EX-99.(B) 21 k02628exv99wxby.txt FINANCIAL STATEMENTS FOR JORF LASFAR EXHIBIT (99)(b) JORF LASFAR ENERGY COMPANY S.C.A JLEC CENTRALE THERMIQUE DE JORF LASFAR B P 99 SIDI BOUZID EL JADIDA MOROCCO Tel : 212 23 34 53 71 Fax : 212 23 34 54 05 US GAAP FINANCIAL STATEMENTS AS OF DECEMBER 31, 2005, 2004 AND 2003 AUDITED R.C. n degree 86655 - Patente n degree 35511273 - Identification Fiscale (I.S TVA) n degree 1021595 JORF LASFAR ENERGY COMPANY INDEX TO FINANCIAL STATEMENTS
Page(s) ------- Balance Sheet As of December 31, 2005, 2004, and 2003 ........................ 2 Statement of Income For years ending December 31, 2005, 2004, and 2003 ............. 3 Statement of Stockholders' Equity For years ending December 31, 2005, 2004, and 2003 ............. 4 Statement of Cash Flows For years ending December 31, 2005, 2004, and 2003 ............. 5 Notes to US GAAP Financial Statements .................................... 6-26
JORF LASFAR ENERGY COMPANY BALANCE SHEET
Note December 31, 2005 December 31, 2004 December 31, 2003 ---- ----------------- ----------------- ----------------- (000) U.S. Dollars (000) U.S. Dollars (000) U.S. Dollars ASSETS Current Assets Cash ............................................. 3.1 62,763 69,800 65,611 Inventories ...................................... 2.c & 4 51,943 59,318 38,548 Account Receivable ............................... 5 114,217 123,867 85,486 Prepayments ...................................... 6 & 2.h 7,936 3,389 4,209 Recoverable VAT .................................. 8 0 1,540 0 Net investment from $ DFL model .................. 2.b & 17.3 11,645 9,644 38,461 Net investment from Euro DFL model ............... 2.b & 17.3 15,132 28,264 40,942 --------- --------- --------- Total current assets ........................ 263,635 295,823 273,256 Long Term Assets, net Restricted Cash .................................. 3.2 231 22,591 83,049 Fixed Assets ..................................... 7 14,881 12,159 9,603 Net investment from $ DFL model .................. 2.b & 17.3 645,078 656,723 638,004 Net investment from Euro DFL model ............... 2.b & 17.3 363,316 437,791 411,100 $ Capacity Charges less than $ DFL model ......... 13.1 76 0 713 Euro Capacity Charges less than Euro DFL model ... 13.2 425 0 0 Deferred Tax Asset ............................... 2.f 0 1,556 0 Other Long Term Assets ........................... 9 13,389 16,339 19,058 --------- --------- --------- Total Long Term Assets ...................... 1,037,396 1,147,158 1,161,527 --------- --------- --------- Total assets ................................ 1,301,031 1,442,980 1,434,783 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable to third parties ................ 10 & 2.h 54,319 73,332 47,721 Accounts payable to related parties .............. 11 & 2.h 104,428 96,410 176,823 VAT Liability ................................... 8 7,131 0 3,972 Taxes payable .................................... 12 & 2.h 499 565 3,598 Current part of Long-term loans in US Dollars .... 15 25,749 25,749 25,749 Current part of Long-term loans in Euro .......... 15 41,531 48,043 44,491 Other current liabilities ........................ 14 7,327 9,363 7,739 --------- --------- --------- Total current liabilities ................... 240,984 253,461 310,093 Non-Current Liabilities Long-term loans in US Dollars .................... 15 160,928 186,677 212,426 Long-term loans in Euro .......................... 15 259,569 348,314 367,052 $ Capacity Charges greater than $ DFL model ...... 13.1 0 44 0 Euro Capacity Charges greater than Euro DFL model 13.2 0 73 422 Deferred Tax Liability ........................... 2.f 3,346 0 0 Derivative Instrument Liability .................. 20 15,107 23,446 22,050 Postemployment Benefits .......................... 19 2,020 13,782 9,878 --------- --------- --------- Total non-current liabilities ............... 440,970 572,336 611,828 Commitment and Contingencies 22 Stockholders' Equity Common Stock ..................................... 16.1 58 58 58 Convertible Stockholders' Securities ............. 16.2 201,425 201,425 201,425 Preferred Stock .................................. 16.3 185,930 185,930 185,930 Retained Earnings ................................ 16.4 246,771 253,216 147,499 Other Comprehensive Income or (Loss) ............. 20 (15,107) (23,446) (22,050) --------- --------- --------- Total stockholders' equity .................. 619,077 617,183 512,862 --------- --------- --------- Total liabilities and stockholders' equity .. 1,301,031 1,442,980 1,434,783
The accompanying Notes 1 to 23 are an integral part of these financial statements. Page 2 JORF LASFAR ENERGY COMPANY STATEMENT OF INCOME
January 1, 2005 January 1, 2004 January 1, 2003 to to to Note December 31, 2005 December 31, 2004 December 31, 2003 ---- ----------------- ----------------- ----------------- (000) U.S. Dollars (000) U.S. Dollars (000) U.S. Dollars REVENUE Lease Revenue from $ DFL model ...... 2.b & 17.2 89,258 80,476 81,793 Lease Revenue from Euro DFL model ... 2.b & 17.2 92,865 104,078 104,635 Energy Payments ..................... 2.h 267,215 216,992 125,985 O&M Revenue ......................... 2.h 53,212 52,406 48,062 Supplemental Capacity Charges ....... 3,597 4,173 3,949 License Tax Reimbursement ........... 3,038 2,864 4,102 Other ............................... 169 844 352 ------- ------- ------- TOTAL REVENUE 509,354 461,833 368,878 OPERATING EXPENSES Coal Cost ........................... 2.h 276,294 224,797 132,153 Fuel Oil Cost ....................... 1,476 1,085 1,280 O&M Costs ........................... 38,893 32,876 33,554 Operator's Incentive ................ 2,906 4,281 2,784 Generator Costs ..................... 2.h 9,298 11,457 9,776 License Tax Costs ................... 3,038 2,864 4,102 Amortization of Major Maintenance ... 9.1 2,529 2,564 1,935 Depreciation of Other Assets ........ 3,316 2,966 2,093 Non-Current Pension Expense ......... 2,864 2,989 2,902 ------- ------- ------- TOTAL OPERATING EXPENSES 340,614 285,879 190,580 OPERATING INCOME 168,741 175,954 178,299 FINANCIAL ITEMS Financial Income .................... 2,682 1,786 2,025 Exchange Gain (+) or Loss (-) ...... 2.d (4,615) 1,867 (8,605) Financial Expenses .................. 18 (40,161) (46,893) (49,425) ------- ------- ------- TOTAL FINANCIAL ITEMS (42,094) (43,239) (56,005) INCOME BEFORE TAXES 126,647 132,715 122,293 Income Taxes Current ........................ 2.e 10,029 9,077 15,448 Deferred ....................... 2.f 5,057 (1,556) (13,005) ------- ------- ------- NET INCOME 16.4 & 21 111,561 125,194 119,850
The accompanying Notes 1 to 23 are an integral part of these financial statements. Page 3 JORF LASFAR ENERGY COMPANY STATEMENT OF STOCKHOLDERS' EQUITY
January 1, 2005 January 1, 2004 January 1, 2003 to to to December 31, December 31, December 31, Note 2005 2004 2003 ---- ---- ---- ---- COMMON STOCK At beginning and end of period in number of shares 16.1 5,500 5,500 5,500 At beginning and end of period in thousands of USD 16.1 58 58 58 (000) U.S. Dollars CONVERTIBLE STOCKHOLDERS' SECURITIES At beginning of period 201,425 201,425 201,425 Conversion of Convertible Stockholders' Securities to Preferred Stock 0 0 0 Conversion of Convertible Stockholders' Securities to Common Stock 0 0 0 ------- ------- ------- At end of period 16.2 201,425 201,425 201,425 PREFERRED STOCK At beginning of period 185,930 185,930 185,930 Conversion of Convertible Stockholders' Securities to Preferred Stock 0 0 0 Conversion of Preferred Stock to Common Stock 0 0 0 ------- ------- ------- At end of period 16.3 185,930 185,930 185,930 RETAINED EARNINGS (DEFICIT) At beginning of period 253,216 147,499 113,031 Net income 111,561 125,194 119,850 Common stock dividend (97,608) 0 (64,973) Preferred stock dividend (9,585) (9,349) (9,796) Convertible stockholders' securities (10,813) (10,128) (10,613) ------- ------- ------- At end of period 16.4 246,770 253,216 147,499 OTHER COMPREHENSIVE INCOME (LOSS) (A) Derivative Instruments At beginning of period (23,446) (22,050) (21,410) Reclassification of gains (losses) included in net income 6,680 7,675 6,871 Unrealized gain (loss) on derivative instruments 1,659 (9,072) (7,511) ------- ------- ------- At end of period 20 (15,107) (23,446) (22,050) ------- ------- ------- 619,077 617,183 512,862 ======= ======= ======= (a) Disclosure of Comprehensive Income (Loss) Net income 111,561 125,194 119,850 Derivative instruments Reclassification of gains (losses) in net income 6,680 7,675 6,871 Unrealized gain (loss) on derivative instruments 1,659 (9,072) (7,511) ------- ------- ------- Total Comprehensive Income 119,900 123,797 119,211 ======= ======= =======
The accompanying Notes 1 to 23 are an integral part of these financial statements. Page 4 JORF LASFAR ENERGY COMPANY STATEMENT OF CASH FLOWS
January 1, 2005 January 1, 2004 January 1, 2003 to to to December 31, 2005 December 31, 2004 December 31, 2003 (000) U.S. (000) U.S. (000) U.S. Note Dollars Dollars Dollars ---- ------- ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES Payments received from ONE ...................................... $ 593,249 $ 526,880 $ 426,250 Interest received ............................................... 2,412 1,538 1,870 Rebates paid to ONE ............................................. (40,023) (58,108) (5,376) Corporate Income Tax Payments ................................... (14,258) (12,795) (12,826) Insurance Payments .............................................. (5,339) (2,927) (5,699) Interest Payments .............................................. (41,423) (46,626) (49,136) Payments to Coal Suppliers ...................................... (280,730) (210,454) (111,262) Payments of Operating Costs ..................................... (62,375) (58,302) (53,971) Payments to Pension Plans ....................................... (13,826) (601) (496) Cash Effect of Value Added Tax .................................. 8,693 (12,393) 2,463 --------- --------- --------- Net cash provided (+) or used (-) by operating activities... 21 146,380 126,211 191,816 CASH FLOWS USED FOR INVESTING ACTIVITIES Net decrease (increase) in restricted cash ...................... 22,324 60,795 (25,942) Acquisition of fixed assets ..................................... (4,958) (6,379) (2,300) Payment of Major Maintenance costs .............................. 0 0 (6,261) --------- --------- --------- Net cash provided (+) or used (-) by investing activities... 17,366 54,416 (34,503) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from loans ............................................. 0 0 0 Proceeds of share capital payments .............................. 0 0 0 Repayment of loans .............................................. (69,503) (69,900) (65,639) Payment of Convertible Securities interest ...................... (10,308) (9,595) (11,417) Payment of Preferred Stock dividends ............................ (9,515) (8,857) (10,539) Payment of Common Stock dividends ............................... (76,093) (89,703) (54,877) Repayment of Stockholders loans ................................. 0 0 0 Purchase of Preferred Stock shares .............................. 0 0 0 Purchase of Common Stock shares ................................. 0 0 0 --------- --------- --------- Net cash provided (+) or used (-) by financing activities... (165,419) (178,055) (142,472) Effect of exchange rate changes on cash ........................... (5,364) 1,617 4,087 CASH AT BEGINNING OF PERIOD ......................................... 69,800 65,611 46,683 NET INCREASE (DECREASE) IN CASH DURING PERIOD ....................... (7,037) 4,188 18,928 --------- --------- --------- CASH AT END OF PERIOD ............................................... 3.1 $ 62,763 $ 69,800 $ 65,611 ========= ========= =========
