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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, 2001
Commission File No. 333-00608
CE CASECNAN WATER AND ENERGY COMPANY, INC.
(Exact name of registrant as specified in its charter)
Philippines Not applicable
----------- --------------
(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)
---------------------------
(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.
767,162 shares of Common Stock, $0.038 par value, were outstanding on March
29, 2002.
TABLE OF CONTENTS
PART I........................................................................4
ITEM 1. BUSINESS.............................................................4
General....................................................................4
Project....................................................................4
Terms of the Securities................................................9
General.........................................................9
Payment of Principal and Interest...............................9
Priority of Payments...........................................11
Debt Service Reserve Fund......................................11
Optional Redemption............................................11
Mandatory Redemption...........................................12
Change in Control Put..........................................12
Profit Distributions...........................................12
Ranking and Security for the Securities........................13
Ratings........................................................13
Nature of Recourse on the Securities...........................13
Incurrence of Additional Debt..................................13
Principal Covenants............................................15
Insurance.............................................................16
Regulatory Matters....................................................16
Employees.............................................................17
ITEM 2. PROPERTIES..........................................................17
ITEM 3. LEGAL PROCEEDINGS...................................................17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................17
PART II......................................................................18
ITEM 5. MARKET FOR COMPANY'S EQUITY AND RELATED STOCKHOLDER MATTERS.........18
ITEM 6. SELECTED FINANCIAL DATA.............................................18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION........................................18
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK..........23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.........................24
Reports of Independent Public Accountants.................................25
Balance Sheets...........................................................27
Statements of Income......................................................28
Statements of Changes in Stockholders' Equity.............................29
Statements of Cash Flows..................................................30
Notes to Financial Statements.............................................31
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.......................................44
PART III.....................................................................45
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.....................45
ITEM 11. EXECUTIVE COMPENSATION..............................................47
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......47
Description of Capital Stock..............................................47
Principal Holders.........................................................48
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION.......................49
PART IV......................................................................50
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES ON FORM 8-K............50
SIGNATURES...................................................................51
INDEX TO EXHIBITS............................................................52
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"). The Casecnan Project
commenced commercial operations on December 11, 2001. Pursuant to the share
ownership adjustment mechanism in the Shareholder Agreement, which is based upon
pro-forma financial projections of the Casecnan Project at commencement of
commercial operations, MidAmerican Energy Holdings Company ("MidAmerican"),
through its wholly owned indirect subsidiary CE Casecnan Ltd, has advised the
minority shareholders that MidAmerican's ownership interest in the Company will
increase to 100%. An initial shareholder has indicated its disagreement with the
ownership adjustment and its right to up to a 15% ownership interest and has
requested certain information with respect to the project's economics which form
the basis of such adjustment.
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 City, Philippines, and its telephone number is 63
2 892 0276. The Company's principal office is located at Pantabangan in the
Province of Nueva Ecija, Philippines.
Project
The Casecnan Project is located in the central part of the island of Luzon.
It consists generally of diversion structures in the Casecnan and Taan Rivers
that 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 allows electrical
energy to be generated at a new 150 MW rated capacity power plant, which is
located in an underground powerhouse cavern at the end of the water tunnel. A
tailrace discharge tunnel of approximately three kilometers delivers 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
is required. Once in the reservoir at Pantabangan, the water is under the
control of, and for the use of the Philippine National Irrigation Administration
("NIA").
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, which 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 during the construction period
and thereafter own and operate the Casecnan Project for a twenty-year
cooperation period, after which, ownership and operation of the Project would be
transferred to NIA and NPC at no cost on an "as-is" basis. 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 constructed and operates 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 fixed fee for the delivery of a minimum volume of water and a
fixed fee for the delivery of a minimum amount of electricity. In addition, NIA
will pay a fee for all electricity delivered in excess of a threshold amount up
to a specified amount.
The water delivery fee is a fixed monthly amount, to be received in US
Dollars at the end of each month, based on 801.9 million cubic meters of water
flow past the water delivery point per year, pro-rated to 66.8 million cubic
meters per month. The unit price for water is established at $0.029 per cubic
meter (subject to adjustment as set forth in the Project Agreement) as of
January 1, 1994 and escalated at seven and one-half percent (7.5%) per annum,
pro-rated on a monthly basis, through the end of the fifth year of the
Cooperation Period and then kept flat at that level for the last fifteen years
of the Cooperation Period. The unit price for water is to be adjusted by $.00043
for each $1.0 million of certain taxes and fees paid by the Company as specified
in the Project Agreement. The unit price of water as of December 2001 is
$0.0907. Actual deliveries of water greater than or less than 66.8 million cubic
meters in any month will not result in any adjustment of the water delivery fee.
The guaranteed energy fee is a fixed monthly amount, to be received in US
Dollars at the end of each month, based on energy deliveries of 228.0 million
kilowatt-hour (kWh) per year, pro-rated to 19.0 million kWh per month. Actual
deliveries of energy less than 19.0 million kWh per month will not result in any
reduction of the guaranteed energy fee but will result in an adjustment to the
excess energy fee. The unit price for guaranteed energy is $0.1596 per kWh.
The excess energy fee is a variable amount, to be received in US Dollars at
the end of each month, for electrical energy delivered in that month in excess
of 19.0 million kWh. No excess energy delivery fee will be due until all
cumulative electrical energy shortfalls in previous months have been made up.
The unit price of excess energy is $0.1509 per kWh. 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 US Dollars.
The fixed fees paid for the delivery of water and energy, regardless of the
amount of electricity or water actually delivered, are expected to provide
approximately 78% of CE Casecnan's revenues. At the end of the Cooperation
Period, the Casecnan Project will be transferred to NIA at no additional
consideration on an "as is" basis.
NIA has subsequently paid all amounts invoiced for water and energy
delivery fees under the Project Agreement as of December 31, 2001, but has not
paid the tax reimbursement portion of the invoices. The tax reimbursement amount
could add approximately 30% to each invoice payment. This amount was not assumed
in any revenue calculations at the time the Securities were issued and
accordingly, failure to receive these amounts should not adversely impact the
Company's ability to make regularly scheduled principal and interest payments on
the Securities. CE Casecnan is in discussions with NIA and representatives of
the Philippine government regarding the tax reimbursement amounts.
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.
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 million of its 11.45% Senior Secured Series A Notes due
2005 (the "Series A Notes") and $171.5 million of its 11.95% Senior Secured
Series B Bonds due 2010 (the "Series B Bonds") and $75 million of its Senior
Secured Floating Rate Notes due 2002, pursuant to an indenture dated November
27, 1995, as amended to date (the "Trust 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 both companies. 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 was 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").
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 was approved by the lenders' independent engineer under the
Trust Indenture.
