OGLETHORPE POWER CORP - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934


	For the quarterly period ended June 30, 2004

	OR

	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from __________ to __________

	Commission File No. 33-7591

Oglethorpe Power Corporation
(An Electric Membership Corporation)
(Exact name of registrant as specified in its charter)

Georgia (State or other jurisdiction of incorporation or organization		58-1211925 (I.R.S. employer identification no.)

Post Office Box 1349 2100 East Exchange Place Tucker, Georgia (Address of principal executive offices)		30085-1349 (Zip Code)

Registrant’s telephone number, including area code		(770) 270-7600

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes No

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. The registrant is a membership corporation and has no authorized or outstanding equity securities.

OGLETHORPE POWER CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2004

			Page No.

PART I – FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Condensed Balance Sheets as of June 30, 2004
		(Unaudited) and December 31, 2003	3

		Condensed Statements of Revenues and Expenses
		(Unaudited) for the Three Months and Six Months ended
		June 30, 2004 and 2003	5

		Condensed Statements of Patronage Capital and Membership
		Fees and Accumulated Other Comprehensive Margin
		(Unaudited) for the Six Months ended
		June 30, 2004 and 2003	6

		Condensed Statements of Cash Flows (Unaudited)
		For the Six Months ended June 30, 2004 and 2003	7

		Notes to Condensed Financial Statements
		For the Six Months ended June 30, 2004 and 2003	8

	Item 2.	Management’s Discussion and Analysis of
		Financial Condition and Results of Operations	11

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18

	Item 4.	Controls and Procedures	18

PART II – OTHER INFORMATION

	Item 1.	Legal Proceedings	19

	Item 5.	Other	19

	Item 6.	Exhibits and Reports on Form 8-K	19

SIGNATURES			21

PART I -FINANCIAL INFORMATION
Item 1.Financial Statements

Oglethorpe Power Corporation
Condensed Balance Sheets
June 30, 2004 and December 31, 2003

	(dollars in thousands)

	2004			2003
	(Unaudited)

Assets

Electric plant:

In service	$	5,776,052		$	5,755,553
Less: Accumulated provision for depreciation		(2,184,343	)		(2,107,274	)

		3,591,709			3,648,279

Nuclear fuel, at amortized cost		83,140			90,283
Construction work in progress		22,303			26,212

		3,697,152			3,764,774

Investments and funds:
Decommissioning fund, at market		185,518			180,448
Deposit on Rocky Mountain transactions, at cost		80,304			77,684
Bond, reserve and construction funds, at market		7,945			21,629
Investment in associated organizations, at cost		30,573			29,374
Other, at cost		1,084			1,084

		305,424			310,219

Current assets:
Cash and temporary cash investments, at cost		121,778			226,830
Other short-term investments, at market		96,323			96,213
Receivables		127,182			112,248
Inventories, at average cost		107,165			105,338
Prepayments and other current assets		6,540			4,959

		458,988			545,588

Deferred charges:
Premium and loss on reacquired debt, being amortized		142,015			139,741
Deferred amortization of capital leases		110,489			110,626
Deferred debt expense, being amortized		22,655			23,953
Deferred nuclear outage costs, being amortized		18,981			14,764
Deferred asset retirement obligations costs, being amortized		17,334			14,821
Other		4,207			5,199

		315,681			309,104

	$	4,777,245		$	4,929,685

The accompanying notes are an integral part of these condensed financial statements.

Oglethorpe Power Corporation
Condensed Balance Sheets
June 30, 2004 and December 31, 2003

	(dollars in thousands)

	2004			2003
	(Unaudited)

Equity and Liabilities

Capitalization:
Patronage capital and membership fees	$	459,812		$	444,418
Accumulated other comprehensive loss		(42,265	)		(49,814	)

		417,547			394,604

Long-term debt		3,236,906			3,315,128
Obligation under capital leases		333,327			342,232
Obligation under Rocky Mountain transactions		80,304			77,684

		4,068,084			4,129,648

Current liabilities:
Long-term debt and capital leases due within one year		148,353			237,522
Accounts payable		61,570			63,559
Accrued interest		8,931			7,158
Accrued and withheld taxes		20,893			19,957
Other current liabilities		7,943			9,109

		247,690			337,305

Deferred credits and other liabilities:
Gain on sale of plant, being amortized		44,672			45,909
Net benefit of Rocky Mountain transactions, being amortized		71,670			73,263
Asset retirement obligations		240,725			233,155
Accumulated retirement costs for other obligations		34,728			35,349
Interest rate swap arrangements		42,155			49,916
Other		27,521			25,140

		461,471			462,732

	$	4,777,245		$	4,929,685

The accompanying notes are an integral part of these condensed financial statements.

