e10vq

0000950124-05-004688.txt : 20050804 0000950124-05-004688.hdr.sgml : 20050804 20050804165433 ACCESSION NUMBER: 0000950124-05-004688 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050804 DATE AS OF CHANGE: 20050804 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DETROIT EDISON SECURITIZATION FUNDING LLC CENTRAL INDEX KEY: 0001128956 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-51066 FILM NUMBER: 05999996 BUSINESS ADDRESS: STREET 1: 2000 SECOND AVE STREET 2: 2412 WCB CITY: DETROIT STATE: MI ZIP: 48226-1279 BUSINESS PHONE: 3132358670 MAIL ADDRESS: STREET 1: 2000 SECOND AVE STREET 2: 2412 WCB CITY: DETROIT STATE: MI ZIP: 48226-1279 10-Q 1 k96818e10vq.htm QUARTERLY REPORT FOR PEROID ENDED 06/30/05 e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended June 30, 2005

Commission file number 333-51066

The registrant meets the conditions set forth in General Instruction H(1) (a) and (b) of Form 10-Q and is, therefore, filing this Form with the reduced disclosure format.

THE DETROIT EDISON SECURITIZATION FUNDING LLC

(a Michigan limited liability company)
(Exact name of registrant as specified in its charter)


Michigan (State or other jurisdiction of incorporation or organization)		38-0478650 (I.R.S. Employer Identification No.)

2000 2^nd Avenue, Detroit, Michigan		48226-1279
(Address of principal executive offices)		(Zip Code)

313-235-4000
(Registrant’s telephone number, including area code)

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.

Yes þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

The Detroit Edison Securitization Funding LLC

Quarterly Report on Form 10-Q
Quarter Ended June 30, 2005

Table of Contents


	page
	number
FORWARD-LOOKING STATEMENTS		1

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Statement of Operations		3

Statement of Financial Position		4

Statement of Cash Flows		5

Statement of Member’s Equity		6

Notes to Financial Statements		7

Report of Independent Registered Public Accounting Firm		8

Item 2. Management’s Narrative Analysis of the Results of Operations		1

PART II – OTHER INFORMATION

Item 6. Exhibits		9

SIGNATURE		10
Chief Executive Officer Section 906 Certification
Chief Financial Officer Section 906 Certification
Monthly Servicer Certificate for April 2005
Monthly Servicer Certificate for May 2005
Monthly Servicer Certificate for June 2005

FORWARD-LOOKING STATEMENTS

Certain information presented herein includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve certain risks and uncertainties that may cause actual future results to differ materially from those contemplated, projected, estimated or budgeted in such forward-looking statements. Securitization bondholders may suffer payment delays or losses if The Detroit Edison Securitization Funding LLC’s (Company’s) assets are not sufficient to pay interest or the scheduled principal of the securitization bonds. Funds for payments are dependent upon the Securitization Property and the right to collect the securitization surcharge over a period limited to 15 years pursuant to a Michigan statute. In addition, collections are dependent on the level of The Detroit Edison Company (Detroit Edison) electric deliveries to customers.

MANAGEMENT’S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS

The Results of Operations discussion for the Company is presented in accordance with General Instruction H(2) (a) of Form 10-Q.

The Company is a special purpose entity established by Detroit Edison to recover certain qualified costs, called Securitization Property by Michigan statute. The qualified costs primarily represent Detroit Edison’s unamortized investment in the 1,150 Megawatt Fermi 2 nuclear power plant that was classified as a regulatory asset. On March 9, 2001, the Company issued securitization bonds and used the net proceeds to purchase the Securitization Property from Detroit Edison. The Company receives surcharge revenues that are intended to recover its costs and service its debt. Amortization expense associated with the Securitization Property is adjusted as necessary so that expenses equal revenues and interest income.

For the three-month period ended June 30, 2005, the Company earned $48,879,000 in surcharge revenues and $321,000 in interest income compared to $44,113,000 in surcharge revenues and $113,000 in interest income for the three-month period ended June 30, 2004. The increase in surcharge revenues is due to the increase in surcharge rates, and increase in electricity sales by Detroit Edison. Amortization expense consists of amortization of the Securitization Property, overcollateralization fee, and over-recovery of securitization surcharge. The amortization expense for the three-month periods ended June 30, 2005 and 2004 was $25,752,000 and $19,550,000, respectively. A portion of the increase in amortization expense reflects the adjustment needed to have revenues and interest income equal expenses. The higher amortization amount is primarily attributable to the increase in bond amortization and surcharge revenues, partially offset by a decrease in interest expense. During the 2005 three-month period, the Company also incurred interest expense of $22,737,000, amortization of debt issuance costs of $403,000 and servicing and administrative fees of $281,000 compared to interest expense of $24,008,000, amortization of debt issuance costs of $368,000, and servicing and administrative fees of $281,000 for the 2004 three-month period.

