Tri-State's Q3 Net Margins Plunge 58% Amid Revenue Declines

TL;DR

**Tri-State's Q3 numbers are a red flag, showing a sharp profit decline and rising debt, signaling potential rate hikes ahead.**

AI Summary

Tri-State Generation & Transmission Association, Inc. reported a significant decrease in net margins attributable to the Association, falling to $23.195 million for the three months ended September 30, 2025, from $54.793 million in the prior year, a 57.68% decline. For the nine-month period, net margins also decreased to $24.146 million from $40.273 million, a 40.05% drop. Operating revenues for the three months ended September 30, 2025, decreased by 13.34% to $458.306 million from $528.883 million, primarily due to a $50.879 million reduction in rate stabilization revenue and a $19.454 million decrease in non-member electric sales. Total assets increased to $5.287 billion as of September 30, 2025, from $5.132 billion at December 31, 2024, driven by a $260.240 million increase in total electric plant. Long-term debt increased by $65.068 million to $2.922 billion, and short-term borrowings surged from $100 thousand to $84.492 million. The company also saw a substantial increase in current asset retirement and environmental remediation obligations, rising from $28.451 million to $86.401 million.

Why It Matters

This significant drop in net margins and operating revenues for Tri-State Generation & Transmission Association, Inc. signals potential financial headwinds for investors and could impact the stability of wholesale electric service rates for its 40 Utility Members. The increase in long-term debt and short-term borrowings, alongside rising environmental remediation obligations, suggests growing financial pressures that may necessitate future rate adjustments, affecting customers. In a competitive energy landscape, these financial challenges could hinder Tri-State's ability to invest in modernization and renewable energy, potentially impacting its market position and long-term viability.

Risk Assessment

Risk Level: high — The net margins attributable to the Association decreased by 57.68% for the three months ended September 30, 2025, and by 40.05% for the nine-month period, indicating significant profitability challenges. Short-term borrowings dramatically increased from $100 thousand to $84.492 million, and current asset retirement and environmental remediation obligations surged from $28.451 million to $86.401 million, highlighting increased financial liabilities and operational risks.

Analyst Insight

Investors should exercise caution and closely monitor Tri-State's future regulatory filings and rate cases, particularly given the significant decline in net margins and the increase in debt and environmental obligations. Potential impacts on Utility Member rates could affect the broader regional energy market. Consider the implications for long-term debt holders.

Financial Highlights

debt To Equity

2.87

revenue

$458.306M

operating Margin

N/A

total Assets

$5.287B

total Debt

$3.007B

net Income

$23.195M

eps

N/A

gross Margin

N/A

cash Position

$201.684M

revenue Growth

-13.34%

Revenue Breakdown

Key Numbers

• $23.195M — Net Margins (Q3 2025) (57.68% decrease from $54.793M in Q3 2024)
• $458.306M — Operating Revenues (Q3 2025) (13.34% decrease from $528.883M in Q3 2024)
• $84.492M — Short-term Borrowings (Significant increase from $100K at Dec 31, 2024)
• $86.401M — Current Environmental Obligations (Increased from $28.451M at Dec 31, 2024)
• $2.922B — Long-term Debt (Increased by $65.068M from $2.857B at Dec 31, 2024)
• $5.287B — Total Assets (Increased from $5.132B at Dec 31, 2024)
• $50.879M — Rate Stabilization Revenue Decrease (Key factor in Q3 2025 revenue decline)
• $19.454M — Non-member Electric Sales Decrease (Contributed to Q3 2025 revenue decline)

Key Players & Entities

• Tri-State Generation & Transmission Association, Inc. (company) — registrant
• FERC (regulator) — Federal Energy Regulatory Commission
• $23.195 million (dollar_amount) — Net margins attributable to the Association for Q3 2025
• $54.793 million (dollar_amount) — Net margins attributable to the Association for Q3 2024
• $458.306 million (dollar_amount) — Operating revenues for Q3 2025
• $528.883 million (dollar_amount) — Operating revenues for Q3 2024
• $84.492 million (dollar_amount) — Short-term borrowings as of September 30, 2025
• $100 thousand (dollar_amount) — Short-term borrowings as of December 31, 2024
• $86.401 million (dollar_amount) — Current asset retirement and environmental remediation obligations as of September 30, 2025
• $28.451 million (dollar_amount) — Current asset retirement and environmental remediation obligations as of December 31, 2024

