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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN
GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND
IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT
(Mark One)
[..X..] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
June 30, 2002
For the quarterly period ended...........................
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. 333-30761
CALIFORNIA INFRASTRUCTURE AND ECONOMIC
DEVELOPMENT BANK SPECIAL PURPOSE TRUST SDG&E-1
(Issuer of the Certificates)
SDG&E FUNDING LLC
(Exact Name Of Registrant As Specified In
Its Certificate Of Formation)
Delaware 95-1184800
- -------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Ash Street, Room 111,
San Diego, California 92101
- -------------------------------------------------------------------
(Address of principal executive offices (Zip code)
Registrant's telephone number, including area code: (619)696-2328
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Sections 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......
PART I
Item 1. Financial Statements.
SDG&E FUNDING LLC
STATEMENT OF OPERATIONS AND CHANGES IN MEMBER'S EQUITY
(In Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
2002 2001 2002 2001
------------------- --------------------
INCOME
- ------
Interest income $ 5,755 $ 6,754 $11,832 $13,839
Other income 277 273 552 548
------ ------ ------- -------
Total Income 6,032 7,027 12,384 14,387
------ ------ ------- -------
EXPENSES
- --------
Interest expense 5,864 6,862 12,051 14,057
General & administrative
expenses 168 165 333 330
------ ------ ------- ------
Total Expenses 6,032 7,027 12,384 14,387
------ ------ ------- ------
NET INCOME -- -- -- --
Member's equity
beginning of period 3,290 3,290 3,290 3,290
------ ------ ------- -------
MEMBER'S EQUITY AT JUNE 30 $ 3,290 $ 3,290 $ 3,290 $ 3,290
====== ====== ======= =======
See note to financial statements.
SDG&E FUNDING LLC
BALANCE SHEET
(In thousands of dollars)
June 30, December 31,
2002 2001
------------- --------------
ASSETS
- -------
Current Assets:
Cash and cash equivalents $ 565 $ 603
Interest and other receivables -- 4,881
Current portion of
transition property 65,800 65,800
------------ ------------
Total Current Assets 66,365 71,284
Noncurrent Assets:
Transition property 290,013 322,004
Deferred financing costs 3,607 3,934
Restricted funds 9,005 1,312
------------ ------------
TOTAL ASSETS $ 368,990 $ 398,534
============ ============
LIABILITIES AND MEMBER'S EQUITY
- -------------------------------
Current Liabilities:
Current portion of
long-term debt $ 65,800 $ 65,800
Accounts payable and
accrued expenses 2,891 444
------------ ------------
Total Current Liabilities 68,691 66,244
Long-term debt 297,009 329,000
------------ ------------
Total Liabilities 365,700 395,244
Member's Equity 3,290 3,290
------------ ------------
TOTAL LIABILITIES AND
MEMBER'S EQUITY $ 368,990 $ 398,534
============ ============
See note to financial statements.
SDG&E FUNDING LLC
STATEMENT OF CASH FLOWS
(In thousands of dollars)
Six Months Ended
June 30,
----------------------------
2002 2001
----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ -- $ --
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of deferred financing costs 327 327
(Increase) decrease in other receivables 4,881 (596)
Increase (decrease) in accounts payable and
accrued expenses 2,447 (314)
------- -------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 7,655 (583)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of transition property from SDG&E 31,991 32,064
Payments on long-term debt (31,991) (32,064)
Decrease (increase) in restricted funds (7,693) 588
------- -------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (7,693) 588
------- -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (38) 5
CASH AND CASH EQUIVALENTS AT DECEMBER 31 603 560
------- -------
CASH AND CASH EQUIVALENTS AT JUNE 30 $ 565 $ 565
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments $12,147 $14,164
======= =======
See note to financial statements.
Note to Financial Statements
- -----------------------------
Basis of Presentation
This Quarterly Report on Form 10-Q includes the financial statements
of SDG&E Funding LLC, a Delaware special-purpose limited-liability
company whose sole member is San Diego Gas & Electric Company (SDG&E),
a provider of electric and natural-gas services. SDG&E is a wholly
owned subsidiary of Sempra Energy. Information in this quarterly
report is unaudited and should be read in conjunction with SDG&E
Funding LLC's Financial Statements and Notes to Financial Statements
included in its 2001 Annual Report on Form 10-K and its Quarterly
Report on Form 10-Q for the three-month period ended March 31, 2002.
SDG&E Funding LLC believes that the accompanying statements reflect
all adjustments that are necessary to present a fair statement of the
financial position and results of operations for the interim periods.
All material adjustments are of a normal, recurring nature unless
otherwise disclosed in this Quarterly Report on Form 10-Q. Results of
operations for interim periods are not necessarily indicative of
results to be expected for a full year.
