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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999
Commission File No. 33-95538
SALTON SEA FUNDING CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 47-0790493
(State of (IRS Employer
Incorporation) Identification No.)
Salton Sea Brine Processing L.P. California 33-0601721
Salton Sea Power Generation L.P. California 33-0567411
Fish Lake Power LLC Delaware 33-0453364
Vulcan Power Company Nevada 95-3992087
CalEnergy Operating Corporation Delaware 33-0268085
Salton Sea Royalty LLC Delaware 47-0790492
VPC Geothermal LLC Delaware 91-1244270
San Felipe Energy Company California 33-0315787
Conejo Energy Company California 33-0268500
Niguel Energy Company California 33-0268502
Vulcan/BN Geothermal Power Company Nevada 33-3992087
Leathers, L.P. California 33-0305342
Del Ranch, L.P. California 33-0278290
Elmore, L.P. California 33-0278294
Salton Sea Power L.L.C. Delaware 47-0810713
CalEnergy Minerals LLC Delaware 47-0810718
CE Turbo LLC Delaware 47-0812159
CE Salton Sea Inc. Delaware 47-0810711
Salton Sea Minerals Corp. Delaware 47-0811261
302 S. 36TH STREET, SUITE 400-A, OMAHA, NE 68131
(Address of principal executive offices and Zip Code of Salton
Sea Funding Corporation)
SALTON SEA FUNDING CORPORATION'S TELEPHONE NUMBER,
INCLUDING AREA CODE: (402) 341-4500
Securities registered pursuant to Section 12(b) of the Act: N/A
Securities registered pursuant to Section 12(g) of the Act: N/A
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
All common stock of Salton Sea Funding Corporation is held by Magma
Power Company. 100 shares of Common Stock were outstanding on March 29,
2000.
Documents incorporated by reference: N/A
TABLE OF CONTENTS
PART I.........................................................................1
ITEM 1. BUSINESS...............................................................1
THE PROJECTS...................................................................2
SALTON SEA PROJECTS............................................................3
PARTNERSHIP PROJECTS...........................................................4
ZINC RECOVERYPROJECT...........................................................4
ROYALTIES AND ROYALTY PROJECTS.................................................5
TERMS OF THE SECURITIES........................................................5
SECURITIES.....................................................................5
STRUCTURE OF AND COLLATERAL FOR THE SECURITIES.................................6
PAYMENT OF INTEREST AND PRINCIPAL..............................................8
PRIORITY OF PAYMENTS..........................................................11
DEBT SERVICE RESERVE FUND.....................................................11
OPTIONAL REDEMPTION...........................................................12
MANDATORY REDEMPTION..........................................................12
DISTRIBUTIONS.................................................................12
INCURRENCE OF ADDITIONAL DEBT.................................................12
PRINCIPAL COVENANTS...........................................................13
EQUITY COMMITMENT.............................................................13
THE PROJECT NOTES.............................................................14
PRINCIPAL CREDIT AGREEMENT COVENANTS..........................................14
CONSIDERATIONS REGARDING LIMITATION ON REMEDIES...............................14
RELIANCE ON SINGLE UTILITY CUSTOMER...........................................14
POWER PRICE AND SALES UNCERTAINTY.............................................14
ZINC PRICE AND SALES UNCERTAINTY..............................................15
CONSTRUCTION UNCERTAINTY......................................................15
UNCERTAINTIES RELATING TO EXPLORATION AND DEVELOPMENT OF GEOTHERMAL
ENERGY RESOURCES.........................................................16
INSURANCE.....................................................................16
REGULATORY AND ENVIRONMENTAL MATTERS..........................................16
EMPLOYEES.....................................................................17
ITEM 2. PROPERTIES............................................................17
ITEM 3. LEGAL PROCEEDINGS.....................................................17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................17
PART II ......................................................................18
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER'S
MATTERS..................................................................18
ITEM 6. SELECTED FINANCIAL DATA...............................................18
SALTON SEA FUNDING CORPORATION................................................18
SALTONSEAGUARANTORS...........................................................19
PARTNERSHIP GUARANTORS........................................................20
ROYALTY GUARANTOR.............................................................21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS....................................................22
FACTORS AFFECTING RESULTS OF OPERATIONS.......................................22
POWER PURCHASE AGREEMENTS.....................................................22
CAPACITY UTILIZATIONS.........................................................23
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997....24
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK...........27
INTEREST RATE RISK............................................................27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...........................29
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.....................................................74
PART III .....................................................................75
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...................75
ITEM 11. EXECUTIVE COMPENSATION...............................................75
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......75
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................75
PART IV.......................................................................79
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULE AND REPORTS ON FORM 8-K......79
SIGNATURES....................................................................80
PART I
ITEM 1. BUSINESS
Salton Sea Funding Corporation ("Funding Corporation") is a special purpose
Delaware corporation, an indirect wholly-owned subsidiary of CE Generation, LLC
("CE Generation") and formed for the sole purpose of issuing securities in its
individual capacity as principal and as agent acting on behalf of the Guarantors
(as defined below). The principal executive office of the Funding Corporation is
located at 302 South 36th Street, Suite 400-A, Omaha, Nebraska 68131 and its
telephone number is (402) 341-4500.
CE Generation owns all of the capital stock of Magma Power Company
("Magma") which in turn owns all of the outstanding capital stock of Funding
Corporation. Through its subsidiaries, CE Generation is primarily engaged in the
development, ownership and operation of environmentally responsible independent
power production facilities in the United States utilizing geothermal and
natural gas resources. CE Generation has an aggregate net ownership interest of
756 MW of electrical generating capacity in power plants in operation or under
construction in the United States, which have an aggregate net capacity of 816
MW (including its interests in the Salton Sea Projects and the Partnership
Projects as defined below).
All of the outstanding stock of Magma was contributed by MidAmerican Energy
Holdings Company, the successor of CalEnergy Company, Inc. ("MidAmerican"), to
CE Generation in February 1999. In March 1999, MidAmerican sold a 50% interest
in CE Generation to El Paso Holding Company, an affiliate of El Paso Energy
Corporation ("El Paso").
Magma directly or indirectly owns all of the capital stock of or
partnership interests in the Funding Corporation and the Guarantors, except for
CalEnergy Minerals LLC ("Minerals LLC") and Salton Sea Minerals Corp. The
Guarantors are comprised of the Salton Sea Guarantors, the Partnership
Guarantors and the Royalty Guarantor.
The Salton Sea Guarantors include Salton Sea Brine Processing L.P.
("SSBP"), Salton Sea Power Generation L.P. ("SSPG") and Fish Lake Power LLC
("Fish Lake") (collectively, the "Initial Salton Sea Guarantors"), which own
four operating geothermal power plants located in Imperial Valley, California
known as Salton Sea I, Salton Sea II, Salton Sea III and Salton Sea IV, and
Salton Sea Power L.L.C. ("Power LLC" together with the Initial Salton Sea
Guarantors, the "Salton Sea Guarantors"), which is constructing a geothermal
power plant in Imperial Valley, California known as Salton Sea V (such project
together with Salton Sea I, II, III and IV, the "Salton Sea Projects").
The Partnership Guarantors include the Vulcan/BN Geothermal Power Company
("Vulcan"), Elmore, L.P. ("Elmore"), Leathers, L.P. ("Leathers") and Del Ranch,
L.P. ("Del Ranch"), each of which owns an operating geothermal power plant
located in Imperial Valley, California known as the Vulcan Project, the Elmore
Project, the Leathers Project and the Del Ranch Project, respectively (together
with the CE Turbo Project and the Zinc Recovery Project, the "Partnership
Projects"). The Partnership Guarantors also include CE Turbo LLC ("Turbo LLC"),
which is constructing a geothermal power plant in the Imperial Valley,
California and CalEnergy Minerals LLC ("Minerals LLC"), which is constructing a
zinc recovery project in the Imperial Valley, California. Finally, the
Partnership Guarantors include CalEnergy Operating Corporation ("CEOC"), Vulcan
Power Company ("VPC"), San Felipe Energy Company ("San Felipe"), Conejo Energy
Company ("Conejo"), Niguel Energy Company ("Niguel"), VPC Geothermal LLC
(formerly, BN Geothermal Inc.) ("VPCG"), Salton Sea Minerals Corp. and CE Salton
Sea Inc. Vulcan Power Company ("VPC") and VPCG, collectively own 100% of the
partnership interests in Vulcan. CEOC and Niguel, San Felipe and Conejo,
collectively own 90% partnership interests in each of Elmore, Leathers and Del
Ranch, respectively.
Magma owns all of the remaining 10% interests in each of Elmore, Leathers
and Del Ranch. CEOC is entitled to receive from Magma, as payment for certain
data and services provided by CEOC, all of the partnership distributions Magma
receives with respect to its 10% ownership interests in each of the Elmore,
Leathers and Del Ranch Projects and Magma's special distributions equal to 4.5%
of total energy revenues from the Leathers Project.
Salton Sea Royalty LLC, ("SSRC" or the "Royalty Guarantor") is the Royalty
Guarantor. SSRC received an assignment of certain fees and royalties
("Royalties") paid by three Partnership Projects, Elmore, Leathers and Del
Ranch.
CEOC currently operates each of the Salton Sea Projects and the Partnership
Projects. Affiliates of Magma control, through a variety of fee, leasehold, and
royalty interests, rights to geothermal resources for power production in the
Salton Sea Known Geothermal Resource Area ("SSKGRA"). The Funding Corporation
believes that such resources will be sufficient to operate the Salton Sea
Projects and the Partnership Projects at contract capacity under their
respective power purchase agreements through the final maturity date of the
Securities.
The principal executive offices of the Salton Sea Guarantors are located at
302 South 36th Street, Suites 400-B, 400-D, 400-E, 400-K and 400-N, Omaha,
Nebraska 68131. The principal executive offices of the Partnership Guarantors is
302 South 36th Street, Suite 400-F, 400-G, 400-I, 400-J, 400-L, 400-M, 400-N,
400-O, 400-P, 400-Q, 400-R, 400-S, 400-T, and 400-U, Omaha, Nebraska 68131. The
principal executive office of the Royalty Guarantor is 302 South 36th Street,
Suite 400-H, Omaha, Nebraska 68131. The Salton Sea Guarantors, Partnership
Guarantors and the Royalty Guarantor are sometimes referred to collectively
herein as the "Guarantors".
THE PROJECTS
Set forth below is a table describing certain characteristics of the Salton
Sea Projects and the Partnership Projects, and the Guarantors' collective
interests therein. All the projects are located in the Imperial Valley,
California. The Salton Sea I-IV, Elmore, Leathers, Del Ranch and Vulcan projects
(the "Existing Projects") each sell power to Southern California Edison Company
("Edison").
DATE OF
PROJECT FACILITY COMMERICAL CONTRACT CONTRACT POWER
CAPACITY(1)(2)OPERATION EXPIRATION TYPE PURCHASERS (3)
SALTON SEA PROJECTS
Salton Sea I 10.0 7/1987 6/2017 Negotiated Edison
Salton Sea II 20.0 4/1990 4/2020 SO4 Edison
Salton Sea III 49.8 2/1989 2/29/19 SO4 Edison
Salton Sea IV 39.6 6/1996 5/2026 Negotiated Edison
SALTON SEA V 49.0 Mid-2000 N/A N/A PX/Zinc Recovery
------ Project
SUBTOTAL 168.4
PARTNERSHIP PROJECTS
Vulcan 34.0 2/1986 2/2016 SO4 Edison
Elmore 38.0 1/1989 12/2018 SO4 Edison
Leathers 38.0 1/1990 12/2019 SO4 Edison
Del Ranch 38.0 1/1989 12/2018 SO4 Edison
CE TURBO 10.0 Mid-2000 N/A N/A PX/Zinc Recovery
----- Project
SUBTOTAL 158.0
TOTAL POWER
PROJECTS 326.4
ZINC RECOVERY
PROJECT 30,000 Mid-2000 N/A N/A N/A
======
(1) Power capacity varies with operating and reservoir conditions.
(2) Facility capacities are measured in MW; zinc recovery project capacity is
measured in estimated tons per year production. (3) Edison is Southern
California Edison Company and PX is the California Power Exchange.
SALTON SEA PROJECTS
The Salton Sea Guarantors collectively own the four operating Salton Sea
Projects and the Salton Sea V project under construction with an aggregate net
generating capacity of approximately 168.4 MW. Each of the four operating Salton
Sea Projects has an executed long term power purchase agreement, providing for
the sale of capacity and energy to Edison.
The Salton Sea II and Salton Sea III power contracts provide for fixed price
capacity payments for the life of the contract, and fixed price energy payments
for the first 10 years. Thereafter, the energy payments paid by Edison will be
based on Edison's then-current, published short-run avoided cost of energy. The
fixed price energy period expired on February 13, 1999 for Salton Sea III and
expires on April 4, 2000 for Salton Sea II.
Salton Sea I and Salton Sea IV have negotiated contracts with Edison. The
Salton Sea I contract provides for a capacity payment and energy payment for the
life of the contract. Both payments are based upon an initial value that is
subject to quarterly adjustment by reference to various inflation-related
indices. The Salton Sea IV contract also provides for fixed price capacity
payments for the life of the contract. Approximately 56% of the kWhs are sold
under the Salton Sea IV PPA at a fixed energy price, which is subject to
quarterly adjustment by reference to various inflation-related indices, through
June 20, 2017 (and at Edison's avoided cost of energy thereafter), while the
remaining 44% of the Salton Sea IV kWhs are sold according to a 10-year fixed
price schedule followed by payments based on a modified avoided cost of energy
for the succeeding 5 years and at Edison's avoided cost of energy thereafter.
Salton Sea V is being constructed as a 49 MW geothermal power plant which
will extract unutilized geothermal energy from geothermal brine that has
previously passed through the other Salton Sea Projects. Salton Sea V has a
negotiated power sale contract to sell a portion of its output to the Zinc
Recovery Project and will sell the remainder into the California Power Exchange
("PX") or such other markets as may develop. Salton Sea V is being constructed
pursuant to a date certain, fixed price, turn key engineering, procurement and
construction contract (the "Salton Sea V EPC Contract") by Stone & Webster
Engineering Corporation ("SWEC"). SWEC's obligations under the Salton Sea V EPC
Contract, including provisions for liquidated damages of up to 20% of the
contract price for certain delays or failures to meet performance guarantees,
are guaranteed by SWEC's parent, Stone & Webster, Incorporated. Salton Sea V is
scheduled to commence Commercial Operation in mid-2000.
Salton Sea I through IV Projects operated at a combined facility capacity
factor of 95.6% in 1997, 94.2% in 1998 and 91.9% in 1999.
PARTNERSHIP PROJECTS
All of the Partnership Projects except the CE Turbo Project and the Zinc
Recovery Project have executed Standard Agreements (called "SO4 Agreements") for
the sale of capacity and energy to Edison which contracts provide for fixed
price capacity payments for the life of the contract and fixed price energy
payments for the first 10 years. Thereafter, the energy payments paid by Edison
will be based on Edison's avoided cost of energy. The fixed price energy period
for the Vulcan Project, the Del Ranch Project, the Elmore Project and the
Leather Project expired on February 9, 1996, December 31, 1998, December 31,
1998 and December 31, 1999, respectively.
Turbo LLC, one of the Partnership Guarantors, is constructing the CE Turbo
Project (the "CE Turbo Project"), which will have a capacity of 10 net MW. The
net output of the CE Turbo Project will be sold to the Zinc Recovery Project (if
Salton Sea V is not delivering power) or sold through the PX or in open market
transactions.
The Partnership Guarantors are upgrading the geothermal brine processing
facilities at the Vulcan and Del Ranch Projects (the "Region 2 Brine Facilities
Construction"). In addition to incorporating the pH modification process, which
has reduced operating costs at the Salton Sea Projects, the new facilities will
achieve economies of scale through improved brine processing systems and the
utilization of more modern equipment.
The CE Turbo Project and the Region 2 Brine Facilities Construction are
being constructed by SWEC pursuant to a date certain, fixed-price, turnkey
engineering, procurement and construction contract (the "Region 2 Upgrade EPC
Contract"). The obligations of SWEC are guaranteed by Stone & Webster,
Incorporated. The CE Turbo Project and the Region 2 Brine Facilities
Construction are scheduled to be completed in mid-2000.
The existing Partnership Projects operated at a combined facility capacity
factor of 102.2% in 1997, 101.3% in 1998, and 103.4% in 1999.
ZINC RECOVERY PROJECT
CalEnergy Minerals LLC ("Minerals LLC"), one of the Partnership Guarantors,
is constructing the Zinc Recovery Project which will recover zinc from the
geothermal brine (the "Zinc Recovery Project"). Facilities will be installed
near the Existing Project sites to extract a zinc chloride solution from the
geothermal brine through an ion exchange process. This solution will be
transported to a central processing plant where zinc ingots will be produced
through solvent extraction, electrowinning and casting processes. The Zinc
Recovery Project is designed to have a capacity of approximately 30,000 tons per
year and is scheduled to commence commercial operation in mid-2000. In September
1999, Minerals LLC entered into a sales agreement whereby all zinc produced by
the Zinc Recovery Project will be sold to Cominco, Ltd. The initial term of the
agreement expires in December 2005.
The Zinc Recovery Project is being constructed by Kvaerner U.S. Inc.
("Kvaerner") pursuant to a date certain, fixed-price, turnkey engineering,
procurement and construction contract (the "Zinc Recovery Project EPC
Contract"). Kvaerner is a wholly-owned indirect subsidiary of Kvaerner ASA, an
internationally recognized engineering and construction firm experienced in the
metals, mining and processing industries. The payment obligations of Kvaerner,
including payment of liquidated damages of up to 20% of the contract price for
certain delays or failures to meet performance guarantees, are secured by a
letter of credit issued by Union Europeenne de CIC (or another financial
institution rated "A" or better by S&P or "A2" or better by Moody's and
otherwise acceptable to Minerals LLC) in an initial aggregate amount equal to
$29.6 million.
ROYALTY PROJECTS
The Royalty Guarantor has received an assignment from Magma of certain
payments ("Royalties") received from the Leathers, Del Ranch and Elmore Projects
in exchange for the provision to those projects of the rights to use certain
geothermal resources. Substantially all of the assigned Royalties are based on a
percentage of energy and capacity revenues of the respective projects. Pursuant
to the assignment, the Royalty Guarantor is entitled to receive the aggregate
percentages of such project's energy and capacity revenues as illustrated in the
chart below. The Partnership Guarantors are also entitled to receive Royalties
from the Partnership Projects as illustrated in the chart below. Royalties are
subject to netting and reduction from time to time to reflect various operating
costs, as reflected in the financial statements herein. All such Royalties
(other than the various operating costs, as reflected in the financial
statements) are payable from revenues which will constitute Partnership
Guarantors collateral.
ROYALTIES TO BE PAID TO ROYALTIES TO BE PAID TO
ROYALTY GUARANTOR PARTNERSHIP GUARANTORS
PROJECT FACILITY % ENERGY % CAPACITY % ENERGY % CAPACITY
CAPACITY REVENUES REVENUES REVENUES REVENUES
(MW)
Del Ranch 38 23.33 1.00 5.67 3.00
Elmore 38 23.33 1.00 5.67 3.00
Leathers 38 21.50 0.00 7.50 3.00
VULCAN 34 0.00 0.00 4.17 0.00
----
TOTAL 148
TERMS OF THE SECURITIES
THE SECURITIES
The Funding Corporation is a special purpose Delaware corporation formed
for the sole purpose of issuing securities in our individual capacity as
principal and as agent acting on behalf of our affiliates which guarantee the
Securities.
The Funding Corporation has completed the following issuances and exchanges
of securities (together, the "Securities"):
* On July 21, 1995, the Funding Corporation issued (1) $232,750,000 of
6.69% Senior Secured Series A Notes due 2000 (the "Series A Securities"), (2)
$133,000,000 of 7.37% Senior Secured Series B Bonds Due 2005 (the "Series B
Securities") and (3) $109,250,000 of 7.84% Senior Secured Series C Bonds Due
2010 (the "Series C Securities");
* On February 13, 1996, the Funding Corporation consummated an exchange
offer where the Funding Corporation issued substantially identical securities
which had been registered under the Securities Act in exchange for the
unregistered Series A through C Securities;
* On June 20, 1996, the Funding Corporation issued (1) $70,000,000 of our
7.02% Senior Secured Series D Bonds Due 2000 (the "Series D Securities") and (2)
$65,000,000 of our 8.30% Senior Secured Series E Bonds Due 2011 (the "Series E
Securities");
* On July 29, 1996, the Funding Corporation consummated an exchange offer
where the Funding Corporation issued substantially identical Supplemental
Securities which had been registered under the Securities Act in exchange for
the unregistered Series D and E Securities; and
* On October 13, 1998, the Funding Corporation issued $285,000,000 of our
7.475% Senior Secured Series F Bonds Due 2018 (the "Series F Securities").
* On August 3, 1999, the Funding Corporation consummated an exchange offer
where the Funding Corporation issued substantially identical Series F Securities
which have been registered under the Securities Act in exchange for the
unregistered Series F Securities.
The Securities have received ratings of "Baa2" by Moody's Investors
Serivce, Inc. ("Moody's") and "BBB" by Standard & Poor's Ratings Group ("S&P").
The Securities will be equivalent in right of payment and in the right to share
in the collateral. On December 31, 1999, the aggregate principal amount of all
Securities outstanding was $569 million.
The Funding Corporation received no proceeds from the exchange pursuant to
the exchange offers. The net proceeds received by the Funding Corporation from
the issuance of the Securities to the Initial Purchasers in the three separate
offerings (after deduction of certain transaction costs) were approximately $884
million and were loaned to the Guarantors in return for the issuance of certain
notes (the "Project Notes"), and were used for the following purposes: (a)
approximately $253 million to repay certain non-recourse indebtedness of
MidAmerican incurred in connection with the Magma Acquisition; (b) approximately
$102 million to refinance existing indebtedness of the Salton Sea Projects; (c)
approximately $115 million to finance the Salton Sea IV Expansion, (d)
approximately $96 million to refinance all of the existing project-level
indebtedness under credit agreements of the Partnership Project Companies; (e)
approximately $15 million to fund the Capital Expenditure Fund to be used for
certain capital improvements to the Partnership Projects and the Salton Sea
Projects, (f) approximately $23 million to fund a portion of the purchase price
payable by the Initial Partnership Guarantors for the Acquired Partnership
Companies, and (g) approximately $280 million to fund in part construction of
the Zinc Recovery Project, CE Turbo Project and Salton Sea V Project, as well as
associated capital improvements and finance costs .
There is no existing trading market for the New Securities and there can be
no assurance regarding the future development of such a market for the New
Securities or the ability of holders of the New Securities to sell their
Securities or the price at which such holders may be able to sell their New
Securities. If such a market were to develop, future trading prices will depend
on many factors, including, among other things, prevailing interest rates, the
operating results of the Funding Corporation and the Guarantors, and the market
for similar securities. The Funding Corporation does not intend to apply for
listing or quotation of the Securities on any securities exchange or stock
market.
STRUCTURE OF AND COLLATERAL FOR THE SECURITIES
The Funding Corporation will make payments on the Securities with the
principal of and interest paid on promissory notes issued by the Guarantors to
the Funding Corporation (the "Project Notes"). The Securities are secured by a
pledge of our capital stock and are guaranteed by the Guarantors. These
guarantees are secured by:
* in the case of the guarantee issued by the Salton Sea Guarantors, by a
lien on substantially all of the assets of the Salton Sea Guarantors and a
pledge of the equity interests in the Salton Sea Guarantors;
* in the case of the guarantee issued by the Partnership Guarantors, by a
lien on substantially all of the assets of the Partnership Project Companies, a
lien on the equity cash flows and royalties of the Initial Partnership
Guarantors and a pledge of the stock of and other equity interests in the
Partnership Guarantors; and
* in the case of the guarantee issued by the Royalty Guarantor, by a lien
on all royalties paid to the Royalty Guarantor and a pledge of the capital stock
of the Royalty Guarantor.
