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FORM 10-K-ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITES EXCHANGE ACT OF 1934
(Mark One)
[ x ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Fiscal year ended December 31, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________________to_______________________
Commission File Number 333-83815
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Caithness Coso Funding Corp.
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(Exact name of registrant as specified in its charter)
Delaware 94-3328762
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1114 Avenue of the Americas, 41st Floor, New York, New York 10036-7790
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 921-9099
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Securities registered pursuant to Section 12(g) of the Act:
6.80% Series B Senior Secured Notes Due 2001
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(Title of class)
9.05% Series B Senior Secured Notes Due 2009
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(Title of class)
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. [ x ] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (229.405 of this chapter) 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. [ ]
The Registrant's Common Stock is not traded in a public market.
Aggregate market value of the voting stock held by non-affiliates
of the registrant:
Not applicable.
Documents Incorporated by Reference: None
CAITHNESS COSO FUNDING CORP.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1999
Part 1 Page
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Item 1. Business 1
Item 2. Properties 8
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Part II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters (Not applicable) 9
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 25
Item 8. Financial Statements and Supplementary Data 26
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 27
Part III
Item 10. Directors and Executive Officers of the Registrants 27
Item 11. Executive Compensation 29
Item 12. Security Ownership of Certain Beneficial Owners and
Management (Not applicable) 29
Item 13. Certain Relationships and Related Transactions 31
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 34
Part I
Item 1. Business.
The Coso Projects
The Coso projects consist of three 80 MW geothermal power plants, called
Navy I, BLM and Navy II, their transmission lines, wells, gathering system and
other related facilities. The Coso projects are located near one another in the
Mojave Desert approximately 150 miles northeast of Los Angeles, California, and
have been generating electricity since the late 1980s. Unlike fossil fuel-fired
power plants, the Coso projects' power plants use geothermal energy derived
from the natural heat of the earth's interior to generate electricity.
The Navy I partnership owns Navy I and its related facilities, the BLM
partnership owns BLM and its related facilities and the Navy II partnership
owns Navy II and its related facilities (collectively the Coso partnership).
The Coso partnerships and their affiliates own the exclusive right to explore,
developand use, currently without any known interference from any other
power developers, a portion of the Coso Known Geothermal Resource Area.
The geothermal power plants, each of which has three separate turbine
generator units, have consistently operated above their nominal capacities, and
the combined average capacity factor for the plants has exceeded 100%, for each
of the last six years.
The Coso partnerships sell 100% of the electrical energy generated at the
plants to Southern California Edison (Edison) under three long-term Standard
Offer No. 4 power purchase agreements. Each power purchase agreement expires
after the last maturity date of the senior secured notes. Edison is one of the
largest investor-owned electric utilities in the United States. Under the power
purchase agreements, the Coso partnerships receive the following payments:
* Capacity payments for being able to produce electricity at certain
levels. Capacity payments are fixed throughout the lives of the power
purchase agreements;
* Capacity bonus payments if they are able to produce electricity above
a specified higher level. The maximum capacity bonus payment available
is also fixed throughout the lives of the power purchase agreements;
and
* Energy payments based on the amount of electricity their respective
plants actually produce.
Energy payments are fixed for the first ten years of firm operation under
the power purchase agreements. Firm operation was achieved for each Coso
partnership when Edison and that Coso partnership under its power purchase
agreement agreed that each generating unit at a plant was a reliable source of
generation and could reasonably be expected to operate continuously at its
effective rating. After the first ten years of firm operation and until its
power purchase agreement expires, Edison makes energy payments to the Coso
partnership based on its avoided cost of energy. Edison's avoided cost of
energy is Edison's cost to generate electricity if Edison were to produce it
itself or buy it from another power producer rather than buy it from the
relevant Cosopartnership. Future energy payments paid by Edison to the Coso
partnerships will most likely be less than historical energy payments because
they will be paid based on Edison's avoided cost of energy. The fixed energy
price period expired in August 1997 for the Navy I partnership and in
March 1999 for the BLM partnership, and will expire in January 2000 for the
Navy II partnership. The Edison power purchase agreements will expire:
1
* In August 2011 for the Navy I partnership;
* In March 2019 for the BLM partnership; and
* In January 2010 for the Navy II partnership.
AB1890 Energy Subsidy Payments
In addition to receiving payments under the power purchase agreements, the
Navy I partnership and the BLM partnership currently qualify for subsidy
payments from a special purpose state fund established under AB1890. The
California Energy Commission administers the fund. AB1890 provides in part for
subsidy payments from 1998 through 2001 to power generators using renewable
sources of energy, including geothermal energy, and who are being paid based on
an avoided cost of energy basis. The funds are distributed in the form of a
production incentive payment that subsidizes renewable energy producers when
prices paid for their electricity are below certain pre-determined target
prices. Under AB1890, the Navy I partnership and the BLM partnership are
expected to receive in the future subsidy payments for energy delivered to
Edison by the Navy I partnership or the BLM partnership, as the case may be, if
Edison's avoided cost of energy falls below 3.0(cent) per kWh. This subsidy is
capped at 1.0(cent) per kWh. The Navy II partnership should also qualify for
these subsidy payments through 2001 once the fixed energy price period under
its power purchase agreement expires.
Purchase of CalEnergy Interests
On February 25, 1999, Caithness Acquisition purchased all of CalEnergy's
interests in the Coso projects. The purchase price consisted of $205.0 million
in cash, plus $5.0 million in contingent payments, plus the assumption of
CalEnergy's and its affiliates' share of debt outstanding at the Coso projects
which then totaled approximately $67.0 million. In order to complete the
purchase, Caithness Acquisition arranged for short-term debt financing in the
principal amount of approximately $211.5 million. Caithness Acquisition used a
portion of the proceeds from the Series A note offering that it received from
the Coso partnerships, together with funds from other sources, to repay all
amounts owed under their short-term debt facility.
Operating Strategy
The Coso partnerships seek to maximize cash flow at the Coso projects
through active management of the Coso projects' cost structure and the Coso
geothermal resource. As a result of Caithness Acquisition's purchase of all of
CalEnergy's interests in the Coso projects, the Coso partnerships have retained
Coso Operating Company, which is one of our affiliates, to maintain all three
plants, the transmission lines and the geothermal resource, including well
drilling. As a result of the change in operators and the restructuring of
operator fees, the aggregate annual fees to be paid by the Coso partnerships to
Coso Operating Company have been reduced significantly. Payments of operator
fees have been subordinated to all payments to be made under the senior secured
notes. Caithness Acquisition, which purchased the managing partners interest in
the Coso partnerships, has caused any management committee fees payable by each
Coso partnership to its partners to be subordinated to all payments to be made
under the senior secured notes.
2
The Coso projects qualify as Small Power QFs under PURPA and the rules and
regulations promulgated under PURPA by FERC. PURPA exempts the Coso projects
from certain federal and state regulations. The Coso projects must continue to
satisfy certain ownership and fuel-use standards to maintain their QF status.
Since their inception, the Coso projects have satisfied these standards and we
expect that they will continue to do so.
The Sponsor
Caithness Energy, the principal operating subsidiary of Caithness
Corporation, is a developer and owner of independent power projects and is the
sponsor of the Coso projects. Since 1966, the current owners of Caithness
Corporation have been involved in the development of long-term investment
opportunities involving natural resources. Caithness Corporation is one of the
two original sponsors of the Coso projects and formed Caithness Energy in 1995
to consolidate its ownership of independent power projects.
Caithness Energy believes that it is currently the second largest owner of
geothermal power projects in the United States, based on the total electrical
generating capacity of its power projects. Through its controlled affiliates,
Caithness Energy owns interests in six geothermal plants, including the Coso
projects, totaling 340 MW. Caithness Energy is also seeking to develop two
additional geothermal power projects with a total potential electrical
generating capacity of over 400 MW, and has interests in other operating power
generating facilities, including solar, wind and natural gas, totaling an
additional 480 MW.
Caithness Energy is headquartered in New York City and has additional
offices in California and Florida.
The Issuer
Caithness Coso Funding Corp. (Coso Funding Corp.) is a special purpose
corporation and a wholly owned subsidiary of the Coso partnerships. It was
formed for the purpose of issuing the senior secured notes on behalf of
the Coso partnerships. The Coso partnerships have jointly, severally, and
unconditionally guaranteed repayment of the senior secured notes.
Coso Funding Corp. has no other material assets, other than the loans made
to the Coso partnerships, and does not conduct any business, other than issuing
the senior secured notes and making the loans to the Coso partnerships.
The Coso Known Geothermal Resource Area
The Coso projects are located in an area that has been designated as a
Known Geothermal Resources Area by the Bureau of Land Management pursuant to the
Geothermal Steam Act of 1970. The Bureau of Land Management designates an area
as a Known Geothermal Resource Area when it determines that a commercially
viable geothermal resource is likely to exist there. There are over 100 Known
Geothermal Resource Areas in the United States, most of which are located in the
western United States in tectonically active regions.
The Coso Known Geothermal Resource Area is located in Inyo County,
California, approximately 150 miles northeast of Los Angeles. The Coso
geothermal resource is a "liquid-dominated" hot water source contained within
the heterogeneous fractured granite rocks of the Coso Mountains. It is believed
the heat source for the Coso geothermal resource is a hot molten rock or "magma"
body located at a depth of six-to-seven miles beneath the surface of the field.
Geochemical studies indicate that the water in the Coso geothermal resource is
ancient water that has been there since the ice age or longer.
3
Steam Sharing Program
The Coso partnerships previously implemented a steam-sharing program,
which they established among the Coso projects under a Coso Geothermal Exchange
Agreement they entered into in 1994. The purpose of the steam-sharing program is
to enhance the management, and to optimize the overall use, of the Coso
geothermal resource. Pursuant to the steam sharing program, the Coso
partnerships constructed an inter-project steam supply and water injection
system which links the three Coso projects and BLM North together via metered
transfer lines through which the Coso partnerships exchange steam and other
geothermal resources with one another.
As part of the steam sharing program, the Coso partnerships plan to
conserve the geothermal resource whenever possible by, among other things,
transferring steam between and among the Coso projects and BLM North, rather
than drilling new wells at the Coso projects' sites prematurely, and expanding a
flexible field-wide water reinjection program. While each of the Navy and the
Bureau of Land Management has consented to the steam sharing program, each has
reserved the right, in its sole discretion, to withdraw its consent to such
transfers under certain circumstances.
In 1999, the Navy I partnership and the Navy II partnership paid aggregate
royalties to the Navy of approximately $6.3 million for steam transferred by
Navy I to Navy II and by Navy II to BLM under the steam sharing program from
geothermal resources located on the property on which Navy I or Navy II, as the
case may be are situated. Of this amount, the Navy I partnership paid
approximately $2.8 million and the Navy II partnership paid approximately $3.5
million. The BLM partnership reimbursed the Navy II partnership approximately
$0.8 million of the royalties paid by Navy II partnership. The BLM partnership
did not pay a royalty for electricity generated by BLM for steam transferred
from Navy property and sold to Edison.
Royalty and Revenue-Sharing Arrangements
The Coso partnerships are required to make royalty payments to, and are
subject to other revenue-sharing arrangements with, the Navy, the Bureau of Land
Management and certain other persons.
Navy I
Under the Navy Contract, as a royalty for Unit 1 at Navy I, the Navy I
partnership is obligated to reimburse partially the Navy for electricity
supplied to it by Edison from electricity generated at Navy I. The reimbursement
payment is based upon a pricing formula included in the Navy Contract. The
percentage rate of reimbursement changes semiannually, but cannot exceed 95% of
the price paid by the Navy to Edison, in accordance with a weighted index based
on the Consumer Price Index and price indices for the oil industry, the electric
power plant industry and the construction industry.
In addition, with respect to Unit 1 at Navy I, the Navy I partnership is
obligated to pay the Navy the sum of $25.0 million on or before December 31,
2009, the expiration date of the term of the Navy Contract. Payment of this
obligation will be made from an established sinking fund to which the Navy I
partnership has been making payments since 1987.
4
For Units 2 and 3 at Navy I, the Navy I partnership's royalty expense is a
fixed percentage of its electricity sales to Edison. The royalty expense is
15.0% of revenues received by the Navy I partnership through 2003 and will
increase to 20.0% from 2004 through 2009, the expiration date of the Navy
Contract.
BLM
The BLM partnership pays royalties to the Bureau of Land Management under
the BLM lease. The royalty rate is 10% of the value of the steam produced by the
BLM partnership. This royalty rate is fixed for the life of the BLM Lease. In
addition to this royalty, the BLM partnership is obligated to pay a royalty to
Coso Land Company, a general partnership of which Caithness Acquisition and
another affiliate of Caithness Energy are the general partners, in connection
with the assignment of the BLM lease to the BLM partnership. The royalty is
subordinated to the payment of all the BLM partnership's other royalties, all
debt service and all operating costs of BLM. No portion of the royalty that has
been accrued to Coso Land Company to date has been paid.
BLM North
Coso Land Company applied, as a tenant-in-common, to the Bureau of Land
Management for assignment of an undivided one-third interest in the LADWP
leases. Once this assignment becomes effective, the Coso partnerships will be
required to pay $8.00 per acre in rent and additional rent to the Bureau of Land
Management. When a leased property commences to produce geothermal steam, the
Coso partnerships will pay monthly royalties under the LADWP leases of 10% of
the amount or value of the steam produced 5% of any by-products and 5% of
commercially demineralized water. The Bureau of Land Management may establish
minimum production levels and reduce the foregoing royalties if necessary to
encourage the greater recovery of leased resources, or as otherwise justified.
Navy II
The Navy II partnership pays royalties to the Navy under the Navy
Contract. The Navy II partnership's royalty expense is a fixed percentage of its
electricity sales to Edison. The royalty rate was 10.0% of electricity sales to
Edison through 1999, and will increase to 18.0% from 2000 through 2004 and to
20.0% from 2005 through the end of the initial term.
Operations and Maintenance
The operations and maintenance services for the Coso projects, including
Navy I, BLM and Navy II, the Navy I Transmission Line, the BLM/Navy II
Transmission Line, the wells, the gathering system and the other related
facilities, are performed by Coso Operating Company on behalf of the Coso
partnerships pursuant to O&M agreements. Coso Operating Company is a wholly
owned subsidiary of Caithness Acquisition. It was initially formed by CalEnergy
to facilitate the transfer of operational control of the Coso projects to
Caithness Energy's affiliates.
5
On February 26, 1999 CalEnergy ceased to be the operator of the Coso
projects, and FPL Energy Operating Services, Inc. (FPLEOSI), an indirect wholly
owned subsidiary of FPL Energy, Inc., assumed that role. The amended and
restated operation and maintenance agreement between FPLEOSI and the managing
general partners was implemented. Under the agreement, FPLEOSI became the plant
operator and Coso Operating Company was responsible for maintenance of the
geothermal resource.
On October 17, 1999 the operating agreement between FPLEOSI and the
managing general partners was terminated and Coso Operating Company became the
sole operator of the plant and the geothermal field.
Insurance
The Coso partnerships currently maintain property, business interruption,
catastrophe and general liability for the Coso projects. The plants are insured
for $600.0 million per occurrence for general property damage (limited to
replacement costs) and $240.0 million per occurrence for business interruption,
subject to a $25,000 deductible for property damage (and a $250,000 deductible
for the turbine generator sets), with a 15-day deductible for business
interruption and a 25-day deductible for machinery breakdown and earthquake.
Catastrophic insurance (including earthquake and flood) is capped at $200.0
million for property damage, subject to a deductible of $2.5 million or 5.0% of
the loss, whichever is greater. Liability insurance coverage is $51.0 million
(occurrence based). Operators' extra expense (control of well) insurance is
$10.0 million per occurrence with a $25,000 deductible.
Employees
Employees necessary for the operation of the Coso partnerships are
provided by Coso Operating Company, under their respective operation and
maintenance agreements. As of December 31, 1999, Coso Operating Company employed
116 people to operate and maintain the Coso projects.
Coso Operating Company maintains a qualified technical staff covering a
broad range of disciplines including geology, geophysics, geochemistry, drilling
technology, reservoir engineering, plant engineering, construction management,
maintenance services, production management, electric power operation and
certain accounting, purchasing and payroll services.
Competition
The Coso partnerships sell all the electrical energy generated at the
plants to Edison under three long-term Standard Offer No. 4 power purchase
agreements. The payments under these agreements have constituted 100% of the
operating revenues of each power plant since its inception.
Environmental and Regulatory Matters
The Coso partnerships are subject to environmental laws and regulations at
the federal, state and local levels in connection with their development,
ownership and operation of the Coso projects. These environmental laws and
regulations generally require that a wide variety of permits and governmental
approvals be obtained to construct and operate an energy-producing facility. The
facility must then operate in compliance with the terms of these permits and
approvals. If the Coso partnerships fail to operate the facility in compliance
with applicable laws, permits and approvals, governmental agencies could levy
fines or curtail operations.
6
The Coso partnerships believe they are in compliance in all material
respects with all applicable environmental regulatory requirements applicable to
the Coso project, and that maintaining compliance with current governmental
requirements will not require a material increase in capital expenditures or
materially adversely affect that Coso partnership's financial condition or
results of operations. It is possible, however, that future developments, such
as more stringent requirements of environmental laws and enforcement policies
thereunder, could affect capital and other costs at the Coso projects and the
manner in which the Coso partnerships conduct their business.
Financial Information
(in thousands)
Navy I Partnership Years Ended December 31,
1997 1998 1999(c)
---- ---- -------
Total Operating Revenue 100,431 53,153 55,666
Operating Income 66,439 21,259 23,995
Total Assets 209,390 202,266 217,712
BLM Partnership Years Ended December 31,
1997 1998 1999(c)
---- ---- -------
Total Operating Revenue 102,868 107,199 49,877
Operating Income 59,675 62,512 11,343
Total Assets 225,172 228,381 216,391
Navy II Partnership Years Ended December 31,
1997 1998 1999(c)
---- ---- -------
Total Operating Revenue 112,796 119,564 113,746
Operating Income 75,047 78,444 70,169
Total Assets 228,653 220,867 273,269
See Footnotes to Summary Selected Historical Financial and Operating Data
7
Item 2. Properties.
Plants
Navy I
Navy I and its steam resource are located on the United States Naval
Weapons Center at China Lake. It commenced operations in 1987. Geothermal steam
for Navy I was produced using over 40 production and injection wells located
within a radius of approximately 3,000 feet of Navy I. Navy I consists of three
separate turbine generators, known as Units 1, 2 and 3, each with approximately
30 MW of electrical generating capacity. Navy I's steam gathering and piping
systems are cross-connected to Navy II via metered transfers to allow steam to
be transferred from wells located on the real property covered by the LADWP
leases to Navy I and between Navy I and Navy II pursuant to the steam sharing
program. Unit 1 at Navy I commenced firm operation in 1987, and Units 2 and 3 at
Navy I commenced firm operation during 1988. Navy I has an aggregate gross
electrical generating capacity of approximately 90 MW, and operated at an
average operating capacity factor of 95.4% in 1999, 94.6% in 1998, and 103.2% in
1997, based on a nameplate capacity of 80 MW.
BLM
BLM and its steam resource are located on Bureau of Land Management
property (other than the Bureau of Land Management property that is subject to
the LADWP leases), within the boundaries of the United States Naval Weapons
Center at China Lake. It commenced operations in 1989. BLM is comprised of
turbine generators located at two different power blocks: the BLM East site and
the BLM West site. The BLM East site is located approximately 1.3 miles east of
the BLM West site. Geothermal steam for BLM was produced using over 35
production and injection wells located within a radius of approximately 4,000
feet from either the BLM East or the BLM West site. BLM consists of three
separate turbine generators, known as Units 7, 8 and 9. Units 7 and 8 are
located at the BLM East site, each with a generating capacity of approximately
30 MW, while Unit 9 is located at the BLM West site, with a generating capacity
of approximately 30 MW. BLM's steam gathering and piping systems are cross
connected to Navy II via metered transfers to allow steam to be transferred
between Navy II and BLM pursuant to the steam sharing program. All three units
commenced firm operation during 1989. BLM has an aggregate gross electrical
generating capacity of approximately 90 MW, and operated at an average operating
capacity factor of 105.0% in 1999, 104.4% in 1998, and 99.6% in 1997, based on a
nameplate capacity of 80 MW.
Navy II
Navy II and its steam resource are located on the United States Naval
Weapons Center at China Lake. It commenced operations in 1989. Geothermal steam
for Navy II was produced using over 35 production and injection wells located
within a radius of approximately 6,000 feet of Navy II. Navy II consists of
three separate turbine generators, known as Units 4, 5 and 6, each with
approximately 30 MW of electrical generating capacity. Navy II's steam supply
systems are cross-connected to Navy I's and BLM's steam supply systems via
metered transfers to allow steam to be transferred between or among the plants
pursuant to the steam sharing program. All three Navy II units commenced firm
operation in 1990. Navy II has an aggregate gross electrical capacity of
approximately 90 MW, and operated at an average operating capacity factor of
112.0% in 1999, 108.6% in 1998, and 108.9% in 1997, based on a nameplate
capacity of 80 MW.
8
Transmission Lines
The electricity generated by Navy I is conveyed over an approximately
28.8-mile 115 kilovolt ("kV") transmission line on Navy and Bureau of Land
Management land that is connected to the Edison substation at Inyokern,
California. The Navy I partnership owns and uses this transmission line and its
related facilities. The electricity generated by BLM and Navy II is conveyed
over an approximately 28.8-mile 230 kV transmission line on Navy and Bureau of
Land Management land that is also connected to the Edison substation at
Inyokern, California. Coso Transmission Line Partners owns the BLM/Navy II
Transmission Line and related facilities.
Item 3. Legal Proceedings.
Settlement of Litigation
In February 2000, Navy I, Navy II, BLM and Edison reached a settlement,
subject to the approval of the California Public Utilities Commission of all
matters of litigation between the Coso Partnerships and Edison. The cost of the
settlement was allocated among the Coso Partnerships.
In June 1999, Navy I, Navy II, BLM, and Fuji Electric Co., and Fuji
Electric Corporation of America reached a settlement agreement. Fuji, in
consideration of the settlement agreement, must provide various equipment and
spare parts to the Coso Partnerships.
In December 1999, the BLM partnership and Dow Chemical Company entered
into a confidential settlement agreement, which was effective January 1, 2000,
to resolve BLM's claim to recover damages incurred related to an installation in
1992 by Dow of a hydrogen sulfide abatement system.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Not applicable.
9
Item 6. Selected Financial Data.
The selected fiscal year end historical financial data has been derived
from the audited financial statements of the Coso partnerships. The information
contained in the following tables should be read in conjunction with the audited
financial statements and notes thereto included elsewhere in this report.
Navy I Partnership
(Stand-alone)(a)
(In thousands, except ratio data)
Year Ended December 31
----------------------
1995 1996 1997 1998 1999 (c)
------ ------ ------ ----- -------
Statement of Operations Data:
Operating Revenues............................. $ 107,063 $ 118,206 $ 100,431(b) $ 53,153(b) $ 55,666
Operating expenses............................. (37,145) (36,147) (33,992) (31,894) (31,671)
---------- ---------- ---------- ---------- ---------
Operating income............................... 69,918 82,059 66,439 21,259 23,995
Non-Operating income and (expense):
Interest expense................................ (11,356) (8,868) (6,260) (4,333) (11,591)
Other expenses................................. -- -- -- (923) (4,359)
Interest and other income, net............... 2,893 3,286 1,980 585 1,776
--------- --------- --------- ---------- ---------
Net income..................................... $ 61,455 $ 76,477 $ 62,159 $ 16,588 $ 9,821
========= ======== ========= ========== =========
Operating Data:
Operating capacity factor (d)(e)............... 112.1% 112.1% 103.2% 94.6% 95.4%
kWh produced................................... 785,400 787,688 723,116 662,560 668,388
See Footnotes to Summary Selected Historical Financial and Operating Data
10
BLM Partnership
(Stand-alone)
(In thousands, except ratio data)
Year Ended December 31,
-----------------------
1995 1996 1997 1998 1999 (c)
------ ------- ------ ------ ---------
Statement of Operations Data:
Operating Revenues................................. $ 100,534 $ 101,923 $ 102,868 $ 107,199 $ 49,877(b)
Operating expenses................................. (40,418) (40,017) (43,193) (44,687) (38,534)
--------- --------- --------- --------- --------
Operating income................................... 60,116 61,906 59,675 62,512 11,343
Non-Operating income and (expense):
Interest expense.............................. (15,063) (13,162) (9,105) (6,267) (8,739)
Other expenses.............................. -- -- -- (953) (3,318)
Interest and other income, net............ 2,644 2,520 1,712 1,181 1,066
-------- -------- -------- -------- -------
Net income............................... $ 47,697 $ 51,264 $ 52,282 $ 56,473 $ 352
======== ======== ======== ======== =======
Operating Data:
Operating capacity factor (d)(e)................... 107.5% 107.9% 99.6% 104.4% 105.0%
kWh produced....................................... 753,200 758,115 697,794 731,767 735,840
See Footnotes to Summary Selected Historical Financial and Operating Data
11
Navy II Partnership
(Stand-alone)
(In thousands, except ratio data)
Year Ended December 31,
-----------------------
1995 1996 1997 1998 1999 (c)
------ ------ ------ ------ ---------
Statement of Operations Data:
Operating Revenues...................................... $ 108,390 $ 115,126 $ 112,796 $ 119,564 $ 113,746
Operating expenses...................................... (39,168) (37,911) (37,749) (41,120) (43,577)
--------- --------- --------- --------- ----------
Operating income........................................ 69,222 77,215 75,047 78,444 70,169
Non-Operating income and (expense):
Interest expense.......................................... (13,868) (12,149) (10,532) (8,122) (11,967)
Other expenses.......................................... -- -- -- (1,664) (4,171)
Interest and other income, net......................... 3,040 3,174 2,187 1,799 2,174
-------- -------- -------- --------- ---------
Net income............................................... $ 58,394 $ 68,240 $ 66,702 $ 70,457 $ 56,205
======== ======== ======== ======== ========
Operating Data:
Operating capacity factor (d)(e)........................ 111.3% 110.6% 108.9% 108.6% 112.0%
kWh produced............................................ 779,800 777,243 762,821 760,659 785,772
See Footnotes to Summary Selected Historical Financial and Operating Data
12
As of December 31,
-------------------
Balance Sheet Data (in thousands): 1995 1996 1997 1998 1999
- ---------------------------------- ------ ------ ------ ------ ------
Navy I Partnership (stand-alone)(a)
Cash.................................................. $ 45,093 $ 15,724 $ 2,888 $ -- $ 7,821
Restricted cash and investments....................... 28,161 29,016 6,479 7,524 25,001
Property, plant and equipment, net.................... 205,451 195,146 186,399 180,189 153,879
Power purchase agreement, net...................... -- -- -- -- 13,388
Total assets............................................... 301,474 264,250 209,390 202,266 217,712
Project loans:
Existing project debt, payable to 127,340 76,056 45,666 40,566 __
Coso Funding Corp...............................
Project notes (f)........................................... -- -- -- -- 151,550
Partners' capital....................................... $164,581 $ 167,834 $ 155,568 $ 149,933 $ 49,362
BLM Partnership (stand-alone)
Cash................................................... $ 40,219 $ 13,166 $ 873 -- $ 6,423
Restricted cash and investments...................... 23,533 23,298 290 290 9,806
Property, plant and equipment, net............ 216,278 208,867 198,296 202,270 165,650
Power purchase agreement, net....................... -- -- -- -- 20,549
Total assets................................................305,327 269,637 225,172 228,381 216,391
Project loans:
Existing project debt, payable to 137,748 105,990 76,654 37,958 __
Coso Funding Corp..............................
