Attached files
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
[x]
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the
quarterly period ended September 30, 2009
or
[ ]
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the
transition period from ________to________
Commission
|
Exact
name of registrant as specified in its charter;
|
IRS
Employer
|
||
File
Number
|
State
or other jurisdiction of incorporation or
organization
|
Identification No.
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||
001-12995
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CE
CASECNAN WATER AND ENERGY COMPANY, INC.
|
Not
Applicable
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||
24th
Floor, 6750 Building, Ayala Avenue
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||||
Makati,
Metro Manila, Philippines
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011
63 2 892-0276
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||||
N/A
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||||
(Former
name, former address and former fiscal year, if changed since last
report)
|
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 T No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” ”accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer
|
Accelerated
filer
|
Non-accelerated
filer T
|
Smaller
reporting company
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes No
T
All of
the shares of common equity of CE Casecnan Water and Energy Company, Inc. are
privately held by a limited group of investors. As of November 4, 2009, the
number of outstanding shares of $0.038 par value common stock was
767,162.
TABLE OF
CONTENTS
PART
I
3
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14
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18
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19
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PART II | ||
20
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20
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20
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20
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20
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20
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20
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21
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22
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2
PART
I
Financial
Statements
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Shareholders of
CE
Casecnan Water and Energy Company, Inc.
We have
reviewed the accompanying balance sheet of CE Casecnan Water and Energy Company,
Inc. (the “Company”) as of September 30, 2009, and the related statements
of operations for the three-month and nine-month periods ended
September 30, 2009 and 2008, and of cash flows and changes in shareholders’
equity for the nine-month periods ended September 30, 2009 and 2008. These
interim financial statements are the responsibility of the Company’s
management.
We
conducted our reviews in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical review procedures and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on
our reviews, we are not aware of any material modifications that should be made
to such interim financial statements for them to be in conformity with
accounting principles generally accepted in the United States of
America.
We have
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the balance sheet of CE Casecnan
Water and Energy Company, Inc. as of December 31, 2008, and the related
statements of operations, changes in shareholders’ equity, and cash flows for
the year then ended (not presented herein); and in our report dated
February 27, 2009, we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the accompanying
balance sheet as of December 31, 2008 is fairly stated, in all material
respects, in relation to the balance sheet from which it has been
derived.
/s/
Manabat Delgado Amper & Co.
Manabat
Delgado Amper & Co.
Member
Firm of Deloitte & Touche
Makati
City, Philippines
November
5, 2009
3
CE
CASECNAN WATER AND ENERGY COMPANY, INC.
BALANCE
SHEETS (Unaudited)
(Amounts
in thousands, except share data)
As
of
|
||||||||
September
30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 87,649 | $ | 49,350 | ||||
Restricted
cash and investments
|
24,193 | 22,881 | ||||||
Receivables,
net
|
48,093 | 20,308 | ||||||
Other
current assets
|
7,170 | 7,387 | ||||||
Total
current assets
|
167,105 | 99,926 | ||||||
Property,
plant and equipment, net
|
265,799 | 281,485 | ||||||
Other
investments
|
18,884 | 14,096 | ||||||
Deferred
income taxes
|
5,216 | 6,995 | ||||||
Other
|
106 | 222 | ||||||
Total
assets
|
$ | 457,110 | $ | 402,724 | ||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable and other accrued liabilities
|
$ | 843 | $ | 1,748 | ||||
Dividends
payable
|
12,125 | 10,825 | ||||||
Accrued
interest
|
1,076 | 3,067 | ||||||
Accrued
property, income and other taxes
|
31,756 | 5,817 | ||||||
Payable
to affiliates
|
2,649 | 2,726 | ||||||
Notes
payable
|
- | 7,115 | ||||||
Current
portion of long-term debt
|
15,435 | 13,720 | ||||||
Total
current liabilities
|
63,884 | 45,018 | ||||||
Long-term
debt
|
8,575 | 17,150 | ||||||
Total
liabilities
|
72,459 | 62,168 | ||||||
Commitments
and contingencies (Note 6)
|
||||||||
Shareholders’
equity:
|
||||||||
Common
stock – 2,148,000 shares authorized, one Philippine peso ($0.038)
par value; 767,162 shares issued and outstanding |
29 | 29 | ||||||
Additional
paid-in capital
|
123,807 | 123,807 | ||||||
Retained
earnings
|
262,583 | 221,839 | ||||||
Accumulated
other comprehensive loss, net
|
(1,768 | ) | (5,119 | ) | ||||
Total
shareholders’ equity
|
384,651 | 340,556 | ||||||
Total
liabilities and shareholders’ equity
|
$ | 457,110 | $ | 402,724 |
The
accompanying notes are an integral part of these financial
statements.
4
CE
CASECNAN WATER AND ENERGY COMPANY, INC.
STATEMENTS
OF OPERATIONS (Unaudited)
(Amounts
in thousands)
Three-Month
Periods
|
Nine-Month
Periods
|
|||||||||||||||
Ended
September 30,
|
Ended
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenue
- Lease rentals and service contracts
|
$ | 50,609 | $ | 38,685 | $ | 106,541 | $ | 96,336 | ||||||||
Operating
expenses:
|
||||||||||||||||
Depreciation
|
5,458 | 5,660 | 16,452 | 16,502 | ||||||||||||
Plant
operations and other operating expenses
|
2,501 | 2,747 | 6,979 | 7,460 | ||||||||||||
Total
operating expenses
|
7,959 | 8,407 | 23,431 | 23,962 | ||||||||||||
Operating
income
|
42,650 | 30,278 | 83,110 | 72,374 | ||||||||||||
Other
income (expense):
|
||||||||||||||||
Interest
expense
|
(756 | ) | (1,710 | ) | (2,630 | ) | (7,213 | ) | ||||||||
Interest
income
|
193 | 456 | 612 | 1,573 | ||||||||||||
Other,
net
|
923 | 1,220 | 2,354 | 3,437 | ||||||||||||
Total
other income (expense)
|
360 | (34 | ) | 336 | (2,203 | ) | ||||||||||
Income
before income tax expense
|
43,010 | 30,244 | 83,446 | 70,171 | ||||||||||||
Income
tax expense
|
8,439 | 10,396 | 16,702 | 24,116 | ||||||||||||
Net
income
|
$ | 34,571 | $ | 19,848 | $ | 66,744 | $ | 46,055 |
The
accompanying notes are an integral part of these financial
statements.
