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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 calendar year ended December 31, 1999 Commission
File No. 333-00608
CE CASECNAN WATER AND ENERGY COMPANY, INC.
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(Exact name of registrant as specified in its charter)
Philippines Not applicable
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(State or other (IRS Employer
jurisdiction of incorporation Identification No.)
or organization)
24th Floor 6750 Building, Ayala Avenue Not applicable
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Makati, Manila, Philippines (Zip Code)
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(Address of principal executive offices)
Registrant's telephone number, including area code: (632) 892-0276
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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______
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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 the Company is held by the original shareholders.
Accordingly there is no market value.
767,162 shares of Common Stock, $0.038 par value, were outstanding on
March 21, 2000.
Documents incorporated by reference: N/A
TABLE OF CONTENTS
PART I.........................................................................3
ITEM 1. BUSINESS..............................................................3
General.....................................................................3
Project.....................................................................3
TERMS OF THE SECURITIES........................................................5
General.....................................................................5
Payment of Principal and Interest...........................................6
Priority of Payments........................................................7
Debt Service Reserve Fund...................................................7
Optional Redemption.........................................................7
Mandatory Redemption........................................................8
Change in Control Put.......................................................8
Distributions...............................................................8
Ranking and Security for the Securities.....................................8
Ratings.....................................................................9
Nature of Recourse on the Securities........................................9
Incurrence of Additional Debt...............................................9
Principal Covenants........................................................10
Insurance..................................................................11
Regulatory Matters.........................................................11
Employees..................................................................11
ITEM 2. PROPERTIES...........................................................11
ITEM 3. LEGAL PROCEEDINGS....................................................11
ITEM4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................11
PART II.......................................................................12
ITEM 5. MARKET FOR COMPANY'S EQUITY AND RELATED STOCKHOLDER MATTERS..........12
ITEM 6. SELECTED FINANCIAL DATA..............................................12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.....................................................12
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK..........13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..........................15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS...................................16
BALANCE SHEETS.............................................................17
ASSETS...............................................................17
Cash.................................................................17
LIABILITIES AND STOCKHOLDERS' EQUITY.................................17
Commitments and Contingencies (Note 7)...............................17
Stockholders' Equity.................................................17
STATEMENTS OF OPERATIONS...................................................18
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY..............................19
STATEMENTS OF CASH FLOWS...................................................20
NOTES TO FINANCIAL STATEMENTS..............................................21
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE....................................................27
PART III......................................................................28
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.....................28
ITEM 11. EXECUTIVE COMPENSATION..............................................30
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......30
Description of Capital Stock...............................................30
Principal Holders..........................................................30
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................31
SIGNATURES....................................................................32
INDEX TO EXHIBITS.............................................................33
PART I
Item 1. Business
General
CE Casecnan Water and Energy Company, Inc. ("Company" or "CE Casecnan") is
a privately held Philippine corporation formed in September of 1994 solely to
develop, construct, own and operate the Casecnan project, a multi-purpose
irrigation and hydroelectric power facility with a rated capacity of
approximately 150 Megawatts ("MW") located on the island of Luzon in the
Republic of the Philippines (the "Casecnan Project"). After the completion of
construction of the Casecnan Project, the Company is expected to be owned at
least 70% (subject to upward adjustment based upon the actual economics of the
Casecnan Project at commencement of commercial operations and the exercise of
certain options by a third party) by MidAmerican Energy Holdings Company, the
successor of CalEnergy Company, Inc. ("MidAmerican"), through its wholly owned
indirect subsidiary CE Casecnan Ltd. The ownership percentage held by the
minority shareholders may be reduced in certain circumstances and such reduction
would result in a corresponding increase in the ownership percentage of the
Company held by affiliates of MidAmerican.
The Securities (described herein) are recourse only to the Company.
MidAmerican has not guaranteed directly or indirectly the payment or performance
of any Company obligations.
The Company's principal executive office is located at 24th Floor 6750
Building, Ayala Avenue, Makati, Manila, Philippines, and its telephone number is
63 2 892 0276. The Company's principal office will be located in Pantabangan in
the Province of Nueva Ecija, Philippines.
Project
The Casecnan Project is located in the central part of the island of Luzon.
It will consist generally of diversion structures in the Casecnan and Taan
Rivers that will capture and divert excess water in the Casecnan watershed by
means of concrete, in-stream diversion weirs and transfer that water through a
transbasin tunnel of approximately 23 kilometers (including the intake adit from
the Taan to the Casecnan River), with a diameter of approximately 6.5 meters to
an existing underutilized water storage reservoir at Pantabangan. During the
water transfer, the elevation differences between the two watersheds will allow
electrical energy to be generated at a new 150 net MW rated capacity power
plant, which will be constructed in an underground powerhouse cavern located at
the end of the water tunnel. A tailrace discharge tunnel of approximately three
kilometers will deliver water from the water tunnel and the new powerhouse to
the Pantabangan Reservoir, providing additional water for irrigation and
increasing the potential electrical generation at two downstream existing
hydroelectric facilities of the Philippine National Power Corporation ("NPC"),
the government-owned and controlled corporation that is the primary supplier of
electricity in the Philippines. Since the water has been determined to remain
suitable for irrigation throughout the Casecnan Project operations of capturing,
diverting and transferring the water, other than removing sediments at the
diversion structures, no treatment will be required. Once in the reservoir at
Pantabangan, the water will be under the control of, and for the use of the
Philippine National Irrigation Administration ("NIA").
The Casecnan Project's diversion structures will be capable of storing
flows from the Casecnan and Taan Rivers over a number of hours, and then
discharging that stored water through the transbasin tunnel and new powerhouse
during the 12 hours (8:00 a.m. through 8:00 p.m.) coinciding with peak
electrical demand hours. Tunnel flows and water depths behind the diversion
structures will be regulated by in-tunnel valves in front of the powerhouse
turbines controlled by the operators at the powerhouse control room.
In early 1994, President Fidel Ramos recognized the need for an irrigation
and hydroelectric project that would provide increased water flows for
irrigation to the rice growing area of Central Luzon, would be environmentally
sound, technically feasible and economically viable, and would involve no
flooding or relocation of local residents. At that time, he directed the
Philippine Department of Agriculture and NPC to work together with other
interested agencies to develop a combined irrigation and hydroelectric project.
Shortly thereafter, the Philippine government was approached by the Company with
a proposal for a project to be developed in the Casecnan area on a
build-own-operate-transfer ("BOOT") basis, that is, an arrangement under which
the Company as developer would agree to build, own and operate the Casecnan
Project during the construction period and a twenty-year cooperation period,
after which ownership and operation of the Project would be transferred to NIA
and NPC at no cost. After conclusion of a public solicitation for competing
proposals, NIA selected the Company as the BOOT developer and entered into a
project agreement with the Company (the "Project Agreement"). The Casecnan
Project was subsequently designated a high priority project under Republic Act
No. 529 by the National Economic and Development Authority of the Philippines.
CE Casecnan is developing the Casecnan Project under the terms of the
Project Agreement between CE Casecnan and NIA. Under the Project Agreement, CE
Casecnan will develop, finance and construct the Casecnan Project over the
construction period, and thereafter own and operate the Casecnan Project for 20
years (the "Cooperation Period"). During the Cooperation Period, NIA is
obligated to accept all deliveries of water and energy, and so long as the
Casecnan Project is physically capable of operating and delivering in accordance
with agreed levels set forth in the Project Agreement, NIA will pay CE Casecnan
a guaranteed fee for the delivery of water and a guaranteed fee for the delivery
of electricity. In addition, NIA will pay a fee for all electricity delivered in
excess of a threshold amount up to a specified amount. NIA will sell the
electricity it purchases to NPC, although NIA's obligations to CE Casecnan under
the Project Agreement are not dependent on NPC's purchase of the electricity
from NIA. All fees to be paid by NIA to CE Casecnan are payable in U.S. dollars.
The guaranteed fees for the delivery of water and energy are expected to provide
approximately 70% of CE Casecnan's revenues.
The Project Agreement provides for additional compensation to CE Casecnan
upon the occurrence of certain events, including increases in Philippine taxes
and adverse changes in Philippine law. Upon the occurrence and during the
continuance of certain force majeure events, including those associated with
Philippine political action, NIA may be obligated to buy the Casecnan Project
from CE Casecnan at a buy out price expected to be in excess of the aggregate
principal amount of the outstanding CE Casecnan debt securities, together with
accrued but unpaid interest. At the end of the Cooperation Period, the Casecnan
Project will be transferred to NIA and NPC for no additional consideration on an
"as is" basis.
The Republic of the Philippines has provided a Performance Undertaking
under which NIA's obligations under the Project Agreement are guaranteed by the
full faith and credit of the Republic of the Philippines. The Project Agreement
and the Performance Undertaking provide for the resolution of disputes by
binding arbitration in Singapore under international arbitration rules.
NIA's payment obligations under the Project Agreement are expected to be
the Company's sole source of operating revenues. Because of the Company's
dependence on NIA, any material failure of NIA to fulfill its obligations under
the Project Agreement and any material failure of the Republic of the
Philippines to fulfill its obligations under the Performance Undertaking would
significantly impair the ability of the Company to meet its obligations under
the Securities.
