2005 Annual Report

Financial Information

• Management's Discussion and Analysis
• Consolidated Balance Sheets
• Consolidated Income Statements
• Consolidated Statements of Cash Flows
• Consolidated Statements of Equity
• Notes to Consolidated Financial Statements

Management's Discussion and Analysis

Management’s Discussion and Analysis provides an overview of the financial condition and results of operations of Golden Spread Electric Cooperative, Inc. and its wholly-owned affiliates, GS Electric Generating Cooperative, Inc. (GSEGC), Oklaunion Electric Generating Cooperative, Inc. (OEGC), and Yoakum Electric Generating Cooperative, Inc. (YEGC).

The matters discussed in Management’s Discussion and Analysis contain forward-looking statements that are based on estimates, forecasts, and assumptions involving risks and uncertainties that could cause actual results or outcomes to differ from those expressed in the forward-looking statements. Any forward-looking statements are based on information as of the date of this report. Net Margins

Golden Spread’s income statements and statements of cash flows, may not reflect its full financial capability and profitability. Golden Spread’s practice, although suspended for 2005, is to return to its members a portion of the margins on an annual basis. Discretionary rate credits reduced net margins in the year authorized, and were credited to members’ power bills in the succeeding year. A more meaningful analysis of Golden Spread’s profitability is represented by the actual operating results, or net margins, before discretionary rate credits. Net margins before rate credits are set forth in the table below:

The increase in Golden Spread’s overall profitability from 2003 through 2005 is the result of increased margins from nonmember sales, as set forth in the table below:

Differences in the nonmember sales margins are due, in part, to variations in the number of megawatt-hours sold to nonmembers, but, even more importantly, nonmember sales margins vary directly with the price of natural gas. Changes in the number of megawatt-hours sold to nonmembers is a function of the energy needed to serve member loads in the Southwest Power Pool (SPP) and plant availability (due to outages or planned maintenance). Changes in natural gas prices affect the associated margins due to the manner in which the split-the-savings calculations are determined; higher natural gas prices result in greater savings to SPS and, therefore, increased margins to Golden Spread. The impact of these two factors can be seen in the following chart:

The above table demonstrates some variation in the number of megawatt-hours sold in 2003 as compared to 2004 and 2005, but very comparable sales volume in 2004 and 2005. The change in natural gas prices is the primary determining factor affecting the level of margins from nonmember sales in each of the years shown above. As natural gas prices have increased, nonmember sales margins have also increased.

The variations in the net margins provided by the Administrative Charge are the result of three factors:

1. The total MW
2. h sales to members
3. The amount of the Administrative Charge ($/MWh)
4. The level of administrative and general expenses, excluding outside professional services cost which are a flow-through item in rates.

Although the Administrative Charge rate has not changed substantially, the increase in MWh sales to members has increased substantially, as shown in the table below, resulting in increased margins from this charge:

The increased volume of sales to members is a result of the addition of five new members in 2003. Golden Spread began serving the new loads, located primarily in the Electric Reliability Council of Texas (ERCOT) effective July 1, 2004. Loads in the SPP increased in 2005 due to hot and dry weather conditions in the members’ service territories.

Margins provided from GSEGC capacity charges, net of associated depreciation and interest expense increase each year due to annual contractual increases in capacity charges.

Other Income consists primarily of interest earned on cash balances, which increased substantially in 2005 and 2004 due to higher cash balances and higher rates earned on invested balances.

REVENUES, PURCHASED POWER AND FUEL EXPENSE

The increases in revenues are a function of three elements:

1. Member sales
2. Nonmember sales
3. Fuel expense, including fuel expense in purchased power

The table that follows shows revenues and the related margin after considering the portion of revenues attributable to fuel expense, including fuel expense in purchased power:

Changes in net wholesale power sales are primarily due to changes in non-fuel operating expenses which are all fully recoverable under the rate, and increased margins on power sales. The following table shows the changes by component from period to period:

Changes in Other listed above are as follows:

1. For 2005 compared to 2004, revenues net of fuel-related expense increased as a result of four factors; base power costs (non-fuel component), DCE capacity charge, SPS partial requirements contract (increase in capacity purchased effective June 1, 2005), and full year of base power costs associated with the ERCOT loads.

2. For 2004 compared to 2003, revenues net of fuel-related expense increased as a result of four factors; base power costs (non-fuel component), DCE capacity charge, SPS partial requirements contract (increase in capacity purchased effective June 1, 2004), and base power costs associated with the ERCOT loads that were assumed July 1, 2004.

