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 June 30, 1999
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 333-29005-01
PANDA GLOBAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2697755
(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 August 11, 1999.
Common Stock, Par Value $.01 Per Share 1,000
<PAGE>
PART I - FINANCIAL INFORMATION
Page
----
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 1. Legal Proceedings 6
Item 6. Exhibits and Reports on Form 8-K 6
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
other than statements of historical fact included in this Quarterly Report on
Form 10-Q, including, without limitation, statements regarding financial
position, projects under evaluation or development, construction or other
budgets and plans and objectives for future operations, are forward-looking
statements. Although the registrant believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from the registrant's expectations
("Cautionary Statements") include the impact of geopolitical occurrences
worldwide; the results of financing efforts; risks in financial markets; risks
under contracts and swap agreements; changes in laws and regulations; unforeseen
engineering and mechanical or technological difficulties; and other risks
described in the registrant's filings from time to time with the Securities and
Exchange Commission. All subsequent written and oral forward-looking statements
attributable to the registrant or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Statements.
<PAGE>
PANDA GLOBAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
<PAGE>
PANDA GLOBAL HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
DECEMBER 31, JUNE 30,
1998 1999
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................... $ 2,056,317 $ 4,613,911
Restricted cash - current ............................... 52,668,167 84,938,717
Accounts receivable ..................................... 9,582,815 10,193,636
Fuel oil, spare parts and supplies ...................... 6,324,191 6,150,135
Deferred taxes .......................................... 18,609,000 --
Other current assets .................................... 1,934,610 1,074,725
------------- -------------
Total current assets .................................. 91,175,100 106,971,124
Plant and equipment:
Electric generating facilities .......................... 301,411,796 301,568,879
Furniture and fixtures .................................. 542,989 542,989
Less: accumulated depreciation .......................... (50,314,383) (56,260,794)
Construction in progress ................................ 81,475,023 101,862,431
Development costs and equipment deposits ................ 58,751,189 20,000,000
------------- -------------
Total plant and equipment, net ........................ 391,866,614 367,713,505
Investments in joint ventures ............................. 793,880 1,022,571
Restricted cash - debt service reserves and escrow deposits 39,022,048 49,668,883
Deferred taxes ............................................ 6,391,000 6,391,000
Debt issuance costs, net of accumulated
amortization of $3,239,618 and $4,064,889, respectively . 11,893,362 11,068,091
------------- -------------
$ 541,142,004 $ 542,835,174
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-1
<PAGE>
PANDA GLOBAL HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S DEFICIT
<TABLE>
<CAPTION>
(Unaudited)
DECEMBER 31, JUNE 30,
1998 1999
------------- -------------
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses:
Construction costs ................................. $ 9,106,941 $ 11,243,725
Interest and letter of credit fees ................. 9,770,768 9,741,079
Operating expenses and other ....................... 6,980,241 5,044,293
Short-term debt ...................................... 33,000,000 --
Current portion of long-term debt .................... 5,924,989 6,460,629
------------- -------------
Total current liabilities ........................ 64,782,939 32,489,726
Deferred revenue ....................................... 12,669,811 23,827,509
Long term debt, less current portion ................... 344,740,630 342,016,801
Capital lease obligation ............................... 246,078,324 248,345,168
Minority interest ...................................... 5,741,166 5,741,166
Commitments and contingencies (Note 4)
Shareholder's deficit:
Common stock, $.01 par value; 1,000 shares authorized,
issued and outstanding ............................ 10 10
Advances to parent ................................... (49,765,758) (75,462,172)
Accumulated deficit .................................. (83,105,118) (34,123,034)
------------- -------------
(132,870,866) (109,585,196)
------------- -------------
$ 541,142,004 $ 542,835,174
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-2
<PAGE>
PANDA GLOBAL HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1999
------------- -------------
<S> <C> <C>
REVENUE:
Electric capacity and energy sales ............... $ 34,526,850 $ 44,222,731
Steam and chilled water sales .................... 380,754 257,042
Interest income .................................. 4,376,887 3,271,959
Other income - gain on sale of development project -- 86,698,331
------------- -------------
39,284,491 134,450,063
------------- -------------
EXPENSES:
Plant operating expenses ......................... 11,096,015 12,730,399
Project development and administrative ........... 6,837,864 8,378,997
Interest expense and letter of credit fees ....... 29,237,186 26,977,902
Depreciation ..................................... 5,850,279 5,946,410
Amortization of debt issuance costs .............. 824,895 825,271
------------- -------------
53,846,239 54,858,979
------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES .................. (14,561,748) 79,591,084
Income tax benefit (expense):
Current ........................................ -- (12,000,000)
Deferred ....................................... -- (18,609,000)
------------- -------------
Total income tax expense ..................... -- (30,609,000)
------------- -------------
NET INCOME (LOSS) .................................. $ (14,561,748) $ 48,982,084
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-3
<PAGE>
PANDA GLOBAL HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1999
(UNAUDITED)
1998 1999
------------ ------------
REVENUE:
Electric capacity and energy sales ........... $ 17,915,842 $ 22,136,385
Steam and chilled water sales ................ 190,816 109,719
Interest income .............................. 2,104,133 1,638,886
------------ ------------
20,210,791 23,884,990
------------ ------------
EXPENSES:
Plant operating expenses ..................... 6,434,857 7,133,260
Project development and administrative ....... 4,407,345 3,362,809
Interest expense and letter of credit fees ... 14,603,608 13,360,433
Depreciation ................................. 2,932,592 2,973,204
Amortization of debt issuance costs .......... 411,970 412,158
------------ ------------
28,790,372 27,241,864
------------ ------------
NET INCOME (LOSS) .............................. $ (8,579,581) $ (3,356,874)
============ ============
See accompanying notes to condensed consolidated financial statements.
F-4
<PAGE>
PANDA GLOBAL HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDER'S DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
---------------- ADVANCES ACCUMULATED SHAREHOLDER'S
SHARES AMOUNT (TO) FROM PARENT DEFICIT DEFICIT
------ ------ ---------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1999 ............................... 1,000 $ 10 $ (49,765,758) $(83,105,118) $(132,870,866)
Advances (to) from parent, net ....................... -- -- (25,696,414) -- (25,696,414)
Net income ........................................... -- -- -- 48,982,084 48,982,084
------ ------ ---------------- ------------ -------------
BALANCE, June 30, 1999 ................................. 1,000 $ 10 $ (75,462,172) $(34,123,034) $(109,585,196)
====== ====== ================ ============ =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-5
<PAGE>
PANDA GLOBAL HOLDINGS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1999
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ......................................... $(14,561,748) $ 48,982,084
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Gain on sale of development project ................... -- (86,698,331)
Deferred tax expense .................................. -- 18,609,000
Depreciation .......................................... 5,850,279 5,946,410
Amortization of debt issuance costs ................... 824,895 825,271
Amortization of loan discount and deferred
interest on capital lease obligation ................ 11,674,169 12,372,639
Deferred revenue ...................................... (239,425) (342,302)
Equity in income of joint venture ..................... -- (74,448)
Changes in assets and liabilities:
Accounts receivable ..................................... (640,195) (610,821)
Fuel oil, spare parts and supplies ...................... (776,824) 174,056
Other current assets .................................... 28,696 859,885
Accounts payable and accrued expenses ................... 1,101,651 (1,965,636)
------------ -------------
Net cash provided (used) by operating activities ...... 3,261,498 (1,922,193)
------------ -------------
INVESTING ACTIVITIES:
Restricted cash - current ................................. 10,438,343 (32,270,550)
Additions to property, plant and equipment ................ (20,582,495) (51,271,596)
Sale of development project ............................... -- 168,503,059
Restricted cash - debt service reserves and escrow deposits 13,469,588 (10,646,835)
------------ -------------
Net cash provided (used) by investing activities ...... 3,325,436 74,314,078
------------ -------------
FINANCING ACTIVITIES:
Advances (to) from parent ................................. 489,623 (26,040,307)
Deferred revenue .......................................... -- 1,500,000
Proceeds from short-term debt ............................. -- 15,534,633
Repayment of short-term debt .............................. -- (48,534,633)
Repayment of long term debt ............................... (2,855,739) (2,753,807)
Repayment of capital lease obligation ..................... (5,213,485) (9,540,177)
Debt issuance costs ....................................... (10,000) --
------------ -------------
Net cash provided (used) by financing activities ...... (7,589,601) (69,834,291)
------------ -------------
Increase (decrease) in cash and cash equivalents ............ (1,002,667) 2,557,594
Cash and cash equivalents, beginning of period .............. 2,929,289 2,056,317
------------ -------------
Cash and cash equivalents, end of period .................... $ 1,926,622 $ 4,613,911
============ =============
NONCASH OPERATING, INVESTING AND FINANCING ACTIVITIES:
Investment in joint venture ............................... $ -- $ 154,243
Accrued construction costs ................................ 8,700,000 11,243,725
Interest expense on capital lease obligation .............. 11,172,086 11,807,021
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-6
<PAGE>
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999
1. ORGANIZATION AND BASIS OF PRESENTATION
Panda Global Holdings, Inc. ("Panda Global", or collectively with its
subsidiaries the "Company"), a wholly owned subsidiary of Panda Energy
International, Inc. ("PEII"), was formed in March 1997 to hold the ownership
interests in certain independent power projects which were formerly owned by
other wholly owned subsidiaries of PEII. The ownership interests were
transferred to the Company at PEII's historical cost. Because the transfers
occurred between entities under common control, the transactions have been
accounted for in a manner similar to a pooling of interests. The Company
operates primarily through three direct wholly owned subsidiaries: Panda Energy
Corporation ("PEC")( a Texas corporation) which indirectly holds the Company's
ownership and leasehold interests in two domestic projects currently in
operation; Panda Global Energy Company ("Global Cayman")(a Cayman Islands
company), which indirectly holds the Company's ownership interests in two
international projects currently under construction; and Panda Merchant Power
Holding, LLC ("Merchant Holding")(a Delaware limited liability company), which
has been established to hold the Company's ownership interests in any domestic
projects which might be developed.
PEC, through its wholly owned subsidiary Panda Interfunding Corporation
("PIC") and PIC's wholly owned subsidiary Panda Interholding Corporation
("Interholding"), holds the Company's ownership interest in the Rosemary project
and leasehold interest in the Brandywine project. The entities holding such
interests include the following: Panda Rosemary Corporation ("PRC"), the general
partner in Panda-Rosemary, L.P. ("Panda-Rosemary"); PRC II Corporation ("PRC
II"), the limited partner in Panda-Rosemary; Panda Brandywine Corporation, the
general partner in Panda-Brandywine, L.P. ("Panda-Brandywine"); and Panda Energy
Corporation (a Delaware corporation), the limited partner in Panda-Brandywine.