On February 12, 2001, the Contractor filed a Request for Arbitration with
the International Chamber of Commerce seeking an extension of the Guaranteed
Substantial Completion Date by up to 153 days through August 31, 2001 resulting
from various alleged force majeure events. In its March 20, 2001 Supplement to
Request for Arbitration, the Contractor also seeks compensation for alleged
additional costs of approximately $4 million it incurred from the claimed force
majeure events to the extent it is unable to recover from its insurer. On April
20, 2001, the Contractor filed a further supplement seeking an additional
compensation for damages of approximately $62 million for the alleged force
majeure event (and geologic conditions) related to the collapse of the surge
shaft. The Contractor alleged that the circumstances surrounding the placing of
the Casecnan Project into commercial operation in December 2001 amounted to a
recission of the Replacement Contract and filed a claim for unspecified quantum
meruit damages. CE Casecnan believes all of such allegations and claims are
without merit and is vigorously contesting the Contractor's claims. The
arbitration is being conducted applying New York law pursuant to the rules of
the International Chamber of Commerce.
On June 25, 2001, the arbitration tribunal temporarily enjoined CE Casecnan
from making calls on the demand guaranty posted by Banca di Roma in support of
the Contractor's obligations to CE Casecnan for delay liquidated damages.
Hearings on the force majeure claims were held in London from July 2 to 14,
2001, and hearings on the Contractor's April 20, 2001 supplement from September
24 to October 3, 2001. Further hearings were held from January 21 to February 1,
2002 and additional hearings were held from March 14 to 19, 2002.
As of December 31, 2001, the Company has received approximately $6.0
million of liquidated damages from demands made on the demand guarantees posted
by Commerzbank on behalf of the Contractor. Although the outcome of the
arbitration, as with any litigious proceeding, is difficult to assess, the
Company believes it will prevail and receive additional liquidated damages in
the arbitration.
Under the Project Agreement, if NIA is able to accept delivery of water
into the Pantabangan Reservoir and NPC has completed the Project's related
transmission line, the Company is liable to pay NIA $5,500 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 transmission line was completed on August 13, 2001 and NIA has completed the
installation and testing of the Casecnan Project's metering equipment.
Accordingly, the Company has accrued $1.6 million for liquidated damages payable
as of December 31, 2001, to NIA for 120 days of delay and this was shown as part
of accounts payable and accrued expenses in the balance sheet.
The 20-year Cooperation Period under the Project Agreement commenced on
December 11, 2001, the start of the Company's commercial operations. NIA has
paid all amounts invoiced for water and energy delivery fees under the Project
Agreement since that date but has not paid the tax reimbursement portion of the
invoices. The tax reimbursement amount could add approximately 30% to each
invoice payment. This amount was not assumed in any revenue calculations at the
time the Securities were issued and accordingly, failure to receive these
amounts should not adversely impact the Company's ability to make regularly
scheduled principal and interest payments on the Securities. CE Casecnan is in
discussions with NIA and representatives of the Philippine government regarding
the tax reimbursement amounts.
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.
The Philippine Congress has passed the Electric Power Industry Reform Act
of 2001 which is aimed at restructuring the power industry, privatization of the
NPC and introduction of a competitive electricity market, among others. The
passage of the bill 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 November 1995, the Company issued and sold (i) $125 million aggregate
principal amount of the 11.45% Senior Secured Series A Notes due November 15,
2005 ("Series A Notes"), (ii) $171.5 million aggregate principal amount of
11.95% Senior Secured Series B Bonds due November 15, 2010 ("Series B Bonds"),
and (iii) $75 million aggregate principal amount of LIBOR plus 3.00% Senior
Secured Floating Rate Notes due November 15, 2002 ("FRNs"), collectively
referred to herein as the "Securities". The FRNs rank pari passu with and will
share the collateral on a pro rata basis with the Series A Notes and the Series
B Bonds and are entitled to the benefits of the Trust Indenture and the
Depositary Agreement.
The Securities are direct obligations of the Company, secured solely by the
Company's collateral.
Payment of Principal and Interest
Interest on the Series A Notes and the Series B Bonds is payable
semiannually every May 15 and November 15 (the "Securities Interest Payment
Date"), which commenced on May 15, 1996, to the registered Holders thereof at
the close of business on May 1 and November 1, as the case may be, preceding
each Securities Interest Payment Date. The initial average life of the Series A
Notes was 8.84 years, and the initial average life of the Series B Bonds was
11.57 years.
The $125 million principal of the Series A Notes due November 15, 2005 is
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 $171.5 million principal of the Series B Bonds due November 15, 2010 is
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 $75.0 million principal of the FRNs due November 15, 2002 is payable in
semiannual installments, which commenced on 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 are payable
quarterly every February 15, May 15, August 15, and November 15, which commenced
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
were and will be deposited in the Construction Fund and disbursed to pay for
budgeted construction or restoration costs, including interest and, where
applicable, principal on the Securities.
After completion of the Casecnan Project, 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 to the Revenue Fund
maintained by the Depositary (other than payments required to be used for VAT
payments to the Republic of the Philippines). Amounts paid to 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 the completion of the Casecnan Project, 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 to 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 next 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 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 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 the completion of the Casecnan Project, 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 Trust 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
When a Change in Control occurs, each Holder will have the right to require
the Company to repurchase all or any part of such Holder's Securities at a cash
purchase price 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 Trust Indenture. There is no assurance that upon a Change in Control the
Company will have sufficient funds to repurchase the Securities.
Profit Distributions
Prior to the completion of the Casecnan Project, there will be no
distributions to the Company or its shareholders. After completion,
distributions may be made only from and to the extent of amounts 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 Trust 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 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 held as
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 Trust 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
affiliates, 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
shareholdings 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 the completion of the Casecnan Project, debt incurred to finance
the construction of capital improvements to the Casecnan Project, which are
required to ensure compliance with applicable law or anticipated changes
therein; provided that no such debt may be incurred unless at the time of
incurrence of such debt, an independent engineer confirms the reasonableness of
(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, that 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 the completion of the Casecnan Project, debt incurred to finance
the construction 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 the reasonableness of (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 the completion of the Casecnan Project, 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
Casecnan 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 debts in the ordinary course of business
to support the operation and maintenance of the Casecnan Project, in an
aggregate amount not to exceed $35 million at any time;
(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 the completion of the Casecnan
Project 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 Trust 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 Trust 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 Trust 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 Trust 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. This coverage includes 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 is insured will cover all losses.
Nevertheless, the Company will not reduce or cancel the coverage 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 before 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
At December 31, 2001, the Company had 38 employees consisting of
operations, maintenance, logistics, compliance, and engineering personnel. At
the powerhouse control room, personnel monitor, direct and control the
operations and maintenance of the whole Casecnan Project. The control room is
staffed 24 hours per day and is the contact point for the Casecnan Project's
customers and others. At the diversion structures, personnel are 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's principal property is the hydroelectric power facility that
was completed in December 2001.
