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2018Financial Statement &

Annual Report

Annual Meeting April 3, 2019

Readymade Hall, Readymade, AB 1:30pm

Lands situated within Ranges 5 and 6, W4th and include lands within Twp. 12 and 13 of Range 7, W4th.

[email protected] 7 - Gary Franz, Chairman

[email protected]

Division 5 - Bob Dykstra, Vice-Chairman

Lands situated within Ranges 11 and 12, W4th.

Lands situated south of Highway No. 4 and lands within Range 21 and north of Highway 4 and south of Highway 61 and west of Range 14, W4th.

[email protected] 1 - Gary Tokariuk

Lands within Ranges 18, 19 and 20 which are situated north of Highway 4 and north of Highway 61, and south of Highway 3, but does not include those water users obtaining their delivery from the main canal in Twp. 9, Range 18, W4th.

[email protected] 2 – Brian Ober

Lands within Ranges 18, 19 and 20 which are situated north of Highway 3 and includes those water users obtaining their delivery from the main canal in Twp. 9, Range 18, W4th.

[email protected]

Division 3 - George Lohues, Vice-Chairman

[email protected]

Division 4 – Alex Ostrop

Lands situated within Ranges 13, 14, 15, 16 and 17, W4th.

Lands situated within Ranges 8, 9, and 10, W4th and include lands within Twp. 10 and 11 of Range 7, W4th.

[email protected] 6 - Gerard Oosterhuis

Division 5 - Cory Nelson

Chairman’s Report 2018

The 2018 season started off with an above normal snow accumulation in the Eastern region of our SMRID district and the entire TID district. With canals and laterals filled with snow, SMRID staff started baling out channels down the center of canals in early spring with hopes that with a normal melt the water would have a place to run. Things were working well until a -20℃ hard freeze and froze everything to ice. Then came the fast melt and staff switched over to emergency response. Fortunately, our management staff had made plans and had prearranged contractors in case we needed them. It was something to see 40+ excavators on our canal banks baling snow and ice. The Main Canal was used to its maximum capacity between Stafford Reservoir to the Sauder Dam Spillway. At one point due to canal capacity the Forty Mile reservoir went above FSL (Full Supply Level) by over a meter. We would like to thank our partners TID, MD of Taber and County of Forty Mile for their collaborative efforts in preventive damage control. On behalf of the SMRID, I would like to recognize the extra commitment from staff involved in this emergency and express our great Appreciation.

As quickly as the flooding came the fields dried up and needed water. One water user commented “Only in Southern Alberta can the lower lands of his quarter be under water while on the high ground the dirt was blowing.” SMRID staff quickly assessed damages to our works, made emergency repairs and started water delivery. We did see some delays in start-up delivery in some areas do to these repairs.

We saw high demand again for water throughout the dry growing season. For the second consecutive year our water delivery system performed well through record water use. The board held to our 16-inch allocation in efforts to retain some water in our reservoirs for this year’s start up. We did go into fall with our internal SMRID reservoirs system at 94% of maximum winter levels.

2018 marked a milestone when Irrican Power made the final external loan payment on our first two plants. I compare it to a farmer making his last land payment. It’s a game changer that secures our valuable investment into the future.

With record water flows of 2018 and capitalizing on higher contract pricing, Irrican realized a profitable season. The plants ran well with a respectable 117 million KWH of production and the average price for power sold last season was 5.9 cents per KWH. As a result of these favourable conditions, Irrican Power generated income of $1.8 Million before taxes last season. At our December meeting the Irrican Board allocated proceeds to create a $2 Million emergency maintenance reserve. The board voted to proceed with a rate payback schedule that plans to repay $4 Million annually back to the three districts starting in 2019. The timing of these payments could not be better to offset recent cuts to our provincial funding.

2

Chairman’s Report 2018

July saw SMRID host another tour. This time we invited our water users to see the Government of Alberta (GOA) Headwork Infrastructure of the SMRID System. We started at the Waterton Reservoir following the main canal down to the Belly Chute all the way to the St. Mary Dam and toured inside the dam underground gallery and spillway. We finished with a tour through the Irrican Power Plant at Drops 4, 5 & 6. The tour was found informative from those who attended. I have never been to this portion of our system. In my 9 years on the board I always learn something on tour. I would encourage any producer to participate the next time we offer a tour to our water users.

SMRID continues with our Riparian Restoration Program; we see the importance of water quality and social license in this program and will continue to work with more partners on this next season. If you have a project you would like to explore, please contact district staff.

Last season saw the implementation of our new water ordering and delivery policy. The feedback that we have received back from producers express an overwhelming appreciation. The flexible and expanded hours are valued as priceless over the dry growing season.

This past February saw SMRID continued Irrigator Information Outreach by holding open house meetings. Due to the response to these meetings and the information shared, we plan to continue this Irrigator meeting initiative.

Expansion Acres as predicted are now fully subscribed; we are sold out. The district has seen the value of Irrigation and we are proud to be part of this vibrant agricultural economy.

Finally, snow pack this winter and near normal internal storage in SMRID reservoirs would indicate a normal start for the 2019 irrigation season. Here’s hoping that it keeps snowing in the mountains of our snow shed. Only thing is, after last spring’s events I might wish for a normal “slower” spring melt and run off.

Wishing you all a prosperous irrigation season this year.

Respectfully submitted, Gary Franz

3

General Managers Report 2018Greetings to all of our irrigators and partners.This past year has been a year of extremes in all aspects of ourlives but most importantly with the weather.

irrigation districts, both canals and dams, the effect of the floodingwould have been far greater. Having the canals to convey water and

the dams to store this water proved invaluable in lessening the impact of the flooding to all citizens.

The second benefit to all was the effective water management systems owned by the district and by the Government of Alberta. Storage was well managed in both systems and was instrumental in ensuring the security of water supply. This security ensured sufficient water for crop development in trying times of heat and dry. In turn, and as a result, we must acknowledge the trickledown effect for all of southern Alberta, an area that doesn’t see as many swings in the economy as those driven by the petroleum industry. To illustrate that I was amazed to find out that there are 120 agri-food industries in Lethbridge alone (source: Economic Development Lethbridge).

Recently the district hosted an open house with board members present to show some options for sustainability of the district and to provide a forum for irrigators to speak with their board representatives. The poster displays were well received and some thoughtful responses were elicited as a result. These posters will be on view at our AGM. Some of those ideas of sustainability will be the topic of board and irrigators and I invite all of those who attended to ensure their ideas are heard as we need to move

ahead with collaboration and communication is the cornerstone of that.

With the help of the Government of Alberta in the form of disaster relief funding we have substantially completed repairs to our canals, particularly the main canal. Initially because we had to start irrigating in the eastern portions of the district shortly after the flooding, we were unable to inspect fully the damage in the canals until shutdown.

Fortunately, the damage was not as severe as anticipated and the repair work, mainly gravel armour replacement has been relatively quick, and less expensive than originally anticipated.

Our biggest two events were both diverse in nature and in fact opposing events; the first being the severe overland flooding experienced throughout most of the district, and the other being the very hot dry year.Both of these events have highlighted the importance of irrigation infrastructure and water management in the area.

Then again, one might say "yup a typical year in Southern Alberta".

It can be unequivocally stated that without the infrastructure of

4

Parcels Deleted from SMRID 2018

SW 28-11-05-W4 NE 36-11-09-W4 Section 05-12-09-W4 SW 09-12-09-W4 NW 09-12-09-W4

SW 16-12-09-W4NE 18-12-09-W4E ½ 17-12-09-W4NW 17-12-09-W4S ½ 19-12-09-W4

SW 30-12-09-W4NE 01-12-10-W4NE 15-12-10-W4SE 22-12-10-W4S ½ 23-12-10-W4

NW 24-09-11-W4SE 04-11-12-W4W ½ 33-10-12-W4E ½ 14-09-15-W4S ½ 30-10-19-W4NE 08-08-20-W4

1112044;15; 20 1212873; 15; 22 1712222; 2; 8

General Managers Report 2018The major cost of the flooding was the disaster response when the district had at one point up to 40 track excavators working to remove blocks of ice from the canal in order to prevent over-topping of the canal from the flood waters entering the canals. A successful application has been made to the Government of Alberta to cover these expenses which not only included the expense of the equipment rentals but also of pumping the excess water out of Yellow Lake and 40 Mile reservoir.The initiatives that I have started to streamline our business processes are starting to make a difference. We are concentrating on three different software bundles on documentation and administration, one to help us with infrastructure management and are currently having software developed that will help with water ordering and recording.This has started to become integral to the way we do business and some of the benefits are already helping us become more efficient. This will all be of benefit when we chart the future waters of sustainability. We will be able to make more informed decision by easy access to all documents at the touch of a computer key, or to be able to reliably predict future maintenance and rehabilitation costs for years into the future.Respectfully submitted,

Terrence Lazarus

Parcels added to SMRID 2018

5

Western Water Coordinators

Eastern Water Coordinators

#3 Brad Wiebe 403-332-2203 #4 Rex Janes 403-332-2204 #5 Glen Olson 403-332-2205

#6 Len Young 403-332-2206#7 Pete Beauregard 403-332-2207

#10 Peter Peters 403-332-2210

#26 Darcy Friesen 403-581-6926#27 Lois Toews 403-581-6927

#30 Miles Kallenberger 403-581-6930 #32 Rodney Seitz 403-581-6932#33 Mike Curran 403-581-6933

