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Wildcat Point Generation Facility

We are currently constructing, and will be the sole owner of, an approximate 1,000 MW natural gas-fueled combined cycle generation facility, named Wildcat Point, in Cecil County, Maryland. The current construction schedule has Wildcat Point achieving commercial operation mid-2017. While the contractual completion date has not been revised, our engineering consultant advises us that it expects that commercial operation of the facility is more likely to occur at the end of the third quarter or early in the fourth quarter of 2017. The EPC contractor advises us that the delay is associated with the incurrence of additional work and other matters, for which it will seek recovery, in whole or in part, from its subcontractors and us. We disagree that we have additional liability under the contract and therefore have not revised our estimated project cost of $834.3 million. We do not believe that any such delay in the commencement of commercial operation of the Wildcat Point facility, or any additional amounts associated with the delay, including PJM capacity delay charges, for which we may be ultimately responsible, are reasonably likely to have a material adverse effect on our results of operations or financial condition due to our ability to collect such amounts through rates charged to our member distribution cooperatives. Even if we are ultimately responsible for additional costs, any such amounts may be offset in part by liquidated damages under the contract associated with the EPC contractor’s delay in achieving substantial completion.

Wildcat Point's major equipment will consist of two Mitsubishi combustion turbines, two Alstom heat recovery steam generators, and one Alstom steam turbine generator. Through March 31, 2017, we capitalized construction costs related to Wildcat Point totaling $748.5 million, including $51.1 million of capitalized interest.

FERC Proceeding Related to Formula Rate

On September 30, 2013, we filed with FERC to revise our cost-based formula rate in order to more closely align our cost recovery from our member distribution cooperatives with the methodologies used by PJM to allocate costs to us. On November 8, 2013, Bear Island, a customer of REC, filed a motion to intervene, protest, and request for hearing. On December 2, 2013, FERC issued its order accepting the proposed revisions for filing to become effective January 1, 2014, subject to refund, and establishing hearing and settlement procedures. On April 13, 2015, we received an initial decision from the hearing judge. On January 19, 2017, FERC issued its order on the hearing judge's initial decision. On February 21, 2017, we submitted our compliance filing, revising the formula rate as directed in the order. Additionally, on February 21, 2017, Bear Island filed a request for rehearing. On March 22, 2017, FERC issued an order granting rehearing of its initial order for the limited purpose of FERC's further consideration of the matter. Our formula rate remains in effect subject to refund pending a final order from FERC. If a refund is ultimately determined, we believe it will result in a reallocation of costs among our member distribution cooperatives.

Recovery of Costs from PJM

On June 23, 2014, we filed a petition at FERC seeking recovery from PJM of approximately $14.9 million of unreimbursed costs, which were incurred during the first quarter of 2014 related to the dispatch of our combustion turbine generating facilities. On June 9, 2015, FERC denied our petition, on July 9, 2015, we filed a request for rehearing, and on August 10, 2015, FERC issued an order granting rehearing for the limited purpose of FERC's further consideration of the matter. On March 1, 2016, FERC denied our request for rehearing and on April 11, 2016, we filed a Petition for Review in the U.S. Court of Appeals for the District of Columbia Circuit. Also related to this matter, on January 5, 2017, we filed a complaint and request for relief in the Circuit Court for the County of Henrico in the Commonwealth of Virginia. We have not recorded a receivable related to this matter.

Revolving Credit Facility

We maintain a $500.0 million revolving credit facility to cover our short-term and medium-term funding needs that are not met by cash from operations or other available funds. The syndicated credit agreement associated with the facility was amended and restated on March 3, 2017, and commitments under this agreement extend until March 3, 2022. As of March 31, 2017, we had outstanding under this facility, $181.8 million in borrowings and $12.2 million in letters of credit. As of December 31, 2016, we had outstanding under this facility, $152.0 million in borrowings and $5.2 million in letters of credit.

Long-term Debt

We currently anticipate that we will issue long-term debt in the third quarter of 2017 to fund capital expenditures related to Wildcat Point construction costs.

Limited Exception under Wholesale Power Contracts

We have a wholesale power contract with each of our member distribution cooperatives. Each contract obligates us to sell and deliver to the member distribution cooperative, and obligates the member distribution cooperative to purchase and receive from us, all power that it requires for the operation of its system, with limited exceptions. One of the limited exceptions permits each of our member distribution cooperatives to receive up to the greater of 5% of its demand and associated energy or 5 MW of demand and associated energy from owned generation or other suppliers. If all of our member distribution cooperatives elected to utilize the 5% or 5 MW exception, we estimate the current impact would be a reduction of approximately 175 MW of demand and associated energy. As of March 31, 2016, our member distribution cooperatives collectively received approximately 9 MW under this exception. Effective May 1, 2016, one of our member distribution cooperatives elected to purchase 51 MW of demand and associated energy from an alternate supplier, bringing the collective removal of load requirements under this exception to approximately 60 MW. We do not anticipate that utilization of this exception will have a material impact on our financial condition, results of operations, or cash flows.

Retail Choice in Virginia

In Virginia, retail choice in the selection of a power supplier is available to customers that consume at least 5 MW of power individually or in the aggregate (with aggregation subject to the approval of the VSCC) and that do not account for more than 1% of the incumbent utility's peak load during the past year. Currently, no customer of our member distribution cooperatives has elected to choose an alternate supplier under this provision. Retail choice is also available to any customer whose noncoincident peak demand exceeds 90 MW. Beginning June 1, 2016, Bear Island, an industrial customer of REC and the only customer of any of our member distribution cooperatives that has noncoincident peak demand that exceeds 90 MW, elected to purchase its power requirements from an alternate supplier. We do not anticipate that this will have a material impact on our financial condition, results of operations, or cash flows.

New Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update 2014-09 Revenue from Contracts with Customers. This update requires entities to recognize revenue when the transfer of promised goods or services to customers occurs in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We are currently evaluating the impact of this pronouncement. We plan to adopt this standard for the fiscal year beginning January 1, 2018.