10-Q 1 september10q2004.txt FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2004 ------------------ or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________to________________ Commission File Number: 333-83815 --------- Caithness Coso Funding Corp. ---------------------------- (Exact name of registrant as specified in its charter) Delaware 94-3328762 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Coso Finance Partners California 68-0133679 Coso Energy Developers California 94-3071296 Coso Power Developers California 94-3102796 --------------------- ---------- ---------- (Exact names of Registrants (State or other (I.R.S. Employer as specified in their charters) jurisdiction of Identification No.) incorporation or organization) 565 Fifth Avenue, 29th Floor, New York, New York 10017-2478 ------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (212) 921-9099 -------------- (Registrant's telephone number, including area code) Not Applicable -------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 300 shares in Caithness Coso Funding Corp. as of November 12, 2004 ------------------------------------------------------------------ CAITHNESS COSO FUNDING CORP. Form 10-Q For the Quarter Ended September 30, 2004 PART I. FINANCIAL INFORMATION Page No. ITEM 1. Financial Statements Caithness Coso Funding Corp. Unaudited balance sheets at September 30, 2004 and December 31, 2003 4 Unaudited statements of operations for the three-months ended September 30, 2004, the three-months ended September 30, 2003, the nine-months ended September 30, 2004 and the nine-months ended September 30, 2003 5 Unaudited condensed statements of cash flows for the nine-months ended September 30, 2004 and the nine-months ended September 30, 2003 6 Notes to the unaudited financial statements 7 Coso Finance Partners and Subsidiary Unaudited consolidated balance sheets at September 30, 2004 and December 31, 2003 8 Unaudited consolidated statements of operations for the three-months ended September 30, 2004, the three-months ended September 30, 2003, the nine-months ended September 30, 2004 and the nine-months ended September 30, 2003 9 Unaudited consolidated condensed statements of cash flows for the nine-months ended September 30, 2004 and the nine-months ended September 30, 2003 10 Notes to the unaudited consolidated financial statements 11 Coso Energy Developers Unaudited balance sheets at September 30, 2004 and December 31, 2003 13 Unaudited statements of operations for the three-months ended September 30, 2004, the three-months ended September 30, 2003, the nine-months ended September 30, 2004 and the nine-months ended September 30, 2003 14 Unaudited condensed statements of cash flows for the nine-months ended September 30, 2004 and the nine-months ended September 30, 2003 15 Notes to the unaudited financial statements 16 Coso Power Developers and Subsidiary Unaudited consolidated balance sheets at September 30, 2004 and December 31, 2003 17 Unaudited consolidated statements of operations for the three-months ended September 30, 2004, the three-months ended September 30, 2003, the nine-months ended September 30, 2004 and the nine-months ended September 30, 2003 18 2 Unaudited consolidated condensed statements of cash flows for the nine-months ended September 30, 2004 and the nine-months ended September 30, 2003 19 Notes to the unaudited consolidated financial statements 20 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 21 ITEM 3. Control and Procedures 27 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 28 ITEM 2. Change in Securities and Use of Proceeds 28 ITEM 3. Defaults upon Senior Securities 28 ITEM 4. Submission of Matters to a Vote of Security Holders 28 ITEM 5. Other Information 28 Supplemental consolidated and combined financial information for the Coso Partnerships and Subsidiaries Unaudited consolidated and combined balance sheets at September 30, 2004 and December 31, 2003 29 Unaudited consolidated and combined statements of operations for the three-months ended September 30, 2004, three-months ended September 30, 2003, the nine-months ended September 30, 2004 and the nine-months ended September 30, 2003 30 Unaudited consolidated, combined and condensed statements of cash flows for the nine-months ended September 30, 2004 and the nine-months ended September 30, 2003 31 Notes to the consolidated unaudited combined financial statements 32 ITEM 6. Exhibits and Reports on Form 8-K 34 3
CAITHNESS COSO FUNDING CORP. UNAUDITED BALANCE SHEETS (Dollars in thousands) September 30, December 31, 2004 2003 Assets: Current Assets: Accrued interest receivable................................................ $ 6,378 $ 1,008 Current portion of project loan from Coso Finance Partners................. 12,456 10,694 Current portion of project loan from Coso Energy Developers................ 9,425 9,920 Current portion of project loan from Coso Power Developers................. 11,110 10,718 ------ ------ Total current assets 39,369 32,340 Project loan from Coso Finance Partners...................................... 80,811 86,853 Project loan from Coso Energy Developers..................................... 71,427 74,901 Project loan from Coso Power Developers...................................... 55,848 60,528 ------ ------ Total assets $ 247,455 $ 254,622 ======= ======= Liabilities and Stockholders' Equity: Current Liabilities: Senior secured notes: Accrued interest payable.................................................. $ 6,378 $ 1,008 Current portion on project loans.......................................... 32,991 31,332 ------ ------ Total current liabilities 39,369 32,340 9.05% notes due December 15, 2009............................................ 208,086 222,282 Stockholders' equity......................................................... - - ------- ------- Total liabilities & stockholders' equity $ 247,455 $ 254,622 ======= ======= See accompanying notes to the unaudited financial statements 4
CAITHNESS COSO FUNDING CORP. UNAUDITED STATEMENTS OF OPERATIONS (Dollars in thousands) Three-Months Three-Months Nine-Months Nine-Months Ended Ended Ended Ended September 30, September 30, September 30, September 30, 2004 2003 2004 2003 Interest income................. $ 5,482 $ 6,144 $ 16,846 $ 18,761 Interest expense................ (5,482) (6,144) (16,846) (18,761) ------- ------- -------- -------- Net income................ $ - $ - $ - $ - ======= ======= ======== ======== See accompanying notes to the unaudited financial statements 5
CAITHNESS COSO FUNDING CORP. UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS (Dollars in thousands) Nine-Months Nine-Months Ended Ended September 30, September 30, 2004 2003 Cash flows from investing activities - repayment of project loans...... $ 7,167 $ 5,044 Cash flows from financing activities - repayment of 9.05% notes........ (7,167) (5,044) ----- ----- Net changes in cash.................................................... $ - $ - ====== ====== Supplemental cash flow disclosure: Cash paid for interest............................................. $ 11,476 $ 12,726 ====== ====== See accompanying notes to the unaudited condensed financial statements 6
CAITHNESS COSO FUNDING CORP. NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (Dollars in thousands) (1) Organization and Operations Caithness Coso Funding Corp. (Funding Corp.), which was incorporated on April 22, 1999, is a single-purpose Delaware corporation formed to issue senior secured notes (Notes) for its own account and as an agent acting on behalf of Coso Finance Partners (CFP), Coso Energy Developers (CED), and Coso Power Developers (CPD), collectively, the "Partnerships." The Partnerships are California general Partnerships. On May 28, 1999, Funding Corp. sold $413,000 of Notes. Pursuant to separate credit agreements between Funding Corp. and each Partnership, the net proceeds from the offering Notes were loaned to the Partnerships. Payment of the Notes is provided for by payments made by the Partnerships under their respective project loans. Funding Corp. has no material assets other than the project loans, and does not conduct any operations apart from having issued the Notes and making the project loans to the Partnerships. (2) Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules. Management believes that the disclosures are adequate to make the information presented not misleading when read in conjunction with the financial statements and the notes thereto in the audited financial statements for the year ended December 31,2003. The preparation of unaudited financial statements in accordance with accounting principles generally accepted in the United States requires Funding Corp. to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, income and expenses during the reporting period. Actual results could differ from these estimates. The financial information herein presented reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results for interim periods presented. The results for the interim periods are not necessarily indicative of results to be expected for the full year. 7
COSO FINANCE PARTNERS AND SUBSIDIARY UNAUDITED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) September 30, December 31, 2004 2003 Assets: Current Assets: Cash and cash equivalents.................................................. $ 9,921 $ 1,454 Restricted cash and cash equivalents....................................... 10,737 11,408 Accounts receivable, net................................................... 12,180 6,925 Prepaid expenses & other assets............................................ 1,105 872 Inventory.................................................................. 5,346 5,270 Amounts due from related parties........................................... 1,449 1,525 ------ ------ Total current assets 40,738 27,454 Restricted cash and cash equivalents.......................................... 14,667 13,249 Property, plant & equipment, net.............................................. 132,091 135,871 Purchase power contract, net.................................................. 7,936 8,798 Deferred financing costs, net................................................. 1,656 1,893 ------- ------- Total assets $ 197,088 $ 187,265 ======= ======= Liabilities and Partners' Capital: Current Liabilities: Accounts payable and accrued liabilities................................... $ 4,943 $ 4,503 Amounts due to related parties............................................. 2,493 474 Current portion of project loan............................................ 12,456 10,694 ------ ------ Total current liabilities 19,892 15,671 Other liabilities............................................................ 16,915 15,603 Project loan................................................................. 80,811 86,853 ------- ------- Total liabilities 117,618 118,127 Minority interest............................................................ 2,397 2,462 Partners' capital............................................................ 77,073 66,676 ------- ------- Total liabilities & partners' capital $ 197,088 $ 187,265 ======= ======= See accompanying notes to the unaudited consolidated financial statements 8
