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, 2000
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Ash Street, Room 111,
San Diego, California 92101
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(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
STATEMENT OF OPERATIONS AND CHANGES IN MEMBER'S EQUITY (Unaudited)
(Dollars in thousands)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
2000 1999 2000 1999
------------------- --------------------
<S> <C> <C> <C> <C>
INCOME
------
Interest income $ 7,747 $ 8,689 $15,831 $17,764
Other income 274 276 548 550
------ ------ ------- -------
Total Income 8,021 8,965 16,379 18,314
------ ------ ------- -------
EXPENSES
--------
Interest expense 7,856 8,797 16,049 17,981
General & administrative 165 168 330 333
------ ------ ------- ------
Total Expenses 8,021 8,965 16,379 18,314
------ ------ ------- ------
NET INCOME -- -- -- --
Member's equity
at December 31 3,290 3,290 3,290 3,290
------ ------ ------- -------
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 SHEET (Unaudited)
(Dollars in thousands)
<CAPTION>
June 30, December 31,
2000 1999
(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 421,885 453,604
Deferred financing costs 4,918 5,246
Restricted funds 7,893 8,741
------------ ------------
TOTAL ASSETS $ 501,061 $ 533,956
============ ============
LIABILITIES AND MEMBER'S EQUITY
-------------------------------
Current Liabilities:
Current portion of
long-term debt $ 65,800 $ 65,800
Accounts payable and
accrued expenses 3,090 4,266
------------ ------------
Total Current Liabilities 68,890 70,066
Long-term debt 428,881 460,600
------------ ------------
Total Liabilities 497,771 530,666
Member's Equity 3,290 3,290
------------ ------------
TOTAL LIABILITIES AND
MEMBER'S EQUITY $ 501,061 $ 533,956
============ ============
See note to financial statements.
</TABLE>
<TABLE>
SDG&E FUNDING LLC
STATEMENT OF CASH FLOWS (Unaudited)
(Dollars in thousands)
<CAPTION>
Six Months Ended
June 30,
----------------------------
2000 1999
----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ -- $ --
Adjustments to reconcile net loss to net
cash provided by operating activities:
Amortization of deferred financing costs 328 328
Increase (decrease) in accounts payable and
accrued expenses (1,176) 1,998
------- -------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (848) 2,326
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of transition property from SDG&E 31,719 33,613
Payments on long-term debt (31,719) (33,613)
Decrease (increase) in restricted funds 848 (2,326)
------- -------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 848 (2,326)
------- -------
NET (DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS -- --
CASH AND CASH EQUIVALENTS AT DECEMBER 31 565 565
------- -------
CASH AND CASH EQUIVALENTS AT JUNE 30 $ 565 $ 565
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest payments $16,166 $18,111
======= =======
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 1999
Annual Report on Form 10-K and its Quarterly Report on Form 10-Q for
the three months ended March 31, 2000.
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
unless otherwise disclosed in this Quarterly Report on 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 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
nonbypassable charges, frequently referred to as "FTA Charges,"
levied on residential electric customers and small commercial
electric customers. The nonbypassable charges were 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, its federal income tax effects and its 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, 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, 1999 and its Quarterly Report on Form 10-Q for the
three months ended March 31, 2000.
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 SDG&E Funding LLC Notes, Series 1997-1, Class
A-1 through Class A-7 (the "Notes") secured by the Transition
Property and other limited collateral, and related activities. The
Notes were issued pursuant to an Indenture between the Note Issuer
and Bankers Trust Company of California, N.A., as trustee (the
"Indenture"). The Note Issuer sold the Notes to the California
Infrastructure and Economic Development Bank Special Purpose Trust
SDG&E-1, a Delaware business trust (the "Trust"), which issued
certificates corresponding to each class of the Notes in a public
offering.
Operating statement effects are limited primarily to income
generated from the Transition Property, interest expense on the
Notes and incidental investment interest income. The Note Issuer
expects to use collections with respect to the Transition Property
to make scheduled principal and interest payments on the Notes.
Interest income earned on the Transition Property is expected to
offset (1) interest expense on the Notes, (2) amortization of debt-
issuance expenses and the discount on the Notes, and (3) the fees
charged by SDG&E for servicing the Transition Property and providing
administrative services to the Note Issuer.
Collections of FTA Charges (described in the Note to Financial
Statements) since inception of the program have met expectations.
For the second quarter of 2000, collections of $23,025,000 resulted
in an undercollection of $237,000 after deducting scheduled
principal and interest payments of $22,835,000, payments of $345,000
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 remaining surplus collections will be
applied toward future payments on the Notes. Management believes
that it is reasonable to expect future collections of FTA Charges to
be sufficient to make scheduled payments on the Notes and pay
related expenses on a timely basis. The FTA Charges will be adjusted
at least annually if there is a material shortfall or overage in
collections.
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, 2000 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, 2000
99.1 Quarterly Servicer's Certificate dated June 20, 2000
(b) Reports on 8-K:
There were no reports on Form 8-K filed after December 31,
1999.
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 14, 2000 By: /s/ James P. Trent
-----------------------------
James P. Trent
Chief Financial Officer and
Chief Accounting Officer