The guarantees issued by the Salton Sea Guarantors are unlimited. However,
the guarantees issued by the Partnership Guarantors and the Royalty Guarantor
are limited to the following amounts:
* for any Initial Partnership Guarantor or the Royalty Guarantor, the total
equity cash flows and royalties received by the Guarantor, minus, without
duplication, (1) any royalties paid, (2) all operating and maintenance costs,
(3) all capital expenditures and (4) debt service;
* for any Additional Partnership Guarantor, the total revenues received by
the Guarantor, minus, without duplication (1) any royalties paid, (2) all
operating and maintenance costs, (3) all capital expenditures and (4) debt
service.
The structure has been designed to cross-collateralize cash flows from each
Guarantor without cross-collateralizing all of the Guarantors' assets.
Therefore, if a Guarantor defaults under its guarantee or its promissory note
issued to the Funding Corporation, without causing a payment default on the
Securities, then the trustee may direct the collateral agent to exercise
remedies only with respect to the collateral securing that Guarantor's
obligations. If, however, the default causes a payment default on the
Securities, then the trustee may accelerate the Securities and direct the
collateral agent to exercise remedies against all of the collateral and, if
different, the collateral pledged by the Salton Sea Guarantors.
The Funding Corporation is a special purpose finance subsidiary of Magma.
Its ability to make payments on the Securities will be entirely dependent on the
Guarantors' performance of their obligations under the Project Notes and the
Guarantees. As is common in non-recourse, project finance structures, the assets
and cash flows of the Guarantors are the sole source of repayment of the Project
Notes and the Guarantees. The Salton Sea Guarantors conduct no other business
and own no other significant assets except those related to the ownership or
operation of the Salton Sea Projects. The Partnership Guarantors conduct no
business other than owning their respective ownership interests in the
Partnership Projects and providing operation, maintenance, administrative and
technical services for Magma, the Salton Sea Projects and the Partnership
Projects. The Royalty Guarantor has been organized solely to receive royalty
payments owed by the Partnership Projects and conducts no other business and
owns no other assets. In the event of a default by any Guarantor under a Project
Note, Credit Agreement or Guarantee, there is no assurance that the exercise of
remedies under such Project Note, Credit Agreement or Guarantee, including
foreclosure on the assets of such Guarantor, would provide sufficient funds to
pay such Guarantor's obligation under the Project Notes and the Guarantees.
Moreover, unless such default causes a payment default under the Indenture (in
which case remedies may be exercised against the defaulting Guarantor's and the
Salton Sea Guarantors' assets), remedies may be exercised only against the
assets of the defaulting Guarantors. No shareholders, partners or affiliates of
the Funding Corporation (other than the Guarantors) and no directors, officers
or employees of the Funding Corporation or the Guarantors will guarantee or be
in any way liable for the payment of the Securities, the Project Notes or the
Guarantees except the guarantee by MidAmerican for the direct and indirect
owners of the Zinc Recovery Project of a specified portion of the scheduled debt
service on the Series F Securities including the current principal amount of
$140.52 million and associated interest. In addition, the obligations of the
Partnership Guarantors and the Royalty Guarantor under the Guarantees are
limited to the available cash flows of such Guarantors. As a result, payment of
amounts owed pursuant to the Project Notes, the Guarantees and the Securities is
dependent upon the availability of sufficient revenues and royalty payments from
the Guarantors' businesses or holdings, after the payment of operating expenses
and the satisfaction of certain other obligations.
PAYMENT OF INTEREST AND PRINCIPAL
The interest payment dates for the Securities are May 30 and November 30.
The $232,750,000 initial principal amount of the 6.69% Series A Securities
due May 30, 2000 is payable in semiannual installments, which commenced November
30, 1995, as follows:
PAYMENT DATE PERCENTAGE OF
PRINCIPAL AMOUNT
PAYABLE
November 30, 1995 9.8440386681%
May 30, 1996 10.3342642320%
November 30, 1996 10.3342642320%
May 30, 1997 13.8298603652%
November 30, 1997 13.8298603652%
May 30, 1998 10.5087003222%
November 30, 1998 10.5087003222%
May 30, 1999 6.4240601504%
November 30, 1999 6.4240601504%
May 30, 2000 7.9621911923%
The $133,000,000 initial principal amount of the 7.37% Series B Securities
due May 30, 2005 is payable in semiannual installments, commencing May 30, 1998,
as follows:
PAYMENT DATE PERCENTAGE OF
PRINCIPAL AMOUNT
PAYABLE
May 30, 1998 9.7819548872%
November 30, 1998 9.7819548872%
May 30, 1999 1.9563909774%
November 30, 1999 1.9563909774%
May 30, 2000 0.3909774436%
November 30, 2000 0.3909774436%
May 30, 2001 8.0360902256%
November 30, 2001 8.0360902256%
May 30, 2002 8.5330827068%
November 30, 2002 8.5330827068%
May 30, 2003 5.6390977444%
November 30, 2003 5.6390977444%
May 30, 2004 7.5781954887%
November 30, 2004 7.5781954887%
May 30, 2005 16.1684210526%
The $109,250,000 initial principal amount of the 7.84% Series C Securities
due May 30, 2010 is payable in semiannual installments, commencing May 30, 2003,
as follows:
PAYMENT DATE PERCENTAGE OF
PRINCIPAL AMOUNT
PAYABLE
May 30, 2003 3.3116704805%
November 30, 2003 3.3116704805%
May 30, 2004 1.6558352403%
November 30, 2004 1.6558352403%
May 30, 2005 0.8283752860%
November 30, 2005 0.8283752860%
May 30, 2006 9.8572082380%
November 30, 2006 9.8572082380%
May 30, 2007 9.8425629291%
November 30, 2007 9.8425629291%
May 30, 2008 10.0851258581%
November 30, 2008 10.0851258581%
May 30, 2009 10.0118993135%
November 30, 2009 10.0118993135%
May 30, 2010 8.8146453090%
The $70,000,000 initial principal amount of the 7.02% Series D Securities
due May 30, 2000 is payable in semiannual installments, commencing May 30, 1997,
as follows:
PAYMENT DATE PERCENTAGE OF
PRINCIPAL AMOUNT
PAYABLE
May 30, 1997 18.4642857143%
November 30, 1997 18.4642857143%
May 30, 1998 22.8571428571%
November 30, 1998 22.8571428571%
May 30, 1999 7.6071428571%
November 30, 1999 7.6071428571%
May 30, 2000 2.1428571430%
The $65,000,000 initial principal amount of the 8.30% Series E Securities
due May 30, 2011 is payable in semiannual installments, commencing May 30, 1999,
as follows:
PAYMENT DATE PERCENTAGE OF
PRINCIPAL AMOUNT
PAYABLE
May 30, 1999 9.2907692308%
November 30, 1999 9.2907692308%
May 30, 2000 3.0769230769%
November 30, 2000 3.0769230769%
May 30, 2001 0.7692307692%
November 30, 2001 0.7692307692%
May 30, 2002 1.2307692308%
November 30, 2002 1.2307692308%
May 30, 2003 2.3076923077%
November 30, 2003 2.3076923077%
May 30, 2004 2.5000000000%
November 30, 2004 2.5000000000%
May 30, 2005 2.6923076923%
November 30, 2005 2.6923076923%
May 30, 2006 1.9230769231%
November 30, 2006 1.9230769231%
May 30, 2007 1.9230769231%
November 30, 2007 1.9230769231%
May 30, 2008 2.6923076923%
November 30, 2008 2.6923076923%
May 30, 2009 2.5000000000%
November 30, 2009 2.5000000000%
May 30, 2010 10.3846153846%
November 30, 2010 10.3846153846%
May 30, 2011 17.4184615384%
The $285,000,000 initial principal amount of the 7.475% Series F Securities
due November 30, 2018 is payable in semiannual installments, commencing May 30,
2001 as follows:
PAYMENT DATE PERCENTAGE OF
PRINCIPAL AMOUNT
PAYABLE
May 30, 2001 0.225%
November 30, 2001 0.225%
May 30, 2002 0.750%
November 30, 2002 0.750%
May 30, 2003 0.500%
November 30, 2003 0.500%
May 30, 2004 0.625%
November 30, 2004 0.625%
May 30, 2005 0.625%
November 30, 2005 0.625%
May 30, 2006 0.650%
November 30, 2006 0.650%
May 30, 2007 0.375%
November 30, 2007 0.375%
May 30, 2008 0.875%
November 30, 2008 0.875%
May 30, 2009 0.375%
November 30, 2009 0.375%
May 30, 2010 1.250%
November 30, 2010 1.250%
May 30, 2011 3.000%
November 30, 2011 3.000%
May 30, 2012 5.750%
November 30, 2012 5.750%
May 30, 2013 5.075%
November 30, 2013 5.075%
May 30, 2014 6.000%
November 30, 2014 6.000%
May 30, 2015 6.550%
November 30, 2015 6.550%
May 30, 2016 7.050%
November 30, 2016 7.050%
May 30, 2017 6.875%
November 30, 2017 6.875%
May 30, 2018 3.450%
November 30, 2018 3.450%
PRIORITY OF PAYMENTS
All revenues received by the Salton Sea Guarantors from the Salton Sea
Projects, all revenues received by the Partnership Guarantors and all Royalties
received by the Royalty Guarantor shall be paid into a Revenue Fund maintained
by the depository agent. Amounts paid into the Revenue Fund shall be distributed
in the following order of priority: (a) to pay operating and maintenance costs
of the Guarantors; (b) to pay certain administrative costs of the agents for the
secured parties under the Financing Documents; (c) to pay principal of, premium
(if any) and interest on the Securities and the debt service reserve bonds, if
any, and interest and certain fees payable to the debt service reserve letter of
credit provider; (d) to pay principal of debt service reserve letter of credit
loans and certain related fees and charges; (e) to replenish any shortfall in
the Debt Service Reserve Fund; (f) to pay certain breakage costs in respect of
debt service reserve letter of credit loans, and indemnification and other
expenses to the secured parties, and (g) to the Distribution Fund or
Distribution Suspense Fund, as applicable.
DEBT SERVICE RESERVE FUND
The Funding Corporation is obligated at all times to maintain a Debt Service
Reserve Fund and/or an acceptable letter of credit, the Debt Service Reserve
Fund is funded from available funds in accordance with the priority of payments
until the aggregate amount of the fund and letter of credit are equal to:
* through December 31, 1999, the maximum semiannual principal and interest
payments on the Securities for the remaining term of the Securities;
* after December 31, 1999 through payment in full of the Initial Securities
and the Supplemental Securities, the maximum annual principal and interest
payments on the Securities for the remaining term of the Securities; and
* after payment in full of the Initial Securities and the Supplemental
Securities, (a) the maximum annual principal and interest payments on the Series
F Securities for the remaining term or (b) if we obtain a confirmation of the
current ratings of the Securities, the maximum semiannual principal and interest
payments on the Series F Securities.
The Debt Service Reserve Letter of Credit, which is being provided by Credit
Suisse First Boston, must be issued by a financial institution rated at least
"A" by S&P and "A2" by Moody's. Drawings on the Debt Service Reserve Letter of
Credit will be available to pay principal of and interest on the Securities and
interest on loans resulting from drawings on such Debt Service Reserve Letter of
Credit.
OPTIONAL REDEMPTION
The Series B Securities, Series C Securities, Series E Securities and Series
F Securities are subject to optional redemption, in whole or in part, pro rata
at par plus accrued interest to the redemption date plus a premium calculated to
"make whole" to comparable U.S. Treasury securities plus 50 basis points. The
Series A Securities and Series D Securities are not subject to optional
redemption.
MANDATORY REDEMPTION
The Securities are subject to mandatory redemption, pro rata within each
maturity, at par plus accrued interest to the redemption date, (a) if a
permitted power contract buy-out occurs unless the rating agencies confirm the
then current rating of the Securities; (b) upon the acceleration of a Project
Note in an amount equal to the principal amount of such note plus accrued
interest; (c) upon the occurrence of certain events of loss, condemnation, title
defects or similar events related to the Salton Sea Projects or the Partnership
Projects; or (d) in certain circumstances if any New Project fails to achieve
substantial completion by the applicable guaranteed substantial completion date
or receives certain net performance liquidated damages under the construction
contract for such Project or (e) upon the foreclosure by the Collateral Agent of
collateral securing the Guarantor's obligations under the Salton Sea Guarantee,
the Partnership Guarantee or Royalty Guarantee.
DISTRIBUTIONS
Distributions may be made only from and to the extent of monies on deposit
in the Distribution Fund. Such distributions are subject to the prior
satisfaction of the following conditions:
(a) the amounts contained in the Principal Fund and the Interest Fund shall
be equal to or greater than the aggregate scheduled principal and
interest payments next due on the Securities;
(b) no default or event of default under the Indenture shall have occurred
and be continuing;
(c) the debt service coverage ratio for the preceding four fiscal quarters,
measured as one annual period, is equal to or greater than 1.4 to 1, if
such distribution date occurs prior to the year 2000, and, if in or
subsequent to the year 2000, is equal to or greater than 1.5 to 1, as
certified by an officer of the Funding Corporation;
(d) the projected debt service coverage ratio of the Securities for the
succeeding four fiscal quarters measured as one annual period is equal
to or greater than 1.4 to 1, if such distribution date occurs prior to
the year 2000, and, if such distribution date occurs in or subsequent
to the year 2000, is equal to or greater than 1.5 to 1, as certified by
an officer of the Funding Corporation;
(e) the debt service reserve fund shall have a balance equal to or greater
than the debt service reserve fund required balance or one or more Debt
Service Reserve Letter (or Letters) of Credit at least equal to
(collectively with the balance, if any, in the Debt Service Reserve
Fund) the debt service reserve fund required balance;
(f) an officer of the Funding Corporation provides a certificate (based on
customary assumptions) that there are sufficient geothermal resources
to operate the Salton Sea Projects and the Partnership Projects at
contract capacity through the final maturity date of the Securities;
and
(g) substantial completion of each New Project shall have occurred on or
prior to such New Project's guaranteed substantial completion date
unless the required amount of Securities shall have been redeemed as
described above under "Mandatory Redemption" or (ii) the rating
agencies shall have confirmed that no rating downgrade would result
from such delay; provided that such condition will apply to a New
Project only (x) after such New Project's guaranteed substantial
completion date or (y) if such New Project has been abandoned.
INCURRENCE OF ADDITIONAL DEBT
The Funding Corporation shall not incur any debt other than "Permitted
Debt". "Permitted Debt" means:
(a) The Securities;
(b) Debt incurred to acquire the East Mesa Project in whole or in part;
provided that no such Debt may be incurred unless at the time of such
incurrence (i) no default or event of default has occurred and is
continuing and (ii) the rating agencies confirm that the incurrence of
such debt will not result in a rating downgrade;
(c) Debt incurred to develop, construct, own, operate or acquire additional
permitted facilities in the Imperial Valley ("Additional Projects");
provided that no such debt may be incurred unless at the time of such
incurrence (i) no default or event of default has occurred and is
continuing and (ii) the rating agencies confirm that the Securities
will maintain an investment grade rating after giving effect to such
debt;
(d) Debt incurred to finance the making of capital improvements to the
Salton Sea Projects, the Partnership Projects or Additional Projects
required to maintain compliance with applicable law or anticipated
changes therein; provided that no such debt may be incurred unless at
the time of such incurrence the independent engineer confirms as
reasonable (i) a certification by the Funding Corporation (containing
customary qualifications) that the proposed capital improvements are
reasonably expected to enable such Project to comply with applicable
or anticipated legal requirements and (ii) the calculations of the
Funding Corporation that demonstrate, after giving effect to the
incurrence of such debt, the minimum projected debt service coverage
ratio (x) for the next four consecutive fiscal quarters, commencing
with the quarter in which such debt is incurred, taken as one annual
period, and (y) for each subsequent fiscal year through the final
maturity date, will not be less than 1.2 to 1;
(e) Debt incurred to finance the making of capital improvements to the
Salton Sea Projects, the Partnership Projects or Additional Projects
not required by applicable law so long as after giving effect to the
incurrence of such debt (i) no default or event of default has
occurred and is continuing, and (ii) (A) the independent engineer
confirms as reasonable (x) the calculations of the Funding Corporation
that demonstrate that the minimum projected debt service coverage
ratio for the next four consecutive quarters, taken as one annual
period, and each subsequent fiscal year, will not be less than 1.4 to
1, and (y) the calculations of the Funding Corporation that
demonstrate the average projected debt service coverage ratio for all
succeeding fiscal years until the final maturity date will not be less
than 1.7 to 1 or (B) the Rating Agencies confirm that the incurrence
of such debt will not result in a rating downgrade;
(f) Working capital debt in an aggregate amount not to exceed $15,000,000;
(g) Debt incurred under the Debt Service Reserve LOC Reimbursement
Agreement;
(h) Debt incurred in connection with certain permitted interest rate swap
arrangements;
(i) Debt incurred by the Funding Corporation in an aggregate amount not to
exceed $30,000,000, in connection with the development, construction,
ownership, operation, maintenance or acquisition of Permitted
Facilities; and
(j) Subordinated debt from affiliates in an aggregate amount not to exceed
$200,000,000 which shall be used to finance capital, operating or other
costs with respect to the Projects or Additional Projects.
All Permitted Debt incurred by the Funding Corporation shall be loaned to
the Guarantors and guaranteed by the Guarantors.
PRINCIPAL INDENTURE COVENANTS
Principal covenants under the Indenture require the Funding Corporation to
agree, except as permitted under the Indenture, (a) not to exercise any remedies
or waive any defaults under the Credit Agreements and the Project Notes, except
as otherwise permitted under the Indenture; (b) not to incur (i) any Debt except
Permitted Debt or (ii) any Lien upon any of its properties except Permitted
Liens and (c) not to enter into any transaction of merger or consolidation or
change its form of organization or its business.
EQUITY COMMITMENT
Pursuant to the Equity Commitment Agreement executed by MidAmerican in favor
of the Guarantors and the Collateral Agent, MidAmerican agreed to contribute
cash equity to the Guarantors in an amount of up to $122,513,000 to fund a
portion of the budgeted costs for construction of the New Projects and
Additional Capital Improvements.
THE PROJECT NOTES
The Salton Sea Guarantors jointly and severally issued a Project Note in an
initial principal amount of $325,000,000 and an additional Project Note in the
amount of $83,272,000; the Partnership Guarantors jointly and severally issued a
Project Note in an initial principal amount of $75,000,000, and additional
Project Notes in amounts of $135,000,000 and $201,728,000, respectively, and the
Royalty Guarantor issued a Project Note in an initial principal amount of
$75,000,000.
PRINCIPAL CREDIT AGREEMENT COVENANTS
Principal covenants under the Credit Agreements require each Guarantor to
agree, subject to certain exceptions and qualifications, (a) not to enter into
any transaction of merger or consolidation, change its form of organization,
liquidate, wind-up or dissolve itself; (b) not to enter into non-arm's length
transactions or agreements with Affiliates; (c) not to incur (i) any debt except
Permitted Guarantor Debt and (ii) any liens except for permitted liens; (d) not
to engage in any business other than as contemplated by the respective Credit
Agreement; and (e) not to amend, terminate or otherwise modify the Project
Documents to which they are a party except as permitted under the respective
Credit Agreements. In addition to these principal covenants, in the Salton Sea
Credit Agreement and the Partnership Credit Agreement, the Salton Sea Guarantors
and the Partnership Guarantors have agreed (a) not to sell, lease or transfer
any property or assets material to the Salton Sea Projects or the Partnership
Projects, as applicable, except in the ordinary course of business; and (b) to
maintain insurance as is generally carried by companies engaged in similar
businesses and owning similar properties.
CONSIDERATIONS REGARDING LIMITATION ON REMEDIES
A significant portion of the proceeds of the Initial Offering were
distributed to MidAmerican to repay certain non-recourse indebtedness incurred
by MidAmerican in connection with the acquisition of Magma (including the
Guarantors). The Royalty Guarantor has purchased an assignment of the royalties
from Magma pursuant to the Magma Assignment Agreement. Magma has also agreed to
make certain payments to CEOC pursuant to the Magma Services Agreement and to
secure such payment obligation with a collateral assignment of certain cash
flows. The Guarantors have executed Guarantees with respect to the entire amount
of Securities. Under certain circumstances (including a proceeding under Title
11 of the United States Code or any similar proceeding), it is possible that a
creditor of a Guarantor or Magma could make a claim, under federal or state
fraudulent conveyance laws, that the Funding Corporation's claims under the
Credit Agreements, the Security Holders' claims under the Guarantees, the
Royalty Guarantor's interest pursuant to the Magma Assignment Agreement or
CEOC's rights under the Magma Services Agreement should be subordinated or not
enforced in accordance with such instruments' terms or that payments thereunder
(including payments to the Holders of the Securities) should be recovered. In
order to prevail on such a claim, a claimant would have to demonstrate that the
obligations incurred under any Guarantor's Credit Agreement or Guarantee or the
transfers made under the Magma Assignment Agreement or the Magma Services
Agreement were not incurred in good faith or that any Guarantor or Magma did not
receive fair consideration in connection with such obligations and transfers,
and that any Guarantor or Magma is and was insolvent at the time of entering
into the Credit Agreement, Guarantee, the Magma Assignment Agreement and/or the
Magma Services Agreement or that it did not have and will not have sufficient
capital for carrying on its business or was not and will not be able to pay its
debts as they mature.
RELIANCE ON SINGLE UTILITY CUSTOMER
Each of the Existing Projects relies on an agreement with Edison to generate
100% of its operating revenues. The payments under these agreements have
constituted 100% of the operating revenues of each Existing Project since its
inception, and may do so for the life of the Securities. Any material failure of
Edison to fulfill its contractual obligations under the Power Purchase
Agreements could have a material adverse effect on the ability of the Funding
Corporation to pay principal of and interest on the Securities.
POWER PRICE AND SALES UNCERTAINTY
The Power Purchase Agreements pursuant to which all of the Existing Projects
(other than Salton Sea I and Salton Sea IV) sell electricity to SCE are SO4
Agreements. These agreements provide for both capacity payments and energy
payments for a term of 30 years. While the basis for the capacity payment is
fixed for the entire 30-year term, the price of energy payments is fixed only
for the first ten years of the term. Thereafter, the required energy payment
converts to Edison's avoided cost of energy, as determined by a methodology
approved by, and subject to change by, the California Public Utility Commission.
The fixed price period expired in February 1996 for Vulcan, in December 1998 for
Del Ranch and Elmore; in February 1999 for Salton Sea III and in December 1999
for Leathers and will expire in April 2000 for Salton Sea II.
For the year ended December 1999 and 1998, Edison's average avoided cost of
energy was 3.1 cents and 3.0 cents per kWh, respectively, which is substantially
below the contract energy prices earned for the year ended December 31, 1999.
Estimates of Edison's future avoided cost of energy vary substantially from year
to year. The Funding Corporation and the Guarantors cannot predict the likely
level of avoided cost of energy prices under these agreements at the expiration
of the fixed price periods. The revenues generated by each of these Projects has
or will likely decline significantly after the expiration of the relevant fixed
price periods.
Although approximately one-third of the net electrical output of Salton Sea
V is expected to be sold for use by the Zinc Recovery Project, neither Salton
Sea V nor the CE Turbo Project currently has any power sales agreements for any
significant portion of the capacity of such Projects. The strategy for Salton
Sea V and the CE Turbo Project is to sell output not needed by the Zinc Recovery
Project in short term transactions through the PX or in such other transactions
from time to time as may be found to be more advantageous than those conducted
through the PX. The PX was recently created to establish markets for the sale of
power on a daily and an hourly basis. Thus, PX prices are expected to have the
characteristics of short term spot prices and to fluctuate from time to time in
a manner that cannot be predicted with accuracy and is not within the control of
the Funding Corporation, the Guarantors or any other person.
ZINC PRICE AND SALES UNCERTAINTY
In September 1999, Minerals LLC entered into a sales agreement whereby all
zinc produced by the Zinc Recovery Project will be sold to Cominco, Ltd. The
initial term of the agreement expires in December 2005.
Because most of the Zinc Recovery Project's revenues will be derived from
the sale of zinc, earnings will be directly related to the price of zinc in the
domestic and world markets. However, zinc prices fluctuate and are affected by
numerous factors, including expectations of inflation, speculative activities,
currency exchange rates, interest rates, global and regional demand and
production, political and economic conditions, discovery of new deposits, and
production costs in major producing regions. The aggregate effect of these
factors, all of which are beyond the control of the Funding Corporation or the
Guarantors, is impossible for the Funding Corporation to predict.
