-----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, MxtYpzN+YCHyPW3wxgeOzISElQYkJFh92xDKsMdL91ncOvLL7fzJ90p2IAk27wPz TPETF/ZwOP22QVWB+A8+Bw== 0000925655-99-000012.txt : 19990517 0000925655-99-000012.hdr.sgml : 19990517 ACCESSION NUMBER: 0000925655-99-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIGEN ENERGY CORP CENTRAL INDEX KEY: 0000925655 STANDARD INDUSTRIAL CLASSIFICATION: STEAM & AIR CONDITIONING SUPPLY [4961] IRS NUMBER: 133378939 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13264 FILM NUMBER: 99623568 BUSINESS ADDRESS: STREET 1: ONE WATER ST CITY: WHITE PLAINS STATE: NY ZIP: 10601 BUSINESS PHONE: 9142866600 MAIL ADDRESS: STREET 1: ONE WATER ST CITY: WHITE PLAINS STATE: NY ZIP: 10601 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _________ Commission File No. 1-13264 TRIGEN ENERGY CORPORATION (Exact name of Registrant as specified in its charter) Delaware 13-3378939 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) One Water Street White Plains, New York 10601-1009 (Address of principal executive offices) (Zip Code) (914) 286-6600 (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 such 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. Yes X No There were 12,356,225 shares of the Registrant's Common Stock outstanding as of May 12, 1999. TRIGEN ENERGY CORPORATION AND SUBSIDIARIES INDEX TO FORM 10-Q Quarter Ended March 31, 1999 Page Part I - Financial Information: Item 1. Financial Statements Consolidated Statements of Operations for the Three Months Ended March 31, 1999 and 1998 (Unaudited) 3 Consolidated Balance Sheets as of March 31, 1999 (Unaudited) and December 31, 1998 4 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1999 and 1998 (Unaudited) 5 Notes to Consolidated Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3.Quantitative and Qualitative Disclosures About Market Risk 12 Part II - Other Information: 13 Signatures: 14 Disclosure Regarding Forward-Looking Statements This report includes historical information as well as statements regarding our future expectations. The statements regarding the future (referred to as "forward-looking statements") include among other things statements about energy markets in 1999, cost reduction targets, return on capital goals, development, production and acceptance of new products and process technologies, ongoing and planned capacity additions and expansions and joint ventures. Important factors that could cause actual results to differ materially from those discussed in such forward-looking statements include: supply/demand for our products, competitive pricing pressures, weather patterns, changes in industry laws and regulations, competitive technology, failure to achieve our cost reduction targets or complete construction projects on schedule and year 2000 computer related difficulties. We believe in good faith that the forward-looking statements in this report have a reasonable basis, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties, but such forward looking statements are not guarantees of future performance and actual results may differ materially from any results expressed or implied by such forward looking statements. Part I - Financial Information Item 1. Financial Statements
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended March 31, 1999 and 1998 Unaudited (In thousands, except per share data) 1999 1998 Revenues Thermal energy $70,685 $60,210 Electric energy 10,793 11,329 Equity in earnings of non-consolidated partnerships 146 703 Fees earned and other revenues 3,805 2,670 ------ ------ Total revenues 85,429 74,912 ------- ------ Operating expenses Fuel and consumables 38,291 32,401 Production and operating costs 13,534 12,336 Depreciation and amortization 6,500 6,050 General and administrative 10,219 8,319 ------- ------ Total operating expenses 68,544 59,106 ------- ------ Operating income 16,885 15,806 Other income (expense) Interest expense ( 6,280) (5,741) Other income, net 358 286 ------- ------- Earnings before minority interests, income taxes, extraordinary item, and a cumulative effect of a change in an accounting principle 10,963 10,351 Minority interests in earnings of subsidiaries 504 793 ------- ------ Earnings before income taxes, extraordinary item and a cumulative effect of a change in an accounting principle 10,459 9,558 Income taxes 4,330 4,110 ------- ------ Earnings before extraordinary item and a cumulative effect of a change in an accounting principle 6,129 5,448 Extraordinary loss from extinguishment of debt, net of tax benefit - ( 299) Cumulative effect of a change in an accounting principle, net of tax benefit (4,903) - ------- ------ Net earnings $ 1,226 $ 5,149 ======== ======= Basic earnings per common share Before extraordinary item and a cumulative effect of a change in an accounting principle $ .51 $ .45 Extraordinary loss - (.03) Cumulative effect of a change in an accounting principle (.41) - --------- ------- Net earnings $ .10 $ .42 ======== ======== Diluted earnings per common share Before extraordinary item and a cumulative effect of a change in an accounting principle $ .51 $ .45 Extraordinary loss - (.03) Cumulative effect of a change in an accounting principle (.41) - --------- -------- Net earnings $ .10 $ .42 ========= ======== Average shares outstanding - basic 12,004 12,002 -------- -------- Average shares outstanding - diluted 12,005 12,029 -------- -------- See accompanying notes to consolidated financial statements.