CE Casecnan financed a portion of the costs of the Casecnan Project through
the issuance of $125,000,000 of its 11.45% Senior Secured Series A Notes due
2005 (the "Series A Notes") and $171,500,000 of its 11.95% Senior Secured Series
B Bonds due 2010 (the "Series B Bonds") and $75,000,000 of its Secured Floating
Rate Notes due 2002, pursuant to an indenture dated November 27, 1995, as
amended to date (the "Casecnan Indenture").
The Casecnan Project was initially being constructed pursuant to a
fixed-price, date-certain, turnkey construction contract (the "Hanbo Contract")
on a joint and several basis by Hanbo Corporation ("Hanbo") and Hanbo
Engineering and Construction Co., Ltd. ("HECC"), both of which are South Korean
corporations. As of May 7, 1997, the Company terminated the Hanbo Contract due
to defaults by Hanbo and HECC including the insolvency of each such company. On
the same date, the Company entered into a new fixed-price, date certain, turnkey
engineering, procurement and construction contract to complete the construction
of the Casecnan Project (the "Replacement Contract"). The work under the
Replacement Contract is being conducted by a consortium consisting of
Cooperativa Muratori Cementisti CMC di Ravenna and Impresa Pizzarotti & C. Spa.,
working together with Siemens A.G., Sulzer Hydro Ltd., Black & Veatch and
Colenco Power Engineering Ltd. (collectively, the "Contractor").
In connection with the Hanbo Contract termination, the Company tendered
four certificates of drawing to Korea First Bank ("KFB") under the irrevocable
standby letter of credit issued by KFB as security under the Hanbo Contract to
pay for certain transition costs and other then ascertainable damages under the
Hanbo Contract. As a result of KFB's wrongful dishonor of the draw request, the
Company filed an action against KFB in New York State Court.
On September 2, 1997, Hanbo and HECC filed a Request for Arbitration before
the International Chamber of Commerce. The Request for Arbitration asserted
various claims by Hanbo and HECC against the Company relating to the terminated
Hanbo Contract and sought damages. On October 10, 1997, the Company served its
answer and defenses in response to the Request for Arbitration as well as
counterclaims against Hanbo and HECC for breaches of the Hanbo Contract.
On April 17, 1998, the Company and Hanbo, HECC, Hanbo Steel Company and KFB
mutually agreed to settle the differences among them related to the Casecnan
Project. Under the settlement, KFB agreed to pay the Company $90 million and the
parties discontinued with prejudice the pending arbitration and litigation
proceedings and released each other from all claims arising out of the
litigation and arbitration. In accordance with the terms of such settlement, the
Company received $10 million from KFB on April 17, 1998 and the remaining
balance of $80 million, including interest thereon, on July 3, 1998.
On November 20, 1999, the Replacement Contract was amended to extend the
Guaranteed Substantial Completion Date for the Casecnan Project to March 31,
2001. This amendment has been approved by the independent engineer under the
Bond Indenture. Accordingly, the Casecnan Project is now expected to become
operational by the second quarter of 2001.
Under the Project Agreement, if NIA is able to accept delivery of water
into the Pantabangan Reservoir and NPC has completed the project related
transmission line, the Company is liable to pay NIA $5,000 per day for each day
of delay in completion of the Casecnan Project beyond July 27, 2000, increasing
to $13,500 per day for each day of delay in completion beyond November 27, 2000.
The Company's ability to make payments on any of its existing and future
obligations is dependent on NIA's and the Republic of the Philippines'
performance of their obligations under the Project Agreement and the Performance
Undertaking, respectively. No shareholders, partners or affiliates of the
Company, including MidAmerican, and no directors, officers or employees of the
Company will guarantee or be in any way liable for payment of the Company's
obligations. As a result, payment of the Company's obligations depends upon the
availability of sufficient revenues from the Company's business after the
payment of operating expenses.
NIA's payments of obligations under the Project Agreement will be
substantially denominated in United States dollars and are expected to be the
Company's sole source of operating revenues. Because of the Company's dependence
on NIA, any material failure of NIA to fulfill its obligations under the Project
Agreement and any material failure of the Republic of the Philippines to fulfill
its obligations under the Performance Undertaking would significantly impair the
ability of the Company to meet its existing and future obligations.
There are pending bills before the Philippine Congress and the Philippine
Senate aimed at restructuring the electric industry, privatization of the NPC
and introduction of a competitive electricity market, among others. The passage
of the bills may have an impact on the Company's future operations and the
industry as a whole, the effect of which is not yet determinable and estimable.
TERMS OF THE SECURITIES
General
In June 1996, the Company exchanged (i) $125,000,000 aggregate principal
amount of the Series A Notes for an equal principal amount of New Series A
Notes, and (ii) $171,500,000 aggregate principal amount of the Series B Bonds
for an equal amount of New Series B Bonds. The Series A Notes and Series B Bonds
are sometimes referred to herein as the "Old Securities", and the New Series A
Notes and the New Series B Bonds are sometimes referred to herein as the "New
Securities". The New Securities are the obligations of the Company evidencing
the same indebtedness as the Old Securities and will be entitled to the benefits
of the Indenture, which governs both the Old Securities and the New Securities.
The form and terms (including principal amount, interest rate, maturity and
ranking) of the New Securities are the same as the form and terms of the Old
Securities, except that (i) the New Securities have been registered under the
Securities Act and therefore will not be subject to certain restrictions on
transfer applicable to the Old Securities and will not be entitled to
registration rights, and (ii) the New Securities will not provide for any
increase in the interest rate thereon.
Simultaneously with the offering of the Old Securities, the Company also
issued and sold $75,000,000 aggregate principal amount of LIBOR Plus 3.00%
Senior Secured Floating Rate Notes due November 15, 2002 ("FRNs") that rank pari
passu with and will share the collateral on a pro rata basis with the Old
Securities and the New Securities and are entitled to the benefits of the
Indenture and the Depositary Agreement. The Old Securities, New Securities and
FRNs are collectively referred to herein as the "Securities."
The Securities are direct obligations of the Company, secured solely by the
Company collateral.
Payment of Principal and Interest
Interest on the New Securities is payable semiannually on each May 15 and
November 15 (the "New Securities Interest Payment Date"), commencing May 15,
1996, to the registered Holders thereof at the close of business on the May 1
and November 1, as the case may be, preceding each New Securities Interest
Payment Date. The initial average life of the Series A Note was 8.84 years, and
the initial average life of the Series B Bonds was 11.57 years.
The $125,000,000 principal of the 11.45% New Series A Note due November 15,
2005 are payable in semiannual installments, commencing May 15, 2003, as
follows:
Percentage of Principal
Payment Date Amount Payable
- ------------ --------------
May 15, 2003 13.50%
November 15, 2003 13.50%
May 15, 2004 17.00%
November 15, 2004 17.00%
May 15, 2005 19.50%
November 15, 2005 19.50%
The $171,500,000 principal of the 11.95% New Series B Bonds due
November 15, 2010 are payable in semiannual installments, commencing May 15,
2002, as follows:
Percentage of Principal
Payment Date Amount Payable
- ------------ --------------
May 15, 2002 2.50%
November 15, 2002 2.50%
May 15, 2003 2.25%
November 15, 2003 2.25%
May 15, 2004 2.00%
November 15, 2004 2.00%
May 15, 2005 1.75%
November 15, 2005 1.75%
May 15, 2006 10.50%
November 15, 2006 10.50%
May 15, 2007 11.00%
November 15, 2007 11.00%
May 15, 2008 11.00%
November 15, 2008 11.00%
May 15, 2009 4.00%
November 15, 2009 4.00%
May 15, 2010 5.00%
November 15, 2010 5.00%
The $75,000,000 principal of the FRNs due November 15, 2002 are payable in
semiannual installments, commencing November 15, 2000, as follows:
Percentage of Principal
Payment Date Amount Payable
- ------------ --------------
November 15, 2000 25.00%
May 15, 2001 19.50%
November 15, 2001 20.00%
May 15, 2002 18.00%
November 15, 2002 17.50%
The FRNs bear interest at LIBOR plus 3.00% per annum and will be payable
quarterly on each February 15, May 15, August 15, and November 15, commencing on
February 15, 1996, to the registered Holders thereof at the close of business on
the preceding February 1, May 1, August 1, and November 1, as the case may be.
Priority of Payments
Prior to completion of the Casecnan Project pursuant to the Replacement
Contract, all net proceeds of the Securities and any liquidated damages proceeds
will be deposited in the Construction Fund and disbursed to pay for budgeted
construction or restoration costs, including interest and, if applicable,
principal on the Securities.
After completion, except as otherwise provided for with respect to
mandatory redemptions and loss proceeds, all revenues received by the Company
from the Casecnan Project will be paid into the Revenue Fund maintained by the
Depositary (other than certain peso payments required to be used for VAT
payments to the Republic of the Philippines). Amounts paid into the Revenue Fund
shall be distributed in the following order of priority: (a) to pay operating
and maintenance costs; (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 (including any increased costs
necessary to gross up such payments for certain withholding taxes and other
assessments and charges), and principal and interest on other senior debt, if
any; (d) to cause the Debt Service Reserve Fund to equal the Debt Service
Reserve Fund Required Balance, as defined below; (e) to pay indemnification
expenses and other expenses to the Secured Parties and certain other costs, and
(f) to the Distribution Fund or Distribution Suspense Fund, as applicable.
