-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T2dYjtnZ0F+4inUq4IT/ITQKIrKm7f4ueBbP6kI78jEVa3kFGqHM8M0pkbtmj4M1 TI5lovTHYAV2tb4kCPoOvQ== 0000912057-00-024785.txt : 20000516 0000912057-00-024785.hdr.sgml : 20000516 ACCESSION NUMBER: 0000912057-00-024785 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SITHE INDEPENDENCE FUNDING CORP CENTRAL INDEX KEY: 0000899281 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 133677475 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-59960 FILM NUMBER: 634979 BUSINESS ADDRESS: STREET 1: 450 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2124509000 MAIL ADDRESS: STREET 1: 450 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 For the Quarterly Period Ended March 31, 2000 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period From ______________ to ___________________ Commission File Number 33-59960 SITHE/INDEPENDENCE FUNDING CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 13-3677475 --------- ----------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 335 MADISON AVENUE, NEW YORK, NY 10017 -------------------------------- ----- (Address of principal executive offices) (Zip code) (212)-351-0000 -------------- (Registrant's telephone number, including area code) SITHE/INDEPENDENCE POWER PARTNERS, L.P. (Exact name of registrant as specified in its charter) DELAWARE 33-0468704 --------- ----------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 335 MADISON AVENUE, NEW YORK, NY 10017 -------------------------------- ----- (Address of principal executive offices) (Zip code) (212)-351-0000 -------------- (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 shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No SITHE/INDEPENDENCE POWER PARTNERS, L.P. SITHE/INDEPENDENCE FUNDING CORPORATION
Page No. -------- PART I FINANCIAL INFORMATION SITHE/INDEPENDENCE POWER PARTNERS, L.P. (a Delaware Limited Partnership) Financial Statements: Condensed Consolidated Balance Sheets at March 31, 2000 and December 31, 1999 (Unaudited)......................................... 3 Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2000 and 1999 (Unaudited)...................... 4 Condensed Consolidated Statement of Partners' Capital for the Three Months Ended March 31, 2000 (Unaudited)............................... 5 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000 and 1999 (Unaudited)............................. 6 Notes to Condensed Consolidated Financial Statements (Unaudited)........................................................... 7 Management's Discussion and Analysis of Financial Condition and Results of Operations................................................. 8 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K................................ 10 Signatures ................................................................ 11
-2- SITHE/INDEPENDENCE POWER PARTNERS, L.P. (A DELAWARE LIMITED PARTNERSHIP) CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS)
MARCH 31, DECEMBER 31, 2000 1999 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 4,675 $ 6,076 Restricted cash and cash equivalents 70,323 40,112 Restricted investments 36,070 35,621 Accounts receivable - trade 31,239 30,315 Fuel inventory and other current assets 3,715 3,113 --------- --------- TOTAL CURRENT ASSETS 146,022 115,237 PROPERTY, PLANT AND EQUIPMENT, AT COST: Land 5,010 5,010 Electric and steam generating facilities 777,429 777,356 --------- --------- 782,439 782,366 Accumulated depreciation (101,603) (96,604) --------- --------- 680,836 685,762 DEBT ISSUANCE COSTS 6,981 7,213 OTHER ASSETS 7,960 5,257 --------- --------- TOTAL ASSETS $ 841,799 $ 813,469 ========= ========= LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES: Trade payables $ 24,402 $ 27,945 Accrued interest 14,202 173 Current portion of long-term debt 19,296 19,296 --------- --------- TOTAL CURRENT LIABILITIES 57,900 47,414 LONG-TERM DEBT: 7.90% secured notes due 2002 63,190 63,190 8.50% secured bonds due 2007 150,839 150,839 9.00% secured bonds due 2013 408,609 408,609 --------- --------- 622,638 622,638 OTHER LIABILITIES 3,463 3,607 COMMITMENTS AND CONTINGENCIES PARTNERS' CAPITAL 157,798 139,810 --------- --------- TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 841,799 $ 813,469 ========= =========
See notes to condensed consolidated financial statements. -3- SITHE/INDEPENDENCE POWER PARTNERS, L.P. (A DELAWARE LIMITED PARTNERSHIP) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, ---------------------- 2000 1999 --------- --------- REVENUE $ 97,106 $ 111,362 --------- --------- COST OF SALES: Fuel 49,123 62,744 Operations and maintenance 11,028 11,000 Depreciation 4,999 4,962 --------- --------- 65,150 78,706 OPERATING INCOME 31,956 32,656 NON-OPERATING INCOME (EXPENSE): Interest expense (14,391) (15,132) Other income, net 423 1,113 --------- --------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR MAJOR OVERHAUL COSTS 17,988 18,637 Cumulative effect of change in accounting for major overhaul costs 0 3,775 --------- --------- NET INCOME $ 17,988 $ 22,412 ========= =========
See notes to condensed consolidated financial statements -4- SITHE/INDEPENDENCE POWER PARTNERS, L.P. (A DELAWARE LIMITED PARTNERSHIP) CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (UNAUDITED) (IN THOUSANDS)
TOTAL GENERAL LIMITED PARTNERS' PARTNER PARTNERS CAPITAL -------- -------- -------- BALANCE, JANUARY 1, 2000 $ 1,198 $138,612 $139,810 Net income and total comprehensive income 180 17,808 17,988 -------- -------- -------- BALANCE, MARCH 31, 2000 $ 1,378 $156,420 $157,798 ======== ======== ========