For the six-month period ended June 30, 2005, the Company earned $95,554,000 in surcharge revenues and $662,000 in interest income compared to $88,673,000 in surcharge revenues and $268,000 in interest income for the six-month period ended June 30, 2004. The increase in surcharge revenues is due to the change in surcharge rates and increase in electricity sales by Detroit Edison. The increase in interest income is caused by the increase in market interest rates.

The amortization expense for the six-month periods ended June 30, 2005 and 2004 was $48,827,000 and $39,152,000, respectively. A portion of the increase in amortization expense reflects the adjustment needed to have revenues and interest income equal expenses. The higher amortization amount was primarily attributable to the increase in bond amortization and surcharge revenues, and partially offset by a decrease in interest expense. During the 2005 six-month period, the Company also incurred interest expense of $45,931,000, amortization of debt issuance costs of $824,000, and servicing and administrative fees of $562,000 compared to interest expense of $48,441,000, amortization of debt issuance costs of $757,000, and servicing fees and administrative fees of $562,000 for the 2004 six-month period.

Detroit Edison, as Servicer, collects a surcharge from its customers for the benefit of the Company and the Securitization Bondholders. The surcharge is adjusted annually to provide sufficient funds for timely payments related to the securitization bonds. This surcharge rate was modified to $0.00388 per kilowatthour (kWh) on March 1, 2005 compared to $0.00374 per kWh that became effective March 1, 2004.

THE DETROIT EDISON SECURITIZATION FUNDING LLC

STATEMENT OF OPERATIONS (Unaudited)


	Three Months Ended						Six Months Ended
	June 30						June 30
	2005			2004			2005			2004
(in Thousands)
Operating Revenues	$	48,879		$	44,113		$	95,554		$	88,673


Operating Expenses
Amortization expense		25,752			19,550			48,827			39,152
Servicing and administrative fees		281			281			562			562
Other		27			19			72			29

		26,060			19,850			49,461			39,743

Operating Income		22,819			24,263			46,093			48,930


Interest Expense and Other
Interest expense		22,737			24,008			45,931			48,441
Interest income		(321	)		(113	)		(662	)		(268	)
Amortization of debt issuance costs		403			368			824			757

		22,819			24,263			46,093			48,930


Net Income	$	—		$	—		$	—		$	—

See Notes to Financial Statements (Unaudited)

THE DETROIT EDISON SECURITIZATION FUNDING LLC

STATEMENT OF FINANCIAL POSITION


	June 30
	2005		December 31
(in Thousands)	(Unaudited)		2004
ASSETS
Current Assets
Restricted cash	$	67,007	$	73,137
Accounts receivable		29,893		23,144
Accrued unbilled revenues		10,510		12,181

		107,410		108,462

Securitized Regulatory Assets
Securitization property, less accumulated amortization of $328,820 and $282,012, respectively		1,390,895		1,437,703

Other Assets
Unamortized bond issuance cost, less accumulated amortization of $5,791 and $4,966, respectively		24,494		25,319

	$	1,522,799	$	1,571,484

LIABILITIES AND MEMBER’S EQUITY
Current Liabilities
Accrued interest	$	30,316	$	31,261
Accounts payable to member		416		375
Current portion of securitization bonds payable		100,955		96,349
Securitization reserve		34,187		32,481

		165,874		160,466

Non-Current Liabilities and Deferred Credits
Securitization bonds payable		1,345,467		1,399,872
Other		2,708		2,396

		1,348,175		1,402,268

Member’s Equity		8,750		8,750

	$	1,522,799	$	1,571,484

See Notes to Financial Statements (Unaudited)

THE DETROIT EDISON SECURITIZATION FUNDING LLC

STATEMENT OF CASH FLOWS (Unaudited)


	Six Months Ended
	June 30
(in Thousands)	2005			2004
Operating Activities
Net income	$	—		$	—
Adjustments to reconcile net income to net cash from operating activities:
Amortization		49,651			39,909
Changes in current assets and liabilities:
Accounts receivable and accrued unbilled revenues		(5,078	)		(6,009	)
Interest payable		(945	)		(849	)
Accounts payable		41			(35	)

Net cash from operating activities		43,669			33,016


Investing Activities
Restricted cash		6,130			13,198

Net cash from investing activities		6,130			13,198


Financing Activities
Payment of bonds		(49,799	)		(46,214	)

Net cash used for financing activities		(49,799	)		(46,214	)


Net Increase in Cash and Cash Equivalents		—			—
Cash and Cash Equivalents at Beginning of the Period		—			—

Cash and Cash Equivalents at End of the Period	$	—		$	—


Supplementary Cash Flow Information
Interest paid	$	46,876		$	49,290

See Notes to Financial Statements (Unaudited)

THE DETROIT EDISON SECURITIZATION FUNDING LLC

STATEMENT OF MEMBER’S EQUITY (Unaudited)


	Six Months Ended
	June 30
	2005		2004
(in Thousands)
Balance beginning of period	$	8,750	$	8,750


Balance end of period	$	8,750	$	8,750

See Notes to Financial Statements (Unaudited)

The Detroit Edison Securitization Funding LLC

Notes to Financial Statements (Unaudited)

NOTE 1 — GENERAL

The financial statements included herein should be read in conjunction with the notes to financial statements contained in the 2004 Annual Report on Form 10-K.