COSO FINANCE PARTNERS AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands) Three-Months Three-Months Nine-Months Nine-Months Ended Ended Ended Ended September 30, September 30, September 30, September 30, 2004 2003 2004 2003 Revenue: Energy revenues................................ $ 11,657 $ 11,643 $ 34,559 $ 34,698 Capacity revenues.............................. 8,190 8,190 12,982 13,011 ------ ------ ------ ------ Total revenue........................... 19,847 19,833 47,541 47,709 Operating expenses: Plant operating expenses....................... 3,019 2,291 8,528 6,875 Royalty expense................................ 5,547 4,982 10,574 11,603 Depreciation and amortization.................. 2,859 2,731 8,557 8,015 ------ ------ ------ ------ Total operating expenses................ 11,425 10,004 27,659 26,493 Operating income........................ 8,422 9,829 19,882 21,216 Other (income)/expenses: Interest and other income...................... (768) (103) (979) (326) Interest expense............................... 2,122 2,402 6,494 7,376 Noncash interest expense....................... 135 130 405 390 ----- ----- ----- ----- Total other expenses.................... 1,489 2,429 5,920 7,440 ----- ----- ----- ----- Income before cumulative effect of change in accounting principle........................ 6,933 7,400 13,962 13,776 Cumulative effect of change in accounting principle........................... - - - 1,780 ----- ----- ------ ------ Net income.............................. $ 6,933 $ 7,400 $ 13,962 $ 11,996 ===== ===== ====== ====== See accompanying notes to the unaudited consolidated financial statements 9
COSO FINANCE PARTNERS AND SUBSIDIARY UNAUDITED CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS (Dollars in thousands) Nine-Months Nine-Months Ended Ended September 30, September 30, 2004 2003 Net cash provided by (used in) operating activities.... $ 21,041 $ 19,196 Net cash provided by (used in) investing activities.... (4,662) (6,072) Net cash provided by (used in) financing activities.... (7,912) (5,552) ----- ----- Net change in cash and cash equivalents................ $ 8,467 $ 7,572 ===== ===== Supplemental cash flow disclosure: Cash paid for interest...................... $ 4,414 $ 5,021 ===== ===== See accompanying notes to the unaudited consolidated and condensed financial statements 10
COSO FINANCE PARTNERS AND SUBSIDIARY NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (Dollars in thousands) (1) Organization and Operation Coso Finance Partners (CFP), a general partnership, is engaged in the operation of an 80 MW power generation facility located at the China Lake Naval Air Weapons Station, China Lake California. CFP sells all electricity produced to Southern California Edison (Edison) under a 24-year power purchase contract expiring in 2011. (2) Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules. Management believes that the disclosures are adequate to make the information presented not misleading when read in conjunction with the financial statements and the notes thereto in the audited financial statements for the year ended December 31, 2003. The preparation of unaudited financial statements in accordance with accounting principles generally accepted in the United States of America requires CFP to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period. Actual results could differ from these estimates. The financial information herein presented reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results for interim periods presented. The results for the interim periods are not necessarily indicative of results to be expected for the full year. CFP has experienced significant quarterly fluctuations in operating results and it expects that these fluctuations in energy revenues, expenses and net income will continue. The data for the consolidated balance sheets presented herein for September 30, 2004 and December 31, 2003 were derived from CFP's financial statements for the interim period and fiscal year then ended and includes the effect of consolidating New CLPSI Company, LLC (CLPSI), but does not include all disclosures required by accounting principles generally accepted in the United States of America. (3) New Accounting Pronouncements The consolidated financial statements of CFP include the accounts of CPLSI, as a result of the adoption of Financial Accounting Standards Board (FASB) Interpretation No. 46. (FIN 46) (Consolidation of Variable Interest Entities), an interpretation of Accounting Research Bulletin No. 51. FIN 46 required certain variable interest entities to be consolidated by the primary beneficiary of the entity even though the equity investors do not have the characteristics of a controlling financial interest, or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. In December 2003, the FASB issued FIN 46 (R), which clarified and replaced FIN 46 that required all variable interest entities, regardless of when they were created to be evaluated under FIN 46 (R) no later than the period ending March 15, 2004. An entity is subject to consolidation according to the provisions of FIN 46 (R) if, by design, the following conditions exist. As a group, the holders of the equity investment at 11 risk lack any one of the following three characteristics of a controlling financial interest: (1) the direct or indirect ability to make decisions about an entity's activities through voting rights or similar rights; (2) the obligation to absorb the expected losses of the entity if they occur; or (3) the right to receive the expected residual returns of the entity if they occur. CFP believes that CLPSI, the entity that holds the inventory for Coso Power Developers, Coso Energy Developer and CFP is a variable interest entity and under FIN 46 (R) should be consolidated. The inventory, related physical assets, and payables have been recorded as CFP's assets and liabilities. The impact to CFP's future consolidated statement of operations will be increased depreciation, partially offset by other income. The consolidated financial statements related to prior periods have been restated to consolidate the accounts of CLPSI as a direct result of the adoption of FIN 46 (R). There was no cumulative effect recorded upon the adoption of the Interpretation. (4) Accounts Receivable and Revenue Recognition Accounts receivable primarily consist of receivables from Edison for electricity delivered and sold under a power purchase contract. Operating revenues are recognized as income during the period in which electricity is delivered to Edison. (5) Reclassifications Certain balances in prior years have been reclassified to conform to the presentation adopted in the current year. 12
COSO ENERGY DEVELOPERS UNAUDITED BALANCE SHEETS (Dollars in thousands) September 30, December 31, 2004 2003 Assets: Current Assets: Cash and cash equivalents............................................. $ 9,088 $ 603 Restricted cash and cash equivalents.................................. 9,861 10,013 Accounts receivable, net.............................................. 10,749 6,830 Prepaid expenses and other assets..................................... 1,564 1,094 Amounts due from related parties...................................... 480 442 ------ ------ Total current assets 31,742 18,982 Restricted cash.......................................................... 142 142 Investment in Coso Transmission Line Partners............................ 2,459 2,542 Advances to New CLPSI Company, LLC....................................... 476 548 Property, plant and equipment, net....................................... 124,917 130,519 Power purchase agreement, net............................................ 15,489 16,293 Deferred financing costs, net............................................ 1,339 1,530 ------- ------- Total assets $ 176,564 $ 170,556 ======= ======= Liabilities and Partners' Capital: Current Liabilities: Accounts payable and accrued liabilities.............................. $ 1,413 $ 2,114 Amounts due to related parties........................................ 3,394 1,473 Current portion of project loan....................................... 9,425 9,920 ------ ------ Total current liabilities 14,232 13,507 Other liabilities and related parties.................................... 27,688 27,331 Project loan............................................................. 71,427 74,901 ------ ------ Total liabilities 113,347 115,739 Partners' capital........................................................ 63,217 54,817 ------- ------- Total liabilities & partners' capital $ 176,564 $ 170,556 ======= ======= See accompanying notes to the unaudited financial statements 13
COSO ENERGY DEVELOPERS UNAUDITED STATEMENTS OF OPERATIONS (Dollars in thousands) Three-Months Three-Months Nine-Months Nine-Months Ended Ended Ended Ended September 30, September 30, September 30, September 30, 2004 2003 2004 2003 Revenue: Energy revenues................................. $ 7,491 $ 8,246 $ 22,913 $ 24,479 Capacity revenues............................... 7,976 7,976 12,687 12,687 ------ ------ ------ ------ Total revenue............................ 15,467 16,222 35,600 37,166 Operating expenses: Plant operating expenses........................ 2,746 3,467 10,906 9,323 Royalty expense................................. 1,318 1,339 1,971 2,028 Depreciation and amortization................... 2,237 2,343 6,952 6,971 ----- ----- ------ ------ Total operating expenses................. 6,301 7,149 19,829 18,322 Operating income......................... 9,166 9,073 15,771 18,844 Other (income)/expenses: Interest and other income....................... (1,140) (282) (1,681) (887) Interest expense................................ 1,839 1,998 5,640 6,032 Noncash interest expense........................ 95 92 284 275 ----- ----- ----- ----- Total other expenses..................... 794 1,808 4,243 5,420 ----- ----- ----- ----- Income before cumulative effect of change in accounting principle......................... 8,372 7,265 11,528 13,424 Cumulative effect of change in accounting principle............................ - - - 924 ----- ----- ------ ------ Net income............................... $ 8,372 $ 7,265 $ 11,528 $ 12,500 ===== ===== ====== ====== See accompanying notes to the unaudited financial statements 14