CONSTRUCTION UNCERTAINTY
Although the eight Existing Projects have been operating for a number of
years, the three New Projects have commenced construction pursuant to fixed
price, date certain turnkey engineering, procurement and construction contracts
and are subject to customary risks associated with the construction of power and
metals processing plants including risks of delays in completion, cost overruns
and failures to perform in accordance with contract terms. In addition, while
each of the individual process steps to be utilized in the Zinc Recovery Project
(including ion exchange, solvent extraction and electrowinning) has been in
operation for more than twenty years and the demonstration plant at the SSKGRA
has successfully recovered zinc through this integrated process, the integrated
process for the production of zinc from geothermal brine has not been attempted
in a large scale commercial facility. Any material unremedied delay in or
unsatisfactory completion of the New Projects could have an adverse effect on
the applicable Guarantors' results of operations.
UNCERTAINTIES RELATING TO EXPLORATION AND DEVELOPMENT OF GEOTHERMAL ENERGY
RESOURCES
Geothermal exploration, development and operations are subject to
uncertainties which vary among different geothermal reservoirs and are similar
to those typically associated with oil and gas exploration and development,
including dry holes and uncontrolled releases. Because of the geological
complexities of geothermal reservoirs, the geographic area and sustainable
output of geothermal reservoirs can only be estimated and cannot be definitively
established. There is, accordingly, a risk of an unexpected decline in the
capacity of geothermal wells and a risk of geothermal reservoirs not being
sufficient for sustained generation of the electrical power capacity desired.
In addition, both the cost of operations and the operating performance of
geothermal power plants may be adversely affected by a variety of operating
factors. Production and injection wells can require frequent maintenance or
replacement. Corrosion caused by high-temperature and high-salinity geothermal
fluids may require the replacement or repair of certain equipment, vessels or
pipelines. New production and injection wells may be required for the
maintenance of current operating levels, thereby requiring substantial capital
expenditures.
INSURANCE
The Salton Sea Projects and the Partnership Projects currently possess
property, business interruption, catastrophic and general liability insurance.
Proceeds of insurance received in connection with the Salton Sea Projects will
be payable to the Depositary for the account of the Salton Sea Guarantors and
will be applied as required under the financing documents. There can be no
assurance that such comprehensive insurance coverage will be available in the
future at commercially reasonable costs or terms or that the amounts for which
the Salton Sea Guarantors and the Partnership Guarantors are or will be insured
will cover all potential losses.
Because geothermally active areas such as the area in which the Projects are
located are subject to frequent low-level seismic disturbances, and serious
seismic disturbances are possible, the power generating plants and other
facilities at the Projects are designed and built to withstand relatively
significant levels of seismic disturbance. However, there is no assurance that
seismic disturbances of a nature and magnitude so as to cause material damage to
the Projects or gathering systems or a material change in the nature of the
geothermal resource will not occur, that insurance with respect to seismic
disturbances will be maintained by or on behalf of all of the Projects, that
insurance proceeds will be adequate to cover all potential losses sustained, or
that insurance will continue to be available in the future in amounts adequate
to insure against such seismic disturbances.
REGULATORY AND ENVIRONMENTAL MATTERS
The Guarantors are subject to a number of environmental laws and regulations
affecting many aspects of their present and future operations, including the
disposal of various forms of materials resulting from geothermal reservoir
production and the drilling and operation of new wells. Such laws and
regulations generally require the Guarantors to obtain and comply with a wide
variety of licenses, permits and other approvals. In addition, regulatory
compliance for the construction of new facilities is a costly and time-consuming
process, and intricate and rapidly changing environmental regulations may
require major expenditures for permitting and create the risk of expensive
delays or material impairment of project value if projects cannot function as
planned due to changing regulatory requirements or local opposition. The
Guarantors and the Projects also remain subject to a varied and complex body of
environmental and energy regulations that both public officials and private
individuals may seek to enforce. There can be no assurance that existing
regulations will not be revised or that new regulations will not be adopted or
become applicable to the Guarantors and the Projects which could have an adverse
impact on their operations. In particular, the independent power market in the
United States is dependent on the existing energy regulatory structure,
including the Public Utility Regulatory Policies Act and its implementation by
utility commissions in the various states. The structure of such federal and
state energy regulations has in the past, and may in the future, be the subject
of various challenges and restructuring proposals by utilities and other
industry participants. The implementation of regulatory changes in response to
such challenges or restructuring proposals, or otherwise imposing more
comprehensive or stringent requirements on the Guarantors and Projects, which
would result in increased compliance costs could have a material adverse effect
on the Guarantors' and the Projects' results of operations.
EMPLOYEES
Employees necessary for the operation of the Salton Sea Projects and the
Partnership Projects are provided by CEOC, under the operation and maintenance
agreements described below. As of December 31, 1999, CEOC employed 197 people at
the Salton Sea Projects and the Partnership Projects, collectively. CEOC
employees are not covered by any collective bargaining agreement. The Funding
Corporation believes that CEOC's employee relations are good.
CEOC maintains a qualified technical staff covering a broad range of
disciplines including geology, geophysics, geochemistry, hydrology, volcanology,
drilling technology, reservoir engineering, plant engineering, construction
management, maintenance services, production management and electric power
operation.
Administrative services for the Guarantors are provided pursuant to the
administrative services agreements described below. MidAmerican employees
provide corporate level managerial, financial, accounting, technical and other
administrative services and CEOC employees provide certain accounting,
purchasing and payroll services.
ITEM 2. PROPERTIES
The Funding Corporation does not separately own or lease office space but
has arranged for a separate suite at MidAmerican's offices in Omaha, Nebraska.
(See page 4 for a schedule of the Guarantors facilities.)
ITEM 3. LEGAL PROCEEDINGS
The Funding Corporation is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER'S MATTERS
Not applicable.
ITEM 6. SELECTED FINANCIAL DATA (Dollars in thousands)
SALTON SEA FUNDING CORPORATION
The following tables set forth selected historical financial and operating
data of the Funding Corporation. The data should be read in conjunction with the
financial statements and related notes and other financial information appearing
elsewhere in this Form 10-K.
Year Ended Year Ended Year Ended Year Ended From June 20, 1995
December 31, December 31, December 31, December 31, (Inception Date)
1999 1998(1) 1997 1996 (2) through
December 31, 1995 (3)
Total revenues $ 48,538 $ 39,329 $ 40,674 $ 40,567 $ 17,577
Net income 1,123 1,783 1,461 1,821 1,507
December 31, December 31, December 31, December 31, December 31,
1999 1998(1) 1997 1996 (2) 1995(3)
Total assets $585,648 $659,337 $474,289 $575,989 $522,521
Senior secured notes and bonds 568,980 626,816 448,754 538,982 452,088
Total liabilities 572,587 647,399 464,134 567,295 515,571
Total stockholder's equity 13,061 11,938 10,155 8,694 6,950
(1) On October 13, 1998 Funding Corporation issued additional securities
of $285,000 of Salton Sea Notes and Bonds Series F.
(2) On June 20, 1996 Funding Corporation issued additional securities of
$135,000 of Salton Sea Notes and Bonds Series D and E.
(3) Funding Corporation was formed on June 20, 1995 for the sole purpose
of acting as issuer of senior notes and bonds and issued
$475,000 of senior secured notes and bonds.
SALTON SEA GUARANTORS
The following tables set forth selected historical combined financial and
operating data of the Salton Sea Guarantors. The data should be read in
conjunction with the financial statements and related notes and other financial
information appearing elsewhere in this Form 10-K.
YEAR ENDED DECEMBER 31,
1999(1) 1998 1997 1996(2) 1995(3)
Sales of electricity $ 81,850 $ 106,274 $ 106,252 $ 90,982 $ 71,605
Total revenues 83,718 107,091 106,425 91,123 71,605
Net income 23,045 45,939 42,816 35,031 17,955
Total assets 633,014 628,515 556,353 565,934 500,400
Senior secured project note 293,954 310,030 266,208 299,840 321,500
Total liabilities 329,842 348,388 322,165 374,562 330,801
(1) The decrease is due to Salton Sea III reaching the end of its fixed price
period in February 1999.
(2) In June 1996, Salton Sea IV commenced operations.
(3) Information as of December 31, 1995 and for the year then ended reflects
adjustments which have been made to the net assets of the Salton Sea
Guarantors to reflect the effect of the acquisition of Magma accounted for
as a purchase business combination pushed down to the Salton Sea
Guarantors.
PARTNERSHIP GUARANTORS
The following tables set forth selected historical combined financial and
operating data of the Partnership Guarantors. The data should be read in
conjunction with the financial statements and related notes, and other financial
information appearing elsewhere in this Form 10-K.
Year Ended December 31,
1999(1) 1998 1997 1996(2) 1995(3)
Sales of electricity $105,921 $165,779 $158,125 $132,212 $76,909
Total revenues 114,988 172,565 162,315 140,226 87,483
Net income 25,481 37,134 33,637 25,759 14,637
Total assets 901,892 907,819 736,783 742,183 602,172
Loans payable --- --- --- --- 43,766
Senior secured project note 261,212 293,576 143,610 182,204 62,706
Total liabilities 377,578 408,986 275,084 314,121 228,440
(1) The decrease is due to the end of the fixed price period at Del Ranch
and Elmore.
(2) On April 17, 1996 the remaining 50% interest of the Partnership
Projects was acquired from Edison Mission Energy.
(3) Information as of December 31, 1995 and for the year then ended
reflects adjustments which have been made to the net assets of the
Partnership Guarantors to reflect the effect of the acquisition of
Magma accounted for as a purchase business combination pushed down to
the Partnership Guarantors.
ROYALTY GUARANTOR
The following tables set forth selected historical financial and operating
data of the Royalty Guarantor. The data should be read in conjunction with the
financial statements and related notes and other financial information appearing
elsewhere in this Form 10-K.
Year Ended December 31,
1999 1998 (1) 1997 1996 1995 (2)
Total revenues $26,274 $51,703 $32,231 $30,143 $28,383
Net income 19,222 19,497 8,661 4,769 3,510
Total assets 71,116 77,432 86,009 91,073 117,341
Senior secured project note 13,814 23,210 38,934 56,936 67,882
Total liabilities 13,896 39,434 67,508 81,233 89,290
(1) In 1998, the Royalty Guarantor received $25,000 in a settlement
related to the GEO East Mesa payments.
(2) Information as of December 31, 1995 and for the year then ended
reflects adjustments which have been made to the net assets of the
Royalty Guarantor to reflect the effect of the acquisition of Magma
accounted for as a purchase business combination pushed down to the
Royalty Guarantor.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FACTORS AFFECTING RESULTS OF OPERATIONS
Funding Corporation was organized for the sole purpose of acting as issuer
of senior secured notes and bonds. On October 13, 1998, June 20, 1996 and July
21, 1995, the Funding Corporation issued $285 million, $135 million and $475
million, respectively, of senior secured notes and bonds (the "Securities"). The
Securities are payable from payments made of principal and interest on the
Project Notes by the Guarantors, to the Funding Corporation. The Securities are
guaranteed on a joint and several basis by the Guarantors. The guarantees of the
Partnership Guarantors and Royalty Guarantor are limited to available cash flow.
The Funding Corporation does not conduct any operations apart from issuing the
Securities.
The periodic results of operations for the Guarantors are influenced to
varying degrees by a number of factors, principally the level of revenues
received under the power purchase agreements, project capacity utilization, the
level of operating expenses and capital expenditures.
POWER PURCHASE AGREEMENTS
The Imperial Valley Project consists of the Partnership Project and the
Salton Sea Project located in the Imperial Valley in California. The operating
Partnership Project consists of the Vulcan, Hoch (Del Ranch), Elmore, and
Leathers Partnerships. The operating Salton Sea Project consists of Salton Sea
I, Salton Sea II, Salton Sea III and Salton Sea IV.
Each of the Projects sells electricity to Edison pursuant to a separate SO4
Agreement or a negotiated power purchase agreement. Each power purchase
agreement is independent of the others, and performance requirements specified
within one such agreement apply only to the Project which is subject to that
agreement. The power purchase agreements provide for energy payments, capacity
payments and capacity bonus payments. Edison makes fixed annual capacity
payments and capacity bonus payments to the projects to the extent that capacity
factors exceed certain benchmarks. The price for capacity is fixed for the life
of the SO4 Agreements and are significantly higher in the months of June through
September. Energy payments are at increasing fixed rates for the first ten years
after firm operation and thereafter at Edison's Avoided Cost of Energy.
The scheduled energy price periods of the Partnership Projects' SO4
Agreements extended until February 1996 for the Vulcan Partnership, December
1998 for the Del Ranch and Elmore Partnerships and December 1999 for the
Leathers Partnerships.
Salton Sea I sells electricity to Edison pursuant to a 30-year negotiated
power purchase agreement, as amended (the "Salton Sea I PPA"), which provides
for capacity and energy payments. The energy payment is calculated using a Base
Price which is subject to quarterly adjustments based on a basket of indices.
The time period weighted average energy payment for Salton Sea I was 5.3 cents
per kWh during 1999. As the Salton Sea I PPA is not an SO4 Agreement, the energy
payments do not revert to Edison's Avoided Cost of Energy. The capacity payment
is approximately $1.1 million per annum.
Salton Sea II and Salton Sea III sell electricity to Edison pursuant to
30-year modified SO4 Agreements that provide for capacity payments, capacity
bonus payments and energy payments. The price for contract capacity and contract
capacity bonus payments is fixed for the life of the modified SO4 Agreements.
The energy payments for the first ten year period, which period expires in April
2000 for Salton Sea II and expired in February 1999 for Salton Sea III are
levelized at a time period weighted average of 10.6 cents per kWh and 9.8 cents
per kWh for Salton Sea II and Salton Sea III, respectively. Thereafter, the
monthly energy payments will be at Edison's Avoided Cost of Energy. For Salton
Sea II only, Edison is entitled to receive, at no cost, 5% of all energy
delivered in excess of 80% of contract capacity through September 30, 2004. The
annual capacity and bonus payments for Salton Sea II and Salton Sea III are
approximately $3.3 million and $9.7 million, respectively.
Salton Sea IV sells electricity to Edison pursuant to a modified SO4
agreement which provides for contract capacity payments on 34 MW of capacity at
two different rates based on the respective contract capacities deemed
attributable to the original Salton Sea PPA option (20 MW) and to the original
Fish Lake PPA (14 MW). The capacity payment price for the 20 MW portion adjusts
quarterly based upon specified indices and the capacity payment price for the 14
MW portion is a fixed levelized rate. The energy payment (for deliveries up to a
rate of 39.6 MW) is at a fixed price for 55.6% of the total energy delivered by
Salton Sea IV and is based on an energy payment schedule for 44.4% of the total
energy delivered by Salton Sea IV. The contract has a 30 year term but Edison is
not required to purchase the 20 MW of capacity and energy originally
attributable to the Salton Sea I PPA option after September 30, 2017, the
original termination date of the Salton Sea I PPA.
For the year ended December 31, 1999 and 1998, Edison's average Avoided
Cost of Energy was 3.1 cents and 3.0 cents per kWh, respectively, which is
substantially below the contract energy prices earned for the year ended
December 31, 1999. Estimates of Edison's future Avoided Cost of Energy vary
substantially from year to year. The Company cannot predict the likely level of
Avoided Cost of Energy prices under the SO4 Agreements and the modified SO4
Agreements at the expiration of the scheduled payment periods. The revenues
generated by each of the projects operating under SO4 Agreements will likely
decline significantly after the expiration of the respective scheduled payment
periods.
CAPACITY UTILIZATIONS
For purposes of consistency in financial presentation, plant capacity
factors for Vulcan, Hoch (Del Ranch), Elmore and Leathers plants are based on
capacity amounts of 34, 38, 38, and 38 net MW respectively, and for Salton Sea
I, Salton Sea II, Salton Sea III and Salton Sea IV plants, are based on nominal
capacity amounts of 10, 20, 49.8 and 39.6 net MW, respectively. Each plant
possesses an operating margin which allows for production in excess of the
amount listed above. Utilization of this operating margin is based upon a
variety of factors and can be expected to vary throughout the year under normal
operating conditions.
The following operating data represents the aggregate capacity and
electricity production of Salton Sea I and II, Salton Sea III and Salton Sea IV:
Years Ended December 31,
1999 1998 1997
Overall capacity factor 91.9% 94.2% 95.6%
Capacity NMW (average) 119.4 119.4 119.4
Kwh produced (in thousands) 960,800 985,500 999,400
The following operating data represents the aggregate capacity and electricity
production of Vulcan, Del Ranch, Elmore and Leathers:
Years Ended December 31,
1999 1998 1997
Operating capacity factor 103.4% 101.3% 102.2%
Capacity NMW (average) 148.0 148.0 148.0
Kwh produced (in thousands) 1,339,900 1,313,900 1,324,400
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
REVENUES
The Salton Sea Guarantors' sales of electricity decreased to $81.9 million
for the year ended December 31, 1999 from $106.3 million for the same period in
1998. The decrease is due to Salton Sea III reaching the end of its fixed price
period in February, 1999. The Salton Sea Guarantors' sales of electricity was
$106.3 million for the year ended December 31, 1998 compared to $106.3 million
for the same period in 1997.
The Partnership Guarantors' sales of electricity decreased to $105.9
million for the year ended December 31, 1999 from $165.8 million for the same
period in 1998, a 36.1% decrease. The decrease is due to the end of the fixed
price period at Del Ranch and Elmore in December 1998. The Partnership
Guarantors' sales of electricity increased to $165.8 million for the year ended
December 31, 1998 from $158.1 million for the same period in 1997, a 4.8%
increase. This increase was due primarily to scheduled price increases.
Interest and other income for the Partnership Guarantors increased to $9.1
million for the year ended December 31, 1999 from $6.8 million for the same
period in 1998. Interest and other income for the Partnership Guarantors
increased to $6.8 million for the year ended December 31, 1998 from $4.2 million
for the same period in 1997. The increases were due to interest income on the
higher restricted cash balances.
The Royalty Guarantor revenue decreased to $26.3 million for the year ended
December 31, 1999 from $51.7 million for the same period in 1998 and $32.2
million for the same period in 1997. The decreases in royalty revenue were
primarily due to a decrease in East Mesa payments related to a settlement
agreement in 1998 for prior years and the result of the lower energy sales at
the Partnership Projects resulting in lower royalties.
OPERATING EXPENSES
The Salton Sea Guarantors' operating expenses, which include royalty,
operating, and general and administrative expenses, decreased to $28.8 million,
or 2.99 cents per kWh, for the year ended December 31, 1999, from $30.3 million
or 3.08 cents per kWh for the same period in 1998 and $30.9 million or 3.09
cents per kWh for the same period in 1997. The decrease in expenses from 1998 to
1999 was due primarily to lower royalty expense and management fees associated
with the lower revenue.
The Partnership Guarantors' operating expenses, which include royalty,
operating, and general and administrative expenses, decreased to $48.0 million,
or 3.88 cents per kWh, for the year ended December 31, 1999, from $63.7 million
or 5.26 cents per kWh for the same period in 1998 and $64.1 million or 5.25
cents per kWh for the same period in 1997. The decrease in costs from 1998 to
1999 was due primarily to the decreases in royalty expense due to lower revenue.
The Royalty Guarantor's operating expenses decreased to $4.6 million for
the year ended December 31, 1999 from $8.1 million for the same period of 1998
and $7.8 million for the same period of 1997. The decrease was due to scheduled
decreases in third party lessor royalties related to the decreases in the
Partnership Projects' sales of electricity.
DEPRECIATION AND AMORTIZATION
The Salton Sea Guarantors' depreciation and amortization increased to $16.9
million for the year ended December 31, 1999 from $14.9 million for the year
ended December 31, 1998 and $14.7 million for the year ended December 31, 1997.
The increase was due to an adjustment in the step up depreciation charges.
The Partnership Guarantors' depreciation and amortization decreased to
$22.6 million for the year ended December 31, 1999 from $48.6 million for the
same period in 1998 and $38.8 million for the same period in 1997. The decrease
from 1998 to 1999 was primarily due to reduced step up depreciation after the
end of the fixed price periods for the Del Ranch and Elmore projects as a result
of greater value being assigned to the scheduled price periods for the contracts
relating to these projects at the time of acquisition. The scheduled price
periods for the contracts relating to Del Ranch and Elmore expired in December
1998. The increase from 1997 to 1998 was due primarily to a modification of the
amortization method used to amortize the fair value adjustments associated with
the scheduled price periods of the four plants acquired in the Imperial Valley.
The amortization method was modified from the weighted average of the scheduled
price periods of the four plants to the scheduled price periods of each
individual plant. The impact of this modification was to increase amortization
expense by $7.5 million in 1998 compared with 1997.
The Royalty Guarantor's amortization decreased to $7.1 million for the year
ended December 31, 1999 from $9.8 million for the same period in 1998 and 1997.
The decrease in 1999 is consistent with the Company's scheduled amortization of
the royalty stream and the excess of cost over fair value related to the Magma
acquisition.
INTEREST EXPENSE
The Salton Sea Guarantors' interest expense, net of capitalized amounts,
decreased to $15.0 million for the year ended December 31, 1999 from $16.0
million for the same period in 1998. The decrease was due primarily to higher
capitalized interest charges on the Salton Sea V construction costs and
repayment of debt. The Salton Sea Guarantors' interest expense, net of
capitalized amounts, decreased to $16.0 million for the year ended December 31,
1998 from $18.1 million for the same period in 1997. The decrease was due
primarily to the repayment of debt.
The Partnership Guarantors' interest expense, net of capitalized amounts,
increased to $6.4 million for the year ended December 31, 1999 from $3.6 million
for the same period in 1998 and $4.4 million for the same period in 1997. The
changes are a result of the issuance of $201.8 million of senior secured project
notes in October 1998 partially offset by repayment of debt and capitalization
of interest on the mineral extraction project.
The Royalty Guarantors' interest expense decreased to $1.7 million for the
year ended December 31, 1999 from $2.8 million for the same period in 1998 and
$4.2 million for the same period in 1997. These decreases are due to the
repayment of debt.
INCOME TAX PROVISION
The Salton Sea Guarantors are substantially comprised of partnerships.
Income taxes are the responsibility of the partners and Salton Sea Guarantors
have no obligation to provide funds to the partners for payment of any tax
liabilities. Accordingly, the Salton Sea Guarantors have no tax obligations.
The Partnership Guarantors' income tax provision decreased to $12.5 million
for the year ended December 31, 1999 from $19.5 million for the same period in
1998 and $21.4 million for the same period in 1997. Income taxes will be paid by
the parent of the Guarantors from distributions to the parent company by the
Guarantors which occur after payment of operating expenses and debt service.
The Royalty Guarantor's income tax provision decreased to a benefit of $6.3
million for the year ended December 31, 1999 from an expense of $11.5 million
for the same period in 1998. The decrease in the provision is due to the change
in the Royalty Guarantor from a corporation to a limited liability company which
is not taxed. The Royalty Guarantor's income tax provision increased to $11.5
million for the year ended December 31, 1998 from $1.8 million for the same
period in 1997. The increase in the provision can be attributed to higher
royalty stream income.
NET INCOME
The Funding Corporation's net income was $1.1 million for the year ended
December 31, 1999 compared to $1.8 million for the year ended December 31, 1998
and $1.5 million for the period ended December 31, 1997, which represented
interest income and expense, net of applicable tax, and the Funding
Corporation's 1% equity in earnings of the Guarantors.
The Salton Sea Guarantors' net income decreased to $23.0 million for the
year ended December 31, 1999, compared to $45.9 million for the year ended
December 31, 1998 and $42.8 million for the year ended December 31, 1997.
The Partnership Guarantors' net income decreased to $25.5 million for the
year ended December 31, 1999, compared to $37.1 million for the year ended
December 31, 1998 and $33.6 million for the year ended December 31, 1997.
The Royalty Guarantor's net income decreased to $19.2 million for the year
ended December 31, 1999, compared to $19.5 million for the year ended December
31, 1998 and $8.7 million for the year ended December 31, 1997.
