SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN
GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND
IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT
(Mark One)
[..X..] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
March 31, 1998
For the quarterly period ended...........................
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 No. 333-30761
CALIFORNIA INFRASTRUCTURE AND ECONOMIC
DEVELOPMENT BANK SPECIAL PURPOSE TRUST SDG&E-1
(Issuer of the Certificates)
SDG&E FUNDING LLC
(Exact Name Of Registrant As Specified In
Its Certificate Of Formation)
Delaware 95-1184800
- -------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Ash Street, Room 111,
San Diego, California 92101
- -------------------------------------------------------------------
(Address of principal executive offices (Zip code)
Registrant's telephone number, including area code: (619)696-2328
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Sections 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......
PART I
Item 1. Financial Statements.
SDG&E FUNDING LLC
STATEMENT OF OPERATIONS AND CHANGES IN MEMBER'S EQUITY (unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(In Thousands)
INCOME
- ------
Interest income $11,829
Other income 283
-------
Total Income 12,112
-------
EXPENSES
- --------
Interest expense 11,963
General & administrative expenses 152
-------
Total Expenses 12,115
-------
NET LOSS (3)
Member's equity at December 31, 1997 3,293
-------
MEMBER'S EQUITY AT MARCH 31, 1998 $ 3,290
=======
See note to financial statements.
SDG&E FUNDING LLC
BALANCE SHEET
(In Thousands)
March 31, December 31,
1998 1997
(unaudited)
----------- -----------
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 1,102 $ 2,427
Interest receivable -- 8
Current portion of
transition property 65,800 65,800
----------- -----------
Total Current Assets 66,902 68,235
Noncurrent Assets:
Transition property 582,036 585,204
Deferred financing costs 5,869 4,920
Restricted funds 4,272 3,190
----------- -----------
TOTAL ASSETS $ 659,079 $ 661,549
=========== ===========
LIABILITIES AND MEMBER'S EQUITY
- -------------------------------
Current Liabilities:
Current portion of
long-term debt $ 65,800 $ 65,800
Accounts payable and
accrued expenses 957 256
----------- -----------
Total Current Liabilities 66,757 66,056
Long-term debt 589,032 592,200
----------- -----------
Total Liabilities 655,789 658,256
Member's Equity 3,290 3,293
----------- -----------
TOTAL LIABILITIES AND
MEMBER'S EQUITY $ 659,079 $ 661,549
=========== ===========
See note to financial statements.
SDG&E FUNDING LLC
STATEMENT OF CASH FLOWS (unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (3)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Interest receivable 8
Amortization of deferred financing costs 150
Increase in accounts payable and
accrued expenses 701
--------
NET CASH PROVIDED BY OPERATING ACTIVITIES 856
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of transition property from SDG&E 3,168
Payments on long-term debt (3,168)
Incurrence of deferred financing costs (1,099)
Increase in restricted funds (1,082)
--------
NET CASH USED BY FINANCING ACTIVITIES (2,181)
--------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,325)
CASH AND CASH EQUIVALENTS AT DECEMBER 31, 1997 2,427
--------
CASH AND CASH EQUIVALENTS AT MARCH 31, 1998 $ 1,102
========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments $ 11,286
========
See note to financial statements.
Note to Financial Statements
- -----------------------------
Basis of Presentation
This Quarterly Report on Form 10-Q includes the financial
statements of SDG&E Funding LLC, a Delaware special-purpose
limited-liability company, whose sole member is San Diego
Gas & Electric Company (SDG&E), a provider of electric and
natural-gas services. SDG&E is a wholly owned subsidiary
of Enova Corporation. This quarterly report should be read
in conjunction with SDG&E Funding LLC's Financial
Statements and Notes to Financial Statements included in
its 1997 Annual Report on Form 10-K.
SDG&E Funding LLC believes that the accompanying statements
reflect all adjustments that are necessary to present a
fair statement of the financial position and results of
operations for the interim period. All material
adjustments are of a normal, recurring nature unless
otherwise disclosed in this Form 10-Q. Results of
operations for interim periods are not necessarily
indicative of results to be expected for a full year.
SDG&E Funding LLC was organized for the limited purposes of
issuing Notes and holding and servicing the Transition
Property. Transition Property is the right to be paid a
specified amount (presented in the financial statements as
"Transition Property") from a nonbypassable charge levied
on residential electric customers and small commercial
electric customers. The nonbypassable charge was
authorized by the California Public Utilities Commission
(CPUC) pursuant to the electric industry restructuring
mandated by California Assembly Bill 1890, as amended by
California Senate Bill 477.