See notes to condensed consolidated financial statements -5- SITHE/INDEPENDENCE POWER PARTNERS, L.P. (A DELAWARE LIMITED PARTNERSHIP) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, -------------------- 2000 1999 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 17,988 $ 22,412 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 4,999 4,962 Amortization of deferred financing costs 232 251 Unrealized loss on marketable securities 862 0 Cumulative effect of change in accounting 0 (3,775) for major overhaul costs Changes in operating assets and liabilities: Accounts receivable - trade (924) (26,894) Fuel inventory and other current assets (602) (1,222) Other assets (2,703) 347 Trade payables (3,543) 10,359 Accrued interest payable 14,029 14,569 Other liabilities (144) 763 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 30,194 21,772 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (73) (1,097) Restricted funds (31,522) (21,354) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (31,595) (22,451) -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (1,401) (679) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,076 2,147 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,675 $ 1,468 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION Cash payments: Interest $ 0 $ 0
See notes to condensed consolidated financial statements. -6- SITHE/INDEPENDENCE POWER PARTNERS, L.P. (A DELAWARE LIMITED PARTNERSHIP) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. THE PARTNERSHIP Sithe/Independence Power Partners, L.P. (the "Partnership"), in which Sithe Energies, Inc. and certain of its direct and indirect wholly-owned subsidiaries (the "Partners") hold all the partnership interests, is a Delaware limited partnership that was formed in November 1990 for a term of 50 years to develop, construct and own a gas-fired cogeneration facility with a design capacity of approximately 1,000 megawatts (the "Project") located in the Town of Scriba, County of Oswego, New York. The Project commenced commercial operation for financial reporting purposes on December 29, 1994. The majority of the capacity and electric energy generated by the Project is sold to Consolidated Edison Company of New York, Inc. ("Con Edison") and Alcan Aluminum Corporation ("Alcan") with the remainder of the electric energy being sold to Niagara Mohawk Power Corporation. 2. BASIS OF PRESENTATION The accompanying consolidated balance sheets at March 31, 2000 and December 31, 1999 and the consolidated statements of operations and cash flows for the three months ended March 31, 2000 and 1999 should be read in conjunction with the audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 1999 for the Partnership and its wholly-owned subsidiary, Sithe/Independence Funding Corporation ("Sithe Funding"). The results of operations for the three months ended March 31, 2000 are not necessarily indicative of the results to be expected for the full year. The unaudited financial information at March 31, 2000 and for the three months ended March 31, 2000 and 1999 contains all adjustments, consisting only of normal recurring adjustments, which management considers necessary for a fair presentation of the financial position and operating results for such periods. Consistent with positions expressed by the Securities and Exchange Commission, in 1999, the Partnership changed its method of accounting for major overhaul costs for major equipment not covered by a service agreement (the "Non-covered Units"), whereby the Partnership expenses such costs as incurred. Previously, the Partnership normalized major overhaul costs by establishing maintenance reserves during the operating period prior to the major overhaul. As a result of this change in accounting for major overhaul costs, the Partnership reversed to income approximately $3.8 million, reported as the cumulative effect of a change in accounting on the 1999 consolidated statement of operations, representing the balance of the major overhaul reserve for Non-covered Units as of January 1, 1999. Results of operations for the three months ended March 31, 1999 have been restated, giving effect to this change in accounting as if it had occurred on January 1, 1999. -7- SITHE/INDEPENDENCE POWER PARTNERS, L.P. (A DELAWARE LIMITED PARTNERSHIP) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Revenue for the first quarter of 2000 of $97.1 million was $14.3 million (13%) lower than in the corresponding period of last year due largely to the scheduled change effective November 1, 1999 in pricing for the second fifteen-year period ("Second Period") of the 40-year Con Edison Energy Purchase Agreement. The decline in revenue was largely offset by a reduction in fuel expense as discussed below. During the Second Period, Con Edison pays a price equal to 93.75% of the Con Edison SC No. 11 Buy Back Energy Rate (the "Energy Rate") plus a fixed monthly capacity charge of $6.7455/kilowatt based on the Project's availability and capacity dedicated to deliveries of electric energy to Con Edison and an operations and maintenance payment of $0.01/kilowatt hour ("kwh") that escalates annually with inflation. Previously, Con Edison paid a price equal to 100% of the Energy Rate plus $0.026/kwh of net generation sold to Con Edison. Effective January 17, 2000, the Energy Rate is the locational based marginal price at Pleasant Valley, New York as determined by the New York Independent System Operator. Cost of sales for the first quarter of 2000 of $65.1 million was $13.7 million (17%) lower than in the corresponding period of last year, largely reflecting a $13.6 million decrease in fuel expense resulting from a scheduled contractual change under the Partnership's long term gas supply agreement, effective January 1, 2000, in the method of pricing fuel associated with energy deliveries to Con Edison from fixed prices to lower variable prices based on the prices paid by Con Edison to the Partnership for capacity and electric energy. Interest expense for