Rural Development:

Financial Condition of the Rural Utilities Service's Electricity Loan Portfolio

T-RCED-97-198: Published: Jul 8, 1997. Publicly Released: Jul 8, 1997.

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Robert A. Robinson
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Pursuant to a congressional request, GAO discussed the Department of Agriculture's (USDA) Rural Utilities Service's (RUS) electricity loan program, focusing on the financial: (1) condition of the electricity loan portfolio; and (2) characteristics of borrowers having electricity loans.

GAO noted that: (1) the total amount of the outstanding principal on RUS' electricity loans was $32.3 billion at the end of fiscal year (FY) 1996; (2) of this amount, about $8 billion, or almost 25 percent, was owed by 12 borrowers that were experiencing financial problems (i.e., they were delinquent, in bankruptcy, or likely to default on loan repayment in the future); (3) these 12 electricity loan borrowers represent less than 2 percent of the total number of electricity loan borrowers; (4) this relatively high dollar amount of problem loans exits even though RUS had written off some borrowers' debts in recent years; (5) specifically, RUS wrote off almost $1.05 billion in electricity loans during the 5-year period from FY 1992 through FY 1996; (6) the financial characteristics for most of the borrowers were favorable, but some were not; and (7) the year-end reports from the borrowers to RUS showed: (a) almost 99 percent of the 855 electricity loan borrowers had positive equity at the end of 1995; (b) a total of 841 borrowers had equity of $1 million or more; (c) about 96 percent of the 855 electricity loan borrowers made a profit in 1995; (d) a total of 789 borrowers made a profit of $100,000 or more; (e) however, 10 electricity loan borrowers had negative equity at the end of 1995; and (f) 38 electricity loan borrowers did not make a profit in 1995.

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