5
CE
CASECNAN WATER AND ENERGY COMPANY, INC.
STATEMENTS
OF CASH FLOWS (Unaudited)
(Amounts
in thousands)
Nine-Month
Periods
|
||||||||
Ended
September 30,
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||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ | 66,744 | $ | 46,055 | ||||
Adjustments
to reconcile net income to net cash flows from operating
activities:
|
||||||||
Depreciation
|
16,452 | 16,502 | ||||||
Amortization
of bond issue costs
|
116 | 238 | ||||||
Provision
for deferred income taxes
|
389 | 174 | ||||||
Changes
in other operating assets and liabilities:
|
||||||||
Receivables,
net
|
(27,785 | ) | 2,810 | |||||
Other
current assets
|
217 | 328 | ||||||
Accounts
payable and other accrued liabilities
|
(952 | ) | (740 | ) | ||||
Accrued
interest
|
(1,991 | ) | (3,080 | ) | ||||
Accrued
property, income and other taxes
|
25,939 | 6,871 | ||||||
Deferred
revenue
|
- | 5,641 | ||||||
Net
cash flows from operating activities
|
79,129 | 74,799 | ||||||
Cash
flows from investing activities:
|
||||||||
Capital
expenditures
|
(766 | ) | (350 | ) | ||||
Increase
in restricted cash and investments
|
(1,312 | ) | (951 | ) | ||||
Net
cash flows from investing activities
|
(2,078 | ) | (1,301 | ) | ||||
Cash
flows from financing activities:
|
||||||||
(Decrease)
increase in payable to affiliates
|
(77 | ) | 138 | |||||
Repayment
of long-term debt
|
(6,860 | ) | (18,865 | ) | ||||
Repayment
of notes payable
|
(7,115 | ) | (32,085 | ) | ||||
Dividends
paid
|
(24,700 | ) | - | |||||
Net
cash flows from financing activities
|
(38,752 | ) | (50,812 | ) | ||||
Net
change in cash and cash equivalents
|
38,299 | 22,686 | ||||||
Cash
and cash equivalents at beginning of period
|
49,350 | 31,083 | ||||||
Cash
and cash equivalents at end of period
|
$ | 87,649 | $ | 53,769 |
The
accompanying notes are an integral part of these financial
statements.
6
CE
CASECNAN WATER AND ENERGY COMPANY, INC.
STATEMENTS
OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(Amounts
in thousands)
Accumulated
|
||||||||||||||||||||
Additional
|
Other
|
|||||||||||||||||||
Common
|
Paid-in
|
Retained
|
Comprehensive
|
|||||||||||||||||
Stock
|
Capital
|
Earnings
|
Loss,
net
|
Total
|
||||||||||||||||
Balance,
January 1, 2008
|
$ | 29 | $ | 123,807 | $ | 148,004 | $ | - | $ | 271,840 | ||||||||||
Net
income
|
- | - | 46,055 | - | 46,055 | |||||||||||||||
Other
comprehensive loss
|
- | - | - | (1,840 | ) | (1,840 | ) | |||||||||||||
Balance,
September 30, 2008
|
$ | 29 | $ | 123,807 | $ | 194,059 | $ | (1,840 | ) | $ | 316,055 | |||||||||
Balance,
January 1, 2009
|
$ | 29 | $ | 123,807 | $ | 221,839 | $ | (5,119 | ) | $ | 340,556 | |||||||||
Net
income
|
- | - | 66,744 | - | 66,744 | |||||||||||||||
Other
comprehensive income
|
- | - | - | 3,351 | 3,351 | |||||||||||||||
Dividends
declared
|
- | - | (26,000 | ) | - | (26,000 | ) | |||||||||||||
Balance,
September 30, 2009
|
$ | 29 | $ | 123,807 | $ | 262,583 | $ | (1,768 | ) | $ | 384,651 |
The
accompanying notes are an integral part of these financial
statements.
7
CE
CASECNAN WATER AND ENERGY COMPANY, INC.
NOTES
TO FINANCIAL STATEMENTS
(Unaudited)
(in U.S.
dollars, unless indicated otherwise)
(1)
|
General
|
CE Casecnan
Water and Energy Company, Inc. (the “Company” or “CE Casecnan”) is a
privately held Philippine corporation formed indirectly by MidAmerican Energy
Holdings Company (“MEHC”) and was registered with the Philippine Securities and
Exchange Commission on September 21, 1994. The Company is 70% owned by
CE Casecnan II, Inc., 15% owned by CE Casecnan Ltd., a
Bermuda-registered corporation, which are both indirect wholly owned
subsidiaries of MEHC, and 15% owned by a third party, subject to appeal. MEHC is
a consolidated subsidiary of Berkshire Hathaway Inc.
The
Company has a contract with the Republic of the Philippines (“ROP”), through the
Philippine National Irrigation Administration (“NIA”) (a ROP-owned and
controlled corporation), for the development and construction of a hydroelectric
power plant and related facilities under a build-own-operate-transfer agreement,
as amended by the Supplemental Agreement dated September 29, 2003 (“Project
Agreement”), covering a 20-year cooperation period (“Cooperation Period”) ending
December 11, 2021, with obligations for the delivery of water and
electricity. At the end of the Cooperation Period, the combined irrigation and
150 megawatt hydroelectric power generation project (the “Casecnan Project”)
will be transferred to the ROP at no cost on an “as is” basis. NIA’s obligations
under the Project Agreement are guaranteed by the full faith and credit of the
ROP (the “Performance Undertaking”).
The
Casecnan Project is dependent upon sufficient rainfall to generate electricity
and deliver water. The seasonality of rainfall patterns and the variability of
rainfall from year to year, all of which are outside the control of the Company,
have a material impact on the amounts of electricity generated and water
delivered by the Casecnan Project. Rainfall has historically been highest from
June through December and lowest from January through May. The contractual terms
for variable water and energy delivery fees can produce significant variability
in revenue between reporting periods.
