coal-based

power plant under construction in Gillette, Wyo. The rated capacity of the $1.35 billion plant is 385 megawatts.

DEEr crEEk station In 2010, construction began on the Deer Creek Station, a 300-megawatt combined-cycle power plant located near Elkton, S.D. The $405 million project is scheduled to be complete in the spring of 2012.

WinD poWEr purchasE aGrEEmEnts 2010 brought the start-up of two more wind projects in partnership with NextEra Energy Resources: 99 megawatts at Day County, S.D., and 100 megawatts at Baldwin, N.D. Baldwin is the sixth partnership between Basin

Electric and NextEra, where NextEra owns and operates the wind project and Basin Electric purchases the output long term.

croW lakE WinD projEct Basin Electric began construction on a $363 million, 151.5-megawatt wind project in south central South Dakota in October 2010. When completed, it will be the largest wind project owned solely by a cooperative in the United States. Basin Electric will also purchase the output from the first community-based wind project, South Dakota Wind Partners, which has seven turbines adjacent to the Crow Lake project.

MWh MWh

annual Capacity

Factor

loCaTion Fuel 2009 2010 2010

Wisdom 1 spencer, Iowa Coal 3,174 24,931 7.5%

Wisdom 2 spencer, Iowa Natural Gas/Fuel oil

196 736 0.2%

DAEC Palo, Iowa Nuclear 467,893 445,064 81.7%

Walter scott 3 Council Bluffs, Iowa Coal 172,866 206,324 89.8%

Walter scott 4 Council Bluffs, Iowa Coal 317,975 309,003 82.7%

Neal 4 sioux City, Iowa Coal 435,915 580,211 88.4%

Crosswind Ayrshire, Iowa Wind 53,813 63,464 34.5%

Hancock Hancock County, Iowa Wind 25,622 27,463 27.9%

ILEC Wind superior/Lakota, Iowa Wind 51,682 72,603 39.5%

WAPA south Dakota Hydro 132,783 132,783

* Refueling outage # Scheduled maintenance outage

Coal Natural Gas

Oil/DieselNuclearRenewable (Other)PurchasedRenewable Hydro

Coal Natural Gas

Oil/DieselNuclearRenewable (Other)PurchasedRenewable Hydro

Coal Natural Gas

Oil/DieselNuclearRenewable (Other)PurchasedRenewable Hydro

Corn BelT PoWer’s generaTion Mix

ToTal energy generaTeD

2010 generaTion

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Photo above: Basin Electric’s Dry Fork Station is a coal-based power plant under construction in Gillette, Wyo. New generation sources prepare Corn Belt Power and its member systems for the future.

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sTrengTHening our Co-oP’s sysTeM In 2010, Corn Belt Power continued upgrading its transmission system, increasing capacity to serve a new wind farm near Milford, repairing storm-damaged lines, patrolling lines for ongoing maintenance and strengthening facilities to withstand future storms.

In June, Corn Belt Power system operators ran alternate control center drills to test equipment function and facilitate training.

eFFiCienTly using ToDay’s resourCes Corn Belt Power and its member co-ops launched several new ventures and continued successful programs to help members use electricity more efficiently. New in 2010, the “Pull the Plug” program offered rebates to members to recycle old, inefficient refrigerators, freezers and window air conditioners. other new programs in 2010 included insulation, weatherization and ENErGy sTAr® appliance rebates.

ongoing programs provided incentives for installing energy-efficient water heaters and heat pumps. The “see the Light Two” campaign delivered two compact fluorescent bulbs to each residence and the “Change a Light, Change the World” promotion gave rEC members instant rebates when buying CFLs at participating stores.

2010 transmission linE projEcts:• Straightened transmission line from Ayrshire to Emmetsburg damaged by a summer storm• Performed helicopter line patrol to identify and report needed repairs• Constructed 30 miles of 69 kV line from Milford to Wallingford to provide outlet to the NextEra Energy

Osceola wind project• Installed spoilers on transmission line near Superior that has historically been affected by winter storms• Reconductored the Whittemore to Emmetsburg 69 kV transmission line

2010 sWitchinG station anD suBstation projEcts:Crews upgraded several Corn Belt Power switching stations and substations in 2010, increasing capacity to serve expanding loads and installing larger, newer equipment:• Completed the 161 kV Bremer County Switching Station and a half mile of triple circuit transmission line• Installed new microprocessor relays, SF6 gas breakers, station service transformers and lightning arrestors

in the Plainfield Switching Station near Waverly and Osgood Switching Station northwest of Emmetsburg• Installed new transformers and regulators in the Clutier, Dumont, East Sheffield, West Sheffield, Oran,

Renwick, Pine Lake, Roland and Bradford substations• Installed new battery banks at the Klemme, Plainfield, Hampton, Osgood, Sherwood and Wisdom

161 kV switching stations

Photos above (Left) At the Dumont Substation, Ryan Conlon and Jeremy Stattelman, journeyman linemen, test inter-

rupters on a three-way switch in May. (Left middle) Electricians install motor operated switches at Milford in April.

(Right middle) At the Osgood Switching Station, crews replace a breaker in October. (Right) Bill Foreman, journeyman

lineman, helps unload transmission poles in the Humboldt pole yard.

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Cooperative2009 kWh Billed by

Corn Belt Power2010 kWh Billed by

Corn Belt PowerBoone Valley Electric Cooperative 9,185,199 kWh 9,746,390 kWh

Butler County rEC 255,500,429 kWh 260,099,326 kWh

Calhoun County rEC 43,375,644 kWh 39,432,600 kWh

Franklin rEC 59,801,796 kWh 55,272,032 kWh

Grundy County rEC 69,384,114 kWh 66,659,503 kWh

Humboldt County rEC 58,542,231 kWh 57,772,519 kWh

Iowa Lakes Electric Cooperative 574,132,660 kWh 606,918,122 kWh

Midland Power Cooperative 248,916,753 kWh 254,612,598 kWh

Prairie Energy Cooperative 252,786,584 kWh 252,258,018 kWh

raccoon Valley Electric Cooperative 150,383,349 kWh 139,861,886 kWh

2009 2010Total Energy sales 1,897,387,587 kWh 1.921,699,372 kWh

rEC Peak Demand (no losses) 307,876 kW 277,851 kW

system Peak Demand 346,711 kW 326,979 kW

Miles of Transmission Lines* 1,733 1,737

Distribution substations 149 149

Employees (average through year) 96 95

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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2007 2008 2009 2010

MWMonTHly

PeaK DeManD

2010 salesTo Corn BelT PoWer rural eleCTriC CooPeraTives

Includes sales to RECs for special loads and municipals

2010 Co-oP HigHligHTs

* Includes jointly owned transmission lines

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ee reBaTes 2010

yTD summary January – December 2010

estimated 2010 Deemed kWh savings

yTD2010 goal

(iaeC Filing)yTD

Percent

residential Co-op reimb. Forms 5,659,838 80.4% Of 2010 Residential Goal

Pull the Plug 426,584 6.1% Of 2010 Residential Goal

service Concepts online CFLs 15,783 0.2% Of 2010 Residential Goal

Farm Progress show CFLs 37,329 0.5% Of 2010 Total Goal

see the Light Two 3,141,253 44.6% Of 2010 Residential Goal

Total residential 9,280,787 7,041,226 131.8% Of 2010 Residential Goal

C&I/Ag 10,314,065 1,642,571 627.9% Of 2010 C&I/Ag Goal

Total 15,975,619 8,683,797 184.0% Of 2010 C&I/Ag and Residential Goal

Some co-ops may choose to apply See the Light Two kWh savings to 2011

Corn Belt Power and its member co-ops continued energy-efficiency education, sponsoring the Momentum is Building Conference Feb. 11-12 in West Des Moines, holding the Build it right training at Iowa Central Community College, Fort Dodge, and hosting exhibits at the Iowa state Fair, Farm Progress show and Clay County Fair.

Along with Northwest Iowa Power Cooperative, Corn Belt Power developed an energy-efficiency wall display that educated members about efficient lighting, window installation, wall insulation and heating systems. Transported in a trailer branded with Touchstone Energy’s “Together We save” graphics, the display provided information at many annual meetings and fairs throughout the year.

In late 2009, the u.s. Department of Energy awarded National rural Electric Cooperative Association’s Cooperative research Network $33.9 million for a nationwide demonstration project that will bring together 27 rural electric cooperatives in 10 states to install more than 153,000 smart grid components.

Corn Belt Power and its member co-ops are included among the cooperatives that qualified for the grant money.