Oglethorpe Power Corporation
Condensed Statements of Revenues and Expenses (Unaudited)
For the Three and Six Months Ended June 30, 2004 and 2003

	(dollars in thousands)

	Three Months						Six Months

	2004			2003			2004			2003

Operating revenues:
Sales to Members	$	319,762		$	284,081		$	616,449		$	546,595
Sales to non-Members		8,654			8,530			16,811			19,507

Total operating revenues		328,416			292,611			633,260			566,102

Operating expenses:
Fuel		84,416			58,228			142,277			103,533
Production		60,485			63,603			118,807			119,906
Purchased power		91,800			79,003			179,497			162,975
Depreciation and amortization		38,318			35,675			76,451			68,439
Income taxes		(3	)		—			(3	)		—
Accretion		2,899			1,497			9,686			1,566

Total operating expenses		277,915			238,006			526,715			456,419

Operating margin		50,501			54,605			106,545			109,683

Other income (expense):
Investment income		5,943			5,243			15,901			10,684
Amortization of deferred gains		618			618			1,237			1,237
Amortization of net benefit of Rocky Mountain transactions		797			797			1,593			1,593
Allowance for equity funds used during construction		35			106			119			231
Other		358			392			1,093			1,164

Total other income		7,751			7,156			19,943			14,909

Interest charges:
Interest on long-term debt and capital leases		50,990			50,499			102,266			98,942
Other interest		672			1,833			1,354			3,571
Allowance for debt funds used during construction		(252	)		(687	)		(864	)		(1,556	)
Amortization of debt discount and expense		4,166			3,625			8,338			7,225

Net interest charges		55,576			55,270			111,094			108,182

Net margin	$	2,676		$	6,491		$	15,394		$	16,410

The accompanying notes are an integral part of these condensed financial statements.

Oglethorpe Power Corporation
Condensed Statements of Patronage Capital and Membership Fees
and Accumulated Other Comprehensive Margin (Unaudited)
For the Six Months Ended June 30, 2004 and 2003

	(dollars in thousands)

	Patronage Capital and Membership Fees		Accumulated Other Comprehensive Margin (Loss)			Total

Balance at December 31, 2002		$427,569		($55,751	)		$371,818

Components of comprehensive margin:
Net margin		16,410					16,410
Unrealized loss on interest rate swap arrangements				(3,871	)		(3,871	)
Unrealized loss on available-for-sale securities				(1,033	)		(1,033	)
Unrealized gain on financial gas hedges				6,520			6,520

Total comprehensive margin							18,026


Balance at June 30, 2003		$443,979		($54,135	)		$389,844



Balance at December 31, 2003		$444,418		($49,814	)		$394,604

Components of comprehensive margin:
Net margin		15,394					15,394
Unrealized gain on interest rate swap arrangements				7,761			7,761
Unrealized loss on available-for-sale securities				(1,560	)		(1,560	)
Unrealized gain on financial gas hedges				1,348			1,348

Total comprehensive margin							22,943


Balance at June 30, 2004		$459,812		($42,265	)		$417,547

The accompanying notes are an integral part of these condensed financial statements.

Oglethorpe Power Corporation
Condensed Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, 2004 and 2003

	(dollars in thousands)

	2004			2003

Cash flows from operating activities:
Net margin	$	15,394		$	16,410


Adjustments to reconcile net margin to net cash provided by operating activities:
Depreciation and amortization, including nuclear fuel		98,889			95,621
Net accretion cost		9,686			1,566
Allowance for equity funds used during construction		(119	)		(231	)
Amortization of deferred gains		(1,237	)		(1,237	)
Amortization of net benefit of Rocky Mountain transactions		(1,593	)		(1,593	)
Other		(461	)		307
Change in operating assets and liabilities:
Receivables		(14,935	)		(38,737	)
Notes receivable		—			398
Inventories		(1,827	)		(6,781	)
Prepayments and other current assets		(235	)		719
Accounts payable		(1,989	)		3,208
Accrued interest		1,773			8,026
Accrued and withheld taxes		936			12,532
Other current liabilities		(1,165	)		(5,091	)
Deferred nuclear outage costs		(13,354	)		(7,661	)
Deferred start-up costs		—			759

Total adjustments		74,369			61,805

Net cash provided by operating activities		89,763			78,215

Cash flows from investing activities:
Property additions		(25,447	)		(65,291	)
Net proceeds from bond, reserve and construction funds		13,548			4,651
Net cash received from merger of Talbot EMC and Chattahoochee EMC into Oglethorpe		—			18,273
Increase in investment in associated organizations		(1,198	)		(223	)
Increase in other short-term investments		(1,534	)		(2,726	)
Increase in decommissioning fund		(9,984	)		(2,275	)