FAQ

Risk Factors

• Declining Net Margins [high — financial]: Net margins for Q3 2025 fell to $23.195 million from $54.793 million in Q3 2024, a 57.68% decrease. For the nine-month period, net margins decreased by 40.05%. This significant decline indicates potential issues with profitability and cost management.
• Revenue Reduction [high — financial]: Operating revenues decreased by 13.34% to $458.306 million in Q3 2025 compared to $528.883 million in Q3 2024. This was primarily driven by a $50.879 million reduction in rate stabilization revenue and a $19.454 million decrease in non-member electric sales.
• Increased Short-Term Borrowings [medium — financial]: Short-term borrowings surged from $100 thousand as of December 31, 2024, to $84.492 million as of September 30, 2025. This indicates a potential need for immediate liquidity and increased reliance on short-term financing.
• Rising Environmental Obligations [medium — financial]: Current asset retirement and environmental remediation obligations increased substantially from $28.451 million at December 31, 2024, to $86.401 million as of September 30, 2025. This suggests increasing costs associated with environmental compliance and potential future liabilities.
• Growing Long-Term Debt [medium — financial]: Long-term debt increased by $65.068 million to $2.922 billion as of September 30, 2025. While the company is investing in its electric plant, the rising debt levels require careful management of interest expenses and debt servicing capacity.
• Investment in Electric Plant [low — operational]: Total electric plant increased by $260.240 million, contributing to the overall rise in total assets. While this indicates investment in infrastructure, it also ties up significant capital and may impact short-term cash flows.

Industry Context

Tri-State Generation & Transmission Association operates in the highly regulated electric utility sector, specifically in wholesale power generation and transmission. The industry is characterized by significant capital investments in infrastructure, long-term contracts, and evolving environmental regulations. Trends include the transition to renewable energy sources, grid modernization, and increasing pressure to reduce carbon emissions.

Regulatory Implications

As a generation and transmission cooperative, Tri-State is subject to extensive regulation by federal agencies like the Federal Energy Regulatory Commission (FERC) and state public utility commissions. Changes in energy policy, environmental standards, and rate-setting methodologies can significantly impact its financial performance and operational strategies.

What Investors Should Do

1. Monitor revenue drivers, particularly rate stabilization and non-member sales, to assess the sustainability of current revenue levels.
2. Analyze the management of increasing short-term borrowings and environmental obligations.
3. Evaluate the impact of increased investment in electric plant on future cash flows and debt servicing capacity.

Glossary

Patronage capital equity

Equity held by members of a cooperative, representing their ownership stake and often reflecting patronage refunds. (This is a key component of Tri-State's equity structure, indicating member ownership and participation.)

Rate stabilization revenue

Revenue recognized under specific regulatory mechanisms designed to stabilize rates for customers, often involving deferrals or adjustments. (A significant decrease in this revenue stream was a primary driver of the overall revenue decline.)

Asset retirement and environmental remediation obligations

Liabilities recognized for the costs associated with the retirement of tangible long-lived assets and the cleanup of environmental contamination. (A substantial increase in these current obligations highlights growing environmental compliance costs and potential future expenditures.)

Regulatory assets

Costs that have been incurred but are not yet recognized as expenses in the income statement, expected to be recovered in future rates. (The significant balance of regulatory assets ($876.612M) indicates substantial costs that are subject to future regulatory approval for recovery.)

Year-Over-Year Comparison

Compared to the prior year's filing, Tri-State has experienced a significant downturn in financial performance. Operating revenues for the three months ended September 30, 2025, decreased by 13.34% to $458.306 million, largely due to reductions in rate stabilization revenue and non-member electric sales. Net margins saw a dramatic 57.68% decline in the third quarter. While total assets grew to $5.287 billion, driven by electric plant investments, long-term debt also increased, and short-term borrowings surged dramatically, alongside a substantial rise in current environmental obligations.

Filing Documents

• tris-20250930.htm (10-Q) — 1186KB
• tris-20250930xexx311x10xq.htm (EX-31.1) — 10KB
• tris-20250930xexx312x10xq.htm (EX-31.2) — 10KB
• tris-20250930xexx321x10xq.htm (EX-32.1) — 5KB
• tris-20250930xexx322x10xq.htm (EX-32.2) — 5KB
• tris-20250930xex95x10xq.htm (EX-95) — 57KB
• 0001637880-25-000057.txt ( ) — 7652KB
• tris-20250930.xsd (EX-101.SCH) — 74KB
• tris-20250930_cal.xml (EX-101.CAL) — 127KB
• tris-20250930_def.xml (EX-101.DEF) — 270KB
• tris-20250930_lab.xml (EX-101.LAB) — 761KB
• tris-20250930_pre.xml (EX-101.PRE) — 519KB
• tris-20250930_htm.xml (XML) — 1043KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION Item 1.

Financial Statements

Financial Statements Consolidated Statements of Financial Position (Unaudited) 1 Consolidated Statements of Operations (Unaudited) 2 Consolidated Statements of Comprehensive Income (Unaudited) 3 Consolidated Statements of Equity (Unaudited) 4 Consolidated Statements of Cash Flows (Unaudited) 5 Notes to Unaudited Consolidated Financial Statements 6 Item 2.

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

Management's Discussion and Analysis of Financial Condition and Results of Operations 26 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 37 Item 4.