In 2010, Corn Belt Power continued work on implementing a load management program that will use smart grid technology to shift energy use at peak times and save co-ops money. The Watts smart® load management system will delay electric water heaters from running during times of peak energy use. The

system will also cycle off air conditioners – reducing some of the air conditioner load just briefly, but long enough to make a difference in the height of the peak demand. That difference will be seen not only at the Basin Electric generator, but also in the power bill sent to Corn Belt Power and its member cooperatives.

During the year, Corn Belt Power and its member co-ops started developing a passive load management program that uses in-home peak alert devices to notify members when a peak is approaching. Members can then opt to delay use of appliances such as dishwashers and clothes washers, lowering the peak demand and saving money for the cooperative and all of its members.

Photos at right: (Above) Old School Signs of Le Mars applies new Together We Save signage to the Corn Belt Power/ Northwest Iowa Power Cooperative energy-efficiency trailer. The trailer transports a new energy-efficiency display that features information on efficient lighting, window installation, wall insulation and heating systems. (Below) Members of Humboldt County REC receive a $25 check for recycling their old refrigerator in the Pull the Plug program.

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exPanDing oPPorTuniTies Even with the national downturn in the economy, Corn Belt Power member co-ops saw growth on their lines, especially in the agriculture sector. 2010 was a year of rebuilding and planning for the future.

The poultry industry continued to grow throughout the Corn Belt Power system. Markets have developed for cage-free eggs and businesses plan to construct several new production farms in 2011. Future plans include new pullet barns and hatcheries.

Energy sales to manufacturers showed signs of steady growth in 2010. During the year, several manufacturers returned to pre-recession employment levels. Manufacturing tied to agriculture continued to advance and require more electricity, increasing member co-op kilowatt-hour sales.

New projects planned for 2011 include a data center, value added ethanol processing, recreation facilities and new feed mills. During 2010, plans progressed for three new industrial parks and speculative buildings.

Corn Belt Power provided 70 commercial and industrial thermography surveys throughout the year, detecting faulty equipment that could have led to an outage. Energy audits also examined lighting, compressed air equipment and commercial motors.

The Iowa Area Development Group presented the 2010 outstanding Business of the year Venture Award to Hawkeye Pride Egg Farm, Corwith, a member of Prairie Energy Cooperative. IADG also honored Green Plains superior Ethanol, superior, Iowa, a member of Iowa Lakes Electric Cooperative, and Buresh Buildings systems, Inc., a member of Franklin rEC, with the Iowa Venture Awards.

In 2010, the Iowa Area Development Group celebrated its 25th anniversary. Since Iowa’s

electric cooperatives created it in 1985, IADG has helped develop and market 90 industrial parks, build 70 speculative buildings for industries, generate over $5.6 billion of capital investment and create or retain nearly 38,000 jobs for Iowa.

Photos above (Left) John Quasdorf, left, apprentice

lineman, and Matt Casper, journeyman lineman,

Franklin REC, install injectors at the West Sheffield

Substation. When load management is in place, the

injectors will receive a signal and send it onto the

power line to members’ homes, where it will control

electric water heaters and central air conditioners.

(Right) This Watts Smart peak alert device will

let co-op members know the status of the Corn Belt

Power system peak.

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2010 BusinEss DEvElopmEnt activityIn 2010, the Corn Belt Providing Opportunity Within Our Economic Region (P.O.W.E.R.) Fund celebrated its 10-year anniversary. This revolving loan fund provides low-interest loans to assist with local economic and community development projects within 25 counties in north central Iowa. The fund’s priorities include job creation and retention, diversification of the local economy and public infrastructure upgrades to improve the health, safety and/or medical care of rural residents. The Corn Belt Power board of directors administers the fund.

nEW rural Economic DEvElopmEnt Grants Corn Belt Power received a $234,000 United States Department of Agriculture grant and matched it with $46,800 to create a $280,800 loan for the city of West Bend. The loan is for seven years at zero percent interest. West Bend used the funds to pave a street and install water, sewer and other infrastructure to serve an

undeveloped industrial park. By installing these services, the city helped facilitate the expansion of Country Maid, Inc., which makes Butter Braid pastries. The Country Maid expansion will create 19 new jobs and retain 10 existing jobs in the community.

Corn Belt Power was awarded a $66,000 USDA grant and will match it with $13,200 to loan a total of $79,200 to Humboldt County for its new 1,350-square-foot Emergency Operations Center. The center will house the Emergency Management Department for Humboldt County as well as provide necessary meeting and training space for emergency personnel. The loan to Humboldt County will be for 10 years at a zero percent interest rate.

rEvolvinG loan FunD Custom Poultry Processing received monies from the Corn Belt P.O.W.E.R. Fund and the Butler County REC Revolving Loan Fund to help with the start up of its operation in Charles City. Custom Poultry Processing processes and packages organic, halal and antibiotic-free chickens.

Spencer Industries Foundation constructed a 40,000-square-foot

speculative building in the Green Industrial Park in Spencer in 2009. The speculative building was constructed to attract new investment and job opportunities to the Spencer area. Several local banks financed the building construction in 2009 and permanent financing was provided by the Corn Belt P.O.W.E.R. Fund, the Iowa Lakes Electric Cooperative Revolving Loan Fund, a new USDA REDL&G that Iowa Lakes Electric Cooperative received and the city of Spencer in 2010.

Glidden Development Group partnered with the Des Moines Area Community College Student Builders Program to start construction on its second energy-efficient home in the fall of 2010. The home’s estimated finish date is spring 2011. The organization’s first home was constructed in the 2009/2010 school year and was sold in the summer of 2010. Built to Iowa Touchstone Energy Home specifications, the houses are located in the Glidden High View addition on the city’s northwest side. The Corn Belt P.O.W.E.R. Fund, the Raccoon Valley Electric Cooperative Revolving Loan Fund and Homeward, Inc. provided financing for these projects.

spEculativE BuilDinG The Hampton 30,000-square-foot speculative building was sold to Buresh Building Systems, Inc., in 2010. Buresh is a general contractor specializing in a wide range of design-build projects in the industrial, agricultural, renewable fuels and commercial markets. In addition, the company purchased North Central Millwright and now installs and maintains grain storage handling equipment. Buresh will add another 9,000 square feet of cold storage at this location. Corn Belt Power and Franklin REC helped finance the construction of the speculative building in 2001 when each loaned Franklin County Development Association $100,000.

Photos above (Left) Brittany Dickey, develop-

ment finance director, works with Corn Belt

Power’s revolving loan fund that is helping to

finance a second speculative house in the High

View Addition, Glidden. (Right) Hawkeye Pride

Egg Farm, LLC, a member of Prairie Energy

Cooperative, built this new egg cracking facility,

layer farm and feed mill near Corwith. Corn Belt

Power crews built the Hawkeye Pride Substation

and Hawkeye Pride tap to serve the new load.

20

arounD THe CooPeraTive Even with a national downturn in the economy, Corn Belt Power sales remained strong in 2010. sales to member co-ops, North Iowa Municipal Electric Cooperative Association and Webster City set a new all-time-high record in 2010, totaling 1,921,699,372 kilowatt-hours, approximately a half percent increase over the previous record of 1,913,494,954 kilowatt-hours set in 2008. The 2010 sales total was approximately 1.3 percent higher than the previous year.

There was no rate increase in 2010. rates remained steady at an average rEC member system cost of 54.67 mills, including substation charge.

2010 was a positive year financially for Corn Belt Power. Lower-than-projected interest rates and expenses, along with higher revenue from increased sales and a patronage allocation from Basin Electric, resulted in a substantial margin. The margin led to the Corn

Belt Power board decision to defer $3.75 million in revenue to 2011 and 2012 to offset rate increases from Basin Electric. The board also approved an additional contribution of $362,815 to the Duane Arnold Energy Center decommissioning fund and approved a $750,000 marketing rebate to member cooperatives. With the approval of the deferral, marketing rebate and decommissioning fund contribution, the margin at year end totaled approximately $5.3 million.

In 2010, Corn Belt Power continued to implement new technology to position the cooperative for future operations. With the completion of a new virtual server project, Corn Belt Power has an improved backup of its network system and fewer machines to maintain.

Corn Belt Power and Iowa Lakes Electric Cooperative added another KCCI-TV schoolNet site with the May installation of the weather monitoring equipment at Pocahontas Area Elementary school.

Two of Corn Belt Power’s member cooperatives – Glidden rEC and sac County rEC – joined forces Jan. 1, 2010 to become Raccoon Valley Electric Cooperative. The newly consolidated cooperative elected David onken to be its representative on the Corn Belt Power board of directors.