COSO ENERGY DEVELOPERS UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS (Dollars in thousands) Nine-Months Nine-Months Ended Ended September 30, September 30, 2004 2003 Net cash provided by (used in) operating activities..... $ 15,893 $ 19,381 Net cash provided by (used in) investing activities..... (311) (3,131) Net cash provided by (used in) financing activities..... (7,097) (2,022) ----- ----- Net change in cash and cash equivalents................. $ 8,485 $ 14,228 ===== ====== Supplemental cash flow disclosure: Cash paid for interest......................... $ 3,838 $ 4,067 ===== ===== See accompanying notes to the unaudited condensed financial statements 15
COSO ENERGY DEVELOPERS NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (Dollars in thousands) (1) Organization and Operation Coso Energy Developers (CED), a general partnership, is engaged in the operation of an 80 MW power generation facility located at the Coso Hot Springs, China Lake California. CED sells all electricity produced to Southern California Edison (Edison) under a 30-year power purchase contract expiring in 2019. (2) Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules. Management believes that the disclosures are adequate to make the information presented not misleading when read in conjunction with the financial statements and the notes thereto in the audited financial statements for the year ended December 31, 2003. The preparation of unaudited financial statements in accordance with accounting principles generally accepted in the United States of America requires CED to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period. Actual results could differ from these estimates. The financial information herein presented reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results for interim periods presented. The results for the interim periods are not necessarily indicative of results to be expected for the full year. CED has experienced significant quarterly fluctuations in operating results and it expects that these fluctuations in energy revenues, expenses and net income will continue. (3) Accounts Receivable and Revenue Recognition Accounts receivable primarily consist of receivables from Edison for electricity delivered and sold under a power purchase contract. Operating revenues are recognized as income during the period in which electricity is delivered to Edison. (4) Reclassifications Certain balances in prior years have been reclassified to conform to the presentation adopted in the current year. 16
COSO POWER DEVELOPERS AND SUBSIDIARY UNAUDITED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) September 30, December 31, 2004 2003 Assets: Current Assets: Cash and cash equivalents............................................. $ 9,674 $ 78 Restricted cash and cash equivalents.................................. 9,727 8,146 Accounts receivable, net.............................................. 12,300 7,985 Prepaid expenses and other assets..................................... 992 830 Amounts due from related parties...................................... 6,605 6,412 ------ ------ Total current assets 39,298 23,451 Restricted cash....................................................... 135 135 Advances to New CLPSI Company, LLC.................................... 1,920 1,914 Property, plant and equipment, net.................................... 115,092 120,509 Power purchase agreement, net......................................... 15,136 17,232 Deferred financing costs, net......................................... 1,139 1,302 ------- ------- Total assets $ 172,720 $ 164,543 ======= ======= Liabilities and Partners' Capital: Current Liabilities: Accounts payable and accrued liabilities.............................. $ 2,636 $ 1,891 Amounts due to related parties........................................ 2,538 1,191 Current portion of project loan....................................... 11,110 10,718 ------ ------ Total current liabilities 16,284 13,800 Other liabilities........................................................ 2,520 2,589 Project loan............................................................. 55,848 60,528 ------ ------ Total liabilities 74,652 76,917 Minority interest........................................................ 2,458 2,542 Partners' capital........................................................ 95,610 85,084 ------- ------- Total liabilities & partners' capital $ 172,720 $ 164,543 ======= ======= See accompanying notes to the unaudited consolidated financial statements 17
COSO POWER DEVELOPERS AND SUBSIDARY UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands) Three-Months Three-Months Nine-Months Nine-Months Ended Ended Ended Ended September 30, September 30, September 30, September 30, 2004 2003 2004 2003 Revenue: Energy revenues................................ $ 9,046 $ 8,465 $ 25,407 $ 23,064 Capacity revenues.............................. 8,048 8,048 12,786 12,786 ------ ------ ------ ------ Total revenue........................... 17,094 16,513 38,193 35,850 Operating expenses: Plant operating expenses....................... 2,014 2,451 7,145 7,336 Royalty expense................................ 3,002 2,655 6,608 5,830 Depreciation and amortization.................. 2,562 2,534 7,680 7,809 ----- ----- ------ ------ Total operating expenses................ 7,578 7,640 21,433 20,975 Operating income........................ 9,516 8,873 16,760 14,875 Other (income)/expenses: Interest and other income...................... (813) (155) (1,081) (446) Interest expense............................... 1,523 1,746 4,712 5,351 Noncash interest expense....................... 113 108 339 323 ----- ----- ----- ----- Total other expenses.................... 823 1,699 3,970 5,228 ----- ----- ----- ----- Income before cumulative effect of change in accounting principle........................ 8,693 7,174 12,790 9,647 Cumulative effect of change in accounting principle........................... - - - 1,777 ----- ----- ------ ----- Net income.............................. $ 8,693 $ 7,174 $ 12,790 $ 7,870 ===== ===== ====== ===== See accompanying notes to the unaudited consolidated financial statements 18
COSO POWER DEVELOPERS AND SUBSIDIARY UNAUDITED CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS (Dollars in thousands) Nine-Months Nine-Months Ended Ended September 30, September 30, 2004 2003 Net cash provided by (used in) operating activities...... $ 17,981 $ 15,647 Net cash provided by (used in) investing activities...... (1,748) (3,171) Net cash provided by (used in) financing activities...... (6,637) (3,763) ----- ----- Net change in cash and cash equivalents.................. 9,596 8,713 ===== ===== Supplemental cash flows disclosure: Cash paid for interest................... $ 3,224 $ 3,638 ===== ===== See accompanying notes to the unaudited consolidated and condensed financial statements 19
COSO POWER DEVELOPERS AND SUBSIDIARY NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (Dollars in thousands) (1) Organization and Operation Coso Power Developers (CPD), a general partnership, is engaged in the operation of an 80 MW power generation facility located at the Coso Hot Springs, China Lake California. CPD sells all electricity produced to Southern California Edison (Edison) under a 20-year power purchase contract expiring in 2010. (2) Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules. Management believes that the disclosures are adequate to make the information presented not misleading when read in conjunction with the financial statements and the notes thereto in the audited financial statements for the year ended December 31, 2003. The preparation of unaudited financial statements in accordance with accounting principles generally accepted in the United States of America requires CPD to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period. Actual results could differ from these estimates. The financial information herein presented reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results for interim periods presented. The results for the interim periods are not necessarily indicative of results to be expected for the full year. CPD has experienced significant quarterly fluctuations in operating results and it expects that these fluctuations in energy revenues, expenses and net income will continue. The data for the consolidated balance sheets presented herein for September 30, 2004 and December 31, 2003 were derived from CPD's financial statements for the interim period and fiscal year then ended and includes the effect of consolidating Coso Transmission Line Partners (CTLP), but does not include all disclosures required by accounting principles generally accepted in the United States of America. (3) New Accounting Pronouncements The consolidated financial statements of CPD include the accounts of CTLP, as a result of the adoption of Financial Accounting Standards Board (FASB) Interpretation No. 46. (FIN 46) (Consolidation of Variable Interest Entities), an interpretation of Accounting Research Bulletin No. 51. FIN 46 required certain variable interest entities to be consolidated by the primary beneficiary of the entity even though the equity investors do not have the characteristics of a controlling financial interest, or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. In December 2003, the FASB issued FIN 46 (R), which clarified and replaced FIN 46 that required all variable interest entities, regardless of when they were created to be evaluated under FIN 46 (R) no later than the period ending March 15, 2004. An entity is subject to 20 consolidation according to the provisions of FIN 46 (R) if, by design, the following conditions exist. As a group, the holders of the equity investment at risk lack any one of the following three characteristics of a controlling financial interest: (1) the direct or indirect ability to make decisions about an entity's activities through voting rights or similar rights; (2) the obligation to absorb the expected losses of the entity if they occur; or (3) the right to receive the expected residual returns of the entity if they occur. CPD believes that CTLP, the entity that holds additional transmission equipment for Coso Energy Developers and CPD is a variable interest entity and under FIN 46 (R) should be consolidated. The additional transmission equipment will be recorded as CPD's assets. The impact to CPD's future statement of operations will be increased depreciation, partially offset by other income. The consolidated financial statements related to prior periods have been restated to consolidate the accounts of CTLP as a direct result of the adoption of FIN 46 (R). There was no cumulative effect recorded upon the adoption of the Interpretation. (4) Accounts Receivable and Revenue Recognition Accounts receivable primarily consist of receivables from Edison for electricity delivered and sold under a power purchase contract. Operating revenues are recognized as income during the period in which electricity is delivered to Edison. (5) Reclassifications Certain balances in prior years have been reclassified to conform to the presentation adopted in the current year. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Except for financial information contained herein, the matters discussed in this quarterly report may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and subject to the safe harbor created by the Securities Litigation Reform Act of 1995. Such statements include declarations regarding the intent, belief or current expectations of Caithness Coso Funding Corp. (Funding Corp.), Coso Finance Partners and Subsidiary (the Navy I Partnership), Coso Energy Developers (the BLM Partnership), and Coso Power Developers and Subsidiary (the Navy II Partnership), collectively, (the Coso Partnerships) and their respective management. Such statements may be identified by terms such as expected, anticipated, may, will, believe or other terms or variations of such words. Any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties; actual results could differ materially from those indicated by such forward-looking statements. Among the important factors that could cause future operating results to differ materially from those anticipated include, but are not limited to: (i) risks relating to the uncertainties in the California energy market, (ii) the financial viability of Southern California Edison, (Edison), (iii) risks related to the operation of power plants including terrorism (iv) the impact of avoided cost pricing along with other pricing variables, (v) general operating risks, including variability of resource and regulatory oversight, (vi) changes in government regulation, (vii) the effects of competition and (viii) the alleged manipulation of the California energy market. 21 General Each Coso Partnership owns an 80MW geothermal power plant, and its respective transmission lines, wells, gathering systems and other related facilities. The Coso Partnerships are located near one another at the United States Naval Air Weapons Center at China Lake, California. The Navy I Partnership owns Navy I and its related facilities. The BLM Partnership owns BLM and its related facilities. The Navy II Partnership owns Navy II and its related facilities. Each Coso partnership sells 100% of the electrical energy generated at its plant to Edison under a long-term Standard Offer No.4 power purchase agreement. Each power purchase agreement expires after the final maturity date of the 9.05% Series B Senior Secured Notes (Notes) issued by Funding Corp. Each Coso partnership is entitled to the following payments under its power purchase agreement: * Capacity payments for being able to produce electricity at certain levels. Capacity payments are fixed throughout the life of each power purchase agreement; * Capacity bonus payments if the Coso partnership is able to produce electricity above a specified level. The maximum annual capacity bonus payment available is also fixed throughout the life of each power purchase agreement; and * Energy payments which are based on the amount of electricity the Coso Partnership's plant actually produces. Energy payments were fixed for the first ten years of firm operation under each power purchase agreement. After the first ten years of firm operation and until January 1, 2002, Edison made energy payments to the Coso Partnerships based on its avoided cost of energy. Edison's avoided cost of energy is Edison's cost to generate electricity if Edison were to produce it itself or buy it from another power producer rather than buy it from the Coso Partnerships. The fixed energy price period expired in August 1997 for the Navy I Partnership, in March 1999 for the BLM Partnership and in January 2000 for the Navy II Partnership. Edison entered into an agreement (Agreement) with the Coso Partnerships on June 19, 2001 that addressed renewable energy pricing and issues concerning California's energy crisis. The Agreement, which was amended on November 30, 2001, established May 1, 2002 as the date the Coso Partnerships began receiving a fixed energy rate of 5.37 cents per kWh for five (5) years in lieu of the rate calculated based on the avoided cost of energy. This Agreement was challenged in the federal courts. The California State Supreme Court found that no state laws were violated, and the United States Court of Appeals for the Ninth Circuit (Ninth Circuit) affirmed this judgment. As a result of the Ninth Circuit's decision, the Agreements remain in full force and effect. No appeal was filed in this matter. After the five year period expires in April 2007, Edison will be required to make energy payments to the Coso Partnerships based on its avoided cost of energy until each partnership's power purchase agreement expires. The power purchase agreement for the Navy I Partnership will expire in August 2011, the power purchase agreement for the BLM Partnership will expire in March 2019, and the power purchase agreement for the Navy II Partnership will expire in January 2010. The California Public Utilities Commission (CPUC) has initiated a hearing to re-evaluate the methodology of calculating the avoided cost of energy in the future. It is not possible to predict with accuracy the likely level of future avoided cost of energy prices. 22 Edison filed a petition for a writ of review of a January 2001 CPUC decision, claiming that the "floor" line loss factor of 0.95 for renewable generators violated the Public Utility Regulatory Policies Act of 1978 (PURPA). Subsequently, the California Court of Appeals issued a decision on August 20, 2002 in response to the writs affirming the January 2001 CPUC decision, except for the 0.95 "floor", which it rejected as an abuse of discretion by the CPUC. While this matter was appealed to the California Supreme Court, the petition for review was denied. The Coso Partnerships are currently evaluating potential actions to redress this issue. Their Agreements set the line loss factor at 1.0 for all energy sold between May 2002 through April 2007. After April 2007, the Coso Partnerships will have a line loss factor of less than 1.0, effectively decreasing revenues if Edison's challenge to the CPUC ruling stands. The Coso Partnerships cannot predict whether any subsequent action regarding this matter will be successful. In 1994, the Coso Partnerships implemented a steam-sharing program, under the Coso Geothermal Exchange Agreement. The purpose of the steam-sharing program is to enhance the management of the Coso geothermal resource and to optimize the resource's overall benefits to the Coso Partnerships by transferring steam among the Coso Partnerships. Under the steam sharing program, the partnership receiving the steam transfer splits revenue earned from electricity generated with the partnership that transferred the steam. The Coso Partnerships are required to make royalty payments to the U.S. Navy and the Bureau of Land Management. On November 1, 2004 the Navy I and Navy II Partnerships entered into a new agreement ("New Contract") with the United States Navy terminating the existing contract that were due to expire on December 31, 2009. The New Contract extends the Navy I and Navy II Partnerships exclusive right to explore, develop and use certain geothermal resources on U.S. Navy lands through October 31, 2034. The New Contract and termination of the existing contracts were disclosed in the Form 8-K filed on November 2, 2004. Under the terms of the New Contract, the royalty paid to the U.S. Navy was restructured so that the Navy I and Navy II Partnerships pay at a rate of 15% of gross revenues received up to an annual base revenue amount. Beyond the annual base revenue amount, the U.S. Navy and the Navy I and Navy II Partnerships will split the additional revenues, on a 50/50 basis, until the U.S. Navy receives a maximum of 20% of all gross revenue. Under the terminated contract with the U. S. Navy, the Navy I Partnership was obligated to pay royalties for Units 2 and 3 at 20% of gross revenue through 2009 and the Navy II Partnership was obligated to pay royalties at 18% of gross revenue through 2004, then due to increase to 20% through 2009. Additionally, the Navy I Partnership was obligated to pay a royalty for Unit I consisting of the payment of the U.S. Navy's electric bill for the China Lake Weapons Facility, subject to an indexed reimbursement from the U.S. Navy. The reimbursement was based on a pricing formula for tariff rates charged by Edison, which were increased in 2001 by the CPUC. On July 10, 2003, the CPUC adopted a settlement between Edison and other parties to lower retail electric rates effective as of August 1, 2003. Those rates were in effect for one year, after which new rates would have been established in accordance with CPUC guidelines and while Edison has filed for new rates, they are not currently effective. Additionally, under the terms of the terminated agreement, the Navy was compensated annually for any savings in electrical usage at the China Lake Facility below a baseline amount ("Conserved Power"). Upon termination of the Navy Contract, the Navy was paid $1.2 million for Conserved Power from January 1, 2004 through October 31, 2004.The terminated contract also obligated the Navy I Partnership to fund an escrow account so that the Navy I Partnership would pay the U.S. Navy $25 million on December 31, 2009. That provision was also terminated and a new escrow arrangement was entered into and the amount the Navy I Partnership owes the U.S. Navy is now $18 million. That payment is secured by the existing funds on deposit so that funds plus accrued interest are expected to aggregate $18.0 million by December 31, 2009. Accordingly, $111,000 was deposited monthly through October 31, 2004. Finally, in the terminated contracts the U.S. Navy had the right to terminate the contracts at any time for their convenience. Under the New Contract that right was eliminated. 