-----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, Ac4rqRBnSUaIeDJIYT9x5fPcPe9T3CCZl7nUpkeDgFlM/A4Acu8qP0D583JK2wyy HvFO1pcjeNMfK1Xd8q0ksQ== 0000912057-97-027302.txt : 19970813 0000912057-97-027302.hdr.sgml : 19970813 ACCESSION NUMBER: 0000912057-97-027302 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970812 SROS: NYSE 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: 1934 Act SEC FILE NUMBER: 033-59960 FILM NUMBER: 97657167 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 Quarterly Report Pursuant to Section 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended June 30, 1997 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) 450 LEXINGTON AVENUE, NEW YORK, NY 10017 - ---------------------------------- ----- (Address of principal executive offices) (Zip code) (212)-450-9000 -------------- (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) 450 LEXINGTON AVENUE, NEW YORK, NY 10017 - ---------------------------------- ----- (Address of principal executive offices) (Zip code) (212)-450-9000 -------------- (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: Consolidated Balance Sheets at June 30, 1997 and December 31, 1996 (Unaudited)..........................................3 Consolidated Statements of Operations for the Three and Six Months Ended June 30, 1997 and 1996 (Unaudited)........................4 Consolidated Statement of Partners' Capital for the Six Months Ended June 30, 1997 (Unaudited).................................5 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1997 and 1996 (Unaudited)...............................6 Notes to Consolidated Financial Statements (Unaudited)...................7 Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................9 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K....................................11 Signatures...................................................................12 - 2 - SITHE/INDEPENDENCE POWER PARTNERS, L.P. (A DELAWARE LIMITED PARTNERSHIP) CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS)
JUNE 30, DECEMBER 31, 1997 1996 -------------- -------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 3,010 $ 4 Restricted cash and cash equivalents 81,079 73,412 Restricted investments 27,184 14,610 Accounts receivable - trade 28,857 39,782 Fuel inventory and other current assets 1,862 2,887 -------------- -------------- TOTAL CURRENT ASSETS 141,992 130,695 PROPERTY, PLANT AND EQUIPMENT, AT COST: Land 5,010 5,875 Electric and steam generating facilities 764,289 755,020 -------------- -------------- 769,299 760,895 Accumulated depreciation (47,541) (37,707) -------------- -------------- 721,758 723,188 Debt Issuance Costs 9,733 10,265 Other Assets 2,628 3,323 -------------- -------------- TOTAL ASSETS $ 876,111 $ 867,471 ============== ============== LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES: Trade payables $ 18,676 $ 24,264 Accrued interest 174 174 Current portion of long-term debt 14,529 10,202 Accrued construction costs and retentions 5,045 9,249 -------------- -------------- TOTAL CURRENT LIABILITIES 38,424 43,889 LONG-TERM DEBT: 7.90% secured notes due 2002 119,325 128,753 8.50% secured bonds due 2007 150,839 150,839 9.00% secured bonds due 2013 408,609 408,609 -------------- -------------- 678,773 688,201 Other Liabilities 4,872 11,682 Commitments and Contingencies Partners' Capital 154,042 123,699 -------------- -------------- TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 876,111 $ 867,471 ============== ==============
See notes to consolidated financial statements. - 3 - SITHE/INDEPENDENCE POWER PARTNERS, L.P. (A DELAWARE LIMITED PARTNERSHIP) CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS)
THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ------------------------------- ------------------------------- 1997 1996 1997 1996 ------------ ------------ ------------ ------------ REVENUE $ 79,328 $ 82,172 $ 184,795 $ 195,582 ------------ ------------ ------------ ------------ COST OF SALES: Fuel 50,550 44,953 103,929 98,180 Operations and maintenance 10,812 9,985 12,818 20,318 Depreciation 4,917 4,694 9,834 9,389 ------------ ------------ ------------ ------------ 66,279 59,632 126,581 127,887 ------------ ------------ ------------ ------------ OPERATING INCOME 13,049 22,540 58,214 67,695 INTEREST INCOME (EXPENSE): Interest expense (15,763) (15,887) (31,460) (31,689) Interest income 1,930 966 3,589 1,430 ------------ ------------ ------------ ------------ NET INCOME (LOSS) $ (784) $ 7,619 $ 30,343 $ 37,436 ============ ============ ============ ============
