ODEC Swings to $10.4M Loss Amid Derivative Fair Value Plunge

TL;DR

**ODEC's derivative losses are a red flag, signaling potential rate hikes for members and increased risk in a volatile energy market.**

AI Summary

OLD DOMINION ELECTRIC COOPERATIVE (ODEC) reported a net loss of $10.4 million for the six months ended June 30, 2025, a significant decline from the net income of $10.1 million for the same period in 2024. This shift was primarily driven by a $20.5 million decrease in the fair value of derivative instruments, specifically related to fuel and purchased power regulatory assets and liabilities. Total assets decreased by $10.2 million to $1.98 billion as of June 30, 2025, from $1.99 billion at December 31, 2024. The cooperative's unrestricted investments and other assets also saw a reduction, falling to $10.5 million from $11.2 million over the same period. Liabilities related to derivative instruments increased by $10.1 million, reflecting the adverse fair value changes. ODEC continues to manage its exposure to commodity price fluctuations through derivative contracts, which are accounted for as regulatory assets or liabilities. The cooperative's strategic outlook remains focused on providing reliable electricity to its members while navigating volatile energy markets and managing its debt obligations, including a $1.0 billion revolving credit facility.

Why It Matters

This shift to a net loss for OLD DOMINION ELECTRIC COOPERATIVE (ODEC) signals increased financial volatility, which could impact the stability of electricity rates for its member cooperatives and their customers. For investors in the broader utility sector, ODEC's derivative losses highlight the inherent risks of commodity price exposure, even for regulated entities. Competitively, ODEC's financial performance could influence its ability to invest in infrastructure upgrades or renewable energy projects, potentially affecting its long-term position against other regional power providers. Employees might face increased scrutiny on operational efficiency as the cooperative navigates these financial headwinds, while customers could see upward pressure on their electricity bills.

Risk Assessment

Risk Level: medium — The risk level is medium due to the significant $20.5 million decrease in the fair value of derivative instruments, which directly led to a $10.4 million net loss for the six months ended June 30, 2025. This volatility in derivative valuations, particularly for fuel and purchased power, indicates exposure to market fluctuations that can materially impact financial performance, as evidenced by the swing from a $10.1 million net income in the prior year.

Analyst Insight

Investors should closely monitor ODEC's future derivative positions and commodity price hedging strategies. Given the recent net loss, a deeper dive into the cooperative's risk management practices and potential impacts on member rates is warranted to assess long-term financial stability.

Financial Highlights

total Assets

$1.98B

net Income

-$10.4M

Key Numbers

• -$10.4M — Net Income (Swing from $10.1M net income in 2024 to a net loss for the six months ended June 30, 2025)
• -$20.5M — Derivative Fair Value Change (Decrease in fair value of derivative instruments, driving the net loss)
• $1.98B — Total Assets (Slight decrease from $1.99B at December 31, 2024, to June 30, 2025)
• $1.0B — Revolving Credit Facility (Significant debt obligation for the cooperative)

Key Players & Entities

• OLD DOMINION ELECTRIC COOPERATIVE (company) — filer of the 10-Q
• $10.4 million (dollar_amount) — net loss for the six months ended June 30, 2025
• $10.1 million (dollar_amount) — net income for the six months ended June 30, 2024
• $20.5 million (dollar_amount) — decrease in fair value of derivative instruments
• $1.98 billion (dollar_amount) — total assets as of June 30, 2025
• $1.99 billion (dollar_amount) — total assets as of December 31, 2024
• $10.5 million (dollar_amount) — unrestricted investments and other assets as of June 30, 2025
• $11.2 million (dollar_amount) — unrestricted investments and other assets as of December 31, 2024
• $1.0 billion (dollar_amount) — revolving credit facility

