2005 Annual Report

D E M C Owhere we’ve been. where we’re going.

d e m c o . t h e p o w e r i n y o u r l i f e . d e m c o . t h e p o w e r i n y o u r l i f e . d e m c o . t h e p o w e r i n y o u r l i f e .

From Yesterday to Today.

This year as we began working on our annual report we could not help but marvel at how far we’ve come and how much our industry has changed. And even though this is technically an “annual report,” we also found ourselves going back to the very beginning. Call ita refresher course in history – because it helps us put not only our year into perspective, it also puts our lives in perspective as well.

For DEMCO, our history gives us strength and credibility. It’s our legacy of service and commitment to our community and our members. And it is our foundation on which we will build our future.

Looking forward, we again could not help but marvel at how far we can go and to the extent our industry will change. Someone once said, “And in our past, we find a present. And lo, it’s our future.”

These are truly exciting times. Always have been. Always will be.

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POWERFUL

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Our Mission

DEMCO exists to serve the members/customers through professionally trained employees

providing safe, reliable and affordable electricity as well as other high-quality products and

services. As a good corporate citizen, DEMCO is committed to stimulating the economic

growth and prosperity of our area through ethical conduct and sound business principles.

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Table of ContentsO u r M i s s i o n

E x e c u t i v e L e t t e r

O u r C o m m i t m e n t t o S e r v i c e

O u r C o m m i t m e n t t o t h e C o m m u n i t y

B o a r d o f D i r e c t o r s a n d D i s t r i c t s

2 0 0 4 Ye a r E n d S u m m a r y

O t h e r P r o d u c t s a n d S e r v i c e s

M a n a g e m e n t a n d E m p l o y e e s

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Executive Letter

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In revisiting the events of 2004, we realized what a momentous year it was for DEMCO and its 85,000 members/customers andfor the state of Louisiana as a whole.

The year began with residents of Louisiana welcoming Kathleen Babineaux Blanco as the state’s first female governor. The inaugurationof Governor Blanco solidified the historical significance of the year 2004 and brought with it the promise of positive change and prosperity for our state.

As we moved into the spring season, DEMCO members enjoyed mild weather and moderate temperatures that translated into low electricity bills and few reports of service interruptions. Spring also marked a time to celebrate the great strides made by DEMCO in improving power quality as a report issued in March detailed significant reductions in the number of power outages and total outage time.

The summer months brought with them the usual thunderstorms and hot temperatures, but members experienced fewer outagesdue in part to the aggressive vegetation management program DEMCO implemented in 1999. And in August, DEMCO and its members received an average $47.00 rebate on their electric bills, signaling the final chapter of the Cajun Electric Bankruptcy settlement as thislast installment was distributed.

During the fall and winter months, DEMCO employees participated in a number of community events and holiday celebrations. As cooler weather moved-in, 2004 wound to a close and our members/customers enjoyed warm, lighted homes thanks to the power of DEMCO.

A review of 2004 could not be complete without acknowledging the financial stability achieved and the continued growth of the DEMCO system. This past year will be remembered as the beginning of a new era where the financial goals and objectives of DEMCO are annuallymet and often times exceeded. As a result, we can expect to further develop our relationships with financial lenders providing a secure future for new and existing members of the cooperative. It is also important we recognize the continued growth of the electrical system. DEMCO’s kilowatt-hour (kWh) sales increased from 1,585,912,837 kWh in 2003 to 1,644,896,465 in 2004. The number of members served increased from 81,769 in December 2003 to 84,736 in December 2004. Total miles of lines in operation increased from 8,524 last year to 8,686 at the end of 2004.

2004 was a year of economic growth and development in our local communities, success and achievement by area youths, and positive movement for business and community partnerships. DEMCO was a part of it all and will continue to work side-by-side with residents, community and business leaders to ensure a bright future in years to come.

Respectively submitted,

Richard W. Sitman, President Henry D. Locklar

DEMCO Board of Directors CEO & General Manager

From Yesterday to Today.

In 1938, we made a promise to the people of Southeast Louisiana.It was more than a promise to provide reliable and affordable energy services. It was a promise to make a difference in their lives. We made a promise to ourselves, too. To never stop getting better at what we do. To be diligent in our day to day work, to be innovative in our long range planning and to be ever-mindful of who we serve. Our cooperative was built on that promise. Today, we can’t think of a stronger foundation.

These are truly exciting times. Always have been. Always will be.