Project notes (f)........................................... -- -- -- -- 107,900
Partners' capital......................................... $119,560 $ 112,666 $ 124,113 $ 163,191 $ 79,350
Navy II Partnership (stand-alone)
Cash.......................................................$ 44,721 $ 18,133 $ 1,148 $ 818 $ 6,020
Restricted cash and investments....................... 22,841 22,391 -- -- 54,338
Property, plant and equipment, net................... 212,848 203,454 199,134 188,840 147,522
Power purchase agreement, net...................... -- -- -- -- 28,409
Total assets............................................... 309,009 272,549 228,653 220,867 273,269
Project loans:
Existing project debt, payable to 156,043 124,361 97,267 61,323 __
Coso Funding Corp...............................
Project notes (f).......................................... -- -- -- -- 153,550
Partners' capital.........................................$ 140,082 $ 126,092 $ 125,413 $ 153,661 $ 104,331
See Footnotes to Summary Selected Historical Financial and Operating Data
13
Footnotes to Summary Selected Historical Financial and Operating Data
(a) Reflects the combined financial results of the Navy I partnership and Coso
Finance Partners II, a California general partnership ("CFP II"). The Navy
I partnership and CFP II were first formed as separate entities to
facilitate the initial bank financing for the construction and development
of Navy I. Initially, the Navy I partnership acquired all of the assets
relating to the first turbine generator unit at Navy I and CFP II acquired
all of the assets of Navy I relating to the second and third generator
units at Navy I. In 1988, CFP II assigned all of its rights and interests
in the second and third generator units at Navy I to the Navy I partnership
in return for a 5.0% royalty to be paid based on the Navy I partnership's
steam production. Since the Navy I partnership and CFP II operate under
common ownership and management control, the historical financial
statements of the entities have been combined after elimination of
intercompany amounts related to the royalty arrangement. At the closing of
the Series A notes offering, CFP II merged with and into the Navy I
partnership and the accrued royalty was extinguished. In addition, the
royalty will no longer be accrued from and after the Series A note
offering.
(b) The decrease in energy revenues is due to the fact that the fixed energy
price period expired for the Navy I partnership in August 1997. The fixed
energy price period for the BLM partnership expired in March 1999 and will
expire for the Navy II partnership in January 2000.
(c) After Caithness Acquisition's purchase of all of CalEnergy's interests in
the Coso projects, on February 25, 1999, the Coso partnerships adopted a
new basis of accounting and therefore, the financial information for the
period after the acquisition is presented on a different cost basis than
that for the period before the acquisition and therefore is not comparable.
The purchase price was allocated to the portion of the assets and
liabilities purchased from CalEnergy based on their fair values, with the
amount of fair value of net assets in excess of the purchase price being
allocated to long-lived assets on a pro-rata basis.
(d) Based on a nameplate capacity of 80 MW.
(e) The reduction in the operating capacity factor for the Navy I partnership
and the increase in the operating capacity factor for the BLM partnership
and the Navy II partnership is due to the transfer of steam from the Navy I
partnership to the BLM partnership and the Navy II partnership under the
steam sharing program.
(f) Reflects indebtedness owed to Caithness Coso Funding Corp., who loaned all
the proceeds from the offering to the Coso partnerships at interest rates
and maturities identical to the interest rates and maturities of the senior
secured notes.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Except for historical financial information contained herein, the matters
discussed in this annual report may be considered forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and subject to
the safe harbor created by the Securities Litigation Reform Act of 1995. Such
statements include declarations regarding the intent, belief or current
expectations of Caithness Coso Funding Corp. ("Funding Corp."), Coso Finance
Partners ("the Navy I Partnership"), Coso Energy Developers ("the BLM
Partnership"), and Coso Power Developers ("the Navy II Partnership", and
together with the Navy I Partnership and the BLM Partnership (the "Coso
Partnerships") and their respective management. Any such forward-looking
statements are not guarantees of future performance and involve a number of
risks and uncertainties; actual results could differ materially from those
indicated by such forward-looking statements. Among the important factors that
could cause actual results to differ materially from those indicated by such
forward-looking statements are: (i) that the information is of a preliminary
nature and may be subject to further adjustment, (ii) risks related to the
operation of power plants, (iii) the impact of avoided cost pricing, (iv)
general operating risks, (v) the dependence on third parties, (vi) changes in
government regulation, (vii) the effects of competition, (viii) the dependence
on senior management, (ix) fluctuations in quarterly results and (x)
seasonality.
14
General
The Coso projects consist of three 80MW geothermal power plants, which
are referred to as Navy I, BLM and Navy II, and their transmission lines, wells,
gathering system and other related facilities. The Coso projects are located
near one another at the United States Naval Air Weapons Center at China Lake,
California. The Navy I partnership owns Navy I and its related facilities. The
BLM partnership owns BLM and its related facilities. The Navy II partnership
owns Navy II and its related facilities. Affiliates of Caithness Corporation and
CalEnergy Company, Inc. ("CalEnergy"), which is now known as MidAmerican Energy
Holdings Company, formed the Coso partnerships in the 1980s to develop,
construct, own and operate the Coso projects. On February 25, 1999 Caithness
Acquisition Company, LLC, purchased all of CalEnergy's interests in the Coso
projects for $205.0 million in cash, plus $5.0 million in contingent payments,
plus the assumption of CalEnergy's and its affiliates' share of debt outstanding
at the Coso projects which then totaled approximately $67.0 million.
Each Coso partnership sells 100% of the electrical energy generated at
its plant to Southern California Edison ("Edison") under a long-term Standard
Offer No.4 power purchase agreement. Each Company's power purchase agreement
expires after the final maturity date of the 6.8% Series B Senior Secured Notes
due 2001 and the 9.05% Series B Senior Secured Notes due 2009 issued by Funding
Corp.
Each Coso partnership receives the following payments under its power
purchase agreement:
* Capacity payments for being able to produce electricity at
certain levels. Capacity payments are fixed throughout the life
of each power purchase agreement;
* Capacity bonus payments if the Coso partnership is able to produce
electricity above a specified higher level. The maximum annual
capacity bonus payment available is also fixed throughout the life
of each power purchase agreement; and
* Energy payments which are based on the amount of electricity
the Coso partnership's plant actually produces.
Energy payments are fixed for the first ten years of firm operation under
each power purchase agreement. Firm operation was achieved for each Coso
partnership when Edison and that Coso partnership agreed that each generating
unit at such Coso partnership's plant was a reliable source of generation and
could reasonably be expected to operate continuously at its effective rating.
After the first ten years of firm operation and until a Coso partnership's power
purchase agreement expires, Edison makes energy payments to the Coso partnership
based on Edison's "avoided cost of energy". Edison's avoided cost of energy is
Edison's cost to generate electricity if Edison were to produce it itself or buy
it from another power producer rather than buy it from the relevant Coso
partnership. The power purchase agreement for the Navy I partnership will expire
in August 2011, the power purchase agreement for the BLM partnership will expire
March 2019, and the power purchase agreement for the Navy II partnership will
expire in January 2010.
15
The fixed energy price period expired in August 1997 for the Navy I
partnership and in March 1999 for the BLM partnership, and will expire in
January 2000 for the Navy II partnership.
The Coso Partnerships have implemented and intend to expand a
steam-sharing program, which they established under a Coso Geothermal Exchange
Agreement they entered into in 1994. The purpose of the steam sharing program is
to enhance the management of the Coso geothermal resource and to optimize the
resource's overall benefits to the Coso Partnerships by transferring steam among
the Coso projects. Under the steam sharing program, the partnership receiving
the steam transfer splits revenue earned from electricity generated with the
partnership that transferred the steam.
For the year ended December 31, 1999, Edison's annual average avoided
cost of energy paid to the Navy I and the BLM Partnership was 3.1(cent) per kWh,
which is substantially below the fixed energy prices earned by the partnerships
prior to the expiration of the fixed energy price periods of their respective
power purchase agreements. Estimates of Edison's future avoided cost of energy
vary significantly, and no one can predict the likely level of avoided cost of
energy prices following the end of the fixed energy price period under the Navy
II Partnership's power purchase agreement in January 2000.
Coso Funding Corp is a special purpose corporation and a wholly owned
subsidiary of the Coso partnerships. It was formed for the purpose of issuing
the senior secured notes on behalf of the Coso partnerships. The Coso
partnerships have jointly, severally, and unconditionally guaranteed repayment
of the senior secured notes.
On May 28, 1999, Coso Funding Corp. was issued $110.0 million of 6.80%
senior secured notes due in 2001 and $303.0 million of 9.05% senior secured
notes due in 2009. The proceeds from the notes were loaned to the Coso
partnerships and are payable to Coso Funding Corp from payments of principal and
interest on the notes. Coso Funding Corp. does not conduct any other operations
apart from issuing the notes.
Under the note agreement, the Coso partnerships established accounts with
a depositary and pledged those accounts as security for the benefit of the
holders of the senior secured notes. All amounts deposited with the depositary
are, at the direction of the Coso partnerships, invested by the depositary in
permitted investments. All revenues or other proceeds actually received by the
Coso partnerships are deposited in a revenue account and withdrawn upon receipt
by the depositary of a certificate from the relevant Coso partnerships detailing
the amounts to be paid from funds in its respective revenue account.
Capacity Utilization
For purposes of consistency in financial presentation, the plant capacity
factor for each of the Coso partnerships is based on a nominal capacity amount
of 80MW (240MW in the aggregate). The Coso partnerships have a gross operating
capacity that allows for the production of electricity in excess of their
nominal capacity amounts. Utilization of this operating margin is based upon a
number of factors and can be expected to vary throughout the year under normal
operating conditions.
16
The following data includes the operating capacity factor, capacity and
electricity production (in kWh) for each Coso partnership on a stand-alone
basis:
Year Ended December 31,
-----------------------
Navy I Partnership (stand alone) 1999 1998 1997
---- ---- ----
Operating capacity factor 95.4% 94.6% 103.2%
Capacity (MW) (average) 76.34 75.63 82.55
kWh produced (000s) 668,388 662,560 723,116
BLM Partnership (stand alone)
Operating capacity factor 105.0% 104.4% 99.6%
Capacity (MW) (average) 84.00 83.54 79.66
kWh produced (000s) 735,840 731,767 697,794
Navy II Partnership (stand alone)
Operating capacity factor 112.1% 108.6% 108.9%
Capacity (MW) (average) 89.70 86.83 87.08
kWh produced (000s) 785,772 760,659 762,821
Total energy production for the Navy I partnership was 668.4 million kWh
for 1999 as compared to 662.6 million kWh for 1998 an increase of 0.9%. Total
energy production for the BLM partnership was 735.8 million kWh for 1999 as
compared to 731.8 million kWh in 1998, an increase of 0.6%. Total energy
production for the Navy II partnership was 785.8 million kWh for 1999 as
compared to 760.7 million kWh in 1998, an increase of 3.3%, due to increased
steam transfers from the Navy I partnership.
Total energy production for the Navy I partnership was 662.6 million kWh
for 1998 as compared to 723.1 million kWh for 1997, a decrease of 8.4%. Total
energy production for the BLM partnership was 731.8 million kWh for 1998 as
compared to 697.8 million kWh in 1997, and an increase of 4.9%. Total energy
production for the Navy II partnership was 760.7 million kWh for 1998 as
compared to 762.8 million kWh in 1997, a decrease of 0.3%. The Navy I
partnership's decrease in energy production in 1998 was due to the transfer of
steam from Navy I to Navy II and to BLM under the steam sharing program.
17
Results of Operations for the years ended December 31, 1999, 1998 and 1997.
- ---------------------------------------------------------------------------
The following discusses the results of operations of the Coso
partnerships for the years ended December 31, 1999, 1998 and 1997 (dollar
amounts in tables in thousands, except per kWh data):
Revenue
1999 1998 1997
---- ---- ----
$ cents/kWh $ cents/kWh $ cents/kWh
- --------- - --------- - ---------
Total Operating Revenues
Navy I partnership 55,666 8.3 53,153 8.0 100,431 13.9
BLM partnership 49,877 6.8 107,199 14.6 102,868 14.7
Navy II partnership 113,746 14.5 119,564 15.7 112,796 14.8
Capacity & Bonus Revenues
Navy I partnership 13,372 2.0 13,573 2.0 13,845 1.9
BLM partnership 13,938 1.9 13,847 1.9 13,939 2.0
Navy II partnership 14,018 1.8 14,018 1.8 14,018 1.8
Energy Revenues
Navy I partnership 42,294 6.3 39,580 6.0 86,586 12.0
BLM partnership 35,939 4.9 93,352 12.8 88,929 12.7
Navy II partnership 99,728 12.7 105,546 13.9 98,778 12.9
Total operating revenues for the Navy I partnership which consist of
capacity payments, capacity bonus payments, and energy payments were $55.7
million for 1999, as compared to $53.2 million in 1998 an increase of 4.7%. The
increase in total operating revenues and energy revenues for 1999 was primarily
due to the Navy I partnership's ability to transfer geothermal steam to the BLM
partnership and the Navy II partnership, both of which were receiving higher
fixed energy prices under their respective power purchase agreements (the BLM
partnership stopped receiving higher fixed energy prices during the first
quarter of 1999) and slightly higher energy prices received from Edison.
Total operating revenues for the BLM partnership were $49.9million
for 1999 as compared to $107.2 million in 1998, a decrease of 53.5%. The BLM
partnership's energy revenues decreased by 57.3 million in 1999 due to the
expiration of the fixed energy price period under the BLM partnership's power
purchase agreement in March 1999 and the receipt of energy payments based on
Edison's avoided cost of energy since that time. Until March 1999 and during
1998 the BLM partnership received approximately 14.6 cents per kWh for energy
delivered. Under the avoided cost of energy formula, the BLM partnership
received an average of approximately 3.21 cents per kWh for energy delivered for
the period April 1999 to December 1999.
Total operating revenues for the Navy II partnership were $113.7 million
for 1999, as compared to $119.6 million in 1998, a decrease of 4.9%. The
decrease in revenue was due to increased steam transfers from the Navy I
partnership.
Total operating revenues for the Navy I partnership, which consist of
capacity payments, capacity bonus payments and energy payments were $53.2
million for 1998 as compared to $100.4 million in 1997, a decrease of 47.1%. The
Navy I partnership's energy revenues were $39.6 million in 1998, as compared to
$86.6 million in 1997, a decrease of 54.3%. These decreases were attributable to
the expiration of the fixed energy price period under the Navy I partnership's
power purchase agreement and are the result of a full year of energy payments
based upon Edison's avoided cost of energy after the fixed energy price period
expired in August 1997. During the final year of its fixed energy price period,
the Navy I partnership received approximately 14.6(cent) per kWh for energy
delivered. Under the avoided cost of energy formula, since August 1997, the Navy
I partnership has been receiving an average of approximately 3.0(cent) per kWh
for energy delivered. This significant decrease in energy payments was partially
offset by the Navy I partnership's ability to transfer geothermal steam to the
BLM partnership and the Navy II partnership, both of which were still receiving
fixed energy payments under their respective power purchase agreements through
December 31, 1998. For 1998, as a result of its transfers of steam under the
steam sharing program, the Navy I partnership received steam transfer payments
of approximately $13.5 million from the BLM partnership and $5.5 million from
the Navy II partnership.
18
The BLM partnership's total operating revenues were $107.2 million in
1998, as compared to $102.9 million in 1997, an increase of 4.2%. The BLM
partnership's energy revenues were $93.4 million in 1998, as compared to $88.9
million in 1997, an increase of 5.0%. These increases were due to a 1.0(cent)
per kWh increase in the rate paid by Edison under the BLM partnership's power
purchase agreement. In addition, kWh produced increased primarily due to
increased steam transfers from the Navy I partnership. However, the impact from
such increased production was offset by steam sharing payments paid by the BLM
partnership to the Navy I partnership.
The Navy II partnership's total operating revenues were $119.6 million in
1998, as compared to $112.8 million in 1997, an increase of 6.0%. The Navy II
partnership's energy revenues were $105.5 million in 1998, as compared to $98.8
million in 1997, an increase of 6.9%. These increases were due primarily to an
increase in the rate paid by Edison under the Navy II partnership's power
purchase agreement. The Navy II partnership was paid 14.6(cent) per kWh in 1998
for the energy component of the electricity it sold to Edison compared to
13.6(cent) per kWh in 1997.
Interest and Other Income
1999 1998 1997
---- ---- ----
$ cents/kWh $ cents/kWh $ cents/kWh
- --------- - --------- - ---------
Navy I partnership 1,776 0.3 585 0.1 1,980 0.3
BLM partnership 1,066 0.1 1,181 0.2 1,712 0.2
Navy II partnership 2,174 0.3 1,799 0.2 2,187 0.3
The Navy I partnership's interest and other income increased by $1.2
million in 1999. During the first quarter of 1999, the Navy I partnership
accrued a $1.6 million business loss insurance recovery in connection with the
shutdown of one of the Navy I partnership's turbine generator units. The shut
down unit was returned to service in May of 1999. The partnership has recovered
$500,000 with respect to the insurance and has reserved the remaining $1.1
million pending resolution of the insurance claim. The remainder of the increase
in interest and other income for the Navy I partnership resulted from interest
income on cash reserves required by the senior notes issued on May 29, 1999. The
BLM partnership's interest and other income was $1.1 million for 1999, as
compared to $1.2 million for 1998, a decrease of 9.7%. The decrease was due to
the reduction in energy revenues subsequent to the expiration of the fixed
energy price period under the BLM partnership power purchase agreements in March
1999. The decreases were partially mitigated by interest income resulting from
cash reserves required by the senior secured notes issued on May 29, 1999. The
Navy II partnership's interest and other income was $2.2 million for 1999, as
compared to $1.8 million for 1998, an increase of 20.8%. Interest on increased
cash reserves required by the senior secured notes issued on May 29, 1999
contributed to the increases in interest income.
19
The Navy I partnership's interest income was $0.6 million for 1998, as
compared to $2.0 million in 1997, a decrease of 70.5%. The BLM partnership's
interest income was $1.2 million for 1998, as compared to $1.7 million in 1997,
a decrease of 31.0%. The Navy II partnership's interest income was $1.8 million
for 1998, as compared to $2.2 million in 1997, a decrease of 17.7%. These
decreases were due to the replacement of a cash funded debt service reserve fund
with a letter of credit in 1997 and to a generally lower interest rate
environment during 1998 versus 1997.
Legal Expenses and Settlement Costs
1999 1998 1997
---- ---- ----
$ cents/kWh $ cents/kWh $ cents/kWh
- --------- - --------- - ---------
Navy I partnership 2,373 0.4 2,969 0.4 0 0.0
BLM partnership 4,169 0.6 2,968 0.4 675 0.1
Navy II partnership 5,819 0.7 2,956 0.4 0 0.0
Legal expenses including monies allocated for litigation settlements
increased in 1999 for the BLM and Navy II partnerships by $1.2 million and $2.9
million, respectively, as a result of, among other expenses, an accrued
settlement obligation that will be paid to Edison upon approval of the settle
ment by the California Public Utility Commission. The legal expenses and
settement costs were inconsequential in 1997 as compared to 1998.
Plant Operations
1999 1998 1997
---- ---- ----
$ cents/kWh $ cents/kWh $ cents/kWh
- --------- - --------- - ---------
Navy I partnership 10,017 1.5 10,020 1.5 10,983 1.5
BLM partnership 15,568 2.1 16,418 2.2 17,806 2.6
Navy II partnership 10,873 1.4 12,271 1.6 12,768 1.7
The decrease in operating expenses for the BLM and Navy II partnerships
for 1999 as compared to 1998 was due primarily to reductions in operator and
management committee fees, insurance and other operating costs somewhat offset
by the increase in property taxes.
The decrease in operating expenses for the Navy I, BLM and Navy II
partnerships for 1998 as compared to 1997 were primarily due to a favorable
property tax appeal and settlement with Inyo County and decreases in operating
expenses.
Royalty Expenses
1999 1998 1997
---- ---- ----
$ cents/kWh $ cents/kWh $ cents/kWh
- --------- - --------- - ---------
Navy I partnership 9,699 1.5 6,824 1.0 9,849 1.4
BLM partnership 3,148 0.4 10,492 1.4 10,106 1.4
Navy II partnership 12,077 1.5 11,868 1.6 11,249 1.5
The Navy I partnership's royalty expenses were $9.7 million for 1999, as
compared to $6.8 million in 1998, an increase of 42.1%. The increase was due to
a scheduled increase in the royalty rate paid to the Navy beginning in November
1998 from 10% to 15%. The BLM partnership's royalty expenses were $3.1 million
for 1999 as compared to $10.5 million in 1998, a decreases of 70.0%. This
decrease was due to a reduction in BLM partnership revenues caused by the
expiration of the fixed energy price period under the BLM partnership's power
purchase agreement in March 1999 and the receipt of energy payments under
Edison's avoided cost of energy since that time. The Navy II partnership's
royalty expenses were $12.1 million for 1999 as compared to $11.9 million in
1998, an increase of 1.8%. The increase was due to an increase in production.
20
The Navy I partnership's royalty expenses were $6.8 million for 1998 as
compared to $9.8 million in 1997, a decrease of 30.7%. This decrease was due to
a decrease in revenues over the same period in 1998 caused by the expiration of
the fixed energy price period under the Navy I partnership's power purchase
agreement. The BLM partnership's royalty expenses were $10.5 million for 1998,
as compared to $10.1 million for 1997, an increase of 3.8%. This was due to the
increased revenues generated by the BLM partnership over the period. The BLM
partnership's royalty expenses for 1998 and 1997 include $3.1 million and 3.2
million, respectively of royalties payable to Coso Land Company. The Navy II
partnership's royalty expenses were $11.9 million for 1998, as compared to $11.2
million in 1997, an increase of 5.5%. This increase was due to an increase in
revenues generated by the Navy II partnership.
Depreciation and Amortization
1999 1998 1997
---- ---- ----
$ cents/kWh $ cents/kWh $ cents/kWh
- --------- - --------- - ---------
Navy I partnership 9,582 1.4 12,081 1.8 13,160 1.8
BLM partnership 15,649 2.1 14,809 2.0 14,606 2.1
Navy II partnership 14,808 1.9 14,025 1.8 13,732 1.8
The Navy I partnership's depreciation and amortization expense was $9.6
million for 1999, as compared to $12.1 million in 1998, a decrease of 20.7%. The
decrease was primarily due to purchase accounting adjustments. The overall
effect was a reduction in depreciation expense that was partially offset by
depreciation on current year additions. The BLM partnership's depreciation and
amortization expense was $15.6 million for 1999 and $14.8 million for 1998, an
increase of 5.7%. The increase was due to substantial increases in current year
asset additions partially offset by the effect of purchase accounting
adjustments. The Navy II partnership's depreciation and amortization expense was
$14.8 million for 1999 and $14.0 million in 1998. The increase was due to
purchase accounting adjustments and depreciation expense on current year asset
additions.
The Navy I partnership's depreciation and amortization expense was $12.1
million for 1998, as compared to $13.2 million for 1997, a decrease of 8.2%. The
decrease was primarily due to the cessation of depreciation expense for certain
wells, which became fully depreciated during these periods. The BLM
partnership's depreciation and amortization expense was $14.8 million for 1998,
as compared to $14.6 million for 1997, an increase of 1.4%. The Navy II
partnership's depreciation and amortization expense was $14.0 million for 1998,
as compared to $13.7 million in 1997, an increase of 2.1%.
21
Interest Expense
1999 1998 1997
---- ---- ----
$ cents/kWh $ cents/kWh $ cents/kWh
- --------- - --------- - ---------
Navy I partnership 9,629 1.4 4,333 0.7 6,260 0.9
BLM partnership 7,324 1.0 6,267 0.9 9,105 1.3
Navy II partnership 9,957 1.3 8,122 1.1 10,532 1.4
The Navy I partnership's interest expense was $9.6 million in 1999 and
$4.3 million in 1998, an increase of 122.2%. The BLM partnership's interest
expense was $7.3 million in 1999 and $6.3 million in 1998, an increase of 16.9%.
The Navy II partnership's interest expense was $10.0 million in 1999 and $8.1
million in 1998, an increase of 22.6%. These increases were due to higher
outstanding debt balances resulting from the $413 million senior secured
financing which closed on May 28, 1999.
The Navy I partnership's interest expense was $4.3 million for 1998, as
compared to $6.3 million in 1997, a decrease of 30.8%. The BLM partnership's
interest expense was $6.3 million for 1998, as compared to $9.1 million in 1997,
a decrease of 31.2%. The Navy II partnership's interest expenses was $8.1
million for 1998, as compared to $10.5 million in 1997, a decrease of 22.9%.
These decreases were due to a decrease in the amounts owed under the then
existing project debt that was repaid at the closing of the Series A notes
offering.
Interest Expense - Acquisition Debt
The Navy I, BLM and Navy II partnerships incurred interest expense -
acquisition debt of $2.0 million, $1.4 million, and $2.0 million, respectively
in 1999. This interest expense related to acquisition debt in the amount of
$211.5 million and was incurred on February 25, 1999 to acquire the interests of
CalEnergy in the Coso partnerships. This acquisition debt was repaid with the
proceeds of the $413.0 million senior secured notes issued on May 28, 1999.
Costs Related to Acquisition Debt
The Navy I, BLM and Navy II partnerships incurred other expenses of
$2.0 million, $1.5 million and $2.0 million, respectively for the twelve months
ended December 31, 1999. These other expenses, which consist primarily of
lending, legal and other fees, related to the acquisition debt in the amount of
$211.5 million were incurred on February 25, 1999 to acquire the interests of
CalEnergy in the Coso partnerships. This acquisition debt was repaid with the
proceeds of the $413.0 million senior secured notes issued on May 28, 1999.
Loss on early extinquishment of debt
The Navy I, BLM and Navy II partnerships recorded a loss on the early
extinguishment of its previous debt in the amounts of $2.4 million, $1.8 million
and $2.1 million, respectively for the twelve months ended December 31, 1999.
This loss was due to premium and other costs incurred to repay the existing
project debt of the Coso Partnerships before its scheduled maturity date. These
costs included tender premiums paid to the holders of the previous debt and the
write off of the remaining balance of deferred financing costs related to the
issuance of the previous debt. The previous debt was repaid with the proceeds of
the $413.0 million senior secured notes issued on May 28, 1999.
22
Liquidity and Capital Resources
Each of the Navy I partnership, the BLM partnership and the Navy II
partnership derive substantially all of their cash flow from Edison under the
power purchase agreements and from interest income earned on funds on deposit.
The Coso partnerships have used their cash primarily for capital expenditures
for power plant improvements, resource and operating costs, distributions to
partners and payments with respect to the project debt.
The following table sets forth a summary of each Coso partnership's cash
flows for the years ended December 31, 1999, December 31, 1998, and December 31,
1997.
1999 1998 1997
---- ---- ----
Navy I partnership (stand alone)
Net cash provided by operating activities $ 24,388 $ 31,928 $ 88,089
Net cash used in investing activities (24,094) (7,493) 18,399
Net cash provided (used) by financing activities 7,527 (27,323) (119,324)
--------- --------- ----------
Net change in cash and cash equivalents $ 7,821 $ (2,888) $ (12,836)
========= ========= ==========
BLM partnership (stand alone)
Net cash provided by operating activities $ 29,806 $ 75,855 $ 60,793
Net cash used in investing activities (16,699) (20,637) 19,435
Net cash provided (used) by financing activities (6,684) (56,091) (92,521)
--------- --------- ----------
Net change in cash and cash equivalents $ 6,423 $ (873) $ (12,293)
========== ========= ==========
Navy II partnership (stand alone)
Net cash provided by operating activities $ 74,802 $ 84,833 $ 80,529
Net cash used in investing activities (58,752) (7,010) (14,530)
Net cash provided (used) by financing activities (10,848) (78,153) (112,044)
---------- --------- ----------
Net change in cash and cash equivalents $ 5,202 $ (330) $ (16,985)
========== ========= ==========
The Navy I partnership's cash flows from operating activities decreased
by $7.5 million in 1999 as compared to 1998, primarily due to financing costs
associated with the short term debt obtained to complete the purchase of
CalEnergy's interest in the Navy I partnership and also due to the interest cost
relating to the $413.0 million senior secured notes issued on May 28, 1999.