23 The BLM Partnerships geothermal lease initially had a term of ten years ending in 1998 with automatic extensions until October 31, 2035, so long as geothermal steam is commercially produced. The royalty paid to the Bureau of Land Management is 10% of the net value of steam produced based on a calculation known as the netback which is estimated and paid monthly with an annual true-up after year-end. The Coso Partnerships also pay other royalties, at various rates which in the aggregate are not material. Funding Corp. is a special purpose corporation and a wholly owned subsidiary of the Coso Partnerships. It was formed for the purpose of issuing the senior secured notes (Notes) on behalf of the Coso Partnerships who have jointly, severally, and unconditionally guaranteed repayment of the Notes. On May 28, 1999, Funding Corp. issued $110.0 million of 6.80% Notes that were due in 2001, and were paid off on December 15, 2001, and $303.0 million of 9.05% Notes due in 2009. The proceeds from the Notes were loaned to the Coso Partnerships and are payable to Funding Corp from payments of principal and interest on the Notes. Funding Corp. does not conduct any other operations apart from serving as the issuer of the Notes. Under the depository agreement with the trustee for the Notes, the Coso Partnerships established accounts with a depository and pledged those accounts as security for the benefit of the holders of the Notes. All amounts deposited with the depository are, at the direction of the Coso Partnerships, invested by the depository in permitted investments. All revenues or other proceeds actually received by the Coso Partnerships are deposited in a revenue account and withdrawn upon receipt by the depository of a certificate from the relevant Coso Partnerships detailing the amounts to be paid from funds in its respective revenue account. Capacity Utilization For purposes of consistency in financial presentation, the plant capacity factor for each of the Coso Partnerships is based on a nominal capacity amount of 80MW (240MW in the aggregate). The Coso Partnerships have a gross operating capacity that allows for the production of electricity in excess of their nominal capacity amounts. Utilization of this operating margin is based upon a number of factors and can be expected to vary throughout the year under normal operating conditions. The following data includes the operating capacity factor, capacity and electricity production (in kWh) for each Coso Partnership on a stand-alone basis:
Three-Months Ended Nine-Months Ended September 30 September 30 2004 2003 2004 2003 ---- ---- ---- ---- Navy I Partnership (stand alone) Operating capacity factor 104.8% 102.6% 100.7% 102.4% Capacity (MW) (average) 83.80 82.05 80.52 81.93 kWh produced (000s) 185,032 181,165 529,503 536,809 24 BLM Partnership (stand alone) Operating capacity factor 84.0% 88.2% 86.0% 88.5% Capacity (MW) (average) 67.19 70.59 68.81 70.76 kWh produced (000s) 148,352 155,865 452,511 463,627 Navy II Partnership (stand alone) Operating capacity factor 107.7% 106.9% 106.3% 100.6% Capacity (MW) (average) 86.19 85.53 85.07 80.47 kWh produced (000s) 190,307 188,849 559,436 527,250
Total energy production for the Navy II Partnership increased for the nine-month period ended September 30, 2004, as compared to the same periods in 2003, due to the successful effort to increase production through well maintenance and capital improvements, including the enhancement of existing production wells, plant efficiency improvements, and additional steam-field piping modifications. In an effort to increase production overall, the Coso Partnerships are working to enhance the reservoir through an injection augmentation program, which is currently in the engineering design phase, aimed at improving reservoir pressure and minimizing resource decline. The funds necessary to implement the capital improvement program are available from reserves established under the Notes and from excess cash flow generated after debt service. Results of Operations for the Three and Nine-months ended September 30, 2004 and 2003 The following discusses the results of operations of the Coso Partnerships for the three and nine-month periods ended September 30, 2004 and 2003 (dollar amounts in tables are in thousands, except per kWh data): Revenue
Three-Months Three-Months Nine-Months Nine-Months Ended Ended Ended Ended September 30, 2004 September 30, 2003 September 30, 2004 September 30, 2003 $ Cents/kWh $ Cents/kWh $ Cents/kWh $ Cents/kWh - --------- - --------- - --------- - --------- Total Operating Revenues including steam transfers Navy I Partnership 19,847 10.7 19,833 10.9 47,541 9.0 47,709 8.9 BLM Partnership 15,467 10.4 16,222 10.4 35,600 7.9 37,166 8.0 Navy II Partnership 17,094 9.0 16,513 8.7 38,193 6.8 35,850 6.8
The Coso Partnerships sell all electricity generated to Edison under their respective power purchase agreement. Total operating revenues consist of capacity payments, capacity bonus payments, and energy payments, including steam transfers discussed above. Total operating revenues for the Navy II Partnership increased for the nine-month period ended September 30, 2004, as compared to the same periods in 2003, primarily due to the increase in production discussed above. 25 Plant Operating Expense
Three-Months Three-Months Nine-Months Nine-Months Ended Ended Ended Ended September 30, 2004 September 30, 2003 September 30, 2004 September 30, 2003 $ Cents/kWh $ Cents/kWh $ Cents/kWh $ Cents/kWh - --------- - --------- - --------- - --------- Navy I Partnership 3,019 1.6 2,291 1.3 8,528 1.6 6,875 1.3 BLM Partnership 2,746 1.9 3,467 2.2 10,906 2.4 9,323 2.0 Navy II Partnership 2,014 1.1 2,451 1.3 7,145 1.3 7,336 1.4
Plant operating expense consists of labor and related expenses, supplies and maintenance, property taxes, insurance, well workovers and administrative expense. The increases in plant operating expense for the Navy I Partnership for the three and nine-months ended September 30, 2004, and for the BLM Partnership for the nine-months ended September 30, 2004, as compared to the same periods in 2003, were primarily due to increased well workovers in 2004 to assist in remediating declines in steam production. The decreases in plant operating expenses for the BLM and Navy II Partnerships for the three-months ended September 30, 2004, as compared to the same period in 2003, were primarily due to decreases in property taxes and well workover activities during that period in 2004. The decrease in property taxes affected each of the Coso Partnerships during the three and nine-months ended September 30, 2004, as compared to the same periods in 2003. Royalty Expense
Three-Months Three-Months Nine-Months Nine-Months Ended Ended Ended Ended September 30, 2004 September 30, 2003 September 30, 2004 September 30, 2003 $ Cents/kWh $ Cents/kWh $ Cents/kWh $ Cents/kWh - --------- - --------- - --------- - --------- Navy I Partnership 5,547 3.0 4,982 2.7 10,574 2.0 11,603 2.2 BLM Partnership 1,318 0.9 1,339 0.9 1,971 0.4 2,028 0.4 Navy II Partnership 3,002 1.6 2,655 1.4 6,608 1.2 5,830 1.1
Royalty expense for the Navy I Partnership increased for the three-months ended September 30, 2004, as compared to the same period in 2003, primarily due to increased royalties from Units 2 and 3 resulting from the scheduled increase in royalty rate discussed above. The increase in royalties from Units 2 and 3 was partially offset by a decrease in Unit 1 royalty, resulting from reduced tariff rates charged by Edison. The decrease in the Unit 1 royalty resulted in the decrease for the nine-month period ended September 30, 2004, as compared to the same period in 2003. Royalty expense for the Navy II Partnership increased for the three and nine-months ended September 30, 2004, as compared to the same periods in 2003, due to the increase in production discussed above. Depreciation and Amortization Depreciation and amortization expense for the Coso Partnerships for the three and nine-months ended September 30, 2004, as compared to the same periods in 2003, remains comparable as older wells and plant overhauls being fully depreciated during 2003 were replaced with new capital additions in 2004. 26 Interest and Other Income Interest and other income for the Coso Partnerships increased for the three and nine-months ended September 30, 2004, as compared to the same periods in 2003, due to the receipt of a refund of prior years' property taxes in 2004. Interest Expense Interest expense for the Coso Partnerships decreased for the three and nine-months ended September 30, 2004, as compared to the same periods in 2003, due to the reduction in the principal amount of the project loan from Funding Corp. Liquidity and Capital Resources Each of the Navy I Partnership, the BLM Partnership and the Navy II Partnership derive substantially all of their cash flow from Edison under their power purchase agreements and from interest income earned on funds on deposit. The Coso Partnerships have used their cash primarily for capital expenditures for power plant improvements, resource and operating costs, distributions to partners and payments with respect to the project loan. The Coso Partnerships cash flow obligations over the next several years consist of debt service payments to Funding Corp., as they come due under the Notes. The Coso Partnerships expect to be able to meet these obligations from operating cash flow. Historically, any excess cash after debt service has either been reserved for capital improvements or distributed to the partners. The Coso Partnerships ability to meet their obligations as they come due will depend upon the ability of Edison to meet its obligations under the terms of the standard offer No. 4 power purchase agreements and the Coso Partnerships' ability to continue to generate electricity. Edison's shortfall in collections, coupled with its near term capital requirements, materially and adversely affected its liquidity during 2000 and 2001. In resolution of that issue, Edison settled with the CPUC on October 2, 2001, enabling it to recover in retail electric rates its historical shortfall in electric purchase costs. On September 23, 2002, the United States Court of Appeals for the Ninth Circuit issued an opinion and order on appeal from the district court's stipulated judgment which affirmed the stipulated judgment in part and referred questions based on California state law to the Supreme Court of California. The appeals court stated that if the Agreement violated California state law then the appeals court would be required to void the stipulated judgment. California Supreme Court accepted the Ninth Circuit Court of Appeals request to address the issues referred to it in the September 23, 2002 ruling, and subsequently found that the stipulated judgment did not violate state laws. Consequently, the Agreement remains in full force and effect and it is unknown if any additional appeals are planned. Immediately after this settlement, Edison and each of the Coso Partnerships entered into an amendment of their respective Agreement (referenced above) pertaining to past due obligations. The