Item 3. Legal Proceedings
Reference is made to a discussion of the Company's current legal
proceedings under Item 1 - Business.
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
===============================================================================
Year ended December 31,
- ----------------------------- --------- --------- --------- --------- ---------
2001 2000 1999 1998 1997
- ----------------------------- --------- --------- --------- --------- ---------
Total revenue $ 8,174 $ - $ - $ - $ -
Operating expenses 3,922 451 - - -
Net income (loss) to common
stockholders 2,867 4,857 699 381 (11,264)
Net income (loss) per share 3.74 6.33 0.91 0.50 (14.68)
Total assets 515,550 482,373 522,398 553,433 491,912
Total liabilities 408,585 378,275 423,157 454,891 393,751
Notes payable 40,763 - - - -
Long-term debt, including 323,125 352,750 371,500 371,500 371,500
curent portion
Stockholders' equity 106,965 104,098 99,241 98,542 98,161
============================= ========= ========= ========= ========= =========
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-looking Statements
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.
Critical Accounting Policies
The preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States
requires management to make judgments, assumptions and estimates that affect the
amounts reported in the financial statements and accompanying notes. Note 2 to
the financial statements describes the significant accounting policies and
methods used in the preparation of the financial statements. Estimates are used
for, but not limited to, the accounting for the allowance for doubtful accounts
and impairment of long-lived assets. Actual results could differ from these
estimates. The following critical accounting policies are impacted significantly
by judgments, assumptions and estimates used in the preparation of the financial
statements.
Allowance for Doubtful Accounts
The allowance for doubtful accounts is based on the Company's assessment of
the collectibility of specific customer accounts.
Impairment of long-lived assets
Impairment of long-lived assets is reviewed 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.
Results of Operations:
The Casecnan Project commenced commercial operations on December 11, 2001.
The revenue of $8.2 million for the year ended December 31, 2001 consists
of revenue for the delivery of water and generation and delivery of electrical
energy. Revenue from water delivery, guaranteed energy and excess energy
generated and delivered are 50%, 26% and 24%, respectively, of the total revenue
for the year.
A total of $0.9 million was used to finance the costs of start-up
activities in 2001 compared to $0.5 million in 2000. Plant operations and
doubtful accounts expense aggregating $2.7 million were incurred during 2001.
Depreciation expense of $1.2 million was for the period after project completion
up to December 31, 2001.
Interest earned on cash balances declined from $11.7 million in 1999 to
$7.6 million in 2000 and decreased to $1.5 million in 2001 due to declining cash
balances as funds were used for the construction activities. Interest expense,
including bond issue amortization, was $44.2 million, $48.3 million and $46.3
million in 2001, 2000, and 1999, respectively and such are related to the notes
and bonds payable issued by the Company in the fourth quarter of 1995. Interest
capitalized during construction was $41.7 million, $47.5 million and $36.5
million in 2001, 2000, and 1999, respectively.
Liquidity and Capital Resources:
CE Casecnan constructed and operates 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 fixed fee for the delivery of a minimum volume of water and a
fixed fee for the delivery of a minimum amount of electricity. In addition, NIA
will pay a fee for all electricity delivered in excess of a threshold amount up
to a specified amount. The water delivery fee is a fixed monthly amount, to be
received in US Dollars at the end of each month, based on 801.9 million cubic
meters of water flow past the water delivery point per year, pro-rated to 66.8
million cubic meters per month. The unit price for water is established at
$0.029 per cubic meter (subject to adjustment as set forth in the Project
Agreement) as of January 1, 1994 and escalated at seven and one-half percent
(7.5%) per annum, pro-rated on a monthly basis, through the end of the fifth
year of the Cooperation Period and then kept flat at that level for the last
fifteen years of years of the Cooperation Period. The unit price for water is to
be adjusted by $.00043 for each $1.0 million of certain taxes and fees paid by
the Company as specified in the Project Agreement. The unit price of water as of
December 2001 is $0.0907. Actual deliveries of water greater than or less than
66.8 million cubic meters in any month will not result in any adjustment of the
water delivery fee. The guaranteed energy fee is a fixed monthly amount, to be
received in US Dollars at the end of each month, based on energy deliveries of
228.0 million kilowatt-hour (kWh) per year, pro-rated to 19.0 million kWh per
month. Actual deliveries of energy less than 19.0 million kWh per month will not
result in any reduction of the guaranteed energy fee but will result in an
adjustment to the excess energy fee. The unit price for guaranteed energy is
$0.1596 per kWh. The excess energy fee is a variable amount, to be received in
US Dollars at the end of each month, for electrical energy delivered in that
month in excess of 19.0 million kWh. No excess energy delivery fee will be due
until all cumulative electrical energy delivery shortfalls in previous months
have been made up. The unit price of excess energy is $0.1509 per kWh. 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 fixed fees paid for the delivery of water and energy,
regardless of the amount of electricity or water actually delivered, are
expected to provide approximately 78% of CE Casecnan's revenues. At the end of
the Cooperation Period, the Casecnan Project will be transferred to NIA at no
additional consideration on an "as is" basis.
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.
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 million of its 11.45% Senior Secured Series A Notes due
2005 (the "Series A Notes") and $171.5 million of its 11.95% Senior Secured
Series B Bonds due 2010 (the "Series B Bonds") and $75 million of its Senior
Secured Floating Rate Notes due 2002, pursuant to an indenture dated November
27, 1995, as amended to date (the "Trust Indenture").
The Casecnan Project was initially 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. On
May 7, 1997, the Company terminated the Hanbo Contract due to defaults by Hanbo
and HECC including the insolvency of both companies. 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 was 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").
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 was approved by the lenders' independent engineer under the
Trust Indenture.
On February 12, 2001, the Contractor filed a Request for Arbitration with
the International Chamber of Commerce seeking an extension of the Guaranteed
Substantial Completion Date by up to 153 days through August 31, 2001 resulting
from various alleged force majeure events. In its March 20, 2001 Supplement to
Request for Arbitration, the Contractor also seeks compensation for alleged
additional costs of approximately $4 million it incurred from the claimed force
majeure events to the extent it is unable to recover from its insurer. On April
20, 2001, the Contractor filed a further supplement seeking an additional
compensation for damages of approximately $62 million for the alleged force
majeure event (and geologic conditions) related to the collapse of the surge
shaft. The Contractor has alleged that the circumstances surrounding the placing
of the Casecnan Project into commercial operation in December 2001 amounted to a
recission of the Replacement Contract and has filed a claim for unspecified
quantum meruit damages. CE Casecnan believes all of such allegations and claims
are without merit and is vigorously contesting the Contractor's claims. The
arbitration is being conducted applying New York law and pursuant to the rules
of the International Chamber of Commerce.
On June 25, 2001, the arbitration tribunal temporarily enjoined CE Casecnan
from making calls on the demand guaranty posted by Banca di Roma in support of
the Contractor's obligations to CE Casecnan for delay liquidated damages.