CAPITAL RESOURCES AND LIQUIDITY
CalEnergy Minerals LLC, a Partnership Guarantor ("Minerals LLC"), developed
and owns the rights to proprietary processes for the extraction of zinc from
elements in solution in the geothermal brine and fluids utilized at the
Company's Imperial Valley plants (the "Zinc Recovery Project") A pilot plant has
successfully produced commercial quality zinc at the company's Imperial Valley
Project. The Company's affilates intend to sequentially develop facilities for
the extraction of manganese, silver, gold, lead, boron, lithium and other
products as it further develops the extraction technology. The Company's
affiliates are also investigating producing silica as an extraction project.
Silica is used as a filler for such products as paint, plastics and high
temperature cement.
Minerals LLC is constructing the Zinc Recovery Project which will recover
zinc from the geothermal brine (the "Zinc Recovery Project"). Facilities will be
installed near the Imperial Valley Project sites to extract a zinc chloride
solution from the geothermal brine through an ion exchange process. This
solution will be transported to a central processing plant where zinc ingots
will be produced through solvent extraction, electrowinning and casting
processes. The Zinc Recovery Project is designed to have a capacity of
approximately 30,000 metric tonnes per year and is scheduled to commence
commercial operation in mid-2000. In September 1999, Minerals LLC entered into a
sales agreement whereby all zinc produced by the Zinc Recovery Project will be
sold to Cominco, Ltd. The initial term of the agreement expires in December
2005.
The Zinc Recovery Project is being constructed by Kvaerner U.S. Inc.
("Kvaerner") pursuant to a date certain, fixed-price, turnkey engineering,
procurement and construction contract (the "Zinc Recovery Project EPC
Contract"). Kvaerner is a wholly-owned indirect subsidiary of Kvaerner ASA, an
internationally recognized engineering and construction firm experienced in the
metals, mining and processing industries. Total project costs of the Zinc
Recovery Project are expected to be approximately $200.9 million. The Company
has incurred $92.8 million of such costs through December 31, 1999.
Salton Sea Power LLC, a Salton Sea Guarantor, is constructing Salton Sea V.
Salton Sea V will be a 49 net MW geothermal power plant which will sell
approximately one-third of its net output to the Zinc Recovery Project. The
remainder will be sold through the California Power Exchange ("PX") or in other
market transactions.
Salton Sea V is being constructed pursuant to a date certain, fixed price,
turn-key engineering, procurement and construction contract (the "Salton Sea V
EPC Contract") by Stone & Webster Engineering Corporation ("SWEC"). Salton Sea V
is scheduled to commence commercial operation in mid-2000. Total project costs
of Salton Sea V are expected to be approximately $119.1 million. Salton Sea
Power LLC has incurred approximately $85.6 million of such costs through
December 31, 1999.
CE Turbo LLC, a Partnership Guarantor, is constructing the CE Turbo
Project. The CE Turbo Project will have a capacity of 10 net MW. The net output
of the CE Turbo Project will be sold to the Zinc Recovery Project or sold
through the PX or in other market transactions.
The Partnership Projects are upgrading the geothermal brine processing
facilities at the Vulcan and Del Ranch Projects with the Region 2 Brine
Facilities Construction. In addition to incorporating the pH modification
process, which has reduced operating costs at the Salton Sea Projects, the new,
more efficient facilities will achieve economies through improved brine
processing systems and the utilization of more modern equipment. The Partnership
Projects expect these improvements to reduce brine-handling operating costs at
the Vulcan Project and the Del Ranch Project.
The CE Turbo Project and the Region 2 Brine Facilities Construction are
being constructed by SWEC pursuant to a date certain, fixed price, turnkey
engineering, procurement and construction contract (the "Region 2 Upgrade EPC
Contract"). The obligations of SWEC are guaranteed by Stone & Webster,
Incorporated. The CE Turbo Project is scheduled to commence initial operations
in early 2000 and the Region 2 Brine Facilities Construction is scheduled to be
completed in mid-2000. Total project costs for both the CE Turbo Project and the
Region 2 Brine Facilities Construction are expected to be approximately $63.7
million. The Company has incurred approximately $40.8 million of such costs
through December 31, 1999.
The operating Salton Sea Guarantors' only source of revenue is payments
received pursuant to long term power sales agreements with Edison, other than
interest earned on funds on deposit. The operating Partnership Guarantors'
primary source of revenue is payments received pursuant to long term power sales
agreements with Edison. The Royalty Guarantor's only source of revenue is
payments received pursuant to resource lease agreements with the Partnership
Projects and agreements with the East Mesa Project. These payments, for each of
the Guarantors, are expected to be sufficient to fund operating and maintenance
expenses, payments of interest and principal on the Securities, projected
capital expenditures and debt service reserve fund requirements.
Inflation has not had a significant impact on the Guarantors' operating
revenue and costs; energy payments for the Guarantors (excluding those projects
receiving avoided cost rates) will continue to be based on fixed rates and are
not adjusted for inflation through the initial ten-year period of each power
purchase agreement.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion of the Company's exposure to various market risks
contains "forward-looking statements" that involve risks and uncertainties.
These projected results have been prepared utilizing certain assumptions
considered reasonable in the circumstances and in light of information currently
available to the Company. Actual results could differ materially from those
projected in the forward-looking information.
INTEREST RATE RISK
At December 31, 1999, the Funding Corporation had fixed-rate long-term debt
of $569.0 million in principal amount and having a fair value of $540.7 million.
These instruments are fixed-rate and therefore do not expose the Company to the
risk of earnings loss due to changes in market interest rates. However, the fair
value of these instruments would decrease by approximately $32.2 million if
interest rates were to increase by 10% from their levels at December 31, 1999.
In general, such a decrease in fair value would impact earnings and cash flows
only if the Company were to reacquire all or a portion of these instruments
prior to their maturity.
Certain information included in this report contains forward-looking
statements made pursuant to the Private Securities Litigation Reform Act of 1995
("Reform Act"). Such statements are based on current expectations and involve a
number of known and unknown risks and uncertainties that could cause the actual
results and performance of the Company to differ materially from any expected
future results or performance, expressed or implied, by the forward-looking
statements. In connection with the safe harbor provisions of the Reform Act, the
Company has identified important factors that could cause actual results to
differ materially from such expectations, including development uncertainty,
operating uncertainty, acquisition uncertainty, uncertainties relating to doing
business outside of the United States, uncertainties relating to geothermal
resources, uncertainties relating to domestic and international economic and
political conditions and uncertainties regarding the impact of regulations,
changes in government policy, industry deregulation and competition. Reference
is made to all of the Company's SEC filings incorporated herein by reference.
The Company assumes no responsibility to update forward-looking information
contained herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
SALTON SEA FUNDING CORPORATION
INDEX TO FINANCIAL STATEMENTS
SALTON SEA FUNDING CORPORATION
Independent auditors' report--Deloitte & Touche LLP...........................31
Balance sheets as of December 31, 1999 and 1998 ..............................32
Statements of operations for the three years ended December 31, 1999 .........33
Statements of stockholder's equity for the three years ended
December 31, 1999...........................................................34
Statements of cash flows for the three years ended December 31, 1999 .........35
Notes to financial statements.................................................36
SALTON SEA GUARANTORS
Independent auditors' report--Deloitte & Touche LLP...........................38
Combined balance sheets as of December 31, 1999 and 1998.....................39
Combined statements of operations for the three years ended
December 31, 1999...........................................................40
Combined statements of Guarantors' equity for the three years ended
December 31, 1999...........................................................41
Combined statements of cash flows for the three years ended December 31, 1999.42
Notes to combined financial statements........................................43
PARTNERSHIP GUARANTORS
Independent auditors' report--Deloitte & Touche LLP...........................48
Combined balance sheets as of December 31, 1999 and 1998......................49
Combined statements of operations for the three years ended December 31, 1999.50
Combined statements of Guarantors' equity for the three years ended
December 31, 1999...........................................................51
Combined statements of cash flows for the three years ended December 31, 1999.52
Notes to combined financial statements........................................53
SALTON SEA ROYALTY LLC
Independent auditors' report--Deloitte & Touche LLP...........................65
Balance sheets as of December 31, 1999 and 1998...............................66
Statements of operations for the three years ended December 31, 1999..........67
Statements of equity for the three years ended December 31, 1999 .............68
Statements of cash flows for the three years ended December 31, 1999 .........69
Notes to financial statements.................................................70
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholder
Salton Sea Funding Corporation
Omaha, Nebraska
We have audited the accompanying balance sheets of Salton Sea Funding
Corporation as of December 31, 1999 and 1998 and the related statements of
operations, stockholder's equity and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Salton Sea Funding Corporation as of
December 31, 1999 and 1998 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
January 25, 2000
SALTON SEA FUNDING CORPORATION
BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
December 31,
1999 1998
ASSETS
Cash $ 2,086 $ 17,629
Prepaid expenses and other assets 3,617 6,768
Due from affiliates 2,118 ---
Current portion secured project notes from guarantors 25,072 57,836
------ ------
Total current assets 32,893 82,233
Secured project notes from Guarantors 543,908 568,980
Investment in 1% of net assets of Guarantors 8,847 8,124
$ 585,648 $ 659,337
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accrued liabilities $ 3,607 $ 3,971
Due to affiliates --- 16,612
Current portion long term debt 25,072 57,836
------ ------
Total current liabilities 28,679 78,419
Senior secured notes and bonds 543,908 568,980
--------- ---------
Total liabilities 572,587 647,399
Commitments and contingencies (Note 3)
Stockholder's equity:
Common stock--authorized 1,000
shares, par value $.01 per share;
issued and outstanding 100 shares - -
Additional paid-in capital 5,366 5,366
Retained earnings 7,695 6,572
--------- ---------
Total stockholder's equity 13,061 11,938
--------- ---------
$ 585,648 $ 659,337
======= =======
The accompanying notes are an integral part of the financial statements.
SALTON SEA FUNDING CORPORATION
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
For the Year Ended December 31,
1999 1998 1997
Revenues:
Interest income $47,815 $38,349 $39,823
Equity in earnings of Guarantors 723 980 851
------- ------- -------
48,538 39,329 40,674
Expenses:
General and administrative expenses 775 804 748
Interest expense 45,859 35,495 37,443
------ ------- ------
Total expenses 46,634 36,299 38,191
Income before income taxes 1,904 3,030 2,483
Provision for income taxes 781 1,247 1,022
--------- ---------- ----------
Net income $ 1,123 $ 1,783 $ 1,461
====== ====== ======
The accompanying notes are an integral part of the financial statements.
SALTON SEA FUNDING CORPORATION
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
Additional
Common Stock Paid-in Retained Total
Shares Amount Capital Earnings Equity
Balance, January 1, 1997 100 $ - $ 5,366 $ 3,328 $ 8,694
Net income - - - 1,461 1,461
------ -------- -------- -------- --------
Balance, December 31, 1997 100 - 5,366 4,789 10,155
Net income - - - 1,783 1,783
------ -------- -------- -------- --------
Balance, December 31, 1998 100 - 5,366 6,572 11,938
Net income - - - 1,123 1,123
------ -------- -------- -------- --------
Balance, December 31, 1999 100 $ - $ 5,366 $ 7,695 $ 13,061
===== ===== ===== ===== =====
The accompanying notes are an integral part of the financial statements.
SALTON SEA FUNDING CORPORATION
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
For the Years Ended December 31,
1999 1998 1997
Cash flows from operating activities:
Net income $ 1,123 $ 1,783 $ 1,461
Adjustments to reconcile net income to net
cash flows from operating activities:
Equity in earnings of guarantors (723) (980) (851)
Changes in assets and liabilities:
Prepaid expenses and other assets 3,151 (3,945) 629
Accrued liabilities (364) 1,189 (509)
-------- --------- --------
Net cash flows from operating activities 3,187 (1,953) 730
-------- --------- --------
Cash flows from investing activities:
Decrease in restricted cash --- --- 14,044
Secured project notes from Guarantors --- (285,000) ---
Principal repayments of secured project
notes from Guarantors 57,836 106,938 90,228
-------- --------- --------
Net cash flows from investing activities 57,836 (178,062) 104,272
-------- --------- --------
Cash flows from financing activities:
Proceeds from offering of senior secured
notes and bonds --- 285,000 ---
Repayment of senior secured
notes and bonds (57,836) (106,938) (90,228)
Due to affiliates (18,730) 4,014 (12,424)
-------- --------- --------
Net cash flows from financing activities (76,566) 182,076 (102,652)
-------- --------- --------
Net change in cash (15,543) 2,061 2,350
Cash at the beginning of period 17,629 15,568 13,218
-------- --------- --------
Cash at the end of period $ 2,086 $ 17,629 $ 15,568
======== ======= =======
Supplemental disclosure
Interest paid $ 46,210 $ 34,326 $ 37,974
======== ======= =======
Income taxes paid $ 781 $ 1,247 $ 1,022
======== ======= =======
The accompanying notes are an integral part of the financial statements.
SALTON SEA FUNDING CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. THE PURPOSE AND BUSINESS OF SALTON SEA FUNDING CORPORATION
Salton Sea Funding Corporation (the "Funding Corporation"), which was
formed on June 20, 1995, is a special purpose Delaware corporation and was
organized for the sole purpose of acting as issuer of senior secured notes and
bonds. On July 21, 1995, June 20, 1996 and October 31, 1998, the Funding
Corporation issued $475.0 million and $135.0 million and $285.0 million,
respectively, of Senior Secured Notes and Bonds (collectively, the
"Securities").
The Funding Corporation is a wholly-owned subsidiary of Magma Power Company,
which in turn was wholly-owned by MidAmerican Energy Holdings Company
("MidAmerican"). On February 8, 1999, MidAmerican created a new subsidiary, CE
Generation and subsequently transferred its interest in the Company and its
power generation assets in the Imperial Valley to CE Generation, with certain
assets being retained by MidAmerican. On March 3, 1999, MidAmerican closed the
sale of 50% of its ownership interests in CE Generation to El Paso Holding
Company, an affiliate of El Paso Energy Corporation.
The Securities are payable from the proceeds of payments made of principal
and interest on the Secured Project Notes from the Guarantors to the Funding
Corporation. The Securities are also guaranteed on a joint and several basis by
the Salton Sea Guarantors, the Partnership Guarantors and Salton Sea Royalty LLC
(collectively the "Guarantors"). The guarantees of the Partnership Guarantors
and Salton Sea Royalty LLC are limited to available cash flow. The Funding
Corporation does not conduct any operations apart from issuing the Securities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT IN GUARANTORS
Since the Funding Corporation has the ability to assert significant
influence over the operations of the Guarantors, it accounts for its one percent
investment in the Guarantors using the equity method of accounting.
INCOME TAXES
The Funding Corporation is included in the consolidated income tax returns
with its parent and affiliates. Income taxes are provided on a separate return
basis; however, tax obligations of the Funding Corporation will be remitted to
the parent only to the extent of cash flows available after operating expenses
and debt service.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values have been estimated based on quoted market prices for debt
issues listed on exchanges. Fair values of financial instruments that are not
actively traded are based on market prices of similar instruments and/or
valuation techniques using market assumptions. Unless otherwise noted, the
estimated fair value amounts do not differ significantly from recorded values.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.
Actual results could differ from those estimates.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which established accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. The Company has not yet determined the impact of this
accounting pronouncement.
3. SENIOR SECURED NOTES AND BONDS
The Funding Corporation's debt securities (the "Notes and Bonds") are as follows
(in thousands):
SENIOR FINAL MATURITY DECEMBER 31, DECEMBER 31,
SECURED SERIES DATE RATE 1999 1998
July 21, 1995 A Notes May 30, 2000 6.69% $18,532 $48,436
July 21, 1995 B Bonds May 30, 2005 7.37% 101,776 106,980
July 21, 1995 C Bonds May 30, 2010 7.84% 109,250 109,250
June 20, 1996 D Notes May 30, 2000 7.02% 1,500 12,150
JUNE 20, 1996 E BONDS MAY 30, 2011 8.30% 52,922 65,000
OCTOBER 13, 1998 F BONDS NOVEMBER 30, 2018 7.475% 285,000 285,000
--------- --------
$568,980 $626,816
Principal and interest payments are made in semi-annual installments.
Principal maturities of the Senior Secured Notes and Bonds are as follows (in
thousands):
2000 $ 25,072
2001 23,658
2002 28,572
2003 28,086
2004 30,588
Thereafter 433,004
-----------
$568,980
=======
On October 13, 1998, the Funding Corporation completed a sale to
institutional investors of $285.0 million aggregate amount of 7.475% Senior
Secured Series F Bonds due November 30, 2018. The proceeds from the offering
will be used to fund construction of two new geothermal power projects, a
related zinc recovery project, certain upgrades for brine processing facilities
and other capital improvements and financing costs.
Pursuant to a depository agreement, Funding Corporation established a debt
service reserve fund in the form of a letter of credit in the amount of $42.5
million from which scheduled interest and principal payments can be made.
The estimated fair values of the Senior Secured Notes and Bonds at
December 31, 1999 and 1998 were $540.7 million and $646.4 million, respectively.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholder
Magma Power Company
Omaha, Nebraska
We have audited the accompanying combined balance sheets of the Salton Sea
Guarantors as of December 31, 1999 and 1998, and the related combined statements
of operations, Guarantors' equity and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are the
responsibility of the Salton Sea Guarantors' management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of the Salton Sea Guarantors as of
December 31, 1999 and 1998 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
January 25, 2000
SALTON SEA GUARANTORS
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
December 31,
1999 1998
Accounts receivable $ 11,537 $ 15,957
Prepaid expenses and other assets 11,695 12,410
------ ------
Total current assets 23,232 28,367
Restricted cash 10,001 71,673
Property, plant, contracts and equipment, net 552,903 480,293
Excess of cost over fair value of net assets acquired, net 46,878 48,182
---------- ----------
$633,014 $628,515
======= =======
LIABILITIES AND GUARANTORS' EQUITY
Liabilities:
Accounts payable $ 33 $ 504
Accrued liabilities 7,862 7,166
Current portion of long term debt 9,737 16,076
----- ------
Total current liabilities 17,632 23,746
Due to affiliates 27,993 30,688
Senior secured project note 284,217 293,954
---------- ----------
Total liabilities 329,842 348,388
Commitments and contingencies (Notes 5 and 6)
Total Guarantors' equity 303,172 280,127
---------- ----------
$633,014 $628,515
======= =======
The accompanying notes are an integral part of the combined financial statements
SALTON SEA GUARANTORS
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
Year Ended December
31,
1999 1998 1997
Revenues:
Sales of electricity $ 81,850 $106,274 $106,252
Interest and other income 1,868 817 173
---------- ---------- ----------
Total Revenues 83,718 107,091 106,425
---------- ---------- ----------
Expenses:
Operating, general and
administrative expenses 28,772 30,306 30,865
Depreciation and amortization 16,891 14,857 14,689
Interest expense 24,251 21,730 23,004
Less capitalized interest (9,241) (5,741) (4,949)
---------- ----------- ----------
Total expenses 60,673 61,152 63,609
---------- ----------- ----------
Net income $23,045 $45,939 $42,816
========== ========== ==========
The accompanying notes are an integral part of the combined financial statements
SALTON SEA GUARANTORS
COMBINED STATEMENTS OF GUARANTORS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
Balance, January 1, 1997 $ 191,372
Net income 42,816
------------
Balance, December 31, 1997 234,188
Net income 45,939
------------
Balance, December 31, 1998 280,127
Net income 23,045
------------
Balance, December 31, 1999 $ 303,172
============
The accompanying notes are an integral part of the combined financial statements
SALTON SEA GUARANTORS
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Years Ended December 31,
1999 1998 1997
Cash flows from operating activities:
Net income $ 23,045 $ 45,939 $ 42,816
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 16,891 14,857 14,689
Changes in assets and liabilities:
Accounts receivable 4,420 (134) (869)
Prepaid expenses and other assets 715 633 2,965
Accounts payable and accrued liabilities 225 (546) (2,415)
--------- --------- ---------
Net cash flows from operating activities 45,296 60,749 57,186
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures (88,197) (15,845) (7,204)
Decrease (Increase) in restricted cash 61,672 (71,673) ---
--------- --------- ---------
Net cash flows from investing activities (26,525) (87,518) (7,204)
--------- --------- ---------
Cash flows from financing activities:
Repayments of senior secured project note (16,076) (39,450) (33,632)
Proceeds from offering of senior secured
project note --- 83,272 ---
Due to affiliates (2,695) (17,053) (16,350)
---------- --------- ---------
Net cash flows from financing activities (18,771) 26,769 (49,982)
---------- --------- --------
Net change in cash --- --- ---
Cash at beginning of period --- --- ---
---------- -------- --------
Cash at end of period $ $ --- $ ---
======= ======== =======
Supplemental disclosure:
Cash paid for interest $ 24,394 $ 21,434 $ 21,591
======= ======== =======
The accompanying notes are an integral part of the combined financial
statements.
SALTON SEA GUARANTORS
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND OPERATIONS
Salton Sea Guarantors (the "Guarantors") (not a legal entity) own 100%
interests in four operating geothermal electric power generating plants (Salton
Sea I, II, III and IV) and a fifth plant (Salton Sea V or the Salton Sea
Expansion) which is currently under construction (collectively, the "Salton Sea
Projects"). All five plants are located in the Imperial Valley of California.
The Salton Sea Guarantors guarantee loans from Salton Sea Funding Corporation
("Funding Corporation"), an indirect wholly-owned subsidiary of Magma Power
Company ("Magma") which in turn was wholly-owned by MidAmerican Energy Holdings
Company ("MidAmerican").
On February 8, 1999, MidAmerican created a new subsidiary, CE Generation
LLC ("CE Generation") and subsequently transferred its interest in the Company
and its power generation assets in the Imperial Valley to CE Generation, with
certain assets being retained by MidAmerican. On March 3, 1999, MidAmerican
closed the sale of 50% of its ownership interests in CE Generation to El Paso
Holding Company, an affiliate of El Paso Energy Corporation.
The financial statements consist of the combination of (1) Salton Sea Brine
Processing, L.P., a California limited partnership between Magma as a 99%
limited partner and Salton Sea Power Company ("SSPC"), a wholly-owned subsidiary
of Magma, as a 1% general partner, (2) Salton Sea Power Generation, L.P., a
California limited partnership between Salton Sea Brine Processing, L.P., as a
99% limited partner, and Salton Sea Power Company, as a 1% general partner, (3)
assets and liabilities attributable to Salton Sea IV which are held 99% by
Salton Sea Power Generation, L.P. and 1% by Fish Lake Power LLC ("FLPC") and (4)
Salton Sea Power L.L.C., a Delaware limited liability company. Effective in June
of 1995, 1% interests in SSPC and FLPC were transferred to Funding Corporation.
All of the entities in the combination are affiliates of Magma and indirect
subsidiaries of CE Generation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements present the combined accounts of the
Salton Sea Projects described above. All significant intercompany transactions
and accounts have been eliminated.
The financial statements reflect the acquisition of Magma and the resulting
push down to the Guarantors of the accounting as a purchase business
combination.
REVENUE RECOGNITION
The Guarantors recognize revenues and related accounts receivable with
respect to their four operating facilities from sales of electricity to Southern
California Edison Company ("Edison") on an accrual basis. Edison is the sole
customer of the Guarantors. The Guarantors earn energy payments based on
kilowatt hours ("kWhs") of energy provided to Edison. During the first 10 years
for Salton Sea II and III, the Guarantors earn payments for energy as scheduled
in their SO4 Agreements. After the 10-year scheduled payment period has expired
(in 1999 for Salton Sea III and 2000 for Salton Sea II), the energy payment per
kWh throughout the remainder of the contract period will be at Edison's Avoided
Cost of Energy.
Salton Sea I sells electricity to Edison pursuant to a 30-year negotiated
power purchase agreement, as amended (the "Salton Sea I PPA"), which provides
for capacity and energy payments. The energy payment is calculated using a Base
Price which is subject to quarterly adjustments based on a basket of indices.
The time period weighted average energy payment for Salton Sea I was 5.3 cents
per kWh during 1999. As the Salton Sea I PPA is not an SO4 Agreement, the energy
payments do not revert to Edison's Avoided Cost of Energy. The capacity payment
is approximately $1.1 million per annum.
Salton Sea II and Salton Sea III sell electricity to Edison pursuant to
30-year modified SO4 Agreements that provide for capacity payments, capacity
bonus payments and energy payments. The price for contract capacity and contract
capacity bonus payments is fixed for the life of the modified SO4 Agreements.