Cash used in investing activities at the Navy I partnership increased by
$16.6 million in 1999 as compared to 1998, primarily as a result of an increase
in restricted cash requirements associated with the project loan from Coso
Funding Corp.
The Navy I partnership's cash flows from financing activities increased
by $34.9 million in 1999 as compared to 1998 as a result of the project loan
from Coso Funding Corp. offset by increased distributions to partners.
The BLM partnership's cash flows from operating activities decreased by
$46.0 million in 1999 as compared 1998, primarily due to a decrease in energy
revenues as a result of the switch to avoided cost and increased financing costs
associated with the short term debt obtained to complete the purchase of
CalEnergy's interest in the BLM partnership.
23
Cash used in investing activities at the BLM partnership decreased by
$3.9 million in 1999 as compared to 1998, primarily due to a decrease in capital
expenditures offset by an increase in restricted cash requirements associated
with the project loan from Coso Funding Corp.
The BLM partnership's cash flows from financing activities increased by
$49.4 million in 1999 as compared to 1998 as a result of the project loan from
Coso Funding Corp. offset by increased distributions to partners.
The Navy II partnership's cash flows from operating activities decreased
by $10.0 million in 1999 as compared 1998, primarily due to financing costs
associated with the short term debt obtained to complete the purchase of
CalEnergy's interest in the Navy II partnership as well as increased steam
transfers.
Cash flows from investing activities at the Navy II partnership increased
by $51.7 million in 1999 as compared to 1998 primarily due to the increase in
restricted cash requirements associated with the project loan from Coso Funding
Corp.
The Navy II partnership's cash flows from financing activities increased
by $67.3 million in 1999 as compared to 1998 as a result of the project loan
from Coso Funding Corp. offset by increased distributions to partners.
The Navy I partnership's cash flows from operating activities decreased
by $56.1 million in 1998 as compared to 1997 primarily due to a decrease in
revenues for the Navy I partnership in 1998 when they received a full year of
energy payments based on Edison's avoided cost of energy.
Cash flows from investing activities at the Navy I partnership decreased
by $25.9 million in 1998 as compared to 1997 primarily due to the release in
1997 of a debt service reserve fund, and further decreased by an increase in
capital expenditures in 1998.
The Navy I partnership's cash used by financing activities decreased by
$92.0 million in 1998 as compared to 1997, primarily as a result of decreased
distributions to partners.
The BLM partnership's cash flows from operating activities increased by
$15 million in 1998 as compared 1997, primarily due to increased related party
transactions.
Cash flows from investing activities at the BLM partnership decreased by
40.1 million in 1998 as compared to 1997, primarily due to the release in 1997
of a debt service reserve fund, and further decreased by an increase in capital
expenditures in 1998.
The BLM partnership's cash flows from financing activities increased by
$36.4 million in 1998 as compared to 1997 as a result of decreased distributions
to partners and the repayment of CalEnergy's promissory note in 1997.
The Navy II partnership's cash flows from operating activities increased
by $4.3 million in 1998 as compared 1997, primarily due to an increase in
revenue in 1998.
Cash flows from investing activities at the Navy II partnership decreased
by $21.5 million in 1998 as compared to 1997 primarily due to the release in
1997 of a debt service reserve fund and further decreased by capital
expenditures in 1998.
The Navy II partnership's cash flows from financing activities increased
by $33.9 million in 1998 as compared to 1997 primarily as a result of decreased
distributions to partners in 1998.
24
Year 2000
In 1999, the Coso partnership's developed a plan to identify, assess and
remediate "Year 2000" issues within each of their significant computer programs
and certain machinery and equipment. The Coso partnerships have not experienced
disruptions to their financial or operating activities caused by failure of
computerized systems from Year 2000 issues. In addition, the Coso partnerships
have not experienced disruptions to operations caused by failure of computerized
systems of suppliers or customers from Year 2000 issues. Management of the Coso
partnerships do not expect Year 2000 issues to have a material adverse effect on
their power plant's operations or financial results in 2000.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Risk Factors
Operating the Coso projects involves, among other things, general
economic, financial, competitive, legislative, regulatory and other factors that
are beyond our control. Changes in these factors could make it more expensive
for the Coso partnerships to operate the Coso projects, could require additional
capital expenditures or could reduce certain benefits currently available to the
Coso partnerships. A variety of other risks affect the Coso projects, some of
which are beyond our control, including:
* One or more of the Coso projects could perform below expected levels
of output or efficiency;
* The Coso geothermal resource could be interrupted or unavailable;
* Operating costs could increase;
* Energy prices paid by Edison could decrease;
* Delivery of electrical energy to Edison could be disrupted;
* Environmental problems could arise which could lead to fines or a
shutdown of one or more plants;
* Plant units and equipment have broken down or failed in the past and
could break down or fail in the future;
* The operators of the Coso projects could suffer labor disputes;
* The government could change permit or governmental approval
requirements;
* Third parties could fail to perform their contractual obligations to
the Coso partnerships; and
* Catastrophic events, such as fires, earthquakes, explosions, floods,
severe storms or other occurrences, could affect one or more of the
Coso projects or Edison.
25
In addition, the Coso partnerships must meet specified performance
requirements under their power purchase agreements during the months of June
through September to continue to qualify for the maximum capacity and capacity
bonus payments. If one or more of the events listed above occur and
substantially affect the performance of one or more of the plants during these
months, operating revenues would significantly decrease.
Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements
26
CAITHNESS COSO FUNDING CORP. AND
COSO OPERATING PARTNERSHIPS
Financial Statements
December 31, 1999
(With Independent Auditors' Report Thereon)
CAITHNESS COSO FUNDING CORP. AND
COSO OPERATING PARTNERSHIPS
Index
Section I Page
Caithness Coso Funding Corp:
KPMG LLP Independent Auditors' Report F-1
Balance Sheet as of December 31, 1999 F-2
Statement of Income for the year ended F-3
December 31, 1999
Statement of Cash Flows for the year
ended December 31, 1999 F-4
Notes to Financial Statements F-5
Section II
Coso Finance Partners:
KPMG LLP Independent Auditors' Report F-6
PricewaterhouseCoopers LLP Report of Independent Accountants F-7
Balance Sheets as of December 31, 1999 and 1998 F-8
Statements of Operations for each of the years in the
three-year period ended December 31, 1999 F-9
Statements of Partners' Capital for each of the years
in the three-year period ended December 31, 1999 F-10
Statements of Cash Flows for each of the years in
the three-year period ended December 31, 1999 F-11
Notes to Financial Statements F-12
Section III
Coso Energy Developers:
KPMG LLP Independent Auditors' Report F-13
PricewaterhouseCoopers LLP Report of Independent Accountants F-14
Balance Sheets as of December 31, 1999 and 1998 F-15
Statements of Operations for each of the years in the
three-year period ended December 31, 1999 F-16
Statements of Partners' Capital for each of the years
in the three-year period ended December 31, 1999 F-17
Statements of Cash Flows for each of the years in
the three-year period ended December 31, 1999 F-18
Notes to Financial Statements F-19
Section IV
Coso Power Developers:
KPMG LLP Independent Auditors' Report F-20
PricewaterhouseCoopers LLP Report of Independent Accountants F-21
Balance Sheets as of December 31, 1999 and 1998 F-22
Statements of Operations for each of the years in
the three-year period ended December 31, 1999 F-23
Statements of Partners' Capital for each of the years
in the three-year period ended December 31, 1999 F-24
Statements of Cash Flows for each of the years in
the three-year period ended December 31, 1999 F-25
Notes to Financial Statements F-26
Independent Auditors' Report
The Partners
Caithness Coso Funding Corp.:
We have audited the accompanying balance sheet of Caithness Coso Funding Corp.
as of December 31, 1999, and the related statements of income and cash flows for
the year 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 Caithness Coso Funding Corp. as
of December 31, 1999, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
February 7, 2000
/s/ KPMG LLP
- ---------------------
KPMG LLP
F-1
CAITHNESS COSO FUNDING CORP.
Balance Sheet
December 31, 1999
(Dollars in thousands)
Assets
Accrued interest receivable $ 1,392
Project loan to Coso Finance Partners 151,550
Project loan to Coso Energy Developers 107,900
Project loan to Coso Power Developers 153,550
----------------
Total assets $ 414,392
================
Liabilities and Stockholders' Equity
Senior secured notes:
Accrued interest payable $ 1,392
6.80% notes due December 15, 2001 110,000
9.05% notes due December 15, 2009 303,000
----------------
Total liabilities 414,392
Stockholders equity (note 4)
----------------
$ 414,392
================
See accompanying notes to financial statements.
F-2
CAITHNESS COSO FUNDING CORP.
Statement of Income
Year ended December 31, 1999
(Dollars in thousands)
Revenue:
Interest income $ 20,491
Expense:
Interest expense (20,491)
---------------
Net income $ ---
===============
See accompanying notes to financial statements.
F-3
CAITHNESS COSO FUNDING CORP.
Statement of Cash Flows
Year ended December 31, 1999
(Dollars in thousands)
Cash flows from investing activities $ ---
--------------
Cash flows from financing activities ---
--------------
Net change in cash ---
Cash at beginning of year
--------------
Cash at end of year $
==============
Supplemental cash flow disclosures:
Interest paid $ 20,491
==============
See accompanying notes to financial statements.
F-4
CAITHNESS COSO FUNDING CORP.
Notes to Financial Statements
December 31, 1999
(Dollars in thousands)
(1) Organization of the Corporation
Caithness Coso Funding Corp. (Funding Corp.), which was incorporated on
April 22, 1999, is a single-purpose Delaware corporation formed to issue
senior secured notes (Notes) for its own account and as an agent acting
on behalf of Coso Finance Partners (CFP), Coso Energy Developers (CED)
and Coso Power Developers (CPD), collectively, the "Partnerships." The
Partnerships are California general partnerships.
On May 28, 1999, Funding Corp. sold $413,000 of senior secured notes (see
note 4). Pursuant to separate credit agreements between Funding Corp. and
each partnership (Credit Agreements), the net proceeds from the offering
of the Notes were loaned to the Partnerships. Payment of the Notes is
provided for by payments made by the Partnerships under their respective
project loans (see note 3). Funding Corp. has no material assets, other
than the project loans, and does not conduct any operations apart from
issuing the Notes and making the project loans to the Partnerships.
(2) Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities,
stockholders' equity and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Fair Value of Financial Instruments
Based on quoted market rates of the senior secured notes, the fair value
of the project loans and underlying Notes as of December 31, 1999 is
$108,900 for the Notes maturing in 2001 and $301,485 for the Notes
maturing in 2009.
(3) Project Loans to the Partnerships
Pursuant to each Credit Agreement, each partnership shall make project
loan payments in scheduled installment amounts which, in the aggregate,
are sufficient to enable Funding Corp. to pay scheduled principal and
interest on the Notes (see note 4).
The Notes are general obligations of Funding Corp., and are secured and
perfected by: (1) first priority pledge of the promissory notes
evidencing each partnership's obligation to repay the loan, (2) first
priority lien on the funds in the debt service cash accounts of the
Partnerships and (3) first priority pledge of all of the outstanding
capital stock of Funding Corp. These obligations are unconditionally
guaranteed by the Partnerships and are secured and perfected by
substantially all assets of the Partnerships and the equity interests in
the Partnerships. Funding Corp., CPD, CED and CFP are jointly and
severally liable for the repayment of the Notes.
(4) Senior Secured Notes
On May 28, 1999, Funding Corp. completed a $413,000 underwritten public
debt offering consisting of $110,000 6.80% senior secured notes due 2001
and $303,000 9.05% senior secured notes due 2009. The Notes were issued
under an indenture dated as of May 28, 1999 between Funding Corp. and the
trustee, U.S. Bank Trust NA. Payment of the Notes is provided for by
payments to be made by the Partnerships on their respective project loans
(see note 3). Interest is payable each June 15 and December 15. As of
December 15, 1999, the principal payment of $52,665 was available for
payment by the trustee. The trustee paid this amount to the noteholders
on January 19, 2000. The failure to make the principal payment on
December 15, 1999 did not result from the lack of performance on the part
of Funding Corp. or the Partnerships and Funding Corps.' management
believes this is not an event of default.
The annual maturity of the senior secured notes for each year ending
December 31 is as follows:
Year ending December 31 Amount
------------------------ -------
2000 $ 82,933
2001 27,067
2002 21,771
2003 27,618
2004 31,332
Thereafter 222,279
-------
$ 413,000
=======
The Note indentures contain certain restrictive covenants that among
other things, limit the ability to incur additional indebtedness, release
funds from reserve accounts, make distributions, create loans and enter
into any transaction, merger or consolidation.
(5) Stockholders' Equity
Funding Corp. is authorized to issue 1,000 shares of common stock,
$.01 par value per share. Upon incorporating in 1999, Funding Corp.
issued 100 common shares each to CFP, CED and CPD.
F-5
Independent Auditors' Report
The Partners and Management Committee
Coso Finance Partners:
We have audited the accompanying balance sheet of Coso Finance Partners as of
December 31, 1999, and the related statements of operations, partners' capital
and cash flows for the year then ended. These financial statements are the
responsibility of the Partnerships' management. Our responsibility is to express
an opinion on these financial statements based on our audit. The combined
financial statements of Coso Finance Partners and Coso Finance Partners II as of
December 31, 1998 and for the years ended December 31, 1998 and 1997, were
audited by other auditors whose report, dated February 12, 1999, expressed an
unqualified opinion.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1999 financial statements referred to above present fairly,
in all material respects, the financial position of Coso Finance Partners as of
December 31, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
As discussed in note 4 to the financial statements, effective February 25, 1999,
Caithness Acquisition Company, LLC acquired all of the partnership interest not
already owned by its affiliates, ESCA LLC and ESCA II Limited Partnership, in a
business combination accounted for as a purchase. As a result of the
acquisition, the financial information for the period after the acquisition is
presented on a different cost basis than that for the period before the
acquisition and, therefore, is not comparable.
February 7, 2000
/s/ KPMG LLP
- ---------------------
KPMG LLP
F-6
Report of Independent Accountants
To the Partners of Coso Finance Partners
and Coso Finance Partners II
In our opinion, the combined financial statements listed in the accompanying
index present fairly, in all material respects, the combined financial position,
results of operations and cash flows of Coso Finance Partners and Coso Finance
Partners II at December 31, 1998 and for each of the two years in the period
ended December 31, 1998, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Partnership's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above. We have not audited the combined financial statements of Coso Finance
Partners and Coso Finance Partners II for any period subsequent to December 31,
1998.
As discussed in Note 2 to the combined financial statements, the Partnerships
adopted in 1998 Statement of Position No. 98-5, "Reporting on the Costs of
Start-Up Activities."
/s/ PricewaterhouseCoopers LLP
- --------------------------------
PricewaterhouseCoopers LLP
San Francisco, California
February 12, 1999
F-7
COSO FINANCE PARTNERS
Balance Sheets
December 31, 1999 and 1998 (note 4)
(Dollars in thousands)
Combined CFP and
CFP II (note 4)
1999 1998
---------------- -------------------
Assets
Cash and cash equivalents $ 7,821 ---
Restricted cash and investments (note 2) 25,001 7,524
Accounts receivable 5,154 5,404
Prepaid expenses and other assets --- 617
Amounts due from related parties (note 9) 4,508 4,160
Property, plant and equipment, net (notes 4 and 6) 153,879 180,189
Investment in China Lake Plant Services, Inc. (note 5) 4,212 4,139
Power purchase contract, net (note 4) 13,388 ---
Deferred financing costs, net (note 2) 3,749 233
---------------- -------------------
Total assets $ 217,712 202,266
================ ===================
Liabilities and Partners' Capital
Accounts payable and accrued liabilities (note 7) $ 16,236 11,389
Amounts due to related parties (note 9) 564 378
Project loans (note 8) 151,550 40,566
---------------- -----------------
Total liabilities 168,350 52,333
Commitments and contingencies (notes 7, 8 and 10)
Partners capital 49,362 149,933
---------------- ----------------
Total liabilities and partners capital $ 217,712 202,266
================ ================
See accompanying notes to financial statements.
F-8
COSO FINANCE PARTNERS
Statements of Operations
Years ended December 31, 1999, 1998 and 1997 (note 4)
(Dollars in thousands)
Combined CFP and
CFP II (note 4)
------------------------------
Twelve Twelve Twelve
Two months Ten months months months months
ended ended ended ended ended
February 28, December 31, December 31, December 31, December 31,
1999 1999 1999 1998 1997
-------------- -------------- --------------- ------------- ---------------
(old basis) (new basis) (old basis) (old basis)
Revenue:
Energy revenues $ 8,098 34,196 42,294 39,580 86,586
Capacity payments 474 12,898 13,372 13,573 13,845
Interest and other income 824 952 1,776 585 1,980
-------------- -------------- --------------- ------------- -------------
Total revenue 9,396 48,046 57,442 53,738 102,411
-------------- -------------- --------------- ------------- -------------
Operating expenses:
Plant operating expense 2,556 7,461 10,017 10,020 10,983
Royalty expense 987 8,712 9,699 6,824 9,849
Depreciated and amortization 1,604 7,978 9,582 12,081 13,160
Edison legal expenses
and settlement costs (note 10) 569 1,804 2,373 2,969 ---
-------------- -------------- --------------- ------------- -------------
Total operating expenses 5,716 25,955 31,671 31,894 33,992
-------------- -------------- --------------- ------------- -------------
Operating income 3,680 22,091 25,771 21,844 68,419
-------------- -------------- --------------- ------------- --------------
Other expenses:
Interest expense 663 8,966 9,629 4,333 6,260
Interest expense - acquisition debt --- 1,962 1,962 --- ---
Costs related to acquisition debt --- 1,984 1,984 --- ---
-------------- -------------- --------------- ------------- -------------
Total other expenses 663 12,912 13,575 4,333 6,260
-------------- -------------- --------------- ------------- -------------
Income before extraordinary
item and cumulative effect of
change in accounting principle 3,017 9,179 12,196 17,511 62,159
Extraordinary item - loss on
extinguishment of debt (note 8) --- 2,375 2,375 --- ---
Cumulative effect of change in
accounting principle: start-up
activities (note 2) --- --- --- 923 ---
-------------- -------------- --------------- ------------- -------------
Net income $ 3,017 6,804 9,821 16,588 62,159
============== ============== =============== ============= =============
See accompanying notes to financial statements.
F-9
COSO FINANCE PARTNERS
Statements of Partners Capital
Years ended December 31, 1999, 1998 and 1997 (note 4)
(Dollars in thousands)
Coso Finance Partners Coso Finance Partners II
------------------------------------- ------------------------------------
China Lake
China Lake ESCA II Geothermal
ESCA Operating New Limited Management New
LLC Company, Inc. CLOC, LLC Partnership Company, Inc. CLGMC Total
--------- -------------- ---------- ----------- -------------- ------- -----------
Balance at December 31, 1996$ 76,526 70,587 --- 11,202 9,519 --- 167,834
Net income 33,222 28,760 --- 95 82 --- 62,159
Distributions to partners (39,892) (34,533) --- --- --- --- (74,425)
---------- ----------- ------------ ----------- ------------ ---------- -----------
Balance at December 31, 1997 69,856 64,814 --- 11,297 9,601 --- 155,568
Net income (loss) 8,974 7,769 --- (83) (72) --- 16,588
Distributions to partners (11,912) (10,311) --- --- --- --- (22,223)
----------- ----------- ------------ ----------- ------------ ---------- -----------
Balance at December 31, 1998 66,918 62,272 --- 11,214 9,529 --- 149,933
Transfer of capital --- (62,272) 62,272 --- (9,529) 9,529 ---
Combination reclassifications 11,214 --- 9,529 (11,214) --- (9,529) ---
Net income 5,264 --- 4,557 --- --- --- 9,821
Effect of purchase accounting --- --- (6,935) --- --- --- (6,935)
Distribution to partners (55,453) --- (48,004) --- --- --- (103,457)
----------- ----------- ------------ ----------- ------------ -------- -----------
Balance at December 31, 1999$ 27,943 --- 21,419 --- --- --- 49,362
=========== =========== ============ =========== ============ ========== ===========
See accompanying notes to financial statements.
F-10
COSO FINANCE PARTNERS
Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997 (note 4)
(Dollars in thousands)
Combined CFP and
CFP II (note 4)
----------------------------
Twelve Twelve Twelve
Two months Ten months months months months
ended ended ended ended ended
February 28, December 31, December 31, December 31, December 31,
1999 1999 1999 1998 1997
------------- ------------- ------------- -------------- -------------
(old basis) (new basis) (old basis) (old basis)
Cash flows from operating activities:
Net income $ 3,017 6,804 9,821 16,588 62,159
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,604 7,978 9,582 12,081 13,160
Amortization of deferred financing costs 18 373 391 123 190
Write-off of deferred financing costs --- 177 177 --- ---
Cumulative effect of accounting change --- --- --- 923 ---
Changes in operating assets and liabilities:
Accounts receivable, prepaid expenses
and other assets 1,015 (514) 501 (1,277) 13,666
Investment in China Lake Plant 19 (92) (73) (172) (239)
Services, Inc.
Accounts payable and accrued liabilities 378 3,773 4,151 3,233 2,346
Amounts due from related parties (1,751) 1,025 (726) 51 (3,152)
Amounts due to related parties 594 (30) 564 378 (41)
----------- ----------- ----------- ------------ -------------
Net cash provided by
operating activities 4,894 19,494 24,388 31,928 88,089
------------- ----------- ----------- ------------ -------------
Cash flows from investing activities:
Capital expenditures (571) (5,904) (6,475) (6,448) (4,138)
(Increase) decrease in restricted cash (194) (17,425) (17,619) (1,045) 22,537
------------- ----------- ----------- ------------ -------------
Net cash (used in) provided by
investing activities (765) (23,329) (24,094) (7,493) 18,399
------------- ----------- ----------- ------------ -------------
Cash flows from financing activities:
Distributions to partners --- (103,457) (103,457) (22,223) (88,934)
Increase in project financing debt --- 151,550 151,550 --- ---
Repayment of project financing loans --- (40,566) (40,566) (5,100) (30,390)
------------- ----------- ----------- ------------ -------------
Net cash provided by (used in)
financing activities --- 7,527 7,527 27,323) (119,324)
------------- ----------- ----------- ------------ -------------
Net change in cash and cash
equivalents 4,129 3,692 7,821 (2,888) (12,836)
Cash and cash equivalents at beginning of period --- 4,129 --- 2,888 15,724
----------- ---------- ---------- ------------ -----------
Cash and cash equivalents at end of period $ 4,129 7,821 7,821 --- 2,888
============= ============= =========== ============ ============
Supplemental cash flow disclosure:
Cash paid for interest $ --- 10,694 10,694 4,210 6,070
============= ============= ============= ============ ============
Schedule of noncash investing activities
as a result of purchase:
Fair value of power purchase contract $ --- 14,344 14,344 --- ---
Reduction in property, plant and equipment --- (24,316) (24,316) --- ---
Net increase in other assets --- 3,733 3,733 --- ---
Liabilities assumed --- (696) (696) --- ---
------------ ----------- ------------ ------------ ------------
Reduction in partners' capital $ --- (6,935) (6,935) --- ---
============ ============= ============ ============ ============
See accompanying notes to financial statements.
F-11
COSO FINANCE PARTNERS
Notes to Financial Statements
December 31, 1999, 1998 and 1997
(Dollars in thousands)
1) Organization, Operation and Business of the Partnerships
Coso Finance Partners (CFP or the Partnership) and Coso Finance Partners
II (CFP II) were formed on July 7, 1987 in connection with the
refinancing of the construction of a 30 net megawatt (NMW) geothermal
power plant constructed on behalf of China Lake Joint Venture (CLJV) on
land at the China Lake Naval Air Weapons Station, Coso Hot Springs, China
Lake, California, and for financing the expansion of that power plant
from 30 NMW to approximately 80 NMW.
CFP was formed to acquire the assets and assume the liabilities of CLJV
insofar as they related to the first turbine generator set of the power
plant and the related geothermal resources. CFP II acquired the assets
and assumed the liabilities of CLJV insofar as they related to the second
and third turbine generator sets, together with the related geothermal
resources. The three turbine generators that comprise the power plant
have the capacity to produce an aggregate of approximately 80 NMW. CFP
and CFP II were formed as separate entities in order to facilitate bank
financing of the completed power plant and power plants under
construction, respectively. In 1988, CFP II assigned its assets and
liabilities to CFP in exchange for a royalty of 5% of the value of the
steam produced.
During 1999, CFP merged with CFP II transforming CFP into a general
partnership owned by ESCA LLC (ESCA) and New CLOC Company (New CLOC),
both Delaware limited liability companies. CFP and CFP II were general
partnerships between China Lake Operating Company (CLOC), a Delaware
corporation wholly owned by CalEnergy Company, Inc. (CalEnergy), and
ESCA, and China Lake Geothermal Management Company (CLGMC), a Delaware
corporation wholly owned by CalEnergy, and ESCA II Limited Partnership
(ESCA II), respectively. ESCA was a California limited liability company
between Caithness Geothermal 1980, Ltd., Caithness Power, L.L.C., and ESI
Geothermal, Inc. (ESI) (a subsidiary of FPL Group, Inc.). ESCA II was a
California limited partnership between Caithness Geothermal 1980, Ltd.,
Mojave Power II, Inc. and ESI Geothermal II, Inc. (a subsidiary of FPL
Group, Inc.).
On February 25, 1999, Caithness Acquisition Company, LLC (CAC), a wholly
owned subsidiary of Caithness Energy, LLC and an affiliate of ESCA and
ESCA II, purchased all of CalEnergy's interest in CLOC and CLGMC (see
note 4) and formed two wholly owned subsidiaries, New CLOC Company, LLC
(New CLOC), a Delaware limited liability company, and New CLGMC Company
(New CLGMC), a Delaware limited liability company. In May 1999, CFP II
merged into CFP, with CFP being the surviving entity, ESCA II merged into
ESCA and New CLGMC merged into New CLOC. In October 1999, CAC purchased
all of ESI's interest in ESCA and ESCA II. The new managing partner of
CFP is now New CLOC.
Since CFP and CFP II operated under common ownership and management
control, the financial statements of CFP and CFP II as of December 31,
1998 and 1997 have been combined after elimination of intercompany
amounts.
The Partnership sells all electricity produced to Southern California
Edison (Edison) under a 24-year power purchase contract expiring in 2011.
Under the terms of this contract, Edison makes payments to CFP as
follows:
* Contractual payments for energy delivered, which payments escalate at
an average rate of approximately 7.6% for the first ten years after
the date of firm operation (scheduled energy price period). After the
scheduled energy price period, the energy payment adjusts to the
actual avoided energy costexperienced by Edison. In August 1997, the
Partnership completed the ten-year period. At that time, Edison ceased
paying the scheduled energy rates. For the years ended December 31,
1999, 1998 and 1997, Edison's average avoided cost of energy was 3.13,
2.95 and 3.28 cents per kWh, respectively. Estimates of Edison's
future avoided cost of energy vary substantially from year to year.
The Partnership cannot predict the likely level of avoided cost of
energy prices under the 24-year power purchase contract and,
accordingly, the revenues generated by the Partnership could fluctuate
significantly;
* Capacity payments which remain fixed over the life of the contract to
the extent that actual energy delivered exceeds minimum levels of the
plant capacity defined in the contract; and
* Bonus payments to the extent that actual energy delivered exceeds 85%
of the plant capacity stated in the contract. In 1999, 1998 and 1997,
the bonus payments aggregated $1,345, $1,510 and $1,805, respectively.