The
unaudited Financial Statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (“GAAP”) for
interim financial information and the United States Securities and Exchange
Commission’s rules and regulations for Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the disclosures required
by GAAP for annual financial statements. Management believes the unaudited
Financial Statements contain all adjustments (consisting only of normal
recurring adjustments) considered necessary for the fair presentation of the
Financial Statements as of September 30, 2009 and for the three- and
nine-month periods ended September 30, 2009 and 2008. The results of
operations for the three- and nine-month periods ended September 30, 2009
are not necessarily indicative of the results to be expected for the full year.
The Company has evaluated subsequent events through November 5, 2009, which
is the date the unaudited Financial Statements were issued.
The
preparation of the unaudited Financial Statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the period. Actual results
may differ from the estimates used in preparing the unaudited Financial
Statements. Note 2 of Notes to Financial Statements included in the
Company’s Annual Report on Form 10-K for the year ended December 31,
2008 describes the most significant accounting policies used in the preparation
of the Financial Statements. There have been no significant changes in the
Company’s assumptions regarding significant accounting estimates and policies
during the nine-month period ended September 30, 2009.
(2)
|
New
Accounting Pronouncements
|
In
April 2009, the Financial Accounting Standards Board (“FASB”) issued
authoritative guidance (included in Accounting Standards Codification (“ASC”)
Topic 825, “Financial Instruments”) that requires publicly traded companies
to include the annual fair value disclosures required for all financial
instruments, as defined by GAAP, in interim financial statements. The Company
adopted this guidance on April 1, 2009 and included the required
disclosures within Notes to Financial Statements.
8
In
April 2009, the FASB issued authoritative guidance (included in ASC Topic
320, “Investments – Debt and Equity Securities”) that amends current
other-than-temporary impairment guidance for debt securities to require a new
other-than-temporary impairment model that shifts the focus from an entity’s
intent to hold the debt security until recovery to its intent, or expected
requirement to sell the debt security. In addition, this guidance expands the
already required annual disclosures about other-than-temporary impairment for
debt and equity securities, requires companies to include these expanded
disclosures in interim financial statements and addresses whether an
other-than-temporary impairment should be recognized in earnings, other
comprehensive income or some combination thereof. The Company adopted this
guidance on April 1, 2009. The adoption did not have a material impact on
the Company’s financial results and disclosures included within Notes to
Financial Statements.
In
April 2009, the FASB issued authoritative guidance (included in ASC Topic
820, “Fair Value Measurements and Disclosures”) that clarifies the
determination of fair value when a market is not active and if a transaction is
not orderly. In addition, this guidance amends previous GAAP to require
disclosures in interim and annual periods of the inputs and valuation
techniques used to measure fair value and a discussion of changes in valuation
techniques and related inputs, if any, during the period and defines “major
categories” consistent with those described in previously
existing GAAP. The Company adopted this guidance on April 1, 2009. The
adoption did not have a material impact on the Company’s financial results and
disclosures included within Notes to Financial Statements.
(3)
|
Restricted
Cash and Investments and Other
Investments
|
Restricted
cash and investments consist of the following (in thousands):
September 30,
2009
|
December 31,
2008
|
|||||||
Dividend
set aside account
|
$ | 14,581 | $ | 13,279 | ||||
Debt
service reserve fund
|
9,612 | 9,602 | ||||||
$ | 24,193 | $ | 22,881 |
Restricted
cash and investments are invested in money-market accounts holding U.S.
government securities.
Other
investments consist of auction rate securities with a carrying value of
$18.9 million and $14.1 million at September 30, 2009 and
December 31, 2008, respectively. The auction rate investments earned
interest at 2.25% and 2.5% at September 30, 2009 and December 31,
2008, respectively. The investments have a remaining weighted average maturity
of 21 years and are classified as available-for-sale
securities.
With the
liquidity issues experienced in global credit and capital markets, the
$21.4 million par value of auction rate securities held by the Company at
September 30, 2009 have experienced multiple failed auctions as the amount
of securities submitted for sale has exceeded the amount of purchase orders. The
securities are rated Baa1 by Moody’s Investors Service and AA- and A by Standard
& Poor’s at September 30, 2009. Although there is no current liquid
market for the auction rate securities, the Company believes the underlying
creditworthiness of the repayment sources for these securities’ principal and
interest has not materially deteriorated. Further, the Company does not intend
to sell, nor is it more-likely-than-not that the Company will be required to
sell, the auction rate securities before an orderly market develops and they can
be sold at a price that approximates par value. Therefore, the Company considers
the auction rate securities to be temporarily impaired. At September 30,
2009, the Company’s pre-tax temporary impairment of the auction rate securities
totaled $2.5 million. If the underlying assets and the guarantors of the
auction rate securities experience credit deterioration, the Company may not
ultimately realize the par value of the investments held at September 30,
2009.
9
(4)
|
Income
Taxes
|
A
reconciliation of the Philippine statutory income tax rate to the effective
income tax rate applicable to income before income tax expense
follows:
Three-Month
Periods
|
Nine-Month
Periods
|
|||||||||||||||
Ended
September 30,
|
Ended
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Philippine
statutory income tax rate
|
30 | % | 35 | % | 30 | % | 35 | % | ||||||||
Optional
standard deduction
|
(10 | ) | - | (10 | ) | - | ||||||||||
Other
|
- | (1 | ) | - | (1 | ) | ||||||||||
Effective
income tax rate
|
20 | % | 34 | % | 20 | % | 34 | % |
The
Company’s deferred income tax asset of $5.2 million and $7.0 million
as of September 30, 2009 and December 31, 2008, respectively, consists
mainly of the difference between the financial reporting basis and the tax
reporting basis for development and construction costs.
(5)
|
Related
Party Transactions
|
In the
normal course of business, the Company transacts with related parties on
commercial terms comparable to transactions with third parties. The payable to
affiliates was $2.6 million and $2.7 million at September 30,
2009 and December 31, 2008, respectively. Costs incurred by the Company in
transactions with related parties amounted to $0.4 million for each of the
three-month periods ended September 30, 2009 and 2008, and
$1.1 million and $1.2 million for the nine-month periods ended
September 30, 2009 and 2008, respectively, and consist primarily of cost
allocations.
