NOTE 1 – PRESENTATION OF FINANCIAL INFORMATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation, have been included. The results of operations for the three and nine months ended September 30, 2016 and 2015 are not necessarily indicative of the results that may be expected for an entire year or any other period.

On September 1, 2016, we announced that the owners of Craig Generating Station Unit 1 reached an agreement with the Colorado Department of Public Health and Environment, U.S. Environmental Protection Agency, WildEarth Guardians and the National Parks Conservation Association to revise the Colorado Visibility and Regional Haze State Implementation Plan (“SIP”). Under the proposed revision to the SIP, the 427-megawatt Craig Generating Station Unit 1, which is part of a three-unit, coal-fired generating facility in Craig, Colorado, will be retired by December 31, 2025. The retirement date was previously estimated to be December 31, 2051. We are the operator of Craig Generating Station and own 24 percent of Craig Generating Station Unit 1. Craig Generating Station Unit 2 and Unit 3 will continue to operate. Our share of Craig Generating Station Unit 1 is 102 megawatts with a net book value of $28.6 million as of September 30, 2016. The shortened life increased monthly depreciation expense in the amount of $186,000 beginning September 1, 2016.

As part of the above mentioned agreement on proposed revisions to the SIP, we intend to retire the Nucla Generating Station by December 31, 2022. The retirement date was previously estimated to be December 31, 2049. We are the operator and sole owner of the 100 megawatt, coal-fired Nucla Generating Station with a net book value of $62.8 million as of September 30, 2016. The shortened life increased monthly depreciation expense in the amount of $666,000 beginning September 1, 2016 and increased the asset retirement obligation in the amount of $2.8 million as of September 30, 2016. The New Horizon Mine, which supplies coal to Nucla Generating Station, will cease coal production with the retirement of Nucla Generating Station. Reclamation efforts at the New Horizon Mine will continue.

Basis of Consolidation

Our consolidated financial statements include the accounts of Tri-State Generation and Transmission Association, Inc., our wholly-owned and majority-owned subsidiaries and certain variable interest entities for which we or our subsidiaries are the primary beneficiaries. See Note 11 – Variable Interest Entities. Our consolidated financial statements also include our undivided interests in jointly owned facilities. All significant intercompany balances and transactions have been eliminated in consolidation.

Jointly Owned Facilities

We own undivided interests in three jointly owned generation facilities that are operated by the operating agent of each facility under joint facility ownership agreements with other utilities as tenants in common. These projects include the Yampa Project (operated by us), the Missouri Basin Power Project (“MBPP”) (operated by Basin Electric Power Cooperative (“Basin”)) and the San Juan Project (operated by Public Service Company of New Mexico). Each participant in these agreements receives a portion of the total output of the generation facilities, which approximates its percentage ownership. Each participant provides its own financing for its share of each facility and accounts for its share of the cost of each facility. The operating agent for each of these projects allocates the fuel and other operating expenses to each participant based upon its share of the use of the facility. Therefore, our share of the plant asset cost, interest, depreciation and other operating expenses is included in our consolidated financial statements.

Our share in each jointly owned facility is as follows as of September 30, 2016 (dollars in thousands):


			Electric				Construction
	Tri-State		Plant in		Accumulated		Work In
	Share		Service		Depreciation		Progress
Yampa Project - Craig Station Units 1 and 2	24.00	%	$	345,104	$	231,067	$	36,420
MBPP - Laramie River Station	24.13	%		399,374		292,476		13,370
San Juan Project – San Juan Unit 3	8.20	%		82,688		69,290		—
Total			$	827,166	$	592,833	$	49,790