Controls and Procedures

Controls and Procedures 37

OTHER INFORMATION

PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 38 Item 4. Mine Safety Disclosures 38 Item 6. Exhibits 38

SIGNATURES

SIGNATURES i Table of Contents GLOSSARY The following abbreviations and acronyms used in this quarterly report on Form 10-Q are defined below: Abbreviations or Acronyms Definition 2022 Revolving Credit Agreement Amended and Restated Credit Agreement, dated as of April 25, 2022, between us and CFC, as administrative agent 2023 ERP our 2023 Electric Resource Plan filed with the COPUC ASC Accounting Standards Codification ASU Accounting Standards Update Basin Basin Electric Power Cooperative Board Board of Directors BYOR Bring Your Own Resource CFC National Rural Utilities Cooperative Finance Corporation CoBank CoBank, ACB Colowyo Coal Colowyo Coal Company L.P., a subsidiary of ours COPUC Colorado Public Utilities Commission D.C. Circuit Court of Appeals United States Court of Appeals for the District of Columbia Circuit DSR Debt Service Ratio (as defined in our Master Indenture) ECR Equity to Capitalization Ratio (as defined in our Master Indenture) EPA Environmental Protection Agency FASB Financial Accounting Standards Board FERC Federal Energy Regulatory Commission Fitch Fitch Ratings Inc. FPA Federal Power Act, as amended GAAP Accounting principles generally accepted in the United States IRA Inflation Reduction Act of 2022 kWh kilowatt hour LPEA La Plata Electric Association, Inc. Master Indenture Master First Mortgage Indenture, Deed of Trust and Security Agreement, dated effective as of December 15, 1999, between us and U.S. Bank Trust Company, National Association, as successor trustee MBPP Missouri Basin Power Project Members our Utility Members and Non-Utility Members MPEI Mountain Parks Electric, Inc. Moody's Moody's Investors Services, Inc. MW megawatt MWh megawatt hour Non-Utility Members our non-utility members NRPPD Northwest Rural Public Power District New ERA Program USDA's Empowering Rural America Program OATT Open Access Transmission Tariff Renewable Revolving Credit Agreement Renewable Revolving Credit Agr

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS This quarterly report on Form 10-Q contains "forward-looking statements." All statements, other than statements of historical facts, that address activities, events or developments that we expect or anticipate to occur in the future, including matters such as the timing of various regulatory and other actions, future capital expenditures, future resources and generation portfolio, future use of deferred revenue, business strategy, member withdraws and development, construction, operation, or closure of facilities (often, but not always, identified through the use of words or phrases such as "will likely result," "are expected to," "will continue," "is anticipated," "estimated," "forecast," "projection," "target" and "outlook") are forward-looking statements. Although we believe that in making these forward-looking statements our expectations are based on reasonable assumptions, any forward-looking statement involves uncertainties and there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. iv Table of Contents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements Tri-State Generation and Transmission Association, Inc. Consolidated Statements of Financial Position (Unaudited) (dollars in thousands) September 30, 2025 December 31, 2024 ASSETS Property, plant and equipment Electric plant In service $ 5,818,586 $ 5,701,182 Construction work in progress 511,309 368,473 Total electric plant 6,329,895 6,069,655 Less allowances for depreciation and amortization ( 2,931,693 ) ( 2,838,877 ) Net electric plant 3,398,202 3,230,778 Other plant 908,867 958,993 Less allowances for depreciation, amortization and depletion ( 802,464 ) ( 770,270 ) Net other plant 106,403 188,723 Total property, plant and equipment 3,504,605 3,419,501 Other assets and investments Investments in other associations 190,840 192,680 Investments in and advances to coal mines 1,629 1,711 Restricted cash and investments 1,937 3,436 Intangible assets, net 30,301 39,556 Other noncurrent assets 14,378 18,407 Total other assets and investments 239,085 255,790 Current assets Cash and cash equivalents 201,684 229,357 Restricted cash and investments 18,143 744 Deposits and advances 30,834 38,180 Accounts receivable—Utility Members 84,774 85,450 Other accounts receivable 36,531 28,727 Coal inventory 125,052 95,511 Materials and supplies 112,549 110,775 Total current assets 609,567 588,744 Deferred charges Regulatory assets 876,612 816,541 Other 57,213 51,735 Total deferred charges 933,825 868,276 Total assets $ 5,287,082 $ 5,132,311 EQUITY AND LIABILITIES Capitalization Patronage capital equity $ 921,566 $ 912,922 Accumulated other comprehensive loss 1,284 965 Noncontrolling interest 130,082 130,498 Total equity 1,052,932 1,044,385 Long-term debt 2,922,414 2,857,346 Total capitalization 3,975,346 3,901,731 Current liabilities Utility Member advances 5,553 5,128 Accounts payable 161,579 158,176 Short-term borrowings 84,492 100 Accrued expenses 33,916 42,705 Current asset retirement and enviro

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