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Unaudited (In thousands, except share data) March 31, December 31, 1999 1998 ---------- ------------ Assets Current assets Cash and cash equivalents $ 12,186 $ 10,074 Accounts receivable Trade (less allowance for doubtful accounts of $1,103 in 1999 and $1,202 in 1998) 42,961 35,236 Other 8,020 5,686 --------- ---------- Total accounts receivable 50,981 40,922 Inventories 7,250 7,074 Prepaid expenses and other current assets 6,608 8,016 --------- ---------- Total current assets 77,025 66,086 Restricted cash and cash equivalents 4,599 4,623 Property, plant and equipment, net 454,197 442,755 Investment in non-consolidated partnerships 28,577 30,319 Intangible assets, net 48,042 49,968 Deferred costs and other assets, net 21,402 24,405 -------- --------- Total assets $633,842 $618,156 ======== ========= Liabilities and Stockholders' Equity Current liabilities Short-term debt $ 11,700 $ 15,000 Current portion of long-term debt 16,650 16,398 Accounts payable 8,472 4,756 Accrued income taxes 6,515 5,728 Accrued fuel 10,136 14,121 Accrued expenses and other current liabilities 25,956 19,626 --------- --------- Total current liabilities 79,429 75,629 Long-term debt 352,643 343,685 Other liabilities 4,492 4,254 Deferred income taxes 39,126 39,422 --------- --------- Total liabilities 475,690 462,990 Minority interests in subsidiaries 8,692 7,238 Stockholders' equity Preferred stock-$.01 par value, authorized and unissued 15,000,000 shares - - Common stock-$.01 par value, authorized 60,000,000 shares, issued 12,417,934 shares in 1999 and 1998 124 124 Additional paid-in capital 120,386 120,595 Retained earnings 37,212 36,417 Unearned compensation - restricted stock ( 4,840) ( 4,967) Accumulated other comprehensive loss ( 1,936) ( 2,002) Treasury stock, at cost, 97,852 shares in 1999 and 145,842 shares in 1998 ( 1,486) ( 2,239) -------- --------- Total stockholders' equity 149,460 147,928 -------- -------- Total liabilities and stockholders' equity $633,842 $618,156 ======== ======== See accompanying notes to consolidated financial statements.
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 1999 and 1998 Unaudited (In thousands) 1999 1998 ---- ---- Cash flows from operating activities Net earnings $ 1,226 $ 5,149 Reconciliation of net earnings to cash provided by operating activities Extraordinary item - 299 Cumulative effect of a change in an accounting principle 4,903 - Depreciation and amortization 6,500 6,050 Deferred income taxes (296) ( 497) Provision for doubtful accounts 122 144 Minority interests in subsidiaries 496 793 Changes in assets and liabilities Accounts receivable (9,631) 3,429 Inventories and other current assets 1,232 1,313 Accounts payable and other current liabilities 10,350 3,167 Noncurrent assets and liabilities ( 756) (2,626) -------- --------- Net cash provided by operating activities 14,146 17,221 -------- --------- Cash flows from investing activities Acquisition of energy facilities (354) (44,100) Investments in non-consolidated partnerships (310) - Capital expenditures (16,579) (11,437) -------- --------- Net cash used in investing activities (17,243) (55,537) -------- --------- Cash flows from financing activities Short-term debt, net (3,300) (7,500) Proceeds of long-term debt 13,970 73,350 Payments of long-term debt (5,017) (17,692) Dividends paid (431) (431) Purchase of treasury stock (38) (527) Distribution to minority interests - (650) -------- --------- Net cash provided by (used in) financing activities 5,184 46,550 -------- --------- Cash and cash equivalents Increase 2,087 8,234 At beginning of period 14,698 13,693 -------- --------- At end of period $16,785 $21,927 ======== ========= Current $12,186 $17,229 Restricted 4,599 4,698 -------- --------- At end of period $16,785 $21,927 ======== ========= Supplemental disclosure of cash flow information Cash paid during the period for Interest $ 5,229 $ 5,261 -------- --------- Income taxes 454 870 -------- --------- See accompanying notes to consolidated financial statements.