Agreement, as amended, was approved by CPUC in January of 2002, and established the fixed energy rates discussed above and set payment terms for the past due amounts owed to the Coso Partnerships by Edison. Edison's failure to pay its future obligations may have a material adverse effect on the Coso Partnerships ability to make debt service payments to Funding Corp., as they come due under the Notes. Net cash from operating activities for the Navy I Partnership increased for the nine-months ended September 30, 2004, as compared to the same period in 2003, primarily due to increased net income and trade payables during 2004. Net cash from operating activities for the BLM Partnership decreased for the 27 nine-months ended September 30, 2004, as compared to the same period in 2003, primarily due to decreased net income and trade payables during 2004. Net cash from operating activities for the Navy II Partnership increased for the nine-months ended September 30, 2004, as compared to the same period in 2003, primarily due to increased net income during 2004. Net cash used in investing activities for the Coso Partnerships decreased for the nine-months ended September 30, 2004, as compared to the same period in 2003, due to reduced capital expenditures partially offset by higher restricted cash requirements associated with the Notes for the Navy I and Navy II Partnerships during 2004. Net cash used in financing activities for the Coso Partnerships increased for the nine-months ended September 30, 2004, as compared to the same period in 2003, primarily due to increased distributions to partners. Item 3. Control and Procedures The Registrant's Chief Executive Officer and Chief Financial Officer (the Registrant's principal executive officer and principal financial officer, respectively) have concluded, based on their evaluation as of September 30, 2004, that the design and operation of the Registrant's "disclosure controls and procedures" (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) are effective to ensure that information required to be disclosed by the Registrant in the reports filed or submitted by the Registrant under the Exchange Act is accumulated, recorded, processed, summarized and reported to the Registrant's management, including the Registrant's principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding whether or not disclosure is required. During the quarter ended September 30, 2004, there were no changes in the Registrant's "internal controls over financial reporting" (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the Registrant's internal controls over financial reporting. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings General The Coso Partnerships are currently parties to various items of litigation relating to day-to-day operations, none of which, if determined adversely, would be material to the financial condition and results of operations of the Coso Partnerships, either individually or taken as a whole. ITEM 2. Change in Securities and Use of Proceeds None. ITEM 3. Defaults Upon Senior Securities None. ITEM 4. Submission of Matters to a Vote of Security Holders None. 28 ITEM 5. Other Information Supplemental Consolidated and Combined Financial Information for the Coso Partnerships and Subsidiaries The following information presents unaudited consolidated and combined financial statements of the Coso Partnerships and Subsidiaries. These financial statements represent a consolidated and combination of the financial statements of Caithness Coso Funding Corp., Coso Finance Partners, Coso Energy Developers, Coso Power Developers, New CLPSI Company, LLC and Coso Transmission Line Partners for the periods indicated. This supplemental financial information is not required by accounting principles generally accepted in the United States of America and has been provided to facilitate a more comprehensive understanding of the financial position, operating results and cash flows of the Coso Partnerships and Subsidiaries as a whole, which jointly and severally guarantee the repayment of the Notes. The unaudited consolidated and combined financial statements should be read in conjunction with each individual Coso Partnership's and Subsidiaries financial statements and their accompanying notes. The financial information herein presented reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results for interim periods presented. The results for the interim periods are not necessarily indicative of results to be expected for the full year. 29
COSO PARTNERSHIPS UNAUDITED CONSOLIDATED AND COMBINED BALANCE SHEETS (Dollars in thousands) September 30, December 31, 2004 2003 Assets: Current Assets: Cash and cash equivalents............................................. $ 28,683 $ 2,135 Restricted cash and cash equivalents.................................. 30,325 29,567 Accounts receivable, net.............................................. 35,229 21,740 Prepaid expenses and other............................................ 3,661 2,796 Inventory............................................................. 5,346 5,270 Amounts due from related parties...................................... 6,966 6,829 ------- ------ 110,210 68,337 Total current assets Restricted cash and cash equivalents..................................... 14,944 13,526 Property, plant and equipment, net....................................... 372,100 386,899 Power purchase agreement, net............................................ 38,561 42,323 Deferred financing costs, net............................................ 4,134 4,725 ------- ------- $ 539,949 $ 515,810 ======= ======= Total assets Liabilities and Partners' Capital: Current Liabilities: Accounts payable and accrued liabilities.............................. $ 8,992 $ 8,508 Amounts due to related parties........................................ 6,857 1,588 Current portion of project loans...................................... 32,991 31,332 ------ ------ 48,840 41,428 Total current liabilities Other liabilities........................................................ 47,123 45,523 Project loan............................................................. 208,086 222,282 ------- ------- 304,049 309,233 Total liabilities Partners' capital........................................................ 235,900 206,577 ------- ------- Total liabilities & partners' capital $ 539,949 $ 515,810 ======= ======= See accompanying notes to the unaudited consolidated and combined financial statements. 30
COSO PARTNERSHIPS UNAUDITED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS (Dollars in thousands) Three-Months Three-Months Nine-Months Nine-Months Ended Ended Ended Ended September 30, September 30, September 30, September 30, 2004 2003 2004 2003 Revenue: Energy revenues.................................. $ 28,194 $ 28,354 $ 82,879 $ 82,241 Capacity revenues................................ 24,214 24,214 38,455 38,484 ------ ------ ------- ------- Total revenue............................. 52,408 52,568 121,334 120,725 Operating expenses: Plant operating expenses......................... 7,695 8,145 26,372 23,406 Royalty expense.................................. 9,867 8,976 19,153 19,461 Depreciation and amortization.................... 7,658 7,608 23,189 22,795 ------ ------ ------ ------ Total operating expenses.................. 25,220 24,729 68,714 65,662 Operating income ......................... 27,188 27,839 52,620 55,063 Other (income)/expenses: Interest and other income........................ (2,637) (476) (3,534) (1,531) Interest expense................................. 5,484 6,146 16,846 18,759 Noncash interest expense......................... 343 330 1,028 988 ----- ----- ------ ------ Total other expenses...................... 3,190 6,000 14,340 18,216 ----- ----- ------ ------ Income before cumulative effect of change in accounting principle............................. 23,998 21,839 38,280 36,847 Cumulative effect of change in accounting principle........................................ - - - 4,481 ------ ------ ------ ------ Net income................................ $ 23,998 $ 21,839 $ 38,280 $ 32,366 ====== ====== ====== ====== See accompanying notes to the unaudited consolidated and combined financial statements. 31
COSO PARTNERSHIPS UNAUDITED CONSOLIDATED, COMBINED AND CONDENSED STATEMENTS OF CASH FLOWS (Dollars in thousands) Nine-Months Nine-Months Ended Ended September 30, September 30, 2004 2003 Net cash provided by (used in) operating activities..... $ 54,915 $ 54,224 Net cash provided by (used in) investing activities..... (6,721) (12,374) Net cash provided by (used in) financing activities..... (21,646) (11,337) ------ ------ Net change in cash and cash equivalents................. $ 26,548 $ 30,513 ====== ====== Supplemental cash flow disclosure: Cash paid for interest.......................... $ 11,476 $ 12,726 ====== ====== See accompanying notes to the unaudited consolidated, combined and condensed financial statements. 32
COSO PARTNERSHIPS NOTES TO THE UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Dollars in thousands) (1) Basis of Presentation The accompanying unaudited consolidated and combined financial statements were derived from the stand alone unaudited financial statements of Caithness Coso Funding Corp., Coso Finance Partners and Subsidiary, Coso Energy Developers and Coso Power Developers and Subsidiary (the Coso Partnerships). All intercompany accounts and transactions were eliminated. This financial information has been provided to facilitate a more comprehensive understanding of the financial position, operating results and cash flows of the Coso Partnerships as a whole. The unaudited consolidated and combined financial statements should be read in conjunction with each individual Partnership's unaudited financial statements. The preparation of unaudited financial statements in accordance with accounting principles generally accepted in the United States requires the Coso Partnerships to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period. Actual results could differ from these estimates. The financial information herein presented reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results for interim periods presented. The results for the interim periods are not necessarily indicative of results to be expected for the full year. The Coso Partnerships have experienced significant quarterly fluctuations in operating results and it expects that these fluctuations in energy revenues, expenses and net income will continue. The data for the consolidated and combined balance sheets presented herein for September 30, 2004 and December 31, 2003 were derived from the Coso Partnership's financial statements for the interim