The energy payments for the first ten year period, which period expire in April
2000 for Salton Sea II and expired in February 1999 for Salton Sea III are
levelized at a time period weighted average of 10.6 cents per kWh and 9.8 cents
per kWh for Salton Sea II and Salton Sea III, respectively. Thereafter, the
monthly energy payments will be Edison's Avoided Cost of Energy. For Salton Sea
II only, Edison is entitled to receive, at no cost, 5% of all energy delivered
in excess of 80% of contract capacity through September 30, 2004. The annual
capacity and bonus payments for Salton Sea II and Salton Sea III are
approximately $3.3 million and $9.7 million, respectively.
Salton Sea IV sells electricity to Edison pursuant to a modified SO4
agreement which provides for contract capacity payments on 34 MW of capacity at
two different rates based on the respective contract capacities deemed
attributable to the original Salton Sea PPA option (20 MW) and to the original
Fish Lake PPA (14 MW). The capacity payment price for the 20 MW portion adjusts
quarterly based upon specified indices and the capacity payment price for the 14
MW portion is a fixed levelized rate. The energy payment (for deliveries up to a
rate of 39.6 MW) is at a fixed price for 55.6% of the total energy delivered by
Salton Sea IV and is based on an energy payment schedule for 44.4% of the total
energy delivered by Salton Sea IV. The contract has a 30-year term but Edison is
not required to purchase the 20 MW of capacity and energy originally
attributable to the Salton Sea I PPA option after September 30, 2017, the
original termination date of the Salton Sea I PPA.
For the year ended December 31, 1999 and 1998, Edison's average Avoided Cost
of Energy was 3.1 cents and 3.0 cents per kWh, respectively, which is
substantially below the contract energy prices earned in 1999. Estimates of
Edison's future Avoided Cost of Energy vary substantially from year to year. The
Guarantors cannot predict the likely level of Avoided Cost of Energy prices
under the SO4 Agreements at the expiration of the scheduled payment periods. The
revenues generated by each of the units operating under SO4 Agreements will
likely decline significantly after the expiration of the relevant scheduled
payment periods.
If Edison was unable to perform, the Guarantors could incur an accounting
loss equal to the entire accounts receivable balance.
RESTRICTED CASH
The restricted cash balance primarily included commercial paper, money market
securities and mortgage backed securities and was composed of amounts deposited
in restricted accounts which the Guarantors will use to fund capital
expenditures.
PROPERTY, PLANT, CONTRACTS AND EQUIPMENT
Property, plant, contracts and equipment are carried at cost less accumulated
depreciation. The Guarantors provide depreciation and amortization of property,
plants, contracts and equipment upon the commencement of revenue production over
the estimated useful life of the assets.
Depreciation of the operating power plant costs, net of salvage value, is
computed on the straight line method over the estimated useful lives, between 10
and 30 years. Depreciation of furniture, fixtures and equipment is computed on
the straight line method over the estimated useful lives of the related assets,
which range from three to ten years.
Power sale agreements have been assigned values separately for each of (1)
the remaining portion of the fixed price periods of the power sales agreements
and (2) the 20 year avoided cost periods of the power sales agreements and are
being amortized separately over such periods using the straight line method.
The Salton Sea reservoir contains commercial quantities of extractable
minerals. The carrying value of the mineral reserves will be amortized upon
commencement of commercial production.
EXCESS OF COST OVER FAIR VALUE
Total acquisition costs in excess of the fair values assigned to the net
assets acquired are amortized over a 40 year period using the straight line
method. At December 31, 1999 and 1998, accumulated amortization of the excess of
cost over fair value was $6.4 million and $5.1 million, respectively.
CAPITALIZATION OF INTEREST AND DEFERRED FINANCING COSTS
Prior to the commencement of operations, interest is capitalized on the
costs of the plants and geothermal resource development to the extent incurred.
Capitalized interest and other deferred charges are amortized over the lives of
the related assets.
Deferred financing costs are amortized over the term of the related
financing using the effective interest method.
INCOME TAXES
The Guarantors are comprised substantially of partnership interests. The
income or loss of each partnership for income tax purposes, along with any
associated tax credits, is the responsibility of the individual partners.
Accordingly, no recognition has been given to federal or state income taxes in
the accompanying combined financial statements.
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, the Guarantors consider only
demand deposits at banks to be cash.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of financial instruments that are not actively traded are based
on market prices of similar instruments and/or valuation techniques using market
assumptions. Unless otherwise noted, the estimated fair value amounts do not
differ significantly from recorded values.
IMPAIRMENT OF LONG-LIVED ASSETS
The Guarantors review long-lived assets and certain identifiable intangibles
for impairments whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An impairment loss would be
recognized, based on discounted cash flows or various models, whenever evidence
exists that the carrying value is not recoverable.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.
Actual results could differ from those estimates.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which established accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. The Guarantors have not yet determined the impact of this
accounting pronouncement.
3. PROPERTY, PLANT, CONTRACTS AND EQUIPMENT
Property, plant, contracts and equipment consisted of the following:
December 31,
1999 1998
------------- -------------
Plant and equipment $333,109 $331,230
Power sale agreements 64,609 64,609
Mineral reserves 86,762 77,521
Wells and resource development 43,584 43,549
-------- ------------
528,064 516,909
Less accumulated depreciation
and amortization (60,786) (45,874)
-------- ------------
467,278 471,035
Construction in progress:
Salton Sea V 85,625 9,258
-------- ------------
$552,903 $480,293
======= =======
4. SENIOR SECURED PROJECT NOTE
The Guarantors have a project note payable to Salton Sea Funding
Corporation with interest rates ranging from 6.69% to 7.84%. They have also
guaranteed, along with other guarantors, the debt of Salton Sea Funding
Corporation, which amounted to $569.0 million at December 31, 1999. The
guarantee issued is collateralized by a lien on substantially all the assets of
and a pledge of the equity interests in the Guarantors. The structure has been
designed to cross collateralize cash flows from each guarantor without cross
collateralizing all of the guarantors' assets.
On October 13, 1998, the Salton Sea Funding Corporation issued an additional
investment grade offering for $285.0 million. In connection with this offering
the Guarantors issued an additional project note in the amount of $83.3 million
with an interest rate of 7.475% with a final maturity of November 30, 2018.
Principal maturities of the senior secured project note are as follows (in
thousands):
2000 $ 9,737
2001 17,319
2002 20,487
2003 22,765
2004 24,409
Thereafter 199,237
------------
$293,954
=======
The estimated fair values of the senior secured projects notes at December
31, 1999 and 1998 were $282.4 million and $323.1 million, respectively.
5. RELATED PARTY TRANSACTIONS
The Guarantors have entered into the following agreements:
o Amended and Restated Easement Grant Deed and Agreement Regarding Rights for
Geothermal Development dated February 23, 1994, as amended, whereby the
Guarantors acquired from Magma Land I, a wholly-owned subsidiary of Magma,
rights to extract geothermal brine from the geothermal lease rights
property which is necessary to operate the Salton Sea Power Generation,
L.P. facilities in return for 5% of all electricity revenues received by
the Guarantors. The amount expensed for the years ended December 31, 1999,
1998 and 1997 was $3.7 million, $4.9 million and $4.9 million,
respectively.
o Administrative Services Agreement dated April 1, 1993 with Magma, whereby
Magma will provide to the Guarantors, excluding Salton Sea IV,
administrative and management services. Fees payable to Magma amount to 3%
of total electricity revenues. The amount expensed for the years ended
December 31, 1999, 1998 and 1997 was $1.5 million, $2.3 million and $2.3
million, respectively.
o Operating and Maintenance Agreement dated April 1, 1993 with CalEnergy
Operating Corporation ("CEOC"), whereby the Guarantors retain CEOC to
operate the Salton Sea facilities for a period of 32 years. Payment is made
to CEOC in the form of reimbursements of expenses incurred. During 1999,
1998 and 1997, the Guarantors reimbursed CEOC for expenses of $6.7 million,
$6.3 million and $7.5 million, respectively.
6. COMMITMENTS AND CONTINGENCIES
Salton Sea Power LLC, a Salton Sea Guarantor, is constructing Salton Sea V.
Salton Sea V will be a 49 net MW geothermal power plant which will sell
approximately one-third of its net output to the Zinc Recovery Project. The
remainder will be sold through the California Power Exchange ("PX") or in other
market transactions.
Salton Sea V is being constructed pursuant to a date certain, fixed price,
turn-key engineering, procurement and construction contract (the "Salton Sea V
EPC Contract") by Stone & Webster Engineering Corporation ("SWEC"). Salton Sea V
is scheduled to commence commercial operation in mid-2000. Total project costs
of Salton Sea V are expected to be approximately $119.1 million. Salton Sea
Power LLC has incurred approximately $85.6 million of such costs through
December 31, 1999.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholder
Magma Power Company
Omaha, Nebraska
We have audited the accompanying combined balance sheets of the Partnership
Guarantors as of December 31, 1999 and 1998, and the related combined statements
of operations, Guarantors' equity and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are the
responsibility of the Partnership Guarantors' management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of the Partnership Guarantors as of
December 31, 1999 and 1998 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
January 25, 2000
PARTNERSHIP GUARANTORS
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
December 31,
1999 1998
ASSETS
Accounts receivable $ 16,295 $ 33,404
Prepaid expenses and other assets 18,959 23,088
-------- --------
Total current assets 35,254 56,492
-------- --------
Restricted cash 60,454 164,983
Property, plant, contracts and equipment, net 531,427 399,817
Management fee, net 71,489 71,596
Due from affiliates 75,274 83,373
Excess of fair value over net assets acquired, net 127,994 131,558
---------- -----------
$901,892 $907,819
======= =======
LIABILITIES AND GUARANTORS' EQUITY
Liabilities:
Accounts payable $ 3,925 $ 1,879
Accrued liabilities 13,534 15,890
CURRENT PORTION OF LONG TERM DEBT 10,562 32,364
------ ------
Total current liabilities 28,021 50,133
Senior secured project note 250,650 261,212
Deferred income taxes 98,907 97,641
----------- ----------
Total liabilities 377,578 408,986
Commitments and contingencies (Notes 4, 5 and 8)
Guarantors' equity:
Common stock 3 3
Additional paid-in capital 387,663 387,663
Retained earnings 136,648 111,167
----------- ----------
Total Guarantors' equity 524,314 498,833
---------- -----------
$901,892 $907,819
======= =======
The accompanying notes are an integral part of the combined financial statements
PARTNERSHIP GUARANTORS
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
Years Ended December 31,
1999 1998 1997
Revenues:
Sales of electricity $105,921 $165,779 $158,125
Interest and other income 9,067 6,786 4,190
--------- -------- --------
Total revenues 114,988 172,565 162,315
Costs and expenses:
Operating, general and administrative costs 47,967 63,717 64,103
Depreciation and amortization 22,566 48,615 38,771
Interest expense 22,200 13,836 13,753
Less capitalized interest (15,773) (10,266) (9,323)
----------- -------- -----------
Total expenses 76,960 115,902 107,304
--------- -------- --------
Income before income taxes 38,028 56,663 55,011
Provision for income taxes 12,547 19,529 21,374
--------- -------- --------
Net income $ 25,481 $ 37,134 $ 33,637
======= ====== ======
The accompanying notes are an integral part of the combined financial statements
PARTNERSHIP GUARANTORS
COMBINED STATEMENTS OF GUARANTORS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
Additional
Common Stock Paid-in Retained Total
Shares Amount Capital Earnings Equity
-------- --------- --------- ---------- -----------
Balance, January 1, 1997 3 $ 3 $387,663 $ 40,396 $428,062
Net income - - - 33,637 33,637
----- -------- -------- -------- ---------
Balance, December 31, 1997 3 3 387,663 74,033 461,699
Net income - - - 37,134 37,134
----- -------- -------- -------- ---------
Balance, December 31, 1998 3 3 387,663 111,167 498,833
Net income - - - 25,481 25,481
----- -------- -------- -------- ---------
Balance, December 31, 1999 3 $ 3 $387,663 $136,648 $524,314
===== ====== ======= ====== =======
The accompanying notes are an integral part of the combined financial statements
PARTNERSHIP GUARANTORS
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Years Ended December 31,
1999 1998 1997
Cash flows from operating activities:
Net income $25,481 $37,134 $ 33,637
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 22,566 48,615 38,771
Deferred income taxes 1,266 (9,210) (1,426)
Changes in assets and liabilities:
Accounts receivable 17,109 (9,923) (715)
Prepaid expenses and other assets 4,129 (9,967) 5,962
Accounts payable and accrued liabilities (310) 30,903 983
---------- --------- ----------
Net cash flows from operating activities 70,241 87,552 77,212
---------- --------- ----------
Cash flows from investing activities:
Capital expenditures (147,801) (74,202) (39,556)
Decrease (increase) in restricted cash 104,529 (164,983) -
Management fee (2,704) (1,514) (4,029)
---------- --------- ----------
Net cash flows from investing activities (45,976) (240,699) (43,585)
---------- --------- ----------
Cash flows from financing activities:
Repayments of senior secured project notes (32,364) (51,762) (38,594)
Proceeds of offering from senior secured
project notes --- 201,728 ---
Decrease in amounts due from affiliates 8,099 3,181 4,967
---------- --------- -------
Net cash flows from financing activities (24,265) 153,147 (33,627)
--------- --------- -------
Net change in cash --- --- ---
Cash at beginning of period --- --- ---
--------- --------- -------
Cash at the end of period $ --- $ --- $ ---
======== ========= =======
Supplemental disclosure:
Cash paid for interest $ 21,715 $ 13,361 $ 13,165
======== ======== =======
Income taxes paid $ 11,281 $ 28,739 $ 22,800
======== ======== =======
The accompanying notes are an integral part of these combined
financial statements.
PARTNERSHIP GUARANTORS
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND OPERATIONS
Partnership Guarantors (the "Guarantors") (not a legal entity) consists of the
combination of Vulcan Power Company ("VPC"), CalEnergy Operating Corporation
("CEOC"), both 99% owned by Magma Power Company ("Magma") and 1% owned by Salton
Sea Funding Corporation (the "Funding Corporation"); CE Turbo LLC, indirectly
wholly-owned by Magma; and CalEnergy Minerals LLC, a Delaware limited liability
company ("Minerals LLC"), formerly indirectly owned by Magma and currently owned
indirectly by MidAmerican Energy Holdings Company ("MidAmerican"). VPC's and
CEOC's principal assets are interests in certain partnerships which are engaged
in the operation of geothermal power plants in the Imperial Valley of
California. The Guarantors have guaranteed the loans to such partnerships from
Funding Corporation, an indirect wholly-owned subsidiary of Magma, which in turn
was wholly-owned by MidAmerican.
On February 8, 1999, MidAmerican created a new subsidiary, CE Generation LLC
("CE Generation") and subsequently transferred its interest in the Company and
its power generation assets in the Imperial Valley to CE Generation, with
Minerals, LLC and other assets being retained by MidAmerican. On March 3, 1999,
MidAmerican closed the sale of 50% of its ownership interests in CE Generation
to El Paso Holding Company, an affiliate of El Paso Energy Corporation.
VPC and its subsidiary hold a 100% interest in Vulcan/BN Geothermal Power
Company, a Nevada general partnership, and CEOC and its subsidiaries hold a 90%
general partner interest in Leathers, L.P., a California limited partnership,
Del Ranch, L.P., a California limited partnership and Elmore, L.P. a California
limited partnership (collectively, the "Partnerships"). Magma owns a 10% limited
partnership interest in each of Leathers L.P., Elmore L.P. and Del Ranch L.P.
and has entered into an agreement to pay to the Guarantors the distributions it
receives related to such 10% interests, in addition to a special distribution
equal to 4.5% of total energy sales from the Leathers Project.
Turbo LLC is constructing the CE Turbo Project. The CE Turbo Project will
have a capacity of 10 net MW. The net output of the CE Turbo Project will be
sold to the Zinc Recovery Project or sold through the California Power Exchange.
Minerals LLC is constructing the Zinc Recovery Project which will recover
zinc from the geothermal brine (the "Zinc Recovery Project"). Facilities will be
installed near Imperial Valley Project sites to extract a zinc chloride solution
from the geothermal brine through an ion exchange process. This solution will be
transported to a central processing plant where zinc ingots will be produced
through solvent extraction, electrowinning and casting processes. The Zinc
Recovery Project is designed to have a capacity of approximately 30,000 metric
tonnes per year and is scheduled to commence commercial operation in mid-2000.
In September 1999, Minerals LLC entered into a sales agreement whereby all zinc
produced by the Zinc Recovery Project will be sold to Cominco, Ltd. The initial
term of the agreement expires in December 2005.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements of the Guarantors present the
accounts of CEOC, VPC, CE Turbo LLC and Minerals LLC and their proportionate
share of the Partnerships in which they have an undivided interest in the assets
and are proportionately liable for their share of the liabilities. All
significant intercompany balances and transactions have been eliminated.
The financial statements reflect the acquisition of Magma and the resulting
push down to the Guarantors of the accounting as a purchase business
combination.
REVENUE RECOGNITION
The Guarantors recognize revenues and related accounts receivable from
sales of electricity on an accrual basis using stated contract prices. All of
the Guarantors sales of electricity are to Southern California Edison Company
("Edison") and are under long-term power purchase contracts.
The Partnership Projects sell all electricity generated by the respective
plants pursuant to four long-term power purchase agreements ("SO4 Agreements")
between the projects and Edison. These SO4 Agreements provide for capacity
payments, capacity bonus payments and energy payments. Edison makes fixed annual
capacity payments to the projects, and to the extent that capacity factors
exceed certain benchmarks is required to make capacity bonus payments. The price
for capacity and capacity bonus payments is fixed for the life of the SO4
Agreements. Energy is sold at increasing fixed rates for the first ten years of
each contract and thereafter at Edison's Avoided Cost of Energy.
The fixed energy price periods of the Partnership Project SO4 Agreements
extended until February 1996 for Vulcan, December 1998 for Hoch (Del Ranch) and
Elmore, and December 1999 for the Leathers Partnership. For 1999, Vulcan, Hoch
and Elmore are receiving Edison's Avoided Cost of Energy pursuant to their
respective SO4 Agreements. The weighted average energy rate for the Partnership
Project was 6.49 cents per kWh in 1999.
For the year ended December 31, 1999 and 1998, Edison's average Avoided Cost
of Energy was 3.1 cents and 3.0 cents per kWh, respectively, which is
substantially below the contract energy prices earned in 1999. Estimates of
Edison's future Avoided Cost of Energy vary substantially from year to year. The
Guarantors cannot predict the likely level of Avoided Cost of Energy prices
under the SO4 Agreements at the expiration of the scheduled payment periods. The
revenues generated by each of the projects operating under SO4 Agreements will
likely decline significantly after the expiration of the relevant scheduled
payment periods.
If Edison was unable to perform, the Guarantors could incur an accounting
loss equal to the entire accounts receivable balance.
RESTRICTED CASH
The restricted cash balance primarily included commercial paper, money market
securities and mortgage backed securities and was composed of amounts deposited
in restricted accounts which the Guarantors will use to fund capital
expenditures.
PROPERTY, PLANT, CONTRACTS AND EQUIPMENT
Property, plant, contracts and equipment are carried at cost less
accumulated depreciation. The Guarantors provide depreciation and amortization
of property, plants, contracts and equipment upon the commencement of revenue
production over the estimated useful life of the assets.
Depreciation of the operating power plant costs, net of salvage value, is
computed on the straight line method over the estimated useful lives, between 10
and 30 years. Depreciation of furniture, fixtures and equipment is computed on
the straight line method over the estimated useful lives of the related assets,
which range from three to ten years.
Power sale agreements have been assigned values separately for each of (1)
the remaining portion of the fixed price periods of the power sales agreements
and (2) the 20 year avoided cost periods of the power sales agreements and are
amortized separately over such periods using the straight line method.
The Salton Sea reservoir contains commercial quantities of extractable
minerals. The carrying value of the mineral reserves will be amortized upon
commencement of commercial production.
The process license represents the economic benefits expected to be realized
from the installation of the license and related technology at the Imperial
Valley. The carrying value of the process license is amortized using the
straight line method over the remaining estimated useful life of the license.
EXCESS OF COST OVER FAIR VALUE
Total acquisition costs in excess of the fair values assigned to the net
assets acquired are amortized over a 40 year period using the straight line
method. At December 31, 1999 and 1998 accumulated amortization of the excess of
cost over fair value of net assets acquired was $17.5 million and $13.9 million,
respectively.
CAPITALIZATION OF INTEREST AND DEFERRED FINANCING COSTS
Prior to the commencement of operations, interest is capitalized on the
costs of the plants and geothermal resource development to the extent incurred.
Capitalized interest and other deferred charges are amortized over the lives of
the related assets.
Deferred financing costs are amortized over the term of the related
financing using the effective interest method.
INCOME TAXES
The entities comprising the Guarantors are included in consolidated income
tax returns with their parent and affiliates; however, income taxes are provided
on a separate return basis. Tax obligations of the Guarantors will be remitted
to the parent only to the extent of cash flows available after operating
expenses and debt service.
MANAGEMENT FEE
Pursuant to the Magma Services Agreement, Magma has agreed to pay CEOC all
equity cash flows and certain royalties payable by the Guarantors in exchange
for providing data and services to Magma. As security for the obligations of
Magma under the Magma Services Agreement, Magma has collaterally assigned to
CEOC its rights to such equity cash flows and certain royalties.
STATEMENTS OF CASH FLOWS
For purposes of the statement of cash flows, the Guarantors consider only
demand deposits at banks to be cash.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of financial instruments that are not actively traded are based
on market prices of similar instruments and/or valuation techniques using market
assumptions. Unless otherwise noted, the estimated fair value amounts do not
differ significantly from recorded values.
IMPAIRMENT OF LONG-LIVED ASSETS
The Guarantors review long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An impairment loss would be
recognized, based on discounted cash flows or various models, whenever evidence
exists that the carrying value is not recoverable.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.
Actual results could differ from those estimates.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which established accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. The Guarantors has not yet determined the impact of this
accounting pronouncement.
3. PROPERTY, PLANT, CONTRACTS AND EQUIPMENT
Property, plant, contracts and equipment consisted of the following (in
thousands):
December 31,
1999 1998
Plant and equipment $ 116,316 $ 92,920
Power sale agreements 123,588 123,588
Process license 46,290 46,290
Mineral reserves 156,563 140,790
Wells and resource development 95,329 91,990
--------- -----------
538,086 495,578
Less accumulated depreciation
and amortization (140,224) (121,980)
--------- -----------
397,862 373,598
Construction in progress:
Zinc recovery project 92,794 23,507
TURBO AND REGION 2 BRINE FACILITIES UPGRADE 40,771 2,712
--------- -----------
$531,427 $399,817
======= =======
4. SENIOR SECURED PROJECT NOTE
The Guarantors have a project note payable to Salton Sea Funding
Corporation with interest rates ranging from 6.69% to 8.30%. They have also
guaranteed, along with other guarantors, the debt of Salton Sea Funding
Corporation, which amounted to $569.0 million at December 31, 1999. The
guarantee is collateralized by a lien on the available cash flow of and a pledge
of stock in the Guarantors. The structure has been designed to cross
collateralize cash flows from each guarantor without cross collateralizing all
of the guarantors' assets.
On October 13, 1998 the Salton Sea Funding Corporation issued an additional
investment grade offering for $285.0 million. In connection with this offering,
the Guarantors issued an additional project note in the amount of $201.7 million
with an interest rate of 7.475% with a final maturity on November 30, 2018.
Principal maturities of the senior secured project note are as follows (in
thousands):
2000 $ 10,562
2001 1,907
2002 4,625
2003 5,017
2004 5,771
Thereafter 233,330
--------
$261,212
=======
The estimated fair values of the senior secured project note at December
31, 1999 and 1998 were $244.7 million and $299.7 million, respectively.
5. RELATED PARTY TRANSACTIONS
The Guarantors are party to a 30-year brine supply agreement through the
Vulcan/BN Geothermal Power Company partnership and a technology license
agreement for the rights to use the technology necessary for the construction
and operation of the Vulcan Plant. Under the brine supply agreement, the
Guarantors will pay VPC 4.167% of the contract energy component of the price of
electricity provided by the Vulcan Plant. In addition, VPC has been designated
as operator of the Vulcan Plant and receives agreed-upon compensation for such
services.