#21 Kevin Kraemer 403-332-2221#23 Stacey Thistlewaite 403-581-6923

#24 Tim Smith 403-581-6924#25 Ken Friesen 403-581-6925

BOARD OF DIRECTORS FEES AND EXPENSES FOR THE YEAR ENDED OCTOBER 31, 2018

NO. OF REIMBURSED DISTRICTTITLE DAYS PER DIEM MILEAGE EXPENSES EXPENSE

CHAIRMAN 45 $18,470 $5,070 $860 $24,400

VICE-CHAIRMAN $13,370 $864 $579 $14,813

BOARD MEMBER $11,725 $484 $599 $12,808

BOARD MEMBER $11,575 $831 $719 $13,125

NAME

GARY FRANZ

GEORGE LOHUES

GARY TOKARIUK

BRIAN OBER

ALEX OSTROP BOARD MEMBER $13,850 $2,394 $1,002 $17,246

GERARD OOSTERHUIS BOARD MEMBER $11,075 $2,045 $1,002 $14,122

$10,500 $1,326 $792 $12,618

$130 - - $130

CORY NELSON

MIKE WIND

JOHN MCKEE

BOARD MEMBER

MAIN CANAL BOARD

MAIN CANAL BOARD

38

34.5

33

39

30.5

29.5

0.5

1.0 $260 - - $260

251.00 $ 90,955 $13,014 $5,553 $109,522

6

I.R.P. Account

TABLE 1 - SMRID I.R.P. Account to October 31, 2018

Job Description

Cost to Date October 31, 2018

Allocated FundsOctober 31, 2018

Estimated Cost to October 31, 2018

$4,775,657 ($139,095) $4,636,562

$18,292 $767,213 $785,505

$10,096,290$1,997,170

($24,871)

$1,322,225

$19,313

$8,099,120

$9,959,237

$2,068,794

$15,461,125 $15,553,438

$100,597 ($597) $100,000

$104,971 ($9,421) $166,106

$140,754 $19,246 $160,000

$40,728,547 $ 4,024,183 $44,752,730

Chin 10

Cameron Lateral

South Grassy Main

N. Burdett Laterals 1 & 3

BI Lateral 26

West Med Hat Lateral 2 (unapproved)

Other Projects

40 Mile Dam Safety Review

Dam Safety Reviews: Seven Person, Klaudt,Stornham

Aquatic Weed & Algae Control Structures 2016/2017

Total Active Projects

Allocated fundsUnallocated fundsTotal funds available

$4,024,183$27,886

$4,052,069

$9,934,366

$3,391,019

7

Technical Service’s Report

SMRID and the Alberta Provincial Government entered into an IRP Financing Agreement for the rehabilitation of capital works for the 2018/2019 fiscal year. A total of $4,936,600 was made available. This fund comprised contributions of $3,702,450 from the Provincial Government and $1,234,150 from the District, representing 75% and 25%, respectively. With this funding and monies carried forward, the North Burdett Laterals 1 / 3 project was completed as shown in Table 2 below:

Table 2. 2018/2019 IRP Project Details

Project Name Project Description Estimated Cost

Cameron Lateral Closed Pipeline $3,527,887

TOTAL $3,527,887

Project Contractor Suppliers Project Components Cost ($)

N. BurdettLaterals 1 & 3

Whissel IPEX Pipe • 11.5 km of pipeline• 15 Irrigation Turnouts• Mechanical screener at intake

$4 Million

Table 1 on the preceding page shows capital works charges for 2018/2019 will result in a carryover of unallocated funds totalling $27,887 for the current year. This amount will be added to the 2018/2019 Irrigation Rehabilitation Program (IRP). SMRID is proposing to enter into a $3,500,000 Irrigation Financing Agreement with the Provincial Government for the 2019/2020 fiscal year. Therefore, including the $27,887 carried over from 2018/2019, a total of $3,527,887 is expected to be available in the 2019/2020 IRP year. Table 3 below shows the proposed IRP project for the 2019/2020 fiscal year. Figure 1 shows the location of the proposed projects.

Table 3. Proposed Irrgation Rehabilitation Program 2019/2020

Other Capital Projects:

SMRID completed work using internal reserves on the Chin 2 pipeline and canal refurbishment project, briefly described below.

Table 4. Other 2018/2019 Capital Projects

Project Contractor Suppliers Project Components Cost ($) Chin 2 concrete

Tanex / Dennis Dirtworx

IPEX Pipe • 9 km of pipeline• 40,000 m3 of canal excavation• 8 concrete canal drop structures• 10 Irrigation turnouts• Mechanical Screener

$5.0 Million

8

Other projects planned through internal reserves for 2019/2020 include the Eight Mile pipeline project at a cost estimate of $2.5 Million.

Following a Functional Analysis review of the Department in 2017, a renewed emphasis was placed on dam safety in 2018 with Technologist Robb Slusar assigned to work full time on SMRID’s portfolio of 18 dams, reporting to Travis Geremia, SMRID Infrastructure Engineer. Work that was completed in relation to Dam Safety is summarized in the table 5:

Table 5. Dam Safety work completed to Year End 2018 Item Description 2018 Year Total

Project ($) 1 Murray Chute, concrete repair $31,535 $50,000 2 Stafford outlet conduits, concrete repair $26,505 $80,000 3 Completion of Dam Safety Reviews: 40 Mile, Klaudt,

7 Persons and Stornham Dams (IRP Funded) $51,673 $160,000

4 Inundation Mapping / Emergency Preparedness Plans for Dams east of Sauder. Supported by a 75% Growing Forward 2 (GF2) Grant from Alberta Agriculture.

$202,022 $245,000

5 Chin east dam Inundation Mapping and drone survey $53,325 $53,328 6 Installation of Piezometers at Grassy Dam and review

of instrumentation at 40 Mile $88,786 $115,000

7 Chin West Dam inspections, project management $13,764 $15,000 TOTAL $467,610 $718,328

Ongoing work in 2019 includes a budgeted $352,000 of expenditures including Dam Safety Reviews for Chin, Cross Coulee, Raymond and Murray Dams. As well, SMRID commissioned $175,000 of risk - based studies / review on the Chin outlet conduits and the 2005 main canal failure site with 75% support through the Canada Agricultural Partnership (CAP) program.

Technical Services staff also oversaw a number of miscellaneous projects, including the repair to Drop 6 on the main canal, new construction for turnout re-locations, irrigation delivery installations as well as capacity checks for expansion acres and alternate parcel agreements.

Seepage Control Plan

Per section 164 of the Irrigation Districts Act, SMRID is exempted from seepage claims, provided that the District submit Five Year Seepage Control plans.

Within the current seepage control plan, the St. Mary River Irrigation District completed work on the following areas: Sections 15 and 17 of Township 10, Range 12 W4M, Sections 3, 10, 15, 22 and 23 of Township 9, Range 19 W4M.

Trevor Helwig, P. Eng. Technical Services Manager

9

RIDGE INLET 187,400

D.U. TYRELL/VERDIGRIS 7,100IRRICAN RAYMOND 506,300

NORTH RIDGE 134,100

DROP 1 609,000

RID 52,900

MUNICIPAL/INDUSTRIAL 783OTHER 2,012

CHIN CHUTE 73,400IRRICAN CHIN 286,200

STAFFORD OUTLET 393,800

RESERVOIR PUMPING 3,751

TID 106,800

HORSEFLY CHECK 310,000

MUNICIPAL/INDUSTRIAL 481OTHER 356

40 MILE SYPHON 182,400


SAUDER INLET 124,700

SAUDER OUTLET 90,700SAUDER SPILLWAY 4,290


MURRAY INLET 34,700

MURRAY OUTLET 43,600




RESERVOIR PUMPING 777

D.U. 40 MILE 3670

START 46,300

RIDGERESERVOIR

END 75,500

RESERVOIRSCHIN - STAFFORD

END 145,500

GRASSY RESERVOIR

5,400END 5,700

START

LAKEYELLOW


40 MILE RESERVOIR

END

START

66,500

67,900

SAUDER RESERVOIR

END 23,800START 19,800

MURRAY RESERVOIR

END 16,800

START 16,500

RESERVOIR PUMPING 784

2018 WATER DIVERSION

DIVERSION FROM ALBERTA ENVIRONMENTTO DISTRICT STORAGE

TOTAL USESMRID

TIDRID

*Note all readings are in ac.ft.