period and fiscal year then ended and includes the effect of consolidating New CLPSI Company, LLC (CLPSI) and Coso Transmission Line Partners (CTLP), but does not include all disclosures required by accounting principles generally accepted in the United States. (2) New Accounting Pronouncements The consolidated financial statements of the Coso Partnerships include the accounts of CPLSI and CTLP, as a result of the adoption of Financial Accounting Standards Board (FASB) Interpretation No. 46. (FIN 46) (Consolidation of Variable Interest Entities), an interpretation of Accounting Research Bulletin No. 51. FIN 46 required certain variable interest entities to be consolidated by the primary beneficiary of the entity even though the equity investors do not have the characteristics of a controlling financial interest, or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. In December 2003, the FASB issued FIN 46 (R), which clarified and replaced FIN 46 that required all variable interest entities, regardless of when they were created to be evaluated under FIN 46 (R) no later than the period ending March 15, 2004. An entity shall be subject to consolidation according to the provisions of FIN 46 (R) if, by design, the following conditions exist. As a group, the holders of the equity investment at risk lack any one of the following three characteristics of a controlling financial interest: (1) the direct or indirect ability to make decisions about an entity's activities through voting rights or similar rights; (2) the obligation to absorb the expected losses of the entity if they occur; or (3) the right to receive the expected residual returns of the entity if they occur. The Coso Partnerships believe that CLPSI and CTLP, the entities that holds the inventory and transmission assets are variable interest entities and under FIN 46 (R) should be consolidated. The inventory, related 33 physical assets, and payables will be recorded as the Coso Partnership's assets and liabilities. The impact to the Coso Partnership's future statement of operations will be increased depreciation, partially offset by other income. The consolidated and combined financial statements related to prior periods have been restated to consolidate the accounts of CLPSI and CTLP as a direct result of the adoption of FIN 46 (R). There was no cumulative effect recorded upon the adoption of the Interpretation. (3) Accounts Receivable and Revenue Recognition Accounts receivable primarily consist of receivables from Edison for electricity delivered and sold under a power purchase contract. Operating revenues are recognized as income during the period in which electricity is delivered to Edison. (4) Reclassifications Certain balances in prior years have been reclassified to conform to the presentation adopted in the current year. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 27.1 Financial Data Schedule--Form SX--Caithness Coso Funding Corp. 27.2 Financial Data Schedule--Form SX--Coso Finance Partners 27.3 Financial Data Schedule--Form SX--Coso Energy Developers 27.4 Financial Data Schedule--Form SX--Coso Power Developers Certification of Chief Executive Officer Certification of Chief Financial Officer 99.1 Certification of Chief Executive Officer 99.2 Certification of Chief Financial Officer (b) Reports on Form 8-K The Coso Partnerships filed a current report on Form 8-K dated November 2, 2004 reporting a new contract entered into with the United States Navy which terminated their existing contracts. 34 EXHIBIT 27.1 Form S-X Commercial and Industrial Companies Financial Data Schedule Worksheet for: CAITHNESS COSO FUNDING CORP. ---------------------------- Review the following list of tags for Article 5 and fill in the correct data in the column(s) provided. Generally, only one column of information will be required, however, two columns are provided if required in the Financial Data Schedule. Unless otherwise noted, all tags are required. A response is required for each item within the schedule. Use the value "0" (zero) if information is immaterial, inapplicable or unknown. Decimals may not be used to state financial data except as indicated. Values not provided will be entered as "0" (zero). Missing dates will be entered as "TO COME". Please be sure to verify all information in the EDGARized exhibit. To include a footnote, place a number in parentheses next to the value and provide the text of each corresponding footnote at the end of the worksheet form. Do you wish to include a LEGEND? This schedule contains summary financial Yes X No information extracted from *_____________ --- --- and is equalified in its entirety by reference to such financial statements. *Identify the financial statement(s) to be referenced in the legend: RESTATED Are your financials being "restated" (NO VALUE REQUIRED) from a previously file period? Yes X No --- --- CIK Use this section only for coregistrant Does this data apply to a coregistrant filings. Yes X No --- --- COREGISTRANT CIK: NAME Use this section only for coregistrant Does this data apply to a coregistrant filings. Yes X No --- --- COREGISTRANT NAME: MULTIPLIER Do the financials require a multiplier X 1,000 1,000,000,000 --- ---- other than 1 (one)? X Yes No 1,000,000 1,000,000,000,000 --- --- --- ---- CURRENCY CURRENCY OF FINANCIAL DATA: Is the currency used other than US Dollars? Use in conjunction with EXCHANGE RATE tag. Yes X No --- --- PERIOD TYPE - MOS X 9 - MOS --- --- --- --- X YEAR YEAR --- --- (for annual report filings) OTHER OTHER ---- ---- FISCAL YEAR END (example: DEC-31-1997) Dec - 31 - 2003 DEC - 31 - 2004 --------------- --------------- mmm - dd - yyyy mmm - dd - yyyy PERIOD START (example: JAN-01-1997) Jan - 01 - 2003 JAN - 01 - 2004 --------------- --------------- mmm - dd - yyyy mmm - dd - yyyy PERIOD END (example: SEP-30-1997) Dec - 31 - 2003 SEP - 30 - 2004 --------------- --------------- mmm - dd - yyyy mmm - dd - yyyy EXCHANGE RATE EXCHANGE RATE: EXCHANGE RATE: Is the exchange rate other than 1 (one)? Value may contain up to 5 decimal places) Use in conjunction with CURRENCY tag. Yes X No --- ---
PERIOD TYPE Year PERIOD TYPE 9 MOS ---- ----- CASH 0 0 SECURITIES 0 0 RECEIVABLES 254,622 247,455 ALLOWANCES 0 0 INVENTORY 0 0 CURRENT ASSETDS 32,340 39,369 PP&E 0 0 DEPRECIATION 0 0 TOTAL ASSETS 254,622 247,455 CURRENT LIABILITIES 32,340 39,369 BONDS 253,614 241,077 PREFERRED MANDATORY 0 0 PREFERRED 0 0 COMMON 0 0 OTHER SE 0 0 TOTAL LIABILITY AND EQUITY 254,622 247,455 SALES 0 0 TOTAL REVENUES 24,828 16,846 CGS 0 0 TOTAL COSTS 0 0 OTHER EXPENSES 0 0 LOSS PROVISION 0 0 INTEREST EXPENSES 24,828 16,846 INCOME PRETAX 0 0 INCOME TAX 0 0 INCOME CONTINUING 0 0 DISCONTINUED 0 0 EXTRAORDINARY 0 0 CHANGES 0 0 NET INCOME 0 0 EPS BASIC 0 0 (Value may contain up to 3 decimal places) EPS DILUTED 0 0 (Value may contain up to 3 decimal places) Footnote Text: (Note: Each footnote cannot exceed 256 characters, including spaces)
EXHIBIT 27.2 Form S-X Commercial and Industrial Companies Financial Data Schedule Worksheet for: COSO FINANCE PARTNERS AND SUBSIDIARY ------------------------------------ Review the following list of tags for Article 5 and fill in the correct data in the column(s) provided. Generally, only one column of information will be required, however, two columns are provided if required in the Financial Data Schedule. Unless otherwise noted, all tags are required. A response is required for each item within the schedule. Use the value "0" (zero) if information is immaterial, inapplicable or unknown. Decimals may not be used to state financial data except as indicated. Values not provided will be entered as "0" (zero). Missing dates will be entered as "TO COME". Please be sure to verify all information in the EDGARized exhibit. To include a footnote, place a number in parentheses next to the value and provide the text of each corresponding footnote at the end of the worksheet form. Do you wish to include a LEGEND? This schedule contains summary financial Yes X No information extracted from *_____________ --- --- and is equalified in its entirety by reference to such financial statements. *Identify the financial statement(s) to be referenced in the legend: RESTATED Are your financials being "restated" (NO VALUE REQUIRED) from a previously file period? Yes X No --- --- CIK Use this section only for coregistrant Does this data apply to a coregistrant filings. Yes X No --- --- COREGISTRANT CIK: NAME Use this section only for coregistrant Does this data apply to a coregistrant filings. Yes X No --- --- COREGISTRANT NAME: MULTIPLIER Do the financials require a multiplier X 1,000 1,000,000,000 --- ---- other than 1 (one)? X Yes No 1,000,000 1,000,000,000,000 --- --- --- ---- CURRENCY CURRENCY OF FINANCIAL DATA: Is the currency used other than US Dollars? Use in conjunction with EXCHANGE RATE tag. Yes X No --- --- PERIOD TYPE - MOS X 9 - MOS --- --- --- --- X YEAR YEAR --- --- (for annual report filings) OTHER OTHER ---- ---- FISCAL YEAR END (example: DEC-31-1997) Dec - 31 - 2003 DEC - 31 - 2004 --------------- --------------- mmm - dd - yyyy mmm - dd - yyyy PERIOD START (example: JAN-01-1997) Jan - 01 - 2003 JAN - 01 - 2004 --------------- --------------- mmm - dd - yyyy mmm - dd - yyyy PERIOD END (example: SEP-30-1997) Dec - 31 - 2003 SEP - 30 - 2004 --------------- --------------- mmm - dd - yyyy mmm - dd - yyyy EXCHANGE RATE EXCHANGE RATE: EXCHANGE RATE: Is the exchange rate other than 1 (one)? Value may contain up to 5 decimal places) Use in conjunction with CURRENCY tag. Yes X No --- ---
PERIOD TYPE Year PERIOD TYPE 9 MOS ---- ----- CASH 1,454 9,921 SECURITIES 24,657 25,404 RECEIVABLES 8,996 14,175 ALLOWANCES 546 546 INVENTORY 0 0 CURRENT ASSETS 27,454 40,738 PP&E 247,215 251,130 DEPRECIATION 111,344 119,039 TOTAL ASSETS 187,265 197,088 CURRENT LIABILITIES 15,671 19,892 BONDS 97,547 93,267 PREFERRED MANDATORY 0 0 PREFERRED 0 0 COMMON 0 0 OTHER SE 0 0 TOTAL LIABILITY AND EQUITY 187,265 197,088 SALES 59,792 47,541 TOTAL REVENUES 61,416 48,520 CGS 0 0 TOTAL COSTS 0 0 OTHER EXPENSES 33,675 27,659 LOSS PROVISION 0 0 INTEREST EXPENSES 10,257 6,899 INCOME PRETAX 0 0 INCOME TAX 0 0 INCOME CONTINUING 0 0 DISCONTINUED 0 0 EXTRAORDINARY 0 0 CHANGES 1,780 0 NET INCOME 15,704 13,962 EPS BASIC 0 0 (Value may contain up to 3 decimal places) EPS DILUTED 0 0 (Value may contain up to 3 decimal places) Footnote Text: (Note: Each footnote cannot exceed 256 characters, including spaces)