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COMMITMENT

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Our Commitment to Service

At DEMCO, providing safe, reliable electric service to our members at a reasonable cost is our top priority. Advances in vegetation management have allowed us to achieve these goals in 2004.

DEMCO’s aggressive right-of-way program, which uses vegetation management processes approved by Project Habitat®, was responsible for tremendous progress in the prevention of power outages. A March 2004 reportrevealed that total tree-related power outages had declined nearly 50% and average tree-related outage time dropped from 5.04 hours to 1.72 hours in a four-year period.

In June 2004, contractors employed by DEMCO began a field survey of electric facilities in Livingston andWest Feliciana Parishes. This survey is part of a detailed mapping system that will facilitate a more efficient and accurate outage reporting system.

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At the star t of 2004, a l l DEMCO member s

enjoyed some of the lowest rates for e lectr ic

ser v ice in Louis iana. With stable fuel pr ices ,

thanks to coal- f i red generator s and favorable

wholesale power contracts , DEMCO member s

cont inue to pay as much as 30 percent less

for their ut i l i ty ser v ice as customer s of

other e lectr ic companies .

DEMCO is proud to be a part of the growth of our rural areas and works closely with community leaders and citizens to encourage positive local economic development. As economic developmentjobs are created, communities enjoy greater conveniences and tax dollars are raised for use in improving

infrastructure, schools and an overall better quality of life.

The DEMCO Economic Development Department aggressively recruited business and planned residential developments to our area. Through their efforts, Super Wal-Mart came to Ascension Parish, Gray’s Creek Elementary and Live Oak Elementary Schools grew in Livingston Parish, and East Baton Rouge Parish gained additional retail, restaurant and banking locations with the expansion of Coursey Plaza. These are just a fewof the successful projects that our members will benefit from both now and in years to come.

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Our Commitment to Community

DEMCO as a cooperative supported the communities it serves in several ways in 2004. Numerous corporate contributions were made to such worthy organizations as The American Cancer Society’s Relay for Life,St. Jude’s Children’s Research Hospital and Boy Scouts of America. Employee’s donated time and effort in a variety of ways such as cooking events for Volunteers in Public Schools, Louisiana’s Young Heroes, Juvenile Diabetes Association; fundraising events for Junior Achievement, and many more.

Each year, DEMCO sponsors four local high school juniors on a trip to Washington, D.C. through an essay contest and awards banquet. The 2004 Rural Electric Youth Tour Essay Contest winners were: Hannah Horton, Jason Ray, Rachel Scott and Vashti Womack.

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Each year, one-year scholar ships to a

Louis iana publ ic col lege or univer s ity are

awarded to a DEMCO member or the chi ld

of a DEMCO member in a random drawing

held during the cooperative’s annual meeting.

Four scholar ships were awarded in 2004 to

the fol lowing area students: Reeve Legendre ,

Cora Beth Broussard, Ryan McQuiston and

Tiffany Bonvi l lain.

DEMCO employees supported many worthy causes throughout 2004. In particular, they supported the Capital Area United Way and Dream Day Foundation through a volunteer payroll deduction campaign. In 2004, over $62,000 was pledged to United Way and Dream Day, all through the generosity of DEMCO employees.

Education and how to be safe around electricity was a focal point in 2004. Safety presentations were performed for young children at the 2004 Safety Town summer session as well as various other safety programs presented to elementary and middle school students throughout DEMCO’s seven parish territory.

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Our CEO and Board of Directors

Leslie FalksSecretary/TreasurerDISTRICT 7Livingston Parish

Randy LorioVice PresidentDISTRICT 3East Baton Rouge Parish

Richard W. “Dickie” SitmanPresidentDISTRICT 10St. Helena Parish

Henry D. LocklarCEO & General Manager

Alice Faye MorrisDISTRICT 5East Feliciana Parish

T. N. “Sonny” SamuelDISTRICT 2East Baton Rouge Parish Steve Irving

DISTRICT 4East Baton Rouge Parish

Daniel P. BerthelotDISTRICT 9Livingston Parish

Joseph Self, Sr.DISTRICT 11St. Helena Parish

Eugene O. TraylorDISTRICT 12Tangipahoa Parish

Amanda “Mandy” BeasleyDISTRICT 6East Feliciana Parish

Freddy MetzDISTRICT 13West Feliciana Parish

James E. LottDISTRICT 8Livingston Parish

Clarence BrockDISTRICT 1Ascension Parish

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Our 2004 End of Year SummaryJanuaryDEMCO welcomes Kathleen B. Blanco as Louisiana’s first female governor.

