Ava Community Energy Financial, Administrative and Procurement Subcommittee
September 9, 2026

Ava’s Working Capital
Finance, Administrative, and
Procurement Subcommittee
September 9, 2026
Contents
2 • Defining Working Capital
• How Ava allocates funds and available cash, including Working Capital • Factors affecting Working Capital management
• Understand the role of the Collection Curve and PCIA in Ava’s Financial Planning • Base case Working Capital adequacy
• Stressing the base case for resilience and potential rapid draw down • Planning implications and defining Ava target minimum balances What do we mean by “Working Capital”?
• Working capital is the money Ava has free to run daily operations and can be measured in two different ways
▪ GAAP measures working capital as short-term assets – short-term liabilities from the Balance Sheet financial statement
• Good for corporations but doesn’t translate well to public enterprises • May not capture true cash available for operations, such as deferred revenues for RSF and special funds such as Local Development ▪ Working capital can also be measured by operational cycles—cash conversion cycle
• Usually tracked by counting days of liquidity instead of dollars • Measures time from when costs are incurred to when revenues are collected • Better for balance tracking and public enterprises
• Sound working capital management practices prevents liquidity crises and ensures smooth business operations
• Especially important in industries with significant swings in demand or long receivable cycles, such as those associated with cost recovery through the PCIA
3 Ava’s Cash Buckets
Total cash balances are allocated to different buckets for treasury management ▪ Reserve Funds—Held in a custodial account at US Bank and invested in accordance to Ava’s Investment Policy as approved by the Board by resolution R-2024-31 in April, 2024 ▪ Rate Stabilization Fund—Held in insured cash sweep (ICS) accounts and certificate of deposits and was established by the Board by resolution R-2025-41 in September, 2025 ▪ Local Development Fund Balance—Held in interest bearing money market and operating accounts and tracked since inception
▪ GASB 62 Deferred Revenue Items—Held in interest bearing money market account and holds cash appropriated for local renewable energy expenses in 2027 per resolution R-2024-26 and solar/storage incentives per resolution R-2024-42 ▪ Cash Collateral & Other Restricted Funds—Held in interest bearing money market account for cash postings from counterparties
▪ Available Working Capital—Held in operating accounts
Note: Ava’s Credit Facility with PNC bank grants an additional liquidity resource but is not listed as cash available working capital
4 Major Factors Affecting Ava Working Capital Planning
• Revenue collection cycle
• PCIA variability
• Commodity Market Volatility
• Cyclical economic activity
• Interest rate markets
• Global conflict and other unplanned events
5 Ava’s Cash Conversion Cycle
Supplier payments average ~ 20 days after delivery, while net customer cash typically reaches Ava around 65 days after usage. This creates ~45-day baseline funding interval 6 Impact of PCIA on Working Capital
What is PCIA and how Ava factors it in to hedging decisions? • The short story: PG&E legacy energy resources are the basis for the PCIA calculation. Functionally, PG&E resources serve as an energy hedge for Ava's customers.
• PCIA is based on a calculation of the indifference amount for Cost Responsibility Surcharge (CRS) resources
• Total cost of the CRS resource portfolio minus the market value of portfolio output
• Market value is determined by brown power price, renewable adder, and RA values (system, local, and flex)
• Because the indifference will vary with changes in the market price, the PCIA acts as a hedge for Ava’s energy purchases
• When energy prices increase, cost of energy supply increases, as does value of CRS portfolio output
• Thus, high energy prices in one year will lead to a lower PCIA charge in the following year due to the Portfolio Allocation Balancing Account (PABA) true-up
7 Power
price
RA value
Renewable
Indifference amount
Power
price
RA value
Renewable
PCIA in High Cost Environment
PCIA in Low Cost Environment
Indifference amount
PCIA as an Equalizing Mechanism
8 • Changes in market prices are eventually balanced through PCIA and rate setting processes
• A price shock or dip creates an immediate cash gap and two-stages for recovery • In the event of a price spike,
• Ava’s current rates collect a portion of the cost incurred in the short term
• Next year’s rates are higher and recover the remaining shortfall over 12 months
• In the event of a price dip.
• Ava’s current rates over collect revenues in the short term • Next year’s rates are lower and surplus is returned to the customer over 12 months
• This creates a 15-24 month long-term cycle for cash balancing (up to 9 months from market shock to ERRA, 3 months from ERRA to rates, 12 months for rates to balance)
Base Case Working Capital Projections
9 • Revenues align with current MPB
and rate expectations
• No new PCIA reform included
• Energy costs occur at expected
market prices (no price shocks)
• Recognition of $10.5MM of GASB
set-aside for local renewable
generation in 2027 per R-2024-26
• Recognition of $18.9MM of RSF in
Jan 2027 as approved by Budget
• Narrow margins in Q3 CY 2027
and Q1 CY 2028
• Forecasted drawdown is $180MM
from highest balance (3/26) to
lowest balance (2/28)
Range of Working Capital Projections
10 • Revenues are stressed under two
scenarios
▪ Bottom Case: September prices
dip then spike in October and run
high through CY 2027
▪ Upper Case: September prices
spike then remain elevated through
CY 2027
• No new PCIA reform included
• GASB and RSF recognitions same
as base case
• Potential breach of balances in
Feb 2028
Minimum Working Capital Levels – Planning
• Ava manages to a minimum of 45 days of Working Capital ▪ Translates to approx. $110 million on average
▪ Gap in Cash Conversion Cycle approximately aligns
▪ Balance at 45 days would trigger decision on using other available funds (i.e. RSF) • If RSF balances are available, Ava may begin utilizing those funds in periods of cash burn without affecting rates or placing stress on liquidity levels
• PNC credit facility requires 120 days of Days Liquidity on Hand (DLOH), ▪ This measure excludes invested amounts
▪ This measure includes the facility itself and does not preclude RSF and other cash balances from applying to the calculation ▪ The base case does not dip below 249 DLOH in the timeframe presented • S&P uses Total Liquidity on Hand (TLOH) which includes all cash balances and credit facility balance ▪ The base case does not dip below 377 TLOH in the timeframe presented • Working Capital minimum gives staff and the Board adequate time to adjust revenues by considering Board action 11 Questions & Next Steps
• Questions??
• Staff continues to update forecasted cash
flows at least monthly as part of active
liquidity management
• Working Capital forecasts may inform
staff recommendations for board action
to maintain balance sheet strength
12