As of
December 31, 2008, the Company had outstanding $7.1 million of
unsecured subordinated notes payable (the “Notes”) to CE Casecnan Ltd., a
shareholder. The Notes had a maturity of November 1, 2015, and bore an
interest rate consisting of the London Interbank Offer Rate plus 5.25%. The
Notes were redeemable at any time prior to maturity upon demand from CE Casecnan
Ltd and on February 5, 2009, CE Casecnan repaid the outstanding Notes
in full. Interest expense on the Notes was $- million and $0.1 million
for the three-month periods ended September 30, 2009 and 2008,
respectively, and $0.1 million and $1.7 million for the nine-month
periods ended September 30, 2009 and 2008, respectively.
(6)
|
Commitments
and Contingencies
|
Shareholder
Litigation
In
February 2002, pursuant to the share ownership adjustment mechanism in the
CE Casecnan shareholder agreement, CE Casecnan Ltd. advised the
minority shareholder of the Company, LaPrairie Group Contractors (International)
Ltd. (“LPG”) that MEHC’s indirect ownership interest in CE Casecnan had
increased to 100% effective from commencement of commercial operations. In July
2002, LPG filed a complaint in the Superior Court of the State of California,
City and County of San Francisco, against CE Casecnan Ltd. and MEHC. LPG’s
complaint, as amended, seeks compensatory and punitive damages arising out of
CE Casecnan Ltd.’s and MEHC’s alleged improper calculation of the proforma
financial projections and alleged improper settlement of the Philippine National
Irrigation Administration arbitration. In January 2006, the Superior Court
of the State of California entered a judgment in favor of LPG against CE
Casecnan Ltd. Pursuant to the judgment, 15% of the distributions of the Company
was deposited into escrow plus interest at 9% per annum. The judgment was
appealed, and as a result of the appellate decision, CE Casecnan Ltd. determined
that LPG would retain ownership of 10% of the shares of the Company, with the
remaining 5% share to be transferred to CE Casecnan Ltd. subject to certain
buy-up rights under the shareholder agreement. The issues relating to the
exercise of the buy-up right have been decided by the court and in June 2009,
LPG exercised its buy-up rights with respect to the remaining 5% ownership
interest in a transaction between shareholders that did not have any impact on
the Company’s results of operations. In October 2009, the court issued a Final
Judgment declaring that LPG was a 15% shareholder, which Final Judgment remains
subject to appeal.
10
In
July 2005, MEHC and CE Casecnan Ltd. commenced an action against
San Lorenzo Ruiz Builders and Developers Group, Inc. (“San Lorenzo”) in the
District Court of Douglas County, Nebraska, seeking a declaratory judgment as to
San Lorenzo’s right to repurchase 15% of the shares in the Company. In
January 2006, San Lorenzo filed a counterclaim against MEHC and
CE Casecnan Ltd. seeking declaratory relief that it has effectively
exercised its option to purchase 15% of the shares of the Company, that it is
the rightful owner of such shares and that it is due all dividends paid on such
shares. Currently, the action is in the discovery phase and a trial has been set
to begin in March 2010. The impact, if any, of this litigation on the Company
cannot be determined at this time.
Supplemental Real Property
Tax
In July
2008, CE Casecnan received a supplemental real property tax assessment
totaling $28.6 million from the province of Nueva Ecija and the
municipality of Pantabangan for the tax years 2002 through the second quarter of
2008. Subsequent amendments of the supplemental assessment to reflect additional
taxable periods in 2008 and 2009 increased the assessment to $32.5 million.
CE Casecnan forwarded the assessment to NIA and the Philippine Department of
Finance (“DOF”), which must authorize any payment for real property taxes and
are obligated to reimburse the Company pursuant to the Project Agreement. In
December 2008, pursuant to written authorization from NIA and DOF, CE
Casecnan tendered $6.8 million as partial payment of the supplemental
assessment and recorded a receivable of an equal amount for the expected full
reimbursement to CE Casecnan from NIA. The $6.8 million partial payment was
reimbursed by NIA in July 2009. In January 2009, CE Casecnan filed a protest on
the supplemental assessment which the provincial treasurer failed to resolve
timely and in May 2009, filed an appeal with the Local Board of Assessment
Appeals. In October 2009, pursuant to written authorization from NIA and DOF, CE
Casecnan paid under protest $5.0 million to the province of Nueva Ecija. The
payment was accrued as of September 30, 2009 within accrued property,
income and other taxes. A receivable of an equal amount also was accrued as of
September 30, 2009 to reflect the expected full reimbursement to CE
Casecnan from NIA. Discussions continue among CE Casecnan, NIA, DOF and the
province of Nueva Ecija to resolve the supplemental real property tax
assessment. No further liability for supplemental real property tax has been
recognized as the Company believes that the claim is without merit.
In March
2009, CE Casecnan received a supplemental real property tax assessment totaling
$36.5 million from the province of Nueva Vizcaya for the tax years 2002 to 2009.
CE Casecnan forwarded the assessment to NIA and the DOF, which must authorize
any payment for real property taxes and are obligated to reimburse the Company
pursuant to the Project Agreement. In May 2009, upon instructions from NIA, CE
Casecnan filed an appeal of the supplemental assessment with the Local Board of
Assessment Appeals. CE Casecnan and the province of Nueva Vizcaya negotiated
terms of an interim agreement that provides for a payment of $16.1 million
by CE Casecnan and a cessation of collection efforts by the province of Nueva
Vizcaya until a final determination of taxable value is rendered. The interim
agreement is expected to be executed in the fourth quarter. An amount of
$16.1 million was accrued as of September 30, 2009 within accrued
property, income and other taxes. A receivable of an equal amount also was
accrued as of September 30, 2009 to reflect the expected full reimbursement
to CE Casecnan from NIA. Discussions continue among CE Casecnan, NIA, DOF and
the province of Nueva Vizcaya to resolve the supplemental real property tax
assessment. No further liability for supplemental real property tax has been
recognized as the Company believes that the claim is without
merit.