The Company, through its general and limited partnership interests, owns 100% of
Panda-Brandywine and, as of July 31, 1996, owns 100% of Panda-Rosemary. Prior to
July 31, 1996, the Company owned 10% of Panda-Rosemary. The Rosemary and
Brandywine projects are located in the United States. Other direct or indirect
wholly owned subsidiaries of PIC include Panda Funding Corporation ("PFC") and
Panda-Rosemary Funding Corporation ("PRFC") and Panda Cayman Interfunding
Corporation ("PIC Cayman"), which have been formed to facilitate the financing
of the development and acquisition of independent power projects.
Global Cayman (which collectively with its subsidiaries is a development
stage enterprise having no operating revenues) 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 the People's Republic of China ("China")
to develop and construct an independent power project located in China. The
Joint Venture Companies 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,
Global Cayman indirectly holds an equity investment 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.
Merchant Holding (which collectively with its subsidiaries is a
development stage enterprise having no operating revenues), through wholly owned
subsidiaries, has been established to hold the Company's ownership interests in
any domestic projects which might be developed.
Additionally, the Company conducts other development activities through
various subsidiaries.
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, 1998. The accompanying unaudited
condensed consolidated financial statements for the six-month and three-month
periods ended June 30, 1998 and 1999 include all adjustments, consisting of
normal recurring accruals, which management considers necessary for a fair
presentation of the results for the interim periods. The results of operations
for the six months ended June 30, 1999 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999. The amounts
presented in the balance sheet as of December 31, 1998 were derived from the
Company's audited consolidated financial statements.
F-7
<PAGE>
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 personnel spent performing these services. The expenses allocated
were $3.0 million and $5.2 million for the six-month periods, and $1.9 million
and $1.7 million for the three-month periods, ended June 30, 1998 and 1999,
respectively. Such costs are included in project development and administrative
expenses in the statement of operations. Management believes the method used to
allocate these costs is reasonable.
3. POWER PROJECTS
TEXAS PROJECTS-- In February 1999, the Company sold the Paris Project to a
third party for a price of approximately $160.5 million. The Company retained a
1% limited partnership interest in the project. Of the sale price, $10 million
is being held in escrow pending successful completion of the project within the
anticipated time and cost budgets. After the project commences commercial
operations, any funds remaining in escrow will be distributed to the Company. In
connection with the sale, the Company repaid the borrowings and accrued interest
under the Bridge Financing Agreement of approximately $48.5 million. The Company
realized a gain of approximately $86.7 million on the sale. Gain recognition has
been deferred on the $10 million held in escrow pending final disposition of the
escrowed funds.
In March 1999, the Company sold the Guadalupe Project (which was in the
initial stage of development) to PEII for $8.0 million, which was the fair
market value of the project as determined by an independent engineering firm.
The proceeds in excess of the Company's capitalized costs of approximately $7.5
million on the project have been included in advances to parent in the
accompanying financial statements.
LUANNAN PROJECT -- The Company has incurred costs on the Luannan Project
of $81.5 million and $101.9 million as of December 31, 1998 and June 30, 1999,
respectively. Such costs are included in the accompanying balance sheets in
plant and equipment under construction in progress.
In May 1999, the Company filed an application with the Chinese government
for determination of the initial tariff under the Luannan Power Purchase
Agreement. The Company understands that current economic and political
conditions in China could adversely affect the amount of the initial tariff.
There can be no assurance that such tariff will allow the Luannan Facility to
generate sufficient revenues to meet outstanding debt obligations issued in
connection with constructing the Luannan Facility, or that any subsequent
applications for an increase in the tariff will be approved by the Chinese
government.
NEPAL PROJECT -- BKPC, the Company's equity investee, has incurred costs
for the Nepal Project (including development, construction and debt issuance
costs) of $37.2 million and $46.5 million as of December 31, 1998 and June 30,
1999, respectively.
EQUIPMENT DEPOSITS -- The Company has paid deposits of $20.0 million on
equipment orders at June 30, 1999.
4. COMMITMENTS AND CONTINGENCIES
The Rosemary and Brandywine projects operate as qualifying facilities, and
the related power contracts are subject to the rules and regulations under the
Public Utilities Regulatory Policies Act of 1978 ("PURPA"). In order to promote
open competition in the industry, proposed legislation in the U.S. Congress has
called for either a repeal of PURPA or a complete restructuring of the
regulations governing the electric industry including PURPA. These federal
initiatives are generally not yet effective, but many states are implementing or
considering regulatory initiatives designed to increase competition in the
domestic power generation industry. In most cases, any initiatives discussed
have indicated that power sales agreements of existing qualifying facilities
would be honored. The Company cannot predict the final form or timing of the
proposed restructuring on a federal or individual state level or the impact, if
any, that such restructuring would have on the Company's existing business or
results of operations. The Company currently believes that any such
restructuring would not have a material effect on its power sales agreements
and, accordingly, that its existing business and results of operations would not
be materially adversely affected, although there can be no assurance in this
regard.
In April 1998, the Company filed suit in federal court charging the Bibb
Company ("Bibb") and Westpoint Stevens, Inc. ("Westpoint") with violating a
contractual agreement in the sale of a textile mill in 1997 and in the operation
of the mill since that
F-8
<PAGE>
time. The Rosemary Facility supplies steam and chilled water to the textile mill
under a contract originally signed with Bibb. Westpoint acquired the textile
mill from Bibb in 1997. The suit asked the court to determine and clarify the
rights of the parties to the contract. The federal court dismissed this action
in June 1998. Shortly thereafter, Bibb and Westpoint filed a separate suit in
state court in Halifax County, North Carolina claiming, among other things,
breach of contract in regard to delivery of steam. In October 1998, the Company
filed suit against Bibb and Westpoint in state court in Dallas County, Texas
regarding the contract. In January 1999, the state court in Halifax County
stayed the action in such court. In February 1999, Westpoint and Bibb moved to
stay the action in the Dallas County court. The Company intends to vigorously
pursue its claims against Bibb and Westpoint in these state court actions. The
Company continues to provide steam and chilled water to the mill pursuant to the
contract. The Company believes that the resolution of this contractual dispute
will not have a material adverse effect upon the financial position, results of
operations or cash flows of the Company.
The Company has entered into purchase commitments totaling approximately
$325 million for equipment. The Company is pursuing external financing with
respect to these commitments.
The Company has entered into various long-term contracts for the purchase
and transportation of fuel subject to termination only in certain limited
circumstances. These contracts have remaining terms of 10 to 25 years. The
Company's minimum purchase commitment under these contracts is 2.3 million
British thermal units of gas annually through October 31, 2011. In the
aggregate, such commitments are not at prices in excess of the current market.
PEII is also involved in other legal and administrative proceedings in the
ordinary course of business. Management believes that the amount of ultimate
liability allocable to the Company with respect to these matters will not have a
material effect on the financial position, results of operations or cash flows
of the Company.
F-9
<PAGE>
PANDA GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE NOTED)
GENERAL
The Company has interests in two completed electric power generation
facilities in the United States: a 100% equity ownership interest in the
Rosemary Facility, which began commercial operations in December 1990, and a
100% leasehold interest (through a capital lease arrangement) in the Brandywine
Facility, which began commercial operations in October 1996. Prior to July 31,
1996, the Company owned a 10% equity interest in the Rosemary Facility. The
Company also owns an approximately 83% indirect interest in the Luannan Facility
currently under construction in China, financing for which was completed in
April 1997. Additionally, the Company owns an indirect equity interest in the
Nepal Facility currently under construction in Nepal, financing for which was
completed in December 1997. The Company also has other projects under
development.
RESULTS OF OPERATIONS
The Company's current revenues from electric power generation are
primarily derived from long-term contracts which include both a fixed capacity
payment and a variable energy payment. The capacity payments, which are based
upon the specified power generating capacity of a project, are designed to cover
fixed costs and to provide an acceptable return on equity. The energy payments,
which are based on actual electricity output, are designed to cover variable
costs including fuel costs and variable operating expenses incurred in
connection with electricity output. Accordingly, the impact of price
fluctuations on the results of operations is generally not material. The extent
to which a facility is dispatched (i.e., required to deliver electricity), and
therefore the actual electricity output for a given period, are subject to the
discretion of the power purchaser, with certain limitations. The capacity
payments are currently the predominant source of revenue for the Company. See
"Liquidity and Capital Resources."
FIRST SIX MONTHS OF 1999 COMPARED TO 1998
The Company recorded net income of $48,982 in the first six months of 1999
on revenues of $134,450 compared to a net loss of $14,562 on revenues of $39,284
during the same period in 1998. The increase in revenues in the 1999 period was
primarily caused by a gain of $86.7 million from the sale of a 99% interest in
the Paris project, as well as an increase in operating revenues at the Rosemary
and Brandywine facilities.
For the 1999 and 1998 periods, capacity revenues for the Rosemary
Facility were $11,763 and $12,691, respectively, reflecting a contractual
decrease in 1999. Energy revenues for the Rosemary Facility for the 1999 and
1998 periods were $1,274 and $1,048, respectively. The increase in energy
revenues for the Rosemary Facility is attributable to higher dispatch levels at
that facility compared to the 1998 period. Capacity revenues from Potomac
Electric Power Company ("PEPCO") for the Brandywine Facility for the first six
months of 1999 and 1998 were $21,875 and $14,118, respectively, reflecting a
contractual increase in 1999. Energy revenues from PEPCO for the Brandywine
Facility for the first six months of 1999 and 1998 were $6,781 and $6,562,
respectively. The increase in energy revenues for the Brandywine Facility is
primarily attributable to higher dispatch levels at that facility compared to
the 1998 period. In addition to capacity and energy revenues from PEPCO, the
Company earned revenues of $2,475 in the 1999 period from excess capacity and
energy sales on a merchant basis from the Brandywine Facility as allowed under
the PEPCO agreement. Additionally, in the first six months of 1999 and 1998, the
Brandywine Facility had energy revenues of $55 and $108, respectively, from the
sale of natural gas and fuel oil to other purchasers.
Plant operating expenses, which included fuel cost, operation and
maintenance expense, insurance and property taxes, increased to $12,730 (29% of
electricity revenues) in the 1999 period from $11,096 (32% of electricity
revenues) in the 1998 period. The increase was primarily due to higher dispatch
levels in the 1999 period.
Project development and administrative expenses were $8,379 (19% of
electricity revenues) and $6,838 (20% of electricity revenues) for the 1999 and
1998 periods, respectively. The increase in 1999 was primarily attributable to a
1
<PAGE>
higher level of management involvement and support that was required to complete
the sale of the 99% interest in the Paris project, and to the accrual of
employee bonuses at PEII in the first quarter of 1999 instead of the fourth
quarter of 1998. Such bonuses, which are included in the overhead cost
allocation pool, were accrued in the fourth quarter of 1997 and prior years. The
increase in 1999 expenses was partially offset by certain nonrecurring expenses
incurred in 1998, primarily legal costs related to the PEPCO agreement and the
write-off of certain deferred costs related to the Kathleen development project.
Interest expense decreased to $26,978 (61% of electricity revenues) in the
1999 period from $29,237 (85% of electricity revenues) in 1998 as a result of an
increase in the capitalized portion of the interest cost on the Senior Secured
Notes as the Luannan Facility approaches completion.
