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
June 30, 1999
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.
<TABLE>
SDG&E FUNDING LLC
STATEMENTS OF OPERATIONS AND CHANGES IN MEMBER'S EQUITY (unaudited)
(Dollars in thousands)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ----------------------
1999 1998 1999 1998
----------------------- ----------------------
<S> <C> <C> <C> <C>
INCOME
- ------
Interest income $8,689 $ 9,900 $17,764 $21,729
Other income 276 272 550 555
------ ------ ------- -------
Total Income 8,965 10,172 18,314 22,284
------ ------ ------- -------
EXPENSES
- --------
Interest expense 8,797 10,007 17,981 21,970
General and administrative 168 165 333 317
------ ------- ------- -------
Total Expenses 8,965 10,172 18,314 22,287
------ ------- ------- -------
NET LOSS -- -- -- (3)
Member's equity,
beginning of period 3,290 3,290 3,290 3,293
------ ------- ------- -------
MEMBER'S EQUITY AT JUNE 30 $3,290 $ 3,290 $ 3,290 $ 3,290
====== ======= ======= =======
See note to financial statements.
</TABLE>
<TABLE>
SDG&E FUNDING LLC
BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
June 30, December 31,
1999 1998
(unaudited)
----------- --------------
<S> <C> <C>
ASSETS
- -------
Current Assets:
Cash and cash equivalents $ 565 $ 565
Current portion of
transition property 65,800 65,800
------------- -------------
Total Current Assets 66,365 66,365
Noncurrent Assets:
Transition property 485,791 519,404
Deferred financing costs 5,574 5,902
Restricted funds 12,265 9,939
------------- -------------
TOTAL ASSETS $ 569,995 $ 601,610
============= =============
LIABILITIES AND MEMBER'S EQUITY
- -------------------------------
Current Liabilities:
Current portion of
long-term debt $ 65,800 $ 65,800
Accounts payable and
accrued expenses 8,118 6,120
------------- -----------
Total Current Liabilities 73,918 71,920
Long-term debt 492,787 526,400
------------- -----------
Total Liabilities 566,705 598,320
Member's Equity 3,290 3,290
------------- -----------
TOTAL LIABILITIES AND
MEMBER'S EQUITY $ 569,995 $ 601,610
============= ===========
See note to financial statements.
</TABLE>
<TABLE>
SDG&E FUNDING LLC
STATEMENTS OF CASH FLOWS (unaudited)
(Dollars in thousands)
<CAPTION>
Six Months Ended
June 30,
--------------------
1999 1998
--------------------
<S> <C> <C>
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 328 315
Increase in accounts payable and
accrued expenses 1,998 2,390
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,326 2,710
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of transition property from SDG&E 33,613 21,867
Payments on long-term debt (33,613) (21,867)
Incurrence of deferred financing costs -- (1,625)
Increase in restricted funds (2,326) (2,947)
-------- --------
NET CASH USED BY FINANCING ACTIVITIES (2,326) (4,572)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS -- (1,862)
CASH AND CASH EQUIVALENTS AT DECEMBER 31 565 2,427
-------- --------
CASH AND CASH EQUIVALENTS AT JUNE 30 $ 565 $ 565
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments $18,111 $21,653
======== ========
See note to financial statements.
</TABLE>
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 Sempra Energy. This quarterly report
should be read in conjunction with SDG&E Funding LLC's Financial
Statements and Notes to Financial Statements included in its 1998
Annual Report on Form 10-K and its Quarterly Report on 10-Q for the
three months ended March 31, 1999.
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
periods. All material adjustments are of a normal, recurring nature.
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 Transition Property. Notes are SDG&E
Funding LLC Notes, Series 1997-1, Class A-1 through Class A-7
(presented in the financial statements as "Long-Term Debt"), secured
by the Transition Property and other, limited collateral. Transition
Property is the right to be paid a specified amount (presented in
the financial statements as "Transition Property") from a
nonbypassable charge ("FTA Charges") 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 the financial condition and results of
operations of SDG&E Funding LLC (the Note Issuer) 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, 1998 and the Note Issuer's Quarterly Report on Form
10-Q for the three months ended March 31, 1999.
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 are 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 pays servicing fees to SDG&E. These servicing fees are offset
by 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.
Collections of FTA Charges are currently meeting expectations and
were sufficient to pay all scheduled payments on the Notes and
related expenses for the Note payment due June 25, 1999. For the
second quarter of 1999, collections of $22,988,000 resulted in an
undercollection of $360,000 after deducting scheduled principal and
interest payments of $22,882,000, payments of $384,000 for servicing
fees and other expenses, and $82,000 retained to fund the
Overcollateralization Account established under the Notes'
indenture. The undercollection was deducted from the previous
surplus collections. 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 has completed an extensive evaluation of its computer
systems and an enterprise-wide date-conversion project. For
additional information on SDG&E's Year 2000 project, see SDG&E's
Quarterly Report on Form 10-Q for the three months ended June 30,
1999.