OPERATING EXPENSES, EXCLUDING FUEL AND PURCHASED POWER

Operating expenses, excluding fuel and purchased power, are summarized in the table below:

The increases in administrative and general expenses are due to an increase in office space occupied by Golden Spread, the addition of new employees along with the associated benefit costs, and increased outside services costs associated with various projects, such as the acquisition of new resources.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2005 and December 31, 2004, Golden Spread had available cash of approximately $87 million and $65 million, respectively. In addition to the available cash, Golden Spread, through its wholly-owned affiliate GS Electric Generating Cooperative, Inc., had $5.6-$5.8 million in reserve funds (i.e., debt service reserve fund and maintenance reserve fund) and $3.5 million in a required cash working capital deposit, all of which have been excluded from the available cash balances. In addition, Golden Spread has a line of credit of $95 million (of which $10 million is reserved in connection with the term loan associated with Mustang Station) which has no outstanding borrowings at December 31, 2005. Of the total cash at December 31, 2005 and 2004, $42.75 million is held in escrow related to the acquisition of an ownership interest in the Oklaunion coal plant. There are no other restrictions, limitations or pledges of any assets, other than as separately identified on the financial statements and in the footnotes.

Over the next several years, Golden Spread has plans to add several generation resources to its power supply portfolio. These resources are needed to serve the growing Southwest Power Pool (SPP) and ERCOT loads, to replace expiring purchased power contracts, and to reduce dependence on volatile market pricing. One of Golden Spread’s goals in developing its power supply portfolio is to retain a comparable fuel mix to that represented under the current resources, including a large percentage of coal-fired generation.

Golden Spread maintains target financial ratios to ensure adequate liquidity, equity, and coverages to keep pace with the need for additional debt to fund generation resources. Use of the targeted ratios guides management and the Board of Directors in determining annual budgets, in setting rates, and in deciding the percentage of net margins that will be retained for growth rather than returned to members as discretionary rate credits. Golden Spread’s financial policies are expected to provide it with adequate financial resources to be able to fund all future projects with an appropriate mix of debt and equity while maintaining a high level of financial ratios compared to the industry.

Consolidated Balance Sheets

Consolidated Income Statements

Consolidated Statements of Cash Flows

Consolidated Statements of Equity

Notes to Consolidated Financial Statements

1. ORGANIZATION AND OPERATIONS

Golden Spread Electric Cooperative, Inc. (Golden Spread) and its affiliates, GS Electric Generating Cooperative, Inc., Oklaunion Electric Generating Cooperative, Inc., Yoakum Electric Generating Cooperative, Inc. and Mid-Tex Generation and Transmission Electric Cooperative, Inc., (collectively referred to as the Cooperative) are Texas cooperative corporations with headquarter facilities located in Amarillo, Texas. Golden Spread’s members include 16 rural electric distribution cooperatives, located in the Panhandle, South Plains and the Edwards Plateau regions of Texas, and in the Panhandle of Oklahoma. The member loads served by the Cooperative are located in the Southwest Power Pool and the Electric Reliability Council of Texas.

The Cooperative is subject to the jurisdiction of the Federal Energy Regulatory Commission for corporate and rate regulation related to its activities in the SPP and is subject to the regulation of the Public Utility Commission of Texas for certain activities in both ERCOT and SPP.

The Cooperative is tax-exempt under Internal Revenue Code Section 501(c)(12) as long as 85% of its gross receipts (as defined under the Internal Revenue Code) are derived from sales to members. For the three years ended December 31, 2005, the 85% test was met. Any revenues earned in excess of costs incurred are allocated to members of Golden Spread and are reflected as patronage capital equity in the accompanying consolidated balance sheets.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting records of the Cooperative are maintained in accordance with the accounting system prescribed by the Federal Energy Regulatory Commission for electric utilities.

Principles of Consolidation

The consolidated financial statements include the accounts of Golden Spread Electric Cooperative, Inc. and its wholly-owned affiliates. All intercompany transactions and balances have been eliminated in consolidation.

Operating Revenues

Revenues for wholesale power sales are billed monthly. Unbilled revenues are accrued for amounts that are recoverable under rate tariffs but not yet billed. Amounts billed to members in excess of recoverable costs under rate tariffs are accrued as a reduction of revenues and as a liability to the members. Operating revenues may be reduced for discretionary rate credits to members determined by Golden Spread on an annual basis. (See note 8.)