Since SDG&E Funding LLC is a single-member, limited-
liability company, all of its federal income tax effects
and its material State of California franchise tax effects
accrue to SDG&E.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following analysis of SDG&E Funding LLC's (the Note Issuer)
financial condition and results of operations is in an abbreviated
format pursuant to Instruction H of Form 10-Q. Such analysis should be
read in conjunction with the Financial Statements and Note to Financial
Statements included in Item 1, above, and the Financial Statements and
Notes to Financial Statements included in the Note Issuer's Annual
Report on Form 10-K for the year ended December 31, 1997.
The Note Issuer is limited by its organizational documents to engaging
in the activities of owning certain property created pursuant to the
California Public Utilities Code (the "Transition Property") and issuing
notes secured by the Transition Property and other limited collateral,
and related activities. Accordingly, operating statement effects were
limited primarily to income generated from the Transition Property,
interest expense on the SDG&E Funding LLC Notes, Series 1997-1, Class
A-1 through Class A-7 (the "Notes"), and incidental investment interest
income. The Note Issuer's primary operating expense is servicing fees
payable to SDG&E. Offsetting this expense are the investment earnings on
the monthly remittances from SDG&E. The investment earnings are not
expected to fully offset servicing expenses payable to SDG&E.
During the three-month period ended March 31, 1998 the income generated
from the Transition Property was $12 million. Interest expense of $12
million relates to interest on the Notes and the amortization of debt
issuance costs.
Collections of FTA Charges are currently meeting expectations and were
sufficient to pay all scheduled payments on the Notes and related
expenses for the first Note payment due March 25, 1998. For the first
quarter of 1998 collections of approximately $15,892,000 resulted in a
surplus of approximately $1,000,000 after deducting scheduled principal
and interest payments of approximately of $14,372,000, payments of
approximately $437,000 for servicing fees and other expenses, and
approximately $83,000 retained to fund the Overcollateralization Account
established under the Notes' indenture. This surplus will be applied
toward future payments on the Notes. The FTA Charges will be adjusted at
least annually if there is a material shortfall or overage in
collections. Management expects future collections of FTA Charges to be
sufficient to cover expenses and to make scheduled payments on the Notes
on a timely basis.
The Note Issuer has no computer systems of its own and relies on certain
systems of SDG&E for information. While there is the potential for
SDG&E's systems to be unable to recognize the year 2000, SDG&E is in the
process of an extensive evaluation of its computer systems and an
enterprise-wide date-conversion project.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable to the Note Issuer or the Trust.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 5. Other Information.
Attached, with respect to the Note Issuer and the Trust, as Exhibit 99.1
is the Quarterly Servicer's Certificate for the quarter ended March 31,
1998 delivered pursuant to the Note Indenture. It includes information
relating to the collections of the nonbypassable charges (the "FTA
Charges") payable by residential electric customers and small commercial
electric customers.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required to be filed by Item 601 of Regulation S-K:
3.1 Certificate of Formation (1)
3.2 Limited Liability Company Agreement (1)
3.3 Amended and Restated Limited Liability Company Agreement (1)
4.1 Note Indenture (2)
4.2 Amended and Restated Declaration and Agreement of Trust (1)
4.3 Series Supplement (2)
4.4 Form of Note (1)
4.5 First Supplement Trust Agreement (2)
4.6 Form of Rate Reduction Certificate (2)
10.1 Transition Property Purchase and Sale Agreement (2)
10.2 Transition Property Servicing Agreement (2)
10.3 Note Purchase Agreement (2)
10.4 Fee and Indemnity Agreement (2)
27.1 Financial Data Schedule for the quarter ended March 31, 1998
99.1 Quarterly Servicer's Certificate dated March 19, 1998
- -------------------------
(1) Incorporated by reference to the same-titled exhibit to the Note
Issuer and Trust's Registration Statement on Form S-3, as amended,
File No. 333-30761.
(2) Incorporated by reference to the same-titled exhibit to the Note
Issuer and Trust's Current Report on Form 8-K filed with the
Commission on December 23, 1997.
- -------------------------
(b) Reports on 8-K:
None.
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) 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.
SDG&E Funding LLC,
as Registrant
Date: May 15, 1998 By: /s/ James P. Trent
-----------------------------
James P. Trent
Chief Financial Officer and
Chief Accounting Officer
6
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 1,102
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 66,902
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 659,079
<CURRENT-LIABILITIES> 66,757
<BONDS> 589,032
0 <F1>
0 <F1>
<COMMON> 0 <F1>
<OTHER-SE> 3,290 <F1>
<TOTAL-LIABILITY-AND-EQUITY> 659,079
<SALES> 0
<TOTAL-REVENUES> 12,112
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 152
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,963
<INCOME-PRETAX> (3)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3)
<EPS-PRIMARY> 0 <F1>
<EPS-DILUTED> 0 <F1>
<FN>
<F1> NO COMMON OR PREFERRED SHARES ISSUED AND OUTSTANDING.