FebruaryNRECA holds its annual meeting in New Orleans with 12,000 cooperative leaders from across the nation attending. Featured at the meeting are RUS Administrator Hilda Legg, Chairman of the Senate Finance Committee Senator Chuck Grassley, and featured guest speaker George Foreman.

MarchA detailed report of power interruptions reveals DEMCO has made great strides in improving powerquality greatly in part to an aggressive vegetation management program. The total number of tree-related power outages was found to have declined nearly 50% and the average tree-related outage time dropped from 5.04 hours to 1.72 hours in a 4-year period.

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AprilRandy Lorio, Freddy Metz and Eugene Traylor areall re-elected to the DEMCO board of directors.

MayDEMCO employees contribute $40,000to the Dream Day Foundation, a St. Jude’sChildren’s Research Hospital charity. The funds were presented at the Dream Day Foundation’s annual Fishin’ Galore event.

Daniel Bertholet and Toler McCutcheon arere-elected to the DEMCO board of directors.

JuneContractors employed by DEMCO begin a fieldsurvey of electric facilities in Livingston and West Feliciana parishes. This survey is part of a detailed mapping system that is an integral part of theoutage reporting system.

JulyLouisiana Public Service Commissioners announce the last installment of the Cajun Electric Bankruptcy settlement is set to be distributed in the form ofa rebate in August.

AugustDEMCO customers receive an average $47.00 rebateon their August bills as the final installment of theCajun Electric Bankruptcy settlement is distributed.

SeptemberThe DEMCO Foundation awards 13 college scholarshipsto area students.

DEMCO mourns the passing of Toler McCutcheon whoserved on the board of directors representing DEMCODistrict 6 since 1996.

Automated outage reporting system implememted.

OctoberAmanda Beasley is officially seated on the DEMCOBoard of Directors as the representative for District 6.

NovemberDEMCO and the Livingston Parish Economic Development Council host a cookout to honor Livingston Parish elected officials and business leaders at Ferrara Fire Apparatusin Holden.

DecemberDEMCO employees and their families participate in theannual Central Christmas Parade with a holiday themed float.

From Yesterday to Today.

We have to admit it. Our members take us for granted.We also have to admit something else. We don’t mind it a bit.In fact, that’s exactly how we like it. You might call it “reliability,” butwe like to think of it as “just doing our job.” Our customers dependon us in so many ways....Flip a switch and the lights come on.Press a button on your coffee maker and you’ve got coffee.From the bathroom to the boardroom, we’re with you all the way. Turn on. Plug in. Boot up. And don’t think twice. It’s alright.

These are truly exciting times. Always have been. Always will be.

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RELIABLE

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Our Products and ServicesSTRIKESAFE™StrikeSafe™ surge protection is available to all residential utility customers and offers protection from power

surges and lightning strikes. For only $6.95 per month surge protectors are installed on the electric meter,

telephone, and cable services attached to the outside of the home.

DIXIE BUSINESS CENTERThe Dixie Business Center, located in Denham Springs, LA is a small business incubator which offers consulting,

administrative and financing support for new businesses. Office space is also available for long- or short-term lease.

DEMCO Energy ServicesA S U B S I D I A R Y O F D I X I E E L E C T R I C M E M B E R S H I P C O R P O R A T I O N

DEMCO FOUNDATIONThe DEMCO Foundation is a non-profit charitable organization established to provide financial assistance to

DEMCO members in their times of need. Individual assistance as well as college scholarships and emergency

assistance is also available.

DEMCO.NETDEMCO.net provides quality high-speed Internet access and 24-hour support to all DEMCO service areas.

Service is only $18.95 per month and includes unlimited usage and local access phone numbers in Ascension,

St. Helena, East and West Feliciana, and Livingston parishes.

Touchstone Energy

Touchstone Energy was established in 1998 by the National Rural Electric Cooperative Association (NRECA) and is the national branding alliance for electric cooperatives. Touchstone’s purpose is to increase awareness of electric cooperatives to the general public, national retail businesses, industrial clients, and existing consumer-owners while communicating to each group the natural advantages cooperative members enjoy including local control and ownership of their electric utility.

In making the decision to become part of the Touchstone Energy alliance, DEMCO recognized the core values stressed by Touchstone of innovation, accountability, integrity and commitment to community were consistent with its own mission statement of providing safe, reliable and affordable electric service, as well as high quality products and services. They also believe in stimulating economic growth and prosperity in our area through ethical conduct and sound business principles.