CalEnergy served as the operator, maintaining the Partnership's
accounting records and operating the CFP plant on a day-to-day basis,
until February 1, 1999 when Coso Operating Company LLC (COC), a Delaware
limited liability company, became operator pursuant to certain operations
and maintenance agreements with CLOC, the managing general partner. COC
was a wholly owned subsidiary of CalEnergy until February 25, 1999 when
CalEnergy assigned all of its interest and rights in COC to CAC, who
became manager and sole member.
On February 25, 1999, CFP entered into two operating and maintenance
agreements, one with FPL Operating Services, Inc. (FPL) and a second with
COC. The initial term of the FPL operating and maintenance agreement was
for three years, to provide for the operation and maintenance of the
geothermal power facilities and the interconnection to the transmission
line. The term of the COC Agreement is through December 31, 2009 to
provide field services and administrative services for the Partnership.
On October 17, 1999, the operating agreement with FPL was terminated and
COC became the sole operator of all Partnership operations.
At formation, and as amended, the terms of the partnership agreements
provided that distributable cash flow before "payout" was allocated 10%
to CLOC as managing partner and 90% in proportion to the remaining sums
necessary to be distributed to each partner to achieve payout. "Payout"
occurred in June 1996 and was defined as the point at which each partner
had received aggregate cash distributions from the 90% allocation in
amounts equal to their accumulated cash contributions plus amounts equal
to 10% simple interest on the cash contributions. For purposes of
allocating net income to partners' capital accounts, profits and losses
are allocated based on the aforementioned percentages. For income tax
purposes, certain deductions and credits are subject to special
allocations as defined in the partnership agreements. Cash flow after
"payout" is allocated 53.6% and 46.4% to ESCA and New CLOC (formerly
CLOC/CLGMC), respectively.
(2) Summary of Significant Accounting Policies
Recognition of Revenue
Operating revenues are recognized as income during the period in which
electricity is delivered to Edison. Revenue was recognized based on the
payment rates scheduled in CFP's power purchase contract with Edison
until August 1997. After August 1997, revenue is recognized based on
Edison's avoided energy cost.
Fixed Assets and Depreciation
The costs of major additions and betterments are capitalized, while
replacements, maintenance and repairs which do not improve or extend the
lives of the respective assets are expensed currently.
Depreciation of the operating power plant and transmission line is
computed on a straight-line basis over their estimated useful life of 30
years and, for significant additions, the remainder of the 30-year life
from the plant's commencement of operations.
Recoverability of Long-Lived Assets
In accordance with Statement of Financial Accounting Standards No.121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" ("SFAS No. 121"), an impairment loss is
recognized whenever events or changes in circumstances indicate that the
carrying amounts of long-lived tangible and intangible assets is not
recoverable. The Partnership considers historical performance and future
estimated results in its evaluation of potential impairment and then
compares the carrying amount of the asset to the estimated future cash
flows expected to result from the use of the asset. If the carrying
amount of the asset exceeds estimated expected undiscounted future cash
flows before interest charges, the Partnership measures the amount of the
impairment by comparing the carrying amount of the asset to its fair
value. The estimation of fair value is generally measured by discounting
expected future cash flows at the rate the Partnership utilizes to
evaluate potential investments. The Partnership estimates fair value
based on the best information available using estimates, judgments and
projections as considered necessary.
Start-Up Activities
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position (SOP) No. 98-5, "Reporting on the Costs of Start-Up
Activities." SOP No. 98-5 requires that, at the effective date of
adoption, costs of start-up activities previously capitalized be expensed
and reported as a cumulative effect of a change in accounting principle,
and further requires that such costs subsequent to adoption be expensed
as incurred. CFP adopted this standard in 1998 and expensed applicable
unamortized costs previously capitalized in connection with the start-up
of CFP. The cumulative effect of the change in accounting principle was
$923.
Wells and Resource Development Costs
The Partnership follows the full cost method of accounting for costs
incurred in connection with the exploration and development of geothermal
resources. All such costs, which include dry hole costs, the cost of
drilling and equipping production wells, and administrative and interest
costs directly attributable to the project, are capitalized and amortized
over their estimated useful lives when production commences. The
estimated useful lives of production wells are 10 years each; exploration
costs and development costs, other than production wells, are amortized
over 30 years and, for significant additions, the remainder of the
30-year life from the plant's commencement of operations.
Deferred Plant Overhaul Costs and Deferred Well Rework Costs
Plant overhaul costs are deferred and amortized over the estimated period
between overhauls as these costs extend the useful life of the respective
assets. These deferred costs of $292 and $109 at December 31, 1999 and
1998, respectively, are included in property, plant and equipment.
Currently, plant overhauls are amortized over three to four years from
the point of completion.
Well rework costs are deferred and amortized over the estimated period
between reworks as these costs extend the useful life of the respective
assets. These deferred costs of $4 and $9 at December 31, 1999 and 1998,
respectively, are included in property, plant and equipment. Currently,
both production and injection rework costs are amortized over twelve
months.
Reclassifications
Certain reclassifications have been made to the 1998 balance sheet and
the 1998 and 1997 statements of operations and cash flows to conform to
the 1999 presentation.
Deferred Financing Costs
Deferred financing costs as of December 31, 1999 and 1998 consist of loan
fees and other costs of financing that are amortized over the term of the
related financing, using the straight-line method and the effective
interest method, respectively. In 1999 fees of $1,978 associated with
certain short-term financing were fully expensed and included in costs
related to acquisition debt, and a refinancing of this debt resulted in
new deferred financing costs of $4,122. Accumulated amortization at
December 31, 1999 and 1998 was $373 and $1,918, respectively. The $215
balance of the deferred financing costs at the date of acquisition
related to the refinanced project debt was included in the extraordinary
loss recorded at the time of the refinancing (see note 8).
Income Taxes
There is no provision for income taxes since such taxes are the
responsibility of the partners.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Partnership considers
all money market instruments purchased with an initial maturity of three
months or less to be cash equivalents.
Restricted Cash and Investments
As of December 31, 1999 and 1998, all of the Partnership's investments
were classified as held to maturity and reported at amortized cost. The
noncurrent restricted cash and investments includes a sinking fund
related to a lump-sum royalty payment of $25,000 to be paid to the Navy
in 2009 (see note 7) totaling $8,583 and $7,382 at December 31, 1999 and
1998, respectively. This account comprised various mortgage-backed
securities with maturities ranging from 1999 through 2005. Restricted
cash and investments also includes a sinking fund for the project debt
service required by the senior secured notes related to the acquisition
of CalEnergy's interest in CFP of $16,418 in restricted cash at December
31, 1999, funding requirements for such debt of $5,556 at December 31,
1999 (see note 8) and various certificates of deposit totaling $-0- and
$142, respectively, at December 31, 1999 and 1998. The carrying amount of
restricted cash and investments at December 31, 1999 and 1998
approximated fair value, which is based on quoted market prices as
provided by the financial institution which holds the investments.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities and
partners' capital and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues, expenses and allocation of profits and losses during the
period. Actual results could differ significantly from those estimates.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable,
prepaid expenses and other assets, amounts due from related parties,
accounts payable and accrued liabilities and amounts due to related
parties, approximated fair value as of December 31, 1999, because of the
relatively short maturity of these instruments. The project loans as of
December 31, 1999 and 1998 have an estimated fair value of $150,647 and
$43,603, respectively, based on the quoted market price of the senior
secured notes and the Coso Funding Corp. notes, respectively (see note
8). The investment in China Lake Plant Services, Inc., approximates the
fair value of such investment.
(3) Interest Rate Swap Agreement
In January 1993, CFP entered into a five-year deposit interest rate swap
agreement which, until certain investments were liquidated in February
1997, effectively converted notional deposit balances from a variable
rate to a fixed rate. Under the agreement, which matured on January 11,
1998, CFP made payments to the counterparty each January 11 and July 11
at variable rates based on LIBOR, reset and compounded every three
months, and in return received payments based on a fixed rate of 6.34%.
The effective LIBOR rate ranged from 5.5313% to 5.8125% during 1997 and
was 5.7500% at December 31, 1997 and at January 11, 1998, the termination
date. The counterparty to this agreement was a large international
financial institution. The carrying amount of the interest rate swap at
December 31, 1997 was $50 (payable to CFP), which approximated its fair
value. The fair value was based on the estimated amount that CFP would
have received to terminate the swap agreement at that date as provided by
the financial institution which was the counterparty to the swap.
(4) Acquisition Accounting
On February 25, 1999, CAC purchased all of CalEnergy's interest in CFP
and CFP II, Coso Energy Developers (CED), and Coso Power Developers
(CPD), collectively known as Coso operating ventures, for approximately
$205,500 in cash plus the assumption of debt of approximately $139,800.
The purchase price allocated to CFP was approximately $62,000 plus the
assumption of debt of approximately $40,600. The acquisition was
accounted for under the purchase method, and no goodwill was recorded.
After CAC's purchase of CalEnergy's interest in CFP, a new basis of
accounting was adopted and, therefore, the financial information for the
period after the acquisition is presented on a different cost basis than
that for the period before the acquisition and, therefore, is not
comparable.
The purchase price was allocated to the portion of the assets and
liabilities purchased from CalEnergy based upon their fair value, with
the amount of fair value of net assets in excess of the purchase price
being allocated to long-lived assets on a pro rata basis. These
adjustments resulted in a net decrease of $24,316 in the recorded amounts
of property, plant and equipment, and an increase in the recorded amounts
for the power purchase contract of $14,344. The power purchase contract
is being amortized on a straight-line basis over the remaining term of
the power purchase contract of 12.5 years. Accumulated amortization on
the power purchase contract at December 31, 1999 was $956.
The following unaudited pro forma financial information for the year
ended December 31, 1999 and 1998 present the results of operations of CFP
as if the acquisition had occurred as of January 1, 1998, after giving
effect to certain adjustments including amortization of intangible
assets, reduced depreciation and operating expense and increased interest
expense. The pro forma financial information does not necessarily reflect
the results of operations that would have occurred had the acquisition
been completed on January 1, 1998.
Year ended December 31
1999 1998
------ ------
Total revenues $ 57,442 53,738
======== ========
Income before extraordinary item and cumulative
effectof change in accounting principle $ 12,512 10,315
======== ========
Net income 10,137 9,392
======== ========
(5) Investment in China Lake Plant Services, Inc.
China Lake Plant Services, Inc. (CLPSI) is a wholly owned subsidiary of
CAC (see note 4). CLPSI purchases, stores and distributes spare parts to
CFP, CED and CPD. Also, certain other facilities utilized by all three
operating ventures are held by CLPSI. CFP's investment in CLPSI represent
funds advanced for the purchase of spare parts inventory and other
assets. Spare parts inventory held by CLPSI on behalf of CFP is valued at
the lower of cost or market.
(6) Property, Plant and Equipment
Property, plant and equipment at December 31, 1999 and 1998 consists of
the following:
1999 1998
------ ------
Power plant and gathering system $ 151,282 173,927
Transmission line 5,705 6,515
Wells and resource development costs 68,170 118,592
225,157 299,034
Less accumulated depreciation and
Amortization (71,278) (118,845)
------- --------
$ 153,879 180,189
======== ========
The transmission line costs represent the Partnership's share of the
costs of construction of transmission lines from Inyokern, California to
the Edison substation at Kramer, California and from Kramer to the Edison
substation at Victorville, California.
(7) Royalty Expense
Royalty expense is summarized as follows:
1999 1998 1997
----- ------ ------
Unit 1 $ 3,394 3,114 3,437
Units 2 and 3 6,305 3,710 6,412
----- ----- -----
Total $ 9,699 6,824 9,849
======= ===== =====
The power plant is located on land owned by the U.S. Navy. Under the
terms of a 30-year contract with the U.S. Navy to develop geothermal
energy on its lands, for the first turbine only, CFP pays the Navy's
monthly Edison bill for specified quantities of electricity and, in
return, is reimbursed at a set rate for such quantities of electricity.
During 1999, 1998 and 1997, CFP was reimbursed for approximately 76%, 76%
and 75%, respectively, of the amount of the Navy's Edison bills paid by
CFP. The fee payable for the second and third turbines increased from 10%
of related revenues to 15% in December 1998 and will increase to 20% in
December 2003.
In addition, CFP is required to pay the Navy $25,000 in December 2009,
the date the contract expires. The payment is secured by funds placed on
deposit monthly, which funds plus accrued interest will aggregate
$25,000. Currently, the monthly amount to be deposited is approximately
$60. The balance included in accounts payable and accrued liabilities at
December 31, 1999 and 1998 was $8,583 and $7,382, respectively.
(8) Project Loans
In order to complete the purchase of CalEnergy's interest in CFP and CFP
II, CAC arranged for short-term debt financing of $211,500, of which
approximately $77,610 was allocated to CFP. As a result of "push-down"
accounting, the short-term debt was reflected in the financial statement
of CFP and was repaid on May 28, 1999 from a portion of the proceeds from
the offering of senior secured notes. Financing costs associated with the
short-term financing are included in interest expense-acquisition debt.
On May 28, 1999, Caithness Coso Funding Corp. (Funding Corp.) raised
$413,000 from an offering of senior secured notes. Funding Corp. loaned
approximately $151,550 to CFP from the $413,000 debt raised from the
offering of senior secured notes. The loan consists of one note of
$29,000 at 6.80% and another of $122,550 at 9.05% with payments due at
various dates through December 15, 2001 and December 15, 2009,
respectively, beginning December 15, 1999. As of December 15, 1999, the
principal payment of $5,556 was available for payment by the trustee. The
trustee paid this amount to the noteholders on January 19, 2000. The
trustee's failure to make the principal payment on December 15, 1999 did
not result from the lack of performance on the part of Funding Corp. or
the Partnership and the Partnership's management believes this is not an
event of default. Furthermore, all related penalties will be assumed by
the trustee. Through this financing the existing project loan and
short-term financing of approximately $118,176 were repaid and an
extraordinary loss of approximately $2,375 from the early extinguishment
of this debt was incurred. The extraordinary loss was due to a premium
and other costs incurred to pay the existing project loan before its
maturity date.
The annual maturity of the project loans for each year ending December 31
is as follows:
Year ending December 31 Amount
2000 $ 16,566
2001 12,434
2002 11,597
2003 13,408
2004 10,694
Thereafter 86,851
======
$ 151,550
=======
The loans contain certain restrictive covenants that among other things,
limit the Partnership's ability to incur additional indebtedness, release
funds from reserve accounts, make distributions, create liens and enter
into any transaction of merger or consolidation.
The Partnership, Funding Corp., CPD and CED are jointly and severally
liable for the repayment of the senior
secured notes.
The annual maturity of the senior secured notes for each year ending
December 31 is as follows:
Year ending December 31 Amount
----------------------- -------
2000 $ 82,933
2001 27,067
2002 21,771
2003 27,618
2004 31,332
Thereafter 222,279
=======
$ 413,000
=======
The project loan outstanding as of December 31, 1998 was from Coso
Funding Corp., a single purpose corporation formed to issue notes for its
own account and as an agent acting on behalf of CFP, CED, and CPD. The
project loan had a weighted average interest rate of 8.79% and 8.76% as
of December 31, 1998 and 1997, respectively.
(9) Related Party Transactions
The amounts due from and to related parties at December 31, 1999 and 1998
consist of the following:
1999 1998
------ ------
Amounts due from related parties:
Due from Coso Operating Company $ 1,663 --
Due from CPD for steam sharing 2,807 1,902
Due from CED for steam sharing 38 2,258
------ -------
$ 4,508 4,160
====== ======
Amounts due to related parties:
Due to Caithness Coso Funding Corp. $ 564 --
Due to CalEnergy -- 378
------ ------
$ 564 378
====== ======
CalEnergy, as operator, through February 1, 1999, was reimbursed monthly
for non-third-party costs incurred on behalf of CFP. These costs are
comprised principally of approved direct CalEnergy operating costs of the
CFP geothermal facility, allocable general and administrative costs, and
operator fees, totaling $4,910 and $5,385 for the years ended December
31, 1998 and 1997, respectively.
COC, as the new operator (see note 1), received an operator fee for the
year ended December 31, 1999 of $443.
Both CalEnergy and ESCA were reimbursed at approved amounts for their
respective costs incurred in relation to the CFP Management Committee.
For the years ended December 31, 1999, 1998 and 1997, CalEnergy received
$25, $147 and $143, respectively, while ESCA received $129, $221 and
$214, respectively.
As of May 28, 1999, the management committee fee was eliminated and
replaced by a non-managing fee payable to ESCA. ESCA received $129 during
the year ended December 31, 1999.
The amount due from COC relates to reimbursements for payments of
operating expenses. This will be paid back as COC funds additional
operating expenses on behalf of CFP.
The amount due to Caithness Coso Funding Corp. is accrued interest from
December 16, 1999 to December 31, 1999 related to the senior secured
notes (see note 8).
The December 31, 1998 due to CalEnergy balance relates to the Partnership
reimbursing CalEnergy for the costs of operating the plant. This amount
fluctuated in concert with the timing of billings and incurring of costs.
CFP is charged by CLPSI for both its inventory usage and its portion of
the expenses of operating CLPSI. The charges to CFP from CLPSI in 1999,
1998 and 1997 were approximately $65, $532 and $486, respectively.
During 1994, the Coso operating ventures entered into steam sharing
agreements under which the ventures may transfer steam, with the
resulting incremental revenue and royalty expense shared equally by the
ventures. In the second half of 1995, interconnection facilities between
the plants were completed and the transfer of steam commenced. CFP steam
sharing revenue, net of royalties and other related costs, amounted to
$17,579, $17,556 and $10,345 in 1999, 1998 and 1997, respectively.
In addition, as of December 31, 1998, the accrued unpaid royalty due to
CFP II from CFP aggregated $8,748.
(10) Settlement of Litigation
In February 2000, the Partnership, CED, CPD and Edison reached a
settlement, subject to the approval of the California Public Utilities
Commission of all matters of litigation between the Coso Partnerships and
Edison. The cost of the settlement was allocated among the Coso
Partnerships. A portion of that cost was reflected in the purchase
accounting applied to the acquisition of CalEnergy's interest in the
Partnership (see note 4). The balance of the settlement was charged to
settlement of litigation and related expenses.
In June 1999, the Partnership, CED, CPD, Fuji Electric Co., Ltd. and
Fuji Electric Corporation of America (Fuji) reached a settlement
agreement. Fuji, in consideration of the settlement agreement, must
send various equipment or spare parts to the Coso Partnerships.
F-12
Independent Auditors' Report
The Partners and Management Committee
Coso Energy Developers:
We have audited the accompanying balance sheet of Coso Energy Developers as of
December 31, 1999, and the related statements of operations, partners' capital
and cash flows for the year then ended. These financial statements are the
responsibility of the Partnerships' management. Our responsibility is to express
an opinion on these financial statements based on our audit. The financial
statements of Coso Energy Developers as of December 31, 1998 and for the years
ended December 31, 1998 and 1997 were audited by other auditors, whose report,
dated February 12, 1999, expressed an unqualified opinion.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1999 financial statements referred to above present fairly,
in all material respects, the financial position of Coso Energy Developers as of
December 31, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
As discussed in note 4 to the financial statements, effective February 25, 1999,
Caithness Acquisition Company, LLC acquired all of the partnership interest not
already owned by its affiliates, Caithness Coso Holdings LLC, in a business
combination accounted for as a purchase. As a result of the acquisition, the
financial information for the period after the acquisition is presented on a
different cost basis than that for the period before the acquisition and,
therefore, is not comparable.
February 7, 2000
/s/ KPMG LLP
- ---------------------
KPMG LLP
F-13
Report of Independent Accountants
To the Partners of Coso Energy Developers
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position, results of
operations and cash flows of Coso Energy Developers at December 31, 1998 and for
each of the two years in the period ended December 31, 1998, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above. We have not audited the
financial statements of Coso Energy Developers for any period subsequent to
December 31, 1998.
As discussed in Note 2 to the financial statements, the Partnership adopted
in 1998 Statement of Position No. 98-5,"Reporting on the Costs of Start-Up
Activities."
/s/ PricewaterhouseCoopers LLP
- --------------------------------
PricewaterhouseCoopers LLP
San Francisco, California
February 12, 1999
F-14
COSO ENERGY DEVELOPERS
Balance Sheets
December 31, 1999 and 1998 (note 4)
(Dollars in thousands)
Assets 1999 1998
----------------- -----------------
Cash and cash equivalents $ 6,423 ---
Restricted cash and investments (note 2) 9,806 290
Accounts receivable 6,095 19,835
Prepaid expenses and other assets 100 856
Amounts due from related parties (note 9) 761 294
Property, plant and equipment (notes 4 and 7) 165,650 202,270
Investment in China Lake Plant Services, Inc. (note 6) 1,228 1,567
Investments in Coso Transmission Line Partners (note 5) 2,981 3,107
Power purchase contract, net (note 4) 20,549 ---
Deferred financing costs, net (note 2) 2,798 162
----------------- -----------------
Total assets $ 216,391 228,381
================= =================
Liabilities and Partners Capital
Accounts payable and accrued liabilities $ 6,681 3,314
Amounts due to related parties (note 9) 22,460 23,918
Project loan (note 8) 107,900 37,958
----------------- -----------------
Total liabilities 137,041 65,190
Commitments and contingencies (notes 8 and 10)
Partners' capital 79,350 163,191
----------------- -----------------
Total liabilities and partners' capital $ 216,391 228,381
================= =================
See accompanying notes to financial statements.
F-15
COSO ENERGY DEVELOPERS
Statements of Operations
Years ended December 31, 1999, 1998 and 1997 (note 4)
(Dollars in thousands)
Two months Ten months Twelve months Twelve months Twelve months
ended ended ended ended ended
February 28, December 31, December 31, December 31, December 31,
1999 1999 1999 1998 1997
--------------- ------------- -------------- -------------- --------------
(old basis) (new basis) (old basis) (old basis)
Revenues:
Energy revenues $ 16,716 19,223 35,939 93,352 88,929
Capacity payments 817 13,121 13,938 13,847 13,939
Interest and other income 78 988 1,066 1,181 1,712
--------------- ------------ ------------- -------------- --------------
Total revenues 17,611 33,332 50,943 108,380 104,580
-------------- ------------- ------------- -------------- --------------
Operating expenses:
Plant operating expense 3,470 12,098 15,568 16,418 17,806
Royalty expense 1,592 1,556 3,148 10,492 10,106
Depreciation and amortization 2,550 13,099 15,649 14,809 14,606
Edison legal expenses and
settlement costs (note 10) 569 3,600 4,169 2,968 675
--------------- ------------- ------------- -------------- ---------------
Total operating expenses 8,181 30,353 38,534 44,687 43,193
--------------- ------------- ------------- -------------- --------------
Operating income 9,430 2,979 12,409 63,693 61,387
--------------- ------------- ------------- -------------- --------------
Other expenses:
Interest expense 616 6,708 7,324 6,267 9,105
Interest expense - acquisition debt --- 1,415 1,415 --- ---
Costs related to acquisition debt --- 1,496 1,496 --- ---
--------------- ------------ -------------- -------------- ---------------
Total other expenses 616 9,619 10,235 6,267 9,105
--------------- ------------- -------------- -------------- ---------------
Income (loss) before extraordinary
item and cumulative effect of
change in accounting principle 8,814 (6,640) 2,174 57,426 52,282
Extraordinary item - loss on
extinguishment of debt (note 8) --- 1,822 1,822 --- ---
Cumulative effect of change
in accounting principle:
start-up activities (note 2) --- --- --- 953 ---
--------------- ------------- ------------- ------------- ---------------
Net income (loss) $ 8,814 (8,462) 352 56,473 52,282
=============== ============= ============= ============= ===============
See accompanying notes to financial statements.
F-16
COSO ENERGY DEVELOPERS
Statements of Partners' Capital
Years ended December 31, 1999, 1998 and 1997 (note 4)
(Dollars in thousands)
Caithness Coso
Coso Hotsprings New
Holdings, Intermountain CHIP
LLC Power, Inc. Company, LLC Total
---------------- -------------------- ------------------ -----------------
Balance at December 31, 1996 $ 61,623 51,043 --- 112,666
Distributions to partners (21,234) (19,601) --- (40,835)
Net income 27,187 25,095 --- 52,282
---------------- -------------------- ------------------ -----------------
Balance at December 31, 1997 67,576 56,537 --- 124,113
Distributions to partners (9,046) (8,349) --- (17,395)
Net income 29,366 27,107 --- 56,473
---------------- -------------------- ------------------ -----------------
Balance at December 31, 1998 87,896 75,295 --- 163,191
Transfer of capital --- (75,295) 75,295 ---
Distributions to partners (39,846) --- (36,780) (76,626)
Net income 183 --- 169 352
Effect of purchase accounting --- --- (7,567) (7,567)
---------------- -------------------- ------------------ -----------------
Balance at December 31, 1999 $ 48,233 --- 31,117 79,350
================ ==================== ================== =================
See accompanying notes to financial statements.
F-17
COSO ENERGY DEVELOPERS
Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997 (note 4)
(Dollars in thousands)
Two months Ten months Twelve months Twelve months Twelve months
ended ended ended ended ended
February 28, December 31, December 31, December 31, December 31,
1999 1999 1999 1998 1997
------------- ------------- -------------- ------------- ---------------
(old basis) (new basis) (old basis) (old basis)
Cash flows from operating activities:
Net income (loss) $ 8,814 (8,462) 352 56,473 52,282
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 2,550 13,099 15,649 14,809 14,606
Amortization of deferred financing costs 14 234 248 160 240
Write-off of deferred financing costs --- 161 161 --- ---
Cumulative effect of accounting change --- --- --- 953 ---
Changes in operating assets and liabilities:
Accounts receivable, prepaid expenses
and other assets (944) 14,833 13,889 (1,246) (2,222)
Investment in Coso Transmission
Line Partners (823) 949 126 115 111
Investment in China Lake Plant
Services, Inc. 141 198 339 646 (57)
Accounts payable and accrued liabilities (1,248) 2,215 967 903 853
Amounts due from related parties (6) (461) (467) (34) 59
Amounts due to related parties 2,055 (3,513) (1,458) 3,076 (5,079)
------------- ------------- -------------- ------------- ---------------
Net cash provided by
operating activities 10,553 19,253 29,806 75,855 60,793
------------- ------------- -------------- ------------- ---------------
Cash flows from investing activities:
Capital reimbursements (expenditures) 316 (7,252) (6,936) (20,637) (3,573)
Decrease (increase) in restricted cash 43 (9,806) (9,763) --- 23,008
------------- ------------- -------------- ------------- --------------
Net cash provided by (used in)
investing activities 359 (17,058) (16,699) (20,637) 19,435
------------- ------------- -------------- ------------- --------------
Cash flows from financing activities:
Distributions to partners --- (76,626) (76,626) (17,395) (53,142)
Increase in project financing debt --- 107,900 107,900 --- ---
Repayment of project financing debt --- (37,958) (37,958) (38,696) (29,336)
Repayment of CalEnergy promissory note --- --- --- --- (10,043)
------------- ------------- -------------- ------------- --------------
Net cash used in
financing activities --- (6,684) (6,684) (56,091) (92,521)
------------- ------------- -------------- ------------- -------------
Net change in cash and
cash equivalents 10,912 (4,489) 6,423 (873) (12,293)
Cash and cash equivalents at beginning of year --- 10,912 --- 873 13,166
------------- ------------- -------------- ------------- -------------
Cash and cash equivalents at end of year $ 10,912 6,423 6,423 --- 873
============= ============= ============== ============= =============
Supplemental cash flow disclosure:
Cash paid for interest $ --- 8,117 8,117 6,105 19,570
============= ============= ============== ============= =============
Schedule of noncash investing activities as a result
of purchase accounting (note 4):
Fair value of power purchase contract $ --- 21,443 21,443 --- ---
Reduction in property, plant and equipment --- (29,304) (29,304) --- ---
Net increase in other assets --- 2,694 2,694 --- ---
Liabilities assumed --- (2,400) (2,400) --- ---
------------- ------------- -------------- ------------- -------------
Reduction in partners capital $ --- (7,567) (7,567) --- ---
============= ============= ============== ============= =============
See accompanying notes to financial statements.