Net cash used in investing activities		(24,615	)		(47,591	)

Cash flows from financing activities:
Long-term debt proceeds, net		(5,009	)		452,510
Long-term debt payments		(168,119	)		(326,532	)
Decrease in notes payable		—			(184,478	)
Increase in notes receivable under interim financing agreement		—			(11,141	)
Increase in deferred credit for major overhaul		2,928			600

Net cash used in financing activities		(170,200	)		(69,041	)

Net decrease in cash and temporary cash investments		(105,052	)		(38,417	)
Cash and temporary cash investments at beginning of period		226,830			151,311

Cash and temporary cash investments at end of period	$	121,778		$	112,894

Cash paid for:
Interest (net of amounts capitalized)	$	100,983		$	93,056
Income taxes		—			—

The accompanying notes are an integral part of these condensed financial statements.

Oglethorpe Power Corporation
Notes to Condensed Financial Statements
June 30, 2004 and 2003

(A)	General. The condensed financial statements included in this report have been prepared by Oglethorpe Power Corporation (Oglethorpe), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). In the opinion of management, the information furnished in this report reflects all adjustments (which include only normal recurring adjustments) and estimates necessary to present fairly, in all material respects, the results for the periods ended June 30, 2004 and 2003. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to SEC rules and regulations, although Oglethorpe believes that the disclosures are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in Oglethorpe’s latest Annual Report on Form 10-K, as filed with the SEC. Certain amounts for 2003 have been reclassified to conform to the current period presentation. The results of operations for the three-month and six-month periods ended June 30, 2004 are not necessarily indicative of results to be expected for the full year.

(B)	New Accounting Pronouncements. In December 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46R, “Consolidation of Variable Interest Entities – an Interpretation of Accounting Research Bulletin (ARB) No. 51.” This interpretation clarifies the application of ARB No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Interpretation No. 46R is not currently effective for Oglethorpe until the end of fiscal year 2004. However, based on its current analysis, Oglethorpe believes that Interpretation No. 46R will have no impact on its financial statements.

(C)	Merger of Chattahoochee EMC and Talbot EMC. Effective May 1, 2003, via a merger, Oglethorpe acquired all of the assets and assumed all of the liabilities of Chattahoochee EMC and Talbot EMC at book value. The merger was accounted for under the purchase method of accounting. The assets primarily consist of the Chattahoochee combined cycle generating facility and the Talbot combustion turbine generating facility. The book value of Chattahoochee EMC and Talbot EMC as of the effective merger date was approximately $609 million, which approximates fair value. The assets and liabilities and results of operations have been included in Oglethorpe’s financial statements since the effective date of the merger.

(D)	Accumulated Comprehensive Margin or (Loss). The table below provides a detail of the beginning and ending balance for each classification of other comprehensive margin or (loss) along with the amount of any reclassification adjustments included in margin for each of the periods presented in the Statement of Patronage Capital and Membership Fees and Accumulated Other Comprehensive Margin. There were no material changes in the nature, timing or amounts of expected reclassification adjustments from the amounts disclosed in Oglethorpe’s Annual Report on Form 10-K for the year ended December 31, 2003. Oglethorpe’s effective tax rate is zero; therefore, all amounts below are presented net of tax.

	Accumulated Other Comprehensive Margin (Loss)

	(dollars in thousands)
	Interest Rate		Available-for-sale			Financial
	Swap Arrangements		Securities			Gas Hedges			Total

Balance at December 31, 2002	($58,443	)	$	1,722		$	970			($55,751	)


Unrealized gain/(loss)	(3,871	)		(205	)		9,072			4,996

Reclassification adjustments	—			(828	)		(2,552	)		(3,380	)


Balance at June 30, 2003	($62,314	)	$	689		$	7,490			($54,135	)




Balance at December 31, 2003	($49,916	)		($618	)	$	720			($49,814	)


Unrealized gain/(loss)	7,761			(1,491	)		255			6,525

Reclassification adjustments	—			(69	)		1,093			1,024


Balance at June 30, 2004	($42,155	)		($2,178	)	$	2,068			($42,265	)


(E)	Environmental matters:

	Set forth below are environmental matters that could have an effect on Oglethorpe. At this time, the resolution of these matters is uncertain, and Oglethorpe has made no accruals for such contingencies and cannot reasonably estimate the possible loss or range of loss with respect to these matters.

