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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 19, 1999
REGISTRATION NO. 333-81601
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2 TO
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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EAST COAST POWER L.L.C.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 4911 52-2143667
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
<TABLE>
<S> <C>
JOSEPH M. BOLLINGER
711 LOUISIANA STREET 711 LOUISIANA STREET
HOUSTON, TEXAS 77002 HOUSTON, TEXAS 77002
(713) 853-6161 (713) 345-9722
(Address, including zip code, and telephone (Name, address, including zip code, and
number, including telephone number
area code, of registrant's principal
executive offices) including area code, of agent for service)
</TABLE>
Copies to:
KEITH R. FULLENWEIDER
VINSON & ELKINS L.L.P.
1001 FANNIN, SUITE 2300
HOUSTON, TEXAS 77002-6760
(713) 758-2222
(713) 758-2346 (FAX)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable following the effectiveness of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
COMPANY MAY NOT EXCHANGE THE NOTES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THE NEW NOTES AND IT IS NOT SOLICITING AN OFFER TO
BUY THE NEW NOTES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED NOVEMBER 19, 1999
$833,939,040
[EAST COAST POWER L.L.C.]
Offer to Exchange
6.737% Series B Senior Secured Notes due 2008
7.066% Series B Senior Secured Notes due 2012
7.536% Series B Senior Secured Notes due 2017
For All Outstanding
6.737% Series A Senior Secured Notes due 2008
7.066% Series A Senior Secured Notes due 2012
7.536% Series A Senior Secured Notes due 2017
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THE NEW NOTES:
- - Terms: The new notes will be freely tradeable and otherwise substantially
identical to the outstanding notes.
- - Listing: The new notes will not be listed on any security exchange or on any
automated dealer quotation system.
THE EXCHANGE OFFER:
- - Expiration: 5:00 p.m. New York City time on , 1999, unless
otherwise extended. The exchange offer will not be extended beyond
, 1999.
- - Conditions: The exchange offer is not conditioned upon any minimum aggregate
principal amount of outstanding notes being tendered.
- - Tendered Notes: All outstanding notes that are validly tendered and not
validly withdrawn will be exchanged for an equal principal amount of new notes
of the same maturity date that are registered under the Securities Act of
1933.
- - Withdrawal: Tenders of outstanding notes may be withdrawn at any time prior to
the expiration of the exchange offer.
- - Tax Consequences: The exchange of outstanding notes for new notes will not be
a taxable event for U.S. federal income tax purposes.
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YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 8 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NEW NOTES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is , 1999.
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This prospectus is part of a registration statement we filed with the
Securities and Exchange Commission. You should rely only on the information or
representations provided in this prospectus. We have not authorized any person
to provide information other than that provided in this prospectus. We have not
authorized anyone to provide you with different information. We are not making
an offer of these securities in any jurisdiction where the offer is not
permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of this document.
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The new notes may not be offered or sold in or into the United Kingdom
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their businesses (or in other circumstances that do not constitute an offer to
the public in the United Kingdom for the purposes of the Public Offers of
Securities Regulations 1995), and this prospectus may only be issued or passed
on to persons in the United Kingdom if such persons are of a kind described in
article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or if such persons are persons to whom this prospectus
may otherwise lawfully be issued or passed on.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES
WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY
REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A
FINDING BY THE DIRECTORS OF THE OFFICE OF SECURITIES REGULATION THAT ANY
DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY
SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE DIRECTORS OF THE OFFICE OF SECURITIES
REGULATION HAVE PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR
RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS
UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE INVESTOR, CUSTOMER OR
CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
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PROSPECTUS SUMMARY
This prospectus summary highlights selected information from this
prospectus but does not contain all of the information that is important to you.
To understand all of the terms of the exchange offer and to attain a more
complete understanding of our business and financial situation, you should read
carefully this entire prospectus. The term "outstanding notes" refers to our
Series A senior secured notes due 2008, 2012 and 2017 that we issued on April
20, 1999. The term "new notes" refers to the Series B senior secured notes
offered in the exchange offer. The term "notes" refers to both the outstanding
notes and the new notes. For an explanation of certain technical terms used in
this prospectus, see "Glossary of Technical Terms."
THE EXCHANGE OFFER
On April 20, 1999, we completed the private offering of the outstanding
notes.
We entered into a registration rights agreement with the initial purchasers
in the private offering in which we agreed to deliver to you this prospectus and
to complete the exchange offer within 270 days after the date we issued the
outstanding notes. You are entitled to exchange in the exchange offer your
outstanding notes for new notes with substantially identical terms.
You should read the discussion under the headings "-- Terms of the New
Notes" and "Description of the New Notes" for further information regarding the
new notes.
We summarize the terms of the exchange offer below. You should read the
discussion under the heading "The Exchange Offer" for further information
regarding the exchange offer and resale of the new notes.
The Exchange Offer... We are offering to exchange up to $833,939,040 aggregate
principal amount of new notes for up to $833,939,040
aggregate principal amount of outstanding notes.
Outstanding notes may be exchanged only for new notes of
the same maturity date and only in integral multiples of
$1,000 (except for the 2008 notes, the exchange of which
will reflect partial payments of principal on June 30,
1999 and September 30, 1999).
Expiration Date...... The exchange offer will expire at 5:00 p.m., New York City
time, on , 1999, or such later date and time
to which we extend it. We will not extend the exchange
offer beyond , 1999.
Withdrawal of
Tenders...............You may withdraw your tender of outstanding notes at any
time prior to the expiration date. We will return to you,
without charge, promptly after the expiration or
termination of the exchange offer any outstanding notes
that you tendered but that were not accepted for exchange.
Conditions to the
Exchange Offer....... We will not be required to accept outstanding notes for
exchange if the exchange would violate applicable law or
any legal action has been instituted or threatened that
would impair our ability to proceed with the exchange
offer. The exchange offer is not conditioned upon any
minimum aggregate principal amount of outstanding notes
being tendered. Please read the section "The Exchange
Offer -- Conditions to the Exchange Offer" for more
information regarding the conditions to the exchange
offer.
Procedures for
Tendering Outstanding
Notes................ If your outstanding notes are held through The Depository
Trust Company and you wish to participate in the exchange
offer, you may do so through the automated tender offer
program of The Depository Trust Company. If you tender
under this program, you will agree to be bound by the
letter of transmittal that we are providing with this
prospectus as though you had signed the letter of
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transmittal. By signing or agreeing to be bound by the
letter of transmittal, you will represent to us that,
among other things:
- any new notes that you receive will be acquired in the
ordinary course of your business;
- you have no arrangement or understanding with any person
or entity to participate in the distribution of the new
notes;
- you are not engaged in and do not intend to engage in
the distribution of the new notes;
- if you are a broker-dealer that will receive new notes
for your own account in exchange for outstanding notes,
you acquired those notes as a result of market-making
activities or other trading activities and you will
deliver a prospectus, as required by law, in connection
with any resale of such new notes; and
- you are not our "affiliate," as defined in Rule 405 of
the Securities Act.
Special Procedures for
Beneficial Owners.... If you own a beneficial interest in outstanding notes that
are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee, and you wish to
tender the outstanding notes in the exchange offer, you
should contact the registered holder promptly and instruct
the registered holder to tender on your behalf.
Guaranteed Delivery
Procedures........... If you wish to tender your outstanding notes and cannot
comply, prior to the expiration date, with the applicable
procedures under the automated tender offer program of The
Depository Trust Company, you must tender your outstanding
notes according to the guaranteed delivery procedures
described in "The Exchange Offer -- Guaranteed Delivery
Procedures."
U.S. Federal Income Tax
Considerations....... The exchange of outstanding notes for new notes in the
exchange offer will not be a taxable event for U.S.
federal income tax purposes. Please read "United States
Federal Income Tax Considerations."
Use of Proceeds...... We will not receive any cash proceeds from the issuance of
new notes.
THE EXCHANGE AGENT
We have appointed The Bank of New York as exchange agent for the exchange
offer. You should direct questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for the notice of guaranteed delivery to the exchange agent addressed
as follows: The Bank of New York, Reorganization Section, 101 Barclay St., Floor
7E, New York, New York 10286. Eligible institutions may make requests by
facsimile at (212) 815-6339.
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TERMS OF THE NEW NOTES
The new notes will be freely tradeable and otherwise substantially
identical to the outstanding notes. The new notes will not have registration
rights or provisions for additional interest. The new notes will evidence the
same debt as the outstanding notes, and the outstanding notes and the new notes
will be governed by the same indenture.
SECURITIES OFFERED... $279,939,040 aggregate principal amount of 6.737% Series B
Senior Secured Notes due 2008
$236,000,000 aggregate principal amount of 7.066% Series B
Senior Secured Notes due 2012
$318,000,000 aggregate principal amount of 7.536% Series B
Senior Secured Notes due 2017
MATURITY DATES....... 2008 new notes: March 31, 2008
2012 new notes: March 31, 2012
2017 new notes: June 30, 2017
PAYMENT DATES........ March 31, June 30, September 30, and December 31,
beginning December 31, 1999
AVERAGE LIFE......... 2008 new notes: 5.4 years
2012 new notes: 11.0 years
2017 new notes: 15.8 years
RATINGS.............. "Baa3" by Moody's Investors Service, "BBB-" by Standard &
Poor's Ratings Services and "BBB-" by Duff & Phelps Credit
Rating Co.
RANKING.............. The new notes:
- are senior secured obligations;
- rank senior to all our existing and future subordinated
indebtedness;
- rank pari passu in right of payment with all our
existing and future senior secured indebtedness; and
- are structurally subordinated to all indebtedness and
other liabilities, including trade payables, of our
subsidiaries and are structurally subordinated to the
distribution rights of minority partners in our power
plants.
As of September 30, 1999, our subsidiaries had
approximately $340.8 million of indebtedness outstanding.
COLLATERAL........... The new notes will be secured by:
- the pledge by our owners of all of their interests in
our company;
- the pledge by us of our interests in certain of our
subsidiaries which indirectly own our interests in the
facilities; and
- the pledge of a $289.6 million intercompany subordinated
note payable by Linden Ltd.
OPTIONAL REDEMPTION.. We may redeem any of the new notes at any time at a
redemption price equal to:
- 100% of the principal amount of the new notes redeemed,
plus
- accrued interest on the new notes redeemed, plus
- a make-whole premium based on rates of comparable
treasury securities, plus 50 basis points.
MANDATORY REDEMPTION. In the event of a governmental taking or other event of
loss (as defined in "Description of the New Notes") at one
of our facilities, we must use any
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proceeds actually received by us in excess of $5.0 million
that are not used to repair or replace such facility, to
redeem as many new notes as possible. In such event, the
redemption price for the new notes will be 100% of the
principal amount of the new notes redeemed plus accrued
interest.
We must redeem all of the new notes without premium in the
event that a power contract buyout (as defined in
"Description of the New Notes") occurs, resulting in one
or more of the owners of our facilities receiving net
buyout proceeds (as defined in "Description of the New
Notes") in excess of $25.0 million. In such an event, the
redemption price for the new notes will be 100% of the
principal amount of the new notes plus accrued interest.
We may not have sufficient funds available at the time of
any power contact buyout to purchase all of the new notes.
We will not be required to redeem any of the new notes
upon the occurrence of an event of loss or power contract
buyout to the extent that we receive confirmation of the
initial ratings of the notes. We may redeem a portion of
the new notes in order to obtain such confirmation.
CHANGE OF CONTROL.... If Enron, in combination with institutional investors,
ceases to beneficially own a majority of the voting
securities in our company, then, unless we receive
confirmation of the initial ratings of the notes or the
holders of 66 2/3% of the new notes and any additional
notes issued under the indenture approve the change in
ownership, we must offer to purchase all of the new notes
at a purchase price equal to 101% of the principal amount
of the new notes plus accrued interest. We may not have
sufficient funds available at the time of any change of
control to purchase all of the new notes.
DEBT SERVICE RESERVE
ACCOUNT............ We will be required to maintain a debt service reserve
account funded with enough money to pay principal and
interest due on the new notes on the next two payment
dates. We do not have to fund this account if we provide
acceptable debt service credit support, which may be
either an Enron undertaking or an acceptable letter of
credit. The trustee will disburse funds from this account
or call upon the debt service credit support if we have
failed to provide sufficient funds to pay principal and
interest three business days prior to the payment date. If
the debt service reserve account has excess reserves, the
trustee may, upon our request, pay us the excess amount.
COVENANTS............ The terms of the new notes will restrict our ability and
the ability of our subsidiaries to:
- incur additional debt;
- incur liens on our property;
- consolidate or merge or sell assets;
- enter into certain transactions with affiliates; and
- take or fail to take certain actions with respect to the
project documents relating to our facilities.
These limitations are subject to a number of important
qualifications and exceptions which are described in
"Description of the New Notes."
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RIGHTS UNDER
REGISTRATION RIGHTS
AGREEMENT.......... If we fail to complete the exchange offer as required by
the registration rights agreement, we will be obligated to
pay additional interest to holders of the outstanding
notes.
Please read "The Exchange Offer" for more information
regarding your rights as a holder of outstanding notes.
RISK FACTORS
You should carefully consider "Risk Factors" beginning on page 10 before
participating in the exchange offer. The following is a summary of the most
significant risks relating to an investment in the notes:
- If you fail to exchange your outstanding notes, the existing transfer
restrictions will remain in effect and the market price of your
outstanding notes may be adversely affected.
- We are dependent on our subsidiaries to generate cash flow to service our
debt, and your right to receive payments on the new notes is junior to
the payment rights of creditors of our subsidiaries and distribution
rights of our minority partners in certain of our subsidiaries.
- Our subsidiaries' debt and partnership agreements limit the trustee's
ability to foreclose on the collateral that secures the new notes and on
your ability to realize value from the collateral.
- We depend on a small number of customers and contracts to provide all of
our revenues. If any of our customers is able to amend or terminate its
agreement with us, our revenues, and therefore our ability to make
payments on the new notes could be materially and adversely affected.
- The operation of our facilities involves risks, including equipment
breakdowns, fuel interruptions, underperformance and catastrophic events.
- We and our subsidiaries may incur additional debt, which could adversely
affect you by diluting the value of the collateral to you and by
diverting our cash flow to the payment of additional debt.
- Our business is subject to substantial regulations and permitting
requirements and may be adversely affected by changes in these
regulations or requirements.
- Our revenues may be adversely affected by fuel cost increases and
unavailability of fuel.
- There are risks associated with the Year 2000 computer problem which
could adversely affect the operations of our facilities or those of our
customers or suppliers.
- There is no public market for the new notes, and we do not intend to list
them on any securities exchange or automated quotation system.
OUR COMPANY
We indirectly own equity interests in three combined-cycle natural gas
cogeneration power plants. The power plants are located in Linden, Camden and
Bayonne, New Jersey. A cogeneration power plant is one that uses a single energy
source to produce two or more forms of energy output. Our facilities burn
natural gas to produce both electricity and steam.
We acquired our equity interests in the facilities from the Cogen
Technologies group in February 1999. In this prospectus, we refer to the
acquisition of our interests in these facilities as "the acquisition." Our
activities are limited to the ownership, operation and potential expansion of
our facilities.
We are owned by Enron Corp., the California Public Employees' Retirement
System, El Paso Energy Corporation and Donaldson, Lufkin & Jenrette Securities
Corporation. Enron and CalPERS hold a portion of their interests through Joint
Energy Development Investments II Limited Partnership ("JEDI II"). The general
partner of JEDI II is an indirect wholly owned subsidiary of Enron. The limited
partners of JEDI II
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are CalPERS and an indirect wholly owned subsidiary of Enron. El Paso Energy and
DLJ hold their interests through Mesquite Investors, L.L.C. Our officers and
employees, who include former officers and employees of the Cogen Technologies
group, manage the day-to-day operations of our company.
Our principal executive offices are located at 711 Louisiana Street,
Houston, Texas 77002. Our telephone number is (713) 853-6161.
INVESTMENT HIGHLIGHTS
We believe that the combination of our facilities' long-term power purchase
agreements and their location in the key New York City and Pennsylvania-New
Jersey-Maryland power markets makes the notes an attractive investment. Some of
the investment highlights are as follows:
- Power Purchase Agreements -- Each of our facilities has committed its
generating capacity under long-term power purchase agreements with
investment-grade investor-owned utilities as follows:
- Linden -- 645 megawatts through 2017;
- Camden -- 143 megawatts through 2013; and
- Bayonne -- 165 megawatts through 2008.
We believe that our power purchase agreements will provide us with stable
cash flow for three reasons:
- our power purchase agreements are based on fixed-price components for
electricity and capacity, with fuel costs generally passed through to
our power purchasers;
- the current regulatory environment and legal precedent in New York and
New Jersey confirm the sanctity of contracts between independent power
producers and investor-owned utilities and the recovery by such
utilities of costs associated with these contracts; and
- prices under our power purchase agreements are consistently lower than
our power purchasers' cost of generation or do not significantly
impact their overall cost of power supply.
- Gas Transportation and Marketing Synergies -- A primary variable in the
financial performance of our facilities will be the management of fuel
costs and transportation service. As the largest marketer of natural gas
in the United States, Enron is well positioned to help in optimizing the
fuel transportation and supply arrangements for our facilities. Any fuel
management services will be provided on an arm's-length basis.
- Quality and Reliability of Service -- All of our facilities burn natural
gas and operate with modern technology, which gives us a cost advantage
over much of the generation capacity in the region. During 1998, our
facilities' weighted average heat rate, based on total electrical output,
was 9,354 Btu/KWh. In addition, our facilities have strong operating
histories, with average availability factors of at least 93% over the
last five years.
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STRUCTURE AND OWNERSHIP
The following chart depicts the summary structure of our ownership
interests in the facilities and our subsidiaries:
Organizational Chart
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RISK FACTORS
An investment in the new notes involves a significant degree of risk,
including the risks described below. You should carefully consider the following
risk factors and other information in this prospectus before making an
investment decision.
IF YOU FAIL TO EXCHANGE YOUR OUTSTANDING NOTES, THE EXISTING TRANSFER
RESTRICTIONS WILL REMAIN IN EFFECT AND THE MARKET PRICE OF YOUR OUTSTANDING
NOTES MAY BE ADVERSELY AFFECTED.
If you do not exchange your outstanding notes for new notes under the
exchange offer, then you will continue to be subject to the existing transfer
restrictions on the outstanding notes. In general, the outstanding notes may not
be offered or sold unless they are registered or exempt from registration under
the Securities Act and applicable state securities laws. Except as required by
the registration rights agreement, we do not intend to register resales of the
outstanding notes. You should refer to "Prospectus Summary -- The Exchange
Offer" and "The Exchange Offer" for information about how to tender your
outstanding notes.
The tender of outstanding notes under the exchange offer will reduce the
principal amount of the outstanding notes outstanding. This may have an adverse
effect upon, and increase the volatility of, the market price of any outstanding
notes that you continue to hold due to a reduction in liquidity.
WE ARE DEPENDENT ON OUR SUBSIDIARIES TO GENERATE CASH FLOW TO SERVICE OUR DEBT,
AND YOUR RIGHT TO RECEIVE PAYMENTS ON THE NEW NOTES IS JUNIOR TO THE PAYMENT
RIGHTS OF CREDITORS OF OUR SUBSIDIARIES AND DISTRIBUTION RIGHTS OF OUR MINORITY
PARTNERS IN CERTAIN OF OUR SUBSIDIARIES.
Our subsidiaries conduct all of our operations and own all of our assets.
As a result, our ability to make required payments on the new notes and our
other debt depends on the performance of the power plants in which our
subsidiaries own interests and our subsidiaries' ability to distribute funds to
us. Our subsidiaries will have no obligation to pay any amounts due on the new
notes, and none of our subsidiaries will guarantee the payment of the new notes.
No other entity besides us, including JEDI II, East Coast Power Holding Company
L.L.C., Enron, CalPERS, Mesquite Investors, El Paso Energy and DLJ, will have
any obligation to pay or guarantee payment of the new notes.
The rights of holders of the new notes will be structurally subordinated to
the rights of our subsidiaries' lenders and our minority partners. A default by
a subsidiary under its debt obligations or the occurrence of a special event
under a partnership agreement (in the case of Linden or Camden) would result in
a block on distributions from the affected subsidiary to us.
The loan agreements entered into by our subsidiaries in connection with the
development, construction and operation of the facilities restrict our
subsidiaries' ability to pay dividends, make distributions or otherwise transfer
funds to us. These loan agreements generally require that, before paying
dividends or making distributions or other transfers, our subsidiaries must pay
other obligations, such as operating expenses, taxes and debt service, and fund
reserve accounts relating to their debt. As of September 30, 1999, our
subsidiaries had $340.8 million of indebtedness outstanding. Our subsidiaries
may incur up to $250 million of additional debt. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Description of the New Notes -- Certain
Covenants -- Limitation on Indebtedness of Our Subsidiaries."
In addition, the minority partners in our subsidiaries that own the Linden
and Camden facilities receive a portion of the distributable cash from those
power plants before we receive any distributable cash. Upon the occurrence of
certain special events, our minority partners in Linden and Camden may remove
our subsidiary as managing general partner, alter the allocation of cash
distributions and prohibit cash distributions to us. Either of these occurrences
would have a material adverse effect on our ability to pay the new notes and our
other debt. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources -- Linden Structure,
Indebtedness and Cash Distributions" and "-- Camden Structure, Indebtedness and
Cash Distributions."
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OUR SUBSIDIARIES' DEBT AND PARTNERSHIP AGREEMENTS LIMIT THE TRUSTEE'S ABILITY TO
FORECLOSE ON THE COLLATERAL THAT SECURES THE NEW NOTES AND ON YOUR ABILITY TO
REALIZE VALUE FROM THE COLLATERAL.
We cannot assure you that if we default on the new notes, the exercise of
the legal remedies provided in the indenture, including foreclosure on the
pledged interests, will provide sufficient funds to repay amounts due on the new
notes and our other debt. In the event of the bankruptcy, insolvency,
liquidation or reorganization of any of our subsidiaries, any creditors of the
subsidiary (including trade creditors) will be entitled to payment in full from
the assets of the subsidiary before we would be entitled to receive any
distributions from the subsidiary. The ability of the trustee to realize value
upon a foreclosure of the collateral for the new notes is structurally
subordinated to our subsidiaries' creditors and minority partners. If any of our
subsidiaries defaults under its debt, its lenders could accelerate the repayment
of the debt and foreclose on any collateral that secures it.
WE DEPEND ON A SMALL NUMBER OF CUSTOMERS AND CONTRACTS TO PROVIDE ALL OF OUR
REVENUES. IF ANY OF OUR CUSTOMERS IS ABLE TO AMEND OR TERMINATE ITS AGREEMENT
WITH US, OUR REVENUES, AND THEREFORE OUR ABILITY TO MAKE PAYMENTS ON THE NEW
NOTES, COULD BE MATERIALLY AND ADVERSELY AFFECTED.
Our facilities' revenues and, therefore, our cash distributions depend
primarily upon payments received from power purchasers and, to a lesser extent,
steam customers. During 1998, our power purchasers accounted for approximately
97% of the total revenues from our facilities. Con Ed accounted for
approximately 57% of total revenues, and Public Service Electric and Gas Company
of New Jersey and Jersey Central Power & Light Company each accounted for
approximately 20% of total revenues. The loss of any power purchase agreement or
the material failure of any customer to fulfill its obligations could adversely
affect the distributions we receive and, therefore, our ability to pay the new
notes and our other debt.
Any of our power purchasers might attempt to amend or terminate its power
purchase agreement with us if the rates it pays for power exceed market rates or
its actual avoided cost for the power purchased or if it is subject to
financial, regulatory or other pressures or if we default on our obligations
under such agreements. However, our power purchase agreements generally do not
permit amendments or early termination without the consent of our subsidiary
that owns the power plant. Our subsidiaries' existing indebtedness and the
applicable partnership agreements prohibit consents to amendment or early
termination without the consent of their lenders and other parties. In addition,
existing Federal Energy Regulatory Commission ("FERC") and appellate court
precedent protect qualifying facility power purchase agreements from unilateral
amendment or termination and from regulatory modification. Nevertheless, it is
possible that a court or regulatory authority could order an amendment to or
early termination of any of our power purchase agreements following a change in
the relevant legislation, case law or regulations. Such an amendment or
termination could materially and adversely affect the revenues of the particular
facility and, consequently, our ability to pay the new notes.
THE OPERATION OF OUR FACILITIES INVOLVES RISKS, INCLUDING EQUIPMENT BREAKDOWNS,
FUEL INTERRUPTIONS, UNDERPERFORMANCE AND CATASTROPHIC EVENTS.
The operation of power generation and steam production facilities involves
many operating risks, including:
- breakdown or failure of power generation equipment, transmission lines,
pipelines or other necessary equipment or processes;
- interruptions in fuel supply;
- performance below expected levels of output or efficiency; and
- operator error or catastrophic events such as fires, explosions,
earthquakes and floods, which could result in personal injury, loss of
life, severe damage or destruction of the power plant, pollution or
environmental damage and suspension of operations.
While our power plants have strong operating histories with average availability
factors of at least 93%, they have experienced occasional equipment breakdowns
or failures. We can not assure you that future occurrences
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of the events listed above would not significantly decrease or eliminate the
revenues from the affected power plant or significantly increase the costs of
operating the power plant. Any of the events listed above could therefore reduce
or eliminate the funds available for the payment of indebtedness related to the
affected power plant and for distribution to us and payment of the new notes. An
extended unavailability of the capacity resulting from such events may entitle
the purchaser under existing power purchase or steam sales agreements for the
affected power plant to terminate its agreements. In addition, occurrence of
these events could lead to a default under the indebtedness related to the
affected power plant, which could result in us losing our interest in the
affected power plant.
Although we have insurance to protect against some of these risks, the
insurance proceeds may not be adequate to cover lost revenues, increased
expenses or other costs related to the occurrence of the events described above.
Further, we can not assure you that the insurance that we currently have will be
available in the future at commercially reasonable rates.
WE AND OUR SUBSIDIARIES MAY INCUR ADDITIONAL DEBT WHICH COULD ADVERSELY AFFECT
YOU BY DILUTING THE VALUE OF THE COLLATERAL TO YOU AND BY DIVERTING OUR CASH
FLOW TO THE PAYMENT OF ADDITIONAL DEBT.
We may incur additional debt, including additional series of new notes, to
pay for certain capital improvements and expansions of our facilities and to
refinance existing indebtedness. Certain types of this permitted indebtedness
may rank equally with the new notes and share ratably in the collateral which
secures the new notes. This would reduce the benefits of the collateral to you
and your ability to control certain actions taken with respect to the
collateral.
In addition, if certain conditions are met, our subsidiaries may incur up
to an additional $250 million of debt for project expansions, capital
improvements or working capital. This additional debt could result in the
dedication of more of our or our subsidiaries' cash flow to the payment of debt
obligations and exacerbate the other risks described. See "Description of the
New Notes -- Issuance of Additional Notes" and "-- Certain Covenants."
OUR BUSINESS IS SUBJECT TO SUBSTANTIAL REGULATIONS AND PERMITTING REQUIREMENTS
AND MAY BE ADVERSELY AFFECTED BY CHANGES IN THESE REGULATIONS OR REQUIREMENTS.
Our business is subject to extensive energy, environmental and other laws
and regulations at the federal, state and local level affecting many aspects of
our operations. Such laws and regulations generally require the facilities to
obtain and comply with a wide variety of licenses, permits and other approvals.
Our business is also subject to certain laws and regulations which private
individuals may seek to enforce. The U.S. Congress is considering proposals
relating to retail electricity competition and related matters which involve a
fundamental restructuring of the electric power industry. Some states have
already provided for retail competition and the unbundling of the generation,
transmission and distribution businesses within their states. Regulatory
initiatives are well under way in New York and New Jersey that could have
implications for our power purchasers and our relationships with them. We expect
the laws and regulations applicable to our business and the electric power
industry generally to be in a state of transition for the foreseeable future.
Accordingly, we cannot assure you that such laws or regulations will not be
changed or reinterpreted or that new laws or regulations will not be adopted
which could have a material adverse effect on our business and, therefore, our
ability to make payments on the new notes.
We cannot assure you that any of our power plants will comply at all times
with all conditions established by existing permits and approvals or that we
will be able to renew or maintain all permits and approvals required to operate
our power plants. Our failure to renew or maintain any required permits or
approvals or our inability to satisfy any requirement of any permits may result
in increased compliance costs, the need for additional capital expenditures or a
suspension of facility operations. In addition, our facilities are subject to
extensive environmental laws and regulations. It may be costly to comply with
changes or reinterpretations of these laws and regulations if they become more
stringent than they currently are. See "Regulation."
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OUR REVENUES MAY BE ADVERSELY AFFECTED BY FUEL COST INCREASES AND UNAVAILABILITY
OF FUEL.
In order to minimize exposure to fuel price risk, we seek to match our fuel
costs with the fuel component included in our power purchase agreements. Because
our facilities do not have long-term gas supply contracts, we can not assure you
that gas supplies will be available at all times during the terms of our
facilities' power purchase agreements. We also can not assure you that our fuel
costs will not be higher than the fuel component provisions of our power
purchase agreements. If fuel is not available or if our fuel costs are higher
than the fuel component provisions of our power purchase agreements, there could
be a material adverse impact on a facility's cash flow and ability to service
its debt and on distributions to us and our ability to make payments under the
new notes and our other debt. Our Linden facility has incurred fuel costs in
excess of its fuel reimbursement component in its power purchase agreement in
four of the last six years. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Power Purchase Agreements."
THERE ARE RISKS ASSOCIATED WITH THE YEAR 2000 COMPUTER PROBLEM WHICH COULD
ADVERSELY AFFECT THE OPERATIONS OF OUR FACILITIES OR THOSE OF OUR CUSTOMERS OR
SUPPLIERS.
Many existing computer systems use only two digits to identify a year in
the date field. These systems were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the Year
2000. We believe that we will be able to achieve substantial Year 2000 readiness
with respect to the mission critical systems that we control. However, we can
not assure you that all of our systems and any systems of third parties on whom
we rely will be adequately remediated so that they are Year 2000 ready by
January 1, 2000. If there are mission-critical Year 2000-related failures that
create substantial disruptions to our business, the adverse impact on our
business could be material. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Year 2000."
THERE IS NO PUBLIC MARKET FOR THE NEW NOTES, AND WE DO NOT INTEND TO LIST THEM
ON ANY SECURITIES EXCHANGE OR AUTOMATED QUOTATION SYSTEM.
There is no existing market for the new notes. We cannot provide any
assurance about:
- the liquidity of any markets that may develop for the new notes;
- your ability to sell your new notes; or
- the prices at which you will be able to sell your new notes.
Future trading prices of the new notes will depend on many factors, including
prevailing interest rates, our operating results, the ratings of new notes, and
the market for similar securities. The initial purchasers of the outstanding
notes have advised us that they presently intend to make a market in the new
notes after completion of the exchange offer. However, those purchasers do not
have any obligation to do so and they may discontinue any market-making
activities at any time without any notice.
We do not intend to apply for listing of the new notes on any securities
exchange or for quotation of the new notes in any automated dealer quotation
system.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the issuance of the outstanding notes, we entered into a
registration rights agreement. Under the registration rights agreement, we
agreed to:
- use our reasonable best efforts to file a registration statement with the
SEC for an exchange of the new notes for the outstanding notes under the
Securities Act and to keep such registration statement effective until
the closing of such exchange offer;
- use our reasonable best efforts to cause the exchange offer to be
consummated within 270 days following the original issuance of the
outstanding notes;
- keep the exchange offer open for acceptance for a period of not less than
30 calendar days after the date notice thereof is mailed to holders of
the outstanding notes, or longer if required by applicable law; and
- accept for exchange all outstanding notes duly tendered and not validly
withdrawn in the exchange offer in accordance with the terms of the
exchange offer registration statement and letter of transmittal.
As soon as practicable after the exchange offer registration statement
becomes effective, we will offer the holders of outstanding notes who are not
prohibited by any law from participating in this exchange offer the opportunity
to exchange their outstanding notes for new notes registered under the
Securities Act that are substantially identical to the outstanding notes, except
that the new notes will not contain terms with respect to transfer restrictions,
registration rights and additional interest.
Under limited circumstances, we will use our reasonable best efforts to
cause the Securities and Exchange Commission to declare effective a shelf
registration statement with respect to the resale of the outstanding notes and
keep the statement effective for up to two years after the effective date of the
shelf registration statement. These circumstances include:
- if any changes in law or their interpretations by the staff of the SEC do
not permit us to effect the exchange offer as contemplated by the
registration rights agreement;
- if the exchange offer is not consummated within 270 days after April 20,
1999 (unless the exchange offer has commenced, in which case if the
exchange offer is not consummated within 90 days after the date on which
the exchange offer commenced);
- if any initial purchaser of the outstanding notes so requests with
respect to outstanding notes held by it within 150 days following
consummation of the exchange offer;
- if any holder of the outstanding notes (other than an initial purchaser)
notifies us that it is not permitted to participate in the exchange offer
or has participated in the exchange offer and has received new notes that
are not freely tradeable; and
- if the initial purchasers do not receive freely tradeable new notes in
exchange for outstanding notes constituting any portion of an unsold
allotment.
Additional interest will accrue on the notes at a rate of 0.5% per annum in
the following circumstances:
- the exchange offer registration statement is not filed with the SEC on or
prior to the 90th calendar day following April 20, 1999;
- the exchange offer registration statement is not declared effective on or
prior to the 240th calendar day following April 20, 1999 or the exchange
offer is not consummated on or prior to the 270th calendar day following
April 20, 1999; or
- a shelf registration statement is not declared effective when required.
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<PAGE> 16
Upon the filing of the exchange offer registration statement, the effectiveness
of the exchange offer registration statement, the consummation of the exchange
offer or the effectiveness of a shelf registration statement, as the case may
be, the interest rate borne by the notes from the date of such filing,
effectiveness or consummation, as the case may be, will be reduced to the
original interest rate. However, if after any such reduction in interest rate a
different event specified in the three clauses above occurs, the interest rate
may again be increased pursuant to the foregoing provisions.
To exchange your outstanding notes for transferable new notes in the
exchange offer, you will be required to make the following representations:
- any new notes will be acquired in the ordinary course of your business;
- you have no arrangement or understanding with any person or entity to
participate in the distribution of the new notes;
- you are not engaged in and do not intend to engage in the distribution of
the new notes;
- if you are a broker-dealer that will receive new notes for your own
account in exchange for outstanding notes, you acquired those notes as a
result of market-making activities or other trading activities and you
will deliver a prospectus, as required by law, in connection with any
resale of such new notes; and
- you are not our "affiliate," as defined in Rule 405 of the Securities
Act.
In addition, we may require you to deliver information to be used in
connection with the shelf registration statement in order to have your notes
included in the shelf registration statement and benefit from the provisions
regarding additional interest described in the preceding paragraphs. A holder
who sells outstanding notes under the shelf registration statement generally
will be required to be named as a selling securityholder in the related
prospectus and to deliver a prospectus to purchasers. Such a holder will also be
subject to the civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the registration rights
agreement that are applicable to such a holder, including indemnification
obligations.
The above summary of the registration rights agreement contains all of its
material terms.
RESALE OF NEW NOTES
Based on interpretations of the SEC in no action letters issued to third
parties, we believe that new notes issued under the exchange offer may be
offered for resale, resold and otherwise transferred by you without compliance
with the registration and prospectus delivery provisions of the Securities Act,
if:
- you are not our "affiliate" within the meaning of Rule 405 under the
Securities Act;
- such new notes are acquired in the ordinary course of your business; and
- you do not intend to participate in the distribution of such new notes.
If you tender in the exchange offer with the intention of participating in
any manner in a distribution of the new notes, you:
- cannot rely on such interpretations by the SEC staff; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.
Unless an exemption from registration is otherwise available, any security
holder intending to distribute new notes should be covered by an effective
registration statement under the Securities Act containing the selling security
holder's information required by Item 507 of Regulation S-K under the Securities
Act. This prospectus may be used for an offer to resell, resale or other
retransfer of new notes only as specifically described in this prospectus. Only
broker-dealers that acquired the outstanding notes as a result of market-
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<PAGE> 17
making activities or other trading activities may participate in the exchange
offer. Each broker-dealer that receives new notes for its own account in
exchange for outstanding notes, where such outstanding notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of the new notes. Broker dealers that acquired the outstanding
notes from us may not rely on the interpretations of the SEC discussed above and
must comply with the registration and prospectus delivery requirements of the
Securities Act, including being named as selling noteholders in order to resell
the outstanding notes or new notes. Please read "Plan of Distribution" for more
details regarding the transfer of new notes.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions described in this prospectus
and in the letter of transmittal, we will accept for exchange any outstanding
notes properly tendered and not withdrawn prior to the expiration date. We will
issue new notes in principal amount equal to the principal amount of outstanding
notes surrendered under the exchange offer. Outstanding notes may be tendered
only for new notes of the same maturity date and only in integral multiples of
$1,000 (except for the 2008 notes, the exchange of which will reflect partial
payments of principal on June 30, 1999 and September 30, 1999).
The exchange offer is not conditioned upon any minimum aggregate principal
amount of outstanding notes being tendered for exchange.
As of the date of this prospectus, $833,939,040 aggregate principal amount
of the outstanding notes are outstanding, reflecting the June 30, 1999 and
September 30, 1999 payments of principal on the 2008 notes in the amount of
$12,130,080, or 4.098%, and $3,930,880, or 1.328%, respectively, of the original
principal amount outstanding. This prospectus and the letter of transmittal are
being sent to all registered holders of outstanding notes. There will be no
fixed record date for determining registered holders of outstanding notes
entitled to participate in the exchange offer.
We intend to conduct the exchange offer in accordance with the provisions
of the registration rights agreement, the applicable requirements of the
Securities Act and the Securities Exchange Act and the rules and regulations of
the SEC. Outstanding notes that are not tendered for exchange in the exchange
offer will remain outstanding and continue to accrue interest and will be
entitled to the rights and benefits such holders have under the indenture
relating to the notes and the registration rights agreement.
We will be deemed to have accepted for exchange properly tendered
outstanding notes when we have given oral or written notice of the acceptance to
the exchange agent and complied with the applicable provisions of the
registration rights agreement. The exchange agent will act as agent for the
tendering holders for the purposes of receiving the new notes from us.
If you tender outstanding notes in the exchange offer, you will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
outstanding notes. We will pay all charges and expenses, other than certain
applicable taxes described below, in connecting with the exchange offer. It is
important that you read the section labeled "-- Fees and Expenses" for more
details regarding fees and expenses incurred in the exchange offer.
We will return any outstanding notes that we do not accept for exchange for
any reason without expense to their tendering holder as promptly as practicable
after the expiration or termination of the exchange offer.
EXPIRATION DATE
The exchange offer will expire at 5:00 p.m., New York City time on
, 1999, unless, in our sole discretion, we extend it. We will not
extend the exchange offer beyond , 1999.
EXTENSIONS, DELAYS IN ACCEPTANCE, TERMINATION OR AMENDMENT
We expressly reserve the right, at any time or various times, to extend the
period of time during which the exchange offer is open. We may delay acceptance
of any outstanding notes by giving oral or written notice of
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<PAGE> 18
such extension to their holders. During any such extensions, all outstanding
notes previously tendered will remain subject to the exchange offer, and we may
accept them for exchange.
In order to extend the exchange offer, we will notify the exchange agent
orally or in writing of any extension. We will notify the registered holders of
outstanding notes of the extension no later than 9:00 a.m., New York City time,
on the business day after the previously scheduled expiration date.
If any of the conditions described below under "-- Conditions to the
Exchange Offer" have not been satisfied, we reserve the right, in our sole
discretion
- to delay accepting for exchange any outstanding notes,
- to extend the exchange offer, or
- to terminate the exchange offer,
by giving oral or written notice of such delay, extension or termination to the
exchange agent. Subject to the terms of the registration rights agreement, we
also reserve the right to amend the terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders of outstanding notes. If we amend the exchange offer in a
manner that we determine to constitute a material change, we will promptly file
with the SEC a post-effective amendment to the registration statement of which
this prospectus is a part to disclose such amendment. We will distribute the
prospectus included in the post-effective amendment to the registered holders of
the outstanding notes. Depending upon the significance of the amendment and the
manner of disclosure to the registered holders, we will extend the exchange
offer if the exchange offer would otherwise expire during such period.
CONDITIONS TO THE EXCHANGE OFFER
Despite any other term of the exchange offer, we will not be required to
accept for exchange, or exchange any new notes for, any outstanding notes, and
we may terminate the exchange offer as provided in this prospectus before
accepting any outstanding notes for exchange, if in our reasonable judgment:
- the exchange offer, or the making of any exchange by a holder of
outstanding notes, would violate applicable law or any applicable
interpretation of the staff of the SEC; or
- any action or proceeding has been instituted or threatened in any court
or by or before any governmental agency with respect to the exchange
offer that, in our judgment, would reasonably be expected to impair our
ability to proceed with the exchange offer.
In addition, we will not be obligated to accept for exchange the
outstanding notes of any holder that has not made to us the representations
described under "-- Purpose and Effect of the Exchange Offer," "-- Procedures
for Tendering" and "Plan of Distribution" and such other representations as may
be reasonably necessary under applicable SEC rules, regulations or
interpretations to make available to us an appropriate form for registration of
the new notes under the Securities Act.
We expressly reserve the right to amend or terminate the exchange offer,
and to reject for exchange any outstanding notes not previously accepted for
exchange, upon the occurrence of any of the conditions to the exchange offer
specified above. We will give oral or written notice of any extension,
amendment, non-acceptance or termination to the holders of the outstanding notes
as promptly as practicable.
These conditions are for our sole benefit, and we may assert them or waive
them in whole or in part at any time or at various times in our sole discretion.
If we fail at any time to exercise any of these rights, this failure will not
mean that we have waived our rights. Each such right will be deemed an ongoing
right that we may assert at any time or at various times.
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In addition, we will not accept for exchange any outstanding notes
tendered, and will not issue new notes in exchange for any such outstanding
notes, if at such time any stop order has been threatened or is in effect with
respect to the registration statement of which this prospectus constitutes a
part or the qualification of the indenture relating to the notes under the Trust
Indenture Act of 1939.
PROCEDURES FOR TENDERING
How to Tender Generally
Only a holder of outstanding notes may tender such outstanding notes in the
exchange offer. To tender in the exchange offer, a holder must:
- complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal;
- have the signature on the letter of transmittal guaranteed if the letter
of transmittal so requires; and
- mail or deliver such letter of transmittal or facsimile to the exchange
agent prior to the expiration date; or
- comply with the automated tender offer program procedures of The
Depository Trust Company, or DTC, described below.
In addition, either:
- the exchange agent must receive outstanding notes along with the letter
of transmittal;
- the exchange agent must receive, prior to the expiration date, a timely
confirmation of book-entry transfer of such outstanding notes into the
exchange agent's account at DTC according to the procedure for book-entry
transfer described below or a properly transmitted agent's message; or
- the holder must comply with the guaranteed delivery procedures described
below.
To be tendered effectively, the exchange agent must receive any physical
delivery of the letter of transmittal and other required documents at its
address provided above under "Prospectus Summary -- The Exchange Agent" prior to
the expiration date.
The tender by a holder that is not withdrawn prior to the expiration date
will constitute an agreement between the holder and us in accordance with the
terms and subject to the conditions described in this prospectus and in the
letter of transmittal.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND RISK.
RATHER THAN MAIL THESE ITEMS, WE RECOMMEND THAT YOU USE AN OVERNIGHT OR HAND
DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ASSURE
DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. YOU SHOULD NOT SEND
THE LETTER OF TRANSMITTAL OR OUTSTANDING NOTES TO US. YOU MAY REQUEST YOUR
BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR OTHER NOMINEES TO EFFECT
THE ABOVE TRANSACTIONS FOR YOU.
How to Tender if You Are a Beneficial Owner
If you beneficially own outstanding notes that are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee and you
wish to tender those notes, you should contact the registered holder promptly
and instruct it to tender on your behalf. If you are a beneficial owner and wish
to tender on your own behalf, you must, prior to completing and executing the
letter of transmittal and delivering your outstanding notes, either:
- make appropriate arrangements to register ownership of the outstanding
notes in your name; or
- obtain a properly completed bond power from the registered holder of
outstanding notes.
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<PAGE> 20
The transfer of registered ownership may take considerable time and may not
be completed prior to the expiration date.
Signatures and Signature Guarantees
You must have signatures on a letter of transmittal or a notice of
withdrawal (as described below) guaranteed by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States, or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934,
that is a member of one of the recognized signature guarantee programs
identified in the letter of transmittal, unless the outstanding notes are
tendered:
- by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter
of transmittal; or
- for the account of a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondence in
the United States, or an eligible guarantor institution.
When You Need Endorsements or Bond Powers
If the letter of transmittal is signed by a person other than the
registered holder of any outstanding notes, the outstanding notes must be
endorsed or accompanied by a properly completed bond power. The bond power must
be signed by the registered holder as the registered holder's name appears on
the outstanding notes and a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States, or an eligible guarantor institution must guarantee the signature on the
bond power.
If the letter of transmittal or any outstanding notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, those persons should so indicate when signing. Unless waived by us,
they should also submit evidence satisfactory to us of their authority to
deliver the letter of transmittal.
Tendering Through DTC's Automated Tender Offer Program
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's automated tender offer
program to tender. Participants in the program may, instead of physically
completing and signing the letter of transmittal and delivering it to the
exchange agent, transmit their acceptance of the exchange offer electronically.
They may do so by causing DTC to transfer the outstanding notes to the exchange
agent in accordance with its procedures for transfer. DTC will then send an
agent's message to the exchange agent.
The term "agent's message" means a message transmitted by DTC, received by
the exchange agent and forming part of the book-entry confirmation, to the
effect that:
- DTC has received an express acknowledgment from a participant in its
automated tender offer program that is tendering outstanding notes that
are the subject of such book-entry confirmation;
- such participant has received and agrees to be bound by the terms of the
letter of transmittal or, in the case of an agent's message relating to
guaranteed delivery, that such participant has received and agrees to be
bound by the applicable notice of guaranteed delivery; and
- the agreement may be enforced against such participant.
Determinations Under the Exchange Offer
We will determine in our sole discretion all questions as to the validity,
form, eligibility, time of receipt, acceptance of tendered outstanding notes and
withdrawal of tendered outstanding notes. Our determination will be final and
binding. We reserve the absolute right to reject any outstanding notes not
properly tendered or
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<PAGE> 21
any outstanding notes our acceptance of which would, in the opinion of our
counsel, be unlawful. We also reserve the right to waive any defect,
irregularities or conditions of tender as to particular outstanding notes. Our
interpretation of the terms and conditions of the exchange offer, including the
instructions in the letter of transmittal, will be final and binding on all
parties. Unless waived, all defects or irregularities in connection with tenders
of outstanding notes must be cured within such time as we shall determine.
Although we intend to notify holders of defects or irregularities with respect
to tenders of outstanding notes, neither we, the exchange agent nor any other
person will incur any liability for failure to give such notification. Tenders
of outstanding notes will not be deemed made until such defects or
irregularities have been cured or waived. Any outstanding notes received by the
exchange agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned to the tendering
holder, unless otherwise provided in the letter of transmittal, as soon as
practicable following the expiration date.
When We Will Issue New Notes
In all cases, we will issue new notes for outstanding notes that we have
accepted for exchange under the exchange offer only after the exchange agent
timely receives:
- outstanding notes or a timely book-entry confirmation of such outstanding
notes into the exchange agent's account at DTC; and
- a properly completed and duly executed letter of transmittal and all
other required documents or a properly transmitted agent's message.
Return of Outstanding Notes Not Accepted or Excepted
If we do not accept any tendered outstanding notes for exchange for any
reason described in the terms and conditions of the exchange offer or if
outstanding notes are submitted for a greater principal amount than the holder
desires to exchange, the unaccepted or non-exchanged outstanding notes will be
returned without expense to their tendering holder. In the case of outstanding
notes tendered by book-entry transfer into the exchange agent's account at DTC
according to the procedures described below, such non-exchanged outstanding
notes will be credited to an account maintained with DTC. These actions will
occur as promptly as practicable after the expiration or termination of the
exchange offer.
Your Representations to Us
By signing or agreeing to be bound by the letter of transmittal, you will
represent to us that, among other things:
- any new notes that you receive will be acquired in the ordinary course of
your business;
- you have no arrangement or understanding with any person or entity to
participate in the distribution of the new notes;
- you are not engaged in and do not intend to engage in the distribution of
the new notes;
- if you are a broker-dealer that will receive new notes for your own
account in exchange for outstanding notes, you acquired those notes as a
result of market-making activities or other trading activities and you
will deliver a prospectus, as required by law, in connection with any
resale of such new notes; and
- you are not our "affiliate," as defined in Rule 405 of the Securities
Act.
BOOK-ENTRY TRANSFER
The exchange agent will establish an account with respect to the
outstanding notes at DTC for purposes of the exchange offer promptly after the
date of this prospectus. Any financial institution participating in DTC's system
may make book-entry delivery of outstanding notes by causing DTC to transfer
such outstanding notes into the exchange agent's account at DTC in accordance
with DTC's procedures for transfer. Holders of outstanding notes who are unable
to deliver confirmation of the book-entry tender of their
18
<PAGE> 22
outstanding notes into the exchange agent's account at DTC or all other
documents required by the letter of transmittal to the exchange agent on or
prior to the expiration date must tender their outstanding notes according to
the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
If you wish to tender your outstanding notes but your outstanding notes are
not immediately available or you cannot deliver your outstanding notes, the
letter of transmittal or any other required documents to the exchange agent or
comply with the applicable procedures under DTC's automated tender offer program
prior to the expiration date, you may tender if:
- the tender is made through a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or
correspondent in the United States, or an eligible guarantor institution;
- prior to the expiration date, the exchange agent receives from such
member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., commercial bank or
trust company having an office or correspondent in the United States, or
eligible guarantor institution either a properly completed and duly
executed notice of guaranteed delivery by facsimile transmission, mail or
hand delivery or a properly transmitted agent's message and notice of
guaranteed delivery:
- setting forth your name and address, the registered number(s) of your
outstanding notes and the principal amount of outstanding notes
tendered;
- stating that the tender is being made thereby; and
- guaranteeing that, within three (3) New York Stock Exchange trading
days after the expiration date, the letter of transmittal or facsimile
thereof, together with the outstanding notes or a book-entry
confirmation, and any other documents required by the letter of
transmittal will be deposited by the eligible guarantor institution
with the exchange agent; and
- the exchange agent receives such properly completed and executed letter
of transmittal or facsimile thereof, as well as all tendered outstanding
notes in proper form for transfer or a book-entry confirmation, and all
other documents required by the letter of transmittal, within three (3)
New York Stock Exchange trading days after the expiration date.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent you if you wish to tender your outstanding notes according to the
guaranteed delivery procedures described above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, you may withdraw your
tender at any time prior to the expiration date.
For a withdrawal to be effective:
- the exchange agent must receive a written notice of withdrawal at one of
the addressees listed above under "Prospectus Summary -- The Exchange
Agent" or
- you must comply with the appropriate procedures of DTC's automated tender
offer program system.
Any notice of withdrawal must:
- specify the name of the person who tendered the outstanding notes to be
withdrawn and
- identify the outstanding notes to be withdrawn, including the principal
amount of such outstanding notes.
19
<PAGE> 23
If outstanding notes have been tendered under the procedure for book-entry
transfer described above, any notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawn outstanding notes
and otherwise comply with the procedures of DTC.
We will determine all questions as to the validity, form, eligibility and
time of receipt of notice of withdrawal, and our determination shall be final
and binding on all parties. We will deem any outstanding notes so withdrawn not
to have been validly tendered for exchange for purposes of the exchange offer.
Any outstanding notes that have been tendered for exchange but that are not
exchanged for any reason will be returned to their holder without cost to the
holder or, in the case of outstanding notes tendered by book-entry transfer into
the exchange agent's account at DTC according to the procedures described above,
such outstanding notes will be credited to an account maintained with DTC for
the outstanding notes. This return or crediting will take place as soon as
practicable after withdrawal, rejection of tender or termination of the exchange
offer. You may retender properly withdrawn outstanding notes by following one of
the procedures described under "-- Procedures for Tendering" above at any time
on or prior to the expiration date.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, we may make additional solicitation by
telegraph, telephone or in person by our officers and regular employees and
those of our affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or other soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its related
reasonable out-of-pocket expenses.
We will pay the cash expenses to be incurred in connection with the
exchange offer. They include:
- SEC registration fees;
- fees and expenses of the exchange agent and trustee;
- accounting and legal fees and printing costs; and
- related fees and expenses.
TRANSFER TAXES
We will pay all transfer taxes, if any, applicable to the exchange of
outstanding notes under the exchange offer. The tendering holder, however, will
be required to pay any transfer taxes, whether imposed on the registered holder
or any other person, if:
- certificates representing outstanding notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of
outstanding notes tendered;
- tendered outstanding notes are registered in the name of any person other
than the person signing the letter of transmittal; or
- a transfer tax is imposed for any reason other than the exchange of
outstanding notes under the exchange offer.
If satisfactory evidence of payment of any transfer taxes payable by a note
holder is not submitted with the letter of transmittal, the amount of such
transfer taxes will be billed directly to that tendering holder.
20
<PAGE> 24
CONSEQUENCES OF FAILURE TO EXCHANGE
If you do not exchange your outstanding notes for new notes under the
exchange offer, you will remain subject to the existing restrictions on transfer
of the outstanding notes. In general, you may not offer or sell the outstanding
notes unless they are registered under the Securities Act, or if the offer or
sale is exempt from registration under the Securities Act and applicable state
securities laws. Except as required by the registration rights agreement, we do
not intend to register resales of the outstanding notes under the Securities
Act.
ACCOUNTING TREATMENT
We will record the new notes in our accounting records at the same carrying
value as the outstanding notes, which is the aggregate principal amount of the
outstanding notes, as reflected in our accounting records on the date of
exchange. Accordingly, we will not recognize any gain or loss for accounting
purposes in connection with the exchange offer. The expenses of the exchange
offer have been accrued and are reflected in the September 30, 1999 balance
sheet as Other Assets (deferred financing costs).
OTHER
Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. You are urged to consult your financial and tax
advisors in making your own decision on what action to take.
We may in the future seek to acquire untendered outstanding notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. We have no present plans to acquire any outstanding notes that are
not tendered in the exchange offer or to file a registration statement to permit
resales of any untendered outstanding notes.
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events based upon our knowledge of facts as of the date of this
prospectus and our assumptions about future events. These forward-looking
statements are subject to various risks and uncertainties that may be outside of
our control, including, among other things:
- governmental, statutory, regulatory or administrative changes or
initiatives affecting our company, our power plants, the contracts
relating to our power plants or the U.S. electricity industry generally;
- the cost and availability of fuel and fuel transportation services for
our power plants;
- the enforceability of the long-term power purchase and steam sales
agreements for our power plants;
- the creditworthiness of our electric power and steam customers;
- weather effects on sales and revenues; and
- competition from other power plants, including new plants that may be
developed in the future.
We use words like "anticipate," "estimate," "project," "plan," "expect" and
similar expressions to help identify forward-looking statements in this
prospectus.
For additional factors that could affect the validity of our
forward-looking statements, you should read "Risk Factors" beginning on page 8.
In light of these and other risks, uncertainties and assumptions, the actual
events or results may be very different from those expressed or implied in the
forward-looking statements in this prospectus or may not occur. We have no
obligation to publicly update or revise any forward-looking statement, whether
as a result of new information, future events or otherwise.
21
<PAGE> 25
OUR OWNERS
GENERAL
Our company is a limited liability company organized in Delaware. We have
three members:
- JEDI II indirectly owns 51% of the Class A membership interests and 1% of
the Class B membership interests;
- Mesquite Investors owns 49% of the Class A membership interests and 49%
of the Class B membership interests; and
- CalPERS owns 50% of the Class B membership interests.
In August 1999, Enron transferred its Class B membership interest
(representing 50% of the total Class B membership interests) to ECP Holding
Company. Also in August 1999, ECP Holding Company transferred a 49% Class A
membership interest and a 49% Class B membership interest to Mesquite Investors,
an affiliate of El Paso Energy and DLJ. Our limited liability company agreement
was amended and restated in August 1999 to admit Mesquite Investors as a Class A
and Class B Member.
Our members are not obligated to make any other contributions to us. All
distributions will be made to the Class A Members until the Class A Members have
received distributions equal to $80.0 million plus specified rates of return.
After the Class A Members have received their preferential distributions, all
distributions will be made 90% to the Class A Members and 10% to the Class B
Members.
JEDI II
JEDI II was formed in December 1997 to invest in certain projects related
to natural gas, crude oil, coal, electricity and other forms of energy. The
general partner of JEDI II is an indirect wholly owned subsidiary of Enron. The
limited partners of JEDI II are CalPERS and an indirect wholly owned subsidiary
of Enron.
ENRON
Enron is an integrated natural gas and electricity company with
headquarters in Houston, Texas. Enron conducts its operations through its
subsidiaries and affiliates, which are principally engaged in:
- the marketing of natural gas, electricity and other commodities and
related risk management and finance services worldwide;
- the development, construction and operation of power plants, pipelines
and other energy related assets worldwide;
- the transportation of natural gas through pipelines to markets throughout
the United States;
- the generation and transmission of electricity to markets in the
northwestern United States; and
- the delivery of high bandwidth communication applications throughout the
United States.
MESQUITE INVESTORS
Mesquite Investors was formed in July 1999 to invest in energy-related
projects. The members of Mesquite Investors are wholly owned subsidiaries of El
Paso Energy and DLJ.
22
<PAGE> 26
EL PASO ENERGY
Headquartered in Houston, Texas, El Paso Energy provides energy solutions
coast-to-coast and worldwide through its five business units. El Paso Energy has
operations in:
- interstate natural gas transmission;
- gas gathering and processing;
- international infrastructure development; and
- energy marketing.
23
<PAGE> 27
USE OF PROCEEDS
Our proceeds from the sale of the outstanding notes were $850.0 million. In
connection with the closing of the sale of the outstanding notes, JEDI II made
an equity contribution to our company of $80.0 million. We used these funds as
follows:
- we used $831.0 million to repay a bridge loan to NationsBank, N.A.
incurred in connection with the acquisition, which resulted in the
release of a $25.0 million guaranty by CalPERS;
- we used $62.1 million to repay a portion of a $250.0 million
subordinated note issued to Enron in connection with the
acquisition;
- we used $25.0 million to make a distribution to Enron North America
in respect of its membership interest in our company; and
- we used $11.9 million to pay a purchase price adjustment to the
sellers based on changes in working capital.
We will not receive any cash proceeds from the issuance of the new notes.
In consideration for issuing the new notes, we will receive in exchange a like
principal amount of outstanding notes. The outstanding notes surrendered in
exchange for the new notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the new notes will not result in any change in our
capitalization.
24
<PAGE> 28
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1999
(in millions):
<TABLE>
<S> <C>
Cash, cash equivalents and restricted cash.................. $ 38.6
========
Notes(1).................................................... $ 833.9
Linden Ltd. term loan(2).................................... 199.1
Subordinated note........................................... 187.9
Member's equity............................................. 81.4
--------
Total capitalization........................................ $1,302.3
========
</TABLE>
- ---------------
(1) Includes current portion of $13.5 million.
(2) Includes current portion of $15.1 million and $3.7 million unamortized
premium recognized in connection with the acquisition.
25
<PAGE> 29
SELECTED FINANCIAL DATA
The following table sets forth summary historical financial data for our
company and our predecessor the Acquired Group, which consists of Cogen
Technologies Linden, Ltd. ("Linden Ltd."), Cogen Technologies Camden GP Limited
Partnership ("Camden GP") and McNair Energy Services Corporation ("MESC") and
its wholly owned subsidiary Cogen Technologies NJ, Inc. ("NJ Inc."). We
completed our acquisition of the Acquired Group in February 1999. Our summary
historical balance sheet data as of September 30, 1999 and the summary income
statement data for the period from February 4, 1999 to September 30, 1999 are
derived from the unaudited consolidated financial statements included elsewhere
in this prospectus. The summary historical balance sheet data as of December 31,
1998 and 1997 and the summary historical income statement data for each of the
three years in the period ended December 31, 1998 for the Acquired Group are
derived from combined financial statements which have been audited by Arthur
Andersen LLP and are included elsewhere in this prospectus. The summary
historical balance sheet data as of each of the years in the three-year period
ended December 31, 1996 and the summary historical income statement data for
each of the two years in the period ended December 31, 1995 for the Acquired
Group are derived from combined financial statements which have been audited by
Arthur Andersen LLP and are not included in this prospectus. The summary
historical balance sheet data as of February 4, 1999 and September 30, 1998 and
the summary income statement data for the period ended February 4, 1999 and the
nine months ended September 30, 1998 for the Acquired Group are derived from the
unaudited combined financial statements of the Acquired Group.
Also set forth below are summary historical financial and operating data
for each of Cogen Technologies Linden Venture, L.P. ("Linden Venture"), the
owner and operator of the Linden facility; Camden Cogen L.P. ("Camden Venture"),
the owner and operator of the Camden facility; and Cogen Technologies NJ Venture
("Bayonne Venture"), the owner and operator of the Bayonne facility. The summary
historical balance sheet data as of December 31, 1998 and 1997 and the summary
income statement data for each of the three years in the period ended December
31, 1998 for these entities are derived from the combined financial statements
of Cogen Technologies New Jersey Operating Partnerships which have been audited
by Arthur Andersen LLP and are included elsewhere in this prospectus. The
summary historical balance sheet data as of each of the years in the three-year
period ended December 31, 1996 and the summary historical income statement data
for each of the two years in the period ended December 31, 1995 are derived from
combined financial statements of Cogen Technologies New Jersey Operating
Partnerships which have been audited by Arthur Andersen LLP and are not included
in this prospectus. The summary historical balance sheet data as of September
30, 1999 and 1998 and the summary income statement information for the periods
then ended are derived from the unaudited combined financial statements of Cogen
Technologies New Jersey Operating Partnerships.
You should read the summary historical financial data in conjunction with
the historical and pro forma financial statements which are included elsewhere
in this prospectus. See also "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
As a result of the acquisition, our capital structure and the accounting
basis of our assets and liabilities differ from those of the business acquired.
Accordingly, certain of the financial information for the periods prior to the
acquisition is not comparable to that for periods subsequent to the acquisition.
26
<PAGE> 30
<TABLE>
<CAPTION>
ACQUIRED GROUP (PREDECESSOR)
-------------------------------------------------------------------
OUR COMPANY NINE
----------- MONTHS
2/4/99 1/1/99 ENDED YEAR ENDED DECEMBER 31,
TO TO SEPTEMBER 30, ------------------------------------------
9/30/99 2/4/99 1998 1998 1997 1996 1995 1994
----------- ------ ------------- ------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Equity in earnings (losses) of
affiliates
Linden Venture........................ $ 34.8 $(44.6) $ 53.4 $ 75.3 $ 73.8 $ 78.7 $ 59.0 $ 64.2
Camden Venture........................ 7.0 (11.9) 12.1 14.2 14.5 13.7 13.4 11.8
Bayonne Venture....................... 20.2 5.0 35.5 47.6 17.5 18.1 28.3 17.4
-------- ------ ------ ------ ------ ------ ------ ------
62.0 (51.5) 101.0 137.1 105.8 110.5 100.7 93.4
-------- ------ ------ ------ ------ ------ ------ ------
Costs and expenses:
Operating overhead...................... -- 0.9 19.8 21.6 11.6 9.6 8.4 6.8
General and administrative.............. 5.5 1.7 8.3 20.2 19.9 10.9 10.4 12.2
-------- ------ ------ ------ ------ ------ ------ ------
5.5 2.6 28.1 41.8 31.5 20.5 18.8 19.0
-------- ------ ------ ------ ------ ------ ------ ------
Income (loss) from operations............. 56.5 (54.1) 72.9 95.3 74.3 90.0 81.9 74.4
Other income (expense):
Interest and other income............... 10.5 0.1 9.6 12.6 15.5 16.7 17.8 13.8
Interest expense........................ (65.6) (2.0) (14.4) (19.3) (21.8) (23.3) (26.5) (25.9)
Allowance for long-term receivable...... -- -- (2.6) -- 10.3 (10.3) 6.5 (6.5)
-------- ------ ------ ------ ------ ------ ------ ------
(55.1) (1.9) (7.4) (6.7) 4.0 (16.9) (2.2) (18.6)
Income (loss) before income taxes......... 1.4 (56.0) 65.5 88.6 78.3 73.1 79.7 55.8
Income taxes............................ -- (1.7) (11.0) (14.6) (4.2) (4.1) (7.5) (2.9)
-------- ------ ------ ------ ------ ------ ------ ------
Net income (loss)......................... $ 1.4 $(57.7) $ 54.5 $ 74.0 $ 74.1 $ 69.0 $ 72.2 $ 52.9
======== ====== ====== ====== ====== ====== ====== ======
BALANCE SHEET DATA AT END OF PERIOD:
Investment in affiliates................ $1,264.0 $82.1 $ 84.1 $ 83.8 $ 75.7 $ 71.8 $ 71.8 $ 74.0
Total assets............................ 1,316.9 259.3 241.9 247.2 250.8 250.5 280.1 282.2
Long-term debt (including current
portion).............................. 1,220.9 205.6 221.3 218.0 230.9 246.9 262.2 276.2
Owner's equity (deficit)................ 81.4 41.7 2.3 16.7 (11.6) (27.4) (16.0) (36.2)
OTHER FINANCIAL DATA:
Distributions received from
affiliates............................ $ 81.5 $20.3 $ 92.1 $128.5 $102.3 $116.7 $106.3 $ 92.2
Ratio of earnings to fixed charges(1)... 1.0 -- 3.8 3.8 3.2 2.9 2.9 2.3
</TABLE>
- ---------------
(1) For purposes of calculating the ratio of earnings to fixed charges, earnings
are defined as income (loss) from continuing operations before income taxes
and fixed charges. Fixed charges consist of interest expense including
amortization of loan fees. For the period ended February 4, 1999 earnings
were insufficient to cover fixed charges by $56.0 million.
27
<PAGE> 31
LINDEN VENTURE
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- ------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Electricity........................... $200.3 $197.5 $262.8 $283.5 $290.4 $246.9 $259.0
Steam................................. 6.2 8.9 11.3 15.5 15.1 8.7 10.1
------ ------ ------ ------ ------ ------ ------
206.5 206.4 274.1 299.0 305.5 255.6 269.1
------ ------ ------ ------ ------ ------ ------
Costs and expenses:
Fuel.................................. 99.8(1) 90.3 118.1 138.1 138.6 104.8 117.5
Operating and maintenance............. 14.4 14.4 19.9 22.1 22.6 28.1 26.3
Depreciation and amortization......... 11.3 11.5 15.4 22.3 22.2 22.3 21.9
General and administrative............ 49.9(2) 7.5 10.1 11.4 10.7 9.1 9.7
Taxes other than income............... 1.3 1.3 1.6 0.6 1.7 2.1 1.8
------ ------ ------ ------ ------ ------ ------
176.7 125.0 165.1 194.5 195.8 166.4 177.2
------ ------ ------ ------ ------ ------ ------
Income from operations.................. 29.8 81.4 109.0 104.5 109.7 89.2 91.9
Interest expense...................... -- -- -- -- (0.1) (0.1) (0.1)
Other income.......................... 4.1 0.5 0.8 1.1 0.6 0.8 3.5
------ ------ ------ ------ ------ ------ ------
Net income............................ $ 33.9 $ 81.9 $109.8 $105.6 $110.2 $ 89.9 $ 95.3
====== ====== ====== ====== ====== ====== ======
THE ACQUIRED GROUP'S SHARE OF:
Net income.............................. $ 14.9(3) $ 53.4 $ 75.3 $ 73.8 $ 78.7 $ 59.0 $ 64.2
Cash distributions...................... 67.4 53.8 74.0 75.6 77.7 59.4 71.6
BALANCE SHEET DATA AT END OF PERIOD:
Property and equipment, net............. $401.5 $417.0 $413.6 $428.2 $450.1 $470.6 $490.1
Total assets............................ 464.4 470.5 470.6 492.4 514.8 525.8 546.5
Long-term debt (including current
portion).............................. -- -- -- -- -- -- --
Partners' capital....................... 434.4 447.6 444.5 458.4 480.4 499.5 520.3
SELECTED OPERATING INFORMATION:
Megawatt-hours generated (thousands).... 2,968 2,880 3,808 3,891 3,806 3,952 3,991
Average heat rate (without steam
credit)(4)............................ 9,730 9,618 9,588 9,852 9,924 9,768 9,783
Average heat rate (with steam
credit)(4)............................ 8,927 8,766 8,757 8,664 8,938 8,848 9,014
Average equivalent availability......... 98% 97% 96% 94% 89% 91% 94%
Steam produced (millions of pounds)..... 3,411 3,360 4,357 5,073 4,953 4,168 5,172
</TABLE>
- ---------------
(1) Includes a one-time payment of $6.0 million in connection with the
termination of a gas management agreement. See Note 2 to the Audited and
Unaudited Financial Statements of Cogen Technologies New Jersey Operating
Partnerships included in this prospectus.