Photos below (Left) Students from Pocahontas Area

Elementary School cheer May 28 during a KCCI-TV

dedication of a SchoolNet weather station donated by

Iowa Lakes Electric Cooperative and Corn Belt Power

Cooperative. Corn Belt Power and its member coopera-

tives now sponsor 20 school weather stations and seven

community webcams in the SchoolNet program. (Right)

Curtis Thelen, information technology specialist, works

on networking wires in Corn Belt Power Cooperative’s

control center in Humboldt.

21

Photo above Bob Nielsen, line foreman, strings line on the Bremer triple circuit. In 2010, Corn Belt Power

continued upgrading its transmission system.

ou r s t ory ’ s

led by our

mission

Corn Belt Power Cooperative enhances the quality of life for members, employees & communities.

Corn Belt Power Cooperative, headquartered in Humboldt, Iowa, is a generation and transmission electric

cooperative owned by its member systems. Corn Belt Power provides electricity to 10 member cooperatives and

one municipal electric cooperative that serve farms, rural residences, small towns and commercial and industrial

members in 41 counties in northern Iowa. Corn Belt Power responsibly provides a safe, reliable and affordable

supply of electricity and helps make the quality of life in our communities the best it can be.

23

membercooperatives12

3

45 6

789

10

24

l. KirBy rangeIowa Lakes Electric Cooperative

Dale sCHaeFer Assistant Secretary/TreasurerFranklin REC

DonalD FelDManPresidentButler County REC

sCoTT sTeCHerSecretaryPrairie Energy Cooperative

larry TilTonHumboldt County REC

CHarles gilBerTMidland Power Cooperative

larry roHaCH Grundy County REC

ronalD DeiBer Vice PresidentNorth Iowa Municipal Electric Cooperative Association (NIMECA)

DaviD onKen TreasurerRaccoon Valley Electric Cooperative

WilliaM CourTer Calhoun County REC

1 2

3 4

5

6

78

9

10

Boone valley Electric Cooperative

board of

25

human rEsourcEsrEtirEmEnts:John Hatcher meter technicianDon Larsen line foremanRon Lowrey warehouse clerkJohn Ralph shift operator

nEW hirEs:Tyler Baxter engineer IKent Paeper fleet and material assistant

upDatEs:Connor Almond apprentice electrician to apprentice linemanTravis Hefty apprentice lineman to journeyman linemanClayton Hood electrical engineer to engineer IDean Jensen journeyman lineman to line foremanMike Sutter apprentice electrician to system operatorLance Tinken system operator to meter technicianBrent Ulrich general plant worker to control operatorKevin White control operator to shift operatorJon Zeman maintenance and inventory assistant to warehouse clerk

in mEmoriam:Josh Smith journeyman electrician

sErvicE aWarDs:Dave Stockdale electrical maintenance foreman, 40 yearsSteve Curry meter technician, 35 yearsRay Lathrop maintenance supervisor, 35 yearsSteve Bohan senior financial analyst, 30 yearsKen Kuyper executive vice president and general manager, 30 yearsRandy Rohr journeyman lineman, 25 yearsDean Jensen line foreman, 20 yearsDennis Berry shift operator, 15 yearsClayton Burkhart electronics technician, 15 yearsRod Stephas shift operator, 15 yearsCorie Erickson assistant right-of-way and land supervisor, 10 yearsMike Cowell control operator, five yearsJoel Harklau journeyman electrician, five yearsBrad Hill communications technician, five yearsJeff Lindaman system operator, five yearsJohn Naber electrical and control, five yearsMatt Newton apprentice lineman, five years

headsdepartment

Ken KuyPerExecutive Vice President and General Manager

KaTHy TaylorVice President, Corporate Relations

Karen BerTeSenior Vice President, Finance and Administration

MiKe THaTCHerVice President, Generation

Kevin BornHoFTVice President, Engineering and System Operations

JiM verMeerVice President, Business Development

2010financialstatements

With Independent Auditors’ Report Thereon

27

Assets 2010 2009Electric plant: In service $ 394,079,082 382,288,357 Less accumulated depreciation (200,963,572 ) (188,102,591 ) 193,115,510 194,185,766 Construction work in progress 6,923,147 10,869,414 Nuclear fuel, net of amortization 13,122,078 11,788,182 213,160,735 216,843,362 Other property and investments: Nonutility property 256,384 256,384 Investment in the National Rural Utilities Cooperative Finance Corporation (NRUCFC) 4,614,983 4,587,008 Decommissioning fund 31,701,919 27,443,055 Other investments 10,432,332 9,108,242 Notes receivable 5,608,135 6,198,875 Other assets 1,423,440 873,516 54,037,193 48,467,080 Deferred charges: DAEC regulatory asset 3,484,570 1,709,944 Deferred refueling costs 3,309,143 1,317,026 DAEC pension regulatory asset 1,631,000 1,864,000 Decommissioning regulatory asset 29,495,534 33,393,416 Other — 6,701 37,920,247 38,291,087 Current assets: Cash and cash equivalents 2,240,633 7,352,890 Special funds 3,822,468 2,846,624 Member accounts receivable 8,962,644 9,073,926 Other receivables 524,786 2,546,691 Inventories: Fuel 10,000,286 13,073,099 Materials and supplies 9,482,095 9,220,249 Prepayments 240,474 288,136 35,273,386 44,401,615 $ 340,391,561 348,003,144

BAlAnce SheetSDecember 31, 2010 and 2009

See accompanying notes to financial statements.

28

Membership capital and liabilities 2010 2009 Membership capital: Memberships, at $100 per membership $ 1,200 1,300 Deferred patronage dividends, restricted 18,306,100 15,996,100 Other equities, per accompanying statements 46,468,884 43,975,515 Accumulated other comprehensive income (loss) 4,795,452 2,554,471 69,571,636 62,527,386 Long-term debt: Federal Financing Bank 182,239,359 190,448,582 NRUCFC 8,260,524 9,841,145 USDA intermediary relending program 4,338,249 4,262,744 194,838,132 204,552,471 Less – current maturities of long-term debt 14,064,286 13,738,935 180,773,846 190,813,536 Other long-term liabilities: DAEC decommissioning liability 56,402,000 58,282,000 Ashlandfillretirementobligation 868,052 831,347 DAEC pension costs 1,665,114 1,856,033 58,935,166 60,969,380 Current liabilities: Current maturities of long-term debt 14,064,286 13,738,935 Short-term debt 3,000,000 8,000,000 Accounts payable 6,670,177 5,171,998 Accrued property and other taxes 3,261,859 3,330,815 Deferred credit 3,750,000 2,800,000 Accrued interest and other 364,591 651,094 31,110,913 33,692,842 $ 340,391,561 348,003,144

BAlAnce SheetSDecember 31, 2010 and 2009

See accompanying notes to financial statements.

29

2010 2009 Operating revenues: Sale of electric energy $ 101,075,662 100,073,021 Lease revenue 1,440,758 480,253 Other 4,785,391 4,555,698 107,301,811 105,108,972 Operating expenses: Operation: Steam and other power generation 36,634,794 30,058,925 Purchased power, net 24,087,688 23,967,517 Transmission 5,579,485 6,246,019 Sales 2,311,234 2,504,367 Administrative and general 3,294,942 3,661,151 Maintenance: Steam and other power generation 6,782,499 7,418,173 Transmission 1,832,902 2,056,498 General plant 152,567 167,584 Depreciation and decommissioning 13,513,131 14,030,766 Gain on the disposition of property (1,582 ) (3,042 ) 94,187,660 90,107,958 Net operating revenues 13,114,151 15,001,014 Interest and other deductions: Interest on long-term debt 9,937,094 9,827,535 Interest during construction (156,217 ) (51,840) Other interest and deductions 168,697 610,621 9,949,574 10,386,316 Net operating margin 3,164,577 4,614,698 Nonoperating margin: Interest and dividend income 723,808 538,465 Patronage income 1,323,763 4,446,527 DOE settlement — 1,654,135 Plant abandonment — (4,425,809) Other, net 144,742 41,716 2,192,313 2,255,034 Net margin $ 5,356,890 6,869,732

StAteMentS of RevenueS AnD expenSeSYears ended December 31, 2010 and 2009

See accompanying notes to financial statements.

