OGLETHORPE POWER CORP - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2004

o	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		30085-1349
(Address of principal executive offices)		(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 x No o

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 o No x

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 SEPTEMBER 30, 2004

			Page No.
PART I - FINANCIAL INFORMATION

	Item 1.	Financial Statements

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

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

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

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

		Notes to Condensed Financial Statements For the Nine Months ended September 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 Information	19

	Item 6.	Exhibits	20

SIGNATURES			21


	2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

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

	(dollars in thousands)

	2004			2003
Assets	(Unaudited)

Electric plant:
In service	$	5,782,633		$	5,755,553
Less: Accumulated provision for depreciation		(2,222,497	)		(2,107,274	)
		3,560,136			3,648,279

Nuclear fuel, at amortized cost		77,310			90,283
Construction work in progress		22,019			26,212
		3,659,465			3,764,774

Investments and funds:
Decommissioning fund, at market		186,171			180,448
Deposit on Rocky Mountain transactions, at cost		81,658			77,684
Bond, reserve and construction funds, at market		8,011			21,629
Investment in associated organizations, at cost		31,395			29,374
Other, at market		14,859			1,084
		322,094			310,219

Current assets:
Cash and cash equivalents, at cost		152,026			226,830
Restricted short-term investments, at market		80,113			-
Other short-term investments, at market		2,845			96,213
Receivables		120,354			112,248
Inventories, at average cost		101,741			105,338
Prepayments and other current assets		5,101			4,959
		462,180			545,588

Deferred charges:
Premium and loss on reacquired debt, being amortized		138,246			139,741
Deferred amortization of capital leases		110,387			110,626
Deferred debt expense, being amortized		22,318			23,953
Deferred nuclear outage costs, being amortized		14,535			14,764
Deferred asset retirement obligations costs, being amortized		20,544			14,821
Other		3,717			5,199
		309,747			309,104
	$	4,753,486		$	4,929,685

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


	3

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

	(dollars in thousands)

	2004			2003
Equity and Liabilities	(Unaudited)

Capitalization:
Patronage capital and membership fees	$	464,206		$	444,418
Accumulated other comprehensive loss		(47,765	)		(49,814	)
		416,441			394,604

Long-term debt		3,202,884			3,315,128
Obligation under capital leases		328,839			342,232
Obligation under Rocky Mountain transactions		81,658			77,684
		4,029,822			4,129,648

Current liabilities:
Long-term debt and capital leases due within one year		156,972			237,522
Accounts payable		44,373			63,559
Accrued interest		15,873			7,158
Accrued and withheld taxes		24,253			19,957
Other current liabilities		10,221			9,109
		251,692			337,305

Deferred credits and other liabilities:
Gain on sale of plant, being amortized		44,053			45,909
Net benefit of Rocky Mountain transactions, being amortized		70,874			73,263
Asset retirement obligations		244,510			233,155
Accumulated retirement costs for other obligations		35,095			35,349
Interest rate swap arrangements		47,734			49,916
Other		29,706			25,140
		471,972			462,732
	$	4,753,486		$	4,929,685

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


	4

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

	(dollars in thousands)

	Three Months						Nine Months
	2004			2003			2004			2003
Operating revenues:
Sales to Members	$	359,291		$	343,797		$	975,740		$	890,392
Sales to non-Members		8,198			8,488			25,009			27,995
Total operating revenues		367,489			352,285			1,000,749			918,387

Operating expenses:
Fuel		85,379			81,151			227,656			184,684
Production		64,638			60,633			183,445			180,539
Purchased power		122,530			113,764			302,027			276,739
Depreciation and amortization		38,316			37,756			114,767			106,195
Income taxes		-			-			(3	)		-
Accretion		2,704			1,703			12,390			3,269
Total operating expenses		313,567			295,007			840,282			751,426
Operating margin		53,922			57,278			160,467			166,961

Other income (expense):
Investment income		5,408			4,733			21,309			15,417
Amortization of deferred gains		619			619			1,856			1,856
Amortization of net benefit of sale of income tax benefits		796			796			2,389			2,389
Allowance for equity funds used during construction		37			82			156			313
Other		403			564			1,496			1,728
Total other income		7,263			6,794			27,206			21,703

Interest charges:
Interest on long-term debt and capital leases		51,328			53,677			153,594			152,619
Other interest		1,580			1,075			2,934			4,646
Allowance for debt funds used during construction		(285	)		(534	)		(1,149	)		(2,090	)
Amortization of debt discount and expense		4,168			3,642			12,506			10,867
Net interest charges		56,791			57,860			167,885			166,042
Net margin	$	4,394		$	6,212		$	19,788		$	22,622