F-18
COSO ENERGY DEVELOPERS
Notes to Financial Statements
December 31, 1999, 1998 and 1997
(Dollars in thousands)
(1) Organization, Operation and Business of the Partnership
Coso Energy Developers (CED or the Partnership) was founded on March 31,
1988, in connection with financing the construction of a geothermal power
plant on land leased from the U.S. Bureau of Land Management (BLM) at
Coso Hot Springs, China Lake, California. CED is a general partnership
owned by Caithness Coso Holdings, LLC (CCH), a California limited
liability company and, until February 25, 1999, Coso Hotsprings
Intermountain Powers, Inc. (CHIP), a Delaware corporation wholly owned by
CalEnergy Company, Inc. (CalEnergy). On February 25, 1999, Caithness
Acquisition Company, LLC (CAC), a wholly owned subsidiary of Caithness
Energy, LLC and an affiliate of CCH, purchased all of CalEnergy's
interest in CHIP (see note 4) and formed a wholly owned subsidiary, New
CHIP Company, LLC (New CHIP), a Delaware limited liability company, to
become the new managing general partner of CED.
The CED power plants are located on land owned by the BLM. There are
turbine generators located at both the East and West power locks. CED
pays royalties to BLM of 10% of the value of the steam produced.
The primary BLM geothermal lease had an initial term of 10 years (1998)
and thereafter is subject to automatic extension until October 31, 2035,
so long as geothermal steam is commercially produced. In addition, the
lease may be extended to 2075 at the option of the BLM. Coso Land Company
(CLC), the original leaseholder, retained a 5% overriding royalty
interest based on the value of the steam produced. CLC was a joint
venture between CalEnergy and an affiliate of CCH. On February 25, 1999,
CalEnergy transferred all its interest and rights in CLC to CAC.
The Partnership sells all electricity produced to Southern California
Edison (Edison) under a 30-year power purchase contract expiring in 2019.
Under the terms of this contract, Edison makes payments to CED as
follows:
* Contractual payments for energy delivered, which payments escalate at
an average rate of approximately 7.6% for the first ten years after
the date of firm operation (scheduled energy price period). After the
scheduled energy price period, the energy payment adjusts to the
actual avoided energy cost experienced by Edison. In March of 1999,
the Partnership completed the ten-year fixed price payment period and
Edison ceased paying the scheduled energy rates. For the years ended
December 31, 1999, 1998 and 1997, Edison's average avoided cost of
energy was 3.13, 2.95 and 3.28 cents per kWh, respectively. Estimates
of Edison's future avoided cost of energy vary substantially from year
to year. The Partnership cannot predict the likely level of avoided
cost of energy prices under the 30-year power purchase contract and,
accordingly, the revenues generated by the Partnership could fluctuate
significantly.
* Capacity payments which remain fixed over the life of the contract to
the extent that actual energy delivered exceeds minimum levels of the
plant capacity defined in the contract; and
* Bonus payments to the extent that actual energy delivery exceeds 85%
of the plant capacity stated in the contract. In 1999, 1998 and 1997,
the bonus aggregated $2,200, $2,124 and $2,177, respectively.
CalEnergy served as the operator, maintaining the Partnership's
accounting records and operating the CED plant on a day-to-day basis,
until February 1, 1999 when Coso Operating Company LLC (COC), a Delaware
limited liability company, became operator pursuant to certain operations
and maintenance agreements with CHIP, the managing general partner. COC
was a wholly-owned subsidiary of CalEnergy until February 25, 1999 when
CalEnergy assigned all of its interest and right in COC to CAC, which
became its manager and sole member.
On February 25, 1999 CED entered into two operating and maintenance
agreements, one with FPL Operating Services, Inc. (FPL) and a second with
COC. The initial term of the FPL operating and maintenance agreement was
for three years, to provide for the operation and maintenance of the
geothermal power facilities and the interconnection to the transmission
line. The term of the COC agreement is through December 31, 2009 to
provide field services and administrative services for the partnership.
On October 17, 1999, the operating agreement with FPL was terminated and
COC became the sole operator of all Partnership operations.
At formation, and as subsequently amended, the partnership agreement
provided that distributable cash flow before "payout" was allocated 3.81%
to CHIP as managing partner and 96.19% allocated in proportion to the
remaining sums necessary to be distributed to each partner to achieve
payout. "Payout" was defined as the point at which each partner had
received aggregate cash distributions from the 96.19% allocation in
amounts equal to their accumulated capital contributions. Cash flow after
"payout," which occurred in June 1994, is allocated 48% to New CHIP,
(formerly CHIP), and 52% to CCH. For purposes of allocating net income to
partners' capital accounts, profits and losses are allocated based on the
aforementioned capital percentages. For income tax purposes, certain
deductions and credits are subject to special allocations as defined in
the partnership agreement.
(2) Summary of Significant Accounting Policies
Recognition of Revenue
Operating revenues are recognized as income during the period in which
electricity is delivered to Edison. Revenue is recognized based on the
payment rates scheduled in CED's power purchase contract with Edison
until March 1999. After March 1999, revenue is recognized based on
Edison's avoided energy cost.
Fixed Assets and Depreciation
The costs of major additions and betterments are capitalized, while
replacements, maintenance and repairs which do not improve or extend the
life of the respective assets are expensed currently.
Depreciation of the power plant and transmission line is computed on a
straight-line basis over their estimated useful life of 30 years and, for
significant additions, the remainder of the 30-year life from the plant's
commencement of operations.
Recoverability of Long-Lived Assets
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" ("SFAS No. 121"), an impairment loss is
recognized whenever events or changes in circumstances indicate that the
carrying amounts of long-lived tangible and intangible assets is not
recoverable. The Partnership considers historical performance and future
estimated results in its evaluation of potential impairment and then
compares the carrying amount of the asset to the estimated future cash
flows expected to result from the use of the asset. If the carrying
amount of the asset exceeds estimated expected undiscounted future cash
flows before interest charges, the Partnership measures the amount of the
impairment by comparing the carrying amount of the asset to its fair
value. The estimation of fair value is generally measured by discounting
expected future cash flows at the rate the Partnership utilizes to
evaluate potential investments. The Partnership estimates fair value
based on the best information available using estimates, judgments and
projections as considered necessary.
Start-Up Activities
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position (SOP) No. 98-5, "Reporting on the Costs of Start-up
Activities." SOP No. 98-5 requires that, at the effective date of
adoption, costs of start-up activities previously capitalized be expensed
and reported as a cumulative effect of a change in accounting principle,
and further requires that such costs subsequent to adoption be expensed
as incurred. CED adopted this standard in 1998 and expensed applicable
unamortized costs previously capitalized in connection with the start-up
of CED. The cumulative effect of the change in accounting principle was
$953.
Wells and Resource Development Costs
CED follows the full cost method of accounting for costs incurred in
connection with the exploration and development of geothermal resources.
All such costs, which include dry hold costs, the cost of drilling and
equipping production wells, and administrative and interest costs
directly attributable to the project are capitalized and amortized over
their estimated useful lives when production commences. The estimated
useful lives of production wells are 10 years each; exploration costs and
development costs, other than production wells, are amortized over 30
years and, for significant additions, the remainder of the 30-year life
from the plant's commencement of operations.
Deferred Plant Overhaul Costs and Deferred Well Rework Costs
Plant overhaul costs are deferred and amortized over the estimated period
between overhauls as these costs extend the life of the respective
assets. These deferred costs of $271 and $502 at December 31, 1999 and
1998, respectively, are included in property, plant and equipment.
Currently, plant overhauls are amortized over three years from the point
of completion.
Well rework costs are deferred and amortized over the estimated period
between reworks as these costs extend the life of the respective assets.
These deferred costs of $46 and $669 at December 31, 1999 and 1998,
respectively, are included in property, plant and equipment. Currently,
both production and injection rework costs are amortized over twelve
months.
Reclassifications
Certain reclassifications have been made to the 1998 balance sheet and
the 1998 and 1997 statements of operations and cash flows to conform to
the 1999 presentation.
Deferred Financing Costs
Deferred financing costs as of December 31, 1999 and 1998 consist of loan
fees and other costs of financing that are amortized over the term of the
related financing using the straight-line method and the effective
interest method, respectively. On February 25, 1999, the fees of $1,408
associated with certain short-term financing were fully expensed and
included in costs related to acquisition debt, and a refinancing of this
debt resulted in new deferred financing costs of $3,032. Accumulated
amortization at December 31, 1999 and 1998 was $234 and $1,845,
respectively. The $148 balance of the deferred financing costs at the
date of acquisition related to the refinanced project debt was included
in the extraordinary loss recorded at the time of the refinancing (see
note 8).
Income Taxes
There is no provision for income taxes since such taxes are the
responsibility of the partners.
Cash and Cash Equivalents
For purposes of the statements of cash flows, CED considers all money
market instruments purchased with an initial maturity of three months or
less to be cash equivalents.
Restricted Cash and Investments
As of December 31, 1999 and 1998, all of the Partnership's investments
were classified as held to maturity and reported at amortized cost.
Included in restricted cash and investments are sinking fund requirements
for the project debt service required by the senior secured notes related
to the acquisition of CalEnergy's interest in CED of $9,806 in restricted
cash at December 31, 1999 and funding requirements for such debt of
$4,105 at December 31, 1999 (see note 8). The carrying amount of
restricted cash and investments at December 31, 1999 and 1998
approximated fair value, which is based on quoted market prices as
provided by the financial institution, which holds the investments.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities and
partners' capital and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues, expenses and the allocation of profits and losses during the
period. Actual results could differ significantly from those estimates.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable,
prepaid expenses and other assets, amounts due from related parties,
accounts payable and accrued liabilities, and amounts due to related
parties approximated fair value as of December 31, 1999, because of the
relatively short maturity of these instruments. The project loans as of
December 31, 1999 and 1998 have an estimated fair value of $107,302 and
$39,980, respectively, based on the quoted market price of the senior
secured notes and the COSO Funding Corp. notes, respectively (see note
8).
The investments in Coso Transmission Line Partners and China Lake Plant
Services, approximates the fair value of such investments.
(3) Interest Rate Swap Agreement
In January 1993, CED entered into a five-year deposit interest rate swap
agreement which, until certain investments were liquidated in February
1997, effectively converted notional deposit balances from a variable
rate to a fixed rate. Under the agreement, which matured on January 11,
1998, CED made payments to the counterparty each January 11 and July 11
at variable rates based on LIBOR, reset and compounded every three
months, and in return received payments based on a fixed rate of 6.34%.
The effective LIBOR rate ranged from 5.5313% to 5.8125% during 1997 and
was 5.7500% at December 31, 1997 and at January 11, 1998, the termination
date. The counterparty to this agreement was a large international
financial institution. The carrying amount of the interest rate swap at
December 31, 1997 was $42 (payable to CED), which approximated its fair
value. The fair value was based on the estimated amount that CED would
have received to terminate the swap at that date as provided by the
financial institution which was the counterparty to the swap
(4) Acquisition Accounting
On February 25, 1999, CAC purchased all of CalEnergy's interest in CED,
Coso Power Developers (CPD), Coso Finance Partners (CFP), and Coso
Finance Partners II (CFP II), collectively known as the Coso operating
ventures, for approximately $205,500 in cash plus the assumption of debt
of approximately $139,800. Allocated to CED from the purchase price was
approximately $69,000 plus the assumption of debt of approximately
$37,900. The acquisition was accounted for under the purchase method, and
no goodwill was recorded.
After CAC's purchase of CalEnergy's interest in CED, a new basis of
accounting was adopted and, therefore, the financial information for the
period after the acquisition is presented on a different cost basis than
that for the period before the acquisition and, therefore, is not
comparable.
The purchase price was allocated to the portion of the assets and
liabilities purchased from CalEnergy based upon their fair values, with
the amount of fair value of net assets in excess of the purchase price
being allocated to long-lived assets on a pro-rata basis. These
adjustments resulted in a net decrease of $29,304 in the recorded amounts
of property, plant and equipment and an increase in the recorded amounts
for the power purchase contract of $21,443. The power purchase contract
is being amortized on a straight-line basis over the remaining term of
the power purchase contract of 20 years. Accumulated amortization on the
power purchase contract at December 31, 1999 was $894.
The following unaudited pro forma financial information for the years
ended December 31, 1999 and 1998 present the results of operations of CED
as if the acquisition had occurred as of January 1, 1998, after giving
effect to certain adjustments, including amortization of intangible
assets, reduced depreciation and operating expense and increased interest
expense. The pro forma financial information does not necessarily reflect
the results of operations that would have occurred had the acquisition
been completed on January 1, 1998.
Year ended December 31
--------------------------
1999 1998
-------------- ------------
Total revenue $ 50,943 108,380
============== ============
Income before extraordinary item
and cumulative effect of change in
accounting principle $ 3,257 57,910
============== ============
Net Income $ 1,435 56,957
============== ============
(5) Investment in Coso Transmission Line Partners
Coso Transmission Line Partners (CTLP) is a partnership, between CED and
CPD, which owns the transmission line and facilities connecting the power
plants owned by CED and CPD to the transmission line, owned by Edison, at
Inyokern, California, located 28 miles south of the plants. CTLP charges
CED and CPD for the use of the transmission line at amounts sufficient
for CTLP to recover its operating costs. These charges are recorded by
CED as operating expenses and reflected as a reduction in CED's
investment in CTLP.
(6) Investments in Advances to China Lake Plant Services, Inc.
China Lake Plant Services, Inc. (CLPSI) is a wholly owned subsidiary of
CAC (see note 4). CLPSI purchases, stores and distributes spare parts to
CED, CPD and CFP. Also, certain other facilities utilized by all three
operating ventures are held by CLPSI. CED's investments in CLPSI
represent funds advanced for the purchase of spare parts inventory and
other assets. Spare parts inventory held by CLPSI on behalf of CED is
valued at the lower of cost or market.
(7) Property, Plant and Equipment
Property, plant and equipment at December 31, 1999 and 1998 consist of
the following:
1999 1998
------- -------
Power plant and gathering system $ 146,327 164,335
Transmission line 9,120 10,201
Wells and resources development costs 81,736 138,575
-------- ---------
237,183 313,111
Less accumulated depreciation
and amortization (71,533) (110,841)
-------- ---------
$ 165,650 202,270
======== =========
The transmission line costs represent the Partnership's share of the
costs of construction of transmission lines from Inyokern, California to
the Edison substation at Kramer, California and from Kramer to the Edison
substation at Victorville, California.
(8) Project Loan
In order to complete the purchase of CalEnergy's interest in CED, CAC
arranged for short-term debt financing of $211,500, of which $55,256 was
allocated to CED. As a result of "push-down" accounting, the short-term
debt was reflected in the financial statement of CED and was repaid on
May 28, 1999 from a portion of the proceeds from the offering of senior
secured notes. Financing costs associated with the short-term financing
are included in interest expense-acquisition debt.
On May 28, 1999, Caithness Coso Funding Corp. (Funding Corp.) raised
$413,000 from an offering of senior secured notes. Funding Corp. loaned
approximately $107,900 to CED from the $413,000 debt raised from the
offering of senior secured notes. The loan consists of one note of
$11,650 at 6.80% and another of $96,250 at 9.05%, with payments due at
various dates through December 15, 2001 and December 15, 2009,
respectively, beginning December 15, 1999. As of December 15, 1999, the
principal payment of $4,105 was available for payment by the trustee. The
trustee paid this amount to the noteholders on January 19, 2000. The
failure to make the principal payment on December 15, 1999 did not result
from the lack of performance on the part of Funding Corp. or the
Partnership and the Partnership's management believes this is not an
event of default. Furthermore, all related penalties will be assumed by
the trustee. Through this financing the existing project loan and
short-term financing loans of $93,214 were repaid and an extraordinary
loss of approximately $1,882 from the early extinguishment of this debt
was incurred. The extraordinary loss was due to a premium and other costs
incurred to pay the existing project loan before its maturity date.
The annual maturity of the project loans for each year ending December 31
is as follows:
Year ending December 31 Amount
------------------------- --------
2000 $ 6,993
2001 4,657
2002 6,375
2003 5,055
2004 9,920
Thereafter 74,900
--------
$ 107,900
========
The loans contain certain restrictive covenants that among other things,
limit the Partnership's ability to incur additional indebtedness, release
funds from reserve accounts, make distributions, create liens and enter
into any transaction of merger or consolidation.
The Partnership, Funding Corp., CPD and CFP are jointly and severally
liable for the repayment of the senior secured notes.
The annual maturity of the senior secured notes for each year ending
December 31 is as follows:
Year ending December 31 Amount
------------------------- ---------
2000 $ 82,933
2001 27,067
2002 21,771
2003 27,618
2004 31,332
Thereafter 222,279
--------
$ 413,000
========
The project loan outstanding as of December 31, 1998 was from Coso
Funding Corp., a single purpose corporation formed to issue notes for its
own account and as an agent acting on behalf of CFP, CED, and CPD. The
project loan had a weighted average interest rate of 8.73% and 8.63% as
of December 31, 1998 and 1997, respectively.
(9) Related Party Transactions
The amounts due from and to related parties at December 31, 1999 and 1998
consist of the following:
1999 1998
----- -----
Amounts due from related parties:
Due from CLC:
Principal $ 141 141
Accrued interest 190 153
Due from Coso Operating Company, LLC 430 --
-------- -------
$ 761 294
======== =======
Amounts due to related parties:
Due to CPD for steam sharing $ 673 259
Due to CFP for steam sharing 38 2,258
Due to CLC 21,339 20,699
Due to Caithness Coso Funding Corp. 410 --
Due to CalEnergy -- 702
--------- -------
$ 22,460 23,918
========= =======
CalEnergy, as operator, through February 1, 1999, was reimbursed monthly
for non-third-party costs incurred on behalf of CED. These costs are
comprised principally of approved direct CalEnergy operating costs of the
CED geothermal facility, allocable general and administrative costs, and
operator fees totaling $6,628 and $6,761 for the years ended December 31,
1998 and 1997, respectively.
COC, as the new operator (see note 1), received an operator fee for the
year ended December 31, 1999 of $443.
Both CCH and CalEnergy are reimbursed at approved amounts for their
respective costs incurred in relation to the CED Management Committee.
For the years ended December 31, 1999, 1998 and 1997, CalEnergy received
$25, $223 and $218, respectively, while CCH received $130, $148 and $145,
respectively.
As of May 28, 1999, the management committee fees were eliminated, and
replaced by a non-managing fee payable to CCH. CCH received $129 during
the year ended December 31, 1999.
As indicated in note 1, CLC is entitled to a royalty of 5% of the value
of steam used by CED to produce the electricity sold to Edison. The
royalty due CLC for the years ended December 31, 1999, 1998 and 1997 was
$771, $3,057 and $3,176, respectively. Payment of royalties due to CLC is
subordinated to payment of the project loans (see note 8).
In addition, as described in note 3, CED is charged for its use of the
transmission line owned by CTLP. The amount of such net charges was $115,
$115 and $112 for the years ended December 31, 1999, 1998 and 1997,
respectively.
CED is charged by CLPSI for both its inventory usage and its portion of
the expenses of operating CLPSI. The 1999, 1998 and 1997 costs charged to
CED from CLPSI were approximately $143, $1,350 and $606, respectively.
The amount due from COC relates to reimbursements for payments of
operating expenses. This will be paid back as COC funds additional
operating expenses on behalf of CED.
The amount due to Caithness Coso Funding Corp. represents accrued
interest from December 16, 1999 to December 31, 1999 related to the
senior secured notes (see note 8).
On December 16, 1992, CED retired CLC's promissory note due CalEnergy,
resulting in the loan from CED to CLC of $141. Interest was accrued on
this loan at 12.5%. Interest on the note was $34 and $29 in 1998 and
1997, respectively.
The December 31, 1998 due to CalEnergy balance relates to the partnership
reimbursing CalEnergy for the costs of operating the plant. This amount
fluctuated in concert with the timing of billings and incurring of costs.
During 1994, the Coso operating ventures entered into steam sharing
agreements under which the ventures may transfer steam, with the
resulting incremental revenue and royalty expense shared equally by the
ventures. In the second half of 1995, interconnection facilities between
the plants were completed and the transfer of steam commenced. CED steam
sharing revenue, net of royalties and other related costs, amounted to
$6,430 and $1,584 in 1998 and 1997, respectively, and in 1999, CED steam
sharing resulted in an expense, net of royalties and other related costs,
of $6,103.
(10) Settlement of Litigation
In February 2000, the Partnership, CFP, CPD and Edison reached a
settlement, subject to the approval of the California Public Utilities
Commission of all matters of litigation between the Coso Partnership and
Edison. The cost of the settlement was allocated among the Coso
Partnerships. A portion of that cost was reflected in the purchase
accounting applied to the acquisition of CalEnergy's interest in the
Partnership (see note 4). The balance of the settlement was charged to
settlement of litigation and related expenses.
In June 1999, the Partnership, CED, CPD, Fuji Electric Co., Ltd. and
Fuji Electric Corporation of America (Fuji) reached a settlement
agreement. Fuji, in consideration of the settlement agreement,
must send various equipment or spare parts to the Coso Partnerships.
In December 1999, the Partnership and Dow Chemical Company (Dow) entered
into a confidential settlement agreement which was effective January 1,
2000, to resolve CED's claim to recover damages incurred related to an
installation in 1992 by Dow of a hydrogen sulfide abatement system.
F-19
Independent Auditors' Report
The Partners and Management Committee
Coso Power Developers:
We have audited the accompanying balance sheet of Coso Power Developers as of
December 31, 1999, and the related statements of operations, partners' capital
and cash flows for the year then ended. These financial statements are the
responsibility of the Partnerships' management. Our responsibility is to express
an opinion on these financial statements based on our audit. The financial
statements of Coso Power Developers as of December 31, 1998 and for the years
ended December 31, 1998 and 1997, were audited by other auditors, whose report
dated February 12, 1999, expressed an unqualified opinion.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the 1999 financial statements referred to above present fairly,
in all material respects, the financial position of Coso Power Developers as of
December 31, 1999 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
As discussed in note 4 to the financial statements, effective February 25, 1999,
Caithness Acquisition Company, LLC acquired all of the partnership interest not
already owned by its affiliates, Navy II Group LLC, in a business combination
accounted for as a purchase. As a result of the acquisition, the financial
information for the period after the acquisition is presented on a different
cost basis than that for the period before the acquisition and, therefore, is
not comparable.
February 7, 2000
/s/ KPMG LLP
- ---------------------
KPMG LLP
F-20
Report of Independent Accountants
To the Partners of Coso Power Developers
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position, results of
operations and cash flows of Coso Power Developers at December 31, 1998 and for
each of the two years in the period ended December 31, 1998, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above. We have not audited the
financial statements of Coso Power Developers for any period subsequent to
December 31, 1998.
As discussed in Note 2 to the financial statements, the Partnership adopted in
1998 Statement of Position No. 98-5, "Reporting on the Costs of Start-Up
Activities."
/s/ PricewaterhouseCoopers LLP
- --------------------------------
PricewaterhouseCoopers LLP
San Francisco, California
February 12, 1999
F-21
COSO POWER DEVELOPERS
Balance Sheets
December 31, 1999 and 1998 (note 4)
(Dollars in thousands)
1999 1998
----------------- -----------------
Assets
Cash and cash equivalents $ 6,020 818
Restricted cash and investments (note 2) 54,338 ---
Accounts receivable 20,540 19,656
Prepaid expenses and other assets --- 716
Amounts due from related parties (note 9) 7,058 4,750
Property, plant and equipment, net (notes 4 and 7) 147,522 188,840
Investment in China Lake Plant Services, Inc. (note 6) 2,098 2,086
Investment in Coso Transmission Line Partners (note 5) 3,660 3,802
Power purchase contract, net (note 4) 28,409 ---
Deferred financing costs, net (note 2) 3,624 199
----------------- -----------------
Total assets $ 273,269 220,867
================= =================
Liabilities and Partners' Capital
Accounts payable and accrued liabilities $ 12,163 3,981
Amounts due to related parties (note 9) 3,225 1,902
Project loans (note 8) 153,550 61,323
----------------- -----------------
Total liabilities 168,938 67,206
Commitments and contingencies (notes 8 and 10)
Partners' capital 104,331 153,661
----------------- -----------------
Total liabilities and partners' capital $ 273,269 220,867
================= =================
See accompanying notes to financial statements.
F-22
COSO POWER DEVELOPERS
Statements of Operations
Years ended December 31, 1999, 1998 and 1997 (note 4)
(Dollars in thousands)
Two months Ten months Twelve months Twelve months Twelve months
ended ended ended ended ended
February 28, December 31, December 31, December 31, December 31,
1999 1999 1999 1998 1997
--------------- -------------- -------------- -------------- --------------
(old basis) (new basis) (old basis) (old basis)
Revenue:
Energy revenues $ 16,687 83,041 99,728 105,546 98,778
Capacity payments 822 13,196 14,018 14,018 14,018
Interest and other income 150 2,024 2,174 1,799 2,187
-------------- -------------- -------------- -------------- --------------
Total revenues 17,659 98,261 115,920 121,363 114,983
--------------- -------------- -------------- -------------- --------------
Operating expenses:
Plant operating expense 2,626 8,247 10,873 12,271 12,768
Royalty expense 1,806 10,271 12,077 11,868 11,249
Depreciation and amortization 2,339 12,469 14,808 14,025 13,732
Edison legal expenses and
settlement costs (note 10) 569 5,250 5,819 2,956 ---
--------------- -------------- -------------- -------------- --------------
Total operating expenses 7,340 36,237 43,577 41,120 37,749
--------------- -------------- -------------- -------------- --------------
Operating income 10,319 62,024 72,343 80,243 77,234
--------------- -------------- -------------- -------------- --------------
Other expenses:
Interest expense 953 9,004 9,957 8,122 10,532
Interest expense - acquisition debt --- 2,010 2,010 --- ---
Costs related to acquisition debt --- 2,024 2,024 --- ---
--------------- -------------- -------------- -------------- --------------
Total other expenses 953 13,038 13,991 8,122 10,532
--------------- -------------- -------------- -------------- --------------
Income before extraordinary item
and cumulative effect of
change in accounting principle 9,366 48,986 58,352 72,121 66,702
Extraordinary item - loss on
extinguishment of debt (note 8) --- 2,147 2,147 --- ---
Cumulative effect of change in
accounting principle: start-up
activities (note 2) --- --- --- 1,664 ---
--------------- -------------- -------------- -------------- --------------
Net income $ 9,366 46,839 56,205 70,457 66,702
=============== ============== ============== ============== ==============
See accompanying notes to financial statements.
