Licking Rural Electrification (LRE) recently celebrated its 85th anniversary and a major financial milestone of achieving 20 percent equity. The cooperative serves more than 26,000 electric members, as well as more than 41,000 natural gas and propane members in 10 central-Ohio counties.
The journey to achieving its main financial goal started in early 2001 following the purchase of a retail natural gas distributor and its subsidiaries and losses incurred from off-system natural gas fixed-price contracts.
The Energy Cooperative, the trademarked name for LRE and subsidiaries, took a deliberate approach to improve its equity position—which sank to negative 31 percent at its lowest point—by reducing expenses, increasing rates, selling off the businesses that were losing money, reducing debt and interest costs, and focusing on operating the core businesses as efficiently as possible.
Patience and Long-Term Planning Helped the Co-op Reach Its Goal
“The main challenge we faced was there was no easy way to reach 20 percent,” explained Todd Ware, CFC District 4 director and president and CEO of The Energy Cooperative. “Patience was the key and looking to the long term was the focus. We dealt with member frustrations and, on the gas side of the business, rates that were controlled by each city we served.”
The Energy Cooperative following the acquisition of National Gas & Oil and its subsidiaries in 1998. He became chief financial officer of The Energy Cooperative in 2001 and chief executive officer in 2012. Ware credits interim CEO John Manczak for making the tough decisions early in the process and Dave Potter, Ware’s predecessor, who began the patient process of building positive equity. In addition, Ware noted the commitment of all the employees, as well as the strong direction of the board.
“CFC played a big part in helping us reach our financial goals,” Ware explained. “No other financial institution would have allowed us the time to recover. Most would have just forced us into bankruptcy. CFC allowed us to borrow additional money in the beginning so we could meet our obligations and then worked with us over the past 20 years to find the right timing on our additional borrowing.”
Ware notes that getting into financial troubles can happen very quickly, and there is no easy fix to get out. He recommends developing a plan with long-range goals, no matter how unattainable they may seem, and then working the plan. Most importantly, his advice is to be patient and persistent.
“I’m appreciative to the CFC team for providing us the room to make progress and setting the tone for their support over the past 20 years,” Ware said. “Elaine MacDonald has been our associate vice president for almost the entire time and worked very hard to help us with timing our borrowing.”