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


	5

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

	(dollars in thousands)



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


Balance at December 31, 2002	$	427,569	$	(55,751	)	$	371,818
Components of comprehensive margin:
Net margin		22,622					22,622
Unrealized gain on interest rate swap arrangements				4,246			4,246
Unrealized loss on available-for-sale securities				(1,889	)		(1,889	)
Unrealized loss on financial gas hedges				(136	)		(136	)

Total comprehensive margin							24,843

Balance at September 30, 2003	$	450,191	$	(53,530	)	$	396,661






Balance at December 31, 2003	$	444,418	$	(49,814	)	$	394,604
Components of comprehensive margin:
Net margin		19,788					19,788
Unrealized gain on interest rate swap arrangements				2,182			2,182
Unrealized loss on available-for-sale securities				(658	)		(658	)
Unrealized gain on financial gas hedges				525			525

Total comprehensive margin							21,837

Balance at September 30, 2004	$	464,206	$	(47,765	)	$	416,441

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


	6

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

	(dollars in thousands)

	2004			2003

Cash flows from operating activities:
Net margin	$	19,788		$	22,622

Adjustments to reconcile net margin to net cash provided by operating activities:
Depreciation and amortization, including nuclear fuel		171,041			166,062
Net accretion cost		12,390			3,269
Allowance for equity funds used during construction		(156	)		(313	)
Amortization of deferred gains		(1,856	)		(1,856	)
Amortization of net benefit of sale of income tax benefits		(2,389	)		(2,389	)
Deferred nuclear outage costs		(13,029	)		(10,371	)
Other		67			(298	)

Change in operating assets and liabilities:
Receivables		(8,106	)		(36,626	)
Notes receivable		-			597
Inventories		3,597			1,872
Prepayments and other current assets		381			(1,082	)
Accounts payable		(19,186	)		(9,680	)
Accrued interest		8,715			12,005
Accrued and withheld taxes		4,296			19,045
Other current liabilities		1,112			(4,949	)
Deferred start-up costs		-			1,897
Total adjustments		156,877			137,183
Net cash provided by operating activities		176,665			159,805

Cash flows from investing activities:
Property additions		(37,915	)		(120,474	)
Net proceeds from bond, reserve and construction funds		13,563			4,695
Net cash received from merger of Talbot EMC and Chattahoochee EMC into Oglethorpe		-			18,273
Increase in investment in associated organizations		(2,020	)		(255	)
Decrease (increase) in restricted and other short-term investments		13,575			(1,773	)
Increase in other long-term investments		(14,699	)		-
Increase in decommissioning fund		(12,910	)		(4,332	)
Proceeds from sale of railcars		-			21,799
Net cash used in investing activities		(40,406	)		(82,067	)

Cash flows from financing activities:
Long-term debt proceeds, net		-			550,928
Long-term debt payments		(206,187	)		(362,148	)
Issuance costs and loss on reacquired debt		(9,375	)		(5,120	)
Decrease in notes payable		-			(260,638	)
Increase in notes receivable under interim financing agreement		-			(11,141	)
Increase in deferred credit for major overhaul		4,499			1,751
Net cash used in financing activities		(211,063	)		(86,368	)
Net decrease in cash and cash equivalents		(74,804	)		(8,630	)
Cash and cash equivalents at beginning of period		226,830			151,311
Cash and cash equivalents at end of period	$	152,026		$	142,681

Cash paid for:
Interest (net of amounts capitalized)	$	146,664		$	143,170
Income taxes		-			-

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


	7

Oglethorpe Power Corporation

Notes to Condensed Financial Statements

September 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 September 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 no t 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 nine-month periods ended September 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 cu rrently effective for Oglethorpe until the end of fiscal year 2004. However, based on its current analysis, Oglethorpe believes that Interpretation No. 46R will not have a material 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 approximated 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 (loss) along with the amount of any reclassification adjustments included in margin for each of the periods presented inthe 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.


	8

	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)	4,246	(1,292)	6,839	9,793

Reclassification adjustments	-	(597)	(6,975)	(7,572)

Balance at September 30, 2003	($54,197)	($167)	$834	($53,530)


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

Unrealized gain/(loss)	2,182	216	(2,007)	391

Reclassification adjustments	-	(874)	2,532	1,658

Balance at September 30, 2004	($47,734)	($1,276)	$1,245	($47,765)

(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.


	9

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.