Debt Service Reserve Fund
At completion, the Company will establish a Debt Service Reserve Fund for
the benefit of the Holders of the Securities, which will be funded in cash from
any remaining shareholder capital contributions in the Capital Contribution Fund
or, to the extent required, from operating revenues as described under "Priority
of Payments" above. Such amounts will be deposited into the Debt Service Reserve
Fund from time to time to the extent required to cause it to equal the Debt
Service Reserve Fund Required Balance which is intended to approximate the
highest amount of the payments of principal and interest to be made on the
Securities during any semiannual period over the subsequent three years.
Optional Redemption
On and after the seventh anniversary of the closing (as defined in the
Trust Indenture) of the Casecnan Project financing, the New Series A Notes are
subject to optional redemption by the Company, in whole and not in part, at par
plus accrued interest to the Redemption Date.
The New Series B Bonds are subject to optional redemption by the Company,
at any time, 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 150 basis points.
After completion, the FRN's are subject to optional redemption by the
Company, in whole or in part, pro rata at par plus accrued interest, on any FRN
interest payment date.
The Company also has the option to redeem the Securities, in whole or in
part, at par plus accrued interest at any time if, as a result of any change in
Philippine tax law or in the application or interpretation of Philippine tax law
occurring after the date of issuance of the Securities, the Company is required
to pay certain additional amounts described in the Indenture.
Mandatory Redemption
The Securities are subject to mandatory redemption, pro rata, at par plus
accrued interest to the redemption date, (a) upon the receipt by the Company of
loss proceeds that exceed $15 million in respect of certain events of property
or casualty loss or similar events, unless the funds are to be utilized by the
Company for an Approved Restoration Plan; or (b) upon the receipt by the Company
of proceeds realized in connection with a Project Agreement Buyout.
Change in Control Put
Upon the occurrence of a Change of Control, each Holder will have the right
to require the Company to repurchase all or any part of such Holder's Securities
at a purchase price in cash equal to 101% of the principal amount thereof, plus
accrued interest to the date of repurchase in accordance with the procedures set
forth in the Indenture. There is no assurance that upon a Change in Control the
Company will have sufficient funds to repurchase the Securities.
Distributions
Prior to completion, there will be no distributions to the Company or its
shareholders. After completion, distributions may be made only from and to the
extent of monies on deposit in the Distribution Fund or Distribution Suspense
Fund. Distributions are subject to the prior satisfaction of the following
conditions:
(a) The amounts contained in the Principal Fund and the Interest
Fund will 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 12-month
period is equal to or greater than 1.35 to 1 as certified by
an officer of the Company;
(d) The projected Debt Service Coverage Ratio of the Securities
for the succeeding 12-month period is equal to or greater than
1.35 to 1, as certified by an officer of the Company; and,
(e) The Debt Service Reserve Fund has a balance equal to or
greater than the Debt Service Reserve Fund Required Balance.
Ranking and Security for the Securities
The Securities and the FRNs are senior debt of the Company and are secured
by (a) an assignment of all revenues received by the Company from the Casecnan
Project; (b) a collateral assignment of all material contracts; (c) a lien on
any accounts and funds on deposit under the Depositary Agreement; (d) a pledge
of approximately 100% of the capital stock of the Company, subject to release in
certain circumstances relating to accessing political risk insurance for the
benefit of the shareholders; and (e) a lien on all other material assets and
property interests of the Company. The Securities will rank pari passu with and
will share the Collateral on a pro rata basis with certain other senior secured
debt, if any (provided that the Debt Service Reserve Fund shall be collateral
solely for the obligations under the Securities). The proceeds of any political
risk insurance covering the capital investment will not be part of the
collateral for the Securities. While under the Indenture the Company may incur
certain permitted debt senior to the Securities, it has no present intention to
do so.
Ratings
Moody's and Standard & Poor's have assigned the Securities ratings of "Ba2"
and "BB+", respectively. There is no assurance that any such credit rating will
remain in effect for any given period of time or that such rating will not be
lowered, suspended or withdrawn entirely by the applicable rating agency, if, in
such rating agency's judgment, circumstances so warrant.
Nature of Recourse on the Securities
The Company's obligations to make payments of principal, premium, if any,
and interest on the Securities are, obligations solely of the Company secured
solely by the collateral. Neither the shareholders of the Company nor any
Affiliate, including MidAmerican, incorporator, officer, director or employee
thereof or of the Company guaranteed the payment of, nor have any obligation
with respect to payment of the Securities, except to the extent that affiliates
of MidAmerican who are stockholders of the Company have pledged their capital
stock in the Company as security for the notes and bonds issued by the Company.
As a result, payment of the Company's obligations depends upon the availability
of sufficient revenues from the Company's business after the payment of
operating expenses.
Incurrence of Additional Debt
The Company shall not incur any debt other than "Permitted Debt."
"Permitted Debt" means:
(a)......The Securities;
(b)......After completion, debt incurred to finance the making of
capital improvements to the Casecnan Project required to maintain compliance
with applicable law or anticipated changes therein; provided that no such Debt
may be incurred unless at the time of incurrence the independent engineer
confirms as reasonable (i) a certification by the Company (containing customary
assumptions and qualifications) that the proposed capital improvements are
reasonably expected to enable the Casecnan Project to comply with applicable or
anticipated legal requirements and (ii) the calculations of the Company that
demonstrate, after giving effect to the incurrence of such debt, the minimum
project 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 1.3 to 1;
(c)......After completion, Debt incurred to finance the making of
capital improvements to the Casecnan Project 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 (I) a certification by the Company (containing
customary assumptions and qualifications) that the proposed capital improvements
are technically feasible and prudent and (II) the calculations of the Company
that demonstrate, after giving effect to the incurrence of such debt, (x) the
minimum project Debt Service Coverage Ratio for the next four consecutive fiscal
quarters, commencing with the quarter in which such debt is incurred, taken as
one annual period, and in every fiscal year thereafter, will not be less than
1.4 to 1 and (y) 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;
(d)......After completion, working capital debt in an aggregate amount
outstanding at any time not to exceed $5 million;
(e)......Debt incurred in connection with certain permitted interest rate
and currency hedging arrangements;
(f)......Subordinated debt from affiliates in an aggregate amount not to
exceed $150 million prior to completion and $100 million after completion, which
shall be used to finance capital, operating or other costs with respect to the
Project;
(g)......Debt incurred for purposes for which permitted liens may be
incurred;
(h)......Debt contemplated to be incurred pursuant to the Casecnan Project
documents, including obligations in connection with any letter of credit in an
aggregate amount outstanding at any time not to exceed $15 million;
(i)......Purchase money debt and other ordinary course trade debt to
support operation and maintenance of the Casecnan Project, in an aggregate
amount at any time not to exceed $35 million;
(j)......Permitted refinancing debt, if, as certified by an authorized
officer of the Company at the time of incurrence, (A)(i) after giving effect to
the incurrence of such debt, (x) the minimum projected Debt Service Coverage
Ratio for the next four consecutive fiscal quarters in which such debt is
incurred, taken as one annual period, and in every fiscal year thereafter, will
not be less than 1.5 to 1, and (y) for each subsequent fiscal year through the
final maturity date, the average project Debt Service Coverage Ratio will not be
less than 2.0 to 1, and (ii) the final maturity and average life of the debt
incurred each exceed those of the debt remaining, (B) each principal payment
equals that of each corresponding principal payment of the debt being replaced
or (C) the rating agencies confirm that the incurrence of such debt will not
result in a rating downgrade; and,
(k)......Debt incurred by the Company prior to completion as necessary for
financing, engineering, construction, completion, testing and start-up of the
Casecnan Project in accordance with an Approved Completion Plan in order to
achieve completion ("Pre-Completion Additional Debt"), provided that (i) the
rating agencies confirm that the incurrence of such debt will not result in a
rating downgrade; or (ii)(A) the independent engineer has confirmed (subject to
customary assumptions and qualifications) as reasonable the technical
feasibility of the Approved Completion Plan including a certification that
(subject to customary assumptions and qualifications) the net proceeds of such
Debt and other funds available to the Company (from Liquidated Damages Proceeds
or otherwise) are reasonably expected to be sufficient to fund the costs of
reaching completion; and (B) the Company certifies at the time of incurrence
(with customary assumptions and qualifications) that (x) the Approved Completion
Plan is technically feasible and prudent, (y) after giving effect to the
incurrence of such debt, the minimum projected Debt Service Coverage Ratio for
the four fiscal quarters commencing with the quarter that commences immediately
after the projected date of commercial operation of the Casecnan Project, taken
as one annual period, and in every fiscal year thereafter, will not be less than
1.3 to 1, and (z) after giving effect to incurrence of such debt, the average
projected Debt Service Coverage Ratio for all succeeding Calendar Years until
the final maturity date will not be less than 1.5 to 1.