Charges to the Guarantors related to the brine supply agreement and
operator's fees on a pro rata basis amounted to $423,000 and $472,000,
respectively, for the year ended December 31, 1999, $363,000 and $416,000,
respectively, for the year ended December 31, 1998, $403,000 and $456,000,
respectively, for the year ended December 31, 1997, respectively.
In addition, the Guarantors entered into the following agreements:
o Easement Grant Deed and Agreement Regarding Rights for Geothermal
Development, whereby the Guarantors acquired from Magma rights to extract
geothermal brine from the geothermal lease rights property which is
necessary to operate the Leathers, Del Ranch and Elmore Plants in return for
17.333%, on a pro rata basis, of all energy revenues received by each plant.
The Guarantors' share of amounts expensed under this agreement for 1999,
1998 and 1997 were $11.9 million, $22.6 million and $21.1 million,
respectively.
o Ground Leases dated March 15 and August 15, 1988 with Magma whereby the
Guarantors lease from Magma for 32 years the surface of the land as
described in the Imperial County Assessor's official records. Amounts
expensed under the ground leases for 1999, 1998 and 1997 were $70,000 per
year.
o Administrative Services Agreements whereby CEOC will provide to the
Partnerships administrative and management services for a period of 32 years
through 2020. Fees payable to CEOC amount to the greater of 3% of total
electricity revenues or $60,000 per month. The minimum monthly payments for
years subsequent to 1989 are increased based on the consumer price index of
the Bureau of Labor and Statistics. Amounts expensed related to these
agreements for 1999, 1998 and 1997 amounted to $2.7 million, $4.5 million
and $4.3 million, respectively.
o Operating and Maintenance Agreements whereby the Guarantors retain CEOC to
operate the plants for a period of 32 years through 2020. Payment is made to
CEOC in the form of reimbursements of expenses incurred and a guaranteed
capacity payment ranging from 10% to 25% of energy revenues over stated
amounts. The Guarantors in 1999, 1998 and 1997 reimbursed CEOC for expenses
of $7.5 million, $8.9 million and $9.0 million, respectively, and accrued a
guaranteed capacity payment of $3.3 million, $4.7 million and $4.5 million
at December 31, 1999, 1998 and 1997, respectively.
6. CONDENSED FINANCIAL INFORMATION
Condensed balance sheet information of the Guarantors' pro rata interest in the
respective entities as of December 31, 1999 and 1998 is as follows (in
thousands):
Vulcan
Power CEOC Elmore Del Ranch Leathers
--------- --------- ---------- ------------ -----------
December 31, 1999 Assets:
Restricted cash $ - $ - $ - $ - $ -
Accounts receivable and
other assets - 16,493 3,564 3,555 10,413
Due from affiliates 1,522 32,417 26,109 30,180 27,581
Property, plant, contracts and
equipment, net 153 13,638 66,116 63,119 66,786
Management fee and
goodwill, net - - - - -
Investments in
partnerships 88,121 292,784 - - -
-------- --------- --------- ---------- -----------
$89,796 $355,332 $95,789 $96,854 $104,780
====== ======= ====== ====== ======
Liabilities and Equity:
Accounts payable, accrued
liabilities and deferred taxes $ 291 $ 7,658 $ 1,504 $ 1,435 $ 1,699
Senior secured project note - - - - -
-------- ---------- --------- ---------- ------------
Total liabilities 291 7,658 1,504 1,435 1,699
Guarantors' equity 89,505 347,674 94,285 95,419 103,081
-------- --------- --------- ---------- ------------
$89,796 $355,332 $95,789 $96,854 $104,780
====== ======= ====== ======= ======
6. CONDENSED FINANCIAL INFORMATION
Condensed balance sheet information of the Guarantors' pro rata interest in the
respective entities as of December 31, 1999 and 1998 is as follows (in
thousands):
Vulcan Adjustments/ Combined
BNG Minerals Eliminations Total
--------- ----------- --------------------------
December 31, 1999 Assets:
Restricted cash $ - $ 44,092 $ 16,362 $ 60,454
Accounts receivable and
other assets 2,373 (1,144) 35,254
Due from affiliates 31,052 3,634 (77,221) 75,274
Property, plant, contracts and
equipment, net 56,360 92,794 172,461 531,427
Management fee and
goodwill, net - - 199,483 199,483
Investments in
partnerships - - (380,905) -
----------- -------- -------- --------
$89,785 $140,520 $(70,964) $901,892
====== ======= ======= =======
Liabilities and Equity:
Accounts payable, accrued
liabilities and deferred taxes $ 1,664 $ - $102,115 $116,366
Senior secured project note - 140,520 120,692 261,212
----------- -------- -------- --------
Total liabilities 1,664 140,520 222,807 377,578
Guarantors' equity 88,121 - (293,771) 524,314
----------- -------- -------- --------
$89,785 $140,520 $(70,964) $901,892
====== ======= ====== ======
6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
Vulcan
Power CEOC Elmore Del Ranch Leathers
--------- --------- --------- ------------- -----------
December 31, 1998 Assets:
Restricted cash $ - $ - $ - $ - $ -
Accounts receivable and
other assets - 15,695 12,648 12,655 12,571
Due from affiliates 849 23,634 17,042 22,294 3,116
Property, plant, contracts and
equipment, net 179 17,326 64,680 59,194 69,084
Management fee and
goodwill, net - - - - -
Investments in
partnerships 82,028 268,449 - - -
-------- --------- --------- ---------- -----------
$83,056 $325,104 $94,370 $94,143 $84,771
====== ======= ====== ====== ======
Liabilities and Equity:
Accounts payable, accrued
liabilities and deferred taxes$ 51 $ 7,869 $ 1,229 $ 2,109 $ 1,497
Senior secured project note - - - - -
-------- ---------- --------- ---------- ------------
Total liabilities 51 7,869 1,229 2,109 1,497
Guarantors' equity 83,005 317,235 93,141 92,034 83,274
-------- --------- --------- ---------- ------------
$83,056 $325,104 $94,370 $94,143 $84,771
====== ======= ====== ======= ======
6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
Vulcan Adjustments/ Combined
BNG Minerals Eliminations Total
--------- -------------------------- ------------
December 31, 1998 Assets:
Restricted cash $ - $100,164 $ 64,819 $164,983
Accounts receivable and
other assets 3,356 - (433) 56,492
Due from affiliates 22,934 16,849 (23,345) 83,373
Property, plant, contracts and
equipment, net 57,320 23,507 108,527 399,817
Management fee and
goodwill, net - - 203,154 203,154
Investments in
partnerships - - (350,477) -
----------- -------- -------- --------
$83,610 $140,520 $ 2,245 $907,819
====== ======= ======= =======
Liabilities and Equity:
Accounts payable, accrued
liabilities and deferred taxes $ 1,582 $ - $101,073 $115,410
Senior secured project note - 140,520 153,056 293,576
----------- -------- -------- --------
Total liabilities 1,582 140,520 254,129 408,986
Guarantors' equity 82,028 - (251,884) 498,833
----------- -------- -------- --------
$83,610 $140,520 $ 2,245 $907,819
====== ======= ====== ======
6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
Condensed combining statements of operations including information of the
Guarantors' pro rata interest in the respective entities for the years ended
December 31, 1999, 1998 and 1997 is as follows:
Vulcan
Power CEOC Elmore Del Ranch Leathers
--------- --------- --------- ------------- -----------
December 31, 1999
Revenues $ 892 $6,104 $16,908 $17,299 $56,127
Expenses 485 - 15,764 13,914 36,320
---------- ---------- ---------- ---------- ----------
Net income $ 407 $6,104 $1,144 $3,385 $19,807
====== ====== ====== ====== ======
December 31, 1998
Revenues $ 772 $47,009 $49,212 $52,241 $50,436
Expenses 383 - 38,583 37,998 38,166
---------- ---------- ---------- ---------- ----------
Net income $ 389 $47,009 $10,629 $14,243 $12,270
====== ====== ====== ====== ======
December 31, 1997
Revenues $ 859 $45,533 $48,114 $47,068 $47,899
Expenses 436 - 35,484 33,139 38,209
---------- ---------- ---------- ---------- ----------
Net income $ 423 $45,533 $12,630 $13,929 $ 9,690
====== ====== ====== ====== ======
6. CONDENSED FINANCIAL INFORMATION (CONTINUED)
Condensed combining statements of operations including information of the
Guarantors' pro rata interest in the respective entities for the years ended
December 31, 1999, 1998 and 1997 is as follows:
Vulcan Adjustments/ Combined
BNG Eliminations Total
------------------------ ------------
December 31, 1999
Revenues $15,756 $1,902 $114,988
Expenses 9,663 13,361 89,507
---------- ------------ -----------
Net income $ 6,093 $(11,459) $25,481
====== ======= ======
December 31, 1998
Revenues $14,608 $(41,713) $172,565
Expenses 9,458 10,843 135,431
---------- ------------ -----------
Net income $ 5,150 $(52,556) $37,134
====== ======= ======
December 31, 1997
Revenues $15,208 $(42,366) $162,315
Expenses 8,903 12,507 128,678
---------- ------------ -----------
Net income $ 6,305 $(54,873) $33,637
====== ======= ======
7. INCOME TAXES
The provision for income taxes for the years ended December 31, 1999, 1998 and
1997 consisted of the following (in thousands):
1999 Current Deferred Total
- ------------ --------- ---------- ----------
Federal $ 8,527 $ 991 $ 9,518
State 2,754 275 3,029
--------- --------- ----------
Total $11,281 $1,266 $12,547
===== ===== ======
1998
- ------------
Federal $22,021 $(7,212) $14,809
State 6,718 (1,998) 4,720
--------- --------- ----------
Total $28,739 $(9,210) $19,529
===== ===== ======
1997
- ------------
Federal $17,563 $(1,222) $16,341
State 5,237 (204) 5,033
--------- --------- ----------
Total $22,800 $(1,426) $21,374
===== ===== ======
Deferred tax liabilities at December 31, 1999 and 1998 consisted of
differences between book and tax methods relating to depreciation and
amortization.
The effective tax rate differs from the federal statutory tax rate due
primarily to percentage depletion in excess of cost depletion and goodwill
amortization.
8. COMMITMENTS AND CONTINGENCIES
CalEnergy Minerals LLC, a Partnership Guarantor ("Minerals LLC"), developed
and owns the rights to proprietary processes for the extraction of zinc from
elements in solution in the geothermal brine and fluids utilized at the
Company's Imperial Valley plants (the "Zinc Recovery Project") as well as the
production of power to be used in the extraction process. A pilot plant has
successfully produced commercial quality zinc at the company's Imperial Valley
Project. The Company's affilates intend to sequentially develop facilities for
the extraction of manganese, silver, gold, lead, boron, lithium and other
products as it further develops the extraction technology. The Company's
affiliates are also investigating producing silica as an extraction project.
Silica is used as a filler for such products as paint, plastics and high
temperature cement.
Minerals LLC is constructing the Zinc Recovery Project which will recover
zinc from the geothermal brine (the "Zinc Recovery Project"). Facilities will be
installed near the Imperial Valley Project sites to extract a zinc chloride
solution from the geothermal brine through an ion exchange process. This
solution will be transported to a central processing plant where zinc ingots
will be produced through solvent extraction, electrowinning and casting
processes. The Zinc Recovery Project is designed to have a capacity of
approximately 30,000 metric tonnes per year and is scheduled to commence
commercial operation in mid-2000. In September 1999, Minerals LLC entered into a
sales agreement whereby all zinc produced by the Zinc Recovery Project will be
sold to Cominco, Ltd. The initial term of the agreement expires in December
2005.
The Zinc Recovery Project is being constructed by Kvaerner U.S. Inc.
("Kvaerner") pursuant to a date certain, fixed-price, turnkey engineering,
procurement and construction contract (the "Zinc Recovery Project EPC
Contract"). Kvaerner is a wholly-owned indirect subsidiary of Kvaerner ASA, an
internationally recognized engineering and construction firm experienced in the
metals, mining and processing industries. Total project costs of the Zinc
Recovery Project are expected to be approximately $200.9 million.
The Company has incurred $92.8 million of such costs through December 31, 1999.
CE Turbo LLC, a Partnership Guarantor, is constructing the CE Turbo
Project. The CE Turbo Project will have a capacity of 10 net MW. The net output
of the CE Turbo Project will be sold to the Zinc Recovery Project or sold
through the California Power Exchange ("PX") or in other market transactions.
The Partnership Projects are upgrading the geothermal brine processing
facilities at the Vulcan and Del Ranch Projects with the Region 2 Brine
Facilities Construction. In addition to incorporating the pH modification
process, which has reduced operating costs at the Salton Sea Projects, the new,
more efficient facilities will achieve economies through improved brine
processing systems and the utilization of more modern equipment. The Partnership
Projects expect these improvements to reduce brine-handling operating costs at
the Vulcan Project and the Del Ranch Project.
The CE Turbo Project and the Region 2 Brine Facilities Construction are being
constructed by Stone & Webster Engineering Corporation ("SWEC") pursuant to a
date certain, fixed price, turnkey engineering, procurement and construction
contract (the "Region 2 Upgrade EPC Contract"). The obligations of SWEC are
guaranteed by Stone & Webster, Incorporated. The CE Turbo Project is scheduled
to commence initial operations in early 2000 and the Region 2 Brine Facilities
Construction is scheduled to be completed in early-2000. Total project costs for
both the CE Turbo Project and the Region 2 Brine Facilities Construction are
expected to be approximately $63.7 million. The Company has incurred
approximately $40.8 million of such costs through December 31, 1999.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholder
Magma Power Company
Omaha, Nebraska
We have audited the accompanying balance sheets of the Salton Sea Royalty
LLC as of December 31, 1999 and 1998 and the related statements of operations,
equity and cash flows for each of the three years in the period ended December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Salton Sea Royalty LLC as of December
31, 1999 and 1998 and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1999 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
January 25, 2000
SALTON SEA ROYALTY LLC
BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
December 31,
1999 1998
ASSETS
Prepaid expenses and other assets $ 235 $ 513
-------- ---------
Total current assets 235 513
Royalty stream, net 16,776 22,932
Excess of cost over fair value of net assets acquired, net 32,280 33,188
Due from affiliates 21,825 20,799
-------- --------
$71,116 $77,432
======= =======
LIABILITIES AND EQUITY
Liabilities:
Accrued liabilities 82 $ 9,455
CURRENT PORTION OF LONG TERM DEBT 4,773 9,396
------- ---------
Total current liabilities 4,855 18,851
Senior secured project note 9,041 13,814
Deferred income taxes --- 6,769
-------- ----------
Total liabilities 13,896 39,434
Commitments and contingencies (Note 3)
Equity:
Common stock, par value $.01 per share; 100 shares
authorized, issued and outstanding - -
Additional paid-in capital 1,561 1,561
Retained earnings 55,659 36,437
-------- ----------
Total equity 57,220 37,998
-------- ----------
$ 71,116 $ 77,432
======= =======
The accompanying notes are an integral part of the financial statements.
SALTON SEA ROYALTY LLC
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
1999 1998 1997
Revenues:
Royalty income $26,274 $51,703 $32,231
Expenses:
Operating, general and administrative expenses 4,610 8,120 7,769
Amortization of royalty stream and goodwill 7,064 9,794 9,794
Interest expense 1,682 2,784 4,179
--------- --------- ---------
Total expenses 13,356 20,698 21,742
--------- --------- ---------
Income before income taxes 12,918 31,005 10,489
Provision (benefit) for income taxes (6,304) 11,508 1,828
--------- --------- ---------
Net income $ 19,222 $19,497 $ 8,661
======= ======= =======
The accompanying notes are an integral part of the financial statements.
SALTON SEA ROYALTY LLC
STATEMENTS OF EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
Additional
Common Stock Paid-in Retained
Shares Amount Capital Earnings Total
---------- ----------- ----------- ------------ -----------
Balance, January 1, 1997 100 $ - $ 1,561 $ 8,279 $ 9,840
Net income - - - 8,661 8,661
-------- ----------- ----------- ---------- ----------
Balance, December 31, 1997 100 - 1,561 16,940 18,501
Net income - - - 19,497 19,497
-------- ----------- ----------- ---------- ----------
Balance, December 31, 1998 100 - 1,561 36,437 37,998
Net income - - - 19,222 19,222
-------- ----------- ----------- ---------- ----------
Balance, December 31, 1999 100 $ - $ 1,561 $55,659 $57,220
===== ======= ======= ====== ======
The accompanying notes are an integral part of the financial statements.
SALTON SEA ROYALTY LLC
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Year End December 31,
1999 1998 1997
Cash flow from operating activities:
Net income $ 19,222 $ 19,497 $ 8,661
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of royalty stream and goodwill 7,064 9,794 9,794
Deferred income taxes (6,769) (499) (4,959)
Changes in assets and liabilities:
Prepaid expenses and other assets 278 468 4,376
Accrued liabilities (9,373) 18,280 9,236
---------- ---------- ----------
Net cash flows from operating activities 10,422 47,540 27,108
---------- ---------- ----------
Net cash flows from financing activities:
Decrease (increase) in due from affiliates (1,026) (31,814) (9,106)
Repayment of senior secured project note (9,396) (15,726) (18,002)
---------- ---------- ----------
Net cash flows from financing activities (10,422) (47,540) (27,108)
---------- ---------- ----------
Net change in cash - - -
Cash at beginning of period - - -
---------- ---------- ----------
Cash at end of period $ - $ - $ -
====== ====== ======
Supplemental disclosure:
Interest paid $ $ $
====== ====== ======
Income taxes paid $ 465 $ 12,007 $ 6,787
The accompanying notes are an integral part of the financial statements.
SALTON SEA ROYALTY LLC
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Salton Sea Royalty LLC (the "Royalty Company") is a special-purpose entity,
99% owned by Magma Power Company ("Magma") and 1% owned by Salton Sea Funding
Corporation (the "Funding Corporation"). Magma was a wholly-owned subsidiary of
MidAmerican Energy Holdings Company ("MidAmerican").
On February 8, 1999, MidAmerican created a new subsidiary, CE Generation
LLC ("CE Generation") and subsequently transferred its interest in the Company
and its power generation assets in the Imperial Valley to CE Generation, with
certain assets being retained by MidAmerican. On March 3, 1999, MidAmerican
closed the sale of 50% of its ownership interests in CE Generation to El Paso
Power Holding Company, an affiliate of El Paso Energy Corporation.
In June 1995, the Royalty Company received an assignment of royalties and
certain fees paid by three partnership projects, Del Ranch, Elmore and Leathers
(collectively, the "Partnership Projects"). On April 17, 1996, MidAmerican
acquired the remaining 50% interest in the Partnership Projects. Prior to this
transaction, Magma and its affiliates had a 50% interest in the Partnership
Projects. In addition, the Royalty Company has received an assignment of certain
resource-related and contract assignment payments payable by the geothermal
power plant located in Imperial Valley, California which is owned by an
unaffiliated third party (East Mesa, together with the Partnership Projects, the
"Projects"). All of the Projects are engaged in the operation of geothermal
power plants in the Imperial Valley in Southern California. Substantially all of
the assigned royalties are based on a percentage of energy and capacity revenues
of the Projects. Included in royalty income are payments from East Mesa related
to a settlement agreement in 1998 for prior years.
All of the Projects have executed long-term power purchase agreements ("SO4
Agreements") providing for capacity and energy sales to Southern California
Edison Company ("Edison"). Each of these agreements provides for fixed price
capacity payments for the life of the contract. In 1998, the East Mesa Project
entered into a Termination Agreement, to which Magma consented, which terminated
its SO4 Agreement upon CPUC approval becoming final in 1999.
The Partnership Projects earn energy payments based on kilowatt hours (kWhs)
of energy provided to Edison. During the first 10 years of the agreement, the
Projects earn payments for energy as scheduled in the SO4 Agreements. After the
10-year scheduled payment period has expired (1998 for Del Ranch and Elmore;
1999 for Leathers), the energy payment per kWh throughout the remainder of the
contract period will be at Edison's Avoided Cost of Energy.
For the year ended December 31, 1999 and 1998, Edison's average Avoided Cost
of Energy was 3.1 cents and 3.0 cents per kWh, respectively, which is
substantially below the contract energy prices earned in 1999. Estimates of
Edison's future Avoided Cost of Energy vary substantially from year to year. The
Royalty Company cannot predict the likely level of Avoided Cost of Energy prices
under the SO4 Agreements at the expiration of the scheduled payment periods. The
revenues generated by each of the units operating under SO4 Agreements will
likely decline significantly after the expiration of the relevant scheduled
payment period which would have a direct effect on the related royalty streams.
As discussed above, all revenues except those derived from East Mesa are from,
and all operating expenses are paid by, related parties.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying statement of operations presents revenues and expenses which
have been assigned to the Royalty Company under the arrangements described above
on the accrual method of accounting. This presentation is a "carve out" of
information from Magma and certain of its affiliates. Such revenues, net of
related expenses, guarantee loans from the Funding Corporation, a wholly-owned
subsidiary of Magma.
The financial statements reflect the acquisition of Magma and the resulting
push down to the Royalty Company of the accounting as a purchase business
combination.
ROYALTY STREAM
The Royalty Company's policy is to provide amortization expense beginning upon
the commencement of revenue production over the estimated remaining useful life
of the identifiable assets.
The royalty streams have been assigned values separately for each of (1) the
remaining portion of the fixed price periods of the Projects' power sales
agreements and (2) the 20 year avoided cost periods of the Projects' power sales
agreements and are amortized separately over such periods using the straight
line method. At December 31, 1999 and 1998, accumulated amortization was $43.7
million and $37.6 million, respectively.
EXCESS OF COST OVER FAIR VALUE
Total acquisition costs in excess of the fair values assigned to the net
assets acquired are amortized over a 40 year period using the straight line
method. At December 31, 1999 and 1998, accumulated amortization of the excess of
cost over fair value was $4.5 million and $3.6 million, respectively.
INCOME TAXES
The Royalty Company is included in consolidated income tax returns with its
parent and affiliates. Income taxes are provided on a separate return basis,
however, tax obligations of the Royalty Company will be remitted to the parent
only to the extent of cash flows available after operating expenses and debt
service. On February 19, 1999, the Royalty Company was converted to a limited
liability company which is not taxed. Therefore, since that date, no recognition
has been given to federal or state income taxes as that is the responsibility of
the individual members of the LLC.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of financial instruments that are not actively traded are based on
market prices of similar instruments and/or valuation techniques using market
assumptions. Unless otherwise noted, the estimated fair value amounts do not
differ significantly from recorded values.
IMPAIRMENT OF LONG-LIVED ASSETS
The Royalty Company reviews long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. An impairment loss
would be recognized, based on discounted cash flows or various models, whenever
evidence exists that the carrying value is not recoverable.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which established accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. The Company has not yet determined the impact of this
accounting pronouncement.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. SENIOR SECURED PROJECT NOTE
The Royalty Company has a project note payable to Salton Sea Funding
Corporation at interest rates ranging from 6.69% to 7.37%. They have also
guaranteed, along with other guarantors, the debt of Salton Sea Funding
Corporation, which amounted to $569.0 million at December 31, 1999. The
guarantee issued is collateralized by a lien on substantially all the assets of
and a pledge of stock in the Guarantor. The structure has been designed to cross
collateralize cash flows from each guarantor without cross collateralizing all
of the guarantors' assets.
Principal maturities of the senior secured project note are as follows (in
thousands):
2000 $ 4,773
2001 4,434
2002 3,460
2003 304
2004 408
Thereafter 435
----------
$13,814
======
The estimated fair values of the senior secured project note at December
31, 1999 and 1998 were $13.5 million and $23.5 million, respectively.