30

other equities Accumulated Deferred Reserve for other patronage Statutory contingent comprehensive total Membership dividends surplus losses income (loss)

Balance, December 31, 2008 $ 49,605,982 1,300 12,321,100 5,387,484 35,233,089 (3,336,991 ) 2009 net margin 6,869,732 — 3,514,790 700,000 2,654,942 — Revenue deferred patronage dividends 160,210 — 160,210 — — — Change in fair value of investments 5,891,462 — — — — 5,891,462 Balance, December 31, 2009 62,527,386 1,300 15,996,100 6,087,484 37,888,031 2,554,471 2010 net margin 5,356,890 — 2,863,521 700,000 1,793,369 — Revenue deferred patronage dividends 136,479 — 136,479 — — — Change in fair value of investments 2,240,981 — — — — 2,240,981 Patronage dividends paid (690,000 ) — (690,000 ) — — — Memberships returned (100 ) (100 ) — — — —Balance, December 31, 2010 $ 69,571,636 1,200 18,306,100 6,787,484 39,681,400 4,795,452

StAteMentS of coMpRehenSive incoMeYears ended December 31, 2010 and 2009

2010 2009Net margin $ 5,356,890 6,869,732 Change in unrealized gain in fair value of investments 2,240,981 5,891,462 Comprehensive income $ 7,597,871 12,761,194

StAteMentS of MeMBeRShip cApitAlYears ended December 31, 2010 and 2009

See accompanying notes to financial statements.

31

2010 2009 Cashflowsfromoperatingactivities: Net margin $ 5,356,890 6,869,732 Adjustments to reconcile net margin to net cash provided by operating activities: Depreciation and decommissioning 13,513,131 14,030,766 Amortization of nuclear fuel 3,651,876 3,428,869 Amortization of deferred refueling costs 1,685,321 1,546,601 Amortization of DAEC pension regulatory asset 233,000 233,000 Undistributed patronage earnings from other investments (1,225,668 ) (4,349,617 ) Changes in current assets and liabilities: Receivables 2,133,187 1,059,554 Inventories 2,810,967 721,759 Prepayments 47,662 (27,389 ) Deferred refueling costs (3,677,438 ) (2,730,040 ) Other – deferred charges 1,123 (4,122 ) Accounts payable 1,425,915 (2,333,721 ) Accrued property and other taxes (68,956 ) 435,914 Deferred credit 950,000 (1,058,000 ) Accrued interest and other (280,925 ) (300,725 ) DAEC pension costs (190,919 ) (180,966 ) Net cash provided by operating activities 26,365,166 17,341,615 Cashflowsfrominvestingactivities: Additions to electric plant, net (9,450,589 ) (9,646,423 ) Additions to nuclear fuel (4,985,772 ) (3,380,600 ) Sale of nonutility plant, net — 5,096 Additions to decommissioning fund (711,677 ) (1,600,000 ) Distributions from (additions to) special funds (975,844 ) 1,034,476 Additions to other investments, other assets, investment in NRUCFC, and notes receivable 50,898 (2,582,871 ) Net cash used in investing activities (16,072,984 ) (16,170,322 )Cashflowsfromfinancingactivities: Proceeds from issuance of long-term debt 4,113,333 36,392,000 Repayment of long-term debt (13,827,672 ) (12,488,914 ) Short-term borrowings, net (5,000,000 ) (20,000,000 ) Deferred patronage dividends paid (690,100 ) — Netcashprovidedby(usedin)financingactivities (15,404,439 ) 3,903,086 Net increase (decrease) in cash and cash equivalents (5,112,257 ) 5,074,379 Cash and cash equivalents at: Beginning of year 7,352,890 2,278,511 End of year $ 2,240,633 7,352,890

StAteMentS of cASh flowSYears ended December 31, 2010 and 2009

See accompanying notes to financial statements.

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noteS to finAnciAl StAteMentS | December 31, 2010 and 2009(1) OrganizationCornBeltPowerCooperative(theCooperative)isaRuralUtilitiesService(RUS)financedgenerationandtransmissioncooperativecreatedandownedby10distributioncooperativesandone municipal cooperative association. Electricity supplied by the Cooperative serves farms, small towns, and commercial and industrial businesses across counties in northern Iowa.

The Cooperative’s Board of Directors is comprised of one representative from each member cooperative and is responsible for, among other things, establishing rates charged to the member cooperatives.

(2) Significant Accounting PoliciesTheCooperativemaintainsitsaccountingrecordsinaccordancewiththeUniformSystemofAccountsasprescribedbytheRUS.Thepreparationoffinancialstatementsinconformitywith U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure ofcontingentassetsandliabilitiesatthedateofthefinancialstatementsandthereportedamountsofrevenuesandexpensesduringthereportingperiod.Actualresultscoulddifferfromthoseestimates.Thesignificantaccountingpoliciesareasfollows:

(a) Electric PlantElectricplantisstatedatoriginalcost,whichincludespayrollandrelatedbenefits,interestduringtheperiodofconstruction,andtheestimatedassetretirementobligation(ARO).

Costs in connection with repairs of properties and replacement of items less than a unit of property are charged to maintenance expense. Additions to and replacements of units of property are charged to electric plant accounts.

Depreciation is provided using straight-line methods and RUS-prescribed lives. These provisions, excluding nuclear facilities, were equivalent to a composite depreciation rate on gross plant of 3.08% and 3.06% for 2010 and 2009, respectively.

Under a joint-ownership agreement, the Cooperative has a 10% undivided interest in the Duane Arnold Energy Center (DAEC), a nuclear-fueled generating station, which was placed in service in 1974. The Cooperative is depreciating its interest in the DAEC and each year’s property additions subsequent to 1984 on a straight-line basis over the remaining term of the Nuclear Regulatory Commission (NRC) license for DAEC. The composite depreciation rate on gross plant for DAEC was 6.10% and 5.48% for 2010 and 2009, respectively.

During 2009, as a result of the majority owner operator deciding to abandon the construction of the Sutherland plant, which the Cooperative shared a 15.4% interest in, the Cooperative incurred a $4,425,809 loss, which is recorded as plant abandonment in the statements of revenues and expenses.

(b) Decommissioning of DAECThe Cooperative recognizes and estimates an asset retirement obligation for its 10% share at the estimated cost to decommission DAEC. An NRC estimate of the decommissioning costs of DAEC was updated in 2008. This report estimated the Cooperative’s share of the decommissioning costs of DAEC to be approximately $76,159,700 (in 2008 dollars). TheCooperativeisprovidingforoverallnucleardecommissioningcostsusingafundingmethodwhichassumesa4%rateofinflationanda3%realrateofreturn.Themethod isdesignedtoaccumulateadecommissioningreservesufficienttocovertheCooperative’sshareofdecommissioningcostsbytheyear2034.Thiswasextendedby20yearsafterthe Cooperative received notice from the NRC the plant license extension was approved in December 2010. During 2009, as a result of a settlement with the Department of Energy (DOE) relating to the DOE’s failure to accept nuclear waste from DAEC, the Cooperative received $1,654,135. The Board approved $1.6 million of these receipts to be transferred into the decommissioning fund, which is recorded in depreciation and decommissioning expense in the statements of revenues and expenses.

The total fair value of the decommissioning funds accumulated at December 31, 2010 was $31,701,919 of which $19,391,909 has been placed in a fund legally restricted for use in decommissioning DAEC. The remaining $12,310,010 while not legally restricted, has been designated by the Cooperative for use in decommissioning DAEC. The total fair value of the decommissioning funds accumulated at December 31, 2009 was $27,443,055, of which $17,286,898 has been placed in a fund legally restricted for use in decommissioning DAEC. The remaining $10,156,137, while not legally restricted, has been designated by the Cooperative for use in decommissioning DAEC.

AtDecember31,2010and2009,decommissioninginvestmentswereclassifiedasavailableforsaleandconsistedofthefollowing:

Amortized unrealized unrealized cost gains losses fair value 2010: Obligations of U.S. government and agencies $ 691,740 22,961 1,946 712,755 Corporate bonds 2,567,099 107,180 14,764 2,659,515 Common and preferred stock 11,401,799 3,662,806 304,651 14,759,954 Hedge funds 2,142,159 113,286 9,224 2,246,221 Cash and cash equivalents 2,112,101 — — 2,112,101 Foreign investments – common stock 7,470,750 1,359,305 171,076 8,658,979 Foreign investments – government 520,818 31,576 — 552,394 $ 26,906,466 5,297,114 501,661 31,701,919

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noteS to finAnciAl StAteMentS | December 31, 2010 and 2009 Amortized unrealized unrealized cost gains losses fair value 2009: Obligations of U.S. government and agencies $ 1,290,590 39,762 6,274 1,324,078 Corporate bonds 2,582,986 58,508 26,334 2,615,160 Common and preferred stock 11,183,277 2,670,218 558,590 13,294,905 Hedge funds 2,450,000 — 192,731 2,257,269 Cash and cash equivalents 878,853 — — 878,853 Foreign investments – common stock 5,669,124 1,025,366 463,564 6,230,926 Foreign investments – government 833,753 11,422 3,311 841,864 $ 24,888,583 3,805,276 1,250,804 27,443,055

MaturitiesofsecuritiesclassifiedasavailableforsalewereasfollowsatDecember31,2010:

Amortized cost fair value Due within one year $ 2,445,294 2,529,777 Dueafteroneyearandthroughfiveyears 872,457 917,504Dueafterfiveyearsandthroughtenyears 376,979 388,400Due after ten years 84,928 88,983 Cash and cash equivalents 2,112,101 2,112,101 Equity securities 18,872,548 23,418,933 Hedge funds 2,142,159 2,246,221 $ 26,906,466 31,701,919

Realizedgainsandlossesfromtheavailableforsalesecuritiesaredeterminedonaspecific‑identificationbasis.Realizedlossesoninvestmentsavailableforsalewere$89,269 and $2,217,220 for 2010 and 2009, respectively. These losses result in a corresponding increase to the decommissioning regulatory asset.