EQUITY = MEMBER'S EQUITY
</TABLE>
Quarterly Servicer's Certificate
California Infrastructure and Economic Development Bank Special
Purpose Trust SDG&E-1
$658,000,000 Rate Reduction Certificates, Series 1997-1
Pursuant to Section 4.01(d)(ii) of the Transition Property Servicing
Agreement dated as of December 16, 1997 (the "Agreement") between
San Diego Gas & Electric Company, as Servicer, and SDG&E Funding
LLC, as Note Issuer, the Servicer does hereby certify as follows:
Capitalized terms used in the Quarterly Servicer's Certificate (the
"Quarterly Certificate") have their respective meanings as set forth
in the Agreement. References herein to certain section and
subsections are references to the respective sections of the
Agreement.
Collection Periods: Jan-98 through Mar-98
Distribution Date: 25-Mar-98
<TABLE>
1. COLLECTIONS ALLOCABLE AND AGGREGATE AMOUNTS AVAILABLE FOR THE
CURRENT DISTRIBUTION DATE:
<S> <C> <C>
i. Remittances for the first Collection Period Jan-98 $605,129.13
ii. Remittances for the second Collection Period Feb-98 $5,214,189.38
iii. Remittances for the third Collection Period Mar-98 $10,072,547.66
iv. Net Earnings on Collection Account $81,290.00
v. General Sub-Account Balance $15,973,156.17
vi. Reserve Sub-Account Balance $0.00
vii. Overcollateralization Sub-Account Balance $0.00
viii. Capital Sub-Account Balance $3,190,000.00
ix. Collection Account Balance $3,190,000.00
2. OUTSTANDING PRINCIPAL BALANCE AND COLLECTION ACCOUNT BALANCE
AS OF PRIOR DISTRIBUTION DATE:
i. Class A-1 Principal Balance $65,800,000.00
ii. Class A-2 Principal Balance $82,639,254.00
iii. Class A-3 Principal Balance $66,230,948.00
iv. Class A-4 Principal Balance $65,671,451.00
v. Class A-5 Principal Balance $96,537,839.00
vi. Class A-6 Principal Balance $197,584,137.00
vii. Class A-7 Principal Balance $83,536,371.00
viii. Rate Reduction Certificate Principal Balance $658,000,000.00
ix. Reserve Sub-Account Balance $0.00
x. Overcollateralization Sub-Account Balance $0.00
xi. Capital Sub-Account Balance $3,190,000.00
3. REQUIRED FUNDING/PAYMENTS AS OF CURRENT DISTRIBUTION DATE:
i. Scheduled Class A-1 Certificate Principal Balance $62,632,171.52
ii. Scheduled Class A-2 Certificate Principal Balance $82,639,254.00
iii. Scheduled Class A-3 Certificate Principal Balance $66,230,948.00
iv. Scheduled Class A-4 Certificate Principal Balance $65,671,451.00
v. Scheduled Class A-5 Certificate Principal Balance $96,537,839.00
vi. Scheduled Class A-6 Certificate Principal Balance $197,584,137.00
vii. Scheduled Class A-7 Certificate Principal Balance $83,536,371.00
viii. Scheduled Class A Certificate Principal Balance $654,832,171.52
ix. Required Class A-1 Coupon Payment $1,080,271.50
x. Required Class A-2 Coupon Payment $1,372,638.01
xi. Required Class A-3 Coupon Payment $1,105,560.10
xii. Required Class A-4 Coupon Payment $1,110,668.42
xiii. Required Class A-5 Coupon Payment $1,643,315.36
xiv. Required Class A-6 Coupon Payment $3,428,578.74
xv. Required Class A-7 Coupon Payment $1,463,348.38
xvi. Required Overcollateralization Funding $82,250.00
xvii. Required Capital Sub-Account Funding $0.00
4. ALLOCATION OF REMITTANCES AS OF CURRENT DISTRIBUTION DATE
PURSUANT TO 8.02(d)of INDENTURE:
i. Note Trustee, Delaware Trustee
and Certificate Trustee Fees $1,083.84
ii. Quarterly Servicing Fee $411,250.00
iii. Quarterly Administration Fee $25,000.00
iv. Operating Expenses (subject to $100,000 cap) $0.00
v. Quarterly Interest
1. Class A-1 Certificate Coupon Payment $1,080,271.50