Depreciation and amortization of debt issue costs amounted to $6,772 (15%
of electricity revenues) in the 1999 period and $6,675 (19% of electricity
revenues) in 1998. The slight increase in 1998 was primarily attributable to
amortization of debt issue costs for the Senior Secured Notes issued in April
1997.
The provision for income taxes, which was attributable to the gain on the
sale of the Paris project, amounted to $30,609 in the first six months of 1999.
There was no provision for income taxes in the first six months of 1998 due to
the net loss incurred and the uncertainty at that time concerning the
realization of the deferred tax asset that resulted from such net loss.
As a result of the various factors discussed above, the Company recorded
net income of $48,982 and a net loss of $14,562 for the 1999 and 1998 periods,
respectively.
SECOND QUARTER 1999 COMPARED TO 1998
The Company recorded a net loss of $3,357 in the second quarter of 1999 on
revenues of $23,885 compared to a net loss of $8,580 on revenues of $20,211
during the same period in 1998. The increase in revenues in the 1999 period was
primarily caused by an increase in capacity revenues at the Brandywine Facility.
For the 1999 and 1998 periods, capacity revenues for the Rosemary
Facility were $5,357 and $5,770, respectively, reflecting a contractual decrease
in 1999. Energy revenues for the Rosemary Facility for the 1999 and 1998 periods
were $587 and $1,044, respectively. The decrease in energy revenues for the
Rosemary Facility is attributable to lower dispatch levels at that facility
compared to the 1998 period. Capacity revenues from Potomac Electric Power
Company ("PEPCO") for the Brandywine Facility for the second quarter of 1999 and
1998 were $10,875 and $7,287, respectively, reflecting a contractual increase in
1999. Energy revenues from PEPCO for the Brandywine Facility for the second
quarter of 1999 and 1998 were $4,116 and $3,793, respectively. The increase in
energy revenues for the Brandywine Facility is primarily attributable to higher
dispatch levels at that facility compared to the 1998 period. In addition to
capacity and energy revenues from PEPCO, the Company earned revenues of $1,196
in the 1999 period from excess capacity and energy sales on a merchant basis
from the Brandywine Facility as allowed under the PEPCO agreement. Additionally,
in the second quarter of 1999 and 1998, the Brandywine Facility had energy
revenues of $5 and $22, respectively, from the sale of natural gas and fuel oil
to other purchasers.
Plant operating expenses, which included fuel cost, operation and
maintenance expense, insurance and property taxes, increased to $7,133 (32% of
electricity revenues) in the 1999 period from $6,435 (36% of electricity
revenues) in the 1998 period. The increase was primarily due to higher dispatch
levels in the 1999 period.
Project development and administrative expenses were $3,363 (15% of
electricity revenues) and $4,407 (25% of electricity revenues) for the 1999 and
1998 periods, respectively. The decrease in 1999 was primarily attributable to
certain nonrecurring expenses incurred in 1998, primarily legal costs related to
the PEPCO agreement and the write-off of certain deferred costs related to the
Kathleen development project.
Interest expense decreased to $13,360 (60% of electricity revenues) in the
1999 period from $14,604 (82% of electricity revenues) in 1998 as a result of an
increase in the capitalized portion of the interest cost on the Senior Secured
Notes as the Luannan Facility approaches completion.
2
<PAGE>
Depreciation and amortization of debt issue costs amounted to $3,385 (15%
of electricity revenues) in the 1999 period and $3,344 (19% of electricity
revenues) in 1998. The slight increase in 1998 was primarily attributable to
amortization of debt issue costs for the Senior Secured Notes issued in April
1997.
There was no provision for income taxes in the second quarter of 1998 or
1999 due to the net loss incurred and the uncertainty concerning the realization
of the deferred tax asset that resulted from such net loss.
As a result of the various factors discussed above, the Company recorded
net losses of $3,357 and $8,580 for the 1999 and 1998 periods, respectively.
LIQUIDITY AND CAPITAL RESOURCES
In the first six months of 1999 and 1998, the Company obtained cash from
operations of the Rosemary Facility and the Brandywine Facility and from
interest on cash balances. Additionally, the Company entered into a partnership
agreement concerning the Paris project and received net proceeds of
approximately $102 million, after repayment of project debt and escrowed funds,
in exchange for partnership interests therein. The Company utilized a portion of
this cash to service its debt and capital lease obligations, to fund project
development efforts, and for general and administrative expenses, including
reimbursement to the Company's parent for costs currently and previously
incurred for the Company's development projects.
The principal future cash requirement of the Company will be payment of
its debt service and capital lease obligations. The Company will rely almost
exclusively on distributions from Global Cayman and PIC to meet its cash
requirements. Those entities in turn will rely almost exclusively on
distributions from the project entities to meet their cash requirements. The
project entities' ability to make such distributions will depend upon the
financial performance of the Rosemary Facility, the Brandywine Facility, the
Luannan Facility and the Nepal Facility and will be subject to a number of
limitations on distributions contained in the project-level debt agreements. To
continue its development activities, the Company will also require external
financing. The Company is pursuing debt and equity financing to fund these
activities. The Company's restricted cash balances are available only for
specific uses as stated in the indentures, such as payment of debt service
obligations, project development, construction and maintenance, and are not
available for general corporate purposes.
The project entities are dependent on capacity payments under their
respective power purchase agreements to meet their fixed obligations, including
payment of project-level debt service, and to make distributions to the Company.
Capacity payments can be adversely affected by a major equipment failure,
resulting in a facility being unavailable for dispatch for an extended period of
time. Capacity payments can also be subject to reduction pursuant to regulatory
disallowance and, under contractual provisions, as a result of events outside
the Company's control. In 1999 and 2006, the capacity payments for the Rosemary
Facility are scheduled to decrease by approximately $1.8 million (7.1%) and $5.4
million (23.1%), respectively, based on the facility's current capacity rating.
Each of the electric energy purchasers under the power purchase agreements
for the Rosemary Facility and the Brandywine Facility has a contractual right to
schedule the facility for dispatch largely at the purchaser's discretion. Thus,
revenues from energy payments will vary depending on the hours these facilities
are dispatched by such purchasers.
IMPACT OF INFLATION
Inflationary increases in the Company's costs, primarily project
development costs, energy costs, and capital costs, may be offset by increases
in revenue as provided in the various purchase agreements, although competition
may limit the Company's ability to fully recover all such increases. The Company
attempts, where possible, to obtain provisions in its power purchase agreements
whereby certain revenue components, such as energy payments, may be adjusted
with inflationary increases. The Company currently believes that inflation will
not have a material adverse effect on the Company's financial position, results
of operations or cash flows in the foreseeable future.
3
<PAGE>
MARKET RISK DISCLOSURES
The Company has limited exposure to financial market risks. The Company
attempts, whenever possible, to hedge certain aspects of its projects against
the effects of fluctuations in inflation, interest rates, foreign currency
exchange rates and energy prices. Because of the complexity of hedging
strategies and the nature of the Company's operations, its results, although
significantly hedged, will likely be somewhat affected, and in certain cases may
be materially affected, by fluctuations in these variables and such fluctuations
may result in material improvement of deterioration of operating results.
The Company has generally structured the energy payments under its power
generation sales contracts to adjust with similar price indices as do its
contracts with the fuel suppliers for the corresponding power plants. The
Company's operations currently consist primarily of businesses with long-term
contracts. While the contract-based portfolio is expected to be an effective
hedge against future energy and electricity market price risks, a significant
portion of the Company's currently expected future revenues may be derived from
businesses without significant long-term revenue contracts. Increasing reliance
on non-contract businesses in the Company's portfolio may subject the Company to
potentially increasing electricity market price volatility.
The Company has also used a hedging strategy in an attempt to insulate
each plant's financial performance, where appropriate, against the risk of
fluctuations in interest rates. Because the capacity payments at the Company's
facilities are essentially fixed, the Company has attempted to hedge against
interest rate fluctuations by arranging fixed rate financing. The Company's
borrowings currently consist entirely of fixed rate obligations. There are no
interest rate swaps or other hedging facilities related to these borrowings. The
Company has no derivative financial instruments in place as of June 30, 1999.
The Company has certain exposure to changes in the foreign currency
exchange rate for the Chinese renminbi. This exposure is limited during the
construction phase of the Luannan Facility because the related debt and most
construction expenditures are denominated in U.S. dollars. After the project
commences commercial operations, the exposure will increase because the
project's operating revenues and expenses will be primarily denominated in the
renminbi. However, certain components of the power price calculation may be
adjusted to reflect local and U.S. inflation and foreign exchange rate
fluctuations in order to mitigate the Luannan Facility's exposure to inflation
and currency risks, and the operation and maintenance contract for the facility
is denominated in dollars. Management currently believes that potential losses
due to fluctuations in the Chinese currency will not have a material impact on
the Company's consolidated financial position, results of operations or cash
flows.
The Company has an investment in a joint venture in Nepal which has debt
at both fixed and variable interest rates. The joint venture has interest rate
derivative agreements, consisting of interest rate swaps, which serve as hedges
against a portion of the variable interest rate exposure. Most of the debt is
denominated in U.S. dollars; however, a portion of the debt is denominated in
the German mark. The joint venture has no hedging facilities relating to the
mark-denominated debt. After commercial operations commence, the joint venture's
foreign currency risk exposure will increase because a significant portion of
the project's operating expenses will be primarily denominated in the Nepalese
rupee. The project's operating revenues under the power purchase agreement are
denominated in U.S. dollars. The Company uses the equity method of accounting
for the joint venture. Management currently believes that potential losses to
the joint venture due to fluctuations in interest rates and foreign currency
exchange rates will not have a material impact on the Company's consolidated
financial position, results of operations or cash flows.
YEAR 2000 MATTERS
Set forth below is information regarding the Company's efforts to be
prepared for problems associated with the potential inability of many existing
computer programs and/or embedded computer chips to recognize the year 2000,
both those in the Company's businesses and those that its businesses depend
upon. Certain of these statements may constitute forward-looking information as
contemplated by the Private Securities Litigation Reform Act of 1995, including
those regardng the Company's expected readiness to handle Y2K problems, expected
costs of remediation and testing, the future costs associated with business
disruption caused by supplier or customer Y2K problems and the success of any
contingency plans. The Company cautions that its predictions of the extent of
potential problems and the effectiveness of measures designed to address them
are based on numerous assumptions,
4
<PAGE>
including but not limited to the accuracy of statements or certifications from
critical third parties and vendors, the ability to identify and remediate or
replace embedded computer chips in affected equipment, and resource
availability, among other things, and readers should be aware that actual
results might differ materially from those discussed below.
The Company's approach to analyzing Y2K issues is to (1) inventory all
systems and equipment likely to be affected, (2) perform an inventory
assessment, (3) conduct remediations, (4) test all equipment and systems, and
(5) develop contingency plans to aid in business continuity.
