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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission File Number 333-29005
PANDA GLOBAL ENERGY COMPANY
(Exact name of registrant as specified in its charter)
Cayman Islands N/A
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
4100 Spring Valley Road, Suite 1001, Dallas, Texas 75244
(Address of principal executive offices, including zip code)
(972) 980-7159
(Registrant's telephone number, including area code)
None
(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 _x_ No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of November 11, 1997.
Common Stock, Par Value $.01 Per Share 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) F-1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 1
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 2
PANDA GLOBAL ENERGY COMPANY
AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
December 31 September 30
1996 1997
---------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................................................ $ 506,289 $ 506,289
Restricted cash - current ........................................................ -- 85,234,427
Accrued interest receivable ...................................................... -- 3,580,840
---------- ------------
Total current assets ........................................................... 506,289 89,321,556
Plant and equipment:
Construction in progress ......................................................... -- 24,847,286
Development costs ................................................................ 3,292,492 9,660,750
---------- ------------
Total plant and equipment ...................................................... 3,292,492 34,508,036
Restricted cash - debt service reserves and escrow deposits ........................ -- 38,469,541
Debt issuance costs, net of accumulated
amortization of $456,845 as of September 30, 1997 ................................ -- 6,859,978
---------- ------------
Total assets ....................................................................... $3,798,781 $169,159,111
========== ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-1
<PAGE>
PANDA GLOBAL ENERGY COMPANY
AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
(Unaudited)
December 31 September 30
1996 1997
----------- -------------
<S> <C> <C>
Current liabilities:
Accrued interest ........................................................... $ -- $ 8,610,422
Long-term debt ............................................................... -- 145,426,088
Minority interest ............................................................ -- 5,741,166
Commitments and contingencies (Note 3)
Shareholder's equity:
Common stock, par value $1: 50,000 shares
authorized; 2 shares issued and outstanding ............................... 2 2
Advances from parent ......................................................... 6,099,779 17,994,127
Deficit accumulated during the development stage ............................. (2,301,000) (8,612,694)
----------- -------------
Total shareholder's equity ................................................ 3,798,781 9,381,435
----------- -------------
Total liabilities and shareholder's equity ................................... $ 3,798,781 $ 169,159,111
=========== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-2
<PAGE>
PANDA GLOBAL ENERGY COMPANY
AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
AND INCEPTION (JULY 20, 1994) THROUGH SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Inception
Nine Months Ended September 30 Through
-------------------------- September 30
1996 1997 1997
----------- ----------- ------------
<S> <C> <C> <C>
Revenue:
Interest income .......................... $ -- $ 3,627,603 $ 3,627,603
Expenses:
Project development and administrative ... 946,000 1,611,030 3,912,030
Interest expense and letter of credit fees -- 7,871,422 7,871,422
Amortization of debt issuance costs ...... -- 456,845 456,845
----------- ----------- ------------
Total expenses ......................... 946,000 9,939,297 12,240,297
----------- ----------- ------------
Net loss ................................... $ (946,000) $(6,311,694) $ (8,612,694)
=========== =========== ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-3
<PAGE>
PANDA GLOBAL ENERGY COMPANY
AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
(UNAUDITED)
Three Months Ended September 30
-------------------------------
1996 1997
--------- -----------
Revenue:
Interest income ............................... $ -- $ 2,069,515
Expenses:
Project development and administrative ........ 392,000 557,000
Interest expense and letter of credit fees .... -- 4,433,422
Amortization of debt issuance costs ........... -- 260,228
--------- -----------
Total expenses .............................. 392,000 5,250,650
--------- -----------
Net loss before minority interest ............... (392,000) (3,181,135)
Minority interest ............................... -- (160,000)
--------- -----------
Net loss ........................................ $(392,000) $(3,341,135)
========= ===========
See accompanying notes to condensed consolidated financial statements.