(2) Includes a one-time payment of $46.4 million in connection with the
termination of a management services agreement. See Note 2 to the Audited
and Unaudited Financial Statements of Cogen Technologies New Jersey
Operating Partnerships included in this prospectus.
(3) The one-time payments in connection with the termination of the gas
management and management services agreement were allocated 100% to the
Acquired Group's share of net income.
(4) Btu/Kilowatt-hour.
28
<PAGE> 32
CAMDEN VENTURE
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- ------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Electricity.............................. $ 54.4 $ 57.0 $ 73.1 $ 80.2 $ 77.2 $ 67.5 $ 66.0
Steam.................................... -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
54.4 57.0 73.1 80.2 77.2 67.5 66.0
------ ------ ------ ------ ------ ------ ------
Costs and expenses:
Fuel..................................... 24.9(1) 25.6 33.3 39.2 38.4 28.9 30.2
Operating and maintenance................ 5.2 5.2 7.0 7.7 6.4 7.2 5.7
Depreciation and amortization............ 2.8 2.8 3.7 6.9 6.8 6.8 6.7
General and administrative............... 13.7(2) 1.7 2.2 2.6 2.6 2.3 2.1
Taxes other than income.................. 0.3 0.3 0.4 0.6 0.6 0.5 0.7
------ ------ ------ ------ ------ ------ ------
46.9 35.6 46.6 57.0 54.8 45.7 45.4
------ ------ ------ ------ ------ ------ ------
Income from operations..................... 7.5 21.4 26.5 23.2 22.4 21.8 20.6
Interest expense......................... (5.2) (5.6) (7.4) (7.7) (8.2) (8.4) (8.8)
Other income............................. 1.0 0.3 0.4 0.4 0.4 0.4 0.2
------ ------ ------ ------ ------ ------ ------
Net income............................... $ 3.3 $ 16.1 $ 19.5 $ 15.9 $ 14.6 $ 13.8 $ 12.0
====== ====== ====== ====== ====== ====== ======
THE ACQUIRED GROUP'S SHARE OF:
Net income (loss).......................... $ (0.4)(3) $ 12.1 $ 14.2 $ 14.5 $ 13.7 $ 13.4 $ 11.8
Cash distributions......................... 7.8 10.5 15.0 8.6 14.5 15.0 4.3
BALANCE SHEET DATA AT END OF PERIOD:
Property and equipment, net................ $100.4 $103.7 $103.1 $106.3 $108.9 $115.3 $121.8
Total assets............................... 123.0 124.1 121.4 125.3 128.4 133.5 140.7
Long-term debt (including current
portion)................................. 80.1 86.1 84.6 90.2 95.2 99.8 104.0
Partners' capital.......................... 36.9 31.4 29.2 28.0 23.8 26.7 30.7
SELECTED OPERATING INFORMATION:
Megawatt-hours generated (thousands)....... 814 878 1,153 1,208 1,190 1,169 1,127
Average heat rate (without steam
credit)(4)............................... 8,717 8,858 8,791 8,764 8,740 8,662 8,709
Average heat rate (with steam credit)(4)... 8,437 8,623 8,601 8,431 8,422 8,347 8,404
Average equivalent availability............ 88%(5) 96% 96% 97% 98% 98% 94%
Steam produced (millions of pounds)........ 207 220 300 301 310 302 281
</TABLE>
- ---------------
(1) Includes a one-time payment of $1.6 million in connection with the
termination of a gas management agreement. See Note 2 to the Audited and
Unaudited Financial Statements of Cogen Technologies New Jersey Operating
Partnerships included in this prospectus.
(2) Includes a one-time payment of $12.8 million in connection with the
termination of a management services agreement. See Note 2 to the Audited
and Unaudited Financial Statements of Cogen Technologies New Jersey
Operating Partnerships included in this prospectus.
(3) The one-time payments in connection with the termination of the gas
management and management services agreements were allocated 100% to the
Acquired Group's share of net income.
(4) Btu/Kilowatt-hour.
(5) Reflects the impact of a planned major outage which occurred in April and
May of 1999. This major outage is scheduled to occur every six years and
results in a reduction in the average equivalent availability.
29
<PAGE> 33
BAYONNE VENTURE
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------- ------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Electricity.............................. $ 79.2 $ 84.1 $112.8 $ 92.8 $ 90.4 $ 93.2 $ 82.6
Steam.................................... 2.6 2.8 3.8 3.7 4.9 3.3 3.8
------ ------ ------ ------ ------ ------ ------
81.8 86.9 116.6 96.5 95.3 96.5 86.4
------ ------ ------ ------ ------ ------ ------
Costs and expenses:
Fuel..................................... 29.7 28.2 38.6 43.2 45.2 33.4 34.9
Operating and maintenance................ 8.3 8.2 10.9 14.4 10.2 11.4 13.0
Depreciation and amortization............ 2.2 2.3 3.0 6.9 6.9 6.9 6.7
General and administrative............... 2.0 2.3 3.1 2.9 2.8 2.6 2.1
Taxes other than income.................. 0.4 0.3 0.5 0.5 0.5 0.5 0.4
------ ------ ------ ------ ------ ------ ------
42.6 41.3 56.1 67.9 65.6 54.8 57.1
------ ------ ------ ------ ------ ------ ------
Income from operations..................... 39.2 45.6 60.5 28.6 29.7 41.7 29.3
Interest expense......................... (5.5) (5.8) (7.7) (8.1) (8.5) (8.8) (9.0)
Other income............................. 0.3 0.7 1.2 0.1 0.1 0.1 0.1
------ ------ ------ ------ ------ ------ ------
Net income............................... $ 34.0 $ 40.5 $ 54.0 $ 20.6 $ 21.3 $ 33.0 $ 20.4
====== ====== ====== ====== ====== ====== ======
THE ACQUIRED GROUP'S SHARE OF:
Net income................................. $ 31.3 $ 35.5 $ 47.6 $ 17.5 $ 18.1 $ 28.3 $ 17.4
Cash distributions......................... 26.6 27.8 39.5 18.1 24.5 31.9 16.3
BALANCE SHEET DATA AT END OF PERIOD:
Property and equipment, net................ $ 68.8 $ 71.6 $ 70.9 $ 73.8 $ 80.6 $ 87.2 $ 92.6
Total assets............................... 100.1 98.8 98.4 99.0 99.8 107.3 111.4
Long-term debt (including current
portion)................................. 65.5 69.3 68.4 71.8 74.9 77.7 80.1
Partners' capital.......................... 26.5 20.9 21.5 12.2 12.5 19.6 23.4
SELECTED OPERATING INFORMATION:
Megawatt-hours generated (thousands)....... 1,060 1,022 1,400 1,330 1,351 1,386 1,225
Average heat rate (without steam
credit)(1)............................... 9,210 9,173 9,183 9,285 9,215 4,184 9,430
Average heat rate (with steam credit)(1)... 8,379 8,256 8,278 8,449 8,370 8,141 8,037
Average equivalent availability............ 96% 94% 95% 94% 97% 98% 91%
Steam produced (millions of pounds)........ 749 781 1,056 927 952 975 1,025
</TABLE>
- ---------------
(1) Btu/Kilowatt-hour.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with the historical
and pro forma consolidated financial statements of East Coast Power L.L.C. and
the related notes thereto and the historical combined financial statements of
the Cogen Tech Group and the Cogen Technologies New Jersey Operating
Partnerships and the related notes thereto appearing elsewhere in this
prospectus. Certain information contained in this section, including information
with respect to our plans and expectations for our business, are forward-looking
statements. You should consider carefully the factors set forth under the
captions "Forward-Looking Statements" and "Risk Factors" for a discussion of
important factors that could cause actual results to differ materially from any
forward-looking statements contained in this prospectus.
GENERAL
East Coast Power L.L.C. is a Delaware limited liability company that was
formed in December 1998 by JEDI II, a limited partnership in which Enron Corp.
and CalPERS each own a 50% interest. On February 4, 1999, our limited liability
company agreement was amended and restated to convert JEDI II's initial
membership to that of a Class A Member and to admit Enron North America Corp.
(formerly Enron Capital & Trade Resources Corp.), a wholly owned subsidiary of
Enron, and CalPERS as Class B members. On February 4, 1999, we acquired equity
interests in three power generation facilities located in Linden, Bayonne and
Camden, New Jersey. The facilities have a total nameplate capacity of 1,037
megawatts of generating capacity. In 1998, the facilities produced a total of
6.36 million megawatt hours of electricity and 5.71 billion pounds of steam. Our
activities are limited to the ownership, operation and possible expansion of the
facilities.
On August 13, 1999, Enron North America transferred its Class B membership
interest in our company (representing 50% of the total Class B membership
interests) to ECP Holding Company. Also on August 13, 1999, ECP Holding Company
transferred a 49% Class A membership interest and a 49% Class B membership
interest in our company to Mesquite Investors, L.L.C., a Delaware limited
liability company which is jointly owned by El Paso Energy Corporation and
Donaldson, Lufkin & Jenrette Securities Corporation. Our limited liability
company agreement was amended and restated on August 13, 1999 to admit Mesquite
Investors as a Class A and Class B Member and to provide for certain
preferential distributions to ECP Holding Company in the event of certain
contract restructuring or capital projects.
Certain historical financial information presented in this prospectus
represents the combined results of operation and financial position of the three
entities we acquired in the acquisition (Linden Ltd., Camden GP and McNair
Energy Services Corporation, which comprise the Cogen Tech Group). These
entities were, directly or indirectly, the general partners of the partnerships
that owned the facilities prior to the closing of the acquisition. We refer to
these acquired entities as the "Acquired Group." We accounted for the
acquisition on the basis of purchase accounting. Accordingly, our investment in
the partnerships that own the facilities was increased by an amount equal to the
excess of the purchase price allocated to such partnerships over the historical
basis in the partnerships.
THE ACQUISITION
We acquired our interests in the facilities in February 1999. For the
reasons discussed below, our results of operations for the first quarter of 1999
are not comparable to the results of operations for the Acquired Group for the
comparable period last year, and we expect our results of operations in future
periods to continue to differ materially from the historical results of the
Acquired Group.
Operating, General and Overhead Expenses
We expect our general and administrative expense to differ materially from
the operating overhead and general and administrative expense reflected in the
historical operations of the Acquired Group, and such difference is reflected in
our first quarter results as described below. We employ approximately 30
persons, compared with approximately 55 employees of the Acquired Group. We also
expect to realize significant
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<PAGE> 35
savings compared to historical operations in travel and entertainment,
professional fees, management information systems, political and charitable
contributions and insurance.
We will also experience cost savings compared to the Acquired Group as a
result of transactions consummated at the time of the acquisition. In connection
with the acquisition, Linden Venture and Camden Venture made one-time payments
to terminate agreements with affiliates with respect to management and gas
management fees. The payments made to terminate these agreements were made from
capital contributions from the sellers. There are no charges relating to these
agreements in our financial statements for periods after the closing of the
acquisition. During the year 1998, the nine months ended September 30, 1998 and
the period prior to the acquisition in 1999, equity in earnings of affiliates
for the Acquired Group reflected costs attributable to the terminated agreements
(excluding the costs to buy out such agreements in the 1999 period) of $4.9
million, $3.7 million and $0.3 million, respectively, for Linden Venture and
$1.3 million, $1.0 million and $0.1 million, respectively, for Camden Venture.
The results of operations for the Acquired Group in the year 1998 and the nine
months ended September 30, 1998 also includes operating overhead of $16.3
million for development bonuses earned during the period (including $14.5
million of one-time payments to buy out such development bonuses). The
development bonuses were eliminated in connection with the acquisition and will
not affect our results of operations for periods after the acquisition. Finally,
the results of operations for the Acquired Group in the year 1998 and the nine
months ended September 30, 1998 include general and administrative expense of
$6.0 million and $4.5 million, respectively, relating to the use of a private
aircraft that is not available to our company.
Linden Receivable
Interest and other income of the Acquired Group relates primarily to an
account receivable for amounts owed to Linden Ltd. by a former affiliate. In
connection with the acquisition, the receivable was distributed to the sellers
in their capacity as partners of Linden Ltd. Since the receivable was
essentially an "intercompany" transaction within this group of sellers, amounts
related to the receivable are not relevant to our operations after the
acquisition. Amounts under "Allowance for long-term receivable" relate entirely
to such receivable. The receivable appears on the balance sheet of the Acquired
Group at December 31, 1998 as a $149.0 million account receivable, affiliate.
Interest in Bayonne Venture
In July 1998, NJ Inc. acquired an additional 5.25% partnership interest in
Bayonne Venture from an unaffiliated party for $12.5 million in cash. On a pro
forma basis, assuming this transaction took place on January 1, 1998, the
Acquired Group's equity in the earnings of Bayonne Venture for the year 1998 and
nine months ended September 30, 1998 would have increased by $1.5 million and
net income would have increased by $1.0 million.
LINDEN DISTRIBUTABLE CASH
The Linden Venture partnership agreement divides cash distributions between
our subsidiary Linden Ltd. and our minority partner. Under the partnership
agreement, our minority partner receives 99% of distributable cash up to a
capped amount per month. The capped amount of approximately $4.3 million per
month through September 1998 was reduced to $3.0 million in October 1998. The
reduction in the cap will permit us to receive additional distributions of
approximately $1.3 million per month from Linden Venture through September 2001.
After September 2001, the cap amount will increase to between $4.3 and $4.8
million per month. See "-- Liquidity and Capital Resources -- Linden Structure,
Indebtedness and Cash Distributions."
POWER PURCHASE AGREEMENTS
Our facilities sell their electric output pursuant to long-term power
purchase agreements with investor-owned utilities. Each of our utility power
purchasers has an investment-grade senior debt rating. Our facilities
historically have provided consistent and substantial cash distributions,
reflecting in part the fixed payment components of the power purchase
agreements.
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<PAGE> 36
The power purchase agreements for our facilities typically include a fixed
capacity payment, an escalating operations and maintenance payment tied to an
inflation index and a fuel expense component tied to the utility's weighted
average cost of gas ("WACOG") or another measure. The fuel components of the
Camden and Bayonne power purchase agreements historically have been well
correlated to our actual fuel costs. The fuel component in one of the Bayonne
agreements is based on the utility's prior year's WACOG resulting in a lag
between reimbursement of fuel costs and actual costs. This provision has not had
a material impact on the Bayonne Facility although it does create variations
between fuel costs and fuel pricing in any given year.
The fuel component in the Linden power purchase agreement is based on a cap
indexed to the purchaser's, Con Ed's, weighted average cost of gas. Con Ed
reimburses the project for its actual fuel costs throughout the year. At the end
of the contract year (April 30), actual costs are compared to the cap. If Linden
Venture's fuel costs exceed the cap, Linden Venture reimburses Con Ed for the
excess over the next 12 months. If fuel costs are below the cap, Linden Venture
and Con Ed split the difference on a 50/50 basis and Con Ed reimburses Linden
Venture for its share of the savings over the next 12 months. Linden Venture's
fuel costs have exceeded the cap established by Con Ed's WACOG in four of the
past six years. Con Ed purchases gas both for distribution to its local gas
customers and as fuel for its gas-fired generating plants. Con Ed's WACOG for
distribution to its gas customers historically has been higher than its WACOG
for generation. This difference reflects the fact that Con Ed's WACOG includes
both the commodity cost of its gas purchases and transportation charges,
including reservation charges for firm transportation. When Con Ed has had
increased demand for gas to run its power plants, the effect is to lower Con
Ed's WACOG by lowering the per unit cost of gas transportation. Linden Venture's
results in 1997 and 1998 were adversely affected by a nuclear plant outage which
increased Con Ed's gas purchases to run gas-fired power plants and therefore
lowered Con Ed's WACOG. We expect Con Ed's WACOG to increase (adjusted for
commodity prices) after completion of the pending sale of its gas-fired
generation assets later this year. However, the effect of the historical costs
will continue to be felt through the contract year which expires at the end of
April 2000. Distributions to us from Linden Venture will continue to be impacted
by our ability to manage our fuel costs against Con Ed's WACOG. See "Our
Business -- The Linden Facility -- Linden Power Purchase Agreement."
LINDEN STEAM AGREEMENTS
The Linden facility provides steam to Infineum USA L.P. and sells steam to
Bayway Refining Company under separate agreements. The Infineum steam sale
agreement provides that Linden Venture's maximum delivery obligation is 181,000
lbs/hr for the months of October through and including May and 109,000 lbs/hr
for the months of June through and including September. As a result of the
pricing and credit provisions of the Infineum agreement, Infineum does not pay
Linden Venture for any of the steam take up to the contract limit. If Infineum
increases its steam take up to the maximum allowed under the contract,
distributions to our company from Linden Venture could be reduced by
approximately $1.3 million per year.
RESULTS OF OPERATIONS
East Coast Power L.L.C. -- Nine Months Ended September 30, 1999
Our results of operations for the nine months ended September 30, 1999
include the effect of the results of operations of the Acquired Group for the
period subsequent to the acquisition (February 5 to September 30, 1999). Unless
otherwise indicated, discussions with respect to Linden Venture, Camden Venture
and Bayonne Venture reflect the results of operations for the full nine-month
periods ended September 30, 1999 and 1998.
Our equity in earnings of affiliates for the nine months ended September
30, 1999 totaled $62.0 million, and we received $81.5 million in cash
distributions during the period subsequent to the acquisition.
Linden Venture. Revenues remained flat at $206.5 million for the nine
months ended September 30, 1999 as compared to revenues of $206.4 million
for the nine months ended September 30, 1998. Electricity revenues
increased by $2.8 million due primarily to a higher fuel component.
Electricity revenues in the nine months ended September 30, 1999 reflected
a $8.0 million limitation in the Linden power purchase agreement on the
pass-through of fuel costs compared with a $6.2 million limitation in
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<PAGE> 37
the prior period. Steam revenues declined by $2.7 million primarily due to
lower fuel costs, which are a component in the determination of the sales
price of steam, and the change in the amount of steam taken by Infineum.
See "-- Linden Steam Agreements." Costs and expenses totaled $176.7 million
in the nine months ended September 30, 1999, including one-time charges of
$46.4 million to terminate a management services agreement and $6.0 million
to terminate a gas management agreement. These amounts are included in
general and administrative and fuel costs, respectively. Excluding these
charges, costs and expenses remained flat at $124.3 million for the nine
months ended September 30, 1999 to $125.0 million for the nine months ended
September 30, 1998, primarily as a result of a $3.5 million increase in
fuel costs.
Linden Venture had net income of $33.9 million in the nine months
ended September 30, 1999 after $52.4 million of one-time charges discussed
above, compared to net income of $81.9 million in the nine months ended
September 30, 1998. Linden Venture made cash distributions of $96.5 million
in the nine months ended September 30, 1999 compared to $92.7 million in
the nine months ended September 30, 1998. The one-time charges of $52.4
million were allocated 100% to the Acquired Group, resulting in a net
income allocation of $14.9 million to the Acquired Group for the nine
months ended September 30, 1999. Excluding these one-time charges, the
Acquired Group was allocated earnings of $67.3 million in the nine months
ended September 30, 1999 compared to earnings of $53.4 million in the nine
months ended September 30, 1998. The Acquired Group's share of Linden
Venture cash distributions in the nine months ended September 30, 1999 was
$67.4 million compared to $53.8 million in the prior period.
Subsequent to the acquisition, Linden Venture reported earnings of
$76.5 million and made cash distributions of $76.8 million. Our share of
such earnings, $59.5 million, are included in our results of operations for
the nine months ended September 30, 1999, and our share of such cash
distributions, $54.0 million, are included in cash flows for the nine
months ended September 30, 1999. Our equity in the earnings of Linden
Venture, $34.8 million, is reported net of $24.7 million of amortization of
the excess of our investment in Linden Venture over our share of Linden
Venture's equity.
Camden Venture. Revenues decreased from $57.0 million for the nine
months ended September 30, 1998 to $54.4 million for the nine months ended
September 30, 1999, primarily as a result of a major planned outage in 1999
which decreased the plant's available capacity from 96% to 88% for the
period. Costs and expenses totaled $46.9 million in the nine months ended
September 30, 1999, including one-time charges of $12.8 million to
terminate a management services agreement and $1.6 million to terminate a
gas management agreement. These amounts are included in general and
administrative and fuel costs, respectively. Excluding these charges, costs
and expenses decreased from $35.6 million in the nine months ended
September 30, 1998 to $32.5 million in the nine months ended September 30,
1999, primarily reflecting a $2.3 million decrease in fuel costs.
Camden Venture had earnings of $3.3 million in the nine months ended
September 30, 1999 after $14.4 million of one-time charges discussed above,
compared to earnings of $16.1 million in the nine months ended September
30, 1998. Camden Venture made cash distributions of $13.3 million in the
nine months ended September 30, 1999 compared to $12.7 million in the nine
months ended September 30, 1998. The one-time charges of $14.4 million were
allocated 100% to the Acquired Group resulting in a net loss allocation of
$0.4 million to the Acquired Group for the nine months ended September 30,
1999. Excluding these one-time charges, the Acquired Group was allocated
earnings of $14.0 million in the nine months ended September 30, 1999
compared to earnings of $12.1 million in the nine months ended September
30, 1998. The Acquired Group's share of Camden Venture cash distributions
in the nine months ended September 30, 1999 was $7.8 million compared to
$10.5 million in the nine months ended September 30, 1998.
Subsequent to the acquisition, Camden Venture reported earnings of
$14.6 million and made cash distributions of $10.9 million ($7.6 million
excluding a $3.3 million special distribution to the limited partner in
connection with the acquisition). Our share of these earnings, $11.5
million, is included in our results of operations for the nine months ended
September 30, 1999, and its share of these cash distributions, $5.7
million, is included in cash flows for the nine months ended September 30,
1999. Our
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<PAGE> 38
equity in the earnings of Camden Venture, $7.0 million, is reported net of
$4.5 million of amortization of the excess of our investment in Camden
Venture over our share of Camden Venture's equity.
Bayonne Venture. Revenues decreased from $86.9 million in the nine
months ended September 30, 1998 to $81.8 million in the nine months ended
September 30, 1999. Electricity revenues for the nine months ended
September 30, 1998 include a $6.4 million fuel component adjustment related
to 1997 and 1996 operations. Excluding the adjustment, electricity revenues
were $1.5 million higher in the nine months ended September 30, 1999,
primarily reflecting a higher fuel component with respect to sales to one
of the electricity purchasers. Costs and expenses increased from $41.3
million in the nine months ended September 30, 1998 to $42.6 million in the
nine months ended September 30, 1999, primarily reflecting a $1.3 million
increase in fuel costs. The other income included in the nine months ended
September 30, 1998 represents interest related to the previously mentioned
fuel component adjustment.
Bayonne Venture had net income of $34.0 million in the nine months
ended September 30, 1999, compared to earnings of $40.5 million in the nine
months ended September 30, 1998, and made cash distributions of $29.0
million in the nine months ended September 30, 1999, compared to $31.9
million in the nine months ended September 30, 1998. The Acquired Group's
share of Bayonne Venture's net income in the nine months ended September
30, 1999 was $31.3 million, compared to $35.5 million in the nine months
ended September 30, 1998, and the Acquired Group's share of Bayonne Venture
cash distributions in the nine months ended September 30, 1999 was $26.6
million compared to $27.8 million in the nine months ended September 30,
1998.
Subsequent to the acquisition, Bayonne Venture reported earnings of
$28.7 million and made cash distributions of $23.7 million. Our share of
these earnings, $26.3 million, is included in our results of operations for
the nine months ended September 30, 1999, and our share of these cash
distributions, $21.8 million, is included in cash flows for the nine months
ended September 30, 1999. Our equity in the earnings of Bayonne Venture,
$20.2 million, is reported net of $6.1 million of amortization of the
excess of our investment in Bayonne Venture over our share of Bayonne
Venture's equity.
General and administrative costs (including operating overhead) for our
company totaled $5.5 million for the nine months ended September 30, 1999,
compared to the Acquired Group's costs of $2.6 million in the one-month period
in 1999 and $28.1 million in the nine months ended September 30, 1998. The
reasons for the lower costs reported by our company are discussed in "-- The
Acquisition -- Operating, General and Overhead Expenses."
We recorded interest expense of $65.6 million for the nine months ended
September 30, 1999. This amount includes $59.7 million in interest expense
related to the bridge loan, the senior secured notes, the Enron subordinated
note and the Linden Ltd. term loan, a $6.4 million write-off and amortization of
deferred costs related to the bridge loan, the Linden Ltd. term loan and the
senior secured notes offset by a $0.5 million amortization of the Linden Ltd.
term loan premium. See "-- Liquidity and Capital Resources -- Acquisition
Financing."
Our loan agreements require us to maintain compliance with certain
financial covenants, among other things. We believe that we are in compliance
with the terms and conditions of the loan agreements as of October 31, 1999.
Acquired Group -- Year Ended December 31, 1998 Compared to Year Ended December
31, 1997
Equity in the earnings of affiliates of the Acquired Group increased from
$105.8 million in 1997 to $137.1 million in 1998. Cash distributions to the
Acquired Group from its affiliates increased from $102.3 million to $128.5
million over the same period.
Linden Venture. Revenues decreased from $299.0 million in 1997 to
$274.1 million in 1998. Electricity revenues decreased by $20.7 million
from period to period due primarily to a lower fuel component. Electricity
revenues also reflected a $7.0 million limitation in the Linden power
purchase agreement on the pass-through of fuel costs in 1998 compared with
a $4.7 million limitation in 1997. Steam revenues declined by $4.2 million
from period to period due primarily to a lower fuel price
35
<PAGE> 39
component and lower steam take. The decline in revenues was more than
offset by a $29.4 million decrease in costs. This decrease in costs was
primarily due to a $20.0 million decrease in fuel costs, a $6.9 million
decrease in depreciation expense as a result of the change in estimated
useful life of the Facility and a $2.2 million decrease in operations and
maintenance costs, primarily reflecting a $1.9 million payment made in 1997
to terminate an operations and maintenance agreement and lower maintenance
costs. As a result of the decline in expenses, net income increased from
$105.6 million in 1997 to $109.8 million in 1998. The Acquired Group's
share of net income increased from $73.8 million in 1997 to $75.3 million
in 1998. However, cash distributions to the Acquired Group decreased from
$75.6 million to $74.0 million over the same period, primarily reflecting
changes in working capital.
Camden Venture. Revenues decreased from $80.2 million in 1997 to $73.1
million in 1998 due primarily to a lower fuel component. The decrease in
revenues from period to period was more than offset by a $10.4 million
decrease in costs during the period. This decrease in costs was primarily
due to a $5.9 million decrease in fuel costs, a $3.2 million decrease in
depreciation expense due to the change in the estimated life of the
Facility and a $0.7 million decline in operations and maintenance costs,
primarily reflecting a $1.4 million payment made in 1997 to terminate an
operations and maintenance agreement. Net income increased from $15.9
million in 1997 to $19.5 million in 1998. The Acquired Group's share of net
income decreased from $14.5 million in 1997 to $14.2 million in 1998.
Income before depreciation increased $0.4 million (all depreciation is
allocated to the limited partner until its capital account equals zero);
however, an increase in debt principal payments, which are a factor in the
amount of net income allocated to the limited partner, resulted in a
decrease in the Acquired Group's share of net income. Cash distributions to
the Acquired Group increased from $8.6 million to $15.0 million from period
to period, primarily reflecting lower capital expenditures for the year.
Bayonne Venture. Revenues increased from $96.5 million in 1997 to
$116.6 million in 1998. Electricity revenues increased by $20.0 million
from period to period due primarily to a $6.4 million fuel component
adjustment related to 1997 and 1996 operations and a higher fuel component.
The fuel component adjustment reflects an adjustment agreed to by one of
the power purchasers in the first quarter of 1998 based upon an audit of
the power purchaser's calculation of the weighted average cost of gas for
prior periods. The fuel component in one of the Bayonne power purchase
agreements is tied to the utility's weighted average cost of gas for the
prior year, resulting in a time lag in the pass-through of fuel costs under
the contract. For example, while the fuel component was higher in 1998 than
1997, the cost of fuel decreased by $4.6 million from 1997 to 1998 due to a
decline in fuel prices. Operations and maintenance costs declined $3.5
million, primarily reflecting a $2.7 million charge in 1997 for an
unplanned overhaul of a gas turbine at the project and a $1.2 million
payment in 1997 to terminate an operations and maintenance agreement.
Depreciation expense decreased $3.9 million from period to period
reflecting the change in the estimated useful life of the Facility.
Interest expense declined by $0.4 million from period to period, reflecting
lower debt outstanding, and interest income increased $1.1 million,
reflecting interest on the previously discussed fuel component adjustment.
Net income increased from $20.6 million in 1997 to $54.0 million in 1998.
The Acquired Group's share of net income increased from $17.5 million in
1997 to $47.6 million in 1998, and cash distributions to the Acquired Group
increased from $18.1 million to $39.5 million over the same period.
Operating overhead of the Acquired Group increased from $11.6 million in
1997 to $21.6 million in 1998. Operating overhead in 1998 includes $14.5 million
to "buy out" development bonuses which certain employees were eligible to
receive in subsequent periods and $1.8 million for development bonuses earned
during the year. General and administrative expenses of the Acquired Group
increased from $19.9 million in 1997 to $20.2 million in 1998.
Acquired Group -- Year Ended December 31, 1997 Compared to Year Ended December
31, 1996
Equity in the earnings of affiliates of the Acquired Group decreased from
$110.5 million in 1996 to $105.8 million in 1997. Cash distributions to the
Acquired Group from its affiliates decreased from $116.7 million in 1996 to
$102.3 million in 1997.
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<PAGE> 40
Linden Venture. Revenues declined from $305.5 million in 1996 to
$299.0 million in 1997, primarily reflecting the effect of a $4.7 million
limitation in the Linden power purchase agreement on the pass-through of
fuel costs in 1997 compared to a $2.3 million benefit in 1996. Fuel and
operations and maintenance costs each decreased by $0.5 million from 1996
to 1997. Linden Venture incurred a $1.9 million payment in 1997 in
connection with the termination of an operations and maintenance agreement.
General and administrative expenses increased by $0.7 million from 1996 to
1997, primarily reflecting higher insurance costs. From 1996 to 1997, other
income increased from $0.6 million to $1.1 million, reflecting increased
cash balances. Net income decreased from $110.2 million in 1996 to $105.6
million in 1997. The Acquired Group's share of net income decreased from
$78.7 million in 1996 to $73.8 million in 1997, and cash distributions to
the Acquired Group decreased from $77.7 million in 1996 to $75.6 million in
1997, reflecting the lower earnings.
Camden Venture. Revenues increased from $77.2 million in 1996 to $80.2
million in 1997, primarily due to a higher capacity factor under the Camden
power purchase agreement. From 1996 to 1997, fuel costs increased by $0.8
million, and operations and maintenance costs increased by $1.3 million,
primarily due to a $1.4 million payment in connection with the termination
of an operations and maintenance agreement. Interest expense decreased by
$0.5 million from 1996 to 1997. Net income increased from $14.6 million in
1996 to $15.9 million in 1997. The Acquired Group's share of net income
increased from $13.7 million in 1996 to $14.5 million in 1997. However,
cash distributions to the Acquired Group decreased from $14.5 million in
1996 to $8.6 million in 1997, primarily due to a $4.0 million increase in
capital expenditures primarily due to the investment in a new air inlet
chiller at the Camden Facility in 1997.
Bayonne Venture. Revenues increased from $95.3 million in 1996 to
$96.5 million in 1997, reflecting a $2.4 million increase in electricity
revenues primarily due to the pass-through of a higher fuel cost factor and
a $1.2 million decrease in steam revenues primarily due to a lower fuel
price component and lower steam take. Fuel costs decreased by $2.0 million
from period to period, reflecting the use of alternative fuels in 1996 and
lower fuel prices in 1997. This cost decline was more than offset by a $4.2
million increase in operations and maintenance costs due primarily to a
$2.7 million charge in 1997 for an unplanned overhaul of a gas turbine at
the project. Estimated costs associated with planned outages for major
maintenance that benefit more than one period are accrued in advance on a
straight-line basis. Bayonne Venture also incurred a $1.2 million payment
in 1997 in connection with the termination of an operations and maintenance
agreement. Interest expense declined from $8.5 million in 1996 to $8.1
million in 1997, reflecting lower debt outstanding. Net income decreased
from $21.3 million in 1996 to $20.6 million in 1997. The Acquired Group's
share of net income decreased from $18.1 million in 1996 to $17.5 million
in 1997, and cash distributions to the Acquired Group decreased from $24.5
million in 1996 to $18.1 million in 1997, primarily reflecting changes in
working capital.
Corporate overhead allocated to the Acquired Group by its affiliates
increased from $9.6 million in 1996 to $11.6 million in 1997, reflecting an
increase in management time relating to the operations and strategic
alternatives with respect to the Acquired Group. General and administrative
costs of the Acquired Group also increased from $10.9 million in 1996 to $19.9
million in 1997, principally reflecting an increase of $7.2 million in charges
for the use of corporate aircraft from 1996 to 1997.
Interest expense declined from $23.3 million in 1996 to $21.8 million in
1997, primarily reflecting lower outstanding long-term debt and fluctuations in
interest rates.
LIQUIDITY AND CAPITAL RESOURCES
Acquisition Financing
We financed the acquisition in part with an $831 million bridge loan and a
$250 million subordinated note issued by us to Enron. We repaid all amounts
outstanding under the bridge loan and a portion of the amount outstanding under
the subordinated note with the proceeds of the offering of the outstanding notes
and an
37
<PAGE> 41
equity contribution by JEDI II. The subordinated note bears interest at 9% per
annum and matures on July 15, 2017.
On April 20, 1999 we sold $850.0 million of senior secured notes in three
tranches as follows: $296.0 million of 6.737% notes due 2008, $236.0 million of
7.066% notes due 2012 and $318.0 million of 7.536% notes due 2017. The 2008
notes bear interest at 6.737% per year and are repayable in 36 quarterly
installments of varying amounts beginning on June 30, 1999, with the final
payment due March 31, 2008. The June 30, 1999 payment of $12.1 million and the
September 30, 1999 payment of $3.9 million reduced the original principal amount
of the 2008 notes to $279.9 million. The 2012 notes bear interest at 7.066% per
year and are repayable in 17 quarterly installments of varying amounts beginning
on March 31, 2008, with the final payment due March 31, 2012. The 2017 notes
bear interest at 7.536% per year and are repayable in 22 quarterly installments
of varying amounts beginning on March 31, 2012, with the final payment due June
30, 2017. Interest on the outstanding notes is payable quarterly, with the first
interest payment made on June 30, 1999.
The outstanding notes are senior secured obligations which rank senior in
right of payment to all existing and future subordinated indebtedness and pari
passu in right of payment with all existing and future senior secured
indebtedness. In addition, the outstanding notes are structurally subordinated
to all indebtedness and other liabilities, including trade payables, of our
subsidiaries and to the distribution rights of minority partners in the
ventures. The outstanding notes are secured by the pledge by our owners of their
interest in our company, our pledge of our ownership interests in certain of our
subsidiaries that own indirect interests in the facilities and the pledge of
Linden Ltd.'s $289.6 million intercompany subordinated note payable to us.
The terms of the outstanding notes limit our ability to pay dividends,
incur additional indebtedness, make payments on subordinated debt and make
certain other restricted payments. The terms of the outstanding notes also
require us to fund a debt service reserve account unless we provide acceptable
debt service credit support in the form of an Enron undertaking or an acceptable
letter of credit. Enron has provided the required undertaking, and, therefore,
we are not currently funding the debt service reserve account.
Also on April 20, 1999, in accordance with the terms of the limited
liability company agreement, JEDI II made an $80.0 million capital contribution
to us.
The proceeds from the sale of the outstanding notes and the capital
contribution by JEDI II were used to repay the bridge loan, make a $25.0 million
cash distribution to Enron North America, repay $62.1 million of the principal
amount of the Enron subordinated note and make an $11.9 million purchase price
adjustment payment in connection with the acquisition. The repayment of the
bridge loan resulted in the release of the $25.0 million guaranty on the loan by
CalPERS. The release was deemed to be a distribution to CalPERS.
General
We have received a proposal from Bank of America, N.A. with respect to a
$30.0 million subordinated credit facility, which we expect to use to fund our
capital expenditure projects and for general corporate purposes. This credit
facility has been approved by our management committee.
Capital Expenditures
Each of the capital expenditures projects described below is subject to
certain lender, partner and regulatory or third party consents which may delay
or prevent the projects. We are currently planning to finance the projects with
cash flow from operations at the project level and borrowings under the proposed
$30.0 million Bank of America subordinated credit facility.
Linden. Linden Venture has proposed capital expenditures of approximately
$21.3 million and $86.6 million in the fourth quarter of 1999 and in the year
2000, respectively. Included in these proposed expenditures is approximately
$19.5 million and $54.9 million in 1999 and 2000, respectively, for the Linden
expansion project; $0.7 million and $10.6 million in 1999 and 2000,
respectively, for the Linden gray water project and $1.1 million and $21.1
million in 1999 and 2000, respectively, for the thermal energy storage project.
38
<PAGE> 42
In June 1999, we entered into a letter of intent with Tosco Refining
Company that contemplates an expansion of the Linden Facility with the addition
of a sixth turbine generator to provide electricity and steam service to Tosco's
Bayway Refinery. Completion of the transactions contemplated by the letter of
intent are subject to, among other things, further negotiations, completion of
due diligence and receipt of necessary approvals.
Currently, the Linden Facility uses city water as the source for make-up
water. The gray water project is a reverse osmosis treatment plant which will
allow the Linden Facility to satisfy its make-up water needs with recycled
wastewater. The thermal energy storage project is designed to use available
electrical energy during off-peak hours for the production of a cold energy
(i.e., ice) reserve. This energy reserve will then be utilized during peak hours
to cool the inlet air feeding each of the Linden facility's gas turbines,
thereby increasing electrical output. The gray water and thermal energy storage
projects are subject, to, among other things, approval of the expansion to the
Linden facility, further negotiations and receipt of necessary approvals.
Camden. Camden Venture has no planned capital expenditures in 1999 or in
2000.
Bayonne. Bayonne Venture has no planned capital expenditures in 1999 or in
2000.
Existing Project and Subsidiary Debt
The following table summarizes the outstanding long-term indebtedness of
our subsidiaries at September 30, 1999:
<TABLE>
<CAPTION>
CURRENT LONG-TERM TOTAL MATURITY
------- --------- ------ --------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Linden Ltd.(1)
Fixed rate............................................ $ 7.2 $ 81.6 $ 88.8 2007
Floating rate......................................... 7.9 88.7 96.6 2007
Working capital....................................... -- 10.0 10.0 2007
----- ------ ------
15.1 180.3 195.4
----- ------ ------
Camden Venture
Term loan -- Tranche A loan........................... 5.5 52.3 57.8 2007
Term loan -- Tranche B loan........................... 1.1 21.2 22.3 2009
----- ------ ------
6.6 73.5 80.1
----- ------ ------
Bayonne Venture
Term loan............................................. 4.1 61.0 65.1 2008
Equipment loan........................................ 0.4 -- 0.4 1999
----- ------ ------
4.5 61.0 65.5
----- ------ ------
Total......................................... $26.2 $314.8 $341.0
===== ====== ======
</TABLE>
- ---------------
(1) Does not include $3.7 million unamortized premium recorded in connection
with the acquisition.
39
<PAGE> 43
Linden Structure, Indebtedness and Cash Distributions
Linden Structure. The following chart shows the Linden ownership structure:
[LINDEN OWNERSHIP STRUCTURE CHART]
The development of the Linden facility was financed through equity
contributions to Linden Venture of $25.0 million from Linden Ltd. and $500.0
million from an owner trust created for the benefit of GECC and Dana Capital
Corporation, its co-investor. The owner trust receives distributions from Linden
Venture on a preferential basis. In addition, the Linden Venture partnership
agreement contains certain provisions that effectively restrict Linden Venture
from, among other things, entering into certain agreements or commitments,
selling or otherwise transferring assets, incurring indebtedness (other than
defined permitted indebtedness), creating or allowing any lien on its property
(other than defined permitted liens) and amending or modifying project
documents.
Linden Indebtedness. At September 30, 1999, Linden Ltd. had outstanding
indebtedness of $195.4 million under the term loan agreement (the "Linden Ltd.
Term Loan") with State Street Bank and Trust Company, as trustee. The Linden
Ltd. Term Loan is secured by the pledge by Linden Ltd. of its general
partnership interest in Linden Venture and certain segregated deposit accounts.
The Linden Ltd. Term Loan is comprised of a fixed rate portion, a floating rate
portion and a working capital portion, all of which mature September 1, 2007. At
September 30, 1999, $88.8 million was outstanding under the fixed rate portion,
$96.6 million was outstanding under the floating rate portion, and $10.0 million
was outstanding under the working capital portion. The fixed rate portion bears
interest at 8.8% with principal and interest payments due quarterly. Principal
payments with respect to the fixed rate portion increase by 2.85% each quarter
with the principal payment due December 1, 1999 being $1.7 million. The floating
rate portion bears interest at LIBOR plus 1.65%, with principal and interest
payments due quarterly. Principal payments with respect to the floating rate
portion increase by 2.85% each quarter, with the principal payment due December
1, 1999 being $1.9 million. The working capital portion bears interest at a one
month financial commercial paper rate plus 0.55%, with interest payable
quarterly.
40
<PAGE> 44
The Linden Ltd. Term Loan contains certain restrictions that significantly
limit or prohibit, among other things, the ability of Linden Ltd. to:
- incur indebtedness;
- make payments of certain indebtedness;
- pay distributions to its owners;
- make investments;
- engage in transactions with affiliates;
- create liens;
- sell assets; and
- engage in acquisitions, mergers and consolidations.
Linden Cash Distributions. The cash remaining after payment of taxes,
operating expenses and maintenance of required reserve funds ("Linden Venture
Distributable Cash") is distributed monthly by Linden Venture to Linden Ltd. and
the owner trust, in accordance with the allocations described below. Portions of
distributions of Linden Venture Distributable Cash to Linden Ltd. are deposited
in an escrow account held by Linden Ltd. for the benefit of the owner trust to
pay monthly (a) debt service requirements under the Linden Ltd. Term Loan and
(b) amounts required to maintain ratios (the "Required Payment Ratios"), for
specified periods, based upon (y) total Linden Venture Distributable Cash,
together with the amount of earnings on the working capital fund and interest
paid by Linden Venture on working capital loans from Linden Ltd. for such
period, to (z) Linden Venture Distributable Cash paid to Linden Ltd. under
Linden Tranche 1 (as defined below), together with debt service payments of
Linden Ltd. on the Linden Ltd. Term Loan, for the same period. No Linden Venture
Distributable Cash may be paid to Linden Ltd. if there exists any default under
the Linden Ltd. Term Loan. The Required Payment Ratios are calculated quarterly
and are required to be at least 1.2 to 1.0.
Linden Venture Distributable Cash is paid to the owner trust and Linden
Ltd. monthly based on three tranches of payments under the Linden Venture
partnership agreement. Linden Ltd. receives 1% and the owner trust, as the
limited partner in Linden Venture, receives 99% of Linden Venture Distributable
Cash up to a capped amount equal to approximately $3.0 million per month through
September 2001 and between $4.3 million and $4.8 million per month after
September 2001 ("Linden Tranche 1"). Linden Tranche 1 distributions are set at a
level such that, over a period of 22.5 years, the owner trust will be repaid an
amount equal to its initial equity investment plus an 8.4% return (including the
allocation of venture tax benefits).
The second tranche ("Linden Tranche 2") is the Linden Venture Distributable
Cash remaining after the Linden Tranche 1 payment, up to an amount equal to
twice the amount of Linden Tranche 1. Linden Tranche 2 distributions are
allocated 99% to Linden Ltd. and 1% to the owner trust. The third tranche
("Linden Tranche 3") is the remaining Linden Venture Distributable Cash in
excess of Tranches 1 and 2 and is distributed 10% to the owner trust and 90% to
Linden Ltd. The distribution of cash according to the terms summarized above
will be in effect until the date (the "Flip Date") which is the earlier of March
17, 2015 or the date upon which the owner trust has achieved a 6.338% return on
its initial equity investment. On the Flip Date, distribution of cash according
to the above mechanism ends, and all Linden Venture Distributable Cash will then
be distributed initially 30% to the owner trust and 70% to Linden Ltd. until the
owner trust has achieved a 6.338% after-tax rate of return, at which time the
owner trust's distributable percentage will be reduced to 20%. The owner trust's
distributable percentage will be further reduced to 10% and finally to 1% when
the owner trust has achieved after-tax rates of return of 7.338% and 8.338%,
respectively.
If there is a positive balance in the Arrears Account (as defined) at any
time prior to the Flip Date, distributions of Linden Venture Distributable Cash
that are normally distributed pursuant to Linden Tranche 2 and Linden Tranche 3
are instead distributed 99% to the owner trust and 1% to Linden Ltd. until the
balance in the Arrears Account equals zero, at which time the normal
distributions of Linden Tranche 2
41
<PAGE> 45
and Linden Tranche 3 resume. If a Tax Indemnity Event (as defined) occurs at any
time, all amounts of Linden Venture Distributable Cash that are normally
distributed to Linden Ltd. are instead distributed to the owner trust until
either the balance in the Tax Indemnity Account (as defined) equals zero or the
owner trust is made whole from a tax standpoint.
Upon the occurrence of a special event under the Linden Venture partnership
agreement, normal distributions are interrupted and Linden Venture Distributable
Cash is instead allocated 99% to the owner trust and 1% to Linden Ltd. Normal
distributions of Linden Venture Distributable Cash resume when the owner trust
receives a specified rate of return on its equity or the Special Event has
ceased to exist, whichever occurs earlier, provided that the Arrears Account
does not have a positive balance. In addition, so long as a Special Event is
ongoing, the owner trust may exercise certain powers with respect to the
management of Linden Venture.
Among other things, the following occurrences with respect to Linden Ltd.
and/or Linden Venture, as applicable, constitute special events which interrupt
normal distributions of Linden Venture Distributable Cash:
- false or misleading representations or warranties or the failure to
perform covenants with respect to certain documents;
- certain defaults in the repayment of certain indebtedness;
- certain failures of counterparties to perform under certain project
documents;
- voluntary or involuntary bankruptcy, receivership or similar proceedings;
- judgments in excess of $1,000,000;
- in certain circumstances, the levying upon, attachment or seizure of
property;
- certain dissolutions and liquidations; and
- the failure to maintain insurance and certain failures to comply with the
terms thereof.
Historical annual distributions from Linden Venture are set forth in the
table below:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Linden Venture Distributable Cash
Distributions to owner trust:
Linden Tranche 1.............................. $ 48.7 $ 51.1 $ 50.8
Linden Tranche 2.............................. 0.7 0.8 0.8
Linden Tranche 3.............................. 0.3 0.1 --
--------- --------- ---------
49.7 52.0 51.6
--------- --------- ---------
Linden Venture Distributable Cash
Distributions to Linden Ltd.:
Linden Tranche 1.............................. 0.5 0.5 0.5
Linden Tranche 2.............................. 70.7 74.1 77.2
Linden Tranche 3.............................. 2.8 1.0 --
--------- --------- ---------
74.0(1) 75.6(1) 77.7(1)
--------- --------- ---------
Total distributions........................... $ 123.7 $ 127.6 $ 129.3
========= ========= =========
</TABLE>
- ---------------
(1) Includes amounts escrowed for payment of the Linden Ltd. Term Loan of $29.4
million, $28.9 million and $28.3 million for 1998, 1997 and 1996,
respectively.
42
<PAGE> 46
Camden Structure, Indebtedness and Cash Distributions
Camden Structure. The following chart sets forth the ownership structure of
Camden Venture:
CAMDEN OWNERSHIP STRUCTURE CHART
Camden Indebtedness. Camden Venture is a party to a term loan agreement
with GECC (the "Camden Venture Term Loan"). GECC assigned Tranche A of the
Camden Venture Term Loan to a group of banks and retained Tranche B. The Camden
Venture Term Loan is secured by a lien on the Camden Facility, Camden Venture's
revenues and other assets and a pledge of the general partnership interest of
Camden GP in Camden Venture. At September 30, 1999, the aggregate outstanding
principal balance of Tranche A, which matures May 1, 2007, was $57.8 million. At
September 30, 1999, the outstanding principal balance of Tranche B, which
matures May 1, 2009, was $22.3 million.
Tranche A accrues interest at the per annum rate of either (a) 3-month
LIBOR plus an increasing margin of 1.00% to 1.625% (1.25% for the period
November 3, 1998 to November 1, 2001) or (b) if such loan is in default, a prime
rate plus an increasing margin of 2.375% to 3.0% or the fed funds rate plus
2.5%, whichever is higher, with principal and interest payable quarterly.
Principal payments with respect to Tranche A increase each quarter by varying
amounts ranging from approximately 1.6% to approximately 4.8% of the prior
quarter's payment with the principal payment due February 1, 1999 being $1.3
million. Camden Venture has entered into an interest rate swap agreement with
GECC to fix the LIBOR portion of the interest rate with respect to Tranche A at
5.945%. The swap agreement has a notional amount equal at all times to the
outstanding principal balance of Tranche A. Tranche B accrues interest at the
annual rate of 11.4%, with interest and principal payable quarterly. Principal
payments with respect to Tranche B increase each quarter by varying amounts
ranging from approximately 1.6% to approximately 4.8% of the prior quarter's
payment, through May 1, 2007, with the principal payment due February 1, 1999
being $0.3 million, and the final eight
43
<PAGE> 47
principal payments averaging approximately $1.3 million each. Optional
prepayments on Tranche B are subject to a yield maintenance premium.
The Camden Venture Term Loan contains certain restrictions that
significantly limit or prohibit, among other things, the ability of Camden
Venture or its general partner, Camden GP, to incur indebtedness, make payments
of certain indebtedness, pay distributions to its owners, make investments,
engage in transactions with affiliates, create liens, sell assets, amend
material contracts and engage in acquisitions, mergers and consolidations. In
addition, the Camden Venture Term Loan requires Camden Venture to establish and
maintain security deposit accounts into which its revenues are deposited and
from which reserve accounts are funded and maintained for various obligations,
including the repayment of the Camden Venture Term Loan.
Camden Cash Distributions. Camden Venture Distributable Cash is the cash
remaining after the payment of:
- project expenses;
- fees and expenses owed to lenders, interest rate swap counterparties and
letter of credit issuers under the Camden Venture Term Loan;
- principal and interest on the Camden Venture Term Loan;
- reimbursement obligations owed on letters of credit issued under the
Camden Venture Term Loan; and
- reserve amounts required if the fixed charge coverage ratio of the Camden
Venture Term Loan is less than 1.2 to 1.0.
Absent the existence of a default under the Camden Venture Term Loan, Camden
Venture Distributable Cash is distributed monthly by Camden Venture to Camden GP
and GECC in accordance with the allocations described below.
Camden Venture Distributable Cash is paid to GECC and Camden GP based on
two tranches of payments under the terms of Camden Venture's partnership
agreement. Under the first tranche ("Camden Tranche 1"), Camden Venture pays to
GECC and the other lenders all amounts due for debt service expenses and other
obligations pursuant to the Camden Venture Term Loan. Also under Camden Tranche
1, GECC receives 99% and Camden GP 1% of Camden Venture Distributable Cash up to
a capped amount equal to approximately $0.3 million to $0.4 million per month
through May 2007 and varying amounts thereafter. Camden Tranche 1 distributions
are set at a level such that GECC will be repaid an amount equal to its initial
equity investment plus a 6.8% return thereon (including the allocation of all
venture tax benefits).
The balance of the Camden Venture Distributable Cash following satisfaction
of the Camden Tranche 1 obligations is distributed 99% to Camden GP and 1% to
GECC ("Camden Tranche 2"). The distributions of cash according to the above
mechanism ends April 1, 2010. Thereafter, Camden Venture Distributable Cash will
be distributed 10% to GECC and 90% to Camden GP.
If there is a positive balance in the monthly arrears account,
distributions of Camden Venture Distributable Cash that are normally distributed
pursuant to Camden Tranche 2 are instead distributed 99% to GECC and 1% to
Camden GP until GECC receives a distribution equal to the then current balance
of the monthly arrears account, which is decreased by the amount of such
distribution, at which time normal distributions of Camden Tranche 2 resume. If
there is a positive balance in the quarterly arrears account, distributions of
Camden Venture Distributable Cash that are normally distributed pursuant to
Camden Tranche 2, or which are otherwise distributable as a result of a positive
monthly arrears account balance as previously discussed, are instead distributed
99% to GECC and 1% to Camden GP until GECC receives a distribution equal to the
then current balance of the quarterly arrears account, which is decreased by the
amount of such distribution, at which time distributions as a result of a
positive monthly arrears account balance are made, if applicable. Otherwise,
normal distributions of Camden Tranche 2 resume. If a tax indemnity event occurs
at any time, all amounts of Camden Venture Distributable Cash that are normally
distributed to Camden GP are instead distributed to GECC until either the
balance in the tax indemnity account equals zero or GECC is made whole from a
tax standpoint.
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<PAGE> 48
Upon the occurrence of a special event under the Camden Venture partnership
agreement, normal distributions are interrupted and Camden Venture Distributable
Cash is instead allocated 99% to GECC and 1% to Camden GP. Normal distributions
of Camden Venture Distributable Cash resume when GECC receives a specified rate
of return on its equity or the Special Event has ceased to exist, whichever
occurs earlier, provided that the arrears account does not have a positive
balance. In addition, so long as a Special Event is ongoing, GECC may exercise
certain powers with respect to the management of Camden Venture.
Among other things, the following occurrences with respect to Camden GP
and/or Camden Venture, as applicable, constitute special events which interrupt
normal distributions of Camden Venture Distributable Cash:
- false or misleading representations or warranties or the failure to
perform covenants with respect to certain documents;
- certain defaults in the repayment of certain indebtedness;
- certain failures of counterparties to perform under certain project
documents;
- voluntary or involuntary bankruptcy, receivership or similar proceedings;
- judgments in excess of $1,000,000;
- in certain circumstances, the levying upon, attachment or seizure of
property;
- certain dissolutions and liquidations; and
- the failure to maintain insurance and certain failures to comply with the
terms thereof.
Historical annual distributions from Camden Venture are set out in the
table below:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Payments to GECC and lenders:
Camden Tranche 1............................................ $16.3 $16.0 $15.7
Camden Tranche 2.......................................... 0.1 0.1 0.1
----- ----- -----
16.4 16.1 15.8
----- ----- -----
Camden Venture Distributable Cash Distributions to Camden
GP:
Camden Tranche 1.......................................... 0.1 0.2 0.2
Camden Tranche 2.......................................... 14.9 8.4 14.3
----- ----- -----
15.0 8.6 14.5
----- ----- -----
Total Distributions............................... $31.4 $24.7 $30.3
===== ===== =====
</TABLE>
45
<PAGE> 49
Bayonne Structure, Indebtedness and Cash Distributions
Bayonne Structure. The following chart sets forth the ownership structure
of Bayonne Venture:
[BAYONNE OWNERSHIP STRUCTURE CHART]
The original development and construction of the Bayonne Facility was
financed through a term loan agreement (the "Bayonne Term Loan") with Prudential
Insurance Company of America and approximately $30.0 million in equity
contributed by the partners of Bayonne Venture.
Bayonne Indebtedness. As of September 30, 1999, Bayonne Venture had $65.1
million of outstanding indebtedness under the Bayonne Term Loan. The Bayonne
Term Loan is generally non-recourse to the partners of Bayonne Venture and is
secured by the Bayonne Facility and other Bayonne Venture assets and all the
revenues of Bayonne Venture. This indebtedness matures October 2008 and accrues
interest at the per annum rate of 10.85%, with accrued interest and principal
payable quarterly. The Bayonne Term Loan is non-callable through September 2002,
and thereafter may, at the option of Bayonne Venture, be prepaid at a premium on
the prepaid portion thereof calculated at a decreasing percentage which
commences at 10.85%.
The Bayonne Term Loan contains certain restrictions that significantly
limit or prohibit, among other things, the ability of Bayonne Venture to incur
indebtedness, make payments of certain indebtedness, pay distributions to its
owners, make investments, engage in transactions with affiliates, create liens,
sell assets and engage in acquisitions, mergers and consolidations. In addition,
the Bayonne Term Loan requires Bayonne Venture to create a debt service reserve
fund from net cash flow if Bayonne Venture's annual debt service coverage ratio,
calculated each quarter using the previous twelve months' financial information,
falls below 1.50x. Bayonne Venture must increase the reserve until funds held in
such reserve plus the funds available for debt service equal 1.50x the previous
twelve months' debt service. Any funds held in such reserve may be released as,
and to the extent that, the balance of funds retained in such reserve (if any)
together with Bayonne Venture's net cash flow cause Bayonne Venture's coverage
ratio to exceed 1.50x. Bayonne Venture
46
<PAGE> 50
has not been required to fund the debt service reserve. At September 30, 1999,
Bayonne Venture's debt service coverage ratio as calculated under the Bayonne
Term Loan was 4.3x.
Bayonne Venture has received a commitment letter from Southwest Bank of
Texas with respect to a $5.0 million credit facility, which is expected to be
used to fund the daily operating cash flow needs of the Bayonne facility. This
credit facility has been approved by the partners of Bayonne Venture.
Bayonne Venture Cash Distributions. The cash remaining after payment of
operating expenses, debt service and maintenance of required reserve funds
("Bayonne Venture Distributable Cash") is distributed monthly by Bayonne Venture
to each of the partners of Bayonne Venture according to each partner's
respective ownership percentages in Bayonne Venture. Under the Bayonne Term
Loan, Bayonne Venture is prohibited from making distributions to its partners
except in accordance with an approved operating budget. No distributions of
Bayonne Venture Distributable Cash may be made if there is a default under the
Bayonne Term Loan.
Historical annual distributions from Bayonne Venture are set forth in the
table below.
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Bayonne Venture Distributable Cash Distributions:(1)
NJ Inc. (former managing general partner of Bayonne
Venture)............................................... $39.5 $18.1 $24.5
Minority general partners................................. 5.2 2.8 3.8
----- ----- -----
Total Distributions............................... $44.7 $20.9 $28.3
===== ===== =====
</TABLE>
- ---------------
(1) Historical annual distributions from Bayonne Venture to its general partners
do not correlate with the current ownership percentages of such partners due
to the purchase by NJ Inc. of an additional 5.25% interest in Bayonne
Venture in July 1998.
YEAR 2000
Many existing computer systems use only two digits to define a year. These
systems were designed and developed without considering the impact of the
upcoming change in century. When computer systems must process dates both before
and after January 1, 2000, two-digit year "fields" may create processing
ambiguities that can cause errors and system failures, resulting in potentially
serious operational problems. For example, computer programs that have
date-sensitive features may recognize a date represented by "00" as the year
1900, instead of 2000. These errors or failures may have limited effects, or the
effects may be widespread, depending on the computer chip, system or software,
and its location and function. For instance, there are embedded chips contained
within electric and steam generation equipment, and electric transmission and
distribution equipment that may be date-sensitive. In these circumstances where
an embedded chip fails to recognize the correct date, electric and steam
generation operations could be adversely affected.
The effects of the Year 2000 problem are exacerbated because of the
interdependence of computer and telecommunications systems in the United States
and throughout the world. This interdependence exists in virtually all
industries, and is certainly true for our company and our suppliers and
customers.
We use computer hardware and software to control and monitor many of the
major components of our electric and steam generation operations. Embedded chips
also exist in some aspects of generation, transmission and distribution. We have
implemented a program to address these issues to make our computer systems and,
where necessary, our embedded chips capable of processing dates later than 1999
in an effort to mitigate any adverse operational or financial impacts.
State Of Readiness
In June 1999 the facilities successfully implemented the Year 2000 Program
(the "Plan"), which was generally based on an approach developed by FERC.
General Electric is contracted to operate and maintain the facilities and has
been responsible for implementing the Plan and preparing the facilities for the
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Year 2000. The Plan embodies the following elements: awareness, inventory,
assessment, remediation, testing and contingency planning. Our plant managers
each are responsible for the Year 2000 program work at their respective plants,
and the Director of Operations has overall responsibility for all aspects of the
Plan. The following table sets forth the status of each element of the Plan at
each facility. The notation "C" indicates that the particular element has been
completed.
<TABLE>
<CAPTION>
AWARENESS INVENTORY ASSESSMENT REMEDIATION TESTING CONTINGENCY PLANNING
--------- --------- ---------- ----------- -------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Linden............... C C C C C C
Camden............... C C C C C C
Bayonne.............. C C C C C C
</TABLE>
As directed by the Plan, a comprehensive inventory of the three facilities
has been completed, documented and assessed with regard to operational
criticality and Year 2000 readiness. At each facility, over 70 systems were
evaluated to determine their "mission-critical" status, resulting in the review
of over 500 individual components. The following systems were determined to be
mission-critical:
- distributed control systems;
- gas turbine and steam turbine control systems;
- continuous emissions monitoring systems; and
- fire protection systems.
At the Camden and Linden facilities, the distributed control systems were
made Year 2000 ready and have been tested. With respect to the Bayonne facility,
General Electric advised us that the distributed control systems have been
tested and are Year 2000 ready. In addition, we have been in contact with an
outside cogeneration facility of the same General Electric design and age as the
Bayonne facility and that facility has tested its distributed control system and
did not identify any remediation required to be Year 2000 ready.
The Bayonne, Camden, and Linden facilities have General Electric gas
turbine and steam turbine control systems. General Electric has advised us that
the Mark 3, 3A and 4 gas turbine and steam turbine control systems were already
Year 2000 ready. A minor change was made to the Mark 5 gas turbine and steam
turbine controls, and that system is now also Year 2000 ready. The Linden
facility has Mark 3A and 4 Simulators which were tested and did not identify any
remediation required to be Year 2000 ready. The air quality monitoring systems
were redesigned and the related software was rewritten in late 1998 and early
1999 to comply with the new reporting requirements of the Environmental
Protection Agency and the New Jersey Department of Environmental Protection.
These components are now Year 2000 ready. The fire protection and other systems
were found to be free of embedded chips and are, in most cases, analog devices
which are not date sensitive.
Other significant components at the facilities include digital relays,
transmitters, communications equipment and switchgear. Component suppliers have
been contacted and component readiness information has been documented. Where
necessary, components were replaced or upgraded to be Year 2000 ready.
We have also evaluated our exposure to Year 2000 problems of
mission-critical third parties with whom we conduct business. Our
mission-critical third party suppliers and systems are:
- fuel suppliers;
- water suppliers;
- utility transmission systems; and
- telecommunications systems with our utility company customers.
Failures of third party computer systems and embedded chips could have a
material impact on our ability to conduct our business. Third parties that are
considered mission critical have provided us their Year 2000 status, and we
expect them to be Year 2000 ready by late 1999 or before. These mission-critical
third-parties
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have assured us through verbal communications and written correspondence that
they currently are or will be Year 2000 ready. Our management therefore has a
high level of confidence that suppliers and customers have recognized the
potential for problems and are taking prudent action to mitigate risks.
Nonetheless, extended interruptions of the fuel and water supply, disruptions in
the transmission systems and/or losses of communications with our company's
utility company customers could result in the shutdown of the affected facility.
We have expended a total of approximately $200,000 on material and
approximately six man-months of effort preparing for the year-end rollover and
expect to expend an additional one-half man-month of effort to complete our
preparations.
As part of the Plan, we are developing contingency plans that deal with two
aspects of the Year 2000 problem: (1) that despite our good-faith, reasonable
efforts, we may not have satisfactorily remediated all of our internal
mission-critical systems; and (2) that outside systems may not be Year 2000
ready, despite our good-faith, reasonable efforts to work with outside entities.
Our contingency plans are being designed to minimize the disruptions or other
adverse effects resulting from Year 2000 incompatibilities regarding these
mission-critical functions or systems, and to facilitate the early
identification and remediation of mission-critical Year 2000 problems that first
manifest themselves after January 1, 2000. Our company's contingency plan
includes safe shutdown and quick restart scenarios in the event of a Year 2000
or other interruption and provides for the presence of additional operations,
maintenance and management staff at the facilities during the year-end rollover.
This increased presence will provide the necessary manpower to reestablish
control systems operations in the event of a failure and to restart generation
equipment in a timely fashion.
The contingency plans mitigate the risks associated with our
mission-critical third party suppliers and systems as follows:
- Alternate fuel capabilities at all three facilities and flexible
electric/steam generation configurations at two of the facilities add to
our capability to respond to potential problems associated with the
facilities' fuel supply. Our company's contingency plan for fuel supply
requires dual fuel operation during the year-end rollover. Our multi-unit
facilities at Linden and Bayonne will have all of their generators in
operation, with some units burning liquid fuel and the rest burning
natural gas. The Camden facility will remain on natural gas but will have
the ability to transfer to liquid fuel automatically if the natural gas
fuel supply is lost. All of the facilities' generation equipment can
operate an alternate fuel supply. We will have alternate fuel supplies at
each of the facilities in sufficient quantity to allow approximately four
to five days of continuous operation.
- Each of the facilities has alternate water supply sources in the event of
interruptions to their normal supply. Each facility has direct
connections (including backup connections) to the local water utility and
substantial onsite water storage. The onsite storage is used for makeup
water to the steam systems and for fire protection. In addition, the
facilities have cooling tower and storm water storage basins that can be
used in emergency situations to continue operations.
- The Linden facility has a "black start" diesel generator which will allow
it to be in a state of readiness if its utility customer is unable to
accept power. The Camden facility plans to lease a temporary diesel
generator which will allow it to be in a state of readiness if its
utility customer is unable to accept power. The Camden and Linden
facilities will therefore be able to come on-line rapidly following the
restoration of the utility transmission system. The Bayonne facility has
an alternate source of power that is supplied from a substation different
from the one where power from the facility is delivered which should
allow it to be in a state of readiness if its utility customer is unable
to accept power.
- Our contingency plan provides alternate means of communicating
effectively with electric power dispatchers. In the event of
interruptions in land line communications, each facility is equipped with
radio band communication equipment and cellular phones. Although we did
not participate, recent communications readiness/contingency programs
sponsored by FERC and NERC indicate that the year-end rollover will not
interfere with normal operations.
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In addition, all onsite tanks, including potable water, backup fuel and
water treatment chemical tanks, will be filled several days prior to the
year-end rollover. Onsite storage of the necessary chemicals will allow the
facilities to continue to produce demineralized water for their boilers.
Our company's contingency plans also contemplate an assessment of all its
mission-critical internal operational systems that use computer-based controls.
The procedure of implementing a contingency plan will be triggered by the first
occurrence of a Year 2000-related failure, and continue for as long as
circumstances require. It is important to note that a system can fail to
correctly process a new century date well before the actual rollover to
1/1/2000.
Worst Case Scenario
The Commission requires that public companies forecast the most reasonably
likely worst case Year 2000 scenario. In doing so, we are assuming that our Year
2000 plan will not be effective. Analysis of the most reasonably likely worst
case Year 2000 scenarios we may face leads to contemplation of the following
possibilities which, though unlikely in some or many cases, must be included in
any consideration of worst cases:
- widespread failure of electrical, gas, water and similar supplies by
utilities serving us;
- widespread disruption of the services of communications common carriers;
- similar disruption to means and modes of transportation for the Company
and its employees, contractors, suppliers, and customers;
- significant disruption to our ability to gain access to, and remain
working in, office buildings and other facilities; and/or
- the failure of substantial numbers of our mission-critical computer
hardware and software systems, including both internal business systems
and systems (such as those with embedded chips) controlling operational
facilities such as electrical generation, transmission, and distribution.
Among other things, we could face substantial claims by customers or loss of
revenues due to service interruptions, inability to fulfill contractual
obligations, inability to account for certain revenues or obligations or to bill
customers accurately and on a timely basis, and increased expenses associated
with litigation, stabilization of operations following mission-critical
failures, and the execution of contingency plans. We could also experience an
inability by our customers and others to pay, on a timely basis or at all,
obligations owed to us. Under these circumstances, the adverse effect on our
company, and the diminution of our revenues, would be material, although not
quantifiable at this time. Further in this scenario, the cumulative effect of
these failures could have a substantial adverse effect on the economy,
domestically and internationally. The adverse effect on our company, and the
diminution of our revenues, from a domestic or global recession or depression
also is likely to be material, although not quantifiable at this time.