National Wealth
Tax
In July
2008, CE Casecnan received an assessment totaling $4.1 million from the
municipality of Alfonso Castaneda for a share of national wealth tax it claims
is owed by the Company for the years from 2002 through 2007. CE Casecnan
forwarded the assessment to NIA and the DOF, which must authorize any payment
for national wealth taxes and are obligated to reimburse the Company pursuant to
the Project Agreement. In September 2008, CE Casecnan received a temporary
restraining order to enjoin the municipality of Alfonso Castaneda from pursuing
its collection efforts until the matter can be decided by the court. A pre-trial
hearing was held in December 2008. The proceedings were suspended to allow
the municipality of Alfonso Castaneda to provide other local government units
the opportunity to intervene in the case. At the June 2009 hearing, the judge
summoned all affected local government units to participate in the hearing and
file the necessary motions for leave for intervention and third party
complaints. No liability for national wealth tax has been recognized as the
Company believes that the claim is without merit.
11
Franchise
Tax
In
January 2006, CE Casecnan received franchise tax assessments for the years
2001 to 2006 totaling $2.2 million from the province of Nueva Vizcaya.
CE Casecnan believes that franchise tax is imposed on companies which have
a secondary or special franchise from the government. CE Casecnan is an
independent power producer and does not have a government franchise. The
Electric Power Industry Reform Act provides that independent power generation is
not a public utility operation and does not require a franchise. Therefore, the
Company has not recognized a liability relating to these assessments. In June
2006, CE Casecnan filed appeals of the assessments which are currently
pending before the Supreme Court Office of the Court Administrator for
reassignment to another court to hear and decide the cases.
Concentration of
Risk
NIA’s
obligations under the Project Agreement are substantially denominated in U.S.
Dollars and are the Company’s sole source of operating revenue. Because of the
Company’s dependence on NIA, any material failure of NIA to fulfill its
obligations under the Project Agreement and any material failure of the ROP to
fulfill its obligations under the Performance Undertaking would significantly
impair the ability of the Company to meet its existing and future obligations,
including obligations pertaining to its outstanding debt. No shareholders,
partners or affiliates of the Company, including MEHC, and no directors,
officers or employees of the Company have guaranteed or will be in any way
liable for payment of the Company’s obligations. As a result, payment of the
Company’s obligations depends upon the availability of sufficient revenue from
the Company’s business after the payment of operating expenses.
(7)
|
Fair
Value Measurements
|
The
carrying amounts of the Company’s cash, certain cash equivalents, receivables
and accounts payable and other accrued liabilities approximate fair value
because of the short-term maturity of these instruments. The Company uses a
three level hierarchy for determining fair value and a financial asset or
liability classification within the hierarchy is determined based on the lowest
level input that is significant to the fair value measurement.
The
Company has investments in money market mutual funds that are accounted for as
available-for-sale securities, are stated at fair value and are presented as
cash and cash equivalents and restricted cash and investments on the Balance
Sheets. The fair value of these securities was $104.6 million and
$34.1 million as of September 30, 2009 and December 31, 2008,
respectively. The fair value is determined by using the quoted market price or
net asset value of the identical security in its principal market. As such, the
Company considers these securities to be valued using Level 1
inputs.
Additionally,
the Company has auction rate securities that are measured at fair value and are
presented as other investments on the Balance Sheets. The fair value of the
Company’s investments in auction rate securities, where there is no current
liquid market, is determined using internally developed discounted cash flow
pricing models based on available observable market data and the Company’s
judgment about the assumptions, including liquidity and nonperformance risks,
which market participants would use when pricing the asset. As such, the Company
considers these securities to be valued using Level 3 inputs. The following
table reconciles the beginning and ending balances of the Company’s auction rate
securities measured at fair value on a recurring basis using significant Level 3
inputs (in thousands):
Three-Month
Periods
|
Nine-Month
Periods
|
|||||||||||||||
Ended
September 30,
|
Ended
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Beginning
balance
|
$ | 17,444 | $ | 19,747 | $ | 14,096 | $ | 21,409 | ||||||||
Unrealized
gains (losses) included in other comprehensive
income (loss) |
1,440 | (1,169 | ) | 4,788 | (2,831 | ) | ||||||||||
Ending
balance
|
$ | 18,884 | $ | 18,578 | $ | 18,884 | $ | 18,578 |
12
The
Company’s long-term debt is carried at cost in the Financial Statements. The
fair value of the Company’s long-term debt has been estimated based upon quoted
market prices. The following table presents the carrying amount and estimated
fair value of the Company’s long-term debt (in thousands):
As
of September 30, 2009
|
As
of December 31, 2008
|
|||||||||||||||
Carrying
Amount
|
Fair
Value
|
Carrying
Amount
|
Fair
Value
|
|||||||||||||
Long-term
debt
|
$ | 24,010 | $ | 24,430 | $ | 30,870 | $ | 31,372 |
(8)
|
Comprehensive
Income and Components of Accumulated Other Comprehensive Loss,
Net
|
Comprehensive
income consists of the following components (in thousands):
Three-Month
Periods
|
Nine-Month
Periods
|
|||||||||||||||
Ended
September 30,
|
Ended
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net
income
|
$ | 34,578 | $ | 19,848 | $ | 66,751 | $ | 46,055 | ||||||||
Other
comprehensive income (loss) – unrealized gains
(losses) on marketable securities, net of tax of $432, $(410), $1,437, $(991) |
1,008 | (759 | ) | 3,351 | (1,840 | ) | ||||||||||
Comprehensive
income
|
$ | 35,586 | $ | 19,089 | $ | 70,102 | $ | 44,215 |
Accumulated
other comprehensive loss, net, consists of unrealized losses on marketable
securities totaling $1.8 million, net of tax of $0.7 million, and
$5.1 million, net of tax of $2.2 million, as of September 30,
2009 and December 31, 2008, respectively.
13
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
The
following is management’s discussion and analysis of certain significant factors
that have affected the financial condition and results of operations of CE
Casecnan Water and Energy Company, Inc. (“CE Casecnan” or the “Company”) during
the periods included herein. Explanations include management’s best estimate of
the impact of weather and other factors. This discussion should be read in
conjunction with the Company’s historical unaudited Financial Statements and
Notes to Financial Statements included in Item 1 of this Form 10-Q.
The Company’s actual results in the future could differ significantly from the
historical results.