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation Trigen Energy Corporation and its subsidiaries ("we"), develop, own and operate commercial and industrial energy systems in the United States and Canada. We use our expertise in thermal engineering and proprietary cogeneration processes to convert fuel to various forms of thermal energy and electricity. We combine heat and power generation, producing electricity as a by-product, for use in our facilities and for sale to customers. The consolidated financial statements of Trigen Energy Corporation and its subsidiaries presented herein are unaudited. However, such information reflects all adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary to present fairly the financial position as of March 31, 1999, and the results of operations and the cash flows for the three months ended March 31, 1999 and 1998. The results of operations and cash flows for the three month period ended March 31, 1999 are not indicative of those to be expected for the year ending December 31, 1999. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 1998 included in our Annual Report on Form 10-K for the year ended December 31, 1998. Certain reclassifications have been made to the 1998 financial statements to conform to the 1999 presentation. 2. Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. We are required to adopt SFAS No. 133 in the first quarter 2000. Based on preliminary analyses, we do not expect the future adoption of SFAS No. 133 will have a material effect on results of operations and financial condition. 3. Cumulative Effect of a Change in an Accounting Principle Effective January 1, 1999, we adopted the American Institute of Certified Public Accountants Statement of Position No. 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 requires that costs associated with start-up activities and organizational costs be expensed as incurred. The effect of the adoption was an after-tax charge of $4.9 million, net of a tax benefit of $3.5 million, to expense deferred organizational and start-up costs as a cumulative effect of a change in an accounting principle. 4. Extraordinary Item We incurred an extraordinary charge of $.3 million, net of a tax benefit of $.2 million, in the three months ended March 31, 1998 in connection with the early retirement of debt. TRIGEN ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 5. Legal Proceedings Grays Ferry Settlement On April 23, 1999, the Pennsylvania Court of Common Pleas of Philadelphia County approved a settlement agreement which ended the lawsuit brought by Grays Ferry Cogeneration Partnership (the "Partnership"), Trigen-Schuylkill Cogeneration, Inc. and Cogen America Schuylkill Inc. against PECO Energy Company and Adwin (Schuylkill) Cogeneration, Inc. The Partnership is the owner of the Grays Ferry Cogeneration Facility located in Philadelphia, Pennsylvania. The Partnership, Trigen-Schuylkill and Cogen America commenced this lawsuit in reaction to the alleged termination by PECO on March 3, 1998, of the electric power purchase agreements between the Partnership and PECO (the "Power Purchase Agreements"). At March 31, 1999, we had an investment of $17.4 million in the Partnership, representing a one third interest in the Partnership through our wholly owned subsidiary, Trigen-Schuylkill. Cogen America and Adwin owned the other two-thirds interests in the Partnership. Adwin is an indirect wholly owned subsidiary of PECO. Under the settlement agreement PECO's subsidiary, Adwin, surrendered its rights to its one-third partnership interest in the Partnership to the two remaining partners, Trigen-Schuylkill and Cogen America. As a result, we own one half of the Partnership and Cogen America owns the other half. We will recognize a gain in 1999 based upon the market value, yet to be determined, of the portion of Adwin's interest in the Partnership that we received. The book value of the additional interest in the Partnership we received is approximately $9.2 million. If the book value approximated market value, the after tax gain would be $0.41 per diluted share. Our forecast that we will earn $1.07 per diluted share from the Partnership in 1999 includes this $0.41 of non-recurring income. Based on the settlement agreement, we estimate that we will recognize after tax income in 1999 from the Partnership of approximately $12.8 million or $1.07 per diluted share. If this settlement had not occurred, we expected to recognize after tax income in 1999 of approximately $5.1 million, or $0.42 per diluted share, from our interest in the Partnership. Separately, The Chase Manhattan Bank and Westinghouse Power Generation, which financed the construction of the Gray's Ferry Cogeneration Facility, agreed to dismiss their lawsuits against PECO. The Chase Manhattan Bank also agreed that they will not charge the Partnership for any default interest up to April 16, 1999. This will result in an additional $.8 million after tax earnings gain to Trigen or $0.07 per diluted share in 1999 as a result of the reversal of default interest charges. This $0.07 includes a non-recurring reversal of 1998 default interest expense of $.5 million after tax or $.04 per diluted share. Our forecast that we will earn $1.07 per diluted share from the Partnership in 1999 includes this $0.07 of income. In the year 2001, the energy price under the Power Purchase Agreements will begin to be based upon a percentage of a market based index, which we expect to produce substantially lower revenues from sales to PECO than the more favorable rates of the early contract years. Under the settlement agreement, the Partnership gained the right to sell to third parties electric energy and capacity from the facility in excess of the 150 megawatts which PECO is required to purchase under the Power Purchase Agreements, subject to a right of first refusal for PECO. We expect that the ability to sell to third parties electric energy and capacity above the 150 megawatts under contract to PECO, will result in an opportunity to improve the financial performance TRIGEN ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) of the Partnership. The Partnership will now have the ability to institute capital modifications to the combustion turbine to increase electric capacity during the summer months when the price of electric capacity and energy are historically the highest. Nassau Litigation On May 29, 1998, the County of Nassau, New York commenced an action against Trigen Energy Corporation and Trigen-Nassau Energy Corporation in New York State Supreme Court. Trigen-Nassau provides energy services to Nassau County under various agreements. Nassau County alleges that Trigen-Nassau breached those agreements by, among other means, charging the County for certain real estate taxes that the County contends are Trigen-Nassau's responsibility. On October 8, 1998, the Court dismissed the claims against Trigen Energy Corporation. On November 9, 1998, Trigen-Nassau filed counterclaims against Nassau County, seeking $1.6 million in damages. Trigen-Nassau alleges that Nassau County breached the parties' agreements by, among other things, failing to operate and maintain certain facilities and equipment. On January 21, 1999, the County requested that the Court dismiss Trigen-Nassau's counterclaims. On April 5, 1999, the Court dismissed some but not all of Trigen-Nassau's counterclaims. The Court declined to dismiss Trigen-Nassau's most important counterclaims which seek approximately $1.5 million in damages. The County is seeking approximately $10 million in damages. We believe we have good defenses to the County's claims, although we cannot predict the outcome of this matter. 6. Comprehensive Income Effective January 1, 1998, we adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income". This statement requires disclosure of all items recognized under accounting standards as components of comprehensive income. Following are the components of comprehensive income for the three months ended March 31, 1999 and 1998 (in thousands). 1999 1998 ------ ----- Net earnings $1,226 $5,149 Other comprehensive income Cumulative foreign currency translation adjustment 66 (3) ------ ------- Comprehensive income $1,292 $5,146 ------ ------- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Three Months ended March 31, 1999 compared with Three Months ended March 31, 1998. Overview For the quarter ended March 31, 1999, we reported earnings before a cumulative effect of a change in an accounting principle of $6.1 million or $.51 per diluted share. This compared with $5.4 million and $.45 of diluted earnings per share before extraordinary item in the first quarter of 1998. Net earnings for the quarter ended March 31, 1999, amounted to $1.2 million or $.10 per diluted share after the effect of adoption of the change in accounting principle. Revenues were $85.4 million in the first quarter compared with $74.9 million last year. First quarter operating income of $16.9 million increased 6.8%, or $1.1 million, over the $15.8 million in the like quarter last year, reflecting increased sales volume and positive contributions from three new industrial accounts which became operational during the quarter. A significant portion of our revenues and profits are subject to seasonal fluctuation due to peak heating demand in the winter and peak cooling demand in the summer. Revenues Revenues of $85.4 million were up $10.5 million or 14% from the first quarter of 1998, due to increased sales volume reflecting a colder winter and from positive contributions from three new industrial accounts which became operational in 1999. Thermal energy sales were up $10.5 million to $70.7 million while electric energy sales declined by $.5 million to $10.8 million. Equity earnings from unconsolidated subsidiaries were down $.6 million from the first quarter 1998, primarily due to increased legal and interest costs incurred by the Grays Ferry Cogeneration Partnership in connection with the PECO lawsuit. Fees earned and other revenues increased $1.1 million primarily due to increased equipment sales and to new industrial accounts. Operating Expenses Fuel and consumables costs were $38.3 million in the first quarter of 1999 compared with $32.4 million in 1998. This increase was due to the higher level of energy revenues and the addition of fuel and consumables costs associated with new industrial accounts. Production and operating costs increased $1.2 million to $13.5 million in the first quarter due to the increase in revenues and the inclusion of production and operating costs associated with