	10

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

Results of Operations

For the Three Months and Nine Months Ended September 30, 2004 and 2003

Net Margin

Oglethorpe's net margin for the three months and nine months ended September 30, 2004 was $4.4 million and $19.8 million, compared to $6.2 million and $22.6 million for the same periods of 2003. Net margin for the nine-month period of 2004 reflects 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 nine-month period ended September 30, 2004.

Net margin for the first nine months of 2004 (as was the case in 2003) is greater than the estimated annual margin requirement under Oglethorpe’s Indenture, dated as of March 1, 1997, from Oglethorpe to Sun Trust Bank, as trustee (the “Mortgage Indenture”). The rate schedule to Oglethorpe’s Wholesale Power Contracts provides for budget adjustments from time to time throughout the year. Oglethorpe’s management is monitoring the expected year-end net margin and if needed may consider additional budget adjustments that would reduce budgeted expenses and associated capacity revenues from Members, with a view to achieving a Margins for Interest Ratio of at least 1.10 for 2004 (the minimum margin requirement under the Mortgage Indenture).

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 nine-month periods ended September 30, 2004 were 4.5% and 9.6% higher than such revenues for the same periods of 2003. Megawatt-hour (MWh) sales to Members increased 2.0% and 8.9% in the current periods compared to the same periods of 2003. The average total revenue per MWh from sales to Members increased 2.4% and 0.6% for the current periods compared to the same periods of 2003.


	11

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

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2004		2003		2004		2003
	(dollars in thousands)

Capacity revenues	$	161,530	$	160,211	$	478,504	$	459,498
Energy revenues		197,761		183,586		497,236		430,894
Total	$	359,291	$	343,797	$	975,740	$	890,392

Capacity revenues for the nine months ended September 30, 2004 increased 4.1% compared to the same period of 2003. The increase in capacity revenues for the nine-month period was primarily due to an increase in revenue requirements beginning in May 2003 associated with the fixed cost recovery for the Chattahoochee and Talbot generating facilities acquired by Oglethorpe in May 2003. See Note (C) and “Financial Condition” for further discussion regarding the merger of Chattahoochee and Talbot EMCs with and into Oglethorpe.

Energy revenues were 7.7% and 15.4% higher for the three-month and nine-month periods ended September 30, 2004 compared to the same periods of 2003. The increase in energy revenues for the third quarter of 2004 was partly due to recovery of increases in fuel costs and partly due to increased generation at the Talbot facility compared to the same period of 2003. The increase in energy revenues for the nine-months ended September 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. In addition, an increase in purchased power energy costs contributed to the increase in Member energy revenues for both the three-month and nine-month periods of 2004 as compared to 2003 . (See “Operating Expenses” below.) Oglethorpe's average energy revenue per MWh from sales to Members was 5.6% and 5.9% 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. Sales to power companies represent sales made directly by Oglethorpe. Total non-Member revenue for the three-month and nine-month periods of 2004 was $8.2 million and $25.0 million, compared to $8.5 million and $28.0 million for the same periods of 2003. 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 market er 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.


	12

Operating Expenses

Operating expenses for the three-month and nine-month periods ended September 30, 2004 were 6.3% and 11.8% higher compared to the same periods of 2003. The increase in operating expenses for the nine-month period ended September 30, 2004 compared to the same period of 2003 was primarily due to higher fuel, purchased power, depreciation and accretion expenses. The increase in operating expenses for the current quarter was primarily due to higher purchased power and accretion expenses.

For the nine-month period of 2004 compared to the same period of 2003, total fuel costs increased 23.3%. 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 6.9% for the current period of 2004 as compared to the same period 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 nine-month period of 2004 compared to 2003, output from Oglethorpe’s coal-fired facilities was 13.2% higher. The generation output from the Chattahoochee facility was 262,000 MWhs higher for the current period compared to the comparable period of 2003. The Chattahoochee facility was acquired in May 2003; therefore, no c orresponding fuel costs were incurred and no generation output was experienced for this facility prior to May 2003.

Purchased power costs increased 7.7% and 9.1% for the three-month and nine-month periods ended September 30, 2004 compared to the same periods of 2003. Purchased MWhs increased 3.8% and 7.7% for the current periods of 2004 compared to the same periods of 2003. The average cost per MWh of total purchased power increased 3.8% and 1.3% in the current periods of 2004 compared to the same periods of 2003. Purchased power costs were as follows:

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2004		2003		2004		2003
	(dollars in thousands)

Capacity costs	$	15,930	$	15,580	$	46,848	$	46,086
Energy costs		106,600		98,184		255,179		230,653
Total	$	122,530	$	113,764	$	302,027	$	276,739

Purchased power energy costs for the three-month and nine-month periods ended September 30, 2004 were 8.6% and 10.6% higher compared to the same periods of 2003. The average cost of purchased power energy for the three months and nine months ended September 30, 2004 was 4.6% and 2.7% higher compared to the same periods of 2003. The increase in average purchased power costs was partly attributable to slightly higher prices in the wholesale electricity markets and partly due to slightly higher prices for energy purchases made from purchased power agreements.