Other operating revenues consist primarily of special facilities charges billed to members for use of transmission assets.

Depreciation

Depreciation of utility plant is provided using straight-line depreciation rates over the following estimated useful lives:

Transmission Plant	15 - 36 Years
Production Plant	30 Years
Gas Interconnection	15 Years
General Plant	5 Years

Debt Issuance Costs

Debt issuance costs are being amortized on a straight-line basis over the life of the underlying debt.

Cash and Cash Equivalents

For purposes of the consolidated statement of cash flows, the Cooperative considers cash and temporary cash investments as cash and cash equivalents.

Concentrations of Credit Risk

The service areas of the member cooperatives are largely dependent on agriculture and, to a lesser extent, oil and gas.

The Cooperative maintains cash balances with various financial institutions insured by the Federal Deposit Insurance Corporation up to $100,000. At times cash balances may exceed insurance coverage. The Cooperative also maintains cash balances with two cooperative banks whose deposits are not federally insured.

Investments in Associated Organizations

Investments in associated organizations primarily consist of Golden Spread’s purchase of an ownership interest in ACES Power Marketing, L.L.C. The investment in APM is accounted for using the cost method of accounting. At December 31, 2005 and 2004, Golden Spread’s investment in APM was $587,717 and $664,716, respectively.

Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

3. UTILITY PLANT

The components of utility plant are summarized as follows:

The Construction Work in Progress represents the construction of a simple cycle gas-fired 150 MW generating facility that will be owned by a Golden Spread affiliate.

During the year ended December 31, 2004, the Cooperative purchased electric plant from its member, South Plains Electric Cooperative, Inc., in the amount of $14,105,780 (net of accumulated depreciation). This plant was recorded by Golden Spread at an original cost of $19,821,775 and accumulated depreciation of $5,715,995. The Cooperative also acquired the related debt in the amount of $13,351,386. The operating costs associated with these assets and the related debt are billed to South Plains Electric Cooperative through special facilities charges.

4. SHORT-TERM FINANCING

The Cooperative has a $95,000,000 line of credit for short-term financing with CFC at an interest rate determined at the date of advance. At December 31, 2004, there was $10,393,507 outstanding at an interest rate of 4.05%. At December 31, 2005, there was no amount outstanding. The Cooperative incurred interest associated with this short-term financing of $90,944 and $261,026 for the years ended December 31, 2005 and 2004, respectively. In 2005, all of this interest was capitalized.

5. LONG-TERM DEBT

Long-term debt is summarized as follows:

The variable-rate term loans were issued upon GSEGC’s purchase of Mustang Station. Under the Credit Agreement with the lending banks, substantially all the assets of GSEGC are pledged as collateral, including the generation facility, a portion of the cash balances, special deposits, and reserve balances of GSEGC totaling approximately $10,126,000 and $10,406,000 at December 31, 2005 and 2004, respectively. The debt is variable-rate debt equal to LIBOR plus an interest margin that ranged from 1.25% to 1.425% in 2003 through 2005, and that increases over time to 1.65% over the term of the loan. GSEGC has entered into agreements to hedge all of the outstanding principal at fixed equivalent rates ranging from 6.92% to 7.63% and increasing over time to fixed equivalent rates up to 7.9%. Final maturity of these notes is in 2020.

The Credit Agreement contains various covenants and restrictions, including the maintenance of a debt service reserve equal to six months’ debt service requirements, maintenance of a working capital reserve of $3,500,000, maintenance of a specified minimum Debt Service Coverage ratio (DSC of 1.20 was required in 2003 through 2005), and restrictions on distributions. GSEGC was in compliance with the Credit Agreement at December 31, 2005 and 2004, and has met all the requirements necessary to pay distributions to Golden Spread. Such distributions totaled $4,637,420 in 2005 and $4,042,625 in 2004. At December 31, 2005, GSEGC held in excess of $7,536,000 that was available for distribution to Golden Spread.

