SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
______________________
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended
SEPTEMBER 30, 1996
COMMISSION FILE NO. 333-608
CE CASECNAN WATER AND ENERGY COMPANY, INC.
(Exact name of registrant as specified in its charter)
PHILIPPINES Not Applicable
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6750 Ayala Avenue, 24th Floor
Makati, Metro Manila Philippines Not Applicable
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (632) 892-0276
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
Former name, former address and former fiscal year, if changed
since last report. Not Applicable
767,162 shares of Common Stock, $0.038 par value were outstanding
as of September 30, 1996.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
Form 10-Q
September 30, 1996
_____________
C O N T E N T S
PART I: FINANCIAL INFORMATION Page
Item 1. Financial Statements
Report of Independent Accountants 3
Unaudited Balance Sheet, September 30, 1996 and
December 31, 1995 4
Unaudited Statements of Operations for the Three Months and
Nine Months Ended September 30, 1996 and for the period
from inception (September 21, 1994) to September 30,1996 5
Unaudited Statements of Cash Flows for the Nine Months Ended
September 30, 1996 and 1995 and for the period from
inception (September 21, 1994) to September 30, 1996 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults on Senior Securities 11
Item 4. Submission of Matters to a Vote of
Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibit 27 13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Stockholders and the Board of Directors
CE Casecnan Water and Energy Company, Inc.
We have reviewed the accompanying balance sheet of CE Casecnan
Water and Energy Company, Inc. (a company in the development
stage) as of September 30, 1996, and the related statements of
operations for the three months and nine months ended September
30, 1996 and the period from inception (September 21, 1994) to
September 30, 1996, and cash flows for the nine months ended
September 30, 1996 and 1995 and the period from inception
(September 21, 1994) to September 30, 1996. The financial
statements are the responsibility of the Company's management.
A review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with auditing standards generally
accepted in the United States of America, 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 review, we are not aware of any material
modifications that should be made to the financial statements
referred to above for them to be in conformity with accounting
principles generally accepted in the United States of America.
We have audited in accordance with auditing standards generally
accepted in the United States of America, the balance sheet of CE
Casecnan Water and Energy Company, Inc. (a company in the
development stage) as of December 31, 1995, and the related
statements of operations for the year ended December 31, 1995,
changes in stockholders' equity for the period from date of
inception (September 21, 1994) to December 31, 1995 and cash
flows for the year ended December 31, 1995, three months ended
December 31, 1994 and for the period from inception (September
21, 1994) to December 31, 1995 (not presented separately herein)
and, in our report dated March 4, 1996, we expressed an
unqualified opinion on those financial statements.
SYCIP, GORRES, VELAYO & CO.
An Arthur Andersen Member Firm
6760 Ayala Avenue
Makati City, Philippines
October 21, 1996
CE CASECNAN WATER AND ENERGY COMPANY, INC.
UNAUDITED BALANCE SHEET
September 30, 1996
(with comparative audited figures for 1995)
(in thousands, except share and per share amounts)
________________________________
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
<S> <C> <C>
ASSETS
Cash $ 1,643 $ 1,696
Restricted cash and short-term
investments 135,330 235,851
Accrued interest and other receivables 5,755 2,820
Restricted investments 298,962 238,465
Bond issue costs, net 12,804 13,342
Development costs 44,909 8,340
Deferred income tax 5,179 646
Total assets $504,582 $501,160
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 18,314 $ 5,951
Advances from an affiliate 549 1,073
Notes and bonds payable 371,500 371,500
Total liabilities 390,363 378,524
Commitments and contingencies
Stockholders' equity:
Common stock - par value $0.038
per share, authorized 2,148,000
shares, issued and outstanding
767,162 shares at September 30, 1996
and December 31, 1995, respectively 29 29
Additional paid in capital 123,807 123,807
Accumulated deficit (9,617) (1,200)
Total stockholders' equity 114,219 122,636
Total liabilities and stockholders'
equity $504,582 $501,160
</TABLE>
The accompanying notes are an integral part of these financial statements.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
UNAUDITED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
________________________________
<TABLE>
<CAPTION>
Three Months Nine Months From Inception
Ended Ended (September 21, 1994)
September 30, September 30, to September 30,
1996 1996 1996
<S> <C> <C> <C>
Revenues:
Interest and other income $ 6,438 $ 19,706 $ 22,200
Total revenues 6,438 19,706 22,200
Costs and expenses:
Interest expense 11,439 34,307 38,657
Less interest capitalized (1,164) (2,362) (2,447)
Amortization of bond issue
costs 238 710 786
Total cost and expenses 10,513 32,655 36,996