Depreciation and amortization increased 8.1% in the nine-months ended September 30, 2004 compared to the same period 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.


	13

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 14.3% (or $0.7 million) and 38.2% (or $5.9 million) in the current three-month and nine-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 decreased 4.4% for the nine-month period of 2004 compared to the same period of 2003. Amortization of debt discount and expense increased $0.5 million and $1.6 million in the current periods of 2004 compared to the same periods of 2003 primarily due to amortization of debt issuance 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 coal-fired Plants Scherer and Wansley choose to comply with these regulations, once finalized. See Management’s Discussion and Analysis of 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 quarters ended March 31, 2004 and June 30, 2004.

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 September 30, 2004, $565 million had been drawn under these loans, and Oglethorpe expects to receive another loan advance of approximately $13 million in early 2005. Oglethorpe provided interim financing for these generating facilities through its commercial paper program. However, by December 31, 2003, sufficient funds had bee n drawn under the FFB loans to retire all outstanding commercial paper issued for this purpose. (See “MANAGEMENT'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.)


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Liquidity

As of September 30, 2004, Oglethorpe had $670 million of available liquidity to meet short-term cash needs and liquidity requirements. This liquidity consisted of, (i) approximately $152 million in cash and cash equivalents, (ii) $80 million in restricted short-term investments (see discussion below), (iii) $18 million in other investments (maturities greater than 90 days but less than 2 years), (iv) $20 million available under a letter of credit facility, and (v) $400 million available under three committed working capital line of credit facilities (see discussion below).

In late July and early August 2004, Oglethorpe made voluntary deposits totaling $80 million into a RUS Cushion of Credit Account with the U.S. Treasury, earning interest at a guaranteed rate of 5% per annum. The funds, including interest earned thereon, can only be applied to future debt service on RUS and RUS guaranteed FFB notes. As of September 30, 2004, the amount on deposit equals approximately four months of RUS/FFB debt service. These deposits provide a source of short-term liquidity.

In September 2004, Oglethorpe renewed, at $300 million, the committed working capital line of credit that supports its commercial paper program. In conjunction with the renewal, Oglethorpe converted this line of credit from a 364-day to a three-year facility.

Oglethorpe also has in place two $50 million committed lines of credit, one with National Rural Utilities Cooperative Finance Corporation that matures on September 30, 2005, and one with CoBank, ACB that matures on November 11, 2005.

Other Financings

Oglethorpe submitted a loan application totaling approximately $72 million to the RUS in September 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.

General

Total assets and total equity plus liabilities as of September 30, 2004 were $4.8 billion, which was $176 million lower than the total at December 31, 2003. The decrease was due primarily to depreciation of plant and decreases in cash and cash equivalents.

Assets

Property additions for the nine months ended September 30, 2004 totaled $37.9 million, primarily for purchases of nuclear fuel and for additions, replacements, and improvements to existing generation facilities.


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Nuclear fuel decreased 14.4% primarily as a result of timing issues. Purchases of nuclear fuel are somewhat below budgeted amounts for 2004. The purchases are projected to be on budget by year-end.

The 16.0% 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 63.0% as the result of lower debt service reserve requirements at September 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.

Other investments and funds increased by $13.8 million as the result of investments in U.S. Treasury Notes with maturities greater than one year.

As of September 30, 2004, Oglethorpe had cash and cash equivalents of $152.0 million, which was a decrease of $74.8 million from December 31, 2003. The decrease was primarily due to $206.2 million repayment of long-term debt (primarily PCB debt) and $37.9 million invested in property additions (primarily improvements and replacements to generation facilities); offset somewhat by $176.7 million of cash generated from operations.

Restricted short-term investments represent funds deposited into a RUS Cushion of Credit Account with the U.S. Treasury. The account was funded during the third quarter primarily with the proceeds obtained from the liquidation of certain other short-term investments.

Other short-term investments decreased by 97.0% primarily as the result of the liquidation of certain investments. The proceeds were primarily used to fund the RUS Cushion of Credit Account.

Deferred asset retirement obligation costs increased 38.6%, or $5.7 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 $7.2 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, $1.0 million of additional amortization was recognized as accretion expense. For information regarding accretion expense, see “Operating Expenses” above.