The following table shows the gross unrealized losses and fair value of the Cooperative’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2010.

less than 12 months 12 months or greater total fair unrealized fair unrealized fair unrealized value losses value losses value lossesObligations of U.S. government and agencies $ 112,466 (1,946 ) — — 112,466 (1,946 ) Corporate bonds 245,996 (5,649 ) 447,746 (9,115 ) 693,742 (14,764 ) Common and preferred stock 602,853 (36,898 ) 1,108,018 (267,753 ) 1,710,871 (304,651 ) Hedge funds 332,935 (9,224 ) — — 332,935 (9,224 ) Foreign investments – government — — — — — — Foreign investments – common stock 667,764 (47,248 ) 440,701 (123,828 ) 1,108,465 (171,076 ) $ 1,962,014 (100,965 ) 1,996,465 (400,696 ) 3,958,479 (501,661 )

Inevaluationofother‑than‑temporaryimpairment,theCooperativeconsidersitsintentandabilitytoholdtheseinvestmentsforaperiodoftimesufficienttoallowfortheanticipated recovery in the market value of these investments, which may be maturity, the severity of the decline, and the length of time and the extent to which fair value has been below cost. The Cooperative does not consider these investments to be other-than-temporarily impaired at December 31, 2010. Individually, none of the investments that haveunrealizedlossesgreaterthan12monthsaresignificanttothefinancialstatements.

(c) Nuclear FuelThe cost of nuclear fuel is amortized to steam and other power generation expenses based on the quantity of heat produced for the generation of electric energy. Such amortization was $3,651,876 and $3,428,869 for 2010 and 2009, respectively.

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noteS to finAnciAl StAteMentS | December 31, 2010 and 2009(d) Other InvestmentsOther investments consist of funds held in trust (mainly from patronage income), cash held for the Cooperative’s intermediary relending program (see note 8), and common and preferred stock.

(e) InventoriesInventories consist of fuel, primarily coal, and materials and supplies. The cost for inventories are determined on a weighted average basis.

(f) Regulatory MattersTheCooperative’sutilityoperationsaresubjecttoprovisionsofAccountingStandardsCodification(ASC)Topic980,Regulated Entities. Therefore, its utility operations recognize theeffectsofrateregulationbytheBoardofDirectorsand,accordingly,haverecordedregulatedassetsandaliabilitytoreflecttheimpactofregulatoryitemsforwhichfuturerates will be increased to recover. The regulatory assets are included within deferred charges and the regulatory liability is included within deferred credit on the balance sheets.

(g) Interest during ConstructionInterestduringconstructionrepresentsthecostoffundsusedforconstructionandnuclearfuelrefinement.Theaverageratewas1.1%and2.4%for2010and2009,respectively,andisbasedontheCooperative’scostsoffinancing.

(h) Agreement with Webster CityThe Cooperative has a long-term lease agreement with Webster City under which Webster City has agreed to provide certain generation and transmission facilities to the Cooperative. The Cooperative has recorded these assets in electric plant.

The Cooperative continues to operate certain Webster City generation and transmission assets and pay for the operation, maintenance, and capital additions associated with those assets. The Cooperative is working with Webster City to modify the current contract to meet the needs of both parties.

(i) Income TaxesThe Cooperative is exempt from federal and state income taxes under Section501(c)(12) of the Internal Revenue Code. Accordingly, no provision for income taxes has been includedintheCooperative’sfinancialstatements.TheCooperativerecognizestheeffectofincometaxpositionsonlyifthosepositionsaremorelikelythannotofbeingsustained.Recognizedincometaxpositionsaremeasuredatthelargestamountthatisgreaterthan50%likelyofbeingrealized.Changesinrecognitionormeasurementarereflectedintheperiod in which the change in judgment occurs.

(j) Statements of Cash FlowsForthepurposeofreportingcashflows,theCooperativeconsiderstemporarycashinvestmentspurchasedwithamaturityofthreemonthsorlesstobecashequivalents. Cash paid for interest was $10,083,407 and $10,544,848 for 2010 and 2009, respectively.

(k) Operating Revenues and Cost of PowerThe Cooperative recognizes sales of electric energy and the related cost of electric energy produced or purchased when energy is delivered to customers.

(l) Emission AllowancesThe 1990 Clean Air Act (the Act) established the requirement for fossil fuel electric generating plants to hold sulfur dioxide (SO2) emission allowances. In 2009, the Clean Air Interstate Rule (CAIR) established a similar requirement for nitrous oxide (NOx) annual and seasonal emission allowances. The Act and CAIR allocate a certain number of emission allowances to owners of fossil fuel generating plants and established an SO2, NOx annual, and NOx seasonal emission allowance trading programs. Emission allowances that have been granted to the Cooperative as a result of the Act do not have any cost, and therefore, the use of these emission allowances does not result in expense. From time to time, the Cooperative will purchase a quantity of each type of emission allowance to ensure an adequate number of allowances are held. The purchased allowances are combined with the allocated allowances to derive an average allowance cost each year for each type of emission allowance. Emission allowances purchased are capitalized in inventory and are charged to fuel expense as they are used in operations.

(3) Agreement with Basin Electric Power CooperativeOn September 1, 2009, the Cooperative became a Class A member of Basin Electric Power Cooperative (Basin Electric). As part of this agreement, energy and capacity needs above the Western Area Power Administration (WAPA) allocation and a separate 50 MW power purchase agreement with Basin Electric are to be provided by Basin Electric at Class A member rates. Further, the Cooperative sells the energy from its generation facilities at cost to Basin Electric but continues to be responsible for and own those facilities. Also, a portion of the 161 kV transmission system that is contiguous with Basin Electric is being leased to Basin Electric. During 2010 and 2009, as part of these agreements, the Cooperative purchased $65,280,769 and $22,415,299 of power and sold $70,327,486 and $22,555,733 of power to Basin Electric, which is recorded net in purchased power, net, in the statements of revenues and expenses.

(4) Fair Value Measurements(a) Fair Value of Financial InstrumentsThefollowingdescribesthecarryingamountsandestimatedfairvalueoffinancialinstrumentsandthemethodsandassumptionsthatwereusedtoestimatethefairvalueofeachclassoffinancialinstruments:

Cash and cash equivalents, member accounts receivable, other receivables, special funds, short‑term debt, accounts payable, and accrued liabilities – The carrying amounts, at face value or cost plus accrued interest, approximate fair value because of the short maturity of these instruments.

Investment in the National Rural Utilities Cooperative Finance Corporation, other investments, and notes receivable – These accounts are recorded at cost. The carrying value of these investments approximates fair value as of December 31, 2010 and 2009 due to the nature of the accounts or underlying short–term nature.

35

noteS to finAnciAl StAteMentS | December 31, 2010 and 2009

Decommissioning funds–Theinvestmentswithinthedecommissioningfundarerecordedatfairvalue.Equitysecuritiesclassifiedasavailableforsalearemeasuredusingquotedmarketpricesatthereportingdatemultipliedbythequantityheld.Debtsecuritiesclassifiedasavailableforsalearemeasuredusingquotedmarketpricesmultipliedbythe quantity held when quoted market prices are available. If quoted market prices are not available, the fair values are estimated using pricing models, quoted prices of similar securitieswithsimilarcharacteristics,ordiscountedcashflow.Forhedgefundswherenoreadilyascertainablemarketvalueexists,management,inconsultationwiththeirinvestmentadvisors,valuestheseinvestmentsingoodfaithbasedupontheinvestment’scurrentfinancialstatementsorotherinformationprovidedbytheunderlyinginvestmentadvisor.