	1. General. As is typical for electric utilities, Oglethorpe is subject to various federal, state and local air and water quality requirements which, among other things, regulate emissions of pollutants, such as particulate matter, sulfur dioxide and nitrogen oxides into the air and discharges of other pollutants, including heat, into waters of the United States. Oglethorpe is also subject to federal, state and local waste disposal requirements that regulate the manner of transportation, storage and disposal of various types of waste.

	In general, environmental requirements are becoming increasingly stringent. New requirements may substantially increase the cost of electric service, by requiring changes in the design or operation of existing facilities. Failure to comply with these requirements could result in the imposition of civil and criminal penalties as well as the complete shutdown of individual generating units not in compliance. Oglethorpe cannot provide assurance that it will always be in compliance with current and future regulations.

	2. Clean Air Act. On December 30, 2002, the Sierra Club, Physicians for Social Responsibility, Georgia Forest Watch and one individual filed suit in Federal Court in Georgia against Georgia Power Company (GPC) alleging violations of the Clean Air Act at Plant Wansley. The complaint alleges violations of opacity limits at both the coal-fired units, in which Oglethorpe is a co-owner, and other violations at several of the combined cycle units where Oglethorpe has no ownership interest. This civil action requests injunctive and declaratory relief, civil penalties, a supplemental environmental project and attorneys’ fees. While Oglethorpe believes that Plant Wansley has complied with applicable laws and regulations, resolution of this matter is uncertain at this time, as is any responsibility of Oglethorpe for a share of any penalties or other costs that might be assessed against GPC.

	On January 16, 2003, the Sierra Club appealed to the United States Court of Appeals for the Eleventh Circuit the Environmental Protection Agency’s (EPA) denial of an administrative petition to invalidate an air operating permit for the combined cycle facility Oglethorpe recently acquired by merging with Chattahoochee EMC. Oglethorpe intervened in the appeal. On May 5, 2004, the Court ruled in favor of the Sierra Club, invalidating EPA’s denial of the petition and remanding the matter to EPA for further consideration. Oglethorpe believes that the order does not affect the ability of the facility to continue to operate pending further consideration, and that a favorable outcome in this matter is likely.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

For the Three Months and Six Months Ended June 30, 2004 and 2003

Net Margin

Oglethorpe’s net margin for the three months and six months ended June 30, 2004 was $2.7 million and $15.4 million, compared to $6.5 million and $16.4 million for the same periods of 2003. Net margin for the second quarter of 2004 reflected a $6.3 million Board of Directors approved reduction to revenue requirements as a result of lower than budgeted fixed production expenses, general and administrative expenses, depreciation expenses and interest costs. The revenue reduction was recorded as a $6.3 million reduction in sales to Members resulting in lower net margin for the second quarter of 2004.

Operating Revenues

Oglethorpe’s operating revenues fluctuate from period to period based on factors including weather and other seasonal factors, load growth in the service territories of Oglethorpe’s 39 electric distribution cooperative members (the Members), operating costs, availability of electric generation resources, Oglethorpe’s decisions of whether to dispatch its owned or purchased resources or Member-owned resources over which it has dispatch rights and by Members’ decisions of whether to purchase a portion of their hourly energy growth requirements from Oglethorpe resources or from other suppliers.

Total revenues from sales to the Members for the three-month and six-month periods ended June 30, 2004 were 12.6% and 12.8% higher than such revenues for the same periods of 2003. Megawatt-hour (MWh) sales to Members increased 17.4% and 13.5% in the current periods compared to the same periods of 2003. The average total revenue per MWh from sales to Members decreased 4.1% and 0.7% for the current periods compared to the same periods of 2003.

The components of Member revenues for the three months and six months ended June 30, 2004 and 2003 were as follows:

	Three Months				Six Months
	Ended June 30,				Ended June 30,

	2004		2003		2004		2003

	(dollars in thousands)
Capacity revenues	$	155,448	$	155,148	$	316,973	$	299,287
Energy revenues		164,314		128,933		299,476		247,308

Total	$	319,762	$	284,081	$	616,449	$	546,595

Capacity revenues for the six months ended June 30, 2004 increased 5.9% compared to the same period of 2003. The increase in capacity revenues for the six-month period was primarily due to an increase in revenue requirement beginning in May 2003 associated with fixed cost recovery for the Chattahoochee and Talbot generating facilities acquired by Oglethorpe in May 2003. See Note (D) and “Financial Condition” for further discussion regarding the merger of Oglethorpe and Chattahoochee and Talbot EMCs.

