-----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, G0YOw2C3cf60ko4U+z1mLZVaj/sRE493G1KiysQ14jdWy5xGdqTJE3UcfI07kmbY THfgIWe8GKGZ6EB8tSqK0g== 0001047469-97-003628.txt : 19971114 0001047469-97-003628.hdr.sgml : 19971114 ACCESSION NUMBER: 0001047469-97-003628 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 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: 97712477 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: 97712478 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 September 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 September 30, 1997 and December 31, 1996 (Unaudited)....................................... 3 Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 1997 and 1996 (Unaudited)................ 4 Consolidated Statement of Partners' Capital for the Nine Months Ended September 30, 1997 (Unaudited)......................... 5 Consolidated Statements of Cash Flows for the Nine Months Ended September 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)
SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------- ------------ ASSETS Current assets: Cash and cash equivalents................. $ 3,886 $ 4 Restricted cash and cash equivalents...... 111,852 73,412 Restricted investments.................... 21,114 14,610 Accounts receivable--trade................ 30,200 39,782 Fuel inventory and other current assets... 1,600 2,887 -------- -------- Total current assets.................... 168,652 130,695 Property, plant and equipment, at cost: Land...................................... 5,010 5,875 Electric and steam generating facilities.. 764,373 755,020 -------- -------- 769,383 760,895 Accumulated depreciation.................. (52,459) (37,707) -------- -------- 716,924 723,188 Debt issuance costs........................ 9,467 10,265 Other assets............................... 2,282 3,323 -------- -------- Total assets.............................. $897,325 $867,471 -------- -------- -------- -------- LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Trade payables............................. $ 20,827 $ 24,264 Accrued interest.......................... 15,216 174 Current portion of long-term debt......... 14,529 10,202 Accrued construction costs and retentions............................... 2,515 9,249 -------- -------- Total current liabilities............... 53,087 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.......................... 2,701 11,682 Commitments and contingencies Partners' capital.......................... 162,764 123,699 -------- -------- Total liabilities and partners' capital.... $897,325 $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 NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, -------------------- ------------------- 1997 1996 1997 1996 -------- -------- -------- -------- Revenue................................................... $ 91,108 $ 91,212 $275,903 $286,794 -------- -------- -------- -------- Cost of sales: Fuel.................................................... 53,418 50,567 157,347 148,747 Operations and maintenance.............................. 10,329 9,651 23,147 29,969 Depreciation............................................ 4,918 4,695 14,752 14,084 -------- -------- -------- -------- 68,665 64,913 195,246 192,800 -------- -------- -------- -------- Operating income.......................................... 22,443 26,299 80,657 93,994 Interest income (expense): Interest expense........................................ (15,502) (15,799) (46,962) (47,488) Interest income......................................... 1,781 743 5,370 2,173 -------- -------- -------- -------- Net income................................................ $ 8,722 $ 11,243 $ 39,065 $ 48,679 -------- -------- -------- -------- -------- -------- -------- --------
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.................................... 391 38,674 39,065 ------ -------- -------- Balance, September 30, 1997................... $1,703 $161,061 $162,764 ------ -------- -------- ------ -------- -------- 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) NINE MONTHS ENDED SEPTEMBER 30, ------------------- 1997 1996 -------- -------- Cash flows from operating activities: Net income............................................. $ 39,065 $ 48,679 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation......................................... 14,752 14,084 Amortization of deferred financing costs............. 798 814 Changes in operating assets and liabilities: Accounts receivable--trade......................... 9,582 2,419 Fuel inventory and other current assets............ 1,287 396 Other assets....................................... 1,041 1,041 Trade payables..................................... (3,437) 2,070 Accrued interest payable........................... 15,042 (15,709) Other liabilities.................................. (8,116) 4,569 -------- -------- Net cash provided by operating activities............... 70,014 58,363 -------- -------- Cash flows from investing activities: Capital expenditures................................... (16,087) (9,475) Restricted funds....................................... (44,944) (40,290) -------- -------- Net cash used in investing activities................... (61,031) (49,765) -------- -------- Cash flows from financing activities: Principal payments of long-term debt................... (5,101) (9,419) -------- -------- Net cash used in financing activities................... (5,101) (9,419) -------- -------- Net increase (decrease) in cash and cash equivalents.... 3,882 (821) Cash and cash equivalents at beginning of period........ 4 942 -------- -------- Cash and cash equivalents at end of period.............. $ 3,886 $ 121 -------- -------- -------- -------- Supplemental cash flow information Cash payments: Interest............................................. $ 30,228 $ 61,179 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 and on September 10, 1997, the Partnership notified the Trustee under the Indenture that final completion of construction had been achieved. 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 September 30, 1997 and December 31, 1996 and the consolidated statements of operations for the three and nine months ended September 30, 1997 and 1996 and cash flows for the nine months ended September 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 nine months ended September 30, 1997 are not necessarily indicative of the results to be expected for the full year. The unaudited financial information at September 30, 1997 and for the three and nine months ended September 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 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 third quarter of 1997 was $91.1 million compared with $91.2 million in the third quarter of 1996. Cost of sales for the third quarter of 1997 of $68.7 million was $3.8 million (6%) higher than in the third quarter of 1996 due to higher fuel costs ($2.9 million), increased operations and maintenance expense ($.7 million) and higher depreciation expense ($.2 million). The increase in fuel costs was due primarily to a scheduled price increase under the Partnership's long-term gas supply contract. Revenue for the first nine months of 1997 of $275.9 million was $10.9 million (4%) lower than in the first nine 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; and a change in the mix of sales due to certain curtailments on transmission of energy deliveries to Con Edison. Cost of sales for the first nine months of 1997 of $195.2 million was $2.4 million (1%) higher than in the first nine months of 1996 reflecting higher fuel cost as a result of a scheduled price increase under the Partnership's long-term gas supply contract, increased maintenance expense and higher depreciation expense, partially offset by an $8.2 million credit to maintenance expense that the Partnership was required to record in connection with the discontinuance of its major overhaul costs normalization policy for its gas turbines, steam turbines and generators. Interest expense for the third quarter and first nine months of 1997 decreased by $.3 million and $.5 million, respectively, from the corresponding periods of last year due to the lower outstanding amount of long-term debt. Interest income for the third quarter and first nine months of 1997 increased by $1.0 million and $3.2 million, respectively, over the corresponding periods of last year due to the higher average balances of restricted funds. 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 September 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 September 30, 1997, -9- the Project's cumulative additional debt service and major overhaul reserve requirements of $33.0 million and $5.4 million, respectively, were fully funded. 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 and pay future Project 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 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 September 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) November 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 November 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 EXHIBIT 27
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 9-MOS DEC-31-1997 SEP-30-1997 3,886 132,966 30,200 0 1,600 168,652 769,383 52,459 897,325 53,087 678,773 0 0 0 162,764 897,325 275,903 275,903 195,246 195,246 0 0 46,962 39,065 0 39,065 0 0 0 39,065 0 0
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