SDG&E Funding LLC was organized for the limited purposes of issuing
Notes and holding and servicing Transition Property. Notes are SDG&E
Funding LLC Notes, Series 1997-1, Class A-1 through Class A-7
(presented in the financial statements as Long-Term Debt), secured by
the Transition Property and other, limited collateral. Transition
Property is the right to be paid a specified amount (presented in the
financial statements as Transition Property) from nonbypassable
charges, frequently referred to as FTA Charges, levied on residential
electric customers and small commercial electric customers of SDG&E.
The nonbypassable charges were authorized by the California Public
Utilities Commission (CPUC) pursuant to the electric industry
restructuring mandated by California Assembly Bill 1890, as amended by
California Senate Bill 477.
Since SDG&E Funding LLC is a single-member, limited-liability company,
its federal income tax effects and its State of California franchise
tax effects accrue to SDG&E.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The following analysis of the financial condition and results of
operations of SDG&E Funding LLC (the Note Issuer) is in an abbreviated
format pursuant to Instruction H of Form 10-Q. Such analysis should be
read in conjunction with the Financial Statements and Note to
Financial Statements included in Item 1 above and the Financial
Statements and Notes to Financial Statements included in the Note
Issuer's Annual Report on Form 10-K for the year ended December 31,
2001 and its Quarterly Report on Form 10-Q for the three-month period
ended March 31, 2002.
The Note Issuer is limited by its organizational documents to engaging
in the activities of owning certain property created pursuant to the
California Public Utilities Code (the Transition Property) and issuing
SDG&E Funding LLC Notes, Series 1997-1, Class A-1 through Class A-7
(the Notes) secured by the Transition Property and other limited
collateral, and related activities. The Notes were issued pursuant to
an Indenture between the Note Issuer and Bankers Trust Company of
California, N.A., as trustee (the Indenture). The Note Issuer sold the
Notes to the California Infrastructure and Economic Development Bank
Special Purpose Trust SDG&E-1, a Delaware business trust (the Trust),
which issued certificates corresponding to each class of the Notes in
a public offering.
Operating statement effects are limited primarily to income generated
from the Transition Property, interest expense on the Notes and
incidental investment interest income. The Note Issuer expects to use
collections with respect to the Transition Property to make scheduled
principal and interest payments on the Notes. Interest income earned
on the Transition Property is expected to offset (1) interest expense
on the Notes, (2) amortization of debt-issuance expenses and the
discount on the Notes, and (3) the fees charged by SDG&E for servicing
the Transition Property and providing administrative services to the
Note Issuer.
Collections of $25,225,000 resulted in a net overcollection for the three
months ended June 30, 2002, of $4,090,000 after deducting scheduled principal
and interest payments of $20,791,000, payments of $262,000 for servicing fees
and other expenses, and $82,000 retained to fund the Overcollateralization
Account established under the Notes' indenture. Collections of $21,997,000
resulted in a net undercollection for the three months ended June 30, 2001,
of $133,000 after deducting scheduled principal and interest payments of
$21,745,000, payments of $303,000 for servicing fees and other expenses, and
$82,000 retained to fund the Overcollateralization Account established under
the Notes' indenture.
During 2001, a net undercollection arose because of decreases in customer
consumption in response to the California energy crisis. Undercollections,
if any, are deducted from the previous surplus collections, the
Overcollateralization Sub-Account established under the Notes' indenture and
the Capital Sub-Account, in that order. To mitigate the undercollections, in
August 2001, the CPUC approved a nonroutine increase in FTA charges for
2001, effective October 1, 2001. In December 2001 SDG&E reforecasted future
consumption patterns and a new FTA rate was set for January 1, 2002 and
beyond. The FTA Charges are adjusted at least annually if there is a
material shortfall or overage in collections. Management believes that it is
reasonable to expect future collections of FTA Charges to be sufficient to
make scheduled payments on the Notes and pay related expenses on a timely
basis.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 5. Other Information.
Attached, with respect to the Note Issuer and the Trust, as Exhibit
99.1 is the Quarterly Servicer's Certificate for the quarter ended
June 30, 2002, delivered pursuant to the Note Indenture. It includes
information relating to the collections of the nonbypassable charges
(the FTA Charges) payable by residential electric customers and small
commercial electric customers.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
99.1 Quarterly Servicer's Certificate dated June 19, 2002.
(b) Reports on 8-K:
There were no reports on Form 8-K filed after March 31,
2002.
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) 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.
SDG&E Funding LLC,
as Registrant
Date: August 14, 2002 By: /s/ James P. Trent
-----------------------------
James P. Trent
Chief Financial Officer and
Chief Accounting Officer