Principal Covenants
Principal covenants under the Indenture require the Company, subject to
certain exceptions and qualifications, (a) not to incur (i) any debt except
permitted debt or (ii) any lien upon any of its assets except permitted liens;
(b) not to enter into any transaction of merger or consolidation, change its
form of organization, liquidate, wind-up or dissolve itself; (c) not to enter
into non-arm's length transactions or agreements with affiliates; (d) not to
engage in any business other than as contemplated by the Indenture; (e) not to
enter into certain change orders under the Turnkey Construction Contract or
amend the Approved Construction Budget and Schedule (or an Approved Completion
Plan), or amend, terminate or otherwise modify any material Project Document to
which it is a party, except as permitted under the Indenture; (f) not to sell,
lease or transfer any property or assets material to the Casecnan Project except
in the ordinary course of business; (g) to construct the Casecnan Project in
accordance with the Approved Construction Budget and Schedule; (h) to operate
and maintain the Casecnan Project in accordance with the Approved Operation and
Maintenance Budget; (i) to maintain insurance as required under the Indenture;
and (j) to enter into an interest rate agreement for the FRNs, within 30 days of
Closing, at a LIBOR cap of up to 7.5%.
Insurance
The Company maintains insurance with respect to the Casecnan Project of a
type and in such amounts as are generally carried by companies engaged in
similar businesses and owning similar projects that are financed in a similar
manner. These coverages will include casualty insurance, including flood and
earthquake coverage, business interruption insurance, primary and excess
liability insurance, automobile insurance and workers compensation insurance.
However, the proceeds of such insurance may not be adequate to cover reduced
revenues, increased expenses or other liabilities arising from the occurrence of
catastrophic events. Moreover, there can be no assurance that such insurance
coverage will be available in the future at commercially reasonable rates or
that the amounts for which the Company will be insured will cover all losses.
Nevertheless, the Company will not reduce or cancel coverages if the Insurance
Consultant determines it is not reasonable to do so and insurance is available
on commercially reasonable terms.
Regulatory Matters
The Company is subject to a number of Philippine statutory and regulatory
standards and required and desirable approvals, including those relating to
energy and environmental laws. Many permits and regulatory approvals are
required and desirable for the construction and operation of the Casecnan
Project. A number of these permits and regulatory approvals have not yet been
obtained. Some of the permits and regulatory approvals that have been obtained
contain conditions, and a number of the permits and approvals not yet obtained
may contain conditions when they are issued. Delay in receipt of or failure to
obtain these permits or approvals or to satisfy any of these conditions could
delay completion of the construction of the Casecnan Project, restrict the
operation of the Casecnan Project, or result in additional costs or taxes. The
adoption of new laws, policies or regulations, or changes in the interpretation
or application of existing laws, policies and regulations, that modify the
present regulatory environment could have a material adverse effect on the
Company's ability to construct or operate the Casecnan Project and could trigger
the Company's right to sell the Casecnan Project to NIA. Upon such sale, the
Securities will be subject to mandatory redemption.
Employees
After completion, the Casecnan Project is expected to employ approximately
25 people, consisting of operations, maintenance, logistics, compliance, and
engineering personnel. At the powerhouse control room, personnel will monitor,
direct and control the operations and maintenance of the whole Casecnan Project.
The control room will be staffed 24 hours per day and will be the contact point
for the Casecnan Project's customers and others. At the diversion structures,
personnel will be responsible to ensure that the trash racks at the tunnel
intakes are kept clean and maintained and that excessive sediment build-up
behind the structure is prevented.
Item 2. Properties
CE Casecnan does not separately own or lease office space but has arranged
for a separate suite at the offices of MidAmerican's affiliate in Manila.
Item 3. Legal Proceedings
The Company is not a party to any material outstanding litigation.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable.
PART II
Item 5. Market for Company's Equity and Related Stockholder Matters.
Not Applicable.
Item 6. Selected Financial Data
Amounts in Thousands Except Per Share Amounts
Year Ended December 31,
1999 1998 1997 1996 1995
- ---------------------------- --------- --------- --------- --------- -----------
- ---------------------------- --------- --------- --------- --------- -----------
Total revenue $ 11,656 $ 19,533 $ 19,786 $ 25,611 $ 2,494
Net income (loss) to common
stockholders 699 3.81 (11,264) (13,211) 1,200)
Net income (loss) per share 0.91 0.50 (14.68) (17.22) (2.09)
Total assets 522,398 553,433 491,912 490,162 501,160
Total liabilities 423,157 454,891 393,751 380,737 378,524
Notes and bonds payable 371,500 371,500 371,500 371,500 371,500
Stockholders' equity 99,241 98,542 98,161 109,425 122,636
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations:
- ---------------------
The Company is in the construction stage and has not yet started commercial
operations as of December 31, 1999. The quarter and year ended December 31, 1999
revenue of $2.7 million and $11.7 million respectively, consists of interest
income on cash and investment balances. The quarter and year ended December 31,
1999 interest expense of $11.3 million and $45.0 million, respectively, less
amounts capitalized of $9.8 million and $36.5 million, respectively, and
amortization of bond issue costs of $0.3 million and $1.3 million, respectively,
are related to the notes and bonds payable issued by the Company in the fourth
quarter of 1995.
Liquidity and Capital Resources:
- -------------------------------
In November 1995, the Company closed the financing and commenced
construction of the Casecnan Project, a combined irrigation and 150 net MW
hydroelectric power generation project located in the central part of the island
of Luzon in the Republic of the Philippines.
CE Casecnan, which is expected to be indirectly owned at least 70% by
MidAmerican, is developing the Casecnan Project under the terms of the Project
Agreement ("Project Agreement") between CE Casecnan and the NIA. Under the
Project Agreement, CE Casecnan will develop, finance and construct the Casecnan
Project over the construction period, and thereafter own and operate the
Casecnan Project for 20 years (the "Cooperation Period"). During the Cooperation
Period, NIA is obligated to accept all deliveries of water and energy, and so
long as the Casecnan Project is physically capable of operating and delivering
in accordance with agreed levels set forth in the Project Agreement, NIA will
pay CE Casecnan a guaranteed fee for the delivery of water and a guaranteed fee
for the delivery of electricity. In addition, NIA will pay a fee for all
electricity delivered in excess of a threshold amount up to a specified amount.
NIA will sell the electricity it purchases to the NPC, although NIA's
obligations to CE Casecnan under the Project Agreement are not dependent on the
purchase of the electricity from NIA by NPC. All fees to be paid by NIA to CE
Casecnan are payable in U.S. dollars.
The Casecnan Project was initially being constructed pursuant to a
fixed-price, date-certain, turnkey construction contract (the "Hanbo Contract")
on a joint and several basis by Hanbo Corporation ("Hanbo") and Hanbo
Engineering and Construction Co., Ltd. ("HECC"), both of which are South Korean
corporations. As of May 7, 1997, the Company terminated the Hanbo Contract due
to defaults by Hanbo and HECC including the insolvency of each such company. On
the same date, the Company entered into a new fixed-price, date certain, turnkey
engineering, procurement and construction contract to complete the construction
of the Casecnan Project (the "Replacement Contract"). The work under the
Replacement Contract is being conducted by a consortium consisting of
Cooperativa Muratori Cementisti CMC di Ravenna and Impresa Pizzarotti & C. Spa.,
working together with Siemens A.G., Sulzer Hydro Ltd., Black & Veatch and
Colenco Power Engineering Ltd. (collectively, the "Contractor").
CE Casecnan financed a portion of the cost of the Casecnan Project through
the issuance of $125 million of its 11.45% Senior Secured Series A Notes due
2005 and $171.5 million of its 11.95% Senior Secured Series B Bonds due 2010 and
$75 million of its Secured Floating Rate Notes due 2002, pursuant to an
indenture dated November 27, 1995, as amended to date (the "Casecnan
Indenture").
The securities are senior debt of the Company and are secured by a
collateral assignment of all revenues received from the Project, a collateral
assignment of all material contracts, a lien on any accounts and funds on
deposit under a Deposit and Disbursement Agreement, a pledge of 100% of the
capital stock of the Company and a lien on all other material assets and
property. The securities rank pari passu with and will share the collateral on a
pro rata basis with other senior secured debt, if any.
The securities are subject to certain optional and mandatory redemption
schemes as provided for in the Casecnan Indenture.
The debt covenants contain certain restrictions as to incurrence of
additional indebtedness; merger, consolidation, dissolution, or any significant
change in corporate structure; non-arm's length transactions or agreements with
affiliates; material change in the Turnkey Construction Contract; and sale,
lease, or transfer of properties material to the Project, among others.
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 Company had fixed-rate long-term debt of $296.5
million in principal amount and having a fair value of $288.5 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 $17.6 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.
At December 31, 1999, the Company had floating-rate obligations of $75.0
million that expose the Company to the risk of increased interest expense in the
event of increases in short-term interest rates. If the floating rates were to
increase by 10% from December 31, 1999 levels, the Company's consolidated
interest expense would increase by approximately $38,000 each month in which
such increase continued based upon December 31, 1999 principal balances.
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 and construction
uncertainty, operating uncertainty, uncertainties relating to doing business
outside of the United States, uncertainties relating to international economic
and political conditions and uncertainties regarding the impact of regulations,
changes in government policy, industry deregulation and competition. The Company
assumes no responsibility to update forward-looking information contained
herein.