Forward-Looking
Statements
This
report contains statements that do not directly or exclusively relate to
historical facts. These statements are “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements can typically be identified by the use of
forward-looking words, such as “may,” “could,” “project,” “believe,”
“anticipate,” “expect,” “estimate,” “continue,” “intend,” “potential,” “plan,”
“forecast” and similar terms. These statements are based upon the Company’s
current intentions, assumptions, expectations and beliefs and are subject to
risks, uncertainties and other important factors. Many of these factors are
outside the Company’s control and could cause actual results to differ
materially from those expressed or implied by the Company’s forward-looking
statements. These factors include, among others:
·
|
changes
in weather conditions that could affect operating revenue;general
economic, political and business conditions in the Philippines and
throughout the world;
|
·
|
changes
in governmental, legislative or regulatory requirements affecting the
Company or the power generation
industry;
|
·
|
availability
of qualified personnel;
|
·
|
the
impact of new accounting pronouncements or changes in current accounting
estimates and assumptions on financial results;
and
|
·
|
other
business or investment considerations that may be disclosed from time to
time in the Company’s filings with the United States Securities and
Exchange Commission (the “SEC”) or in other publicly disseminated written
documents.
|
Further
details of the potential risks and uncertainties affecting the Company are
described in the Company’s filings with the SEC, including Part II, Item 1A and
other discussions contained in this Form 10-Q. The Company undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. The foregoing review
of factors should not be construed as exclusive.
Business
The
Company has a contract with the Republic of the Philippines (“ROP”), through the
Philippine National Irrigation Administration (“NIA”) (a ROP-owned and
controlled corporation), for the development and construction of a hydroelectric
power plant and related facilities under a build-own-operate-transfer agreement,
as amended by the Supplemental Agreement dated September 29, 2003 (the
“Project Agreement”), covering a 20-year cooperation period (“Cooperation
Period”) ending December 11, 2021, with obligations for the delivery of
water and electricity. At the end of the Cooperation Period, the combined
irrigation and 150 megawatt hydroelectric power generation project (the
“Casecnan Project”) will be transferred to the ROP at no cost on an “as is”
basis. NIA’s obligations under the Project Agreement are guaranteed by the full
faith and credit of the ROP (the “Performance Undertaking”). The Project
Agreement and the Performance Undertaking provide for the resolution of disputes
by binding arbitration in Singapore under international arbitration
rules.
Results
of Operations for the Third Quarter and the First Nine Months of 2009 and
2008
The
Casecnan Project is dependent upon sufficient rainfall to generate electricity
and deliver water. The seasonality of rainfall patterns and the variability of
rainfall from year to year, all of which are outside the control of the Company,
have a material impact on the amounts of electricity generated and water
delivered by the Casecnan Project. Rainfall has historically been highest from
June through December and lowest from January through May. The contractual terms
for variable water and energy delivery fees can produce significant variability
in revenue between reporting periods.
14
Prior to
December 25, 2008, the water delivery fee was a fixed monthly payment based
upon an assumed annual water delivery of 801.9 million cubic meters,
prorated to 66.8 million cubic meters per month, multiplied by the water
delivery fee rate of $0.07381 per cubic meter. For each contract year
starting from December 25, 2003 and ending on December 25, 2008, a
water delivery fee credit, or deferred revenue, was computed equal to
801.9 million cubic meters minus the greater of actual water deliveries or
700.0 million cubic meters - the annual minimum water delivery threshold.
Accordingly, in recognizing revenue, the water delivery fees were recorded each
month prorated to 58.3 million cubic meters until the minimum threshold had
been reached for the current contract year. The water delivery fee credit at the
end of each contract year, if any, was available to be earned in the succeeding
contract year through December 25, 2008. All water delivery credits
available under the contract were earned by the Company as of December 25,
2008.
For
contract years from December 25, 2008 through the end of the Cooperation
Period, guaranteed water delivery fees are $51.7 million, calculated as the
annual minimum water delivery threshold multiplied by $0.07381.
Variable
water delivery fees are earned for all water deliveries within the contract
year, if any, exceeding the annual minimum water delivery threshold multiplied
by $0.07381, until a cumulative 1.324 billion cubic meters of water subject
to variable water delivery fees have been delivered.
Guaranteed
energy delivery fees are $36.4 million per year, calculated as the assumed
annual delivery of 228.0 Gigawatt-hours (“GWh”), prorated to 19.0 GWh
per month and multiplied by $0.1596 per kilowatt-hour (“kWh”).
The
Company earns variable energy delivery fees in each contract year based upon
actual energy delivered in excess of 228.0 GWh, multiplied by the
applicable rate, until cumulative energy of 490.0 GWh per year are
delivered. Prior to December 25, 2008, the rate was $0.1509 per kWh.
Thereafter, the variable energy delivery rate is $0.1132 per kWh for the
contract year ending December 25, 2009, escalating at 1% per annum. Energy
deliveries between 490.0 GWh and 550.0 GWh within a contract year earn
variable energy delivery fees at a rate of 1.3 Philippine pesos (“pesos”)
per kWh prior to December 25, 2008 and 1.0 pesos per kWh thereafter,
escalating at 1% per annum. Energy deliveries above 550.0 GWh per year are
at no cost to NIA. Within each contract year, no variable energy delivery fees
are payable until energy in excess of the cumulative 19.0 GWh per month for
the contract year to date has been delivered.
The
following table provides certain operating data of the Casecnan
Project:
Third
Quarter
|
First
Nine Months
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Electricity
produced (GWh)
|
243.5 | 177.3 | 472.8 | 382.9 | ||||||||||||
Water
delivered (million cubic meters)
|
446.8 | 315.1 | 831.3 | 665.4 |
The
Company’s water and energy fees are as follows (in millions):
Third
Quarter
|
First
Nine Months
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Water
delivery fees
|
$ | 23.3 | $ | 12.9 | $ | 49.0 | $ | 38.8 | ||||||||
Energy
delivery fees
|
27.3 | 25.8 | 57.5 | 57.5 | ||||||||||||
$ | 50.6 | $ | 38.7 | $ | 106.5 | $ | 96.3 |
15
Revenue
in 2009 increased $11.9 million for the third quarter and
$10.2 million for the first nine months compared to 2008. The increase in
water delivery fees and energy delivery fees for 2009 was due to higher than
normal water flow which resulted in water deliveries exceeding the annual
minimum threshold and higher electricity production compared to 2008. The higher
electricity production in 2009 was partially offset for the third quarter and
largely offset for the first nine months by the lower price for variable energy
fees.