Long‑term debt – The fair value of the Cooperative’s long-term debt is measured based on the borrowing rates currently available to the Cooperative for debt with similar terms and maturities. The fair values as of December 31, 2010 and 2009 are estimated at $204,759,765 and $209,113,944, respectively.

(b) Fair Value HierarchyASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjustedquotedpricesinactivemarketsforidenticalassetsorliabilities(Level1measurements)andthelowestprioritytomeasurementsinvolvingsignificantunobservableinputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1 – inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Cooperative has the ability to access at the measurement date.

Level 2 – inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 – inputs are unobservable inputs for the asset or liability.

Thelevelinthefairvaluehierarchywithinwhichafairvaluemeasurementinitsentiretyfallsisbasedonthelowestlevelinputthatissignificanttothefairvaluemeasurementin its entirety.

The following tables present assets and liabilities that are measured at fair value on a recurring basis (including items that are required to be measured at fair value and items for which the fair value option has been elected) at December 31, 2010 and 2009:

fair value measurements at December 31, 2010 using Quoted prices in active Significant markets for other Significant identical observable unobservable December 31, assets inputs inputs 2010 (level 1) (level 2) (level 3)Assets: Cash and cash equivalents: Commercial paper $ — — — — Decommissioning fund: Obligations of the U.S. and agencies 712,755 712,755 — — Corporate bonds 2,659,515 — 2,659,515 — Common and preferred stock 14,759,954 14,759,954 — — Hedge funds 2,246,221 — — 2,246,221 Foreign investments – government 552,394 552,394 — — Foreign investments – common stock 8,658,979 8,658,979 — — Cash and cash equivalents 2,112,101 2,112,101 Total $ 31,701,919 26,796,183 2,659,515 2,246,221

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noteS to finAnciAl StAteMentS | December 31, 2010 and 2009 fair value measurements at December 31, 2009 using Quoted prices in active Significant markets for other Significant identical observable unobservable December 31, assets inputs inputs 2009 (level 1) (level 2) (level 3)Assets: Cash and cash equivalents: Commercial paper $ 7,085,338 7,085,338 — — Decommissioning fund: Obligations of the U.S. and agencies 1,324,078 1,324,078 — — Corporate bonds 2,615,160 — 2,615,160 — Common and preferred stock 13,294,905 13,294,905 — — Hedge funds 2,257,269 — — 2,257,269 Foreign investments – government 841,864 841,864 — — Foreign investments – common stock 6,230,926 6,230,926 — — Cash and cash equivalents 878,853 878,853 — — Total $ 34,528,393 29,655,964 2,615,160 2,257,269

ThefollowingtablespresenttheCooperative’sactivityforassetsmeasuredatfairvalueonarecurringbasisusingsignificantunobservableinputs(Level3)asdefined in Statement 157 for the years ended December 31, 2010 and 2009:

Balance at December 31, 2009 $ 2,257,269 Sales (231,124 ) Realized loss on sale (76,717 ) Unrealized gains included in other comprehensive income 296,793 Balance at December 31, 2010 $ 2,246,221

Balance at December 31, 2008 $ 2,308,635 Sales (265,418 ) Realized loss on sale (84,582 ) Unrealized gains included in other comprehensive income 298,634 Balance at December 31, 2009 $ 2,257,269

(5) Investment in the National Rural Utilities Cooperative Finance Corporation (NRUCFC), Notes Receivable, and Other InvestmentsThe Cooperative has investments in the following:

2010 2009Common and preferred stock $ 207,165 205,683 Funds held in trust 9,287,168 8,075,796 Restricted cash 2,361,439 1,700,279 Investment in NRUCFC 4,614,983 4,587,008 Economic development loans 5,608,135 6,198,875 $ 22,078,890 20,767,641

The above investments are included in the accompanying balance sheets as follows:

2010 2009Investment in NRUCFC $ 4,614,983 4,587,008 Notes receivable 5,608,135 6,198,875 Other investments 10,432,332 9,108,242 Other assets 1,423,440 873,516 $ 22,078,890 20,767,641

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noteS to finAnciAl StAteMentS | December 31, 2010 and 2009

The Cooperative has an investment of $4,614,983 and $4,587,008, at December 31, 2010 and 2009, respectively, with the NRUCFC. This investment is required in order to allow the Cooperative to borrow funds from NRUCFC. The investment earns interest of 7.5% on $2,000,000, which matures in 2044, 5.0% on $2,195,507, which matures between 2070 and 2080, and 3.0% on $121,789, which matures in 2025. The remaining balance of $297,687 does not earn interest.

Notes receivable consist of notes to member cooperatives and other businesses to assist in economic development of qualifying industrial sites, speculative buildings, rural housing, and certain joint venture projects. Interest rates on these notes receivable range from 0% to 7.65%.

Funds held in trust consist mainly of deferred patronage dividends related to the Cooperative’s membership in other cooperatives.

(6) Deferred Patronage Dividends and Other EquitiesIn accordance with the Iowa Code, the Board of Directors is required to allocate a portion of the current year’s net margin to statutory surplus until the statutory surplus equals 30% of total membership capital. No additions can be made to statutory surplus whenever it exceeds 50% of total membership capital. The Board of Directors appropriated $700,000 of the 2010 and 2009 net margins to statutory surplus.

The equity–designated “reserve for contingent losses” in the statements of membership capital is an appropriation of equity by the Board of Directors. The Board of Directors appropriated $1,793,369 and $2,654,942 of the 2010 and 2009, respectively, net margin to reserve for contingent losses. There is no statutory restriction of this equity.

The Board of Directors is permitted by the Iowa Code to allocate the current year’s net margin to deferred patronage dividends upon meeting certain requirements and is required tomakesuchallocationsifthenetmarginfortheyearexceedsspecifiedmaximums.TheBoardofDirectorshasappropriated$3,000,000and$3,675,000ofthe2010and2009netmargins, respectively, to deferred patronage dividends. Deferred patronage dividends are to be paid in the future as determined by the Board of Directors.

Under the conditions of the Cooperative’s mortgages, deferred patronage dividends cannot be retired without approval of the RUS and the NRUCFC unless the remaining equity meets certain tests. The Cooperative did not meet these tests at December 31, 2010 and 2009.

(7) Deferred Regulatory Debits and CreditsRegulatory assets are recorded for expenses that are deferred and will be recovered through rates charged to members in future periods. Such deferrals are made at the discretion of the Cooperative’s Board of Directors. The Cooperative does not earn a return on these regulatory assets. Regulatory credits are established for revenues that have been deferred at the discretion of the Cooperative’s Board of Directors. These amounts will be included in income in the year that they are applied to future costs or otherwise returned to members through a reduction in rates.

At December 31, 2010 and 2009, deferred regulatory debits and credits consisted of the following:

2010 2009Deferred regulatory assets: DAEC regulatory asset $ 3,484,570 1,709,944 Deferred refueling costs 3,309,143 1,317,026 DAEC pension regulatory asset 1,631,000 1,864,000 Decommissioning regulatory asset 29,495,534 33,393,416 $ 37,920,247 38,284,386 Deferred regulatory credits: Deferred credit $ 3,750,000 2,800,000

DAEC Regulatory Asset ‑ In 2008, the Cooperative, with Board of Directors approval, established a regulatory asset in conjunction with the deferral of depreciation costs related to the DAEC until the extension of the plant license has been approved by the NRC (see note 2b). The plant license was approved in December 2010, accordingly, the Cooperative will begin amortizing the asset over the remaining life of the license.

Deferred Refueling Costs ‑ The Cooperative defers extraordinary operation and maintenance expenses incurred during refueling outages of DAEC. DAEC nuclear refueling occurs approximately every two years and occurred in February 2009 and October 2010. These deferred costs are being amortized to expense based on the expected generation of the next fuel cycle, which corresponds with the period the Cooperative is recovering these costs in its rates. Such amortization was $1,685,321 and $1,546,601 for 2010 and 2009, respectively.

DAEC Pension Regulatory Asset ‑ In 2007, the Cooperative entered into an agreement with FPL to pay FPL $2,330,000 of pension costs related to DAEC over a 10 year period. The Cooperative has established a regulatory asset in conjunction with the pension costs and amortizes the liability over a 10 year period. Such amortization was $233,000 for 2010 and 2009.

Decommissioning Regulatory Asset – In connection with the costs related to decommissioning of DAEC, the Cooperative has established a regulatory asset in conjunction with recording of the decommissioning liability. This regulatory asset is the difference between the decommissioning liability and the realized value of the investments in the decommissioning fund.