STATE OF READINESS
In 1998, the Company established a readiness program, led by a senior
executive and consisting of a team of employees with extensive knowledge of the
Company's businesses and processes, as well as outside consultants experienced
in these areas who are being used as advisors to assist with third-party
analysis and contingency planning. The Company estimates that its has identified
the potential problems in non-information technology (IT) areas such as
distributed control systems, programmable logic control systems, gas and
electricity metering systems, environmental emissions monitoring equipment,
back-up power systems and telephone and security systems. Additionally, the
Company estimates that it has identified the potential issues regarding the more
traditional IT areas such as computer hardware and software programs for
accounting and payroll, among others. The Company's generation plants are also
significantly dependent on transmission and distribution systems to carry the
electricity to the ultimate end users. Due to the interdependent nature of the
electricity supply chain, the Company has extended its evaluation of Y2K issues
to include key suppliers, customers and vendors, and has sought written
assurance from these parties as to their Y2K readiness. The Company expects to
complete steps one through four, referred to above, by the end of the third
quarter of 1999. The Company's businesses are currently working through planned
programs in order to achieve Y2K readiness.
COSTS OF ADDRESSING Y2K ISSUES
Based on internal analysis, the Company does not anticipate that the costs
to achieve full Y2K readiness company-wide will be material. This estimate
includes expected costs to make its businesses Y2K ready, but not necessarily
the costs associated with post-Y2K corrective actions or damage, if any. The
Company expects to fund these expenditures through internal sources.
RISKS OF Y2K FAILURES
Failures by each of the Company's generation facilities to address Y2K
issues may lead to numerical errors that, if not addressed or mitigated, may
cause system malfunctions resulting in the inability to deliver electricity,
among other things. There can be no assurance that Y2K issues will not
materially adversely impact the Company's facilities, services, competitive
conditions, operating results, financial conditions or cash flows. The Company's
generating businesses may also be unable to deliver electricity because of the
failure of the interconnected distribution companies to receive or transmit the
electricity. In such instances of business interruption due to supplier or
customer default, the Company will pursue all contractual remedies available to
it to minimize the impact on its results of operations; however, there can be no
assurance that, in all instances, the Company will be able to legally protect
itself from damages arising from third-party Y2K failures. Because of the
significant interdependency of the supplier chain, the Company cannot guarantee
that services will be uninterrupted nor can it adequately predict a reasonably
likely worst case scenario until substantially all of the testing phase is
completed.
CONTINGENCY PLANS
The Company is still in the process of identifying and testing appropriate
contingency plans addressing emergency operations, disaster recovery, data
preservation and business continuation plans, and intends to have them in place
by the fourth quarter of 1999. The plans will be continuously refined as new
information becomes available.
5
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
HEARD PROCEEDINGS
Panda Energy Corporation ("PEC") is a party to a lawsuit captioned,
Panda Energy Corporation, v. Heard Energy Corporation, et al., (No.
94-0672-J); in the District Court of Dallas County, Texas (191st
Judicial District). PEC initiated this litigation in April 1994 and has
alleged that defendants Wolf, Gwynn and Kinney, former PEC employees,
formed a competing company (Heard Energy Corporation) and
misappropriated certain of PEC's international power project
opportunities. On July 30, 1999, PEC filed an amended Petition with the
trial court and further discovery is ongoing. Further discussion of
this matter is set forth in the registrant's Annual Report on Form 10-K
for the year ended December 31, 1998.
The registrant does not believe that an adverse result in this case
would have a material adverse effect on the business, financial
condition or results of operations of the registrant and its
subsidiaries, taken as a whole.
NATIONAL DEVELOPMENT AND RESEARCH CORPORATION PROCEEDING
On October 14, 1997, Panda Global Energy Company, a wholly-owned
subsidiary of the Company ("PGE"), commenced a proceeding in the
District Court of Dallas County, 101st Judicial District captioned
Panda Global Energy Company v. National Development and Research
Corporation and Robert E. Tang, Case No. 97-9315-E. PGE's petition
sought a declaratory judgment for the termination of various agreements
between PGE and National Development and Research Corporation ("NDR")
regarding the development of power projects in the PRC. On December 9,
1997, NDR filed a counter-claim against PGE and Robert W. Carter
asserting that, among other things, such agreements are still in effect
and that NDR is entitled to certain payments thereunder. This claim was
subsequently dropped by NDR. The case currently is set for trial in
August 1999. Further discussions of this matter is set forth in the
registrant's Annual Report on Form 10-K for the year ended Deceber 31,
1998. The Company does not believe that an adverse result in this
proceeding would have a material adverse effect on the business,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole.
ITEM 5. OTHER MATTERS
The Owners of the Luannan Facility have applied to the Tangshan Price
Bureau for determination of the initial tariff for the Luannan Power
Purchase Agreement, and continue discussions with the Tangshan Price
Bureau in this regard. The
-6-
<PAGE>
Company currently believes that the final tariff could be lower than
the amount requested in its original application. There can be no
assurance that any such tariff will allow the Luannan Facility to
generate sufficient revenues to meet outstanding debt obligations
regarding the Luannan Facility, or that any subsequent applications for
an increase in the tariff will be approved by the Tangshan Price
Bureau.
Effective June 30, 1999, the joint venture owners of the Luannan
Facility and Duke/Fluor Daniel International Services ("DFD") agreed to
terminate the various operation and maintenance agreements with DFD for
such facility. In this regard, the joint venture owners currently
intend to perform such operation and maintenance services at the
Luannan Facility.
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:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
<C> <S>
10.94.05 Full Settlement and Release Agreement by and between
Tangshan Panda Heat and Power, Ltd., Tangshan Pan-Western
Heat and Power Co., Ltd., Tangshan Cayman Heat and
Power Co., Ltd., Tangshan Pan-Sino Heat Co., Ltd.,
Duke/Fluor Daniel International and Duke/Fluor Daniel
International Services, dated June 30, 1999. <F1>
10.138.7 Change Order No. 007 To The Amended and Restated Contract
for the Engineering, Procurement and Construction of
the Upper Bhote Koshi Hydroelectric Project, dated as
of September 30, 1998. <F1>
10.138.8 Change Order No. 008 To The Amended and Restated
Contract for the Engineering, Procurement and
Construction of the Upper Bhote Koshi Hydroelectric
Project, dated July 19, 1999. <F1>
10.178 Letter of Intent between Panda Development Corporation
and GE Power Systems and Sales, dated March 4, 1999. <F1>
10.179 Letter of Intent between Pan-Turbo Co., LLC and GE Power
Systems and Sales, dated March 18, 1999. <F1>
27.01 Financial Data Schedule.
(b) Reports on Form 8-K: None.
<FN>
<F1>
Filed herewith
</FN>
</TABLE>
-7-
<PAGE>
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 HOLDINGS, INC.
Date: August 13, 1999 By: /s/ Janice Carter
Janice Carter
Executive Vice President,
Secretary and Treasurer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ----------- ------------
<C> <S> <C>
10.94.05 Full Settlement and Release Agreement
by and between Tangshan Panda Heat and
Power, Ltd., Tangshan Pan-Western Heat
and Power Co., Ltd., Tangshan Cayman Heat
and Power Co., Ltd., Tangshan Pan-Sino
Heat Co., Ltd., Duke/Fluor Daniel
International and Duke/Fluor Daniel
International Services, dated June 30,
1999. <F1>
10.138.7 Change Order No. 007 To The Amended
and Restated Contract for the Engineering,
Procurement and Construction of the Upper
Bhote Koshi Hydroelectric Project, dated
as of September 30, 1998. <F1>
10.138.8 Change Order No. 008 To The Amended
and Restated Contract for the Engineering,
Procurement and Construction of the Upper
Bhote Koshi Hydroelectric Project, dated
July 19, 1999. <F1>
10.178 Letter of Intent between Panda Development
Corporation and GE Power Systems and Sales,
dated March 4, 1999. <F1>
10.179 Letter of Intent between Pan-Turbo Co., LLC
and GE Power Systems and Sales, dated March 18,
1999. <F1>
27.01 Financial Data Schedule.
<FN>
<F1>
Filed herewith
</FN>
</TABLE>
EXHIBIT 10.94.05
FULL SETTLEMENT AND RELEASE AGREMEENT
This Full Settlement and Release Agreement ("Agreement"), is entered into
and effective this 30th day of June, 1999, by and between Duke/Fluor Daniel
International ("DFDI"), a general partnership formed pursuant to the laws of the
State of Nevada, U.S.A., Duke/Fluor Daniel International Services ("DFDIS"), a
general partnership formed pursuant to the laws of the State of Nevada, U.S.A.
(DFDI and DFDIS are collectively hereinafter referred to as "DFD Parties"),
Tangshan Panda Heat and Power, Ltd., a Chinese Joint Venture company, Tangshan
Pan-Western Heat and Power Co., Ltd., a Chinese Joint Venture company, Tangshan
Cayman Heat and Power Co., Ltd., a Chinese Joint Venture company, and Tangshan
Pan-Sino Heat Co., Ltd. a Chinese Joint Venture company, (Tangshan Panda Heat
and Power, Ltd., Tangshan Pan-Sino Heat Co., Ltd. are collectively, hereinafter
referred to as "Owner Parties"). DFD Parties and Owner Parties are hereinafter
referred to individually as "Party" and collectively as "Parties."
WHEREAS, Owner Parties and DFD Parties are parties to and entered into the
following described agreements (collectively, the "O & M Agreements") covering
and pertaining to the rendering of construction, operations and maintenance
services by certain The DFD Parties to the Owner Parties' Luannan County
Coal-Fired Power Plant located in, Luanan County, Hebi Provience, China (the
"Project"):
1. That certain Offshore Services Agreement Construction Phase, dated effective
as of January 1, 1998 and executed by and between Owner Parties and
Duke/Fluor Daniel International, a general partnership.
2. That certain Offshore Services Agreement Commercial Operations Phase, dated
effective as of January 1, 1998 and executed by and between Owner Parties
and Duke/Fluor Daniel International, a general partnership.
3. That certain Second Amended and Restated On-Shore Operation and Maintenance
Agreement Construction Phase, dated January 1, 1998 and executed by and
between Owner Parties and Duke/Fluor Daniel International Services, a
general partnership.
4. That certain Second Amended and Restated On-Shore Operation and Maintenance
Agreement Commercial Operations Phase, dated January 1, 1998 and executed by
and between Owner Parties and Duke/Fluor Daniel International Services, a
general partnership.
WHEREAS, Owner Parties and DFD Parties have mutually agreed to terminate the
O & M Agreements and the services to be performed with respect thereto, in
accordance with the terms, provisions and conditions of this Agreement.
NOW, THEREFORE, for and in consideration of the covenants hereinafter set
forth, and other good and valuable consideration, the Parties covenant,
stipulate and agree as follows, to-wit:
<PAGE>
1. The Parties hereby covenant, stipulate and agree to terminate and bring
to conclusion in accordance with the terms of this Agreement and effective as of
the date hereof, each of the O & M Agreements, including any and all amendments,
modifications, alterations, understandings, agreements, letter agreements or
other documents arising therefrom or relating thereto, made or entered into on
or before June 30, 1999.