We will continue to monitor business conditions with the aim of assessing
and quantifying material adverse effects, if any, that result or may result from
the Year 2000 problem.
Summary
We believe that we will be able to achieve substantial Year 2000 readiness
with respect to the mission critical systems that we control. However, from a
forward-looking perspective, the extent and magnitude of the Year 2000 problem
as it will affect us, both before and for some period after January 1, 2000, are
difficult to predict or quantify. Accordingly, there can be no assurance that
all of our systems and all outside systems will be adequately remediated so that
they are Year 2000 ready by January 1, 2000, or by some earlier date, so as not
to create a material disruption to our business. If, despite our reasonable
efforts under the Plan, there are mission-critical Year 2000-related failures
that create substantial disruptions to our business, the adverse impact on our
business could be material. Additionally, Year 2000 costs are difficult to
estimate accurately because of unanticipated vendor delays, technical
difficulties, the impact of tests of outside systems and
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<PAGE> 54
similar events. Moreover, the estimated costs of implementing the Plan do not
take into account the costs, if any, that might be incurred as a result of Year
2000-related failures that occur despite our implementation of the Plan.
MARKET RISK DISCLOSURES
Our company's exposure to interest rate risk results from the Linden Ltd.
Term Loan. In regards to the floating rate and working capital portion of this
loan, a 10% fluctuation in LIBOR rates and in financial commercial paper rates
in effect during the first nine months of 1999 would not have a materially
adverse impact on earnings in the last quarter of 1999.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Statement Accounting Standards Board ("FASB") adopted
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," in June 1998. The statement
requires that all derivatives be recognized at fair value as assets or
liabilities and that changes in fair value be recorded in earnings or other
comprehensive income. In July 1999, the FASB adopted SFAS No. 137, which defers
the required adoption date of SFAS No. 133 by one year to fiscal years beginning
after June 15, 2000. Our analysis of the potential impact of this statement has
not been completed.
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OUR BUSINESS
Our sole business is the ownership, operation and potential expansion of
our facilities, which are located in Linden, Camden and Bayonne, New Jersey. The
following information summarizes certain important information with respect to
our facilities:
<TABLE>
<CAPTION>
LINDEN VENTURE CAMDEN VENTURE BAYONNE VENTURE
--------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
Location................... Linden, NJ Camden, NJ Bayonne, NJ
Equipment Type............. 5 GE Frame 7EA gas turbines 1 GE Frame 7EA gas turbine 3 GE Frame 6B gas turbines
3 GE condensing steam 1 GE condensing steam 1 GE SAEC steam turbine
turbines turbine
Nameplate Electric 715 MW 146 MW 176 MW
Capacity.................
Power Purchase
Agreement/Expiration..... Con Ed/2017 PSE&G/2013 JCP&L (75.8%)/2008
PSE&G (24.2%)/2008
Commercial Operations...... May 1992 March 1993 October 1988
Average Heat Rate
(1998)(1)................ 9,588 Btu/KWh 8,791 Btu/KWh 9,183 Btu/KWh
Historical Average
Availability
(1993-1998).............. 93% 96% 95%
Facility Dispatch.......... Dispatchable (restricted) Base load Base load
Facility Design Maximum
Steam Output Capacity.... 1,250,000 lbs/hr 92,000 lbs/hr 225,000 lbs/hr
Facility Design Steam Sales
Capacity................. 1,000,000 lbs/hr 60,000 lbs/hr 125,000 lbs/hr
Steam Sales/Expiration..... Bayway Refining Camden Paperboard/2013 IMTT-Bayonne/Year-to-Year
Company/2017 IMTT-BX/Year-to-Year
Infineum USA L.P./2017
Facility Operator.......... GE GE GE
Fuel Type.................. Natural Gas, Butane Natural Gas, Kerosene, Natural Gas, Kerosene,
Jet-A or L.S. Diesel Jet-A or L.S. Diesel
Approximate Daily Average
Fuel Requirements........ 110,000 MMBtu 30,000 MMBtu 36,000 MMBtu
Fuel Supply................ Spot(2) Spot(2) PSE&G -- CIG Tariff
Gas Transportation/
Expiration............... PSE&G and Elizabethtown/ PSE&G/2013 PSE&G -- CIG Tariff/5 days'
2017 termination
</TABLE>
- ---------------
(1) Without credit for steam production.
(2) The fuel supply for the Linden and Camden facilities is provided under
short-term firm gas supply contracts. The contract price is based on spot
gas prices plus a reservation charge.
THE LINDEN FACILITY
Linden Facility Description. The Linden facility is a 715 MW gas-fired,
combined-cycle cogeneration dispatchable facility located in Linden, New Jersey,
on the site of Bayway Refining Company, adjacent to a chemical plant complex and
technology center owned by Infineum USA L.P. The Linden facility began
commercial operations in May 1992.
During the last five full calendar years, the Linden facility had an
average availability factor of 93%. This facility sells its electric capacity
and energy (up to 645 MW) to The Consolidated Edison Company of New York, Inc.
under a power purchase agreement which expires in 2017. Moody's Investors
Service rates Con Ed's long-term debt as A1, and Standard & Poor's Ratings
Services rates it as A+. The Linden facility provides steam to Bayway Refining
Company, a subsidiary of Tosco Corporation, and to Infineum USA L.P., a joint
venture among Exxon Chemical Corporation, The Shell Petroleum Company Limited
and Shell Chemical Company, under agreements which expire in 2017. We have
operating and maintenance responsibility for the Linden facility, but we have
contracted with General Electric Company to provide the day-to-day operation and
maintenance of the plant.
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The Linden facility is comprised of five GE Frame 7EA gas turbine
generators and three GE condensing steam turbine generators. Natural gas is
burned directly in the gas turbine generators to produce electricity and high
temperature exhaust gases. The exhaust gases from the gas turbines are channeled
into five Nooter Eriksen heat recovery steam generators to produce high pressure
steam for the steam turbine generators. The steam turbine generators produce
additional electricity and process steam which is sold to Bayway Refining and
Infineum. The steam turbines, in turn, exhaust into a multi-cell air cooled
condenser to return condensate to the plant's water cycle. The condensate
produced by the air cooled condenser reduces the plant's water consumption by
approximately 66%. Condensate from process steam sold to Bayway Refining and
Infineum is not returned to the cycle. All raw makeup water is purchased from
Elizabethtown Water Company.
The Linden facility has been designed to operate 24 hours per day, 365 days
per year, for a total of 8,760 hours per year, at 93% availability, with design
net delivered capacity of 645 MW and export steam generation volume of 1,000,000
pounds per hour.
The 13.8 KV electrical power produced by the generators is stepped up to
345 KV. The SF6 gas insulated switch gear then delivers the electricity to an
underground, parallel connected pair of oil-filled cable ducts, which provide
the outgoing power connection directly to Con Ed, allowing the plant to be
treated as an "in-city" facility. The Linden facility's qualification as an
"in-city facility" is significant because, under current regulations, 80% of the
power used in New York City must be generated by "in-city" generators. This
electric interconnection terminates with Con Ed's Goethals Station on Staten
Island, New York. The total interconnection distance to Con Ed is approximately
1.6 miles. Each cable has potential transmission capacity of 650 MW.
The Linden facility has been designed, and is being maintained and
operated, to meet the strict environmental standards of the State of New Jersey.
The Linden facility uses best available control technology to reduce gas
turbine, water and noise emissions to the levels required and permitted by
federal and state regulators. Nitrogen oxide ("NOx") emissions levels are
controlled through steam injection into the turbine combustion chambers and by
selective catalytic reduction in the heat recovery steam generators. Carbon
monoxide ("CO") emissions are controlled by the design of the combustion
turbines.
Linden Power Purchase Agreement. Linden Venture sells all the electricity
up to the power production capacity produced by the Linden facility, net of
auxiliary plant loads and deliveries of electricity to steam customers, to Con
Ed pursuant to a power purchase agreement (the "Linden PPA"). Certain provisions
of the Linden PPA are summarized below.
Term: Base term of 25 years from May 1, 1992, the date of initial
commercial operations.
Regulatory Approval: Approval by the Public Service Commission of New York
(the "NYPSC") allowing Con Ed full recovery of all payments for the purchase of
electricity under the Linden PPA through its fuel adjustment clause was received
in 1991.
Pricing: Base term pricing is determined by the following components:
Capacity: Con Ed is required to pay a fixed capacity rate of 1.8553c per
KWh delivered or available, subject to a cap of 85% of the Linden
facility's dependable maximum net capability. The dependable maximum net
capability is determined by an annual capability test but may not exceed
an agreed maximum of 645MW. Kilowatt-hours delivered or available in
excess of the 85% cap during the 12 months preceding any off-peak months
can be credited to an off-peak month to the extent the total payments
for that month do not exceed the 85% cap. Linden Venture receives a
credit of 240,000 KWh in any month that Con Ed curtails deliveries, but
curtailment requests occurring in a peak period cannot be credited to an
off-peak period.
Fuel: Con Ed is required to pay actual fuel costs, including steam
commodity, transportation and storage costs attributable to electricity
actually delivered, subject to an annual cap of 2.634c per KWh
delivered, adjusted for changes in Con Ed's annual weighted average cost
of gas since 1989 (3.356c for September 1999). Linden Venture is
entitled to keep 50% of the amount by which actual fuel costs are less
than the annual cap. Actual fuel costs above the annual cap are absorbed
100% by
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Linden Venture. In addition, Con Ed is required to pay the full costs
attributable to steam generated by an outside source and delivered to
the Linden facility.
Operating and Maintenance: Con Ed is required to pay an escalating
operations and maintenance ("O&M") rate equal to 0.9c per KWh as of the
inception of the Linden PPA, increasing by a local CPI inflation factor
on a monthly basis (1.268c per KWh for September 1999). The O&M
component is equal to this rate multiplied by KWhs delivered or
available subject to a cap equal to 90% of the Linden facility's
dependable maximum net capability. Kilowatt-hours delivered or available
in excess of the 90% cap during the 12 months preceding any off-peak
months can be credited to such month up to the 90% cap.
Pricing during any renewal periods and during curtailment is determined
by alternate mechanisms as set forth in the Linden PPA.
Curtailment: Con Ed is permitted to reduce the dispatch of the plant by
various amounts in certain periods. At any time during the term of the
Linden PPA, upon four hours' notice, Con Ed may reduce actual deliveries to
82% of the dependable maximum net capability. Upon 12 hours' notice, Con Ed
may reduce actual deliveries to 82% of the dependable maximum net
capability less 150 MW for an eight hour period on weekday nights a maximum
of 100 times a year. During the first 15 years of the Linden PPA, upon 24
hours' notice, Con Ed may reduce actual deliveries to 47% of the dependable
maximum net capability on weekends and certain holidays. In the last 10
years of the Linden PPA, Con Ed has the right, upon 24 hours' notice, to
reduce the dispatch of the plant to 47% of the dependable maximum net
capability on a continuous basis, with limited rights to cycle the plants
to higher loads. Con Ed's obligations to pay capacity and O&M charges are
unaltered by curtailment.
Voltage Support: The Linden facility must supply voltage support within a
specified range, as requested by Con Ed, at the point of interconnection,
to be measured at Con Ed's Goethals Station on Staten Island, New York.
Qualifying Facility Status: During any period in which the Linden facility
ceases, temporarily or permanently, to be a QF, the Linden PPA provides
that Con Ed's rates will be reduced 10%. The FERC may, however, require a
lower rate to be charged during such period. In addition, certain
additional obligations, as set forth in the Linden PPA, are imposed on
Linden Venture in the event of a loss of QF status.
Breach of Contract: Among other events, failure by the Linden facility to
use good faith efforts to resume deliveries after an outage of 120 days
constitutes a breach. Failure to perform for reasons of force majeure is
not deemed a breach.
Force Majeure: Either party to the Linden PPA may suspend performance
thereunder (except for any obligation to make payments) due to the
occurrence of force majeure, provided that the non-performing party
provides notice to the other party within 14 days of becoming aware of the
force majeure event and endeavors to remedy its inability to perform.
Linden Steam Sale Agreements. Steam produced by the Linden facility is sold
to Infineum and Bayway Refining under two separate agreements. Infineum is a
joint venture among Exxon Chemical Corporation, The Shell Petroleum Company
Limited and Shell Chemical Company. Exxon Chemical Corporation is a division of
Exxon Corporation, which has long term debt credit ratings from Moody's
Investors Service and Standard & Poor's Ratings Services of Aaa and AAA,
respectively. The Shell Petroleum Company Limited and Shell Chemical Company are
members of the Royal Dutch/Shell Group, which has a long term debt credit rating
from S&P of AAA. Bayway Refining is owned by Tosco Corporation, which has long
term debt credit ratings from Moody's and S&P of Baa2 and BBB, respectively. The
base term of both steam sale agreements expires in April 2017.
Steam Sales from Infineum to Bayway Refining. Historically, under the
Linden contractual steam arrangements, Bayway Refining has purchased all
steam in excess of Infineum's takes. The Infineum
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steam sale agreement provides that Linden Venture's maximum delivery
obligation is 181,000 lbs/hr for the months of October through and
including May ("peak period") and 109,000 lbs/hr for the months of June
through and including September ("off-peak period"). On a historical basis,
Infineum has taken approximately 120,000 lbs/hr during the peak period,
which it receives at no cost. However, Infineum recently began taking
quantities of steam up to its maximum contract quantity of 181,000 lbs/hr.
If Infineum elects to take steam up to the maximum contract quantity
during the peak and off-peak periods throughout the contract term, it is
estimated that distributions to our company from Linden Venture could be
reduced by approximately $1.3 million per year over the life of the
contract. It is possible that this amount could increase if Infineum seeks
to take quantities of steam in excess of the maximum contract quantity. The
Infineum steam sale agreement requires Linden Venture to deliver quantities
above the maximum contract quantities to the extent Linden Venture is able
to do so, provided that Linden Venture is not materially adversely affected
under the Linden PPA or Linden Venture's other agreements to sell steam to
other steam users.
Operating Standards for Qualifying Facilities. In order to be a
qualifying cogeneration facility under the Public Utility Regulatory
Policies Act of 1978, the Linden Facility must satisfy an operating
standard and an efficiency standard relating to the production of thermal
energy by the Linden facility. The operating standard requires that at
least 5% of a facility's total energy output must be useful thermal energy
used in an industrial or commercial process. If a facility achieves an
operating standard of 15% or more, then in order to satisfy the efficiency
standard, the useful power output of the facility plus one-half the useful
thermal energy output must be no less than 42.5% of the total energy input
of natural gas to the facility. If a facility achieves an operating
standard that is below 15% (but above 5%), the facility must achieve an
efficiency standard of at least 45%. The operating and efficiency standards
are calculated for the first 12 months of a facility's operations and for
each calendar year subsequent to the year in which the facility first
produces electricity. The facility commenced operations in 1992. From 1993
through 1998, the Linden facility achieved an operating standard no lower
than 28.6% and an efficiency standard no lower than 46.0% in any calendar
year.
In order to maintain its status as a qualifying facility, Linden
Venture relies on the fact that the demand for steam by Bayway Refining and
Infineum is significantly above the level required to achieve the minimum
operating and efficiency standards. The Linden steam sale agreements do not
have minimum steam purchase requirements that are tied to the Linden
facility maintaining qualifying facility status.
Linden Gas Service Agreement. Linden Venture is a party to a gas service
agreement (the "Linden GSA") with PSE&G and Elizabethtown Gas Company (the
"Suppliers"), providing for transportation and partial supply to be furnished
jointly by PSE&G and Elizabethtown Gas Company. Certain provisions of the Linden
GSA are summarized below.
Term: Base term of 25 years. Sales service terminates after 15 years,
unless extended by the Suppliers at the end of the 13th year, in which case
such sales service continues for an additional 10 years. If no such
election is made, the transportation resale service increases to the
maximum quantity during the final 10 years of the base term to replace the
terminated sales service.
Quantities: The base amount of gas provided pursuant to resale service is
85,000 MMBtu/day. The resale amount may be increased or decreased, subject
to a minimum quantity of gas of 73,000 MMBtu/day and a maximum quantity of
143,500 MMBtu/day, over the life of the Linden GSA. Gas delivered pursuant
to sales service is subject to nomination by Linden Venture and can range
from zero to 58,500 MMBtu/day. Sales service is fully interruptible, but
resale service may be curtailed only to the minimum quantity. Delivery of
butane may be used to satisfy the minimum quantity in periods of reduced
resale service quantity. Butane storage and deliverability are sized to
supply the minimum fuel requirements during gas supply interruption. During
such interruptions, the plant can be operated on butane at an output level
of only 300 MW due to butane deliverability restrictions. After the
fifteenth
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year, the parties may negotiate to adjust the quantities of gas and butane
to reflect changes in electricity purchases by Con Ed.
Obligations: Resale service under the Linden GSA creates an obligation on
Linden Venture to procure a sufficient supply of natural gas to deliver to
the designated interstate pipeline receipt points. Linden Venture must
contract for a year-round supply of natural gas of 85,000 MMBtu/day plus
line loss and compressor fuel. Such supply must be firm from December
through March and must be contractually committed for by the preceding June
1. The Linden facility must purchase and make available to the Suppliers
certain quantities of butane storage and butane product, which may be
substituted by the Suppliers during curtailment on peak days during the
period November through March. The Suppliers must obtain firm
transportation capacity for a period of at least 15 years and obtain
interruptible transportation as necessary.
Services: Under resale service, Linden Venture purchases gas in the U.S.
Gulf Coast production areas from which the Suppliers have pipeline
transportation capacity. Linden Venture delivers to the pipeline receipt
points of the Suppliers in the production area the base amount of 85,000
MMBtu/ day, plus line loss and compressor fuel, and sells such amount to
the Suppliers at those locations. Suppliers then resell these amounts, less
line loss and compressor fuel, to Linden Venture at the Linden facility's
interconnections with the Suppliers' facilities. Resale service volumes are
at least the minimum quantity, plus line loss and compressor fuel. FERC
Order 636, issued April 1992, prohibits new contracts for such resale
transportation services. The Linden GSA is allowed under the grandfather
provision of FERC Order 636, but it cannot be extended or renewed. Subject
to nominations by Linden Venture, the Suppliers sell additional gas to
Linden Venture from their system supply in an amount that can range from
zero to 58,500 MMBtu/day. Butane also is purchased by Linden Venture from
Bayway Refining for use as back-up fuel if the suppliers fail to deliver
natural gas.
Pricing: Resale service pricing is based on the sum of three components:
- a component based on the price paid by the Suppliers for natural gas
sold to the Suppliers at their receipt points;
- a component based on transportation costs; and
- a component based on a specified service fee which can escalate.
Sales service is priced separately for peak and off-peak service.
Off-peak supply pricing is based on the sum of three components:
- a component equal to the Suppliers' cost of gas;
- a component based on a specified service fee which can escalate with
the Suppliers' base rates; and
- a component equal to 1.5% of the Suppliers' cost of gas.
Peak sales service during the months of December through March above a
specified level includes a price component based on storage costs.
Force Majeure: The Linden GSA may be terminated by the Suppliers for
lack of performance by Linden Venture due to the occurrence of force
majeure if the inability to perform extends for 18 months. This period
of time can be extended if certain fees are paid to the Suppliers by
Linden Venture. The Linden GSA may be terminated by Linden Venture if
the Suppliers experience a force majeure event that extends for six
months.
Linden Operation and Maintenance Agreement. General Electric operates and
maintains the Linden Facility pursuant to an operations and maintenance
agreement with a 12 year term which began in 1997. Linden Venture has the right
to terminate the agreement upon 180 days' notice and the payment of specified
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amounts at the end of each of the fourth and seventh years and upon 180 days'
notice at the end of the tenth year.
Linden Site Lease. Linden Venture leases the site for the Linden Facility
from Bayway Refining. The term of the Linden site lease is 25 years from the
date of initial commercial operations of the Linden Facility of May 1992. Bayway
Refining is entitled to terminate the Linden site lease in the event Linden
Venture defaults under the Bayway Refining steam sale agreement (subject to
various protections in favor of Linden Venture). The Linden site lease provides
Linden Venture with both a leasehold estate in the Linden site and non-exclusive
easements over other portions of Bayway Refining's property for various
interconnections to the Linden Facility.
THE CAMDEN FACILITY
Camden Facility Description. The Camden facility is a 146 MW gas-fired,
combined-cycle cogeneration facility located in Camden, New Jersey. The Camden
facility began commercial operations in March 1993.
During the last five full calendar years, the Camden facility had an
average availability factor of 96%. This facility sells its electric capacity
and energy (up to 143 MW) to Public Service Electric and Gas Company of New
Jersey under a power purchase agreement which expires in 2013. Moody's Investors
Service rates PSE&G's long-term debt as A3, and Standard & Poor's Ratings
Services rates it as A-. The Camden facility sells steam to Camden Paperboard
Company under an agreement which expires in 2013. We have operating and
maintenance responsibility for the Camden facility, but we have contracted with
General Electric Company to provide the day-to-day operation and maintenance of
the plant.
The Camden facility is comprised of one GE Frame 7EA gas turbine generator
and one GE extractional condensing steam turbine generator. Natural gas is
burned directly in a combustion turbine generator to produce electricity and
high temperature exhaust gases. These exhaust gases are channeled to a Deltak
heat recovery steam generator to produce high pressure steam for a steam turbine
driven electric generator, providing additional electricity as well as quality
process steam for sale to Camden Paperboard Company. See "-- Camden Steam Sale
Agreement." The steam turbine exhausts into a water cooled surface condenser to
return condensate to the Camden facility's water cycle. All raw makeup water is
purchased from the City of Camden and treated for use by the plant's
state-of-the-art demineralizer system. The Camden facility design has been
optimized based on thermal cycle power output of 143 MW net and average export
steam generation volume of approximately 35,000 lbs/hour.
The 13.8 KV electrical power produced by the generators is stepped up to
230 KV and delivered to a gas insulated breaker and outdoor switchgear for
distribution and transmission into the PSE&G electric grid. An underground
dielectric fluid-cooled cable provides the outgoing power connection to PSE&G.
This cable interconnects with the PSE&G Gloucester Sub-station in Gloucester,
New Jersey, over an interconnection distance of approximately four miles.
The Camden facility has been designed, and is being maintained and
operated, to meet the strict environmental standards of the State of New Jersey.
The Camden facility uses best available control technology to reduce gas turbine
emissions to the level required and permitted by federal and state regulators.
NOx and CO emissions levels are controlled through steam injection into the
turbine combustion chamber and by the design of the combustion turbine. The
Camden facility incorporates a selective catalytic reduction system to further
reduce CO and NOx emissions.
Camden Power Purchase Agreement. Camden Venture sells the electrical
capacity of the Camden facility to PSE&G pursuant to a power purchase agreement
(the "Camden PPA") which also provides for the interconnection of the Camden
Facility with PSE&G's transmission system. Certain provisions of the Camden PPA
are summarized below.
Term: Base term through March 2013.
Regulatory Approval: NJBPU authorization was received in June 1989.
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Pricing: Pricing is comprised of a capacity payment and an energy charge,
which has three components, each as described below:
Capacity: PSE&G is required to pay a monthly seasonal capacity payment
for power delivered to PSE&G's receipt point. The payment is escalated
at 5% per annum. The rate as of September 30, 1999 was
$14.6576/KW/month. Payments during the summer peak months will not
exceed the Camden Facility's current nominated capacity of 148.5 MW, and
payments during the winter peak months will not exceed the Camden
facility's current nominated capacity of 151.5 MW. Camden Venture has
the right to adjust these seasonal capacity levels every three years,
with a cumulative maximum of 10% of the initial nominated capacity of
135 MW during summer months and 145 MW during winter months. Adjustments
to date have resulted in the cumulative summer maximum being achieved.
In the event that any capacity in excess of the nominated capacity has
been delivered in either the summer or winter peak months, PSE&G is
entitled to a refund of a portion of the capacity charges to the extent
it has paid for such excess capacity.
Energy Fixed: PSE&G is required to pay a fixed energy component of
2.0c/KWh for power delivered to PSE&G's receipt point. The fixed energy
component remains unchanged for 20 years.
Energy Fuel: PSE&G is required to pay a fuel charge for power delivered
to PSE&G's receipt point which escalates monthly based upon PSE&G's
average cost of gas in the CIG tariff. The average cost of gas equals
PSE&G's average gas commodity cost plus a transportation component equal
to PSE&G's interstate pipeline usage charges and one-half of PSE&G's
interstate pipeline reservation charges. For September 1999, the
adjustable component was 2.526c/KWh.
Energy Inflation: PSE&G is required to pay an inflation component for
power delivered to PSE&G's receipt point which escalates annually based
on a GNP index. This component closely tracks a portion of the Camden
facility's pipeline charges and variable O&M costs, which tend to
increase with inflation. For September 1999, the inflation component was
1.254c/KWh.
Security: The tracking account under the Camden PPA tracks the difference
between payments PSE&G has made to Camden Venture and projected payments
based on PJM capacity and energy rates. These projections are fixed and set
out in the Camden PPA. The tracking account reached a maximum of $54
million during 1997 and will decline to zero by 2001. If a breach by PSE&G
were to result in a termination of the Camden PPA, Camden Venture would be
required to pay to PSE&G the amount, if any, by which the balance in the
tracking account exceeds the damages found to be due to Camden Venture as a
result of such breach. PSE&G has been granted a second lien on the Camden
Facility to secure its rights with respect to the security provisions of
the Camden PPA.
Curtailment: PSE&G is obligated to accept all of the Camden facility's net
electrical output, except in the following circumstances:
- the Camden facility fails to comply with certain interconnection,
protection and safety requirements and standards for customer-owned
generating facilities;
- such acceptance would jeopardize the integrity or transmission
facilities of the PSE&G or PJM systems;
- during system emergencies or planned maintenance of the transmission
or interconnection facilities; or
- during "light load" periods, if, due to operational circumstances,
PSE&G would incur costs greater than those that it would have incurred
if it had not made such purchases.
PSE&G has never curtailed deliveries pursuant to these provisions other
than for minimum general system emergencies and other than during "light load"
periods, which have occurred every year.
Qualifying Facility Status: If sections 201 and 210 of the Public Utility
Regulatory Policies Act of 1978 ("PURPA") are no longer in effect or the
Camden facility ceases to qualify as a QF for reasons not
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within its control, including a reduction or cessation in thermal energy
use, the Camden PPA will nevertheless continue in effect provided the
following conditions are met:
- the NJBPU does not bar PSE&G from passing the rates through to its
customers;
- federal, state or local laws are not violated; and
- Camden Venture or its owners are not subject to unreasonably
burdensome regulation under the Public Utility Holding Company Act of
1935 ("PUHCA").
However, in such circumstances, Camden Venture must file the Camden PPA
with the FERC, and the FERC might impose a lower rate. See
"Regulation -- Federal Energy Regulation." If one of the above events does
occur, Camden Venture and PSE&G must negotiate in good faith for an arrangement
with substantially similar economic benefits to each party as are provided under
the Camden PPA. If one of the above PURPA events occurs, and the NJBPU denies
rate pass-through of PSE&G's obligations under the Camden PPA, Camden Venture
and PSE&G must negotiate in good faith to provide a rate with substantially
similar economic benefits to each party, and which the NJBPU will permit PSE&G
to recover from its ratepayers. Any such agreement would be subject to approval
by the FERC. If the parties cannot reach such an agreement, either party may
exercise any other right afforded it under the Camden PPA.
Breach of Contract: Among other events, the failure by Camden Venture to
perform its obligations under the Camden PPA constitutes a breach unless,
within 30 days after notice from PSE&G, Camden Venture cures the breach or
commences and diligently pursues a cure. For any reason other than force
majeure or curtailment, failure to deliver electric power for 240 out of
365 days constitutes a breach. Such occurrences will be deemed events of
default which, if not remedied in 30 days, may be submitted to a regulatory
body with appropriate jurisdiction or arbitration for resolution.
Force Majeure: Either party to the Camden PPA may suspend performance
thereunder (except for any obligation to make payments for expenses already
incurred) due to the occurrence of force majeure, provided that the
non-performing party provides prompt notice to the other party of the force
majeure event and expeditiously takes action to remedy the event excusing
performance.
Camden Steam Sale Agreement. Camden Venture sells steam to Camden
Paperboard, a subsidiary of Caraustar Industries, Inc., which has long term debt
credit ratings from Moody's and S&P of Baa1 and BBB, respectively. The agreement
provides for a base period expiring in March 2013. Under the Camden steam sale
agreement, Camden Venture must sell and deliver steam up to a maximum quantity
of 50,000 lbs/hour. However, Camden Venture has agreed to take all reasonable
steps to provide up to 60,000 lbs/hour if requested by Camden Paperboard. Camden
Paperboard has agreed to accept and utilize a minimum quantity of steam
sufficient to preserve the Camden facility's QF status under PURPA. Camden
Paperboard's obligation is deemed satisfied if it purchases an amount averaging
23,000 lbs/hour from Camden Venture. Camden Paperboard's obligation to take the
minimum steam required for the Camden facility to maintain QF status will be
excused for a maximum of twelve months in the aggregate due to any of the
following:
- an event of force majeure;
- a major plant overhaul;
- retooling or equipment failure; or
- reduced plant capacity at Camden Paperboard's facility due to economic
conditions.
After such period, Camden Paperboard's obligation to take steam will be
unaffected by such events or conditions. Camden Paperboard is required to return
steam condensate in specified quantities and qualities. Steam is priced in two
increments. Camden Paperboard receives the first 35,000 lbs/hour at no cost;
thereafter, it pays one-half the avoided boiler fuel cost per 1,000 lbs/hour in
excess of 35,000 lbs/hour on a monthly basis. The Camden steam sale agreement
may not be assigned or transferred by either party without the prior written
consent of the other party, provided that either party may assign it to an
affiliate or a lender.
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Camden Gas Service Agreement. Camden Venture is party to a gas service
agreement with PSE&G (the "Camden GSA"), certain provisions of which are
summarized below.
Term: Base term extends through May 2011.
Quantities: PSE&G must provide the Camden facility with firm gas
transportation (to burner tip) for up to 30,000 MMBtu/day and must
provide interruptible gas transportation service to Camden during peak
period curtailments if interstate pipeline capacity is available. Every
three annual periods following the date of commercial operations, Camden
Venture may adjust the daily quantity plus or minus 2,750 MMBtu/day from
the original contract quantity of 27,500 MMBtu/day to reflect
anticipated changes in the fuel requirements of the Camden Facility.
Obligations: PSE&G must provide firm transportation for 30,000 MMBtu/day
(plus shrinkage) on a continuous, year-round basis, subject to a maximum
of 25 days of interruption per year on any day the U.S. Weather Bureau
forecasts certain average temperatures at Newark International Airport
in Newark, New Jersey. During such interruptions, the Camden facility
can burn kerosene, Jet-A or L.S. Diesel, although interruptible gas
service may be available via extended service or through other
arrangements that Camden Venture may make for incremental gas supplies.
PSE&G is required to obtain firm gas transportation for at least 15
years to provide the resale service. PSE&G is responsible for obtaining
any additional regulatory approvals that may be required in the future.
Camden Venture is obligated to deliver and sell the contract quantity of
gas to PSE&G at the receipt points and to purchase such gas at the
Camden facility upon delivery by PSE&G. Upon curtailment, the Camden
facility may substitute alternative fuels and also may use up to 22,000
barrels of alternative fuels in lieu of the resale service for up to 25
days per year.
Services: Gas purchased by Camden Venture is sold to PSE&G, with certain
exceptions, at a price equal to Camden Venture's cost and is then
delivered by PSE&G to the Camden Facility and resold to Camden Venture.
FERC Order 636, issued April 1992, prohibits new contracts for such
resale transportation services. The Camden GSA is allowed under the
grandfather provision of FERC Order 636, but it cannot be extended or
renewed.
Pricing: Resale service pricing is based on three components:
- the price per MMBtu at the receipt point;
- PSE&G's average cost of interstate transportation per MMBtu; and
- a service charge provided to PSE&G.
Force Majeure: The Camden GSA may be terminated in certain circumstances
by PSE&G for lack of performance by Camden Venture due to the occurrence
of force majeure if the inability to perform extends for a period of 18
months. Camden Venture may terminate the Camden GSA if PSE&G experiences
a force majeure event for a period of six months.
Camden Operation and Maintenance Agreement. General Electric operates and
maintains the Camden facility pursuant to an operations and maintenance
agreement with a 12 year term which began in 1997. Camden Venture has the right
to terminate the agreement upon 180 days' notice and the payment of specified
amounts at the end of each of the fourth and seventh project years and upon 180
days' notice at the end of the tenth project year.
Camden Site Arrangements. Camden Venture acquired the Camden site, which
consists of two adjacent parcels, in January 1992 prior to the commencement of
construction of the Camden facility.
THE BAYONNE FACILITY
Bayonne Facility Description. The Bayonne facility is a 176 MW gas-fired,
combined-cycle cogeneration facility located on the site of the IMTT facility in
Bayonne, New Jersey. FERC has certified the Bayonne facility as a QF under
PURPA. The Bayonne facility began commercial operations in October 1988.
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During the last five full calendar years, the Bayonne facility had an
average availability factor of 95%. This facility sells approximately 76% of its
electric capacity and energy (up to 125 MW) to Jersey Central Power & Light
Company and approximately 24% (up to 40 MW) to PSE&G under separate power
purchase agreements which expire in 2008. Moody's Investors Service rates
JCP&L's long-term debt as Baa1, and Standard & Poor's Ratings Services rates it
as A+. The Bayonne facility sells steam to IMTT-Bayonne and IMTT-BX under
separate year-to-year agreements. We have operating and maintenance
responsibility for the Bayonne facility, but we have contracted with General
Electric Company to provide the day-to-day operation and maintenance of the
plant.
The Bayonne facility is comprised of three GE Frame 6B gas turbine
generators and one GE Single Admission/Extraction Condensing steam turbine
generator. Natural gas is burned directly in a combustion turbine generator to
produce electricity and high temperature exhaust gases. The exhaust gases from
the gas turbines are channeled into three Henry Vogt heat recovery steam
generators to produce high pressure steam for a steam turbine driven electric
generator, providing additional electricity as well as extracting quality
process steam for sale to IMTT-Bayonne and IMTT-BX. The steam turbine exhausts
into a water cooled surface condenser to return condensate to the Bayonne
facility's water cycle. All raw makeup water is purchased from the City of
Bayonne.
The 13.8 KV electrical power produced by the generators is stepped up to
138 KV and delivered by SF6 switchgear to an underground cable which provides
the outgoing power connection to PSE&G. This cable interconnects with PSE&G's
Bayonne Substation in Bayonne, New Jersey, over an interconnection distance of
approximately three miles.
The Bayonne facility has been designed, and is being maintained and
operated, to meet the strict environmental standards of the State of New Jersey.
The Bayonne facility uses best available control technology to reduce gas
turbine, water and noise emissions to the levels required and permitted by
federal and state regulators. NOx emissions levels are controlled through water
injection into the turbine combustion chambers and by selective catalytic
reduction in the heat recovery steam generators. CO emissions are controlled by
the design of the combustion turbines.
The Bayonne facility has been designed based on a thermal cycle power
output of 165 MW net and average export steam generation volume of 125,000
pounds per hour. Recent upgrades to the three gas turbine generators, which were
completed in early 1998, increased the Bayonne facility's output by 6.7 MW.
Transmission Interconnections. Bayonne Venture is party to a transmission
service and interconnection agreement with PSE&G pursuant to which PSE&G agreed
to design, construct, own and operate a 138 KV underground transmission cable
circuit and associated terminal facilities to connect the Bayonne facility with
PSE&G's Public Service System at PSE&G's Bayonne Switching Station. The electric
power transmission facilities of PSE&G are interconnected with those of JCP&L,
and both PSE&G and JCP&L are members of the PJM. The initial term of the
agreement expires in 2008. A determination by the FERC that the Bayonne facility
is no longer a qualifying facility is an event of termination under the
transmission and interconnection agreement.
Bayonne Power Purchase Agreements. Bayonne Venture sells 75.8% of the
Bayonne facility's net electrical output (up to an average annual maximum of 125
MW) to JCP&L pursuant to a power purchase agreement (the "JCP&L PPA"). The
remaining 24.2% of electrical output of the Bayonne facility (up to 40 MW) is
sold to PSE&G pursuant to a power purchase agreement (the "PSE&G PPA"). Certain
provisions of the JCP&L PPA and the PSE&G and PPA are summarized below.
JCP&L PPA.
Term: Base term expires in October 2008.
Regulatory Approval: Approval by the New Jersey Board of Public Utilities
(the "NJBPU") was received in December 1985. The first amendment to the
JCP&L PPA was not submitted to the NJBPU for approval because the changes
were non-substantive. NJBPU approval of the second amendment to the JCP&L
PPA was received in December 1988.
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Pricing: Pricing is determined by the sum of the fixed, gas, gross national
product and retail rate components (as explained below) and is adjusted
annually (the "Applicable Rate"). The JCP&L PPA requires that JCP&L pay
120% of the Applicable Rate for all electricity delivered during on-peak
periods and 88.9% of the Applicable Rate for all electricity delivered
during off-peak periods. The peak period is 8:00 am to 8:00 pm, Monday
through Friday, 52 weeks per year. The components are set forth below:
Fixed: The fixed component is 2.80c/KWh for electricity delivered to
receipt points, up to a maximum aggregate of 125 MW/hour on an average
annual basis.
Gas: The gas component is indexed against changes in JCP&L's weighted
average cost of gas for the prior year. For September 1999, the gas
component was 3.027c/KWh for power delivered to receipt points, up to a
maximum aggregate of 125 MW/hour on an average annual basis.
GNP Deflator: The general price change component reflects inflation
adjustments. For September 1999, this component was approximately
0.973c/KWh for power delivered to receipt points, up to a maximum
aggregate of 125 MW/hour on an average annual basis.
Retail Rate: The local price change component reflects changes in
JCP&L's retail rates. For September 1999, this component was
approximately 0.792c/KWh, for power delivered to receipt points, up to a
maximum aggregate of 125 MW/hour on an average annual basis.
Qualifying Facility Status: The JCP&L PPA does not require the Bayonne
facility to remain a qualifying facility. However, should the Bayonne
facility lose its qualifying facility status, Bayonne Venture would be
required to file the JCP&L PPA with the FERC, and the FERC might impose a
lower rate.
Curtailment: JCP&L may curtail purchases only in the event of force majeure
and other excusable conditions, including emergencies involving the
wheeling system and interruptions, curtailments and reductions required by
prudent electrical practices. We do not anticipate that these limited
curtailment provisions will have a material effect on Bayonne Venture's
revenues under the JCP&L PPA. JCP&L has not curtailed power purchases to
date.
Breach of Contract: Among other events, failure of the Bayonne facility to
deliver electricity for 365 consecutive days, for reasons other than force
majeure, constitutes a breach.
Force Majeure: Either party to the JCP&L PPA may suspend performance
thereunder (except for any obligation arising prior to such event to make
payments) due to the occurrence of force majeure, provided that the
non-performing party provides prompt notice to the other party of the force
majeure event and expeditiously takes action to continue performance,
remedy the event excusing performance and mitigate resulting damages to the
other party.
PSE&G PPA.
Term: Base term expires in November 2008.
Regulatory Approval: NJBPU authorization was received in June 1989.
Pricing: Pricing under the PSE&G PPA is comprised of a capacity payment and
an energy charge which has three components, each as described below:
Capacity: PSE&G is required to pay a monthly seasonal capacity payment
for power delivered to PSE&G's receipt point. The payment is escalated
at 4.9% per annum. As of September 30, 1999, the rate was
$14.13/Kw/month. Payments during the summer peak months will not exceed
PSE&G's proportion of the Bayonne facility's nominated capacity of 150
MW (i.e., 36 MW), and payments during the winter peak months will not
exceed PSE&G's proportion of the Bayonne facility's nominated capacity
of 179 MW (i.e., 43 MW). Bayonne Venture has the right to adjust these
seasonal capacity levels every year, within a range of plus or minus 10%
of the initial or renominated values.
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Energy Fixed: PSE&G is required to pay a fixed energy component of
2.0c/KWh for power delivered to PSE&G's receipt point. The fixed energy
component remains unchanged during the base term of the PSE&G PPA.
Energy Fuel: PSE&G is required to pay a fuel energy component for power
delivered to PSE&G's receipt point which escalates monthly in accordance
with PSE&G's Cogeneration Interruptible Gas Rate Schedule ("CIG") as
approved by NJBPU. The CIG rate is based on PSE&G's average cost of gas
and includes an additional component representing transportation through
the local distribution system. For September 1999, the fuel energy
component rate was 2.721c/KWh.
Energy Inflation: PSE&G is required to pay an inflation component for
power delivered to PSE&G's receipt point which escalates annually based
on a GNP index. This component closely tracks a portion of the Bayonne
facility pipeline charges and variable O&M costs, which tend to increase
with inflation. For September 1999, the inflation component was
0.938c/KWh.
Security: The tracking account under the PSE&G PPA tracks the difference
between payments PSE&G has made to Bayonne Venture and estimated future
capacity and energy rates of the PJM. These estimates are fixed and set out
in the PSE&G PPA. The tracking account reached a maximum of $46 million
during 1997 and will decline to zero by 2005. If a breach by PSE&G were to
result in a termination of the PSE&G PPA, Bayonne Venture would be required
to pay to PSE&G the amount, if any, by which the balance in the tracking
account exceeds the damages found to be due to Bayonne Venture as a result
of such breach. Bayonne Venture has provided a letter of credit to PSE&G
for 10% of the tracking account ($4.6 million at September 30, 1999) to
secure its contingent obligation with respect to the security provisions of
the PSE&G PPA. If the tracking account has not been closed by the end of
the base term, Bayonne Venture may either (i) pay any credit balance due to
PSE&G or (ii) continue sales to PSE&G under terms that will reduce the
balance to zero over a maximum period of five years.
Curtailment: PSE&G may curtail purchases in the following circumstances:
- the Bayonne facility fails to comply with certain interconnection,
protection and safety requirements and standards for customer-owned
generating facilities;
- such acceptance would jeopardize the integrity or transmission
facilities of the PSE&G or PJM systems;
- during system emergencies or planned maintenance of the transmission
or interconnection facilities; or
- during "light load periods" if, due to operational circumstances,
PSE&G would incur costs greater than those that it would have incurred
if it had not made such purchases.
As of the date of this prospectus, PSE&G has curtailed the Bayonne
facility only pursuant to the "light load" provisions.
Qualifying Facility Status: If sections 201 and 210 of PURPA are no longer
in effect or the Bayonne facility ceases to qualify as a QF for reasons not
within its control, including a reduction or cessation in thermal energy
use, the PSE&G PPA will nevertheless continue in effect, provided the
following conditions are met:
- the NJBPU does not bar PSE&G from passing the rates through to its
customers;
- federal, state or local laws are not violated; and
- Bayonne Venture or its owners are not subject to unreasonably
burdensome regulation under PUHCA.
However, in such circumstances, Bayonne Venture must file the PSE&G PPA
with the FERC, and the FERC might impose a lower rate. See
"Regulation -- Federal Energy Regulation." If one of the above
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events does occur, Bayonne Venture and PSE&G must negotiate in good faith
for an arrangement with substantially similar economic benefits to each
party as are provided under the PSE&G PPA. If one of the above PURPA events
occurs and the NJBPU denies rate pass-through of PSE&G's obligations under
the PSE&G PPA, Bayonne Venture and PSE&G must negotiate in good faith to
provide a rate with substantially similar economic benefits to each party,
and which the NJBPU will permit PSE&G to recover from its ratepayers. Any
such agreement would be subject to approval by the FERC. If the parties
cannot reach such an agreement, either party may exercise any other right
afforded it under the PSE&G PPA.
Breach of Contract: Failure by Bayonne Venture to perform its obligations,
including a failure by Bayonne Venture to deliver electric power to PSE&G
for 240 out of 365 consecutive days for any reason other than force majeure
or curtailment, constitutes a breach unless, within 30 days after notice of
breach from PSE&G, Bayonne Venture cures the breach or commences and
diligently pursues a cure.
Force Majeure: Either party to the PSE&G PPA may suspend performance
thereunder (except for any obligation to make payments for expenses already
incurred) due to the occurrence of force majeure, provided that the
non-performing party provides prompt notice to the other party of the force
majeure event and expeditiously takes action to remedy the event excusing
performance.
Bayonne Steam Sale Agreements. Steam produced by the Bayonne facility is
sold to IMTT-Bayonne and IMTT-BX under two separate agreements. IMTT-Bayonne and
IMTT-BX are subsidiaries of Van Ommeren. The IMTT-Bayonne and IMTT-BX steam sale
agreements are described below.
IMTT-Bayonne. Pursuant to the IMTT-Bayonne steam sale agreement,
IMTT-Bayonne agrees to purchase from Bayonne Venture all of the thermal
energy requirements of its tank terminal facility, up to the deemed
maximum steam production of 57,000 lbs/hour, according to a pricing
formula based on IMTT-Bayonne's avoided cost of steam. The IMTT-Bayonne
steam sale agreement also provides for the sale of electricity to
IMTT-Bayonne at Bayonne Venture's option. Bayonne Venture has no current
plans to offer IMTT-Bayonne electricity. The IMTT-Bayonne steam sale
agreement provides for a base term of 10 years, which has expired, and
for automatic renewals thereafter for each subsequent year, unless
either party elects to terminate the agreement at the end of a renewal
year upon 60 days' notice. The IMTT-Bayonne steam sale agreement is
currently in full force and effect.
IMTT-BX. Under the terms of the IMTT-BX steam sale agreement, IMTT-BX
agrees to purchase from Bayonne Venture an average of 50,000 lbs/hour of
steam on an annualized basis, at all times that Bayonne Venture has a
minimum of 65,000 lbs/hour of deliverable steam. The pricing formula is
based on IMTT-BX's avoided cost of steam. IMTT-BX has the right to
reduce its required take of 50,000 lbs/hour to the extent that there are
changes in its operations which result in lower annual steam
requirements. The IMTT-BX steam sale agreement provides for an initial
term of five years, which has expired, and for automatic renewals for
each subsequent year, unless either party provides one year's written
notice of its intent to terminate the agreement. The IMTT-BX steam sale
agreement would then terminate one year after such notice or at an
earlier date upon which the parties mutually agree.
Bayonne Gas Supply Arrangement. Bayonne Venture is party to an agreement
for gas service with PSE&G, which provides that PSE&G will supply gas to Bayonne
Venture pursuant to the terms of the PSE&G CIG, as modified by the Bayonne gas
service agreement. The Bayonne facility requires an average of approximately
36,000 MMBtu/day. Certain provisions of the agreement are summarized below.
Term: Subject to termination upon five days' notice.
Quantities: Bayonne Venture may purchase up to a maximum of 3,000 Mcf/hour
and up to a maximum of 17,600,000 MMBtu/year.
Obligations: The Bayonne facility must maintain QF status.
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Service: Interruptible service is provided by PSE&G under certain
conditions that include PSE&G's continuing ability to provide the service
and the Bayonne facility's continuing status as a QF. The Bayonne
facility's supply is subject to 100% interruption during very low
temperature days on eight hours' notice.
In the event that PSE&G interrupts gas service, the Bayonne facility can
utilize kerosene, which is stored at the site in a day tank with a capacity of
250,000 gallons. In addition, the Bayonne facility has approximately 60,000
barrels (equivalent to approximately 10 days' supply at full output) of storage
under lease from IMTT -- Bayonne adjacent to the site with direct pipeline
transfer capability to the Bayonne facility's day tank. Additional fuel is
stored routinely by fuel suppliers at the IMTT -- Bayonne terminal facility.
Over the preceding four winters, the Bayonne facility's gas supply has been
interrupted a total of ten days. During those periods of interruption, the plant
continued to operate on kerosene.
Pricing: Bayonne Venture is required to pay a monthly charge per MMBtu of
gas equal to the sum of:
- PSE&G's estimated average commodity cost of gas at the sources of the
gas;
- PSE&G's estimated interstate pipeline commodity charges;
- 50% of PSE&G's estimated interstate pipeline demand charges; and
- PSE&G's local distribution charge.
The average price of gas under the PSE&G CIG in 1998 was $2.978 per MMBtu.
Bayonne Operation and Maintenance Agreement. General Electric operates and
maintains the Bayonne facility pursuant to an operations and maintenance
agreement with a twelve year term that began in 1997. Bayonne Venture has a
right to terminate the Bayonne agreement upon 180 days' notice and the payment
of specified amounts at the end of each of the fourth and seventh project years
and upon 180 days' notice at the end of the tenth project year.
Bayonne Site Lease Agreement. Bayonne Venture leases the site for the
Bayonne facility from IMTT-Bayonne and Bayonne Industries, Inc. The initial term
of the Bayonne site lease is 20 years from May 22, 1986. After the expiration of
the initial term, the Bayonne site lease will automatically renew for two
succeeding terms, the first for two years and the second for 10 years, unless
Bayonne Venture elects to terminate the lease upon nine months' notice. Base
rent for the Bayonne facility is pre-paid for 20 years. The Bayonne site lease
provides Bayonne Venture with both a leasehold estate in the Bayonne site and
non-exclusive easements over other portions of Bayonne Industries' property for
various interconnections to the Bayonne facility.
COMPETITION
Our facilities sell power pursuant to long-term agreements with
investor-owned utilities in New York and New Jersey. Because of the terms of the
power purchase agreements for the facilities, our revenues are not significantly
impacted by competition from other sources of generation. The power generation
industry is rapidly evolving, however, and regulatory initiatives have been
adopted at the federal level and in both New York and New Jersey aimed at
increasing competition in the power generation business. As a result, it is
likely that when the power purchase agreements expire over the period of
2008-2017, the facilities will be required to compete in a significantly
different market in which operating efficiency and other economic factors will
determine success. We are likely to face intense competition from generation
companies throughout the region as well as from the wholesale power markets. See
"Regulation -- Federal Energy Regulation" and "-- State Energy Regulation."
EMPLOYEES
We have three officers who are responsible for the day-to-day management of
our affairs. Our company has approximately 30 employees in total. Upon the
request of our management, Enron may provide tax,
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human resource, legal, office space, cash management, information technology,
payroll and employee benefit related services pursuant to our corporate services
agreement with Enron. See "Our Management -- Corporate Services Agreement."
Under the Linden, Camden and Bayonne O&M agreements, General Electric operates
and maintains the facilities and manages all aspects of their operations.
INSURANCE
We have a comprehensive insurance program underwritten by recognized
insurance companies licensed to do business in the State of New Jersey, which
has been reviewed by an independent insurance consultant. The insurance program
includes:
- commercial general public liability, automobile liability and excess
liability insurance;
- property insurance, including "all risks" property damage (including
boiler and machinery); and
- 12 month business interruption insurance.
Limits and deductibles in respect of these insurance policies are comparable to
those carried by other electric generating facilities of similar size.
LITIGATION
Our subsidiaries are involved in or threatened with other various legal
proceedings from time to time arising in the ordinary course of business. We do
not believe that any liability arising from any such current proceedings will
have a material adverse effect on our consolidated results of operations or
financial position.
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REGULATION
Our Company is subject to complex energy, environmental and other laws and
regulations at the federal, state and local levels in connection with the
ownership and operation of the facilities. Federal laws and regulations govern
transactions by electrical and gas utility companies, the types of fuel which
may be utilized by an electric generating plant, the type of energy which may be
produced by such a plant and the ownership structure of a plant. State utility
regulatory commissions may examine the prudence of the rates and, in some
instances, other terms and conditions under which public utilities purchase
electric power from independent producers and approve the rates for sale of
retail electric power. Energy producing projects also are subject to federal,
state and local laws and administrative regulations which govern the emissions
and other substances produced, discharged or disposed of by a plant and the
geographical location, zoning, land use and operation of a plant.
FEDERAL ENERGY REGULATION
Public Utility Regulatory Policies Act of 1978 and implementing regulations
An electricity generating project must be a QF under FERC regulations in
order to take advantage of certain rate and regulatory incentives provided by
PURPA. PURPA exempts owners of all qualifying cogeneration facilities from PUHCA
regulation based on the ownership and operation of a QF, and exempts most
categories of QFs from most provisions of the Federal Power Act (the "FPA") and,
except under certain limited circumstances, state laws concerning rate or
financial regulation. We believe that each of the facilities currently meets the
requirements under PURPA for QF status.
PURPA provides two primary benefits to owners of QFs. First, QFs generally
are relieved of compliance with extensive federal, state and local regulations
that control the organizational and financial structure of an entity that owns
or operates an electric generating plant and the prices and terms on which
electricity may be sold by the plant to a wholesale purchaser. Secondly, FERC's
regulations promulgated under PURPA require that electric utilities purchase
needed electricity generated by QFs at a price based on the purchasing utility's
"avoided cost" and that the utility sell back-up power to the QF on a
non-discriminatory basis. The term "avoided cost" is defined as the incremental
cost to an electric utility of electric energy or capacity, or both, which, but
for the purchase from QFs, such utility would generate for itself or purchase
from another source. FERC regulations also permit QFs and utilities to negotiate
agreements for utility purchases of power at rates that differ from the
utility's avoided cost. Due to the decrease in energy prices in comparison to
energy prices in the 1980s, when many PURPA avoided cost contracts were
established, many existing QF contracts provide for avoided costs that are
considerably higher than the cost of power available from other sources.
The FERC and the federal appellate courts have rejected utility efforts to
reduce the prices in QF contracts unilaterally, without the consent of the QF
owner. In Freehold Cogeneration Associates, L.P. v. Board of Regulatory
Commissioners of the State of New Jersey et. al., 44 F.3d 1179 (3d Cir. 1995),
cert. denied, 516 U.S. 815 (1995), a ruling which the U.S. Supreme Court
declined to review, the U.S. Court of Appeals for the Third Circuit held that a
state regulatory commission is preempted by PURPA from lowering the rates for
purchases from a QF in a contract that the state commission had previously
approved. Similarly, in New York State Electric & Gas Corp., 71 FERC para.
61,027 (1995), order denying reconsideration, 72 FERC para. 61,067 (1995),
dismissed, 117 F.3d 1473 (1997), the FERC rejected a request by a utility that
the FERC hold that above-current market rates established in contracts between
QFs and a utility violate PURPA. The FERC held that its regulations do not
prohibit rates based on projected avoided costs where the rates subsequently
differ from actual avoided costs at the time of delivery and stated that it
would not disturb QF contracts if the contracts were not challenged as exceeding
avoided costs at the time they were signed.
In order to be a QF, a cogeneration facility must produce not only
electricity but also useful thermal energy for use in an industrial or
commercial process for heating or cooling applications in certain minimum
proportions to the facility's total energy output and must meet certain energy
efficiency standards. A QF also must not be more than 50% owned by an electric
utility company or by an electric utility holding company, or a subsidiary of
such a utility or holding company or any combination thereof. In the case of
partnerships, joint ventures and limited liability companies, the FERC has
defined "ownership" to mean that a utility may not
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receive more than 50% of the stream of economic benefits from the operation of
the QF or possess more than 50% control of the QF. The FERC has interpreted
"control" to mean the ability unilaterally to alter the "stream of benefits" or
enter into QF-related contracts with affiliates. Under the FERC's PURPA
regulations, a holding company that is exempt from PUHCA regulation pursuant to
Section 3(a)(1) of PUHCA is considered a "utility" for purposes of the FERC's
PURPA restrictions on utility ownership. Upon Enron's 1997 acquisition of
Portland General Corp. and its subsidiary Portland General Electric Co., Enron
became a holding company exempt under Section 3(a)(1) of PUHCA and a "utility"
for purposes of the FERC's PURPA ownership regulations. Consequently, the
aggregate of Enron's and any other utilities' ownership interest in a QF cannot
exceed 50%.
Certain factors necessary to maintain QF status are subject to risks
outside our control. For example, loss of a thermal energy customer or failure
of a thermal energy customer to take required amounts of thermal energy from a
cogeneration facility that is a QF could cause the facility to fail to meet
requirements regarding the level of useful thermal energy output. Upon the
occurrence of such an event, we would seek to replace the thermal energy
customer or find another use for the thermal energy which meets PURPA's
requirements, but we cannot assure you that this would be possible.
If one of the plants in which we have an interest should lose its status as
a QF, the plant would no longer be entitled to the exemptions from PUHCA, the
FPA and state law afforded to QFs under PURPA. Loss of such exemptions could:
- trigger certain rights of termination under power purchase agreements;
- subject the plant owner to rate and financial regulation as a public
utility under the FPA and state law; and
- if the plant owner were not an exempt wholesale generator ("EWG"), result
in our company inadvertently becoming a public utility holding company by
virtue of our owning more than 10% of the voting securities of, or
controlling, a facility that would no longer be exempt from PUHCA.
Loss of QF status might also trigger defaults under covenants to maintain QF
status in financing agreements and under the indenture. If a plant in which we
have an interest should lose its status as a QF and the FERC were not to waive
its QF regulations, FERC would require our venture that owns the plant to refund
to the utility power purchaser, an amount equal to the difference between the
contract rate and the utility's hourly marginal variable cost, plus interest,
for the period in which QF status was not retained and power sales were made at
the contract rate. If a power purchase agreement expressly provides for a rate
to apply in circumstances in which the facility is no longer a QF, as do some of
the power purchase agreements for the facilities, the FERC would permit that
rate to be charged, if it is shown that the contract "is the product of market
forces." If such a showing cannot be made, FERC precedent indicates that the
FERC would establish a rate based on the facility's cost-of-service, capped at
the contract rate. See "Our Business -- The Linden Facility -- Linden Power
Purchase Agreement," "-- The Camden Facility -- Camden Power Purchase Agreement"
and "-- The Bayonne Facility -- Bayonne Power Purchase Agreements."
Under current FERC policy, the FERC will continue to make available the
exemptions from PUHCA, the FPA, and state utility regulation available to a QF
that fails to satisfy the applicable standards unless the non-compliance was
marked by long duration or frequent occurrence. In addition, under the Energy
Policy Act of 1992, if the entity that owns a plant can be qualified as an EWG,
the entity will be exempt from PUHCA even if it does not qualify as a QF.
Therefore, another response to the loss or potential loss of QF status is to
qualify the plant as an EWG. Each of the facilities has been qualified as an
EWG. EWG status, however, may not address the potential default issues relating
to maintenance of QF status under power and steam purchase agreements and
financing instruments. EWGs must also apply to the FERC for rate approval for
wholesale transactions and are not permitted to make retail sales of electricity
(such as to the thermal energy customer) unless the facility is also a QF.
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Public Utility Holding Company Act of 1935
Under PUHCA, any corporation, partnership or other legal entity which owns
or controls 10% or more of the outstanding voting securities of a "public
utility company" or a company which is a "holding company" for a public utility
company is subject to registration with the Commission and regulation under
PUHCA, unless eligible for an exemption from regulation under PUHCA. A holding
company of a public utility company that is subject to registration is required
by PUHCA to limit its utility operations to a single integrated utility system
and to divest any other operations not functionally related to the operation of
that utility system. Approval by the SEC is required for nearly all important
financial and business dealings of a registered holding company. Most QFs are
not public utility companies under PUHCA. The Energy Policy Act of 1992, among
other things, amends PUHCA to allow EWGs, under certain circumstances, to own
and operate generation facilities without subjecting the owner or operator to
registration or regulation under PUHCA.
Federal Natural Gas Transportation Regulation
Each of our three power plants is fueled with natural gas. The cost of
natural gas is ordinarily the largest expense (other than debt costs) of a
venture and is critical to the venture's economics. The risks associated with
using natural gas can include:
- the need to arrange transportation of the gas from great distances,
including obtaining removal, export and import authority if the gas is
transported from Canada;
- the possibility of interruption of the gas supply or transportation
(depending on the quality of the gas reserves purchased or dedicated to
the plant, the financial and operating strength of the gas supplier and
whether firm or non-firm transportation is purchased); and
- obligations to take a minimum quantity of gas or pay for it (i.e.,
take-or-pay obligations).
Pursuant to the Natural Gas Act, FERC has jurisdiction over the
transportation and storage of natural gas in interstate commerce. With respect
to most transactions that do not involve the construction of pipeline
facilities, regulatory authorization can be obtained on a self-implementing
basis. However, pipeline rates for such services are subject to continuing FERC
oversight.
Proposed Deregulation
The United States Congress is considering proposed legislation which would
repeal PURPA entirely or at least repeal the obligation of utilities to purchase
energy from QFs at avoided costs. Importantly, virtually all of the pending
proposals to repeal PURPA would do so prospectively. That is, they would
"grandfather" or not impair or invalidate existing QF contracts.
Various bills also have proposed the repeal of PUHCA which would eliminate
some of the adverse consequences flowing from a loss of QF status, but also
would likely result in increased competition in the power generation business
and an acceleration of electric industry restructuring.
Many state legislatures and state utility commissions have already
implemented, and others are currently studying, a number of proposals to
restructure the electric retail industry in the United States. Such
restructuring could permit "customer choice" for retail customers. Retail
customers would be given the opportunity to choose their electricity supplier,
thus creating a more competitive energy market. In April 1996, the FERC issued
Order No. 888, which requires utilities to offer eligible wholesale transmission
customers non-discriminatory open access on utility transmission lines on a
comparable basis to the utilities' own use of the lines. Order No. 888 has been
the subject of rehearing and now is undergoing judicial review. Order No. 888
endorses the recovery of legitimate and verifiable "stranded costs" (fixed costs
that will be "stranded" by the ability of wholesale customers to choose new
electric power suppliers). These may include the costs utilities are required to
pay under many QF contracts which some utilities view as excessive when compared
with current market prices. Many utilities are therefore seeking ways to lower
these QF contract prices or rescind the contracts altogether out of concern that
their shareholders will be required to bear all or part of such "stranded
costs." Some utilities have engaged in litigation against QFs to achieve these
ends. In addition,
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future electric rates may be deregulated in a restructured United States
electric industry, and increased competition may result in lower rates and less
profit for sellers of electricity in the United States. The effect of any such
restructuring cannot be fully predicted.
The Clinton administration has announced a proposal to expand retail
competition in the United States electricity markets by the year 2003 under a
plan that would allow consumers to choose which electric company would supply
power to their residences and businesses. Under the proposal, states would be
required to open their markets to retail competition by January 1, 2003.
However, a state could "opt out" of retail competition, thus not allowing retail
customers a choice of supplier if it believes its consumers would be better off
under the status quo or an alternate state-crafted plan. In the event that a
particular state were to elect to maintain the status quo, it would be required
to hold public hearings to explain why competition in the electricity market in
that state would not be in the interests of its residents. A number of states
already have begun the process of opening their electricity markets to
competition. The administration's proposal would allow electric utilities to
recover reasonable "stranded costs," funds invested in nuclear and other
high-cost power plants (including contracts with QFs) that no longer may be
economically viable to operate in a competitive market. Individual states would
determine the amounts of the stranded costs that utilities would be permitted to
recover. The plan also attempts to address environmental concerns by requiring
that 7.5% of the electricity sold in the United States be generated from
renewable energy sources such as the wind or sun by 2010. In addition, the
proposal would supplement an Environmental Protection Agency proposal to limit
power plant emissions of nitrogen oxide (NOx) by giving EPA authority to
establish a NOx trading program. EPA would permit power plants to trade
pollution credits for nitrogen oxides, which combine with other air pollutants
to form ground-level ozone. There can be no assurance that such proposed
legislation will be enacted or, if enacted, as to the effect that it may have on
the power generation industry or our business.
Over the last four years, Congress has considered various pieces of
legislation to restructure the electricity industry, including those described
above, that would require customer choice, repeal PURPA, repeal PUHCA, and the
like. The debate is likely to continue, and perhaps intensify, during the
current Congress. The prospects for the enactment of any new legislation are
uncertain. The effect of enacting any such legislation cannot be predicted with
any degree of certainty. It seems likely that the existing PURPA contracts would
be given favorable treatment in any successful legislative proposal. The
effects, of any possible PUHCA amendments are more difficult to predict. They
could conceivably have a material adverse effect on our company. But it seems
more likely that Congress would want to encourage increased competition in
generation, rather than discourage it. Thus, it can be expected to deal in a
positive way with any likely transitional issues stemming from PUHCA repeal in
an effort to encourage new generating capacity, and new generation owners,
rather than to discourage new competitors.
STATE ENERGY REGULATION
State public utility commissions ("PUCs") have historically had broad
authority to regulate both the rates charged by, and the financial activities
of, electric utilities and to promulgate regulations for implementation of
PURPA. Since a power sales contract becomes a part of a utility's cost structure
(generally reflected in its retail rates), the utility's costs associated with
power sales contracts with independent electricity producers are potentially
under the regulatory purview of PUCs. If a PUC has approved the process by which
a utility secures its power supply, it is generally inclined to "pass through"
the expense associated with an independent power contract to the utility's
retail customers. In addition, retail sales of thermal energy by an independent
power producer may be subject to PUC regulation depending on state law.
Independent power producers which are not QFs under PURPA are considered to be
public utilities in many states and are subject to broad regulation by a PUC,
ranging from the requirement of a certificate of public convenience and
necessity to regulation of organizational, accounting, financial and other
corporate matters. States may assert jurisdiction over the location and
construction of electric generating facilities including QFs and, with the
exception of QFs, over the issuance of securities and the sale or other transfer
of assets by these facilities.
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New Jersey
On April 30, 1997, NJBPU issued an order adopting its Final Report in the
Energy Master Plan process entitled "Restructuring the Electric Power Industry
in New Jersey: Findings and Recommendations." The principal goal of NJBPU
according to its Final Report was to open the electric generation market to
increased competition and thereby reduce generation and production costs. On
July 15, 1997, each of New Jersey's four electric utility companies filed a
restructuring plan, an unbundled rate filing, and a stranded costs filing with
NJBPU pursuant to the requirements of the NJBPU's Final Report. On September 14,
1998, legislation was introduced in the New Jersey Assembly to authorize the
NJBPU to permit competition in the New Jersey energy market. That legislation,
which was adopted by the New Jersey legislature on January 28, 1999 and signed
by the governor on February 7, 1999, provides that August 1, 1999 will be the
starting date for full retail choice, with full implementation no earlier than
June 1 but no later than August 1.
NJBPU concluded in its Final Report that electric utilities "should be
given an opportunity to recover from customers the costs associated with past
financial commitments made by the utility for the purpose of procuring
generating supplies to serve the retail electric customers in their service
territory." NJBPU also concluded, however, "there neither can nor should be a
guarantee provided for 100% recovery of stranded costs." These pronouncements
remain subject to current and future regulatory proceedings and actions by the
New Jersey legislature.
NJ Stranded Costs. The New Jersey legislation includes provisions for the
determination and recovery of stranded costs of electric utilities. Stranded
costs are defined by the legislation in Section 13(c) as "the amount by which
the net cost of an electric public utility's electric generating assets or
electric power purchase commitments, as determined by NJBPU pursuant to this
Act, exceeds the market value of those assets or contractual commitments in a
competitive supply market place and the costs of buydowns or buyouts of power
purchase contracts." NJBPU seeks to address the stranded costs that may be
created as a result of its decision "to open the power generation market up to
competition." NJBPU has determined to "limit the eligibility for stranded cost
surcharge recovery to costs related directly to utility power supply" including,
"utility generation plant, long and short-term power purchase contracts with
other utilities and long-term power purchase contracts with non-utility
generators." Stranded costs arising from the power purchase agreements
pertaining to the facilities discussed herein would appear to qualify for
coverage in the latter category.
The stranded costs filing of each utility will determine the specific
initial level of non-mitigatable stranded costs to be recovered by each utility.
Each of these stranded costs filings has been transmitted to the Office of
Administrative Law for evidentiary hearings. The JCP&L hearing commenced on
December 2, 1997. On May 19, 1999, the NJBPU approved a settlement which
provides for the recovery by JCP&L of $525 million of stranded costs associated
with above-market non-utility generator ("NUG") contracts. The PSE&G hearing
commenced on July 23, 1997. A partial settlement among Enron, PSE&G, the
independent power producer group, certain commercial consumers, a labor union
and certain other parties was approved by the NJBPU with minor modifications in
late April 1999. The settlement provides for the full and timely recovery of the
outer market costs with regard to the NUG contracts. A notice of appeal was
filed in October 1999 by a group of New Jersey industrial intervenors. The
notice does not make any reference to the recovery of the above-market costs of
the NUG contracts.
NJ Above Market Power Purchase Contracts. The JCP&L PPA received initial
regulatory approval on December 16, 1985 and final approval of the contract
amendment on December 8, 1986. The PSE&G PPA received regulatory approval on
July 5, 1989. The Camden PPA (with PSE&G) received initial approval on June 29,
1989 and final approval of contract amendments on February 27, 1991. The
approval orders found all contracts reasonable, fairly negotiated and prudent
through the term of the contract and permit recovery of all costs through the
companies' fuel clauses. Both PSE&G contracts contain a section entitled "Repeal
of PURPA" explaining the process for resolution of possible disallowance of
costs by NJBPU. NJBPU stated in its Final Report that utilities must and should
"take all available measures to mitigate stranded costs caused by the
introduction of retail competition," including the "buy-out or renegotiation of
existing purchased power contracts with non-utility generators." NJBPU has
acknowledged that it appears to lack jurisdiction to order modification of NUGs'
contracts and has determined that the "non-mitigatable costs associated with all
such
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contracts which have previously been reviewed and approved by NJBPU,
notwithstanding the specific date, must be eligible for stranded cost recovery."