F-23
COSO POWER DEVELOPERS
Statements of Partners' Capital
Years ended December 31, 1999, 1998 and 1997 (note 4)
(Dollars in thousands)
Caithness
Navy II Coso New
Group, Technology CTC
LLC Corporation Company, LLC Total
---------------- -------------------- ------------------ -----------------
Balance at December 31, 1996 $ 63,046.0 63,046.0 --- 126,092.0
Distributions to partners (33,690.5) (33,690.5) --- (67,381.0)
Net income 33,351.0 33,351.0 --- 66,702.0
---------------- -------------------- ------------------ -----------------
Balance at December 31, 1997 62,706.5 62,706.5 --- 125,413.0
Distributions to partners (21,104.5) (21,104.5) --- (42,209.0)
Net income 35,228.5 35,228.5 --- 70,457.0
---------------- -------------------- ------------------ -----------------
Balance at December 31, 1998 76,830.5 76,830.5 --- 153,661.0
Transfer of capital --- (76,830.5) 76,830.5 ---
Distributions to partners (51,537.5) --- (51,537.5) (103,075.0)
Net income 28,102.5 --- 28,102.0 56,205.0
Effect of purchase accounting --- --- (2,460.0) (2,460.0)
---------------- -------------------- ------------------ -----------------
Balance at December 31, 1999 $ 53,395.5 --- 50,935.5 104,331.0
================ ==================== ================== =================
See accompanying notes to financial statements.
F-24
COSO POWER DEVELOPERS
Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997 (note 4)
(Dollars in thousands)
Two months Ten months Twelve Twelve Twelve
ended ended months ended months ended months ended
February 28, December 31, December 31, December 31, December 31,
1999 1999 1999 1998 1997
----------- ------------ ----------- ----------- ------------
(old basis) (new basis) (old basis) (old basis)
Cash flows from operating activities:
Net income $ 9,366 46,839 56,205 70,457 66,702
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,339 12,469 14,808 14,025 13,732
Amortization of deferred financing costs 20 551 571 204 271
Write-off of deferred financing costs --- 217 217 --- ---
Cumulative effect of accounting change --- --- --- 1,664 ---
Changes in operating assets and liabilities:
Accounts receivable, prepaid expense and (909) 329 (580) (1,095) (1,457)
other assets
Investment in Coso Transmission Line Partners (989) 1,131 142 127 127
Investment in China Lake Plant Services, Inc. 52 (64) (12) (343) 503
Accounts payable and accrued liabilities 439 3,997 4,436 864 796
Amounts due from related parties 1,432 (3,740) (2,308) (1,268) (795)
Amounts due to related parties 2,088 (765) 1,323 198 650
----------- ------------ ----------- ----------- ------------
Net cash provided by operating activities 13,838 60,964 74,802 84,833 80,529
----------- ------------ ----------- ----------- ------------
Cash flows from investing activities:
Capital expenditures (1,182) (3,232) (4,414) (7,010) (7,861)
(Increase) decrease in restricted cash --- (54,338) (54,338) --- 22,391
----------- ------------ ----------- ----------- ------------
Net cash (used in) provided by
investing activities (1,182) (57,570) (58,752) (7,010) 14,530
----------- ------------ ----------- ----------- ------------
Cash flows from financing activities:
Distributions to partners --- (103,075) (103,075) (42,209) (83,977)
Increase in project financing debt --- 153,550 153,550 --- ---
Repayment of project financing debt --- (61,323) (61,323) (35,944) (27,094)
Repayment of CalEnergy promissory note --- --- --- --- (973)
----------- ------------ ----------- ----------- ------------
Net cash used in financing activities --- (10,848) (10,848) (78,153) (112,044)
----------- ------------ ----------- ----------- ------------
Net change in cash and cash equivalents 12,656 (7,454) 5,202 (330) (16,985)
Cash and cash equivalents at beginning of year 818 13,474 818 1,148 18,133
----------- ------------ ----------- ------------ ------------
Cash and cash equivalents at end of year $ 13,474 6,020 6,020 818 1,148
=========== ============ =========== ============ ============
Supplemental cash flow disclosure
Cash paid for interest $ --- 11,060 11,060 7,918 10,877
=========== ============ =========== ============ ============
Schedule of noncash investing activities as a result
of purchase accounting (note 4):
Fair value of power purchase contract $ --- 30,738 30,738 --- ---
Reduction in property, plant and equipment --- (33,536) (33,536) --- ---
Net increase in other assets --- 4,084 4,084 --- ---
Liabilities assumed --- (3,746) (3,746) --- ---
----------- ------------ ----------- ------------ ------------
Reduction in partners' capital $ --- (2,460) (2,460) --- ---
=========== ============ =========== ============ ============
See accompanying notes to financial statements.
F-25
COSO POWER DEVELOPERS
Notes to Financial Statements
December 31, 1999, 1998 and 1997
(Dollars in thousands)
(1) Organization, Operation and Business of the Partnership
Coso Power Developers (CPD or the Partnership) was formed on July 31,
1989, in connection with financing the construction of a geothermal power
plant on land at the China Lake Naval Air Weapons Station at Coso Hot
Springs, China Lake, California. CPD is a general partnership between
Caithness Navy II Group LLC (Navy II), a New Jersey limited liability
company, and, until February 25, 1999, Coso Technology Corporation (CTC),
a Delaware corporation wholly owned by CalEnergy, Inc. (CalEnergy). On
February 25, 1999, Caithness Acquisition Company, LLC, (CAC), a wholly
owned subsidiary of Caithness Energy, LLC and an affiliate of Navy II,
purchased all of CalEnergy's interest in CTC (see note 4) and formed a
wholly owned subsidiary, New CTC Company, LLC (New CTC), a Deleware
limited liability company, to become the new managing general partner of
CPD.
The power plant is located on land owned by the U.S. Navy. Under the
terms of a 30-year contract with the U.S. Navy to develop geothermal
energy on its land, CPD pays a royalty to the U.S. Navy which was
initially 4% of revenues, then increased to 10% at December 31, 1998, and
is currently 18% of revenues as of December 24, 1999. The royalty will
increase to 20% of revenues after December 15, 2004. The U.S. Navy
contract expires in 2009; the U.S. Navy has an option to extend it to
2019.
The Partnership sells all electricity produced to Southern California
Edison (Edison) under a 20-year power purchase contract expiring in 2010.
Under the terms of this contract, Edison makes payments to CPD as
follows:
* Contractual payments for energy delivered, which escalate at an
average rate of approximately 7.6% for the first ten years after the
date of firm operation (scheduled energy price period). The scheduled
energy price period extends until January 2000. After the scheduled
energy price period, the energy payment adjusts to the actual avoided
energy cost experienced by Edison. For the years ended December 31,
1999, 1998 and 1997, Edison's average avoided cost of energy was 3.13,
2.95 and 3.28 cents per kwh, respectively. Estimates of Edison's
future avoided cost of energy vary substantially from year to year.
The Partnership cannot predict the likely level of avoided cost of
energy prices under the 20-year power purchase contract and,
accordingly, the revenues generated by the Partnership could fluctuate
significantly;
* Capacity payments which remain fixed over the life of the contract
to the extent that actual energy delivered exceeds minimum levels of
the plant capacity defined in the contract; and
* Bonus payments to the extent that actual energy delivered exceeds
85% of the plant capacity stated in the contract. In 1999, 1998 and
1997, the bonus payments aggregated $2,248, $2,242 and $2,236,
respectively.
CalEnergy served as the operator, maintaining the Partnership's
accounting records and operating the CPD plant on a day-to-day basis,
until February 1, 1999 when Coso Operating Company LLC (COC), a Delaware
limited liability company, became operator pursuant to certain operations
and maintenance agreements with CTC, the managing general partner. COC
was a wholly owned subsidiary of CalEnergy until February 25, 1999 when
CalEnergy assigned all of its interest and right in COC to CAC, which
became manager and sole member.
On February 25, 1999, CPD entered into two operating and maintenance
agreements, one with FPL Operating Services, Inc. (FPL) and a second with
COC. The initial terms of the FPL operating and maintenance agreement was
for three years, to provide for the operation and maintenance of the
geothermal power facilities and the interconnection to the transmission
line. The term of the COC Agreement is through December 31, 2009 to
provide field services and administrative services for the Partnership.
On October 17, 1999, the operating agreement with FPL was terminated and
COC became the sole operator of all Partnership operations.
At formation, and as subsequently amended, the partnership agreement
provides that cash flows before and after "payout," which has occurred,
are allocated 50% each to New CTC, (formerly CTC), and Navy II. "Payout"
is defined as the point at which earned partner has received aggregate
cash distributions in an amount equal to their accumulated capital
contributions. For purposes of allocating net income to partners' capital
accounts and for income tax purposes, profits and losses are allocated
based on the aforementioned capital percentages.
(2) Summary of Significant Accounting Policies
Recognition of Revenue
Operating revenues are recognized as income during the period in which
electricity is delivered to Edison. Revenue is recognized based on the
payment rates scheduled in CPD's power purchase contract with Edison
until January 2000. After January 2000, revenue will be recognized based
on Edison's avoided energy cost.
Fixed Assets and Depreciation
The costs of major additions and betterments are capitalized, while
replacements, maintenance and repairs which do not improve or extend the
life of the respective assets are expensed currently.
Depreciation of the power plant and transmission line is computed on a
straight-line basis over their estimated useful life of 30 years and, for
significant additions, the remainder of the 30-year life from the plant's
commencement of operations.
Recoverability of Long-Lived Assets
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" ("SFAS No. 121"), an impairment loss is
recognized whenever events or changes in circumstances indicate that the
carrying amounts of long-lived tangible and intangible assets is not
recoverable. The Partnership considers historical performance and future
estimated results in its evaluation of potential impairment and then
compares the carrying amount of the asset to the estimated future cash
flows expected to result from the use of the asset. If the carrying
amount of the asset exceeds estimated expected undiscounted future cash
flows before interest charges, the Partnership measures the amount of the
impairment by comparing the carrying amount of the asset to its fair
value. The estimation of fair value is generally measured by discounting
expected future cash flows at the rate the Partnership utilizes to
evaluate potential investments. The Partnership estimates fair value
based on the best information available using estimates, judgments and
projections as considered necessary.
Start-Up Activities
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position (SOP) No. 98-5, "Reporting on the Costs of Start-Up
Activities." SOP No. 98-5 requires that, at the effective date of
adoption, costs of start-up activities previously capitalized be expensed
and reported as a cumulative effect of change in accounting principle,
and further requires that such costs subsequent to adoption be expensed
as incurred. CPD adopted this standard in 1998 and expensed applicable
unamortized costs previously capitalized in connection with the start-up
of CPD. The cumulative effect of the change in accounting principle was
$1,664.
Wells and Resource Development Costs
CPD follows the full cost method of accounting for costs incurred in
connection with the exploration and development of geothermal resources.
All such costs, which include dry hole costs, the costs of drilling and
equipping production wells, and administrative and interest costs
directly attributable to the project, are capitalized and amortized over
their estimated useful lives when production commences. The estimated
useful lives of production wells are 10 years each; exploration costs and
development costs, other than production wells, are amortized over 30
years and, for significant additions, the remainder of the 30-year life
from the plant's commencement of operations.
Deferred Plant Overhaul Costs and Deferred Well Rework Costs
Plant overhaul costs are deferred and amortized over the estimated period
between overhauls as these costs extend the useful life of the respective
assets. These deferred costs of $97 and $176 at December 31, 1999 and
1998, respectively, are included in property, plant and equipment.
Currently, plant overhauls are amortized over three years from the point
of completion.
Well rework costs are deferred and amortized over the estimated period
between reworks as these costs extend the useful life of the respective
assets. These deferred costs of $-0- and $83 at December 31, 1999 and
1998, respectively, are included in property, plant and equipment.
Currently, both production and injection rework costs are amortized over
twelve months.
Reclassifications
Certain reclassifications have been made to the 1998 balance sheet and
the 1998 and 1997 statements of operations and cash flows to conform to
the 1999 presentation.
Deferred Financing Costs
Deferred financing costs as of December 31, 1999 and 1998 consist of loan
fees and other costs of financing that are amortized over the term of the
related financing using the straight line-method and the effective
interest method, respectively. In 1999, fees of $2,004 associated with
certain short-term financing were fully expensed and included in costs
related to acquisition debt, and a refinancing of this debt resulted in
new deferred financing costs of $4,175. Accumulated amortization at
December 31, 1999 and 1998 was $551 and $2,027, respectively. The $179
balance of the deferred financing costs at the date of acquisition
related to the refinanced project debt was included in the extraordinary
loss recorded at the time of the refinancing (see note 8).
Income Taxes
There is no provision for income taxes since such taxes are the
responsibility of the partners.
Cash and Cash Equivalents
For purposes of the statements of cash flows, CPD considers all money
market instruments purchased with an initial maturity of three months or
less to be cash equivalents.
Restricted Cash and Investments
As of December 31, 1999 all of the Partnership's investments were
classified as held to maturity and reported at amortized cost. Included
in restricted cash and investments are sinking fund requirements for the
project debt service required by the senior secured notes related to the
acquisition of CalEnergy's interest in CPD of $54,338 in restricted cash
at December 31, 1999 and funding requirements for such debt of $43,004 at
December 31, 1999 (see note 8). The carrying amount of restricted cash
and investments at December 31, 1999 and 1998 approximated fair value,
which is based on quoted market prices as provided by the financial
institution which holds the investments.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities,
partners' capital and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues, expenses and the allocation of profits and losses during the
reportable period. Actual results could differ significantly from those
estimates.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable,
prepaid expenses and other assets, amounts due from related parties,
accounts payable and accrued liabilities, and amounts due to related
parties approximated fair value as of December 31, 1999, because of the
relatively short maturity of these instruments. The project loans as of
December 31, 1999 and 1998 have an estimated fair value of $152,435 and
$63,912, respectively, based on the quoted market price of the senior
secured notes and the Coso Funding Corp. notes, respectively (see note
8).
The investments in Coso Transmission Line Partners and China Lake Plant
Services, Inc., approximates the fair value of such investments.
(3) Interest Rate Swap Agreement
In January 1993, CPD entered into a five-year deposit interest rate swap
agreement which, until certain investments were liquidated in February
1997, effectively converted notional deposit balances from a variable
rate to a fixed rate. Under the agreement, which matured on January 11,
1998, CPD made payments to the counterparty each January 11 and July 11
at variable rates based on LIBOR, reset and compounded every three
months, and in return received payments based on a fixed rate of 6.34%.
The effective LIBOR rate ranged from 5.5313% to 5.8125% during 1997 and
was 5.7500% at December 31, 1997 and at January 11, 1998, the termination
date. The counterparty to this agreement was a large international
financial institution. The carrying amount of the interest rate swap at
December 31, 1997 was $41 (payable to CPD), which approximated its fair
value. The fair value was based on the estimated amount that CPD would
have received to terminate the swap at that date as provided by the
financial institution which was the counterparty to the swap.
(4) Acquisition Accounting
On February 25, 1999, CAC purchased all of CalEnergy's interest in CPD,
Coso Energy Developers (CED), Coso Finance Partners (CFP), and Coso
Finance Partners (CFP II), collectively known as the Coso operating
ventures, for approximately $205,500 in cash plus the assumption of debt
of approximately $139,800. The purchase price allocated to CPD was
approximately $74,500 plus the assumption of debt of approximately
$61,300. The acquisition was accounted for under the purchase method, and
no goodwill was recorded.
After CAC's purchase of CalEnergy's interest in CPD, a new basis of
accounting was adopted and, therefore, the financial information for the
period after the acquisition is presented on a different cost basis than
that for the period before the acquisition and, therefore, is not
comparable.
The purchase price was allocated to the portion of the assets and
liabilities purchased from CalEnergy based upon their fair values, with
the amount of fair value of net assets in excess of the purchase price
being allocated to long-lived assets on a pro rata basis. These
adjustments resulted in a net decrease of $33,536 in the recorded amounts
value of property, plant and equipment and an increase in the recorded
amounts for the power purchase contract of $30,738. The power purchase
contract is being amortized on a straight-line basis over the remaining
term of the power purchase contract of 11 years. Accumulated amortization
on the power purchase contract at December 31, 1999 was $2,329.
The following unaudited pro forma financial information for the years
ended December 31, 1999 and 1998 presents the results of operations of
CPD as if the acquisition had occurred as of January 1, 1998, after
giving effect to certain adjustments including amortization of intangible
assets, reduced depreciation and operating expense and increased interest
expense. The pro forma financial information does not necessarily reflect
the results of operations that would have occurred had the acquisition
been completed on January 1, 1998.
Year ended December 31
----------------------
1999 1998
------- -------
Total revenues $ 115,920 121,363
Income before extraordinary item and
cumulative effect of change in
accounting principle $ 59,528 69,283
======= ======
Net Income $ 57,381 67,619
======= ======
(5) Investment in Coso Transmission Line Partners
Coso Transmission Line Partners (CTLP) is a partnership between CPD and
CED, which owns the transmission line and facilities connecting the power
plants owned by CPD and CED to the transmission line, owned by Edison, at
Inyokern, California, located 28 miles south of the plants. CTLP charges
CPD and CED for the use of the transmission line at amounts sufficient
for CTLP to recover its operating costs. These charges are recorded by
CPD as operating expenses and reflected as a reduction in CPD's
investment in CTLP.
(6) Investments in China Lake Plant Services, Inc.
China Lake Plant Services, Inc. (CLPSI) is a wholly owned subsidiary of
CAC (see note 4). CLPSI purchases, stores and distributes spare parts to
CPD, CED and CFP. Also, certain other facilities utilized by all three
operating ventures are held by CLPSI. CPD's investments in CLPSI
represent funds advanced for the purchase of spare parts inventory and
other assets. Spare parts inventory held by CLPSI on behalf of CPD is
valued at the lower of cost or market.
(7) Property, Plant and Equipment
Property, plant and equipment at December 31, 1999 and 1998 consists of
the following:
1999 1998
------ -----
Power, plant and gathering system $ 141,068 164,952
Transmission line 7,245 8,332
Wells and resources development
costs 59,735 114,764
------ -------
208,048 288,048
Less accumulated depreciation
and amortization (60,526) (99,208)
------- -------
$ 147,522 188,840
======== =======
The transmission line costs represent the Partnership's share of the
costs of construction of transmission lines from Inyokern, California to
the Edison substation at Kramer, California and from Kramer to the Edison
substation at Victorville, California.
(8) Project Loans
In order to complete the purchase of CalEnergy's interest in CPD, CAC
arranged for short-term debt financing of $211,500, of which
approximately $78,634 was allocated to CPD. As a result of "push-down"
accounting, the short-term debt was reflected in the financial statements
of CPD and was repaid on May 28, 1999 from a portion of the proceeds from
the offering of senior secured notes. Financing costs associated with the
short-term financing are included in interest expense - acquisition debt.
On May 28, 1999, Caithness Coso Funding Corp. (Funding Corp.)raised
$413,000 from an offering of senior secured notes. Funding Corp. loaned
approximately$153,550 to CPD from the $413,000 debt raised from the
offering of senior secured notes. The loan consists of one note of
$69,350 at 6.80% and another note of $84,200 at 9.05% with payments due
at various dates through December 15, 2001 and December 15, 2009,
respectively, beginning December 15, 1999. As of December 15, 1999 the
principal payment of $43,004 was available for payment by the trustee.
The trustee paid this amount to the noteholders on January 19, 2000. The
failure to make the principal payment on December 15, 1999 did not
result from the lack of performance on the part of Funding Corp. or the
Partnership and the Partnership's management believes this is not
an event of default. Furthermore, all related penatlies will be
assumed by the trustee. Through this financing the existing project loan
and short-term financing of approximately $139,957 was repaid and an
extraordinary loss of approximately $2,147 from the early extinguishment
of this debt was incurred. The extraordinary loss was due to a premium
and other costs incurred to pay the existing project loan before its
maturity date.
The annual maturity of the project loans for each year ending December 31
is as follows:
Year ending December 31 Amount
------------------------ --------
2000 $ 59,374
2001 9,976
2002 3,799
2003 9,155
2004 10,718
Thereafter 60,528
--------
$ 153,550
========
The loans contain certain restrictive covenants that, among other things,
limit the Partnership's ability to incur additional indebtedness, release
funds from reserve amounts, make distributions, create loans and enter
into any transaction of merger or consolidation.
The Partnership, Funding Corp., CED and CFP are jointly and severally
liable for the repayment of the senior secured notes.
The annual maturity of the senior secured notes for each year ending
December 31 is as follows:
Year ending December 31 Amount
------------------------- -------
2000 $ 82,933
2001 27,067
2002 21,771
2003 27,618
2004 31,332
Thereafter 222,279
-------
$ 413,000
========
The project loan outstanding as of December 31, 1998 was from Coso
Funding Corp., a single purpose corporation formed to issue notes for its
own account and as an agent acting on behalf of CFP, CED, and CPD. The
project loan had a weighted average interest rate of 8.65% and 8.61% as
of December 31, 1998 and 1997, respectively.
(9) Related Party Transactions
The amounts due from and to related parties at December 31, 1999 and 1998
consist of the following:
1999 1998
------- ------
Amounts due from related parties:
Due from CED for steam sharing $ 673 259
Due from Coso Operating Company 2,714 --
Due from China Lake Joint Venture:
Principal 1,562 1,562
Accrued interest 2,109 1,688
Due from CalEnergy -- 1,241
------ -----
$ 7,058 4,750
====== =====
Amounts due to related parties:
Due to CFP for steam sharing $ 2,807 1,902
Due to Caithness Coso Funding Corp. 418 --
----- -----
$ 3,225 1,902
====== =====
CalEnergy, as operator, through February 1, 1999, was reimbursed monthly
for non-third-party costs incurred on behalf of CPD. These costs are
comprised principally of approved direct CalEnergy operating costs of the
CPD geothermal facility, allocable general and administrative costs, and
operator fees totaling $5,494 and $5,740 for the years ended December 31,
1998 and 1997, respectively.
COC, as the new operator (see note 1), received an operator fee for the
year ended December 31, 1999 of $443.
Both CalEnergy and Navy II were reimbursed at approved amounts for their
respective costs incurred in relation to the CPD Management Committee.
For the years ended December 31, 1999, 1998 and 1997, CalEnergy received
$25, $148 and $145, respectively, while Navy II received $130, $223 and
$218, respectively.
As of May 28, 1999, the management committee fees were eliminated and
replaced by a nonmanaging fee payable to Navy II. Navy II received $129
during the year ended December 31, 1999.
As discussed in note 4, CPD is charged for its use of the transmission
line owned by CTLP. The amount of such net charges was $127 for each of
the years ended December 31, 1999, 1998 and 1997, respectively.
CPD is charged by CLPSI for both its inventory usage and its portion of
the expenses of operating CLPSI. The charges to CPD from CLPSI in 1999,
1998 and 1997 were approximately $78, $361 and $1,227, respectively.
On December 16, 1992, CPD retired China Lake Joint Venture's (CLJV)
promissory note due CalEnergy, resulting in the loan from CPD to CLJV of
$1,562 at December 31, 1992. CLJV is an affiliated venture. Interest has
been accrued on this loan at 12.5%. Interest on the loan was $421, $371
and $329 in 1999, 1998 and 1997, respectively.
The amount due from COC relates to reimbursements for payments of
operating expenses. This will be paid back as COC funds additional
operating expenses on behalf of CPD.
The amount due to Caithness Coso Funding Corp. represents accrued
interest from December 16, 1999 to December 31, 1999 related to the
senior secured notes (see note 8).
The December 31, 1998 due from CalEnergy balance relates to the
Partnership reimbursing CalEnergy for the costs of operating the plant.
This amount fluctuated in concert with the timing of billings and
incurring of costs.
During 1994, the three Coso operating ventures entered into steam sharing
agreements under which the ventures may transfer steam, with the
resulting incremental revenue and royalty expense shared equally by the
ventures. In the second half of 1995, interconnection facilities between
the plants were completed and the transfer of steam commenced. CPD steam
sharing revenue, net of royalties and other related costs, amounted to
$342 and $1,750 in 1998 and 1997, respectively, and in 1999, CPD steam
sharing resulted in an expense, net of royalties and other related costs,
of $18,618.
(10) Settlement of Litigation
In February 2000, the Partnership, CED, CFP and Edison reached a
settlement, subject to the approval of the California Public Utilities
Commission of all matters of litigation between the Coso Partnership and
Edison. The cost of the settlement was allocated among the Coso
Partnerships. A portion of that cost was reflected in the purchase
accounting applied to the acquisition of CalEnergy's interest in the
Partnership (see note 4). The balance of the settlement was charged to
settlement of litigation and related expenses.
In June 1999, the Partnership, CED, CFP, Fuji Electric Co., Ltd. and
Fuji Electric Corporation of America (Fuji) reached a settlement
agreement. Fuji, in consideration of the settlement agreement, must
send various equipment or spare parts to the Coso Partnerships.
F-26
Item 9. Changes in and disagreements with Accountants on Accounting and
Financial Disclosure.
Since 1991, Caithness Energy and CalEnergy, the two former co-sponsors of
the Coso projects, had engaged PricewaterhouseCoopers LLP to audit the financial
statements of the Coso partnerships. On February 25, 1999, Caithness
Acquisition, Caithness Energy's wholly owned subsidiary, purchased all of
CalEnergy's interests in the Coso projects, and Caithness Energy engaged KPMG
LLP, its own independent certified public accountants, to audit the financial
statements of the Coso partnerships in the future, rather than to continue to
have PricewaterhouseCoopers LLP audit those financial statements. In connection
with the audits of the financial statements of Coso Finance Partners and Coso
Finance Partners II, Coso Energy Developers and Coso Power Developers for each
of the two years in the period ended December 31, 1998 and through February 25,
1999, (i) Caithness Energy had no disagreements with PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to make
reference thereto in their reports on the financial statements for such years,
and (ii) the reports of PricewaterhouseCoopers LLP on the Coso partnerships did
not contain any adverse opinion or disclaimer of opinion, and were not modified
as to uncertainty, audit scope or accounting principles except for the reference
to the Coso partnerships' adoption in 1998 of Statement of Position No. 98-5,
"Reporting on the Costs of Start-up Activities."
Part III
Item 10. Directors and Executive Officers of the Registrant.
The following table sets forth the persons who currently serve as our
directors and executive officers as of December 31, 1999:
Name Age Position(s)
---- --- -----------
James D. Bishop, Sr. ......... 66 Director, Chairman and Chief Executive Officer
Leslie J. Gelber.............. 43 Director, President and Chief Operating Officer
James D. Bishop, Jr. ......... 39 Director, Vice Chairman
Christopher T. McCallion...... 38 Director, Executive Vice President and Chief Financial
Officer
Larry K. Carpenter............ 50 Director, Executive Vice President
James C. Sullivan............. 72 Director, Senior Vice President and Secretary
Mark A. Ferrucci.............. 47 Director
David V. Casale............... 36 Vice President and Controller
Barbara Bishop Gollan......... 41 Vice President
27
James D. Bishop, Sr., Chairman, Chief Executive Officer and a Director of
Funding Corp. and of Caithness Energy, has served asa Director of Caithness
Corporation since its inception in 1975. Mr. Bishop served as Caithness
Corporation's President from its inception until December 1986 and as Chairman
of Caithness Corporation from January 1987 until the present. Mr. Bishop also
serves as a director for various other entities, which engage in independent
power production and natural resource exploration and development. Mr. Bishop
holds a Master of Business Administration degree from Harvard Business School
and a Bachelor of Arts degree from Yale University. Mr. Bishop is the father of
James D. Bishop, Jr. and Barbara Bishop Gollan.
Leslie J. Gelber, President, Chief Operating Officer and a Director of
Funding Corp. and of Caithness Energy,has served as President and Chief
Operating Officer of Caithness Corporationsince January 1999. Prior to joining
Caithness Corporation, Mr. Gelber served as President of Cogen Technologies,
Inc., which is also engaged in the field of independent power production, from
August 1998 until December 1998. From July 1993 to July 1998, Mr. Gelber served
as President of ESI Energy, Inc., the non-regulated independent power company
owned by FPL Group, Inc. Mr. Gelber holds a Master of Business Administration
degree from the University of Miami and holds a Bachelor of Arts degree in
Economics from Alfred University.