Hearings on the force majeure claims were held in London from July 2 to 14,
2001, and hearings on the Contractor's April 20, 2001 supplement were held in
London from September 24 to October 3, 2001. Further hearings were held from
January 21 to February 1, 2002 and additional hearings were held from March 14
to 19, 2002.
As of December 31, 2001 the Company has received approximately $6.0 million
of liquidated damages from demands made on the demand guarantees posted by
Commerzbank on behalf of the Contractor. Although the outcome of the
arbitration, as with any litigious proceeding, is difficult to assess, the
Company believes it will prevail and receive additional liquidated damages in
the arbitration.
Contractual Obligations
The Company has contractual obligations and commercial commitments that may
affect its financial condition. Based on management's assessment of the
underlying provisions and circumstances of the material contractual obligations
and commercial commitments of the Company, including material off-balance sheet
and structured finance arrangements, there is no known trend, demand,
commitment, event or uncertainty that is reasonably likely to occur which would
have a material effect on the Company's financial condition or results of
operations. The following table identifies the Company's material obligations as
of December 31, 2001:
==============================================================================
Payments Due by Period
------------------------------------------------
Less Than 2-3 4-5 After 5
Contractual cash obligations Total 1 Year Years Years Years
- ------------------------------------------------------------------------------
(in thousands)
Long-term debt $323,125 $ 35,200 $ 90,828 $ 90,767 $106,330
Other long-term obligations 40,763 40,763
- ------------------------------------------------------------------------------
Total contractual cash
obligations $363,888 $ 35,200 $ 90,828 $131,530 $106,330
==============================================================================
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, 2001, the Company had fixed-rate long-term debt of $296.5
million in principal amount and having a fair value of $269.4 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 $15.4 million if
interest rates were to increase by 10% from their levels at December 31, 2001.
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, 2001, the Company had floating-rate obligations of $26.6
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, 2001 levels, the Company's consolidated
interest expense would increase by approximately $4,000 each month based upon
December 31, 2001 principal balances.
Item 8. Financial Statements and Supplementary Data
Reports of Independent Accountants............................................25
Balance Sheets as of December 31, 2001 and 2000...............................27
Statements of Income for the Years Ended December 31,
2001, 2000 and 1999...........................................................28
Statements of Changes in Stockholders' Equity for the
Years Ended December 31, 2001, 2000 and 1999..................................29
Statements of Cash Flows for the Years Ended December 31,
2001, 2000 and 1999...........................................................30
Notes to Financial Statements.................................................31
Report of Independent Accountants
To the Board of Directors and Stockholders of
CE Casecnan Water and Energy Company, Inc.
We have audited the accompanying balance sheets of CE Casecnan Water and
Energy Company, Inc. as of December 31, 2001 and 2000, and the related
statements of income, of changes in stockholders' equity and of cash flows for
the years then ended. 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. The financial statements of CE
Casecnan Water and Energy Company, Inc. for the year ended December 31, 1999
were audited by other independent accountants, whose report dated January 25,
2000 expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards 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, 2001 and 2000, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles in the United States of America.
JOAQUIN CUNANAN & CO.
A Pricewaterhousecoopers member firm
Makati City, Philippines
February 26, 2002
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 the related statements of operations, changes in stockholders' equity
and cash flows for each of the two years in the period ended December 31, 1999
and for the period from the date 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 the results of its operations, changes
in stockholders' equity, and its cash flows for each of the two 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.
BALANCE SHEETS
DECEMBER 31, 2001 and 2000
(Amounts in thousands U.S. Dollars)
ASSETS
==============================================================================
2001 2000
- ------------------------------------------------------------------------------
Current assets
Cash $ 1,078 $ 703
Trade receivable, net (Note 3) 8,012 -
Accrued interest and other receivable 19 573
Prepaid expenses and other current assets 1,894 42
- ------------------------------------------------------------------------------
Total current assets 11,003 1,318
Restricted cash and investments (Note 2) 5,978 47,923
Bond issue costs, net (Note 2) 6,712 8,315
Property, plant and equipment, net (Notes 2 and 4) 486,486 419,121
Deferred income tax (Notes 2 and 6) 5,371 5,696
- ------------------------------------------------------------------------------
$515,550 $482,373
==============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses (Note 8) $ 5,176 $ 960
Accrued interest 5,014 5,565
Payable to affiliates (Note 7) 34,507 19,000
Current portion of long-term debt (Notes 5 and 12) 35,200 29,625
- -------------------------------------------------------------------------------
Total current liabilities 79,897 55,150
- -------------------------------------------------------------------------------
Notes payable with related party (Notes 7 and 12) 40,763 -
- -------------------------------------------------------------------------------
Long-term debt, net of current portion (Notes 5 and 12) 287,925 323,125
- -------------------------------------------------------------------------------
Commitments and contingencies (Note 9)
- -------------------------------------------------------------------------------
Stockholders' equity
Capital stock (Note 10)
Authorized - 2,148,000 shares at one
Philippine peso ($0.038) par value per share
Issued - 767,162 shares 29 29
Additional paid-in capital 123,807 123,807
Accumulated deficit (16,871) (19,738)
- -------------------------------------------------------------------------------
106,965 104,098
- -------------------------------------------------------------------------------
$515,550 $482,373
===============================================================================
The accompanying notes are an integral part of these financial statements.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(With comparative figures for the year ended December 31, 1999)
(Amounts in thousands U.S. Dollars, except share data)
==============================================================================
2001 2000 1999
------------------------------------------------------------------------------
Revenues (Notes 2 and 3)
Delivery of water $ 4,114 $ - $ -
Sale of electricity 4,060 - -
------------------------------------------------------------------------------
8,174 - -
------------------------------------------------------------------------------
Operating expenses
Depreciation (Note 2) 1,249 - -
Plant operations (Note 11) 2,152 451 -
Doubtful accounts expense (Note 3) 521 - -
------------------------------------------------------------------------------
3,922 451 -
------------------------------------------------------------------------------
Operating income (loss) 4,252 (451) -
------------------------------------------------------------------------------
Other income (expenses)
Interest income 1,450 7,605 11,656
Interest expense (Notes 5 and 7) (44,162) (48,349) (46,329)
Capitalized interest (Note 2) 41,652 47,454 36,501
------------------------------------------------------------------------------
(1,060) 6,710 1,828
------------------------------------------------------------------------------
Income before provision for income tax 3,192 6,259 1,828
Provision for deferred income tax (Note 6) 325 1,402 1,129
------------------------------------------------------------------------------
Net income $ 2,867 $ 4,857 $ 699
==============================================================================
Net income per share (Note 2) $3.74 $6.33 $0.91
==============================================================================
Average number of common shares outstanding 767,162 767,162 767,162
==============================================================================
The accompanying notes are an integral part of these financial statements.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(With comparative figures for the year ended December 31, 1999)