Energy revenues were 27.4% and 21.1% higher for the three-month and six-month periods ended June 30, 2004 compared to the same periods of 2003. The increase in energy revenues for the second quarter and for the six-months ended June 30, 2004 was primarily due to recovery of increases in fuel costs related to operating the recently acquired Chattahoochee generating facilities and partly due to increased generation from coal-fired facilities (see “Operating Expenses” below). Oglethorpe’s average energy revenue per MWh from sales to Members was 8.6% and 6.7% higher in the current periods compared to the same periods of 2003.

Sales to non-Members were from energy sales to power companies and from energy sales to LG&E Energy Marketing Inc. (LEM) and Morgan Stanley Capital Group Inc. (Morgan Stanley) under their power marketer arrangements with Oglethorpe. The following table summarizes the sources of non-Member revenues for the three months and six months ended June 30, 2004 and 2003:

	Three Months				Six Months
	Ended June 30,				Ended June 30,

	2004		2003		2004		2003

	(dollars in thousands)
Sales to power companies	$	8,399	$	7,790	$	16,346	$	18,462
Sales to LEM and Morgan Stanley		255		740		465		1,045

Total	$	8,654	$	8,530	$	16,811	$	19,507

Sales to power companies represent sales made directly by Oglethorpe. Oglethorpe sells short-term energy to non-Members for the benefit of Members participating in its capacity and energy pool. Sales to LEM and Morgan Stanley represent the net energy transmitted on behalf of LEM and Morgan Stanley off-system on an hourly basis from Oglethorpe’s total resources under the LEM and Morgan Stanley power marketer arrangements. Oglethorpe sold this energy to LEM at Oglethorpe’s cost, subject to certain limitations, and to Morgan Stanley at a contractually fixed price. The volume of sales to LEM and Morgan Stanley depends primarily on the power marketers’ decisions for servicing their load requirements.

Operating Expenses

Operating expenses for the three-month and six-month periods ended June 30, 2004 were 16.8% and 15.4% higher compared to the same periods of 2003. The increase in operating expenses for the three-month and six-month periods ended June 30, 2004 compared to the same periods of 2003 was primarily due to higher fuel, purchased power, depreciation and accretion expenses.

For the three-month and six-month periods of 2004 compared to the same periods of 2003, total fuel costs increased 45.0% and 37.4%, respectively. The increase in total fuel costs was partly as a result of an increase in MWhs of generation (primarily due to increased MWhs sold to Members) of 14.0% and 11.2% for the current periods of 2004 as compared to the same periods of 2003 and partly due to higher average fuel costs associated with increased fossil generation and generation from the Chattahoochee facility, a gas-fired combined cycle plant. For the three-month and six-month periods of 2004 compared to 2003, output from Oglethorpe’s coal-fired facilities was 22.9% and 20.5% higher. The generation output from the Chattahoochee facility was 370,000 and 403,000 MWhs higher for the current periods compared to the comparable periods of 2003. The Chattahoochee facility was acquired in May 2003; therefore, there was no corresponding fuel costs i ncurred or generation output for this facility prior to May 2003.

Purchased power costs increased 16.2% and 10.1% for the three-month and six-month periods ended June 30, 2004 compared to the same periods of 2003. Purchased MWhs increased 18.8% and 10.6% for the current periods of 2004 compared to the same periods of 2003. The average cost per MWh of total purchased power decreased 2.2% and 0.4% in the current periods of 2004 compared to the same periods of 2003. Purchased power costs were as follows:

	Three Months				Six Months
	Ended June 30,				Ended June 30,

	2004		2003		2004		2003

	(dollars in thousands)
Capacity costs	$	15,663	$	15,309	$	30,918	$	30,506
Energy costs		76,137		63,694		148,579		132,469

Total	$	91,800	$	79,003	$	179,497	$	162,975

Purchased power energy costs for the three-month and six-month periods ended June 30, 2004 was 19.5% and 12.2% higher compared to the same periods of 2003. The average cost of purchased power energy for the three months and six months ended June 30, 2004 was 0.6% and 1.4% higher compared to the same periods of 2003.

Depreciation and amortization increased 7.4% and 11.7% in the current periods of 2004 compared to the same periods of 2003. The increase is primarily attributable to depreciation expense associated with the Chattahoochee and Talbot generating facilities acquired by Oglethorpe in May 2003. There was no corresponding depreciation expense for these facilities prior to May 2003.

Accretion expense, which Oglethorpe began recording in January 2003, represents the change in the asset retirement obligations due to the passage of time. For nuclear decommissioning, Oglethorpe records a regulatory asset for the timing difference in accretion expense recognized under SFAS No. 143 compared to the expense recovered for ratemaking purposes. The accretion expense recognized is equal to the earnings from the decommissioning trust fund. In 2004 decommissioning trust fund earnings were greater than in 2003, thus accretion expense recognized was higher in 2004.