Loss before income taxes (4,075) (12,949) (14,796)
Deferred income tax benefit 1,426 4,532 5,179
Net loss to common
stockholders $ (2,649) $ (8,417) $ (9,617)
Net loss per share - primary $ (3.45) $ (10.97) $ (14.97)
Average number of common and
common equivalent shares
outstanding 767,162 767,162 642,498
</TABLE>
The accompanying notes are an integral part of these financial statements.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
UNAUDITED STATEMENTS OF CASH FLOWS
(in thousands)
________________________________
<TABLE>
<CAPTION>
Nine Months Nine Months From Inception
Ended Ended (September 21, 1994)
September 30, September 30, to September 30,
1996 1995 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (8,417) $ - $ (9,617)
Adjustments to reconcile net cash
flow from operating activities:
Provision for deferred income
tax benefit (4,532) - (5,179)
Amortization of bond issue costs 710 - 786
Increase in accrued interest and
other receivables (2,935) - (5,755)
Increase in accounts payable and
accrued expenses 11,450 - 15,715
Net cash flows from operating activities (3,724) - (4,050)
Cash flows from investing activities:
Additions to development costs (36,569) (2,480) (44,909)
Decrease (increase) in restricted
cash and short-term investments100,521 - (135,330)
Increase in restricted investments (60,497) - (298,962)
Increase in accounts payable and accrued
expenses related to development
activities 1,193 - 2,599
Net cash flows from investing activities 4,648 (2,480) (476,602)
Cash flows from financing activities:
Issuance of bonds payable - - 371,500
Proceeds from issuance of capital stock - - 29
Additional paid-in capital - - 123,807
Bond issue costs (173) - (13,590)
Accrued expense related to financing
activities (279) 25 -
Advances from (to) an affiliate (525) 1,955 549
Net cash flows from financing activities (977) 1,980 482,295
Net increase (decrease) in cash and
cash equivalents (53) (500) 1,643
Cash and cash equivalents at beginning
of period 1,696 550 -
Cash and cash equivalents at end
of period $ 1,643 $ 50 $ 1,643
</TABLE>
The accompanying notes are an integral part of these financial statements.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share amounts)
________________________________
1. General:
In the opinion of management of CE Casecnan Water and Energy
Company, Inc. (the "Company"), the accompanying unaudited
financial statements contain all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the
financial position as of September 30, 1996 and the results of
operations for the three months and nine months ended September
30, 1996, and the period from inception (September 21, 1994) to
September 30, 1996, and cash flows for the nine months ended
September 30, 1996 and 1995 and the period from inception
(September 21, 1994) to September 30, 1996.
The results of operations for the three months and nine months
ended September 30, 1996 are not necessarily indicative of the
results to be expected for the full year. The Company did not
have any revenues or expenses until the fourth quarter of 1995.
2. Other Footnote Information:
Reference is made to the Company's December 31, 1995 audited
financial statements included in Amendment No. 3 to the Form S-4
dated April 30, 1996 that included information necessary or
useful to the understanding of the Company's business and
financial statement presentations. In particular, the Company's
significant accounting policies and practices were presented as
Note 3 to the financial statements included in that report.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share amounts)
________________________________
Results of Operations:
The Company is in the construction stage and has not yet started
commercial operations as of September 30, 1996. The quarter and
year to date revenue ended September 30, 1996 of $6,438 and
$19,706 consists of interest income from cash received from bond
proceeds and equity contributions. The quarter and year to date
interest expense ended September 30, 1996 of $11,439 and $34,307
less amounts capitalized of $1,164 and $2,362 and amortization of
bond issue costs of $238 and $710 are related to the notes and
bonds payable issued by the Company in the fourth quarter of
1995.
Liquidity and Capital Resources:
The Company has a contract with the Philippine Government,
through the National Irrigation Administration ("NIA") (a
government-owned and controlled corporation), for the development
and construction of a hydroelectric power plant and related
facilities under a build-own-operate-transfer agreement
("Agreement"), covering a 20-year cooperation period with "take-
or-pay" obligations for water and electricity. At the end of the
20-year cooperation period, the Casecnan Multipurpose Irrigation
and Power Project (the "Project") will be transferred to the
Philippine Government at no cost. The Philippine Government also
signed a performance undertaking which, among others, affirms and
guarantees the obligations of NIA under the Agreement.
Construction of the Project commenced in 1995 and such costs are
included in the development costs account. The total project
cost for the facility is approximately $495,000. The draws on
the notes and bonds payable excluding interest expense payments
were $17,712 and $34,012 for the three months and nine months
ended September 30, 1996, respectively.