The accompanying Notes 1 to 23 are an integral part of these financial statements. Page 5 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 1. GENERAL A. BACKGROUND The power station at Jorf Lasfar is located on the Atlantic coast of Morocco, adjacent to the Port of Jorf Lasfar, in the Province of El Jadida. This location is approximately 127 km south--west of Casablanca. Units 1 and 2 of the power station were constructed by GEC Alstom for the Moroccan Electricity Company, Office National de l'Electricite ("ONE"), and are now in commercial operation. Each of these existing Units is 330 MW, fired by coal. In October of 1994, the ONE issued a public tender for international companies to expand the power station at Jorf Lasfar. In February of 1995, the ONE selected the "Consortium" of ABB Energy Ventures and CMS Generation as the preferred bidder and exclusive partner for negotiation. In April of 1996, the Consortium and the ONE reached agreement in principle, and initialed the necessary Project Agreements. B. ESTABLISHMENT In order to officially conclude and implement these Project Agreements, the Consortium established the Jorf Lasfar Energy Company (the "Company" or "JLEC") on January 20, 1997. The Company was established as a limited partnership ("societe en commandite par actions") in accordance with the Laws of the Kingdom of Morocco, with Commercial Registration Number 86655, Fiscal Identification Number 1021595, and Patente Number 35511274. In accordance with its charter documents, the Company's objective and purpose is to construct, operate, manage and maintain the power station at Jorf Lasfar, including the development, financing, engineering, design, construction, commissioning, testing, operation and maintenance of two (2) new coal-fired Units, which are very similar in size and technology to the existing Units. In order to secure its fuel supply the Company also operates and maintains the coal-unloading pier in the Port of Jorf Lasfar. For these activities, the Company received a "right of possession" ("droit de jouissance") for the Site, the existing Units, the new Units and coal unloading pier. This "right of possession" will continue for the duration of the Project Agreements, which is anticipated to be 30 years, ending on September 13, 2027. C. COMPANY LOAN, TRANSFER OF POSSESSION, PROJECT FINANCING AND INITIAL DISBURSEMENT On September 12, 1997, all Project Agreements were signed, the Company Loan Agreement was executed and the first disbursement of the Company Loan was used to pay the TPA fee to ONE. As a consequence, JLEC received possession of the power station at Jorf Lasfar on September 13, 1997, and began to sell its available capacity and net generation to ONE. All remaining requirements for project financing were completed in November, and initial disbursement of the Project Loans occurred on November 25, 1997. D. CONSTRUCTION, COMMERCIAL OPERATION, PURCHASE OF COMPANY LOAN AND REPAYMENT OF PROJECT LOANS After a period of construction lasting 33 months and 41 months, Unit 3 and 4 began normal commercial operation on June 9, 2000, and February 2, 2001, respectively. Consequently, the JLEC stockholders purchased 100% of the Company Loan Notes on December 11, 2000, and JLEC began the repayment of all Project Loans on May 15, 2001. JLEC is scheduled to complete the repayment of all Project Loans on February 15, 2013. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. BASIS OF PREPARATION OF FINANCIAL STATEMENTS The Company's financial statements are prepared using the historical cost convention. The accounting and reporting policies of the Company are in accordance with the generally accepted accounting principles of Morocco, which are called "Code General de Normalisation Comptable" or "CGNC". Financial statements are prepared in accordance with these CGNC standards, and expressed in Dirhams. In addition to and separately from Moroccan (CGNC) financial statements in Dirhams, the Company uses the U.S Dollar as functional currency, and has prepared these financial statements in accordance with generally accepted accounting principles of the United States. Page 6 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 B. REVENUE RECOGNITION On September 12, 1997, the Company and the Office National de L'Electricite executed a set of contracts related to the power station at Jorf Lasfar. In accordance with Statement of Financial Accounting Standard (SFAS) No. 13, these contracts are accounted for as a direct financing lease. Accordingly, JLEC (the "Lessor") will receive a stream of payments from ONE (the "Lessee") over the term of the lease. The term of the lease is determined in accordance with SFAS No. 13 Section (5)(f) which has been superseded by SFAS No. 98 Section 22(a). The following policies are used to calculate the minimum lease payments and the unearned income from the lease. MINIMUM LEASE PAYMENTS are determined in accordance with SFAS No. 13 Section 5(j), and are based on the capacity payments that ONE will take to JLEC. These minimum lease payments do not include reimbursable or executory costs such as the reimbursement of coal costs. The sum of these capacity payments equals the gross investment under the lease. This gross investment minus the net investment in the plants is defined to be the UNEARNED INTEREST INCOME. This unearned interest income will be accreted and recognized into earnings as LEASE REVENUE over the lease term using the effective interest method so as to produce a constant periodic rate of return on the net investment. The NET INVESTMENT represents the cost of acquiring and constructing the leased assets. These ACQUISITION AND CONSTRUCTION COSTS include the following items which are capitalized and allocated to Units 1 and 2 and Units 3 and 4 based upon appropriate allocation methodologies: TRANSFER OF POSSESSION AGREEMENT (TPA): The TPA payment is included in the cost basis of the leased assets. DIRECT CONSTRUCTION COSTS: All direct costs related to construction are included in the cost basis of the leased assets. CAPITALIZED COSTS: Interest and financing costs incurred during construction are capitalized and included in the cost of the constructed units. PROJECT DEVELOPMENT COSTS AND FEES: These costs and fees are also capitalized and included in the cost basis of the leased assets. FINANCING COSTS: Interest expense is recognized on the effective interest method over the life of the debt. Other financing costs such as commitment fees, guarantee fees, etc. are considered a component of the interest expense of the related debt or financing. As such, they are amortized into expense using the effective interest method over the life of the related debt or financing. C. INVENTORIES The Company accounts for inventories by consistently applying the FIFO method for spare part inventory valuation and average cost method for Coal and other inventory valuation. Inventories are periodically revalued to the lessor of market value or cost. Page 7 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 D. FOREIGN CURRENCY TRANSACTIONS The books and records of the Company for U.S. GAAP are maintained in U.S. Dollars, which is both the reporting and functional currency. Transactions in other currencies are translated to U.S. Dollars at the spot rate for current period expenses and at the settlement rate for non-period transactions. Monetary assets and monetary liabilities outstanding in other foreign currencies on balance sheet dates are translated into U.S. Dollars at rates prevailing on such balance sheet dates. Exchange gains and losses on those foreign currency operations are included in determining net income for the period in which exchange rates change. E. CORPORATE TAX Current Income tax is determined under Moroccan Income tax rules. In 1997, JLEC signed a "tax incentive" convention with the Moroccan tax authorities. The main principles of this convention are summarized below: - Income is subject to corporate tax rate of 35% - Income tax holiday period is ten years - Income tax holiday period starts on the "commercial operation date" for each unit - Income tax holiday is 100% during the first five-year period then at 50% of the income tax rate during the second five-year period - Income not related to the sale of electricity is subject to a tax rate of 35% The "commercial operation date" for Units 1 and 2, Unit 3 and Unit 4 were September 13, 1997, June 10, 2000 and February 3, 2001, respectively. On September 13, 2002, income related to Units 1 and 2 became taxable at 17.5%. On June 10, 2005, income related to Unit 3 became taxable at 17.5%. Unit 4 was still in the 100% tax holiday period during 2005. F. DEFERRED INCOME TAX As of December 31, 2005, the applicable tax rate on Units 1, 2 and 3 is 17.5%. JLEC determines and books the current income tax (US$ 10,028,853 for 2005) as required by the tax laws and regulations of Morocco. Temporary differences between US GAAP and the CGNC balance sheets may create the need to record deferred income taxes. In particular, the treatment of Net Investment and revenue recognition (as disclosed in note 2.b above) under US GAAP are different from the treatment of these items under the tax laws and regulations of Morocco. The main temporary differences result from the use of the Direct Financing Lease method under US GAAP which generated a Deferred Tax Liability of $ 5,999,932 and differences in the timing of the deductibility of pension liabilities which generated a Deferred Tax Asset of $ 2,498,693. The total of deferred tax liability is $ 3,501,239 ($0 as of December 31, 2004 and $0 as of December 31, 2003). The total of the deferred tax asset amounts to $ 0 ($1,555,763 as of December 31, 2004 and $0 as of December 31, 2003). G. OFF BALANCE SHEET COMMITMENTS The Company discloses all off-balance sheet commitments, if any, on balance sheet dates. H. RECLASSIFICATIONS Certain amounts for the prior period have been reclassified for comparative purposes. These reclassifications, however, did not change the Total Revenue or Total Operating Expenses of the prior period. I. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Actual result could differ from these estimates and assumptions. In management's opinion, the information contained in this report reflects all adjustments of a normal recurring nature necessary to assure the fair presentation of financial position, results of operations and cash flows for the periods presented. Page 8 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 3. CASH 3.1 Cash The Company's cash as of December 31, 2005, includes the initial capital deposits of the Company's stockholders, as explained further in Note 16.1. Such cash is held in Moroccan Dirhams in accounts at CITIBANK MAGHREB, which is located at Zenith Millenium Immeuble 1, Lotissement Attaoufik, Sidi Maarouf, Casablanca Morocco. The remainder of the company's' cash is held by the Offshore Collateral Agent, Deutsche Bank Trust Company Americas in US$ and Euro, and by the Onshore Collateral Agent, BMCI - Banque Marocaine pour le Commerce et l'Industrie in Moroccan Dirhams and US$. The cash balances includes the following categories :