2. Before July 15, 1999, the Owner Parties shall cause to be paid through
Panda Global Energy Company, to DFDIS, the sum of $ 2,200,000.00 (Two million,
Two hundred thousand and No/100 Dollars). This amount will be paid in U.S.
Dollars, by wire transfer to such bank account as DFDIS shall designate in
writing. This amount excludes DFD's June 1999 invoice and true-up to be invoiced
by and paid to DFDIS with thirty (30) days of receipt of invoice. These Payments
by the Owner Parties to the DFD Parties shall satisfy any and all payment
obligations of Owner Parties to the DFD Parties under all of the O&M Agreements,
including any and all amendments, modifications, alterations, understandings,
agreements, letter agreements or other documents arising therefrom or relating
thereto.
3. Except for any continuing obligations expressly provided in this
Settlement and Release Agreement, the Owner Parties and the DFD Parties,
including each of their respective affiliates, subsidiaries and parent
companies, and the respective officers, employees, directors, agents, and
representatives of each of them, do hereby fully, completely and forever waive,
relieve, release, remise, acquit and discharge the other, from and for any and
all claims, demands, causes of action, damages, expenses, lawsuits or
liabilities arising from or relating to the O&M Agreements or to the services
provided in connection therewith, including, without limitation, any claim for
non-payment, breach, bad faith, performance or lack thereof, consequential or
indirect damages and damages.
4. With respect to payments made by Owner Parties to the DFD Parties for DFD
Parties' personnel under the Second Amended and Restated On-Shore Operation and
Maintenance Agreement, Construction Phase, the Owner Parties shall make any and
all required filings with respect to taxes on the income of such DFD Parties'
expatriate personnel, and the Owner Parties shall bear all costs associated with
such taxes and shall hold the DFD Parties harmless from any such taxes,
including any related penalties or interest. The Owner Parties shall provide
copies of all such filings to Pat McCarthy, or his successor designated in
writing by the DFD Parties.
5. This Agreement shall be binding upon and shall inure to the benefit of
the Parties, together with their respective successors and assigns.
IN WITNESS WHEREOF, the undersigned parties have caused their duly authorized
representatives to execute this Agreement effective as of the date first above
written.
<PAGE>
TANGSHAN PANDA HEAT AND POWER, LTD.,
a Chinese Joint Venture company
By: _________________________________
Title: ______________________________
TANGSHAN PAN-WESTERN HEAT AND POWER CO., LTD.,
a Chinese Joint Venture company
By: _________________________________
Title: ______________________________
TANGSHAN CAYMAN HEAT AND POWER CO., LTD.,
a Chinese Joint Venture company
By: _________________________________
Title: ______________________________
TANGSHAN PAN-SINO HEAT CO., LTD.,
a Chinese Joint Venture company
By: _________________________________
Title: ______________________________
DUKE/FLUOR DANIEL INTERNATIONAL,
a General Partnership
By: _________________________________
Title: ______________________________
DUKE/FLUOR DANIEL INTERNATIONAL SERVICES,
a General Partnership
By: _________________________________
Title: ______________________________
EXHIBIT 10.138.7
CHANGE ORDER
TO THE
AMENDED AND RESTATED CONTRACT
FOR THE
ENGINEERING, PROCUREMENT AND CONSTRUCTION
OF THE
UPPER BHOTE KOSHI HYDROELECTRIC PROJECT
CHANGE ORDER NO. 007
RECITALS:
Whereas, in accordance with Article 6, the Contractor and Owner mutually agree
to amend certain terms in the Amended and Restated Contract for the Engineering,
Procurement and Construction of the Upper Bhote Koshi Hydroelectric Project,
dated December 19, 1996 including Change Orders 1,2, 3,4,5,and 6 (the
"Contract"), including, the Critical Dates, the Construction Schedule, and the
Milestone Payment Schedule, and have mutually agreed to this Change Order No.
007.
Whereas, the Contractor failed to achieve, in a timely manner, certain milestone
Critical Dates as amended and restated in Change Order No. 005 of the Contract,
the Contractor has proposed a recovery plan to assure the earliest possible
achievement of project completion.
Now therefore, the Parties agree to the following:
A. SPECIAL CONSIDERATIONS
1. The Parties agree to amend and replace the Milestone Payment Schedule
attached as Exhibit E-2 to the Contract as amended in Change Order No.
003 and Change Order No. 005, with the Milestone Payment Schedule
attached as Exhibit 7.2 to this Change Order No. 007.
2. The Parties acknowledge that Bonus for Early Delivery and Schedule
Liquidated Damages shall remain in full force.
3. This Change Order No. 007 shall constitute the entire agreement between
Owner and Contractor relating to the subject matter hereof and shall
operate as an amendment to the Contract. This Change Order No. 007 shall
supercede Change Order No. 005 A (2) and (3). All other terms and
conditions of the /Contract are hereby ratified and confirmed and shall
remain in full force and effect.
<PAGE>
B. SCHEDULE ADJUSTMENT
1. The Parties agree to amend the Construction Schedule attached as Exhibit
A to the Contract as previously amended in Change Order No. 003 and
Change Order No. 005, with the amendments to the Construction Schedule,
entitled Recovery Schedule, attached as Exhibit 7.1 to this Change Order
No. 007.
2. The Parties agree not to amend and restate the Critical Dates as defined
in Article 5.2.3, Change Order No. 001, Change Order No. 002, Change
Order No. 003, and Change Order No. 005. The Critical Dates shall remain
as follows:
<TABLE>
<CAPTION>
Milestone Critical Date
<S> <C>
Start Mobilization 06/01/97
Health, Safety and Environmental 07/05/97
Plan Complete
Turbine, Generator, Inlet Valve 08/31/97
and Governor Ordered
Transformer and Powerhouse Crane 11/15/97
Ordered
River Closure 03/20/98
Cutoff Wall Under Spillway Complete 12/15/97
Powerhouse Excavation Complete 02/28/98
Draft Tubes Delivered to the Site 03/01/98
Surge Shaft Complete 09/15/98
Headrace Tunnel Excavation 50% 09/30/98
Complete
Dam, Spillway and Right Side Wall
of Descending Basing Foundations 06/15/98
Concrete Complete
Powerhouse Roof Complete 04/30/99
All Transmission Tower Erected 05/30/99
All Major Equipment on Site 06/01/99
Headrace Tunnel Complete 09/20/99
Operators Village Complete 07/01/99
Transmission Line Complete 08/31/99
Penstock Complete 10/31/99
Stage 2 Headworks Concrete Complete 09/20/99
Unit Delivery Date of First Unit 11/15/99
Unit Delivery Date of Second Unit 12/31/99
</TABLE>
<PAGE>
C. COST ADJUSTMENT
NONE
Agreed this ___________ day of September 1998 by and between:
OWNER: CONTRACTOR:
Bhote Koshi Power Company China Gezhouba Construction
Private Limited Group Corporation for Water
Resources and Hydropower
By:______________________ By:_________________________
Ted C. Hollon Wang Heming
Senior Vice President Project Manager
<PAGE>
MILESTONE PAYMENT SCHEDULE
<TABLE>
<CAPTION>
Milestone No. Milestone Description Percent of Amount in
Contract US$
Portion
<S> <S> <C> <C>
1 Mobilization payment upon 10.00% 4,634,000
receipt of Notice to Proceed
2 Health, safety and 0.39%
Environmental Plan submitted
and approved by Owner; Owner's
temporary office and residence
complete, mobilization complete
and in compliance with Health,
Safety and Environmental Plan
and environmental laws 180,726
3 Project engineering design 1.67%
and desanding basin physical model
and testing complete;Project
design report, including design
drawings, and report on
desanding basin physical model
testing delivered to Owner 773,878
4 River crossing No. 1 complete 0.15% 69,510
5 River crossing No. 2 complete 0.91% 421,694
6 Construction roads for access 1.99%
along the left bank at the
headworks, adit A, adit B,
penstock and and surge shaft
complete 922,166
7 Construction roads for 0.78%
switchyard and powerhouse
construction area complete 361,452
8 Left bank high slope protection 1.40%
above elevation 435 m.