James D. Bishop, Jr., Vice Chairman and a Director of Funding Corp. and of
Caithness Energy, joined Caithness Corporation in 1988 and has served as
President and Chief Operating Officer of Caithness Corporation from November
1995 until December 1998. Mr. Bishop also serves on all of the boards of
directors and management committees of the entities and joint ventures
affiliated with Caithness Corporation. Mr. Bishop holds a Master of Business
Administration degree from the Kellogg Graduate School of Management at
Northwestern University and holds a Bachelor of Science degree from Trinity
College. Mr. Bishop is the son of James D. Bishop, Sr. and the brother of
Barbara Bishop Gollan.
Christopher T. McCallion, Executive Vice President, Chief Financial
Officer and a Director of Funding Corp. and of Caithness Energy, served as Vice
President and Controller of Caithness Corporation from July 1991 to November
1995, and has served as Executive Vice President and Chief Financial Officer of
Caithness Corporation since November 1995. Mr. McCallion holds a Bachelor of
Science degree from Seton Hall University.
Larry K. Carpenter, Executive Vice President and a Director of Funding
Corp. and of Caithness Energy, has served as an Executive Vice President of
Caithness Corporation since January 1999. Prior to joining Caithness
Corporation, Mr. Carpenter served as Vice President of Development at ESI
Energy, Inc., the non-regulated independent power company owned by FPL Group
Inc., from 1985 to December 1998. Mr. Carpenter holds a Bachelor of Science
degree in Electrical Engineering from the University of Florida.
James C. Sullivan, a Senior Vice President, Secretary and a Director of
Funding Corp. and of Caithness Energy, has served as Senior Vice President,
Secretary and a Director of Caithness Corporation since April 1996. Mr. Sullivan
attended Holy Cross Seminary at Notre Dame University, Indiana University and
the University of Tokyo before graduating from the State University of
California at Pasadena.
Mark A. Ferrucci, a Director of Funding Corp., has served as the
independent director of Funding Corp. since May 1999. Since 1997, Mr. Ferrucci
has been an employee of CT Corporation System, an independent company that
provides corporate and UCC services to businesses and law firms. From 1977 until
1992, Mr. Ferrucci served as CT Corporation System's Assistant Secretary and as
Assistant Vice President of CT Corporation System from 1992 until the present.
28
David V. Casale, a Vice President and the Controller of Funding Corp. and
of Caithness Energy joined Caithness Corporation in December 1991 and has served
as a Vice President and as its Controller since November 1995. Mr. Casale also
serves on the boards of directors of joint ventures affiliated with Caithness
Corporation. Mr. Casale holds a Bachelor of Arts degree from Adelphi University.
Barbara Bishop Gollan, a Vice President of Funding Corp. and of Caithness
Energy, joined Caithness Corporation as Vice President in October 1990. Ms.
Gollan has authored and co-authored a number of technical papers on geothermal
systems, which were presented to The Geothermal Resources Council, the Geologic
Society of America and the Stanford Geothermal Workshop. Ms. Gollan holds a
Master of Science degree in Geology and Geochemistry from Stanford University
and holds a Bachelor of Arts degree from Amherst College. Ms. Gollan is the
daughter of Mr. James D. Bishop, Sr. and sister of James D. Bishop, Jr.
The Board of Directors appointed Mr. Ferrucci as an independent director.
The unanimous affirmative vote of our Board of Directors (including Mr.
Ferrucci) is required before we can take certain actions, including, but not
limited to, (1) engaging in any business or activity other than issuing the
senior secured notes and making the related loans to the Coso partnerships, (2)
incurring any debt, or assuming or guaranteeing any debt of any other entity,
(3) dissolving or liquidating, (4) consolidating, merging or selling all or
substantially all of our assets or (5) instituting any bankruptcy or insolvency
proceedings.
Item 11. Executive Compensation.
None of the directors or executive officers of Coso Funding Corp.
receives any compensation for his or her services, except Mr. Ferruci, who
received $8,400 in compensation for services provided in 1999.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of December 31, 1999, certain
information regarding the beneficial ownership of Coso Funding Corp.'s voting
securities and the beneficial ownership of the voting securities of each of the
Coso partnerships by:
(1) Each person who is known by us and the Coso partnerships to
beneficially own 5% or more of Coso Funding Corp.'s voting
securities or 5% or more of the voting securities of any Coso partnership,
(2) Each of Coso Funding Corp.'s directors and executive officers who also act
in similar capacities on behalf of the managing partner of each Coso
partnership and each of the delegates to the management committee of each
Coso partnership, and
(3) All of Coso Funding Corp.'s directors and executive officers who also act
in similar capacities for the managing partnership of each Coso
partnership and all of the delegates to the management committee of each
Coso partnership as a group.
Beneficial ownership has been determined in accordance with Rule 13d-3
under the Securities Exchange Act of 1934, as amended. Except as otherwise
noted, each person named below has an address in care of our principal executive
offices.
29
Beneficial Ownership of Coso Funding Corp. and the Coso Partnerships
Percent Indirect Percent Indirect Percent Indirect Percent Indirect
Beneficial Beneficial Beneficial Beneficial
Ownership in Ownership in Ownership in Ownership in
Coso Funding the Navy I the BLM the Navy II
Name and Address of Beneficial Owner Corp. Partnership Partnership Partnership
------------------------------------ ----------------- ---------------- ---------------- ------------------
James D. Bishop, Sr. (1)(2)............... 0.6% 1.0% -- 0.7%
Leslie J. Gelber (1)(3)................... -- -- -- --
James D. Bishop, Jr. (1)(4)............... 32.8% 32.2% 35.1% 31.3%
Christopher T. McCallion (1)(3)........... -- -- -- --
Larry K. Carpenter (1)(3)................. -- -- -- --
James C. Sullivan (1)(5).................. 2.8% 2.9% 2.9% 2.6%
Mark A. Ferrucci.......................... -- -- -- --
David Casale (1)(3)....................... -- -- -- --
Barbara Bishop Gollan (1)(3)(6)........... -- -- -- --
Dominion Energy, Inc. (7)................. * -- 7.8% 2.8%
901 East Byrd Street
Richmond, VA 23219
Mojave Energy Company (8)................. 6.1% 5.5% 7.7% 5.2%
c/o Davenport Resources, Inc.
200 Railroad Avenue, 3rd floor
Greenwich, CT 06830
All directors, executive officers and 36.2% 36.1% 38.0% 34.6%
management committee delegates as a group.
* Less than 5.0%.
(1) The address of such person is c/o Caithness Corporation, 1114 Avenue of
the Americas, 41st Floor, New York, New York 10036-7790.
(2) The beneficial ownership of James D. Bishop, Sr.'s interests is based upon
his ownership of shares of common stock of Mojave Power, Inc. and Mojave
Power II, Inc. which own, indirectly through various entities, general
partnership interests in the Navy I partnership and the Navy II
partnership. In addition to these interests, James D. Bishop, Sr. is the
beneficiary of The James D. Bishop Trust--1998 ( "Bishop, Sr. Trust "),
which owns shares of common stock of Caithness Corporation. Caithness
Corporation owns, indirectly through various entities, general partnership
interests in the Navy I partnership, the BLM partnership and the Navy II
partnership, which collectively own all of the shares of common stock of
Funding Corp. The voting rights to the shares of common stock of Caithness
Corporation held by the Bishop, Sr. Trust have been transferred to The
Caithness Entities Voting Trust, the trustee of which is James D. Bishop,
Jr. The Bishop, Sr. Trust is irrevocable. James D. Bishop, Sr., therefore,
does not have voting or investment power over these shares of common stock
of Caithness Corporation.
30
(3) Owner of economic interests in the Coso partnerships through Caithness
Corporation's employee incentive plans, which economic interests are not
listed on this table
(4) James D. Bishop, Jr. is: (i) the beneficiary of The James D. Bishop, Jr.
Irrevocable Trust--1996 (the "Bishop, Jr. Trust "), which owns shares of
common stock of Caithness Corporation, the voting rights of which have been
transferred to The Caithness Entities Voting Trust, the trustee of which is
James D. Bishop, Jr.; (ii) the owner of common stock of Caithness
Corporation and of Mojave Power, Inc.; and (iii) the trustee of The
Caithness Entities Voting Trust which possesses sole voting control over
the shares of common stock of Caithness Corporation held by the Bishop, Sr.
Trust, The Barbara Bishop Gollan Irrevocable Trust--1996 (the "Gollan Trust
"), The Elizabeth Bishop DeLuca Irrevocable Trust--1996 and The Linda
Bishop Fotiu Irrevocable Trust--1996. The interests listed in (i) and (ii)
above entitle James D. Bishop, Jr. to the following indirect beneficial
ownership interests: Funding Corp. (1.9%); Navy I partnership (1.5%); BLM
partnership (1.7%); and Navy II partnership (2.5%). James D. Bishop, Jr.
disclaims beneficial ownership of the interests listed in (iii) above.
(5) The beneficial ownership of James C. Sullivan's interests is based upon
his ownership of shares of common stock of Caithness Corporation which
owns, indirectly through various entities, general partnership interests
in the Navy I partnership, the BLM partnership and the Navy II
partnership, and his ownership of shares of common stock of Mojave Power,
Inc. and Mojave Power II, Inc. which own, indirectly through various
entities, general partnership interests in the Navy I partnership and the
Navy II partnership.
(6) Barbara Bishop Gollan is the beneficiary of the Gollan Trust, which owns
shares of common stock of Caithness Corporation. The voting rights to the
shares of common stock of Caithness Corporation held by the Gollan Trust
have been transferred to The Caithness Entities Voting Trust, the trustee
of which is James D. Bishop, Jr. The Gollan Trust is irrevocable. Barbara
Bishop Gollan, therefore, does not have voting or investment power over
these shares of common stock of Caithness Corporation.
(7) Dominion Energy, Inc. owns: (i) a limited liability company membership
interest in Caithness BLM Group, LP, a Delaware limited partnership, which
owns a limited liability company membership interest in CCH, which owns a
general partnership interest in the BLM partnership; and (ii) a limited
liability company membership interest in Navy II Group which owns a
general partnership interest in the Navy II partnership and a limited
liability company membership interest in CCH, which owns a general
partnership interest in the BLM partnership.
(8) Mojave Energy Company owns limited liability company membership interests
in Caithness Power, LLC, which owns, indirectly through various entities,
general partnership interests in each of the Coso partnerships.
Item 13. Certain Relationships and Related Transactions.
The Coso Partnerships
Each of the Coso partnerships has two general partners, a managing partner
and a non-managing partner. Under the amended and restated partnership agreement
of each Coso partnership, the managing partner of the Coso partnership is
generally responsible for the management and control of the day-to-day business
and affairs. The managing partner of the Navy I partnership is New CLOC Company,
LLC, a Delaware limited liability company, the managing partner of the BLM
partnership is New CHIP Company, LLC, a Delaware limited liability company and
the managing partner of the Navy II partnership is New CTC Company, LLC, a
Delaware limited liability company. The non-managing partner of the Navy I
partnership is ESCA LLC, a Delaware limited liability company, the non-managing
partner of the BLM partnership is Caithness Coso Holdings, LLC, a Delaware
limited liability company, and the non-managing partner of the Navy II
partnership is Caithness Navy II Group, LLC, a Delaware limited liability
company.
31
Each managing partner is a limited liability company, which is managed by
a manager who is appointed by Caithness Acquisition, the sole member of each
managing partner. The manager is responsible for the ordinary course management
and operations by its Coso partnership of that partnership's Coso project.
Caithness Acquisition has appointed itself as the manager of each managing
partner. Caithness Acquisition has also appointed Mr. Ferrucci as the
independent manager of each managing partner. (In addition, each of the managing
members of the non-managing partners has appointed Mr. Ferrucci as the
independent manager of that non-managing partner.) The approval of the
independent manager is required before the managing partner (or the non-managing
partner, as the case may be) may take certain actions that do not involve the
ordinary course management and operations by the Coso partnerships of the Coso
projects, including, among others, (1) commencing any bankruptcy or insolvency
proceeding involving the managing partner, (2) incurring any debt in the name of
the managing partner for which it would be liable, (3) dissolving, liquidating,
consolidating or merging, or selling all or substantially all of the assets of,
its respective Coso partnership, or (4) engaging in any business or activity
other than acting as the managing partner of its respective Coso partnership.
Each managing partner also has its officers, who are also officers of Coso
Funding Corp. , who act on behalf of the managing partners of the Coso
partnerships.
Caithness Acquisition, a limited liability company, is the manager and
sole member of each of the managing partners. Caithness Energy, as the manager
and sole owner of Caithness Acquisition, has delegated its role as manager of
Caithness Acquisition to the Caithness Acquisition board of directors, including
the power to manage the managing partners of the Coso partnerships. Each
managing partner's officers are also the officers of Caithness Acquisition. None
of the persons acting on behalf of the Coso partnerships receives any
compensation from the Coso partnerships for his or her services, except that
nominal compensation is paid in consideration for Mr. Ferrucci's services.
Caithness Energy is governed by a board of directors and not by its
members. Thedirectors of Funding Corp., other than Mr. Ferrucci, also currently
serve asmembers of the board of directors of Caithness Energy. Under the
limited liability company agreement of Caithness Energy, Caithness
Corporation is entitled to appoint a number of members to the Board of Directors
of Caithness Energy who hold, in the aggregate, a majority of the votes of
all members of such board of directors. Caithness Corporation's present
appointees are Messrs. Bishop, Sr., Bishop, Jr. and Sullivan. In addition,
Messrs. Gelber, Carpenter and McCallion serve as voting members of the
board of directors of Caithness Energy pursuant to their individual executive
compensation agreements with Caithness Energy. These six individuals, together
with Mr. Ferrucci, serve as the Caithness Acquisition board of directors.
Management Committees
Under the amended and restated partnership agreement of each Coso
partnership, the managing partner of the Coso partnership is subject to the
directives of a management committee which oversees the business operations of
the Coso partnership. The managing partner of a Coso partnership may not take
certain specific actions without the consent of the management committee of that
Coso partnership. However, the management committee may not direct the managing
partner of the Coso partnership to take any action over which the independent
manager has exclusive authority without the requisite approval of the
independent manager. The management committee of each Coso partnership consists
of four delegates, two of which are appointed by the managing partner and two of
which are appointed by the non-managing partner. Each partner may substitute or
change its delegates.
32
Under the amended and restated partnership agreements of the Coso
partnerships, each partner may appoint one delegate with multiple votes. The
names of the delegates appointed by affiliates of Caithness Energy to the
management committees of the Coso partnerships are set forth below.
As of December 31, 1999, the following persons were the members of the
management committee of each Coso partnership, as applicable. Each person has
two votes on each management committee on which he serves:
Name Age Partnership(s)
----- ---- --------------
James D. Bishop, Jr. .. 39 Navy I partnership, BLM partnership,
Navy II partnership
Christopher T. McCallion 38 Navy I partnership, BLM partnership,
Navy II partnership
Certain information regarding Messrs. Bishop and McCallion is provided
above.
Management Committee Fees
The members of the management committees are not entitled to any direct
compensation from Coso Funding Corp. or the Coso partnerships. However, each
Coso partnership previously paid to its two general partner's annual management
committee fees for their participation on the management committee of that Coso
partnership. The following table sets forth, for the years ended December 31,
1996, 1997, 1998 and 1999, the total amount of management committee fees paid or
payable by each of the Coso partnerships to its partners:
Year Ended December 31
1996 1997 1998 1999
------ ------ ------ ------
Navy I Partnership
New CLOC.................... $ --- $ --- $ --- $ ---
Predecessor of New CLOC 143,000 143,000 147,000 25,000
ESCA........................ 214,000 214,000 221,000 221,000
--------- --------- --------- ---------
$ 357,000 $ 357,000 $ 368,000 $ 246,000
BLM Partnership
New CHIP.................... $ --- $ --- $ --- $ ---
Predecessor of New CHIP 145,000 145,000 148,000 25,000
CCH......................... 222,000 218,000 223,000 223,000
--------- --------- --------- ---------
$ 367,000 $ 363,000 $ 371,000 $ 248,000
Navy II Partnership..............
New CTC..................... $ --- $ --- $ --- $ ---
Predecessor of New CTC...... 145,000 145,000 148,000 25,000
Navy II Group............... 218,000 218,000 223,000 223,000
--------- --------- --------- ---------
$ 363,000 $ 363,000 $ 371,000 $ 248,000
33
The Coso partnerships no longer pay management committee fees to their
managing partners.
Funding Corp.
As of June 30, 1999, the authorized capital stock of Coso Funding Corp.
consisted of 1,000 shares of common stock, par value $0.01 per share, of which
300 shares were outstanding. The outstanding common stock is owned equally by
the Coso partnerships.
Coso Partnerships
The directors and executive officers also act in similar capacities on
behalf of the managing partner of each Coso partnership and, except for Mr.
Ferrucci, on behalf of Caithness Acquisition and Caithness Energy. Several of
these directors and executive officers beneficially own the securities of
Caithness Corporation. Caithness Corporation and its affiliates beneficially own
all of the member interests of Caithness Energy.
Part IV
Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K.
(a) Documents filed as part of this report:
Financial Statements and Schedules
(b) Current reports on Form 8-K:
Coso Funding Corp. filed a current report on Form 8-K dated October 18,
1999 reporting the purchase of all the indirect ownership interests
held by ESI Geothermal, Inc. in Coso Finance Partners by Caithness
Acquisition Company, LLC pursuant to a Sale Agreement dated October 6,
1999.
(c) Exhibits:
The exhibits listed on the accompanying Index to Exhibits are filed as
part of this Annual Report.
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
------- ----------------------
3.1 Certificate of Incorporation of Caithness Coso Funding Corp.*
3.2 Bylaws of Caithness Coso Funding Corp.*
3.3 Third Amended and Restated Partnership Agreement of Coso Finance
Partners, dated as of May 28,1999.*
34
3.4 Third Amended and Restated Partnership Agreement of Coso Energy
Developers, dated as of May 28,1999.*
3.5 Third Amended and Restated Partnership Agreement of Coso Power
Developers, dated as of May 28,1999.*
3.6 Amendment Agreement, dated as of May 28, 1999, by and among Coso
Finance Partners, Caithness Acquisition Company, LLC, New CLOC
Company, LLC, ESCA, LLC and Coso Operating Company LLC.*
3.7 Amendment Agreement, dated as of May 28, 1999, by and among Coso
Energy Developers, Caithness Acquisition Company, LLC, New CHIP
Company, LLC, Caithness Coso Holdings, LLC and Coso Operating
Company LLC.*
3.8 Amendment Agreement, dated as of May 28, 1999, by and among Coso
Power Developers, Caithness Acquisition Company, LLC, New CTC
Company, LLC, Caithness Navy II Group, LLC and Coso Operating
Company LLC.*
4.1 Indenture, dated as of May 28, 1999, among Caithness Coso Funding
Corp., Coso Finance Partners, Coso Energy Developers, Coso Power
Developers, and U.S. Bank Trust National Association as trustee and
as collateral agent.*
4.3 Notation of Guarantee, dated as of May 28, 1999, of Coso Finance
Partners.*
4.4 Notation of Guarantee, dated as of May 28, 1999, of Coso Energy
Developers.*
4.5 Notation of Guarantee, dated as of May 28, 1999, of Coso Power
Developers.*
4.6 Registration Rights Agreement, dated as of May 28, 1999, by and
among Caithness Coso Funding Corp., Coso Finance Partners, Coso
Energy Developers, Coso Power Developers, and Donaldson, Lufkin &
Jenrette Securities Corporation.*
10.1 Deposit and Disbursement Agreement, dated as of May 28, 1999, among
Caithness Coso Funding Corp., Coso Finance Partners, Coso Energy
Developers, Coso Power Developers, and U.S. Bank Trust National
Association, as collateral agent, as trustee, and as depositary.*
10.2 Credit Agreement, dated as of May 28, 1999, between Caithness Coso
Funding Corp. and Coso Finance Partners.*
10.3 Promissory Note due 2001 of Coso Finance Partners in favor of
Caithness Coso Funding Corp.*
10.4 Promissory Note due 2009 of Coso Finance Partners in favor of
Caithness Coso Funding Corp.*
10.5 Credit Agreement, dated as of May 28, 1999, between Caithness Coso
Funding Corp. and Coso Energy Developers.*
10.6 Promissory Note due 2001 of Coso Energy Developers in favor of
Caithness Coso Funding Corp.*
10.7 Promissory Note due 2009 of Coso Energy Developers in favor of
Caithness Coso Funding Corp.*
35
10.8 Credit Agreement, dated as of May 28, 1999, between Caithness
Coso Funding Corp. and Coso Power Developers.*
10.9 Promissory Note due 2001 of Coso Power Developers in favor of
Caithness Coso Funding Corp.*
10.10 Promissory Note due 2009 of Coso Power Developers in favor of
Caithness Coso Funding Corp.*
10.11 Purchase Agreement, dated as of May 21, 1999, by and among Caithness
Coso Funding Corp., as Issuer, Coso Finance Partners, Coso Energy
Developers and Coso Power Developers, as guarantors, and Donaldson,
Lufkin & Jenrette Securities Corporation, as initial purchaser.*
10.12 Security Agreement, dated as of May 28, 1999, executed by and among
Caithness Coso Funding Corp. in favor of U.S. Bank Trust National
Association, as collateral agent.*
10.13 Security Agreement, dated as of May 28, 1999, executed by and among
Coso Finance Partners in Favor of U.S. Bank Trust National
Association, as collateral agent.*
10.14 Security Agreement, dated as of May 28, 1999, executed by Coso Energy
Developers in favor of U.S. Bank Trust National Association, as
collateral agent.*
10.15 Security Agreement, dated as of May 28, 1999, executed by Coso Power
Developers in favor of U.S. Bank Trust National Association, as
collateral agent.*
10.18 Security Agreement (Navy I project permits), dated as of May 28,
1999, executed by Coso Operating Company LLC in favor of U.S. Bank
Trust National Association, as collateral agent.*
10.19 Security Agreement (BLM project permits), dated as of May 28, 1999,
executed by Coso Operating Company LLC in favor of U.S. Bank Trust
National Association, as collateral agent.*
10.20 Security Agreement (Navy II project permits), dated as of May 28,
1999, executed by Coso Operating Company LLC in favor of U.S. Bank
Trust National Association, as collateral agent.*
10.24 Deed of Trust, Assignment of Rents, Fixture Filing and Security
Agreement, dated as of May 28, 1999, executed by Coso Finance
Partners in favor of U.S. Bank Trust National Association, as
trustee, and as beneficiary.*
10.25 Deed of Trust, Assignment of Rents, Fixture Filing and Security
Agreement, dated as of May 28,1999, executed by Coso Energy
Developers in favor of U.S. Bank Trust National Association, as
trustee, and as beneficiary.*
10.26 Deed of Trust, Assignment of Rents, Fixture Filing and Security
Agreement, dated as of May 28, 1999, executed by Coso Power
Developers in favor of U.S. Bank Trust National Association, as
trustee, and as beneficiary.*
10.27 Deed of Trust, Assignment of Rents, Fixture Filing and Security
Agreement, dated as of May 28, 1999, executed by Coso Transmission
Line Partners in favor of U.S. Bank Trust National Association, as
trustee, and as beneficiary.*
10.28 Deed of Trust, Assignment of Rents, Fixture Filing and Security
Agreement, dated as of May 28, 1999, executed by China Lake Joint
Venture in favor of U.S. Bank Trust National Association, as trustee,
and as beneficiary.*
36
10.29 Deed of Trust, Assignment of Rents, Fixture Filing and Security
Agreement, dated as of May 28, 1999, executed by Coso Land Company in
favor of U.S. Bank Trust National Association, as trustee, and as
beneficiary.*
10.30 Stock Pledge Agreement, dated as of May 28, 1999, by Coso Finance
Partners, Coso Energy Developers and Coso Power Developers in favor
of U.S. Bank Trust National Association, as Collateral agent.*
10.31 Partnership Interest Pledge Agreement (Navy I), dated as of May 28,
1999, by ESCA, LLC and New CLOC Company, LLC, in favor of U.S. Bank
Trust National Association, as collateral agent.*
10.32 Partnership Interest Pledge Agreement (BLM), dated as of May 28,1999,
by Caithness Coso Holdings, LLC and New CHIP Company, LLC, in favor
of U.S. Bank Trust National Association, as Collateral agent.*
10.33 Partnership Interest Pledge Agreement (Navy II), dated as of May 28,
1999, by Caithness Navy II Group, LLC and New CTC Company, LLC, in
favor of U.S. Bank Trust National Association, as collateral agent.*
10.34 Partnership Interest Pledge Agreement (CTLP), dated as of May 28,
1999, by Coso Energy Developers and Coso Power Developers, in favor
of U.S. Bank Trust National Association, as Collateral agent.*
10.35 Partnership Interest Pledge Agreement (CLJV), dated as of May 28,
1999, by Caithness Acquisition Company, LLC and Caithness Geothermal
1980 Ltd., LP, in favor of U.S. Bank Trust National Association,
as collateral agent.*
10.36 Partnership Interest Pledge Agreement (CLC), dated as of May 28,
1999,by Caithness Acquisition Company, LLC and Caithness Geothermal
1980 Ltd., LP, in favor of U.S. Bank Trust National Association,as
collateral agent.*
10.37 Promissory Notes Security Agreement, dated as of May 28, 1999, by
Caithness Coso Funding Corp., in favor of U.S. Bank Trust National
Association, as collateral agent.*
10.38 Original Service Contract N62474-79-C-5382, dated December 6, 1979,
between U.S. Naval Weapons Center and California Energy Company,
Inc., Contractor (the "Navy Contract "), including all Amendments
thereto.*
10.39 Escrow Agreement, dated December 16, 1992, as amended, by and among
Coso Finance Partners, Bank of America and the Navy.*
10.40 Offer to Lease and Lease for Geothermal Resources, Serial No. 11402,
dated April 29, 1985 but Effective May 1, 1985, from the United
States of America, acting through the Bureau of Land Management, to
California Energy Company, Inc.; as assigned by Assignment Affecting
Record Title to Geothermal Resources Lease, dated June 24, 1985, but
effective July 1, 1985 from California Energy Company, Inc. to Coso
Land Company; as assigned by Assignment of Record Title Interest in a
Lease for Oil and Gas or Geothermal Resources, dated April 20, 1988,
but effective May 1, 1988 from Coso Land Company to Coso Geothermal
Company; as assigned by Assignment of Record Title Interest in a
Lease for Oil and Gas or Geothermal Resources dated April 20, 1988
but effective May 1, 1988 from Coso Geothermal Company to Coso Energy
Developers.*
37
10.41 Geothermal Resources Lease, Serial No. CA-11383, by and between the
United States of America, acting through the Bureau of Land
Management, and the LADWP, effective as of January 1, 1988; as
assigned by Lease Assignment Agreement by and between LADWP and Coso
Land Company , dated September 10, 1997; as assigned by Assignment of
Record Title Interest in Lease for Oil and Gas or Geothermal
Resources, by and between the United States of America, acting
through the Bureau of Land Management, and Coso Land Company,
effective January 1, 1998; and as extended by Extension of primary
term of CACA-11383 to September 23, 2004.*
10.42 Geothermal Resources Lease, Serial No. CA-11384, by and between the
United States of America, acting through the Bureau of Land
Management, and the LADWP, effective as of February 1, 1982; as
assigned by Lease Assignment Agreement by and between LADWP and Coso
Land Company, dated September 10, 1997; as assigned by Assignment of
Record Title Interest in a Lease for Oil and Gas or Geothermal
Resources (CACA-11384), by and between the United States of America,
acting through the Bureau of Land Management, and Coso Land Company,
effective as of January 1, 1998; and as extended by extension of
primary term of CACA-11385 to December 24, 2002.*
10.43 Geothermal Resources Lease, Serial No. CA-11385, by and between the
United States of America, acting through the Bureau of Land
Management, and the LADWP, effective as of February 1, 1982; as
assigned by Lease Assignment Agreement by and between LADWP and Coso
Land Company, dated September 10, 1997; as assigned by Assignment of
Record Title Interest in a Lease for Oil and Gas or Geothermal
Resources (CACA-11385) by and between the United States of America,
acting Through the Bureau of Land Management, and Coso Land Company,
effective as of January 1, 1998; and as extended by extension of
primary term of CACA-11385 to December 24, 2002.*
10.44 License for Electric Power Plant Site Utilizing Geothermal Resources
between the United States of America, Licensor, through the Bureau of
Land Management, and Coso Energy Developers, Licensee, Serial No.