new industrial accounts. Depreciation and amortization expense was $6.5 million compared with $6.1 million in 1998. The increase reflects the higher level of capital expenditures. General and administrative expenses were up $1.9 million from the first quarter 1998 primarily due to legal expenses incurred in pursuing the Oklahoma City antitrust lawsuit against OG&E and from overhead related to new industrial accounts. Interest Expense, Net Interest expense increased $.5 million to $6.3 million in the first quarter due to higher debt levels. Income Taxes Our effective tax rate is determined primarily by the federal statutory rate of 35%, and state and local income taxes. The effective income tax rate for the first quarter of 1999 and 1998 was 41.4% and 43.0%, respectively. Cumulative Effect of a Change in an Accounting Principle We incurred an after-tax charge of $4.9 million, net of a tax benefit of $3.5 million, related to the adoption of SOP 98-5 "Reporting on the Costs of Start-Up Activities" which was recorded as a cumulative effect of a change in an accounting principle. Reference is made to Note 3 of the Notes to Consolidated Financial with respect to the cumulative effect of a change in an accounting principle. Liquidity and Financial Position Cash and cash equivalents were $16.8 million at March 31, 1999 (which included $4.6 million of restricted cash and cash equivalents), an increase of $2.1 million from year end 1998. Working capital was a negative $2.4 million compared with a negative $9.5 million at December 31, 1998. At March 31, 1999, receivables were up 24.6% to $51.0 million and inventories increased slightly to $7.3 million from the balances at the end of 1998. Accounts payable were up $3.7 million to $8.5 million, accrued fuels decreased by $4.0 million to $10.1 million and accrued expenses and other current liabilities were up $6.3 million to $26.0 million at March 31, 1999. Our working capital requirements vary in line with the peak heating demand in the winter and peak cooling demand in the summer. During the first three months of 1999, the Company generated $14.1 million of cash from operating activities compared with $17.2 million in the like period last year. The decrease in cash generated from operations in 1999 was due to higher working capital requirements. During the first three months of 1999, we invested $16.6 million in capital expenditures, $.7 million in the acquisition of energy facilities and non-consolidated partnership investments and paid dividends of $.4 million to shareholders. Total debt was $381.0 million at March 31, 1999 compared with $375.1 million at the end of 1998. The $5.9 million increase, along with cash generated from operations, was predominately used to fund capital expenditures. During the first three months of 1999, stockholders' equity increased $1.5 million to $149.5 million at March 31, 1999. This increase reflects $1.2 million of net earnings, $.2 million of amortization of unearned compensation related to restricted shares and a profit sharing contribution of $.5 million from treasury, partially offset by $.4 million of dividend payments to shareholders. Reference is made to Note 5 of the Notes to Consolidated Financial Statements with respect to legal proceedings involving the Company. Year 2000 Date Conversion An issue affecting us and other businesses is the inability of many computer systems and applications to process the year 2000 ("Y2K") and beyond. To address this problem, we have developed a plan that divides direction for Y2K preparedness into four responsibility areas. These areas are Plant Production, Plant Non- Production, Desktop Systems and Corporate Systems. Plant Production includes primary plant systems that produce steam, chilling and hot water, electricity and other forms of energy. A plan to upgrade all non-compliant software and hardware has been underway since 1996. Testing of our Plant Production systems for Y2K compatibility is on schedule and expected to be completed by June 1999. If any Plant and Production systems fail these tests, we plan to take additional steps to make those systems Y2K compatible as soon as possible. We anticipate that all primary plant systems will be compliant by the third quarter of 1999. If we are not successful in these efforts, we may experience operational difficulties in serving our customers at some locations. Plant Non-Production includes Y2K issues related to telecommunications hardware, climate control systems, security systems, elevators, parking controls, and related systems. Generally, these systems achieve 100% compliance with minor hardware upgrades or chip replacements from original parts manufacturers. At this time, we believe that all of our material Plant Non-Production systems are Y2K compliant. We anticipate all Desktop systems to be compliant by September 1999 and Corporate Systems, which include financial and billing systems, to be compliant by December 1999. At this time, we believe our accounting system is Y2K compliant. We are in the process of upgrading our billing and other systems to achieve compliance. If we are not successful in these efforts, we believe that it would not impact our ability to serve our customers, although we may experience administrative difficulties. We estimate the total external