See notes to consolidated financial statements - 4 - SITHE/INDEPENDENCE POWER PARTNERS, L.P. (A DELAWARE LIMITED PARTNERSHIP) CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (UNAUDITED) (IN THOUSANDS)
TOTAL GENERAL LIMITED PARTNERS' PARTNER PARTNERS CAPITAL ------------ ----------- -------------- BALANCE, JANUARY 1, 1997 $ 1,312 $ 122,387 $ 123,699 Net income 303 30,040 30,343 -------- ----------- ------------ BALANCE, JUNE 30, 1997 $ 1,615 $ 152,427 $ 154,042 ========== ============= ==============
See notes to consolidated financial statements. - 5 - SITHE/INDEPENDENCE POWER PARTNERS, L.P. (A DELAWARE LIMITED PARTNERSHIP) CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, ------------------------------ 1997 1996 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 30,343 $ 37,436 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 9,834 9,389 Amortization of deferred financing costs 532 543 Changes in operating assets and liabilities: Accounts receivable - trade 10,925 2,947 Fuel inventory and other current assets 1,025 731 Other assets 695 694 Trade payables (5,588) 1,038 Accrued interest payable - (450) Other liabilities (5,945) 3,304 ------------- ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 41,821 55,632 ------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (13,473) (9,310) Restricted funds (20,241) (38,193) ------------- ------------ NET CASH USED IN INVESTING ACTIVITIES (33,714) (47,503) ------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments of long-term debt (5,101) (7,455) ------------- ------------ NET CASH USED IN FINANCING ACTIVITIES (5,101) (7,455) ------------- ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS 3,006 674 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4 942 ------------- ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,010 $ 1,616 ============= ============ SUPPLEMENTAL CASH FLOW INFORMATION Cash payments: Interest $ 30,228 $ 30,736
See notes to consolidated financial statements. - 6 - SITHE/INDEPENDENCE POWER PARTNERS, L.P. (A DELAWARE LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. THE PARTNERSHIP Sithe/Independence Power Partners, L.P. (the "Partnership"), in which Sithe Energies, Inc. ("Sithe Energies") 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 with the remainder of the electric energy being sold to Niagara Mohawk Power Corporation ("Niagara Mohawk"). 2. BASIS OF PRESENTATION The accompanying consolidated balance sheets at June 30, 1997 and December 31, 1996 and the consolidated statements of operations for the three and six months ended June 30, 1997 and 1996 and cash flows for the six months ended June 30, 1997 and 1996 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, 1996 for the Partnership and its wholly-owned subsidiary, Sithe/Independence Funding Corporation. The results of operations for the three and six months ended June 30, 1997 are not necessarily indicative of the results to be expected for the full year. The unaudited financial information at June 30, 1997 and for the three and six months ended June 30, 1997 and 1996 contains all adjustments, consisting only of normal recurring adjustments, which management considers necessary for a fair presentation of the operating results for such periods. Effective January 1, 1997, the Partnership entered into a twelve-year service agreement with General Electric Company ("GE") under which the Partnership will pay GE specified amounts per megawatt-hour of net generation to perform all scheduled major equipment overhauls for the Project's gas turbines, steam turbines and generators (the "covered units") during such period. As a result of such agreement, which, among other things, was entered into to lock in the cost of future major overhauls for the covered units, the Partnership discontinued the application of its major overhaul cost - 7 - normalization policy for the covered units as of the beginning of the first quarter of 1997. In that connection, in the first quarter of 1997, the Partnership was required to reverse to income as a credit to maintenance expense the $8.2 million of major overhaul reserves for the covered units that had been established in prior years under that policy. During the second quarter of 1997, the Partnership obtained from the Trustee under the Indenture (the "Securities Indenture"), pursuant to which the Partnership issued long term debt (the "Securities"), a release of the lien and transferred ownership of approximately 160 acres of land to a wholly-owned subsidiary of Sithe Energies. The land, which is not required for operation of the Project or for any potential future Project expansion, was transferred at book value (approximately $.9 million) and no gain or loss was recorded by the Partnership. - 8 - 