(Amounts in thousands U.S. Dollars, except share data)
================================================================================
Outstanding Additional
Common Common Paid-in Accumulated
Shares Stock Capital Deficit Total
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Balance, December 31, 1998 767,162 $29 $123,807 $(25,294) $ 98,542
Net income - - - 699 699
- --------------------------------------------------------------------------------
Balance, December 31, 1999 (24,595) 99,241
Net income - - - 4,857 4,857
- --------------------------------------------------------------------------------
Balance, December 31, 2000 767,162 29 123,807 (19,738) 104,098
Net income - - - 2,867 2,867
- --------------------------------------------------------------------------------
Balance, December 31, 2001 767,162 $29 $123,807 $(16,871) $106,965
================================================================================
The accompanying notes are an integral part of these financial statements.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(With comparative figures for the year ended December 31, 1999)
(Amounts in thousands U.S. Dollars)
================================================================================
2001 2000 1999
- --------------------------------------------------------------------------------
Cash flows from operating activities
Net income $ 2,867 $ 4,857 $ 699
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation 1,249 - -
Amortization of bond issue costs 1,603 2,270 1,324
Provision for deferred income tax 325 1,402 1,129
Changes in assets and liabilities
Decrease in accrued interest receivable 554 1,177 1,264
Increase in trade and other receivable (8,012) - -
Increase in prepaid expenses (1,852) (42) -
Increase in accounts payable and accrued
expenses 384 381 -
- --------------------------------------------------------------------------------
Net cash provided (used in) operating activities (2,882) 10,045 4,416
- --------------------------------------------------------------------------------
Cash flows from investing activities
Additions to development and construction costs (74,592) (82,713) (76,420)
Liquidated damages received 5,978 - -
Decrease (increase) in restricted:
Cash and short-term investments (5,978) 42,063 103,894
Investments 47,923 74,253 166
Increase (decrease) in accounts payable and
accrued expenses related to development and
construction costs 3,281 (35,489) (41,002)
- --------------------------------------------------------------------------------
Net cash used in investing activities (23,388) (1,886) (13,362)
- --------------------------------------------------------------------------------
Cash flows from financing activities
Increase in advances from affiliates 15,507 8,976 9,268
Payment of long-term debt (29,625) (18,750) -
Proceeds from notes payable 40,763 - -
- --------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 26,645 (9,774) 9,268
- --------------------------------------------------------------------------------
Net increase (decrease) in cash 375 (1,615) 322
Cash at beginning of year 703 2,318 1,996
- --------------------------------------------------------------------------------
Cash at end of year $ 1,078 $ 703 $ 2,318
================================================================================
Supplemental disclosure of cash flow information
Interest paid during the period (net of
amount capitalized) $ 1,267 $(1,259) $ 8,670
================================================================================
The accompanying notes are an integral part of these financial statements.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
(Amounts in U.S. Dollars, unless indicated otherwise)
Note 1 - Organization and operations
CE Casecnan Water and Energy Company, Inc. (the Company) was registered
with the Philippine Securities and Exchange Commission on September 21, 1994.
The purpose of the Company 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.
The Company has a contract with the Philippine Government, through the
Philippine National Irrigation Administration (NIA) (a government-owned and
controlled corporation), 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 (Cooperation Period)
with "take-or-pay" obligations for water and electricity. At the end of the
Cooperation Period, the combined irrigation and 150 megawatt hydroelectric power
generation project (the Casecnan Project) will be transferred to the Philippine
Government at no cost on an "as is" basis. The Philippine Government also signed
a Performance Undertaking, which, among others, affirms and guarantees the
obligations of NIA under the contract. Construction of the Casecnan Project
commenced in 1995.
The Casecnan Project commenced commercial operations on December 11, 2001.
Prior to this date, the Company was considered to be a development stage
enterprise. Pursuant to the share ownership adjustment mechanism in the
Shareholder Agreement, which is based upon pro-forma financial projections of
the Casecnan Project at commencement of commercial operations, MidAmerican
Energy Holdings Company ("MidAmerican"), through its wholly owned indirect
subsidiary CE Casecnan Ltd, has advised the minority shareholders that
MidAmerican's ownership interest in the Company will increase to 100%. An
initial shareholder has indicated its disagreement with the ownership adjustment
and its right to up to a 15% ownership interest and has requested certain
information with respect to the project's economics which form the basis of such
adjustment.
The Company's operations are in one reportable segment, the water and
electricity generation industry.
The Company is registered with the Philippine Board of Investments 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.
Note 2 - Summary of significant accounting policies
The financial statements are prepared in accordance with generally accepted
accounting principles in the United States of America. The more significant
accounting policies and practices of the Company are set forth below:
Basis of presentation
The functional and reporting currency of the Company is the United States
Dollar. Gains or losses resulting from translation of monetary assets and
liabilities in foreign currencies are not material.
Restricted cash and investments are primarily commercial papers, money
market 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, 2001
approximates their fair value, which is based on quoted market prices as
provided by the financial institution holding the investments.
Bond issue costs consist of costs incurred in the issuance of senior
secured notes and bonds and are deferred and amortized over the term of the
notes and bonds using the effective interest rate method. Amortization of bond
issue costs is capitalized during the construction period and charged to
operations, as an interest expense, upon completion of the Casecnan Project.
Property, plant and equipment are stated at cost (including capitalized
interest costs) less accumulated depreciation. Depreciation is computed on the
straight-line method based on the Cooperation Period for the hydroelectric power
plant and office and building structure, and on the estimated useful life of
five years for other equipment. Minor expenditures for repairs and maintenance
are charged to operations as incurred; significant renewals and improvements are
capitalized. Liquidated damages relative to the Casecnan Project are recorded as
reduction to the cost of the capital projects. When an asset is sold or
otherwise disposed of, its cost and related accumulated depreciation are removed
from the accounts and the resulting gain or loss is credited or charged to
operations.
Interest on long-term debt is capitalized as part of the cost of capital
projects during the construction period and charged to operations upon
completion of the Casecnan Project.
Deferred income 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 income 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 income
tax assets if it is more likely than not that a tax benefit will not be
realized.
Net income per share is based on the weighted average number of common
shares outstanding during the period.
Impairment of long-lived assets is reviewed 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.
Revenues from sale of electricity and delivery of water are recognized as
income during the period in which actual capacity is generated and delivered to
the customer. Interest and other income are recognized when earned. The
allowance for doubtful accounts is based on the Company's assessment of the
collectibility of customer accounts.
Transactions in foreign currencies (Philippines pesos) are recorded based
on the prevailing rates of exchange at transaction dates. Foreign currency
denominated monetary assets and liabilities are translated at the exchange rate
prevailing at the balance sheet date. The resulting exchange differences from
settlements of foreign currency transactions and translations of monetary assets
and liabilities are credited or charged to operations.