Deferred Credit – In September 2009, the Cooperative became a Class A member of Basin Electric and collected additional revenue over the next four months not anticipated in the beginning of the year. Rate increases were forecasted at the beginning of 2010, therefore, the Cooperative’s Board of Directors established a deferred credit of $2,800,000 for revenue which was returned to members in 2010 in the form of reduced revenue requirements. In October 2010, large rate increases were forecasted for the next three years; therefore, the Cooperative’s Board of Directors established a deferred credit of $3,750,000 which will be returned to members in the form of reduced revenue requirements. The revenue deferral was set aside in a cash account to cover expenditures in 2011 and 2012. RUS requires these deferral plans be set aside in a special fund. In addition, the Cooperative set aside money inaspecialfundtocoverthefutureremovaloftheWisdomUnit1ashlandfill.Thebalanceinthefundwas$72,468and$46,624attheendof2010and2009,respectively.

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noteS to finAnciAl StAteMentS | December 31, 2010 and 2009(8) Short‑Term DebtIn 2008, the Cooperative entered into a $150,000,000 syndicated unsecured revolving credit facility with NRUCFC, The Bank of Tokyo-Mitsubishi UFJ, LTD, and Lloyds TSB Bank. The previous two existing credit facilities were rescinded at the same time. On October 1, 2009, the Cooperative reduced the unsecured credit facility from $150,000,000 to $75,000,000. On June 1, 2010, the Cooperative further reduced the unsecured credit facility to $50,000,000. The Cooperative has drawn down on this credit facility $3,000,000 and $8,000,000 as of December 31, 2010 and 2009, respectively. Interest rates for the 2010 advances range from 1.08% to 1.20%.

(9) Long‑Term DebtLong-term debt consists of mortgage notes payable to the United States of America acting through the RUS from the Federal Financing Bank (FFB) notes issued in conjunction withNRUCFCfinancing,andnotesborrowedthroughtheUSDAIntermediaryRelendingProgram(IRPNotes)andRuralEconomicDevelopmentLoansandGrants(REDLGloans) Program. The proceeds of these IRP Notes and REDLG loans are then lent to other eligible businesses within certain approved counties in the Cooperative’s service area. Substantially, all the assets, rent, income, revenue, and net margin of the Cooperative are pledged as collateral for the long-term debt of the Cooperative, except for IRP Notes and REDLG loans, which are not secured by assets of the Cooperative. Long-term debt is comprised of:

2010 2009 Mortgage notes due in quarterly installments: FFB 2.563% – 10.657%, due 2011 – 2039 $ 182,239,359 190,448,582 NRUCFC 4.825% – 6.125%, due 2011 – 2020 8,260,524 9,841,145 190,499,883 200,289,727 USDA Intermediary Relending Program – 0% – 1%, due 2011 – 2035 4,338,249 4,262,744 $ 194,838,132 204,552,471

Maturitiesoflong‑termdebtforthenextfiveyearsareasfollows:

Year: 2011 $ 14,064,286 2012 13,782,827 2013 11,340,168 2014 10,849,279 2015 10,072,635 Thereafter 134,728,937 $ 194,838,132

Restrictive covenants required the Cooperative to set rates that would enable it to maintain a times interest earned ratio (TIER) of 1.05 and a debt service coverage (DSC) of 1.0 on averageinatleasttwooutofeverythreeyears.AsofDecember31,2010and2009,theCooperativewasincompliancewithitscovenantsonlong‑termdebtwithrespecttofinancialratios.

During2010,theCooperativeborrowed$3,911,000fromtheFFBtofinancetransmissionandgenerationconstructionwithratesrangingfrom3.198%to4.115%.

USDA Rural Development requires all IRP & REDLG loans to be fully insured. The Cooperative maintains IRP & REDLG accounts with Bank Iowa. In October 2008, Bank Iowa entered into an agreement with Federal Home Loan Mortgage Corporation and Federal Home Loan Banks pledging $500,000 to each entity totaling $1,000,000. This was pledged in the form of repurchase agreements to guarantee the IRP & REDLG accounts in case of default. The Cooperative does not incur any expenses related to this agreement as all expenses are paid by Bank Iowa. The maturity date of the agreement is February 23, 2017 for the Federal Home Loan Mortgage Corporation agreement and September 25, 2014 for the Federal Home Loan Banks agreement.

(10) Commitments and ContingenciesIn 2002, the Cooperative entered into a power purchase agreement to purchase 11.49% of the monthly generation from the Hancock County Wind Energy Center up to 11.22 megawatts.ThisagreementiseffectivethroughDecember31,2022andratesarefirmforthelifeofthecontract.

In 2007, the Cooperative entered into a power purchase agreement to purchase the monthly generation from Crosswind Energy, LLC up to 21 megawatts. This agreement is effective throughJune15,2022andratesarefirmforthelifeofthecontract.

A long-term purchased power agreement with Basin Electric began on January 1, 2008 for 50 MW and expires December 31, 2050.

On September 1, 2009, the Cooperative became a Class A member of Basin Electric. As part of this agreement, energy and capacity needs above the WAPA allocation mentioned in the previous paragraph are to be provided by Basin Electric. The Cooperative sells the energy from its generation facilities at cost to Basin Electric but continues to be responsible for and own those facilities. Also, a portion of the 161 kV transmission system that is contiguous with Basin Electric is being leased to Basin Electric.

In 2008, the Cooperative entered into a power purchase agreement to purchase the monthly generation from Iowa Lakes Electric Cooperative’s two wind farms both of which started generating in 2009. The agreement is effective through December 31, 2011 and can be extended if both parties mutually agree to extend it. Rates are based upon Basin Electric’s Commercial Wind Rate.

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noteS to finAnciAl StAteMentS | December 31, 2010 and 2009(11) Joint Plant OwnershipUnder joint ownership agreements with other utilities, the Cooperative had undivided interests at December 31, 2010 in electric plant, including construction work in progress, as shown below:

total unit electric Accumulated accredited cooperative’s plant depreciation capacity (Mw) share (%) Wisdom Unit 2 $ 16,146,457 3,171,841 80 43.8 % Neal #4 47,612,002 40,573,685 644 11.3 Walter Scott #3 26,909,486 12,631,681 690 3.8 DAEC 99,885,174 73,533,996 614 10.0 Walter Scott #4 65,835,599 7,330,066 804 5.3 Walter Scott #4 – transmission 4,791,174 526,461 — 3.9 Lehigh Webster – transmission 2,902,027 1,026,549 — 30.4 Neal #3 Grimes-Lehigh – transmission 654,234 85,899 — 5.2

Eachparticipantprovideditsownfinancingforitsshareoftheunit.TheCooperative’sshareofdirectexpensesofthejointlyownedunitsisincludedintheoperatingandmaintenanceexpenses on the statements of revenues and expenses.

During 1991, the Cooperative; one of its members, North Iowa Municipal Electric Cooperative Association (NIMECA); and the City of Grundy Center, a NIMECA member, entered into a long-term lease agreement for the use by Grundy Center of two megawatts of the Cooperative’s capacity in the Neal #4 generation facilities. The Cooperative will continue to actastheNeal#4partneronbehalfofGrundyCenter.Theaboveplantstatisticshavebeenreducedtoreflecttheagreement.

During 2006, the Cooperative; one of its members, NIMECA; and the city of Spencer, a NIMECA member, entered into a long-term generation use agreement of approximately fivemegawattsoftheCooperative’scapacityintheWisdomUnit2generationfacilities.Theaboveplantstatisticshavebeenreducedtoreflecttheagreement.

During 2009, the Cooperative had excess transmission capacity in the Walter Scott #4 transmission line; therefore, an agreement was reached whereby the excess was exchanged for additional ownership in Grimes-Lehigh and Lehigh Webster line.

(12) Asset Retirement ObligationThe Cooperative has AROs arising from regulatory requirements to perform certain asset retirement activities at the time of decommissioning DAEC and disposing of certain electric plant.Theliabilitywasinitiallymeasuredatfairvalueandsubsequentlyisadjustedforaccretionexpenseandchangesintheamountortimingoftheestimatedcashflows.Thecorresponding asset retirement costs are capitalized as part of the carrying amount of the related long-lived asset and depreciated over the asset’s remaining useful life.