Other deferred charges decreased by 28.5% due to the regular monthly amortization of these charges.

Equity and Liabilities

Long-term debt and capital leases due within one year decreased by 33.9% as a result of principal payments made during 2004. The balance at December 31, 2003 included the PCBs that were callable January 1, 2004, and which were redeemed on January 2, 2004.


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Accounts payable decreased 30.2% primarily as a result of a decrease in payables to Georgia Power Company and the power marketers. The payable to Georgia Power Company at December 31, 2003 included higher accruals for fuel purchases and certain construction projects.

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

Accrued and withheld taxes increased 21.5% as a result of the monthly accruals for 2004 property tax.

Other deferred charges increased 18.2% primarily as a result of deferred credits representing payments made to Oglethorpe by its Members for funding the future overhaul of the combustion turbine plants. The cost associated with the major overhaul will be expensed as incurred. Revenues will be recognized as the expenses are recorded.

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.


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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 September 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 Chief Financial Officer 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.


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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 Information

Control Area Services

As described in Item 5 of Oglethorpe’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, 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 (the Revised and Restated Coordination Services Agreement (“RCSA”). GSOC sent a notice of termination of the RCSA to GPC in January 2004. Although GPC requested FERC to amend the RCSA’s termination provisions by extending the minimum term through December 31, 2005, FERC rejected GPC’s request to amend the RCSA unilaterally and allowed it to terminate on September 30, 2004. However, the parties executed a replacement agreement for the RCSA, resulting in rates that are lower than those in the existing RCSA. GPC, with the concurrence of Oglethorpe and GSOC, petitioned FERC to allow the RCSA to remain in effect until the commencement of service under the replacement agreement, now anticipated to be February 1, 2005.

Member Withdrawal

As reported on Form 8-K dated October 7, 2004, pursuant to the provisions of Oglethorpe’s bylaws, Flint Electric Membership Corporation (“Flint”) delivered to Oglethorpe a Notice of Intent to Withdraw and an executed Withdrawal Agreement, dated as of October 1, 2004. After the passage of 90 days and the fulfillment of certain conditions, including the approval by the Rural Utilities Service (“RUS”) of certain power supply contracts between Flint and other power suppliers, Flint would no longer be a member of Oglethorpe.

As provided in the Withdrawal Agreement, Flint also notified Oglethorpe of its intent to assign its Wholesale Power Contract (the “Flint WPC”) to Cobb Electric Membership Corporation (“Cobb”). Upon the assignment, Cobb would be responsible for performance of all obligations to Oglethorpe under the Flint WPC and Flint would be released from those obligations.

Further, Cobb and six other Members of Oglethorpe participating in a resource scheduling group with Cobb requested Oglethorpe to approve the reallocation of the power supply resources covered by the Flint WPC among members of the scheduling group. Such a reallocation is subject to the approval of RUS. Upon the effectiveness of the reallocation, Cobb would remain responsible for only a portion of the Flint WPC, and the other Members would each become responsible for reallocated portions, with all portions totaling 100% of the Flint WPC.


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The Oglethorpe Board of Directors consented to the proposed assignment of the Flint WPC to Cobb and approved the reallocation at its November 11 meeting, each subject to the effectiveness of Flint’s withdrawal, currently anticipated to be January 1, 2005, provided all conditions are met.

Member System Lease

Oglethorpe previously reported under “Oglethorpe Power Corporation” in Item 1 of its Annual Report on Form 10-K for the year ended December 31, 2003, that one of its Members, Pataula Electric Membership Corporation (“Pataula”) had approached Cobb about acquiring its system. On October 15, 2004 , Pataula requested, in accordance with its Wholesale Power Contract, that Oglethorpe consent to the lease of its system to Cobb. Cobb offered to guarantee the obligations of Pataula under Pataula’s Wholesale Power Contract with Oglethorpe. Further, Pataula and Cobb have petitioned the Georgia Public Service Commission to transfer Pataula’s customers and reassign its service territory to Cobb. At its November 11, 2004 meeting, the Oglethorpe Board of Directors consented to the lease, subject to the guarantee by Cobb.

Item 6. Exhibits

Number		Description
3.2		Bylaws of Oglethorpe, as amended and restated, as of November 8, 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)


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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: November 12, 2004	By:	/s/ Thomas A. Smith Thomas A. Smith President and Chief Executive Officer


Date: November 12, 2004		/s/ Mark Chesla Mark Chesla Vice President, Controller (Chief Accounting Officer)


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