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 second quarter of 1997 of $79.3 million was $2.8 million (3%) lower than in the second quarter of 1996 primarily because the second quarter of 1996 reflected the benefit of a 1995 tariff adjustment payment received from Con Edison, partially offset by a first quarter 1996 tariff adjustment payment made to Niagara Mohawk. Cost of sales for the second quarter of 1997 of $66.3 million was $6.6 million (11%) higher than in the second quarter of 1996 due to higher fuel costs ($5.6 million), increased operations and maintenance expense ($.8 million) and higher depreciation expense ($.2 million). The increase in fuel costs was due partly to a scheduled price increase under the Partnership's long-term gas supply contract as well as to the fact that the 1996 second quarter reflected a rebate of first-quarter 1996 fuel costs resulting from the Niagara Mohawk tariff adjustment discussed above. Revenue for the first six months of 1997 of $184.8 million was $10.8 million (6%) lower than in the first six months of 1996 reflecting lower first quarter incremental revenue from selling gas instead of electricity as the mild 1997 winter and resultant low gas prices afforded fewer arbitrage opportunities than in the 1996 period; the fact that the 1996 period included a 1995 tariff adjustment payment from Con Edison; one less day of generation than in 1996 which was a leap year; a change in the mix of sales due to certain curtailments on transmission of energy deliveries to Con Edison; and lower Niagara Mohawk tariffs. Cost of sales for the first six months of 1997 of $126.6 million was $1.3 million (1%) lower than in the first six months of 1996 reflecting an $8.2 million credit to maintenance expense that the Partnership was required to record in connection with the discontinuance of its major overhaul cost normalization policy for its gas turbines, steam turbines and generators, partially offset by higher fuel costs as a result of a scheduled price increase under the Partnership's long-term gas supply contract, increased operations and maintenance expense and higher depreciation expense. Interest expense for the second quarter and first six months of 1997 decreased by $.1 million and $.2 million, respectively, from the corresponding periods of last year due to lower outstanding amount of long-term debt. Interest income for the second quarter and first six months of 1997 increased by $1.0 million and $2.2 million, respectively, over the corresponding periods of last year due to the higher average balances of restricted funds. - 9 - LIQUIDITY AND CAPITAL RESOURCES 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 June 30, 1997, letters of credit aggregating $16.0 million were outstanding in connection with such obligations. Also, the Partnership secured the Project's debt service obligations with a letter of credit in the amount of $50 million and as of June 30, 1997 had sufficient restricted cash on hand to meet its cumulative additional debt service reserve and major overhaul reserve funding requirements pursuant to the Securities Indenture as of such date of $33.0 million and $5.4 million, respectively. 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 presently 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, pay future Project debt service and make future required contributions to project reserve accounts. Although the Partnership's net income could decline over the next two and one-half years due largely to Tier I gas pricing increasing at a greater rate than increases in the energy component of billings to Con Edison, the Partnership believes that cash flow will be more than sufficient to pay scheduled debt service. - 10 - 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 June 30, 1997. (b) Reports on Form 8-K: No report on Form 8-K was filed during the quarter covered by this report. - 11 - 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) August 12, 1997 /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 August 12, 1997 /s/ Richard J. Cronin III ------------------------- RICHARD J. CRONIN III CHIEF FINANCIAL OFFICER AND SENIOR VICE PRESIDENT (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) - 12 - EX-27 2 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON PAGES 3 AND 4 OF THE PARTNERSHIP'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000899281 SITHE/INDEPENDENCE FUNDING CORP. 1,000 6-MOS DEC-31-1997 JUN-30-1997 3,010 108,263 28,857 0 1,862 141,992 769,299 47,541 876,111 38,424 678,773 0 0 0 154,042 876,111 184,795 184,795 126,581 126,581 0 0 31,460 30,343 0 30,343 0 0 0 30,343 0 0
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