the first quarter of 2000 of $14.4 million was $.7 million (5%) lower than in the corresponding period of last year as a result of lower outstanding amounts of long-term debt. For the first quarter of 2000, other income, net of $.4 million consisted of $1.3 million of interest income and $.9 million of unrealized losses on restricted investments held as trading securities. For the first quarter of 1999, other income, net of $1.1 million consisted entirely of interest income. Based on temperatures in the region of the Project to date and projects completed in 1999 to increase thermal energy deliveries to Alcan, the Partnership believes that the Project is well positioned from a qualifying facility standpoint in 2000. -8- LIQUIDITY AND CAPITAL RESOURCES Financing for the Project consisted of a loan to the Partnership by Sithe Funding of the proceeds of its issuance of $717.2 million of notes and bonds (the "Securities") and $60 million of capital contributions by the Partners. In addition, under a credit facility obtained by the Partners, one or more letters of credit may be issued in connection with their obligations pursuant to certain Project contracts, and, as of March 31, 2000, letters of credit aggregating $13.6 million were outstanding in connection with such obligations. Also, the Partnership has secured the Project's debt service reserve obligations with a letter of credit in the amount of $50 million. As of March 31, 2000, the Partnership had restricted funds and investments aggregating $106.4 million, including the Project's cumulative cash debt service reserve and major overhaul reserve of $33.0 million and $5.7 million, respectively. In addition, these restricted funds included $17.0 million that was utilized for April 2000 operating expenses, $9.9 million in the Partnership distribution account and the balance reserved for the June 2000 debt service payment. Funds in the Partnership distribution account are available as additional operating and debt service reserves until such time as certain coverage ratios are achieved. To secure the Partnership's obligation to pay any amounts drawn under the debt service letter of credit, the letter of credit provider has been assigned a security interest and lien on all of the collateral in which the holders of the Securities have been assigned a security interest and lien. The Partnership believes that funds available from cash on hand, restricted funds, operations and the debt service letter of credit will be more than sufficient to liquidate Partnership obligations as they come due and pay scheduled debt service. FORWARD-LOOKING STATEMENTS Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934. The words "anticipate", "believe", "expect", "estimated" and similar expressions generally identify forward-looking statements. While the Partnership believes in the veracity of all statements made herein, forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Partnership, are inherently subject to significant business, economic and competitive uncertainties and contingencies, the price of natural gas and the demand for and price of electricity. These uncertainties and contingencies could cause the Partnership's actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Partnership. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Partnership has investments in financial instruments subject to interest rate risk consisting of $70.3 million of restricted cash and cash equivalents and $36.1 million of restricted investments. In the case of restricted cash and cash equivalents, due to the short duration of these financial instruments a 10% immediate change in interest rates would not have a material effect on the Partnership's financial condition. In the case of restricted investments, the resulting potential decrease in fair value from a 10% immediate change in interest rates would be approximately $.5 million. The Partnership's outstanding long-term debt at March 31, 2000 bears interest at fixed rates and therefore the Partnership's results of operations would not be affected by changes in interest rates as they apply to borrowings. -9- PART II -- OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits:
EXHIBIT NO. DESCRIPTION OF EXHIBIT ----------- ---------------------- 27---- Article 5 Financial Data Schedule of Sithe/Independence Power Partners, L.P. for the quarter ended March 31, 2000.
(b) Reports on Form 8-K: No report on Form 8-K was filed during the quarter covered by this report. -10- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SITHE/INDEPENDENCE FUNDING CORPORATION -------------------------------------- (REGISTRANT) May 15, 2000 /s/ RICHARD J. CRONIN III -------------------------------------- RICHARD J. CRONIN III CHIEF FINANCIAL OFFICER AND SENIOR VICE PRESIDENT (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) Pursuant to the requirements of the Securities Exchange Act of 1934, the co-registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SITHE/INDEPENDENCE POWER PARTNERS, L.P. --------------------------------------- (REGISTRANT) By: SITHE/INDEPENDENCE, INC. GENERAL PARTNER May 15, 2000 /s/ RICHARD J. CRONIN III ------------------------------------ RICHARD J. CRONIN III CHIEF FINANCIAL OFFICER AND SENIOR VICE PRESIDENT (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) -11- EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OEPRATIONS FOUND ON PAGES 3 AND 4 OF THE PARTNERSHIP'S FORM 10Q FOR THE YEAR-TO-DATE, AND IS QUALFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000899281 SITHE/INDEPENDENCE FUNDING CORP. 3-MOS DEC-31-2000 MAR-31-2000 4,675 0 31,239 0 3,715 146,022 782,439 (101,603) 841,799 57,900 622,638 0 0 0 157,798 841,799 97,106 97,106 65,150 65,150 0 0 14,391 17,988 0 17,988 0 0 0 17,988 0 0
-----END PRIVACY-ENHANCED MESSAGE-----