NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/

Our rural electric cooperative members operate primarily in the energy sector, which is one of 16 critical infrastructure sectors identified by the U.S. government because the services provided by each sector, all of which have an impact on other sectors, are deemed essential in supporting and maintaining the overall functioning of the U.S. economy. Rural electric cooperatives are an integral part of the U.S. electric utility industry, a sub-sector of the energy sector. According to a report published in June 2025 by the National Rural Electric Cooperative Association (“NRECA”), electric cooperatives serve as power providers for approximately 42 million people, including over 22 million businesses, homes, schools and farms across 48 states. Electric cooperatives provide power to approximately 56% of thenation’s land mass. Based on the latest annual data reported by the U.S. Energy Information Administration, a statistical and analytical agency within the U.S. Department of Energy, the electric utility industry had revenue of approximately $491 billion in 2023.

CFC was established by electric utility cooperatives to serve as a supplemental financing source to RUS loan programs and to mitigate uncertainty related to government funding. CFC aggregates the combined strength of its rural electric member cooperatives to access the public capital markets and other funding sources. CFC works cooperatively with RUS; however, CFC is not a federal agency or a government-sponsored enterprise. CFC meets the financial needs of its rural electric members by:

•providing financing to RUS-eligible rural electric utility systems for infrastructure, including for those facilities that are not eligible for financing from RUS;

•providing bridge loans required by borrowers in anticipation of receiving RUS funding;

•providing financial products not otherwise available from RUS, including lines of credit, letters of credit, guarantees on tax-exempt financing, weather-related emergency lines of credit, unsecured loans and investment products such as commercial paper, select notes, medium-term notes and member capital securities; and

•meeting the financing needs of those rural electric systems that repay or prepay their RUS loans and replace the government loans with private capital.

Regulatory Oversight of Electric Cooperatives

There are 11 states in which some or all electric cooperatives are subject to state regulatory oversight of their rates and tariffs by state utility commissions and do not have a right to opt out of regulation. Those states are Arizona, Arkansas, Hawaii, Kentucky, Louisiana, Maine, Maryland, New Mexico, Vermont, Virginia and West Virginia. Regulatory jurisdiction by state commissions generally includes rate and tariff regulation, the issuance of securities and the enforcement of service territory as provided for by state law.

The Federal Energy Regulatory Commission (“FERC”) has regulatory authority over three aspects of electric power, as provided for under Parts II and III of the Federal Power Act (“FPA”):

•the transmission of electric energy in interstate commerce;

•the sale of electric energy at wholesale in interstate commerce; and

•the approval and enforcement of reliability standards affecting all users, owners and operators of the bulk power system.

In addition, FERC regulates the issuance of securities by public utilities under the FPA in the event the applicable state commission does not.

Our electric distribution and power supply members are subject to regulation by various federal, regional, state and local authorities with respect to the environmental effects of their operations. At the federal level, the U.S. Environmental Protection Agency (“EPA”) from time to time proposes rulemakings that could force the electric utility industry to incur capital costs to comply with potential new regulations and possibly retire coal-fired generating capacity. Since there are only 11 states in which some or all electric cooperatives are subject to state regulatory oversight of their rates and tariffs, in most cases any associated costs of compliance can be passed on to cooperative consumers without additional regulatory approval.

On April 25, 2024, the EPA announced carbon pollution standards for coal and gas-fired power plants. The rules set carbon dioxide limits for new gas-fired combustion turbines and carbon dioxide emission guidelines for existing coal, oil and gas-fired steam generating units. On June 11, 2025, the EPA issued a proposed rule that will eliminate existing limits on greenhouse gas emissions from coal and gas-fired power plants promulgated under Section 111 of the Clean Air Act. The proposed rule, which is in a comment period, will face scrutiny from legal advocates and environmental organizations.

Facilitation of Rural Broadband Expansion by Electric Cooperatives

Many electric cooperatives are making investments in fiber to support core electric plant communications. Some of these electric cooperatives are leveraging these fiber assets to offer broadband services, either directly or through partnering with local telecommunication companies and others. Over 30 electric cooperatives were awarded approximately $250 million in federal funding through the Connect America Fund Phase II auction (“CAF II”) process by the Federal Communications Commission (“FCC”) that was held in 2018. The awarded funds are being distributed over a 10-year period. More than 190 electric cooperatives, many of which are already offering or building out projects, were awarded approximately $1.6 billion though the FCC’s Rural Development Opportunity Fund (“RDOF”) in 2021. Those funds also will be distributed over a 10-year period. As federal and state governments increase funding opportunities for electric cooperatives in order to offer broadband services, we will continue to increase our credit support, which may include loans and/or letters of credit, to borrowers who participate in CAF II, RDOF and other programs designed to increase broadband services in rural areas. Our aggregate loans outstanding to CFC electric distribution cooperative members relating to broadband projects, which we started tracking in October 2017, was approxi mately $3,441 million and $3,103 million as of May 31, 2025 and 2024, respectively.