The Cooperative recognizes and estimates an ARO for its 10% share of the estimated cost to decommission DAEC. During 2008, a NRC estimate of the decommissioning costs was updated. This report estimated the Cooperative’s share of costs to be approximately $76,159,700 (in 2008 dollars). On December 16, 2010, the NRC announced approval of a plant licenseextensionof20years(from2014to2034).Asaresult,theCooperativerecognizedachangeinestimateoftheAROduemainlytothetimingofestimatedcashflowsdueto the extension of the plant license. The following table presents the activity for the AROs for the years ended December 31, 2010 and 2009:

2010 2009Balance at January 1 $ 58,282,000 55,017,000 Changes in estimates, including timing (4,566,000 ) —Accretion expense 2,686,000 3,265,000 Balance at December 31 $ 56,402,000 58,282,000

In2008,theCooperativealsorecognizedtheliabilityforitsshareoftheestimatedcosttoremovetheashlandfillsatWalterScott#3andNeal#4.Areconciliationofthechangesin the asset retirement obligation is depicted below:

2010 2009Balance at January 1 $ 831,347 816,456 Changes in estimates, including timing — (24,732 ) Accretion expense — 39,623 Obligations incurred 36,705 — Balance at December 31 $ 868,052 831,347

(13) Nuclear Insurance ProgramLiability for accidents at nuclear power plants is governed by the Price-Anderson Act, which limits the liability of nuclear reactor owners to the amount of insurance available from both private sources and an industry retrospective payment plan. In accordance with this Act, DAEC maintains $375 million of private liability insurance, which is the maximum obtainable,andparticipatesinasecondaryfinancialprotectionsystem,whichprovidesupto$12.2billionofliabilityinsurancecoverageperincidentatanynuclearreactorinthe

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noteS to finAnciAl StAteMentS | December 31, 2010 and 2009

UnitedStates.TheCooperative’sassessmentonits10%ownershipinDAECmaybeupto$11,670,000pernuclearincident.Theselimitsaresubjecttoadjustmentsforinflation in future years. Existing nuclear power plants, including DAEC, are covered under the insurance system of the 1988 Act for the remainder of their operating lives.

Pursuant to provisions in various nuclear insurance policies, the Cooperative could be assessed retroactive premiums in connection with future accidents at a nuclear facility owned by a utility participating in the particular insurance plan. In addition, the Cooperative could be assessed annually $1,334,000 related to coverage for excess property damage if the insurer’s losses relating to an accident exceed its reserves. While assessment also may be made for losses in certain prior years, the Cooperative is not aware of any losses in such years that it believes are likely to result in an assessment.

In the unlikely event of a catastrophic loss at DAEC, the amount of insurance available may not be adequate to cover property damage, decontamination, and premature decommissioning. Uninsured losses, to the extent not recovered through rates, would be borne by the Cooperative and could have a material adverse effect on the Cooperative’s financialpositionandresultsofoperations.

(14) Benefit PlansTheCooperativeparticipatesintheNationalRuralElectricCooperativeAssociation(NRECA)Retirement&SecurityProgram(theProgram).TheProgramisadefinedbenefitpensionplanqualifiedunderSection401andtaxexemptunderSection501(a)oftheInternalRevenueCode.TheCooperativerecordedatotalcurrentperiodservicecosttotheProgram of $1,575,345 and $1,120,225 for 2010 and 2009, respectively. In this multiple-employer plan, which is available to all NRECA member cooperatives, the accumulated benefitsandplanassetsarenotdeterminedorallocatedseparatelybyindividualemployer.TheCooperativealsoprovidesa401(k)plan,availabletoallemployees,withtheCooperative matching 40% of the employees’ contributions up to 5% of the employees’ wages. At December 31, 2010 and 2009, the Cooperative contributed $117,700 and $114,105, respectively, to the 401(k) plan.

(15) NIMECA Combined Transmission SystemIn 1989, the Cooperative and one of its members, NIMECA, entered into a joint transmission agreement that allows several members of NIMECA an individual undivided ownership interest in and access to the Cooperative’s transmission system. The Cooperative will continue to operate and maintain the system. NIMECA members will reimburse the Cooperative for the proportionate share of operating expenses of the system and will contribute proportionately for all future capital additions of the system. The reimbursement of the 2010 and 2009 operating expenses was $812,412 and $670,072, respectively, and were recorded as other operating revenues. Additionally, the Cooperative and NIMECA entered into a capacity sharing agreement that provided for the sharing of generating resources through August 2009.

(16) Environmental MattersTheCleanAirAct(theAct),asamended,madesignificantreductionsintheamountsofSO2 and nitrogen oxide (NOx) emissions allowed on an annual basis nationwide. TheCooperative’scoal‑firedgeneratingstationsareincompliancewiththestandardsestablishedbyPhaseIandPhaseIIoftheAct.

On December 23, 2008, the U.S.Court of Appeals for the District of Columbia Circuit reversed its vacatur of the U.S.Environmental Protection Agency’s (EPA) Clean Air Interstate Rule(CAIR).TheCourthadvacatedCAIRinJuly2008,citingsignificantflawsintheEPA’sregulations.CAIRregulatesinterstateemissionofoxidesofnitrogen(NOx) and sulfur dioxide (SO2)contributingtononattainmentareasforfineparticulateandozone.CAIRpermanentlycapsemissionsofSO2 and NOx in the eastern states.

On July 6, 2010, the EPA proposed the Transport Rule, which is to address the interstate transport of air pollution. This rule is proposed to replace CAIR. In the proposed Transport Rule, the EPA lists one approach for reducing SO2 and NOxemissionsandtwoalternatives.Thefinalruleistobeissuedin2011.

InDecember2009,thefinalEPAMandatoryGreenhouseGas(GHG)Reportingrulebecameeffective.Thefinalrulerequiresthatsourcesabovecertainthresholdlevelstomonitor and report GHG emissions.

EPAisworkingtowardmorestringenthazardousairpollutantregulationsforcoalandoil‑firedelectricutilitysteamgeneratingplants.Theseregulationsareexpectedtobeproposedin 2011 as a Utility Maximum Achievable Control Technology (MACT) Standard.

InJune2010,EPAproposedaCoalAshRuletofurtherregulatecoalashlandfillsandashponds.Theproposedrulehastwocoalash–designatedalternatives.Hazardousregulationsare out for public comment.

The Cooperative believes that the combination of the costs for the required capital investments, increased operational expenses, and purchase of emission allowances resulting fromthesenewregulationswillbesignificant.

(17) Subsequent EventsTheCooperativehasevaluatedsubsequenteventsfromthebalancesheetdatethroughMarch3,2011,thedateatwhichthefinancialstatementswereavailabletobeissued.

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inDepenDent AuDitoRS’ RepoRtthe Board of Directors corn Belt power cooperative:

We have audited the accompanying balance sheets of Corn Belt Power Cooperative (a cooperative association incorporated in Iowa) as of December 31, 2010 and 2009, and the related statementsofrevenuesandexpenses,membershipcapital,comprehensiveincome,andcashflowsfortheyearsthenended.ThesefinancialstatementsaretheresponsibilityofCornBeltPowerCooperative’smanagement.Ourresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudits.

WeconductedourauditsinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmericaandthestandardsapplicabletofinancialauditscontainedinGovernment Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhetherthefinancialstatementsarefreeofmaterialmisstatement.Anauditincludesconsiderationofinternalcontroloverfinancialreportingasabasisfordesigningauditprocedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Corn Belt Power Cooperative’s internal control over financialreporting.Accordingly,weexpressnosuchopinion.Anauditalsoincludesexamining,onatestbasis,evidencesupportingtheamountsanddisclosuresinthefinancialstatements,assessingtheaccountingprinciplesusedandsignificantestimatesmadebymanagement,aswellasevaluatingtheoverallfinancialstatementpresentation.Webelievethat our audits provide a reasonable basis for our opinion.

Inouropinion,thefinancialstatementsreferredtoabovepresentfairly,inallmaterialrespects,thefinancialpositionofCornBeltPowerCooperativeasofDecember31,2010and2009,andtheresultsofitsoperationsanditscashflowsfortheyearsthenended,inconformitywithU.S.generallyacceptedaccountingprinciples.

In accordance with Government Auditing Standards, we have also issued our report dated March 3, 2011 on our consideration of Corn Belt Power Cooperative’s internal control over financialreportingandonourtestsofitscompliancewithcertainprovisionsoflaws,regulations,contracts,andgrantagreementsandothermatters.Thepurposeofthatreportistodescribethescopeofourtestingofinternalcontroloverfinancialreportingandcomplianceandtheresultsofthattesting,andnottoprovideanopinionontheinternalcontroloverfinancialreportingoroncompliance.ThatreportisanintegralpartofanauditperformedinaccordancewithGovernment Auditing Standards and should be considered in assessing the results of our audit.

/s/ KPMG LLP

Kansas City, Missouri March 3, 2011

1300 13th street north | p.o. box 508 | humboldt, ia 50548

p 515 332 2571 | f 515 332 1375 | www.cbpower.coop

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