NJBPU based its determination that it lacks jurisdiction to order
modification of NUGs' contracts on the decision of the Third Circuit Court of
Appeals in Freehold, which held that:
Once the [NJBPU] approved the power purchase agreement between Freehold and
JCP&L, on the grounds that the rates were consistent with avoided cost, any
action or order by the [NJBPU] to reconsider its approval or to deny the
passage of those rates to JCP&L consumers under purported state authority
was preempted by federal law. (Id., Freehold 44 F.3d at 1194).
NJBPU has interpreted the Freehold decision to mean that without
legislative action at the federal or state level, a state regulator has minimal
ability to subsequently adjust the pricing in such NUGs' contracts once
approved.
Notwithstanding NJBPU's acknowledgment that it appears to lack jurisdiction
to order modification of non-utility generators' contracts under current law, it
has "strongly encouraged all stakeholders to renew their efforts to explore all
reasonable means to mitigate independent power producer's contracts." NJBPU
further stated that the appropriate regulatory and legislative bodies may "wish
to review this issue to provide an added impetus for parties to these contracts
to seriously consider mitigation." JCP&L and PSE&G have reported to NJBPU that
they intend to pursue efforts to mitigate their above-market costs for NUG power
purchase agreements on a voluntary basis.
In conclusion, while New Jersey regulators have provided for recovery of
the "above market" or stranded costs associated with the power purchase
agreements, there will continue to be public scrutiny of those costs and
pressure to renegotiate the power purchase agreements, using all reasonably
available measures.
New York
Retail Electricity. The NYPSC has been conducting a generic "competitive
opportunities" proceeding to determine how to introduce competition into retail
electricity markets in New York. On May 20, 1996, the NYPSC issued a policy
statement in connection with that proceeding in which it endorsed a fundamental
restructuring of the electric industry in New York State. The NYPSC's goals, as
stated in its policy statement, are lower prices for consumers from competition,
increased choice of suppliers and services for customers, information
dissemination to allow educated consumer decisions, maintenance of the
reliability of the electric system, continuation of social/conservation
programs, mitigation of market power and continuation of the obligation to serve
customers. Pursuant to this policy, the NYPSC directed all New York utilities,
including Con Ed, to file proposed transition plans that address market
structure issues, the restructuring of their corporate organization, operational
constraints, a schedule allowing retail customers to choose an alternative
supplier of electricity, a rate plan for the duration of the transition period
and for recovering stranded costs.
Con Ed made such a filing on October 1, 1996. On March 13, 1997, Con Ed and
the NYPSC staff entered into a Settlement Agreement. Certain aspects of the
Settlement Agreement, which was approved by the NYPSC by order issued on
September 23, 1997, are summarized below. The summary of the Settlement
Agreement is qualified by reference to the actual terms thereof, copies of which
are publicly available as an attachment to the order.
The Settlement Agreement provides for a transition to a competitive
electric market by instituting "retail access" over a five-year period, a
five-year rate plan for the transition, a reasonable opportunity to recover
stranded costs, the divestiture by Con Ed of at least 50% of its New York City
fossil-fueled generating capacity (Con Ed subsequently agreed to divest 100% of
this capacity), and, subject to shareholder and other approvals that were
subsequently obtained, a corporate reorganization into a holding company
structure.
With respect to contracts to purchase electricity from a NUG, like Linden
Venture, the Settlement Agreement provides an incentive for Con Ed to mitigate
NUG costs during the transition period. Con Ed will be permitted to retain the
full reductions in fixed NUG costs during the five-year period and 30% of
reductions in variable NUG costs for a period of 18 months resulting from
renegotiation, buyout or buydown of NUG
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contracts exclusive of financing related savings from securitization. Con Ed
will be permitted a reasonable opportunity to recover the amount by which actual
costs of its purchases from NUGs exceed the market value after the transition
period. Any potential disallowance after the transition period will be limited
to the lower of 10% of the above-market costs or $300 million. The potential
disallowance will be offset by NUG contract mitigation achieved by Con Ed after
the beginning of the transition period and 10% of the gross proceeds from
generating unit sales to third parties. Con Ed will be permitted a reasonable
opportunity to recover any costs subject to disallowance that are not offset by
these two factors if it makes good faith efforts in implementing provisions of
the Settlement Agreement leading to the development of a competitive electric
market in its service territory. We believe that Con Ed is likely to
successfully offset all or a very substantial portion of its potential $300
million disallowance based upon recently completed NUG restructurings and the
proceeds from recently completed divestiture auctions. While stranded cost
recovery relating to the Linden PPA is not guaranteed, the Settlement Agreement
and Con Ed's actions and announcements to date appear consistent with our
expectations that Con Ed will achieve full recovery of such costs.
Linden Venture received initial regulatory approval on September 12, 1989
and final approval of contract amendments on May 9, 1991, pursuant to a Con Ed
petition for approval. Approval for the contract and contract amendments was
supported by affirmative recommendations from the NYPSC staff. The approval was
based on estimates that electricity purchased pursuant to the contract would be
less costly than estimates of Con Ed's long-run avoided cost. The NYPSC
authorized Con Ed to recover "all direct purchase costs incurred pursuant to the
Linden PPA through the utility's fuel adjustment clause."
To the extent Linden Venture operates in conformance with the Linden PPA,
Con Ed is entitled to full cost recovery without any subsequent regulatory
requirements. Nevertheless, there are ongoing investigations into certain
aspects of NYPSC regulation of NUG's in New York. The NYPSC has granted
utilities permission to closely monitor the QF status of plants having contracts
with New York utilities. This policy was challenged at the FERC, which affirmed
it with certain modifications. There is also still pending before the NYPSC a
request by the utilities for a clarification of their right to suspend purchases
from QFs due to operational circumstances (i.e., light load), when purchases
from QFs will result in costs greater than those which the utility would incur
if it did not make such purchases because of the inability to curtail other
"must-run" units. However, Con Ed specifically waived this right in the second
amendment to the Linden PPA.
Retail Natural Gas. In November 1998, the NYPSC issued a policy statement
pursuant to which it will encourage local distribution companies to exit the
business of selling natural gas to end users and instead become
transportation-only companies over the next three to seven years, subject to a
New York statutory provision that all end users have access to a "provider of
last resort." As noted in the discussion of the Linden PPA, Con Ed is required
to pay the actual fuel costs attributable to electricity actually delivered from
the Linden facility. Con Ed's fuel cost payment is adjusted for changes in Con
Ed's annual weighted average cost of gas since 1989, with Linden Venture either
absorbing excess costs or receiving an incentive payment for cost savings. If,
pursuant to the NYPSC policy, Con Ed ceases selling gas or reduces its sales
significantly, Con Ed's annual weighted average cost of gas may be altered
significantly and in a manner that is difficult to predict. In such a
circumstance, Con Ed may seek to negotiate a new method for determining Con Ed's
responsibility for fuel costs under the Linden PPA.
ENVIRONMENTAL REGULATION
Our operations are subject to numerous federal, state, and local laws and
regulations governing the discharge of materials into the environment or
otherwise relating to environmental protection and restriction upon land use.
These laws and regulations primarily involve:
- the generation, handling, storage, transport, and disposal of hazardous
substances;
- the emission or discharge of air and water pollutants;
- the emission of noise from the facilities; and
- the implementation of safety and health standards with respect to our
facilities or the public or environment in general.
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In addition, these laws and regulations in many cases require us to secure
permits and other regulatory approvals with respect to its ongoing or planned
projects, which often triggers the need to comply with lengthy and complex
permitting or approval procedures, as well as impose ongoing reporting and
compliance obligations. Modified or renewed permits and authorizations may be
required for any physical or operational changes to our facilities. Failure to
comply with these applicable laws and regulations, including any permits or
authorizations required thereunder, may result in the assessment of
administrative, civil, and criminal penalties, imposition of cleanup costs and
liens, and, to a lesser extent, issuance of injunctions to limit or cease
operations. As discussed below, while we believe we are in substantial
compliance with applicable laws and regulations, there can be no assurance that
we will be able to obtain all necessary permits and approvals for proposed
projects or that compliance with new or changed environmental laws and
regulations would not have a material adverse effect on our results of
operations, financial condition, or competitive position.
Federal Clean Air Act (the "CAA")
Our operations are subject to the CAA and comparable state and local
requirements. As originally enacted, the CAA set guidelines for emission
standards for major pollutants (e.g., sulfur dioxide and oxides of nitrogen)
from newly built sources. Amendments to the CAA were adopted in 1990 which
contain provisions that attempt to reduce emissions from existing sources,
particularly previously exempted older power plants, and thus may result in
gradual imposition of certain pollution control requirements with respect to air
emissions from the operations of our facilities. We believe that all of our
plants are in compliance in all material respects with the applicable federal
and state performance standards under the CAA, the 1990 amendments, and
comparable state laws. In addition, the 1990 amendments to the CAA established
the Northeast Ozone Transport Region ("NEOTR") which required various states,
including New Jersey, to adopt more stringent controls on the pollutants that
contribute to the formation of low-level ozone (i.e., volatile organic compounds
and oxides of nitrogen). Pursuant to a 1994 Memorandum of Understanding between
the member states of the NEOTR, New Jersey has recently adopted regulations
implementing a region-wide plan for nitrogen oxide emissions. While our plants
are subject to this rule, and therefore subject to additional operating
requirements, we believe that the new rules do not have a material impact on our
ability to maintain our present level of operations.
Federal Clean Water Act (the "CWA")
Our operations are also subject to the CWA and analogous state laws
relating to the discharge of pollutants to surface and groundwaters. The CWA and
state laws also establish requirements for municipally-owned sewage treatment
plants, including pretreatment requirements for industrial users of those
plants. Local sewerage authorities also have established regulations governing
connections to and discharges into their sewer systems and treatment plants.
Pursuant to these laws and regulations, we are required to obtain permits for
the discharge of our wastewater and stormwater runoff and to develop and
implement spill prevention, control and countermeasure plans with respect to its
handling and storage of oil. We believe that we are in substantial compliance
with the requirements of the CWA and analogous state laws and that any
non-compliance would not have a material adverse effect on our company.
Resource Conservation and Recovery Act ("RCRA")
Our company generates wastes, including hazardous wastes, that are subject
to RCRA and comparable state statutes. RCRA regulates the generation, treatment,
storage, handling, transportation, and disposal of hazardous and non-hazardous
wastes. Moreover, the EPA and various state agencies have limited the approved
methods of disposal for certain hazardous and non-hazardous wastes. We believe
that we are in substantial compliance with RCRA and comparable state statutes,
and we do not expect the cost of disposal of the regulated wastes to be
material.
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"
or "Superfund")
CERCLA and similar state laws impose liability, without regard to fault or
the legality of the original conduct, on certain classes of persons that are
considered to have contributed to the release of a "hazardous
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substance" into the environment. These persons include the owner or operator of
the disposal site or sites where the release occurred and companies that
transported, disposed or arranged for the transport or disposal of the hazardous
substances found at the site. Persons who are or were responsible for releases
of hazardous substances under CERCLA may be subject to joint and several
liability for the costs of cleaning up the hazardous substances that have been
released into the environment and for damages to natural resources, and it is
not uncommon for neighboring landowners and other third parties to file claims
for personal injury and property damage allegedly caused by the hazardous
substances released into the environment. The New Jersey Spill Act imposes
similar liability under state law for discharges of hazardous substances,
including petroleum products and, under certain circumstances, authorizes the
collection of treble damages from a responsible party. As of the present time,
we believe that we are not subject to liability for any Superfund or New Jersey
Spill Act matters. We generate wastes, including hazardous wastes, that are
transported offsite for disposal at third party waste disposal sites, however,
and thus we cannot assure you that we will not incur liability under CERCLA or
the New Jersey Spill Act in the future.
We currently own or lease properties that for many years in the past have
been used for oil refining and/or storage activities or other industrial
purposes. Although we believe that we are currently utilizing operating and
disposal practices that are in substantial compliance with applicable
environmental laws and regulations, historical operating and disposal practices
on the properties by third parties not under our control may have resulted in
the disposal or release of hydrocarbons or other wastes upon the properties or
on or under other locations where such wastes have been taken for disposal.
These properties and the wastes disposed thereon may be subject to CERCLA, RCRA,
and analogous state laws including the New Jersey Spill Act. Under such laws, we
could be required to remove or remediate previously disposed wastes (including
wastes disposed of or released by prior owners or operators) or property
contamination (including groundwater contamination by prior owners or operators)
to prevent future contamination.
New Jersey Industrial Site Recovery Act ("ISRA")
Our acquisition of our interests in the facilities resulted in the
triggering of ISRA, obligating the sellers (as the parties who transferred their
legal interests in entities indirectly owning or operating properties qualifying
as "industrial establishments") to comply with requirements under ISRA. In
general, ISRA requires entities who transfer such legal interests to notify the
New Jersey Department of Environmental Protection ("NJDEP") of the triggering of
ISRA and to obtain NJDEP approval prior to the closing of any such transfer of
legal interests. In order to obtain NJDEP approval for a triggering event, the
responsible party must conduct a satisfactory investigation of the environmental
conditions of the industrial establishments and, if necessary, commit to
undertake appropriate remedial measures to address any contamination present at
the industrial establishments. The sellers obtained NJDEP approval for the
transfer of their legal interests in each of the facilities. Based on the
foregoing, we believe that we will not incur any material cost with respect to
ISRA as a result of the acquisition of our interests in the facilities.
Nevertheless, we cannot assure you that any imposition upon our company of ISRA
cleanup requirements due to future events that trigger ISRA would not have a
material adverse effect on us.
New Jersey Toxic Catastrophe Prevention Act ("TCPA")
The TCPA requires owners of facilities that use an "extraordinarily
hazardous substance" to prepare a comprehensive risk management plan pertaining
to its use of such substances. Our Bayonne facility is subject to these
requirements due to its use of anhydrous ammonia in its air pollution control
systems. Similarly, our Camden and Linden facilities are subject to the TCPA due
to their use of aqueous ammonia. We believe that we are in material compliance
with the TCPA requirements.
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OUR MANAGEMENT
We are a member managed limited liability company, which means that our
members are responsible for managing our affairs. Under our limited liability
company agreement, our Class A Members have the authority to manage our business
and affairs. Our executive officers and employees, who include former officers
and employees of the entities we acquired in the acquisition, are responsible
for the day-to-day activities of our company.
Our Class B Members do not have any authority to manage our company.
However, we must have the consent of all Class B Members (or their successors)
to:
- change our business purpose;
- change or create obligations of the other members under our debt
agreements; or
- cause us to merge or consolidate with another company.
EXECUTIVE OFFICERS
We currently have three officers who are appointed by ECP Holding Company
and may be removed by ECP Holding Company at any time. Our officers are
responsible for the day-to-day management of our affairs, including our general
administrative affairs and the operation and maintenance of the facilities in
accordance with annual budgets approved by ECP Holding Company.
Ross D. Ain, 52, has served as President, Business Development of our
company since February 1999. From November 1994 to January 1999, he served as an
executive officer of various companies affiliated with the Acquired Group, most
recently as Vice Chairman of Cogen Technologies Generating Company. Prior to
November 1994, Mr. Ain was engaged in the private practice of law in Washington
D.C. as a partner with the firm of Van Ness Feldman, a Professional Corporation.
Joseph M. Bollinger, 52, has served as President, Generating of our company
since February 1999. From June 1986 to January 1999, he served as an executive
officer of various companies affiliated with the Acquired Group, most recently
as President of Cogen Technologies Generating Company. Prior to June 1986, Mr.
Bollinger held positions in engineering and project management with GE.
Robert J. Licato, 36, has served as Vice President -- Operations and
Secretary of our company since April 1999. From February 1992 to January 1999,
he served in various management positions of companies affiliated with the
Acquired Group, most recently as Director of Operations Support/Projects. Prior
to February 1992, Mr. Licato held positions in engineering and management with
Con Ed.
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with Mr. Ain and Mr. Bollinger.
Each of these agreements provides for an initial term of one year from the
closing of our acquisition of the facilities and for a renewal term of three
years following the expiration of the initial term.
CORPORATE SERVICES AGREEMENT
At our request, Enron may provide certain corporate, administrative and
support services to our company and our subsidiaries under a corporate services
agreement. Fees paid under the agreement will be provided on a cost-plus basis,
which we believe will approximate the fair market value of the service actually
provided.
Either party may reduce the level of any of the services provided or
terminate the agreement upon 30 days' prior written notice.
RELATED PARTY TRANSACTIONS
Our company and our subsidiaries may from time to time enter into contracts
or other business relationships with one or more of our members or their
affiliates. For example, we expect that Enron will assist
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us in purchasing natural gas for our power plants and in arranging for gas
transportation service. Enron may provide backup fuel management, power
marketing or other services to us and our subsidiaries. In addition, Enron has
provided credit support in the form of an undertaking which eliminates our
obligation to fund a debt service reserve account (as described in "Description
of the New Notes"), and Enron has also provided several letters of credit for
our benefit. Enron and El Paso Energy have agreed to share in the costs of
providing this credit support, for which we pay Enron and El Paso Energy a fee.
Our limited liability company agreement provides that the terms of such
transactions be comparable or at least as favorable to us as the terms of arm's
length transactions among unaffiliated parties and that the terms of the
transaction be approved by all Class A Members. In addition, the indenture
provides that we may not, and may not permit any subsidiary to, enter into any
material transaction or arrangement with any affiliate, whether or not in the
ordinary course, that is not on terms and conditions at least as favorable as
would be obtained in a comparable arm's length transaction with a person or
entity other than an affiliate, as determined in good faith by our managing
member.
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DESCRIPTION OF THE NEW NOTES
GENERAL
We will issue the new notes under the indenture between our company and The
Bank of New York, as trustee, dated as of April 20, 1999 (the "Issue Date"). You
can find the definitions of certain terms used in this section under "-- Certain
Definitions." The following description is a summary of the material provisions
of the indenture. It does not restate the indenture in its entirety. We urge you
to read the indenture because it and not this description defines your rights as
holders of the new notes. You may obtain a copy of the indenture from us. As
used in this section only, references to "we," "us" and "our company" exclude
our Subsidiaries.
Each series of the outstanding notes and the new notes will constitute a
single class of debt securities under the indenture. If the exchange offer is
consummated, holders of outstanding notes who do not exchange their outstanding
notes for new notes of the same series will vote together with holders of the
new notes for all relevant purposes under the indenture. Accordingly, in
determining whether the required holders have given any notice, consent or
waiver or taken any other action permitted under the indenture, any outstanding
notes that remain outstanding after the exchange offer will be aggregated with
the new notes of the same series, and the holders of the outstanding notes and
the new notes will vote together as a single class. As used in this section, the
term "notes" refers to both the outstanding notes and the new notes. All
references in this prospectus to specified percentages in aggregate principal
amount of the outstanding notes means, at any time after the exchange offer is
consummated, the percentages in aggregate principal amount of the outstanding
notes and the new notes collectively then outstanding.
You may transfer and exchange notes at the office of the registrar and any
co-registrar. The Bank of New York, the trustee under the indenture, is the
initial paying agent and registrar for the notes. We will issue the new notes
only in fully registered form, without coupons, in denominations of $1,000 and
any integral multiple thereof (except for the 2008 notes, the exchange of which
will reflect partial payments of principal on June 30, 1999 and September 30,
1999). We may require holders to pay any transfer tax or other similar
governmental charge applicable to transfers and exchanges.
PRINCIPAL, MATURITY AND INTEREST
We will issue the new notes in three series limited to the following
respective total principal amounts: $279,939,040 6.737% Series B Senior Secured
Notes due 2008; $236,000,000 7.066% Series B Senior Secured Notes due 2012; and
$318,000,000 7.536% Series B Senior Secured Notes due 2017. The 2008 new notes
will mature on March 31, 2008; the 2012 new notes will mature on March 31, 2012;
and the 2017 new notes will mature on June 30, 2017.
We will pay interest on the new notes quarterly on each March 31, June 30,
September 30 and December 31, commencing December 31, 1999 (the "Payment
Dates"). Interest on the new notes will accrue from the most recent date to
which interest has been paid on the old notes. Interest will be computed on the
basis of a 360-day year comprising twelve 30-day months.
Principal payments on the notes will continue to be made on the Payment
Dates in accordance with the amortization schedule listed below. The percentages
of the original principal amount payable on each Payment Date are:
<TABLE>
<CAPTION>
2008 2012 2017
PAYMENT DATE NOTES NOTES NOTES
- ------------ ------- ------- -------
<S> <C> <C> <C>
June 30, 1999............................................... 4.098% -- --
September 30, 1999.......................................... 1.328% -- --
December 31, 1999........................................... 1.352% -- --
March 31, 2000.............................................. 1.051% -- --
June 30, 2000............................................... 1.071% -- --
September 30, 2000.......................................... 1.090% -- --
</TABLE>
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<TABLE>
<CAPTION>
2008 2012 2017
PAYMENT DATE NOTES NOTES NOTES
- ------------ ------- ------- -------
<S> <C> <C> <C>
December 31, 2000........................................... 1.110% -- --
March 31, 2001.............................................. 1.670% -- --
June 30, 2001............................................... 1.700% -- --
September 30, 2001.......................................... 1.732% -- --
December 31, 2001........................................... 1.763% -- --
March 31, 2002.............................................. 2.862% -- --
June 30, 2002............................................... 2.914% -- --
September 30, 2002.......................................... 2.968% -- --
December 31, 2002........................................... 3.021% -- --
March 31, 2003.............................................. 2.567% -- --
June 30, 2003............................................... 2.614% -- --
September 30, 2003.......................................... 2.662% -- --
December 31, 2003........................................... 2.710% -- --
March 31, 2004.............................................. 2.215% -- --
June 30, 2004............................................... 2.256% -- --
September 30, 2004.......................................... 2.297% -- --
December 31, 2004........................................... 2.338% -- --
March 31, 2005.............................................. 3.594% -- --
June 30, 2005............................................... 3.659% -- --
September 30, 2005.......................................... 3.726% -- --
December 31, 2005........................................... 3.793% -- --
March 31, 2006.............................................. 3.742% -- --
June 30, 2006............................................... 3.811% -- --
September 30, 2006.......................................... 3.879% -- --
December 31, 2006........................................... 3.950% -- --
March 31, 2007.............................................. 3.769% -- --
June 30, 2007............................................... 3.837% -- --
September 30, 2007.......................................... 3.907% -- --
December 31, 2007........................................... 3.978% -- --
March 31, 2008.............................................. 4.966% 1.861% --
June 30, 2008............................................... -- 8.237% --
September 30, 2008.......................................... -- 8.393% --
December 31, 2008........................................... -- 8.552% --
March 31, 2009.............................................. -- 4.365% --
June 30, 2009............................................... -- 4.448% --
September 30, 2009.......................................... -- 4.532% --
December 31, 2009........................................... -- 4.617% --
March 31, 2010.............................................. -- 5.082% --
June 30, 2010............................................... -- 5.178% --
September 30, 2010.......................................... -- 5.277% --
December 31, 2010........................................... -- 5.376% --
March 31, 2011.............................................. -- 6.947% --
June 30, 2011............................................... -- 7.079% --
September 30, 2011.......................................... -- 7.213% --
December 31, 2011........................................... -- 7.350% --
March 31, 2012.............................................. -- 5.493% 1.339%
June 30, 2012............................................... -- -- 5.521%
September 30, 2012.......................................... -- -- 5.631%
December 31, 2012........................................... -- -- 5.744%
March 31, 2013.............................................. -- -- 3.510%
June 30, 2013............................................... -- -- 3.580%
</TABLE>
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<TABLE>
<CAPTION>
2008 2012 2017
PAYMENT DATE NOTES NOTES NOTES
- ------------ ------- ------- -------
<S> <C> <C> <C>
September 30, 2013.......................................... -- -- 3.652%
December 31, 2013........................................... -- -- 3.725%
March 31, 2014.............................................. -- -- 3.623%
June 30, 2014............................................... -- -- 3.696%
September 30, 2014.......................................... -- -- 3.770%
December 31, 2014........................................... -- -- 3.845%
March 31, 2015.............................................. -- -- 4.023%
June 30, 2015............................................... -- -- 4.103%
September 30, 2015.......................................... -- -- 4.186%
December 31, 2015........................................... -- -- 4.270%
March 31, 2016.............................................. -- -- 5.821%
June 30, 2016............................................... -- -- 5.938%
September 30, 2016.......................................... -- -- 6.057%
December 31, 2016........................................... -- -- 6.178%
March 31, 2017.............................................. -- -- 7.047%
June 30, 2017............................................... -- -- 4.741%
------- ------- -------
Total....................................................... 100.00% 100.00% 100.00%
</TABLE>
The principal of, premium, if any, and interest on the notes will be
payable (and the notes will be exchangeable and transferable) at the office or
agency of our company in the Borough of Manhattan, The City of New York
maintained for such purposes (which initially will be the office of the trustee
located at 101 Barclay Street, Floor 21 West, New York, NY 10286, attention:
Corporate Trust Administration) to the Person in whose name such note is
registered on the March 15, June 15, September 15 or December 15 immediately
preceding the applicable Payment Date or, at the option of our company in the
case of any certificated notes, payment may be paid by check mailed to the
address of the person entitled thereto as such address appears in the security
register. The notes will not be entitled to the benefit of any sinking fund.
ISSUANCE OF ADDITIONAL NOTES
The indenture provides for the issuance of additional notes subject to
compliance with the covenants contained in the indenture. Any additional notes
will be part of the same issue as the notes offered hereby, will rank pari passu
in right of payment with the notes and will vote on all matters with the notes
of the same series. For purposes of this "Description of the New Notes,"
reference to the notes does not include additional notes unless otherwise
indicated. No offering of any such additional notes is being or shall in any
manner be deemed to be made by this prospectus. For a description of the
conditions under which we may issue additional notes, see "-- Certain
Covenants -- Limitation on Indebtedness of Our Company."
SECURITY
The notes will be secured by:
- the pledge by ECP Holding Company, CalPERS and Mesquite Investors of
their interests in our company;
- the pledge of our interests in our wholly owned subsidiaries that own
Camden GP (JEDI Camden LP, L.L.C. and JEDI Camden GP, L.L.C.), our wholly
owned subsidiary that indirectly owns Linden Ltd. (JEDI Linden NB,
L.L.C.) and our wholly owned subsidiary that is the managing general
partner in Bayonne Venture (JEDI Bayonne GP, L.L.C. ("Bayonne GP"));
- the pledge by JEDI Linden NB, L.L.C. of its interests in its wholly owned
subsidiaries (JEDI Linden LP, L.L.C. and JEDI Linden, Inc.) and its 99%
owned subsidiary (JEDI Linden GP, L.L.C.) which together, directly or
indirectly, own Linden Ltd.;
- the pledge by JEDI Linden LP, L.L.C. of its limited partnership interests
in Linden Ltd.;
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- the pledge by JEDI Camden LP, L.L.C. of its limited partnership interests
in Camden GP;
- the pledge of our interest in the Linden subordinated note; and
- the pledge of our interest in the Debt Service Reserve Account
(collectively, the "Pledged Interests").
Camden GP and Linden Ltd. are the general partners of the partnerships
which own the Camden Facility and the Linden Facility, respectively. Bayonne
Venture owns the Bayonne Facility.
Any additional notes issued will share equally and ratably in the Pledged
Interests with the notes. The Security Documents restrict the issuance of
additional equity interests in the Company and the other entities in which
equity interests have been pledged unless such additional equity interests are
also pledged to secure the notes.
RANKING
The notes:
- will be senior secured obligations of our company;
- will rank pari passu in right of payment with all other senior secured
obligations of our company and senior in right of payment to all existing
and future subordinated debt of our company;
- will be structurally subordinated to all indebtedness and other
liabilities, including trade payables, of our Subsidiaries; and
- will be structurally subordinated to the rights of the minority partners
in Linden Venture and Camden Venture.
OPTIONAL REDEMPTION
Each series of the notes will be redeemable, at our option, at any time in
whole or from time to time in part, on not less than 30 nor more than 60 days'
prior notice to the holders of such series of notes, on any date prior to its
maturity (a "Redemption Date"), at a redemption price (the "Optional Redemption
Price") equal to:
- 100% of the outstanding principal amount thereof; plus
- accrued and unpaid interest thereon to the Redemption Date; plus
- a Make Whole Premium.
In no event will the Optional Redemption Price ever be less than 100% of the
principal amount of the notes (or portion thereof) being redeemed plus accrued
and unpaid interest thereon to the Redemption Date.
The amount of the Make Whole Premium with respect to any series of notes
(or portion thereof) to be redeemed will be equal to the excess, if any, of:
- the sum of the present values, calculated as of the Redemption Date, of
each remaining scheduled payment of principal and interest thereon
(exclusive of interest accrued to such Redemption Date) discounted from
the date such payment would have been payable, but for redemption, to
such Redemption Date on a quarterly basis (assuming a 360-day year
consisting of twelve 30-day months) at a discount rate equal to the
Treasury Rate plus 50 basis points with respect to the series of notes
being redeemed; over
- the outstanding principal amount of the series of notes (or portion
thereof) being redeemed.
The applicable "Treasury Rate" is a yield based on the yields on U.S.
treasury securities with comparable maturities and principal amounts to that of
the notes being redeemed. We will calculate the applicable Treasury Rate by
taking the arithmetic mean of the yields on U.S. treasury securities published
under the
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heading "Week Ending" under the caption "Treasury Constant Maturities" in
statistical release H.15(519), published weekly by the Federal Reserve System,
with maturities corresponding to the remaining life to maturity of the notes. If
statistical release H.15(519) or a successor publication of the Federal Reserve
Board is not available, we will designate a reasonably comparable index for this
calculation.
If statistical release H.15(519), or any successor or alternative index,
does not have any U.S. treasury securities with maturities corresponding exactly
to the notes to be redeemed, we will use the yields on the two U.S. treasury
securities with maturities most closely corresponding to the remaining life to
maturity of the notes. We will then interpolate or extrapolate, on a straight
line basis, the applicable Treasury Rate based on these two published yields.
The applicable Treasury Rate is to be determined on the third business day
preceding any redemption date and the maturity of U.S. treasury securities will
be rounded to the nearest month to determine those with maturities most closely
corresponding to the notes. The Optional Redemption Price is calculated assuming
a 360-day year consisting of twelve 30-day months.
If less than all of any series of notes are to be redeemed, the particular
notes of such series to be redeemed will be selected not more than 45 days prior
to the redemption date by the trustee either by lot, pro rata or by such method
as the trustee deems fair and appropriate; provided that no notes of $1,000 in
principal amount or less shall be redeemed in part. Notice of redemption will be
mailed to each holder of the series of notes being redeemed at such holder's
address of record. Interest will cease to accrue on any series of notes on and
after the Redemption Date.
MANDATORY REDEMPTION AT PAR
Events of Loss
Upon the occurrence of an Event of Loss, we will be obligated to use the
Remaining Net Loss Proceeds received by our company to redeem the notes and
additional notes, if any, without any premium at a redemption price (the
"Mandatory Redemption Price") equal to 100% of the principal amount of the notes
or additional notes to be redeemed plus accrued and unpaid interest thereon to
the Redemption Date. Remaining Net Loss Proceeds is defined as Net Loss Proceeds
with respect to one or more Events of Loss minus the aggregate amount of all of
such proceeds used toward the restoration, repair, reconstruction or replacement
of the affected Facility.
We will not be obligated to redeem any notes or additional notes upon the
occurrence of an Event of Loss if:
- the aggregate amount of Remaining Net Loss Proceeds from such Event of
Loss does not exceed $5 million; or
- the then current rating of the notes is at least as high as the rating of
the notes on the Issue Date and, after giving effect to such Event of
Loss and the use or contemplated use of the proceeds therefrom as
announced by our company, the Rating Agencies confirm that a Rating
Downgrade will not result.
Under the terms of the indebtedness of certain of our Subsidiaries, and the
terms of the preferred equity interests of certain Subsidiaries, the lenders to
such Subsidiaries and the holders of such preferred equity interests have prior
rights to certain proceeds arising from an Event of Loss. The existence of these
rights substantially reduces the likelihood that proceeds relating to an Event
of Loss would be distributed to us rather than used to repay or redeem the
obligations to such lenders or preferred equity holders or being "trapped" at a
Subsidiary level for an extended period. Therefore, there can be no assurance
that we will be required to redeem any notes or additional notes upon the
occurrence of an Event of Loss.
Power Contract Buyouts
All of the notes will be subject to mandatory redemption without premium at
the Mandatory Redemption Price if an Operating Partnership receives at any time
an aggregate amount of Net Buyout Proceeds in excess
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of $25 million from one or more Power Contract Buyouts related to its Facility,
unless the then current rating of the notes is at least as high as the rating of
the outstanding notes on the Issue Date and, after giving effect to such buyout
and the use or contemplated use of the proceeds therefrom as announced by our
company, the Rating Agencies confirm that a Rating Downgrade will not result;
provided, however, that in lieu of the foregoing we may redeem a portion of the
notes at the Mandatory Redemption Price if the then current rating of the notes
is at least as high as the rating of the outstanding notes on the Issue Date
and, after giving effect to the buyout, the partial redemption and the use or
contemplated use of the proceeds therefrom as announced by our company, the
Rating Agencies confirm that a Rating Downgrade will not result.
If a Power Contract Buyout occurs, there can be no assurance that we will
have available funds sufficient to pay the purchase price for all notes and
additional notes that we are required to purchase pursuant to the foregoing
covenant. Due to our position in the organizational structure, we may not
receive any of the Net Buyout Proceeds received by the Operating Partnership.
The failure of our company to redeem the notes or additional notes required to
be redeemed upon a Power Contract Buyout or to pay the applicable Mandatory
Redemption Price when due would result in an Event of Default and would give the
trustee and the holders of notes and additional notes the rights described under
"-- Events of Default."
Terms of Mandatory Redemption
If the notes are redeemed pursuant to any of the foregoing provisions, the
notes will be redeemed:
- pari passu with any other senior secured debt of our company which
requires redemption or repayment; and
- pro rata among each of the series of the notes and additional notes.
Notice of redemption will be mailed to each holder of the series of notes
or additional notes being redeemed at such holder's address of record. Interest
will cease to accrue on any series of notes or additional notes on and after the
Redemption Date.
PURCHASE AT THE OPTION OF HOLDERS -- CHANGE OF CONTROL
If a Change of Control occurs, then each holder of notes and additional
notes will have the right to require that we purchase all, but not less than
all, of such holder's notes or additional notes, as the case may be, at a
purchase price in cash equal to 101% of the outstanding principal amount of such
notes or additional notes, plus accrued and unpaid interest, if any, to the date
of purchase, pursuant to the offer described below (the "Change of Control
Offer") and the other procedures set forth in the indenture.
Within 30 days following any Change of Control, our company will notify the
trustee thereof and give written notice of such Change of Control to each holder
of notes and additional notes by first-class mail, postage prepaid, at its
address appearing in the security register, stating, among other things:
- that a Change of Control has occurred;
- the purchase price and the expiration date of the Change of Control
Offer, which will be a Business Day no earlier than 30 days nor later
than 60 days from the date such notice is mailed or such later date as is
necessary to comply with any applicable requirements under the Exchange
Act of 1934;
- the purchase date, which will be not more than five Business Days
following the expiration date;
- the places where the notes and additional notes to be purchased are to be
surrendered;
- that any note or additional note not tendered will continue to accrue
interest;
- that, unless we default in the payment of the purchase price, any notes
or additional notes accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest after the Change of Control
purchase date; and
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- certain other procedures that holders of notes and additional notes must
follow to accept a Change of Control Offer or to withdraw such
acceptance, including procedures of The Depository Trust Company.
If a Change of Control Offer is made, there can be no assurance that we
will have available funds sufficient to pay the purchase price for all of the
notes and additional notes that might be tendered by holders of notes and
additional notes seeking to accept the Change of Control Offer. The failure of
our company to make or consummate the Change of Control Offer or to pay the
applicable Change of Control purchase price when due would result in an Event of
Default and would give the trustee and the holders of notes and additional notes
the rights described under "-- Events of Default."
We will not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control Offer made by our company and
purchases all the notes and additional notes validly tendered and not withdrawn
under such Change of Control Offer.
We will comply with the applicable tender offer rules, including Rule-14e
under the Exchange Act, and any other applicable securities laws and regulations
in connection with a Change of Control Offer. To the extent that the provisions
of any securities laws or regulations conflict with the "Change of Control"
provisions of the indenture, we shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached our obligations under
the "Change of Control" provisions of the indenture by virtue thereof.
CERTAIN COVENANTS
The indenture contains various covenants, including the following:
Limitation on Indebtedness of Our Company
We will not create, incur or suffer to exist any Indebtedness, other than:
- the notes;
- Indebtedness incurred to finance the making of capital improvements to
the Facilities required to maintain compliance with applicable law or
anticipated changes therein; provided that no such Indebtedness may be
incurred unless, at the time of such incurrence, the Independent Engineer
confirms as reasonable (a) a certification by our company that the
proposed capital improvements are reasonably expected to enable such
Facility to comply with applicable law or anticipated changes therein and
(b) the calculations of our company that demonstrate, after giving effect
to the incurrence of such Indebtedness, the minimum Forward Debt Service
Coverage Ratio, (1) for the next four consecutive fiscal quarters, taken
as one annual period, commencing with the quarter in which such
Indebtedness is incurred and (2) for each subsequent fiscal year through
the maturity date of the notes, will not be less than 1.1 to 1;
- Indebtedness incurred to finance the making of capital improvements to
the Facilities so long as after giving effect to the incurrence of such
Indebtedness (a) no Default or Event of Default has occurred and is
continuing and (b) the then current rating of the notes is at least as
high as the rating of the outstanding notes on the Issue Date and the
Rating Agencies confirm that the incurrence of such Indebtedness will not
result in a Rating Downgrade;
- Interest Rate Agreements;
- Subordinated Indebtedness; and
- Indebtedness incurred to refinance, renew, replace, defease or refund, in
whole or part, any Indebtedness specified in the five clauses set forth
above and any Indebtedness incurred pursuant to this clause (plus accrued
interest and fees and expenses related to such financing, renewal,
replacement, defeasance or refunding); provided that any such refinancing
must be on terms no less favorable in the
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aggregate to us than the outstanding Indebtedness refinanced (as
determined by the Managing Member of our company in good faith).
Any Indebtedness will be deemed to have been satisfied and discharged, and
at all relevant times deemed to be neither existing nor outstanding, for all
purposes if there has been irrevocably deposited in trust, for the benefit of
the holders of such Indebtedness, any combination of money or obligations issued
by or guaranteed by the full faith and credit of the United States of America
sufficient to pay all interest and principal, including applicable premium, if
any, when due on such Indebtedness for the sole purpose of payment of such
Indebtedness.
Limitation on Indebtedness of Our Subsidiaries
No Subsidiary of our company will create, incur or suffer to exist any
Indebtedness other than:
- Indebtedness outstanding on the date the outstanding notes were issued
and any Indebtedness incurred to refinance, renew, replace, defease or
refund, in whole or part, any such Indebtedness (plus accrued interest
and fees and expenses related to such financing, renewal, replacement,
defeasance or refunding); provided that any such refinancing must be on
terms no less favorable in the aggregate to our company and our
Subsidiaries than the outstanding Indebtedness refinanced (as determined
by the Managing Member of our company in good faith);
- up to $225 million of Indebtedness incurred to finance capital
improvements to the Facilities, so long as after giving effect to the
incurrence of such Indebtedness (a) no Default or Event of Default has
occurred and is continuing and (b) the then current rating of the notes
is at least as high as the rating of the outstanding notes on the Issue
Date and the Rating Agencies confirm that the incurrence of such
Indebtedness will not result in a Rating Downgrade; and
- up to $25 million of Indebtedness incurred or assumed solely for the
purpose of financing the cost of acquiring or constructing an asset or
for working capital purposes. This "Limitation on Indebtedness of Our
Subsidiaries" covenant does not prohibit intercompany loans between our
company and any of our Subsidiaries or between two of our Subsidiaries.
Limitation on Restricted Payments
We may declare and pay dividends or pay or make any other distributions on
account of our Capital Stock or Subordinated Indebtedness on a quarterly basis;
provided that:
<TABLE>
<S> <C> <C> <C>
(a) no Default or Event of Default has occurred and is continuing;
(b) the amount of such dividends or other distributions paid or made, as
applicable, do not exceed 100% of Net Cash Flow after the Issue Date;
and
(c) (1) for restricted payments made through September 30, 2001, we:
(A) have maintained a Debt Service Coverage Ratio of at least
1.20 to 1 over the four preceding fiscal quarters, taken as
one annual period, and
(B) have projected a Debt Service Coverage Ratio (as certified
by our company to the trustee) for the next four fiscal
quarters, taken as one annual period, of at least 1.20 to 1,
and
(2) for restricted payments made after September 30, 2001, we:
(A) have maintained a Debt Service Coverage Ratio of at least
1.25 to 1 over the four preceding fiscal quarters, taken as
one annual period, and
(B) have projected a Debt Service Coverage Ratio (as certified
by the Company to the trustee) for the next four fiscal
quarters, taken as one annual period, of at least 1.25 to 1.
</TABLE>
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In the event we are prevented from paying dividends or paying or making other
distributions on our Capital Stock or Subordinated Indebtedness pursuant to the
provisions of clause (c) in the preceding sentence, we may not pay dividends or
pay or make distributions in respect of our Capital Stock or Subordinated
Indebtedness until the requirements described in clause (c) above have been met
for two consecutive fiscal quarters (a "restricted payment suspension");
provided, however, that if we meet for any fiscal quarter during a restricted
payment suspension the required Debt Service Coverage Ratio over the four
preceding fiscal quarters, taken as one annual period, and the projected Debt
Service Coverage Ratio for the next four fiscal quarters, taken as one annual
period, as well as the other requirements set forth above, then we may pay a
dividend or pay or make a distribution in respect of our Capital Stock or
Subordinated Indebtedness in an amount not to exceed Net Cash Flow for such
quarter. The fair market value of distributions of assets, other than cash, in
excess of $10 million shall be determined by an Independent Investment Banker,
or if less than $10 million, shall be determined in good faith by the Managing
Member of our company.
Limitation on Asset Sales
Except for a sale of substantially all of our assets as permitted by the
"Limitation on Consolidation, Merger and Sale or Disposition of Assets"
covenant, we may not sell, transfer, assign or otherwise dispose of any
Operating Partnership, Managing General Partner or other Subsidiary of our
company that holds an interest, directly or indirectly, in any Operating
Partnership or Managing General Partner, or any interest in any of the
foregoing, and no Operating Partnership or other Subsidiary of our company may
sell, transfer, assign or otherwise dispose of assets owned by such Operating
Partnership or other Subsidiary, as the case may be, except Excluded
Dispositions unless the then current rating of the notes is at least as high as
the rating of the original notes on the Issue Date and, after giving effect to
such sale, transfer, assignment or other disposition, the Rating Agencies
confirm that a Rating Downgrade will not result.
Maintenance of QF Status
We must maintain and cause each of our Subsidiaries to maintain all the
Facilities in conformity with the requirements under PURPA necessary to retain
QF Status, unless the loss of such status would not have a Material Adverse
Effect.
Limitation on Liens
So long as any notes are outstanding, we may not, and may not permit any
Subsidiary to, create, incur, assume, or suffer to exist any Indebtedness of our
company or any of our Subsidiaries that is secured by any mortgage, security
interest, pledge or lien ("Lien") of or upon any Principal Operating Property,
whether owned on the Issue Date or thereafter acquired, without in any such case
effectively securing the notes (together with, if we shall so determine, any
other Indebtedness of our company ranking equally with the notes) equally and
ratably with such Indebtedness (but only so long as such Indebtedness is so
secured).
The foregoing restriction will not apply to:
- the Pledged Interests;
- any Liens existing on the Issue Date, including any Lien which would
extend to property acquired after the Issue Date pursuant to any
agreement entered into prior to the Issue Date, or any Lien created
pursuant to an "after-acquired property" clause or similar terms in
existence on the Issue Date;
- Liens to secure Indebtedness incurred pursuant to the second or third
clauses of the "Limitation on Indebtedness of Our Subsidiaries" covenant;
- any Lien on any asset existing thereon at the time of acquisition of such
asset and not created in connection with or in contemplation of such
acquisition; provided that the incurrence of such Indebtedness is
permitted under the "Limitation on Indebtedness of Our Company" covenant
or the "Limitation on Indebtedness of Our Subsidiaries" covenant;
- any Lien arising solely by operation of law;
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- any Lien in the form of a tax or other statutory lien; provided that any
such Lien shall be discharged within 60 days after the date it is created
or arises (unless contested in good faith by our company or such
Subsidiary, in which case it shall be discharged within 60 days after
final adjudication);
- any Lien securing Indebtedness of our company or any of our Subsidiaries,
all or a portion of the net proceeds of which are used, substantially
concurrently with the funding thereof (and for purposes of determining
such "substantial concurrence," taking into consideration, among other
things, required notices to be given to holders of outstanding securities
under the indenture (including the notes) in connection with such
refunding, refinancing or repurchase, and the required corresponding
durations thereof), to refinance, refund or repurchase all outstanding
securities under the indenture (including the notes), including the
amount of all accrued interest thereon and reasonable fees and expenses
and premium, if any, incurred by our company or any such Subsidiaries in
connection therewith; and
- any extension, renewal, refinancing, refunding or replacement (or
successive extensions, renewals, refinancing, refundings or
replacements), in whole or in part, of any Lien referred to in the second
through the seventh clauses set forth above; provided, however, that the
principal amount of Indebtedness secured thereby and not otherwise
authorized by such second through seventh clauses, inclusive, shall not
exceed the principal amount of Indebtedness, plus any premium, fee and
related costs and expenses incurred or payable to third parties in
connection with any such extension, renewal, refinancing, refunding or
replacement, so secured at the time of such extension, renewal,
refinancing, refunding or replacement.
Limitation on Consolidation, Merger and Sale or Disposition of Assets
We will not consolidate with or merge with or into any other Person or
sell, transfer or otherwise dispose of our properties as or substantially as an
entirety unless:
- the successor or transferee Person shall be a Person organized and
existing under the laws of the United States of America, any State
thereof or the District of Columbia;
- the successor or transferee Person assumes by supplemental indenture the
due and punctual payment of the principal of, and premium and interest
on, all the notes and the performance of every covenant of the indenture
to be performed or observed by our company;
- immediately after giving effect to such transaction, no Event of Default
or Default shall have occurred and be continuing; and
- we shall deliver to the trustee an Officers' Certificate and an Opinion
of Counsel, each stating that the transaction and any such supplemental
indenture comply with the indenture.
Upon any such consolidation, merger, sale, transfer or other disposition of the
properties of our company as, or substantially as, an entirety, the successor
Person formed by such consolidation or with whom or into which our company is
merged or to which such sale, transfer or other disposition is made shall
succeed to and be substituted for, and may exercise every right and power of,
our company under the indenture with the same effect as if such successor Person
had been named as our company therein, and we will be released from all
obligations under the indenture and the notes.
Limitation on Transactions with Affiliates
We shall not, and shall not permit any Subsidiary to, enter into any
material transaction or arrangement, whether or not in the ordinary course of
business, with any Affiliate that is not on terms and conditions at least as
favorable as would be obtained in a comparable arm's-length transaction with a
Person other than an Affiliate as determined in good faith by the Managing
Member of our company.
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Maintenance of Existence
Subject to the covenant above under "-- Limitation on Consolidation, Merger
and Sale or Disposition of Assets," we shall do or cause to be done all things
necessary (a) to preserve and keep in full force and effect our existence, and
(b) to preserve all material rights and franchises of our company and, so long
as we have a controlling equity interest in an Operating Partnership, each
Operating Partnership; provided, however, that we shall not be required to
preserve any such right or franchise of any such Operating Partnership if either
(a) the preservation thereof is not consistent with our fiduciary obligations or
any of our Subsidiaries' fiduciary obligations with respect thereto (provided
that no such fiduciary obligation shall be deemed to exist if all of the
partnership interests of an Operating Partnership are owned directly or
indirectly by our company) or (b) the Managing Member of our company shall
determine that (1) the preservation thereof is no longer desirable in the
conduct of the business of our company and our Subsidiaries taken as a whole and
(2) the loss thereof would not have a Material Adverse Effect.
Project Documents
We will, and will cause our Subsidiaries to:
- perform and observe in all material respects the covenants and agreements
contained in each of the Project Documents;
- enforce, defend and protect all of our material rights contained in any
of the Project Documents;
- take all reasonable and necessary actions to prevent the termination or
cancellation of any of the Project Documents,
unless the Managing Member of our company determines in good faith that such
failure to perform, observe, enforce, defend, protect or act is in our best
interest.
In addition, we will not, and will cause our Subsidiaries not to:
- breach any obligation under any Project Document to which it is a party
and fail to cure such breach within the applicable cure period provided
for in such Project Document (or, if no cure period is specified in such
Project Document, within 30 days of such breach);
- (a) amend, vary or waive, or consent to any amendment, variation or
waiver of, any terms of any of the Project Documents to which it is a
party, (b) release, surrender, cancel or terminate any rights or
obligations under, or discharge any obligations (other than by
performance) of, the Project Documents to which it is a party or (c)
affirmatively consent to the assignment by any party to certain Project
Documents of such party's right or obligations under such Project
Documents without the consent of holders holding at least 66 2/3% in
aggregate principal amount of the outstanding Note; or
- assign, transfer or otherwise dispose of any of its rights in any of the
Project Documents to which it is a party unless, in each case, such
action would not have a Material Adverse Effect.
Nature of the Business
Our company and our Subsidiaries may not engage in any business other than
the Line of Business.
Certain Other Covenants
The indenture contains certain additional covenants, including but not
limited to:
- an operation and maintenance covenant;
- a maintenance of insurance covenant;
- a taxes and claims covenant;
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- a compliance with law covenant; and
- a maintenance of licenses and approvals covenant.
DEBT SERVICE RESERVE ACCOUNT
We will establish and fund an account with the trustee (the "Debt Service
Reserve Account") in an amount equal at all times to the aggregate principal and
interest payments on the notes scheduled to be paid on the next two Payment
Dates (the "Debt Service Reserve Requirement"). The trustee will disburse funds
from the Debt Service Reserve Account to pay principal, premium, if any, and
interest on the notes if our company has failed to provide sufficient funds to
the Paying Agent to pay such principal, premium and interest on the notes on the
third Business Day prior to the Payment Date. We may elect not to fund the Debt
Service Reserve Account, in whole or in part, or may withdraw all or any portion
of the amount in the Debt Service Reserve Account, to the extent that cash on
deposit in the Debt Service Reserve Account, together with any Debt Service
Credit Support, exceeds the Debt Service Reserve Requirement.
If at any time the balance of the Debt Service Reserve Account exceeds the
Debt Service Reserve Requirement and no Default or Event of Default has occurred
and is continuing, the trustee, on written request of our company, shall pay
over to us or our designees any such excess cash or cancel any excess amount of
Debt Service Credit Support, or both, as requested by our company, to the extent
of such excess.
At any time when the balance of the Debt Service Reserve Account (including
available amounts under Debt Service Credit Support) does not meet the Debt
Service Reserve Requirement, we may not pay dividends or make distributions in
respect of our Capital Stock or Subordinated Indebtedness.
EVENTS OF DEFAULT
Each of the following is an "Event of Default" under the indenture:
- default in the payment of principal of and premium, if any, on any note
or additional note when due and payable or the failure to redeem any note
or additional note on any mandatory redemption date;
- default in the payment of interest on any note or additional note when
due which continues for 30 days;
- default in the performance or breach of any other covenant or agreement
in the notes or additional notes or in the indenture or any Security
Document and the continuation thereof for 60 days after receipt by us of
notice from the trustee or from the holders of at least 25% of the
outstanding notes;
- bankruptcy, insolvency, reorganization, assignment or receivership of any
Facility Owner;
- acceleration of (a) any of our Indebtedness that ranks pari passu with
the notes or (b) any of our unsecured and/or unsubordinated Indebtedness
in an aggregate amount in excess of $25 million;
- entry of any final judgment or decree for the payment of money against us
(which is non-appealable, which remains unpaid or unstayed for a period
of 90 or more consecutive days or as to which all rights to appeal have
expired or been exhausted) in excess of $10 million, excluding amounts
covered by in-force insurance for which the insurer has admitted
liability; and
- on or after the Issue Date other than in accordance with the provisions
of the indenture or the Security Documents, (a) if for any reason, other
than the satisfaction in full and discharge of the obligations secured
thereby, any Security Document ceases to be or is not in full force and
effect or the trustee ceases to have first priority security interests in
the Collateral and, in each case, such cessation continues for 30 days or
(b) any of the grantors under the Security Documents asserts in writing
that any Security Document has ceased to be or is not in full force and
effect.
If an Event of Default occurs because we fail to pay principal, interest or
premium of any note or additional note and such event is continuing, the trustee
may accelerate the notes and additional notes upon the written direction of
holders of at least 25% in aggregate principal amount of the notes and
additional notes. If any other Event of Default specified above occurs and is
continuing, the trustee may accelerate the notes
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and additional notes upon the written direction of at least 51% of such holders.
If the trustee accelerates the notes in any case, the following amounts shall
immediately be due and payable:
- the entire outstanding principal amount of the notes and additional
notes; and
- accrued interest on, Make-Whole Premium (if any) and other amounts
payable with respect to the notes and additional notes. However, in the
case of an Event of Default because of the bankruptcy or insolvency of
our company, the notes and additional notes shall accelerate
automatically without direction from any holders of the notes or
additional notes and with the same effect as the acceleration described
above.
Any acceleration of the notes or additional notes shall be automatically
rescinded and annulled if:
- we pay or deposit with the trustee a sum sufficient to pay all matured
installments of interest and the principal and any premium which has
become due otherwise than by acceleration; and
- all Defaults shall have been cured or waived.
To rescind acceleration, however, we must pay or deposit such sum with the
trustee before a judgment or decree for the payment of the principal amount of
the notes or additional notes has been obtained.
The indenture provides that the trustee generally will be under no
obligation to exercise any of its rights or powers under the indenture at the
request or direction of any of the holders unless those holders have offered to
the trustee reasonable security or indemnity. Subject to these provisions for
indemnity and other specified limitations contained in the indenture, the
holders of a majority in principal amount of the outstanding notes and
additional notes generally will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the trustee, or
of exercising any trust or power conferred on the trustee. The holders of a
majority in principal amount of the outstanding notes and additional notes
generally will have the right to waive any past Default or Event of Default
(other than a payment default) on behalf of all holders.
The indenture provides that no holder may institute any action against us
under the indenture unless:
- the holder previously has given to the trustee written notice of Default
and its continuance;
- the holders of at least a majority in aggregate principal amount of the
notes and additional notes then outstanding that are affected by the
Event of Default shall have requested the trustee to institute the action
and shall have offered the trustee security or reasonable indemnity; and
- the trustee shall not have instituted the action within 60 days of such
request.
Furthermore, no holder will be entitled to institute any such action if and to
the extent that such action would disturb or prejudice the rights of other
holders. Even though the right of a holder to institute a proceeding with
respect to the indenture is subject to certain conditions precedent, each holder
has the absolute and unconditional right to receive payment of the principal of,
premium, if any, and interest on such note or additional note when due and to
institute suit for the enforcement of any such payment. These rights may not be
impaired without the consent of such holder.
The indenture provides that the trustee is required to give the holders
notice of any Default with respect to the notes or additional notes that is
known to the trustee within 90 days after the occurrence of such Default, unless
the Default is cured or waived. However, except in the case of default in the
payment of principal of, premium, if any, or interest on any notes or additional
notes, the trustee may withhold such notice if it determines in good faith that
it is in the interest of such holders to do so. Following each calendar quarter,
we are required to deliver to the trustee a certificate as to whether or not, to
the knowledge of the officers signing such certificate, we are in compliance
with the conditions and covenants under the indenture (including its Debt
Service Reserve Requirement).
AMENDMENT, SUPPLEMENT AND WAIVER
Modifications and amendments of the indenture may be made by our company
and the trustee with the consent of the holders of a majority in aggregate
outstanding principal amount of the notes; provided, however,
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that no such modification or amendment may, without the consent of the holder of
each outstanding note affected thereby:
- change the stated maturity of the principal of, or any installment of
interest on, any note, reduce the principal amount thereof or the rate of
interest thereon or any premium payable upon the redemption thereof,
change the currency in which any note or any premium or the interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment after the stated maturity thereof (or, in
the case of redemption, on or after the redemption date);
- amend, change or modify the obligation of our company to make and
consummate a Change of Control Offer in the event of a Change of Control
in accordance with the section entitled "Purchase at the Option of
Holders -- Change of Control," including amending, changing or modifying
any definition relating thereto;
- reduce the percentage in principal amount of outstanding notes, the
consent of whose holders is required for any waiver of compliance with
certain provisions of, or certain defaults and their consequences
provided for under, the indenture;
- waive a default in the payment of principal of, premium, if any, or
interest on the notes;
- modify the ranking or priority of the notes;
- permit the release or termination of all or substantially all of the
security afforded by the Liens under the indenture and the Security
Documents, except in accordance with the terms thereof; or
- agree to create any Lien on the Collateral or any part thereof or release
or terminate any of the Liens of the trustee, except in accordance with
the terms of the Security Documents.
The holders of a majority in aggregate principal amount of the notes outstanding
may waive compliance with certain restrictive covenants and provisions of the
indenture.
Without the consent of any holders, at any time and from time to time, we
may enter into one or more indentures supplemental to the indenture with the
trustee for any of the following purposes:
- to evidence the succession of another Person to our company and the
assumption by any such successor of the covenants of our company in the
indenture and the notes;
- to add to the covenants of our company for the benefit of the holders or
to surrender any right or power herein conferred upon us;
- to add additional Events of Defaults;
- to provide for uncertificated notes in addition to or in place of the
certificated Notes;
- to evidence and provide for the acceptance of appointment under the
indenture by a successor trustee;
- to cure any ambiguity, to correct or supplement any provision in the
indenture that may be defective or inconsistent with any other provision
in the indenture, or to make any other provisions with respect to matters
or questions arising under the indenture; provided that such actions
pursuant to this clause do not adversely affect the interests of the
holders in any material respect;
- to mortgage, pledge, hypothecate or grant a security interest in favor of
the trustee for the benefit of the holders as additional security for the
payment and performance of our obligations under the indenture; or
- to comply with any requirement of the Trust Indenture Act or the
Commission in order to effect and maintain the qualification of the
indenture under such act.
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LEGAL DEFEASANCE AND COVENANT DEFEASANCE
We may, at our option and at any time, terminate our obligations with
respect to the outstanding notes ("legal defeasance"). Such legal defeasance
means that we will be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding notes and satisfied all of its obligations under
the notes and the indenture, except for:
- the rights of holders to receive payments in respect of the principal of,
premium, if any, and interest on such notes when such payments are due;
- our obligations to issue temporary notes, register the transfer or
exchange of any notes, replace mutilated, destroyed, lost or stolen
notes, maintain an office or agency for payments in respect of the notes
and segregate and hold such payments in trust;
- the rights, powers, trusts, duties and immunities of the trustee; and
- the legal defeasance provisions of the indenture.
In addition, we may, at our option and at any time, elect to terminate our
obligations with respect to certain covenants set forth in the indenture and
described under "-- Certain Covenants" above, and any omission to comply with
such obligations would not constitute a Default or an Event of Default with
respect to the notes ("covenant defeasance").
In order to exercise either legal defeasance or covenant defeasance:
- we must irrevocably deposit or cause to be deposited with the trustee, as
trust funds in trust, specifically pledged as security for, and dedicated
solely to, the benefit of the holders, money in an amount, or U.S.
Government Obligations that through the scheduled payment of principal
and interest thereon will provide money in an amount, or a combination
thereof, sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay and discharge the principal of,
premium, if any, and interest on the outstanding notes at maturity (or
upon redemption, if applicable) of such principal or installment of
interest;
- no Default or Event of Default may have occurred and be continuing on the
date of such deposit or, insofar as an event of bankruptcy under the
fourth clause of "-- Events of Default" above is concerned, at any time
during the period ending on the 91st day after the date of such deposit;
- such legal defeasance or covenant defeasance may not result in a breach
or violation of, or constitute a default under, the indenture or any
other material agreement or instrument to which the Company is a party or
by which it is bound;
- in the case of legal defeasance, we must deliver to the trustee an
opinion of counsel stating that we have received from, or there has been
published by, the Internal Revenue Service a ruling, or since the date
hereof, there has been a change in applicable federal income tax law, to
the effect, and based thereon such opinion must confirm that, the holders
will not recognize income, gain or loss for federal income tax purposes
as a result of such legal defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times
as would have been the case if such legal defeasance had not occurred;
- in the case of covenant defeasance, we must have delivered to the trustee
an opinion of counsel to the effect that the holders will not recognize
income, gain or loss for federal income tax purposes as a result of such
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred; and
- we must have delivered to the trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent to either
the legal defeasance or the covenant defeasance, as the case may be, have
been complied with.
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TRANSFER AND EXCHANGE
A holder may transfer or exchange notes in accordance with the indenture.
Transfer restrictions will continue to apply to any outstanding notes not
exchanged for new notes in the exchange offer. Please read "The Exchange
Offer -- Consequences of Failure to Exchange." The registrar and the trustee may
require a holder, among other things, to furnish appropriate endorsements and
transfer documents and we may require a holder to pay any taxes and fees
required by law or permitted by the indenture. No holder will incur any service
charges, however, for any registration of transfer or exchange of the notes. We
are not required to transfer or exchange any note for a period of 15 days before
a selection of notes to be redeemed.
The registered holder of a note will be treated as the owner of it for all
purposes.
RESIGNATION OR REMOVAL OF TRUSTEE
The trustee may resign at any time upon written notice to our company
specifying the day upon which the resignation is to take effect, and such
resignation will take effect immediately upon the later of the appointment of a
successor trustee and such specified day.
The trustee may be removed at any time by an instrument or concurrent
instruments in writing filed with the trustee and signed by the holders, or
their attorneys-in-fact, of at least a majority in principal amount of the then
outstanding notes and additional notes of all series. In addition, so long as no
Event of Default or Default has occurred and is continuing, we may remove the
trustee upon notice to all holders and the trustee and appointment of a
successor trustee.
CONCERNING THE TRUSTEE
The indenture provides that, except during the continuance of an Event of
Default, the trustee will perform only such duties as are specifically set forth
in the indenture. Under the indenture, the holders of a majority in outstanding
principal amount of the notes and additional notes, if any, will have the right
to direct the time, method and place of conducting any proceeding for exercising
any remedy available to the trustee, subject to certain exceptions. If an Event
of Default has occurred and is continuing, the trustee will exercise such rights
and powers vested in it under the indenture and use the same degree of care and
skill in its exercise as a prudent Person would exercise under the circumstances
in the conduct of such Person's own affairs.
The indenture contains limitations on the rights of the trustee thereunder,
should it become a creditor of our company, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claims, as security or otherwise. The trustee is permitted to engage in
other transactions; provided, however, that, if it acquires any conflicting
interest (as defined in the Trust Indenture Act), it must eliminate such
conflict upon the occurrence of an Event of Default or else resign.
BOOK-ENTRY, DELIVERY AND FORM
Each series of the new notes will initially be represented by one or more
permanent global notes in definitive, fully registered book-entry form that will
be registered in the name of Cede & Co., the global note holder, as nominee of
DTC. The global notes will be deposited on behalf of the acquirors of the new
notes represented thereby with a custodian for DTC for credit to the respective
accounts of the acquirors or to such other accounts as they may direct at DTC.
See "The Exchange Offer -- Book-Entry Transfer."
The Global Notes
We expect that under procedures established by DTC:
- upon deposit of the global notes with DTC or its custodian, DTC will
credit on its internal system portions of the global notes that shall be
comprised of the corresponding respective amounts of the global notes to
the respective accounts of persons who have accounts with such
depositary; and
- ownership of the notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC or its
nominee, with respect to interests of persons who have
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accounts with DTC ("participants"), and the records of participants, with
respect to interests of persons other than participants.
So long as DTC or its nominee is the registered owner or holder of any of
the notes, DTC or such nominee will be considered the sole owner or holder of
such notes represented by the global notes for all purposes under the indenture
and under the notes represented thereby. No beneficial owner of an interest in
the global notes will be able to transfer such interest except in accordance
with the applicable procedures of DTC in addition to those provided for under
the indenture.
Payments on the notes represented by the global notes will be made to DTC
or its nominee, as the case may be, as the registered owner thereof. None of our
company, the trustee or any paying agent under the indenture will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the global notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest.
We expect that DTC or its nominee, upon receipt of any payment on the notes
represented by the global notes, will credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the global notes as shown in the records of DTC or its nominee. We also expect
that payments by participants to owners of beneficial interests in the global
notes held through such participants will be governed by standing instructions
and customary practice as is now the case with securities held for the accounts
of customers registered in the names of nominees for such customers. Such
payment will be the responsibility of such participants.
Transfers between participants in DTC will be effected in accordance with
DTC rules and will be settled in immediately available funds. If a holder
requires physical delivery of a certificated security for any reason, including
to see notes to persons in states that require physical delivery of such
security or to pledge such securities, such holder must transfer its interest in
the global notes in accordance with the normal procedures of DTC and the
procedures in the indenture.
DTC has advised us that DTC will take any action permitted to be taken by a
holder of notes, including the presentation of notes for exchange as described
below, only at the direction of one or more participants to whose account the
DTC interests in the global notes are credited and only in respect of the
aggregate principal amount as to which such participant or participants has or
have given such direction. However, if there is an event of default under the
indenture, DTC will exchange the global notes for certificated securities that
it will distribute to its participants.
DTC has advised us as follows:
- DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code
and a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered under the provisions
of Section 17A of the Securities Exchange Act of 1934;
- DTC holds securities that its participants deposit with DTC and
facilitates the settlement among participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in participants' accounts, thereby
eliminating the need for physical movement of securities certificates;
- Direct participants include securities brokers and dealers, banks, trust
companies, clearing corporations and other organizations;
- DTC is owned by a number of its participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc.;
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- Access to the DTC system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a direct participant, either
directly or indirectly; and
- The rules applicable to DTC and its participants are on file with the
SEC.
Although DTC is expected to follow these procedures in order to facilitate
transfers of interests in the global notes among participants of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither we nor the trustee will have any
responsibility for the performance by DTC or its direct or indirect participants
of their respective obligations under the rules and procedures governing their
operations.
Certificated Securities
Interests in the global notes will be exchanged for certificated securities
if:
- DTC or any successor depositary (the "Depositary") notifies us that it is
unwilling or unable to continue as depositary for the global notes, or
DTC ceases to be a "clearing agency" registered under the Securities
Exchange Act of 1934, and a successor depositary is not appointed by us
within 90 days;
- an event of default has occurred and is continuing with respect to the
notes and the registrar has received a request from the Depositary to
issue certificated securities in lieu of all or a portion of the global
notes, in which case we will deliver certificated securities within 30
days of such request; or
- we determine not to have the notes represented by global notes.
Upon the occurrence of any of the events described in the preceding sentence, we
will cause the appropriate certificated securities to be delivered.
Neither we nor the trustee will be liable for any delay by the Depositary
or its nominee in identifying the beneficial owners of the related notes. Each
such person may conclusively rely on, and will be protected in relying on,
instructions from such Depositary or nominee for all purposes, including the
registration and delivery, and the respective principal amounts, of the notes to
be issued.
Same-Day Settlement and Payment
The indenture requires that payments in respect of the notes represented by
the global notes (including principal, premium, if any, and interest) be made by
wire transfer of immediately available funds to the accounts specified by the
global note holder. With respect to certificated notes, we will make all
payments of principal, premium, if any, and interest by wire transfer of
immediately available funds to the accounts specified by the holders thereof or,
if no such account is specified, by mailing a check to each such holder's
registered address. Secondary trading in long-term notes and debentures of
corporate issues is generally settled in clearinghouse or next-day funds. In
contrast, notes represented by the global notes are expected to be eligible to
trade in the PORTAL market and to trade in DTC's Same-day Funds Settlement
System, and any permitted secondary market trading activity in such notes will,
therefore, be required by DTC to be settled in immediately available funds. We
expect that secondary trading in the certificated notes will also be settled in
immediately available funds.