cost to achieve Y2K compliance to be $1 million for the years 1997 through 1999. We believe we are staffed sufficiently to address all Y2K issues. We purchase raw material from key vendors to produce energy. These vendors include major natural gas, electricity, and water utilities, fuel oil and chemical distributors and coal producers. We will continue to survey our key vendors to determine their Y2K compliance. At this time, we do not expect any material disruption in services from vendors due to Y2K issues. We are, however, dependent in part, upon the ability of our vendors to be Y2K compliant. Our Y2K efforts are ongoing and our overall plan, as well as consideration of contingency plans, will continue to evolve as new information becomes available. At this time, we do not expect any major interruption of our business activities due to Y2K issues. However, we are unable to estimate the ultimate effect Y2K risks will have on our operating results. Item 3. Quantitative and Qualitative Disclosures About Market Risk We do not engage in the trading of market risk sensitive instruments in the normal course of business. Our short and long- term debt is subject to fixed and variable interest rates including rates primarily based on LIBOR. Based upon the debt balances at March 31, 1999, a change in the LIBOR rate of .25% would have a corresponding change in interest expense of approximately $630,000 per year when three-month LIBOR is under 6.0% ranging to approximately $539,000 per year when three-month LIBOR is over 7.5%. Three-month LIBOR at March 31, 1999 was 5.06%. We use financial instruments to limit the financial risk of increases in interest rates on our floating rate debt. The differential to be paid or received under financial instruments is accrued and recognized in interest expense as interest rates change. As of March 31, 1999, we had outstanding interest rate swap, cap and collar agreements related to $42.5 million of debt outstanding, with an average fixed interest rate of 5.8% and an average remaining life of 6 years. The cost to terminate the swap, cap and collar was not material at March 31, 1999. We do not expect these financial instruments to have a material effect on our earnings or cash flows. Part II - Other Information Item 1. Legal Proceedings. We report information regarding our legal proceedings under Note 5 to the Consolidated Financial Statements in this Report and in our Annual Report on Form 10-K for the year ended December 31, 1998. Item 3. Defaults Upon Senior Securities. As part of the settlement of the lawsuit between Grays Ferry Cogeneration Partnership (the "Partnership") and PECO Energy Company, The Chase Manhattan Bank and certain other commercial banks (collectively the "Banks") and Westinghouse Power Generation agreed to waive claims for default interest against the Partnership up to April 16, 1999. The Banks and Westinghouse financed the construction of the Grays Ferry Cogeneration Facility under separate loan agreements. The Partnership owes a total principal amount of approximately $84,400,000 to the Banks. The Partnership owes a total principal amount of approximately $15,000,000 to Westinghouse. As of the date of this Report, the Partnership is in default under its debt agreements with the Banks and Westinghouse for the following reasons. The Partnership did not convert on time the Bank's short term construction loan for the Grays Ferry Cogeneration Facility to a longer term loan. The Partnership could not complete that conversion because of a dispute with the construction contractor which has now been resolved. The Partnership also did not make a principal payment to Westinghouse because the Banks required the Partnership to apply the Partnership's available cash (net of operating expenses) to repayment of principal owed to the Banks. Westinghouse and the Banks have not accelerated the debt owed to them nor charged default interest against the Partnership, although the Banks have reserved their rights to do so. The Banks have required to date, and may require in the future, the Partnership to apply the Partnership's available cash (net of operating expenses) to repayment of principal owed to the Banks. We expect to resolve all outstanding default issues with the Banks and Westinghouse in the second quarter. Item 6. Exhibits and Reports on Form 8-K (a)The following exhibits are filed as part of this amendment: 27 Financial Data Schedule (b) The following reports on Form 8-K were filed during the three months ended March 31, 1999 Item 2. Acquisition or Disposition of Assets, April 27, 1999. 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. TRIGEN ENERGY CORPORATION /s/ MARTIN S. STONE ---------------------------- Martin S. Stone Vice President Finance & Chief Financial Officer /s/ DANIEL J. SAMELA ---------------------------- Daniel J. Samela Controller Date: May 14, 1999 EX-27 2
5 This schedule contains summary financial information extracted from SEC Form 10-Q for quarter ending March 31, 1999 and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-31-1999 MAR-31-1999 16,785 0 52,084 1,103 7,250 77,025 554,890 100,693 633,842 79,429 352,643 0 0 124 149,336 633,842 85,429 85,429 58,325 68,544 146 0 6,280 10,459 4,330 6,129 0 0 (4,903) 1,226 .10 .10
-----END PRIVACY-ENHANCED MESSAGE-----