Item 8. Financial Statements and Supplementary Data
Report of Independent Public Accountants......................................17
Balance Sheets as of December 31, 1999 and 1998...............................18
Statements of Operations for the Years Ended December 31, 1999,
1998 and 1997 and for the Period from the Date of Inception (September
21, 1994) to December 31, 1999................................................19
Statements of Changes in Stockholders' Equity for the Period from
Inception (September 21, 1994) to December 31, 1999...........................20
Statements of Cash Flows for the Years Ended December 31, 1999,
1998 and 1997 and for the Period from the Date of Inception (September 21,
1994) to December 31, 1999....................................................21
Notes to Financial Statements.................................................22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Stockholders and the Board of Directors
CE Casecnan Water and Energy Company, Inc.
We have audited the accompanying balance sheets of CE Casecnan Water and Energy
Company, Inc. (a company in the development stage) as of December 31, 1999 and
1998, and the related statements of operations, changes in stockholders' equity
and cash flows for each of the three years in the period ended December 31, 1999
and for the period from the date of inception (September 21, 1994) to 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 auditing standards generally accepted
in the United States of America. 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, the financial statements referred to above present fairly, in
all material respects, the financial position of CE Casecnan Water and Energy
Company, Inc. as of December 31, 1999 and 1998, and the results of its
operations, changes in stockholders' equity, and its cash flows for each of the
three years in the period ended December 31, 1999 and for the period from the
date of inception (September 21, 1994) to December 31, 1999 in conformity with
accounting principles generally accepted in the United States of America.
SyCip Gorres Velayo & Co
An Arthur Andersen Member Firm
January 25, 2000
CE CASECNAN WATER AND ENERGY COMPANY, INC.
(A Company in the Development Stage)
- --------------------------------------------------------------------------------
BALANCE SHEETS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999 AND 1998
(Presented in United States Dollars)
(Amounts in Thousands, Except Number of Shares and Par Value )
1999 1998
- --------------------------------------------------------------------------------
ASSETS
Cash $ 2,318 $ 1,996
Restricted Cash and Short-term Investments (Note 4) 42,064 145,958
Accrued Interest Receivable 1,750 3,014
Restricted Investments (Note 4) 122,175 122,341
Bond Issue Costs - net (Note 4) 9,010 10,334
Development and Construction Costs (Notes 1, 4 and 7) 337,983 261,563
Deferred Income Tax - net (Note 5) 7,098 8,227
- -------------------------------------------------------------------------------
$522,398 $553,433
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Expenses (Note 7) $ 41,633 $ 82,635
Advances from Affiliates (Note 3) 10,024 756
Notes and Bonds Payable (Note 4) 371,500 371,500
- --------------------------------------------------------------------------------
Commitments and Contingencies (Note 7)
Stockholders' Equity
Capital stock-$0.038 par value (Note 4, 5 and 6)
Authorized - 2,148,000 shares
Issued - 767,162 shares 29 29
Additional paid-in capital (Note 4) 123,807 123,807
Accumulated deficit (24,595) (25,294)
- -------------------------------------------------------------------------------
99,241 98,542
- -------------------------------------------------------------------------------
$522,398 $553,433
===============================================================================
See accompanying Notes to Financial Statements.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
(A Company in the Development Stage)
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 AND THE PERIOD FROM THE
DATE OF INCEPTION (SEPTEMBER 21, 1994) TO DECEMBER 31, 1999 (Presented in United
States Dollars) (Amounts in Thousands Except Net Income (Loss) Per Share and
Average Number of Shares Outstanding)
From the date
of Inception
(September 21,
1994) to
December 31,
1999 1998 1997 1999
- ---------------------------------------------------------------------------------------------------
INTEREST INCOME $ 11,656 $ 19,533 $ 19,786 $ 79,079
- ---------------------------------------------------------------------------------------------------
EXPENSES
Interest - net of interest capitalized 8,504 17,867 33,653 106,192
Amortization of bond issue costs 1,324 1,179 1,053 4,580
- ---------------------------------------------------------------------------------------------------
9,828 19,046 34,706 110,772
- ---------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAX 1,828 487 (14,920) (31,693)
BENEFIT FROM (PROVISION FOR)
DEFERRED INCOME TAX (Note 5) (1,129) (106) 3,656 7,098
- ---------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 699 $ 381 ($11,264) ($24,595)
===================================================================================================
Net Income (Loss) Per Share $ 0.91 $ 0.50 ($14.68) ($34.19)
===================================================================================================
Average Number of Common Shares Outstanding 767,162 767,162 767,162 719,389
===================================================================================================
See accompanying Notes to Financial Statements.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
(A Company in the Development Stage)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
AND THE PERIOD FROM INCEPTION (SEPTEMBER 21, 1994)
TO DECEMBER 31, 1999
(Presented in United States Dollars)
(Amounts in Thousands, Except Number of Shares and Par Value )
Outstanding Additional
Common Common Paid-in Accumulated
Shares Stock Capital Deficit Total
- ------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 21, 1994 - $ - $ - $ - $ -
ISSUANCE OF COMMON SHARES
AT $0.038 PAR VALUE 537,014 20 530 - 550
- ------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 537,014 20 530 - 550
ADDITIONAL ISSUANCE OF
COMMON SHARES (Note 6) 230,148 9 - - 9
ADDITIONAL PAID-IN CAPITAL
(Note 4) - - 123,277 - 123,277
NET LOSS - - - (1,200) (1,200)
- -------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 767,162 29 123,807 (1,200) 122,636
NET LOSS - - - (13,211) (13,211)
- -------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 767,162 29 123,807 (14,411) 109,425
NET LOSS - - - (11,264) (11,264)
- -------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 767,162 29 123,807 (25,675) 98,161
NET LOSS - - - 381 381
- -------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 767,162 29 123,807 (25,294) 98,542
NET INCOME - - - 699 699
- -------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 767,162 $ 29 $123,807 ($24,595) $ 99,241
=============================================================================================================
See accompanying Notes to Financial Statements.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
(A Company in the Development Stage)
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 AND THE PERIOD FROM THE
DATE OF INCEPTION (SEPTEMBER 21, 1994) TO DECEMBER 31, 1999 (Presented in United
States Dollars) (Amounts in Thousands)
From the date
of Inception
(September 21,
1994) to
December 31,
1999 1998 1997 1999
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 699 $ 381 ($11,264) ($24,595)
Adjustments to reconcile net income (loss)
Amortization of bond issue costs 1,324 1,179 1,053 4,580
Provision for (benefit from) deferred 1,129 106 (3,656) (7,098)
Changes in assets and liabilities
Decrease (increase) in accrued 1,264 (52) 1,996 (1,750)
Increase in accounts payable - 2,195 360 8,650
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 4,416 3,809 (11,511) (20,213)
- ----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to development and construction costs (76,420) (103,297) (107,474) (337,983)
Decrease (increase) in restricted:
Cash and short-term investments 103,894 37,520 (39,356) (42,064)
Investments 166 4,343 146,331 (122,175)
Increase (decrease) in accounts payable (41,002) 61,248 10,029 32,983
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (13,362) (186) 9,530 (469,239)
- ----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in advances from affiliates 9,268 (2,303) 2,625 10,024
Increase in bond issue costs - - - (13,590)
Proceeds from:
Capital stock - - - 123,836
Notes and bonds payable - - - 371,500
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 9,268 (2,303) 2,625 491,770
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH 322 1,320 644 2,318
CASH AT BEGINNING OF PERIOD 1,996 676 32 -
- ----------------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 2,318 $ 1,996 $ 676 $ 2,318
================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Interest paid during the period
(net of amount capitalized) $ 8,670 $ 18,477 $ 33,293 $ 100,509
================================================================================================================
See accompanying Notes to Financial Statements.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
(A Company in the Development Stage)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Organization
The Company was registered with the Philippine Securities and Exchange
Commission on September 21, 1994, with a calendar year which ends on December
31. Its primary purpose is to design, develop, construct, erect, assemble,
commission, operate and own a hydroelectric power plant and the related
facilities for conversion into electricity of water provided by and under
contract with the Philippine Government or any government-owned or controlled
corporation (GOCC).
The Company has a contract with the Philippine Government, through the
National Irrigation Administration (NIA) (a GOCC), for the development and
construction of a hydroelectric power plant and related facilities under a
build-own-operate-transfer agreement (Project Agreement), covering a 20-year
cooperation period with "take-or-pay" obligations for water and electricity. At
the end of the 20-year cooperation period, the combined irrigation and 150 net
megawatt hydroelectric power generation project (the Casecnan Project) will be
transferred to the Philippine Government at no cost. The Philippine Government
also signed a Performance Undertaking which, among others, affirms and
guarantees the obligations of NIA under the Project Agreement. Construction of
the Casecnan Project commenced in 1995 and the related costs are included under
"Development and Construction Costs" account in the balance sheets.
The Company is in the development stage and has not yet started commercial
operations as of December 31, 1999.
After the completion of the aforementioned project, the Company is expected
to be at least 70% owned by MidAmerican Energy Holdings Company (MidAmerican),
the successor of CalEnergy Company, Inc., subject to upward adjustment based
upon the actual economics of the Casecnan Project at commencement of commercial
operations.
2. Summary of Significant Accounting Policies
Basis of Presentation
The financial statements of the Company were prepared in United States
dollar amounts. Gains or losses resulting from translation of monetary assets
and liabilities in foreign currencies are not material.