Because of time zone differences, the securities account of a Euroclear
System or Cedel Bank participant purchasing an interest in a global note from a
participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Cedel participant, during the securities settlement
processing day (which must be a business day for Euroclear or Cedel) immediately
following the settlement date of DTC. DTC has advised us that cash received in
Euroclear or Cedel as a result of sales of interests in a global note by or
through a Euroclear or Cedel participant to a participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or Cedel cash account only as of the business day for
Euroclear or Cedel following DTC's settlement date.
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GOVERNING LAW
The indenture and the notes will be governed by and construed in accordance
with New York law.
CERTAIN DEFINITIONS
"Acceptable Credit Provider" means a bank or trust company authorized to
engage in the banking business having a combined capital and surplus of at least
$500,000,000 or the equivalent thereof whose long-term unsecured debt is rated
"A-" or higher by S&P or "A3" or higher by Moody's or, if both of such rating
agencies are no longer in business or no longer rating unsecured debt of banks
or trust companies, a comparable rating of another internationally recognized
rating agency selected by our company and reasonably acceptable to the trustee.
"Affiliate" means, as to any Person, any Subsidiary of such Person and any
other Person which, directly or indirectly, controls or is controlled by or
under direct or indirect common control with such specified Person. For the
purposes of this definition, "control," when used with respect to any Person,
means the possession of the power to direct or cause the direction of management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
Notwithstanding the foregoing, no individual shall be an Affiliate of any Person
solely by reason of his or her being a director, manager, officer or employee of
such Person.
"Base Case Financial Model" means the model so titled in the Independent
Engineer's report prepared in connection with the sale of the outstanding notes,
as amended from time to time and certified by the Independent Engineer for
purposes of calculating the Forward Debt Service Coverage Ratio.
"Bridge Loan" means the $831,000,000 loan to our company entered into in
connection with the acquisition of our interests in the Facilities.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banks or trust companies in the Borough of Manhattan,
The City of New York or in any other city where the corporate trust office of
the trustee may be located, are obligated or authorized by law or executive
order to close.
"CalPERS Security Agreement" means the security agreement dated the Issue
Date between CalPERS and the trustee.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any preferred
stock or interests, but excluding any debt securities convertible into such
equity.
"Cash Distribution" means all cash distributions received by us which are
made in respect and attributable to, and based upon our direct or indirect
equity interests or ownership in the Operating Partnerships, other power
projects and other investments.
"Cashflow" means during any period the sum of:
- all amounts received by us pursuant to distributions from the Operating
Partnerships (other than damages or penalties received by us pursuant to
the Project Documents);
- all proceeds received by us from business interruption insurance;
- all interest income or hedging receipts (net of costs) received by us;
- all other amounts received by us in respect of the Facilities and
Operating Partnerships; and
- any amounts released to us after the Issue Date from the expense account
established in connection with the bridge loan.
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"Change of Control" means a combination of (a) Enron and (b) CalPERS and/or
other third party institutional investors ceases to be the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of at
least a majority of the voting power of all classes of Voting Stock of our
company; provided, however, that a Change of Control shall not be deemed to
occur if (1) the holders of 66 2/3% of the aggregate principal amount of the
outstanding notes (and additional notes) consent to the transaction that results
in such combination of (a) Enron and (b) CalPERS and/or other third party
institutional investors ceasing to be the beneficial owner of at least a
majority of voting power of all classes of Voting Stock of our company or (2)
after giving effect to the transaction that results in such combination of (a)
Enron and (b) CalPERS and/or other third party institutional investors ceasing
to be the beneficial owner of at least a majority of the voting power of all
classes of Voting Stock of our company, the then current rating of the Notes is
at least as high as the rating of the Notes on the Issue Date, and the Rating
Agencies confirm that a Rating Downgrade will not result.
"Common Security Agreement" means the common security agreement dated the
Issue Date among our company, certain of its Subsidiaries and the trustee.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a constant maturity
corresponding to the remaining term of the series of the notes (calculated to
the nearest 1/12th of a year) that would be utilized, at the time of selection
and in accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of the
notes to be redeemed.
"Comparable Treasury Price" means (a) the average of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) on the third business day preceding such redemption
date, as set forth in the daily statistical release (or any successor release)
published by the Federal Reserve Bank of New York and designated "composite 3:30
p.m. Quotations for U.S. Government Securities" or (b) if such release (or any
successor release) is not published or does not contain such prices on such
business day, (1) the average of the Reference Treasury Dealer Quotations for
such Redemption Date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations for such Redemption Date or (2) if we obtain fewer
than four such Reference Treasury Dealer Quotations, the average of all such
Quotations.
"Debt Service Coverage Ratio" means for any period, without duplication, a
ratio the numerator of which is Net Cashflow for that period, and the
denominator of which is principal, interest and commitment fees, underwriting
fees and other similar fees owed by our company due for such period on the notes
and other Indebtedness which ranks pari passu with the notes (without giving
effect to any amounts paid from the expense account established in connection
with the bridge loan). For purposes of calculating the Debt Service Coverage
Ratio for the first four quarters ending after the Issue Date in connection with
the "Limitation on Restricted Payments" covenant, historical numbers shall be
used for completed quarters (the first quarter being deemed to be the period
from February 4, 1999 to June 30, 1999) and projected numbers shall be used or
relied upon for the remaining quarters.
"Debt Service Credit Support" means (a) an undertaking to advance money to
the trustee for the benefit of the holders by (1) Enron, if and so long as
Enron's senior long-term unsecured debt has an Investment Grade Rating or (2)
any successor to Enron resulting from a Change of Control, merger, consolidation
or similar transaction resulting in a change in the beneficial ownership of our
company, if and so long as such Person's senior long-term unsecured debt has an
Investment Grade Rating or (b) a letter or letters of credit from an Acceptable
Credit Provider.
"Default" means an event or condition that, with giving of notice, lapse of
time or both would become an Event of Default.
"ECP Holding Company Security Agreement" means the security agreement dated
the Issue Date between ECP Holding Company and the trustee.
"Event of Loss" means any compulsory transfer or taking, or taking or
transfer under threat of compulsory transfer or taking, of all or substantially
all of any Facility by any Governmental Authority, or any
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event which causes all or substantially all of any Facility to be damaged,
destroyed or rendered unfit for normal use for any reason whatsoever.
"Excluded Dispositions" means sales, transfers, assignments and other
dispositions as follows:
- assets that in a single transaction or a series of related transactions
do not have a fair market value in excess of $10 million in any calendar
year;
- assets resulting from, included in, covered by, or related to an Event of
Loss or a Power Contract Buyout;
- any sale, exchange of assets or lease by our company or any of our
Subsidiaries (as lessor) made in the ordinary course of business
(excluding any forward sale, sale of receivables or similar
transactions);
- an issuance or sale of equity interests by a Subsidiary of our company to
our company or to another Subsidiary of our company;
- a sale, transfer, assignment or other disposition by our company or a
Subsidiary of our company to our company or another Subsidiary of our
company;
- a dividend or other distribution permitted under the caption "Certain
Covenants -- Limitation on Restricted Payments";
- the sale, exchange, lease by our company or any of our Subsidiaries (as
lessor) or other disposition of obsolete assets not integral to any Line
of Business;
- the abandonment or relinquishment of assets in the ordinary course of
business; and
- creations of liens, grants of security interests or pledges or
assignments to secure Indebtedness that are not prohibited under the
"Limitation on Liens" covenant.
"Facility" means any of the Bayonne Facility, the Camden Facility and the
Linden Facility and any Facility Expansion, as the context may require.
"Facility Expansion" means:
- an expansion in the electric power generating capacity of up to 300 MW at
or adjacent to the Linden Facility;
- an expansion in the electric power generating capacity of up to 500 MW at
or adjacent to the Bayonne Facility; and
- the expansion of transmission, infrastructure, or fuel storage or
transportation facilities at any Facility, together with related power
supply, thermal energy and fuel contracts and ancillary facilities,
services or goods.
"Facility Owner" means, collectively, our company and each of our
Subsidiaries, including the Operating Partnerships and the Managing General
Partners.
"Forward Debt Service Coverage Ratio" means the projected Debt Service
Coverage Ratio over the life of the Notes with the longest maturity using as the
basis for the calculation of the Debt Service Coverage Ratio the amounts so
shown on the Base Case Financial Model, as amended, from time for time and
certified by the Independent Engineer.
"GAAP" means generally accepted accounting principles in the United States
of America, including those set forth in (i) the opinions and pronouncements of
the Accounting Principles Board of the American Institute of Certified Public
Accountants (the "AICPA"), (ii) statements and pronouncements of the Financial
Accounting Standards Board of the AICPA, (iii) such other statements by such
other entity as approved by a significant segment of the accounting profession
and (iv) the rules and regulations of the Commission governing the inclusion of
financial statements (including pro forma financial statements) in periodic
reports required to be filed pursuant to Section 13 of the Exchange Act,
including opinions and
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pronouncements in staff accounting bulletins and similar written statements from
the accounting staff of the Commission.
"Governmental Authority" means any United States federal, state, municipal,
local, territorial or other governmental subdivision, department, commission,
board, bureau, agency, regulatory authority, instrumentality or judicial or
administrative body.
"Indebtedness" with respect to any Person means, at any time, without
duplication:
- its liabilities for borrowed money and its redemption obligations in
respect of mandatorily redeemable preferred stock;
- its liabilities for the deferred purchase price of property acquired by
such Person and all liabilities created or arising under any conditional
sale or other title retention agreement with respect to any such property
(excluding, in each of the foregoing cases, accounts payable and other
current liabilities arising in the ordinary course of business);
- all liabilities appearing on its balance sheet in accordance with GAAP in
respect of capital leases;
- all liabilities for borrowed money secured by any Lien with respect to
any property owned by such Person (whether or not it has assumed or
otherwise become liable for such liabilities);
- all its reimbursement obligations in respect of letters of credit or
instruments serving a similar function issued or accepted for its account
by banks and other financial institutions (whether or not representing
obligations for borrowed money); and
- any guaranty of such Person with respect to liabilities of a type
described in any of the clauses set forth above in this definition.
"Independent Engineer" means Burns and Roe Enterprises, Inc. or another
widely recognized independent engineering firm, engineer and/or industry
consultant who is widely recognized as an expert in electric power or thermal
energy generation or cogeneration retained as independent engineer or consultant
by us.
"Independent Investment Banker" means NationsBanc Montgomery Securities LLC
or its successor or, if such firm is unwilling or unable to select the
Comparable Treasury Issue, an independent investment banking institution of
national standing appointed by us; provided that if neither such Person is
appointed and willing to serve at least 15 Business Days prior to the Redemption
Date, then by an independent investment banking institution of a national
standing appointed by the trustee.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement, in each case, entered into for non-speculative
purposes.
"Investment Grade Rating" means, with respect to any Indebtedness, a rating
of "BBB-" or higher by S&P or "Baa3" or higher by Moody's, or, if any of such
rating agencies is no longer in business or no longer rating such entity's
Indebtedness, a comparable rating of another internationally recognized rating
agency selected by our company and reasonably acceptable to the trustee.
"Issue Date" means April 20, 1999, the date on which the outstanding notes
were originally issued under the indenture.
"Linden subordinated note" means the subordinated promissory note of Linden
Ltd. dated February 5, 1999 payable to us in the original principal amount of
$289,581,328.
"Line of Business" means, with respect to our company and our Subsidiaries:
- the business of construction, development, acquisition, servicing,
ownership, improvement, operation and management of the Facilities,
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- the business of consulting, insurance or advisory activities related to
any business referred to in this definition; and
- any activity or business that is reasonably related thereto.
"Managing General Partners" means Linden Ltd., Camden GP and Bayonne GP.
"Managing Member" means, with respect to our company, ECP Holding Company
or any other Person designated by the members of our company to be our managing
member.
"Material Adverse Effect" means a material adverse effect on:
- the financial position or results of operation of our company and our
Subsidiaries, taken as a whole;
- our ability to perform our obligations under the notes; or
- the ability of a Facility Owner to perform any obligation under a Project
Document that is material to our company and our Subsidiaries taken as a
whole.
"Mesquite Investors Security Agreement" means the security agreement dated
August 13, 1999 between Mesquite Investors and the trustee.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Buyout Proceeds" means all cash proceeds and the fair market value of
all non-cash proceeds received by our company or any of our Subsidiaries
(including the Operating Partnership and the Managing General Partners) (without
duplication) from a Power Contract Buyout, in each case, net of all expenses,
costs and other amounts expended or incurred by or on behalf of the recipient or
recipients (as applicable) of such cash proceeds in connection with the
collection, enforcement, negotiation, settlement, proceedings, administration or
other activity related to the receipt and final collection of such proceeds.
"Net Cashflow" during any period means the amount determined in accordance
with the definition of Cashflow for that period minus the sum of (a) all amounts
paid by or on behalf of our company in respect of administration and overhead
other than any subordinated payments and (b) all taxes paid by us (other than
tax reimbursements paid by us), without duplication; provided, however, that net
cashflow for the quarter ended June 30, 1999 will be deemed to also include all
amounts received by us after February 4, 1999 through the Issue Date minus (a)
interest paid on the bridge loan and (b) all amounts paid by or on behalf of our
company in respect of administration and overhead between February 4, 1999 and
the Issue Date.
"Net Loss Proceeds" means all cash proceeds of insurance received by us on
account of an Event of Loss, all cash awards of compensation and the fair market
value of all non-cash proceeds for the taking by condemnation, eminent domain or
similar proceeding resulting from an Event of Loss, in each case, net of all
expenses, costs and other amounts expended or incurred by or on behalf of the
recipients of such cash proceeds, cash award or non-cash proceeds in connection
with the collection, enforcement, negotiation, settlement, proceedings,
administration or other activity related to the receipt and final collection of
such proceeds; provided, however, in all cases, excluding the receipt of
proceeds of business interruption insurance, environmental damage insurance (to
the extent applied to the remediation or the reimbursement for the cost of
remediation of the environmental damage giving rise to such insurance claim) or
similar types of policies.
"Notes" means, collectively, the 2008 notes, the 2012 notes and the 2017
notes.
"Officers' Certificate" means a certificate signed by an officer or
manager, as the case may be, of our company or any of our Subsidiaries, or any
authorized partner or member of any of them, as the case may be.
"Operating Partnerships" or "Operating Partnership" means collectively or
individually, as the case may be, Linden Venture, Camden Venture and Bayonne
Venture.
"Operating Property" means (a) any interest in real property owned by our
company or our Subsidiaries and (b) any asset owned by our company or our
Subsidiaries that is depreciable in accordance with GAAP, excluding, in either
case, (1) any interest of our company or our Subsidiaries as lessee under any
lease which
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has been or would be capitalized on the books of the lessee in accordance with
GAAP and (2) any interest, asset or property which has a fair market value at
the time of determination of less than $5 million.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the trustee; such counsel may be an employee of, or
counsel to, our company, any of our Subsidiaries or the trustee or any of their
Affiliates.
"Payment Dates" mean March 31, June 30, September 30 and December 31,
commencing June 30, 1999.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, limited liability company, trust,
unincorporated organization or Governmental Authority.
"Power Contract Buyout" means the termination of, or the negotiated
reduction of capacity or electricity to be sold under, a Power Purchase
Agreement other than pursuant to such agreement's terms and the payment by the
purchaser made in connection therewith.
"Power Purchase Agreement" means any agreement for the sale of electrical
generating capacity or electricity by a Facility other than any such agreement
that has a term of one year or less or that may be canceled or terminated by
either the power purchaser or seller thereunder on less than one year's notice
without substantial economic detriment.
"Principal Operating Property" means any Operating Property that consists
of any of the following: (a) a real estate site on which any Facility is located
and (b) any Facility or any turbine located at any Facility, excluding, however,
from each of clauses (a) and (b), any such assets or properties consisting of
inventories, fuel, furniture, office fixtures and equipment (including computer
and data processing equipment), vehicles and equipment used in, or useful with,
vehicles.
"Project Documents" includes all Power Purchase Agreements, steam
contracts, operating and maintenance agreements, administrative services
contracts, construction contracts (other than purchase orders), transmission
agreements, fuel supply contracts and partnership agreements that relate to a
Facility, other than any such agreement that has a term of one year or less or
that may be canceled or terminated by a party thereto on less than one year's
notice without substantial economic detriment.
"Rating" means the rating of (a) the notes by the Rating Agencies on the
Issue Date and (b) the additional notes on their date of issuance, provided that
if any of the Rating Agencies that initially rated such notes or additional
notes is no longer in business or no longer rating the notes or additional
notes, a comparable rating of another internationally recognized rating
institutions selected in good faith by our Managing Member.
"Rating Agencies" means Moody's and S&P to the extent that at each relevant
time of determination, each of them has an active and current rating in effect
on the notes, or any fewer than all of them to the extent that less than all of
them have a current rating in effect on the notes; provided that if none of them
has a current rating on the notes at any relevant time of determination, at
least 2 other internationally recognized rating institutions selected in good
faith by our Managing Member.
"Rating Downgrade" means a lowering by one or more of the Rating Agencies
of the Ratings.
"Reference Treasury Dealer" means (a) NationsBanc Montgomery Securities LLC
or its successor; provided, however, that if it shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), we
shall substitute therefore another Primary Treasury Dealer, and (b) any other
Primary Treasury Dealer selected by our company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to us and to the trustee by such Reference Treasury Dealer at 5:00 p.m.
on the third business day preceding such Redemption Date.
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"S&P" means Standard & Poor's Rating Services and its successors.
"Security Documents" means the Mesquite Investors Security Agreement, the
CalPERS Security Agreement, the ECP Holding Company Security Agreement and the
Common Security Agreement.
"Subordinated Indebtedness" means any Indebtedness of our company (whether
outstanding on the date hereof or thereafter incurred) which:
- is subordinate or junior in right of payment to the notes and the
additional notes, if any, pursuant to a written agreement to that effect;
and
- is not subject to acceleration, so long as any notes or additional notes,
if any, are outstanding under the indenture, unless the principal of the
notes or additional notes, if any, have been accelerated under the
indenture.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by:
- such Person;
- such Person and one or more Subsidiaries of such Person; or
- one or more Subsidiaries of such Person.
"Treasury Rate" means, a rate of interest per annum equal to (a) the yield,
under the heading which represents the average for the immediately preceding
week, appearing in the most recently published statistical release designated
"H.15(519) Selected Interest Rates" or any successor release which is published
weekly by the Board of Governors of the Federal Reserve System and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Comparable Treasury Issue (if such maturity is not
within three months before or after the Maturity Date, yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
shall be determined and the Treasury Rate shall be interpolated or extrapolated
from such yields on a straight line basis, rounding to the nearest basis point)
or (b) if such release (or any successor release) is not published during the
week preceding the calculation date or does not contain such yields, the rate
per annum equal to the quarterly equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Redemption Date.
"Voting Stock" means any class or classes of Capital Stock of a Person
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the board of directors,
managers or trustees, or to elect or designate those generally responsible for
managing the business and affairs under ordinary circumstances, of any Person
(irrespective of whether or not, at the time, securities of any other class or
classes has, or might have, voting power by reason of the happening of any
contingency).
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The discussion below is intended to be a general description of the United
States federal income tax considerations material to an investment in the notes.
It does not take into account the individual circumstances of any particular
investor and does not purport to discuss all of the possible tax consequences of
the purchase, ownership or disposition of the notes and is not intended as tax
advice. Therefore, prospective investors are urged to consult their own tax
advisors with respect to the income tax consequences of an investment in the
notes, including application of state, provincial, local, foreign and other tax
laws.
U.S. HOLDERS
In the opinion of Vinson & Elkins L.L.P., legal counsel to our company, the
following are the material United States federal income tax consequences
associated with the exchange and the acquisition, ownership, and disposition of
the notes. The following summary does not discuss all of the aspects of federal
income taxation that may be relevant to a prospective holder of the notes in
light of his or her particular circumstances, or to certain types of holders
which are subject to special treatment under the federal income tax laws
(including persons who hold the notes as part of a conversion, straddle or
hedge, dealers in securities, insurance companies, tax-exempt organizations,
financial institutions, broker-dealers and S corporations). Further, this
summary pertains only to U.S. Holders that will hold the notes as capital assets
within the meaning of section 1221 of the Internal Revenue Code of 1986, as
amended (the "Code"). A "U.S. Holder" is a beneficial owner of notes that is:
- an individual who is a citizen or resident of the United States;
- a corporation or partnership created or organized in the United States or
under the laws of the United States or of any State thereof (including
the District of Columbia);
- an estate the income of which is subject to U.S. federal income tax
regardless of its source; or
- a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States persons who
have the authority to control all substantial decisions of the trust. In
addition, this summary does not describe any tax consequences under
state, local, or foreign tax laws.
This summary is based upon the provisions of the Code, Treasury Regulations
(the "Regulations"), rulings and pronouncements issued by the Internal Revenue
Service ("IRS") and judicial decisions now in effect, all of which are subject
to change at any time by legislative, judicial or administrative action. Any
such changes may be applied retroactively in a manner that could adversely
affect the U.S. Holders of the notes. We have not sought and will not seek any
rulings from the IRS with respect to the matters discussed below. We cannot
assure you that the IRS will not take positions concerning the tax consequences
of the purchase, ownership or disposition of the Notes which are different from
those discussed herein.
The Exchange Offer
The exchange of outstanding notes for new notes will not produce, for
federal income tax purposes, recognizable gain or loss to either our company or
a U.S. Holder of a new note because the new notes will be identical in all
material respects to the outstanding notes. The U.S. Holder will have an initial
adjusted tax basis and a holding period in the new note equal to his or her
adjusted tax basis and holding period in the outstanding note.
Payments of Interest
Stated interest paid on each note held by a U.S. Holder will generally be
taxable in accordance with the U.S. Holder's method of accounting for federal
income tax purposes. Special rules governing the treatment of market discount
and amortizable premium are described below. The notes will not be issued with
"original issue discount" for United States federal income tax purposes.
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Market Discount
If a U.S. Holder purchases a note for less than the stated redemption price
of the note at maturity, the difference is considered market discount, unless
such difference is de minimis, i.e., less than one-fourth of one percent of the
stated redemption price of the note at maturity multiplied by the number of
complete years remaining to maturity. Under the market discount rules, any gain
realized by the U.S. Holder on a taxable disposition of a note having market
discount, as well as any partial principal payment made with respect to such a
note, will be treated as ordinary income to the extent of the then accrued
market discount of the note.
Any market discount will accrue ratably from the date of acquisition to the
maturity date of the note, unless the U.S. Holder elects, irrevocably, to accrue
market discount on a constant interest rate method under which marginally less
market discount would accrue in early years and marginally greater amounts would
accrue in later years. The election to accrue market discount on a constant
interest rate method is irrevocable but may be made separately as to each note
held by the holder.
Accrual of market discount will not cause the accrued amounts to be
included currently in a U.S. Holder's taxable income, in the absence of a
disposition of, or principal payment on, the note. A U.S. Holder of such a note
is generally required to defer the deduction of all or a portion of the interest
expense on any indebtedness incurred or continued to purchase or carry the note
until the deferred income is realized. A U.S. Holder may elect to currently
include market discount in income as it accrues on either a ratable or constant
interest rate method. In such event, interest expense relating to the
acquisition of a note which would otherwise be deferred would be currently
deductible to the extent otherwise permitted by the Code. The election to
include market discount in income currently, once made, applies to all market
discount obligations acquired by such U.S. Holder on or after the first day of
the first taxable year to which the election applies and all subsequent years
unless revoked with the consent of the IRS.
Amortizable Premium
If a U.S. Holder acquires a note for an amount which is greater than its
principal amount, such U.S. Holder will be considered to have purchased such
note with amortizable bond premium equal to the amount of such excess. The U.S.
Holder may elect to amortize the premium using a constant yield method over the
period from the acquisition date to the maturity date of the note. Amortized
amounts may be offset only against interest paid with respect to the note. Once
made, an election to amortize and offset interest on the note may be revoked
only with the consent of the IRS and will apply to all notes held by the
subsequent U.S. Holder on the first day of the taxable year to which the
election relates and to subsequent taxable years and to all notes subsequently
acquired by such U.S. Holder.
Sale, Redemption or Other Taxable Disposition of Notes
The sale, redemption or certain other taxable dispositions of a note will
result in the recognition of gain or loss to the U.S. Holder in an amount equal
to the difference, if any, between (a) the amount realized upon the disposition
or redemption and (b) the U.S. Holder's adjusted tax basis in such note. A U.S.
Holder's tax basis for determining gain or loss on the disposition or redemption
of a note generally will be the cost of such note to such U.S. Holder, increased
by the amount of any market discount includible in such U.S. Holder's gross
income with respect to such note, and decreased by the amount of any payments
under the note that are part of its stated redemption price at maturity and by
the portion of any premium applied to reduce interest payments as described
above. Such gain or loss will be capital gain or loss (except to the extent the
gain represents market discount on the note not previously included in gross
income, to which extent such gain would be treated as ordinary income). In the
case of an individual U.S. Holder, such capital gain generally will be subject
to a maximum federal tax rate of 20% if the individual has held the note for
more than one year and otherwise will be short-term capital gain or loss. The
deductibility of capital losses is subject to certain limitations. Prospective
investors should consult their own tax advisors in this regard. Payments on such
disposition for accrued stated interest not previously included in income will
be treated as ordinary interest income.
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Purchase or Redemption of Notes
Purchase at the Option of the Holders -- Change of Control. Upon a Change
of Control, we are required to offer to purchase all outstanding notes for a
price equal to 101% of the principal amount thereof plus accrued and unpaid
interest. Under the Regulations, such a Change of Control purchase offer will
not affect the yield or maturity date of the notes unless, based on all the
facts and circumstances as of the issue date, it is significantly more likely
than not that a Change of Control giving rise to the offer will occur. We will
not treat the Change of Control provisions of the notes as affecting the
calculation of the yield to maturity of any note.
Optional Redemption. At our option, we may redeem part or all of the notes
at any time at a redemption price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest thereon to the date of redemption, plus a make
whole premium. For purposes of determining whether the notes are issued with any
original issue discount, the Regulations generally provide that an issuer will
be treated as exercising any such option if its exercise would lower the yield
of the debt instrument. A redemption of the notes at the optional redemption
prices, however, would increase rather than decrease the effective yield of the
debt instrument as calculated from the issue date and accordingly, the optional
redemption provisions of the Notes will not affect the calculation of yield to
maturity of any note.
Should we exercise an option and redeem a note, or upon the mandatory
redemption of a note, the U.S. Holder of the note would be required to treat any
amount paid by us (other than amounts paid as accrued and unpaid interest
thereon) as an amount realized upon the redemption of the note.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to interest
payments on the notes made to U.S. Holders other than certain exempt recipients
(such as corporations) and to proceeds realized by such holders on dispositions
of the notes. A 31% backup withholding tax will apply to such amounts only if
the U.S. Holder:
- fails to furnish its social security or other taxpayer identification
number ("TIN") within a reasonable time after request therefor;
- furnishes an incorrect TIN;
- fails to report properly interest or dividend income; or
- fails under certain circumstances to provide a certified statement,
signed under penalty of perjury, that the TIN provided is its correct
number and that it is not subject to backup withholding.
Any amount withheld from a payment to a U.S. Holder under the backup withholding
rules is allowable as a refund or as a credit against such holder's federal
income tax liability, provided that the required information is furnished to the
IRS. Furthermore, certain penalties may be imposed by the IRS on a U.S. Holder
who is required to supply information but who does not do so in the proper
manner. U.S. Holders of the notes should consult their tax advisors as to their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption.
NON-U.S. HOLDERS
The following is a general discussion of certain U.S. federal tax
consequences of the ownership and disposition of notes applicable to beneficial
owners that are Non-U.S. Holders ("Non-U.S. Holders") of the notes. A "Non-U.S.
Holder" is any person other than:
- an individual who is a citizen or resident of the United States;
- a corporation or partnership created or organized in the United States or
under the laws of the United States or of any State thereof (including
the District of Columbia);
- an estate the income of which is subject to U.S. federal income tax
regardless of its source; or
- a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States persons who
have the authority to control all substantial decisions of the trust.
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This discussion is for general information only and does not deal with all
aspects of U.S. federal income and estate taxation that may be relevant to
Non-U.S. Holders in view of their particular circumstances, nor does it address
the effect of any applicable state and local or foreign tax law. Furthermore,
this summary is based upon provisions of the Code, Regulations, rulings and
pronouncements issued by the IRS and judicial decisions now in effect, all of
which are subject to change at any time by legislative, judicial or
administrative action. Any such changes may be applied retroactively in a manner
that could adversely affect the Non-U.S. Holders of the notes. We have not
sought and will not seek any rulings from the IRS or opinions from counsel with
respect to the matters discussed below. There can be no assurance that the IRS
will not take positions concerning the tax consequences of the purchase,
ownership or disposition of the notes which are different from those discussed
herein. PROSPECTIVE FOREIGN INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS
REGARDING THE FEDERAL, STATE AND LOCAL, AND FOREIGN INCOME AND OTHER TAX
CONSEQUENCES OF OWNING AND DISPOSING OF THE NOTES.
Payments of Interest from U.S. Sources
Interest paid from U.S. sources on the notes to a Non-U.S. Holder should
qualify as "portfolio interest" on which no withholding of U.S. income tax is
imposed, provided (a) the Non-U.S. Holder:
- does not own, actually or constructively, 10% or more of the total
combined voting power of all classes of our capital stock;
- is not a controlled foreign corporation within the meaning of section
957(a) of the Code that is related directly or indirectly to our company;
- is not a bank which acquired the notes in consideration for an extension
of credit made pursuant to a loan agreement entered into in the ordinary
course of its business; and
- such amounts are not considered payments of "contingent interest"
described in Section 871(h)(4) of the Code (relating primarily to
interest based on or determined by reference to income, profits, cash
flow, sales, dividends or other comparable attributes of our company or a
party related to us), and
(b) we receive a statement that the beneficial owner of the notes is a Non-U.S.
Holder. Such statement is made on an IRS Form W-8, or a successor form, which is
signed by the beneficial owner under penalties of perjury, certifies that the
beneficial owner of the notes is a Non-U.S. person and provides the name and
address of the beneficial owner. Otherwise, interest paid from U.S. sources to a
Non-U.S. Holder of notes will be subject to the withholding of U.S. income tax
at the rate of 30% of the gross amount of interest paid or a lower rate under an
applicable income tax treaty.
Interest paid from U.S. sources to a Non-U.S. Holder may also be exempt
from U.S. federal withholding taxes provided such Non-U.S. Holder delivers (a)
IRS Form 1001, or a successor form, signed by the Non-U.S. Holder of the Note or
such Non-U.S. Holder's agent claiming exemption from or reduction of withholding
under an applicable tax treaty, or (b) IRS Form 4224, or a successor form,
signed by the Non-U.S. Holder of the Note or such Non-U.S. Holder's agent
claiming exemption from withholding tax on income effectively connected with the
conduct of a trade or business within the United States; provided that, in any
such case (x) the applicable form is delivered pursuant to applicable procedures
and is properly transmitted to the person otherwise required to withhold tax and
(y) none of the persons receiving the form has actual knowledge that the
Non-U.S. Holder is not a Non-U.S. Holder or that any certification on the form
is false. Non-U.S. Holders that are classified as partnerships for U.S. federal
income tax purposes but classified as corporations for non-United States tax
purposes may, however, not be entitled to the benefits of an otherwise
applicable tax treaty. Interest that is effectively connected with the conduct
by a Non-U.S. Holder of a trade or business within the United States generally
will be subject to United States federal income tax on a net basis in the manner
described above for U.S. Holders. In addition, a Non-U.S. Holder that is a
corporation may be subject to a branch profits tax in respect of such
effectively connected income equal to 30% or such lower rate as may be specified
in an applicable tax treaty.
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Sale, Redemption or Other Taxable Disposition of the Notes
Generally, a Non-U.S. Holder of a note will not be subject to U.S. federal
income tax on any gain realized on the sale, redemption or other disposition of
a note unless:
- such gain or income is effectively connected with a trade or business in
the United States of the Non-U.S. Holder or, under an applicable tax
treaty, is attributable to a United States permanent establishment
maintained by the Non-U.S. Holder;
- in the case of a Non-U.S. Holder who is an individual, the Non-U.S.
Holder is present in the United States for 183 days or more in the
taxable year of such sale and certain other requirements are met; or
- the Non-U.S. Holder is subject to tax pursuant to the provisions of the
Code applicable to certain former citizens and residents of the United
States.
Information Reporting and Backup Withholding
U.S. information reporting and backup withholding tax (which is a
withholding tax imposed at the rate of 31% on certain payments to persons who
fail to furnish the information required under U.S. information reporting
requirements) generally will not apply to interest paid on the notes to a
Non-U.S. Holder who has provided us (or our agent) with a Form W-8, or a
successor form, provided the payor does not have actual knowledge that the payee
is not a Non-U.S. person.
Payment of the proceeds from a sale of the notes to or through a U.S.
office of a broker will be subject to information reporting and backup
withholding unless the owner certifies as to its status as a Non-U.S. Holder
under penalties of perjury or otherwise establishes an exemption. Payment of the
proceeds from a sale of notes to or through a non-U.S. office of a broker
generally will not be subject to information reporting or backup withholding;
however, if such broker is:
- a United States person;
- a "controlled foreign corporation"; or
- a foreign person that derives 50% or more of its gross income from the
conduct of a trade or business in the United States,
such payment will be subject to information reporting (but currently not backup
withholding, although the issue of whether backup withholding should apply is
under consideration by the IRS) unless such broker has documentary evidence in
its records that the owner is a Non-U.S. Holder and certain other conditions are
met or the owner otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be credited
against the Non-U.S. Holder's federal income tax liability, if any, or refunded,
provided the required information is furnished to the IRS.
THE FEDERAL TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE TAX
IMPLICATIONS OF HOLDING AND DISPOSING OF THE NOTES UNDER APPLICABLE STATE OR
LOCAL LAWS. FOREIGN INVESTORS SHOULD ALSO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES UNIQUE TO INVESTORS WHO ARE NOT U.S. PERSONS.
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PLAN OF DISTRIBUTION
Based on interpretations by the staff of the SEC in no action letters
issued to third parties, we believe that you may transfer new notes issued under
the exchange offer in exchange for the outstanding notes if:
- you acquire the new notes in the ordinary course of your business; and
- you are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a
distribution of such new notes.
You may not participate in the exchange offer if you are:
- our "affiliates" within the meaning of Rule 405 under the Securities Act;
or
- a broker-dealer that acquired outstanding notes directly from us.
Each broker-dealer that receives new notes for its own account in exchange
for outstanding notes, where the outstanding notes were acquired by the
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of the new notes.
The letter of transmittal states that by so acknowledging and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
To date, the staff of the SEC has taken the position that broker-dealers
may fulfill their prospectus delivery requirements with respect to transactions
involving an exchange of securities such as this exchange offer, other than a
resale of an unsold allotment from the original sale of the outstanding notes,
with the prospectus contained in the exchange offer registration statement. Each
broker-dealer that receives new notes for its own account pursuant to the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of such new notes. This prospectus, and any amendment or
supplement to this prospectus, may be used by a broker-dealer in connection with
resales of new notes received in exchange for outstanding notes where such
outstanding notes were acquired as a result of market-making activities or other
trading activities. We have agreed that, starting on the expiration date of the
exchange offer and ending on the close of business 180 days after the expiration
date, we will make this prospectus, and any amendment or supplement to this
prospectus, available to any broker-dealer for use in connection with any such
resale. In addition, until such date all dealers effecting transactions in the
new notes may be required to deliver a prospectus.
If you wish to exchange your outstanding notes for new notes in the
exchange offer, you will be required to make representations to us as described
in "The Exchange Offer -- Purpose and Effect of the Exchange Offer" and
"-- Procedures for Tendering -- Your Representations to Us" in this prospectus
and in the letter of transmittal. In addition, if you are a broker-dealer who
receives new notes for your own account in exchange for outstanding notes that
were acquired by you as a result of market-making activities or other trading
activities, you will be required to acknowledge that you will deliver a
prospectus in connection with any resale by you of such new notes.
We will not receive any proceeds from any sale of new notes by
broker-dealers. Broker-dealers who receive new notes for their own account in
the exchange offer may sell them from time to time in one or more transactions
in the over-the-counter market:
- in negotiated transactions;
- through the writing of options on the new notes or a combination of such
methods of resale;
- at market prices prevailing at the time of resale; and
- at prices related to such prevailing market prices or negotiated prices.
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Any resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any broker-dealer or the purchasers of any new notes. Any broker-dealer
that resells new notes it received for its own account in the exchange offer and
any broker or dealer that participates in a distribution of such new notes may
be deemed to be an "underwriter" within the meaning of the Securities Act. Any
profit on any resale of new notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The letter of transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
LEGAL MATTERS
The validity of the new notes and the tax consequences of the exchange
offer will be passed upon for our company by Vinson & Elkins L.L.P., Houston,
Texas.
INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements included in this prospectus and elsewhere in the
registration statement, to the extent and for the periods indicated in their
reports, have been audited by Arthur Andersen LLP, independent public
accountants, and are included herein in reliance upon the authority of said firm
as experts in accounting and auditing in giving said reports.
AVAILABLE INFORMATION
Upon consummation of the exchange offer, we will be subject to the
informational requirements of the Exchange Act and, in accordance therewith,
will file reports and other information with the Commission. Reports and other
information filed by our company with the Commission can be inspected without
charge and copied, upon payment of prescribed rates, at the public reference
facilities maintained by the Commission located at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York 10048 and the
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material and any part thereof will also be available
by mail from the Public Reference Section of the Commission, located at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates, and via the
Commission's address on the World Wide Web at http://www.sec.gov.
109
<PAGE> 113
GLOSSARY OF TECHNICAL TERMS
The following terms used in this prospectus have the following meanings:
"Average availability" means the fraction of time (usually expressed as a
percent on an annual or multi-annual basis) within which a generating plant (or
unit) is actually capable of providing service, whether or not it is actually in
service and regardless of the capacity level that can be provided.
"Avoided Costs" means the incremental costs that would be incurred by an
electric utility for electric energy or capacity, or both, which, but for the
purchase from a Qualifying Facility, it would produce or purchase from another
service.
"Base load" plant or facility means a generation unit which is normally
operated to supply all or part of the minimum load of a utility system and
which, consequently, operates at a high load factor.
"Btu" means British thermal units, a unit of energy.
"Cogeneration" means the sequential use of a simple energy source to
produce two or more forms of energy output. For example, our plants burn natural
gas to produce electricity and steam.
"Dispatchable" means the ability of an electric generating unit to be
committed to meet demand for electricity in a fashion determined to be most
efficient by the system controller.
"Equivalent availability" means the ratio (usually expressed as a percent)
of the time a generating unit is ready for, or in, service multiplied by the
capacity level that can be provided, plus the time a generating unit is given
contractual credit for being ready for service multiplied by the contractual
capacity, to the total time interval under consideration multiplied by the
contractual capacity. (It is possible for the equivalent availability to be
above or below 100%.)
"EWG" means an "exempt wholesale generator" in accordance with the Public
Utility Holding Company Act of 1935.
"Gas-fired, combined-cycle cogeneration facility" means a facility in which
a gas turbine, burning natural gas or fuel oil, turns an electrical generator.
The exhaust gases from the turbine are directed into a waste heat recovery
boiler, producing high pressure steam which is run through a steam turbine,
producing additional electricity. After exiting the steam turbine, the low
pressure steam is delivered to the steam host facility for processing and
building heat.
"Kilovolt" or "KV" means one thousand volts.
"Kilowatt" or "KW" means one thousand watts.
"Kilowatt-hour" or "KWh" means a unit of electrical energy equal to one
kilowatt of power supplied or taken from an electric circuit steadily for one
hour.
"Mcf" means one thousand cubic feet.
"Megawatt" or "MW" means one million watts. References to specific amounts
of megawatts in the case of plant capacities are to the "name plate" capacities
on the turbines in the plants.
"Megawatt-hour" or "MWh" means one thousand kilowatt-hours.
"MMBtu" means one million Btu.
"QF" or "qualifying facility" means a "qualifying cogeneration facility" in
accordance with PURPA.
"tracking account" means an accounting device designed to relate a utility
power purchaser's Avoided Cost to the payments it makes on such power purchase
agreement over the life thereof. Often, because of project financing
considerations, payments exceed the initial estimated Avoided Cost in the early
years of a power purchase agreement and come into line with, and are less than,
such estimated Avoided Costs in later years of the agreement. Accordingly, many
power purchase agreements set up the device of a tracking account so that if
there is a termination of the power purchase agreement at a time when the
utility purchaser has paid
110
<PAGE> 114
amounts exceeding its estimated Avoided Costs, the utility can be paid back the
difference. To the extent that the amounts paid by the purchaser exceed its
estimated Avoided Cost, the venture selling the power under the power purchase
agreement is indebted to the purchaser for such amount, which is recorded in the
tracking account.
"ventures" means the ventures or entities in which our subsidiaries have
equity interests and which in turn directly own our independent power plants.
111
<PAGE> 115
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF
EAST COAST POWER L.L.C.
Pro Forma Consolidated Statement of Operations of East
Coast Power L.L.C. for the nine months ended September
30, 1999............................................... F-4
Pro Forma Consolidated Statement of Operations of East
Coast Power L.L.C. for the year ended December 31,
1998................................................... F-6
UNAUDITED FINANCIAL STATEMENTS OF EAST COAST POWER L.L.C.
Consolidated Statement of Operations of East Coast Power
L.L.C. for the period February 4, 1999 to September 30,
1999................................................... F-9
Consolidated Balance Sheet of East Coast Power L.L.C. as
of September 30, 1999.................................. F-10
Consolidated Statement of Cash Flows of East Coast Power
L.L.C. for the period February 4, 1999 to September 30,
1999................................................... F-11
Consolidated Statement of Members' Equity of East Coast
Power L.L.C. for the period February 4, 1999 to
September 30, 1999..................................... F-12
Notes to Consolidated Financial Statements of East Coast
Power L.L.C............................................ F-13
AUDITED FINANCIAL STATEMENTS OF EAST COAST POWER L.L.C.
Report of Independent Public Accountants.................. F-19
Consolidated Statement of Operations of East Coast Power
L.L.C. for the period February 4, 1999 to March 31,
1999................................................... F-20
Consolidated Balance Sheet of East Coast Power L.L.C. as
of March 31, 1999...................................... F-21
Consolidated Statement of Cash Flows of East Coast Power
for the period February 4, 1999 to March 31, 1999...... F-22
Consolidated Statement of Members' Equity of East Coast
Power L.L.C. for the period February 4, 1999 to March
31, 1999............................................... F-23
Notes to Consolidated Financial Statements of East Coast
Power L.L.C. .......................................... F-24
UNAUDITED FINANCIAL STATEMENTS OF COGEN TECH GROUP
Combined Statements of Income of Cogen Tech Group for the
period January 1, 1999 to February 4, 1999 and the nine
months ended September 30, 1998........................ F-35
Combined Statement of Cash Flows of Cogen Tech Group for
the period January 1, 1999 to February 4, 1999 and the
nine months ended September 30, 1998................... F-36
Combined Statement of Owners' Equity of Cogen Tech Group
for the period January 1, 1999 to February 4, 1999..... F-37
Notes to Combined Financial Statements of Cogen Tech
Group.................................................. F-38
AUDITED FINANCIAL STATEMENTS OF COGEN TECH GROUP
Report of Independent Public Accountants.................. F-41
Combined Statements of Income of Cogen Tech Group for the
years ended December 31, 1998, 1997 and 1996........... F-42
Combined Balance Sheets of Cogen Tech Group as of December
31, 1998 and 1997...................................... F-43
Combined Statements of Cash Flows of Cogen Tech Group for
the years ended December 31, 1998, 1997 and 1996....... F-44
Combined Statements of Owners' Equity of Cogen Tech Group
for the years ended December 31, 1998, 1997 and 1996... F-45
Notes to Combined Financial Statements of Cogen Tech
Group.................................................. F-46
UNAUDITED FINANCIAL STATEMENTS OF COGEN TECHNOLOGIES NEW
JERSEY OPERATING PARTNERSHIPS
Combined Statements of Income of Cogen Technologies New
Jersey Operating Partnerships for the period from
February 5, 1999 to September 30, 1999, the period from
January 1, 1999 to February 4, 1999 and the nine months
ended September 30, 1998............................... F-56
Combined Balance Sheets of Cogen Technologies New Jersey
Operating Partnerships as of September 30, 1999 and
December 31, 1998...................................... F-57
</TABLE>
F-1
<PAGE> 116
<TABLE>
<S> <C>
Combined Statements of Cash Flows of Cogen Technologies New
Jersey Operating Partnerships for the period from February
5, 1999 to September 30, 1999, the period from January 1,
1999 to February 4, 1999 and the nine months ended September
30, 1998.................................................... F-58
Combined Statements of Partners' Capital of Cogen
Technologies New Jersey Operating Partnerships for the
period from February 5, 1999 to September 30, 1999 and
the period from January 1, 1999 to February 4, 1999.... F-59
Notes to Combined Financial Statements of Cogen
Technologies New Jersey Operating Partnerships......... F-60
AUDITED FINANCIAL STATEMENTS OF COGEN TECHNOLOGIES NEW
JERSEY OPERATING PARTNERSHIPS
Report of Independent Public Accountants.................. F-63
Combined Statements of Income of Cogen Technologies New
Jersey Operating Partnerships for the years ended
December 31, 1998, 1997 and 1996....................... F-64
Combined Balance Sheets of Cogen Technologies New Jersey
Operating Partnerships as of December 31, 1998 and
1997................................................... F-65
Combined Statements of Cash Flows of Cogen Technologies
New Jersey Operating Partnerships for the years ended
December 31, 1998, 1997 and 1996....................... F-66
Combined Statements of Partners' Capital of Cogen
Technologies New Jersey Operating Partnerships for the
years ended December 31, 1998, 1997 and 1996........... F-67
Notes to Combined Financial Statements of Cogen
Technologies New Jersey Operating Partnerships......... F-68
</TABLE>
F-2
<PAGE> 117
EAST COAST POWER L.L.C.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
East Coast Power L.L.C. (the "Company") was formed in December 1998 in
connection with the acquisition of the Cogen Tech Group (the "Acquired Group").
The following unaudited pro forma consolidated financial statements give effect
to (i) the acquisition of the Acquired Group by the Company in February 1999 and
certain related transactions, (ii) the acquisition by an entity acquired by the
Company of an additional indirect 5.25% partnership interest in Cogen
Technologies NJ Venture ("Bayonne Venture") in July 1998 and (iii) the issuance
of $850.0 million of outstanding notes in April 1999, based on the historical
combined financial statements of the Acquired Group and the historical
consolidated financial statements of the Company, under the assumptions and
adjustments set forth in the notes hereto. The amounts shown in the column
entitled Acquired Group reflect the combined financial statements of Cogen
Technologies Linden, Ltd. ("Linden Ltd."), Cogen Technologies Camden GP Limited
Partnership ("Camden GP") and McNair Energy Services Corporation ("MESC") and
its wholly owned subsidiary Cogen Technologies NJ, Inc. ("NJ Inc."). As a result
of the acquisition, the Company acquired all of the equity interests in Linden
Ltd., Camden GP and MESC.
The unaudited pro forma consolidated statements of operations for the year
ended December 31, 1998 and the nine months ended September 30, 1999 assume such
transactions were consummated at the beginning of the period presented. The
unaudited pro forma consolidated financial statements have been prepared for
informational purposes only and are not necessarily indicative of the actual or
future results of operations or financial condition that would have been
achieved had the transaction occurred at the dates assumed. The unaudited pro
forma consolidated financial statements should be read together with the
historical combined financial statements of the Acquired Group and the related
notes thereto, the historical consolidated financial statements of the Company
and the related notes thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations, included elsewhere in this
prospectus.
The adjustments contained in the unaudited pro forma consolidated
statements of operations do not give effect to any nonrecurring costs directly
associated with such transactions that might be incurred within the next twelve
months and do not give effect to any potential cost savings and synergies that
could result from such transactions.
F-3
<PAGE> 118
EAST COAST POWER L.L.C.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
HISTORICAL
----------------------------
ACQUIRED
GROUP COMPANY
JANUARY 1 TO FEBRUARY 4 TO COMPANY
FEBRUARY 4, SEPTEMBER 30, PRO FORMA PRO
1999(1) 1999 ADJUSTMENTS FORMA(1)
------------ ------------- ----------- --------
(IN MILLIONS OF DOLLARS EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C>
Revenues
Equity in earnings (loss) of
Cogen Technologies Linden Venture,
L.P. ................................. $(44.6) $ 34.8 $ (3.0)(2) $(12.8)
Camden Cogen Venture L.P. .............. (11.9) 7.0 (0.6)(2) (5.5)
Cogen Technologies NJ Venture........... 5.0 20.2 (0.8)(2) 24.4
------ ------ ------ ------
(51.5) 62.0 (4.4) 6.1
Costs and Expenses
Operating overhead......................... 0.9 -- -- 0.9
General and administrative................. 1.7 5.5 -- 7.2
------ ------ ------ ------
2.6 5.5 -- 8.1
------ ------ ------ ------
Income (Loss) from Operations................ (54.1) 56.5 (4.4) (2.0)
Other Income (Expense)
Interest and other income.................. 0.1 10.5 (8.9)(3) 1.7
11.7(4)
(18.5)(5)
(1.6)(6)
Interest expense........................... (2.0) (65.6) (0.3)(7) (76.3)
------ ------ ------ ------
Income (Loss) Before Income Taxes............ (56.0) 1.4 (22.0) (76.6)
Income taxes............................... (1.7) -- 1.7(8) --
------ ------ ------ ------
Net Income (Loss)............................ $(57.7) $ 1.4 $(20.3) $(76.6)
====== ====== ====== ======
Ratio of Earnings to Fixed Charges(9)........ --
======
</TABLE>
- ---------------
(1) The pro forma results for the Company have not been adjusted for the
following items:
In connection with the acquisition, Cogen Technologies Linden Venture,
L.P. ("Linden Venture") and Camden Cogen L.P. ("Camden Venture") made
one-time payments totaling $66.8 million to terminate certain agreements
with affiliates with respect to the payment of management and gas
management fees. Such management and gas management fees were paid based on
a percentage of gross revenues and gas purchases, respectively. The
termination fees for such agreements were paid from contributions by the
sellers. Costs included in the Acquired Group historical and the Company
pro forma amounts for equity in earnings of affiliates associated with the
agreements which were terminated are $52.4 million for Linden Venture and
$14.4 million for Camden Venture, which represents the termination payments
plus the current period expenses with respect to such agreements.
The Acquired Group's operating overhead includes $0.3 million of
development bonuses which were previously granted to employees and were
being charged to expense as earned. Since all such bonuses were bought out
prior to the acquisition, the Company will not incur charges relating to
the development bonuses in future periods.
Prior to the acquisition, the Acquired Group used a corporate aircraft
owned by an affiliate and was charged for such use based on the affiliate's
cost to own and operate the aircraft and the Acquired Group's proportionate
usage. Such aircraft was not acquired by the Company and is not available
for use by the Company. The Acquired Group's general and administrative
expense includes $0.4 million with
F-4
<PAGE> 119
respect to the use of such aircraft. The Company does not anticipate
incurring similar charges in the future.
(2) In connection with the acquisition, the Company has allocated a portion of
the purchase price to its equity investment in each of Linden Venture,
Camden Venture and Bayonne Venture. Under generally accepted accounting
principles, the difference between the purchase price allocated to each
venture and the historical equity in each venture will be amortized over the
remaining lives of the facilities, as indicated in the table below. The
adjustments reflect amortization with respect to the period prior to the
acquisition. In the acquisition, the Company allocated the purchase price of
$1,096.2 million to the fair value of assets acquired and liabilities
assumed as follows (in millions of dollars):
<TABLE>
<CAPTION>
AMORTIZATION
PERIOD FOR
ALLOCATED EXCESS OF FAIR
BOOK FAIR VALUE OVER BOOK
ASSETS ACQUIRED/LIABILITIES ASSUMED VALUE VALUE VALUE
----------------------------------- ----- --------- ---------------
<S> <C> <C> <C>
Linden Venture........................................ $ 56.3 $ 918.6 23 years
Camden Venture........................................ 15.6 179.0 24 years
Bayonne Venture....................................... 10.2 185.9 20 years
Cash.................................................. 17.7 17.7 --
Accounts Receivable................................... 8.6 8.6 --
Deferred Financing Costs.............................. 1.4 1.4 8 years
Linden Ltd. Term Loan................................. (205.6) (209.9) 8 years
Other Liabilities..................................... (4.6) (5.1) --
--------
Purchase Price........................................ $1,096.2
========
</TABLE>
The purchase price reflected in the above table has been preliminarily
allocated based on estimated fair values at the date of acquisition pending
final determination of acquisition costs and certain acquired balances. As
of September 30, 1999 management is not aware of any matters which could
significantly impact this allocation.
(3) Reflects the reversal of an $8.9 million payment received with respect to
the cancellation of the interest rate swap in April 1999. The interest rate
swap was related to the bridge loan and represented a $600.0 million
notional swap with a February 11, 2009 maturity date. Under the terms of the
swap, the Company was the fixed-rate payor (5.65%) and the floating rated
receiver (LIBOR).
(4) Reflects the reversal of historical interest expense with respect to: (i)
the bridge loan ($10.4 million); (ii) a $62.1 million principal payment on
the subordinated note ($1.2 million); and (iii) the Camden GP term loan
($0.1 million). The bridge loan was repaid with proceeds from the issuance
of the outstanding notes, and the related interest rate swap was canceled.
$62.1 million of the principal amount of the subordinated note was repaid
with proceeds from the issuance of the outstanding notes, and the Camden GP
term loan was repaid prior to the acquisition.
(5) Reflects interest expense associated with the outstanding notes for the
period January 1 to April 20 assuming interest rates as follows: $296
million at 6.737%, $236 million at 7.066% and $318 million at 7.536%.
(6) Reflects interest expense associated with $187.9 million principal amount of
the subordinated note for the period January 1 to February 4 at 9%.
(7) Reflects the amortization of $12.9 million of deferred debt issuance costs
related to the issuance of the notes. Such costs are being deferred and
amortized pro rata over the life of the notes, $4.5 million over 9 years,
$3.6 million over 13 years and $4.8 million over 18 years. The adjustment
reflects amortization for the period from January 1 to April 20.
(8) Reflects the effect of reversing historical taxes for MESC. The Company will
be taxed as a partnership.
(9) For purposes of calculating the ratio of earnings to fixed charges, earnings
are defined as income (loss) from continuing operations before income taxes
and fixed charges. Fixed charges consist of interest expense including
amortization of loan fees. For the pro-forma period ended September 30, 1999
earnings were insufficient to cover fixed charges by $76.6 million.
F-5
<PAGE> 120
EAST COAST POWER L.L.C.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-------------------------------------------
ACQUIRED COMPANY
GROUP PRO FORMA PRO
HISTORICAL(1) ADJUSTMENTS FORMA(1)
-------------- ------------ ---------
(IN MILLIONS OF DOLLARS EXCEPT FOR RATIOS)
<S> <C> <C> <C>
Revenues
Equity in earnings of affiliates:
Cogen Technologies Linden Venture, L.P. ............ $ 75.3 $ (37.1)(2) $ 38.2
Camden Venture L.P. ................................ 14.2 (6.8)(2) 7.4
(9.1)(2)
Cogen Technologies NJ Venture....................... 47.6 2.0(3) 40.5
------ ------- ------
137.1 (51.0) 86.1
------ ------- ------
Cost and Expenses
Operating overhead..................................... 21.6 -- 21.6
General and administrative............................. 20.2 -- 20.2
------ ------- ------
41.8 -- 41.8
------ ------- ------
Income (Loss) from Operations............................ 95.3 (51.0) 44.3
Other Income (Expense):
Interest and other income.............................. 12.6 (11.8)(4) 0.8
(59.8)(5)
(16.9)(6)
(1.0)(7)
(5.7)(8)
1.3(9)
Interest expense....................................... (19.3) 0.8(10) (100.6)
------ ------- ------
Income (Loss) Before Income Taxes........................ 88.6 (144.1) (55.5)
Income taxes........................................... (14.6) 14.6(11) --
------ ------- ------
Net Income (Loss)........................................ $ 74.0 $(129.5) $(55.5)
====== ======= ======
Ratio of Earnings to Fixed Charges(12)................... --
======
</TABLE>
- ---------------
(1) The pro forma results for the Company have not been adjusted for the
following matters:
In connection with the acquisition, Cogen Technologies Linden Venture,
L.P. ("Linden Venture") and Camden Cogen L.P. ("Camden Venture") made
one-time payments totaling $66.8 million to terminate certain agreements
with affiliates with respect to the payment of management and gas
management fees. Such management and gas management fees were paid based on
a percentage of gross revenues and gas purchases, respectively. The
termination fees for such agreements were paid from contributions by the
sellers. Costs included in the historical and pro forma amounts for equity
in earnings of affiliates associated with the agreements which were
terminated are $4.9 million for Linden Venture and $1.3 million for Camden
Venture for the year ended December 31, 1998.
The Acquired Group's operating overhead includes $14.5 million of
one-time payments to "buy out" development bonuses which were previously
granted to employees and were being charged to expense as earned. Since all
such bonuses were bought out prior to the acquisition, the Company will not
incur charges relating to the development bonuses in future periods. The
Acquired Group's operating overhead also includes $1.8 million for the year
ended December 31, 1998, with respect to development bonuses earned during
the period.
F-6
<PAGE> 121
Prior to the acquisition, the Acquired Group used a corporate aircraft
owned by an affiliate and was charged for such use based on the affiliate's
cost to own and operate the aircraft and the Acquired Group's proportionate
usage. Such aircraft was not acquired by the Company and is not available
for use by the Company. The Acquired Group's general and administrative
expense includes $6.0 million for the year ended December 31, 1998, with
respect to the use of such aircraft.
The Company does not anticipate incurring similar charges in the
future.
(2) In connection with the acquisition, the Company has allocated a portion of
the purchase price to its equity investment in each of Linden Venture,
Camden Venture and Bayonne Venture. Under generally accepted accounting
principles, the difference between the purchase price allocated to each
venture and the historical equity in each venture will be amortized over
the remaining lives of the facilities, as indicated in the table below. The
adjustments reflect one year of amortization. In the acquisition, the
Company allocated the purchase price of $1,096.2 million to the fair value
of assets acquired and liabilities assumed as follows (in millions):
<TABLE>
<CAPTION>
AMORTIZATION
PERIOD FOR
ALLOCATED EXCESS OF FAIR
BOOK FAIR VALUE OVER
ASSETS ACQUIRED/LIABILITIES ASSUMED VALUE VALUE BOOK VALUE
----------------------------------- ------- --------- --------------
<S> <C> <C> <C>
Linden Venture..................................... $ 56.3 $ 918.6 23 years
Camden Venture..................................... 15.6 179.0 24 years
Bayonne Venture.................................... 10.2 185.9 20 years
Cash............................................... 17.7 17.7 --
Accounts Receivable................................ 8.6 8.6 --
Deferred Financing Costs........................... 1.4 1.4 8 years
Linder Ltd. Term Loan.............................. (205.6) (209.9) 8 years
Other Liabilities.................................. (4.6) (5.1) --
--------
Purchase Price........................... $1,096.2
========
</TABLE>
The purchase price reflected in the above table has been preliminarily
allocated based on estimated fair values at the date of acquisition pending
final determination of acquisition costs and certain acquired balances. As
of September 30, 1999 management is not aware of any matters which could
significantly impact this allocation.
(3) Reflects the equity in the earnings of Bayonne Venture attributable to a
5.25% partnership interest in Bayonne Venture which was acquired from an
unaffiliated entity in July 1998. Historical amounts include equity
earnings with respect to such interest for the period August 1998 through
December 1998. The pro forma adjustment represents equity earnings with
respect to such interest for the period January 1998 through July 1998.
(4) Reflects the elimination of interest income related to a receivable owed to
Linden Ltd. from Cogen Technologies Financial Services, L.P., which was
distributed to the sellers in connection with the acquisition. The Company
did not acquire Cogen Technologies Financial Services, L.P.
(5) Reflects interest expense associated with the outstanding notes assuming
interest rates as follows: $296 million at 6.737%, $236 million at 7.066%
and $318 million at 7.536%.
(6) Reflects interest expense associated with $187.9 million principal amount
of the subordinated note at 9%.
(7) Reflects the amortization of $12.9 million of deferred debt issuance costs
related to the issuance of the Notes. Such costs are being deferred and
amortized pro rata over the life of the Notes, $4.5 million over 9 years,
$3.6 million over 13 years and $4.8 million over 18 years. The adjustment
reflects one year of amortization.
(8) Reflects the write-off of debt issuance fees associated with the bridge
loan because these pro forma financial statements reflect the repayment of
the bridge loan.
(9) Reflects the reversal of historical interest expense associated with the
Camden GP term loan. The Camden GP term loan was paid in full prior to the
closing of the acquisition.
F-7
<PAGE> 122
(10) Reflects the amortization of the $4.3 million premium with respect to
Linden Ltd.'s long-term debt assumed in the acquisition.
(11) Reflects the effect of reversing historical taxes for MESC. The Company
will be taxed as a partnership.
(12) For purposes of calculating the ratio of earnings to fixed charges,
earnings are defined as income (loss) from continuing operations before
income taxes and fixed charges. Fixed charges consist of interest expense
including amortization of loan fees. For the pro-forma period ended
December 31, 1998 earnings were insufficient to cover fixed charges by
$55.5 million.
F-8
<PAGE> 123
EAST COAST POWER L.L.C.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FEBRUARY 4, 1999
TO SEPTEMBER 30,
1999
-------------------
<S> <C>
Revenues
Equity in earnings of
Cogen Technologies Linden Venture, L.P................. $ 34.8
Camden Cogen L.P....................................... 7.0
Cogen Technologies NJ Venture.......................... 20.2
------
62.0
Cost and Expenses
General and administrative................................ 5.5
------
Income from Operations...................................... 56.5
Other Income (Expense)
Interest and other income................................. 10.5
Interest expense.......................................... (65.6)
------
Net Income.................................................. $ 1.4
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE> 124
EAST COAST POWER L.L.C.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(IN MILLIONS OF DOLLARS)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
-------------
<S> <C>
Current Assets
Cash and cash equivalents................................. $ 24.8
Restricted cash........................................... 13.8
Other current assets...................................... 0.4
--------
39.0
--------
Investments in Affiliates
Cogen Technologies Linden Venture, L.P.................... 899.3
Camden Cogen L.P.......................................... 180.4
Cogen Technologies NJ Venture............................. 184.3
--------
1,264.0
--------
Other Assets................................................ 13.9
--------
$1,316.9
========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities
Accounts payable.......................................... $ 0.3
Accounts payable, affiliate............................... 2.3
Current maturities on long-term debt...................... 28.6
Interest payable.......................................... 3.4
Other current liabilities................................. 8.6
--------
43.8
Long-Term Debt.............................................. 1,192.3
Commitments and Contingencies (Note 6)
Members' Equity............................................. 81.4
--------
$1,316.9
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE> 125
EAST COAST POWER L.L.C.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
FEBRUARY 4,
1999 TO
SEPTEMBER 30,
1999
--------------
<S> <C>
Operating Activities:
Net income................................................ $ 1.4
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in earnings of affiliates
Cogen Technologies Linden Venture, L.P............... (34.8)
Camden Cogen L.P..................................... (7.0)
Cogen Technologies NJ Venture........................ (20.2)
Distributions received from affiliates
Cogen Technologies Linden Venture, L.P............... 54.0
Camden Cogen L.P..................................... 5.7
Cogen Technologies NJ Venture........................ 21.8
Amortization of deferred financing costs............... 6.4
Amortization of Linden Ltd. term loan premium.......... (0.6)
Changes in other operating assets and liabilities
Decrease in accounts receivable........................ 8.6
Increase in other current assets....................... (0.3)
Increase in accounts payable........................... 0.3
Increase in accounts payable, affiliate................ 2.3
Increase in interest payable........................... 0.4
Net change in other assets and liabilities............. (1.2)
---------
Net Cash Provided by Operating Activities................... 36.8
---------
Investing Activities:
Acquisition of Acquired Group (net of cash acquired of
$17.7)................................................. (821.0)
Purchase of Enron Corp. common stock...................... (250.0)
---------
Net Cash Used in Investing Activities....................... (1,071.0)
---------
Financing Activities:
Long-term borrowings under bridge loan.................... 831.0
Long-term borrowings under Enron Subordinated Note........ 250.0
Long-term borrowings under senior secured notes........... 850.0
Principal payments on long-term debt...................... (919.5)
Financing costs........................................... (18.7)
Contributions received.................................... 105.0
Distributions Paid........................................ (25.0)
---------
Net Cash Provided by Financing Activities................... 1,072.8
---------
Increase in Cash and Cash Equivalents....................... 38.6
Cash and Cash Equivalents at Beginning of Period............ --
---------
Cash and Cash Equivalents at End of Period.................. $ 38.6
=========
Cash Paid for Interest...................................... $ 59.4
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE> 126
EAST COAST POWER L.L.C.
CONSOLIDATED STATEMENT OF MEMBERS' EQUITY (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
CLASS A CLASS B TOTAL
------- ------- ------
<S> <C> <C> <C>
Balance at February 4, 1999................................. $ -- $ -- $ --
Contributions............................................. 80.0 25.0 105.0
Distributions............................................. -- (25.0) (25.0)
Net Income................................................ 1.4 -- 1.4
----- ------ ------
Balance at September 30, 1999............................... $81.4 $ -- $ 81.4
===== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE> 127
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
East Coast Power L.L.C. (the "Company") is a Delaware limited liability
company that was formed on December 18, 1998 by Joint Energy Development
Investments II Limited Partnership ("JEDI II"), a limited partnership in which
Enron Corp. ("Enron") and the California Public Employees' Retirement System
("CalPERS") each own a 50% interest. On February 4, 1999, the limited liability
company agreement of the Company was amended and restated to convert JEDI II's
initial membership to that of a Class A Member and to admit Enron North America
Corp. ("Enron North America"), formerly Enron Capital & Trade Resources Corp., a
wholly-owned subsidiary of Enron Corp., and CalPERS as Class B Members. On
August 13, 1999, Enron North America transferred its Class B membership interest
in the Company (representing 50% of the total Class B membership interests) to
East Coast Power Holding Company L.L.C. ("ECP Holding Company"). Also on August
13, 1999, ECP Holding Company transferred a 49% Class A membership interest and
a 49% Class B membership interest in the Company to Mesquite Investors, L.L.C.
("Mesquite Investors"), a Delaware limited liability company and an affiliate of
El Paso Energy Corporation. The limited liability company agreement of the
Company was amended and restated on August 13, 1999 to admit Mesquite Investors
as a Class A and Class B Member and to provide that ECP Holding Company is
entitled to certain preferential distributions in the event of certain contract
restructuring or capital projects. The Company and its wholly owned subsidiaries
own equity interests in and control and operate three power generation
facilities located in New Jersey (the "facilities").
All distributions from the Company will be made to the Class A Members
until the Class A Members have received distributions equal to $80.0 million
plus specified rates of return. After the Class A Members have received their
preferential distributions, all distributions will be made 90% to the Class A
Members and 10% to the Class B Members.
The Company had no assets or liabilities and conducted no operations prior
to February 4, 1999. On February 4, 1999 the Company indirectly acquired equity
interests in the facilities (the "acquisition") through the acquisition of
entities (collectively, the "Acquired Group") that were under the common control
of Robert C. McNair, members of his immediate family and related trusts ("McNair
Interests"). The Acquired Group included McNair Energy Services Corporation
("MESC"), a Texas corporation, and its wholly owned subsidiary Cogen
Technologies NJ, Inc. ("NJ Inc."), a New Jersey corporation, Cogen Technologies
Linden, Ltd. ("Linden Ltd."), a Texas limited partnership, and Cogen
Technologies Camden GP Limited Partnership ("Camden GP"), a Delaware limited
partnership.
Linden Ltd. is the managing general partner of Cogen Technologies Linden
Venture, L.P. ("Linden Venture"), a Delaware limited partnership that owns and
operates a 715-megawatt cogeneration facility in Linden, New Jersey. Camden GP
is the managing general partner of Camden Cogen L.P. ("Camden Venture"), a
Delaware limited partnership that owns and operates a 146-megawatt cogeneration
facility in Camden, New Jersey. JEDI Bayonne GP, L.L.C. is the managing general
partner of Cogen Technologies NJ Venture ("Bayonne Venture"), a New Jersey
general partnership that owns and operates a 176-megawatt cogeneration facility
in Bayonne, New Jersey. The Company's interest in Linden Ltd., Camden GP and
Bayonne Venture are held through wholly-owned limited liability companies, which
were formed for the specific and limited purpose of holding the interests in
these entities. The financial position and results of operations of these
limited liability companies are reflected in the consolidated financial
statements of the Company.