complete; Cutoff wall under
spillway section complete 648,760
9 Diversion tunnel and diversion 2.44%
channel complete (not including
the roof of box culvert and
gate slot) 1,130,696
10 Upper and lower cofferdams 2.50%
complete; Cutoff wall under
right bank slope section; complete 1,158,500
<PAGE>
11 Desanding basin intake and 3.12%
riverside wall foundation
excavation and spillway
weir body foundation
excavation completed;
Spillway weir body and
desanding basin riverside
wall foundation concrete
(1m) placement completed;
Stage 1 cofferdam removed 1,445,808
12 Gravity dam block 1 through 3 1.56%
foundation excavation
complete and foundation
concrete (2m) placement 722,904
13 By-pass conduit and desanding 7.50%
basin intake trench concrete
placed to EL.1420m; Riverside
wall body concrete block A and B
placed to EL.1417m, block C
placed to EL.1415m; Spillway
weir body concrete placed to
EL.1420m; Flood protection for
construction of spillway and
desanding basin completed. 3,475,500
14 Cut-off wall under right 0.77%
abutment slope section
completed (excluding Aniko
highway section and connect
section) 356,818
15 Headrace tunnel intake 5.00%
excavation completed; Desending
basin intake, by-pass conduit
intake and riverside wall (except
end wall) concrete placed to
EL.1435m; Spillway piers concrete
placed to EL.1435m 2,317,000
16 Headworks gates installation 2.33%
cut-off wall (including Aniko
highway section and connect
section) completed.; Rubble
masonry for protection and
backfill completed; Desanding
basin concrete complete 1,079,722
17 Gravity Dam body concrete 2.80%
placed to EL.1435m; Spillway
weir surface concrete complete 1,297,520
18 Adit A and B excavation and 0.68%
rock support complete,
headrace tunnel excavation
and support from surge shaft
to downstream outlet complete 315,112
19 600 m headrace tunnel 1.76%
excavation completed 815,584
20 Milestone 19 plus 700m 2.03%
headrace tunnel excavation
complete 940,702
21 Milestone 20 plus 700m 2.03%
headrace tunnel excavation
completed. 940,702
22 Milestone 21 plus 700m 2.03%
headrace tunnel excavation
completed 940,702
23 Headrace tunnel excavation 2.03%
complete 940,702
24 705m of headrace tunnel 1.72%
rock support and lining (side
wall and arch where necessary)
complete 797,048
25 Milestone 24 plus 1000m 2.30%
headrace tunnel rock support
and lining (side wall and
arch where necessary) complete 1,065,820
26 Headrace tunnel rock support 3.62%
and lining complete 1,677,508
27 Grouting and drain holes 0.78%
complete in headrace tunnel,
and adit A and adit B plugged
complete 361,452
28 Surge shaft and vent tunnel 0.57%
excavation, rock support and
concrete complete 264,138
29 Orders placed for Major 3.61%
Equipment (not including the
additional transformer);
Order placed for steel and
hardware for penstock and
spillway gates 1,672,874
30 Penstock steel and hardware 1.88%
delivered to the site; and
Contractor penstock construction
operation ready to proceed 871,192
31 Penstock tunnel section, 0.31%
including steel liner,
concrete encasement and
grouting, complete 143,654
32 Exposed section of penstock 1.57%
complete, including provisions
for draiage, restoration of
public roadway, and completion
of penstock and tunnel leakage
test 727,538
33 Powerhouse cofferdam in place 0.91%
and tailrace excavation complete 421,694
34 Powerhouse excavation 0.88%
complete for drainage sump
construction 407,792
35 Powerhouse foundation concrete 0.85%
(below El.1279m) complete 393,890
<PAGE>
36 Powerhouse Stage 1 concrete 1.50%
placed to El.1292m; Powerhouse
cofferdam removal; Powerhouse
back slope (excluding switchyard)
protection complete; Tailrace
concrete placement and tailrace
stoplog gate installation
complete; Yard backfilled to
El.1287m 695,100
37 Powerhouse state 1 concrete 0.72%
placed to El.1330m; State 2
concrete of erection bay placed
to El.1292m 333,648
38 Owners office and residence 2.50%
(operators village) complete 1,158,500
39 Maintenance faiclity building 1.22%
complete and accepted by Owner 565,348
40 Transmission towers delivered 0.83%
to the Facility Site 384,622
41 Survey and subsurface testing 1.00%
of all tower locations,
foundations for each tower
complete 463,400
42 All towers erected and 0.99%
hardware and conductors
installed, inspected and tested,
complete 458,766
43 Delivery of First Unit and 6.89%
auxiliary equipment to the
Facility Site 3,192,826
44 Delivery of Second Unit to 2.04%
the Facility Site 945,336
45 Powerhouse state 2 concrete, 1.64%
roof structure, inner brick
work complete; Powerhouse
bridge crane and draft tube
gate hoisting equipment
installation complete 759,976
46 Achievement of First Unit 0.91%
Delivery Date, in accordance
with the requirements of the
Contract 421,694
47 Installation of all electrical 2.15%
and mechanical auxiliary and
miscellaneous equipment and
systems, including all
switchyard equipment, complete 996,310
48 Achievement of Second Unit 0.91%
Delivery Date, in accordance
with the requirements of the
Contract 421,694
49 Final Acceptance in accordance 1.83%
with requirements of the
Contract 848,022
TOTALS 100.00% 46,340,000
</TABLE>
EXHIBIT 10.138.8
CHANGE ORDER
TO THE
AMENDED AND RESTATED CONTRACT
FOR THE
ENGINEERING, PROCUREMENT AND CONSTRUCTION
OF THE
UPPER BHOTE KOSHI HYDROELECTRIC PROJECT
CHANGE ORDER NO. 008
RECITALS:
Whereas, in accordance with Article 6, the Contractor and Owner mutually agree
to amend certain terms in the Amended and Restated Contract for the Engineering,
Procurement and Construction of the Upper Bhote Koshi Hydroelectric Project,
dated December 19, 1996 including Change Orders 1,2,3,4,5,6and 7 (the
"Contract"), including, the Critical Dates, the Construction Schedule, and the
Milestone Payment Schedule, and have mutually agreed to this Change Order No.
008.
Whereas, there have been certain events that have affected the Contractor and
Owner during the construction of the project. These include, repairs to the
Larcha stream crossing, labor strike, wind damage, detonator magazine explosion,
and additional flood protection. The Contractor and the Owner have reached
agreement on the economic value of these events as set forth herein.
Whereas; the events of August 1998, that included a flood of the Bhote Koshi
River during the night of 10 August and the morning of 11 August affecting the
Facility Site and landslides throughout the month of August along the Arniko
Highway limiting access to the Facility Site, which is a combination of events
that materially and adversely affected the Parties abilities to perform their
obligations under the Contract.
Now therefore, the Parties agree to the following:
A. SPECIAL CONSIDERATIONS
1. The Parties acknowledge that Bonus for Early Delivery and Schedule
Liquidated Damages shall remain in full force, except as modified
herein.
2. This Change Order No. 008 shall constitute the entire agreement
between Owner and Contractor relating to the subject matter hereof
and shall operate as an amendment to the Contract. This Change Order
shall supercede, as appropriate, previous change orders. All other
terms and conditions of the Contract are hereby ratified and
confirmed and shall remain in full force and effect.
3. Due to the Force Majeure Events of August 1998 and other events as
cited in the Recitals, certain changes to the Contract to reflect the
affects of the Force Majeure Events on the expectations for project
completion it is agreed that the following two Definitions under
Article 1 of the Contract shall be changed to read as follows:
"Final Acceptance Date" shall mean the date on which Final Acceptance
actually occurs but in no event shall be later than July 30, 2000.
"Guaranteed Unit Delivery Date" shall mean with respect to the
First Unit, February 22, 2000 and with respect to the Second Unit,
April 7, 2000.
4. Due to the Force Majeure Events of August 1998 and other events
cited in the Recitals, certain changes to the Contract to reflect
the affects of the Force Majeure Events on the expectations for project
completion it is agreed that Article 10.6.1 and 10.6.1(d) of the Contract
shall be changed to read:
10.6.1 For any failed or incomplete Performance Test as demonstrated
by the inability to achieve the Minimum Performance Level, as set
forth in Article 10.5, Contractor shall correct the defect in the Works,
at the Contractor's expense, and the failed or incomplete Performance
Test shall be repeated. Such correction of defects and retesting may
be performed prior to the earlier of July 30, 2000 or
10.6.1 (d)with respect to either Unit, the Unit Delivery Date for each
Unit, provided, however, that if any Minimum Performance Levels are
not achieved, or if the Works otherwise fail to conform to the technical
specifications and requirements, as set forth in this Contract, by July
30, 2000, such failure shall constitute a default of the Contract pursuant
to Article 15; and provided further after the Guaranteed Unit Delivery
Date for either Unit the Contractor shall pay Schedule Liquidated
Damages as specified in Articles 12.3.
5. Due to the Force Majeure Events of August 1998 and other events as
cited in the Recitals, certain changes to the Contract to reflect the
affects of the Force Majeure Events on the expectations for project
completion it is agreed that Article 10.9 of the Contract shall be
changed to read:
10.9 Owner's Acceptance of Unit Delivery Date. Within fifteen (15)
Days following receipt by Owner of such Notice of Unit Delivery Date
with respect to any Unit, Owner shall notify Contractor in writing
whether Owner and the Independent Engineer have concluded that
Contractor has fulfilled the requirements of this Contract sufficient
to successfully achieve such Unit Delivery Date. If Owner and Independent
Engineer determine that Contractor has not fulfilled the requirements
for Unit Delivery Date of such Unit, Owner shall so notify Contractor,
specifying in reasonable detail the manner in which the requirements for
the Unit Delivery Date have not been met. Contractor shall promptly act
to correct such deficiencies so as to achieve such Unit Delivery Date by
the Guaranteed Unit Delivery Date. If Contractor fails to achieve such
Unit Delivery Date of either Unit by the Guaranteed Unit Delivery Date,
Contractor shall pay Schedule Liquidated Damages. Following any such
remedial action, Contractor may deliver to Owner a new Unit Delivery Date
Notice conforming to the requirements of this Article 10.9, and the
provisions of this Article 10.9 shall apply with respect to such new Unit
Delivery Date Notice in the same manner as they applied with respect to
the original Unit Delivery Date Notice. The foregoing procedure shall be
repeated as often as necessary, as long as Contractor is accruing, and
paying when due, Schedule Liquidated Damages, until the earlier of: (i)
Owner and Independent Engineer no longer reject Contractor's Unit Delivery
Date Notice and provide their own Notice to Contractor that the Unit
Delivery Date has occurred, and (ii) July 30, 2000.
6. Due to the Force Majeure Events of August 1998 and other events as cited
in the Recitals, certain changes to the Contract to reflect the affects
of the Force Majeure Events on the expectations for project completion it
is agreed that Article 10.10 of the Contract shall be changed to read:
10.10 Notice of Final Acceptance. Once Contractor has completed all of
the requirements for Final Acceptance, Contractor shall submit a proposed
Final Acceptance Certificate to Owner. A team consisting of representatives
of Owner, Financing Parties, Independent Engineer and Contractor shall as
soon as practicable make a final inspection of the Facility and determine
whether the Facility meets all requirements of this Contract. Within
fifteen (15) Days following such final inspection, Owner, with the consent
of Financing Parties and Independent Engineer, shall notify Contractor in
writing whether Contractor has fulfilled the requirements of this Contract
to reach Final Acceptance. If Owner and Independent Engineer determine
in good faith that, notwithstanding Contractor's delivery of the Final
Acceptance Certificate, the Contractor has not fulfilled the requirements
for Final Acceptance for the Facility, then Owner shall deliver its
Notice to such effect to Contractor describing in reasonable detail the
deficiencies noted and corrective action recommended. Contractor shall
promptly act to correct any such deficiencies. The procedure set forth
in this Article 10.10 shall be repeated as necessary until Owner accepts
the Final Acceptance Certificate and provides its own Notice to Contractor
that the Final Acceptance Date has occurred, provided however, if
Contractor has not completed the requirements for Final Acceptance by
July 30, 2000, Owner may upon Notice to Contractor, complete any
remaining items on the Punch List and charge all expenses incurred by
Owner to complete such Punch List items.
7. Due to the Force Majeure Events of August 1998 and other events as cited in
the Recitals, certain changes to the Contract to reflect the affects of the
Force Majeure Events on the expectations for project completion it is agreed
that Article 12.1 of the Contract shall be changed to read:
12.1 Guarantee of Timely Completion. Contractor warrants and guarantees
that (1) the First Unit Delivery shall occur on or before the Guaranteed
Unit Delivery Date of the First Unit, or February 22, 2000, and (2) the
second Unit Delivery shall occur on or before the Guaranteed Unit Delivery
Date of the Second Unit, or April 7, 2000, but in no event shall such date
be before September 1, 1999.
8. Due to the Force Majeure Events of August 1998 and other events as cited in
the Recitals, certain changes to the Contract to reflect the affects of the
Force Majeure Events on the expectations for project completion it is agreed
that Article 12.2 of the Contract shall be changed to read:
12.2 Bonus for Early Unit Delivery.
12.2.1 Bonus for Early Delivery of First Unit. In the event that the Unit
Delivery Date of the First Unit occurs prior to February 22, 2000, but not
earlier than September 1, 1999, Owner shall pay Contractor a bonus equal to
the relevant amount set forth in the following table:
<PAGE>
<TABLE>
<CAPTION>
Delivery Date Bonus Amount
<S> <C>
February 15, 2000 through $ 75,000
February 21, 2000
February 8, 2000 through $150,000
February 14, 2000
February 1, 2000 through $225,000
February 7, 2000
January 25, 2000 through $300,000
January 31, 2000
January 18, 2000 through $385,000
January 24, 2000
January 11, 2000 through $470,000
January 17, 2000
January 3, 1999 through $555,000
January 10, 2000
December 27, 1999 through $640,000
January 2, 1999
December 20, 1999 through $725,000
December 26, 1999
December 13, 1999 through $810,000
December 19, 1999
December 8, 1999 through $895,000
December 12, 1999
</TABLE>
No bonus shall be paid for any Day prior to September 1, 1999 and this
provision shall not be modified by any Force Majeure Event.