12/31/05 12/31/04 12/31/03 US$ US$ US$ ---------- ---------- ---------- Off-shore Revenue in US$ 23,487,215 19,658,389 24,426,875 Off-shore Revenue in Euro 5,263,923 6,471,506 6,590,224 ---------- ---------- ---------- Total Off-Shore Revenue 28,751,138 26,129,895 31,017,099 On-shore O&M Account - Generator 5,151,140 12,565,202 6,946,245 On-shore O&M Account - Operator 1,042,679 2,468,763 4,279,000 Off-shore O&M Accounts 6,071 4,742 4,546 ---------- ---------- ---------- Total O&M Accounts 6,199,890 15,038,706 11,229,792 Fuel & Spare Part Accounts 18,727,645 18,388,897 12,929,694 Off-shore Debt Service Accrual Accounts in US$ 3,526,813 3,641,836 3,734,278 Off-shore Debt Service Accrual Accounts in Euro 5,497,741 6,489,135 6,637,737 ---------- ---------- ---------- Total Debt Service Accrual Accounts 9,024,554 10,130,971 10,372,015 Distribution Account in US$ 0 44,489 0 Stockholder capital deposits 59,469 66,934 62,863 ---------- ---------- ---------- Total 62,762,696 69,799,893 65,611,462 ========== ========== ==========
3.2 Restricted Cash In accordance with the Common Agreement and the Offshore Collateral Agency Agreement, the following Reserve Account cash and letters of credit ( as shown in Note 3.4) are held by Deutsche Bank Trust Company Americas as security for JLEC's lenders. Major Maintenance Reserve Account in US$ 3.4 a 0 1,410,601 2,500,000 Fixed O&M Reserve Account in US$ 3.4 b 0 0 4,800,000 Debt Service Reserve Account in US$ 3.4 c 0 0 11,200,000 Super Reserve Account in US$ 3.4 d 0 20,913,300 45,600,000 ---------- ---------- ---------- Off-shore Reserve Accounts in US$ 0 22,323,901 64,100,000 Fixed O&M Reserve Account in Euro 230,810 267,002 243,656 Debt Service Reserve Account in Euro 3.4 e 0 0 18,705,220 ---------- ---------- ---------- Off-shore Reserve Accounts in Euro 230,810 267,002 18,948,876 ---------- ---------- ---------- Total Reserve Accounts 230,810 22,590,902 83,048,876 ========== ========== ==========
3.3 Total Cash Cash 3.1 62,762,696 69,799,893 65,611,462 Restricted Cash in Reserve Accounts 3.2 230,810 22,590,902 83,048,876 ---------- ---------- ---------- 62,993,506 92,390,795 148,660,339 ========== ========== ==========
3.4 Letters of Credit Additional liquidity is available, if needed for debt service, from Sponsor (CMS and ABB) Letters of Credit in the following accounts :
12/31/05 12/31/04 12/31/02 ---------- ---------- ---------- a. Major Maintenance Reserve Account US$ 10,000,000 6,100,000 2,500,000 b. Fixed O&M Reserve Account US$ 9,600,000 9,600,000 4,800,000 c. Debt Service Reserve Account US$ 20,400,000 21,400,000 11,300,000 d. Super Reserve Account US$ 80,000,000 79,086,700 39,086,700 e. Debt Service Reserve Account Euro 26,800,000 28,200,000 15,000,000
Page 9 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 4. INVENTORIES The inventories are detailed as follows for the year ending:
12/31/05 12/31/04 12/31/03 US$ US$ US$ ---------- ---------- ---------- Stock of Coal 4.1 33,363,034 41,419,482 24,763,321 Stock of Fuel-oil 4.2 1,331,092 1,355,124 1,638,256 Stock of Spare Parts 4.3 16,655,779 15,386,680 10,940,862 Other Stocks (Chemicals, Oils,...) 593,338 1,156,676 1,205,566 ---------- ---------- ---------- 51,943,242 59,317,963 38,548,005 ========== ========== ==========
4.1 The stock of coal represents the value of 347,441 tones existing in the coal storage area plus 125,609 tones in transit to Jorf Lasfar, for a total inventory of 473,050 tones as of December 31, 2005 (614,328 tones total as of December 31, 2004, and 582,063 tones total as of December 31, 2003). 4.2 The stock of fuel oil represents 6,496 m3 existing in the fuel tanks as of December 31, 2005 (7,654 m3 as of December 31, 2004, and 9,471 m3 as of December 31, 2003). 4.3 The stock of Spare Parts represents the value of spare parts as of December 31, 2005, that were purchased after the close-out of the Net Investment on December 31, 2000, and remain in JLEC's inventory as of December 31, 2005. 5. RECEIVABLES The "Accounts Receivables" as of December 31, 2005 are detailed as follows :
12/31/05 12/31/04 12/31/03 US$ US$ US$ ----------- ----------- ---------- Account Receivable - ONE 5.1 113,978,487 123,770,898 85,214,510 Account Receivable - Others 5.2 238,706 96,570 271,345 ----------- ----------- ---------- 114,217,192 123,867,468 85,485,855 =========== =========== ==========
5.1 The account receivable from ONE consists of November 2005 and December 2005 invoices. 5.2 The other receivables include a) accrued interest earned by investment of JLEC's cash balances (US$ 60,167), and b) other receivable (US$ 178,538). In addition, JLEC has invoiced AMCI a total of $8,599,483 under Coal Supply Agreement 720, representing JLEC's excess cost of purchasing 186,244 tons of coal from a third party after AMCI failed to fulfill its obligation to deliver 187,682 tons of coal to JLEC. AMCI has failed to pay JLEC's invoices when due; and therefore, JLEC has called on AMCI's performance bond of $1,500,000 and is seeking the remainder of $7,099,483 from AMCI through litigation with uncertain outcome. 6. PREPAYMENTS The "Prepayments" as of December 31, 2005 are detailed as follows :
12/31/05 12/31/04 12/31/03 US$ US$ US$ ---------- ---------- ---------- Prepayments For Income Tax - Gross 16,067,338 6,754,801 0 Income Tax Payable -10,028,853 -4,568,726 0 ---------- ---------- ---------- Prepayments for Income Tax - Net 6,038,486 2,186,076 0 Prepaid Insurance 513,781 524,479 3,599,349 Prepaid Expenses 797,072 324,949 321,637 Other Prepayments 586,278 353,506 287,640 ---------- ---------- ---------- 7,935,616 3,389,010 4,208,626 ========== ========== ==========
7. FIXED ASSETS The "Fixed Assets" are detailed as follows for year ending :
12/31/05 12/31/04 12/31/03 US$ US$ US$ ---------- ---------- ---------- Fixed Asset - Gross 18,494,760 16,493,623 11,694,954 Depreciation -7,381,753 -4,753,714 -2,516,437 Construction in Progress 3,767,900 418,708 424,902 ---------- ---------- ---------- 14,880,908 12,158,617 9,603,420 ========== ========== ==========
8. V.A.T LIABILITY The "V.A.T Liability" account represents the net amount of Value Added Tax as shown below :
12/31/05 12/31/04 12/31/03 US$ US$ US$ ---------- ---------- ---------- Value Added Tax received from ONE to be declared 12,336,557 13,463,427 5,179,969 Value Added Tax to be paid & declared -5,205,116 -15,003,302 -1,207,918 ---------- ---------- ---------- 7,131,441 -1,539,875 3,972,052 ========== ========== ==========
In 2005 and 2003 the Value Added Tax (VAT) were liablities while in 2004 the VAT was recoverable and was recorded as an asset. 9. OTHER LONG TERM ASSETS The Other Long Term Assets are as follows :
12/31/05 12/31/04 12/31/03 US$ US$ US$ ---------- ---------- ---------- Long Term Receivables from employee home mortgage loans 4,187,029 3,946,932 3,372,930 Long Term Ash Disposal Site 0 660,624 1,389,307 Major Maintenance capitalized during prior years 17,828,927 17,828,927 7,299,779 Major Maintenance capitalized during current year 0 0 10,529,148 Less : Amortization of Major Maintenance during prior years -6,097,963 -3,533,479 -1,598,577 9.1 Less : Amortization of Major Maintenance in current year -2,529,355 -2,564,485 -1,934,902 ---------- ---------- ---------- 13,388,638 16,338,520 19,057,686 ========== ========== ==========
9.1 Capitalized major maintenance costs are amortized over the estimated useful life of the investment, which for the turbine overhauls is 7 years (84 months) . Page 10 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 10. ACCOUNTS PAYABLE TO THIRD PARTIES The "Account Payable to Third Parties" includes the main suppliers of JLEC as of December 31, 2005 and are detailed as follows :
12/31/05 12/31/04 12/31/03 US$ US$ US$ ---------- ----------- ---------- ONE - Availability Rebate - Gross 12,260,084 15,950,384 7,583,477 less provisional payments to ONE -7,661,363 -15,696,844 -3,443,569 ---------- ----------- ---------- ONE - Availability Rebate - Net 4,598,721 253,540 4,139,908 ONE - Fixed Reduction Rebate 8,376,603 8,687,506 0 ---------- ----------- ---------- ONE - Total Rebates 12,975,324 8,941,045 4,139,908 Glencore 12,453,129 22,932,140 20,030,571 Anglo Coal 8,738,244 0 6,320,391 BULK Trading 7,829,367 20,302,750 4,470,349 Weglokoks 4,595,313 0 0 CARGILL 0 10,197,420 0 BHP Billiton 0 2,550,241 2,800,790 ---------- ----------- ---------- Total Coal Suppliers 33,616,052 55,982,551 33,622,101 Alstom Power 999,252 859,588 1,507,931 Other suppliers 6,728,796 7,548,586 8,451,151 ---------- ----------- ---------- Total 54,319,424 73,331,771 47,721,091 ========== =========== ==========
11. RELATED PARTY TRANSACTIONS During the year 2005, JLEC has booked a number of related parties transactions as follows :
ABB Equity Ventures ABB Maroc ABB Others CMS MOPCO CMS MOPCO CMS Others Total Currencies US$ MAD US$ MAD MAD US$ US$ ---------- ---------- ---------- ---------- ---------- ---------- ---------- Acc. Payable 12/31/04 90,591 861,216 43,146 9,769,277 42,344,781 2,298 2005 : Management Fees 33,415,077 Incentive Accrual 32,424,389 Services 293,620 4,573,578 102,366 Insurance Brokerage 410,000 Spare Part Purchases 1,050,033 69,585 0 Total Payments 2005 276,985 1,493,952 518,586 33,122,084 42,344,890 102,366 Acc. Payable 107,226 417,297 4,145 14,635,848 32,424,279 2,297 Acc. Pay. in US$ 107,226 44,981 4,145 1,577,632 3,495,088 2,297 5,231,369
ABB Equity Ventures, ABB Maroc and other ABB companies (such as ABB Switzerland Ltd, ABB Power Technology, S.A., ABB Secheron S.A. and ABB Komposit) are subsidiaries of ABB Ltd, which is the ultimate parent company of 3 JLEC shareholders: Tre Kronor Investment AB, AB Cythere 61 and AB Cythere 63. CMS Morocco Operating Company, Consumers Energy and CMS Generation are subsidiaries of CMS Energy, which is the ultimate parent company of 3 JLEC shareholders: Jorf Lasfar Energiaktiebolag, Jorf Lasfar Power Energy AB and Jorf Lasfar Handelsbolag.