Retirement cost is determined actuarially based on the Projected Unit
Credit Actuarial Cost Method.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America 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 revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
New accounting pronouncements
In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. This standard is effective for fiscal years beginning
after June 15, 2002, and provides accounting requirements for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. Under the standard, the asset retirement obligation is
recorded at fair value in the period in which it is incurred by increasing the
carrying amount of the related long-lived asset. The liability is accreted to
its present value in each subsequent period and the capitalized cost is
depreciated over the useful life of the related assets. The effect of this
standard on the financial statements has not been determined.
In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of, but retains its fundamental provisions for recognizing
and measuring impairment of long-lived assets to be held and used. This standard
also requires that all long-lived assets to be disposed of by sale are carried
at the lower of carrying amount or fair value less cost to sell, and that
depreciation should cease to be recorded on such assets. SFAS 144 standardizes
the accounting and presentation requirements for all long-lived assets to be
disposed of by sale, superseding previous guidance for discontinued operations
of business segments. This standard is effective for fiscal years beginning
after December 15, 2001.
Reclassification
Certain accounts in the 2000 financial statements were reclassified to
conform with the 2001 financial statement presentation. Such reclassification
did not impact previously reported net income or retained earnings.
Note 3 - Trade receivable
Trade receivable pertains to receivable from NIA for water delivered to NIA
and the electricity generated and delivered by the Company to the Philippine
National Power Corporation on behalf of NIA. Trade receivable as of December 31,
2001 consists of:
=============================================================
Amount
(in thousands)
- -------------------------------------------------------------
- -------------------------------------------------------------
Water delivery fee $4,474
Guaranteed energy delivery fee 2,059
Excess energy delivery fee 2,000
- -------------------------------------------------------------
8,543
Less - allowance for doubtful accounts 521
- -------------------------------------------------------------
$8,012
=============================================================
Water delivery fee is a fixed monthly amount, to be received in US Dollars
at the end of each month, based on 801.9 million cubic meters of water flow past
the water delivery point per year, pro-rated to 66.8 million cubic meters per
month. The unit price for water is set at $0.029 per cubic meter (subject to
adjustment as set forth in the Project Agreement) as of January 1, 1994 and
escalated at seven and one-half percent (7.5%) per annum, pro-rated on a monthly
basis, through the end of the fifth year of the Cooperation Period and then kept
flat at that level for the last fifteen years of the Cooperation Period. The
unit price for water is to be adjusted by $.00043 for each $1.0 million of
certain taxes and fees paid by the Company as specified in the Project
Agreement. The unit price of water as of December 2001 is $0.0907. Actual
deliveries of water greater than or less than 66.8 million cubic meters in any
month will not result in any adjustment of the water delivery fee.
Guaranteed energy delivery fee is a fixed monthly amount, to be received in
US Dollars at the end of each month, based on energy deliveries of 228.0 million
kilowatt-hour (kWh) per year, pro-rated to 19.0 million kWh per month. Actual
deliveries of energy less than 19.0 million kWh per month will not result in any
reduction of the guaranteed energy fee but will result in an adjustment to the
excess energy fee. The unit price for guaranteed energy is $0.1596 per kWh.
Excess energy delivery fee is a variable amount, to be received in US
Dollars at the end of each month, for electrical energy delivered in excess of
19.0 million kWh. No excess energy delivery fee will be due until all cumulative
electrical energy shortfalls in previous months have been made up. The unit
price of excess energy is $0.1509 per kWh.
NIA has subsequently paid all amounts invoiced for water and energy
delivery fees under the Project Agreement as of December 31, 2001, but has not
paid the tax reimbursement portion of the invoices. The tax reimbursement amount
could add approximately 30% to each invoice payment. This amount was not assumed
in any revenue calculations at the time the Securities were issued and
accordingly, failure to receive these amounts should not adversely impact the
Company's ability to make regularly scheduled principal and interest payments on
the Securities. CE Casecnan is in discussions with NIA and representatives of
the Philippine government regarding the tax reimbursement amounts.
Note 4 - Property plant and equipment
Property, plant and equipment at December 31 consist of the following (in
thousands):
==================================================================
2001 2000
- ------------------------------------------------------------------
Hydroelectric power plant $487,516 $
Office and other equipment 44 -
- ------------------------------------------------------------------
487,560 -
Less - accumulated depreciation 1,249 -
- ------------------------------------------------------------------
486,311 -
Construction in progress 175 419,121
- ------------------------------------------------------------------
$486,486 $419,121
==================================================================
Note 5 - Long-term debt
On November 27, 1995, the Company issued $371.5 million worth of notes and
bonds to finance the construction of the Casecnan Project. These debts consist
of $75.0 million Senior Secured Floating Rate Notes (FRNs) bearing interest at
LIBOR plus 3.00% payable in installment through 2002; $125.0 million Senior
Secured Series A Notes (Series A Notes) with interest at 11.45% due in 2005; and
$171.5 million Senior Secured Series B Bonds (Series B Bonds) with interest at
11.95% due in 2010. For the year ended December 31, 2001, the notes and bonds
have effective interest rates of 13.13% and 13.57% for the Series A Notes and
Series B Bonds, respectively, inclusive of bond issue cost amortization. The
effective interest rate for the FRNs fluctuated between 5.59% and 10.72% in 2001
and was 5.60% at December 31, 2001. 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.
The repayment schedule is as follows (in thousands):
================================================================================
FRNs Series A notes Series B bonds Total
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
$26,625 $125,000 $171,500 $323,125
================================================================================
The securities areor debt 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. On and after the seventh
anniversary of the Closing (as defined in the Trust Indenture) of the Casecnan
Project financing, the 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 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 the completion
of the Casecnan Project, 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 Trust
Indenture. 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.
When a Change in Control occurs, each Holder will have the right to require
the Company to repurchase all or any part of such Holder's Securities at a cash
purchase price 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 Trust Indenture. There is no assurance that upon a Change in Control the
Company will have sufficient funds to repurchase the Securities.
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; 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 was strictly used to fund the
construction of the Casecnan Project when the proceeds from the Series A Notes
and Series B Bonds were fully utilized. The contributions are included in the
"Additional paid-in capital" account in the balance sheets.
As of December 31, 2001, MidAmerican held $3.0 million of the outstanding
Casecnan FRNs. The purchase of the FRNs by MidAmerican does not release the
Company of its obligations.
Note 6 - Deferred income tax asset
The Company's deferred income tax asset amounting to $5.4 million and $5.7
million (net of valuation allowance of $2.4 million for both years) as of
December 31, 2001 and 2000, respectively, consists mainly of the difference
between the financial reporting basis and the tax reporting basis for
development and construction costs. Valuation allowance is recognized for the
portion of deferred income tax asset for which it is more likely than not that
the tax benefit will not be realized due to the income tax holiday for six years
from the start of commercial operations.