33,900

START 117,100

41,300

30,600

25,800

653,700-9,900

663,700504,000106,80052,900

START 65,700

ST. MARYRESERVOIR

END 75,300

START 40,100

WATERTONRESERVOIR

END 0

MURRAY SPILLWAY 4,800


11

Water Coordinator

Assessed Acres Ac-Ft Used Acres

IrrigatedAc-Ft / Acre

Land Use Factor

22,206.01 17,309.73 20,805.95 0.83 0.94

21,061.86 18,390.38 18,835.89 0.98 0.89

32,821.91 26,364.13 30,973.88 0.85 0.94

23,447.42 17,785.50 20,902.40 0.85 0.89

28,865.52 21,914.88 26,818.35 0.82 0.93

28,481.25 15,291.94 27,198.90 0.56 0.95

2,959.75 3,022.01 2,951.75 1.02 1.00

29,610.84 22,507.58 28,901.24 0.78 0.98

31,228.98 32,201.34 30,322.21 1.06 0.97

29,205.00 30,580.89 28,931.10 1.06 0.99

24,482.96 25,285.59 23,572.08 1.07 0.96

29,463.54 25,538.94 28,544.50 0.89 0.97

23,280.30 21,596.66 22,453.30 0.96 0.96

24,138.81 25,838.15 22,556.07 1.15 0.93

26,968.83 27,331.29 25,318.93 1.08 0.94

Wiebe, Brad Janes, Rex Olson, Glen Young, Len Egeland, Butch Peters, Peter Peters, Peter Kraemer, Kevin Thistlethwaite, Stacey Smith, Tim Friesen, Kenneth Friesen, Darcy Deeley, Richard Kallenberger, Miles Seitz, Rodney Curran, Mike 23,971.35 23,340.35 22,446.33 1.04 0.94

*402,014.33 **354,299.36 **381,532.88

2018 WATER DELIVERIES

* includes 1,943.78 ac. for Minimum Annual & Annual Agreements, 854 ac. forAnnual Spill Agreements, 552.10 ac. for Leases and 130 ac. Terminable

** Ac-Ft used at farm gate

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Crop NameIrrigated Crop

AreaNon Irrigated

Crop Area ANS Crop Area Total

ALFALFA 10,287.24 117.00 786.20 11,190.44ALFALFA 2 CUT 16,824.27 380.30 1,156.76 18,361.33ALFALFA 3 CUT 4,225.45 0.00 0.00 4,225.45ALFALFA SEED 3,420.42 0.00 0.00 3,420.42ALFALFA SILAGE 1,081.00 0.00 171.30 1,252.30BARLEY 13,777.32 226.50 659.33 14,663.15BARLEY SILAGE 5,489.23 14.00 386.17 5,889.40BARLEY SILAGE UNDERSEED 1,114.40 0.00 67.50 1,181.90BROME HAY 70.80 0.00 0.00 70.80CANOLA 37,464.02 187.54 1,341.23 38,992.79CANOLA SEED 20,025.30 64.00 15.00 20,104.30CARROTS 71.60 59.00 0.00 130.60CATNIP 454.00 0.00 0.00 454.00CHICK PEAS 2,087.11 0.00 21.00 2,108.11CORN SILAGE 25,819.71 13.73 999.80 26,833.24CPS WHEAT 1,722.50 0.00 0.00 1,722.50CRESTED WHEAT GRASS 0.00 8.50 0.00 8.50DILL 256.00 0.00 56.50 312.50DRY BEANS 31,261.41 65.00 325.38 31,651.79DRY PEAS 11,424.54 112.00 616.72 12,153.26DRY YELLOW PEAS 685.00 0.00 0.00 685.00DURUM WHEAT 33,131.98 103.50 972.49 34,207.97FABA BEANS 425.50 0.00 2.00 427.50FLAX 5,595.50 0.00 14.00 5,609.50FRESH CORN (SWEET) 519.00 0.00 0.00 519.00FRESH PEAS 1,406.30 0.00 0.00 1,406.30GOLF COURSE 217.40 0.00 0.00 217.40GRAIN CORN 6,386.43 0.00 4.30 6,390.73GRASS HAY 5,760.98 424.79 712.30 6,898.07GRASS SEED 648.00 0.00 0.00 648.00GREEN FEED 1,893.91 25.00 116.50 2,035.41HARD SPRING WHEAT 57,485.13 620.30 3,252.09 61,357.52HEMP 4,949.10 0.00 96.00 5,045.10ITALIAN GRASS 120.00 0.00 0.00 120.00LENTILS 3,223.70 4.00 158.17 3,385.87MALT BARLEY 256.76 0.00 13.16 269.92MARKET GARDENS 525.70 0.00 30.40 556.10MINT 4,206.00 0.00 0.00 4,206.00MISC. 1,295.51 178.82 249.73 1,724.06MUSTARD 225.00 0.00 0.00 225.00NATIVE PASTURE 3,670.04 216.00 572.80 4,458.84NON CROP 121.00 184.40 334.50 639.90NURSEY 329.90 30.80 6.90 367.60OATS 413.00 0.00 0.00 413.00OATS SILAGE 310.00 0.00 0.00 310.00ONIONS 5.00 0.00 0.00 5.00POTATO 15,640.18 20.00 173.00 15,833.18RYE 407.00 0.00 5.00 412.00SEED POTATOES 65.00 0.00 0.00 65.00SMALL FRUIT 57.50 0.00 0.00 57.50SOFT WHEAT 2,225.40 0.00 49.83 2,275.23SORGHUM SUDAN GRASS 428.00 35.00 0.00 463.00SOYBEANS 598.50 2.00 27.00 627.50SUGAR BEETS 10,577.34 0.00 179.50 10,756.84SUMMER FALLOW 170.50 28.00 688.60 887.10SUNFLOWER 449.00 0.00 0.00 449.00TAME PASTURE 8,759.08 1,010.51 1,193.04 10,962.63TIMOTHY HAY 7,122.24 0.00 286.19 7,408.43TRITICALE 951.10 0.00 82.20 1,033.30TRITICALE SILAGE 497.30 0.00 0.00 497.30TURF SOD 146.00 0.00 0.00 146.00WINTER WHEAT 12,756.58 231.00 297.17 13,284.75Totals 381,532.88 4,361.69 16,119.76 402,014.33

2018 CROP SUMMARY

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2018 MAINTENANCE REPORTThe St. Mary River Irrigation District has extensive infrastructure for supply and delivery of water. The District is committed to maintaining this infrastructure to ensure that it is operational and that it meets its design life. With a rapid snow melt due to higher than normal spring time temperatures, the main canal being full of snow and ice we did experience flooding issues in certain areas. We had up to 40 excavators (both farmer and contractor) assisting with bailing snow and ice, containing the water in the main canal. We did sustain some damage to our infrastructure because of this. The province is assisting with the cost of repairs, including emergency response and repairs which commenced December 2018 and is continuing through 2019. Because we were dealing with the flooding, some of the scheduled maintenance work for the spring was not completed, and we went from dealing with flooding to delivering water within one day. Currently, there appears to be no major sluff’s that have to be repaired on the main canal before start up. We did take the opportunity to remove excess silt build-up in some areas before start up and after water was turned off. We did have damage to air relief valves because of the freezing temperatures right at shut down because pipelines were still full of water.The following table outlines maintenance items completed for 2018.Jan Tamminga, C.E.T.MANAGER OF OPERATIONS

WESTERN DIVISION

EASTERN DIVISION

ItemMainCanal

Canals,Pipelines & Drains Total

MainCanal

Canals,Total

Grand Total

Right of Way Mowing (km) 159 312 471 326

Pipelines & Drains

320 646 1,117

Canal Cleaning (km) 20 20 180 120 300 320

Silt Removal (m3) 6,352 3,000 500 3,500 9,852

Armour Hauled (m3){Erosion/Slough Repairs} 2,488 816 3,304 16,206 16,206 19,510

Concrete Canal Maint. (m)

1 1

40 40 40

Operating Road Grading (km) 239 247 486 265 120 385 871

Operating Road Graveling (km) 63 17 80 200 40 240 320

Pipeline Installation (m)

Structure Repairs 12 37 49 6 6 55

Pipeline Repairs- Air Relief Valves 36 36 70 70 106

- Valves 17 17 33 33 50

- Leak Repairs 2 2 4 4 6

Replacement of Farm Turnouts 5 5 6

Replacement of Road Crossings

Repairs to Gates and Hoists 8 14 22 22

Repairs to Pumps

Repairs/Maintenance to- Water Meters- Hydrometric Stations

Weed Control Aquatic (km) 36 369 405 220 900 1,120 1,525

Weed Control Non-Aquatic (ac) 522 432 954 1,600 800 2,400 3,354

6,352

333

2 2 2

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NOTICE OF WEED CONTROL TREATMENTS 2019 The St. Mary River Irrigation District will be controlling broadleaf weeds along its right of ways for the 2019 irrigation season. The District will use 2,4-D, Milestone, Dicamba and Glyphosate for weed control on driving banks and reed canary grass control along canals. This spray program will be starting in April of 2019 and will continue to the end of the irrigation season.

Also included in this weed control program will be the treatments for aquatic weeds. To control these aquatic weeds, the St. Mary River Irrigation District may be treating the canals, as required, as noted below on a regular two week interval for the 2019 irrigation season. The canals will be treated with Magnacide H (Acrolein, stabilized) to control the growth of aquatic weeds and algae.