Common Stock Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor (see Note 16.1) Energiaktie- Power Energy Handelsbolag Investment AB Cythere AB Cythere bolag AB AB 61 63 Total Currencies MAD MAD MAD MAD MAD MAD MAD ----------- ----------- ------------ ----------- ----------- ----------- ----------- Acc. Payable 12/31/04 167,509,911 154,109,119 13,400,793 16,221,663 884,802 388,428,350 740,554,638 Dividends Declared Payable in 2005 220,000,000 202,400,000 17,600,000 17,600,000 960,000 421,440,000 880,000,000 Total Payments 2005 179,404,457 165,052,101 14,352,356 13,659,646 745,072 327,086,444 700,300,076 Acc. Payable 208,105,454 191,457,018 16,648,437 20,162,016 1,099,730 482,781,906 920,254,562 B/S FX Rate MAD/USD 9.277 9.277 9.277 9.277 9.277 9.277 9.277 Acc. Pay. in US$ 22,432,167 20,637,593 1,794,573 2,173,310 118,542 52,040,175 99,196,361
Preferred Stock & Convertible Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor Securities Energiaktie- Power Energy Handelsbolag Investment AB Cythere AB Cythere (see Notes 16.2 & 16.3) bolag AB AB 61 63 Total ----------- ----------- ------------ ----------- ----------- ----------- ----------- Currencies MAD MAD MAD MAD MAD MAD MAD ----------- ----------- ------------ ----------- ----------- ----------- ----------- Preferred Stock Dividend payable 0 0 0 0 186,827 82,086,257 82,273,084 Convertible Securities Interest payable 42,850,564 39,422,519 3,428,045 3,428,045 0 0 89,129,174 Total Payments 2005 42,850,564 39,422,519 3,428,045 3,428,045 186,827 82,086,257 171,402,258 Acc. Payable 0 0 0 0 0 0 0 B/S FX Rate MAD/USD 9.277 9.277 9.277 9.277 9.277 9.277 9.277 Acc. Pay. in US$ 0 0 0 0 0 0 0 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total Accounts Payable to Related Parties 104,427,730 -----------
Page 11 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 11. RELATED PARTY TRANSACTIONS (CONTINUED) During the year 2004, JLEC has booked a number of related parties transactions as follows :
ABB Equity Ventures ABB Maroc ABB Others CMS MOPCO CMS MOPCO CMS Others Total Currencies US$ MAD US$ MAD MAD US$ US$ ----------- ----------- ----------- ----------- ----------- ----------- ----------- Acc. Payable 12/31/03 90,007 0 36,608 4,757,590 29,319,976 93,661 2004 : Management Fees 32,195,453 Incentive Accrual 42,344,890 Services 256,323 5,066,894 3,817 Insurance Brokerage 330,000 Spare Part Purchases 1,460,976 1,077,929 Total Payments 2004 255,739 599,760 1,401,390 32,250,660 29,320,086 95,180 Acc. Payable 90,591 861,216 43,146 9,769,277 42,344,781 2,298 Acc. Pay. in US$ 90,591 104,486 43,146 1,185,247 5,137,433 2,298 6,563,201
Common Stock Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor (see Note 16.1) Energiaktie- Power Energy Handelsbolag Investment AB Cythere AB Cythere bolag AB AB 61 63 Total ----------- ----------- ----------- ----------- ----------- ------------- ------------- Currencies MAD MAD MAD MAD MAD MAD MAD ----------- ----------- ----------- ----------- ----------- ------------- ------------- Acc. Payable 12/31/03 214,928,711 197,734,415 17,194,297 43,438,991 2,369,384 1,040,159,631 1,515,825,428 Dividends Declared Payable in 2004 0 0 0 0 0 0 0 Total Payments 2004 47,418,800 43,625,296 3,793,504 27,217,328 1,484,582 651,731,281 775,270,790 Acc. Payable 167,509,911 154,109,119 13,400,793 16,221,663 884,802 388,428,350 740,554,638 B/S FX Rate MAD/USD 8.2424 8.2424 8.2424 8.2424 8.2424 8.2424 8.2424 Acc. Pay. in US$ 20,322,953 18,697,117 1,625,836 1,968,075 107,348 47,125,637 89,846,967
Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor Preferred Stock & Convertible Securities Energiaktie- Power Energy Handelsbolag Investment AB Cythere AB Cythere (see Notes 16.2 & 16.3) bolag AB AB 61 63 Total ----------- ----------- ----------- ----------- ----------- ------------- ------------- Currencies MAD MAD MAD MAD MAD MAD MAD ----------- ----------- ----------- ----------- ----------- ------------- ------------- Preferred Stock Dividend payable 0 0 0 0 186,316 81,861,977 82,048,293 Convertible Securities Interest payable 42,733,486 39,314,807 3,418,679 3,418,679 0 0 88,885,651 Total Payments 2004 42,733,486 39,314,807 3,418,679 3,418,679 186,316 81,861,977 170,933,944 Acc. Payable 0 0 0 0 0 0 0 B/S FX Rate MAD/USD 8.2424 8.2424 8.2424 8.2424 8.2424 8.2424 8.2424 Acc. Pay. in US$ 0 0 0 0 0 0 0 ----------- ----------- ----------- ----------- ----------- ------------- ------------- Total Accounts Payable to Related Parties 96,410,168 -------------
During 2003, related party transactions consisted of the following:
ABB Equity Ventures ABB Maroc ABB Others CMS MOPCO CMS MOPCO CMS Others Total Currencies US$ MAD US$ MAD MAD US$ US$ ----------- ----------- ----------- ----------- ----------- ----------- ----------- Acc. Payable 12/31/02 105,764 125,880 0 -1,452,394 46,253,345 82,686 2003 : Management Fees 32,938,795 Incentive Accrual 29,320,319 Services 214,644 3,582,315 136,496 Insurance Brokerage 345,000 Spare Part Purchases 237,916 90,575 Total Payments 2003 230,400 363,796 398,967 30,311,126 46,253,688 125,522 Acc. Payable 90,007 0 36,608 4,757,590 29,319,976 93,661 Acc. Pay. in US$ 90,007 0 36,608 542,101 3,340,851 93,661 4,103,228
Common Stock Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor (see Note 16.1) Energiaktie- Power Energy Handelsbolag Investment AB Cythere AB Cythere bolag AB AB 61 63 Total ----------- ----------- ----------- ----------- ----------- ------------- ------------- Currencies MAD MAD MAD MAD MAD MAD MAD ----------- ----------- ----------- ----------- ----------- ------------- ------------- Acc. Payable 12/31/02 220,166,565 202,553,239 17,613,325 39,682,115 2,164,464 950,199,532 1,432,379,240 Dividends Declared Payable in 2003 151,250,000 139,150,000 12,100,000 12,100,000 660,000 289,740,000 605,000,000 Total Payments 2003 156,487,853 143,968,825 12,519,028 8,343,124 455,079 199,779,902 521,553,812 Acc. Payable 214,928,711 197,734,415 17,194,297 43,438,991 2,369,384 1,040,159,631 1,515,825,428 B/S FX Rate MAD/USD 8.776 8.776 8.776 8.776 8.776 8.776 8.776 Acc. Pay. in US$ 24,489,951 22,530,755 1,959,196 4,949,635 269,978 118,520,502 172,720,019
Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor Preferred Stock & Convertible Securities Energiaktie- Power Energy Handelsbolag Investment AB Cythere AB Cythere (see Notes 16.2 & 16.3) bolag AB AB 61 63 Total ----------- ----------- ----------- ----------- ----------- ------------- ------------- Currencies MAD MAD MAD MAD MAD MAD MAD ----------- ----------- ----------- ----------- ----------- ------------- ------------- Preferred Stock Dividend payable 0 0 0 0 226,840 99,666,957 99,893,797 Convertible Securities Interest payable 52,028,019 47,865,778 4,162,242 4,162,242 0 0 108,218,281 Total Payments 2003 52,028,019 47,865,778 4,162,242 4,162,242 226,840 99,666,957 208,112,078 Acc. Payable 0 0 0 0 0 0 0 B/S FX Rate MAD/USD 8.776 8.776 8.776 8.776 8.776 8.776 8.776 Acc. Pay. in US$ 0 0 0 0 0 0 0 ----------- ----------- ----------- ----------- ----------- ------------- ------------- Total Accounts Payable to Related Parties 176,823,247 -------------
Page 12 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 12. TAXES PAYABLE : The "taxes payable" includes the following items as of December 31, 2005 :
12/31/05 12/31/04 12/31/03 US$ US$ US$ ---------- ---------- ---------- Income Tax - Gross 0 0 5,393,931 Prepayments for Income Tax 0 0 -3,929,580 ---------- ---------- ---------- Income Tax Payable ( see Note 6) 0 0 1,464,351 Value Added Tax on behalf of foreign suppliers 153,030 204,712 309,190 Withholding Tax 84,894 100,984 260,841 Payroll Tax 261,044 259,164 237,358 Licence Tax 0 0 1,325,971 ---------- ---------- ---------- Total 498,968 564,860 3,597,710 ========== ========== ==========
13. CAPACITY CHARGES 2005
13.1 $ Capacity Charges less than $ DFL Model Actual DFL model ----------- ----------- $ Capacity Min Lease ----------- ----------- Charges Payments Difference ----------- ----------- ----------- CGNC US GAAP US GAAP ----------- ----------- ----------- USD USD USD ----------- ----------- ----------- $ Capacity Charges 120,964,406 121,579,240 -614,835 $ O.N.E Rebate -22,182,641 -22,676,909 494,269 ----------- ----------- ----------- 2005 in USD 98,781,765 98,902,331 -120,566 2004 in USD 44,183 ----------- $ Capacity Charges less than $ DFL Model -76,383 -----------
Actual DFL model ------------- ----------- 13.2 Euro Capacity Charges less than Euro DFL Model Euro Capacity Min Lease ------------- ----------- Charges Payments Difference ------------- ----------- ----------- CGNC US GAAP US GAAP ------------- ----------- ----------- Euro Euro Euro/USD ------------- ----------- ----------- Euro Capacity Charges 111,715,690 112,521,159 -805,469 Euro O.N.E Rebate -16,424,630 -16,816,070 391,441 ----------- ----------- ----------- 2005 in Euro 95,291,060 95,705,089 -414,029 2004 in Euro 53,499 ----------- -360,530 B/S FX Rate X1.17936 ----------- Euro Capacity Charges less than Euro DFL Model in USD -425,193 -----------
2004
13.1 $ Capacity Charges greater than $ DFL Model Actual DFL model ----------- ----------- in November and December 2004 $ Capacity Min Lease ----------- ----------- Charges Payments Difference ----------- ----------- ----------- CGNC US GAAP US GAAP ----------- ----------- ----------- USD USD USD ----------- ----------- ----------- $ Capacity Charges 20,705,351 20,383,548 321,803 $ O.N.E Rebate -4,302,807 -4,025,187 -277,620 ----------- ----------- ----------- 2004 in USD 16,402,544 16,358,361 44,183 $ Capacity Charges greater than $ DFL Model 44,183 -----------
Actual DFL model ------------- ----------- 13.2 Euro Capacity Charges greater than Euro DFL Model Euro Capacity Min Lease ------------- ----------- in November and December 2004 Charges Payments Difference ------------- ----------- ----------- CGNC US GAAP US GAAP ------------- ----------- ----------- Euro Euro Euro/USD ------------- ----------- ----------- Euro Capacity Charges 20,032,963 19,721,611 311,353 Euro O.N.E Rebate -3,123,333 -2,865,480 -257,853 ----------- ----------- ----------- 2004 in Euro 16,909,630 16,856,131 53,499 B/S FX Rate X 1.36428 ----------- Euro Capacity Charges greater than Euro DFL Model in USD 72,988 -----------
Page 13 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 13. CAPACITY CHARGES (CONTINUED) 2003
13.1 $ Capacity Charges less than $ DFL Model Actual DFL model ----------- ----------- $ Capacity Min Lease ----------- ----------- Charges Payments Difference ----------- ----------- ----------- CGNC US GAAP US GAAP ----------- ----------- ----------- USD USD USD ----------- ----------- ----------- $ Capacity Charges 103,690,956 104,516,335 -825,379 $ O.N.E Rebate -2,761,910 -2,874,199 112,289 ----------- ----------- ----------- 2003 in USD 100,929,046 101,642,136 -713,090 $ Capacity Charges less than $ DFL Model -713,090 -----------