12.2.2 Bonus for Early Delivery of Second Unit. In the event that the
Unit Delivery Date of the Second Unit occurs prior to April 7, 2000,
but not earlier than September 1, 1999, Owner will pay Contractor a bonus
equal to the relevant amount set forth in the following table:
<TABLE>
<CAPTION>
Delivery Date Bonus Amount
<S> <C>
April 1, 2000 through $ 100,000
Arpil 7, 2000
March 25, 2000 through $ 200,000
March 31, 2000
March 18, 2000 through $ 310,000
March 24, 2000
March 11, 2000 through $ 420,000
March 17, 2000
March 5, 2000 through $ 540,000
March 10, 2000
February 27, 2000 through $ 660,000
March 4, 2000
February 20, 2000 through $ 780,000
February 26, 2000
February 13, 2000 through $ 900,000
February 19, 2000
February 6, 2000 through $1,020,000
February 12, 2000
January 30, 2000 through $1,140,000
February 5, 2000
January 23, 2000 through $1,260,000
January 29, 2000
January 16, 2000 through $1,380,000
January 22, 2000
January 9, 2000 through $1,500,000
January 15, 2000
January 1, 1999 through $1,620,000
January 8, 2000
December 25, 1999 through $1,740,000
December 31, 1999
December 18, 1999 through $1,860,000
December 24, 1999
December 11, 1999 through $1,980,000
December 17, 1999
December 8, 1999 through $2,100,000
December 10, 1999
</TABLE>
No bonus shall be paid for any Day prior to September 1, 1999 and this
provision shall not be modified by any Force Majeure Event.
9. Due to the Force Majeure Events of August 1998 and other events as
cited in the Recitals, certain changes to the Contract to reflect the
affects of the Force Majeure Events on the expectations for project
completion it is agreed that Article 12.3.1 of the Contract shall be
changed to read:
12.3.1 If the Unit Delivery Date of the First Unit does not occur on
or before the Guaranteed Unit Delivery Date of the First Unit, Contractor
shall pay to Owner Twenty Thousand Dollars ($20,000) for each Day that
the Unit Delivery Date of the First Unit is delayed beyond the Guaranteed
Unit Delivery Date of the First Unit, up to and including March 22, 2000,
and shall pay to Owner Twenty-Five Thousand Dollars ($25,000) for each
Day that the Unit Delivery Date of the First Unit is delayed from March
23, 2000 up to and including April 7, 2000.
10. Due to the Force Majeure Events of August 1998 and other events as
cited in the Recitals, certain changes to the Contract to reflect the
affects of the Force Majeure Events on the expectations for project
completion it is agreed that Article 12.3.2 of the Contract shall be
changed to read:
12.3.2 If the Unit Delivery Date of the Second Unit does not occur on
or before the Guaranteed Unit Delivery Date of the Second Unit, or
April 7, 2000, Contractor shall pay to Owner Forty Thousand Dollars
($40,000) for each Day that the Unit Delivery Date of the Second Unit
is delayed beyond the Guaranteed Unit Delivery Date of the Second Unit,
up to and including June 22, 2000. For any such delay after June 22,
2000, Contractor shall pay to Owner Forty Five Thousand Dollars ($45,000)
for each Day that the Unit Delivery Date of the Second Unit is delayed
beyond June 22, 2000 up to and including the termination date of this
Contract pursuant to the last paragraph of this Article 12, or until the
maximum limit on Schedule Liquidated Damages is reached, whichever
occurs first.
11. Due to the Force Majeure Events of August 1998 and other events as cited
in the Recitals, certain changes to the Contract to reflect the affects of
the Force Majeure Events on the expectations for project completion it is
agreed that Article 12.3.4 of the Contract shall be changed to read:
12.3.4 In the event that the Unit Delivery Date for the Second Unit does
not occur on or before July 30, 2000, although Contractor has paid Schedule
Liquidated Damages or Performance Liquidated Damages, in addition to the
liability of Contractor due to indemnification and third party claims set
forth in Article 16 and 18.2 and Schedule Liquidated Damages, Owner may
terminated Contractor's employment and pay an amount up to thirty-five
percent (35%) of the total Contract Price, and Owner may, at its sole
option, draw on the Performance Guarantee and withhold the retainage and
may assert such remedies as are set forth in Article 15.1.
12. Due to the Force Majeure Events of August 1998 and other events as cited
in the Recitals, certain changes to the Contract to reflect the affects of
the Force Majeure Events on the expectations for project completion it is
agreed that Article 13.2.1 of the Contract shall be changed to read:
<PAGE>
13.2.1 Prolonged Delay. If the Unit Delivery Dates for both Units shall
not have occurred by July 30, 2000 and, although Contractor shall have paid
Performance Liquidated Damages and Schedule Liquidated Damages, in addition
to the liability of the Contractor due to indemnification and third party
claims set forth in Article 16 and 18.2, Owner may terminate Contractor's
employment and this Contract pursuant to Article 15.1.2(b) and upon such
termination, Contractor shall pay an amount up to thirty-five percent (35%)
of the total Contract Price and Owner may, at its sole option, draw on the
Performance Guarantee and withhold the retainage and may assert such
remedies as are set forth in Article 15.1.
13. Due to the Force Majeure Events of August 1998 and other events as cited in
the Recitals, certain changes to the Contract to reflect the affects of the
Force Majeure Events on the expectations for project completion it is
agreed that Article 13.5.2(d) of the Contract shall be changed to read:
13.5.2(d). If (y) is less than the Minimum Output, the Owner may in its
sole discretion, require the Contractor to correct the defect in the
Works, and repeat the Performance Test for the Second Unit, and pay
Schedule Liquidated Damages as set forth in Article 12 until the date
upon which the defects in the First Unit are corrected to the
satisfaction of the Owner and Performance Tests, including the
simultaneous full gate operation of both Units, are performed and the
results demonstrate that the First Unit has achieved the Minimum Output
for such Unit. The failure of the Contractor to satisfy the conditions
in the immediately preceding sentence by July 30, 2000 shall constitute
a default under this Contract and shall entitle Owner to terminate
Contractor's employment and this Contract pursuant to Article 15.1.2(b)
and assert such remedies as are set forth in Article 15.1.5. The
delivery of the Second Unit shall not occur until the Performance Test
for the Second Unit demonstrates that both Units can meet or exceed
Minimum Output.
14. Due to the Force Majeure Events of August 1998 and other events as cited in
the Recitals, certain changes to the Contract to reflect the affects of the
Force Majeure Events on the expectations for project completion it is
agreed that Article 15.1.2(b) of the Contract shall be changed to read:
15.1.2(b). In the event Contractor (i) fails to achieve the Unit Delivery
Date for the Second Unit on or before July 30, 2000, (ii) fails to
achieve a milestone in the time period permitted under Contractor's
recovery plan approved by the Owner in accordance with Article 5.2.3,
or (iii) the Contractor does not provide special steps to be taken in
the recovery plan provided pursuant to Article 5.2.3, acceptable to
Owner, Owner may, without providing Contractor with a period to cure,
and without prejudice to any other right or remedy under this Contract,
terminate Contractor'' employment and this Contract.
15. In full and final settlement of any and all claims made by the Contractor
to the Owner out of in connection with the work done on the Larcha stream
crossing prior to August 1998 the Owner shall reimburse the Contractor
twenty four thousand three hundred fifty nine dollars and fifty two cents
($ 24,359.52) as determined as half the expenses in the repairs completed
by the Contractor.
<PAGE>
16. In full and final settlement of any and all claims made by the Contractor
to the Owner arising out of or in connection with the labor strike that
occurred starting 8 November 1997 the Owner shall reimburse the Contractor
twenty three thousand ($23,000) for one half of the labor costs for idle
labor during said strike.
17. In full and final settlement of any and all claims made by the Contractor
to the Owner arising out of or in connection with the wind damage that
occurred at the Facility Site 31 March 1998 the Owner shall reimburse
the Contractor thirty five thousand nine hundred and twenty four dollars
($35,924) for the documented costs of the repair of the damages and
idle labor caused by said event.
18. In full and final settlement of any and all claims made by the Contractor
to the Owner arising out of or in connection with the detonator magazine
explosion that occurred on 17 March 1998 the Owner shall reimburse the
Contractor sixty thousand dollars ($60,000) for the repair of the damages
and idle labor for the time of the detonator magazine explosion.
19. In full and final settlement of any and all claims made by the Contractor
to the Owner arising out of or in connection with the work completed by
the Contractor to increase the flood protection of the project to a
flow level of six hundred and forty (640) cubic meters per second the
Owner shall reimburse the Contractor one hundred and eight thousand
seven hundred and twenty nine dollars ($108,729) for construction of
the protective works.
20. In full and final settlement of any and all claims made by the Contractor
to the Owner arising out of or in connections with the material damages
and repairs of the Arniko highway as a result of the Force Majeure
Events of August 1998 the Owner shall reimburse the Contractor four
hundred and fifty thousand dollars ($450,000).
21. Both parties agree that under the proposed schedule for completion of
installation of the generating units it may not be possible to meet all
the testing requirements required under the Contract due to availability
of flow in the Bhote Koshi River. Specifically, the river flows may
not be sufficient enough to fully test the desanding basin or two-unit
operation. The parties agree to meet prior to 15 December 1999 and
develop a solution to deal with potential limited water availability.
B. SCHEDULE ADJUSTMENT
1. The Parties agree to amend the Construction Schedule attached as Exhibit A
to the Contract as previously amended in Change Order No. 003, Change Order
No. 005, and Change Order 007 with the amendments to the Construction
Schedule, entitled Acceleration Schedule, attached as Exhibit 8.1 to this
Change Order No. 008.
2. The Parties agree to amend and restate the Critical Dates as defined in
Article 5.2.3, Change Order No. 001, Change Order No. 002, Change Order No.
003, Change Order No. 005, and Change Order No. 007. The Critical Dates
shall be defined as:
<PAGE>
<TABLE>
<CAPTION>
Milestones Critical Date
<S> <C>
Start Mobilization 06/01/97
Health, Safety and Environmental Plan Complete 07/05/97
Turbine, Generator, Inlet Valve and Governor Ordered 08/31/97
Transformer and Powerhouse Crane Ordered 11/15/97
River Closure 03/20/98
Cutoff Wall Under Spillway Complete 12/15/97
Powerhouse Excavation Complete 02/28/98
Draft Tubes Delivered to the Site 03/01/98
Surge Shaft Complete 09/15/98
Headrace Tunnel Excavation 50% Complete 09/30/98
Dam, Spillway and Right Side Wall of Desanding Basin
Foundations Concrete Complete 06/15/98
Powerhouse Roof Complete 08/06/99
All Transmission Tower Erected 09/06/99
All Major Equipment on Site 06/08/99
Headrace Tunnel Complete 12/27/99
Operator's Village Complete 10/08/99
Transmission Line Complete 11/08/99
Penstock Complete 02/07/2000
Stage 2 Headworks Concrete Complete 12/27/99
Unit Delivery Date of First Unit 02/22/2000
Unit Delivery Date of Second Unit 04/07/2000
</TABLE>
C. COST ADJUSTMENT
There shall be no cost adjustment to the Amended and Restated EPC
Contract as the funds to be paid to the Contractor by the Owner as
stated in this Change Order are reimbursements for work already
completed by the Contractor or for damages incurred by the Contractor.