Restricted Cash and Short-term Investments
Investments other than restricted cash are primarily commercial paper and
money market securities. Restricted cash include similar securities and
mortgage-backed securities.
Since the Company has the positive intent and ability to hold all of its
investments to maturity, these are classified as held to maturity and recorded
at amortized cost. The carrying amount of investments as of December 31, 1999
approximates their fair value which is based on quoted market prices as provided
by the financial institution holding the investments.
Bond Issue Costs
Bond issue costs consist of costs incurred in the issuance of senior
secured notes and bonds and are being amortized over the term of the notes and
bonds using the effective interest rate method.
Development and Construction Costs
Costs related to the development and construction of the hydroelectric
power plant and related facilities are capitalized and will be amortized over a
period of 20 years from the start of its commercial operations.
Interest Capitalization
Interest and other financial charges are being capitalized as part of the
cost of capital projects. Interest is capitalized up to the extent of
construction and development costs incurred.
Foreign Currency Transactions
Transactions conducted in foreign currencies (Philippine pesos) are
recorded based on the prevailing rates of exchange at transaction dates.
Monetary assets and liabilities denominated in foreign currencies (Philippine
pesos) are restated in the financial statements at the exchange rates prevailing
at the balance sheet date.
Income Tax
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial reporting bases
of assets and liabilities and their related tax bases. Deferred tax assets and
liabilities are measured using the tax rate expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered
or settled. A valuation allowance is provided for deferred tax assets if it is
more likely that a tax benefit will not be realized.
Net Income (Loss) Per Share
Net income (loss) per share is based on the weighted average number of
common shares outstanding during the period.
Impairment of Long-Lived Assets
The 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 whenever evidence exists that the carrying value is not recoverable.
Use of Estimates
The preparation of the 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. Advances from Affiliates
The Company has transactions with its affiliates which consist of cash
advances for capital requirements related to the construction of the Casecnan
Project.
4. Notes and Bonds Payable
On November 27, 1995, the Company issued $371.5 million worth of notes and
bonds to finance the construction of the Casecnan Project. These consist of
$75.0 million Senior Secured Floating Rate Notes (FRNs) due 2002; $125 million
Senior Secured Series A Notes (Series A Notes) with interest at 11.45% due 2005;
and, $171.5 million Senior Secured Series B Bonds (Series B Bonds) with interest
at 11.95% due 2010. For the year ended December 31, 1999, the notes and bonds
had effective interest rates of 9.31%, 11.99% and 12.38% for FRNs, Series A
Notes and Series B Bonds, respectively, inclusive of the effect of bond issue
cost amortization. Quarterly interest payments for the FRNs commenced on
February 15, 1996, and semi-annual interest payments for Series A Notes and
Series B Bonds commenced on May 15, 1996.
Semi-annual installments for principal payments will commence on November
15, 2000, May 15, 2003 and May 15, 2002 for the FRNs, Series A Notes and Series
B Bonds, respectively. The repayment schedule is as follows (in thousands):
Series A Series B
FRN Notes Bonds Total
-----------------------------------------------------------------------
2000 $18,750 $- $- $18,750
2001 29,625 - - 29,625
2002 26,625 - 8,575 35,200
2003 - 33,750 7,718 41,468
2004 - 42,500 6,860 49,360
2005 - 48,750 6,002 54,752
2006 - - 36,015 36,015
2007 - - 37,730 37,730
2008 - - 37,730 37,730
2009 - - 13,720 13,720
2010 - - 17,150 17,150
-----------------------------------------------------------------------
$75,000 $125,000 $171,500 $371,500
=======================================================================
The securities are senior debts of the Company and are secured by an
assignment of all revenues that will be received from the Casecnan Project, a
collateral assignment of all material contracts, a lien on any accounts and
funds on deposit under a Deposit and Disbursement Agreement, a pledge of 100% of
the capital stock of the Company and a lien on all other material assets and
property interests of the Company. The securities rank pari passu with and will
share the collateral on a pro rata basis with other senior secured debt, if any.
The securities are subject to certain optional and mandatory redemption schemes
as provided for in the Trust Indenture.
The debt covenants contain certain restrictions as to incurrence of
additional indebtedness; merger, consolidation, dissolution, or any significant
change in corporate structure; non-arm's length transactions or agreements with
affiliates; material change in the Turnkey Construction Contract (see Note 7);
sale, lease, or transfer of properties material to the Casecnan Project, among
others.
In connection with the foregoing secured indebtedness, the Company, on
November 27, 1995, entered into a Deposit and Disbursement Agreement with
Chemical Trust Company of California (Chemical Trust) and Kiewit (a predecessor
shareholder) whereby Chemical Trust acts as a depositary and a collateral agent.
As a depositary agent, it will hold monies, instruments and securities pledged
by the Company to the collateral agent. The terms of this agreement require the
establishment of several funds which include a Capital Contribution Fund. The
Company's stockholders deposited an aggregate capital contribution of
approximately US$123.3 million to the fund which will be strictly used to fund
the construction of the Casecnan Project when the proceeds from the Series A
Notes and Series B Bonds have been fully utilized. The contributions are
included in the "Additional paid-in capital" account in the balance sheets.
As of December 31, 1999, MidAmerican held $8.4 million of the Casecnan
FRNs. The purchase of the FRNs by MidAmerican does not release the Company of
its obligations.
Interest capitalized as part of development and construction costs amounted
to $36.5 million and $27.1 million in 1999 and 1998, respectively.
5. Income Tax
The Company's deferred tax asset amounting to $7.1 million and $8.2 million
(net of valuation allowance of $3.0 million and $3.5 million) as of December 31,
1999 and 1998, respectively, consists mainly of the difference between the
financial reporting basis and the tax reporting basis for development and
construction costs. Effective January 1998, the Philippine statutory tax rate
had been changed from 35% to 34% in 1998, further reduced to 33% in 1999, and
will be 32% in 2000 and onwards. In 1999, an adjustment of $0.7 million was made
to the company's deferred income tax to reflect the effect of these tax rate
changes.
6. Capital Stock
On October 26, 1995, the Company issued 230,148 shares to the current
minority stockholders out of the unsubscribed portion of the Company's
authorized capital stock.
The minority stockholders initially formed a venture to pursue the
opportunity of developing a water and energy project in the Casecnan Basin.
After securing preliminary indications of interest from the Philippine
Government, the minority stockholders sought out the other shareholders to form
a new entity capable of financing and building the Casecnan Project. In
consideration of their role in initiating the Casecnan Project, delivering the
opportunity to the Company and performing development assistance, the minority
stockholders retained an ownership interest in the Company.
7. Commitments and Contingencies
The Casecnan Project was being constructed pursuant to a fixed-price,
date-certain, Turnkey Construction Contract (the "Hanbo Contract") on a joint
and several basis by Hanbo Corporation ("Hanbo") and Hanbo Engineering and
Construction Co., Ltd. ("HECC"), both of which are South Korean corporations. As
of May 7, 1997, the Company terminated the Hanbo Contract due to defaults by
Hanbo and HECC including the insolvency of each such company. On the same date,
the Company entered into a new fixed-price, date-certain, turnkey engineering,
procurement and construction contract to complete the construction of the
Casecnan Project (the "Replacement Contract"). The work under the Replacement
Contract is being conducted by a consortium consisting of Cooperativa Muratori
Cementisti CMC di Ravenna and Impresa Pizzarotti & C. Spa., working together
with Siemens A.G., Sulzer Hydro Ltd., Black & Veatch and Colenco Power
Engineering Ltd. (collectively, the "Replacement Contractor").
In connection with the Hanbo Contract termination, the Company tendered
four certificates of drawing to Korea First Bank ("KFB") under the irrevocable
standby letter of credit issued by KFB as security under the Hanbo Contract to
pay for certain transition costs and other then ascertainable damages under the
Hanbo Contract. As a result of KFB's wrongful dishonor of the draw request, the
Company filed an action against KFB in New York State Court.
On September 2, 1997, Hanbo and HECC filed a Request for Arbitration before
the International Chamber of Commerce. The Request of Arbitration asserted
various claims by Hanbo and HECC against the Company relating to the terminated
Hanbo Contract and sought damages. On October 10, 1997, the Company served its
answer and defenses in response to the Request of Arbitration as well as
counterclaims against Hanbo and HECC for breaches of the Hanbo Contract.
On April 17, 1998, the Company and Hanbo, HECC, Hanbo Steel Company and KFB
mutually agreed to settle the differences among them related to the Casecnan
Project. Under the settlement, KFB agreed to pay the Company $90 million and the
parties discontinued with prejudice the pending arbitration and litigation
proceedings and released each other from all claims arising out of the
litigation and arbitration. In accordance with the terms of such settlement, the
Company received $10 million from KFB on April 17, 1998 and the remaining
balance of $80 million, including interest thereon, on July 3, 1998. The receipt
of the $90 million was originally included in "Accounts Payable and Accrued
Expenses" account in the balance sheets and is being released periodically to
offset costs which were, and will be, incurred over the remainder of the
construction period. As of December 31, 1999, the unamortized portion of the
settlement amounts to $36 million.