CACA 22512, dated March 8, 1989 (expires 3/8/19).*
10.45 License for Electric Power Plant Site Utilizing Geothermal Resources
between the United States of America, acting through the Bureau of
Land Management, and Coso Energy Developers, Licensee, Serial No.
25690, dated 12/29/1989 (expires 12/28/19).*
10.46 Right of Way CA-18885 by and between the United States of America,
acting through the Bureau of Land Management, and California Energy
Company, Inc., dated May 7, 1986 (telephone cable)(expires 5/7/16).*
10.47 Right of Way CA-13510 by and between the United States of America,
acting through the Bureau of Land Management, and California Energy
Company, Inc., dated April 12, 1984 (Coso office site)(expires
4/12/14).*
10.48 Agreement of Transfer and Assignment (Navy I Transmission Line),
dated July 14, 1987, among China Lake Joint Venture and Coso Finance
Partners.*
10.49 Agreement of Transfer and Assignment (Navy II Transmission Line),
dated July 31, 1989, among Coso Power Developers and Coso
Transmission Line Partners.*
10.50 Agreement of Transfer and Assignment (BLM Transmission Line), dated
July 31, 1989, among Coso Energy Developers and Coso Transmission
Line Partners.*
38
10.51 Agreement Regarding Overriding Royalty (CLC Royalty), dated May 5,
1988, between Coso Energy Developers and Coso Land Company.*
10.52 Coso Geothermal Exchange Agreement, dated January 11, 1994, by and
among Coso Finance Partners, Coso Energy Developers, Coso Power
Developers, and California Energy Company, Inc.*
10.53 Amendment to Coso Geothermal Exchange Agreement, dated April 12,
1995, by and among Coso Finance Partners, Coso Energy Developers,
Coso Power Developers, and California Energy Company, Inc.*
10.55 Operation and Maintenance Agreement (Navy I Project), dated May 28,
1999, by and among FPL Energy Operating Services, Inc. and Coso
Operating Company, LLC and New CLOC Company, LLC.*
10.56 Operation and Maintenance Agreement (BLM Project), dated May 28,
1999, by and among FPL Energy Operating Services, Inc. and Coso
Operating Company, LLC and New CHIP Company, LLC.*
10.57 Operation and Maintenance Agreement (Navy II Project), dated May 28,
1999, by and among FPL Energy Operating Services, Inc. and Coso
Operating Company, LLC and New CTC Company, LLC.*
10.58 Field Operation and Maintenance Agreement (Navy I), dated February
25, 1999, between Coso Operating Company, LLC and New CLOC Company,
LLC.*
10.59 Field Operations and Maintenance Agreement (Navy II), dated February
25, 1999, between Coso Operating Company, LLC and New CTC Company,
LLC.*
10.60 Field Operations and Maintenance Agreement (BLM), dated February 25,
1999, between Coso Operating Company, LLC and New CHIP Company, LLC.*
10.61 Purchase Agreement, dated as of January 16, 1999, by and among
Caithness Energy, L.L.C., Caithness Acquisition Company, LLC, and
California Energy Company, Inc.*
10.62 Agreement Concerning Consideration, dated as of February 25, 1999,
by and among Caithness Energy, L.L.C., Caithness Acquisition Company,
L.L.C., New CLOC Company, LLC, New CHIP Company, LLC, New CTC
Company, LLC, and CalEnergy Company, Inc.*
10.63 Future Revenue Agreement, dated February 25, 1999, by and between
Caithness Energy, L.L.C., Caithness Acquisition Company, LLC, New CTC
Company, LLC, New CLOC Company, LLC, NewCHIP Company, LLC, Coso
Finance Partners, Coso Energy Developers, Coso Power Developers, and
California Energy Company, Inc.*
10.64 Acknowledgment and Agreement--Release, dated January 16, 1999,
executed by Caithness Resources, Inc., Caithness Corporation,
Caithness Power, L.L.C., James Bishop Sr., and Caithness CEA
Geothermal, LP (appended to Exhibit 10.61).*
10.65 Acknowledgment and Agreement--Indemnity, dated May 28, 1999, executed
by Coso Finance Partners, New CLOC Company, LLC, ESCA, LLC, Coso
Energy Developers, New CHIP Company, LLC, Caithness Coso Holdings,
LLC, Coso Power Developers, New CTC Company, LLC, and Caithness Navy
II Group, LLC.*
39
10.66 Acknowledgment and Agreement--Release, dated May 28, 1999, executed
by Coso Finance Partners, New CLOC Company, LLC, ESCA, LLC, Coso
Energy Developers, New CHIP Company, LLC, Caithness Coso Holdings,
LLC, Coso Power Developers, New CTC Company, LLC, and Caithness Navy
II Group, LLC.*
10.67 Acknowledgment and Agreement--Indemnity, dated January 16, 1999,
executed by Caithness Resources, Inc., Caithness Corporation,
Caithness Power, L.L.C., China Lake Operating Company, Coso
Technology Corporation and Coso Hotsprings Intermountain Power
(appended to Exhibit 10.61).*
10.68 Power Purchase Agreement (modified Standard Offer No.4) (Navy I),
dated as of June 4, 1984, as Amended, by and between Southern
California Edison Company and Coso Finance Partners (as assignee of
China Lake Joint Venture).*
10.69 Power Purchase Agreement (modified Standard Offer No.4) (BLM), dated
as of February 1, 1985, by and between Southern California Edison
Company and Coso Energy Developers (as assignee of China Lake Joint
Venture).*
10.70 Power Purchase Agreement (modified Standard Offer No.4) (Navy II),
dated as of February 1, 1985, by and between Southern California
Edison Company and Coso Power Developers (as assignee of China Lake
Joint Venture).*
10.72 Interconnection and Integration Facilities Agreement (BLM project),
dated December 15, 1988, Between Southern California Edison Company
and Coso Energy Developers (as assignee of China Lake Joint
Venture).*
10.73 Interconnection and Integration Facilities Agreement (Navy II
project), dated December 15, 1988, Between Southern California Edison
Company and Coso Power Developers (as assignee of China Lake Joint
Venture).*
10.77 Operating Fee Subordination Agreement (Navy I), dated as of May 28,
1999, by and among Coso Operating Company, LLC, and U.S. Bank Trust
National Association, as collateral agent.*
10.78 Operating Fee Subordination Agreement (BLM), dated as of May 28,
1999, by and among Coso Operating Company, LLC, and U.S. Bank Trust
National Association, as collateral agent.*
10.79 Operating Fee Subordination Agreement (Navy II), dated as of May 28,
1999, by and among Coso Operating Company, LLC, and U.S. Bank Trust
National Association, as collateral agent.*
10.80 Management Fee Subordination Agreement (Navy I), dated as of May 28,
1999, by and among ESCA, LLC, New CLOC Company, LLC, Coso Finance
Partners, and U.S. Bank Trust National Association, as collateral
agent.*
10.81 Management Fee Subordination Agreement (BLM), dated as of May 28,
1999, by and among Caithness Coso Holdings, LLC, New CHIP Company,
LLC, Coso Energy Developers, and U.S. Bank Trust National
Association, as collateral agent.*
10.82 Management Fee Subordination Agreement (Navy II), dated as of May 28,
1999, by and among Caithness Navy II Group, LLC, New CTC Company,
LLC, Coso Power Developers, and U.S. Bank Trust NationalAssociation,
as collateral agent.*
10.83 Cotenancy Agreement, dated as of May 28, 1999, by and among Coso
Finance Partners, Coso Energy Developers, and Coso Power Developers.*
40
10.84 Acquisition Agreement, dated as of May 28, 1999, among Coso Land
Company, Coso Finance Partners, Coso Energy Developers, Coso Power
Developers, and Coso Operating Company, LLC.*
10.85 Assignment and Assumption Agreement, dated as of May 28, 1999, by and
among MidAmerican Energy Holdings Company as successor-in-interest to
Cal Energy Company, Inc., Coso Energy Developers, Coso Power
Developers and Coso Finance Partners.*
21.1 Subsidiaries of Caithness Coso Funding Corp., Coso Finance Partners,
Coso Energy Developers, and Coso Power Developers.*
23.3 Consent of Sandwell Engineering Inc.*
23.4 Consent of Henwood Energy Services, Inc.*
23.5 Consent of GeothermEx, Inc.*
23.6 Consent of Riordan & McKinzie, A Professional Law Corporation
(included in Exhibit 5.1).*
23.7 Consent of Reed Smith Shaw & McClay LLP (included in Exhibit 5.2).*
24.1 Powers of Attorney (included on pages II-9, II-11, II-13 and II-15).*
25.1 Form T-1 Statement of Eligibility and Qualification of U.S. Bank
Trust National Association as Trustee.*
27.1 Financial Data Schedule--Form S-X--Caithness Coso Funding Corp.
27.2 Financial Data Schedule--Form S-X--Coso Finance Partners.
27.3 Financial Data Schedule--Form S-X--Coso Energy Developers.
27.4 Financial Data Schedule--Form S-X--Coso Power Developers.
99.1 Sale Agreement by and between Caithness Acquisition Company, LLC, and
ESI Geothermal, Inc. dated as of October 6, 1999.**
99.2 Assignment, Assumption and Novation Agreement (Coso Finance Partners)
by and between FPL Energy Operating Services, Inc. and Coso Operating
Company, LLC dated October 18, 1999.**
99.3 Assignment, Assumption and Novation Agreement (Coso Energy
Developers) by and between FPL Energy Operating Services, Inc. and
Coso Operating Company, LLC dated October 18, 1999.**
99.4 Assignment, Assumption and Novation Agreement (Coso Power Developers)
by and between FPL Energy Operating Services, Inc. and Coso
Operating Company, LLC dated October 18, 1999.**
41
* Incorporated herein by reference from the Registration Statement on Form
S-4, Registration No. 333-83815 filed with the Securities and Exchange
Commission (the SEC) by Coso Funding Corp. on October 7, 1999, as amended.
** Incorporated herein by reference from the Form 8-K on report dated October
18, 1999 for Coso Funding Corp., filed with the SEC.
42
EXHIBIT 27.1
Form S-X
Commercial and Industrial Companies
Financial Data Schedule Worksheet for: CAITHNESS COSO FUNDING CORP
---------------------------
Review the following list of tags for Article 5 and fill in the correct data in
the column(s) provided. Generally, only one column of information will be
required, however, two columns are provided if required in the Financial Data
Schedule.
Unless otherwise noted, all tags are required. A response is required for each
item within the schedule. Use the value "0" (zero) if information is immaterial,
inapplicable or unknown. Decimals may not be used to state financial data except
as indicated. Values not provided will be entered as "0" (zero). Missing dates
will be entered as "TO COME". Please be sure to verify all information in the
EDGARized exhibit.
To include a footnote, place a number in parentheses next to the value and
provide the text of each corresponding footnote at the end of the worksheet
form.
Do you wish to include a LEGEND? This schedule contains summary financial
Yes X No information extracted from *___________
--- --- and is qualified in its entirety by
reference to such financial statements.
*Identify the financial statement(s)
to be referenced in the legend:
RESTATED
Are your financials being "restated" (NO VALUE REQUIRED)
from a previously filed period?
Yes X No
--- ---
CIK Use this section only for coregistrant
Does this data apply to a coregistrant filings.
Yes No
--- --- COREGISTRANT CIK:
NAME Use this section only for coregistrant
Does this data apply to a coregistrant filings.
Yes No
--- --- COREGISTRANT NAME:
MULTIPLIER X 1,000 1,000,000,000
Do the financials require a multiplier --- ---
other than 1 (one)? 1,000,000 1,000,000,000,000
X Yes No --- ---
--- ---
CURRENCY CURRENCY OF FINANCIAL DATA:
Is the currency used other than US
Dollars? Use in conjunction with
EXCHANGE RATE tag.
Yes X No
--- ---
PERIOD TYPE - MOS - MOS
-- ---- -- ----
YEAR X YEAR
--- ---
(For annual report filings)
OTHER OTHER
--- ---
FISCAL YEAR END
(example: DEC-31-1997) DEC-31-1999
----------- -----------
mmm-dd-yyyy mmm-dd-yyyy
PERIOD START
(example: JAN-01-1997) JAN-01-1999
----------- -----------
mmm-dd-yyyy mmm-dd-yyyy
PERIOD END
(example: SEP-30-1997) DEC-31-1999
----------- -----------
mmm-dd-yyyy mmm-dd-yyyy
EXCHANGE RATE EXCHANGE RATE: EXCHANGE RATE:
Is the exchange rate other than 1
(one)? (Value may contain up to 5
decimal places) Use in conjunction
with CURRENCY tag.
Yes X No
--- ---
PERIOD TYPE: Year PERIOD TYPE: Year
---- ----
CASH 0 0
SECURITIES 0 0
RECEIVABLES 0 414,392
ALLOWANCES 0 0
INVENTORY 0 0
CURRENT ASSETS 0 1,392
PP&E 0 0
DEPRECIATION 0 0
TOTAL ASSETS 0 414,392
CURRENT LIABILITIES 0 1,392
BONDS 0 413,000
PREFERRED MANDATORY 0 0
PREFERRED 0 0
COMMON 0 0
OTHER SE 0 0
TOTAL LIABILITY AND EQUITY 0 414,392
SALES 0 0
TOTAL REVENUES 0 20,491
CGS 0 0
TOTAL COSTS 0 0
OTHER EXPENSES 0 0
LOSS PROVISION 0 0
INTEREST EXPENSE 0 20,491
INCOME PRETAX 0 0
INCOME TAX 0 0
INCOME CONTINUING 0 0
DISCONTINUED 0 0
EXTRAORDINARY 0 0
CHANGES 0 0
NET INCOME 0 0
EPS BASIC 0 0
(Value may contain up to 3 decimal places)
EPS DILUTED 0 0
(Value may contain up to 3 decimal places)
Footnote Text: (Note: Each footnote cannot exceed 256 characters, including spaces)
EXHIBIT 27.2
Form S-X
Commercial and Industrial Companies
Financial Data Schedule Worksheet for: COSO FINANCE PARTNERS
-----------------------
Review the following list of tags for Article 5 and fill in the correct data in
the column(s) provided. Generally, only one column of information will be
required, however, two columns are provided if required in the Financial Data
Schedule.
Unless otherwise noted, all tags are required. A response is required for each
item within the schedule. Use the value "0" (zero) if information is immaterial,
inapplicable or unknown. Decimals may not be used to state financial data except
as indicated. Values not provided will be entered as "0" (zero). Missing dates
will be entered as "TO COME". Please be sure to verify all information in the
EDGARized exhibit.
To include a footnote, place a number in parentheses next to the value and
provide the text of each corresponding footnote at the end of the worksheet
form.
Do you wish to include a LEGEND? This schedule contains summary financial
Yes X No information extracted from *___________
--- --- and is qualified in its entirety by
reference to such financial statements.
*Identify the financial statement(s)
to be referenced in the legend:
RESTATED
Are your financials being "restated" (NO VALUE REQUIRED)
from a previously filed period?
Yes X No
--- ---
CIK Use this section only for coregistrant
Does this data apply to a coregistrant filings.
Yes No
--- --- COREGISTRANT CIK:
NAME Use this section only for coregistrant
Does this data apply to a coregistrant filings.
Yes No
--- --- COREGISTRANT NAME:
MULTIPLIER X 1,000 1,000,000,000
Do the financials require a multiplier --- ---
other than 1 (one)? 1,000,000 1,000,000,000,000
X Yes No --- ---
--- ---
CURRENCY CURRENCY OF FINANCIAL DATA:
Is the currency used other than US
Dollars? Use in conjunction with
EXCHANGE RATE tag.
Yes X No
--- ---
PERIOD TYPE - MOS - MOS
-- ---- -- ----
X YEAR X YEAR
--- ---
(For annual report filings)
OTHER OTHER
--- ---
FISCAL YEAR END
(example: DEC-31-1997) DEC-31-1998 DEC-31-1999
----------- -----------
mmm-dd-yyyy mmm-dd-yyyy
PERIOD START
(example: JAN-01-1997) JAN-01-1998 JAN-01-1999
----------- -----------
mmm-dd-yyyy mmm-dd-yyyy
PERIOD END
(example: SEP-30-1997) DEC-31-1998 DEC-31-1999
----------- -----------
mmm-dd-yyyy mmm-dd-yyyy
EXCHANGE RATE EXCHANGE RATE: EXCHANGE RATE:
Is the exchange rate other than 1
(one)?(Value may contain up to 5
decimal places) Use in conjunction
with CURRENCY tag.
Yes X No
--- ---
PERIOD TYPE: Year PERIOD TYPE: Year
CASH 0 7,821
SECURITIES 7,524 25,001
RECEIVABLES 9,564 9,662
ALLOWANCE 0 0
INVENTORY 0 0
CURRENT ASSETS 10,181 17,483
PP&E 299,034 225,157
DEPRECIATION 118,845 71,278
TOTAL ASSETS 202,266 217,712
CURRENT LIABILITIES 11,767 16,800
BONDS 40,566 151,550
PREFERRED MANDATORY 0 0
PREFERRED 0 0
COMMON 0 0
OTHER SE 0 0
TOTAL LIABILITY AND EQUITY 202,266 217,712
SALES 53,153 55,666
TOTAL REVENUES 53,738 57,442
CGS 0 0
TOTAL COSTS 0 0
OTHER EXPENSES 31,894 31,671
LOSS PROVISION 0 0
INTEREST EXPENSE 4,333 13,575
INCOME PRETAX 0 0
INCOME TAX 0 0
INCOME CONTINUING 0 0
DISCONTINUED 0 0
EXTRAORDINARY 0 2,375
CHANGES 923 0
NET INCOME 16,588 9,821
EPS BASIC 0 0
(Value may contain up to 3 decimal places)
EPS DILUTED 0 0
(Value may contain up to 3 decimal places)
Footnote Text: (Note: Each footnote cannot exceed 256 characters, including spaces)
EXHIBIT 27.3
Form S-X
Commercial and Industrial Companies
Financial Data Schedule Worksheet for: COSO ENERGY DEVELOPERS
-----------------------
Review the following list of tags for Article 5 and fill in the correct data in
the column(s) provided. Generally, only one column of information will be
required, however, two columns are provided if required in the Financial Data
Schedule.
Unless otherwise noted, all tags are required. A response is required for each
item within the schedule. Use the value "0" (zero) if information is immaterial,
inapplicable or unknown. Decimals may not be used to state financial data except
as indicated. Values not provided will be entered as "0" (zero). Missing dates
will be entered as "TO COME". Please be sure to verify all information in the
EDGARized exhibit.
To include a footnote, place a number in parentheses next to the value and
provide the text of each corresponding footnote at the end of the worksheet
form.
Do you wish to include a LEGEND? This schedule contains summary financial
Yes X No information extracted from *___________
--- --- and is qualified in its entirety by
reference to such financial statements.
*Identify the financial statement(s)
to be referenced in the legend:
RESTATED
Are your financials being "restated" (NO VALUE REQUIRED)
from a previously filed period?
Yes X No
--- ---
CIK Use this section only for coregistrant
Does this data apply to a coregistrant filings.
Yes No
--- --- COREGISTRANT CIK:
NAME Use this section only for coregistrant
Does this data apply to a coregistrant filings.
Yes No
--- --- COREGISTRANT NAME:
MULTIPLIER X 1,000 1,000,000,000
Do the financials require a multiplier --- ---
other than 1 (one)? 1,000,000 1,000,000,000,000
X Yes No --- ---
--- ---
CURRENCY CURRENCY OF FINANCIAL DATA:
Is the currency used other than US
Dollars? Use in conjunction with
EXCHANGE RATE tag.
Yes X No
--- ---
PERIOD TYPE - MOS - MOS
-- ---- -- ----
X YEAR X YEAR
--- ---
(For annual report filings)
OTHER OTHER
--- ---
FISCAL YEAR END
(example: DEC-31-1997) DEC-31-1998 DEC-31-1999
----------- -----------
mmm-dd-yyyy mmm-dd-yyyy
PERIOD START
(example: JAN-01-1997) JAN-01-1998 JAN-01-1999
----------- -----------
mmm-dd-yyyy mmm-dd-yyyy
PERIOD END
(example: SEP-30-1997) DEC-31-1998 DEC-31-1999
----------- -----------
mmm-dd-yyyy mmm-dd-yyyy
EXCHANGE RATE EXCHANGE RATE: EXCHANGE RATE:
Is the exchange rate other than 1
(one)?(Value may contain up to 5
decimal places) Use in conjunction
with CURRENCY tag.
Yes X No
--- ---
PERIOD TYPE: Year PERIOD TYPE Year
CASH 0 6,423
SECURITIES 290 9,806
RECEIVABLES 20,129 6,856
ALLOWANCE 0 0
INVENTORY 0 0
CURRENT ASSETS 20,985 13,379
PP&E 313,111 237,183
DEPRECIATION 110,841 71,533
TOTAL ASSETS 228,231 216,391
CURRENT LIABILITIES 27,232 29,141
BONDS 37,958 107,900
PREFERRED MANDATORY 0 0
PREFERRED 0 0
COMMON 0 0
OTHER SE 0 0
TOTAL LIABILITY AND EQUITY 228,231 216,391
SALES 107,199 49,877
TOTAL REVENUES 108,380 50,943
CGS 0 0
TOTAL COSTS 0 0
OTHER EXPENSES 44,687 38,534
LOSS PROVISION 0 0
INTEREST EXPENSE 6,267 10,235
INCOME PRETAX 0 0
INCOME TAX 0 0
INCOME CONTINUING 0 0
DISCONTINUED 0 0
EXTRAORDINARY 0 1,822
CHANGES 953 0
NET INCOME 56,473 352
EPS BASIC 0 0
(Value may contain up to 3 decimal places)
EPS DILUTED 0 0
(Value may contain up to 3 decimal places)
Footnote Text: (Note: Each footnote cannot exceed 256 characters, including spaces)
EXHIBIT 27.4
Form S-X
Commercial and Industrial Companies
Financial Data Schedule Worksheet for: COSO POWER DEVELOPERS
-----------------------
Review the following list of tags for Article 5 and fill in the correct data in
the column(s) provided. Generally, only one column of information will be
required, however, two columns are provided if required in the Financial Data
Schedule.
Unless otherwise noted, all tags are required. A response is required for each
item within the schedule. Use the value "0" (zero) if information is immaterial,
inapplicable or unknown. Decimals may not be used to state financial data except
as indicated. Values not provided will be entered as "0" (zero). Missing dates
will be entered as "TO COME". Please be sure to verify all information in the
EDGARized exhibit.
To include a footnote, place a number in parentheses next to the value and
provide the text of each corresponding footnote at the end of the worksheet
form.
Do you wish to include a LEGEND? This schedule contains summary financial
Yes X No information extracted from *___________
--- --- and is qualified in its entirety by
reference to such financial statements.
*Identify the financial statement(s)
to be referenced in the legend:
RESTATED
Are your financials being "restated" (NO VALUE REQUIRED)
from a previously filed period?
Yes X No
--- ---
CIK Use this section only for coregistrant
Does this data apply to a coregistrant filings.
Yes No
--- --- COREGISTRANT CIK:
NAME Use this section only for coregistrant
Does this data apply to a coregistrant filings.
Yes No
--- --- COREGISTRANT NAME:
MULTIPLIER X 1,000 1,000,000,000
Do the financials require a multiplier --- ---
other than 1 (one)? 1,000,000 1,000,000,000,000
X Yes No --- ---
--- ---
CURRENCY CURRENCY OF FINANCIAL DATA:
Is the currency used other than US
Dollars? Use in conjunction with
EXCHANGE RATE tag.
Yes X No
--- ---
PERIOD TYPE - MOS - MOS
-- ---- -- ----
X YEAR X YEAR
--- ---
(For annual report filings)
OTHER OTHER
--- ---
FISCAL YEAR END
(example: DEC-31-1997) DEC-31-1998 DEC-31-1999
----------- -----------
mmm-dd-yyyy mmm-dd-yyyy
PERIOD START
(example: JAN-01-1997) JAN-01-1998 JAN-01-1999
----------- -----------
mmm-dd-yyyy mmm-dd-yyyy
PERIOD END
(example: SEP-30-1997) DEC-31-1998 DEC-31-1999
----------- -----------
mmm-dd-yyyy mmm-dd-yyyy
EXCHANGE RATE EXCHANGE RATE: EXCHANGE RATE:
Is the exchange rate other than 1
(one)?(Value may contain up to 5
decimal places) Use in conjunction
with CURRENCY tag.
Yes X No
--- ---
PERIOD TYPE: Year PERIOD TYPE: Year
CASH 818 6,020
SECURITIES 0 54,338
RECEIVABLES 24,406 27,598
ALLOWANCE 0 0
INVENTORY 0 0
CURRENT ASSETS 25,940 33,618
PP&E 288,048 208,048
DEPRECIATION 99,208 60,526
TOTAL ASSETS 220,867 273,269
CURRENT LIABILITIES 5,883 15,388
BONDS 61,323 153,550
PREFERRED MANDATORY 0 0
PREFERRED 0 0
COMMON 0 0
OTHER SE 0 0
TOTAL LIABILITY AND EQUITY 220,867 273,269
SALES 119,564 113,746
TOTAL REVENUES 121,363 115,920
CGS 0 0
TOTAL COSTS 0 0
OTHER EXPENSES 41,120 43,577
LOSS PROVISION 0 0
INTEREST EXPENSE 8,122 13,991
INCOME PRETAX 0 0
INCOME TAX 0 0
INCOME CONTINUING 0 0
DISCONTINUED 0 0
EXTRAORDINARY 0 2,147
CHANGES 1,664 0
NET INCOME 70,457 56,205
EPS BASIC 0 0
(Value may contain up to 3 decimal places)
EPS DILUTED 0 0
(Value may contain up to 3 decimal places)
Footnote Text: (Note: Each footnote cannot exceed 256 characters, including spaces)
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CAITHNESS COSO FUNDING CORP.
a Delaware corporation
By: /s/ Christopher T. McCallion
-------------------------------------
Christopher T. McCallion
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ JAMES D. BISHOP, SR. Director, Chairman and Chief
- ----------------------------------------- Executive Officer (Principal March 30, 2000
James D. Bishop, Sr. Executive Officer)
/s/ CHRISTOPHER T. MCCALLION Director, Executive Vice President
- ----------------------------------------- and Chief Financial Officer ) March 30, 2000
Christopher T. McCallion (Principal Accounting Officer
/s/ LESLIE J. GELBER Director, President and Chief
- ----------------------------------------- Operating Officer March 30, 2000
Leslie J. Gelber
/s/ JAMES D. BISHOP, JR. Director March 30, 2000
- -----------------------------------------
James D. Bishop, Jr.
/s/ LARRY K. CARPENTER Director March 30, 2000
- -----------------------------------------
Larry K. Carpenter
/s/ JAMES C. SULLIVAN Director March 30, 2000
- -----------------------------------------
James C. Sullivan
/s/ MARK A. FERRUCCI Director March 30, 2000
- -----------------------------------------
Mark A. Ferrucci