The Project is being constructed by Hanbo Corporation and Hanbo
Engineering & Construction Co., Ltd. (formerly You One
Engineering & Construction Co., Ltd.) (collectively, the
"Contractor"), both of which are South Korean corporations, on a
joint and several basis, pursuant to a fixed price (approximately
$236,000), date-certain, turnkey construction contract (the
"Turnkey Construction Contract"). The Contractor's obligations
under the Turnkey Construction Contract are guaranteed by Hanbo
Steel Company, Ltd. In addition, the Contractor's obligations
under the Turnkey Construction Contract are collateralized by the
unconditional, irrevocable standby letter of credit issued by
Korea First Bank in the amount of approximately $118,000. The
Company entered into an agreement for engineering services with
Knight Piesold. Ltd. for a fee based on the provisions of that
agreement.
The Company's ability to make payments on any of its existing and
future obligations is dependent on NIA's and the Republic of the
Philippines' performance of their obligations under the Agreement
and the performance undertaking, respectively. No shareholders,
partners or
CE CASECNAN WATER AND ENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share amounts)
________________________________
Liquidity and Capital Resources: (continued)
affiliates of the Company, including CalEnergy and Kiewit, and no
directors, officers or employees of the Company will guarantee or
be in any way liable for payment of the Company's obligations
except to the extent that the Company's stockholders have pledged
their capital stock in the Company as security for the notes and
bonds issued by the Company. As a result, payment of the
Company's obligations depends upon the availability of sufficient
revenues from the Company's business after the payment of
operating expenses.
NIA's payments of obligations under the Agreement are expected to
be the Company's sole source of operating revenues. Because of
the Company's dependence on NIA, any material failure of NIA to
fulfill its obligations under the Agreement and any material
failure of the Republic of the Philippines to fulfill its
obligations under the performance undertaking would significantly
impair the ability of the Company to meet its existing and future
obligations. Payments under the Agreement will be denominated in
U.S. Dollars except for any VAT or other gross-up taxes, which
are paid in Philippine Pesos.
On November 27, 1995, the Company issued $371,500 worth of notes
and bonds to finance the construction of the Project. These
consist of $75,000 Senior Secured Floating Rate Notes (FRNs) due
2002, $125,000 Senior Secured Series A Notes (Series A Notes)
with interest at 11.45% due 2005 and $171,500 Senior Secured
Series B Bonds (Series B Bonds) with interest at 11.95% due 2010.
For the nine months ended September 30, 1996, these debt
securities had effective interest rates of 9.85%, 12.95% and
13.42% for FRNs, Series A Notes and Series B Bonds, respectively,
inclusive of the effect of bond issue cost amortization.
Quarterly interest payments for the FRNs commenced on February
15, 1996, and semiannual interest payments for Series A Notes and
Series B Bonds commenced on May 15, 1996. Semiannual
installments for principal payments will commence on November 15,
2000, May 15, 2003 and May 15, 2002 for the FRNs, Series A Notes
and Series B Bonds, respectively.
The securities are senior debt of the Company and are secured by
a collateral assignment of all revenues received from the
Project, a collateral assignment of all material contracts, a
lien on any accounts and funds on deposit under a Deposit and
Disbursement Agreement, a pledge of 100% of the capital stock of
the Company and a lien on all other material assets and property.
The securities rank pari passu with and will share the collateral
on a pro rata basis with other senior secured debt, if any.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share amounts)
________________________________
Liquidity and Capital Resources (continued):
The securities are subject to certain optional and mandatory
redemption schemes as provided for in the offering circular.
The debt covenants contain certain restrictions as to incurrence
of additional indebtedness; merger, consolidation, dissolution,
or any significant change in corporate structure; non-arm's
length transactions or agreements with affiliates; material
change in the Turnkey Construction Contract; and sale, lease, or
transfer of properties material to the Project, among others.
The financial statements of the Company were prepared in United
States Dollar amounts. Gains or losses from translation of
monetary assets and liabilities in foreign currencies are not
material.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
PART II - OTHER INFORMATION
Item 1 - Legal proceedings.
Not applicable.
Item 2 - Changes in Securities.
Not applicable.
Item 3 - Defaults on Senior Securities.
Not applicable.
Item 4 - Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5 - Other Information.
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K.
Not applicable.
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.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
Date: November 6, 1996 /s/ Gregory E. Abel
Gregory E. Abel
Executive Vice President and
Chief Accounting Officer
/s/ John G. Sylvia
John G. Sylvia
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 136,973
<SECURITIES> 0
<RECEIVABLES> 5,755
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 44,909
<DEPRECIATION> 0
<TOTAL-ASSETS> 504,582
<CURRENT-LIABILITIES> 0
<BONDS> 371,500
0
0
<COMMON> 29
<OTHER-SE> 114,190
<TOTAL-LIABILITY-AND-EQUITY> 504,582
<SALES> 0
<TOTAL-REVENUES> 19,706
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,655
<INCOME-PRETAX> (12,949)
<INCOME-TAX> (4,532)
<INCOME-CONTINUING> (8,417)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,417)
<EPS-PRIMARY> (10.97)
<EPS-DILUTED> (10.97)
</TABLE>