The senior secured notes are first mortgage obligations issued by Golden Spread in May 2005 through a private placement. The notes are secured by assets held under a Trust Indenture (totaling $68,816,000 at December 31, 2005) including Mustang Station Unit 4 (see note 9), the Mustang land site, certain other utility plant, and cash balances held by trustee. The notes are fixed-rate obligations bearing interest at 5.75%, with equal semi-annual principal and interest payments of $2,331,550, payable over 20 years. During the year ended December 31, 2005, Golden Spread accrued $2,057,819 in interest, of which, $1,065,703 was capitalized. The Trust Indenture contains various covenants and restrictions including maintaining minimum equity capital (as defined) of $50 million, maintenance of a DSC of 1.25, and maintenance of secured assets under the trust equivalent to 1.10 times the debt outstanding.

All of the mortgage notes are due in quarterly installments and are secured by the Cooperative’s transmission assets (with a book value of $18,919,825 and $15,276,676 at December 31, 2005 and 2004, respectively) and the revenues recoverable through the special facilities charges associated with the special facilities.

As of December 31, 2005, annual maturities of long-term debt for the next five years were as follows:

2006	$ 4,161,407
2007	4,619,872
2008	5,059,099
2009	5,373,495
2010	7,062,959

6. DERIVATIVE INSTRUMENTS

The Cooperative has entered into interest rate swap agreements to hedge against changes in floating interest rates on its financing for Mustang Station. The interest rate swap agreements effectively convert floating rates into fixed rates so that the Cooperative can predict with greater assurance what its future interest costs will be and protect itself against increases in floating rates.

The Cooperative also routinely enters into physical commodity contracts for purchases of natural gas and has capacity sales contracts with its members. Both types of these contracts generally qualify for the normal purchase and sales exception under SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities – An Amendment of Financial Accounting Standards Board (FASB) Statement No. 133.”

Changes in the fair value of derivative instruments designated as cash flow hedges are recorded in Accumulated Comprehensive Income (ACI) for the effective portion. As of December 31, 2005 and 2004, the entire hedge is considered effective and is recorded in ACI. The following reflects the amounts that are recorded in assets, liabilities, and in ACI at December 31, 2005 and 2004, for the Cooperative’s derivative instruments:

Total unrealized comprehensive loss on cash flow hedges represents the cumulative effect on the Cooperative’s ACI balance from losses from effective cash flow hedges since the adoption of SFAS No. 133. For the year ended December 31, 2005, the gain from effective cash flow hedges was $3,215,000 resulting in a cumulative loss of $8,800,000 at December 31, 2005.

As of December 31, 2005, the maximum length of time over which the Cooperative was hedging its exposure to the variability in future cash flows for forecasted transactions was 14 years. The Cooperative expects the entire hedge to remain effective throughout the term of the related debt and does not expect to reclassify ACI into earnings in the future.

7. PENSION BENEFITS

Golden Spread provides pension benefits for substantially all of its employees through the National Rural Electric Cooperative Association Retirement and Security Program and Savings Plan. The Retirement and Security plan is a defined benefit pension plan for which Golden Spread makes contributions to the plan equal to the amounts accrued for pension expense. In this multi-employer plan, which is available to all member cooperatives of NRECA, the accumulated benefits and plan assets are not determined or allocated separately by individual employer. Golden Spread’s contributions to the plan in 2005, 2004, and 2003, were $92,434, $69,558, and $59,247, respectively. The savings plan has been established under Code Section 401(K) of the Internal Revenue Code, as a defined contribution plan. Under the savings plan, Golden Spread matches employee contributions up to a maximum of four percent of each participating employee’s salary. Employer contributions to the plan for the years ended December 31, 2005, 2004, and 2003, were $22,506, $18,882, and $17,234, respectively.

8. RATE MATTERS

Under the Golden Spread tariff, Golden Spread bills its members based on estimated costs and usage. The tariff provides that there will be a reconciliation of actual costs incurred compared to the amounts billed. Any over or under recovery of costs are refunded or surcharged in the subsequent year. At year end, Golden Spread had recorded $1,387,000, $353,000, and $5,900,000 related to the over recovery of costs for the years ended 2005, 2004, and 2003. The tariff also provides that all or part of any margins earned may be refunded to the members as discretionary rate credits. For the years ended December 31, 2004 and 2003, Golden Spread accrued, $13,600,000 and $14,350,000, respectively, as discretionary rate credits. These amounts were refunded to the members as rate credits in the succeeding year. For 2005, Golden Spread made a determination that no discretionary rate credits from 2005 margins would be refunded to members.

9. GENERATION

GSEGC and Denver City Energy Associates, L.P., an independent power producer and EWG, jointly own Mustang Station, an approximately 480 megawatt gas-fired combined- cycle turbine-generation station located near Denver City, Texas. The operation of the plant is governed by a Joint Operating Agreement between the two owners.