YEAR 2019 AQUATIC TREATMENT LOCATIONS AND DATES

North Coaldale Area EAST LATERAL TP 9 RG 19/20 - NORTH EAST LATERAL TP 8/9/10 RG 20/21

COALDALE LATERAL TP 9 RG 19/20 - CAMERON LATERAL TP 9 RG 19/20 - LETHBRIDGE MAIN TP 8 RG 20/21 Apr 30 May 14, 28 June 11, 25 July 9, 23 Aug 6, 20 Sept 3, 17 Oct 1

South Coaldale Area CHIN LATERAL 2 TP 8 RG 20 - CHIN LATERAL 10 TP 7/8 RG 18 - CAMERON EXTENSION TP 10 RG 19/20-

Chin 4 and 5 May 1, 15, 29 June 12, 26 July 10, 24 Aug 7, 21 Sept 4, 18 Oct 2

Lethbridge / Coaldale Area NORTH LATERAL TP 8/9/10 RG 20/21 - WHOOP-UP LATERAL TP 7/8 RG 21 - VERDIGRIS TP 4 RG 16/17

May 2, 16, 30 June 13, 27 July 11, 25 Aug 8, 22 Sept 5, 19 Oct 3

North Grassy, North & South Burdett GRASSY OUTLET TP 9/10 RG 13 - N. GRASSY MAIN TP 10/11 RG 13 - N. BURDETT MAIN TP 10/11 RG 12/13

LATERAL 8 & 9 TP8/9 RG 12 - BOW ISLAND LATERAL 34 TP 12 RG 8 Apr 30 May 14, 28 June 11, 25 July 9, 23 Aug 6, 20 Sept 3, 17 Oct 1

Burdett / Bow Island Area YELLOW LAKE LAT 10 TP 8/9 RG 12 - BOW ISLAND LAT 2B TP 9 RG 11 - BOW ISLAND LAT 10 TP 10 RG 11-

BOW ISLAND LAT 22 TP 11 RG 10 May 1, 15, 29 June 12, 26 July 10, 24 Aug 7, 21 Sept 4, 18 Oct 2

Seven Persons Area WEST MED. HAT LATERAL 2 TP 12 RG 6/7-

MED. HAT LATERALS 10 & 13 TP 11/12 RG 6 - BOW ISLAND LATERAL 34 TP 12 RG 8 May 2, 16, 30 June 13, 27 July 11, 25 Aug 8, 22 Sept 5, 19 Oct 3

Grassy Lake Area GRASSY OUTLET CANAL TP 9/10 RG 13 - NORTH GRASSY MAIN TP 10/11 RG 13

NORTH BURDETT MAIN TP 10/11 RG 12/13 - SOUTH GRASSY MAIN TP 9/10 RG 13/14 May 7, 21 June 4, 18 July 2, 16, 30 Aug 13, 27 Sept 10, 24

South Medicine Hat MAIN CANAL BELOW MURRAY TP 10/11 RG 6/7 - SOUTH MED. HAT LATERAL 3 TP 11/12 RG 5/6

LATERAL 38 TP 10 RG 7/8 - LATERAL 2B TP 12 RG 7 May 8, 22 June 5, 19 July 3, 17, 31 Aug 14, 28 Sept 11, 25

Main Canal Treatments MAIN CANAL SAUDER RES. TO MURRAY RES. TP 10/11/12 RG 7/8

May 9, 23 June 6, 20 July 4, 18 Aug 1, 15, 29 Sept 12, 26

STAFFORD RES. TO SAUDER RES. TP 8/9/10/11/12 RG 10/11/12/13/14/15/16/17/18/19/20 June 3 to 7 OR June 17 to 21 All laterals will be affected.

All sub-laterals that take water from the above noted laterals may/will be affected by these treatments. Information material will be supplied upon request if you have land affected by these treatments.

This weed control program is administered by licensed applicators that are under approval from Alberta Environmental Protection.

Manager of Operations

15

Rates $22.00(After Discounts

$21.69)

Water Conveyance, $2.60

Leases, $0.73

Other (Includes grant funding),

$3.02

2018 SMRID GENERAL OPERATIONS REVENUES

Total $28.03

Maintenance, $13.19

Engineering & Administration,

$4.56

Capital (IRP), $3.07

Water Delivery, $5.21

Capital (Fixed Assets), $1.69

District Works, $1.63

2018 SMRID CASH EXPENDITURES

Total $29.35

2018 REVENUES & EXPENDITURES

16

St. Mary River Irrigation DistrictConsolidated Financial Statements

For the year ended October 31, 2018

17

Management's Responsibility

To the Board of Directors of the St. Mary River Irrigation District:

Management is responsible for the preparation and presentation of the accompanying consolidated financial statements, including responsibility for significant accounting judgments and estimates in accordance with Canadian accounting standards for not-for-profit organizations and ensuring that all information in the annual report is consistent with the statements. This responsibility includes selecting appropriate accounting principles and methods, and making decisions affecting the measurement of transactions in which objective judgment is required.

In discharging its responsibilities for the integrity and fairness of the consolidated financial statements, management designs and maintains the necessary accounting systems and related internal controls to provide reasonable assurance that transactions are authorized, assets are safeguarded and financial records are properly maintained to provide reliable information for the preparation of consolidated financial statements.

The Board of Directors is composed primarily of Directors who are neither management nor employees of the District. The Board is responsible for overseeing management in the performance of its financial reporting responsibilities, and for approving the financial information included in the annual report. The Board fulfils these responsibilities by reviewing the financial information prepared by management and discussing relevant matters with management and external auditors. The Board is also responsible for recommending the appointment of the District's external auditors.

MNP LLP, an independent firm of Chartered Professional Accountants, is appointed by the directors to audit the consolidated financial statements and report directly to them; their report follows. The external auditors have full and free access to, and meet periodically and separately with, both the Board and management to discuss their audit findings.

February 27, 2019

Terrence Lazarus - General Manager

18

Independent Auditors’ Report

To the Members of the St. Mary River Irrigation District:

We have audited the accompanying consolidated financial statements of the St. Mary River Irrigation District, which comprise theconsolidated statement of financial position as at October 31, 2018, and the consolidated statements of operations and changes in netassets, cash flows and the related schedules for the year then ended, and a summary of significant accounting policies and otherexplanatory information.

Management’s Responsibility for the Consolidated Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordance withCanadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary toenable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit inaccordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free frommaterial misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financialstatements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatementof the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internalcontrol relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the St. Mary RiverIrrigation District as at October 31, 2018 and the results of its operations, changes in net assets and its cash flows for the year thenended in accordance with Canadian accounting standards for not-for-profit organizations.

Lethbridge, Alberta

February 27, 2019 Chartered Professional Accountants

19

St. Mary River Irrigation DistrictConsolidated Statement of Financial Position

As at October 31, 2018

GeneralOperations

IrrigationWorks

Irrican 2018 2017

AssetsCurrent

Cash and cash equivalents 7,610,274 10,773,349 5,289,609 23,673,232 20,376,151Accounts receivable (Note 3) 2,626,178 90,172 734,719 3,451,069 2,812,674Materials and supplies 252,453 196,967 - 449,420 519,806Prepaid expenses 3,754 244,236 68,547 316,537 314,821Due from (to) funds (Note 4) 1,163,452 - (1,163,452) - -

11,656,111 11,304,724 4,929,423 27,890,258 24,023,452

Due from (to) funds (Note 4) (4,631,412) (1,195,214) 5,826,626 - -

Capital assets (Note 5) 6,533,780 - 36,509,782 43,043,562 44,056,735

Investment reserves (Note 6) - - - - 2,873,466

Investments (Note 7) - 59,404,956 2,409,461 61,814,417 54,462,177

Work in progress (Note 17) - 42,365,642 - 42,365,642 29,918,266

Irrigation works (Note 8) 66,575 374,338,708 - 374,405,283 379,513,945

Future income taxes (Note 9) - - 5,583,447 5,583,447 6,083,906

13,625,054 486,218,816 55,258,739 555,102,609 540,931,947

Continued on next page

The accompanying notes are an integral part of these consolidated financial statements

20

—birector6-1̀)

St. Mary River Irrigation District Consolidated Statement of Financial Position

As at October 31, 2018

General Operations

Irrigation Works

lrrican 2018 2017

Liabilities Current

Accounts payable 1,443,064 1,993,778 112,752 3,549,594 1,254,057 Goods and services tax 129,873 15,992 145,865 133,299 Deferred revenue (Note 11) 156,978 1,710,810 - 1,867,788 2,233,401 Current portion of due to districts (Note 13) 273,860 273,860 Current portion of long-term debt (Note 14) - - - 2,603,742 Term loans due on demand (Note 12) 7,593,333 7,593,333 8,185,000

1,729,915 3,704,588 7,995,937 13,430,440 14,409,499

Due to Districts (Note 13) 11,889,545 11,889,545 11,374,610

Long-term debt (Note 14) 1,519,575 1,519,575 1,519,875

1,729,915 3,704,588 21,405,057 26,839,560 27,303,984

Commitments (Note 17)

Net Assets Invested in capital assets 6,600,353 416,704,350 19,896,342 443,201,045 434,265,514 Externally restricted assets (Note 15) 4,021,185 - 4,021,185 13,368,225 Internally restricted assets (Note 15) 6,651,719 6,651,719 7,033,518 Internally restricted Expansion (Note 15) - 55,136,974 - 55,136,974 45,086,395 Unrestricted surplus 5,294,786 13,957,340 19,252,126 13,874,311

