-----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, F9VJkU6xYAtV1JYa0nD8gCl/zSKM9JRO9NU1Y2hUo4ZksI0TvgkTG7gl2n+suXx7 QDqtIZBumHb4aNBlFOF7CQ== 0001005477-98-002465.txt : 19980814 0001005477-98-002465.hdr.sgml : 19980814 ACCESSION NUMBER: 0001005477-98-002465 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 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: SEC FILE NUMBER: 033-59960 FILM NUMBER: 98685467 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 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SITHE INDEPENDENCE POWER PARTNERS LP CENTRAL INDEX KEY: 0000899322 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 330468704 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-59960-01 FILM NUMBER: 98685468 BUSINESS ADDRESS: STREET 1: 450 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2124509000 MAIL ADDRESS: STREET 2: 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, 1998 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, 1998 and December 31, 1997 (Unaudited)...................................... 3 Consolidated Statements of Operations for the Three and Six Months Ended June 30, 1998 and 1997 (Unaudited).................... 4 Consolidated Statement of Partners' Capital for the Six Months Ended June 30, 1998 (Unaudited)............................. 5 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1998 and 1997 (Unaudited)........................... 6 Notes to 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) CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) June 30, December 31, 1998 1997 --------- ------------ ASSETS Current assets: Cash and cash equivalents $ -- $ 3 Restricted cash and cash equivalents 76,892 40,643 Restricted investments 17,330 34,674 Accounts receivable - trade 26,912 33,384 Fuel inventory and other current assets 6,511 1,872 --------- --------- Total current assets 127,645 110,576 Property, plant and equipment, at cost: Land 5,010 5,010 Electric and steam generating facilities 765,317 765,239 --------- --------- 770,327 770,249 Accumulated depreciation (67,232) (56,975) --------- --------- 703,095 713,274 Debt issuance costs 8,710 9,212 Other assets 4,290 4,985 --------- --------- Total assets $ 843,740 $ 838,047 ========= ========= LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Trade payables $ 20,176 $ 20,823 Accrued interest 311 174 Current portion of long-term debt 23,133 18,856 Accrued construction costs and retentions -- 443 --------- --------- Total current liabilities 43,620 40,296 Long-term debt: 7.90% secured notes due 2002 96,191 109,897 8.50% secured bonds due 2007 150,839 150,839 9.00% secured bonds due 2013 408,609 408,609 --------- --------- 655,639 669,345 Other liabilities 6,055 7,842 Commitments and contingencies Partners' capital 138,426 120,564 --------- --------- Total liabilities and partners' capital $ 843,740 $ 838,047 ========= ========= 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, ---------------------- ---------------------- 1998 1997 1998 1997 --------- --------- --------- --------- Revenue $ 78,430 $ 79,328 $ 181,457 $ 184,795 --------- --------- --------- --------- Cost of sales: Fuel 49,426 50,550 105,236 103,929 Operations and maintenance 10,451 10,812 20,931 12,818 Depreciation 4,918 4,917 10,257 9,834 --------- --------- --------- --------- 64,795 66,279 136,424 126,581 --------- --------- --------- --------- Operating income 13,635 13,049 45,033 58,214 Non-operating income (expense): Interest expense (16,038) (15,763) (30,645) (31,460) Other income, net 2,211 1,930 3,474 3,589 --------- --------- --------- --------- Net income (loss) (192) $ (784) $ 17,862 $ 30,343 ========= ========= ========= =========
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, 1998 $ 1,280 $119,284 $120,564 Net income 179 17,683 17,862 -------- -------- -------- Balance, June 30, 1998 $ 1,459 $136,967 $138,426 ======== ======== ======== 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, --------------------- 1998 1997 -------- -------- Cash flows from operating activities: Net income $ 17,862 $ 30,343 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 10,257 9,834 Amortization of deferred financing costs 502 532 Changes in operating assets and liabilities: Accounts receivable - trade 6,472 10,925 Fuel inventory and other current assets (4,639) 1,025 Other assets 695 695 Trade payables (647) (5,588) Accrued interest payable 137 -- Other liabilities (1,787) (5,945) -------- -------- Net cash provided by operating activities 28,852 41,821 -------- -------- Cash flows from investing activities: Capital expenditures (521) (13,473) Restricted funds (18,905) (20,241) -------- -------- Net cash used in investing activities (19,426) (33,714) -------- -------- Cash flows from financing activities: Principal payments of long-term debt (9,429) (5,101) -------- -------- Net cash used in financing activities (9,429) (5,101) -------- -------- Net increase (decrease) in cash and cash equivalents (3) 3,006 Cash and cash equivalents at beginning of period 3 4 -------- -------- Cash and cash equivalents at end of period $ -- $ 3,010 ======== ======== Supplemental cash flow information Cash payments: Interest $ 30,508 $ 30,228 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. 