Actual DFL model ------------- ----------- 13.2 Euro Capacity Charges greater than Euro DFL Model Euro Capacity Min Lease ------------- ----------- Charges Payments Difference ------------- ----------- ----------- CGNC US GAAP US GAAP ------------- ----------- ----------- Euro Euro Euro/USD ------------- ----------- ----------- Euro Capacity Charges 125,149,979 124,917,610 232,369 Euro O.N.E Rebate -3,333,492 -3,435,234 101,742 ----------- ----------- ----------- 2003 in Euro 121,816,487 121,482,376 334,111 B/S FX Rate X 1.263417 ----------- Euro Capacity Charges greater than Euro DFL Model in USD 422,122
14. OTHER CURRENT LIABILITIES The "Other Current Liabilities" as of December 31, 2005 are detailed as follows:
12/31/05 12/31/04 12/31/03 US$ US$ US$ ----------- ----------- ----------- Accrued Expenses: interest, swaps and fees 14.1 4,516,665 5,726,546 5,904,937 Accrued salaries expense 1,538,372 2,075,391 1,198,164 Liability for Compensated Absences 319,280 310,222 298,523 Coal Custom Duty Advances from ONE 554,771 671,924 0 Current Deferred Tax 155,503 0 0 Other Liabilities 242,786 578,504 337,780 ----------- ----------- ----------- 7,327,377 9,362,588 7,739,404 =========== =========== ===========
14.1 The accrued interests and fee expenses are detailed by loans as follows :
12/31/05 12/31/04 12/31/03 US$ US$ US$ ----------- ----------- ----------- OPIC 570,954 648,818 728,141 SACE 1,213,676 1,597,674 1,586,760 WB 1,208,062 1,708,747 1,712,739 US EXIM 1,289,865 1,467,777 1,574,138 ERG 234,107 303,531 303,158 ----------- ----------- ----------- 4,516,665 5,726,547 5,904,937 =========== =========== ===========
Page 14 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 15. LONG TERM LOANS Long term loans are detailed as follows as of December 31, 2005 :
Interest Reimbursement Borrowing Principal ----------------- Interest -------------------------------- Loan Date Currency Amount Type Rate Payment Maturity Periodicity ----------- -------- -------- ----------- ----- ------- --------- ------------- ----------- US EXIM 9/12/02 US$ 142,149,976 Fixed 7.2000% Quarterly Feb. 15, 2013 Quarterly OPIC Note A 11/25/97 US$ 36,552,083 Fixed 10.2300% Quarterly Feb. 15, 2013 Quarterly OPIC Note B 02/11/98 US$ 7,975,000 Fixed 9.9200% Quarterly Feb. 15, 2013 Quarterly ----------- 44,527,083 ----------- Total L.T loan in US$ 186,677,059 ----------- Current part in USD 25,748,559 ----------- Non-Current part in USD 160,928,500 -----------
Interest Reimbursement Rollover Principal ---------------------- Interest ----------------------------- Loan Date Currency Amount Type Rate Payment Maturity Periodicity ---------- -------- -------- ----------- -------- ------- --------- ------------- ----------- SACE 11/15/05 Euro 140,558,242 Fixed 5.73000% Quarterly Feb. 15, 2013 Quarterly ERG 11/15/05 Euro 18,063,034 Variable 4.44763% Quarterly Feb. 15, 2013 Quarterly World Bank 11/15/05 Euro 96,687,425 Variable 4.19763% Quarterly Feb. 15, 2013 Quarterly ----------- Total L.T loan in Euro 255,308,700 ----------- B/S FX Rate Euro/USD 1.17936 ----------- Total L.T loan in USD 301,099,750 ----------- Current part in USD 41,531,000 ----------- Non-Current part in USD 259,568,750 -----------
Total principal repayments for the next five years are detailed below. Forecasts of interest payments, interest-rate swap payments and guarantee fees are also shown below . For further information regarding swaps, see Note 20.
Remaining Remaining Remaining Principal Principal Principal Principal Principal Interest Swap Guarantee Repayment in Repayment in Repayment in Repayment in Repayment in Payments Payments Fees 2006 2007 2008 2009 2010 2006-2013 2006-2013 2006-2013 ------------ ------------ ------------ ------------ ------------ --------- ---------- --------- In USD US EXIM 19,606,893 19,606,893 19,606,893 19,606,893 19,606,893 38,405,875 0 0 OPIC A 5,041,666 5,041,666 5,041,666 5,041,666 5,041,666 14,019,567 0 0 OPIC B 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 2,966,123 0 0 ------------ ------------ ------------ ------------ ------------ ---------- ----------- ---------- Total in USD 25,748,559 25,748,559 25,748,559 25,748,559 25,748,559 55,391,565 0 0 ------------ ------------ ------------ ------------ ------------ ---------- ----------- ---------- In Euro SACE 19,387,344 19,387,344 19,387,344 19,387,344 19,387,344 30,642,181 0 0 ERG 2,491,452 2,491,452 2,491,452 2,491,452 2,491,452 3,056,526 2,853,816 0 WB 13,336,197 13,336,197 13,336,197 13,336,197 13,336,197 15,440,488 15,057,593 3,308,859 Total in Euro 35,214,993 35,214,993 35,214,993 35,214,993 35,214,993 49,139,195 17,911,408 3,308,859 B/S FX Rate Euro/USD 1.17936 1.17936 1.17936 1.17936 1.17936 1.17936 1.17936 1.17936 ------------ ------------ ------------ ------------ ------------ ---------- ----------- ---------- Total in USD 41,531,000 41,531,000 41,531,000 41,531,000 41,531,000 57,952,586 21,123,920 3,902,321 ------------ ------------ ------------ ------------ ------------ ---------- ----------- ----------
Page 15 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 15. LONG TERM LOANS (CONTINUED) Long term loans are detailed as follows as of December 31, 2004 :
Interest Reimbursement Borrowing Principal ------------------- Interest ----------------------------- Loan Date Currency Amount Type Rate Payment Maturity Periodicity ----------- --------- -------- ----------- ----- ------- --------- ------------- ----------- US EXIM 9/12/02 US$ 161,756,869 Fixed 7.2000% Quarterly Feb. 15, 2013 Quarterly OPIC Note A 11/25/97 US$ 41,593,750 Fixed 10.2300% Quarterly Feb. 15, 2013 Quarterly OPIC Note B 02/11/98 US$ 9,075,000 Fixed 9.9200% Quarterly Feb. 15, 2013 Quarterly ----------- 50,668,750 ----------- Total L.T loan in US$ 212,425,619 ----------- Current part in USD 25,748,559 ----------- Non-Current part in USD 186,677,060 -----------
Interest Reimbursement Rollover Principal --------------------- Interest ---------------------------- Loan Date Currency Amount Type Rate Payment Maturity Periodicity ---------- -------- -------- ----------- -------- ------- --------- ------------- ----------- SACE 11/15/04 Euro 159,945,585 Fixed 5.73000% Quarterly Feb. 15, 2013 Quarterly ERG 11/15/04 Euro 20,554,486 Variable 4.17013% Quarterly Feb. 15, 2013 Quarterly World Bank 11/15/04 Euro 110,023,622 Variable 3.92013% Quarterly Feb. 15, 2013 Quarterly ----------- Total L.T loan in Euro 290,523,693 ----------- B/S FX Rate Euro/USD 1.36429 ----------- Total L.T loan in USD 396,357,727 ----------- Current part in USD 48,043,360 ----------- Non-Current part in USD 348,314,367 -----------
Long term loans are detailed as follows as of December 31, 2003 :
Interest Reimbursement Borrowing Principal ------------------ Interest ----------------------------- Loan Date Currency Amount Type Rate Payment Maturity Periodicity ---------- --------- -------- ----------- ----- ------- --------- ------------- ----------- US EXIM 9/12/02 US$ 181,363,762 Fixed 7.2000% Quarterly Feb. 15, 2013 Quarterly OPIC Note A 11/25/97 US$ 46,635,417 Fixed 10.2300% Quarterly Feb. 15, 2013 Quarterly OPIC Note B 02/11/98 US$ 10,175,000 Fixed 9.9200% Quarterly Feb. 15, 2013 Quarterly ----------- 56,810,417 ----------- Total L.T loan in US$ 238,174,179 ----------- Current part in USD 25,748,560 ----------- Non-Current part in USD 212,425,619 -----------
Interest Reimbursement Rollover Principal ------------------- Interest ------------------------------- Loan Date Currency Amount Type Rate Payment Maturity Periodicity ---------- -------- -------- ----------- -------- ------- --------- ------------ ----------- SACE 11/17/03 Euro 179,332,929 Fixed 5.7300% Quarterly Feb. 15, 2013 Quarterly ERG 11/17/03 Euro 23,045,939 Variable 4.16888% Quarterly Feb. 15, 2013 Quarterly World Bank 11/17/03 Euro 123,359,818 Variable 3.9189% Quarterly Feb. 15, 2013 Quarterly ----------- Total L.T loan in Euro 325,738,687 ----------- B/S FX Rate Euro/USD 1.26342 ----------- Total L.T loan in USD 411,543,784 ----------- Current part in USD 44,491,219 ----------- Non-Current part in USD 367,052,565 -----------
Page 16 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 15. LONG TERM LOANS (CONTINUED) PLEDGE OF STOCK AND OTHER ASSETS As security for the repayment of the loans, and the payment of all related interest, fees and swap obligations, JLEC and its stockholders have entered into various pledge agreements with Deutsche Bank Trust Company Americas, as Offshore Collateral Agent, and with Banque Marocaine pour le Commerce et l'Industrie, as Onshore Collateral Agent, for the benefit of such lenders and other secured parties. Such security shall continue in effect until the repayment in full of all outstanding principal amounts and the payment in full of all related interest, fee and swap obligations, which is scheduled to occur in February of 2013. The principle pledge agreements are: 1. The Stockholder Pledge and Security Agreements, in which each of JLEC's stockholders pledges all of its shares, claims, rights and interests in JLEC to the Offshore Collateral Agent. 2. The Security and Assignment Agreement, in which JLEC assigns to the Offshore Collateral Agent a security interest in all of JLEC's rights, title and interest in the following collateral, among others: a. all of JLEC's contractual rights, b. all rents, profits, income and revenues derived by JLEC from its ownership of the Project, c. all cash deposits and other assets in any of JLEC's accounts with financial institutions, d. all permits, licenses and other governmental authorizations obtained by JLEC in connection with its ownership of the Project, e. all of JLEC's insurance policies and related claims and proceeds, and f. all personal property and inventories of JLEC. 3. The Agreement for Pledge of Shares, in which each of JLEC's stockholders pledges all of its shares, claims, rights and interests in JLEC to the Onshore Collateral Agent, and assigns to the Onshore Collateral Agent the direct payment by JLEC of all dividends and other stockholder distributions if and whenever a Default has occurred and is continuing. 4. The General Delegation of Contract Claims, in which JLEC assigns to the Onshore Collateral Agent the direct payment of any and all contract claims due to JLEC if and whenever a Default has occurred and is continuing. 5. The Pledge over General Operating Accounts, in which JLEC pledges to the Onshore Collateral Agent any and all monies in JLEC's accounts with the Onshore Collateral Agent. 6. The Master Agreement for Assignment of Accounts Receivable as Security, in which JLEC assigns to the Onshore Collateral Agent a security interest in all of the accounts receivable payable by ONE to JLEC under the Power Purchase Agreement. COVENANTS The covenants on the loans also place restrictions on JLEC's payment of dividends and other distributions to JLEC's stockholders. Specifically, JLEC may not: 1. Pay any dividends to its stockholders, or 2. Make any distribution, payment or delivery of property or cash to its stockholders, or 3. Redeem, retire, purchase or otherwise acquire any shares of its capital stock, or 4. Purchase or redeem any subordinated debt except on quarterly repayment dates and only then after first satisfying all debt service obligations and satisfying all of the following conditions, among others: a. No default shall have occurred, b. The total of cash and letters of credit in all JLEC reserve accounts shall equal or exceed required levels, c. JLEC's actual debt service coverage ratios for the current quarter and preceding four quarters have all been greater than 1.3, and d. JLEC's forecasted debt service coverage ratios for the next succeeding two quarters are greater than 1.3. JLEC has complied with these covenants since May 2001, when the loans began to be repaid. Page 17 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 16. STOCKHOLDERS' EQUITY 16.1 COMMON STOCK AS OF DECEMBER 31, 2005, 2004, AND 2003