4. INCOME TAXES
The provision for income taxes for the year ended December 31, 1999, 1998
and 1997, consisted of the following:
Current Deferred Total
--------- ----------- --------
1999
Federal $ 363 $(5,921) $(5,558)
State 102 (848) (746)
--------- ----------- --------
Total $ 465 $(6,769) $(6,304)
===== ====== =====
1998
Federal $ 9,267 $ (294) $ 8,973
State 2,740 (205) 2,535
--------- ----------- --------
Total $12,007 $ (499) $11,508
===== ====== =====
1997
Federal $5,292 $(4,159) $1,133
State 1,495 (800) 695
--------- ----------- --------
Total $6,787 $(4,959) $1,828
===== ====== =====
The Royalty Company's effective tax rate differs from the statutory federal
income tax rate due primarily to percentage depletion in excess of cost
depletion and goodwill amortization.
Deferred tax liabilities (assets) at December 31, 1999 and 1998 consisted of
the following:
1999 1998
----------- ----------
Deferred liabilities:
Depreciation and amortization $ --- $9,368
Deferred assets:
Deferred income --- (2,599)
----------- -----------
Net deferred tax liability $ --- $6,769
====== ======
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the current executive officers of the Funding
Corporation and the Guarantors and their positions with the Funding Corporation
and each of the Guarantors (or general partner thereof):
EXECUTIVE OFFICER POSITION
Gregory E. Abel* Director
Robert S. Silberman* President and Chief Operating Officer
Brian K. Hankel Vice President and Treasurer
Joseph M. Lillo Vice President and Controller
Douglas L. Anderson Director, Vice President, and General Counsel
Patrick J. Goodman Director
Larry Kellerman* Director
John L. Harrison* Director
* Gregory E. Abel is Director of CalEnergy Minerals LLC and Salton Sea
Minerals Corp. only.
* Robert S. Silberman, in addition to President and Chief Operating
Officer, is Director of CalEnergy Minerals LLC and Salton Sea Minerals Corp.
* Larry Kellerman is Director for all entities except CalEnergy Minerals
LLC and Salton Sea Minerals Corp.
* John L. Harrison is Director for all entities except CalEnergy Minerals
LLC and Salton Sea Minerals Corp.
GREGORY E. ABEL, 37, Director for CalEnergy Minerals LLC and Salton Sea
Minerals Corp. only. Mr. Abel joined MidAmerican in 1992. Mr. Abel is a
Chartered Accountant and from 1984 to 1992 he was employed by Price Waterhouse.
As a Manager in the San Francisco office of Price Waterhouse, he was responsible
for clients in the energy industry.
ROBERT S. SILBERMAN, 42, President and Chief Operating Officer of each
Guarantor subsidiary except CalEnergy Minerals LLC and Salton Sea Minerals Corp.
where he is also Director. Mr. Silberman joined MidAmerican in 1995. Prior to
that, Mr. Silberman served as Executive Assistant to the Chairman and Chief
Executive Officer of International Paper Company from 1993 to 1995, as Director
of Project Finance and Implementation for the Ogden Corporation from 1986 to
1989 and as Project Manager in Business Development for Allied-Signal, Inc. from
1984 to 1985. He has also served as the Assistant Secretary of the Army for the
United States Department of Defense.
BRIAN K. HANKEL, 37, Vice President and Treasurer of each Guarantor
subsidiary. Mr. Hankel joined MidAmerican in February 1992 as Treasury Analyst
and served in that position to December 1995. Mr. Hankel was appointed Assistant
Treasurer in January 1996 and was appointed Treasurer in January 1997. Prior to
that, Mr. Hankel was a Money Position Analyst at FirsTier Bank of Lincoln from
1988 to 1992 and Senior Credit Analyst at FirsTier from 1987 to 1988.
JOSEPH M. LILLO, 30, Vice President and Controller. Mr. Lillo joined
MidAmerican in November 1996, and served as Manager of Financial Reporting and
was promoted to Controller/IPP in March 1998. Mr Lillo was promoted to
Controller in July 1999. Prior to joining the Company, Mr. Lillo was a senior
associate with Coopers & Lybrand LLP.
DOUGLAS L. ANDERSON, 42, Director, Vice President and General Counsel of
each Guarantor subsidiary. Mr. Anderson joined MidAmerican in February 1993.
From 1990 to 1993, Mr. Anderson was a business attorney with Fraser, Stryker,
Vaughn, Meusey, Olson, Boyer & Cloch, P.C. in Omaha. Prior to that Mr. Anderson
was a principal in the firm Anderson & Anderson.
PATRICK J. GOODMAN, 33, Director. Mr. Goodman joined MidAmerican in June
1995, and served as Manager of Consolidation Accounting until September 1996
when he was promoted to Controller. Prior to joining MidAmerican, Mr. Goodman
was a financial manager for National Indemnity Company and a senior associate at
Coopers & Lybrand.
LARRY KELLERMAN, 44, President of El Paso Power Services Company and a
Director of each Guarantor subsidiary except CalEnergy Minerals LLC and Salton
Sea Minerals Corp. Mr. Kellerman joined El Paso Energy in February 1998. Prior
to joining El Paso Energy, he was President of Citizens Power, where he
initiated Citizens' activities in the power marketing field in 1988, when
Citizens was the initial power marketer granted FERC authorization. From 1982
through 1988, Mr. Kellerman was General Manager of Power Marketing and Power
Supply for Portland General Electric. From 1979 through 1982, Mr. Kellerman was
Financial Analyst and Power Contract Negotiator with Southern California Edison,
where he negotiated some of the first Public Utility Regulatory Policies Act
qualifying facility contracts in the nation.
JOHN L. HARRISON, 41, Senior Managing Director and Chief Financial Officer
of El Paso Merchant Energy and a Director of each Guarantor subsidiary except
CalEnergy Minerals LLC and Salton Sea Minerals Corp. Mr. Harrison joined El Paso
Energy in June 1996. Prior to joining El Paso Energy, Mr. Harrison was a partner
with Coopers & Lybrand LLP for five years.
ITEM 11. EXECUTIVE COMPENSATION
The Funding Corporation's and the Guarantors' directors and executive
officers receive no remuneration for serving in such capacities.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
DESCRIPTION OF CAPITAL STOCK
As of December 31, 1999, the authorized capital stock of the Funding
Corporation consisted of 1,000 shares of common stock, par value $.01 per share
(the "Common Stock"), of which 100 shares were outstanding. There is no public
trading market for the Common Stock. As of December 31, 1999, there was one
holder of record of the Common Stock. Holders of Common Stock are entitled to
one vote per share on any matter coming before the stockholders for a vote.
The Funding Corporation does not expect in the foreseeable future to pay
any dividends on the Common Stock. The Indenture contains certain restrictions
on the payment of dividends with respect to the Common Stock.
PRINCIPAL HOLDERS
Since the formation of the Funding Corporation in June 1995, all of the
outstanding shares of Common Stock have been owned by Magma. Magma directly or
indirectly owns all of the capital stock of or partnership interests in the
Funding Corporation and the Guarantors.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
OTHER RELATIONSHIPS AND RELATED TRANSACTIONS
The Salton Sea Projects' and the Partnership Projects' geothermal power
plants are owned, administered and operated by Magma or subsidiaries of Magma.
Geothermal fluid supplying these facilities is provided from Magma's (or a
subsidiary's) geothermal resource holdings in the SSKGRA.
In providing rights to geothermal resources and/or geothermal fluids,
administering and operating the geothermal power plants, and disposing of solids
from these facilities, Magma (directly and through subsidiaries) receives
certain royalties, cost reimbursements and fees for its services and the rights
it provides. See the financial statements attached hereto.
The Funding Corporation believes that the transactions with related parties
described above, taking into consideration all of the respective terms and
conditions of each of the relevant contracts and agreements, are at least as
favorable to the Guarantors as those which could have been obtained from
unrelated parties in arms' length negotiations.
RELATIONSHIP OF THE FUNDING CORPORATION AND THE GUARANTORS TO MAGMA AND
MIDAMERICAN
The Funding Corporation is a wholly owned direct subsidiary of Magma
organized for the sole purpose of acting as issuer of the Securities. The
Funding Corporation is restricted, pursuant to the terms of the Indenture, to
acting as issuer of the Securities and other indebtedness as permitted under the
Indenture, making loans to the Guarantors pursuant to the Credit Agreements, and
transactions related thereto. The Funding Corporation and each of the Guarantors
(and, in the case of SSBP, SSPG, Elmore, Leathers, Del Ranch and Vulcan, the
general partners thereof) have been organized and are operated as legal entities
separate and apart from MidAmerican, El Paso, CE Generation, Magma and any other
Affiliates of MidAmerican, El Paso, CE Generation or Magma, and, accordingly,
the assets of the Funding Corporation and the Guarantors (and, in the case of
SSBP, SSPG, Elmore, Leathers, Del Ranch and Vulcan, the general partners
thereof) will not be generally available to satisfy the obligations of
MidAmerican, El Paso, CE Generation, Magma or any other Affiliates of
MidAmerican, El Paso, CE Generation or Magma; provided, however, that
unrestricted cash of the Funding Corporation and the Guarantors or other assets
which are available for distribution may, subject to applicable law and the
terms of financing arrangements of such parties, be advanced, loaned, paid as
dividends or otherwise distributed or contributed to MidAmerican, El Paso, CE
Generation, Magma or Affiliates thereof.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULE AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedules
(i) Financial Statements
Financial Statements are included in Part II of this Form 10-K
(ii) Financial Statement Schedules
Financial Statement Schedules are not included because they are
not required or the information required is included in Part II of
this Form 10-K.
(b) Reports on Form 8-K
Not applicable.
(c) Exhibits
The exhibits listed on the accompanying Exhibit Index are filed as part
of this Annual Report.
For the purposes of complying with the amendments to the rules
governing Form S-4 effective July 13, 1990 under the Securities Act of 1933, the
undersigned hereby undertakes as follows, which undertaking shall be
incorporated by reference into the Funding Corporation's currently effective
Registration Statements on Form S-4.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant, the registrant has been advised that in the opinion the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(d) Financial statements required by Regulations S-X, which are excluded
from the Annual Report by Rule 14a-3(b).
Not Applicable
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000.
SALTON SEA FUNDING CORPORATION
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ LARRY KELLERMAN * March 29, 2000
Larry Kellerman
Director
/S/ JOHN L. HARRISON * March 29, 2000
John L. Harrison
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000
SALTON SEA BRINE PROCESSING, L.P.
a California limited partnership
By: Salton Sea Power Company,
a California corporation, its
general partner
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ LARRY KELLERMAN * March 29, 2000
Larry Kellerman
Director
/S/ JOHN L. HARRISON * March 29, 2000
John L. Harrison
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000
SALTON SEA POWER GENERATION, L.P.,
a California limited partnership
By: Salton Sea Power Company, a
California corporation, its
general partner
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ LARRY KELLERMAN * March 29, 2000
Larry Kellerman
Director
/S/ JOHN L. HARRISON * March 29, 2000
John L. Harrison
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000
FISH LAKE POWER LLC
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ LARRY KELLERMAN * March 29, 2000
Larry Kellerman
Director
/S/ JOHN L. HARRISON * March 29, 2000
John L. Harrison
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000
VULCAN POWER COMPANY
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ LARRY KELLERMAN * March 29, 2000
Larry Kellerman
Director
/S/ JOHN L. HARRISON * March 29, 2000
John L. Harrison
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000
CALENERGY OPERATING CORPORATION
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ LARRY KELLERMAN * March 29, 2000
Larry Kellerman
Director
/S/ JOHN L. HARRISON * March 29, 2000
John L. Harrison
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000
SALTON SEA ROYALTY LLC
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ LARRY KELLERMAN * March 29, 2000
Larry Kellerman
Director
/S/ JOHN L. HARRISON * March 29, 2000
John L. Harrison
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000
LEATHERS, L.P., a
California limited partnership
By: CalEnergy Operating Corporation, a
Delaware corporation, its
general partner
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ LARRY KELLERMAN * March 29, 2000
Larry Kellerman
Director
/S/ JOHN L. HARRISON * March 29, 2000
John L. Harrison
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000.
ELMORE L.P., a California limited partnership
By: CalEnergy Operating Corporation, a
Delaware corporation, its
general partner
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ LARRY KELLERMAN * March 29, 2000
Larry Kellerman
Director
/S/ JOHN L. HARRISON * March 29, 2000
John L. Harrison
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000.
DEL RANCH L.P., a
California limited partnership
By: CalEnergy Operating Corporation, a
Delaware corporation, its
general partner
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ LARRY KELLERMAN * March 29, 2000
Larry Kellerman
Director
/S/ JOHN L. HARRISON * March 29, 2000
John L. Harrison
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000.
VPC GEOTHERMAL LLC., a
Delaware corporation
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ LARRY KELLERMAN * March 29, 2000
Larry Kellerman
Director
/S/ JOHN L. HARRISON * March 29, 2000
John L. Harrison
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000.
NIGUEL ENERGY COMPANY, a
California corporation
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ LARRY KELLERMAN * March 29, 2000
Larry Kellerman
Director
/S/ JOHN L. HARRISON * March 29, 2000
John L. Harrison
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000.
CONEJO ENERGY COMPANY, a
California corporation
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ LARRY KELLERMAN * March 29, 2000
Larry Kellerman
Director
/S/ JOHN L. HARRISON * March 29, 2000
John L. Harrison
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000.
SAN FELIPE ENERGY COMPANY, a
California corporation
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ LARRY KELLERMAN * March 29, 2000
Larry Kellerman
Director
/S/ JOHN L. HARRISON * March 29, 2000
John L. Harrison
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000.
VULCAN/BN GEOTHERMAL POWER COMPANY, a
Nevada general partnership
By: VULCAN POWER COMPANY, a
Nevada corporation, Partner
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ LARRY KELLERMAN * March 29, 2000
Larry Kellerman
Director
/S/ JOHN L. HARRISON * March 29, 2000
John L. Harrison
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000.
SALTON SEA POWER L.L.C., a
Delaware Limited Liability Company
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ LARRY KELLERMAN * March 29, 2000
Larry Kellerman
Director
/S/ JOHN L. HARRISON * March 29, 2000
John L. Harrison
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000.
CE TURBO LLC, a
Delaware Limited Liability Company
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ LARRY KELLERMAN * March 29, 2000
Larry Kellerman
Director
/S/ JOHN L. HARRISON * March 29, 2000
John L. Harrison
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000.
CE SALTON SEA INC., a
Delaware Corporation
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ LARRY KELLERMAN * March 29, 2000
Larry Kellerman
Director
/S/ JOHN L. HARRISON * March 29, 2000
John L. Harrison
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000.
CALENERGY MINERALS LLC, a
Delaware Limited Liability Company
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
Director, President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
Director, President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ GREGORY E. ABEL * March 29, 2000
Gregory E. Abel
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
SIGNATURES
Pursuant to the requirements 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, in the City of Omaha,
State of Nebraska, on March 29, 2000.
SALTON SEA MINERALS CORP., a
Delaware Corporation
BY:/S/ ROBERT S. SILBERMAN*
Robert S. Silberman
Director, President and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, each
thereunto duly authorized in the City of Omaha, State of Nebraska, on the dates
indicated.
SIGNATURE DATE
/S/ ROBERT S. SILBERMAN* March 29, 2000
Robert S. Silberman
Director, President and Chief Operating Officer
(Principal Executive Officer)
/S/ JOSEPH M. LILLO * March 29, 2000
Joseph M. Lillo
Vice President and Controller
(Principal Accounting Officer)
/S/ DOUGLAS L. ANDERSON March 29, 2000
Douglas L. Anderson
Director
/S/ PATRICK J. GOODMAN* March 29, 2000
Patrick J. Goodman
Director
/S/ GREGORY E. ABEL * March 29, 2000
Gregory E. Abel
Director
* BY: /S/ DOUGLAS L. ANDERSON
Douglas L. Anderson
Attorney-in-fact
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
3.1 Articles of Incorporation of the Funding Corporation (incorporated by
reference to Exhibit 3.1 to the Funding Corporation Registration Statement
on Form S-4 dated August 9, 1995, 33-95538 ("Form S-4")).
3.2 By-laws of the Funding Corporation (incorporated by reference to Exhibit
3.2 to the Funding Corporation Form S-4).
3.3 Limited Partnership Agreement of SSBP (incorporated by reference to Exhibit
3.3 to the Funding Corporation Form S-4).
3.4 Limited Partnership Agreement of SSPG (incorporated by reference to Exhibit
3.4 to the Funding Corporation Form S-4).
3.5 Articles of Incorporation of Fish Lake (incorporated by reference to
Exhibit 3.5 to the Funding Corporation Form S-4).
3.6 By-laws of Fish Lake (incorporated by reference to Exhibit 3.6 to the
Funding Corporation Form S-4).
3.7 Articles of Incorporation of VPC (incorporated by reference to Exhibit 3.7
to the Funding Corporation Form S-4).
3.8 By-laws of VPC (incorporated by reference to Exhibit 3.8 to the Funding
Corporation Form S-4).
3.9 Articles of Incorporation of CEOC (incorporated by reference to Exhibit 3.9
to the Funding Corporation Form S-4).
3.10 By-laws of CEOC (incorporated by reference to Exhibit 3.10 to the Funding
Corporation Form S-4).
3.11 Articles of Incorporation of the Royalty Guarantor (incorporated by
reference to Exhibit 3.11 to the Funding Corporation Form S-4).
3.12 By-laws of the Royalty Guarantor (incorporated by reference to Exhibit 3.12
to the Funding Corporation Form S-4).
3.13 Certificate of Amendment of Certificate of Incorporation dated as of March
26, 1996 (incorporated by reference to Exhibit 3.13 to the Funding
Corporation Form 10-K for the year ending December 31, 1996).
3.14 Articles of Incorporation of BNG (incorporated by reference to Exhibit 3.13
to the Funding Corporation Registration Statement on Form S-4 dated July 2,
1996, 333-07527 ("Funding Corporation II Form S-4")).
3.15 By-laws of BNG (incorporated by reference to Exhibit 3.14 to the Funding
Corporation II Form S-4).
3.16 Articles of Incorporation of San Felipe (incorporated by reference to
Exhibit 3.15 to the Funding Corporation II Form S-4).
3.17 By-laws of San Felipe (incorporated by reference to Exhibit 3.16 to the
Funding Corporation II Form S-4).
3.18 Articles of Incorporation of Conejo (incorporated by reference to Exhibit
3.17 to the Funding Corporation II Form S-4).
3.19 By-laws of Conejo (incorporated by reference to Exhibit 3.18 to the Funding
Corporation II Form S-4).
3.20 Articles of Incorporation of Niguel (incorporated by reference to Exhibit
3.19 to the Funding Corporation II Form S-4).
3.21 By-laws of Niguel (incorporated by reference to Exhibit 3.20 to the Funding
Corporation II Form S-4).
3.22 General Partnership Agreement of Vulcan (incorporated by reference to
Exhibit 3.21 to the Funding Corporation II Form S-4).
3.23 Limited Partnership Agreement of Leathers (incorporated by reference to
Exhibit 3.22 to the Funding Corporation II Form S-4).
3.24 Amended and Restated Limited Partnership Agreement of Del Ranch
(incorporated by reference to Exhibit 3.23 to the Funding Corporation II
Form S-4).
3.25 Amended and Restated Limited Partnership Agreement of Elmore (incorporated
by reference to Exhibit 3.24 to the Funding Corporation II Form S-4).
4.1(a) Indenture, dated as of July 21, 1995, between Chemical Trust Company of
California and the Funding Corporation (incorporated by reference to
Exhibit 4.1(a) to the Funding Corporation Form S-4).
4.1(b) First Supplemental Indenture, dated as of October 18, 1995, between
Chemical Trust Company of California and the Funding Corporation
(incorporated by reference to Exhibit 4.1(b) to the Funding Corporation
Form S-4).
4.1(c) Second Supplemental Indenture, dated as of June 20, 1996, between
Chemical Trust Company of California and the Funding Corporation
(incorporated by reference to Exhibit 4.1(c) to the Funding Corporation II
Form S-4).
4.1(d) Third Supplemental Indenture between Chemical Trust Company of California
and the Funding Corporation (incorporated by reference to Exhibit 4.1(d) to
the Funding Corporation II Form S-4).
4.1(e) Fourth Supplemental Indenture between Chemical Trust Company of
California and the Funding Corporation (incorporated by reference to
Exhibit 4.1(e) to the Funding Corporation Form 10-K/A for the year ending
December 31, 1998).
4.2 Salton Sea Secured Guarantee, dated as of July 21, 1995, by SSBP, SSPG and
Fish Lake in favor of Chemical Trust Company of California (incorporated by
reference to Exhibit 4.2 to the Funding Corporation Form S-4).
4.3(a) Partnership Guarantors Secured Limited Guarantee, dated as of July 21,
1995, by CEOC and VPC in favor of Chemical Trust Company of California
(incorporated by reference to Exhibit 4.3 to the Funding Corporation Form
S-4).
4.3(b) Amended and Restated Partnership Guarantors Secured Limited Guarantee,
dated as of June 20, 1996 by CEOC, and VPC, Conejo, Niguel, Sal Felipe,
BNG, Del Ranch, Elmore, Leathers and Vulcan in favor of Chemical Trust
Company of California (incorporated by reference to Exhibit 4.3 to the
Funding Corporation II Form S-4).
4.3(c) Second Amended and Restated Partnership Secured Limited Guarantee, dated
as of October 13, 1998 by by CEOC, and VPC, Conejo, Niguel, Sal Felipe,
BNG, Del Ranch, Elmore, Leathers and Vulcan in favor of Chemical Trust
Company of California (incorporated by reference to Exhibit 4.3(c) to the
Funding Corporation Form 10-K/A for the year ending December 31, 1998).
4.4 Royalty Guarantor Secured Limited Guarantee, dated as of July 21, 1995, by
the Royalty Guarantor in favor of Chemical Trust Company of California
(incorporated by reference to Exhibit 4.4 to the Funding Corporation Form
S-4).
4.5(a) Exchange and Registration Rights Agreement, dated July 21, 1995, by and
among CS First Boston Corporation, Lehman Brothers Inc. and the Funding
Corporation (incorporated by reference to Exhibit 4.5 to the Funding
Corporation Form S-4).
4.5(b) Exchange and Registration Rights Agreement, dated June 20, 1996, by and
between CS First Boston Corporation and the Funding Corporation
(incorporated by reference to Exhibit 4.5 to the Funding Corporation II
Form S-4).
4.6(a) Collateral Agency and Intercreditor Agreement, dated as of July 21, 1995,
by and among Credit Suisse, Chemical Trust Company of California, the
Funding Corporation and the Guarantors (incorporated by reference to
Exhibit 4.6 to the Funding Corporation Form S-4).
4.6(b) First Amendment to the Collateral Agency and Intercreditor Agreement,
dated asm of June 20, 1996, by and among Credit Suisse, Chemical Trust
Company of California, the Funding Corporation and the Guarantors
(incorporated by reference to Exhibit 4.6(b) to the Funding Corporation II
Form S-4).
4.6(c) Second Amendment to the Collateral Agency and Intercreditor Agreement,
dated as of October 13, 1998, by and among Credit Suisse, Chemical Trust
Company of California, the Funding Corporation and the Guarantors
(incorporated by reference to Exhibit 4.6(c) to the Funding Corporation
Form 10-K/A for the year ending December 31, 1998).
4.7 Stock Pledge Agreement, dated as of July 21, 1995, by Magma Power Company
in favor of Chemical Trust Company of California (incorporated by reference
to Exhibit 4.7 to the Funding Corporation Form S-4).
4.8(a) Purchase Agreement, dated July 18, 1995, by and among CS First Boston
Corporation, Lehman Brothers Inc., the Guarantors and the Funding
Corporation (incorporated by reference to Exhibit 4.8 to the Funding
Corporation Form S-4).
4.8(b) Purchase Agreement, dated June 17, 1996, by and among CS First Boston
Corporation, the Guarantors and the Funding Corporation (incorporated by
reference to Exhibit 4.8 to the Funding Corporation II Form S-4).
4.8(c) Purchase Agreement, dated October 13, 1998 by and among CS First Boston
Corporation, the Guarantors and the Funding Corporation (incorporated by
reference to Exhibit 4.8(c) to the Funding Corporation Form 10-K/A for the
year ending December 31, 1998).
4.9 Support Letter, dated as of July 21, 1995, by and among Magma Power
Company, the Funding Corporation and the Guarantors (incorporated by
reference to Exhibit 4.9 to the Funding Corporation Form S-4).