11,895,139 482,514,228 33,853,682 528,263,049 513,627,963

13,625,054 486,218,816 55,258,739 555,102,609 540,931,947

Approved on behalf of the Board


2

21

St. Mary River Irrigation DistrictConsolidated Statement of Operations and Changes in Net Assets


GeneralOperations

IrrigationWorks

Irrican 2018 2017

Revenue Irrigation rates, net (Note 16) 8,920,968 - - 8,920,968 8,773,871Conveyance of commercial water 615,869 - - 615,869 575,924Conveyance of household purposeswater 428,120 - - 428,120 442,160Oilwell drilling water - - - - 9,000Penalties 25,388 - - 25,388 26,236Discounts (214,393) - - (214,393) (221,328)

9,775,952 - - 9,775,952 9,605,863

Lease revenue, net (Note 16) 267,166 - - 267,166 252,917Interest and other income 1,251,924 - 1,495,996 2,747,920 1,604,119Unrealized gains (loss) on marketablesecurities - (1,393,071) (287,763) (1,680,834) 1,519,937Gain on sale of assets 37,229 - - 37,229 86,347Service fee income 29,856 - - 29,856 44,986Irrigation works fund revenue(Note 15) - 4,753,338 - 4,753,338 5,688,521Expansion revenue - 11,467,945 - 11,467,945 5,544,505Power generation revenue (Schedule 1) - - 7,409,036 7,409,036 2,688,067

Total revenue 11,362,127 14,828,212 8,617,269 34,807,608 27,035,262

ExpensesOperating expenses (Schedule 2) 9,536,823 - - 9,536,823 8,076,240Interest on long-term debt 100,147 - - 100,147 311,365Irrigation works expenditures - 248,059 - 248,059 185,872Amortization irrigation works 979 5,539,000 - 5,539,979 5,534,588Power generation expenditures (Schedule 1) - - 4,103,867 4,103,867 4,273,343Administration expenditures (Schedule 1) - - 143,188 143,188 179,875Future income tax expense (recovery)(Schedule 1) - - 500,459 500,459 (788,366)

Total expenses 9,637,949 5,787,059 4,747,514 20,172,522 17,772,917

Excess of revenue over expenses 1,724,178 9,041,153 3,869,755 14,635,086 9,262,345

Net assets, beginning of year 11,667,841 471,976,195 29,983,927 513,627,963 504,365,618

Interfund transfer (1,496,880) 1,496,880 - - -

Net assets, end of year 11,895,139 482,514,228 33,853,682 528,263,049 513,627,963


22

St. Mary River Irrigation DistrictConsolidated Statement of Cash Flows


GeneralOperations

IrrigationWorks

Irrican 2018 2017

Cash provided by (used for) the followingactivities Operating

Excess of revenue over expenses 1,724,178 9,041,153 3,869,755 14,635,086 9,262,345Amortization 382,280 5,539,000 1,464,242 7,385,522 7,342,552Gain on sale of assets (37,229) - - (37,229) (86,347)Future income tax expense (recovery) - - 500,459 500,459 (788,366)Unrealized (gain) loss on marketablesecurities - 1,393,071 287,763 1,680,834 (1,519,937)

2,069,229 15,973,224 6,122,219 24,164,672 14,210,247Changes in working capital accounts

Accounts receivable (855,099) 171,143 45,561 (638,395) (189,354)Materials and supplies 52,590 17,796 - 70,386 110,296Prepaid expenses 17,201 3,823 (22,740) (1,716) (61,382)Accounts payable 331,797 1,901,110 62,641 2,295,530 (1,040,894)Goods and services tax 21,693 - (9,127) 12,579 10,466Deferred revenue (269,583) (96,030) - (365,613) 1,878,388

1,367,828 17,971,066 6,198,554 25,537,443 14,917,767

Investing and financing activities Advances of term debt - - - - 1,260,000Repayment of term loans due ondemand - - (591,667) (591,667) -Repayment of long-term debt (1,885,652) - (718,390) (2,604,042) (3,337,691)Due to Districts - - 788,795 788,795 780,937Proceeds from sale of capital assets 59,326 - - 59,326 173,717Additions to capital assets (732,639) - (118,520) (851,159) (780,278)Additions to Irrigation Works - (12,881,827) - (12,881,827) (4,853,541)Decrease (increase) in investments - (8,001,389) 1,841,601 (6,159,788) (10,438,816)

(2,558,965) (20,883,216) 1,201,819 (22,240,362) (17,195,672)

Interfund transfers Provision for capital additions andirrigation works (1,496,880) 1,496,880 - - -Interfund transfers 1,849,712 313,069 (2,162,786) - -

352,832 1,809,949 (2,162,786) - -

Increase (decrease) in cash resources (838,305) (1,102,201) 5,237,587 3,297,081 (2,277,905)Cash resources, beginning of year 8,448,579 11,875,550 52,022 20,376,151 22,654,056

Cash resources, end of year 7,610,274 10,773,349 5,289,609 23,673,232 20,376,151


23

St. Mary River Irrigation DistrictNotes to the Consolidated Financial Statements


1. Incorporation and nature of the organization

The St. Mary River Irrigation District (the "District”) is responsible for the efficient and economical distribution of water forirrigators of the District. The District operates under the authority of the Irrigation Districts Act, Chapter I-11, RevisedStatutes of Alberta 2000.

The District owns a 75% interest in Irrigation Canal Power Co-operative Ltd. ("Irrican"), which was incorporated onDecember 18, 1990 in order to combine the efforts of its membership in the design, construction, operation andmaintenance of hydro-developments and power plants in association with irrigation works in the St. Mary River IrrigationProject Headworks and St. Mary River Irrigation Project area. The purpose of Irrican is the generation and supply ofelectrical energy for the use and benefit of all irrigators in the St. Mary River Irrigation District, Taber Irrigation District andthe Raymond Irrigation District. Irrican receives its revenue under the Small Power Research and Development Act ofAlberta and through the sale of power through the power pool.

2. Significant accounting policies

The consolidated financial statements have been prepared in accordance with Canadian accounting standards for not-for-profit organizations (ASNPO) set out in Part III of the CPA Canada Handbook - Accounting, as issued by the AccountingStandards Board in Canada and include the following significant accounting policies:

Fund accounting

In order to ensure observance of limitations and restrictions placed on the use of resources available to the Organization,the accounts are maintained on a fund accounting basis. Accordingly, resources are classified for accounting and reportingpurposes into funds. These funds are held in accordance with the objectives specified by the contributors or in accordancewith the directives issued by the Board of Directors. These consolidated financial statements have been prepared inaccordance with the restricted fund method of accounting for contributions.

Three funds are maintained: General Operating Fund, Irrigation Works Fund and Irrican Fund.

The General Operating Fund is used to account for the District's administrative and operating activities and the assets,liabilities, revenue and expenses related to the District's property, buildings and equipment.

The Irrigation Works Fund accounts for capital receipts for new irrigation works and interest earnings arising from suchmonies. Costs incurred in constructing new irrigation works and in replacing and rehabilitating existing structures areprovided for from the fund. The Province of Alberta contributes funding for 75% of expenditures approved by the IrrigationCouncil and the District contributes 25%.

The Irrican Fund reports the assets, liabilities, revenues and expenses related to Irrigation Canal Power Co-operative Ltd.

Investment in a profit-oriented subsidiary

The District’s consolidated financial statements include the accounts of its controlled subsidiary, Irrigation Canal Power Co-Operative Ltd. ("Irrican"). Consolidated financial statements are prepared by aggregating the accounts of Irrican with thoseof the District. Transactions between the organizations and inter-organization balances have been eliminated in theconsolidated financial statements.

Cash and cash equivalents

The District considers unrestricted cash on hand, in banks, guaranteed investment certificates, fixed income bonds andmoney market funds that mature within six months of year-end as cash and cash equivalents. Irrican cash subject torestrictions that prevent its use for current purposes is included in cash reserves.

Investment reserves

Investment reserves consist of guaranteed investments certificates, money market funds and fixed income bonds recordedat fair value.

24



2. Significant accounting policies (Continued from previous page)

Investments

Investments consist of guaranteed investment certificates, marketable securities and provincial bonds recorded at fair valuefor those with prices quoted in an active market, and cost less impairment for those that are not quoted in an active market.They have been classified as current or long-term in concurrence with the nature and intent of the investment. Changes infair value are recorded immediately in net income.

Inventory

Materials and supplies - Purchased materials and supplies inventories are valued at the lower of cost or net realizable valuewith cost determined by the first-in, first-out method.

Irrigation acres - Irrigation acres held for resale are valued at the lower of cost and net realizable value with cost determinedon a specific item basis.

Work in progress - Work in progress is stated at cost and capitalized as specific projects are completed.