The accompanying financial statements are prepared using accounting principles generally accepted in the United States of America. These accounting principles require management to use estimates and assumptions that impact reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from those estimates.

The financial statements are unaudited, but in the opinion of the Company, include all adjustments necessary for a fair statement of the results for the interim periods. Financial results for this interim period are not necessarily indicative of results that may be expected for any other interim period or for the fiscal year.

NOTE 2 — LONG-TERM DEBT

The Company retired $49,799,000 of securitization bonds during the first quarter of 2005.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Managers of
The Detroit Edison Securitization Funding LLC

We have reviewed the accompanying condensed statement of financial position of The Detroit Edison Securitization Funding LLC as of June 30, 2005, and the related condensed statement of operations for the three-month and six-month periods ended June 30, 2005 and 2004, and the condensed statements of cash flows and member’s equity for the six-month periods ended June 30, 2005 and 2004. These interim financial statements are the responsibility of The Detroit Edison Securitization Funding LLC’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the statement of financial position of The Detroit Edison Securitization Funding LLC as of December 31, 2004, and the related statements of operations, cash flows and member’s equity for the year then ended (not presented herein); and in our report dated March 15, 2005, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed statement of financial position as of December 31, 2004 is fairly stated, in all material respects, in relation to the statement of financial position from which it has been derived.

/S/ DELOITTE & TOUCHE LLP

Detroit, Michigan
August 4, 2005

Other Information

EXHIBITS


Exhibit
Number		Description
Filed:
99-68		Monthly Servicer Certificate dated May 13, 2005

99-69		Monthly Servicer Certificate dated June 13, 2005

99-70		Monthly Servicer Certificate dated July 13, 2005

Furnished:
32-17		Chief Executive Officer Section 906 Certification

32-18		Chief Financial Officer Section 906 Certification

SIGNATURE

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.


		THE DETROIT EDISON
		SECURITIZATION FUNDING LLC

Date: August 4, 2005		/s/ DANIEL G. BRUDZYNSKI

		Daniel G. Brudzynski
		Chief Accounting Officer and Controller

EXHIBIT INDEX


Exhibit
Number		Description
Filed:
99-68		Monthly Servicer Certificate dated May 13, 2005

99-69		Monthly Servicer Certificate dated June 13, 2005

99-70		Monthly Servicer Certificate dated July 13, 2005

Furnished:
32-17		Chief Executive Officer Section 906 Certification

32-18		Chief Financial Officer Section 906 Certification

EX-32.17 2 k96818exv32w17.htm CHIEF EXECUTIVE OFFICER SECTION 906 CERTIFICATION exv32w17

Exhibit 32-17

CERTIFICATION 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 on Form 10-Q of The Detroit Edison Securitization Funding LLC (the “Company”) for the quarter ended June 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David E. Meador, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

(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 results of operations of the Company.


Dated: August 4, 2005		/s/ DAVID E. MEADOR

		David E. Meador
		Manager
		The Detroit Edison Securitization Funding LLC

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.18 3 k96818exv32w18.htm CHIEF FINANCIAL OFFICER SECTION 906 CERTIFICATION exv32w18

Exhibit 32-18

CERTIFICATION 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 on Form 10-Q of The Detroit Edison Securitization Funding LLC (the “Company”) for the quarter ended June 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel G. Brudzynski, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

(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 results of operations of the Company.


Dated: August 4, 2005		/s/ DANIEL G. BRUDZYNSKI

		Daniel G. Brudzynski
		Controller
		The Detroit Edison Securitization Funding LLC