Plant
operations and other operating expenses decreased $0.2 million for the
third quarter and $0.5 million for the first nine months of 2009 compared
to 2008 primarily due to lower general and administrative costs.
Interest
expense decreased $0.9 million for the third quarter and $4.6 million
for the first nine months of 2009 compared to 2008 due to lower outstanding debt
balances resulting from the scheduled repayment of long-term debt and the
repayment of notes payable.
Interest
income decreased $0.3 million for the third quarter and $1.0 million
for the first nine months of 2009 compared to 2008 as a result of lower interest
rates.
Other,
net decreased $0.3 million for the third quarter and $1.0 million for
the first nine months of 2009 compared to 2008 due to lower allocable output
value added tax and the impact of foreign currency exchange rates on
peso-denominated transactions.
Income
tax expense decreased $2.0 million for the third quarter and
$7.4 million for the first nine months of 2009 compared to 2008 due to a
reduction in the Philippine statutory income tax rate from 35% to 30% and the
adoption of the optional standard deduction method for calculating income tax
liabilities, partially offset by higher taxable income.
Liquidity
and Capital Resources
NIA’s
obligations under the Project Agreement are substantially denominated in U.S.
dollars and are the Company’s sole source of operating revenue. Because of the
Company’s dependence on NIA, any material failure of NIA to fulfill its
obligations under the Project Agreement and any material failure of the ROP to
fulfill its obligations under the Performance Undertaking would significantly
impair the ability of the Company to meet its existing and future obligations,
including obligations pertaining to its outstanding debt. No shareholders,
partners or affiliates of the Company, including MidAmerican Energy Holdings
Company, and no directors, officers or employees of the Company have guaranteed
or will be in any way liable for payment of the Company’s obligations. As a
result, payment of the Company’s obligations depends upon the availability of
sufficient revenue from the Company’s business after the payment of operating
expenses.
The
Company’s cash and cash equivalents were $87.6 million as of
September 30, 2009, compared to $49.4 million as of
December 31, 2008.
Cash Flows from Operating
Activities
Net cash
flows from operating activities for the nine-month periods ended
September 30, 2009 and 2008 were $79.1 million and $74.8 million,
respectively. The increase in operating cash flows in 2009 was primarily due to
the higher revenue collections resulting from higher water delivery fees and
energy delivery fees.
Cash Flows from Investing
Activities
Net cash
flows from investing activities for the nine-month periods ended
September 30, 2009 and 2008 were $(2.1) million and
$(1.3) million, respectively. In 2009, the Company deposited
$1.3 million of declared but unpaid dividends in the escrow account
compared to $0.9 million in 2008. Capital expenditures were
$0.4 million higher in 2009 due to improvements to the water catchment
structures.
16
Cash Flows from Financing
Activities
Net cash
flows from financing activities for the nine-month periods ended
September 30, 2009 and 2008 were $(38.8) million and
$(50.8) million, respectively. In 2009, the Company repaid the remaining
$7.1 million of notes payable to CE Casecnan Ltd., made $6.9 million
of project financing debt scheduled payments and paid $24.7 million of
dividends on common stock. In 2008, the Company made $18.9 million of
project financing debt scheduled payments and repaid $32.1 million of notes
payable to CE Casecnan Ltd.
Auction
Rate Securities
With the
liquidity issues experienced in global credit and capital markets, the
$21.4 million par value of auction rate securities held by the Company at
September 30, 2009 have experienced multiple failed auctions as the amount
of securities submitted for sale has exceeded the amount of purchase orders. The
securities are rated Baa1 by Moody’s Investors Service and AA- and A by Standard
& Poor’s at September 30, 2009. Although there is no current liquid
market for the auction rate securities, the Company believes the underlying
creditworthiness of the repayment sources for these securities’ principal and
interest has not materially deteriorated. Further, the Company does not intend
to sell, nor is it more-likely-than-not that the Company will be required to
sell, the auction rate securities before an orderly market develops and they can
be sold at a price that approximates par value. Therefore, the Company considers
the auction rate securities to be temporarily impaired. At September 30,
2009, the Company’s pre-tax temporary impairment of the auction rate securities
totaled $2.5 million. If the underlying assets and the guarantors of the
auction rate securities experience credit deterioration, the Company may not
ultimately realize the par value of the investments held at September 30,
2009.
Supplemental
Real Property Tax
In July
2008, CE Casecnan received a supplemental real property tax assessment
totaling $28.6 million from the province of Nueva Ecija and the
municipality of Pantabangan for the tax years 2002 through the second quarter of
2008. Subsequent amendments of the supplemental assessment to reflect additional
taxable periods in 2008 and 2009 increased the assessment to $32.5 million.
CE Casecnan forwarded the assessment to NIA and the Philippine Department of
Finance (“DOF”), which must authorize any payment for real property taxes and
are obligated to reimburse the Company pursuant to the Project Agreement. In
December 2008, pursuant to written authorization from NIA and DOF, CE
Casecnan tendered $6.8 million as partial payment of the supplemental
assessment and recorded a receivable of an equal amount for the expected full
reimbursement to CE Casecnan from NIA. The $6.8 million partial payment was
reimbursed by NIA in July 2009. In January 2009, CE Casecnan filed a protest on
the supplemental assessment which the provincial treasurer failed to resolve
timely and in May 2009, filed an appeal with the Local Board of Assessment
Appeals. In October 2009, pursuant to written authorization from NIA and DOF, CE
Casecnan paid under protest $5.0 million to the province of Nueva Ecija.
The payment was accrued as of September 30, 2009 within accrued property,
income and other taxes. A receivable of an equal amount also was accrued as of
September 30, 2009 to reflect the expected full reimbursement to CE
Casecnan from NIA. Discussions continue among CE Casecnan, NIA, DOF and the
province of Nueva Ecija to resolve the supplemental real property tax
assessment. No further liability for supplemental real property tax has been
recognized as the Company believes that the claim is without merit.