Cash distributions, net income and net losses are allocated to the partners
of Linden Venture, Camden Venture, and Bayonne Venture (collectively, the
"Ventures") in accordance with the Ventures' partnership agreements.
F-13
<PAGE> 128
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Basis of Consolidation and Presentation
The accompanying unaudited consolidated financial statements reflect, in
the opinion of management, all adjustments, consisting only of normal and
recurring adjustments, necessary to present fairly the consolidated financial
position of the Company and its wholly-owned subsidiaries as of September 30,
1999 and the results of its operations, cash flows and changes in its members'
equity for the period from which it commenced operations on February 4, 1999 to
September 30, 1999. All material transactions between the consolidated entities
have been eliminated. Interim period results are not necessarily indicative of
the results of operations or cash flows for a full year period.
These financial statements should be read in conjunction with the audited
financial statements of the Company.
The Company's investments in Linden Venture, Camden Venture and Bayonne
Venture (collectively, the "Ventures") are accounted for using the equity method
of accounting since the other partners have substantive participating rights
with respect to the partnerships' operations.
Cash and Cash Equivalents/Restricted Cash
All highly liquid short-term investments with original maturities of three
months or less are considered to be cash equivalents. At September 30, 1999,
$13.8 million of the Company's cash was held by Linden Ltd. and all of such cash
was restricted either to service Linden Ltd.'s debt or, if necessary, to make
working capital loans to Linden Venture.
Derivative Financial Instruments
From time to time the Company uses derivatives to manage interest rate
risk. The Company's policy is to use derivatives for risk management purposes
only and does not enter into such contracts for trading purposes. To date, the
Company has entered into one interest rate swap agreement with Enron North
America, which was cancelled on April 14, 1999.
Instruments used as hedges must be effective in managing risk associated
with the exposure being hedged and must be designated as a hedge at the
inception of the contract. Accordingly, changes in the market values or cash
flows of hedge instruments must have a high degree of inverse correlation with
changes in market values or cash flows of the underlying hedged items.
Derivatives that meet the hedge criteria are accounted for under the deferral or
accrual method as discussed in Note 5.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of certain estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities, if any, and the periods in
which certain items of revenue and expense are included. Actual results may
differ from such estimates.
Income Taxes
As limited liability companies and partnerships, the Company and its
consolidated subsidiaries are not subject to state or federal income taxes. Such
taxes accrue to the owners of the Company and, accordingly, income taxes have
not been recognized in the consolidated financial statements.
Recent Accounting Pronouncements
The Financial Statement Accounting Standards Board ("FASB") adopted
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities,"
F-14
<PAGE> 129
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
in June 1998. The statement requires that all derivatives be recognized at fair
value as assets or liabilities and that changes in fair value be recorded in
earnings or other comprehensive income. In July 1999, the FASB adopted SFAS No.
137 that defers the required adoption date of SFAS No. 133 by one year to fiscal
years beginning after June 15, 2000. The Company's analysis of the potential
impact of this statement has not been completed.
(2) THE ACQUISITION
As discussed in Note 2 to the Company's March 31, 1999 financial
statements, in a series of transactions on February 4 and 5, 1999, the Company
acquired the assets and liabilities of the Acquired Group. For financial
statement purposes the acquisition was accounted for as a purchase and,
accordingly, the results of operations of the assets acquired are included in
the Company's consolidated financial statements with effect from the date of
acquisition. The aggregate purchase price, including the costs of the
acquisition, has been allocated to the assets and liabilities acquired based on
their estimated fair value.
The following table reflects the Company's estimate of this allocation
based upon the latest information available:
<TABLE>
<CAPTION>
AMORTIZATION
PERIOD FOR
EXCESS OF
ALLOCATED FAIR VALUE
BOOK FAIR OVER BOOK
ASSET ACQUIRED/LIABILITIES ASSUMED VALUE VALUE VALUE
---------------------------------- ------ --------- ------------
<S> <C> <C> <C>
Linden Venture.............................................. 56.3 918.6 23 years
Camden Venture.............................................. 15.6 179.0 24 years
Bayonne Venture............................................. 10.2 185.9 20 years
Cash........................................................ 17.7 17.7 --
Accounts Receivable......................................... 8.6 8.6 --
Deferred Financing Costs.................................... 1.4 1.4 8 years
Linden Ltd. Term Loan....................................... (205.6) (209.9) 8 years
Other Liabilities........................................... (4.6) (5.1) --
-------
Purchase Price.............................................. 1,096.2
=======
</TABLE>
The purchase price reflected in the above table has been preliminarily
allocated based on estimated fair values at the date of acquisition pending
final determination of acquisition costs and certain acquired balances. As of
September 30, 1999 management is not aware of any matters which could
significantly impact this allocation.
(3) CAPITAL TRANSACTIONS
Capital Contribution
On April 20, 1999, in accordance with the terms of the Company's limited
liability agreement, JEDI II made a $80.0 million capital contribution to the
Company.
Bridge Loan
In connection with the acquisition, on February 4, 1999 the Company
borrowed $831.0 million under the terms of the bridge loan agreement. The bridge
loan included a $105.0 million tranche bearing interest at LIBOR plus 0.35% and
a $726.0 million tranche bearing interest at LIBOR plus 1.25%. The applicable
LIBOR rate is the one, three, six or, if commercially available, nine or twelve
month rates as elected by the Company. All amounts outstanding under the bridge
loan were repaid on April 20, 1999 using a portion of the proceeds from the sale
by the Company of $850.0 million of senior secured notes. The repayment resulted
in the release of the pledges and assignments serving the bridge loan.
F-15
<PAGE> 130
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Senior Secured Notes
On April 20, 1999, the Company sold $850.0 million of senior secured notes
(the "Notes") in three tranches as follows: $296.0 million of 6.737% Notes due
2008 (the "2008 Notes"), $236.0 million of 7.066% Notes due 2012 (the "2012
Notes") and $318.0 million of 7.536% Notes due 2017 (the "2017 Notes"). The 2008
Notes bear interest at 6.737% per annum and are repayable in 36 quarterly
installments of varying amounts beginning on June 30, 1999 with the final
payment due March 31, 2008. The 2012 Notes bear interest at 7.066% per annum and
are repayable in 17 quarterly installments of varying amounts beginning on March
31, 2008 with the final payment due March 31, 2012. The 2017 Notes bear interest
at 7.536% per annum and are repayable in 22 quarterly installments of varying
amounts beginning on March 31, 2012 with the final payment due June 30, 2017.
Interest on the Notes is payable quarterly beginning June 30, 1999.
The Notes are senior secured obligations which rank senior to all existing
and future subordinated indebtedness; rank pari passu in right of payment with
all existing and future senior secured indebtedness; and are structurally
subordinated to all indebtedness and other liabilities, including trade
payables, of the Company's subsidiaries and to the distribution rights of
minority partners in the Ventures. The Notes are secured by the pledge by the
owners of the Company of their interest in the Company, the pledge by the
Company of its ownership interests in certain of the subsidiaries that own
interests in the facilities and the pledge of Linden Ltd.'s $289.6 million
intercompany subordinated note payable to the Company.
The Notes may be redeemed at any time at a redemption price that includes a
make-whole premium based on comparable treasury securities plus 50 basis points.
The Notes are mandatorily redeemable at prices specified in the indenture upon
the occurrence of certain events, including certain loss events, power contract
buyouts or change of control. In addition, the terms of the Notes limit the
Company's ability to pay dividends, incur additional indebtedness, make payments
on subordinated debt and make certain other restricted payments. The terms of
the Notes also require the Company to maintain compliance with certain financial
covenants, including funding a debt service reserve account unless it provides
acceptable debt service credit support in the form of an Enron undertaking or an
acceptable letter of credit. Enron has provided the required undertaking, and
the Company is not currently funding the debt service reserve account. The
Company believes it is in compliance with the terms and conditions of the Notes.
Use of Proceeds
The proceeds from the sale of the Notes and the capital contribution by
JEDI II were used to repay the bridge loan, make a $25.0 million cash
distribution to Enron North America, repay $62.1 million of the principal amount
of the Enron subordinated note and make a $12.0 million purchase price
adjustment payment in connection with the acquisition. The repayment of the
bridge loan resulted in the release of the $25.0 million guaranty on the loan by
CalPERS. The release was deemed to be a distribution to CalPERS.
F-16
<PAGE> 131
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
(4) INVESTMENT IN AFFILIATES
The following table presents summary income statement information for the
Company's affiliates for the periods January 1, 1999 to February 4, 1999 and
February 5, 1999 to September 30, 1999 (in millions of dollars):
<TABLE>
<CAPTION>
LINDEN VENTURE CAMDEN VENTURE BAYONNE VENTURE
--------------------------------- --------------------------------- ---------------------------------
FEBRUARY 5 JANUARY 1 FEBRUARY 5 JANUARY 1 FEBRUARY 5 JANUARY 1
TO SEPTEMBER 30, TO FEBRUARY 4, TO SEPTEMBER 30, TO FEBRUARY 4, TO SEPTEMBER 30, TO FEBRUARY 4,
1999 1999 1999 1999 1999 1999
---------------- -------------- ---------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Electricity........ $176.4 $ 23.9 $46.2 $ 8.2 $68.1 $11.1
Steam.............. 5.6 0.6 -- -- 2.2 0.4
------ ------ ----- ------ ----- -----
182.0 24.5 46.2 8.2 70.3 11.5
------ ------ ----- ------ ----- -----
Costs and Expenses
Fuel............... 83.6 16.2 20.1 4.8 26.1 3.6
Operating and
maintenance..... 12.5 1.9 4.6 0.6 7.2 1.1
Depreciation and
amortization.... 9.9 1.4 2.4 0.4 1.9 0.3
General and
administrative... 2.4 47.5 0.7 13.0 1.7 0.3
Taxes, other than
income.......... 1.1 0.2 0.3 -- 0.4 --
------ ------ ----- ------ ----- -----
109.5 67.2 28.1 18.8 37.3 5.3
------ ------ ----- ------ ----- -----
Income (Loss) from
Operations......... 72.5 (42.7) 18.1 (10.6) 33.0 6.2
------ ----- -----
Other Income
(Expense)
Interest and other
income.......... 4.0 0.1 1.0 -- 0.3 --
Interest expense... -- -- (4.5) (0.7) (4.7) (0.8)
------ ------ ----- ------ ----- -----
Net Income (Loss).... $ 76.5 $(42.6) $14.6 $(11.3) $28.6 $ 5.4
====== ====== ===== ====== ===== =====
</TABLE>
(5) DERIVATIVE FINANCIAL INSTRUMENTS
The Company entered into a $600.0 million notional amount interest rate
swap agreement with Enron North America to hedge its exposure to the floating
interest rates of the Bridge Loan. The agreement was a contract to exchange
fixed and floating interest rate payments periodically over the term of the
Bridge Loan without the exchange of the underlying notional amount. Differences
paid or received were accrued in the financial statements as part of interest
expense on the underlying debt over the life of the agreement. On April 14, 1999
the interest rate swap was cancelled and the Company received a payment of $8.9
million in connection with the cancellation. This amount has been included in
other income for the period. There are no outstanding derivative financial
instruments at September 30, 1999.
(6) COMMITMENTS AND CONTINGENCIES
In June 1999, the Company entered into a letter of intent with Tosco
Refining Company that contemplates an expansion of the Linden Facility through
the addition of a sixth turbine generator to provide
F-17
<PAGE> 132
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
electricity and steam service to Tosco's Bayway Refinery. Completion of the
transactions contemplated by the letter of intent are subject to, among other
things, further negotiations, completion of due diligence and receipt of
necessary approvals.
The McNair Interests have indemnified the Company against any and all
damages, losses, liabilities and expenses with respect to an environmental
lawsuit filed in Louisiana state court against a predecessor entity of MESC.
There are certain claims and legal actions pending against the Company, its
subsidiaries and its equity investees. While the outcome of such proceedings
cannot be predicted with certainty, management does not expect these matters to
have a material adverse effect on the financial condition or results of
operations of the Company.
(7) SUBSEQUENT EVENTS
On November 4, 1999, in accordance with the terms of the Company's limited
liability agreement, the Company made a $25.3 million distribution to JEDI II.
F-18
<PAGE> 133
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To East Coast Power L.L.C.:
We have audited the accompanying consolidated balance sheet of East Cost
Power L.L.C. (a Delaware limited liability company) as of March 31, 1999, and
the related consolidated statements of income, members' equity and cash flows
for the period from February 4, 1999 to March 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of East Coast Power L.L.C. as
of March 31, 1999, and the results of their operations and their cash flows for
the period from February 4, 1999 to March 31, 1999 in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
June 25, 1999
F-19
<PAGE> 134
EAST COAST POWER L.L.C.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FEBRUARY 4, 1999
TO MARCH 31, 1999
-------------------
<S> <C>
Revenues
Equity in earnings of
Cogen Technologies Linden Venture, L.P................. $ 6.4
Camden Cogen L.P....................................... 1.9
Cogen Technologies NJ Venture.......................... 6.4
------
14.7
Cost and Expenses
General and administrative................................ 1.4
------
Income from Operations...................................... 13.3
Other Income (Expense)
Interest and other income................................. 0.3
Interest expense.......................................... (17.2)
------
Net Loss.................................................... $ (3.6)
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE> 135
EAST COAST POWER L.L.C.
CONSOLIDATED BALANCE SHEET
(IN MILLIONS OF DOLLARS)
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
1999
---------
<S> <C>
Current Assets
Cash and cash equivalents................................. $ 7.3
Restricted cash........................................... 17.9
Accounts receivable....................................... 8.6
Contributions receivable.................................. 80.0
Other current assets...................................... 0.3
--------
114.1
--------
Investments in Affiliates
Cogen Technologies Linden Venture, L.P.................... 915.9
Camden Cogen L.P.......................................... 179.1
Cogen Technologies NJ Venture............................. 188.8
--------
1,283.8
--------
Other Assets................................................ 24.9
--------
$1,422.8
========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities
Accounts payable.......................................... $ 0.2
Accounts payable, affiliate............................... 2.5
Current maturities on long-term debt...................... 37.5
Interest payable.......................................... 8.7
Distributions payable..................................... 25.0
Other current liabilities................................. 22.4
--------
96.3
Long-Term Debt.............................................. 1,250.1
Commitments and Contingencies (Note 8)
Members' Equity............................................. 76.4
--------
$1,422.8
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE> 136
EAST COAST POWER L.L.C.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
FEBRUARY 4,
1999 TO
MARCH 31,
1999
--------------
<S> <C>
Operating Activities:
Net loss.................................................. $ (3.6)
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in earnings of affiliates
Cogen Technologies Linden Venture, L.P............... (6.4)
Camden Cogen L.P..................................... (1.9)
Cogen Technologies NJ Venture........................ (6.4)
Distributions received from affiliates
Cogen Technologies Linden Venture, L.P............... 9.1
Camden Cogen L.P..................................... 1.8
Cogen Technologies NJ Venture........................ 3.0
Amortization of deferred financing costs............... 2.8
Changes in other operating assets and liabilities
Increase in other current assets....................... (0.3)
Increase in accounts payable........................... 0.2
Increase in accounts payable, affiliate................ 0.9
Increase in interest payable........................... 5.7
Increase in other current liabilities.................. 1.0
Net change in other assets and liabilities............. (0.3)
---------
Net Cash Provided by Operating Activities................... 5.6
---------
Investing Activities:
Acquisition of Acquired Group (net of cash acquired of
$17.7)................................................. (807.1)
Purchase of Enron Corp. common stock...................... (250.0)
---------
Net Cash Used in Investing Activities....................... (1,057.1)
---------
Financing Activities:
Long-term borrowings under bridge loan.................... 831.0
Long-term borrowings under Enron subordinated note........ 250.0
Principal payments on long-term debt...................... (3.3)
Financing costs........................................... (5.1)
Contributions received.................................... 25.0
---------
Net Cash Provided by Financing Activities................... 1,097.6
---------
Increase in Cash and Cash Equivalents....................... 46.1
Cash and Cash Equivalents at Beginning of Period............ --
---------
Cash and Cash Equivalents at End of Period (includes $20.9
million which is classified as Other Assets).............. $ 46.1
=========
Cash Paid for Interest...................................... $ 8.7
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE> 137
EAST COAST POWER L.L.C.
CONSOLIDATED STATEMENT OF MEMBERS' EQUITY
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
CLASS A CLASS B TOTAL
------- ------- ------
<S> <C> <C> <C>
Balance at February 4, 1999................................. $ -- $ -- $ --
Contributions............................................. 80.0 25.0 105.0
Distributions............................................. -- (25.0) (25.0)
Net loss.................................................. (3.6) -- (3.6)
----- ------ ------
Balance at March 31, 1999................................... $76.4 $ -- $ 76.4
===== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE> 138
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
East Coast Power L.L.C. (the "Company") is a Delaware limited liability
company that was formed on December 18, 1998 by Joint Energy Development
Investments II Limited Partnership ("JEDI II"), a limited partnership in which
Enron Corp. and the California Public Employees' Retirement System ("CalPERS")
each own a 50% interest. On February 4, 1999, the limited liability company
agreement of the Company was amended and restated to convert JEDI II's initial
membership to that of a Class A Member and to admit Enron North America Corp.
("Enron North America"), formerly Enron Capital & Trade Resources Corp., a
wholly-owned subsidiary of Enron Corp., and CalPERS as Class B Members. The
Company and its wholly owned subsidiaries own equity interests in and control
and operate three power generation facilities located in New Jersey (the
"facilities").
The Class B Members are entitled to preferential distributions in an amount
equal to $25.0 million each plus interest prior to any distributions to the
Class A Member. After the Class B Members have received these preferential
distributions, all distributions will be made to the Class A Member until the
Class A Member has received distributions equal to $80.0 million plus specified
rates of return. After the Class A Member has received its preferential
distributions, all distributions will be made 90% to the Class A Member and 10%
to the Class B Members.
The Company had no assets or liabilities and conducted no operations prior
to February 4, 1999. On February 4, 1999 the Company indirectly acquired equity
interests in the facilities (the "acquisition") through the acquisition of
entities (collectively, the "Acquired Group") that were under the common control
of Robert C. McNair, members of his immediate family and related trusts. The
Acquired Group included McNair Energy Services Corporation ("MESC"), a Texas
corporation, and its wholly owned subsidiary Cogen Technologies NJ, Inc. ("NJ
Inc."), a New Jersey corporation, Cogen Technologies Linden, Ltd. ("Linden
Ltd."), a Texas limited partnership, and Cogen Technologies Camden GP Limited
Partnership ("Camden GP"), a Delaware limited partnership.
Linden Ltd. is the managing general partner of Cogen Technologies Linden
Venture, L.P. ("Linden Venture"), a Delaware limited partnership that owns and
operates a 715-megawatt cogeneration facility in Linden, New Jersey. Camden GP
is the managing general partner of Camden Cogen L.P. ("Camden Venture"), a
Delaware limited partnership that owns and operates a 146-megawatt cogeneration
facility in Camden, New Jersey. JEDI Bayonne GP, L.L.C. is the managing general
partner of Cogen Technologies NJ Venture ("Bayonne Venture"), a New Jersey
general partnership that owns and operates a 176-megawatt cogeneration facility
in Bayonne, New Jersey. The Company's interest in Linden Ltd., Camden GP and
Bayonne Venture are held through wholly-owned limited liability companies which
were formed for the specific and limited purpose of holding the interests in
these entities. The financial position and results of operations of these
limited liability companies are reflected in the consolidated financial
statements of the Company.
Cash distributions, net income and net losses are allocated to the partners
of Linden Venture, Camden Venture, and Bayonne Venture (collectively, the
"Ventures") in accordance with the Ventures' partnership agreements, as
discussed in Note 4.
Basis of Consolidation and Presentation
The accompanying consolidated financial statements present the consolidated
financial position of the Company and its wholly-owned subsidiaries as of March
31, 1999 and the results of its operations, cash flows and changes in its
members' equity for the period from which it commenced operations on February 4,
1999 to March 31, 1999. All material transactions between the consolidated
entities have been eliminated.
F-24
<PAGE> 139
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's investments in the Ventures are accounted for using the
equity method of accounting since the other partners have substantive
participating rights with respect to the partnerships' operations.
Cash and Cash Equivalents/Restricted Cash
All highly liquid short-term investments with original maturities of three
months or less are considered to be cash equivalents. At March 31, 1999, $13.0
million of the Company's cash was held by Linden Ltd. and all of such cash was
restricted either to service Linden Ltd.'s debt or, if necessary, to make
working capital loans to \Linden Venture. Also at March 31, 1999, the use of
$25.8 million of the Company's cash was restricted to use in the payment of
costs and expenses associated with the acquisition and the Notes discussed in
Note 3. Of the $25.8 million in restricted cash, $20.9 million is expected to be
used to pay financing costs and has been classified in Other Assets in the
Company's balance sheet at March 31, 1999.
Derivative Financial Instruments
From time to time the Company uses derivatives to manage interest rate
risk. The Company's policy is to use derivatives for risk management purposes
only and does not enter into such contracts for trading purposes. To date, the
Company has entered into one interest rate swap agreement with Enron North
America, which was outstanding at March 31, 1999.
Instruments used as hedges must be effective in managing risk associated
with the exposure being hedged and must be designated as a hedge at the
inception of the contract. Accordingly, changes in the market values or cash
flows of hedge instruments must have a high degree of inverse correlation with
changes in market values or cash flows of the underlying hedged items.
Derivatives that meet the hedge criteria are accounted for under the deferral or
accrual method as discussed in Note 6.
Credit Risk
Financial instruments which potentially subject the Company to credit risk
consist primarily of cash and accounts receivable. Cash accounts are held by
major financial institutions and accounts receivable are from parties who are
affiliated with Robert C. McNair.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of certain estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities, if any, and the periods in
which certain items of revenue and expense are included. Actual results may
differ from such estimates.
Income Taxes
As limited liability companies and partnerships, the Company and its
consolidated subsidiaries are not subject to state or federal income taxes. Such
taxes accrue to the owners of the Company and, accordingly, such income taxes
have not been recognized in the consolidated financial statements.
Recent Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") adopted Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," in June 1998. The statement requires that
all derivatives be recognized at fair value as assets or liabilities and that
changes in fair value be recorded in earnings or other comprehensive income. In
May 1999, FASB proposed an amendment to SFAS No. 133 that would defer its
required adoption date by one year to fiscal years
F-25
<PAGE> 140
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
beginning after June 15, 2000. The Company's analysis of the potential impact of
this statement has not been completed.
(2) THE ACQUISITION
In a series of transactions on February 4 and 5, 1999, the Company acquired
the assets and liabilities of the Acquired Group. For financial statement
purposes the acquisition was accounted for as a purchase and, accordingly, the
results of operations of the assets acquired are included in the Company's
consolidated financial statements with effect from the date of acquisition. The
aggregate purchase price, including the costs of the acquisition, has been
allocated to the assets and liabilities acquired based on their estimated fair
value. A portion of the purchase price has been allocated to the acquired equity
investments in Linden Venture, Camden Venture and Bayonne Venture. The
difference between the purchase price allocated to each venture and the
historical equity in such ventures is being amortized over the remaining useful
lives of the facilities, which range from 20 to 24 years.
In connection with the acquisition, on February 4, 1999, the Company
borrowed $831.0 million under the terms of a credit agreement with NationsBank
N.A. (the "bridge loan") and $250.0 million under the terms of a Credit and
Subordination Agreement with Enron Corp. (the "Enron subordinated note"). The
$250.0 million borrowed under the Enron subordinated note was used to purchase
shares of Enron Corp. common stock which were used as consideration in the
acquisition.
In addition, on February 4, 1999, the Company received a $25.0 million
contribution from CalPERS in the form of a guaranty on the bridge loan, and on
February 5, 1999, the Company received a contribution valued at $25.0 million
from Enron North America in the form of an indirect interest in one of the
facilities. Such contributions were received in respect to the Class B
memberships of Enron North America and CalPERS.
In the acquisition, the Company allocated the purchase price of $1,096.2
million to the fair value of assets acquired and liabilities assumed, as follows
(in millions of dollars):
<TABLE>
<CAPTION>
AMORTIZATION
PERIOD FOR
ALLOCATED EXCESS OF FAIR
BOOK FAIR VALUE OVER BOOK
ASSETS ACQUIRED/LIABILITIES ASSUMED VALUE VALUE VALUE
----------------------------------- ----- --------- ---------------
<S> <C> <C> <C>
Linden Venture............................................ $ 56.3 $ 918.6 23 years
Camden Venture............................................ 15.6 179.0 24 years
Bayonne Venture........................................... 10.2 185.4 20 years
Cash...................................................... 17.7 17.7 --
Accounts Receivable....................................... 8.6 8.6 --
Deferred Financing Costs.................................. 1.4 1.4 8 years
Linden Ltd. Term Loan..................................... (205.6) (209.9) 8 years
Other Liabilities......................................... (4.6) (4.6) --
--------
Purchase Price............................................ $1,096.2
========
</TABLE>
The purchase price reflected in the above table has been preliminarily
allocated based on estimated fair values at the date of acquisition pending
final determination of acquisition costs and certain acquired balances.
The acquisition of the Acquired Group is presented in the Consolidated
Statement of Cash Flows net of $17.7 million of cash acquired and does not
reflect the following noncash items: (i) $250.0 million of Enron Corp. common
stock used as consideration in the acquisition; (ii) $20.5 million of costs
associated with the acquisition which were accrued at March 31, 1999; and (iii)
$214.5 million of liabilities assumed in the acquisition.
F-26
<PAGE> 141
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following unaudited proforma results of operations for the three months
ended March 31, 1999 have been prepared as if the acquisition had occurred
January 1, 1999. The pro forma results include amortization of the excess of the
purchase price allocated to the Ventures over the historical equity in the
Ventures, interest expense on borrowings related to the acquisition and the
reversal of income taxes since the Company is not subject to such taxes. The
historical combined results of operations represent the combined results of
operations of the Acquired Group for the period January 1, 1999 to February 4,
1999 and the Company for the period February 4, 1999 to March 31, 1999. The
proforma results of operations do not purport to be indicative of the results
that would have occurred had the acquisition occurred January 1, 1999, nor do
they purport to be indicative of the results of future operations.
<TABLE>
<CAPTION>
HISTORICAL
----------------------------
THE
ACQUIRED GROUP COMPANY PRO FORMA
1/1/99 TO 2/4/99 1/1/99 TO
2/4/99 TO 3/31/99 3/31/99
-------------- ---------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Revenues........................................ $(51.5)(1) $14.7 $(41.2)
Income (loss) from operations................... (54.1) 13.3 (45.2)
Income (loss) before income taxes............... (56.0) (3.6) (73.0)
Net income (loss)............................... (57.7) (3.6) (73.0)
</TABLE>
- ---------------
(1) The equity in earnings of affiliates included in the results of operations
of the Acquired Group for the period January 1, 1999 to February 4, 1999
includes the effect of $66.8 million in one-time payments made by Linden
Venture and Camden Venture to terminate certain management services and gas
management contracts.
(3) SUBSEQUENT EVENTS
Interest Rate Swap
On April 14, 1999 the interest rate swap with Enron North America was
canceled and the Company received a payment of $8.9 million in connection with
the cancellation.
Financing Transactions
On April 20, 1999 the Company sold $850.0 million of senior secured notes
(the "Notes") in three tranches as follows: $296.0 million of 6.737% Notes due
2008 (the "2008 Notes"), $236.0 million of 7.066% Notes due 2012 (the "2012
Notes") and $318.0 million of 7.536% Notes due 2017 (the "2017 Notes"). The 2008
Notes bear interest at 6.737% per annum and are repayable in 36 quarterly
installments of varying amounts beginning on June 30, 1999 with the final
payment due March 31, 2008. The 2012 Notes bear interest at 7.066% per annum and
are repayable in 17 quarterly installments of varying amounts beginning on March
31, 2008 with the final payment due March 31, 2012. The 2017 Notes bear interest
at 7.536% per annum and are repayable in 22 quarterly installments of varying
amounts beginning on March 31, 2012 with the final payment due June 30, 2017.
Interest on the Notes is payable quarterly with the first interest payment due
June 30, 1999.
The Notes are senior secured obligations which rank senior to all existing
and future subordinated indebtedness; rank pari passu in right of payment with
all existing and future senior secured indebtedness; and are structurally
subordinated to all indebtedness and other liabilities, including trade
payables, of the Company's subsidiaries and to the distribution rights of
minority partners in the Ventures. The Notes are secured by the pledge by the
owners of the Company of their interest in the Company, the pledge by the
Company of its ownership interests in certain of the subsidiaries that own
interests in the facilities and the pledge of Linden Ltd.'s $289.6 million
intercompany subordinated note payable to the Company.
F-27
<PAGE> 142
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Notes may be redeemed at any time at a redemption price that includes a
make-whole premium based on comparable treasury securities plus 50 basis points.
The Notes are mandatorily redeemable at prices specified in the indenture upon
the occurrence of certain events, including certain loss events, power contract
buyouts or change of control. In addition, the terms of the Notes limit the
Company's ability to pay dividends, incur additional indebtedness, make payments
on subordinated debt and make certain other restricted payments. The terms of
the Notes also require the Company to fund a debt service reserve account unless
it provides acceptable debt service credit support in the form of an Enron
undertaking or an acceptable letter of credit. Enron has provided the required
undertaking, and the Company is not currently funding the debt service reserve
account. Aggregate maturities for the Notes for the next five years (for the
twelve-month period ended March 31) are as follows: 2000 -- $23.2 million;
2001 -- $14.6 million; 2002 -- $23.8 million; 2003 -- $34.0 million; and
2004 -- $30.2 million.
Also on April 20, 1999, in accordance with the terms of the limited
liability company agreement, JEDI II made a $80.0 million capital contribution
to the Company. Such amount is reflected in the Company's March 31, 1999 balance
sheet as Contributions Receivable.
The proceeds from the sale of the Notes and the capital contribution by
JEDI II were used to repay the bridge loan, make a $25.0 million cash
distribution to Enron North America (which is reflected in the Company's March
31, 1999 balance sheet as Distributions Payable), repay $62.1 million of the
principal amount of the Enron subordinated note and make a $12.0 million
purchase price adjustment payment in connection with the acquisition. The
repayment of the bridge loan resulted in the release of the $25.0 million
guaranty on the loan by CalPERS. The release was deemed to be a distribution to
CalPERS.
Expansion of the Linden Facility
In June 1999, the Company entered into a letter of intent with Tosco
Refining Company that contemplates an expansion of the Linden Facility through
the addition of a sixth turbine generator to provide electricity and steam
service to Tosco's Bayway Refinery. Completion of the transactions contemplated
by the letter of intent are subject to, among other things, further
negotiations, completion of due diligence and receipt of necessary approvals.
Event (Unaudited) Subsequent to Date of Auditors' Report
Mesquite Investors Transaction
On August 13, 1999, Enron North America transferred its Class B membership
interest in the Company (representing 50% of the total Class B membership
interests) to East Coast Power Holding Company L.L.C. ("ECP Holding Company").
Also on August 13, 1999, ECP Holding Company transferred a 49% Class A
membership interest and a 49% Class B membership interest in the Company to
Mesquite Investors, L.L.C., a Delaware limited liability company and an
affiliate of El Paso Energy Corporation ("Mesquite Investors"). The limited
liability company agreement of the Company was amended and restated August 13,
1999 to admit Mesquite Investors as a Class A and Class B Member and to provide
that ECP Holding Company is entitled to certain preferential distributions in
the event of certain contract restructurings or capital projects.
F-28
<PAGE> 143
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) INVESTMENT IN AFFILIATES
The following table reflects the changes in the Company's investments in
affiliates for the period February 4, 1999 to March 31, 1999 (in millions of
dollars):
<TABLE>
<CAPTION>
LINDEN CAMDEN BAYONNE
VENTURE VENTURE VENTURE
------- ------- -------
<S> <C> <C> <C>
Balance at beginning of period......................... $ -- $ -- $ --
Acquisition of interests............................... 918.6 179.0 185.4
Equity in earnings..................................... 12.6 3.0 7.9
Amortization of excess cost............................ (6.2) (1.1) (1.5)
Distributions received................................. (9.1) (1.8) (3.0)
------ ------ ------
$915.9 $179.1 $188.8
====== ====== ======
</TABLE>
The following table presents summary balance sheet information for the
Company's affiliates at March 31, 1999 (in millions of dollars):
<TABLE>
<CAPTION>
LINDEN CAMDEN BAYONNE
VENTURE VENTURE VENTURE
------- ------- -------
<S> <C> <C> <C>
Assets
Current assets....................................... $ 53.7 $ 20.2 $ 29.8
Property, plant and equipment, net................... 409.7 102.2 70.2
Other assets......................................... -- -- 1.1
------ ------ ------
$463.4 $122.4 $101.1
====== ====== ======
Liabilities and Partners' Capital
Current liabilities.................................. $ 24.5 $ 13.9 $ 11.0
Long-term debt....................................... -- 76.9 63.1
Other long-term liabilities.......................... 0.6 -- --
Partners' capital.................................... 438.3 31.6 27.0
------ ------ ------
$463.4 $122.4 $101.1
====== ====== ======
</TABLE>
F-29
<PAGE> 144
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents summary income statement information for the
Company's affiliates for the periods January 1, 1999 to February 4, 1999 and
February 5, 1999 to March 31, 1999 (in millions of dollars):
<TABLE>
<CAPTION>
LINDEN VENTURE CAMDEN VENTURE BAYONNE VENTURE
----------------------------- ----------------------------- -----------------------------
FEBRUARY 5 JANUARY 1 FEBRUARY 5 JANUARY 1 FEBRUARY 5 JANUARY 1
TO MARCH 31, TO FEBRUARY 4, TO MARCH 31, TO FEBRUARY 4, TO MARCH 31, TO FEBRUARY 4,
1999 1999 1999 1999 1999 1999
------------ -------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Electricity.......... $37.4 $ 23.9 $11.2 $ 8.2 $17.2 $11.1
Steam................ 0.8 0.6 -- -- 0.7 0.4
----- ------ ----- ------ ----- -----
38.2 24.5 11.2 8.2 17.9 11.5
----- ------ ----- ------ ----- -----
Costs and Expenses
Fuel................. 16.1 16.2 4.7 4.8 5.7 3.6
Operating and
maintenance....... 3.1 1.9 1.0 0.6 1.5 1.1
Depreciation and
amortization...... 2.5 1.4 0.5 0.4 0.4 0.3
General and
administrative.... 0.9 47.5 0.2 13.0 0.5 0.3
Taxes, other than
income............ 0.3 0.2 0.1 -- 0.1 --
----- ------ ----- ------ ----- -----
22.9 67.2 6.5 18.8 8.2 5.3
----- ------ ----- ------ ----- -----
Income (Loss) from
Operations........... 15.3 (42.7) 4.7 (10.6) 9.7 6.2
Other Income (Expense)
Interest and other
income............ 0.8 0.1 0.1 -- -- --
Interest expense..... -- -- (1.0) (0.7) (1.1) (0.8)
----- ------ ----- ------ ----- -----
Net Income (Loss)...... $16.1 $(42.6) $ 3.8 $(11.3) $ 8.6 $ 5.4
===== ====== ===== ====== ===== =====
</TABLE>
The results of operations of Linden Venture and Camden Venture for the
period ended February 4, 1999 include the effect of one-time payments in
connection with the termination of certain gas management and management
services agreements of $52.4 million and $14.4 million, respectively.
The following table presents statement of cash flows information for the
Company's affiliates for the periods January 1, 1999 to February 4, 1999 and
February 5, 1999 to March 31, 1999 (in millions of dollars):
<TABLE>
<CAPTION>
LINDEN VENTURE CAMDEN VENTURE BAYONNE VENTURE
----------------------------- ----------------------------- -----------------------------
FEBRUARY 5 JANUARY 1 FEBRUARY 5 JANUARY 1 FEBRUARY 5 JANUARY 1
TO MARCH 31, TO FEBRUARY 4, TO MARCH 31, TO FEBRUARY 4, TO MARCH 31, TO FEBRUARY 4,
1999 1999 1999 1999 1999 1999
------------ -------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Cash provided by (used
in) operating
activities.............. $ 22.1 $(42.7) $ 7.2 $(13.1) $11.4 $ 3.1
Cash provided by (used
in) investing
activities............ -- -- -- -- -- --
Cash provided by (used
in) financing
activities............ (12.4) 32.7 (5.4) 13.9 (6.2) (4.1)
------ ------ ----- ------ ----- -----
Increase (decrease) in
cash and cash
equivalents........... $ 9.7 $(10.0) $ 1.8 $ 0.8 $ 5.2 $(1.0)
====== ====== ===== ====== ===== =====
</TABLE>
F-30
<PAGE> 145
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under the terms of Linden Venture's partnership agreement, monthly cash
distributions are allocated, 1% to Linden Ltd. and 99% to the limited partner up
to a specified rate of return (approximately $3.0 million per month from October
1998 through September 2001 and between $4.3 million and $4.8 million per month
thereafter) ("Tranche 1"), then 99% to Linden Ltd. and 1% to the limited partner
up to a capped amount, which is twice the amount of Tranche 1, and the remainder
90% to Linden Ltd. and 10% to the limited partner. During the period subsequent
to the acquisition, Linden Ltd. received 73% of Linden Venture's cash
distributions. Linden Venture's income before depreciation is allocated to the
partners on the basis of cash distributed with any excess primarily allocated
99% to Linden Ltd. Losses are allocated 100% to Linden Ltd. until its capital
account equals zero, then to the limited partner until its capital account
equals zero, with any remainder allocated 100% to Linden Ltd. Depreciation up to
$525.0 million is allocated 5% to Linden Ltd. and 95% to the limited partners.
All remaining depreciation is allocated 99% to Linden Ltd. During the period
subsequent to the acquisition, Linden Ltd. was allocated 78% of Linden Venture's
net income.
Under the terms of Camden Venture's partnership agreement, monthly cash
distributions are allocated 1% to Camden GP and 99% to the limited partner up to
a specified cumulative rate of return (approximately $0.4 million per month
through May 2007 and varying amounts thereafter) and the remaining available
cash for the month is allocated 99% to Camden GP and 1% to the limited partner.
Once the limited partner has received its specified rate of return, cash
distributions will be allocated 90% to Camden GP and 10% to the limited partner.
Camden Venture's debt agreements contain covenants which, among other things,
limit Camden Venture's ability to make cash distributions. During the period
subsequent to the acquisition, Camden GP received 84% of Camden Venture's cash
distributions (excluding a $3.3 million distribution associated with the
acquisition to the limited partner). Camden Venture's income before depreciation
is allocated as follows: (i) an amount equal to debt principal payments, 100% to
the limited partner; (ii) an amount equal to and allocated on the same basis as
cash distributed; and (iii) any remainder generally 99% to Camden GP and 1% to
the limited partner. Losses are allocated 100% to Camden GP until its capital
account equals zero, then to the limited partner until its capital account
equals zero, the remainder to Camden GP. Depreciation is allocated 100% to the
limited partner until its capital account equals zero and the remainder to
Camden GP. During the period subsequent to the acquisition, Camden GP was
allocated 79% of Camden Venture's net income.
Under the terms of Bayonne Venture's joint venture agreement partners are
allocated profits and losses and receive cash distributions based on ownership
percentage. Bayonne Venture's debt agreements contain covenants which, among
other things, limit Bayonne Venture's ability to make cash distributions. The
Company is allocated 91.75% of Bayonne Venture's profits and losses and receives
91.75% of all cash distributions.
(5) LONG-TERM DEBT
Bridge Loan
In connection with the acquisition, on February 4, 1999 the Company
borrowed $831.0 million under the terms of the bridge loan agreement. The bridge
loan included a $105.0 million tranche bearing interest at LIBOR plus 0.35% and
a $726.0 million tranche bearing interest at LIBOR plus 1.25%. The applicable
LIBOR rate is the one, three, six or, if commercially available, nine or twelve
month rates as elected by the Company. Amounts outstanding under the bridge loan
were secured by the same collateral as the Notes. All amounts outstanding under
the bridge loan were repaid on April 20, 1999 using a portion of the proceeds
from the sale of the Notes and the pledges and assignments serving the bridge
loan were released.
Enron Subordinated Note
In connection with the acquisition, on February 4,1999 the Company borrowed
$250.0 million under the terms of the Enron subordinated note. Amounts
outstanding under the Enron subordinated note bear interest
F-31
<PAGE> 146
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
at 9% per annum and interest is payable quarterly. The principal amount is
repayable in 32 installments of varying amounts beginning March 31, 2008, with
the final payment due on December 31, 2015. The Enron subordinated note is
subordinated to the bridge loan and the Notes.
The Enron subordinated note contains provisions that allow the lender to
assign all or a portion of its interest in the loan to third parties. In the
event of such an assignment the lender may, in consultation with the Company,
adjust the interest rate and term and other terms and provisions of the
agreement, other than the aggregate principal amount of the loan, to achieve an
assignment which is satisfactory to the lender. The Enron subordinated note also
contains provisions that, among other things, may limit the Company's ability to
make distributions to its members. The Company believes it is in compliance with
the terms and conditions of the note.
On April 20, 1999 the Company repaid $62.1 million of the principal amount
of the Enron subordinated note with a portion of the proceeds from the sale of
the Notes. The prepayment reduced the required principal payments on a pro rata
basis.
Linden Ltd.
In September 1992 Linden Ltd. entered into a $250.0 million Amended and
Restated Term Loan Agreement with State Street Bank & Trust Co. which matures in
September 2007. At March 31, 1999 $202.3 million was outstanding under the terms
of the agreement, comprised of a fixed rate portion ($100.2 million), a floating
rate portion ($92.1 million) and a working capital portion ($10.0 million).
Under the terms of the agreement the fixed rate portion bears interest at 8.8%
(an unamortized premium balance of $4.3 million is being amortized using the
interest method, resulting in an effective interest rate of approximately 9.6%
per annum), the floating rate portion bears interest at LIBOR plus 1.65% and the
working capital portion bears interest at a one month financial commercial paper
rate plus 0.55%. Principal and interest payments are made quarterly in varying
amounts. Borrowings under the agreement are secured by Linden Ltd.'s interest in
Linden Venture. The agreement contains certain restrictions that limit or
prohibit, among other things, the ability of Linden Ltd. to incur indebtedness,
pay distributions, make investments, engage in transactions with affiliates,
create liens, sell assets and engage in acquisitions, mergers and
consolidations.
Aggregate maturities for the next five years (for the twelve-month period
ended March 31) are as follows: 2000 -- $14.3 million; 2001 -- $16.0 million;
2002 -- $17.9 million; 2003 -- $20.0 million; and 2004 -- $22.4 million.
Camden GP
In February 1992 Camden GP entered into a $36.5 million Term Loan Agreement
with General Electric Capital Corporation. Borrowings under the agreement, which
totaled $14.8 million, bore interest at LIBOR plus 4.25% and were secured by
Camden GP's holdings in Camden Venture. On February 4, 1999, prior to the
acquisition, Camden GP repaid the outstanding balance under the loan agreement
($12.5 million, including prepayment penalties and accrued interest of $0.3
million). The funds necessary to make the repayments were provided by
contributions from the general and limited partners of Camden GP.
(6) DERIVATIVE FINANCIAL INSTRUMENTS
The Company has entered into a $600.0 million notional amount interest rate
swap agreement with Enron North America to hedge its exposure to the floating
interest rates of the bridge loan. The agreement is a contract to exchange fixed
and floating interest rate payments periodically over the term of the bridge
loan without the exchange of the underlying notional amount. Differences paid or
received are accrued in the financial statements as part of interest expense on
the underlying debt over the life of the agreement. During
F-32
<PAGE> 147
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the period ended March 31, 1999 the Company recorded interest expense of $0.5
million in connection with the interest rate swap.
(7) RELATED PARTY TRANSACTIONS
Enron North America provides the Company with services such as legal,
finance and human resources. In addition the Company is allocated certain
expenses such as building rent and miscellaneous office services. The Company
believes such charges for services and allocations of expenses represent those
that would be obtained in the market. During the period ended March 31, 1999 the
amount charged to the Company with respect to such costs and services totaled
$0.2 million.
The Company's employees participate in a noncontributory defined benefit
retirement plan maintained by Enron and in Enron plans that provide certain
medical, life insurance, dental and other benefits to eligible employees. During
the period ended March 31, 1999 costs with respect to such employee benefit
plans totaled $31,000.
Various commercial lenders have issued letters of credit at the request of
Enron on behalf of the Company. At March 31, 1999 there were letters of credit
in the amount of $22.3 million outstanding.
At March 31, 1999 amounts due to Enron Corp. and Enron North America, which
are reflected in the consolidated balance sheet as Accounts payable, affiliates,
totaled $2.5 million, including $1.6 million due to Enron North America with
respect to certain items related to the acquisition.
In connection with the acquisition and at the request of Enron, Bank of
America issued two letters of credit on behalf of the Company: (i) a $22.25
million letter of credit issued to the lenders under the Linden Ltd. term loan
which secures the obligations under that loan; and (ii) a $4.5 million letter of
credit issued to Public Service Electric & Gas Company of New Jersey which
secures certain obligations pursuant to Camden Venture's power purchase
agreement.
(8) COMMITMENTS AND CONTINGENCIES
The McNair Interests have indemnified the Company against any and all
damages, losses, liabilities and expenses with respect to an environmental
lawsuit filed in Louisiana state court against a predecessor entity of MESC.
There are certain claims and legal actions pending against the Company, its
subsidiaries and its equity investees. While the outcome of such proceedings
cannot be predicted with certainty, management does not expect these matters to
have a material adverse effect on the financial condition or results of
operations of the Company.
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 "Disclosures About Fair Value of Financial Instruments"
requires the disclosure, to the extent practicable, of the fair value of
financial instruments which are recognized or unrecognized in the balance sheet.
The fair value disclosed herein is not representative of the amount that could
be realized or settled. The following table reflects the fair value of long-term
debt at March 31, 1999 (in millions of dollars):
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- -----
<S> <C> <C>
East Coast Power
Bridge Loan............................................... $831.0 $831.0
Enron Subordinated Note................................... 250.0 250.0
Linden Ltd.................................................. 206.6 205.7
</TABLE>
F-33
<PAGE> 148
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The fair value of Linden Ltd.'s fixed-rate long-term debt has been
determined based on the differential between the fixed interest rate and
interest rates of long-term treasury securities at the date of the borrowing and
the balance sheet date. The fair value of the Enron subordinated note reflects
certain provisions of the agreement related to the assignment of the note. The
carrying amount of floating rate debt approximates fair value due to the
market-sensitive interest rate on such debt.
At March 31, 1999 the Company had a $600.0 million interest rate swap
agreement with respect to the bridge loan. The agreement was canceled in April
1999 and the Company received an $8.9 million payment in respect of the
cancellation.
The carrying amount of current assets and liabilities are considered to be
reasonable estimates of their fair values due to their short-term nature. The
carrying amount of the long-term receivable from an affiliate is considered to
be a reasonable estimate of fair value since interest is earned at market rates.
F-34
<PAGE> 149
COGEN TECH GROUP
COMBINED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JANUARY 1, FOR THE NINE
1999 TO MONTHS ENDED
FEBRUARY 4, SEPTEMBER 30,
1999 1998
--------------- --------------
<S> <C> <C>
Revenues
Equity in earnings (loss) of
Cogen Technologies Linden Venture, L.P................. $(44.6) $ 53.4
Camden Cogen L.P....................................... (11.9) 12.1
Cogen Technologies NJ Venture.......................... 5.0 35.5
------ ------
(51.5) 101.0
Cost and Expenses
Operating overhead........................................ 0.9 19.8
General and administrative................................ 1.7 8.3
------ ------
2.6 28.1
------ ------
Income (Loss) from Operations............................... (54.1) 72.9
Other Income (Expense)
Interest and other income................................. 0.1 9.6
Interest expense.......................................... (2.0) (14.4)
Allowance for long term receivable........................ -- (2.6)
------ ------
Income (Loss) Before Income Taxes........................... (56.0) 65.5
Income taxes.............................................. (1.7) (11.0)
------ ------
Net Income (Loss)........................................... $(57.7) $ 54.5
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE> 150
COGEN TECH GROUP
COMBINED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JANUARY 1, FOR THE NINE
1999 TO MONTHS ENDED
FEBRUARY 4, SEPTEMBER 30,
1999 1998
--------------- -------------
<S> <C> <C>
Operating Activities
Net income (loss)......................................... $(57.7) $ 54.5
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Equity in (earnings) losses of affiliates
Cogen Technologies Linden Venture, L.P............... 44.6 (53.4)
Camden Cogen L.P..................................... 11.9 (12.1)
Cogen Technologies NJ Venture........................ (5.0) (35.5)
Distributions received from affiliates
Cogen Technologies Linden Venture, L.P............... 13.4 53.8
Camden Cogen L.P..................................... 2.1 10.5
Cogen Technologies NJ Venture........................ 4.8 27.8
Deferred income taxes.................................. 0.6 1.9
Allowance for long-term receivable, affiliate............. -- 2.6
Changes in operating assets and liabilities............... (9.9) (5.4)
------ ------
Net Cash Provided by Operating Activities................... 4.8 44.7
------ ------
Investing Activities
Investment in Cogen Technologies NJ Venture............... -- (12.5)
Decreases in long-term receivable, affiliate.............. -- 62.6
Increases in long-term receivable, affiliate.............. -- (44.7)
Contributions to affiliates............................... (70.1) --
------ ------
Net Cash Provided by (Used in) Investing Activities......... (70.1) 5.4
------ ------
Financing Activities
Principal payments on long-term borrowings................ (12.4) (9.5)
Contributions received.................................... 82.7 --
Cash distributions........................................ -- (40.6)
------ ------
Net Cash Provided by (Used in) Financing Activities......... $ 70.3 $(50.1)
------ ------
Increase in Cash and Cash Equivalents....................... 5.0 --
Cash and Cash Equivalents at Beginning of Period............ 12.7 12.6
------ ------
Cash and Cash Equivalents at End of Period.................. $ 17.7 $ 12.6
====== ======
Cash Payments for
Income Taxes.............................................. $ 4.0 $ 7.2
====== ======
Interest.................................................. $ 0.8 $ 15.2
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-36
<PAGE> 151
COGEN TECH GROUP
COMBINED STATEMENT OF OWNERS' EQUITY (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JANUARY 1,
1999 TO
FEBRUARY 4,
1999
---------------
<S> <C>
Balance at January 1, 1999.................................. $ 16.7
Contributions............................................. 82.7
Net loss.................................................. (57.7)
------
Balance at February 4, 1999................................. $ 41.7
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-37
<PAGE> 152
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
The combined financial statements of the Cogen Tech Group (the "Acquired
Group") includes McNair Energy Services Corporation ("MESC") and its wholly
owned subsidiary Cogen Technologies NJ, Inc., a Delaware corporation ("NJ
Inc."), Cogen Technologies Linden, Ltd. ("Linden Ltd.") and Cogen Technologies
Camden GP Limited Partnership ("Camden GP"). The financial statements of the
Acquired Group are presented on a combined basis since all such entities were
under the common control and management of Robert C. McNair, members of his
immediate family and related trusts (the "McNair Interests") during the period
presented. All material transactions between the combined entities have been
eliminated.
The accompanying unaudited combined financial statements of the Acquired
Group reflect, in the opinion of management, all adjustments, consisting only of
normal and recurring adjustments, necessary to present fairly the Acquired
Group's results of operations and cash flows for the period January 1, 1999 to
February 4, 1999 and the nine months ended September 30, 1998. Interim period
results are not necessarily indicative of the results of operations or cash
flows for a full-year period. These financial statements and the notes thereto
should be read in conjunction with the audited financial statements of the
Acquired Group included elsewhere in this prospectus.
In a series of transactions that are discussed below, certain contracts of
Linden Ltd. and Camden GP were terminated and the interests in Linden Ltd.,
Camden GP and MESC held by the McNair Interests were acquired by East Coast
Power L.L.C. ("the Company"). The Company is a Delaware limited liability
company formed by Joint Energy Development Investments II Limited Partnership, a
limited partnership in which Enron Corp. and the California Public Employees'
Retirement System each own a 50% interest.
Linden Ltd.
Linden Ltd. is a Texas limited partnership whose general partner prior to
the February 4, 1999 transactions discussed below, RCM Holdings, Inc., is owned
100% by the McNair Interests. Under the terms of Linden Ltd.'s partnership
agreement, RCM Holdings, Inc. was allocated 82% of Linden Ltd.'s profits and
losses and received 82% of all cash distributions. Linden Ltd. provides
planning, operational and financial management services as managing general
partner of Cogen Technologies Linden Venture, L.P. ("Linden Venture"), a
Delaware limited partnership that owns and operates a 715-megawatt cogeneration
facility in Linden, New Jersey.
On February 4, 1999, Linden Venture terminated its management services
agreement with Linden Ltd. and Linden Ltd. terminated its management services
agreement with RCM Management Services, L.P. ("RCM Management"). To terminate
such agreement, Linden Ltd. made a capital contribution to Linden Venture of
$46.4 million and Linden Venture made a one-time payment to Linden Ltd. of $46.4
million. Subsequently, Linden Ltd. made a one-time payment to RCM Management of
$46.4 million. Also on February 4, 1999, Linden Venture terminated a gas
management agreement with an affiliate. To terminate such agreement, Linden Ltd.
made a capital contribution of $6.0 million Linden Venture and Linden Venture
made a one-time payment to the affiliate of $6.0 million. These transactions are
reflected in the financial statements of Linden Ltd. in the period ended
February 4, 1999. Such transactions have no effect on the liquidity or financial
condition of Linden Ltd. since the amounts necessary to make the payments were
provided by contributions from the partners.
Subsequently on February 4, 1999, the Company acquired 47.5% of the general
and limited partnership interests in Linden Ltd. for $146.6 million in cash and
$250.0 million in Enron Corp. common stock. Following that transaction, Linden
Ltd. redeemed the 52.5% of the general and limited partnership interests not
controlled by East Coast Power in return for the distribution of $289.4 million
in cash and a $149.0 million account receivable from an affiliate. The cash
portion of the redemption was paid using the proceeds from a
F-38
<PAGE> 153
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
$289.4 million loan from Morgan Stanley & Co. Incorporated. The loan, plus
accrued interest of $0.2 million, was repaid on February 5, 1999 using the
proceeds of a loan from the Company.
Camden GP
Camden GP is a Delaware limited partnership whose general partner prior to
the February 4, 1999 transactions discussed below, Cogen Technologies Camden
Inc. ("CTCI") is owned 100% by the McNair Interests. Under the terms of Camden
GP's partnership agreement, Camden Inc. was allocated 82% of Camden GP's profits
and losses and received 82% of all cash distributions. CTCI provided planning,
operational and financial management services as managing general partner of
Camden Cogen L.P. ("Camden Venture"), a Delaware limited partnership that owns
and operates a 146-megawatt cogeneration facility in Camden, New Jersey.
On February 4, 1999, Camden Venture terminated its management services
agreement with Camden GP and Camden GP terminated its management services
agreement with RCM Management. To terminate such agreement, Camden GP made a
capital contribution to Camden Venture of $12.8 million and Camden Venture made
a one-time payment to Camden GP of $12.8 million. Subsequently, Camden GP made a
one-time payment to RCM Management of $12.8 million. Also on February 4, 1999,
Camden Venture terminated a gas management agreement with an affiliate. To
terminate such agreement, Camden GP made a capital contribution of $1.6 million
to Camden Venture and Camden Venture made a one-time payment to the affiliate of
$1.6 million. These transactions are reflected in the financial statements of
Camden GP in the period ended February 4, 1999. Such transactions have no effect
on the liquidity or financial condition of Camden GP since the amounts necessary
to make the payments were provided by contributions from the partners.
Also on February 4, 1999, Camden GP repaid the outstanding balance under
its term loan agreement ($12.5 million, including prepayment penalties and
accrued interest of $0.3 million). The funds necessary to make the repayments
were provided by contributions from the general and limited partners.
Subsequently on February 4, 1999, the Company acquired 100% of the general
and limited partnership interests in Camden GP for $140.0 million in cash.
MESC
MESC is a Texas corporation that prior to the February 4, 1999 transactions
discussed below was owned approximately 82% by the McNair Interests. MESC owned
100% of NJ Inc., which provided planning, operational and financial management
services as managing general partner for Cogen Technologies NJ Venture ("Bayonne
Venture"), a New Jersey general partnership that owns and operates a
176-megawatt cogeneration facility in Bayonne, New Jersey.
On February 4, 1999, NJ Inc. was merged with and into MESC. Also on
February 4, MESC redeemed 90% of its outstanding common shares for $216.0
million in notes (the "MESC Notes"). Subsequently on February 4, Enron North
America Corp. ("Enron North America"), formerly Enron Capital & Trade Resources
Corp., a wholly owned subsidiary of Enron Corp., acquired all of the outstanding
common shares of MESC for $24.0 million in cash. On February 5, MESC was merged
with and into Enron North America and Enron North America contributed its
interest in Bayonne Venture to the Company. In addition, the Company retired the
$216.0 million of MESC Notes.
Investments in Affiliates
The Acquired Group's investments in Linden Venture, Camden Venture and
Bayonne Venture are accounted for using the equity method of accounting since
the other partners have substantive participating rights with respect to the
partnerships' operations.
F-39
<PAGE> 154
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
(2) COMMITMENTS AND CONTINGENCIES
Six plaintiffs, individually on behalf of themselves and as representatives
of a class of persons similarly situated, filed an environmental lawsuit in
Louisiana state court against 92 defendants, including McNair Transport, Inc.
(predecessor to MESC). In the lawsuit, plaintiffs allege that defendants caused
environmental contamination at two sites in Iberville Parish, Louisiana.
Plaintiffs, who are alleged to have worked at the sites or resided near the
sites, claim personal injuries, increased risk and fear of future disease, and
property damage. Plaintiffs seek actual and exemplary damages of an unspecified
amount. Defendants removed the case to federal court, and the lawsuit is
currently pending in the United States District Court for the Middle District of
Louisiana. On October 2, 1998, the court denied class certification to the
plaintiffs, and limited discovery on the merits of the case has occurred in
1999. Discovery in the merits is expected to continue in 2000. On October 1,
1999, a substantially identical suit was filed in state court in Louisiana on
behalf of 320 additional plaintiffs. Defendants have removed the case to federal
court, and the suit is now pending in the United States District Court for the
Western District of Louisiana. Defendants have also asked the court to transfer
the suit to the United States District Court for the Middle District of
Louisiana, where it may be consolidated with the original suit. Management is
unable at this time to evaluate the merits of the plaintiffs' claims, if any, or
to estimate potential costs or liability.
There are certain other claims and legal actions pending against the
Acquired Group and its equity investees. While the outcome of such proceedings
cannot be predicted with certainty, management does not expect these matters to
have a material adverse effect on the financial condition or results of
operations of the Acquired Group.
F-40
<PAGE> 155
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To East Coast Power L.L.C.:
We have audited the accompanying combined balance sheets of Cogen Tech
Group (a group of cogeneration investing entities owned by Robert C. McNair and
affiliates) as of December 31, 1998 and 1997, and the related combined
statements of income, owners' equity and cash flows for each of the three years
in the period ended December 31, 1998. These financial statements are the
responsibility of Cogen Tech Group's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cogen Tech Group as of
December 31, 1998 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
March 2, 1999
F-41
<PAGE> 156
COGEN TECH GROUP
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1998 1997 1996
------ ------ ------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Revenues
Equity in Earnings of
Cogen Technologies Linden Venture, L.P................. $ 75.3 $ 73.8 $ 78.7
Camden Cogen L.P....................................... 14.2 14.5 13.7
Cogen Technologies NJ Venture.......................... 47.6 17.5 18.1
------ ------ ------
137.1 105.8 110.5
------ ------ ------
Costs and Expenses
Operating overhead........................................ 21.6 11.6 9.6
General and administrative................................ 20.2 19.9 10.9
------ ------ ------
41.8 31.5 20.5
------ ------ ------
Income from Operations...................................... 95.3 74.3 90.0
Other Income (Expense)
Interest and other income................................. 12.6 15.5 16.7
Interest expense.......................................... (19.3) (21.8) (23.3)
Allowance for long-term receivable........................ -- 10.3 (10.3)
------ ------ ------
Income Before Income Taxes.................................. 88.6 78.3 73.1
Income taxes.............................................. (14.6) (4.2) (4.1)
------ ------ ------
Net Income.................................................. $ 74.0 $ 74.1 $ 69.0
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-42
<PAGE> 157
COGEN TECH GROUP
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
--------- ---------
(IN MILLIONS OF DOLLARS)
<S> <C> <C>
Current Assets
Cash and cash equivalents................................. $ 12.7 $ 12.6
Accounts receivable, affiliate............................ 0.2 --
Other current assets...................................... -- 0.1
------ ------
12.9 12.7
------ ------
Investments in Affiliates
Cogen Technologies Linden Venture, L.P.................... 61.9 60.6
Camden Cogen L.P.......................................... 11.9 12.7
Cogen Technologies NJ Venture............................. 10.0 2.4
------ ------
83.8 75.7
------ ------
Other Assets
Accounts receivable, affiliate............................ 149.0 160.8
Other..................................................... 1.5 1.6
------ ------
150.5 162.4
------ ------
$247.2 $250.8
====== ======
LIABILITIES AND OWNERS' EQUITY
Current Liabilities
Accounts payable, affiliate............................... $ -- $ 11.7
Current maturities on long-term debt...................... 14.5 12.9
Income taxes payable...................................... 4.4 0.1
Interest payable.......................................... 1.8 2.0
------ ------
20.7 26.7
Long-Term Debt.............................................. 203.5 218.0
Other Long-Term Liabilities................................. -- 13.0
Deferred Income Taxes....................................... 6.3 4.7
Commitments and Contingencies (Note 7)
Owners' Equity.............................................. 16.7 (11.6)
------ ------
$247.2 $250.8
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-43
<PAGE> 158
COGEN TECH GROUP
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997 1996
------ ------ ------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Operating Activities
Net income................................................ $ 74.0 $ 74.1 $ 69.0
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in earnings of affiliates:
Cogen Technologies Linden Venture, L.P............... (75.3) (73.8) (78.7)
Camden Cogen L.P..................................... (14.2) (14.5) (13.7)
Cogen Technologies NJ Venture........................ (47.6) (17.5) (18.1)
Distributions received from affiliates:
Cogen Technologies Linden Venture, L.P............... 74.0 75.6 77.7
Camden Cogen L.P..................................... 15.0 8.6 14.5
Cogen Technologies NJ Venture........................ 39.5 18.1 24.5
Deferred income taxes.................................. 1.6 1.2 0.7
Allowance for long-term receivable..................... -- (10.3) 10.3
Changes in other operating assets and liabilities
Decrease (increase) in accounts receivable,
affiliate............................................. (0.2) 5.2 1.4
Decrease (increase) in other current assets............ 0.1 0.7 0.2
Increase (decrease) in accounts payable, affiliate..... (11.7) (1.4) (9.3)
Increase (decrease) in interest payable................ (0.2) 0.3 (0.4)
Increase (decrease) in income taxes payable............ 4.3 0.1 0.3
Net change in other assets and liabilities............. 0.1 0.3 (0.1)
------ ------ ------
Net Cash Provided by Operating Activities................. 59.4 66.7 78.3
------ ------ ------
Investing Activities
Investment in Cogen Technologies NJ Venture............... (12.5) -- --
Decreases in long-term receivable, affiliate.............. 68.7 70.0 37.2
Increases in long-term receivable, affiliate.............. (56.9) (62.2) (20.0)
------ ------ ------
Net Cash Provided by (Used in) Investing Activities......... (0.7) 7.8 17.2
------ ------ ------
Financing Activities
Principal payments on long-term borrowings................ (12.9) (16.0) (15.3)
Cash distributions........................................ (45.7) (58.3) (80.4)
------ ------ ------
Net Cash Used in Financing Activities....................... (58.6) (74.3) (95.7)
------ ------ ------
Net Increase in Cash and Cash Equivalents................... 0.1 0.2 (0.2)
Cash and Cash Equivalents at Beginning of Year.............. 12.6 12.4 12.6
------ ------ ------
Cash and Cash Equivalents at End of Year.................... $ 12.7 $ 12.6 $ 12.4
====== ====== ======
Cash Payments for
Income taxes.............................................. $ 7.9 $ 2.6 $ 3.4
====== ====== ======
Interest.................................................. $ 19.5 $ 21.4 $ 23.4
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-44
<PAGE> 159
COGEN TECH GROUP
COMBINED STATEMENTS OF OWNERS' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997 1996
------ ------ ------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Owners' Equity at Beginning of Year......................... $(11.6) $(27.4) $(16.0)
Net income................................................ 74.0 74.1 69.0
Distributions............................................. (45.7) (58.3) (80.4)
------ ------ ------
Owners' Equity at End of Year............................... $ 16.7 $(11.6) $(27.4)
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-45
<PAGE> 160
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
The combined financial statements of the Cogen Tech Group (the "Acquired
Group") includes McNair Energy Services Corporation ("MESC") and its wholly
owned subsidiary Cogen Technologies NJ, Inc., a Delaware corporation ("NJ
Inc."), Cogen Technologies Linden, Ltd. ("Linden Ltd.") and Cogen Technologies
Camden GP Limited Partnership ("Camden GP"). The financial statements of the
Acquired Group are presented on a combined basis since all such entities were
under the common control and management of the McNair Interests for all periods
presented. All material transactions between the combined entities have been
eliminated.
Linden Ltd. is a Texas limited partnership whose general partner, RCM
Holdings, Inc., is owned 100% by the McNair Interests. Under the terms of Linden
Ltd.'s partnership agreement, RCM Holdings, Inc. is allocated 82% of Linden
Ltd.'s profits and losses and receives 82% of all cash distributions. Linden
Ltd. provides planning, operational and financial management services as
managing general partner of Cogen Technologies Linden Venture, L.P. ("Linden
Venture"), a Delaware limited partnership that owns and operates a 715-megawatt
cogeneration facility in Linden, New Jersey. The allocation of Linden Venture's
income and cash distributions to Linden Ltd. is discussed in Note 3.
Camden GP is a Delaware limited partnership whose general partner, Cogen
Technologies Camden Inc. ("CTCI") is owned 100% by the McNair Interests. Under
the terms of Camden GP's partnership agreement, Camden Inc. is allocated 82% of
Camden GP's profits and losses and receives 82% of all cash distributions. CTCI
provides planning, operational and financial management services as managing
general partner of Camden Cogen L.P. ("Camden Venture"), a Delaware limited
partnership that owns and operates a 146-megawatt cogeneration facility in
Camden, New Jersey. The allocation of Camden Venture's earnings and cash
distributions to Camden GP is discussed in Note 3.
MESC is a Texas corporation that is owned approximately 82% by Robert C.
McNair, members of his immediate family and related trusts (the "McNair
Interests") and owns 100% of NJ Inc. NJ Inc. provides planning, operational and
financial management services as managing general partner for Cogen Technologies
NJ Venture ("Bayonne Venture"), a New Jersey general partnership that owns and
operates a 176-megawatt cogeneration facility in Bayonne, New Jersey. The
allocation of Bayonne Venture's earnings and cash distributions to NJ Inc. is
discussed in Note 3.
The Acquired Group's investments in Linden Venture, Camden Venture and
Bayonne Venture are accounted for using the equity method of accounting since
the other partners have substantive participating rights with respect to the
partnerships' operations.
Cash and Cash Equivalents/Restricted Cash
All highly liquid short-term investments with original maturities of three
months or less are considered to be cash equivalents. At December 31, 1998 and
1997, all of the Acquired Group's cash was held by Linden Ltd., and all such
cash was restricted either to service Linden Ltd.'s debt or, if necessary, to
make working capital loans to Linden Venture.
Credit Risk
Financial instruments which potentially subject the Acquired Group to
credit risk consist primarily of cash and accounts receivable. Cash accounts are
held by major financial institutions, and accounts receivable are with related
parties.
F-46
<PAGE> 161
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
Federal and state income taxes with respect to Linden Ltd. and Camden GP
are not levied at the partnership or corporate levels but rather on the
individual partner or shareholder level. Accordingly, such income taxes have not
been recognized in the combined financial statements for such entities. MESC
accounts for federal and state income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes."
Deferred tax assets and liabilities are recognized based on anticipated future
tax consequences attributable to differences between the financial statement
carrying amounts of assets and liabilities and their respective tax bases.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of certain estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities, if any, and the periods in
which certain items of revenue and expense are included. Actual results may
differ from such estimates.
Earnings Per Share
Historical earnings per share have been omitted from the combined
statements of income since such information is not meaningful and the
historically combined company is not a separate legal entity with a singular
capital structure.