Capital assets

Property, buildings and equipment are amortized on a straight-line basis over the estimated useful life of the asset class asfollows:

Buildings 60 yearsHeavy equipment – non power 15 yearsHeavy equipment – power 10 yearsShop equipment, furniture and fixtures 10 yearsAuto equipment and large tools 7 yearsLight duty vehicles and communications equipment 5 years

Amortization on other items is determined as follows:i) Communications equipment is amortized on a 10% declining balance basis.ii) Irrigation works are amortized on a straight-line basis over their estimated average useful life of 80 years.iii) Irrican buildings and equipment at the Chin, Raymond and Drop 4, 5, 6 hydro-development sites are amortized on

a straight-line basis over their estimated useful life of 40 years.iv) Irrican computer equipment and equipment are initially recorded at cost. Amortization is provided using the

declining balance method at 55% and 20% respectively. In the year of acquisition, amortization is taken at one-halfthe above rates.

Income taxes

St. Mary River Irrigation District is exempt from income taxes under section 149 1(l) of the income tax act.

Irrican follows the asset and liability method of accounting for future income taxes. Under this method, future income taxassets and liabilities are recorded based on temporary differences between the carrying amount of balance sheet items andtheir corresponding tax bases. In addition, the future benefits of income tax assets, including unused tax losses, arerecognized, subject to a valuation allowance, to the extent that it is more likely than not that such future benefits willultimately be realized. Future income tax assets and liabilities are measured using enacted tax rates and laws expected toapply when the tax liabilities or assets are to be either settled or realized.

Revenue recognition

Revenue from general operations is recognized when billing occurs.Revenue from irrigation works is recognized when funding is received. Revenue from expansion acres is recognized whenpayment has been received and the legal title to the rights has been transferred to the customer. Irrican recognizes revenuefrom electrical energy sales at the time of generation and delivery to the purchasing utility, as metered at the point ofinterconnection with the transmission system. Other income is recognized when the amount can be reasonably estimatedand collection is reasonably assured.

25




Long-lived assets

Long-lived assets consists of property, buildings and equipment and irrigation works. Long-lived assets held for use aremeasured and amortized as described in the applicable accounting policies.

The District performs impairment testing on long-lived assets held for use whenever events or changes in circumstancesindicate that the carrying value of an asset, or group of assets, may not be recoverable. Impairment losses are recognizedwhen undiscounted future cash flows from its use and disposal are less than the asset's carrying amount. Impairment ismeasured as the amount by which the asset's carrying value exceeds its fair value. Any impairment is included in loss forthe year.

Measurement uncertainty

The preparation of consolidated financial statements in conformity with Canadian accounting standards for not-for-profitorganizations requires management to make estimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and thereported amounts of revenues and expenses during the reporting period. Actual results will differ from those estimates.

Management has estimated the average useful life of irrigation works in the District to be 80 years, and buildings to be 60years. Management has estimated the useful life of hydro-development sites to be 40 years. Amortization of irrigationworks, buildings and power plants is based on these estimates.

The calculation of future income tax is based on assumptions, which are subject to uncertainty as to timing and which taxrates are expected to apply when temporary differences reverse. By their nature, these estimates are subject tomeasurement uncertainty, and the effect on the financial statements from changes in such estimates in future years couldbe significant.

These estimates and assumptions are reviewed periodically and, as adjustments become necessary they are reported inexcess of revenues and expenses in the periods in which they become known.

Employee future benefits

The District is part of a multiemployer defined benefit plan for which there is insufficient information to apply defined benefitplan accounting because the actuary does not attribute portions of the deficiency to individual employers. Accordingly, theDistrict is not able to identify its share of the plan assets and liabilities, and therefore, the District uses defined contributionplan accounting for this plan.

Foreign currency translation

These financial statements have been presented in Canadian dollars, the principal currency of the District's operations.

Transactions amounts denominated in foreign currencies are translated into their Canadian dollar equivalents at exchangerates prevailing at the transaction dates. Carrying values of monetary assets and liabilities reflect the exchange rates at thebalance sheet date. Gains and losses on translation or settlement are included in the determination of excess of revenueand expenses for the current period.

Derivative financial instruments

Derivative financial instruments are financial contracts whose value changes in response to a change in an underlyingvariable, such as specified interest rate, financial instrument or commodity price, or foreign exchange rate. The Organizationenters into derivative contracts to manage its exposure to commodity price risks associated with the provision of powerproduction. Derivatives financial instruments may be designated as hedges, provided that certain criteria are met. As atOctober 31, 2018, the Organization has no derivative financial instruments which have been designated as hedges.

26




Financial instruments

The Organization recognizes its financial instruments when the Organization becomes party to the contractual provisions ofthe financial instrument. All financial instruments are initially recorded at their fair value, including financial assets andliabilities originated and issued in a related party transaction with management. Financial assets and liabilities originatedand issued in all other related party transactions are initially measured at their carrying or exchange amount in accordancewith CPA Canada 3840 Related Party Transactions (refer to Note 18.).

At initial recognition, the Organization may irrevocably elect to subsequently measure any financial instrument at fair value.The Organization has not made such an election during the year.

The Organization subsequently measures investments in equity instruments quoted in an active market at fair value.Investments in equity instruments not quoted in an active market are subsequently measured at cost less impairment. Allother financial assets and liabilities are subsequently measured at amortized cost.

Transaction costs and financing fees directly attributable to the origination, acquisition, issuance or assumption of financialinstruments subsequently measured at fair value are immediately recognized in the excess of revenues over expenses forthe current period. Conversely, transaction costs and financing fees are added to the carrying amount for those financialinstruments subsequently measured at amortized cost or cost.

Financial asset impairment

The Organization assesses impairment of all of its financial assets measured at cost or amortized cost. The Organizationgroups assets for impairment testing when available information is not sufficient to permit identification of each individuallyimpaired financial asset in the group; there are numerous assets affected by the same factors; no asset is individuallysignificant. Management considers whether the issuer is having significant financial difficulty; whether there has been abreach in contract, such as a default or delinquency in interest or principal payments; in determining whether objectiveevidence of impairment exists. When there is an indication of impairment, the Organization determines whether it hasresulted in a significant adverse change in the expected timing or amount of future cash flows during the year. If so, theOrganization reduces the carrying amount of any impaired financial assets to the highest of: the present value of cash flowsexpected to be generated by holding the assets; the amount that could be realized by selling the assets; and the amountexpected to be realized by exercising any rights to collateral held against those assets. Any impairment, which is notconsidered temporary, is included in current year excess of revenues over expenses.

The Organization reverses impairment losses on financial assets when there is a decrease in impairment and the decreasecan be objectively related to an event occurring after the impairment loss was recognized. The amount of the reversal isrecognized in the excess of excess in the year the reversal occurs.

3. Accounts receivable

2018 2017

General Operations Fund:Water rates and charges 2,626,178 1,771,079

Irrigation Works Fund:Balances owing on irrigation works sold,special construction for irrigators,and water right charges

90,172 261,315

Irrican Fund:Trade receivables 733,890 779,520Accrued interest 829 760

734,719 780,280

3,451,069 2,812,674

27



4. Due from (to) funds

The General Operations Fund borrowed money from external lenders and advanced these amounts to the Irrican fund. Therepayment terms of Irrican mirror the obligation of the General Operations Fund to its creditors as disclosed in notes 12.and 14.

5. Capital assets

2018 2017Accumulated Net book Net book

Cost amortization value value

Land 407,248 - 407,248 407,248Buildings 3,730,279 522,765 3,207,514 3,269,686Heavy equipment - non power 228,196 138,986 89,210 98,309Heavy equipment - power 3,937,643 2,078,050 1,859,593 1,809,652Shop equipment, furniture and fixtures 724,851 566,780 158,071 121,326Communications equipment 690,194 528,106 162,088 149,167Auto equipment and large tools 252,354 197,322 55,032 64,058Light duty vehicles 1,640,706 1,045,682 595,024 281,971

11,611,471 5,077,691 6,533,780 6,201,417

Irrican Fund:Drops 4,5,6 hydroelectric power generation site 14,840,690 5,317,964 9,522,726 9,893,793Raymond Reservoir hydroelectric power generation site 26,814,979 10,701,659 16,113,320 16,747,287Chin Chute hydroelectric power generation site 17,835,959 7,114,087 10,721,872 11,143,716Computer equipment 276,489 245,403 31,086 16,094Equipment 184,429 63,651 120,778 54,428

59,952,546 23,442,764 36,509,782 37,855,318

71,564,017 28,520,455 43,043,562 44,056,735

6. Investment reserves

Irrican Fund:

As a condition of the Alberta Capital Finance Authority (ACFA) loans to the Irrigation Districts, which are secured by Irricanfund assets as disclosed in note 14., certain amounts of funds are required to be set aside in a reserve, either in the Co-Operative or in the Irrigation Districts themselves. In 2018, the ACFA loans have been fully repaid. Therefore, there is nolonger a requirement for an investment reserve.

2018 2017

Composition of investment reservesFixed income bonds - 2,319,033Marketable securities - 554,433

- 2,873,466

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7. Investments

Investments, consist of guaranteed investment certificates, marketable securities and provincial bonds, they have beenclassified as current or long-term in concurrence with the nature and intent of the investment. The investments are requiredto meet the District's obligations.