F-4
<PAGE>
PANDA GLOBAL ENERGY COMPANY
AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Deficit
Accumulated
During the Total
Number Common Advances Development Shareholder's
of Shares Stock from Parent Stage Equity
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 ............... 2 $ 2 $ 6,099,779 $ (2,301,000) $ 3,798,781
Advances from parent ................... -- -- 11,894,348 -- 11,894,348
Net loss ............................... -- -- -- (6,311,694) (6,311,694)
------------ ------------ ------------ ------------ ------------
Balance, September 30, 1997 ............ 2 $ 2 $ 17,994,127 $ (8,612,694) $ 9,381,435
============ ============ ============ ============ ============
</TABLE>
F-5
<PAGE>
PANDA GLOBAL ENERGY COMPANY
AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
AND INCEPTION (JULY 20, 1994) THROUGH SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Inception
Through
September 30
1996 1997 1997
------------- ------------- -------------
<S> <C> <C> <C>
Operating activities:
Net loss ......................................................... $ (946,000) $ (6,311,694) $ (8,612,694)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Amortization of debt issuance costs ............................ -- 456,845 456,845
Amortization of debt discount .................................. -- 401,000 401,000
Changes in assets and liabilities:
Accrued interest receivable .................................... -- (3,580,840) (3,580,840)
Accrued interest payable ....................................... -- 8,610,422 8,610,422
------------- ------------- -------------
Net cash provided (used) by operating activities ............. (946,000) (424,267) (2,725,267)
------------- ------------- -------------
Investing activities:
Restricted cash - current ........................................ -- (85,234,427) (85,234,427)
Additions to plant and equipment ................................. (1,585,518) (22,356,479) (25,648,971)
Restricted cash - debt service reserves
and escrow deposits ........................................... -- (38,469,541) (38,469,541)
------------- ------------- -------------
Cash used by investing activities ................................ (1,585,518) (146,060,447) (149,352,939)
------------- ------------- -------------
Financing activities:
Proceeds from long-term debt ..................................... -- 145,025,088 145,025,088
Contributions from minority interest owners ...................... -- 5,741,166 5,741,166
Capital contribution from parent ................................. -- -- 2
Advances from parent ............................................. 2,531,518 3,035,283 9,135,062
Debt issuance costs .............................................. -- (7,316,823) (7,316,823)
------------- ------------- -------------
Cash provided by financing activities ............................ 2,531,518 146,484,714 152,584,495
------------- ------------- -------------
Increase (decrease) in cash and cash equivalents ................... -- -- 506,289
Cash and cash equivalents, beginning of period ..................... 6,289 506,289 --
------------- ------------- -------------
Cash and cash equivalents, end of period ........................... $ 6,289 $ 506,289 $ 506,289
============= ============= =============
Noncash investing and financing activities:
Development costs transferred from parent ......................... $ -- $ 8,859,065 $ 8,859,065
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-6
<PAGE>
PANDA GLOBAL ENERGY COMPANY AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 1996 and 1997
and the Period from Inception (July 20, 1994)
Through September 30, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Panda Global Energy Company ("Global Cayman", or
collectively with its subsidiaries the "Company")(a Cayman
Islands company) is a wholly owned subsidiary of Panda Global
Holdings, Inc. ("Panda Global"), which in turn is a wholly owned
subsidiary of Panda Energy International, Inc. ("PEII"). PEII is
engaged in the development, acquisition, ownership and operation
of independent power generation facilities and other energy-
related projects worldwide. Global Cayman was formed in March
1997 to hold PEII's indirect ownership interest in an independent
power project located in the People's Republic of China
("China"). The ownership interest was transferred to Global
Cayman at PEII's historical cost. Because the transfer occurred
between entities under common control, the transaction has been
accounted for in a manner similar to a pooling of interests.
Global Cayman holds a 95.5% ownership interest in Pan-Sino
Energy Development Company LLC ("Pan-Sino") (a Cayman Islands
company), which in turn holds a 99% ownership interest in Pan-
Western Energy Corporation LLC ("Pan-Western")(a Cayman Islands
company), which in turn owns an approximately 88% interest in
four joint venture companies (the "Joint Venture Companies")
organized under the laws of China to develop and construct two
50 megawatt coal-fired cogeneration plants (the "Luannan
Project") located in Luannan County, Tangshan Municipality, Hebei
Province, China. Pan-Sino and Pan-Western were formed on July
20,1994 and are the Company's predecessor. The Joint Venture
Companies, which currently have no material assets or operations,
are: Tangshan Panda Heat and Power Company, Ltd. ("Tangshan
Panda"), Tangshan Pan-Western Heat and Power Company, Ltd.
("Tangshan Pan-Western"), Tangshan Cayman Heat and Power Company,
Ltd. ("Tangshan Cayman") and Tangshan Pan-Sino Heat Company, Ltd.
("Tangshan Pan-Sino"). Additionally, effective in June 1997,
Global Cayman, through its wholly owned subsidiary Panda Bhote
Koshi Company (a Cayman Islands company), holds a 100% interest
in Panda of Nepal LLC (a Cayman Islands company), which in turn
holds an ownership interest (expected to be 75% following the
completion of financing) in Bhote Koshi Power Company Pvt. Ltd.