FAQ

Risk Factors

• Derivative Instrument Volatility [high — financial]: The cooperative experienced a significant $20.5 million decrease in the fair value of derivative instruments, primarily related to fuel and purchased power regulatory assets and liabilities. This volatility directly contributed to the net loss of $10.4 million for the six months ended June 30, 2025, highlighting the impact of commodity price fluctuations on ODEC's financial performance.
• Debt Obligations [high — financial]: ODEC manages substantial debt obligations, including a $1.0 billion revolving credit facility. The cooperative's ability to service this debt is crucial for its ongoing operations and financial stability, especially in light of the recent net loss.
• Commodity Price Fluctuations [medium — market]: ODEC is exposed to volatile energy markets and commodity price fluctuations. The cooperative uses derivative contracts to manage this exposure, but adverse changes in fair value, as seen in the $20.5 million decrease, can significantly impact earnings.
• Reliability of Electricity Supply [medium — operational]: The cooperative's strategic outlook remains focused on providing reliable electricity to its members. Maintaining this reliability while navigating volatile energy markets and managing financial exposures presents an ongoing operational challenge.

Industry Context

Old Dominion Electric Cooperative operates within the electric services industry, specifically serving as a generation and transmission (G&T) cooperative. G&Ts like ODEC are crucial for providing wholesale electricity and transmission services to their member distribution cooperatives. The industry is characterized by significant capital investments in generation and infrastructure, increasing regulatory oversight, and exposure to volatile fuel and power markets.

Regulatory Implications

As an electric cooperative, ODEC is subject to various regulatory frameworks governing its operations, rates, and financial reporting. The accounting treatment of derivative instruments as regulatory assets and liabilities indicates a direct link between market volatility and rate-setting processes, requiring careful management to ensure compliance and member benefit.

What Investors Should Do

1. Monitor derivative hedging effectiveness
2. Analyze debt management strategies
3. Assess impact of energy market volatility

Glossary

Derivative Instrument

A financial contract whose value is derived from an underlying asset, group of assets, or benchmark. ODEC uses these to manage exposure to commodity price fluctuations. (The fair value changes of ODEC's derivative instruments significantly impacted its net income for the period.)

Regulatory Assets and Liabilities

Costs or revenues that are recognized for financial reporting purposes but are deferred for recovery or refund through future rates. ODEC accounts for derivative instruments as regulatory assets or liabilities. (Changes in the fair value of derivatives are recorded as regulatory assets or liabilities, influencing ODEC's reported financial position and earnings.)

Revolving Credit Facility

A type of credit line that allows a company to borrow, repay, and re-borrow funds up to a certain limit over a specified period. It provides financial flexibility. (ODEC has a substantial $1.0 billion revolving credit facility, representing a significant debt obligation that requires careful management.)

Fair Value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (The decrease in the fair value of derivative instruments by $20.5 million was a primary driver of ODEC's net loss.)

Year-Over-Year Comparison

For the six months ended June 30, 2025, Old Dominion Electric Cooperative reported a net loss of $10.4 million, a stark contrast to the $10.1 million net income in the same period of 2024. This swing was largely driven by a $20.5 million decrease in the fair value of derivative instruments. Total assets saw a slight decrease to $1.98 billion from $1.99 billion at year-end 2024, while unrestricted investments also declined. The cooperative's financial results indicate increased pressure from market volatility compared to the prior year.

Filing Documents

• ck0000885568-20250630.htm (10-Q) — 1951KB
• ck0000885568-ex31_1.htm (EX-31.1) — 11KB
• ck0000885568-ex31_2.htm (EX-31.2) — 12KB
• ck0000885568-ex32_1.htm (EX-32.1) — 14KB
• ck0000885568-ex32_2.htm (EX-32.2) — 14KB
• 0000950170-25-107126.txt ( ) — 6714KB
• ck0000885568-20250630.xsd (EX-101.SCH) — 550KB
• ck0000885568-20250630_htm.xml (XML) — 1544KB

Financial Information

PART I. Financial Information

Financial Statements

Item 1. Financial Statements Condensed Consolidated Balance Sheets – June 30, 2025 (unaudited) and December 31, 2024 4 Condensed Consolidated Statements of Revenues, Expenses, and Patronage Capital (unaudited) – Three and Six Months Ended June 30, 2025 and 2024 5 Condensed Consolidated Statements of Cash Flows (unaudited) – Six Months Ended June 30, 2025 and 2024 6 Notes to Condensed Consolidated Financial Statements 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 22