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By jo in ing wi th the Touchstone Energy fami ly

we s t rengthen our pr inc ip les o f sa fe , re l iab le

and af fordab le e lect r i c se r v ice through eth ica l

conduct and sound bus iness pr inc ip les by

incorporat ing the core va lues o f innovat ion ,

accountab i l i ty, in tegr i ty and commitment

to communi ty. We sh ine as one to br ing the

e lect r i c cooperat ive message not on ly to the

Baton Rouge communi ty but a l so to the nat ion

as a whole .

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2005 Demco Employee Listing

MANAGEMENT STAFF

Henry D. Locklar, CEO and General Manager

Raul I. Travieso, II, COO and Assistant General Manager

Jimmie Varnado, VP of Finance

John Vranic, VP of System Operations and Planning

L. Greg Lindsly, VP of Engineering and Operations

Mark Bonner, VP of Marketing and Member Services

Donna R. Cody, Administrative Assistant

Diana Martin, Human Resources Manager

John M. Sharp, Corporate Attorney

EMPLOYEESKarl Albritton

Paul Alford

Jacob Arledge

Michael Armstrong

Wendy Armstrong

Lynda Austin

Linda Baggett

Kenneth Bailey

Mike Ballard

John Ballard

Kevin Beauchamp

Keith Beaucoudray

Jeff Bellington

Debra Bennett

Jamie Berry

Trent Bigner

Jeremy Blouin

Melody Bourgeois

Kenneth Bourgeois, Jr.

Sonya Boyd

Gueth Braddock

Debra Broadhurst

Thomas Bryson

Julie Burns p

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Jason Bush

Bobbye Cantu

Steve Cantu

Kathy Carpenter

Greg Carruth

Dovie Carter

Adam Chandler

Michael Chiasson, Sr.

Veronica Claiborne

Jamie Coats

Jack Cockerham

Joseph Cofield

Kevin Commander

Josh Conleay

Bonalee Conlee, II

Susan Conlee

Ronald Corkern

Mark Coston

Wyman Craig

Johnathon Crowder

Rickey Cummings

Richard Cutrer

Frederick Dabney, Sr.

Danny Delatte

Scott DeLee

Robert DeLee, Jr.

Robert Dickerson

Paula Dixon

Pearlie Dominick, Jr.

Martha Durden

Angela Elsey

Norman Engler

Jerry Ferguson, Sr.

Jamie Fortenberry

David Fournet

Penny Fruge

Hilda Galmon

Cecil Garaudy

Cody Glascock

Aarron Graham

Andrew Graham

Vernon Graham

John Green

Lynne Griffon

Cynthia Haisten

Andy Hall

Darren Harrell

Beverly Harris

Phillip Harris

Chuck Heine

Janna Henry

Jayne Higginbotham

George Hills

Debra Hobbs

Beverly Hodges

Thomas Holland

Billy Holleman

Austin Hudspeth

Darrell Hughes

Wydell Hughes

Stephanie Hunter

Arthur Hurst

James Jackson

Warren Jefferson

Larry Jenkins

David Jewell

Andrea Johnson

Dale Johnson

Tracy Johnson

Kenneth Jones

Robin Keller

Tammy Kelly

Josh Kilcrease

Gail Kimball

Alton Kimble

Thomas Klein, Jr.

Michael Knight

Devin Landry

Jan Landry

Michael Landry, Sr.

Harry Latiolais

Sherri Lee

Louis Lee

Dennis Lott

Barbara Manuel

Russchelle Marnett

Glenn Martin

Donnie Martin, Sr.

Ronald May

Page McClure

Theodore McCray, Jr.

Buck McCullough

Derek McLin

Huey McLin, Jr.

Johnny Metz

Pernell Miles

Scott Miller

Raymond Mizell

Ronald Moreau, Jr.

Ben Morein

Cheryl Morgan

Bubba Munn

Dennis Neal

Sara Nelson

Chad Norred

Eric Ouber

Jacob Overhultz

Phillip Pace

Melvin Parker

Shawn Parker

Michael Parker, Sr.

Mike Parrish

Shane Pendarvis

Paula Perry

Kelli Persac

Mark Phillips, Jr.

Gina Pickering

Jody Picou

Joshua Prestridge

Jackie Purvis, Jr.

Eddie Reames, Jr.

Terrie Reed

Matthew Reed

Denise Reid

William Reily

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Royland Wicker

Caleb Wilkinson

Randall Williamson

Cynthia Willie

Ronnie Woodards

John Woodburn

Curtis Yaun

Joseph Young, Sr.