This Change Order shall constitute a full and final settlement on all the
issues addressed herein. Reimbursement of funds shall be made on or
before 5 June 1999 provided the Contractor is not foreclosed from such
payment under the Amended and Restated EPC Contract.
Agreed this ___________ day of June 1999 by and between:
<TABLE>
<S> <C>
OWNER: CONTRACTOR:
Bhote Koshi Power Company China Gezhouba Construction Group
Private Limited Corporation for Water Resources
And Hydropower
By:/s/______________________ By:/s/__________________________
Ted C. Hollon Wang Heming
Senior Vice President Project Manager
</TABLE>
EXHIBIT 10.178
March 4, 1999
GE Power Systems
Re: Panda Development Corporation ("PDC"): Letter of Intent
GE IPS #80904
Gentlemen:
Whereas GE Power Systems and Sales ("GE") and PDC are in substantial agreement
with regard to the commercial terms associated with the purchase of the
Equipment for the PDC SPP I Project which will have a 1,000MW net output, it is
agreed by Parties to execute a definitive contract document by May 1, 1999
(which date may be extended by mutual agreement of the Parties) that includes
terms and conditions substantially similar (with minor modifications that do not
materially adversely affect either PDC or GE) to the Panda Guadalupe Project,
Purchase Order 226779-4-0301-01 executed by GE and an affiliate of PDC on
November 24, 1998 (The "Prior Purchase Order"), as further modified by the
following:
Equipment:
The equipment scope of supply is substantially similar to the Prior Purchase
Order for four (4) PG7241 combustion turbine generators with 9ppm Dry Low NOx
combustors, and two (2) steam turbine generators provided that GE can guarantee
the shipment dates contained herein ("Equipment"). The two (2) steam turbine
generators, however, will incorporate side exhaust.
Equipment Pricing:
Qty 4 PG7241 GT Units $ 126,000,000
Qty 2 TC2F30 nominal 170 MW STG Units with side exhaust $ 36,400,000
The price includes freight to domestic U.S. site and Technical Director for
installation.
Equipment Shipping/Title:
Title to Equipment or finished material, shipped directly to the Site which is
sourced from the US shall pass to PDC when available for shipment from the
manufacturer's factory or for shipment to a storage facility. Title to Equipment
or finished material shipped directly to the Site which is sourced from outside
of the US shall pass to PDC at the port of export immediately after the
Equipment or finished materials have been cleared for export. Partial shipments
will be allowed.
Notwithstanding passage of title, GE shall remain liable for transportation to
the Site and risk of loss during shipment to the "Point of Delivery". Risk of
loss will pass to PDC upon delivery of the Equipment at the "Point of Delivery"
which shall be to the nearest accessible rail siding to the Site or, if by
truck, at the Site.
Shipping Dates are as follows:
Gas Turbine Generator Units: 2 units by 3/31/2001,
2 units by 4/30/2001
Steam Turbine Generator Unites: 1 unit by 2/28/2001 and 1 unit by 3/31/2001
Shipping Dates for equipment manufactured in the United States are the actual
dates on which Equipment loaded on conveyance at the facility of Seller or
Seller's supplier. Shipping Dates for equipment manufactured outside the United
Sates are the actual dates on which Equipment is loaded on conveyance at a U.S.
Port of Entry which is no further from the Jobsite than Schenectady, New York.
Terms of Payment and Termination:
Issuance of this binding Letter of Intent to GE is contingent on a nonrefundable
down payment of $4,000,000 on the date of execution hereof and a nonrefundable
payment of $4,000,000 at the Contract signing, but in no case later than May 1,
1999.
Payment terms are per attached Schedule "A". Should PDC terminate for
convenience, termination charges as indicated in Schedule "B", attached, shall
be payable. Credit will be given for payments received. GE shall have the right
to terminate the contract should PDC fail to fulfill its obligations under the
contract, and in such case, the termination charges will become payable.
Liquidated Damages:
In general accordance with the Prior Purchase Order.
Assignment or Amendment:
This Agreement may be assigned by PDC only to financing parties, EPC contractor,
or strategic equity partner without consent of GE or may be superceded by
subsequent contract between PDC and GE. GE reserves the right to assign this
Agreement in whole or in part to any wholly owned subsidiary, provided GE shall
guarantee the performance by such subsidiary. A change in performance
requirements due to change in Project Site location will be by mutual consent of
GE, which will not be unreasonably withheld.
Financial Closing:
The Financial Closure Date is anticipated to be June 30, 2000.
Acceptance:
Assuming the above conditions are acceptable, please sign below where indicated
to evidence your agreement to the terms stated herein.
<PAGE>
GE POWER SYSTEMS AND SALES
By:_______________________________
Name: James P. Spellman
Title: Generation Account Manager
PANDA DEVELOPMENT CORPORATION
By:_______________________________
Name: J. Brian Dietz
Title: Vice President, Engineering
EXHIBIT 10.179
March 18, 1999
GE Power Systems
Re: Pan-Turbo Co., LLC. ("PTC"): Letter of Intent GE IPS #80904
Gentlemen:
Whereas GE Power Systems and Sales ("GE") and PTC are in substantial agreement
with regard to the commercial terms associated with the purchase of the
Equipment for the PTC Merchant Plant ("MP") II Project which will have a 1,000MW
net output, it is agreed by Parties to execute a definitive contract document by
May 1, 1999 (which date may be extended by mutual agreement of the Parties) that
includes terms and conditions substantially similar (with minor modifications
that do not materially adversely affect either PTC or GE) to the Panda Guadalupe
Project, Purchase Order 226779-4-0301-01 executed by GE and an affiliate of PTC
on November 24, 1998 (The "Prior Purchase Order"), as further modified by the
following:
Equipment:
The equipment scope of supply is substantially similar to the Prior Purchase
Order for four (4) PG7241 combustion turbine generators with 9ppm Dry Low NOx
combustors, and two (2) steam turbine generators provided that GE can guarantee
the shipment dates contained herein ("Equipment"). The two (2) steam turbine
generators, however, will incorporate side exhaust.
Equipment Pricing:
Qty 4 PG7241 GT Units $ 126,000,000
Qty 2 TC2F30 nominal 170 MW STG Units with side exhaust $ 36,400,000
The price includes freight to domestic U.S. site and Technical Director for
installation.
Equipment Shipping/Title:
Title to Equipment or finished material, shipped directly to the Site which is
sourced from the US shall pass to PTC when available for shipment from the
manufacturer's factory or for shipment to a storage facility. Title to Equipment
or finished material shipped directly to the Site which is sourced from outside
of the US shall pass to PTC at the port of export immediately after the
Equipment or finished materials have been cleared for export. Partial shipments
will be allowed. Notwithstanding passage of title, GE shall remain liable for
transportation to the Site and risk of loss during shipment to the "Point of
Delivery".
Risk of loss will pass to PTC upon delivery of the Equipment at the "Point of
Delivery" which shall be to the nearest accessible rail siding to the Site or,
if by truck, at the Site.
Shipping Dates are as follows:
Gas Turbine Generator Units: 2 units by 10/31/2001, 1 unit by
11/30/2001 and 1 unit by 12/31/2001
Steam Turbine Generator Units: 2 units by 8/31/2001
Shipping Dates for equipment manufactured in the United States are the actual
dates on which Equipment is loaded on conveyance at the facility of Seller or
Seller's supplier. Shipping Dates for equipment manufactured outside the United
Sates are the actual dates on which Equipment is loaded on conveyance at a U.S.
Port of Entry which is no further from the Site than Schenectady, New York.
Terms of Payment and Termination:
Issuance of this binding Letter of Intent to GE is contingent on a nonrefundable
down payment of $4,000,000 on the date of execution hereof and a nonrefundable
payment of $4,000,000 at the Contract signing, but in no case later than May 31,
1999 unless mutually extended by the parties.
Payment terms are per attached Schedule "A". Should PTC terminate for
convenience, termination charges as indicated in Schedule "B", attached, shall
be payable. Credit will be given for payments received. GE shall have the right
to terminate the contract should PTC fail to fulfill its obligations under the
contract, and in such case, the termination charges will become payable.
Liquidated Damages:
In general accordance with the Prior Purchase Order.
Assignment or Amendment:
This Agreement may be assigned by PTC only to financing parties, EPC contractor,
or strategic equity partner without consent of GE or may be superceded by
subsequent contract between PTC and GE. GE reserves the right to assign this
Agreement in whole or in part to any wholly owned subsidiary, provided GE shall
guarantee the performance by such subsidiary. A change in performance
requirements due to change in Project Site location will be by mutual consent of
GE, which will not be unreasonably withheld.
Financial Closing:
The Financial Closure Date is anticipated to be November 2000.
Acceptance:
Assuming the above conditions are acceptable, please sign below where indicated
to evidence your agreement to the terms stated herein.
<PAGE>
GE POWER SYSTEMS AND SALES
By:/s/_______________________________
Name: James P. Spellman
Title: Generation Account Manager
PAN-TURBO CO., LLC
By:/s/_______________________________
Name: Ted Hollon
Title: Senior Vice President
Engineering and Construction
<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> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-END> JUN-30-1998 JUN-30-1999
<CASH> 54,724,484 89,552,628
<SECURITIES> 0 0
<RECEIVABLES> 9,582,815 10,193,636
<ALLOWANCES> 0 0
<INVENTORY> 6,324,191 6,150,135
<CURRENT-ASSETS> 91,175,100 106,971,124
<PP&E> 442,180,977 423,974,299
<DEPRECIATION> (50,314,383) (56,260,794)
<TOTAL-ASSETS> 541,142,004 542,835,174
<CURRENT-LIABILITIES> 64,782,939 32,489,726
<BONDS> 344,740,630 342,016,801
0 0
0 0
<COMMON> 10 10
<OTHER-SE> (132,870,876) (109,585,206)
<TOTAL-LIABILITY-AND-EQUITY> 544,142,004 542,835,174
<SALES> 34,907,604 44,479,773
<TOTAL-REVENUES> 39,284,491 134,450,063
<CGS> 11,096,015 12,730,399
<TOTAL-COSTS> 17,933,879 21,109,396
<OTHER-EXPENSES> 6,675,174 6,771,681
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 29,237,186 26,977,902
<INCOME-PRETAX> (14,561,748) 79,591,084
<INCOME-TAX> 0 (30,609,000)
<INCOME-CONTINUING> (14,561,748) 48,982,084
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (14,561,748) 48,982,084
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