Other Income

Investment income increased 13.4% (or $0.7 million) and 48.8% (or $5.2 million) in the current three-month and six-month periods compared to the same periods of 2003 primarily due to higher earnings from the decommissioning fund.

Interest Charges

Interest on long-term debt and capital leases increased 3.4% for the six-month period of 2004 compared to the same period of 2003. The increase resulted primarily from interest costs related to debt issued to finance the generating facilities acquired by Oglethorpe in the merger of Chattahoochee EMC and Talbot EMC. Other interest expense decreased $1.2 million and $2.2 million for the current periods of 2004 compared to the same periods of 2003. The decrease was primarily due to the commercial paper issued to finance a portion of the Talbot EMC and Chattahoochee EMC construction projects that was refinanced with long-term Federal Financing Bank (FFB) loans and the related interest costs now being reflected in interest on long-term debt and capital leases. Amortization of debt discount and expense increased $0.5 million and $1.1 million in the current periods of 2004 compared to the same periods of 2003 primarily due to amortization of debt issua nce costs associated with a $133.3 million pollution control revenue bond (PCB) refunding transaction completed in December 2003.

Financial Condition

Capital Requirements and Liquidity and Sources of Capital

Environmental Matters

Oglethorpe’s future capital expenditures depend in part on future environmental regulations, including future implementation of existing laws and regulations and how Oglethorpe and the other co-owners of Plants Scherer and Wansley choose to comply with these regulations, once finalized. See Management’s Discussion and Analysis for Financial Condition and Results of Operations–Financial Condition–Capital Requirements” in Oglethorpe’s Annual Report on Form 10-K for the year ended December 31, 2003 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.

In July 2004, attorneys general from eight northeastern and midwestern states and the corporation counsel for New York City filed a complaint in U.S. District Court for the Southern District of New York against Southern Company and other electric power companies. A nearly identical complaint was filed by three environmental groups in the same court against these same defendants. The plaintiffs allege that the defendants’ emissions of carbon dioxide contribute to global warming and thus constitute a public nuisance. The plaintiffs seek injunctive relief, which might result in a capping of carbon dioxide emissions from the defendants’ plants, under the federal common law, under state public nuisance law, and under common law theories of private nuisance. Damages have not, however, been requested. Any such relief against the Southern Company’s units in Georgia could impact units at Plants Wansley and Scherer co-owned by Georgia Power , a subsidiary of Southern Company, and Oglethorpe. Although Oglethorpe believes these claims are without merit, the outcome of these actions cannot be determined at this time, and an adverse judgment could result in substantial capital expenditures by Oglethorpe with respect to its share of co-owned units.

Financing for Talbot EMC and Chattahoochee EMC

In May 2003, Talbot EMC and Chattahoochee EMC were merged with and into Oglethorpe. Pursuant to the merger, Oglethorpe succeeded to all of the assets and liabilities of Talbot EMC and Chattahoochee EMC. The assets consist of a 618 MW combustion turbine facility referred to as the Talbot Energy Facility and a 468 MW combined cycle facility referred to as the Chattahoochee Energy Facility. Oglethorpe is financing these generating facilities through two loans from the FFB, guaranteed by the RUS. At June 30, 2004, $565 million had been drawn under these loans, and Oglethorpe expects to receive its final loan advance of approximately $13 million in late 2004 or early 2005. Oglethorpe provided interim financing for these generating facilities through its commercial paper program. However, by December 31, 2003, sufficient funds had been drawn under the FFB loans to retire all outstanding commercial paper issued for this purpose. (See “MANAGEMENT&# 146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – Financial Condition – Capital Requirements– Financing for Acquisition of Talbot EMC and Chattahoochee EMC” in Item 7 of Oglethorpe’s Annual Report on Form 10-K for the year ended December 31, 2003.)

Liquidity

As of June 30, 2004, Oglethorpe had $633 million of available liquidity to meet short-term cash needs and liquidity requirements. This liquidity consisted of, (i) approximately $122 million in cash and temporary cash investments, (ii) $96 million in other short-term investments, (iii) $20 million available under a letter of credit facility, and (iv) $395 million available under three committed line of credit facilities (including a $295 million committed line of credit facility that supports Oglethorpe’s commercial paper program and two lines of credit, each for $50 million).

In September 2004, Oglethorpe expects to renew the $295 million working capital line of credit facility that supports its commercial paper program. In conjunction with the renewal, Oglethorpe expects to increase the facility to $300 million and convert this line of credit from a 364-day to a three-year facility.