On November 20, 1999, the Replacement Contract was amended to extend the
Guaranteed Substantial Completion Date for the Casecnan Project to March 31,
2001. This amendment has been approved by the independent engineer under the
Bond Indenture. Accordingly, the Casecnan Project is now expected to become
operational by the second quarter of 2001.
Under the Project Agreement, if NIA is able to accept delivery of water
into the Pantabangan Reservoir and NPC has completed the project related
transmission lien, the Company is liable to pay NIA $5,000 per day for each day
of delay in completion of the Casecnan Project beyond July 27, 2000, increasing
to $13,500 per day for each day of delay in completion beyond November 27, 2000.
The Company's ability to make payments on any of its existing and future
obligations is dependent on NIA's and the Republic of the Philippines'
performance of their obligations under the Project Agreement and the Performance
Undertaking, respectively. No shareholders, partners or affiliates of the
Company, including MidAmerican, and no directors, officers or employees of the
Company will guarantee or be in any way liable for payment of the Company's
obligations. As a result, payment of the Company's obligations depends upon the
availability of sufficient revenues from the Company's business after the
payment of operating expenses.
NIA's payments of obligations under the Project Agreement will be
substantially denominated in United States dollars and are expected to be the
Company's sole source of operating revenues. Because of the Company's dependence
on NIA, any material failure of NIA to fulfill its obligations under the Project
Agreement and any material failure of the Republic of the Philippines to fulfill
its obligations under the Performance Undertaking would significantly impair the
ability of the Company to meet its existing and future obligations.
There are pending bills before the Philippine Congress and the Philippine
Senate aimed at restructuring the electric industry, privatization of the NPC
and introduction of a competitive electricity market, among others. The passage
of the bills may have an impact on the Company's future operations and the
industry as a whole, the effect of which is not yet determinable and estimable.
8. Fair Value of Financial Instruments
Financial Accounting Standards Board (FASB) Statement No. 107, "Disclosures
About Fair Value of Financial Instruments", defines the fair value of financial
instruments as the amount at which the instruments could be exchanged in a
current transaction between willing parties. Although management uses its best
judgment in estimating the fair value of these financial instruments, there are
inherent limitations in any estimation technique. Therefore, the fair value
estimates presented herein are not necessarily indicative of the amounts that
the Company could realize in a current transaction.
The methods and assumptions used to estimate fair value are as follows:
Other financial instruments
Financial instruments other than notes and bonds payable of a material
nature fall into the definition of short-term and fair value is estimated
as the carrying amount.
Notes and Bonds Payable
The fair value of the Company's notes and bonds payable are estimated based
on the quoted market prices for the same or similar issues or on the
current rates offered to the Company for debt of the same maturing
maturities.
The carrying amounts in the table below are included under the indicated
captions in Note 4 (in thousands).
1999 1998
----------------------------------------------------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
FRNs $ 75,000 $73,500 $ 75,000 $62,250
Series A Notes 125,000 121,962 125,000 97,938
Series B Bonds 171,500 166,527 171,500 144,060
----------------------------------------------------------------------
$371,500 $361,989 $371,500 $304,248
======================================================================
9. Registration with the Board of Investments (BOI)
The Company is registered with the BOI of the Philippines as a new operator
of hydroelectric power plant with pioneer status under the Omnibus Investments
Code of 1987 (Executive Order No. 226). Under the terms of its registration, the
Company is entitled to certain incentives which include an income tax holiday
for a minimum of six years from the start of commercial operations; tax and
duty-free importation of capital equipment; tax credits on domestic capital
equipment; and, exemption from customs duties and national internal revenue
taxes for the importation and unrestricted use of the consigned equipment for
the development, construction, start-up, testing and operation of the power
plant. The registration also requires, among others, the maintenance of a
debt-to-equity ratio not exceeding 75:25 upon commencement of commercial
operations.
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 Company
The following table sets forth the names, ages, and positions of the
directors and executive officers of the Company:
NAME AGE POSITION
David L. Sokol 43 Director and Chairman
Gregory E. Abel 37 Vice Chairman and Chief Executive Officer
Robert S. Silberman 42 Director and President
Patrick J. Goodman 33 Director, Senior Vice President and Chief
Financial Officer
Steven A. McArthur 42 Senior Vice President
Douglas L. Anderson 42 Vice President, General Counsel and
Assistant Secretary
David A. Baldwin 35 Director, Vice President and General Manager
Jose R. Sandejas 62 Director and Corporate Secretary
Marivic Espiritu 32 Director and Assistant Corporate Secretary
Jose Jaime Cruz 29 Director
Scott LaPrairie 42 Director
Rachael Hernandez 32 Director
James D. Stallmeyer 42 Vice President
Edward F. Bazemore 62 Vice President - Human Resources
Brian K. Hankel 37 Vice President and Treasurer
Directors of the Company are elected annually and hold office until a
successor is elected. Executive officers are chosen from time to time by vote of
the Board of Directors. Pursuant to the terms of the Stockholders Agreement, CE
Casecnan Ltd. is entitled to elect seven of the directors, and each of the
minority investors is entitled to elect one director.
David L. Sokol. In addition to serving as a Director and Chairman of
the Company, Mr. Sokol has been Chief Executive Officer of MidAmerican since
April 19, 1993 and served as President of MidAmerican from April 19, 1993 until
January 21, 1995. Mr. Sokol has been Chairman of the Board of Directors since
May 1994 and a director of MidAmerican since March 1991. Formerly, among other
positions held in the independent power industry, Mr. Sokol served as the
President and Chief Executive Officer of Kiewit Energy Company, which at that
time was a wholly owned subsidiary of PKS, and Ogden Projects, Inc.
Gregory E. Abel. In addition to serving as Chief Executive Officer of
the Company, Mr. Abel is President and Chief Operating Officer of MidAmerican.
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. In addition to serving as Director and President
of the Company, Mr. Silberman is President and Chief Operating Officer of
CalEnergy Generation, a group of subsidiaries of MidAmerican. 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, as Director of Project Finance and Implementation for the Ogden
Corporation and as a Project Manager in Business Development for Allied Signal,
Inc. He has also served as Assistant Secretary of the Army for the United States
Department of Defense.
Patrick J. Goodman. In addition to serving as Director, Senior Vice
President and Chief Financial Officer for the Company, he is Senior Vice
President and Chief Financial Officer for MidAmerican. 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.
Steven A. McArthur. Mr. McArthur is a Senior Vice President and
Secretary of MidAmerican. Mr. McArthur joined MidAmerican in February 1991. From
1988 to 1991 he was an attorney in the Corporate Finance Group at Shearman &
Sterling in San Francisco. From 1984 to 1988, he was an attorney in the
Corporate Finance Group at Winthrop, Stimson, Putnam & Roberts in New York.
Douglas L. Anderson. In addition to serving as Vice President, General
Counsel and Assistant Secretary for the Company, Mr. Anderson is Vice President
and Assistant General Counsel of MidAmerican and General Counsel of CalEnergy
Generation. Mr. Anderson joined MidAmerican in February 1993. From 1990 to 1993
Mr. Anderson was a business attorney with Fraser, Stryker, Vaughn, Meusey,
Olson, Boyer & Bloch, P.C. in Omaha and prior to that Mr. Anderson was a
principal in the firm Anderson & Anderson.
David A. Baldwin. In addition to serving as Director, Vice President
and General Manager for the Company, he is General Manager, Philippines for
MidAmerican. From December 1996 to June 1997, Mr. Baldwin served as Vice
President, Project Development for Asia Power Ltd. In Hong Kong. From October
1994 to December 1996, Mr. Baldwin was Project Director at SouthPac Corporation
Ltd. In New Zealand and, prior to that, he held a series of project management
and engineering positions at Shell International in the Neatherlands and New
Zealand.
Jose R. Sandejas. In addition to serving as a Director and Corporate
Secretary of the Company, Mr. Sandejas is a partner with the law firm of
Quisumbing Torres & Evangelista.
Marivic Espiritu. In addition to serving as a Director and Assistant
Corporate Secretary of the Company, Ms. Espiritu is a partner with the law firm
of Quisumbing Torres & Evangelista.
Jose Jaime Cruz. In addition to serving as a Director of the Company,
Mr. Cruz is an attorney with the law firm of Quesumbing Torres & Evangelista.
Scott LaPrairie. In addition to serving as a Director of the Company,
Mr. LaPrairie is President and Chief Executive Officer of the LaPrairie Group of
Companies.
Rachael Hernandez. In addition to serving as a Director of the
Company, Ms. Hernandez is Corporate Counsel for the Company and certain of its
affiliates.
James D. Stallmeyer. In addition to serving as Vice President of the
Company, Mr. Stallmeyer is Commercial Director and General Counsel of Northern
Electric. Mr. Stallmeyer joined the Company in 1993. Mr. Stallmeyer practiced in
the public finance and banking areas at Chapman and Cutler in Chicago from 1984
to 1987 and in the corporate finance department from 1989 to 1993. Prior to
that, Mr. Stallmeyer was an attorney in the public finance department of the
Chicago office of Skadden, Arps, Slate, Meagher & Flom in 1987 and 1988 and was
a legal writing instructor at the University of Illinois College of Law in 1988
and 1989.