2. Class A-2 Certificate Coupon Payment $1,372,638.01
3. Class A-3 Certificate Coupon Payment $1,105,560.10
4. Class A-4 Certificate Coupon Payment $1,110,668.42
5. Class A-5 Certificate Coupon Payment $1,643,315.36
6. Class A-6 Certificate Coupon Payment $3,428,578.74
7. Class A-7 Certificate Coupon Payment $1,463,348.38
vi. Principal Due and Payable as a Result of Event
of Default or on Final Maturity Date $0.00
vii. Quarterly Principal
1. Class A-1 Certificate Principal Payment $3,167,828.48
2. Class A-2 Certificate Principal Payment $0.00
3. Class A-3 Certificate Principal Payment $0.00
4. Class A-4 Certificate Principal Payment $0.00
5. Class A-5 Certificate Principal Payment $0.00
6. Class A-6 Certificate Principal Payment $0.00
7. Class A-7 Certificate Principal Payment $0.00
viii. Operating Expenses (in excess of $100,000) $0.00
ix. Funding of Overcollateralization Sub-Account
(to required level) $82,250.00
x. Funding of Capital Sub-Account (to required level) $0.00
xi. Net Earnings Released to Note Issuer $81,290.00
xii. Released to Note Issuer upon Series Retirement:
Overcollateralization Sub-Account $0.00
xiii. Released to Note Issuer upon Series Retirement:
Capital Sub-Account $0.00
xiv. Deposits to Reserve Sub-Account $1,000,073.34
xv. Released to Note Issuer upon Series Retirement:
Collection Account $0.00
5. OUTSTANDING PRINCIPAL BALANCE AND COLLECTION ACCOUNT BALANCE AS
OF CURRENT DISTRIBUTION DATE (after giving effect to payments to
be made on such distribution date):
i. Class A-1 Principal Balance $62,632,171.52
ii. Class A-2 Principal Balance $82,639,254.00
iii. Class A-3 Principal Balance $66,230,948.00
iv. Class A-4 Principal Balance $65,671,451.00
v. Class A-5 Principal Balance $96,537,839.00
vi. Class A-6 Principal Balance $197,584,137.00
vii. Class A-7 Principal Balance $83,536,371.00
viii. Rate Reduction Certificate Principal Balance $654,832,171.52
ix. Reserve Sub-Account Balance $1,000,073.34
x. Overcollateralization Sub-Account Balance $82,250.00
xi. Capital Sub-Account Balance $3,190,000.00
6. SUB-ACCOUNT DRAWS AS OF CURRENT DISTRIBUTION DATE(if
applicable, pursuant to Section 8.02(e) of Indenture):
i. Reserve Sub-Account $0.00
ii. Overcollateralization Sub-Account $0.00
iii. Capital Sub-Account $0.00
iv. Total Draws $0.00
7. SHORTFALLS IN INTEREST AND PRINCIPAL PAYMENTS AS OF CURRENT
DISTRIBUTION DATE:
i. Quarterly Interest
1. Class A-1 Certificate Coupon Payment $0.00
2. Class A-2 Certificate Coupon Payment $0.00
3. Class A-3 Certificate Coupon Payment $0.00
4. Class A-4 Certificate Coupon Payment $0.00
5. Class A-5 Certificate Coupon Payment $0.00
6. Class A-6 Certificate Coupon Payment $0.00
7. Class A-7 Certificate Coupon Payment $0.00
ii. Quarterly Principal
1. Class A-1 Certificate Principal Payment $0.00
2. Class A-2 Certificate Principal Payment $0.00
3. Class A-3 Certificate Principal Payment $0.00
4. Class A-4 Certificate Principal Payment $0.00
5. Class A-5 Certificate Principal Payment $0.00
6. Class A-6 Certificate Principal Payment $0.00
7. Class A-7 Certificate Principal Payment $0.00
8. SHORTFALLS IN REQUIRED SUB-ACCOUNT LEVELS AS OF CURRENT
DISTRIBUTION DATE:
i. Overcollateralization Sub-Account $0.00
ii. Capital Sub-Account $0.00
</TABLE>
IN WITNESS HEREOF, the undersigned has duly executed and delivered
this Quarterly Servicer's Certificate this 19th day of March, 1998.
SAN DIEGO GAS & ELECTRIC COMPANY, as Servicer
by: /s/ James P. Trent
-----------------------------
title: Manager, Accounting Operations
-------------------------------