The $50 million line of credit facility in place with the National Rural Utilities Cooperative Finance Corporation has been renewed through September 30, 2005.

Other Financings

Oglethorpe anticipates submitting a loan application totaling approximately $76 million to the RUS in late 2004. If approved, the loan will fund normal additions and replacements to generation facilities expected to be incurred in 2004 through 2007. This loan would be funded through the FFB and guaranteed by the RUS and the debt would be secured under Oglethorpe’s Mortgage Indenture.

Oglethorpe is also monitoring the current interest rate environment and may take advantage of other refinancing opportunities, such as converting a portion of its existing tax-exempt PCB debt from a variable rate to a fixed rate of interest.

General

Total assets and total equity plus liabilities as of June 30, 2004 were $4.8 billion, which was $152 million lower than the total at December 31, 2003. The decrease was due primarily to depreciation of plant and decreases in cash and temporary cash investments.

Assets

Property additions for the six months ended June 30, 2004 totaled $25.4 million, primarily for purchases of nuclear fuel and for additions, replacements, and improvements to existing generation facilities.

The 14.9% decrease in construction work in progress was primarily a result of the completion of a cooling tower at Plant Hatch, which was placed in service during the second quarter of 2004.

The bond, reserve and construction funds balance decreased 63.3% as the result of lower debt service reserve requirements at June 30, 2004 as compared to December 31, 2003. In conjunction with the December 2003 PCB refinancing, approximately $13.6 million was released from the debt service reserve funds and applied mainly to the payment of principal and interest due on the bonds being refunded. The newly issued PCBs do not require a debt service reserve fund.

As of June 30, 2004, Oglethorpe had cash and temporary cash investments of $121.8 million that was a decrease of $105.1 million from December 31, 2003. The decrease was primarily due to $168.1 million repayment of long-term debt and $25.4 million invested in property additions offset somewhat by $89.8 million of cash generated from operations.

Receivables increased 13.3% largely as a result of increased sales to Members. The increase in sales to Members was a result of warmer weather in June 2004 as compared to December 2004.

Prepayments and other current assets increased 31.9% as a result of insurance premium payments and an increase in the market value of the natural gas hedge contracts, offset somewhat by the receipt of prepaid inventory.

The 28.6% increase in deferred nuclear outage costs resulted from the deferral of refueling outage costs incurred for Plant Hatch Unit No. 1 and Plant Vogtle Unit No. 2, which were in outages during the first and second quarters of 2004, respectively. Nuclear outage costs incurred during a refueling outage are deferred and amortized over an 18-month or 24-month operating cycle, depending upon the plant.

Deferred asset retirement obligation costs increased 17.0%, or $2.5 million. Consistent with Oglethorpe’s rate making policy, unrealized gains or losses from the nuclear decommissioning fund are added to or deducted from the deferred asset. A decrease in the unrealized gain resulted in a $4.9 million increase in the deferred asset, which was offset somewhat by recognized earnings produced by the nuclear decommissioning funds. As a result of these earnings, $2.1 million of additional amortization was recognized as accretion expense. For information regarding accretion expense, see “Operating Expenses” above.

Other deferred charges decreased by 19.1% due to the regular monthly amortization of these charges.

Equity and Liabilities

The accumulated other comprehensive margin loss decreased by 15.2% primarily as a result of a decrease in the unrealized loss associated with the interest rate swap arrangements.

Long-term debt and capital leases due within one year decreased by 37.5% as a result of principal payments made during the first quarter of 2004. The balance at December 31, 2003 included the PCBs whose first call date was January 1, 2004, and which were redeemed on January 2, 2004.

The increase in accrued interest was largely due to the interest expense accrual associated with the lease of Plant Scherer Unit No. 2 compared to no accrual at December 31, 2003 for the Scherer debt as a result of the payment made (as due) on that date.

The decrease in other current liabilities was primarily a result of payments made related to certain year-end accruals and a performance-based pay accrual, offset somewhat by an increase in operating and maintenance expense accruals for Plant Doyle.

Oglethorpe has recorded an unrealized loss related to the interest rate swap arrangements of $42.2 million, which represents the estimated payment Oglethorpe would make if the swap arrangements were terminated.

New and Proposed Accounting Pronouncements

For a discussion of New and Proposed Accounting Pronouncements see Note B of Notes to Condensed Financial Statements.