EX-99.68 4 k96818exv99w68.txt MONTHLY SERVICER CERTIFICATE FOR APRIL 2005 EXHIBIT 99-68 MONTHLY SERVICER CERTIFICATE Pursuant to Section 4.01(d)(ii) of the Securitization Property Servicing Agreement, dated as of March 9, 2001 (the "Agreement"), between The Detroit Edison Company, as servicer (the "Servicer") and The Detroit Edison Securitization Funding LLC, the Servicer does hereby certify as follows: Capitalized terms used herein have their respective meanings as set forth in the Agreement. For the Monthly Period: April 2005 ---------- 1. BILLINGS: a) Monthly kWh Consumption: 3,993,149,412 ------------- b) Applicable SB Charge: $ 0.00388 --------- c) Total SB Charge Amount Invoiced this Month (Net of .5% uncollectible factor): $ 15,406,997.47 --------------- d) Cumulative SB Charge Amount Invoiced this Remittance Period: $ 65,240,058,00 --------------- 2. REMITTANCES: a) Weighted Average Days outstanding: 55 -- b) Total Amount Remitted this Month: $ 15,747,824.19 --------------- c) Cumulative Amount Remitted this Remittance Period: $ 59,258,500.95 --------------- 3. BALANCES ON SUBACCOUNTS (AT END OF MONTHLY PERIOD): a) Collection Account Balance: $ 32,729,063.94 --------------- b) Reserve Subaccount Balance: $ 587.36 --------- c) Series Overcollateralization Subaccount Balance: $198.08 ------- d) Series Capital Subaccount Balance: $ 2,956,231.74 --------------

Executed as of May 13, 2005. THE DETROIT EDISON COMPANY as Servicer By: /s/ Peter B. Oleksiak ------------------------------------- Name: Peter B. Oleksiak Title: Assistant Controller EX-99.69 5 k96818exv99w69.txt MONTHLY SERVICER CERTIFICATE FOR MAY 2005 EXHIBIT 99-69 MONTHLY SERVICER CERTIFICATE Pursuant to Section 4.01(d)(ii) of the Securitization Property Servicing Agreement, dated as of March 9, 2001 (the "Agreement"), between The Detroit Edison Company, as servicer (the "Servicer") and The Detroit Edison Securitization Funding LLC, the Servicer does hereby certify as follows: Capitalized terms used herein have their respective meanings as set forth in the Agreement. For the Monthly Period: May 2005 -------- 1. BILLINGS: a) Monthly kWh Consumption: 3,797,309,119 ------------- b) Applicable SB Charge: $ 0.00388 --------- c) Total SB Charge Amount Invoiced this Month (Net of .5% uncollectible factor): $ 14,640,192.73 --------------- d) Cumulative SB Charge Amount Invoiced this Remittance Period: $ 79,880,250.73 --------------- 2. REMITTANCES: a) Weighted Average Days outstanding: 55 -- b) Total Amount Remitted this Month: $ 14,934,585.82 --------------- c) Cumulative Amount Remitted this Remittance Period: $ 74,193,086.77 --------------- 3. BALANCES ON SUBACCOUNTS (AT END OF MONTHLY PERIOD): a) Collection Account Balance: $ 47,669,535.61 --------------- b) Reserve Subaccount Balance: $ 587.36 --------- c) Series Overcollateralization Subaccount Balance: $198.08 ------- d) Series Capital Subaccount Balance: $ 2,955,356.41 --------------

Executed as of June 13, 2005. THE DETROIT EDISON COMPANY as Servicer By: /s/ Peter B. Oleksiak ------------------------------------ Name: Peter B. Oleksiak Title: Assistant Controller EX-99.70 6 k96818exv99w70.txt MONTHLY SERVICER CERTIFICATE FOR JUNE 2005 EXHIBIT 99-70 MONTHLY SERVICER CERTIFICATE Pursuant to Section 4.01(d)(ii) of the Securitization Property Servicing Agreement, dated as of March 9, 2001 (the "Agreement"), between The Detroit Edison Company, as servicer (the "Servicer") and The Detroit Edison Securitization Funding LLC, the Servicer does hereby certify as follows: Capitalized terms used herein have their respective meanings as set forth in the Agreement. For the Monthly Period: June 2005 --------- 1. BILLINGS: a) Monthly kWh Consumption: 4,493,649,916 ------------- b) Applicable SB Charge: $ 0.00388 --------- c) Total SB Charge Amount Invoiced this Month (Net of .5% uncollectible factor): $ 17,344,940.05 --------------- d) Cumulative SB Charge Amount Invoiced this Remittance Period: $ 97,225,190.78 --------------- 2. REMITTANCES: a) Weighted Average Days outstanding: 55 -- b) Total Amount Remitted this Month: $ 16,313,650.98 --------------- c) Cumulative Amount Remitted this Remittance Period: $ 90,506,737.75 --------------- 3. BALANCES ON SUBACCOUNTS (AT END OF MONTHLY PERIOD): a) Collection Account Balance: $ 64,043,702.55 --------------- b) Reserve Subaccount Balance: $ 587.36 --------- c) Series Overcollateralization Subaccount Balance: $198.08 ------- d) Series Capital Subaccount Balance: $ 2,962,709.15 --------------

Executed as of July 13, 2005. THE DETROIT EDISON COMPANY as Servicer By: /s/ Peter B. Oleksiak ------------------------------------ Name: Peter B. Oleksiak Title: Assistant Controller