In 2004, Golden Spread commenced construction on a 150 megawatt (summer rating) gas-fired combustion turbine-generator (Mustang Station Unit 4) that will be used primarily to serve peak load. The unit, which is expected to achieve commercial operation in the spring of 2006, is located adjacent to Mustang Station.

Mustang Station is located on land owned by Golden Spread located near Denver City, Texas. Golden Spread has leased the land to the project under two long-term leases. DCEA serves as operating agent for both Mustang Station and Mustang Station Unit 4.

Golden Spread purchases all of the Mustang Station capacity. Golden Spread, in its role as fuel manager, is responsible for the supply and transportation of natural gas for all units. Golden Spread has a Commitment and Dispatch Service Agreement with Southwestern Public Service Company whereby SPS is under contract to dispatch Mustang Station on behalf of Golden Spread. The Agreement provides that SPS will conduct a joint economic dispatch of Golden Spread and SPS resources to serve combined Golden Spread and SPS loads, and determine after the fact whether sales were made by Golden Spread to SPS or by SPS to Golden Spread. Such sales are priced on a“split-the-savings” basis. Golden Spread retains the right under the agreement to schedule sales to third parties.

10. SIGNIFICANT CUSTOMERS

In each of the three years ended December 31, 2005, 2004, and 2003, Golden Spread had two customers, whose sales volumes exceed 10% of Golden Spread’s annual wholesale power sales, including Golden Spread’s member, South Plains Electric Cooperative, and SPS. Sales to SPEC represented 12%-13% of both megawatthour sales and revenues in each of the years. Sales to SPS under the Commitment and Dispatch Service Agreement represented almost 47% of megawatt-hour sales and 44% of revenues in 2005 and 2004, and 45% of megawatt-hour sales and 43% of revenues in 2003.

11. COMMITMENTS AND CONTINGENCIES

Golden Spread purchases a portion of its wholesale power and energy from SPS on a partial requirements basis under a Power Sales Agreement (PSA). The PSA provides for a specified megawatt purchase by the Cooperative, with annual adjustments under certain specified conditions. Under the PSA, Golden Spread purchased 310 megawatts through May 2004, 330 megawatts through May 2005 and 355 megawatts thereafter. Effective, June 1, 2006, Golden Spread will increase its purchases to 370 megawatts. In 2002, SPS served notice to Golden Spread of termination of the contract effective in 2012.

Under purchase power agreements with DCEA and GSEGC, Golden Spread is obligated to purchase all of the capacity of the generation project described in Note 9.

The power supply contracts related to the ERCOT loads of Golden Spread’s new members and the assumption of additional loads of existing members were assigned to Golden Spread effective July 1, 2004. These contracts are with American Electric Power and TXU. Each of the contracts has varying terms.

On May 29, 2003, Golden Spread filed a petition against DCEA in Potter County District Court, seeking relief and declaratory orders concerning DCEA’s failure to supply energy at the contractually defined combined cycle heat rate during outages, DCEA’s failure to reimburse Golden Spread for replacement power during certain outages, and DCEA’s failure to provide spinning reserves, as required by the PPA. DCEA filed an answer and counter-claim seeking recovery of payments withheld by Golden Spread. On February 3, 2006, the judge in this matter signed a motion for partial summary judgment that dismissed Golden Spread’s claims against DCEA. The case is currently pending. As of December 2005, Golden Spread is seeking relief from DCEA of approximately $1.7 million. Upon resolution of these claims, reduced expense may result that has not been recorded in the accompanying financial statements, or if DCEA prevails in its counter-claim, Golden Spread would be required to pay amounts withheld, which have been accrued as expense in the accompanying consolidated financial statements. Golden Spread has established reserves to cover any claims by DCEA. Amounts paid to DCEA are flowed through by Golden Spread to its members under existing contractual arrangements. There is not expected to be any material effect on the accompanying financial statements as a result of the ultimate outcome of the dispute.