EXHIBIT 27.3 Form S-X Commercial and Industrial Companies Financial Data Schedule Worksheet for: COSO ENERGY DEVELOPERS ---------------------- Review the following list of tags for Article 5 and fill in the correct data in the column(s) provided. Generally, only one column of information will be required, however, two columns are provided if required in the Financial Data Schedule. Unless otherwise noted, all tags are required. A response is required for each item within the schedule. Use the value "0" (zero) if information is immaterial, inapplicable or unknown. Decimals may not be used to state financial data except as indicated. Values not provided will be entered as "0" (zero). Missing dates will be entered as "TO COME". Please be sure to verify all information in the EDGARized exhibit. To include a footnote, place a number in parentheses next to the value and provide the text of each corresponding footnote at the end of the worksheet form. Do you wish to include a LEGEND? This schedule contains summary financial Yes X No information extracted from *_____________ --- --- and is equalified in its entirety by reference to such financial statements. *Identify the financial statement(s) to be referenced in the legend: RESTATED Are your financials being "restated" (NO VALUE REQUIRED) from a previously file period? Yes X No --- --- CIK Use this section only for coregistrant Does this data apply to a coregistrant filings. Yes X No --- --- COREGISTRANT CIK: NAME Use this section only for coregistrant Does this data apply to a coregistrant filings. Yes X No --- --- COREGISTRANT NAME: MULTIPLIER Do the financials require a multiplier X 1,000 1,000,000,000 --- ---- other than 1 (one)? X Yes No 1,000,000 1,000,000,000,000 --- --- --- ---- CURRENCY CURRENCY OF FINANCIAL DATA: Is the currency used other than US Dollars? Use in conjunction with EXCHANGE RATE tag. Yes X No --- --- PERIOD TYPE - MOS X 9 - MOS --- --- --- --- X YEAR YEAR --- --- (for annual report filings) OTHER OTHER ---- ---- FISCAL YEAR END (example: DEC-31-1997) Dec - 31 - 2003 DEC - 31 - 2004 --------------- --------------- mmm - dd - yyyy mmm - dd - yyyy PERIOD START (example: JAN-01-1997) Jan - 01 - 2003 JAN - 01 - 2004 --------------- --------------- mmm - dd - yyyy mmm - dd - yyyy PERIOD END (example: SEP-30-1997) Dec - 31 - 2003 SEP - 30 - 2004 --------------- --------------- mmm - dd - yyyy mmm - dd - yyyy EXCHANGE RATE EXCHANGE RATE: EXCHANGE RATE: Is the exchange rate other than 1 (one)? Value may contain up to 5 decimal places) Use in conjunction with CURRENCY tag. Yes X No --- ---
PERIOD TYPE Year PERIOD TYPE 9 MOS ---- ----- CASH 603 9,088 SECURITIES 10,155 10,003 RECEIVABLES 7,272 11,229 ALLOWANCES 0 0 INVENTORY 0 0 CURRENT ASSETS 18,982 31,742 PP&E 250,930 251,475 DEPRECIATION 120,411 126,558 TOTAL ASSETS 170,556 176,564 CURRENT LIABILITIES 13,507 14,232 BONDS 84,821 80,852 PREFERRED MANDATORY 0 0 PREFERRED 0 0 COMMON 0 0 OTHER SE 0 0 TOTAL LIABILITY AND EQUITY 170,556 176,564 SALES 46,869 35,600 TOTAL REVENUES 48,010 37,281 CGS 0 0 TOTAL COSTS 0 0 OTHER EXPENSES 24,820 19,829 LOSS PROVISION 0 0 INTEREST EXPENSES 8,385 5,924 INCOME PRETAX 0 0 INCOME TAX 0 0 INCOME CONTINUING 0 0 DISCONTINUED 0 0 EXTRAORDINARY 0 0 CHANGES 924 0 NET INCOME 13,881 11,528 EPS BASIC 0 0 (Value may contain up to 3 decimal places) EPS DILUTED 0 0 (Value may contain up to 3 decimal places) Footnote Text: (Note: Each footnote cannot exceed 256 characters, including spaces)
EXHIBIT 27.4 Form S-X Commercial and Industrial Companies Financial Data Schedule Worksheet for: COSO POWER DEVELOPERS AND SUBSIDIARY ------------------------------------ Review the following list of tags for Article 5 and fill in the correct data in the column(s) provided. Generally, only one column of information will be required, however, two columns are provided if required in the Financial Data Schedule. Unless otherwise noted, all tags are required. A response is required for each item within the schedule. Use the value "0" (zero) if information is immaterial, inapplicable or unknown. Decimals may not be used to state financial data except as indicated. Values not provided will be entered as "0" (zero). Missing dates will be entered as "TO COME". Please be sure to verify all information in the EDGARized exhibit. To include a footnote, place a number in parentheses next to the value and provide the text of each corresponding footnote at the end of the worksheet form. Do you wish to include a LEGEND? This schedule contains summary financial Yes X No information extracted from *_____________ --- --- and is equalified in its entirety by reference to such financial statements. *Identify the financial statement(s) to be referenced in the legend: RESTATED Are your financials being "restated" (NO VALUE REQUIRED) from a previously file period? Yes X No --- --- CIK Use this section only for coregistrant Does this data apply to a coregistrant filings. Yes X No --- --- COREGISTRANT CIK: NAME Use this section only for coregistrant Does this data apply to a coregistrant filings. Yes X No --- --- COREGISTRANT NAME: MULTIPLIER Do the financials require a multiplier X 1,000 1,000,000,000 --- ---- other than 1 (one)? X Yes No 1,000,000 1,000,000,000,000 --- --- --- ---- CURRENCY CURRENCY OF FINANCIAL DATA: Is the currency used other than US Dollars? Use in conjunction with EXCHANGE RATE tag. Yes X No --- --- PERIOD TYPE - MOS X 9 - MOS --- --- --- --- X YEAR YEAR --- --- (for annual report filings) OTHER OTHER ---- ---- FISCAL YEAR END (example: DEC-31-1997) Dec - 31 - 2003 DEC - 31 - 2004 --------------- --------------- mmm - dd - yyyy mmm - dd - yyyy PERIOD START (example: JAN-01-1997) Jan - 01 - 2003 JAN - 01 - 2004 --------------- --------------- mmm - dd - yyyy mmm - dd - yyyy PERIOD END (example: SEP-30-1997) Dec - 31 - 2003 SEP - 30 - 2004 --------------- --------------- mmm - dd - yyyy mmm - dd - yyyy EXCHANGE RATE EXCHANGE RATE: EXCHANGE RATE: Is the exchange rate other than 1 (one)? Value may contain up to 5 decimal places) Use in conjunction with CURRENCY tag. Yes X No --- ---
PERIOD TYPE Year PERIOD TYPE 9 MOS ---- ----- CASH 78 9,674 SECURITIES 8,281 9,862 RECEIVABLES 14,479 18,987 ALLOWANCES 82 82 INVENTORY 0 0 CURRENT ASSETS 23,451 39,298 PP&E 225,873 226,041 DEPRECIATION 105,364 110,949 TOTAL ASSETS 164,543 172,720 CURRENT LIABILITIES 13,800 16,284 BONDS 71,246 66,958 PREFERRED MANDATORY 0 0 PREFERRED 0 0 COMMON 0 0 OTHER SE 0 0 TOTAL LIABILITY AND EQUITY 164,543 172,720 SALES 46,149 38,193 TOTAL REVENUES 46,575 39,274 CGS 0 0 TOTAL COSTS 0 0 OTHER EXPENSES 27,410 21,433 LOSS PROVISION 0 0 INTEREST EXPENSES 7,500 5,051 INCOME PRETAX 0 0 INCOME TAX 0 0 INCOME CONTINUING 0 0 DISCONTINUED 0 0 EXTRAORDINARY 0 0 CHANGES 1,777 0 NET INCOME 9,888 12,790 EPS BASIC 0 0 (Value may contain up to 3 decimal places) EPS DILUTED 0 0 (Value may contain up to 3 decimal places) Footnote Text: (Note: Each footnote cannot exceed 256 characters, including spaces)
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002 I, James D. Bishop, Sr., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Caithness Coso Funding Corp., Coso Finance Partners and Subsidiary, Coso Energy Developers, and Coso Power Developers and Subsidiary (collectively, the Registrant); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report; 4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and 6. The Registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 12, 2004 Caithness Coso Funding Corp. a Delaware Corporation By: /S/ JAMES D. BISHOP, SR. ------------------------ James D. Bishop, Sr. Director, Chairman & Chief Executive Officer CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002 I, Christopher T. McCallion, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Caithness Coso Funding Corp., Coso Finance Partners and Subsidiary, Coso Energy Developers, and Coso Power Developers and Subsidiary (collectively, the Registrant); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report; 4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and 6. The Registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 12, 2004 Caithness Coso Funding Corp. a Delaware Corporation By: /S/ CHRISTOPHER T. MCCALLION ---------------------------- Christopher T. McCallion Executive Vice President & Chief Financial Officer Principal Financial & Accounting Officer Exhibit 99.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Caithness Coso Funding Corp., Coso Finance Partners and Subsidiary, Coso Energy Developers, and Coso Power Developers and Subsidiary (collectively, the Registrant) on Form 10-Q for the period ending September 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, James D. Bishop, Sr., Chief Executive Officer of the Registrant, certify, to the best of my knowledge and belief, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant. Date: November 12, 2004 Caithness Coso Funding Corp. a Delaware Corporation By: /S/ JAMES D. BISHOP, SR. ------------------------ James D. Bishop, Sr. Director, Chairman & Chief Executive Officer Exhibit 99.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Caithness Coso Funding Corp., Coso Finance Partners and Subsidiary, Coso Energy Developers, and Coso Power Developers and Subsidiary (collectively, the Registrant) on Form 10-Q for the period ending September 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Christopher T. McCallion, Chief Financial Officer of the Registrant, certify, to the best of my knowledge and belief, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant. Date: November 12, 2004 Caithness Coso Funding Corp. a Delaware Corporation By: /S/ CHRISTOPHER T. MCCALLION ---------------------------- Christopher T. McCallion Executive Vice President & Chief Financial Officer Principal Financial & Accounting Officer SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CAITHNESS COSO FUNDING CORP., a Delaware corporation Date: November 12, 2004 By: /S/ CHRISTOPHER T. MCCALLION ---------------------------- Christopher T. McCallion Executive Vice President & Chief Financial Officer (Principal Financial and Accounting Officer) COSO FINANCE PARTNERS AND SUBSIDIARY a California general Partnership By: New CLOC Company, LLC, its Managing General Partner Date: November 12, 2004 By: /S/ CHRISTOPHER T. MCCALLION ---------------------------- Christopher T. McCallion Executive Vice President & Chief Financial Officer (Principal Financial and Accounting Officer) COSO ENERGY DEVELOPERS a California general Partnership By: New CHIP Company, LLC, its Managing General Partner Date: November 12, 2004 By: /S/ CHRISTOPHER T. MCCALLION ---------------------------- Christopher T. McCallion Executive Vice President & Chief Financial Officer (Principal Financial and Accounting Officer) COSO POWER DEVELOPERS AND SUBSIDIARY a California general Partnership By: New CTC Company, LLC, its Managing General Partner Date: November 12, 2004 By: /S/ CHRISTOPHER T. MCCALLION ---------------------------- Christopher T. McCallion Executive Vice President & Chief Financial Officer (Principal Financial and Accounting Officer)