Common Stock ------------------------------------------------- Type of Number Par value Par value Stockholders Partner of Shares Dirham US Dollar ----------------------- ----------- --------- --------- --------- Jorf Lasfar Handelsbolag, Sweden............................. CMS General 110 11,000 1,155 Jorf Lasfar Energiaktiebolag, Sweden......................... CMS Limited 1,375 137,500 14,443 Jorf Lasfar Power Energy AB, Sweden.......................... CMS Limited 1,265 126,500 13,288 Tre Kronor Investment AB, Sweden............................ ABB General 110 11,000 1,155 AB Cythere 63, Sweden........................................ ABB Limited 2,634 263,400 27,668 AB Cythere 61, Sweden........................................ ABB Limited 6 600 63 ----------- --------- --------- --------- Total 5,500 550,000 57,773
16.2 CONVERTIBLE STOCKHOLDERS' SECURITIES AS OF DECEMBER 31, 2005, 2004, AND 2003 On December 11, 2000, the JLEC stockholders purchased 100% of all Company Loan Notes for $ 387,355,000, and amended the Company Loan Agreement to make such stockholder securities convertible into Preferred Stock or Common Stock. On January 1, 2001, the convertible securities (Company Loan Principal) held by AB Cythere 61 and AB Cythere 63 were converted into Preferred Stock as shown below on Note 16.3 . Such conversions shall be made into a fixed number of JLEC shares as listed below :
Type of Number Par value Par value Stockholders Partner of Shares Dirham US Dollar ---------------- ----------- ---------- ------------- ----------- Jorf Lasfar Handelsbolag, Sweden............................. CMS General 842,962 84,296,200 7,747,100 Jorf Lasfar Energiaktiebolag, Sweden......................... CMS Limited 10,537,024 1,053,702,400 96,838,750 Jorf Lasfar Power Energy AB, Sweden.......................... CMS Limited 9,694,062 969,406,200 89,091,650 Tre Kronor Investment AB, Sweden............................ ABB General 842,962 84,296,200 7,747,100 AB Cythere 63, Sweden........................................ ABB Limited 0 0 0 AB Cythere 61, Sweden........................................ ABB Limited 0 0 0 ----------- ---------- ------------- ----------- Total 21,917,010 2,191,701,000 201,424,600
Under the terms of the amended Company Loan Agreement summarized below, these convertible securities constitute an hybrid instrument which are delt with in accordance with the substance of the transaction, i.e. as a Preferred Stock equivalent : (a) Expression of the Loan in MAD The outstanding USD 201,424,600 principal amount is expressed as MAD 2,191,701,000 for the purpose of computing interest and principal payments due under this Agreement. However, interest and principal payments will be paid to the stockholders in USD, provided that the Company is not responsible for any losses realized by the stockholders resulting from the depreciation of the value of the MAD relative to the USD. (b) Repayment or conversion into Stock Under the terms of the amended Agreement : - the Security may only be repaid, in whole or in part, at the Company's option; - the part of the Security principal held by other Company Lenders listed above may be converted into Common Stock at any time, using the same conversion ratio used for the conversion of the parts of AB Cythere 61 and AB Cythere 63; - the shares of Preferred Stock issued to AB Cythere 61 and AB Cythere 63 may be converted into Common Stock. In this case, all outstanding Security principal held by other Company Lenders will be mandatorily converted into Common Stock at the same conversion ratio. (c) Interest payment and accruals as Retained Earning In accordance with Amendment N degrees.2, the Company will pay interest on the unpaid principal amount once per year, at the interest rate per annum equal to the greater of (1) the Moroccan maximum deductible rate, and (2) 4.00%. The applicable interest rate for 2005 was 4.00% (4.00% in 2004 and 4.00% in 2003). Accruals for such interest payments are reported as part of the Retained Earning allocation in Note 16.4, and are not expensed. Page 18 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 16.3 PREFERRED STOCK AS OF DECEMBER 31, 2005, 2004, AND 2003 In accordance with Section 3.01 par.(b) of the amended Company Loan Agreement (see note 16.2 above), the Company has converted on January 1, 2001, all outstanding Company Loan principal held by AB Cythere 61 and AB Cythere 63, at the conversion ratio of one (1) share of Preferred Stock for each one hundred (100) MAD of such Company Loan principal converted into Preferred Stock, as follows:
Preferred Stock ---------------------------------------------------- Type of Number Par value Par value Stockholders Partner of Shares Dirham US Dollar -------------- ----------- ---------- ------------- ----------- Jorf Lasfar Handelsbolag, Sweden ................. CMS General 0 0 0 Jorf Lasfar Energiaktiebolag, Sweden ............. CMS Limited 0 0 0 Jorf Lasfar Power Energy AB, Sweden .............. CMS Limited 0 0 0 Tre Kronor Investment AB, Sweden ................ ABB General 0 0 0 AB Cythere 63, Sweden ............................ ABB Limited 20,185,145 2,018,514,500 185,508,183 AB Cythere 61, Sweden ............................ ABB Limited 45,941 4,594,100 422,217 ----------- ---------- ------------- ----------- Total 20,231,086 2,023,108,600 185,930,400
Such shares are non-participating voting shares of convertible Preferred Stock of the Company, and: - are convertible at any moment into shares of Common Stock; - give right to the collection of a minimum priority dividend, at least equal to 4% of the aggregate par value of the preferred shares, - do not participate in the distribution of the remaining balance of Retained Earning, which is divided among the shares of Common Stock as shown in Note 16.4. 16.4 RECONCILIATION AND ALLOCATION OF RETAINED EARNINGS
2005 US$ ------ ----------- Retained Earnings as of December 31, 2004 253,215,661 Retained Earnings increase during 2005 111,561,388 Retained Earnings decrease during 2005 Convertible Securities interest payable as of January 1, 2005 -10,813,498 89,129,174 Dirhams ( at 8.2424 Dirhams per US Dollar) Preferred Stock Dividend payable as of March 31, 2005 -9,585,139 82,273,084 Dirhams ( at 8.5834 Dirhams per US Dollar) Common Stock Dividends payable as of August 31, 2005 -97,607,507 5,500 Common Stock Shares 160,000 Dirhams per share 880,000,000 Dirhams 9.0157 Dirhams per US Dollar on August 31, 2005 ----------- Total Retained Earnings 246,770,905
The Retained Earnings are allocated among the stockholders as follows:
Common Convertible Securities Preferred Stock Stock Total --------------- ---------------------- ----------------------- ----------------------- Stockholders Type of Partner Dirhams US Dollars Dirhams US Dollars US Dollars US Dollars -------------- --------------- ---------- ---------- ---------- ---------- ---------- ----------- Jorf Lasfar Handelsbolag, Sweden ...... CMS General 3,418,679 368,507 0 0 4,566,911 4,935,418 Jorf Lasfar Energiaktiebolag, Sweden .. CMS Limited 42,733,486 4,606,341 0 0 57,086,385 61,692,726 Jorf Lasfar Power Energy AB, Sweden ... CMS Limited 39,314,807 4,237,834 0 0 52,519,474 56,757,308 Tre Kronor Investment AB, Sweden ..... ABB General 3,418,679 368,507 0 0 4,566,911 4,935,418 AB Cythere 63, Sweden ................. ABB Limited 0 0 81,861,977 8,824,091 109,356,755 118,180,847 AB Cythere 61, Sweden ................. ABB Limited 0 0 186,316 20,083 249,104 269,188 ---------- ---------- ---------- ---------- ----------- ----------- Total 88,885,652 9,581,189 82,048,293 8,844,175 228,345,541 246,770,905
The allocations for Convertible Securities (88,885,652 Dirhams) and Preferred Stock (82,084,293 Dirhams) are scheduled for payment on May 15, 2006. Page 19 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 16.4 RECONCILIATION AND ALLOCATION OF RETAINED EARNINGS (CONTINUED)
US$ ----------- 2004 Retained Earnings as of December 31, 2003 147,498,955 Retained Earnings increase during 2004 125,193,694 Retained Earnings decrease during 2004 Convertible Securities interest payable as of January 1, 2004 -10,128,034 88,885,651 Dirhams ( at 8.7762 Dirhams per US Dollar) Preferred Stock Dividend payable as of January 1, 2004 -9,348,954 82,048,293 Dirhams ( at 8.7762 Dirhams per US Dollar) ----------- Total Retained Earnings 253,215,661
The Retained Earnings are allocated among the shareholders as follows :
Common Convertible Securities Preferred Stock Stock Total --------------- ---------------------- ---------------------- ----------- ----------- Shareholders Type of Partner Dirhams US Dollars Dirhams US Dollars US Dollars US Dollars -------------- --------------- ---------- ---------- ---------- ---------- ----------- ----------- Jorf Lasfar Handelsbolag, Sweden ...... CMS General 3,428,045 415,904 0 0 4,648,409 5,064,313 Jorf Lasfar Energiaktiebolag, Sweden .. CMS Limited 42,850,564 5,198,797 0 0 58,105,118 63,303,915 Jorf Lasfar Power Energy AB, Sweden ... CMS Limited 39,422,519 4,782,893 0 0 53,456,709 58,239,602 Tre Kronor Investment AB, Sweden ..... ABB General 3,428,045 415,904 0 0 4,648,409 5,064,313 AB Cythere 63, Sweden ................. ABB Limited 0 0 82,086,256 9,959,024 111,308,278 121,267,301 AB Cythere 61, Sweden ................. ABB Limited 0 0 186,827 22,667 253,550 276,216 ---------- ---------- ---------- ---------- ----------- ----------- Total 89,129,174 10,813,498 82,273,083 9,981,690 232,420,473 253,215,661