On November 4, 2005, DCEA initiated arbitration proceedings against Golden Spread and on November 28, 2005 Golden Spread filed a counter-claim against DCEA. DCEA filed a non-monetary claim seeking only a declaration that its billing practices were consistent with the PPA. In its counter-claim, Golden Spread alleges that DCEA has failed to properly calculate the variable energy rate used to charge Golden Spread for energy purchased under the PPA. On December 28, 2005, GS Electric Generating Cooperative, Inc. initiated arbitration proceedings against DCEA alleging that DCEA has failed to follow the cost allocation requirements of the Joint Operating Agreement between DCEA and GSEGC as they relate to the commodity cost of fuel, and that DCEA has improperly allocated to GSEGC the cost of fuel used to generate electricity sold by DCEA. The two arbitration proceedings have been consolidated and a hearing on the merits is scheduled to commence on May 15, 2006. As of December 2005, Golden Spread and GSEGC each are seeking relief of approximately $2.3 million. There is not expected to be any material effect on the accompanying financial statements as a result of the ultimate outcome of the dispute.

At December 31, 2005, Golden Spread had provided irrevocable letters of credit, aggregating $6,500,000, to secure fuel purchases for Mustang Station.

12. RELATED PARTY TRANSACTIONS

From time to time the Cooperative rents an airplane for transportation needs from Top Prop Leasing, Inc. (Top Prop). Top Prop is wholly owned by Robert W. Bryant, president and general manager of Golden Spread. Transactions between the Cooperative and Top Prop are consummated on terms equivalent to those that prevail in arm’s length transactions. For the years ended December 31, 2005, 2004, and 2003, the Cooperative paid charges totaling $43,850, $45,200, and $80,200, respectively, for rentals from Top Prop.

13. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Many of the Cooperative’s financial statements include references to amounts that lack an available market with similar terms, conditions, and maturities as those reflected in the carrying amount recorded. Accordingly, assumptions, estimations, and present value calculations were used for purposes of this disclosure. Estimated fair value has been determined by calculating the present value of financial instruments using the best available data.

Fair value for some amounts carried in the financial statements has not been calculated. The recorded book value for temporary investments approximates fair value given the short period to maturity. Long-term variable interest notes reprice frequently at market rates; therefore, the carrying amounts approximate fair value. Hedges used to offset the variable nature of these notes are recorded in accumulated comprehensive income.

The estimated fair value of the Cooperative’s financial instruments at December 31, 2005, is as follows:

	Carrying Value		Fair Value
CFC Fixed-Rate Long-Term Debt	$ 9,381,016		$ 8,478,238
Senior Secured Notes	54,249,700		48,618,199
	$ 63,630,716		$ 57,096,437

The fair value of the Cooperative’s CFC fixed rate long-term debt is calculated by computing the present value of the individual notes to the next repricing date using a discount rate that is the current CFC fixed interest rate available for long-term debt. The fair value of the Senior Secured Notes is calculated using the discount rate that represents the rate at which the Cooperative could borrow those funds at December 31, 2005.

14. PENDING ACQUISITION OF NEW GENERATION

On January 30, 2004, Golden Spread entered into a contract with AEP Texas Central Company (TCC), to purchase its 7.81% ownership interest in the Oklaunion Power Station, a 690 megawatt coal-fired generating station located near Vernon, Texas. On January 30, 2004, Golden Spread placed in escrow a cash deposit for the full amount of the purchase price of $42.75 million (including fuel, materials and supplies inventory). Oklaunion is located in the ERCOT West Zone and, if the contract is honored, the 54 megawatts acquired in this transaction will be used to serve a portion of the base load requirements of Golden Spread’s ERCOT loads.

Golden Spread’s contract to purchase TCC’s Oklaunion interest is subject to certain contractual rights of first refusal held by co-owners of Oklaunion. Two co-owners, Oklahoma Municipal Power Authority (OMPA) and the City of Brownsville, have sought to exercise their first refusal rights and TCC has entered into separate contracts to sell its interest in Oklaunion to each of them. Golden Spread filed suit in state district court in Dallas alleging that neither co-owner has effectively exercised its first refusal rights and that Golden Spread is entitled to specific performance of its contract. On July 11, 2005, the trial court granted a Golden Spread motion for summary judgment finding neither OMPA nor the City of Brownsville had matched the terms of the Golden Spread contract and, therefore, had failed to effectively exercise their rights of first refusal. The court denied a separate Golden Spread motion for summary judgment.

The City of Brownsville, OMPA and TCC appealed the trial court’s decision granting the Golden Spread motion, and Golden Spread has appealed the trial court’s decision denying Golden Spread’s second motion for summary judgment. In January 2006, the Dallas Court for the Texas Court of Appeals heard oral arguments in the case. A decision is pending.