Forward-Looking Statements and Associated Risks

This Quarterly Report on Form 10-Q contains forward-looking statements, including statements regarding, among other items, (i) anticipated transactions by Oglethorpe and (ii) Oglethorpe’s future capital requirements and sources of capital. These forward-looking statements are based largely on Oglethorpe’s current expectations and are subject to a number of risks and uncertainties, some of which are beyond Oglethorpe’s control. For factors that could cause actual results to differ materially from those anticipated by these forward-looking statements, see “BUSINESS-Competition” in Item 1 of Oglethorpe’s 2003 Annual Report on Form 10-K. In light of these risks and uncertainties, there can be no assurance that events anticipated by the forward-looking statements contained in this Quarterly Report will in fact transpire.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Oglethorpe’s market risks have not changed materially from the market risks reported in Oglethorpe’s 2003 Annual Report on Form 10-K.

Item 4.

Controls and Procedures

As of June 30, 2004, Oglethorpe had carried out an evaluation, under the supervision and with the participation of its management, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on this evaluation, the President and Chief Executive Officer and the Senior Vice President, Finance and Planning concluded that Oglethorpe’s disclosure controls and procedures are effective to ensure that information required to be disclosed by Oglethorpe in the reports that Oglethorpe files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods required by the Securities Exchange Act and the rules there under.

No change in Oglethorpe’s internal control over financial reporting occurred during the most recent fiscal quarter that has materially affected, or are reasonably likely to materially affect, Oglethorpe’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

Environmental Matters

For information about environmental matters that could have an effect on Oglethorpe, see Note (E) to Notes to Condensed Financial Statements.

Item 5.

Other

Oglethorpe and Georgia System Operations Corporation (“GSOC”) have a contract with Georgia Power Company (“GPC”) to provide certain coordination services for the benefit of Oglethorpe and its Members. For a discussion of these relationships, see “OGLETHORPE POWER CORPORATION – Relationship with GSOC” and “–Relationship with GPC” in Item 1 of Oglethorpe’s Annual Report on Form 10-K for the year ended December 31, 2003. GSOC determined that it could provide these services to Oglethorpe and its Members at a lower cost by beginning operation of a control area, and in January 2004 sent a notice of termination to GPC under the Revised and Restated Coordination Services Agreement (“RCSA”). In June 2004, GPC requested FERC to amend the RCSA’s termination provisions by extending the minimum term through December 31, 2005 and requiring Oglethorpe and GSOC to satisfy GPC t hat replacement protocols were in place prior to allowing any termination after that date. However, GPC did not seek to change the existing RCSA rates. In July 2004, GSOC and Oglethorpe each responded, asking FERC to reject GPC’s request to amend the RCSA unilaterally, and to allow it to terminate on September 30, 2004, so that GSOC could begin operation of a control area. FERC must act by August 20, 2004, either accepting GPC’s or Oglethorpe and GSOC’s request, or setting the matter for hearing. The parties are discussing a replacement agreement for the RCSA that could settle the dispute and could result in rates that are lower than those in the existing RCSA. Oglethorpe’s management believes that the outcome of this dispute will not have a material adverse effect on the financial condition or results of operations of Oglethorpe.

In July 2004, Elizabeth B. Higgins, Oglethorpe’s Senior Vice President, Finance & Planning, was appointed Chief Financial Officer, and Mark Chesla was appointed Oglethorpe’s Vice President, Controller.

Oglethorpe has filed financial and statistical information relating to its Members with Nationally Recognized Municipal Securities Information Repositories in fulfillment of its obligations under an agreement with an underwriter pursuant to Rule 15c2-12 of the Securities Exchange Act of 1934. A copy of the Member financial and statistical information is attached as Exhibit 99.1.

Item 6.

Exhibits and Reports on Form 8-K


	(a)	Exhibits


		Number		Description
		3.2		Bylaws of Oglethorpe, as amended and restated, as of March 29, 2004
		31.1		Rule 13a-14(a)/15d-14(a) Certification, by Thomas A. Smith (Principal Executive Officer)

		31.2		Rule 13a-14(a)/15d-14(a) Certification, by Elizabeth B. Higgins (Principal Financial Officer)
		32.1		Certification Pursuant to 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Thomas A. Smith (Principal Executive Officer)
		32.2		Certification Pursuant to 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Elizabeth B. Higgins (Principal Financial Officer)
		99.1		Member Financial and Statistical Information


	(b)	Reports on Form 8-K

No reports on Form 8-K were filed by Oglethorpe for the quarter ended June 30, 2004.

SIGNATURES

Pursuant to the requirements 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.

		Oglethorpe Power Corporation (An Electric Membership Corporation)


Date: August 13, 2004	By:	/s/ Thomas A. Smith Thomas A. Smith President and Chief Executive Officer (Principal Executive Officer)


Date: August 13, 2004		/s/ Mark Chesla Mark Chesla Vice President, Controller (Chief Accounting Officer)