US$ ----------- 2003 Retained Earnings as of December 31, 2002 113,030,506 Retained Earnings increase during 2003 119,850,319 Retained Earnings decrease during 2003 Convertible Securities interest payable as of January 1, 2003 -10,612,757 108,218,281 Dirhams ( at 10.1970 Dirhams per US Dollar) Preferred Stock Dividend payable as of January 1, 2003 -9,796,391 99,893,797 Dirhams ( at 10.1970 Dirhams per US Dollar) Common Stock Dividend payable as of October 30, 2003 -64,972,722 5,500 Common Stock Shares 110,000 Dirhams per share 605,000,000 Dirhams 9.3116 Dirhams per US Dollar on October 30, 2003 ----------- Total Retained Earnings 147,498,955
The Retained Earnings are allocated among the shareholders as follows :
Common Convertible Securities Preferred Stock Stock Total --------------- ---------------------- ---------------------- ----------- ----------- Shareholders Type of Partner Dirhams US Dollars Dirhams US Dollars US Dollars US Dollars ------------- --------------- ---------- ---------- ---------- ---------- ----------- ----------- Jorf Lasfar Handelsbolag, Sweden ....... CMS General 3,418,679 389,540 0 0 2,560,439 2,949,979 Jorf Lasfar Energiaktiebolag, Sweden ... CMS Limited 42,733,486 4,869,247 0 0 32,005,492 36,874,739 Jorf Lasfar Power Energy AB, Sweden .... CMS Limited 39,314,807 4,479,707 0 0 29,445,052 33,924,760 Tre Kronor Investment AB, Sweden ...... ABB General 3,418,679 389,540 0 0 2,560,439 2,949,979 AB Cythere 63, Sweden .................. ABB Limited 0 0 81,861,977 9,327,725 61,310,884 70,638,608 AB Cythere 61, Sweden .................. ABB Limited 0 0 186,316 21,230 139,660 160,890 ---------- ---------- ---------- ---------- ----------- ----------- Total 88,885,652 10,128,034 82,048,293 9,348,954 128,021,967 147,498,955
Page 20 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 17. DIRECT FINANCING LEASE - (D.F.L) As explained in Note 2b, JLEC is using the Direct Financing Lease methodology. Specific accounts were created to reflect this method. These accounts are detailed below . Direct Financing Lease - (D.F.L) as of December 31, 2005 17.1 LONG TERM RECEIVABLES AS OF DECEMBER 31, 2005
US$ Euro ------------- ------------- Units 1 to 4 Units 1 to 4 ------------- ------------- Total Minimum Lease Payments 2,084,457,657 1,038,253,560 Minimum Lease Payments for 2005 -98,902,328 -95,705,084 ------------- ------------- Total of Future Minimum Lease Payments 1,985,555,329 942,548,476 X 1.17936 ------------- ------------- Total of Future Minimum Lease Payments in US$ 17.3 1,985,555,329 1,111,599,840 ============= =============
The minimum lease payments under the US GAAP model for the next five years are as follows:
US$ Euro -------------- -------------- Year Units 1 to 4 Units 1 to 4 ------ -------------- -------------- 2006 99,348,712 84,343,267 2007 94,266,264 83,270,646 2008 97,990,818 79,557,495 2009 97,756,285 76,945,799 2010 91,054,494 80,225,551
17.2 UNEARNED INCOME AS OF DECEMBER 31, 2005
US$ Euro ------------- ------------ Units 1 to 4 Units 1 to 4 ------------- ------------ Total Unearned Income 1,418,090,734 696,642,515 ---------- Lease Revenue 2005 -89,258,071 -74,987,909 X 1.23840 92,865,318 ------------- ------------ ---------- 1,328,832,663 621,654,606 X 1.17936 ------------- ------------ Total Remaining Unearned Income in US$ 17.3 1,328,832,663 733,151,852 ============= ============
The Lease Revenues under the US GAAP model for the next five years are as follows:
US$ Euro ------------ ------------ Year Units 1 to 4 Units 1 to 4 ------ ------------ ------------ 2006 87,703,727 71,512,790 2007 86,501,207 68,270,588 2008 85,143,123 64,820,922 2009 83,150,426 61,693,606 2010 81,563,514 57,390,062
17.3 NET INVESTMENT IN DIRECT FINANCING LEASES AS OF DECEMBER 31, 2005
US$ Euro -------------- ------------- Units 1 to 4 Units 1 to 4 -------------- ------------- Total of Future Minimum Lease Payments in US$ 17.1 1,985,555,329 1,111,599,840 Total Remaining Unearned Income in US$ 17.2 -1,328,832,663 -733,151,852 -------------- ------------- Net investment in direct financing leases in US$ 656,722,666 378,447,988 ============== ============= Current part in US$ 11,644,985 15,131,695 Non-Current part in US$ 645,077,681 363,316,293
Page 21 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 Direct Financing Lease - (D.F.L) as of December 31, 2004 17.1 LONG TERM RECEIVABLES AS OF DECEMBER 31, 2004
US$ Euro ------------- ------------- Units 1 to 4 Units 1 to 4 ------------- ------------- Total Minimum Lease Payments 17.4 2,197,963,436 1,152,862,047 Minimum Lease Payments for 2004 -113,505,779 -114,608,487 ------------- ------------- Total of Future Minimum Lease Payments 2,084,457,657 1,038,253,560 X 1.36428 ------------- ------------- Total of Future Minimum Lease Payments in US$ 17.3 2,084,457,657 1,416,475,939 ============= =============
The minimum lease payments under the US GAAP model for the next five years are as follows:
US$ Euro ------------ ------------ Year Units 1 to 4 Units 1 to 4 ------ ------------ ------------ 2005 98,902,331 95,705,089 2006 99,348,712 84,343,267 2007 94,266,264 83,270,646 2008 97,990,818 79,557,495 2009 97,756,285 76,945,799
17.2 UNEARNED INCOME AS OF DECEMBER 31, 2004
US$ Euro ------------- ------------ Units 1 to 4 Units 1 to 4 ------------- ------------ Total Unearned Income 17.4 1,498,566,597 780,404,581 ----------- Lease Revenue 2004 -80,475,863 -83,762,066 X 1.24254 104,077,762 ------------- ------------ ----------- 1,418,090,734 696,642,515 X 1.36428 ------------- ------------ Total Remaining Unearned Income in US$ 17.3 1,418,090,734 950,420,397 ============= ============
The Lease Revenues under the US GAAP model for the next five years are as follows:
US$ Euro ------------ ------------ Year Units 1 to 4 Units 1 to 4 ------ ------------ ------------ 2005 89,258,072 74,987,906 2006 87,703,727 71,512,790 2007 86,501,207 68,270,588 2008 85,143,123 64,820,922 2009 83,150,426 61,693,606
17.3 NET INVESTMENT IN DIRECT FINANCING LEASES AS OF DECEMBER 31, 2004
US$ Euro -------------- -------------- Units 1 to 4 Units 1 to 4 -------------- -------------- Total of Future Minimum Lease Payments in US$ 17.1 2,084,457,657 1,416,475,939 Total Remaining Unearned Income in US$ 17.2 -1,418,090,734 -950,420,397 -------------- -------------- Net investment in direct financing leases in US$ 666,366,923 466,055,542 ============== ============== Current part in US$ 9,644,259 28,264,185 Non-Current part in US$ 656,722,664 437,791,357
17.4 On November 8, 2004, Amendment No. 2 to the Power Purchase Agreement became effective, and JLEC updated our Direct Finance Lease models including an extension of such DFL models by 15 years until September 13, 2027. As a result, starting from January 1, 2004, the total minimum lease payments have increased from $1,181,954,019 to $2,197,963,436 and from Euro 834,803,410 to Euro 1,152,862,047. Likewise, JLEC's total unearned income under the updated and extended DFL models increased from $505,489,540 to $1,498,566,597 and from Euro 477,010,214 to Euro 780,404,581. Page 22 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 Direct Financing Lease - (D.F.L) as of December 31, 2003 17.1 LONG TERM RECEIVABLES AS OF DECEMBER 31, 2003
US$ Euro ------------- ------------- Units 1 to 4 Units 1 to 4 ------------- ------------- Total Minimum Lease Payments 1,283,596,155 956,285,785 Minimum Lease Payments for 2003 -101,642,136 -121,482,375 ------------- ------------- Total of Future Minimum Lease Payments 1,181,954,019 834,803,410 X 1.263417 ------------- ------------- Total of Future Minimum Lease Payments in US$ 17.3 1,181,954,019 1,054,704,794 ============= =============
The minimum lease payments under the US GAAP model for the next five years are as follows:
US$ Euro ------------ ------------ Year Units 1 to 4 Units 1 to 4 ------ ------------ ------------ 2004 116,664,592 116,635,941 2005 116,371,118 107,167,144 2006 108,749,430 92,362,540 2007 96,617,923 85,060,254 2008 104,467,842 84,500,888
17.2 UNEARNED INCOME AS OF DECEMBER 31, 2003
US$ Euro ------------ ------------ Units 1 to 4 Units 1 to 4 ------------ ------------ Total Unearned Income 587,282,368 568,767,180 ----------- Lease Revenue 2003 -81,792,828 -91,756,966 X 0.95144 104,635,053 ------------ ------------ ----------- 505,489,540 477,010,214 ------------ ------------ X 1.263417 ------------ ------------ Total Remaining Unearned Income in US$ 17.3 505,489,540 602,662,799 ============ ============
The Lease Revenues under the US GAAP model for the next five years are as follows:
US$ Euro ------------ ------------ Year Units 1 to 4 Units 1 to 4 ------ ------------ ------------ 2004 78,203,985 84,230,456 2005 73,392,008 76,117,547 2006 68,172,214 69,587,224 2007 64,172,868 64,534,124 2008 59,591,568 58,711,491
17.3 NET INVESTMENT IN DIRECT FINANCING LEASES AS OF DECEMBER 31, 2003
US$ Euro ------------- ------------- Units 1 to 4 Units 1 to 4 ------------- ------------- Total of Future Minimum Lease Payments in US$ 17.1 1,181,954,019 1,054,704,794 Total Remaining Unearned Income in US$ 17.2 -505,489,540 -602,662,799 ------------- ------------- Net investment in direct financing leases in US$ 676,464,479 452,041,995 ============= ============= Current part in US$ 38,460,607 40,941,639 Non-Current part in US$ 638,003,872 411,100,356
Page 23 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 18. FINANCIAL EXPENSES
12/31/05 12/31/04 12/31/03 US$ US$ US$ ------------ ------------ ------------ The Financial Expenses are detailed as follows, for the year ending: Interest, Fees and Swaps incurred from inception to the year ending: Up-Front Fees 25,609,073 25,609,073 25,609,073 Interest Costs 358,167,574 324,780,552 287,290,576 Premiums 23,808,481 23,808,481 23,808,481 Commitment Fees 19,312,672 19,312,672 19,312,672 Arrangement Fees 2,396,273 2,396,273 2,396,273 Other Fees (acceptance fees, Agent fees...etc) 10,393,398 10,240,839 9,754,617 Guarantee Fees 23,141,044 22,035,847 20,598,822 Swaps 51,622,612 44,896,300 37,238,114 ------------ ------------ ------------ 514,451,127 473,080,038 426,008,628 Accrued Interest, Fees, Swaps (see Note 14.1) 4,516,665 5,726,546 5,904,937 ------------ ------------ ------------ Total Interest, Fees and Swaps 518,967,792 478,806,584 431,913,565 ------------ ------------ ------------ Interest, fees and swaps capitalized as part of the project construction for Units 3&4 -210,949,363 -210,949,363 -210,949,363 ------------ ------------ ------------ Interest, fees and swaps expensed - Total 308,018,429 267,857,221 220,964,202 Interest, fees and swaps expensed during prior years -267,857,221 -220,964,202 -171,539,035 ------------ ------------ ------------ Interest, fees and swaps expensed during current year 40,161,208 46,893,019 49,425,167 ============ ============ ============