2018 2017

Irrigation Works Fund:Guaranteed investment certificates 445,203 741,356Marketable securities 57,598,370 50,379,385Fixed income bonds 1,361,383 1,675,897

59,404,956 52,796,638

Irrican Fund:Guaranteed investment certificates - 122,701Marketable securities 2,409,461 1,542,838

2,409,461 1,665,539

8. Irrigation Works

2018 2017Cost Accumulated

amortizationNet book

valueNet book value

Right of way 6,356,231 - 6,356,231 6,356,231Irrigation works 533,854,335 165,871,858 367,982,477 373,090,160

540,210,566 165,871,858 374,338,708 379,446,391

9. Future Income taxes

Irrican's income tax expense included in determination of net income for the year ended October 31, 2018 consists of afuture income tax expense related to temporary differences of $500,459 (2017 - benefit of $788,366).

Irrican has income tax losses which are available to offset income for tax purposes in the amount of $2,619,770 untilOctober 31, 2036 and $1,470,656 until October 31, 2037.

29



10. Operating lines of credit

General Operations Fund

At the year end, the District had available short-term bank lines of credit amounting to $3,000,000 (2017 - $3,000,000) noneof which was drawn down. These revolving demand ATB Financial loans bear interest at prime minus 0.25% and aresecured by general security agreement covering all present and after acquired property with a limited debenture to$9,375,000 with a fixed charge over Drop 4, 5, 6, Chin Chute and Raymond Reservoir sites of Irrican. It is also secured byan assignment of lease to Irrican, priority agreement between Alberta Capital Finance Authority and Irrican, St. MaryIrrigation District, Raymond Irrigation District, Taber Irrigation District, ATB and St. Mary Irrigation District, variouspostponements, caveats and an option agreement and a continuing guarantee from Irrican limited to $9,375,000.

Irrican Fund

Irrican has a demand operating facility in the amount of $1,000,000 and a letter of credit facility in the amount of $100,000with ATB Financial, which bears interest at prime plus 0.50%, of which neither has been drawn upon as at October 31,2018. The security is the same as that detailed for ATB Financial loans in note 12.

On October 31, 2018, the prime rate of interest was 3.95% (2017 - 3.20%).

11. Deferred revenue

General Operations Fund

Deferred revenue consists of surface lease payments received in advance, contributions and Alberta Environment andParks contributions for Fencing and Offstream Cattle Watering Program for Stafford and Sauder Reservoirs. Deferredamounts will be taken into revenue when the project requirements are completed and related expenditures have beenincurred.

Irrigation Works Fund

Deferred revenue consists of advance payments for expansion acre water rights for which the title does not transfer until the2019 irrigation season.

30



12. Term loans due on demand

2018 2017

Irrican fund - Prime plus 0.5%, ATB Financial demand loan secured as below, repayable inannual principal repayments of $591,667, plus interest paid monthly, due March 31, 2019. 7,593,333 8,185,000

Principal repayment on term loans due on demand in each of the next five years are estimated as follows:2019 591,6672020 591,6672021 591,6672022 591,6672023 591,667

The Irrican fund has a loan agreement for a non-revolving reducing loan facility in the amount of $8,875,000 at an interestrate of prime plus 0.5%, of which $7,593,333 has been drawn.

ATB Financial demand loans, secured by a demand promissory note, general security agreement covering all present andafter acquired property forming part of the Drop 4,5,6 project and a third fixed charge over all other present and afteracquired property of Irrican. It is also secured by a $10 million demand debenture in respect of Drop 4,5,6 project leaseholdinterest, proceeds of insurance, postponement of claim from St. Mary River Irrigation District, Taber Irrigation District andRaymond Irrigation District, assignment of leases and assignment of future power contracts relating to the Drop 4,5,6project.

The ATB term debt with the Irrican fund is subject to certain financial covenants with respect to fixed charge coverage ratioand equity. The covenants were in compliance as of October 31, 2018.

13. Due to Districts

2018 2017

Raymond Irrigation District 4,865,544 4,549,992Taber Irrigation District 7,297,862 6,824,618

12,163,406 11,374,610Less: current portion 273,861 -

11,889,545 11,374,610

The amounts due to the Districts bear interest at prime plus 2.0% (2017 - prime plus 2.00%), have no fixed terms ofrepayment, and are secured by all present and after acquired property of Irrican and the assignment of Irrican's interest inthe Small Power Producer's Contracts. These amounts have been classified as long-term because the Irrigation Districtshave agreed to waive their right to demand repayment for the coming year.

Subsequent to year end, the due to Districts balances and the long-term debt balances (refer to note 14.) were consolidatedand the terms of repayment were agreed upon. The consolidated loans are repayable over 25 years, with installments dueJuly and October each year, bearing interest at prime plus 1.0% as set on October 31st for each coming year. The currentportion of the consolidated loans have been classified as a current liability as at October 31, 2018.

Principal repayments on due to Districts in each of the next five years are estimated as follows:

2019 273,8612020 284,9782021 299,4092022 314,5702023 330,500

31



14. Long-term debt

2018 2017

General Operations FundLoan repaid during the year. - 1,885,652Less: current portion - (1,885,652)

- -

Irrican Fund

Due to Taber Irrigation DistrictLoan repaid during the year - 431,014Prime plus 2.25% demand loan, interest only payable annually until further terms arenegotiated

911,745 911,745

911,745 1,342,759

Due to Raymond Irrigation DistrictLoan repaid during the year - 287,375Prime plus 2.25% demand loan, interest only payable annually until further terms arenegotiated

607,831 607,831

607,831 895,206

1,519,575 2,237,965Less: current portion - (718,090)

1,519,575 1,519,875

Amounts due to Taber Irrigation District and Raymond Irrigation District are secured by all present and after acquiredproperty of Irrican and the assignment of Irrican's interest in the Small Power Producer's Contracts. These amounts havebeen classified as long-term because the Irrigation Districts have agreed to waive their right to demand repayment for thecoming year.

Subsequent to year end, the terms were negotiated and consolidated with the Due to Districts balances. Refer to note 13.

32



15. Externally and internally restricted surplus

Irrigation Works Fund These surplus amounts are restricted by the Province of Alberta (externally restricted) and by the District (internally restricted)for use in adding to and/or rehabilitating irrigation works.

2018 2017District Province of

Alberta CostSharing

Total Total

Restricted surplus – Irrigation Works Fund, beginning of the year

7,033,517 10,494,759 17,528,276 14,889,317

Add: Contributions received from the Province of Alberta General Revenue Fund - 3,702,450 3,702,450 5,012,274 Contributions for new parcels and irrigation works, net 810,433 - 810,433 498,480 Interest earnings 105,679 134,777 240,456 177,767 Transfer from District to Province of Alberta Cost Sharing (1,234,150) 1,234,150 - -Total Irrigation Works Fund Revenues (318,038) 5,071,377 4,753,339 5,688,521Provision for irrigation works 1,496,880 - 1,496,880 1,907,611Total additions 1,178,842 5,071,377 6,250,219 7,596,132Deduct: Electricity Bow Island Lateral 12 248,059 - 248,059 185,872 Additions to Irrigation Works 1,312,581 11,544,951 12,857,532 4,771,300Total deductions 1,560,640 11,544,951 13,105,591 4,957,172Restricted surplus – Irrigation Works Fund, end of the year 6,651,719 4,021,185 10,672,903 17,528,276

The internally restricted surplus shown in the District column above include reserves for the main canal with a year-end balanceof $4,558,757 (2017 - $4,235,830), as well as surplus held in the miscellaneous capital reserve and the Bow Island Lateral 12reserve.

As a result of the Expansion Plebiscite being passed, the Board has established an Expansion Reserve, which includesrevenues from sale of expansion water rights and investment income on funds held in the reserve. When the reserve is firmlyestablished, the income from investments will be used to stabilize rates, accelerate rehabilitation and capital replacement.

Irrican Fund

Externally restricted funds of $nil (2017 - $2,873,466) represent amounts required by Alberta Capital Finance Authority and ATBFinancial to be set aside as a condition of their financing agreements with the District.

33



16. Irrigation Rates, Net

Irrigation rates, net, consist of:2018

397,302.15 Irrigation Acres at $22.00 per Acre 8,740,6471,232.30 Minimum Charge Irrigation Acres at $440.00 per Parcel (104 Parcels) 45,7602,603.20 Annual Acres at $44.00 per Acre 114,541

194.58 Minimum Charge Annual Acres at $880.00 per Parcel (17 Parcels) 14,960130.00 Terminable Acres at $44 per Acre 5,720

401,462.23 Total Assessed Acres 8,921,628

Reclassifications and deferments (660)

8,920,968

2017

391,927.70 Irrigation Acres at $22.00 per Acre 8,622,4091,220.30 Minimum Charge Irrigation Acres at $440.00 per Parcel (103 Parcels) 45,3201,982.00 Annual Acres at $44.00 per Acre 87,208

179.28 Minimum Charge Annual Acres at $880.00 per Parcel (16 Parcels) 14,080130.00 Terminable Acres at $44 per Acre 5,720

395,439.28 Total Assessed Acres 8,774,737

Reclassifications and deferments (866)

8,773,871

Included in lease revenue are 552.10 (2017 - 552.10) leased acres totaling revenues of $37,251 (2017 - $36,147).