(a Nepal company), which was organized under the laws of Nepal to
develop and construct an independent power project in Nepal
("Nepal Project").
All material intercompany accounts and transactions have
been eliminated in consolidation.
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles and should be read in conjunction
with the audited consolidated financial statements for the year
ended December 31, 1996. The accompanying unaudited financial
statements for the three- and nine-month periods ended September
30, 1996 and 1997 include all adjustments, consisting of normal
recurring accruals, which management considers necessary for a
fair presentation of the results of operations for the interim
periods. The results of operations for the nine months ended
September 30, 1997 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1997. The
amounts presented in the balance sheet as of December 31, 1996
were derived from the Company's audited financial statements.
Development stage enterprise -- The Company is in the
development stage and has no operating revenues. Financing for
construction of the Luannan Project was obtained in April 1997
(see Note 3). The Company is currently pursuing financing for
the Nepal Project.
F-7
Cash -- Included in cash and cash equivalents are highly
liquid investments with original maturities of three months or
less.
Plant and Equipment -- Costs of developing new projects are
capitalized when the projects reach an advanced stage of
development where the execution of a power purchase agreement has
occurred or is imminent. Such costs primarily consist of
engineering, legal and other costs directly related to the
project. Development costs are transferred to construction in
progress when financing has been obtained and construction has
commenced. Costs related to projects under construction,
including interest on funds borrowed to finance the construction
of facilities, are capitalized as construction in progress. Such
costs will be depreciated using the straight-line method over the
term of the power purchase agreement (20 years and 25 years for
the Luannan Project and the Nepal Project, respectively - see
Note 3). Depreciation will begin when the completed facility is
ready for its intended use.
Allocation of Administrative Costs -- PEII performs certain
accounting, legal, insurance and consulting services for the
Company. These general and administrative costs are generally
allocated to the Company using the percentage of time PEII spent
performing these services. The expenses allocated were $946,000
and $1,612,000 for the nine months ended September 30, 1996 and
1997 and were $392,000 and $557,000 for the three months ended
September 30, 1996 and 1997, respectively. The allocated costs
are included in general and administrative expenses in the
consolidated statements of operations. Management believes the
method used to allocate these costs is reasonable.
Income taxes -- On the basis of the current legislation in
the Cayman Islands, there is no income, corporation, profits,
capital gains or other form of taxation that would be of
application to Global Cayman or its subsidiaries and,
accordingly, there is no withholding tax. In addition, Pan-
Western, as an exempted company, has obtained from the Cayman
Islands Government an undertaking that should the current
legislation change, no taxation will be imposed upon the profits
of Pan-Western or any shareholders in Pan-Western for a twenty
year period commencing August, 1994.
3. POWER PROJECTS AND LONG-TERM DEBT
Luannan Project -- In 1994, PEII entered into a preliminary
letter of intent with a subsidiary of the North China Power Group
Company ("NCPGC") for the purchase and sale of electric energy
from the Luannan Project. On September 22, 1995, Tangshan Panda
and Tangshan Pan-Western (see Note 1) entered into a Power
Purchase Agreement with NCPGC for the purchase and sale of
electric energy from the Luannan Project. Under the terms of the
20-year agreement, all electrical output of the project will be
sold to NCPGC. The steam and hot water generated by Tangshan-
Cayman's facility within the project will be sold to the domestic
Chinese industrial and commercial markets by Tangshan Pan-Sino.
The Luannan Project will be constructed pursuant to a fixed-
price, turnkey contract with Harbin Power Engineering Company
Limited. Preliminary construction activity commenced in December
1996. Full construction activity commenced after the successful
completion of financing in April 1997 as discussed below. The
Company has incurred costs of $24.8 million on the Luannan
Project through September 30, 1997, which are included in plant
and equipment under construction in progress in the accompanying
balance sheet.
In April 1997, Global Cayman issued $155.2 million original
principal amount of senior secured notes ("Senior Secured Notes")
to finance the development and construction of the Luannan
Project. The Senior Secured Notes, which were issued at a
discount for gross proceeds of $145.0 million, bear interest at a
fixed rate of 12 1/2% payable semiannually commencing October 15,
1997. Scheduled principal payments are required semiannually
commencing October 15, 2000 and will continue through maturity on
April 15, 2004. The Senior Secured Notes are subject to
mandatory redemption prior to maturity under certain conditions.