Note 7 - Related party transactions
In the normal course of business, the Company transacts with its affiliates
in the form of advances for construction related and operating expenses. The
payable to affiliates was $34.5 million and $19.0 million at December 31, 2001
and 2000, respectively.
The Company has $40.8 million of unsecured subordinated notes payable to CE
Casecnan Ltd. due November 15, 2005. The unsecured notes bear interest at LIBOR
plus two (2%) percent which is payable every May 15 and November 15. Any overdue
payment of principal or interest payable on the notes shall increase the annual
interest by two (2%) percent. At December 31, 2001, the effective interest rate
on the notes was 6.0%. The notes may be prepaid at any time without premium or
penalty but with accrued interest, if any. The unsecured subordinated notes and
any and all payments, whether of principal, interest or otherwise are subject in
all respects to the terms of the Subordination Agreement dated November 15, 2001
between CE Casecnan Ltd. and the Company in favor of the Trustee, the Collateral
Agent, the co-collateral agent, the Depositary, any party that becomes a
Permitted Counterparty under an Interest Rate/Currency Protection Agreement, any
party that becomes a working capital facility agent and any other Person that
becomes a secured party under the Intercreditor Agreement.
Note 8 - Accounts payable and accrued expenses
Accounts payable and accrued expenses at December 31 consist of the
following (in thousands):
===============================================================================
2001 2000
- -------------------------------------------------------------------------------
Accrued contractor's fees $1,783 $521
Accrued liquidated damages (Note 9) 1,620 -
Other accounts payable and accrued expenses 1,773 439
- -------------------------------------------------------------------------------
$5,176 $960
===============================================================================
Note 9 - Commitments and contingencies
Replacement contract
The Casecnan Project was initially 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. On
May 7, 1997, the Company terminated the Hanbo Contract due to defaults by Hanbo
and HECC including the insolvency of both companies. 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 was 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").
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 was approved by the lenders' independent engineer under the
Trust Indenture. In January 2001, the Company received a new working schedule
from the Contractor that showed a completion date of August 31, 2001. The delay
in completion was attributable in part to the collapse in December 2000 of the
Project's partially completed vertical surge shaft and the need to drill a
replacement surge shaft.
On February 12, 2001, the Contractor filed a Request for Arbitration with
the International Chamber of Commerce seeking an extension of the Guaranteed
Substantial Completion Date by up to 153 days through August 31, 2001 resulting
from various alleged force majeure events. In its March 20, 2001 Supplement to
Request for Arbitration, the Contractor also seeks compensation for alleged
additional costs of approximately $4 million it incurred from the claimed force
majeure events to the extent it is unable to recover from its insurer. On April
20, 2001, the Contractor filed a further supplement seeking an additional
compensation for damages of approximately $62 million for the alleged force
majeure event (and geologic conditions) related to the collapse of the surge
shaft. The Contractor has alleged that the circumstances surrounding the placing
of the Casecnan Project into commercial operation in December 2001 amounted to a
recission of the Replacement Contract and has filed a claim for unspecified
quantum meruit damages. CE Casecnan believes all of such allegations and claims
are without merit and is vigorously contesting the Contractor's claims. The
arbitration is being conducted applying New York law and pursuant to the rules
of the International Chamber of Commerce.
On June 25, 2001, the arbitration tribunal temporarily enjoined CE Casecnan
from making calls on the demand guaranty posted by Banca di Roma in support of
the Contractor's obligations to CE Casecnan for delay liquidated damages.
Hearings on the force majeure claims were held in London from July 2 to 14,
2001, and hearings on the Contractor's April 20, 2001 supplement from September
24 to October 3, 2001. Further hearings were held from January 21 to February 1,
2002 and additional hearings were held from March 14 to 19, 2002.
Upon the receipt of the working schedule, however, the Company has sought
and obtained from the lender's independent engineer approval for a revised
construction schedule under the Trust Indenture. In connection with the revised
schedule, the ultimate parent company of CE Casecnan agreed to make available up
to $11.6 million of additional funds under certain conditions pursuant to a
Shareholder Support Letter dated February 8, 2001 (the "Shareholder Support
Letter"). The ultimate parent company has fully satisfied its obligations under
the Shareholder Support Letter.
The receipt of the new working schedule did not change the Guaranteed
Substantial Completion Date under the Replacement Contract, and the Contractor
was still contractually obligated either to complete the Project by March 31,
2001 or to pay liquidated damages for the delay in completion. As of December
31, 2001, the Company has received approximately $6.0 million of liquidated
damages from demands made on the demand guarantees posted by Commerzbank on
behalf of the Contractor. Although the outcome of the arbitration, as with any
litigious proceeding, is difficult to assess, the Company believes it will
prevail and receive additional liquidated damages in the arbitration.
Project transmission line
Under the Project Agreement, if NIA is able to accept delivery of water
into the Pantabangan Reservoir and NPC has completed the Project's related
transmission line, the Company is liable to pay NIA $5,500 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 Project transmission line was completed on August 13, 2001 and NIA has
completed the installation and testing of the Project's metering equipment.
Accordingly, the Company has accrued $1.6 million for liquidated damages as of
December 31, 2001, payable to NIA for 120 days of delay and this was shown as
part of accounts payable and accrued expenses in the balance sheets.
Concentration of risk
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. 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.
Regulatory environment
The Philippine Congress has passed the Electric Power Industry Reform Act
of 2001 which is aimed at restructuring the power industry, privatization of the
National Power Corporation and introduction of a competitive electricity market,
among others. The passage of the bill 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.
Note 10 - 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 certain rights to an ownership interest in the Company.
Note 11 - Retirement plan
The Company has a funded, noncontributory, defined benefit plan covering
all of its regular employees. The benefits are based on years of service and
compensation on the last year of employment.
Based on the latest actuarial valuation as of January 1, 2001, the
actuarial accrued liability amounted to $75,011 and the fair value of the plan
assets amounted to $20,796 resulting to an unfunded actuarial liability of
$54,215. The principal actuarial assumptions used to determine retirement
benefits included investment yield of 10% and salary increase rate of 11%. The
Company's annual contribution to the retirement plan consists of a payment
covering the current service cost for the year plus a payment toward funding the
actuarial accrued liability.
The total retirement expense incurred was $80,280 in 2001, $8,278 in 2000
and $13,138 in 1999.
Note 12 - 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:
Cash, trade receivable, accounts payable and accrued expenses
The carrying amount reported in the balance sheets for these accounts
approximates fair value because of the short maturity and nature of such
accounts.
Notes payable
The carrying amount reported in the balance sheets approximates fair value
in the absence of quoted market price.
Long-term debt
The fair value of the Company's long-term debt is estimated based on quoted
market prices of similar types of arrangements.