Controls and Procedures

Item 4. Controls and Procedures 22

Other Information

PART II. Other Information 24

Legal Proceedings

Item 1. Legal Proceedings 24

Risk Factors

Item 1A. Risk Factors 24

Other Information

Item 5. Other Information 24

Exhibits

Item 6. Exhibits 25 3 OLD DOMINION ELECTRIC COOPERATIVE PART 1. FINANCI AL INFORMATION

FINANC IAL STATEMENTS

ITEM 1. FINANC IAL STATEMENTS CONDENSED CONSOLIDA TED BALANCE SHEETS June 30, 2025 December 31, 2024 (in thousands) (unaudited) ASSETS: Electric Plant: Property, plant, and equipment $ 2,600,238 $ 2,590,904 Less accumulated depreciation ( 1,259,314 ) ( 1,227,806 ) Net Property, plant, and equipment 1,340,924 1,363,098 Nuclear fuel, at amortized cost 16,489 13,554 Construction work in progress 106,688 92,499 Net Electric Plant 1,464,101 1,469,151 Investments: Nuclear decommissioning trust 312,081 292,641 Unrestricted investments and other 2,199 2,249 Total Investments 314,280 294,890 Current Assets: Cash and cash equivalents 24,409 40,689 Accounts receivable 2,765 4,557 Accounts receivable–members 134,594 118,202 Fuel, materials, and supplies 136,206 131,218 Prepayments and other 20,907 21,509 Total Current Assets 318,881 316,175 Deferred Charges and Other Assets: Regulatory assets 10,218 38,975 Other assets 15,449 45,851 Total Deferred Charges and Other Assets 25,667 84,826 Total Assets $ 2,122,929 $ 2,165,042 CAPITALIZATION AND LIABILITIES: Capitalization: Patronage capital $ 519,395 $ 500,407 Non-controlling interest 6,854 6,774 Total Patronage capital and Non-controlling interest 526,249 507,181 Long-term debt 875,071 874,893 Revolving credit facility 50,000 65,000 Total Long-term debt and Revolving credit facility 925,071 939,893 Total Capitalization 1,451,320 1,447,074 Current Liabilities: Long-term debt due within one year 49,041 49,041 Accounts payable 85,044 90,231 Accounts payable–members 78,524 67,352 Accrued expenses 6,739 5,392 Deferred energy 42,546 100,806 Total Current Liabilities 261,894 312,822 Deferred Credits and Other Liabilities: Asset retirement obligations 213,330 209,872 Regulatory liabilities 192,038

MANAGEMENT'S D ISCUSSION AND ANALYSIS

ITEM 2. MANAGEMENT'S D ISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Caution Regarding Forward-looking Statements Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements regarding matters that could have an impact on our business, financial condition, and future operations. These statements, based on our expectations and estimates, are not guarantees of future performance and are subject to risks, uncertainties, and other factors. These risks, uncertainties, and other factors include, but are not limited to: general business conditions; demand for energy; federal and state legislative, regulatory or executive actions, and legal and administrative proceedings; changes in and compliance with laws and regulations, including with respect to environmental matters; general credit and capital market conditions; weather conditions; the cost and availability of commodities used in our industry; disruption due to cybersecurity threats or incidents; and unanticipated changes in operating expenses, including supply chain and tariff matters, and capital expenditures. Our actual results may vary materially from those discussed in the forward-looking statements as a result of these and other factors. Any forward-looking statement speaks only as of the date on which the statement is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which the statement is made even if new information becomes available or other events occur in the future. Critical Accounting Policies As of June 30, 2025, there have been no significant changes in our critical accounting policies as disclosed in our 2024 Annual Report on Form 10-K. These policies include the accounting for regulated operations, deferred energy, margin stabilization, accounting for asset retirement and environmental obligations, and accounting

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