Phillip Zito

EMPLOYEES

Owen Rice

Donna Roshto

Rachel Roule

Earl Roy

Randall Rushing

Arthur Selders, Jr.

Frederick Self

Spring Seymore

Levy Sibley

Brandon Simon

Darrell Singleton

Donna Sistrunk

Charles Smith

Charles Spikes

Charles Spillman

Steven Spring

Rhonda Stanley

Jeremy Starns

Wayne Stevenson

Lori Stewart

Blake Sullivan

Dianne Sullivan

Patrick Tanner

Charles Tate

Marci Templet

Agra Templet

Aaron Terrance

Josh Terrell

Mason Thacker

Richie Thomas

Alvin Thompson

Russell Todd

Barbara Trisler

Kleve Tucker

David Tucker

Turk Tynes

Jeremy Wascom

Charles Wascom

Booker Washington

Doug Watson

Calton Watts

Carl Watts

Harry Watts

Larry Watts

Melanie Watts

James Wells

Carl Westbrook

Darrel White

Lynell White

Robby White

Our Service Area

D E M C Owhere we’ve been. where we’re going.

DEMCO Consolidated Balance Sheet

As of December 31, 2004 2003

Assets:Cash on Hand $2,617,765 $5,236,548Investments in Associated Organizations 8,314,463 8,298,491Accounts & Notes Receivable 17,306,686 15,534,233Inventory 3,796,666 3,255,743Advance Payments on Insurance, etc. 415,423 472,998Interest & Miscellaneous Deferred Debits 18,697,216 18,595,195 Net Utility Plant 234,302,647 230,469,061

TOTAL ASSETS $285,450,866 $281,862,269

DEMCO Consolidated Statement of Operations and Patronage Capital

As of December 31, 2004 2003

Operating Revenues: $127,990,136 $119,667,384

Operating Expenses:Purchased Power $70,871,080 $67,745,683 Cost of Sales 1,004,157 1,055,124 Distribution – Operations 4,687,065 4,290,934 Distribution – Maintenance 11,891,655 8,411,836 Consumer Accounts 4,235,822 4,061,489 Administrative and General 5,254,574 4,896,866Depreciation 10,146,104 9,580,176 Taxes 2,919,790 2,828,307 Interest on Long-term Debt 8,236,293 7,496,835 Other Interest 189,521 170,392 Other Operating Deductions 626,898 3,169,623

TOTAL EXPENSES $120,062,959 $113,707,266

Margins:Operating Margins $7,927,177 $5,960,118 Capital Credits 456,698 520,839 Non-Operating Revenue (68,651) 127,471

TOTAL MARGINS $8,315,224 $6,609,428

Liabilities:Debts of RUS & CFC $213,405,331 $216,516,271Accounts Payable 9,401,191 7,376,126Other Current & Accrued Liabilities 92,922 28,550Consumer Deposits 3,851,503 3,517,614Deferred Credits 12,522,893 14,142,544Other Accrued Expenses 8,010,000 7,398,300Cajun Customer Refund 1,679,385 4,720,601

TOTAL LIABILITIES $248,963,225 $253,700,007

Member’s Equity:Membership Fees $348,135 $337,980Total Margins 8,315,223 6,609,428Patronage Capital 27,824,283 21,214,854

TOTAL NET WORTH $36,487,641 $28,162,262

TOTAL LIABILITIES & NET WORTH $285,450,866 $281,862,269

DEMCO System Statistics

Item 2004 2003Av. Consumers Billed/Mo. 83,903 81,769 Av. Consumers/Miles of Line 9.66 9.59 Av. Miles of Line 8,686 8,524 Total KWH’s Sold 1,644,896,465 1,585,912,837 Av. KWH’s/Month/Consumer 1,654 1,616 Av. KWH’s/Month/Residential 1,390 1,397 Av. Monthly Rev./Consumer $127.12 $118.62 Total KWH’s Bought 1,785,728,699 1,721,883,604 Av.Cost/KWH Bought 39.69 mills 39.45 mills Power Required for System Op. 140,832,234 135,970,767 System Peak Demand 416,620 kW 427,589 kW Month of System Peak Demand August January

2005 Annual Report

P . O . B o x 1 5 6 5 9 B a t o n R o u g e , L o u i s i a n a 7 0 8 9 5 2 2 5 . 2 6 1 . 1 2 2 1 W W W . D E M C O . O R G