19. POSTEMPLOYMENT BENEFITS JLEC contributes to two pension plans as described in Notes 19.1 and 19.2. JLEC's obligations for retiree health care insurance and other postemployment costs are described in Note 19.3 19.1 CAISSE DE DEPOT ET DE GESTION (CDG) On December 23, 2005, JLEC entered into a Pension Plan Transfer Agreement with the CDG and its affiliates called RCAR and CNRA. In accordance with the terms of this Transfer Agreement, JLEC made a total, one-time payment of MAD 175,149,622 (USD 18,957,844) to the RCAR and CNRA to fully fund the pension plan covering most (252 of 322) of JLEC's employees, and transferred the administration, actuarial risk and investment return risk of this pension plan to the CDG/RCAR/CNRA. Further, this Pension Plan Transfer Agreement defines JLEC's future contributions to the RCAR for such pension plan to be equal to 18.00% of the compensation of each participating employee. Such future contributions will be expensed by JLEC in the period for which they are due. As a result of the Transfer Agreement and payment described above, JLEC's unfunded pension liability is zero as of December 31, 2005, compared with USD 11,524,374 as of December 31, 2004, and USD 7,965,451 as of December 31, 2003. JLEC estimates our 2006 contributions will be USD 443,184. 19.2 CAISSE INTERPROFESSIONNELLE MAROCAINE DE RETRAITES (CIMR) Employees of JLEC not covered by the pension plan described in Note 19.1 participate in a pension fund called CIMR, to which JLEC contributes an amount equal to 7.32 percent of the employee's gross pay ( 7.08% in 2004, and 6.84% in 2003 ). This fund is carried in the employee's name, and the future pension benefits an employee will receive depend only on the amount contributed to his account and the returns earned on the investment of those contributions. JLEC's contributions to the CIMR pension fund are expensed by JLEC in the period for which they are due. In 2005, JLEC's contributions to the CIMR pension fund amounted to USD 206,088, compared with USD 173,073 in 2004, and USD 145,677 in 2003. JLEC estimates our 2006 contributions will be USD 219,247. 19.3 POSTEMPLOYMENT OBLIGATIONS For those 252 employees described in Note 19.1, JLEC retains an obligation for certain postemployment benefits consisting of a 2/3 share of retiree health insurance premiums and reimbursement of retiree electrical charges. Such insurance premiums are forecast to trend higher in the future at a rate of 6.50% per year; provided, however, that JLEC's contribution for each retiree's health insurance is capped at 7,039 Dirhams ($ 782) per year for a typical family of four. Using data as of September 30, 2005, Deloitte & Touche prepared an actuarial forecast of JLEC's postemployment obligations and determined that the present value at a 6.00% discount rate of such JLEC obligations amounted to USD 2,020,119 as of December 31, 2005. This compares with USD 2,257,713 as of December 31, 2004, and USD 1,912,675 as of December 31, 2003. JLEC recognizes such actuarial gains and losses directly in current period Income Before Tax. JLEC estimates our future payments for such postemployment benefits will be as follows : Page 24 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 20. DERIVATIVE INSTRUMENT LIABILITY / OTHER COMPREHENSIVE INCOME JLEC adopted SFAS N degrees. 133 on January 1, 2001. This standard requires JLEC to recognize at fair value on the balance sheet, as assets or liabilities, all contracts that meet the definition of a derivative instrument. Details of all JLEC derivative instruments (interest rate swaps) are provided in the following tables as of December 31, 2005, 2004 and 2003, and all such swaps qualify with 100% effectiveness as cash flow hedge for JLEC's variable interest rate loans. Therefore, in accordance with SFAS N degrees. 133, the changes in fair value of these interest rate swaps are reflected directly in Stockholders' Equity under "Other Comprehensive Income or (Loss)". JLEC determines fair value based upon market price estimations provided by the swap providers. JLEC estimates that our swap expenses in 2006 will be USD 5,337,622. 2005
Fixed Rate Current Current Settlement Forecast of Credit Swap Paid by Libor Paid Notional and Termination Remaining Valuation Facility Providers Currency JLEC to JLEC Amount Amortization Date Payments in Euro ---------- --------- -------- ---------- ---------- ----------- ------------ ----------- ------------ ---------- World Bank BNP Euro 6.4115% 2.31813% 32,229,142 Quarterly 2/15/2013 5,018,993 3,633,143 ABN Euro 6.4175% 2.31813% 32,229,142 Quarterly 2/15/2013 5,026,350 3,651,524 CSFB Euro 6.4060% 2.31813% 32,229,142 Quarterly 2/15/2013 5,012,250 3,476,765 ---------- ---------- ---------- 96,687,425 15,057,593 10,761,432 ---------- ---------- ---------- ERG BNP Euro 6.4700% 2.31813% 6,021,011 Quarterly 2/15/2013 951,043 690,620 ABN Euro 6.4750% 2.31813% 6,021,011 Quarterly 2/15/2013 952,188 693,891 CSFB Euro 6.4680% 2.31813% 6,021,011 Quarterly 2/15/2013 950,585 663,435 ---------- --------- --------- 18,063,034 2,853,816 2,047,947 Total in Euro 12,809,379 ---------- B/S FX rate X 1.17936 Total in USD 15,106,813 ==========
2004
Fixed Rate Current Current Settlement Forecast of Credit Swap Paid by Libor Paid Notional and Termination Remaining Valuation Facility Providers Currency JLEC to JLEC Amount Amortization Date Payments in Euro ---------- --------- -------- ---------- ---------- ----------- ------------ ----------- ----------- ---------- World Bank BNP Euro 6.4115% 2.17025% 36,674,540 Quarterly 2/15/2013 6,705,625 4,867,269 ABN Euro 6.4175% 2.17025% 36,674,540 Quarterly 2/15/2013 6,715,112 4,857,758 CSFB Euro 6.4060% 2.17025% 36,674,540 Quarterly 2/15/2013 6,696,930 4,681,464 ----------- ----------- ---------- 110,023,620 20,117,667 14,406,491 ERG BNP Euro 6.4700% 2.17025% 6,851,496 Quarterly 2/15/2013 1,270,016 925,233 ABN Euro 6.4750% 2.17025% 6,851,496 Quarterly 2/15/2013 1,271,493 923,161 CSFB Euro 6.4680% 2.17025% 6,851,496 Quarterly 2/15/2013 1,269,426 930,588 ---------- ---------- ---------- 20,554,488 3,810,935 2,778,982 Total in Euro 17,185,473 ---------- B/S FX rate X 1.36429 Total in USD 23,445,919 ==========
2003
Fixed Rate Current Current Settlement Forecast of Credit Swap Paid by Libor Paid Notional and Termination Remaining Valuation Facility Providers Currency JLEC to JLEC Amount Amortization Date Payments in Euro ---------- --------- -------- ---------- ---------- ----------- ------------ ----------- ----------- ---------- World Bank BNP Euro 6.4115% 2.16888% 41,119,939 Quarterly 2/15/2013 8,400,358 4,942,789 ABN Euro 6.4175% 2.16888% 41,119,939 Quarterly 2/15/2013 8,412,238 4,940,969 CSFB Euro 6.4060% 2.16888% 41,119,939 Quarterly 2/15/2013 8,389,468 4,733,058 ----------- ----------- ---------- 123,359,818 25,202,063 14,616,816 ERG BNP Euro 6.4700% 2.16888% 7,681,980 Quarterly 2/15/2013 1,590,984 942,887 ABN Euro 6.4750% 2.16888% 7,681,980 Quarterly 2/15/2013 1,592,834 942,179 CSFB Euro 6.4680% 2.16888% 7,681,980 Quarterly 2/15/2013 1,590,245 950,471 ----------- ----------- ---------- 23,045,940 4,774,063 2,835,537 Total in Euro 17,452,353 ----------- B/S FX rate X 1.26342 Total in USD 22,049,599 ==========
Page 25 JORF LASFAR ENERGY COMPANY NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005 21. CASH FLOWS FOR 2005 Reconciliation of net income to net cash from operating activities under the Direct Method is as follows :
2005 2004 2003 US$ US$ US$ ----------- ----------- ----------- Net Income .......................................................... 111,561,388 125,193,694 119,850,319 Adjustment to reconcile Net Income to cash provided from operating activities : Depreciation and amortization .............................. 5,844,911 5,530,445 4,028,115 Deferred taxes ............................................. 5,057,003 (1,555,763) (13,005,297) Lease Revenue .............................................. (182,123,389) (184,553,625) (186,427,881) Finance tariff cash revenue ................................ 216,790,731 213,372,941 246,405,730 Changes in operating assets and liabilities: Inventories ........................................... 7,374,721 (20,769,958) 2,066,641 Accounts receivable ................................... 9,650,275 (38,381,613) (9,311,086) Prepayments ........................................... (4,546,607) 819,616 1,996,086 Accounts payable ...................................... (20,344,178) 28,070,653 21,732,263 Unfunded pension obligation ........................... (11,761,968) 3,903,961 4,185,183 Other liabilities ..................................... 3,509,238 (7,036,106) (1,527,625) Effect of exchange rate changes ....................... 5,367,876 1,616,716 1,824,028 ----------- ----------- ----------- Net cash provided by operating activities. 146,380,000 126,210,962 191,816,478
22. UNCERTAINTIES AS OF DECEMBER 31, 2005 JLEC's corporate tax return, payroll tax and VAT returns for the years 2002 to 2005 are open to audit by the Moroccan Tax Authorities. JLEC is periodically involved in other legal, tax and other proceedings regarding matters arising in the ordinary course of business. JLEC believes that the outcome of these matters will not materially affect its results of operations or liquidity. 23. NEW ACCOUNTING STANDARDS In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payments" (FAS 123R). FAS 123R requires that JLEC recognizes the cost of share-based payments granted to employees measured at the grant-date fair value of the award. JLEC is required to adopt FAS 123R effective January 1, 2006 for all share-based grants made or modified after June 15, 2005, and for the unvested portion of outstanding share-based grants made prior to June 15, 2005. This new standard will not have any impact on the JLEC's accounts. In December 2004, the FASB issued SFAS No. 153 "Exchanges of Non-Monetary Assets" as an amendment to APB Opinion No. 29 "Accounting for Non-Monetary Transactions." APB 29 prescribes that exchanges of non-monetary transactions should be measured based on the fair value of the assets exchanged, while providing an exception for non-monetary exchange of similar productive assets. SFAS 153 eliminates the exception provided in APB 29 and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. SFAS 153 is to be applied prospectively and is effective for all non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. JLEC does not expect any material effect upon the adoption of this new standard. Page 26