In March
2009, CE Casecnan received a supplemental real property tax assessment totaling
$36.5 million from the province of Nueva Vizcaya for the tax years 2002 to
2009. CE Casecnan forwarded the assessment to NIA and the DOF, which must
authorize any payment for real property taxes and are obligated to reimburse the
Company pursuant to the Project Agreement. In May 2009, upon instructions from
NIA, CE Casecnan filed an appeal of the supplemental assessment with the Local
Board of Assessment Appeals. CE Casecnan and the province of Nueva Vizcaya
negotiated terms of an interim agreement that provides for a payment of
$16.1 million by CE Casecnan and a cessation of collection efforts by the
province of Nueva Vizcaya until a final determination of taxable value is
rendered. The interim agreement is expected to be executed in the fourth
quarter. An amount of $16.1 million was accrued as of September 30,
2009 within accrued property, income and other taxes. A receivable of an equal
amount also was accrued as of September 30, 2009 to reflect the expected
full reimbursement to CE Casecnan from NIA. Discussions continue among CE
Casecnan, NIA, DOF and the province of Nueva Vizcaya to resolve the supplemental
real property tax assessment. No further liability for supplemental real
property tax has been recognized as the Company believes that the claim is
without merit.
17
National
Wealth Tax
In July
2008, CE Casecnan received an assessment totaling $4.1 million from the
municipality of Alfonso Castaneda for a share of national wealth tax it claims
is owed by the Company for the years from 2002 through 2007. CE Casecnan
forwarded the assessment to NIA and the DOF, which must authorize any payment
for national wealth taxes and are obligated to reimburse the Company pursuant to
the Project Agreement. In September 2008, CE Casecnan received a temporary
restraining order to enjoin the municipality of Alfonso Castaneda from pursuing
its collection efforts until the matter can be decided by the court. A pre-trial
hearing was held in December 2008. The proceedings were suspended to allow the
municipality of Alfonso Castaneda to provide other local government units the
opportunity to intervene in the case. At the June 2009 hearing, the judge
summoned all affected local government units to participate in the hearing and
file the necessary motions for leave for intervention and third party
complaints. No liability for national wealth tax has been recognized as the
Company believes that the claim is without merit.
Franchise
Tax
In
January 2006, CE Casecnan received franchise tax assessments for the years
2001 to 2006 totaling $2.2 million from the province of Nueva Vizcaya.
CE Casecnan believes that franchise tax is imposed on companies which have
a secondary or special franchise from the government. CE Casecnan is an
independent power producer and does not have a government franchise. The
Electric Power Industry Reform Act provides that independent power generation is
not a public utility operation and does not require a franchise. Therefore, the
Company has not recognized a liability relating to these assessments. In June
2006, CE Casecnan filed appeals of the assessments which are currently
pending before the Supreme Court Office of the Court Administrator for
reassignment to another court to hear and decide the cases.
Contractual
Obligations
Subsequent
to December 31, 2008, there were no material changes outside the normal
course of business in contractual obligations from the information provided in
Item 7 of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008.
New
Accounting Pronouncements
For a
discussion of new accounting pronouncements affecting the Company, refer to
Note 2 of Notes to Financial Statements included in Item 1 of this
Form 10-Q.
Critical
Accounting Policies
Certain
accounting policies require management to make estimates and judgments
concerning transactions that will be settled several years in the future.
Amounts recognized in the Financial Statements from such estimates are
necessarily based on numerous assumptions involving varying and potentially
significant degrees of judgment and uncertainty. Accordingly, the amounts
currently reflected in the Financial Statements will likely increase or decrease
in the future as additional information becomes available. Estimates are used
for, but not limited to, the allowance for doubtful accounts and auction rate
securities – measurement principles. For additional discussion of the Company’s
critical accounting policies, see Item 7 of the Company’s Annual Report on
Form 10-K for the year ended December 31, 2008. The Company’s critical
accounting policies have not changed materially since December 31,
2008.
Quantitative
and Qualitative Disclosures About Market
Risk
|
For
quantitative and qualitative disclosures about market risk affecting the
Company, see Item 7A of the Company’s Annual Report on Form 10-K for the
year ended December 31, 2008. The Company’s exposure to market risk
and its management of such risk has not changed materially since
December 31, 2008.
18
Controls
and Procedures
|
At the
end of the period covered by this Quarterly Report on Form 10-Q, the Company
carried out an evaluation, under the supervision and with the participation of
the Company’s management, including the President (principal executive officer)
and the Chief Financial Officer (principal financial officer), of the
effectiveness of the design and operation of the Company’s disclosure controls
and procedures (as defined in Rule 13a-15(e) promulgated under the Securities
and Exchange Act of 1934, as amended). Based upon that evaluation, the Company’s
management, including the President (principal executive officer) and the Chief
Financial Officer (principal financial officer), concluded that the Company’s
disclosure controls and procedures were effective to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms, and is accumulated and
communicated to management, including the Company’s President (principal
executive officer) and Chief Financial Officer (principal financial officer), or
persons performing similar functions, as appropriate to allow timely decisions
regarding required disclosure. There has been no change in the Company’s
internal control over financial reporting during the quarter ended
September 30, 2009 that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
19
PART
II
Legal
Proceedings
|
None.
Risk
Factors
|
There has
been no material change to the Company’s risk factors from those disclosed in
Item 1A of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008.
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
Not
applicable.
Item
3.
|
Not
applicable.
Not
applicable.
Item
5.
|
Not
applicable.
Item
6.
|
The
exhibits listed on the accompanying Exhibit Index are filed as part of this
Quarterly Report.
20
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.
CE CASECNAN WATER AND ENERGY COMPANY,
INC.
|
||
(Registrant)
|
||
Date:
November 5, 2009
|
/s/ Patrick J. Goodman
|
|
Patrick
J. Goodman
|
||
Senior
Vice President and Chief Financial Officer
|
||
(principal
financial and accounting officer)
|
21
Exhibit No.
|
Description
|
|
31.1
|
Principal
Executive Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Principal
Financial Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Principal
Executive Officer Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Principal
Financial Officer Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
22