(2) SUBSEQUENT EVENTS
On February 4, 1999, Linden Venture and Camden Venture terminated their
respective management services agreements with Linden Ltd. and Camden GP and
Linden Ltd. and Camden GP terminated their respective management services
agreements with RCM Management Services, L.P. ("RCM Management"). To terminate
such agreements, Linden Ltd. and Camden GP made capital contributions to Linden
Venture and Camden Venture of $46.4 million and $12.8 million, respectively, and
Linden Venture and Camden Venture made one-time payments to Linden Ltd. and
Camden GP of $46.4 million and $12.8 million, respectively. Subsequently, Linden
Ltd. and Camden GP made one-time payments to RCM Management of $46.4 million and
$12.8 million, respectively. These transactions will be reflected in the
financial statements of Linden Ltd., Camden GP, Linden Venture and Camden
Venture in the first quarter of 1999. Such transactions have no effect on the
liquidity or financial condition of such entities since the amounts necessary to
make the payments were provided by contributions from the partners.
On February 4, 1999, Linden Venture and Camden Venture terminated certain
gas management agreements with an affiliate. To terminate such agreements,
Linden Ltd. and Camden GP made capital contributions of $6.0 million and $1.6
million to Linden Venture and Camden Venture, respectively, and Linden Venture
and Camden Venture made one-time payments to the affiliate of $6.0 million and
$1.6 million, respectively. These transactions will be reflected in the
financial statements of Linden Venture and Camden Venture in the first quarter
of 1999. Such transactions have no effect on the liquidity or financial
condition of such entities since the amounts necessary to make the payments were
provided by contributions from the partners.
On February 4, 1999, East Coast Power acquired 47.5% of the general and
limited partnership interests in Linden Ltd. for $146.6 million in cash and
$250.0 million in Enron Corp. common stock. Subsequently on February 4, Linden
Ltd. redeemed the 52.5% of the general and limited partnership interests not
controlled by East Coast Power in return for the distribution of $289.4 million
in cash and a $149.0 million account receivable from an affiliate. The cash
portion of the redemption was paid using the proceeds from a
F-47
<PAGE> 162
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
$289.4 million loan from Morgan Stanley & Co. Incorporated. The loan, plus
accrued interest of $0.2 million, was repaid on February 5, 1999 using the
proceeds from a loan from East Coast Power.
On February 4, 1999, East Coast Power acquired 100% of the general and
limited partnership interests in Camden GP for $140.0 million in cash.
On February 4, 1999, Camden GP repaid the outstanding balance under its
term loan agreement ($12.5 million, including prepayment penalties and accrued
interest of $0.3 million). The funds necessary to make the repayments were
provided by contributions from the general and limited partners.
On February 4, 1999, NJ Inc. was merged with and into MESC. Also on
February 4, MESC redeemed 90% of its outstanding common shares for $216.0
million in Notes (the "MESC Notes"). Subsequently on February 4, Enron North
America Corp. ("Enron North America"), formerly Enron Capital & Trade Resources
Corp., a wholly owned subsidiary of Enron Corp., acquired all of the outstanding
common shares of MESC for $24.0 million in cash. On February 5, MESC was merged
with and into Enron North America and Enron North America contributed its
interest in Bayonne Venture to East Coast Power L.L.C. ("East Coast Power"). In
addition, East Coast Power assumed and subsequently retired the $216.0 million
of MESC Notes. East Coast Power is a Delaware limited liability company formed
by JEDI II, a limited partnership in which Enron Corp. and the California Public
Employees' Retirement System each own a 50% interest.
(3) INVESTMENTS IN AFFILIATES
The following table reflects the changes in the Acquired Group's
investments in affiliates (in millions of dollars):
<TABLE>
<CAPTION>
LINDEN CAMDEN VENTURE
VENTURE VENTURE BAYONNE(1)
------- ------- ----------
<S> <C> <C> <C>
Balance at December 31, 1995............................. $ 61.4 $ 7.6 $ (3.8)
Equity in earnings....................................... 78.7 13.7 18.5
Distributions............................................ (77.7) (14.5) (24.5)
Amortization of excess cost.............................. -- -- (0.3)
------ ------ ------
Balance at December 31, 1996............................. 62.4 6.8 (10.1)
Equity in earnings....................................... 73.8 14.5 17.9
Distributions............................................ (75.6) (8.6) (18.1)
Amortization of excess cost.............................. -- -- (0.3)
------ ------ ------
Balance at December 31, 1997............................. 60.6 12.7 (10.6)
Investment............................................... -- -- 12.5
Equity in earnings....................................... 75.3 14.2 47.9
Distributions............................................ (74.0) (15.0) (39.5)
Amortization of excess cost.............................. -- -- (0.3)
------ ------ ------
Balance at December 31, 1998............................. $ 61.9 $ 11.9 $ 10.0
====== ====== ======
</TABLE>
- ---------------
(1) Through December 31, 1997, NJ Inc. received distributions from Bayonne
Venture that were $13.0 million in excess of its proportionate share of
Bayonne Venture's partners' capital before distributions ($12.7 million at
December 31, 1996 and $6.6 million at December 31, 1995). All partners share
in liquidation rights to the extent of their individual capital accounts;
accordingly, such excess is classified as a long-term liability in the
December 31, 1997 balance sheet. The amount reflected as Investments in
affiliates, Bayonne Venture at December 31, 1997 represents NJ Inc.'s
unamortized cost in excess of its equity in the underlying net assets of
Bayonne Venture, and such amount is being amortized over the remaining life
of Bayonne Venture's power purchase agreements.
F-48
<PAGE> 163
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
In July 1998, NJ Inc. purchased an additional 5.25% limited partnership
interest in Bayonne Venture for $12.5 million in cash from an unaffiliated
party. On a pro forma basis, assuming the transaction took place on January 1,
1998, such transaction would have increased the Acquired Group's equity in the
earnings of Bayonne Venture for the year ended December 31, 1998 by $1.5 million
and the Acquired Group's net income for such period by $1.0 million. NJ Inc.'s
cost in excess of its equity in the underlying net assets of Bayonne Venture at
the time of the purchase, $2.6 million, is being amortized over ten years.
The following table presents summary balance sheet information for the
Acquired Group's affiliates at December 31, 1998 and 1997 (in millions of
dollars):
<TABLE>
<CAPTION>
LINDEN VENTURE CAMDEN VENTURE BAYONNE VENTURE
--------------- --------------- ---------------
1998 1997 1998 1997 1998 1997
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets............................ $ 57.0 $ 64.2 $ 18.3 $ 19.0 $25.9 $25.0
Property, plant and equipment, net........ 413.6 428.2 103.1 106.3 70.9 73.8
Other assets.............................. -- -- -- -- 1.6 0.2
------ ------ ------ ------ ----- -----
$470.6 $492.4 $121.4 $125.3 $98.4 $99.0
====== ====== ====== ====== ===== =====
Liabilities and Partners' Capital
Current liabilities....................... $ 24.5 $ 31.8 $ 13.7 $ 11.8 $12.8 $18.9
Long-term debt............................ -- -- 78.5 84.7 64.1 67.9
Other long-term liabilities............... 1.6 2.2 -- 0.8 -- --
Partners' capital......................... 444.5 458.4 29.2 28.0 21.5 12.2
------ ------ ------ ------ ----- -----
$470.6 $492.4 $121.4 $125.3 $98.4 $99.0
====== ====== ====== ====== ===== =====
</TABLE>
The following table presents summary income statement information for the
Acquired Group's affiliates for the years ended December 31, 1998, 1997 and 1996
(in millions of dollars):
<TABLE>
<CAPTION>
LINDEN VENTURE CAMDEN VENTURE BAYONNE VENTURE
------------------------ --------------------- ----------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
------ ------ ------ ----- ----- ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Electricity................ $262.8 $283.5 $290.4 $73.1 $80.2 $77.2 $112.8 $92.8 $90.4
Steam...................... 11.3 15.5 15.1 -- -- -- 3.8 3.7 4.9
------ ------ ------ ----- ----- ----- ------ ----- -----
274.1 299.0 305.5 73.1 80.2 77.2 116.6 96.5 95.3
------ ------ ------ ----- ----- ----- ------ ----- -----
Costs and Expenses:
Fuel....................... 118.1 138.1 138.6 33.3 39.2 38.4 38.6 43.2 45.2
Operating & maintenance.... 19.9 22.1 22.6 7.0 7.7 6.4 10.9 14.4 10.2
Depreciation &
amortization............ 15.4 22.3 22.2 3.7 6.9 6.8 3.0 6.9 6.9
General & administrative... 10.1 11.4 10.7 2.2 2.6 2.6 3.1 2.9 2.8
Taxes, other than income... 1.6 0.6 1.7 0.4 0.6 0.6 0.5 0.5 0.5
------ ------ ------ ----- ----- ----- ------ ----- -----
165.1 194.5 195.8 46.6 57.0 54.8 56.1 67.9 65.6
------ ------ ------ ----- ----- ----- ------ ----- -----
Income from Operations....... 109.0 104.5 109.7 26.5 23.2 22.4 60.5 28.6 29.7
Other Income (Expense)
Interest and other
income..................... 0.8 1.1 0.6 0.4 0.4 0.4 1.2 0.1 0.1
Interest expense........... -- -- (0.1) (7.4) (7.7) (8.2) (7.7) (8.1) (8.5)
------ ------ ------ ----- ----- ----- ------ ----- -----
Net Income................... $109.8 $105.6 $110.2 $19.5 $15.9 $14.6 $ 54.0 $20.6 $21.3
====== ====== ====== ===== ===== ===== ====== ===== =====
</TABLE>
F-49
<PAGE> 164
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents statement of cash flows information for the
Acquired Group's affiliates for the years ended December 31, 1998, 1997 and 1996
(in millions of dollars):
<TABLE>
<CAPTION>
LINDEN VENTURE CAMDEN VENTURE BAYONNE VENTURE
------------------------ ---------------------- ---------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
------ ------ ------ ----- ----- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash provided by operating
activities.................... $120.4 $134.4 $130.4 $24.2 $21.7 $21.9 $51.2 $26.9 $30.0
Cash used in investing
activities.................. (0.8) (0.4) (1.7) (0.5) (4.4) (0.4) (0.1) -- (0.3)
Cash used in financing
activities.................. (123.7) (127.6) (129.3) (23.9) (16.7) (22.1) (47.2) (24.0) (31.2)
------ ------ ------ ----- ----- ----- ----- ----- -----
Increase (decrease) in cash
and cash equivalents........ $ (4.1) $ 6.4 $ (0.6) $(0.2) $ 0.6 $(0.6) $ 3.9 $ 2.9 $(1.5)
====== ====== ====== ===== ===== ===== ===== ===== =====
</TABLE>
Under the terms of Linden Venture's partnership agreement, monthly cash
distributions are allocated, 1% to Linden Ltd. and 99% to the limited partner up
to a specified rate of return (approximately $3.0 million per month from October
1998 through September 2001 and between $4.3 million and $4.8 million per month
thereafter) ("Tranche 1"), then 99% to Linden Ltd. and 1% to the limited partner
up to a capped amount, which is twice the amount of Tranche 1, and the remainder
90% to Linden Ltd. and 10% to the limited partner. During 1998, 1997 and 1996,
Linden Ltd. received 60%, 59% and 60%, respectively, of Linden Venture's cash
distributions. Linden Venture's income before depreciation is allocated to the
partners on the basis of cash distributed with any excess primarily allocated
99% to Linden Ltd. Losses are allocated 100% to Linden Ltd. until its capital
account equals zero, then to the limited partner until its capital account
equals zero, with any remainder allocated 100% to Linden Ltd. Depreciation up to
$525.0 million is allocated 5% to Linden Ltd. and 95% to the limited partners.
All remaining depreciation is allocated 99% to Linden Ltd. During 1998, 1997 and
1996, Linden Ltd. was allocated 69%, 70% and 71%, respectively, of Linden
Venture's net income.
Under the terms of Camden Venture's partnership agreement, monthly cash
distributions are allocated 1% to Camden GP and 99% to the limited partner up to
a specified cumulative rate of return (approximately $0.3 million to $0.4
million per month through May 2007 and varying amounts thereafter) and the
remaining available cash for the month is allocated 99% to Camden GP and 1% to
the limited partner. Once the limited partner has received its specified rate of
return, cash distributions will be allocated 90% to Camden GP and 10% to the
limited partner. During 1998, 1997 and 1996, Camden GP received 82%, 74% and
83%, respectively, of Camden Venture's cash distributions. Camden Venture's
income before depreciation is allocated as follows: (i) an amount equal to debt
principal payments, 100% to the limited partner; (ii) an amount equal to and
allocated on the same basis as cash distributed; and (iii) any remainder
generally 99% to Camden GP and 1% to the limited partner. Losses are allocated
100% to Camden GP until its capital account equals zero, then to the limited
partner until its capital account equals zero, the remainder to Camden GP.
Depreciation is allocated 100% to the limited partner until its capital account
equals zero and the remainder to Camden GP. During 1998, 1997 and 1996, Camden
GP was allocated 73%, 91% and 94%, respectively, of Camden Venture's net income.
Under the terms of Bayonne Venture's joint venture agreement, NJ Inc. is
allocated profits and losses and receives cash distributions based on its
ownership percentage. Through July 1998, NJ Inc. was allocated 86.5% of Bayonne
Venture's profits and losses and received 86.5% of all cash distributions.
Subsequent to the acquisition of an additional 5.25% interest in July 1998, NJ
Inc. has been allocated 91.75% of Bayonne Venture's profits and losses and
received 91.75% of all cash distributions. For the year ended December 31, 1998,
NJ Inc. was allocated 88.7% of Bayonne Venture's profits and losses and received
88.4% of all cash distributions.
F-50
<PAGE> 165
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(4) LONG-TERM DEBT
In September 1992, Linden Ltd. entered into a $250.0 million Amended and
Restated Term Loan Agreement with State Street Bank & Trust Co. which matures in
September 2007 and is comprised of a fixed rate portion, a floating rate portion
and a working capital portion. Under the terms of the agreement the fixed rate
portion bears interest at 8.8%, the floating rate portion bears interest at
LIBOR plus 1.65% and the working capital portion bears interest at the one month
financial commercial paper rate (as reported in Federal Statistical Release H.15
(514) or successor publication) plus 0.55%. Borrowings under the agreement are
secured by Linden Ltd.'s partnership interest in Linden Venture. Principal and
interest payments are made quarterly at varying amounts in accordance with the
terms of the agreement. The agreement contains certain restrictions that limit
or prohibit, among other things, the ability to incur indebtedness, make
payments of certain indebtedness, pay distributions, make investments, engage in
transactions with affiliates, create liens, sell assets and engage in
acquisitions, mergers and consolidations.
In February 1992, Camden GP entered into a $36.5 million Term Loan
Agreement with General Electric Capital Corporation (the "Camden GP Term Loan
Agreement") which matures in May 2010. Borrowings under the agreement, which
totaled $14.8 million, bear interest at the London Interbank Offering Rate
(LIBOR) plus 4.25% and are secured by Camden GP's holdings in Camden Venture.
Principal and interest payments are made quarterly at varying amounts in
accordance with the terms of the agreement.
At December 31, 1996, NJ Inc. had outstanding $4.4 million under the terms
of a term loan agreement with The Prudential Insurance Company of America. Such
amount was repaid in 1997.
Long-term debt at December 31, 1998 and 1997 consisted of the following (in
millions of dollars):
<TABLE>
<CAPTION>
1998 1997
------------------- -------------------
CURRENT LONG-TERM CURRENT LONG-TERM
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Linden Ltd.
Fixed rate...................................... $ 6.7 $ 87.0 $ 6.0 $ 93.7
Floating rate................................... 7.2 94.7 6.4 101.9
Working capital................................. -- 10.0 -- 10.0
----- ------ ----- ------
13.9 191.7 12.4 205.6
----- ------ ----- ------
Camden GP......................................... 0.6 11.8 0.5 12.4
----- ------ ----- ------
$14.5 $203.5 $12.9 $218.0
===== ====== ===== ======
</TABLE>
Aggregate total maturities during the next five years are as follows:
1999 -- $14.5 million; 2000 -- $16.2 million; 2001 -- $18.1 million;
2002 -- $20.3 million; and 2003 -- $22.7 million.
(5) RELATED PARTY TRANSACTIONS
Linden Ltd. has advanced funds to Cogen Technologies Financial Services,
L.P. ("Financial Services"), an investment company which is controlled by the
McNair Interests, which amounted to $149.0 million and $160.8 million at
December 31, 1998 and 1997, respectively. Such amount is classified as a
long-term receivable in the combined balance sheets. The receivable bears
interest at 8.8%, and Linden Ltd. has earned net interest of $11.8 million in
1998, $14.6 million in 1997 and $15.6 million in 1996.
Financial Services has used the funds to make advances to other affiliates
for general working capital needs and has invested in treasury Notes, treasury
bills and certain marketable securities. The market value of Financial Services'
investments in marketable securities, which is the only liquid asset the
partnership holds, supports Financial Services' ability to repay the amounts
advanced by Linden Ltd. In those instances when the market value of Financial
Services' marketable securities is below the amount of Linden Ltd.'s receivable,
F-51
<PAGE> 166
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
creating doubt about the collectibility of the receivable, Linden Ltd. provides
a valuation allowance to reflect the shortfall. To the extent the market value
of the underlying marketable securities recovers, the provision is reversed.
Linden Ltd. recorded provisions (reversal of provisions) with respect to its
receivable from Financial Services of $(10.3 million) in 1997 and $10.3 million
in 1996. At December 31, 1998 and 1997, the cumulative allowance recognized with
respect to such receivable was zero.
From time to time advances are made between Financial Services and Camden
GP. At December 31, 1997, $1.9 million was payable to Financial Services by
Camden GP, and at December 31, 1998, $0.2 million was payable by Financial
Services to Camden GP. Advances bear interest at 9.3%, and during 1998, 1997 and
1996 Camden GP recorded interest income totaling $0.2 million, $0.6 million and
$0.9 million, respectively.
Camden GP provides planning, operational and financial management services
to Camden Venture for a monthly management fee equal to 1.5% of Camden Venture's
gross revenues. Such fees charged to Camden Venture in 1998, 1997 and 1996
totaled $1.1 million, $1.2 million and $1.2 million, respectively. Linden Ltd.
provides similar services to Linden Venture for a monthly management fee equal
to 1.5% of Linden Venture's gross revenues. Such fees charged to Linden Venture
in 1998, 1997 and 1996 totaled $4.2 million, $4.6 million and $4.5 million,
respectively. RCM Management Services, L.P. ("RCM Management"), which is
controlled by the McNair Interests, provides planning, operational and financial
management services to Camden GP and Linden Ltd. for a monthly management fee
equal to 1.5% of the gross revenues of Camden Venture and Linden Venture,
respectively. Such fees charged were as follows in 1998, 1997 and 1996: (i)
Camden GP -- $1.1 million, $1.2 million and $1.2 million, respectively; and (ii)
Linden Ltd. -- $4.2 million, $4.6 million and $4.5 million, respectively.
Under the terms of an agreement between RCM Management and NJ Inc., RCM
Management provides planning, operational and financial management services
directly to Bayonne Venture for a monthly management fee equal to 1.5% of
Bayonne Venture's gross revenues. Such fees charged to Bayonne Venture totaled
$1.7 million, $1.4 million and $1.4 million in 1998, 1997 and 1996,
respectively. Under the terms of such agreement, Bayonne Venture has assumed the
cost and pays such fee directly to RCM Management.
Cogen Technologies Capital Company, L.P. ("Cogen Capital"), in which the
McNair Interests have a 1% general partner and an approximate 81% limited
partner interest, charges Camden GP, Linden Ltd., and NJ Inc. for certain
management, financial and administrative support services. Such fees charged
were as follows in 1998, 1997 and 1996: (i) Linden Ltd. -- $28.3 million, $21.2
million and $13.7 million, respectively; (ii) Camden GP -- $5.8 million, $4.3
million and $2.9 million, respectively; and (iii) NJ Inc. -- $7.0 million, $5.2
million and $3.3 million, respectively. The costs of such services are
accumulated primarily based on employee time allocations and are charged to
specific entities based on electricity generation capacity. NJ Inc. charged
Cogen Capital $5.9 million in 1998, $2.2 million in 1997 and $2.0 million in
1996 for certain management, financial and administrative support services. The
costs of such services are accumulated primarily based on employee time
allocations.
See Note 2 with respect to the cancellation of certain agreements with
related parties.
F-52
<PAGE> 167
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(6) INCOME TAXES
As explained in Note 1, certain entities in the Acquired Group are
tax-paying entities. Income tax expense for such entities for the years ended
December 31, 1998, 1997 and 1996 consisted of (in millions of dollars):
<TABLE>
<CAPTION>
1998 1997 1996
----- ---- ----
<S> <C> <C> <C>
Current
Federal................................................... $12.0 $2.6 $3.1
State..................................................... 1.0 0.4 0.3
----- ---- ----
13.0 3.0 3.4
----- ---- ----
Deferred
Federal................................................... 1.4 0.4 0.7
State..................................................... 0.2 0.8 --
----- ---- ----
1.6 1.2 0.7
----- ---- ----
Total............................................. $14.6 $4.2 $4.1
===== ==== ====
</TABLE>
Deferred tax liabilities (assets) at December 31, 1998 and 1997 are
composed of the following differences between financial and tax reporting
amounts (in millions of dollars):
<TABLE>
<CAPTION>
1998 1997
---- -----
<S> <C> <C>
Deferred income tax liabilities
Tax depreciation in excess of book depreciation........... $5.7 $ 6.4
State tax depreciation in excess of book depreciation..... 0.1 --
Maintenance accrual....................................... 0.5 --
Deferred income tax assets
Alternative minimum tax credit carryforward............... -- (0.8)
Book depreciation in excess of state tax depreciation..... -- (0.1)
Maintenance accrual....................................... -- (0.8)
---- -----
Net deferred income tax liability........................... $6.3 $ 4.7
==== =====
</TABLE>
A reconciliation of income tax expense computed by applying the statutory
federal income tax rate to income before income taxes for the years ended
December 31, 1998, 1997 and 1996 is presented in the following table (in
millions of dollars):
<TABLE>
<CAPTION>
1998 1997 1996
----- ---- ----
<S> <C> <C> <C>
Federal income taxes at statutory rate...................... $13.8 $3.5 $3.9
Increase resulting from:
State income taxes, net of federal effect................. 0.8 0.2 0.2
Other..................................................... -- 0.5 --
----- ---- ----
$14.6 $4.2 $4.1
===== ==== ====
</TABLE>
(7) COMMITMENTS AND CONTINGENCIES
Six plaintiffs, individually on behalf of themselves and as representatives
of a class of persons similarly situated, filed an environmental lawsuit in
Louisiana state court against 92 defendants, including McNair Transport, Inc.
(predecessor to MESC). In the lawsuit, plaintiffs allege that defendants caused
environmental contamination at two sites in Iberville Parish, Louisiana.
Plaintiffs, who are alleged to have worked at the sites
F-53
<PAGE> 168
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
or resided near the sites, claim personal injuries, increased risk and fear of
future disease, and property damage. Plaintiffs seek actual and exemplary
damages of an unspecified amount. Defendants removed the case to federal court,
and the lawsuit is currently pending in the United States District Court for the
Middle District of Louisiana. On October 2, 1998, the court denied class
certification to the plaintiffs, and discovery on the merits of the case is
expected to begin in the first quarter of 1999. Management is unable at this
time to evaluate the merits of the plaintiffs' claims, if any, or to estimate
potential costs or liability.
There are certain other claims and legal actions pending against the
Acquired Group and its equity investees. While the outcome of such proceedings
cannot be predicted with certainty, management does not expect these matters to
have a material adverse effect on the financial condition or results of
operations of the Group.
(8) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 "Disclosures About Fair Value of Financial Instruments"
requires the disclosure, to the extent practicable, of the fair value of
financial instruments which are recognized or unrecognized in the balance sheet.
The fair value disclosed herein is not representative of the amount that could
be realized or settled, nor does the fair value amount consider tax
consequences, if any, of realization or settlement. The following table reflects
the fair value of long-term debt at December 31, 1998 and 1997 (in millions of
dollars):
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Long-Term Debt
Camden GP....................................... $ 12.4 $ 12.4 $ 12.9 $ 12.9
Linden Ltd...................................... 205.6 229.3 218.0 225.5
</TABLE>
The fair value of fixed-rate long-term debt has been determined based on
the differential between the interest rates of long-term treasury securities of
equivalent maturities and the effective interest rates on the debt at the date
of the borrowing plus the interest rates on similar treasury securities at the
balance sheet date. With respect to floating rate debt, the carrying amount
approximates fair value due to the market-sensitive interest rate on such debt.
The carrying amount of current assets and liabilities are considered to be
reasonable estimates of their fair values due to their short-term nature. The
carrying amount of the long-term receivable from an affiliate is considered to
be a reasonable estimate of fair value since interest is earned at market rates.
F-54
<PAGE> 169
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(9) SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1 QTR 2 QTR 3 QTR 4 QTR YEAR
------ ------ ----- ----- ------
<S> <C> <C> <C> <C> <C>
1998
Revenues.................................. $ 37.2 $ 28.5 $35.1 $36.3 $137.1
Costs and expenses........................ (14.2) (12.7) (8.1) (6.8) (41.8)
Income from operations.................... 23.0 15.8 27.0 29.5 95.3
Other income (expense).................... (1.9) (1.6) (1.8) (1.4) (6.7)
Income taxes.............................. (4.7) (2.1) (3.7) (4.1) (14.6)
Net income................................ 16.4 12.1 21.5 24.0 74.0
Gross profit(1)........................... 27.9 20.6 32.5 34.5 115.5
1997
Revenues.................................. $ 26.4 $ 22.2 $30.9 $26.3 $105.8
Costs and expenses........................ (7.8) (7.2) (8.2) (8.3) (31.5)
Income from operations.................... 18.6 15.0 22.7 18.0 74.3
Other income (expense)(2)................. (3.9) 7.8 1.1 (1.0) 4.0
Income taxes.............................. (0.7) (1.8) (1.1) (0.6) (4.2)
Net income................................ 14.0 21.0 22.7 16.4 74.1
Gross profit(1)........................... 23.5 19.3 28.0 23.4 94.2
</TABLE>
- ---------------
(1) Income from operations plus general and administrative expense.
(2) Includes benefit (charge) for allowance on long-term receivable as follows:
1 Qtr -- ($1.8 million); 2 Qtr -- $9.2 million; 3 Qtr -- $2.6 million; 4
Qtr -- $0.3 million; Year -- $10.3 million.
F-55
<PAGE> 170
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED STATEMENTS OF INCOME (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
FEBRUARY 5, JANUARY 1, NINE MONTHS
1999 TO 1999 TO ENDED
SEPTEMBER 30, FEBRUARY 4, SEPTEMBER 30,
1999 1999 1998
------------- ------------ -------------
<S> <C> <C> <C>
Revenues
Electricity........................................... $290.7 $ 43.2 $338.6
Steam................................................. 7.8 1.0 11.7
------ ------ ------
298.5 44.2 350.3
------ ------ ------
Costs and Expenses
Fuel.................................................. 129.8 24.6 144.1
Operating and maintenance............................. 24.3 3.6 27.8
Depreciation and amortization......................... 14.2 2.1 16.6
General and administrative............................ 4.8 60.8 11.5
Taxes, other than income.............................. 1.8 0.2 1.9
------ ------ ------
174.9 91.3 201.9
------ ------ ------
Income (Loss) from Operations........................... 123.6 (47.1) 148.4
Other Income (Expense)
Interest and other income............................. 5.3 0.1 1.5
Interest expense...................................... (9.2) (1.5) (11.4)
------ ------ ------
Net Income (Loss)....................................... $119.7 $(48.5) $138.5
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-56
<PAGE> 171
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999 DECEMBER 31,
(UNAUDITED) 1998
------------- ------------
(IN MILLIONS OF DOLLARS)
<S> <C> <C>
Current Assets
Cash and cash equivalents................................. $ 44.3 $ 39.1
Accounts receivable....................................... 51.5 42.7
Inventories............................................... 16.0 16.7
Other current assets...................................... 2.2 2.7
------- -------
114.0 101.2
------- -------
Property, Plant and Equipment, at cost...................... 827.0 827.6
Accumulated depreciation.................................. (256.3) (240.0)
------- -------
570.7 587.6
------- -------
Other Assets................................................ 2.8 1.6
------- -------
$ 687.5 $ 690.4
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Accounts payable.......................................... $ 34.4 $ 29.1
Accounts payable, affiliate............................... -- 0.4
Current maturities on long-term debt...................... 11.1 10.4
Short-term debt........................................... -- 0.9
Interest payable.......................................... 3.0 3.1
Other current liabilities................................. 6.7 7.1
------- -------
55.2 51.0
Long-Term Debt.............................................. 134.5 142.6
Other Long-Term Liabilities................................. -- 1.6
Commitments and Contingencies (Note 3)
Partners' Capital........................................... 497.8 495.2
------- -------
$ 687.5 $ 690.4
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-57
<PAGE> 172
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM NINE
FEBRUARY 5, JANUARY 1, MONTHS
1999 TO 1999 TO ENDED
SEPTEMBER 30, FEBRUARY 4, SEPTEMBER 30,
1999 1999 1998
------------- ----------- -------------
<S> <C> <C> <C>
Operating Activities
Net income (loss)...................................... $ 119.7 $(48.5) $ 138.5
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 14.2 2.1 16.6
Changes in other operating assets and liabilities
Net change in other assets and liabilities.......... 1.2 (6.3) (18.1)
------- ------ -------
Net Cash Provided by (Used in) Operating Activities...... 135.1 (52.7) 137.0
------- ------ -------
Investing Activities
Additions to property, plant and equipment............. (0.3) -- (0.6)
------- ------ -------
Net Cash Used in Investing Activities.................... (0.3) -- (0.6)
------- ------ -------
Financing Activities
Net change in borrowings............................... (8.0) (0.3) (4.6)
Cash contributions by partners......................... -- 70.1 --
Cash distributions to partners......................... (111.4) (27.3) (137.3)
------- ------ -------
Net Cash Provided by (Used in) Financing Activities...... (119.4) 42.5 (141.9)
------- ------ -------
Net Increase (Decrease) in Cash and Cash Equivalents..... 15.4 (10.2) (5.5)
Cash and Cash Equivalents at Beginning of Period......... 28.9 39.1 39.5
------- ------ -------
Cash and Cash Equivalents at End of Period............... $ 44.3 $ 28.9 $ 34.0
======= ====== =======
Cash Paid for Interest................................... $ 7.1 $ 3.7 $ 11.5
======= ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-58
<PAGE> 173
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED STATEMENTS OF PARTNERS' CAPITAL (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------- -------- ------
<S> <C> <C> <C>
Balance at January 1, 1999.................................. $ 79.0 $416.2 $495.2
Contributions............................................. 70.1 -- 70.1
Net income (loss)......................................... (51.5) 3.0 (48.5)
Distributions............................................. (20.3) (7.0) (27.3)
------ ------ ------
Balance at February 4, 1999................................. 77.3 412.2 489.5
Net income................................................ 97.2 22.5 119.7
Distributions............................................. (81.7) (29.7) (111.4)
------ ------ ------
Balance at September 30, 1999............................... $ 92.8 $405.0 $497.8
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-59
<PAGE> 174
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The combined financial statements of the Cogen Technologies New Jersey
Operating Partnerships (the "Operating Partnerships") includes (i) Cogen
Technologies NJ Venture ("Bayonne Venture"); (ii) Camden Cogen L.P. ("Camden
Venture"); and (iii) Cogen Technologies Linden Venture, L.P. ("Linden Venture").
The Operating Partnerships are engaged in the operation of natural gas-fired
cogeneration facilities in the state of New Jersey. The financial statements of
the Operating Partnerships are presented on a combined basis since all such
entities are under common equity ownership and management by general partners
that are under common control. All material transactions between the combined
entities have been eliminated.
At December 31, 1998, the Operating Partnerships were under the common
control of Robert C. McNair, members of his immediate family and related trusts
(the "McNair Interests"). At December 31, 1998, the McNair Interests (i)
indirectly owned approximately 82% of NJ Inc., the managing partner of Bayonne
Venture, (ii) owned 100% of the 82% general partner of Cogen Technologies Camden
GP Limited Partnership ("Camden GP"), the managing partner of Camden Venture,
and (iii) owned 100% of the 82% general partner of Cogen Technologies Linden,
Ltd. ("Linden Ltd."), the managing partner of Linden Venture.
On February 4, 1999, East Coast Power L.L.C. ("East Coast Power") acquired
100% of the general and limited partnership interests in Camden GP and Linden
Ltd. Also on February 4, Enron Capital & Trade Resources Corp., a wholly owned
subsidiary of Enron Corp., acquired 91.75% of the partnership interests in
Bayonne Venture (including the interests controlled by the McNair Interests) and
contributed such interests to East Coast Power. East Coast Power subsequently
contributed its interest in Bayonne Venture to JEDI Bayonne GP, L.L.C. ("Bayonne
GP"), a limited liability company in which East Coast Power owns 100% of the
membership interests, and Bayonne GP was named managing partner of Bayonne
Venture. East Coast Power is a Delaware limited liability company formed by
Joint Energy Development Investments II Limited Partnership ("JEDI II"), a
limited partnership in which Enron Corp. and the California Public Employees'
Retirement System each own a 50% interest.
Bayonne Venture, a New Jersey general partnership, owns and operates a
176-megawatt cogeneration facility in Bayonne, New Jersey. Through July 1998,
the managing partner was allocated 86.5% of Bayonne Venture's profits and losses
and received 86.5% of all cash distributions. At such time an additional 5.25%
interest in Bayonne Venture was acquired and subsequent to such acquisition the
managing partner has been allocated 91.75% of Bayonne Venture's profits and
losses and has received 91.75% of all cash distributions.
Camden Venture, a Delaware limited partnership, owns and operates a
146-megawatt cogeneration facility in Camden, New Jersey. Camden GP is the
managing partner of Camden Venture. Under the terms of Camden Venture's
partnership agreement, monthly cash distributions are allocated 99% to the
limited partner and 1% to Camden GP up to a specified cumulative rate of return
(approximately $0.3 million to $0.4 million per month through May 2007 and
varying amounts thereafter) and the remaining available cash for the month is
allocated 99% to Camden GP and 1% to the limited partner. Once the limited
partner has received its specified rate of return, cash distributions will be
allocated 90% to Camden GP and 10% to the limited partner. During the first nine
months of 1999 and 1998, Camden GP received 78% (excluding a $3.3 million
special distribution to the limited partner related to the East Coast Power
acquisition) and 83%, respectively, of Camden Venture's cash distributions.
Camden Venture's income before depreciation is allocated as follows: (i) an
amount equal to debt principal payments, 100% to the limited partner; (ii) an
amount equal to and allocated on the same basis as cash distributed; and (iii)
any remainder is generally allocated 99% to Camden GP and 1% to the limited
partner. Losses are allocated 100% to Camden GP until its capital account equals
zero and then 100% to the limited partner until its capital account equals zero
and then 100% to Camden GP. Depreciation is allocated 100% to the limited
partner until its capital account equals zero and then to Camden GP. During the
first nine months of 1999 and 1998, Camden GP was allocated 79% (excluding the
$14.4 million of one-time payments in connection with the termination of the gas
management
F-60
<PAGE> 175
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
and management services agreements that were allocated 100% to Camden GP's share
of income) and 75%, respectively, of Camden Venture's net income.
Linden Venture, a Delaware limited partnership, owns and operates a
715-megawatt cogeneration facility in Linden, New Jersey. Linden Ltd. is the
managing partner of Linden Venture. Under the terms of Linden Venture's
partnership agreement, cash is distributed monthly, 1% to Linden Ltd. and 99% to
the limited partner up to a specified rate of return (approximately $4.3 million
per month through September 1998, approximately $3.0 million per month from
October 1998 through September 2001 and between $4.3 million and $4.8 million
per month thereafter) ("Tranche 1"), then 99% to Linden Ltd. and 1% to the
limited partner up to an amount equal to twice the amount of Tranche 1 and the
remainder 90% to Linden Ltd. and 10% to the limited partner. During the first
nine months of 1999 and 1998, Linden Ltd. received 70% and 58%, respectively, of
Linden Venture's cash distributions. Linden Venture's income before depreciation
is allocated to the partners on the basis of cash distributed with any excess
primarily allocated 99% to Linden Ltd. Losses are allocated 100% to Linden Ltd.
until its capital account equals zero and then to the limited partners until
their capital accounts equal zero with any remainder allocated 100% to Linden
Ltd. Depreciation up to $525.0 million is allocated 5% to Linden Ltd. and 95% to
the limited partners. All remaining depreciation is allocated 99% to Linden Ltd.
During the first nine months of 1999 and 1998, Linden Ltd. was allocated 78%
(excluding the $52.4 million of one-time payments in connection with the
termination of the gas management and management services agreements that were
allocated 100% to Linden Ltd.'s share of income) and 65%, respectively, of
Linden Venture's net income.
The accompanying unaudited combined financial statements of the Operating
Partnerships reflect, in the opinion of management, all adjustments, consisting
only of normal and recurring adjustments, necessary to present fairly the
Operating Partnerships' financial position at September 30, 1999 and the
Operating Partnerships' results of operations and cash flows for the period
January 1, 1999 to February 4, 1999, the period February 5, 1999 to September
30, 1999 and the nine-month period ended September 30, 1998. Interim period
results are not necessarily indicative of the results of operations or cash
flows for a full-year period.
These financial statements and the notes thereto should be read in
conjunction with the audited financial statements of the Operating Partnerships
included elsewhere in this prospectus.
(2) RELATED PARTY TRANSACTIONS
On February 4, 1999, Linden Venture and Camden Venture terminated their
respective management services agreements with Linden Ltd. and Camden GP. To
terminate such agreements, Linden Ltd. and Camden GP made capital contributions
to Linden Venture and Camden Venture, respectively, and Linden Venture and
Camden Venture made one-time payments to Linden Ltd. and Camden GP of $46.4
million and $12.8 million, respectively. Also on February 4, Linden Venture and
Camden Venture terminated certain gas management agreements with an affiliate.
To terminate such agreements, Linden Ltd. and Camden GP made capital
contributions to Linden Venture and Camden Venture, respectively, and Linden
Venture and Camden Venture made one-time payments to the affiliate of $6.0
million and $1.6 million, respectively. These transactions are reflected in the
results of operations in the period January 1, 1999 to February 4, 1999. Such
transactions have no effect on the liquidity or financial condition of such
entities since the amounts necessary to make the payments were provided by
contributions from the partners.
(3) COMMITMENTS AND CONTINGENCIES
In 1997 Linden Venture initiated an arbitration proceeding against Ebasco
Constructors, Inc. and ENSERCH (the "Respondents") for alleged design
deficiencies and warranty claims with respect to the construction of the Linden
Facility. In April 1999, the proceeding was settled and Linden Venture was
relieved of its obligation to pay certain liabilities and received a cash
payment of $1.2 million.
F-61
<PAGE> 176
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
In June 1999, Linden Venture entered into a letter of intent with Tosco
Refining Company that contemplates an expansion of the Linden Facility through
the addition of a sixth turbine generator to provide electricity and steam
service to Tosco's Bayway Refinery. Completion of the transactions contemplated
by the letter of intent are subject to, among other things, further
negotiations, completion of due diligence and receipt of necessary approvals.
There are other claims and legal actions pending against the Operating
Partnerships. While the outcome of such proceedings cannot be predicted with
certainty, management does not expect these matters to have a material adverse
effect on the financial condition or results of operations of the Operating
Partnerships.
F-62
<PAGE> 177
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To East Coast Power L.L.C.:
We have audited the accompanying combined balance sheets of Cogen
Technologies New Jersey Operating Partnerships (a group of cogeneration
partnerships in which Robert C. McNair and affiliates have an interest) as of
December 31, 1998 and 1997, and the related combined statements of income,
partners' capital and cash flows for each of the three years in the period ended
December 31, 1998. These financial statements are the responsibility of the
partnerships' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cogen Technologies New
Jersey Operating Partnerships as of December 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
March 2, 1999
F-63
<PAGE> 178
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
1998 1997 1996
------ ------ ------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Revenues
Electricity............................................... $448.7 $456.5 $458.0
Steam..................................................... 15.1 19.2 20.0
------ ------ ------
463.8 475.7 478.0
------ ------ ------
Costs and Expenses
Fuel...................................................... 190.0 220.5 222.2
Operating and maintenance................................. 37.8 44.2 39.2
Depreciation and amortization............................. 22.1 36.1 35.9
General and administrative................................ 15.4 16.9 16.1
Taxes, other than income.................................. 2.5 1.7 2.8
------ ------ ------
267.8 319.4 316.2
------ ------ ------
Income from Operations...................................... 196.0 156.3 161.8
Other Income (Expense)
Interest and other income................................. 2.4 1.6 1.1
Interest expense.......................................... (15.1) (15.8) (16.8)
------ ------ ------
Net Income.................................................. $183.3 $142.1 $146.1
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-64
<PAGE> 179
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
---------- ----------
(IN MILLIONS OF DOLLARS)
<S> <C> <C>
Current Assets
Cash and cash equivalents................................. $ 39.1 $ 39.5
Accounts receivable....................................... 42.7 44.6
Inventories............................................... 16.7 21.2
Other current assets...................................... 2.7 2.9
------- -------
101.2 108.2
------- -------
Property, Plant and Equipment, at cost...................... 827.6 826.2
Accumulated depreciation.................................. (240.0) (217.9)
------- -------
587.6 608.3
------- -------
Other Assets................................................ 1.6 0.2
------- -------
$ 690.4 $ 716.7
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Accounts payable.......................................... $ 29.1 $ 38.6
Accounts payable, affiliate............................... 0.4 --
Current maturities on long-term debt...................... 10.4 9.4
Short-term debt........................................... 0.9 --
Interest payable.......................................... 3.1 3.2
Other current liabilities................................. 7.1 11.3
------- -------
51.0 62.5
Long-Term Debt.............................................. 142.6 152.6
Other Long-Term Liabilities................................. 1.6 3.0
Commitments and Contingencies (Note 5)
Partners' Capital........................................... 495.2 498.6
------- -------
$ 690.4 $ 716.7
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-65
<PAGE> 180
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1998 1997 1996
------- ------- -------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Operating Activities
Net income................................................ $ 183.3 $ 142.1 $ 146.1
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 22.1 36.1 35.9
Changes in other operating assets and liabilities
Decrease (increase) in accounts receivable............. 1.9 8.3 (10.6)
Decrease (increase) in inventories..................... 4.5 (3.8) (1.6)
Decrease (increase) in other current assets............ 0.2 0.3 (0.4)
Increase (decrease) in accounts payable................ (9.5) (1.6) 10.5
Increase (decrease) in accounts payable, affiliate..... 0.4 (0.5) (2.8)
Increase (decrease) in interest payable................ (0.1) (0.3) (0.1)
Increase (decrease) in other current liabilities....... (4.2) 2.9 7.2
Net change in other assets and liabilities............. (2.8) (0.5) (1.9)
------- ------- -------
Net Cash Provided by Operating Activities................... 195.8 183.0 182.3
------- ------- -------
Investing Activities
Additions to property, plant and equipment................ (1.4) (4.8) (2.4)
------- ------- -------
Net Cash Used in Investing Activities....................... (1.4) (4.8) (2.4)
------- ------- -------
Financing Activities
Principal payments on long-term borrowings................ (9.0) (8.1) (7.4)
Net change in short-term debt............................. 0.9 -- --
Cash distributions to partners............................ (186.7) (160.2) (175.2)
------- ------- -------
Net Cash Used in Financing Activities....................... (194.8) (168.3) (182.6)
------- ------- -------
Net Increase (Decrease) in Cash and Cash Equivalents........ (0.4) 9.9 (2.7)
Cash and Cash Equivalents at Beginning of Year.............. 39.5 29.6 32.3
------- ------- -------
Cash and Cash Equivalents at End of Year.................... $ 39.1 $ 39.5 $ 29.6
======= ======= =======
Cash Payments for Interest.................................. $ 15.3 $ 16.0 $ 16.9
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-66
<PAGE> 181
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------- -------- -------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Balance at January 1, 1996.................................. $ 62.4 $483.4 $ 545.8
Net income................................................ 110.8 35.3 146.1
Distributions............................................. (116.7) (58.5) (175.2)
------- ------ -------
Balance at December 31, 1996................................ 56.5 460.2 516.7
Net income................................................ 106.1 36.0 142.1
Distributions............................................. (102.3) (57.9) (160.2)
------- ------ -------
Balance at December 31, 1997................................ 60.3 438.3 498.6
Net income................................................ 137.3 46.0 183.3
Purchase (sale) of interests.............................. 9.9 (9.9) --
Distributions............................................. (128.5) (58.2) (186.7)
------- ------ -------
Balance at December 31, 1998................................ $ 79.0 $416.2 $ 495.2
======= ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-67
<PAGE> 182
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
The combined financial statements of the Cogen Technologies New Jersey
Operating Partnerships (the "Operating Partnerships") includes (i) Cogen
Technologies NJ Venture ("Bayonne Venture"); (ii) Camden Cogen L.P. ("Camden
Venture"); and (iii) Cogen Technologies Linden Venture, L.P. ("Linden Venture").
The Operating Partnerships are engaged in the operation of natural gas-fired
cogeneration facilities in the state of New Jersey. The financial statements of
the Operating Partnerships are presented on a combined basis since all such
entities were under common equity ownership and management by general partners
that were under the common control of the McNair Interests (as defined herein)
at December 31, 1998. All material transactions between the combined entities
have been eliminated.
Bayonne Venture, a New Jersey general partnership, owns and operates a
176-megawatt cogeneration facility in Bayonne, New Jersey. Cogen Technologies
NJ, Inc. ("NJ Inc."), a Delaware corporation which is owned 100% by McNair
Energy Services Corporation ("MESC"), a Texas corporation that at December 31,
1998 was owned approximately 82% by Robert C. McNair, members of his immediate
family and related trusts (the "McNair Interests"), is the managing partner of
Bayonne Venture and provides planning, operational and financial management
services. Through July 1998, NJ Inc. was allocated 86.5% of Bayonne Venture's
profits and losses and received 86.5% of all cash distributions. At such time NJ
Inc. acquired an additional 5.25% interest in Bayonne Venture and subsequent to
such acquisition NJ Inc. has been allocated 91.75% of Bayonne Venture's profits
and losses and has received 91.75% of all cash distributions. During 1998 NJ
Inc. was allocated 88.7% of Bayonne Venture's profits and losses and received
88.4% of all cash distributions.
Camden Venture, a Delaware limited partnership, owns and operates a
146-megawatt cogeneration facility in Camden, New Jersey. Cogen Technologies
Camden GP Limited Partnership ("Camden GP"), whose 82% general partner was owned
100% by the McNair Interests at December 31, 1998, is the managing partner of
Camden Venture and provides planning, operational and financial management
services. Under the terms of Camden Venture's partnership agreement, monthly
cash distributions are allocated 99% to the limited partner and 1% to Camden GP
up to a specified cumulative rate of return (approximately $0.3 million to $0.4
million per month through May 2007 and varying amounts thereafter) and the
remaining available cash for the month is allocated 99% to Camden GP and 1% to
the limited partner. Once the limited partner has received its specified rate of
return, cash distributions will be allocated 90% to Camden GP and 10% to the
limited partner. During 1998, 1997 and 1996, Camden GP received $15.0 million,
$8.6 million and $14.5 million, respectively, which represented 82%, 74% and
83%, respectively, of Camden Venture's cash distributions. Camden Venture's
income before depreciation is allocated as follows: (i) an amount equal to debt
principal payments, 100% to the limited partner; (ii) an amount equal to and
allocated on the same basis as cash distributed; and (iii) any remainder is
generally allocated 99% to Camden GP and 1% to the limited partner. Losses are
allocated 100% to Camden GP until its capital account equals zero and then 100%
to the limited partner until its capital account equals zero and then 100% to
Camden GP. Depreciation is allocated 100% to the limited partner until its
capital account equals zero and then to Camden GP. During 1998, 1997 and 1996,
Camden GP was allocated 73%, 91% and 94%, respectively, of Camden Venture's net
income.
Linden Venture, a Delaware limited partnership, owns and operates a
715-megawatt cogeneration facility in Linden, New Jersey. Cogen Technologies
Linden, Ltd. ("Linden Ltd."), whose 82% general partner is owned 100% by the
McNair Interests, is the managing partner of Linden Venture and provides
planning, operational and financial management services. Under the terms of
Linden Venture's partnership agreement, cash is distributed monthly, 1% to
Linden Ltd. and 99% to the limited partner up to a specified rate of return
(approximately $4.3 million per month through September 1998, approximately $3.0
million per month from October 1998 through September 2001 and between $4.3
million and $4.8 million per month thereafter) ("Tranche 1"), then 99% to Linden
Ltd. and 1% to the limited partner up to an amount equal to twice the
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NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
amount of Tranche 1 and the remainder 90% to Linden Ltd. and 10% to the limited
partner. During 1998, 1997 and 1996, Linden Ltd. received $74.0 million, $75.6
million and $77.7 million, respectively, which represented 60%, 59% and 60%,
respectively, of Linden Venture's cash distributions. Linden Venture's income
before depreciation is allocated to the partners on the basis of cash
distributed with any excess primarily allocated 99% to Linden Ltd. Losses are
allocated 100% to Linden Ltd. until its capital account equals zero and then to
the limited partners until their capital accounts equal zero with any remainder
allocated 100% to Linden Ltd. Depreciation up to $525.0 million is allocated 5%
to Linden Ltd. and 95% to the limited partners. All remaining depreciation is
allocated 99% to Linden Ltd. During 1998, 1997 and 1996, Linden Ltd. was
allocated 69%, 70% and 71%, respectively, of Linden Venture's net income.
Cash and Cash Equivalents/Restricted Cash
All highly liquid short-term investments with original maturities of three
months or less are considered to be cash equivalents. At December 31, 1998 and
1997, $26.7 million and $23.3 million, respectively, of the Operating
Partnerships' cash was held in accounts to secure certain current liabilities.
Inventories
Spare parts inventories at December 31, 1998 and 1997 were $12.9 million
and $16.5 million, respectively, and at such dates kerosene and butane
inventories were $3.8 million and $4.7 million, respectively. Inventories are
valued at average cost.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Effective January 1, 1998,
the Operating Partnerships made certain changes in the estimates used for the
purpose of computing depreciation. The estimated useful life of the facilities
was increased from a range of 20 to 25 years, which coincided with the primary
term of the long-term power purchase agreements under which the Operating
Partnerships sell electricity, to 30 years. In addition, the Operating
Partnerships increased the estimated salvage value of the facilities from zero
to 10%. Such changes were made to recognize the usefulness of the facilities
beyond the primary term of the power purchase agreements and the residual value
of the facilities upon the termination of operations. Such changes in the useful
life resulted in increases in 1998 operating and net income of $9.2 million and
changes to residual value resulted in increases in 1998 operating and net income
of $5.0 million.
During the first quarter of 1996, the Operating Partnerships adopted
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of."
SFAS No. 121 requires, among other things, that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The application of SFAS No.
121 has had no impact on the Operating Partnerships' financial position or
results of operations.
Estimated costs associated with planned outages for major overhauls that
benefit more than one period and do not extend the estimated useful life of the
related asset are accrued in advance on a straight-line basis over periods of 1
to 6 years prior to such overhauls. For the years ended December 31, 1998, 1997
and 1996, estimated costs of $8.7 million, $8.6 million and $4.9 million,
respectively were accrued and expensed. Routine and unplanned maintenance and
repairs are expensed as incurred. For the years ended December 31, 1998, 1997
and 1996, $3.1 million, $5.1 million and $6.7 million, respectively, was charged
to expense with respect to routine and unplanned maintenance and repairs.
Revenue Recognition
The Operating Partnerships operate under long-term power purchase
agreements with major utilities. Pursuant to the terms of such agreements, the
utilities pay a price per kilowatt hour for the entire term of the agreement
that generally includes: (i) a constant capacity rate per kilowatt hour; (ii) an
inflation component;
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NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
and (iii) a fuel cost component. Accordingly, the Operating Partnerships
recognize electricity revenues at the above rates in the periods the electricity
is delivered.
Steam revenues are recognized as they are earned pursuant to the underlying
sales agreements.
Deferred Revenues
Pursuant to the power purchase agreement between Consolidated Edison
Company of New York, Inc. ("ConEd") and Linden Venture, ConEd makes prepayments
to Linden Venture for butane inventory. At December 31, 1998 and 1997 such
prepayments totaled $1.6 million and $2.2 million, respectively, and are
included in Other Long-Term Liabilities in the balance sheet. The butane
inventory is expensed and the revenue is recognized when the butane is consumed.
Income Taxes
Income taxes with respect to the Operating Partnerships are not levied at
the partnership level but rather on the individual partners. Accordingly, no
income taxes have been recognized in the combined financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of certain estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities, if any, and the periods in
which certain items of revenue and expense are included. Actual results may
differ from such estimates.
(2) SUBSEQUENT EVENTS
On February 4, 1999, Linden Venture and Camden Venture terminated their
respective management services agreements with Linden Ltd. and Camden GP. To
terminate such agreements, Linden Ltd. and Camden GP made capital contributions
to Linden Venture and Camden Venture, respectively, and Linden Venture and
Camden Venture made one-time payments to Linden Ltd. and Camden GP of $46.4
million and $12.8 million, respectively. Also on February 4, Linden Venture and
Camden Venture terminated certain gas management agreements with an affiliate.
To terminate such agreements, Linden Ltd. and Camden GP made capital
contributions to Linden Venture and Camden Venture, respectively, and Linden
Venture and Camden Venture made one-time payments to the affiliate of $6.0
million and $1.6 million, respectively. These transactions will be reflected in
the financial statements of Linden Venture and Camden Venture in the first
quarter of 1999. Such transactions have no effect on the liquidity or financial
condition of such entities since the amounts necessary to make the payments were
provided by contributions from the partners.
On February 4, 1999, NJ Inc. was merged with and into MESC and MESC was
designated managing general partner of Bayonne Venture. Subsequently, East Coast
Power L.L.C. ("East Coast Power") acquired all of the outstanding common shares
of MESC. Also on February 4, East Coast Power acquired control of Camden GP and
Linden Ltd. East Coast Power is a Delaware limited liability company formed by
Joint Energy Development Investments II Limited Partnership ("JEDI II"), a
Delaware limited partnership in which Enron Corp. and the California Public
Employees' Retirement System each own a 50% interest.
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NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(3) FINANCING AND DEBT
Long-term debt at December 31, 1998 and 1997 consisted of the following (in
millions of dollars):
<TABLE>
<CAPTION>
1998 1997
------------------- -------------------
CURRENT LONG-TERM CURRENT LONG-TERM
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Bayonne Venture
Term Loan.................................... $ 3.9 $ 64.1 $3.5 $ 67.9
Equipment Loan............................... 0.4 -- 0.4 --
----- ------ ---- ------
4.3 64.1 3.9 67.9
----- ------ ---- ------
Camden Venture
Term loan-Tranche A.......................... 5.1 56.4 4.6 61.5
Term loan-Tranche B.......................... 1.0 22.1 0.9 23.2
----- ------ ---- ------
6.1 78.5 5.5 84.7
----- ------ ---- ------
$10.4 $142.6 $9.4 $152.6
===== ====== ==== ======
</TABLE>
Aggregate total maturities during the next five years are as follows:
1999 -- $10.4 million; 2000 -- $11.0 million; 2001 -- $12.1 million;
2002 -- $13.3 million; and 2003 -- $14.7 million.
Under the terms of a 1987 twenty-year term loan agreement with The
Prudential Insurance Company of America, Bayonne Venture had an outstanding
principal balance of $68.0 million at December 31, 1998. The principal bears
interest at 10.85% per annum, and principal and interest are payable quarterly
through October 2008. All of Bayonne Venture's property, rights and interests
are pledged as collateral under the terms of this agreement.
Under the terms of a 1986 loan agreement with Bayonne Industries, Bayonne
Venture had an outstanding balance of $0.4 million at December 31, 1998
(including accrued interest of $0.2 million). The principal balance and accrued
interest is payable upon the execution of a new steam sale agreement. The
principal balance bears interest at the prime rate of First National Bank of
Chicago plus 1%.
Camden Venture's Tranche A loan with a group of banks bears interest at
rates which increase over the term of the agreement from 1.0% to 1.625% above
the three-month LIBOR rate (1.25% for the period November 3, 1998 to November 1,
2001). Principal and interest are payable quarterly through May 1, 2007. Camden
Venture has entered into an interest rate swap agreement with General Electric
Capital Corporation ("GECC") which fixes the LIBOR rate at 5.945%. The swap
agreement has a notional amount equal at all times to the outstanding principal
balance of the Tranche A loan. The effect of the swap on interest expense for
the years ended December 31, 1998, 1997 and 1996 was to increase such expense by
$0.2 million, $0.2 million and $0.3 million, respectively. The Tranche B loan
with GECC bears interest at 11.4% with principal and interest payable quarterly
through May 1, 2009.
Under the terms of an agreement between Bayonne Venture and a bank, the
bank has agreed to lend to Bayonne Venture a principal amount not to exceed $5.0
million on a revolving credit basis with the proceeds to be used to satisfy
short-term working capital requirements. Outstanding principal amounts bear
interest at 0.5% per annum below the bank's prime rate and Bayonne Venture must
pay a commitment fee of 0.25% on the average unused principal amount. At
December 31, 1998, $0.9 million was outstanding under the terms of the
agreement. In February 1999, Bayonne Venture repaid all amounts outstanding
under the terms of the agreement and the agreement was terminated.
GECC provides standby letters of credit for Linden Venture to secure
various obligations with Con Ed and Bayway Refining Company. As of December 31,
1998 and 1997 letters of credit totaling $10.0 million and $57.2 million,
respectively, were outstanding. GECC receives a monthly fee equal to 0.75% of
each
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NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
outstanding letter of credit. Such fees totaled $0.3 million, $0.7 million and
$1.0 million in 1998, 1997 and 1996, respectively.
A bank provides a letter of credit for Bayonne Venture to secure certain
obligations to Public Service Electric & Gas Company ("PSE&G"). As of December
31, 1998 and 1997 letters of credit in the amounts of $4.6 million and $4.4
million, respectively, were outstanding. The letter of credit expires in May
1999.
GECC provides a letter of credit for Camden Venture to secure certain
obligations under the Tranche A loans. As of December 31, 1998 and 1997 letters
of credit in the amounts of $4.8 million were outstanding. The letter of credit
expires in May 2007.
The term loan agreements of Camden Venture and Bayonne Venture contain
certain restrictions that limit or prohibit, among other things, the ability to
incur indebtedness, make payments of certain indebtedness, pay distributions,
make investments, engage in transactions with affiliates, create liens, sell
assets and engage in acquisitions, mergers and consolidations.
(4) RELATED PARTY TRANSACTIONS
Camden GP provides planning, operational and financial management services
to Camden Venture for a monthly fee equal to 1.5% of Camden Venture's gross
revenues. Such fees charged to Camden Venture in 1998, 1997 and 1996 totaled
$1.1 million, $1.2 million and $1.2 million, respectively. Linden Ltd. provides
similar services to Linden Venture for a monthly management fee equal to 1.5% of
Linden Venture's gross revenues. Such fees charged to Linden Venture in 1998,
1997 and 1996 totaled $4.2 million, $4.6 million and $4.5 million, respectively.
RCM Management Services, L.P. ("RCM Management"), which is controlled by the
McNair Interests, provides similar services to Bayonne Venture for a monthly
management fee equal to 1.5% of Bayonne Venture's gross revenues. Such fees
charged to Bayonne Venture in 1998, 1997 and 1996 totaled $1.7 million, $1.4
million and $1.4 million, respectively.
Periodically Cogen Technologies Financial Services, L.P. ("Financial
Services") advances funds to the Operating Partnerships for working capital
purposes. At December 31, 1998 such amount totaled $0.4 million.
Camden Venture and Linden Venture pay a natural gas management fee of $0.02
per thousand cubic feet of gas purchased to an affiliate. During 1998, 1997 and
1996, Camden Venture was charged $0.2 million, $0.2 million and $0.2 million,
respectively, and Linden Venture was charged $0.7 million, $0.7 million and $0.7
million, respectively, for such services.
Bayonne Venture purchases natural gas and standby electricity from PSE&G
(an affiliate of one of Bayonne Venture's limited partners). In 1998, 1997 and
1996 such purchases totaled $38.2 million, $42.2 million and $39.9 million,
respectively. In addition, Bayonne Venture pays wheeling charges to PSE&G, and
in 1998, 1997 and 1996 such charges totaled $1.5 million, $1.4 million and $1.4
million, respectively.
CT Global Insurance, Ltd. ("CT Global"), which is controlled by the McNair
Interests, provides property and general liability insurance coverage to the
Operating Partnerships. During 1998, 1997 and 1996, the Operating Partnerships
paid CT Global $0.8 million, $0.7 million and $1.7 million, respectively, for
such insurance coverage.
See Note 2 with respect to the cancellation of certain agreements with
related parties.
(5) COMMITMENTS AND CONTINGENCIES
Bayonne Venture
Bayonne Venture has contracted to sell approximately 76% of its electrical
capacity to Jersey Central Power & Light Company ("JCP&L") pursuant to a 20-year
power purchase agreement which expires in 2008, with a ten-year renewal period
subject to the approval of both parties. The agreement establishes the
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COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
sales price of the electricity based on a fixed rate component plus factors for
inflation and JCP&L's cost of natural gas and retail sales prices. The remainder
of Bayonne Venture's output is sold to PSE&G pursuant to a 20-year power
purchase agreement which expires in 2008, with two five-year renewal periods
subject to the approval of both parties. The agreement provides for payments to
Bayonne Venture consisting of a capacity payment plus an energy payment which
includes a fixed component plus factors for inflation and fuel costs.
Bayonne Venture and PSE&G entered into a revised transmission service and
interconnection agreement (the "Transmission and Interconnection Agreement") on
April 27, 1987, under which PSE&G agreed to design, construct, own and operate a
138 kilovolt underground transmission cable circuit and associated terminal
facilities (jointly the "Interconnection") to connect the Bayonne Facility with
PSE&G's Public Service System at PSE&G's Bayonne Switching Station. The initial
term of the agreement is 20 years. Upon the expiration of the initial term, the
Transmission and Interconnection Agreement shall automatically be extended for a
succeeding term of 10 years, unless either party elects, upon three years'
notice, to terminate the Transmission and Interconnection Agreement at the close
of the initial term.
NJ Inc. entered into an agreement for the sale of steam and electricity (as
amended, the "IMTT Steam Sale Agreement") with IMTT-Bayonne on June 13, 1985,
which was amended on May 22, 1986. The IMTT Steam Sale Agreement, which was
subsequently assigned by NJ Inc. to Bayonne Venture, provides for the sale to
IMTT- Bayonne of 100% of its steam needs at its tank terminal facility and, at
Bayonne Venture's option, the sale of electricity. Bayonne Venture has no
current plans to offer IMTT-Bayonne electricity under the IMTT Steam Sale
Agreement. The IMTT Steam Sale Agreement has a base term of 10 years, which has
expired, with automatic renewal thereafter for each following year unless either
party elects to terminate the agreement at the end of a renewal year upon 60
days notice. IMTT-Bayonne agrees to purchase from Bayonne Venture all of the
thermal energy requirements of its tank terminal facility up to the deemed
maximum steam production of 57,000 lbs/hour according to a pricing formula based
on IMTT-Bayonne's avoided cost of steam.
Bayonne Venture and Exxon entered into an Agreement for the Sale of Steam
(the "Exxon Steam Sale Agreement") on February 27, 1987, which was amended on
August 21, 1988. Under the terms of the Exxon Steam Sale Agreement, Exxon agreed
to purchase from the Bayonne Facility an average of 50,000 lbs/hour of steam on
an annualized basis. The Exxon Steam Sale Agreement provides for an initial term
of five years (now expired). Thereafter, the Exxon Steam Sale Agreement
continues on a year to year basis unless either party exercises its rights to
terminate as provided in the Exxon Steam Sale Agreement. Beginning in the fifth
year of the agreement, either party is entitled to serve written notice on the
other of its interest to terminate the agreement. The Exxon Steam Sale Agreement
would then terminate one year after the notice or at an earlier date upon which
the parties mutually agree. Exxon used the steam at its adjacent terminal
facility for industrial purposes. Exxon sold its terminal facility in Bayonne to
IMTT-BX on April 1, 1993. As a result, IMTT-BX assumed Exxon's rights and
obligations under the Exxon Steam Sale Agreement and is currently performing
under the agreement.
Bayonne Venture currently purchases its natural gas requirements from PSE&G
pursuant to the provisions of an agreement with a base term of one year with
automatic renewals subject to termination upon five days notice. Bayonne Venture
will purchase up to a maximum of 3,000 decatherms per hour and up to a maximum
of 17,600,000 decatherms per year. Interruptible service shall be provided under
certain conditions that include PSE&G's continuing ability to provide service
and the Bayonne Facility's continuing status as a Qualifying Facility. The
Bayonne Facility's supply is subject to 100% interruption on eight hours notice.
Bayonne Venture is required to pay a monthly charge per MMBtu of gas equal to
the sum of (i) PSE&G's estimated average commodity cost of gas; (ii) PSE&G's
interstate pipeline commodity charges, (iii) 50% of PSE&G's interstate pipeline
demand charges; and (iv) PSE&G's local distribution charge.
Bayonne Venture, IMTT-Bayonne and Bayonne Industries, Inc. ("Bayonne
Industries") entered into a ground lease agreement dated as of May 22, 1986 (the
"Bayonne Site Lease") with respect to the Bayonne
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COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Facility site within the IMTT-Bayonne facility (the "Bayonne Site"). The Bayonne
Site Lease provides Bayonne Venture with both a leasehold estate in the Bayonne
Site and non-exclusive easements over other portions of Bayonne Industries'
property for various interconnections to the Bayonne Facility.
The initial term of the Bayonne Site Lease is 20 years from the date of the
Bayonne Site Lease. The Bayonne Site Lease will automatically renew after
expiration of the initial term, for two succeeding terms, the first for two
years and the second for 10 years, unless Bayonne Venture elects to terminate
the lease. Base rent for the Bayonne Facility is pre-paid for 20 years.
In June 1997, Bayonne Venture paid a termination fee of $1.2 million, which
is included in operating and maintenance expense in the combined statement of
income, to cancel an operating and maintenance agreement with another company
and signed a new twelve-year operating and maintenance agreement with General
Electric Company ("GE"). The agreement provides for all operating and routine
maintenance of the facility at direct costs plus a minimum fee ($16 thousand per
month beginning in August 1998) and the payment of bonuses if certain operating
targets are met. During 1998 and 1997, Bayonne Venture paid $0.2 million and
$0.1 million, respectively, in bonuses under the terms of the agreement with GE.
Camden Venture
Camden Venture's electrical capacity is sold to PSE&G pursuant to a 20-year
power purchase agreement which expires in March 2013, with two five-year renewal
periods. The agreement provides for payments to Camden Venture consisting of a
capacity payment plus an energy payment which includes a fixed component plus
factors for inflation and fuel costs. Camden Venture sells steam to Camden
Paperboard Company pursuant to a 20-year power purchase agreement which expires
in 2010, with two five-year renewal periods subject to the approval of both
parties.
All of Camden Venture's property, rights, titles and interests are pledged
as collateral to secure the term loan discussed in Note 3 and to secure certain
obligations under the power purchase agreement with PSE&G.
Camden Venture has a 20-year gas service agreement with PSE&G under the
terms of which PSE&G provides firm transportation for 30,000 MMBtu of natural
gas per day.
In June 1997 Camden Venture paid a termination fee of $1.4 million, which
is included in operating and maintenance expense in the combined statement of
income, to cancel an operating and maintenance agreement with another company
and signed a new twelve-year operating and maintenance agreement with GE. The
agreement provides for all operating and routine maintenance of the facility at
direct costs plus a minimum fee of approximately $16,000 per month beginning in
August 1998 and the payment of bonuses if certain operating targets are met.
During 1998 and 1997, Camden Venture paid $0.2 million and $0.1 million,
respectively, in bonuses under the terms of the agreement with GE.
Linden Venture
Linden Venture sells its electrical capacity to ConEd pursuant to a 25-year
power purchase agreement which expires in May 2017, with two five-year renewal
periods subject to the approval of both parties. The agreement establishes a
sales price of the electricity based primarily on capacity, fuel costs and
operating and maintenance costs.
Linden Venture has a 25-year gas service agreement with PSE&G and
Elizabethtown Gas Company under the terms of which such companies provide firm
transportation for all of Linden Venture's natural gas requirements as well as a
portion of its natural gas supply.