Edward F. Bazemore. In addition to serving as Vice President, Human
Resources for the Company, Mr. Bazemore also serves as Vice President, Human
Resources/IPP for MidAmerican. Mr. Bazemore joined MidAmerican in 1991. From
1989 to 1991, he was Vice President, Human Resources, at Ogden Projects, Inc. in
New Jersey. Prior to that Mr Bazemore was Director of Human Resources for Ricoh
Corporation, also in New Jersey. Previously, he was Director of Industrial
Relations for Scripto, Inc. in Atlanta, Georgia.
Brian K. Hankel. In addition to serving as Vice President and
Treasurer for the Company, he is Vice President and Treasurer for MidAmerican.
Mr. Hankel joined MidAmerican in February 1992 as a 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 joining
the Company, Mr. Hankel was a Money Position Analyst at FirsTier Bank of Lincoln
from 1988 to 1992.
Item 11. EXECUTIVE COMPENSATION
None of the executive officers or directors of the Company receives
compensation from the Company for services as officers or directors of the
Company. All directors are reimbursed for their expenses in attending board and
committee meetings.
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 Company
consisted of 2,148,000 shares of common stock, par value 1.00 peso per share
(the "Common Stock"), of which 767,162 shares were outstanding. There is no
public trading market for the Common Stock. As of December 31, 1999 there were 8
holders 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 Indenture contains certain restrictions on the payment of dividends
with respect to the Common Stock.
Principal Holders
The following table sets forth information with respect to the shares
of common stock owned of record and beneficially by all persons who own of
record or are known by the Company to own beneficially more than 5% of the
common stock and by all directors and officers of the Company as a group.
Number Of Percentage Of
Name and Address of Owner Shares Owned* Common Stock Owned
1. CE Casecnan, Ltd. (1) 537,005 70%(2)
a Bermuda corporation
c/o Conyers Dill & Pearman
Clarendon House
P.O. Box 666
Hamilton, Bermuda HM CX
2. LaPrairie Group Contractors
(International), Ltd. 115,074 15%(3)
a Barbados corporation
c/o P.O. . Box 690C
Bridgetown, Barbados
3. San Lorenzo Ruiz Builders and Developers
Group, Inc. 115,074 15%(3)(4)
a Philippine corporation
Violago Compound
222 East Rodriguez Avenue
Quezon City, Philippines
*In addition, each director of the Company owns one share in the Company as
required by Philippine law.
(1) MidAmerican indirectly owns CE Casecnan, Ltd., a Bermuda
corporation which is the registered owner of the shares.
(2) Number of shares owned subject to upward adjustment based on
projected level of financial return to MidAmerican from the Project calculated
at the time of Completion and the absence of the timely exercise of the option
specified in note (4) below.
(3) Number of shares owned and percentages owned subject to downward
adjustment based on projected level of financial return to MidAmerican from the
Project calculated at the time of Completion. Neither of the minority
shareholders will have a major role in the development, construction or
operation of the Casecnan project.
(4) During 1998, MidAmerican purchased substantially all of the shares
held by San Lorenzo Ruiz Builders and Developers Group Inc.; however, San
Lorenzo has an option to repurchase those shares at project completion.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not Applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company 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 27, 2000.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
By: /s/ Robert S. Silberman*
Robert S. Silberman
President
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has caused this report to be signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
/s/ David L. Sokol* Director and Chairman of the Board March 27, 2000
David L. Sokol
/s/ Robert S. Silberman*Director, President and Chief Operating March 27, 2000
Robert S. Silberman Officer (Principal Executive Officer)
/s/ Patrick J. Goodman* Director, Senior Vice President and
Patrick J. Goodman Chief Financial Officer March 27, 2000
(Principal Financial Officer)
/s/ Rachael Hernandez* Director March 27, 2000
Rachael Hernandez
/s/ Marivic Espiritu* Director March 27, 2000
Marivic Espiritu
/s/ David A. Baldwin* Director March 27, 2000
David A. Baldwin
/s/ Jose Jaime Cruz* Director March 27, 2000
Jose Jaime Cruz
/s/ Jose R. Sandejas* Director March 27, 2000
Jose R. Sandejas
*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 Company (incorporated by
reference to Exhibit 3.1 the Company's Registration
Statement on Form S-4, as amended, dated January 25, 1996
("Form S-4")).
3.2 By-laws of the Company (incorporated by reference to Exhibit
3.2 the Company's Form S-4).
4.1(a) Trust Indenture, dated as of November 27, 1995, between
Chemical Trust Company of California and the Company
(incorporated by reference to Exhibit 4.1(a) the Company's
Form S-4).
4.1(b) First Supplemental Indenture, dated as of April 10, 1996,
between Chemical Trust Company of California and the Company
(incorporated by reference to Exhibit 4.1(b) to the Company's
Form S-4).
4.2 Exchange and Registration Rights Agreement, dated as of
November 27, 1995, by and among CS First Boston Corporation,
Bear Stearns & Co. Inc., Lehman Brothers Inc. and the
Company (incorporated by reference to Exhibit 4.2 the
Company'sForm S-4).
4.3 Collateral Agency and Intercreditor Agreement, dated as of
November 27, 1995, by and among Chemical Trust Company of
California, Far East Bank & Trust Company and the Company
(incorporated by reference to Exhibit 4.3 the Company's Form
S-4).
4.4 Mortgage and Security Agreement, dated as of November 10,
1995, by and among CE Casecnan Ltd., Kiewit Energy
International (Bermuda) Ltd., La Prairie Group Contractors
(International) Ltd., San Lorenzo Ruiz Builders and
Developers Group, Inc., Chemical Trust Company of
California, Far East Bank & Trust Company and the Company
(incorporated by reference to Exhibit 4.4 the Company's Form
S-4).
4.6 Deposit and Disbursement Agreement, dated as of November 27,
1995, by and among the Company, Chemical Trust Company of
California, Kiewit Energy Company and the Company
(incorporated by reference to the Company's Form S-4).
4.7 Consent of NIA, dated as of November 10, 1995, to the
assignment of the Amended and Restated Casecnan Project
Agreement (incorporated by reference to Exhibit 4.7 to the
Company's Form S-4).
4.8 Consent of the Republic of Philippines, dated November 10,
1995, to the assignment of the Performance Undertaking and the
Amended and Restated Casecnan Project Agreement (incorporated
by reference to Exhibit 4.8 to the Company's Form S-4).
4.9 Consent of Hanbo Corporation and You One Engineering and
Construction Company, Ltd., dated as of November 17, 1995,
to the assignment of the Engineering, Procurement and
Construction Contract (incorporated by reference to Exhibit
4.9 to the Company's Form S-4).
4.10 Consent of Hanbo Steel, dated as of November 17, 1995, to the
assignment of the Guaranty of Engineering, Procurement and
Construction Contract (incorporated by reference to Exhibit
4.10 to the Company's Form S-4).
4.11 Notification, dated as of November 27, 1995, from the Company
to Korea First Bank, of the assignment of the Irrevocable
Letter of Credit (incorporated by reference to Exhibit 4.11 to
the Company's Form S-4).
10.1 Amended and Restated Casecnan Project Agreement, dated as of
June 26, 1995, between the National Irrigation Administration
and theCompany (incorporated by reference to Exhibit 10.1 the
Company's Form S-4).
10.2 Performance Undertaking, dated as of July 20, 1995, executed
by the Secretary of Finance on behalf of the Republic of the
Philippines (incorporated by reference to Exhibit 10.2 to the
Company's Form S-4).
10.3 Engineering, Procurement and Construction Contract, dated
as of October 10, 1995, by and among Hanbo Corporation,
You One Engineering and Construction Company, Ltd. and the
Company (incorporated by reference to Exhibit 10.3 the
Company's Form S-4)
10.4 Master Equipment Lease Agreement, dated as of November 1,
1995, between You One Engineering and Construction
Company, Ltd. and the Company (incorporated by reference to
Exhibit 10.4 the Company's Form S-4).
10.5 Sublease Agreement No. 1, dated as of November 1, 1995,
between You One Engineering and Construction Company, Ltd.
and the Company (incorporated by reference to Exhibit 10.5 the
Company's Form S-4).
10.6 Guaranty of Engineering, Procurement and Construction
Contract, dated as of November 13, 1995, by Hanbo Steel
guaranteeing the performance of the obligations of Hanbo
Corporation and You One Engineering and Construction Company,
Ltd. under the Engineering Procurement and Construction
Contract (incorporated by reference to Exhibit 10.6 to the
Company's Form S-4).
10.7 Korea First Bank Irrevocable Letter of Credit issued to the
Company in the aggregate principal amount of
U.S.$117,850,000.00 to support the obligations of Hanbo
Corporation and You One Engineering and Construction Company,
Ltd. under the Engineering, Procurement and Construction
Contract (incorporated by reference to Exhibit 10.7 to the
Company's Form S-4).
10.8 Engineering, Procurement and Construction Contract dated May
7, 1997 between the Company and CP Casecnan - Consortium
(incorporated by reference to Exhibit 10.8 to the Company's
Form 10-K dated December 31, 1998).
10.9 Amendment Agreement dated November 20, 1999 between the
Company and CP Casecnan - Consortium.
24 Power of Attorney
27 Financial Data Schedule