17. Commitments

The District has capital projects under construction of $42,365,642 (2017 - $29,915,132) shown as Work in progress. Inaddition, the District has commitments estimated to be $7,401,189 (2017 - $8,841,011) in respect of incomplete work undercontract on these capital projects. Amounts are added to Irrigation Works on a project by project basis as they reachsubstantial completion. The remainder of cash available in the Irrigation Works fund is for future projects that have not yetcommenced.

Irrican has entered into a contract with Bullfrog Power Inc. on January 1, 2014 to sell all Green Power Certificates,generated monthly, from Drop 456 at a rate of $7.50/Green Power Certificate or 0.075/KWh. The contract expires onDecember 31, 2018. Revenue generated from this contract during the year was $150,247 (2017 - $157,961).

34



18. Related party transactions

During the year, the Taber and Raymond Irrigation Districts, who are minority shareholders in Irrican, charged operating,administration fees and maintenance recoveries to Irrican totaling $62,471 (2017 - $42,137). The St. Mary River IrrigationDistrict charged the Taber and Raymond Irrigation Districts $329,326 (2017 - $327,582) in maintenance recoveries relatingto the Main Canal.

In addition, the Taber and Raymond Irrigation Districts charged Irrican interest on loans as follows:2018 2017

Taber Irrigation District 434,073 463,496Raymond Irrigation District 289,403 309,023

723,476 772,519

As at year end, $5,610 (2017 - $35,342) relating to these charges by the Districts is included in accounts payable. Thesecharges were incurred in the normal course of operations and are measured at the exchange amount, which is the amountestablished and agreed to among the related parties.

During the year, the District received revenues of $170,276 (2017 - $357,370) for irrigation acres, expansion acres anddomestic water from members of the Board of Directors. These transactions are in the normal course of operations and aremeasured at the exchange amounts outlined in the District by-laws.

19. Capital management

The District's objective when managing capital is to safeguard the entity's ability to continue as a going concern.

The District sets the amount of capital in proportion to risk and manages the capital structure and makes adjustments to it inlight of changes to economic conditions and the risk characteristics of the underlying assets, as well as with consideration ofexternally imposed capital requirements.

The District manages the following as capital:2018 2017

Invested in capital assets 443,201,045 434,265,514Invested in other funds 85,062,004 79,362,449

528,263,049 513,627,963

Irrican is subject to capital requirement imposed by ATB Financial with regards to maintaining a capital balance of$8,600,000. During the year ended October 31, 2018, Irrican complied with the capital requirements.

35



20. Local Authorities Pension Plan

Employees of the St. Mary River Irrigation District participate in the Local Authorities Pension Plan (LAPP), which is coveredby the Public Sector Pension Plans Act. It is financed by employer and employee contributions and investment earnings ofthe LAPP fund. The District is required to make current service contributions to the Plan of 10.39% (2017 - 11.39%) ofpensionable earnings up to the Canada Pension Plan's Maximum Pensionable Earnings and 14.84% (2017 - 15.84%) forthe excess. Total current service contributions by the employees of the District to the Local Authorities Pension Plan in fiscal2018 were $344,733 (2017 - $376,458) and the contributions made by the District to the Local Authorities Pension Plan infiscal 2018 were $375,640 (2017 - $408,199). At December 31, 2017, the Plan serves about 259,714 people (2016 -253,862) and 420 employers (2016 - 417) and it disclosed an actuarial surplus of $4.84 billion (2016 - $637 million deficit).

21. Financial instruments

The Organization, as part of its operations, carries a number of financial instruments. It is management's opinion that theOrganization is not exposed to significant interest, currency, credit, liquidity or other price risks arising from these financialinstruments except as otherwise disclosed.

Credit concentration

The District does not have significant exposure to risk from any individual customer. The District conducts regular reviewsof its existing customers' credit performance. The Irrigation Districts Act provides a mechanism to recover lossesassociated with non-payment of irrigation rates and rights.

Irrican is exposed to credit risk on its account receivable. The credit risk is concentrated because Irrican has only twocustomers. The risk is considered minimal, as the accounts receivable are current and the customers are financially stable.

Interest rate risk

Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in the interestrates. Changes in market interest rates may have an effect on the cash flows associated with some financial assets andliabilities, known as cash flow risk, and on the fair value of other financial assets or liabilities, known as price risk. TheDistrict has acquired a significant amount of debt that bears interest at floating rates, and as such, is exposed to interestrate risk. The District has mitigated this risk by negotiating the option to fix its interest if it deems appropriate.

Market risk

The District is exposed to market risk with respect to fluctuations in the trading price of the shares invested in marketablesecurities (Note 6. & 7.). Irrican is exposed to energy price movements within the open market as part of its normaloperations.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because ofchanges in foreign exchange rates. Foreign denominated marketable securities were $397,056 CAD$ (2017 - $570,205).

Commodities exchange risk

The Co-Operative is subject to commodity risk with respect to the provision of power production, the market value of whichchanges relative to market conditions and consumer demands. Production from the Drop 4,5,6, Chin, and Raymond plant issold at market rates and is subject to commodity price risk. The Co-Operative enters into short term derivative contracts tomanage its exposure to commodity price risks associated with its power production.

22. Subsequent event

Subsequent to year end, the District will receive Government of Alberta assistance due to the flooding that occurred in theSpring of 2018. The final funding amount has yet to be determined.

23. Comparative figures

Certain comparative figures have been reclassified to conform with current year presentation.

36

St. Mary River Irrigation DistrictSchedule 1 - Consolidated Schedule of Revenue and Expenditures - Irrican Fund


2018 2017Raymond

SiteChinSite

Drop4,5,6Site

Total Total

Power generation revenue 3,970,066 2,210,996 1,227,974 7,409,036 2,688,067

Power generation expenditures Repairs, maintenance and supplies 59,498 113,117 29,866 202,481 209,240 Operating costs 337,106 269,425 244,807 851,338 834,046 Insurance 33,111 30,700 29,926 93,737 92,847 Telephone and utilities 56,929 34,614 30,192 121,735 117,833 Interest on term debt - - 327,195 327,195 258,908 Interest on long-term debt 440,476 293,651 82,815 816,942 1,079,747 Municipal taxes 178,359 42,394 5,444 226,197 220,566 Amortization 653,657 433,790 376,795 1,464,242 1,460,156

1,759,136 1,217,691 1,127,040 4,103,867 4,273,343

Surplus (deficit) from operations 2,210,930 993,305 100,934 3,305,169 (1,585,276)Interest and other income 1,492,996 1,158,585Unrealized gain (loss) on marketable securities (287,763) 56,750Surplus (deficit) before administrative expenditures 4,510,402 (369,941)Administrative expenditures

Administration fees 97,788 100,317 Insurance 18,075 19,325 Travel and promotion 4,225 43,433 Professional fees 23,100 16,800

143,188 179,875Excess (deficit) of revenue over expenditures

before income taxes 4,367,214 (549,816)Future income tax expense (recovery) 500,459 (788,366)Excess of revenue over expenditures for the year 3,866,755 238,550

37

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38

NOTES

39

NOTES

40

Bow Island Office

702 Centre Street Bow Island, AlbertaPhone: 403-545-6866Fax: 403-545-2517

Office Hours: Tuesday – Thursday10:00am – 12:00pm; 12:30pm – 3:00pm *Please direct all mail to Lethbridge Office

Lethbridge Office (MAIN)

525 - 40 St. SouthLethbridge, Alberta, T1J 4M1 Phone: 403-328-4401Fax: 403-328-4460

Office Hours:Monday – Friday8:15 am – 12:00pm;1:00pm – 4:30 pm Email: [email protected] Site: www.smrid.ab.ca

[email protected]@[email protected]

[email protected]@smrid.ab.ca

General Manager Land Administrator Administration Support Mgr.

Technical Services Mgr. Project Coordinator Project Manager [email protected]

Manager of Operations [email protected]. Mgr. of Ops. East [email protected]

AdministrationTerrence Lazarus, R.E.T. Linda Park Joyce Lam, CPA, CA

Technical ServicesTrevor Helwig, P. Eng. David Joachim, C.E.T. Travis Geremia, P.Eng.

OperationsJan Tamminga, C.E.T. Mike Zmurchyk George Bohner Asst. Mgr. of Ops. West [email protected]

Contact us

FORM 2 NOTICE OF NOMINATION LOCAL AUTHORITIES ELECTION ACT

(Section 26) ST. MARY RIVER IRRIGATION DISTRICT, Province of Alberta Notice is hereby given that nominations for the election of candidates for the following offices will be received at the location of the local jurisdiction office set out below until 4:00 p.m. on Wednesday, March 20, 2019. Office

Number of Vacancies

Electoral Division Number

Board Member 1 1 Board Member 1 4

DIVISION 1 Those lands situated south of Highway No. 4 and those lands within

Range 21 and lying to the north of Highway 4 and south of Highway 61 and lying to the west of Range 14.

DIVISION 4 Those lands situated within Ranges 13, 14, 15, 16 and 17, W4th.

Location (Address) of Local Jurisdiction Office: St. Mary River Irrigation District 525 – 40th Street South Lethbridge, AB T1J 4M1 St. Mary River Irrigation District 702 Centre Street Bow Island, AB T0K 0G0 Dated at the City of Lethbridge in the Province of Alberta, this 15th day of February, 2019. Terrence Lazarus Returning Officer

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