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
June 30, 1999 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
27.1 Financial Data Schedule for the quarter ended June 30,
1999
99.1 Quarterly Servicer's Certificate dated June 16, 1999
(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: August 11, 1999 By: /s/ James P. Trent
-----------------------------
James P. Trent
Chief Financial Officer and
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONDENSED STATEMENT OF OPERATIONS, BALANCE
SHEET AND CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
<CIK> 0001041864
<NAME> SDG&E FUNDING LLC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 565
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 66,365
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 569,995
<CURRENT-LIABILITIES> 73,918
<BONDS> 492,787
0 <F1>
0 <F1>
<COMMON> 0 <F1>
<OTHER-SE> 3,290 <F1>
<TOTAL-LIABILITY-AND-EQUITY> 569,995
<SALES> 0
<TOTAL-REVENUES> 18,314
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 333
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,981
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0 <F1>
<EPS-DILUTED> 0 <F1>
<FN>
<F1> NO COMMON OR PREFERRED SHARES ISSUED AND OUTSTANDING.
EQUITY = MEMBER'S EQUITY
</TABLE>
EXHIBIT 99.1
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: Apr-99 through Jun-99
Distribution Date: 25-Jun-99
<TABLE>
1. COLLECTIONS ALLOCABLE AND AGGREGATE AMOUNTS AVAILABLE FOR THE
CURRENT DISTRIBUTION DATE:
<S> <C> <C>
i. Remittances for the first Collection Period Apr-99 $8,058,113.52
ii. Remittances for the second Collection Period May-99 $7,636,935.38
iii. Remittances for the third Collection Period Jun-99 $7,293,368.18
iv. Net Earnings on Collection Account $281,077.80
v. General Sub-Account Balance $23,269,494.88
vi. Reserve Sub-Account Balance $8,941,884.74
vii. Overcollateralization Sub-Account Balance $411,250.00
viii. Capital Sub-Account Balance $3,190,000.00
ix. Collection Account Balance $35,812,629.62
2. OUTSTANDING PRINCIPAL BALANCE AND COLLECTION ACCOUNT BALANCE
AS OF PRIOR DISTRIBUTION DATE:
i. Class A-1 Principal Balance $0.00
ii. Class A-2 Principal Balance $63,000,733.42
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 $572,561,479.42
ix. Reserve Sub-Account Balance $8,941,884.74
x. Overcollateralization Sub-Account Balance $411,250.00
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 $0.00
ii. Scheduled Class A-2 Certificate Principal Balance $49,025,773.57
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 $558,586,519.57
ix. Required Class A-1 Coupon Payment $0.00
x. Required Class A-2 Coupon Payment $951,311.07
xi. Required Class A-3 Coupon Payment $1,005,054.64
xii. Required Class A-4 Coupon Payment $1,009,698.56
xiii. Required Class A-5 Coupon Payment $1,493,923.06
xiv. Required Class A-6 Coupon Payment $3,116,889.76
xv. Required Class A-7 Coupon Payment $1,330,316.71
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 $1,193.33
ii. Quarterly Servicing Fee $357,850.92
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 $0.00
2. Class A-2 Certificate Coupon Payment $951,311.07
3. Class A-3 Certificate Coupon Payment $1,005,054.64
4. Class A-4 Certificate Coupon Payment $1,009,698.56
5. Class A-5 Certificate Coupon Payment $1,493,923.06
6. Class A-6 Certificate Coupon Payment $3,116,889.76
7. Class A-7 Certificate Coupon Payment $1,330,316.71
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 $0.00
2. Class A-2 Certificate Principal Payment $13,974,959.85
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 $281,077.80
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 ($360,030.82)
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 $0.00
ii. Class A-2 Principal Balance $49,025,773.57
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 $558,586,519.57
ix. Reserve Sub-Account Balance $8,581,853.92
x. Overcollateralization Sub-Account Balance $493,500.00
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>
9. DISTRIBUTIONS OF PRINCIPAL PER $1,000 OF ORIGINAL PRINCIPAL AMOUNT:
PRINCIPAL PER $1,000
ORIGINAL PRINCIPAL PRINCIPAL PAYMENT OF ORIGINAL PRINCIPAL
(A) (B) (B/A*1000)
i. Class A-1 $65,800,000.00 $0.00 $0.000000
ii. Class A-2 $82,639,254.00 $13,974,959.85 $169.108011
iii. Class A-3 $66,230,948.00 $0.00 $0.000000
iv. Class A-4 $65,671,451.00 $0.00 $0.000000
v. Class A-5 $96,537,839.00 $0.00 $0.000000
vi. Class A-6 $197,584,137.00 $0.00 $0.000000
vii. Class A-7 $83,536,371.00 $0.00 $0.000000
10. DISTRIBUTIONS OF INTEREST PER $1,000 OF ORIGINAL PRINCIPAL AMOUNT:
INTEREST PER $1,000
ORIGINAL PRINCIPAL PRINCIPAL PAYMENT OF ORIGINAL PRINCIPAL
(A) (B) (B/A*1000)
i. Class A-1 $65,800,000.00 $0.00 $0.000000
ii. Class A-2 $82,639,254.00 $951,311.07 $11.511613
iii. Class A-3 $66,230,948.00 $1,005,054.64 $15.175000
iv. Class A-4 $65,671,451.00 $1,009,698.56 $15.375000
v. Class A-5 $96,537,839.00 $1,493,923.06 $15.475000
vi. Class A-6 $197,584,137.00 $3,116,889.76 $15.775000
vii. Class A-7 $83,536,371.00 $1,330,316.71 $15.925000
IN WITNESS HEREOF, the undersigned has duly executed and delivered
this Quarterly Servicer's Certificate this 16th day of June, 1999.
SAN DIEGO GAS & ELECTRIC COMPANY, as Servicer
by: /s/ James P. Trent
-----------------------------
title: Director, Financial Reporting
-------------------------------