4.37 Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as
of July 21, 1995, by and among the Funding Corporation, certain banks and
Credit Suisse, as agent (incorporated by reference to Exhibit 4.10 to the
Funding Corporation Form S-4).
4.10(a) Amendment to Notes and to Amended Debt Service Reserve Letter of Credit
and Reimbursement Agreement, dated October 13, 1998, by and among the
Funding Corporation, certain banks and Credit Suisse, as agent
(incorporated by reference to Exhibit 4.10(a) to the Funding Corporation
Form 10-K/A for the year ending December 31, 1998).
4.11 Revolving Credit Agreement, dated as of July 21, 1995, by and among Credit
Suisse and the Funding Corporation (incorporated by reference to Exhibit
4.11 to the Funding Corporation Form S-4).
4.12 Salton Sea Credit Agreement, dated July 21, 1995, by and among SSBP, SSPG
and Fish Lake (incorporated by reference to Exhibit 4.12 to the Funding
Corporation Form S-4).
4.13 Salton Sea Project Note, dated July 21, 1995, by SSBP, SSPG and Fish Lake
in favor of the Funding Corporation (incorporated by reference to Exhibit
4.13 to the Funding Corporation Form S-4).
4.13(a) Salton Sea Project Note (SSI), dated October 13, 1998, by SSBP, SSPG and
Fish Lake in favor of the Funding Corporation (incorporated by reference to
Exhibit 4.13(a) to the Funding Corporation Form 10-K/A for the year ending
December 31, 1998).
4.13(b) Salton Sea Project Note (SSIII), dated October 13, 1998, by SSBP, SSPG
and Fish Lake in favor of the Funding (incorporated by reference to Exhibit
4.13(b) to the Funding Corporation Form 10-K/A for the year ending December
31, 1998).
4.14(a) Deposit and Disbursement Agreement, dated as of July 21, 1995, by and
among the Funding Corporation, Chemical Trust Company of California and the
Guarantors (incorporated by reference to Exhibit 4.14 to the Funding
Corporation Form S-4).
4.14(b) Amendment No. 1 to Deposit and Disbursement Agreement, dated as of June
20, 1996, by and among the Funding Corporation, Chemical Trust Company of
California and the Guarantors (incorporated by reference to Exhibit 4.14(b)
to the Funding Corporation II Form S-4).
4.14(c) Amended and Restated Deposit and Disbursement Agreement, dated as of
October 13, 1998, by and among the Funding Corporation, Chemical Trust
Company of California and the Guarantors. *
4.15 Partnership Interest Pledge Agreement, dated as of July 21, 1995, by Magma
Power Company and Salton Sea Power Company in favor of Chemical Trust
Company of California (incorporated by reference to Exhibit 4.15 to the
Funding Corporation Form S-4).
4.16 Partnership Interest Pledge Agreement, dated as of July 21, 1995, by SSBP
and Salton Sea Power Company in favor of Chemical Trust Company of
California (incorporated by reference to Exhibit 4.16 to the Funding
Corporation Form S-4).
4.17 Stock Pledge Agreement (Pledge of Stock of Fish Lake by Magma Power Company
and the Funding Corporation), dated as of July 21, 1995, by Magma Power
Company and the Funding Corporation in favor of Chemical Trust Company of
California (incorporated by reference to Exhibit 4.17 to the Funding
Corporation Form S-4).
4.18 Cost Overrun Commitment, dated as of July 21, 1995, between MidAmerican,
SSPG, SSBP and Fish Lake (incorporated by reference to Exhibit 4.18 to the
Funding Corporation Form S-4).
4.19(a) Partnership Guarantors Credit Agreement, dated July 21, 1995, by and
among CEOC, VPC and the Funding Corporation (incorporated by reference to
Exhibit 4.19 to the Funding Corporation Form S-4).
4.19(b) Amended and Restated Partnership Guarantors Credit Agreement, dated June
20, 1996, by and among the Partnership Guarantors and the Funding
Corporation (incorporated by reference to Exhibit 4.19 to the Funding
Corporation II Form S-4).
4.19(c) Second Amended and Restated Partnership Guarantors Credit Agreement,
dated October 13, 1998, by and among the Partnership Guarantors and the
Funding Corporation (incorporated by reference to Exhibit 4.19(c) to the
Funding Corporation Form 10-K/A for the year ending December 31, 1998).
4.20 Partnership Guarantors Security Agreement and Assignment of Rights, dated
as of July 21, 1995, by CEOC and VPC in favor of Chemical Trust Company of
California (incorporated by reference to Exhibit 4.20 to the Funding
Corporation Form S-4).
4.21 Stock Pledge Agreement (Pledge of Stock of CEOC by Magma Power Company and
the Funding Corporation), dated as of July 21, 1995, by Magma Power Company
and Funding Corporation in favor of Chemical Trust Company of California
(incorporated by reference to Exhibit 4.21 to the Funding Corporation Form
S-4).
4.22 Stock Pledge Agreement (Pledge of Stock of VPC by Magma Power Company and
the Funding Corporation), dated as of July 21, 1995, by Magma Power Company
and the Funding Corporation in favor of Chemical Trust Company of
California (incorporated by reference to Exhibit 4.22 to the Funding
Corporation Form S-4).
4.23 Royalty Guarantor Credit Agreement, among the Royalty Guarantor and the
Funding Corporation, dated as of July 21, 1995 (incorporated by reference
to Exhibit 4.23 to the Funding Corporation Form S-4).
4.24 Royalty Project Note, dated as of July 21, 1995, by the Royalty Guarantor
in favor of the Funding Corporation (incorporated by reference to Exhibit
4.24 to the Funding Corporation Form S-4).
4.25 Royalty Security Agreement and Assignment of Revenues, dated as of July 21,
1995, by the Royalty Guarantor in favor of Chemical Trust Company of
California (incorporated by reference to Exhibit 4.25 to the Funding
Corporation Form S-4).
4.26 Royalty Deed of Trust, dated as of July 21, 1995, by the Royalty Guarantor
to Chicago Title Company for the use and benefit of Chemical Trust Company
of California (incorporated by reference to Exhibit 4.26 to the Funding
Corporation Form S-4).
4.27 Stock Pledge Agreement (Pledge of Stock of Royalty Guarantor by Magma Power
Company and the Funding Corporation), dated as of July 21, 1995, by Magma
Power Company and the Funding Corporation in favor of Chemical Trust
Company of California (incorporated by reference to Exhibit 4.27 to the
Funding Corporation Form S-4).
4.28 Collateral Assignment of the Imperial Irrigation District Agreements, dated
as of July 21, 1995, by SSBP, SSPG and Fish Lake in favor of Chemical Trust
Company of California (incorporated by reference to Exhibit 4.28 to the
Funding Corporation Form S-4).
4.29 Collateral Assignments of Certain Salton Sea Agreements, dated as of July
21, 1995, by SSBP, SSPG and Fish Lake in favor of Chemical Trust Company of
California (incorporated by reference to Exhibit 4.29 to the Funding
Corporation Form S-4).
4.30 Debt Service Reserve Letter of Credit by Credit Suisse in favor of Chemical
Trust Company of California (incorporated by reference to Exhibit 4.30 to
the Funding Corporation Form S-4).
4.31 Partnership Project Note, dated July 21, 1995, by VPC and CEOC in favor of
the Funding Corporation.
4.31(a) Partnership Project Note (SSI), dated October 13, 1998, by VPC and CEOC
in favor of the Funding Corporation (incorporated by reference to Exhibit
4.31(a) to the Funding Corporation Form 10-K/A for the year ending December
31, 1998).
4.31(b) Partnership Project Note (SSII), dated October 13, 1998, by VPC and CEOC
in favor of the Funding Corporation (incorporated by reference to Exhibit
4.31(b) to the Funding Corporation Form 10-K/A for the year ending December
31, 1998).
4.31(c) Partnership Project Note (SSIII), dated October 13, 1998, by VPC and
CEOC in favor of the Funding Corporation (incorporated by reference to
Exhibit 4.31(c) to the Funding Corporation Form 10-K/A for the year ending
December 31, 1998).
4.32 Collateral Assignment of the Imperial Irrigation District Agreements, dated
as of June 20, 1996, by Vulcan, Elmore, Leathers, VPC and Del Ranch in
favor of Chemical Trust Company of California (incorporated by reference to
Exhibit 4.29 to the Funding Corporation II Form S-4).
4.33 Collateral Assignments of Certain Partnership Agreements, dated as of June
20, 1996, by Vulcan Elmore, Leathers and Del Ranch in favor of Chemical
Trust Company of California (incorporated by reference to Exhibit 4.31 to
the Funding Corporation II Form S-4).
4.34 Debt Service Reserve Letter of Credit by Credit Suisse in favor of Chemical
Trust Company of California (incorporated by reference to Exhibit 4.32 to
the Funding Corporation II Form S-4).
4.35 Partnership Project Note, dated June 20, 1996, by the Partnership
Guarantors in favor of the Funding Corporation in the principal amount of
$54,956,000 (incorporated by reference to Exhibit 4.33 to the Funding
Corporation II Form S-4).
4.36 Partnership Project Note, dated June 20, 1996, by the Partnership
Guarantors in favor of the Funding Corporation in the principal amount of
$135,000,000 (incorporated by reference to Exhibit 4.34 to the Funding
Corporation II Form S-4).
4.37 Deed of Trust, dated as of June 20, 1996, by Vulcan to Chicago Title
Company for the use and benefit of Chemical Trust Company of California
(incorporated by reference to Exhibit 4.35 to the Funding Corporation II
Form S-4).
4.37(a) First Amendment to Deed of Trust, dated October 13, 1998 by Vulcan to
Chicago Title Company for the use and benefit of Chemical Trust Company of
California (incorporated by reference to Exhibit 4.37(a) to the Funding
Corporation Form 10-K/A for the year ending December 31, 1998).
4.38 Deed of Trust, dated as of June 20, 1996, by Elmore to Chicago Title
Company for the use and benefit of Chemical Trust Company of California
(incorporated by reference to Exhibit 4.36 to the Funding Corporation II
Form S-4).
4.38(a) First Amendment to Deed of Trust, dated October 13, 1998, by Elmore to
Chicago Title Company for the use and benefit of Chemical Trust Company of
California (incorporated by reference to Exhibit 4.38(a) to the Funding
Corporation Form 10-K/A for the year ending December 31, 1998).
4.39 Deed of Trust, dated as of June 20, 1996, by Leathers to Chicago Title
Company for the use and benefit of Chemical Trust Company of California
(incorporated by reference to Exhibit 4.37 to the Funding Corporation II
Form S-4).
4.39(a) First Amendment to Deed of Trust, dated October 13, 1998, by Leathers to
Chicago Title Company for the use and benefit of Chemical Trust Company of
California (incorporated by reference to Exhibit 4.39(a) to the Funding
Corporation Form 10-K/A for the year ending December 31, 1998).
4.40 Deed of Trust, dated as of June 20, 1996, by Del Ranch to Chicago Title
Company for the use and benefit of Chemical Trust Company of California
(incorporated by reference to Exhibit 4.38 to the Funding Corporation II
Form S-4).
4.40(a) First Amendment to Deed of Trust, dated October 13, 1998, by Del Ranch
to Chicago Title Company for the use and benefit of Chemical Trust Company
of California (incorporated by reference to Exhibit 4.40(a) to the Funding
Corporation Form 10-K/A for the year ending December 31, 1998).
4.41 Stock Pledge Agreement, Dated as of June 20, 1996, by CEOC, pledging the
stock of Conejo, Niguel and San Felipe in favor of Chemical Trust Company
of California for the benefit of the Secured Parties and the Funding
Corporation (incorporated by reference to Exhibit 4.39 to the Funding
Corporation II Form S-4).
4.42 Stock Pledge Agreement, dated as of June 20, 1996, by VPC, pledging the
stock of BNG in favor of Chemical Trust Company of California for the
benefit of the Secured Parties and the Funding Corporation (incorporated by
reference to Exhibit 4.40 to the Funding Corporation II Form S-4).
4.43 Partnership Interest Pledge Agreement, dated as of June 20, 1996, by VPC
and BNG, pledging the partnership interests in Vulcan in favor of Chemical
Trust Company of California for the benefit of the Secured Parties and the
Funding Corporation (incorporated by reference to Exhibit 4.41 to the
Funding Corporation II Form S-4).
4.44 Partnership Interest Pledge Agreement, dated as of June 20, 1996, by Magma,
CEOC and each of Conejo, Niguel, San Felipe, respectively, pledging the
partnership interests in Del Ranch, Elmore and Leathers, respectively, in
favor of Chemical Trust Company of California for the benefit of the
Secured Parties and the Funding Corporation (incorporated by reference to
Exhibit 4.42 to the Funding Corporation II Form S-4).
4.45 Agreement regarding Security Documents, dated as of June 20, 1996, by and
among the Initial Guarantors, Magma, SSPC, the Funding Corporation and
Chemical Trust Company of California (incorporated by reference to Exhibit
4.43 to the Funding Corporation II Form S-4).
10.1(a) Salton Sea Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing, dated as of July 21, 1995, by SSBP, SSPG and Fish Lake to
Chicago Title Company for the use and benefit of Chemical Trust Company of
California (incorporated by reference to Exhibit 10.1 to the Funding
Corporation Form S-4) .
10.1(b) First Amendment to Salton Sea Deed of Trust, Assignment of Rents,
Security Agreement and Fixed Filing, dated as of June 20, 1996, by SSBP,
SSPG and Fish Lake to Chicago Title Company for the use and benefit of
Chemical Trust Company of California (incorporated by reference to Exhibit
10.2 to the Funding Corporation II Form S-4).
10.1(c) Second Amendment to Salton Sea Deed of Trust, Assignment of Rents,
Security Agreement and Fixed Filing, dated as of October 13, 1998, by SSBP,
SSPG and Fish Lake to Chicago Title Company for the use and benefit of
Chemical Trust Company of California (incorporated by reference to Exhibit
10.1(c) to the Funding Corporation Form 10-K/A for the year ending December
31, 1998).
10.2 Collateral Assignment of Southern California Edison Company Agreements,
dated as of July 21, 1995, by SSPG and Fish Lake in favor of Chemical Trust
Company of California (incorporated by reference to Exhibit 10.2 to the
Funding Corporation Form S-4).
10.3 Contract for the Purchase and Sale of Electric Power from the Salton Sea
Geothermal Facility, dated May 9, 1987 (the "Unit 1 Power Purchase
Agreement"), between Southern California Edison Company and Earth Energy,
Inc. (incorporated by reference to Exhibit 10.3 to the Funding Corporation
Form S-4).
10.4 Amendment No. 1 to the Unit 1 Power Purchase Agreement, dated as of March
30, 1993, between Southern California Edison Company and Earth Energy, Inc.
(incorporated by reference to Exhibit 10.4 to the Funding Corporation Form
S-4).
10.5 Amendment No. 2 to Unit 1 Power Purchase Agreement, dated November 29,
1994, between Southern California Edison Company and SSPG (incorporated by
reference to Exhibit 10.5 to the Funding Corporation Form S-4).
10.6 Contract for the Purchase and Sale of Electric Power, dated April 16, 1985
(the "Unit 2 Power Purchase Agreement"), between Southern California Edison
Company and Westmoreland Geothermal Associates (incorporated by reference
to Exhibit 10.6 to the Funding Corporation Form S-4).
10.7 Amendment No. 1 to Unit 2 Power Purchase Agreement, dated as of December
18, 1987, between Southern California Edison Company and Earth Energy, Inc.
(incorporated by reference to Exhibit 10.7 to the Funding Corporation Form
S-4).
10.8 Power Purchase Contract, dated April 16, 1985 (the "Unit 3 Power Purchase
Agreement"), between Southern California Edison Company and Union Oil
Company of California (incorporated by reference to Exhibit 10.8 to the
Funding Corporation Form S-4).
10.9 Power Purchase Contract (the "Unit 4 Power Purchase Agreement"), dated
November 29, 1994, between Southern California Edison Company, SSPG and
Fish Lake (incorporated by reference to Exhibit 10.9 to the Funding
Corporation Form S-4).
10.10Plant Connection Agreement (Unit 2), dated October 3, 1989, between the
Imperial Irrigation District and Earth Energy, Inc. (incorporated by
reference to Exhibit 10.10 to the Funding Corporation Form S-4).
10.11Plant Connection Agreement, dated August 2, 1988 (Unit 3), between the
Imperial Irrigation District and Desert Power Company (incorporated by
reference to Exhibit 10.11 to the Funding Corporation Form S-4).
10.12Imperial Irrigation District Funding and Construction Agreements as
amended (Units 2 and 3), dated as of June 29, 1987, among the Imperial
Irrigation District, Earth Energy, Inc., Chevron Geothermal Company of
California, Geo East Mesa No. 3, Inc., Magma Power Company, Desert Power
Company, Geo East Mesa No. 2, Inc., Heber Geothermal Company, Ormesa
Geothermal, Ormesa Geothermal II, Vulcan/BN Geothermal Power Company, Union
Oil Company of California, Del Ranch L.P., Elmore L.P., Leathers L.P., Geo
East Mesa Limited Partnership and Imperial Resource Recovery Associates,
L.P. (incorporated by reference to Exhibit 10.12 to the Funding Corporation
Form S-4).
10.13Transmission Service Agreement, dated as of October 3, 1989 (Unit 2),
between the Imperial Irrigation District and Earth Energy, Inc.
(incorporated by reference to Exhibit 10.13 to the Funding Corporation Form
S-4).
10.14Transmission Service Agreement, dated as of August 2, 1988 (Unit 3),
between the Imperial Irrigation District and Desert Power Company
(incorporated by reference to Exhibit 10.14 to the Funding Corporation Form
S-4).
10.15Plant Connection Agreement (Unit 4), dated as of July 14, 1995, by and
between the Imperial Irrigation District, SSPG and Fish Lake (incorporated
by reference to Exhibit 10.15 to the Funding Corporation Form S-4).
10.16Letter Agreement, dated February 2, 1995, between Magma Power Company and
the Imperial Irrigation District (incorporated by reference to Exhibit
10.16 to the Funding Corporation Form S-4).
10.17Transmission Service Agreement (Unit 4), dated as of July 14, 1995, by and
between the Imperial Irrigation District, SSPG and Fish Lake (incorporated
by reference to Exhibit 10.17 to the Funding Corporation Form S-4).
10.18Transmission Line Construction Agreement (Unit 4), dated July 14, 1995,
between the Imperial Irrigation District, SSPG and Fish Lake (incorporated
by reference to Exhibit 10.18 to the Funding Corporation Form S-4).
10.19Funding Agreement, dated June 15, 1988 (Unit 2), between Southern
California Edison Company and Earth Energy, Inc. (incorporated by reference
to Exhibit 10.19 to the Funding Corporation Form S-4).
10.20Second Amended and Restated Administrative Services Agreement, by and
among CEOC, SSBP, SSPG and Fish Lake, dated as of July 15, 1995
(incorporated by reference to Exhibit 10.20 to the Funding Corporation Form
S-4).
10.21Second Amended and Restated Operating and Maintenance Agreement, dated as
of July 15, 1995, by and among Magma Power Company, SSBP, SSPG and Fish
Lake (incorporated by reference to Exhibit 10.21 to the Funding Corporation
Form S-4).
10.22 Intentionally Omitted.
10.23Collateral Assignment of Southern California Edison Company Agreements,
dated as of June 20, 1996, by Vulcan, Elmore, Leathers and Del Ranch in
favor of Chemical Trust Company of California (incorporated by reference to
Exhibit 10.23 to the Funding Corporation II Form S-4).
10.24Administrative Services Agreement, dated as of June 17, 1996, between CEOC
and Vulcan (incorporated by reference to Exhibit 10.24 to the Funding
Corporation II Form S-4).
10.25Amended and Restated Construction, Operating and Accounting Agreement,
dated as of June 17, 1996, between VPC and Vulcan (incorporated by
reference to Exhibit 10.25 to the Funding Corporation II Form S-4).
10.26Long Term Power Purchase Contract, dated March 1, 1984, as amended,
between SCE and Vulcan, as successor to Magma Electric Company
(incorporated by reference to Exhibit 10.26 to the Funding Corporation II
Form S-4).
10.27Transmission Service Agreement, dated December 1, 1988, between VPC and
IID (incorporated by reference to Exhibit 10.27 to the Funding Corporation
II Form S-4).
10.28Plant Connection Agreement, dated as of December 1, 1988, between VPC and
IID (incorporated by reference to Exhibit 10.28 to the Funding Corporation
II Form S-4).
10.29Amended and Restated Administrative Services Agreement, dated as of June
17, 1996 between CEOC and Elmore (incorporated by reference to Exhibit
10.29 to the Funding Corporation II Form S-4).
10.29Amended and Restated Operating and Maintenance Agreement, dated as of June
17, 1996, between CEOC and Elmore (incorporated by reference to Exhibit
10.30 to the Funding Corporation II Form S-4).
10.31Long Term Power Purchase Contract, dated June 15, 1984, as amended,
between SCE and Elmore, as successor to Magma Electric Company
(incorporated by reference to Exhibit 10.31 to the Funding Corporation II
Form S-4).
10.32Transmission Service Agreement, dated as of August 2, 1988, as amended,
between Elmore and IID (incorporated by reference to Exhibit 10.32 to the
Funding Corporation II Form S-4).
10.33Plant Connection Agreement, dated as of August 2, 1988, between Elmore and
IID (incorporated by reference to Exhibit 10.33 to the Funding Corporation
II Form S-4).
10.34Amended and Restated Administrative Services Agreement, dated as of June
17, 1996, between CEOC and Leathers (incorporated by reference to Exhibit
10.34 to the Funding Corporation II Form S-4).
10.35Amended and Restated Operating and Maintenance Agreement, dated as of June
17, 1996, between CEOC and Leathers (incorporated by reference to Exhibit
10.35 to the Funding Corporation II Form S-4).
10.36Long Term Power Purchase Contract, dated August 16, 1985, as amended,
between SCE and Leathers, as successor to Imperial Energy Corporation
(incorporated by reference to Exhibit 10.36 to the Funding Corporation II
Form S-4).
10.37Transmission Service Agreement, dated as of October 3, 1989, as amended,
between Leathers and IID (incorporated by reference to Exhibit 10.37 to the
Funding Corporation II Form S-4).
10.38Plant Connection Agreement, dated as of October 3, 1989, between Leathers
and IID (incorporated by reference to Exhibit 10.38 to the Funding
Corporation II Form S-4).
10.39Amended and Restated Administrative Services Agreement, dated as of June
17, 1996, between CEOC and Del Ranch (incorporated by reference to Exhibit
10.39 to the Funding Corporation II Form S-4).
10.40Amended and Restated Operating and Maintenance Agreement, dated as of June
17, 1996, between CEOC and Del Ranch (incorporated by reference to Exhibit
10.40 to the Funding Corporation II Form S-4).
10.41Long Term Power Purchase Contract, dated February 22, 1984, as amended,
between SCE and Del Ranch, as successor to Magma (incorporated by reference
to Exhibit 10.41 to the Funding Corporation II Form S-4).
10.42Transmission Service Agreement, dated as of August 2, 1988, as amended,
between Del Ranch and IID (incorporated by reference to Exhibit 10.42 to
the Funding Corporation II Form S-4).
10.43Plant Connection Agreement, dated as of August 2, 1988, between Del Ranch
and IID (incorporated by reference to Exhibit 10.43 to the Funding
Corporation II Form S-4).
10.44Funding Agreement, dated May 18, 1990, between SCE and Del Ranch
(incorporated by reference to Exhibit 10.44 to the Funding Corporation II
Form S-4).
10.45Funding Agreement, dated May 18, 1990, between SCE and Elmore
(incorporated by reference to Exhibit 10.45 to the Funding Corporation II
Form S-4).
10.46Funding Agreement, dated June 15, 1990, between SCE and Leathers
(incorporated by reference to Exhibit 10.46 to the Funding Corporation II
Form S-4).
10.47Funding Agreement, dated May 18, 1990, between SCE and Leathers
(incorporated by reference to Exhibit 10.47 to the Funding Corporation II
Form S-4).
10.48Funding Agreement, dated May 18, 1990, between SCE and Vulcan
(incorporated by reference to Exhibit 10.48 to the Funding Corporation II
Form S-4).
24. Power of Attorney
27. Financial Data Schedule.