==============================================================================
2001 2000
- ------------------------------------------------------------------------------
Carrying Estimated Carrying Estimated
In thousands value fair value value Fair value
- ------------------------------------------------------------------------------
Series B Bonds $171,500 $154,350 $171,500 $156,134
Series A Notes 125,000 115,000 125,000 114,875
FRNs 26,625 25,028 56,250 53,859
- ------------------------------------------------------------------------------
$323,125 $294,378 $352,750 $324,868
==============================================================================
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None
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 45 Director and Chairman
Gregory E. Abel 39 Vice Chairman and President
Patrick J. Goodman 35 Director, Senior Vice President and
Chief Financial Officer
Douglas L. Anderson 44 Vice President, General Counsel and
Assistant Secretary
David A. Baldwin 37 Director, Vice President and General Manager
Jose Sandejas 64 Director and Corporate Secretary
Marivic Punzalan-Espiritu 33 Director and Assistant Corporate Secretary
Jose Jaime Cruz 31 Director
Scott LaPrairie 44 Director
Linda Castillo 42 Director
James D. Stallmeyer 44 Vice President
Brian K. Hankel 39 Vice President and Treasurer
Paul J. Leighton 48 Assistant Corporate Secretary
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 Vice Chairman and President 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.
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.
Douglas L. Anderson. In addition to serving as Vice President, General
Counsel and Assistant Secretary for the Company, Mr. Anderson is Senior Vice
President and General Counsel of MidAmerican. Mr. Anderson joined MidAmerican in
February 1993. From 1990 to 1993. Mr. Anderson was a business attorney with
Fraser & Stryker 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 President and 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 Netherlands
and New Zealand.
Jose 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
.
Marivic Punzalan-Espiritu. In addition to serving as a Director and
Assistant Corporate Secretary of the Company, Ms. Punzalan-Espiritu is a partner
with the law firm of Quisumbing Torres.
Jose Jaime Cruz. In addition to serving as a Director of the Company, Mr.
Cruz is an attorney with the law firm of Quisumbing Torres.
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.
Linda B. Castillo. In addition to serving as a Director of the Company, Ms.
Castillo 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.
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.
Paul J. Leighton. In addition to serving as Assistant Corporate Secretary,
Mr. Leighton is also Vice President, Corporate Law, Assistant General Counsel
and Assistant Secretary of MidAmerican. Mr. Leighton has served as Corporate
Secretary for MidAmerican and its predecessor companies since 1988 and as an
attorney since 1978.
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, 2001, the authorized capital stock of the Company
consisted of 2,148,000 shares of common stock, par value 1.00 Philippine peso
($0.038) 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, 2001 there were 11 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 Trust Indenture contains certain restrictions on the payment of
dividends with respect to the Common Stock.
Principal Stockholders
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 % Of Common
Name and Address of Owner Shares Owned* 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 115,074 15% (3)
(International), Ltd.
a Barbados corporation
c/o P.O. . Box 690C
Bridgetown, Barbados
3. San Lorenzo Ruiz Builders 115,074 15% (3)(4)
and Developers Group, Inc.
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) Pursuant to the share ownership adjustment mechanism in the Shareholder
Agreement, which is based upon pro-forma financial projections of the Casecnan
Project at commencement of commercial operations, MidAmerican Energy Holdings
Company ("MidAmerican"), through its wholly owned indirect subsidiary CE
Casecnan Ltd, has advised the minority shareholders that MidAmerican's ownership
interest in the Company will increase to 100%. An initial shareholder has
indicated its disagreement with the ownership adjustment and its right to up to
a 15% ownership interest and has requested certain information with respect to
the project's economics which form the basis of such adjustment. Number of
shares owned subject to upward adjustment based on the absence of the timely
exercise of the option specified in note (4) below.
(3) Pursuant to the share ownership adjustment mechanism in the Shareholder
Agreement, which is based upon pro-forma financial projections of the Casecnan
Project at commencement of commercial operations, MidAmerican Energy Holdings
Company ("MidAmerican"), through its wholly owned indirect subsidiary CE
Casecnan Ltd, has advised the minority shareholders that MidAmerican's ownership
interest in the Company will increase to 100%. An initial shareholder has
indicated its disagreement with the ownership adjustment and its right to up to
a 15% ownership interest and has requested certain information with respect to
the project's economics which form the basis of such adjustment. 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.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated December 13, 2001
announcing that on December 11, 2001 it achieved commercial operation of the
Casecnan combined irrigation and hydroelectric power generation project under
the terms of the Project Agreement and that achievement of commercial operation
commences the 20 year Cooperation Period under the Project Agreement.
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 29, 2002.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
By: /s/ * Douglas L. Anderson
Douglas L. Anderson
Vice 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 29, 2002
- -------------------
David L. Sokol
/s/ David A. Baldwin* Vice President & General Manager March 29, 2002
- --------------------- (Principal Executive Officer)
David A. Baldwin
/s/ Patrick J. Goodman* Director, Senior Vice President March 29, 2002
- ----------------------- and Chief Financial Officer
Patrick J. Goodman (Principal Financial Officer)
/s/ Linda B. Castillo* Director March 29, 2002
- ----------------------
Linda B. Castillo
/s/ Marivic Espiritu* Director March 29, 2002
- ---------------------
/s/ Jose Jaime Cruz* Director March 29, 2002
- --------------------
Jose Jaime Cruz
/s/ Jose R. Sandejas* Director March 29, 2002
- ---------------------
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's Form 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
FirstBank, 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 the Company
(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 (incorporated by reference to Exhibit 10.9 to the
Company's Form 10-K dated December 31, 1999).
24 Power of Attorney
POWER OF ATTORNEY
The undersigned, a member of the Board of Directors and/or as Officer of CE
CASECNAN WATER AND ENERGY COMPANY, INC., a corporation registered in the
Republic of the Philippines (the "Company"), hereby constitutes and appoints
Douglas L. Anderson and Paul J. Leighton and each of them as his/her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for and in his/her stead, in any and all capacities, to sign on
his/her behalf the Company's Form 10-K Annual Report for the fiscal year ended
December 31, 2001 and to execute any amendments thereto and to file the same,
with all exhibits thereto, and all other documents in connection therewith, with
the United States Securities and Exchange Commission and applicable stock
exchanges, with the full power and authority to do and perform each and every
act and thing necessary or advisable to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his/her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Dated as of March 29, 2002.
/s/ David L. Sokol
DAVID L. SOKOL
/s/ Patrick J. Goodman /s/ David A. Baldwin
PATRICK J. GOODMAN DAVID A. BALDWIN
/s/ Marivic Espiritu /s/ Jose Jaime Cruz
MARIVIC ESPIRITU JOSE JAIME CRUZ
/s/ Linda B. Castillo /s/ Jose R. Sandejas
LINDA B. CASTILLO JOSE R. SANDEJAS