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 June 30, 1998 and December 31, 1997 and the consolidated statements of operations for the three and six months ended June 30, 1998 and 1997 and cash flows for the six months ended June 30, 1998 and 1997 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, 1997 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, 1998 are not necessarily indicative of the results to be expected for the full year. The unaudited financial information at June 30, 1998 and for the three and six months ended June 30, 1998 and 1997 contains all adjustments, consisting only of normal recurring adjustments, which management considers necessary for a fair presentation of the operating results for such periods. Operations and maintenance expense for the first quarter of 1997 reflects an $8.2 million credit as a result of the Partnership's discontinuance of its major overhaul cost normalization policy for its gas turbines, steam turbines and generators (the "covered units"). This policy was discontinued effective January 1, 1997, when the Partnership entered into a twelve-year service agreement with General Electric Company ("GE"), under which GE performs all scheduled major overhauls of the covered units. -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 second quarter of 1998 of $78.4 million was $.9 million (1%) lower than in the second quarter of 1997 due primarily to lower net generation in the second quarter of 1998 than in 1997 offset in part by higher Con Edison tariffs in the second quarter of 1998 compared to the same period of last year. Cost of sales for the second quarter of 1998 of $64.8 million was $1.5 million (2%) lower than in the second quarter of 1997 reflecting a $3.0 million gas transportation cost rebate and lower fuel usage due to lower net generation, partly offset by higher fuel costs due to a contractual price increase under the Partnership's long-term gas supply contract. Revenue for the first six months of 1998 of $181.5 million was $3.3 million (2%) lower than in the first six months of 1997 reflecting lower net generation during the first half of 1998 compared to the same period of 1997. Cost of sales for the first six months of 1998 of $136.4 million was $9.8 million (8%) higher than in the first six months of 1997 principally reflecting higher fuel costs due to a contractual price increase under the Partnership's long-term gas supply contract, partly offset by a $3.0 million gas transportation cost rebate and the fact that the first half of 1997 included an $8.2 million credit to maintenance expense associated with the discontinuance of the Partnership's major overhaul cost normalization policy for the covered units. Interest expense for the first six months of 1998 decreased by $.8 million from the same period as last year due to lower outstanding amounts of long-term debt. Other income, net, consisted of interest income for all periods. 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, 1998, letters of credit aggregating $13.9 million were outstanding in connection with such obligations. Also, the Partnership secured the Project's debt service reserve obligations with a letter of credit in the amount of $50 million and as of June 30, 1998, the Project's cumulative additional debt service reserve and major overhaul reserve requirements of $33.0 million and $5.6 million, respectively, were fully funded. -8- Above-normal temperatures in the first half of 1998 limited the amount of thermal energy delivered to Alcan for heating purposes during such period. Accordingly, the Partnership may be required to reduce electricity generation in the second half of 1998 in order to maintain the ratio of thermal energy to electricity production required to ensure the Project's Qualifying Facility ("QF") status for 1998. The Partnership is actively pursuing a number of initiatives to mitigate the impact of weather variances on the Project's QF status and operations in the second-half of 1998 and thereafter. While a reduction in the level of electricity generation during the second half of 1998 could reduce the Partnership's 1998 net income, the Partnership believes that this will not have an adverse impact on the Partnership's ability to liquidate Partnership obligations as they come due and pay scheduled debt service. Although the Partnership's net income could decline through the fourth quarter of 1999 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 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. The Partnership utilizes a number of computerized operating and control systems at the Project, including applications used in plant operations and various administrative functions. To the extent that the computer applications cannot properly interpret the calendar year 2000 and beyond, some level of modification or replacement of such applications will be necessary. The Partnership has a comprehensive plan to identify all of its applications that are not year 2000 compliant and, by December 31, 1998, expects to have commenced the necessary modifications and replacements of such applications. Based upon information currently available about the Partnership's systems that are non-compliant and the Partnership's ongoing efforts to upgrade or replace critical systems, as necessary to address the year 2000 issue, the Partnership believes that its plan of action is sufficient to secure year 2000 compliance of its critical systems in a timely manner and currently does not anticipate any material adverse impact on its financial position, year 2000 compliance costs or operations as a result of the year 2000 issue directly affecting the systems at the Project. The Partnership is also assessing its exposure to year 2000 issues of third parties with whom it has material contracts. If the Partnership's and/or third party computer systems fail to achieve year 2000 compliance, such failures could have a material adverse impact on the Partnership's financial position or results of operations. 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 "believe", "expect" 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, including the continuation of above normal temperatures, 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. -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 June 30, 1998. (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) August 13, 1998 /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 13, 1998 /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 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 10Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000899281 SITHE/INDEPENDENCE FUNDING CORP. 6-MOS DEC-31-1998 JUN-30-1998 0 0 26,912 0 6,511 127,645 770,327 (67,232) 843,740 43,620 655,639 0 0 0 138,426 843,740 181,457 181,457 136,424 136,424 0 0 30,645 17,862 0 17,862 0 0 0 17,862 0 0
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