The Senior Secured Notes are secured by (i) a pledge of 100% of
the capital stock of Global Cayman, 99% of the capital stock of
Pan-Western and at least 90% of the capital stock of Pan-Sino,
and (ii) a security interest in certain funds of Global Cayman
and its subsidiaries established under the indenture.
Additionally, the Senior Secured Notes are fully and
unconditionally guaranteed by Panda Global, whose guarantee (the
"Senior Secured Notes Guarantee") is secured by (i) a pledge of
100% of the capital stock of Panda Global and PEC and (ii) a
security interest in certain funds of Panda Global established
under the indenture. The Senior Secured Notes Guarantee is
effectively subordinated to the obligations of PIC and its
subsidiaries under the Series A Bonds and project-level financing
arrangements. The indenture contains certain covenants,
including limitations on distributions, additional debt and
certain other transactions.
F-8
Nepal Project - The Company has an ownership interest
(expected to be 75% following completion of financing) in a joint
venture with a major hydroelectric engineering company and a
local Nepalese party to build a 36 megawatt hydroelectric
facility on the upper Bhote Koshi River in Nepal ("Nepal
Project"). The ownership interest was transferred from a
subsidiary of PEII to Global Cayman at historical cost in June
1997. A 25-year power purchase agreement with the Nepal
Electricity Authority was signed in July 1996. The Nepal Project
will be constructed pursuant to a fixed-price, turnkey contract
with China Gezhouba Construction Group Corporation. The Company
has received a commitment letter from a multilateral agency to
provide debt financing for the Nepal Project and is currently
seeking additional financing for the project. Construction of
the project is subject to the successful completion of financing.
The Company has incurred development costs for the Nepal Project
of $9.7 million as of September 30, 1997, which are included in
plant and equipment under development costs in the accompanying
balance sheet.
The Luannan and Nepal Projects are subject to political,
regulatory and economic uncertainties, risks of expropriation of
property and cancellation or modification of contract rights,
foreign exchange restrictions, construction risk, dependence on
limited number of customers and other risks arising from foreign
governmental sovereignty.
4. ADVANCES FROM PARENT
PEII has performed all project development and
administrative activities for the Company. The advances from
parent reflect the advances for such costs incurred by PEII on
the Company's behalf. Such advances have no specific repayment
terms, bear no interest and may be partially reimbursed during
the construction period of the related projects as permitted by
the indentures.
F-9
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The Company is a development stage enterprise having no
operating revenues. Prior to April 1997, when financing for
the Luannan Project was completed by the issuance of $145.0
million discounted principal amount of Senior Secured Notes,
the Company's results of operations included no revenues and
included only general and administrative expenses allocated
from its ultimate parent (Panda Energy International, Inc.)
for certain accounting, legal, insurance and consulting
services. Such expenses increased from 1996 to 1997
primarily due to the increased administrative assistance
required to support the Luannan Project as its development
and construction continues. After the issuance of the
Senior Secured Notes in April 1997, the Company has also
incurred interest expense and amortization of debt issuance
costs and has earned interest income on the construction and
debt service reserve funds that are maintained under the
debt agreement.
-1-
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this
Quarterly Report on Form 10-Q:
Exhibit
Number Exhibit Description
27.01 Financial Data Schedule.*
* Filed herewith.
(b) The registrant did not file any reports on Form 8-K
during the quarter for which this report is filed.
-2-
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.
PANDA GLOBAL ENERGY COMPANY
Date: November 11, 1997 By: /s/ Janice Carter
Janice Carter
Executive Vice President,
Secretary and Treasurer
EXHIBIT INDEX
Sequentially
Numbered
Number Description Page
27.01 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from SEC Form 10-Q and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-END> SEP-30-1996 SEP-30-1997
<CASH> 506,289 85,740,716
<SECURITIES> 0 0
<RECEIVABLES> 0 3,580,840
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 506,289 89,321,556
<PP&E> 3,292,492 34,508,036
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 3,798,781 169,159,111
<CURRENT-LIABILITIES> 0 8,610,422
<BONDS> 0 145,426,088
0 0
0 0
<COMMON> 2 2
<OTHER-SE> 3,798,779 9,381,433
<TOTAL-LIABILITY-AND-EQUITY> 3,798,781 169,159,111
<SALES> 0 0
<TOTAL-REVENUES> 0 3,627,603
<CGS> 0 0
<TOTAL-COSTS> 946,000 1,611,030
<OTHER-EXPENSES> 0 456,845
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 7,871,422
<INCOME-PRETAX> (946,000) (6,311,694)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (946,000) (6,311,694)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (946,000) (6,311,694)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