In June 1997 Linden Venture paid a termination fee of $1.9 million, which
is included in operating and maintenance expense in the combined statement of
income, to cancel an operating and maintenance agreement with another company
and signed a new twelve-year operating and maintenance agreement with
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COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
GE. The agreement provides for all operating and routine maintenance of the
facility at direct costs plus a minimum fee of approximately $31,000 per month
beginning in August 1998 and the payment of bonuses if certain operating targets
are met. During 1998 and 1997, Linden Venture paid $0.3 million and $0.1
million, respectively, in bonuses under the terms of the agreement with GE.
Linden Venture has an agreement to lease the property on which its
facilities are constructed until the year 2017, with an option to extend the
lease until the year 2048. Minimum lease payments for 1999 are approximately
$0.4 million and subsequent annual lease payments will be escalated by the
change in the Consumer Price Index. Lease expense during each of 1998, 1997 and
1996 was $0.4 million.
Other
In July 1998, in connection with an arbitration proceeding brought in 1997
by Linden Venture at the American Arbitration Association against Ebasco
Constructors, Inc. and ENSERCH ("Respondents"), Respondents filed a revised
counterclaim against Linden Venture in the amount of $16.0 million. Prior to the
filing of such revised counterclaim, the arbitration panel had reduced Linden
Venture's claim against the Respondents to $9.0 million and had reduced
Respondents' initial counterclaim to $3.9 million. The initial claims brought by
Linden Venture against Respondents were for alleged design deficiencies and
warranty claims with respect to the construction of the Linden Facility. The
Respondents' counterclaim alleged delay and disruption to the performance of the
construction contract. While the outcome of this proceeding cannot be predicted
with certainty, management does not expect this matter to have a material
adverse effect on the financial condition or results of operations of the
Operating Partnerships.
There are other claims and legal actions pending against the Operating
Partnerships. While the outcome of such proceedings cannot be predicted with
certainty, management does not expect these matters to have a material adverse
effect on the financial condition or results of operations of the Operating
Partnerships.
(6) MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK
Major Customers
The Operating Partnerships' operating revenues primarily relate to sales to
three customers pursuant to long-term contracts. The following table reflects
customers who accounted for more than 10% of the Operating Partnerships'
revenues in the years ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
ConEd....................................................... 57% 60% 61%
PSE&G....................................................... 20% 21% 21%
JCP&L....................................................... 20% 15% 15%
</TABLE>
Concentration of Credit Risk
Financial instruments which potentially subject the Operating Partnerships
to credit risk consist of cash and accounts receivable. Cash accounts are held
by major financial institutions. Accounts receivable are primarily concentrated
with the three major utilities which purchase the Operating Partnerships'
electricity under long-term agreements. The Operating Partnerships do not
require collateral or other security to support accounts receivable. Accounts
receivable are net of Bayonne Venture's allowance for doubtful accounts of $0.3
million at December 31, 1998 and 1997. The Operating Partnerships have no other
financial instruments which subject them to credit risk.
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COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(7) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 "Disclosures About Fair Value of Financial Instruments"
requires the disclosure, to the extent practicable, of the fair value of
financial instruments which are recognized or unrecognized in the balance sheet.
The fair value disclosed herein is not representative of the amount that could
be realized or settled, nor does the fair value amount consider tax
consequences, if any, of realization or settlement. The following table reflects
the fair value of long-term debt at December 31, 1998 and 1997 (in millions of
dollars):
<TABLE>
<CAPTION>
1998 1997
---------------- ----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Long-Term Debt
Camden Venture.................................... $84.6 $86.0 $90.2 $89.4
Bayonne Venture................................... 68.4 85.3 71.8 86.3
</TABLE>
The fair value of fixed-rate long-term debt has been determined based on
the differential between the interest rates of long-term treasury securities of
equivalent maturities and the effective interest rates on the debt at the date
of the borrowing plus the interest rates on similar treasury securities at the
balance sheet date. With respect to floating rate debt, the carrying amount
approximates fair value due to the market-sensitive interest rate on such debt.
The fair value of Camden Venture's interest rate swap is estimated to be
$1.9 million, the approximate amount that GECC would pay to terminate the
agreement at December 31, 1998, based on interest rates in effect at that time.
The carrying amount of current assets and liabilities are considered to be
reasonable estimates of their fair values due to their short-term nature.
(8) SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1 QTR 2 QTR 3 QTR 4 QTR YEAR
------ ------ ------ ------ -------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
1998
Revenues....................................... $123.0 $110.9 $116.4 $113.5 $ 463.8
Costs and expenses............................. (69.7) (66.8) (65.4) (65.9) (267.8)
Income from operations......................... 53.3 44.1 51.0 47.6 196.0
Other income (expense)......................... (2.9) (3.4) (3.5) (2.9) (12.7)
Net income..................................... 50.4 40.7 47.5 44.7 183.3
Gross profit(1)................................ 57.6 47.6 54.5 51.7 211.4
1997
Revenues....................................... $124.3 $109.9 $117.9 $123.6 $ 475.7
Costs and expenses............................. (85.2) (74.8) (74.1) (85.3) (319.4)
Income from operations......................... 39.1 35.1 43.8 38.3 156.3
Other income (expense)......................... (3.7) (3.7) (3.5) (3.3) (14.2)
Net income..................................... 35.4 31.4 40.3 35.0 142.1
Gross profit(1)................................ 43.4 39.2 47.6 43.0 173.2
</TABLE>
- ---------------
(1) Income from operations plus general and administrative expenses.
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================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 1
Risk Factors........................... 8
The Exchange Offer..................... 12
Forward-Looking Statements............. 21
Our Owners............................. 22
Use of Proceeds........................ 24
Capitalization......................... 25
Selected Financial Data................ 26
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 31
Our Business........................... 52
Regulation............................. 67
Our Management......................... 76
Description of the New Notes........... 78
United States Federal Income Tax
Considerations....................... 103
Plan of Distribution................... 108
Legal Matters.......................... 109
Independent Public Accountants......... 109
Available Information.................. 109
Glossary of Technical Terms............ 110
Index to Financial Statements.......... F-1
</TABLE>
================================================================================
================================================================================
PROSPECTUS
$833,939,040
[EAST COAST POWER L.L.C.]
OFFER TO EXCHANGE
6.737% Series B Senior Secured Notes due 2008
7.066% Series B Senior Secured Notes due 2012
7.536% Series B Senior Secured Notes due 2017
FOR ALL OUTSTANDING
6.737% Series A Senior Secured Notes due 2008
7.066% Series A Senior Secured Notes due 2012
7.536% Series A Senior Secured Notes due 2017
, 1999
================================================================================
<PAGE> 192
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 18-108 of the Delaware Limited Liability Company Act provides:
Subject to such standards and restrictions, if any, as are set forth in its
limited liability company agreement, a limited liability company may, and shall
have the power to, indemnify and hold harmless any member or manager or other
person from and against any and all claims and demands whatsoever.
Section 6.04 of the Company's Second Amended and Restated Limited Liability
Company Agreement provides:
Indemnification. (a) To the fullest extent permitted by Law, the Company
shall indemnify the officers of the Company and the Class A Members and their
respective officers, directors, employees, agents and controlling Persons, and
each Class B Member and its officers, directors, employees, agents and
controlling Persons (each, an "Indemnified Person"), on request by the
Indemnified Person, and hold each of them harmless from and against all losses,
costs, liabilities, damages and expenses (including reasonable costs of suit and
attorney's fees) any of them may incur as an officer, a Member of the Company or
as a controlling Person of such Member, in performing the obligations of an
officer or the Class A Member with respect to the Company, or in exercising
rights of a Class B Member, INCLUDING ANY MATTER ARISING OUT OF OR RESULTING
FROM THE INDEMNIFIED PERSON'S OWN SIMPLE, PARTIAL, OR CONCURRENT NEGLIGENCE,
except for any such loss, cost, liability, damage or expense primarily
attributable to the Indemnified Person's breach or reckless disregard of
fiduciary duties, gross negligence, willful misconduct, fraud or material breach
of this Agreement. If an Indemnified Person becomes involved in any action,
proceeding or investigation with respect to which indemnity may be available
under this Section 6.04, the Company may reimburse the Indemnified Person for
its reasonable legal and other expenses (including the cost of investigation and
preparation) as they are incurred, provided, that the Indemnified Person shall
promptly repay to the Company the amount of any such expense paid if it is
ultimately determined that the Indemnified Person was not entitled to
indemnification hereunder. Any amounts payable in respect of indemnification
hereunder shall be recoverable only from the assets of the Company.
(b) Promptly after receipt by an Indemnified Person of notice of any claim
or the commencement of any action with respect to which indemnity may be
available under this Section 6.04, the Indemnified Person shall, if a claim in
respect thereof is to be made against the Company under this Section 6.04,
notify the Company in writing of the claim or the commencement of the action;
provided, that the failure to notify the Company shall not relieve it from any
liability which it may have to an Indemnified Person other than under this
Section 6.03 except to the extent that the Company is prejudiced thereby. If any
such claim or action shall be brought against an Indemnified Person, and it
shall notify the Company thereof, the Company shall be entitled to participate
therein, and, to the extent that it wishes, to assume the defense thereof with
counsel reasonably satisfactory to the Indemnified Person. After notice from the
Company to the Indemnified Person of its election to assume the defense of such
claim or action, the Company shall not be liable to the Indemnified Person under
this Sections 6.04 for any legal or other expenses subsequently incurred by the
Indemnified Person in connection with the defense thereof; provided, that all of
the Indemnified Persons shall have the right to employ one counsel to represent
them if, in the opinion of counsel to the Indemnified Persons (which, in the
case of Investor, may be its internal counsel), there are available to them
defenses not available to the Company and in that event the fees and expenses of
such separate counsel shall be paid by the Company. In no event shall the
Company be required to indemnify an Indemnified Person with respect to amounts
paid in settlement of a claim unless such claim was settled with the consent of
the Company.
II-1
<PAGE> 193
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following instruments and documents are included as Exhibits to this
Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
3.1 -- Second Amended and Restated Limited Liability Company
Agreement of East Coast Power L.L.C., dated as of August
13, 1999 among East Coast Power Holding Company L.L.C.,
the California State Public Employees' Retirement System
and Mesquite Investors, L.L.C.
4.1 -- Indenture between East Coast Power L.L.C. and The Bank of
New York, as trustee, dated as of April 20, 1999.
4.3 -- Registration Rights Agreement dated April 14, 1999, among
East Coast Power L.L.C., NationsBanc Montgomery
Securities LLC, Credit Suisse First Boston Corporation,
Lehman Brothers Inc. and SG Cowen Securities Corporation.
4.4 -- CalPERS Security Agreement dated as of April 20, 1999,
made by California Public Employees' Retirement System,
as Grantor, to The Bank of New York, as trustee.
4.5 -- Common Security Agreement dated as of April 20, 1999,
made by the signatories thereto, as Grantors, to The Bank
of New York, as trustee, and to The Bank of New York, as
Account Collateral Securities Intermediary.
4.6(a) -- East Coast Power Holding Company Security Agreement dated
as of April 20, 1999, made by East Coast Power Holding
Company L.L.C., as Grantor, to The Bank of New York, as
trustee.
4.6(b) -- First Amendment to East Coast Power Holding Company
Security Agreement, dated as of August 13, 1999, made by
East Coast Power Holding Company L.L.C., as Grantor, to
The Bank of New York, as trustee.
4.7 -- ECT Merchant Investments Corp. Security Agreement dated
as of April 20, 1999, made by ECT Merchant Investments
Corp., as Grantor, to The Bank of New York, as trustee.
4.8 -- Mesquite Security Agreement, dated as of August 13, 1999,
made by Mesquite Investors, L.L.C., as Grantor, to The
Bank of New York, as trustee.
5.1 -- Opinion of Vinson & Elkins L.L.P. regarding Legality.
8.1 -- Opinion of Vinson & Elkins, L.L.P. regarding Tax Matters.
10.1 -- Transaction Agreement dated as of October 25, 1998, among
Enron Corp., Enron Capital & Trade Resources Corp., RCM
Holdings, Inc., Cogen Technologies Camden, Inc., Cogen
Technologies Capital Company, L.P., Cogen Technologies
Limited Partners Joint Venture, the Partners of Cogen
Technologies Limited Partners Joint Venture and the
Shareholders of McNair Energy Services Corporation.
10.2 -- Amendment No. 1 dated as of November 6, 1998, to
Transaction Agreement dated as of October 25, 1998.
10.3 -- Amendment No. 2 dated as of November 13, 1998, to
Transaction Agreement dated as of October 25, 1998.
10.4 -- Amendment No. 3 dated as of February 1, 1999, to
Transaction Agreement dated as of October 25, 1998.
*10.5 -- Corporate Services Agreement effective as of February 5,
1999, between East Coast Power L.L.C. and Enron Capital &
Trade Resources Corp.
10.6 -- Amended and Restated Credit Support Agreement dated as of
August 13, 1999, among East Coast Power L.L.C., Enron
Corp. and the Lenders.
</TABLE>
II-2
<PAGE> 194
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.7(a) -- Promissory Note, dated as of August 13, 1999, by East
Coast Power L.L.C. in favor of Enron Corp.
10.7(b) -- Promissory Note, dated as of August 13, 1999, by East
Coast Power L.L.C. in favor of El Paso Energy Corp.
10.8(a) -- Power Purchase Agreement dated as of April 14, 1989, by
and between Consolidated Edison Company of New York, Inc.
and Cogen Technologies, Inc. (n/k/a RCM Holdings, Inc.)
(incorporated by reference to Exhibit 10.1 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
(b) -- Assignment of Power Purchase Agreement dated as of July
21, 1989, by Cogen Technologies, Inc. to Cogen
Technologies Linden, Ltd. with the consent of
Consolidated Edison Company of New York, Inc. on August
3, 1989.
(c) -- Assignment of Power Purchase Agreement dated as of
December 22, 1989, by Cogen Technologies Linden, Ltd. to
Cogen Technologies Linden Venture, L.P. with the consent
of Consolidated Edison Company of New York, Inc. on
December 22, 1989.
10.9 -- First Amendment dated September 17, 1990 to Power
Purchase Agreement dated April 14, 1989 between
Consolidated Edison Company of New York, Inc. and Cogen
Technologies Linden Venture, L.P. (incorporated by
reference to Exhibit 10.2 to Registration Statement on
Form S-1 (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on May 26, 1998).
10.10 -- Second Amendment dated December 22, 1993 to Power
Purchase Agreement dated April 14, 1989 between
Consolidated Edison Company of New York, Inc. and Cogen
Technologies Linden Venture, L.P. (incorporated by
reference to Exhibit 10.3 to Registration Statement on
Form S-1 (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on May 26, 1998).
10.11 -- Gas Service Agreement by and among Cogen Technologies
Linden Venture, L.P., Public Service Electric and Gas
Company and Elizabethtown Gas Company dated July 13, 1990
(incorporated by reference to Exhibit 10.4 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
25, 1998).
10.12 -- Agreement between Cogen Technologies Linden Venture, L.P.
and Exxon Corporation for the Sale of Steam dated August
1, 1990, as amended and restated by agreement by and
between Cogen Technologies Linden Venture, L.P. and
Infineum USA L.P. dated as of January 1, 1999.
10.13 -- Agreement between Cogen Technologies Linden Venture, L.P.
and Bayway Refining Company for the Sale of Steam
effective as of April 8, 1993.
10.14 -- Backup Fuel Storage and Supply Agreement between Cogen
Technologies Linden Venture, L.P. and Exxon Corporation
dated October 4, 1991 (incorporated by reference to
Exhibit 10.6 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.15(a) -- Ground Lease Agreement dated as of August 1, 1990, by and
between Cogen Technologies Linden Venture, L.P. and Exxon
Corporation (incorporated by reference to Exhibit 10.7 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
(b) -- Amendment of Ground Lease Agreement by Letter Agreement
dated as of September 27, 1991, by Exxon Corporation,
agreed to by Cogen Technologies Linden Venture, L.P. and
consented to by General Electric Power Funding
Corporation.
</TABLE>
II-3
<PAGE> 195
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
(c) -- Amendment to Ground Lease Agreement dated as of July 31,
1992, by and between Cogen Technologies Linden Venture,
L.P. and Exxon Corporation.
(d) -- Assignment of Cogen Lease dated as of April 8, 1993, by
and between Exxon Corporation and Bayway Refining Company
(as confirmed by Confirmation of Assignment of Cogen
Lease dated as of April 8, 1993, by and between Exxon
Corporation and Bayway Refining Company).
(e) -- Second Amendment to Ground Lease Agreement dated as of
April 13, 1994, by and between Bayway Refining Company
and Cogen Technologies Linden Venture, L.P.
10.16 -- Operation and Maintenance Agreement by and between Cogen
Technologies Linden Venture, L.P. and General Electric
Company dated June 6, 1997 (incorporated by reference to
Exhibit 10.8 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.17 -- Amended and Restated Term Loan Agreement, dated as of
September 15, 1992, between Cogen Technologies Linden,
Ltd. and State Street Bank and Trust Company of
Connecticut, National Association, as trustee
(incorporated by reference to Exhibit 10.9 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.18 -- First Amendment, dated April 30, 1993, to the Amended and
Restated Term Loan Agreement, dated as of September 15,
1992, between Cogen Technologies Linden, Ltd. and State
Street Bank and Trust Company of Connecticut, National
Association, as trustee (incorporated by reference to
Exhibit 10.10 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.19 -- Second Amendment, dated as of February 4, 1999, to the
Amended and Restated Term Loan Agreement, dated as of
September 15, 1992, between Cogen Technologies Linden,
Ltd. and State Street Bank and Trust Company of
Connecticut, National Association, as Trustee.
10.20 -- Amended and Restated Agreement of Limited Partnership of
Cogen Technologies Linden Venture, L.P., dated as of
September 15, 1992 (incorporated by reference to Exhibit
10.11 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.21 -- First Amendment, dated April 30, 1993, to the Amended and
Restated Agreement of Limited Partnership of Cogen
Technologies Linden Venture, L.P., dated as of September
15, 1992 (incorporated by reference to Exhibit 10.12 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.22 -- Second Amendment, dated as of February 4, 1999, of the
Amended and Restated Agreement of Limited Partnership of
Cogen Technologies Linden Venture, L.P., dated as of
September 15, 1992.
10.23 -- Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd., effective as of June 28, 1989 (incorporated
by reference to Exhibit 10.13 to Registration Statement
on Form S-1 (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on May 26, 1998).
10.24 -- First Amendment, dated as of February 14, 1990, to the
Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd. (incorporated by reference to Exhibit 10.14
to Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
</TABLE>
II-4
<PAGE> 196
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.25 -- Second Amendment, dated as of July 31, 1990, to the
Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd. (incorporated by reference to Exhibit 10.15
to Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.26 -- Third Amendment, dated as of February 4, 1999, to the
Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd.
10.27 -- Redemption and Conversion of Partnership Interests and
Fourth Amendment to the Agreement of Limited Partnership
of Cogen Technologies Linden, Ltd., dated as of February
4, 1999.
10.28 -- Easement Agreement dated June 21, 1991 among Cogen
Technologies Linden Venture, L.P., Texas Eastern
Cryogenics, Inc., Texas Eastern Transmission Corporation
and Houston Center Corporation and Assignment and
Conveyance dated December 22, 1993 (incorporated by
reference to Exhibit 10.16 to Registration Statement on
Form S-1/A (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on August 14, 1998).
10.29 -- Easement Crossing Agreement dated as of December 17,
1990, by and between Coastal Pipeline Company and Cogen
Technologies Linden Venture, L.P., assigned to
Consolidated Edison Company of New York, Inc. pursuant to
the Assignment and Conveyance Agreement dated as of
December 22, 1993, by and between Cogen Technologies
Linden Venture, L.P. and Consolidated Edison Company of
New York, Inc.
10.30 -- Letter Agreement dated June 12, 1991 between Cogen
Technologies Linden Venture, L.P. and Colonial Pipeline
Company.
10.31 -- Indenture dated as of May 9, 1991 between the People of
the State of New York, acting by their Commissioner of
the Office of General Services and Cogen Technologies
Linden Venture, L.P.
10.32 -- Amended and Restated Security Deposit Agreement and
Escrow Agreement dated as of September 17, 1992 among
Cogen Technologies Linden Venture, L.P., Cogen
Technologies Linden, Ltd., State Street Bank and Trust
Company of Connecticut as Limited Partner and as Lender
and Midatlantic National Bank, as amended by Amendment
dated April 30, 1993 (incorporated by reference to
Exhibit 10.17 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.33 -- Assignment and Security agreement dated February 15, 1990
between Cogen Technologies Linden, Ltd. and General
Electric Power Funding Corporation and Assignment
Agreement, dated as of September 15, 1992, among General
Electric Power Funding Corporation, State Street Bank and
Trust Company or Connecticut, National Association, as
trustee, and Cogen Technologies Linden, Ltd.
(incorporated by reference to Exhibit 10.19 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.34 -- Collateral Agency Agreement dated as of February 15, 1990
between Cogen Technologies Linden, Ltd. and General
Electric Power Funding Corporation and Assignment
Agreement, dated as of September 15, 1992, among General
Electric Power Funding Corporation, State Street Bank and
Trust Company or Connecticut, National Association, as
trustee, and Cogen Technologies Linden, Ltd.
(incorporated by reference to Exhibit 10.20 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
</TABLE>
II-5
<PAGE> 197
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.35 -- Letter of Credit and Reimbursement Agreement dated as of
September 17, 1992 between Cogen Technologies Linden
Venture, L.P. and General Electric Capital Corporation
(incorporated by reference to Exhibit 10.27 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.36 -- Power Purchase and Interconnection Agreement, dated April
15, 1988, between Public Service Electric and Gas Company
and Camden Cogen, L.P. (incorporated by reference to
Exhibit 10.30 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.37 -- First Amendment, dated June 12, 1990, to the Power
Purchase and Interconnection Agreement, dated April 15,
1988, between Public Service Electric and Gas Company and
Camden Cogen, L.P. (incorporated by reference to Exhibit
10.31 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.38 -- Second Amendment, dated August 21, 1990, to the Power
Purchase and Interconnection Agreement, dated April 15,
1988, between Public Service Electric and Gas Company and
Camden Cogen, L.P. (incorporated by reference to Exhibit
10.32 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.39 -- Gas Service Agreement, dated May 15, 1991, between Camden
Cogen L.P. and Public Service Electric and Gas Company
(incorporated by reference to Exhibit 10.33 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
25, 1998).
10.40 -- First Amendment, dated November 1, 1991, to the Gas
Service Agreement dated May 15, 1991 between Camden Cogen
L.P. and Public Service Electric and Gas Company
(incorporated by reference to Exhibit 10.34 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.41(a) -- Energy Purchase Agreement, dated December 18, 1989,
between Camden Cogen, L.P. and Camden Paperboard
Corporation (incorporated by reference to Exhibit 10.35
to Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
(b) -- First Amendment dated as of March 5, 1992, to Energy
Purchase Agreement dated December 18, 1989.
10.42 -- Amendment and Restatement dated as of April 1, 1993 of
the Construction and Term Loan Agreement dated as of
February 4, 1992 among Camden Cogen, L.P., the lenders
from time to time parties to the Agreement, and General
Electric Capital Corporation (incorporated by reference
to Exhibit 10.36 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.43 -- Amendment No. 1 dated as of December 22, 1993, by and
among Camden Cogen L.P., the lenders from time to time
parties to the Agreement, The Bank of Tokyo Trust
Company, The Toronto-Dominion Bank Trust Company and
General Electric Capital Corporation, to the Amendment
and Restatement dated as of April 1, 1993 of the
Construction and Term Loan Agreement dated as of February
4, 1992 among Camden Cogen L.P. and General Electric
Capital Corporation (incorporated by reference to Exhibit
10.37 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
</TABLE>
II-6
<PAGE> 198
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
*10.44 -- Amendment No. 2 dated as of July 31, 1998, by and among
Camden Cogen L.P., The Bank of Tokyo-Mitsubishi Trust
Company (f/k/a The Bank of Tokyo Trust Company),
Commerzbank AG, New York Branch, Commerzbank AG, Atlanta
Agency, The Fuji Bank Limited, Credit Lyonnais, New York
Branch and General Electric Capital Corporation, to the
Amendment and Restatement dated as of April 1, 1993 of
the Construction and Term Loan Agreement dated as of
February 4, 1992 among Camden Cogen L.P. and General
Electric Capital Corporation.
10.45 -- Amendment No. 3 dated as of February 4, 1999, by and
among Camden Cogen L.P., the Tranche A Lenders and
Tranche B Lenders, The Bank of Tokyo-Mitsubishi Trust
Company (f/k/a The Bank of Tokyo Trust Company),
Commerzbank AG, New York Branch, and General Electric
Capital Corporation, to the Amendment and Restatement
dated as of April 1, 1993 of the Construction and Term
Loan Agreement dated as of February 4, 1992 among Camden
Cogen L.P. and General Electric Capital Corporation.
10.46 -- Agreement of Limited Partnership of Cogen Technologies
Camden GP Limited Partnership, dated as of July 26, 1991
(incorporated by reference to Exhibit 10.40 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.47 -- First Amendment, dated December 1, 1991, to the Agreement
of Limited Partnership of Cogen Technologies Camden GP
Limited Partnership, dated as of July 26, 1991
(incorporated by reference to Exhibit 10.41 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.48 -- Second Amendment, dated as of February 4, 1999, to the
Agreement of Limited Partnership of Cogen Technologies
Camden GP Limited Partnership, dated as of July 26, 1991.
10.49 -- Amended and Restated Agreement of Limited Partnership of
Camden Cogen L.P., dated as of February 9, 1993
(incorporated by reference to Exhibit 10.42 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.50 -- Amendment No. 1 dated as of April 1, 1993 to the Amended
and Restated Agreement of Limited Partnership of Camden
Cogen L.P., dated as of February 9, 1993 (incorporated by
reference to Exhibit 10.43 to Registration Statement on
Form S-1 (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on May 26, 1998).
10.51 -- Amendment No. 2 dated as of December 22, 1993 to the
Amended and Restated Agreement of Limited Partnership of
Camden Cogen L.P., dated as of February 9, 1993
(incorporated by reference to Exhibit 10.44 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
*10.52 -- Amendment No. 3 dated as of February 4, 1999, to the
Agreement of Limited Partnership of Camden Cogen L.P.,
dated as of February 9, 1993.
10.53 -- Operation and Maintenance Agreement by and between Camden
Cogen L.P. and General Electric Company dated June 6,
1997 (incorporated by reference to Exhibit 10.45 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
</TABLE>
II-7
<PAGE> 199
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.54(a) -- Mortgage dated February 4, 1992 between General Electric
Capital Corporation and Camden Cogen L.P., as amended by
First Amendment to Mortgage dated April 19, 1993 and
Assignment of Mortgage dated December 22, 1993
(incorporated by reference to Exhibit 10.46 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
*(b) -- Assignment of Mortgage by Toronto Dominion (Texas), Inc.
to Commerzbank AG, New York Branch, dated as of July 31,
1998.
10.55 -- Second Amended and Restated Security Deposit Agreement
dated December 22, 1993 among Bank of Tokyo Trust
Company, Toronto-Dominion Bank Trust Company, Camden
Cogen L.P., General Electric Capital Corporation and
Cogen Technologies Camden GP Limited Partnership and
Successor Security Deposit Agreement dated December 22,
1993 (incorporated by reference to Exhibit 10.47 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
*10.56 -- Amendment No. 1, dated as of July 31, 1998, by and among
Camden Cogen L.P., Toronto Dominion (Texas), Inc.(f/k/a
The Toronto-Dominion Bank Trust Company), The
Toronto-Dominion Bank, General Electric Capital
Corporation, Cogen Technologies Camden GP Limited
Partnership, The Bank of Tokyo-Mitsubishi Trust Company
(f/k/a The Bank of Tokyo Trust Company), Commerzbank AG,
New York Branch, Commerzbank AG, Atlanta Agency, The Fuji
Bank Limited and Credit Lyonnais, New York Branch, to the
Second Amended and Restated Security Deposit Agreement
dated as of December 22, 1993.
10.57 -- Second Successor Security Deposit Agent Agreement dated
as of July 31, 1998, by and among Commerzbank AG, New
York Branch, Commerzbank AG, Atlanta Agency, The Bank of
Tokyo- Mitsubishi Trust Company (f/k/a The Bank of Tokyo
Trust Company), Camden Cogen L.P., Cogen Technologies
Camden GP Limited Partnership, The Fuji Bank Limited,
Credit Lyonnais, New York Branch, Toronto Dominion
(Texas), Inc. (f/k/a The Toronto-Dominion Bank Trust
Company), The Toronto-Dominion Bank and General Electric
Capital Corporation (superseding Successor Security
Deposit Agent Agreement dated as of December 22, 1993, by
and among The Toronto-Dominion Bank Trust Company, Cogen
Technologies Camden GP Limited Partnership, General
Electric Capital Corporation, Camden Cogen L.P.,
Midatlantic National Bank, The Bank of Tokyo Trust
Company and The Toronto-Dominion Bank).
10.58 -- Second Successor Agency Agreement dated as of July 31,
1998, by and among Commerzbank AG, New York Branch,
Commerzbank AG, Atlanta Agency, The Bank of
Tokyo-Mitsubishi Trust Company, General Electric Capital
Corporation, Toronto Dominion (Texas), Inc., The Fuji
Bank Limited, Credit Lyonnais, New York Branch, The
Toronto-Dominion Bank and consented to by Camden Cogen
L.P.
10.59 -- Security Agreement dated as of February 4, 1992, between
General Electric Capital Corporation and Camden Cogen
L.P., as amended by Amendment No. 1 dated April 1, 1993
and Amendment No. 2 dated December 22, 1993 (incorporated
by reference to Exhibit 10.48 to Registration Statement
on Form S-1/A (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on August 14, 1998).
</TABLE>
II-8
<PAGE> 200
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.60 -- Pledge and Security Agreement dated as of February 4,
1992, between General Electric Capital Corporation and
Cogen Technologies Camden Inc., as amended by Amendment
No. 1 dated April 1, 1993 and Amendment No. 2 dated
December 22, 1993 (incorporated by reference to Exhibit
10.49 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.61 -- Mortgage from Camden Cogen L.P., Mortgagor, to General
Electric Power Funding Corporation, Mortgagee, dated as
of February 4, 1992 (incorporated by reference to Exhibit
10.50 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.62 -- Second Mortgage from Camden Cogen L.P., Mortgagor, to
Public Service Electric and Gas Company, Mortgagee, dated
as of February 4, 1992 (incorporated by reference to
Exhibit 10.51 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.63 -- Interest Rate and Currency Exchange Agreement dated April
1, 1993 between General Electric Capital Corporation and
Camden Cogen L.P., as amended by Amendment No. 1 dated as
of December 22, 1993 and Confirmation Letter dated April
1, 1993 and Amendment No. 1 dated December 22, 1993
(incorporated by reference to Exhibit 10.52 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.64 -- Agreement for the Sale of Steam and Electricity dated
June 13, 1985 between IMTT-Bayonne and Cogen Technologies
NJ, Inc., as amended by Amendment dated May 22, 1986 and
Consent to Assignment dated December 15, 1988
(incorporated by reference to Exhibit 10.54 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.65 -- Easement Agreement dated as of April 1, 1993, by and
between Camden Cogen L.P. and Public Service Electric and
Gas Company.
10.66 -- Easement Agreement dated as of December 18, 1992, by and
between MacAndrews & Forbes Company and Camden Cogen
L.P., as amended by Amendment to Easement Agreement dated
as of March 22, 1993, by and between Mafco Worldwide
Corporation (f/k/a Mac Andrews & Forbes Company) and
Camden Cogen L.P.
10.67 -- Easement Agreement dated as of February 22, 1993, by and
between Camden Paperboard Corporation and Camden Cogen
L.P.
10.68 -- Agreement for the Sale of Steam dated as of February 27,
1987 between Cogen Technologies NJ Venture and Exxon
Company U.S.A., as amended by Amendment dated August 21,
1988, assigned to General Electric Power Funding
Corporation pursuant to an Assignment Agreement dated as
of February 27, 1987, by and between Cogen Technologies
NJ Venture and General Electric Power Funding Corporation
(incorporated by reference to Exhibit 10.55 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.69 -- Letter Agreement for Gas Service between Public Service
Electric and Gas Company and Cogen Technologies NJ
Venture dated October 10, 1986 (incorporated by reference
to Exhibit 10.56 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
</TABLE>
II-9
<PAGE> 201
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.70 -- Water Supply Agreement between the City of Bayonne and
Cogen Technologies NJ Venture dated June 1, 1988
(incorporated by reference to Exhibit 10.57 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.71 -- Lease Agreement between Bayonne Industries, Inc.,
IMTT-Bayonne and Cogen Technologies NJ Venture dated
October 18, 1986 (incorporated by reference to Exhibit
10.58 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.72 -- Easement from Bayonne Industries, Inc. and IMTT-Bayonne
to Cogen Technologies NJ Venture dated October 20, 1986,
as amended by First Amendment dated December 15, 1988
(incorporated by reference to Exhibit 10.59 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.73 -- Power Purchase and Operations Coordination Agreement
between Public Service Electric and Gas Company and Cogen
Technologies NJ Venture dated June 5, 1989 (incorporated
by reference to Exhibit 10.60 to Registration Statement
on Form S-1 (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on May 26, 1998).
10.74 -- Agreement for Purchase of Electric Power between Cogen
Technologies NJ, Inc. and Jersey Central Power & Light
Company dated October 29, 1985 (incorporated by reference
to Exhibit 10.61 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.75 -- First Amendment dated September 5, 1986 to Agreement for
Purchase of Electric Power between Cogen Technologies NJ,
Inc. and Jersey Central Power & Light Company dated
October 29, 1985 (incorporated by reference to Exhibit
10.62 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
*10.76 -- Assignment Agreement dated as of September 8, 1986, by
and between Cogen Technologies NJ, Inc. and Cogen
Technologies NJ Venture.
10.77 -- Second Amendment dated August 1, 1988 to Agreement for
Purchase of Electric Power between Cogen Technologies NJ
Venture and Jersey Central Power & Light Company dated
October 28, 1985 (incorporated by reference to Exhibit
10.63 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.78 -- Operation and Maintenance Agreement by and between Cogen
Technologies NJ Venture and General Electric Company
dated June 6, 1997 (incorporated by reference to Exhibit
10.64 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.79 -- Revised Transmission Service and Interconnection
Agreement between Public Service Electric and Gas Company
and Cogen Technologies NJ Venture dated April 27, 1987
(incorporated by reference to Exhibit 10.65 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.80 -- Term Loan Agreement dated as of November 1, 1987 between
Cogen Technologies NJ Venture and The Prudential
Insurance Company of America (incorporated by reference
to Exhibit 10.66 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
</TABLE>
II-10
<PAGE> 202
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.81 -- First Amendment dated December 15, 1988 to the Term Loan
Agreement dated as of November 1, 1987 between Cogen
Technologies NJ Venture and The Prudential Insurance
Company of America (incorporated by reference to Exhibit
10.67 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.82 -- Second Amendment dated July 31, 1996 to the Term Loan
Agreement dated as of November 1, 1987 between Cogen
Technologies NJ Venture and The Prudential Insurance
Company of America (incorporated by reference to Exhibit
10.68 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.83 -- Amended and Restated Joint Venture Agreement of Cogen
Technologies NJ Venture dated August 25, 1986, by and
among Cogen Technologies NJ, Inc., Enron Cogeneration
Five Company, CEA Bayonne, Inc. (the name of which was
changed to PSEG Bayonne Inc. and was recently merged into
Cogen Technologies NJ, Inc.), PSVO Bayonne, Inc. and
Transco Cogeneration Company (incorporated by reference
to Exhibit 10.71 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.84 -- Option Agreement between Bayonne Industries, Inc. and
Cogen Technologies NJ, Inc. dated May 22, 1986
(incorporated by reference to Exhibit 10.72 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.85 -- Purchase and Sale Agreement among Bayonne Industries,
Inc., IMTT-Bayonne and Cogen Technologies NJ, Inc. dated
May 22, 1986 (incorporated by reference to Exhibit 10.73
to Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.86 -- Steam Producing Facilities Lease Agreement between Cogen
Technologies NJ, Inc. and IMTT-Bayonne dated May 22, 1986
and Consent to Assignment dated December 15, 1998
(incorporated by reference to Exhibit 10.74 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.87 -- Mortgage and Security Agreement between The Prudential
Insurance Company of America and Cogen Technologies NJ
Venture dated December 15, 1988 (incorporated by
reference to Exhibit 10.75 to Registration Statement on
Form S-1/A (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on August 14, 1998).
10.88 -- Security Agreement and Assignment between The Prudential
Insurance Company of America and Cogen Technologies NJ
Venture dated December 15, 1988, as amended by Amendment
dated April 27, 1995 and Waiver of Consent by The
Prudential Insurance Company of America dated July 28,
1995 (incorporated by reference to Exhibit 10.76 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.89 -- Disbursement and Security Agreement between The
Prudential Insurance Company of America, Midatlantic
National Bank and Cogen Technologies NJ Venture dated
December 15, 1988, as amended by Amendment No. 1 dated
February 9, 1989 (incorporated by reference to Exhibit
10.77 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.90 -- Kerosene Fuel Storage Agreement dated May 17, 1994
between IMTT-Bayonne and Cogen Technologies NJ Venture
(incorporated by reference to Exhibit 10.78 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
</TABLE>
II-11
<PAGE> 203
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
*10.91 -- License Agreement for Wire, Pipe and Cable Transverse
Crossings and Longitudinal Occupations dated as of August
21, 1992, by and between Consolidated Rail Corporation
and Camden Cogen L.P.
*10.92 -- Lease Agreement dated as of May 22, 1986, by and among
Bayonne Industries, Inc., IMTT-Bayonne and Cogen
Technologies NJ, Inc.
*10.93 -- Letter Agreement dated as of March 15, 1990 by and
between Texas Eastern Cryogenics, Inc. and Cogen
Technologies, Inc. (n/k/a RCM Holdings, Inc.).
*10.94 -- Agreement for Maintenance and Operations of IMTT-Bayonne
Chem South Boilers dated as of April 3, 1998, by and
between IMTT-Bayonne and Cogen Technologies NJ Venture,
as amended by Letter Agreement dated as of April 3, 1998,
by and between General Electric O&M Services and Cogen
Technologies NJ Venture, as assigned to The Prudential
Insurance Company of America pursuant to a Security
Agreement and Assignment dated as of December 15, 1988,
by and between Cogen Technologies NJ Venture and The
Prudential Insurance Company of America, and consented to
by IMTT-Bayonne pursuant to a Consent to Assignment dated
as of April 3, 1998, by IMTT-Bayonne in favor of Cogen
Technologies NJ Venture.
*10.95 -- Security Agreement dated as of May 22, 1986, by and
between Cogen Technologies NJ, Inc. and Bayonne
Industries, Inc.
10.96 -- Assignment and Security Agreement, dated February 4,
1992, made by Cogen Technologies Camden GP Limited
Partnership in favor of General Electric Capital
Corporation (incorporated by reference to Exhibit 10.79
to Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
25, 1998).
10.97 -- Purchase Agreement, dated as of August 2, 1999, between
East Coast Power Holding Company, L.L.C. and Mesquite
Investors, L.L.C.
10.98 -- Contribution Agreement, dated as of August 2, 1999, among
ECT Merchant Investments Corp., Enron Capital Management
II Limited Partnership, Enron Capital Management III
Limited Partnership, Joint Energy Development Investments
II Limited Partnership, East Coast Power Holding Company
L.L.C., the California Public Employees' Retirement
System and Mesquite Investors, L.L.C.
12.1 -- Computation of Ratio of Earnings to Fixed Charges.
21.1 -- Subsidiaries of the Company.
*23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit
5.1).
25.1 -- Statement of Eligibility of Trustee.
*27.1 -- Financial Data Schedule.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Letter to Clients.
99.3 -- Form of Letter to Registered Holders and DTC
Participants.
99.4 -- Form of Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* Filed herewith.
(b) Financial Statement Schedules
None.
II-12
<PAGE> 204
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statements (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registration pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in the documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-13
<PAGE> 205
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Houston, State of Texas, on November 19, 1999.
EAST COAST POWER L.L.C.
By /s/ JOSEPH M. BOLLINGER
-----------------------------------
Name: Joseph M. Bollinger
Title: President, Generating
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROSS D. AIN President, Business November 19, 1999
- ----------------------------------------------------- Development
Ross D. Ain (principal executive officer)
/s/ JOSEPH M. BOLLINGER President, Generating November 19, 1999
- ----------------------------------------------------- (principal
Joseph M. Bollinger executive, financial and
accounting officer)
/s/ J. CLIFFORD BAXTER Director of Enron Capital II November 19, 1999
- ----------------------------------------------------- Corp., the indirect general
J. Clifford Baxter partner of the Company's
majority Class A Member
/s/ JAMES V. DERRICK, JR. Director of Enron Capital II November 19, 1999
- ----------------------------------------------------- Corp., the indirect general
James V. Derrick, Jr. partner of the Company's
majority Class A Member
/s/ KEVIN P. HANNON Director of Enron Capital II November 19, 1999
- ----------------------------------------------------- Corp., the indirect general
Kevin P. Hannon partner of the Company's
majority Class A Member
</TABLE>
II-14
<PAGE> 206
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
3.1 -- Second Amended and Restated Limited Liability Company
Agreement of East Coast Power L.L.C., dated as of August
13, 1999 among East Coast Power Holding Company L.L.C.,
the California State Public Employees' Retirement System
and Mesquite Investors, L.L.C.
4.1 -- Indenture between East Coast Power L.L.C. and The Bank of
New York, as trustee, dated as of April 20, 1999.
4.3 -- Registration Rights Agreement dated April 14, 1999, among
East Coast Power L.L.C., NationsBanc Montgomery
Securities LLC, Credit Suisse First Boston Corporation,
Lehman Brothers Inc. and SG Cowen Securities Corporation.
4.4 -- CalPERS Security Agreement dated as of April 20, 1999,
made by California Public Employees' Retirement System,
as Grantor, to The Bank of New York, as trustee.
4.5 -- Common Security Agreement dated as of April 20, 1999,
made by the signatories thereto, as Grantors, to The Bank
of New York, as trustee, and to The Bank of New York, as
Account Collateral Securities Intermediary.
4.6(a) -- East Coast Power Holding Company Security Agreement dated
as of April 20, 1999, made by East Coast Power Holding
Company L.L.C., as Grantor, to The Bank of New York, as
trustee.
4.6(b) -- First Amendment to East Coast Power Holding Company
Security Agreement, dated as of August 13, 1999, made by
East Coast Power Holding Company L.L.C., as Grantor, to
The Bank of New York, as trustee.
4.7 -- ECT Merchant Investments Corp. Security Agreement dated
as of April 20, 1999, made by ECT Merchant Investments
Corp., as Grantor, to The Bank of New York, as trustee.
4.8 -- Mesquite Security Agreement, dated as of August 13, 1999,
made by Mesquite Investors, L.L.C., as Grantor, to The
Bank of New York, as trustee.
5.1 -- Opinion of Vinson & Elkins L.L.P. regarding Legality.
8.1 -- Opinion of Vinson & Elkins, L.L.P. regarding Tax Matters.
10.1 -- Transaction Agreement dated as of October 25, 1998, among
Enron Corp., Enron Capital & Trade Resources Corp., RCM
Holdings, Inc., Cogen Technologies Camden, Inc., Cogen
Technologies Capital Company, L.P., Cogen Technologies
Limited Partners Joint Venture, the Partners of Cogen
Technologies Limited Partners Joint Venture and the
Shareholders of McNair Energy Services Corporation.
10.2 -- Amendment No. 1 dated as of November 6, 1998, to
Transaction Agreement dated as of October 25, 1998.
10.3 -- Amendment No. 2 dated as of November 13, 1998, to
Transaction Agreement dated as of October 25, 1998.
10.4 -- Amendment No. 3 dated as of February 1, 1999, to
Transaction Agreement dated as of October 25, 1998.
*10.5 -- Corporate Services Agreement effective as of February 5,
1999, between East Coast Power L.L.C. and Enron Capital &
Trade Resources Corp.
10.6 -- Amended and Restated Credit Support Agreement dated as of
August 13, 1999, among East Coast Power L.L.C., Enron
Corp. and the Lenders.
10.7(a) -- Promissory Note, dated as of August 13, 1999, by East
Coast Power L.L.C. in favor of Enron Corp.
</TABLE>
<PAGE> 207
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.7(b) -- Promissory Note, dated as of August 13, 1999, by East
Coast Power L.L.C. in favor of El Paso Energy Corp.
10.8(a) -- Power Purchase Agreement dated as of April 14, 1989, by
and between Consolidated Edison Company of New York, Inc.
and Cogen Technologies, Inc. (n/k/a RCM Holdings, Inc.)
(incorporated by reference to Exhibit 10.1 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
(b) -- Assignment of Power Purchase Agreement dated as of July
21, 1989, by Cogen Technologies, Inc. to Cogen
Technologies Linden, Ltd. with the consent of
Consolidated Edison Company of New York, Inc. on August
3, 1989.
(c) -- Assignment of Power Purchase Agreement dated as of
December 22, 1989, by Cogen Technologies Linden, Ltd. to
Cogen Technologies Linden Venture, L.P. with the consent
of Consolidated Edison Company of New York, Inc. on
December 22, 1989.
10.9 -- First Amendment dated September 17, 1990 to Power
Purchase Agreement dated April 14, 1989 between
Consolidated Edison Company of New York, Inc. and Cogen
Technologies Linden Venture, L.P. (incorporated by
reference to Exhibit 10.2 to Registration Statement on
Form S-1 (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on May 26, 1998).
10.10 -- Second Amendment dated December 22, 1993 to Power
Purchase Agreement dated April 14, 1989 between
Consolidated Edison Company of New York, Inc. and Cogen
Technologies Linden Venture, L.P. (incorporated by
reference to Exhibit 10.3 to Registration Statement on
Form S-1 (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on May 26, 1998).
10.11 -- Gas Service Agreement by and among Cogen Technologies
Linden Venture, L.P., Public Service Electric and Gas
Company and Elizabethtown Gas Company dated July 13, 1990
(incorporated by reference to Exhibit 10.4 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
25, 1998).
10.12 -- Agreement between Cogen Technologies Linden Venture, L.P.
and Exxon Corporation for the Sale of Steam dated August
1, 1990, as amended and restated by agreement by and
between Cogen Technologies Linden Venture, L.P. and
Infineum USA L.P. dated as of January 1, 1999.
10.13 -- Agreement between Cogen Technologies Linden Venture, L.P.
and Bayway Refining Company for the Sale of Steam
effective as of April 8, 1993.
10.14 -- Backup Fuel Storage and Supply Agreement between Cogen
Technologies Linden Venture, L.P. and Exxon Corporation
dated October 4, 1991 (incorporated by reference to
Exhibit 10.6 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.15(a) -- Ground Lease Agreement dated as of August 1, 1990, by and
between Cogen Technologies Linden Venture, L.P. and Exxon
Corporation (incorporated by reference to Exhibit 10.7 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
(b) -- Amendment of Ground Lease Agreement by Letter Agreement
dated as of September 27, 1991, by Exxon Corporation,
agreed to by Cogen Technologies Linden Venture, L.P. and
consented to by General Electric Power Funding
Corporation.
(c) -- Amendment to Ground Lease Agreement dated as of July 31,
1992, by and between Cogen Technologies Linden Venture,
L.P. and Exxon Corporation.
</TABLE>
<PAGE> 208
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
(d) -- Assignment of Cogen Lease dated as of April 8, 1993, by
and between Exxon Corporation and Bayway Refining Company
(as confirmed by Confirmation of Assignment of Cogen
Lease dated as of April 8, 1993, by and between Exxon
Corporation and Bayway Refining Company).
(e) -- Second Amendment to Ground Lease Agreement dated as of
April 13, 1994, by and between Bayway Refining Company
and Cogen Technologies Linden Venture, L.P.
10.16 -- Operation and Maintenance Agreement by and between Cogen
Technologies Linden Venture, L.P. and General Electric
Company dated June 6, 1997 (incorporated by reference to
Exhibit 10.8 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.17 -- Amended and Restated Term Loan Agreement, dated as of
September 15, 1992, between Cogen Technologies Linden,
Ltd. and State Street Bank and Trust Company of
Connecticut, National Association, as trustee
(incorporated by reference to Exhibit 10.9 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.18 -- First Amendment, dated April 30, 1993, to the Amended and
Restated Term Loan Agreement, dated as of September 15,
1992, between Cogen Technologies Linden, Ltd. and State
Street Bank and Trust Company of Connecticut, National
Association, as trustee (incorporated by reference to
Exhibit 10.10 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.19 -- Second Amendment, dated as of February 4, 1999, to the
Amended and Restated Term Loan Agreement, dated as of
September 15, 1992, between Cogen Technologies Linden,
Ltd. and State Street Bank and Trust Company of
Connecticut, National Association, as Trustee.
10.20 -- Amended and Restated Agreement of Limited Partnership of
Cogen Technologies Linden Venture, L.P., dated as of
September 15, 1992 (incorporated by reference to Exhibit
10.11 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.21 -- First Amendment, dated April 30, 1993, to the Amended and
Restated Agreement of Limited Partnership of Cogen
Technologies Linden Venture, L.P., dated as of September
15, 1992 (incorporated by reference to Exhibit 10.12 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.22 -- Second Amendment, dated as of February 4, 1999, of the
Amended and Restated Agreement of Limited Partnership of
Cogen Technologies Linden Venture, L.P., dated as of
September 15, 1992.
10.23 -- Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd., effective as of June 28, 1989 (incorporated
by reference to Exhibit 10.13 to Registration Statement
on Form S-1 (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on May 26, 1998).
10.24 -- First Amendment, dated as of February 14, 1990, to the
Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd. (incorporated by reference to Exhibit 10.14
to Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.25 -- Second Amendment, dated as of July 31, 1990, to the
Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd. (incorporated by reference to Exhibit 10.15
to Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
</TABLE>
<PAGE> 209
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
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<C> <S>
10.26 -- Third Amendment, dated as of February 4, 1999, to the
Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd.
10.27 -- Redemption and Conversion of Partnership Interests and
Fourth Amendment to the Agreement of Limited Partnership
of Cogen Technologies Linden, Ltd., dated as of February
4, 1999.
10.28 -- Easement Agreement dated June 21, 1991 among Cogen
Technologies Linden Venture, L.P., Texas Eastern
Cryogenics, Inc., Texas Eastern Transmission Corporation
and Houston Center Corporation and Assignment and
Conveyance dated December 22, 1993 (incorporated by
reference to Exhibit 10.16 to Registration Statement on
Form S-1/A (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on August 14, 1998).
10.29 -- Easement Crossing Agreement dated as of December 17,
1990, by and between Coastal Pipeline Company and Cogen
Technologies Linden Venture, L.P., assigned to
Consolidated Edison Company of New York, Inc. pursuant to
the Assignment and Conveyance Agreement dated as of
December 22, 1993, by and between Cogen Technologies
Linden Venture, L.P. and Consolidated Edison Company of
New York, Inc.
10.30 -- Letter Agreement dated June 12, 1991 between Cogen
Technologies Linden Venture, L.P. and Colonial Pipeline
Company.
10.31 -- Indenture dated as of May 9, 1991 between the People of
the State of New York, acting by their Commissioner of
the Office of General Services and Cogen Technologies
Linden Venture, L.P.
10.32 -- Amended and Restated Security Deposit Agreement and
Escrow Agreement dated as of September 17, 1992 among
Cogen Technologies Linden Venture, L.P., Cogen
Technologies Linden, Ltd., State Street Bank and Trust
Company of Connecticut as Limited Partner and as Lender
and Midatlantic National Bank, as amended by Amendment
dated April 30, 1993 (incorporated by reference to
Exhibit 10.17 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.33 -- Assignment and Security agreement dated February 15, 1990
between Cogen Technologies Linden, Ltd. and General
Electric Power Funding Corporation and Assignment
Agreement, dated as of September 15, 1992, among General
Electric Power Funding Corporation, State Street Bank and
Trust Company or Connecticut, National Association, as
trustee, and Cogen Technologies Linden, Ltd.
(incorporated by reference to Exhibit 10.19 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.34 -- Collateral Agency Agreement dated as of February 15, 1990
between Cogen Technologies Linden, Ltd. and General
Electric Power Funding Corporation and Assignment
Agreement, dated as of September 15, 1992, among General
Electric Power Funding Corporation, State Street Bank and
Trust Company or Connecticut, National Association, as
trustee, and Cogen Technologies Linden, Ltd.
(incorporated by reference to Exhibit 10.20 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
</TABLE>
<PAGE> 210
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
*10.44 -- Amendment No. 2 dated as of July 31, 1998, by and among
Camden Cogen L.P., The Bank of Tokyo-Mitsubishi Trust
Company (f/k/a The Bank of Tokyo Trust Company),
Commerzbank AG, New York Branch, Commerzbank AG, Atlanta
Agency, The Fuji Bank Limited, Credit Lyonnais, New York
Branch and General Electric Capital Corporation, to the
Amendment and Restatement dated as of April 1, 1993 of
the Construction and Term Loan Agreement dated as of
February 4, 1992 among Camden Cogen L.P. and General
Electric Capital Corporation.
10.45 -- Amendment No. 3 dated as of February 4, 1999, by and
among Camden Cogen L.P., the Tranche A Lenders and
Tranche B Lenders, The Bank of Tokyo-Mitsubishi Trust
Company (f/k/a The Bank of Tokyo Trust Company),
Commerzbank AG, New York Branch, and General Electric
Capital Corporation, to the Amendment and Restatement
dated as of April 1, 1993 of the Construction and Term
Loan Agreement dated as of February 4, 1992 among Camden
Cogen L.P. and General Electric Capital Corporation.
10.46 -- Agreement of Limited Partnership of Cogen Technologies
Camden GP Limited Partnership, dated as of July 26, 1991
(incorporated by reference to Exhibit 10.40 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.47 -- First Amendment, dated December 1, 1991, to the Agreement
of Limited Partnership of Cogen Technologies Camden GP
Limited Partnership, dated as of July 26, 1991
(incorporated by reference to Exhibit 10.41 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.48 -- Second Amendment, dated as of February 4, 1999, to the
Agreement of Limited Partnership of Cogen Technologies
Camden GP Limited Partnership, dated as of July 26, 1991.
10.49 -- Amended and Restated Agreement of Limited Partnership of
Camden Cogen L.P., dated as of February 9, 1993
(incorporated by reference to Exhibit 10.42 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.50 -- Amendment No. 1 dated as of April 1, 1993 to the Amended
and Restated Agreement of Limited Partnership of Camden
Cogen L.P., dated as of February 9, 1993 (incorporated by
reference to Exhibit 10.43 to Registration Statement on
Form S-1 (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on May 26, 1998).
10.51 -- Amendment No. 2 dated as of December 22, 1993 to the
Amended and Restated Agreement of Limited Partnership of
Camden Cogen L.P., dated as of February 9, 1993
(incorporated by reference to Exhibit 10.44 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
*10.52 -- Amendment No. 3 dated as of February 4, 1999, to the
Agreement of Limited Partnership of Camden Cogen L.P.,
dated as of February 9, 1993.
10.53 -- Operation and Maintenance Agreement by and between Camden
Cogen L.P. and General Electric Company dated June 6,
1997 (incorporated by reference to Exhibit 10.45 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
</TABLE>
<PAGE> 211
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.54(a) -- Mortgage dated February 4, 1992 between General Electric
Capital Corporation and Camden Cogen L.P., as amended by
First Amendment to Mortgage dated April 19, 1993 and
Assignment of Mortgage dated December 22, 1993
(incorporated by reference to Exhibit 10.46 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
*(b) -- Assignment of Mortgage by Toronto Dominion (Texas), Inc.
to Commerzbank AG, New York Branch, dated as of July 31,
1998.
10.55 -- Second Amended and Restated Security Deposit Agreement
dated December 22, 1993 among Bank of Tokyo Trust
Company, Toronto-Dominion Bank Trust Company, Camden
Cogen L.P., General Electric Capital Corporation and
Cogen Technologies Camden GP Limited Partnership and
Successor Security Deposit Agreement dated December 22,
1993 (incorporated by reference to Exhibit 10.47 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
*10.56 -- Amendment No. 1, dated as of July 31, 1998, by and among
Camden Cogen L.P., Toronto Dominion (Texas), Inc.(f/k/a
The Toronto-Dominion Bank Trust Company), The
Toronto-Dominion Bank, General Electric Capital
Corporation, Cogen Technologies Camden GP Limited
Partnership, The Bank of Tokyo-Mitsubishi Trust Company
(f/k/a The Bank of Tokyo Trust Company), Commerzbank AG,
New York Branch, Commerzbank AG, Atlanta Agency, The Fuji
Bank Limited and Credit Lyonnais, New York Branch, to the
Second Amended and Restated Security Deposit Agreement
dated as of December 22, 1993.
10.57 -- Second Successor Security Deposit Agent Agreement dated
as of July 31, 1998, by and among Commerzbank AG, New
York Branch, Commerzbank AG, Atlanta Agency, The Bank of
Tokyo- Mitsubishi Trust Company (f/k/a The Bank of Tokyo
Trust Company), Camden Cogen L.P., Cogen Technologies
Camden GP Limited Partnership, The Fuji Bank Limited,
Credit Lyonnais, New York Branch, Toronto Dominion
(Texas), Inc. (f/k/a The Toronto-Dominion Bank Trust
Company), The Toronto-Dominion Bank and General Electric
Capital Corporation (superseding Successor Security
Deposit Agent Agreement dated as of December 22, 1993, by
and among The Toronto-Dominion Bank Trust Company, Cogen
Technologies Camden GP Limited Partnership, General
Electric Capital Corporation, Camden Cogen L.P.,
Midatlantic National Bank, The Bank of Tokyo Trust
Company and The Toronto-Dominion Bank).
10.58 -- Second Successor Agency Agreement dated as of July 31,
1998, by and among Commerzbank AG, New York Branch,
Commerzbank AG, Atlanta Agency, The Bank of
Tokyo-Mitsubishi Trust Company, General Electric Capital
Corporation, Toronto Dominion (Texas), Inc., The Fuji
Bank Limited, Credit Lyonnais, New York Branch, The
Toronto-Dominion Bank and consented to by Camden Cogen
L.P.
10.59 -- Security Agreement dated as of February 4, 1992, between
General Electric Capital Corporation and Camden Cogen
L.P., as amended by Amendment No. 1 dated April 1, 1993
and Amendment No. 2 dated December 22, 1993 (incorporated
by reference to Exhibit 10.48 to Registration Statement
on Form S-1/A (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on August 14, 1998).
</TABLE>
<PAGE> 212
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.60 -- Pledge and Security Agreement dated as of February 4,
1992, between General Electric Capital Corporation and
Cogen Technologies Camden Inc., as amended by Amendment
No. 1 dated April 1, 1993 and Amendment No. 2 dated
December 22, 1993 (incorporated by reference to Exhibit
10.49 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.61 -- Mortgage from Camden Cogen L.P., Mortgagor, to General
Electric Power Funding Corporation, Mortgagee, dated as
of February 4, 1992 (incorporated by reference to Exhibit
10.50 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.62 -- Second Mortgage from Camden Cogen L.P., Mortgagor, to
Public Service Electric and Gas Company, Mortgagee, dated
as of February 4, 1992 (incorporated by reference to
Exhibit 10.51 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.63 -- Interest Rate and Currency Exchange Agreement dated April
1, 1993 between General Electric Capital Corporation and
Camden Cogen L.P., as amended by Amendment No. 1 dated as
of December 22, 1993 and Confirmation Letter dated April
1, 1993 and Amendment No. 1 dated December 22, 1993
(incorporated by reference to Exhibit 10.52 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.64 -- Agreement for the Sale of Steam and Electricity dated
June 13, 1985 between IMTT-Bayonne and Cogen Technologies
NJ, Inc., as amended by Amendment dated May 22, 1986 and
Consent to Assignment dated December 15, 1988
(incorporated by reference to Exhibit 10.54 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.65 -- Easement Agreement dated as of April 1, 1993, by and
between Camden Cogen L.P. and Public Service Electric and
Gas Company.
10.66 -- Easement Agreement dated as of December 18, 1992, by and
between MacAndrews & Forbes Company and Camden Cogen
L.P., as amended by Amendment to Easement Agreement dated
as of March 22, 1993, by and between Mafco Worldwide
Corporation (f/k/a Mac Andrews & Forbes Company) and
Camden Cogen L.P.
10.67 -- Easement Agreement dated as of February 22, 1993, by and
between Camden Paperboard Corporation and Camden Cogen
L.P.
10.68 -- Agreement for the Sale of Steam dated as of February 27,
1987 between Cogen Technologies NJ Venture and Exxon
Company U.S.A., as amended by Amendment dated August 21,
1988, assigned to General Electric Power Funding
Corporation pursuant to an Assignment Agreement dated as
of February 27, 1987, by and between Cogen Technologies
NJ Venture and General Electric Power Funding Corporation
(incorporated by reference to Exhibit 10.55 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.69 -- Letter Agreement for Gas Service between Public Service
Electric and Gas Company and Cogen Technologies NJ
Venture dated October 10, 1986 (incorporated by reference
to Exhibit 10.56 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
</TABLE>
<PAGE> 213
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.70 -- Water Supply Agreement between the City of Bayonne and
Cogen Technologies NJ Venture dated June 1, 1988
(incorporated by reference to Exhibit 10.57 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.71 -- Lease Agreement between Bayonne Industries, Inc.,
IMTT-Bayonne and Cogen Technologies NJ Venture dated
October 18, 1986 (incorporated by reference to Exhibit
10.58 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.72 -- Easement from Bayonne Industries, Inc. and IMTT-Bayonne
to Cogen Technologies NJ Venture dated October 20, 1986,
as amended by First Amendment dated December 15, 1988
(incorporated by reference to Exhibit 10.59 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.73 -- Power Purchase and Operations Coordination Agreement
between Public Service Electric and Gas Company and Cogen
Technologies NJ Venture dated June 5, 1989 (incorporated
by reference to Exhibit 10.60 to Registration Statement
on Form S-1 (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on May 26, 1998).
10.74 -- Agreement for Purchase of Electric Power between Cogen
Technologies NJ, Inc. and Jersey Central Power & Light
Company dated October 29, 1985 (incorporated by reference
to Exhibit 10.61 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.75 -- First Amendment dated September 5, 1986 to Agreement for
Purchase of Electric Power between Cogen Technologies NJ,
Inc. and Jersey Central Power & Light Company dated
October 29, 1985 (incorporated by reference to Exhibit
10.62 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
*10.76 -- Assignment Agreement dated as of September 8, 1986, by
and between Cogen Technologies NJ, Inc. and Cogen
Technologies NJ Venture.
10.77 -- Second Amendment dated August 1, 1988 to Agreement for
Purchase of Electric Power between Cogen Technologies NJ
Venture and Jersey Central Power & Light Company dated
October 28, 1985 (incorporated by reference to Exhibit
10.63 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.78 -- Operation and Maintenance Agreement by and between Cogen
Technologies NJ Venture and General Electric Company
dated June 6, 1997 (incorporated by reference to Exhibit
10.64 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.79 -- Revised Transmission Service and Interconnection
Agreement between Public Service Electric and Gas Company
and Cogen Technologies NJ Venture dated April 27, 1987
(incorporated by reference to Exhibit 10.65 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.80 -- Term Loan Agreement dated as of November 1, 1987 between
Cogen Technologies NJ Venture and The Prudential
Insurance Company of America (incorporated by reference
to Exhibit 10.66 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
</TABLE>
<PAGE> 214
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.81 -- First Amendment dated December 15, 1988 to the Term Loan
Agreement dated as of November 1, 1987 between Cogen
Technologies NJ Venture and The Prudential Insurance
Company of America (incorporated by reference to Exhibit
10.67 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.82 -- Second Amendment dated July 31, 1996 to the Term Loan
Agreement dated as of November 1, 1987 between Cogen
Technologies NJ Venture and The Prudential Insurance
Company of America (incorporated by reference to Exhibit
10.68 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.83 -- Amended and Restated Joint Venture Agreement of Cogen
Technologies NJ Venture dated August 25, 1986, by and
among Cogen Technologies NJ, Inc., Enron Cogeneration
Five Company, CEA Bayonne, Inc. (the name of which was
changed to PSEG Bayonne Inc. and was recently merged into
Cogen Technologies NJ, Inc.), PSVO Bayonne, Inc. and
Transco Cogeneration Company (incorporated by reference
to Exhibit 10.71 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.84 -- Option Agreement between Bayonne Industries, Inc. and
Cogen Technologies NJ, Inc. dated May 22, 1986
(incorporated by reference to Exhibit 10.72 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.85 -- Purchase and Sale Agreement among Bayonne Industries,
Inc., IMTT-Bayonne and Cogen Technologies NJ, Inc. dated
May 22, 1986 (incorporated by reference to Exhibit 10.73
to Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.86 -- Steam Producing Facilities Lease Agreement between Cogen
Technologies NJ, Inc. and IMTT-Bayonne dated May 22, 1986
and Consent to Assignment dated December 15, 1998
(incorporated by reference to Exhibit 10.74 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.87 -- Mortgage and Security Agreement between The Prudential
Insurance Company of America and Cogen Technologies NJ
Venture dated December 15, 1988 (incorporated by
reference to Exhibit 10.75 to Registration Statement on
Form S-1/A (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on August 14, 1998).
10.88 -- Security Agreement and Assignment between The Prudential
Insurance Company of America and Cogen Technologies NJ
Venture dated December 15, 1988, as amended by Amendment
dated April 27, 1995 and Waiver of Consent by The
Prudential Insurance Company of America dated July 28,
1995 (incorporated by reference to Exhibit 10.76 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.89 -- Disbursement and Security Agreement between The
Prudential Insurance Company of America, Midatlantic
National Bank and Cogen Technologies NJ Venture dated
December 15, 1988, as amended by Amendment No. 1 dated
February 9, 1989 (incorporated by reference to Exhibit
10.77 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.90 -- Kerosene Fuel Storage Agreement dated May 17, 1994
between IMTT-Bayonne and Cogen Technologies NJ Venture
(incorporated by reference to Exhibit 10.78 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
</TABLE>
<PAGE> 215
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
*10.91 -- License Agreement for Wire, Pipe and Cable Transverse
Crossings and Longitudinal Occupations dated as of August
21, 1992, by and between Consolidated Rail Corporation
and Camden Cogen L.P.
*10.92 -- Lease Agreement dated as of May 22, 1986, by and among
Bayonne Industries, Inc., IMTT-Bayonne and Cogen
Technologies NJ, Inc.
*10.93 -- Letter Agreement dated as of March 15, 1990 by and
between Texas Eastern Cryogenics, Inc. and Cogen
Technologies, Inc. (n/k/a RCM Holdings, Inc.).
*10.94 -- Agreement for Maintenance and Operations of IMTT-Bayonne
Chem South Boilers dated as of April 3, 1998, by and
between IMTT-Bayonne and Cogen Technologies NJ Venture,
as amended by Letter Agreement dated as of April 3, 1998,
by and between General Electric O&M Services and Cogen
Technologies NJ Venture, as assigned to The Prudential
Insurance Company of America pursuant to a Security
Agreement and Assignment dated as of December 15, 1988,
by and between Cogen Technologies NJ Venture and The
Prudential Insurance Company of America, and consented to
by IMTT-Bayonne pursuant to a Consent to Assignment dated
as of April 3, 1998, by IMTT-Bayonne in favor of Cogen
Technologies NJ Venture.
*10.95 -- Security Agreement dated as of May 22, 1986, by and
between Cogen Technologies NJ, Inc. and Bayonne
Industries, Inc.
10.96 -- Assignment and Security Agreement, dated February 4,
1992, made by Cogen Technologies Camden GP Limited
Partnership in favor of General Electric Capital
Corporation (incorporated by reference to Exhibit 10.79
to Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
25, 1998).
10.97 -- Purchase Agreement, dated as of August 2, 1999, between
East Coast Power Holding Company, L.L.C. and Mesquite
Investors, L.L.C.
10.98 -- Contribution Agreement, dated as of August 2, 1999, among
ECT Merchant Investments Corp., Enron Capital Management
II Limited Partnership, Enron Capital Management III
Limited Partnership, Joint Energy Development Investments
II Limited Partnership, East Coast Power Holding Company
L.L.C., the California Public Employees' Retirement
System and Mesquite Investors, L.L.C.
12.1 -- Computation of Ratio of Earnings to Fixed Charges.
21.1 -- Subsidiaries of the Company.
*23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit
5.1).
25.1 -- Statement of Eligibility of Trustee.
*27.1 -- Financial Data Schedule.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Letter to Clients.
99.3 -- Form of Letter to Registered Holders and DTC
Participants.
99.4 -- Form of Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
EXHIBIT 10.5
CORPORATE SERVICES AGREEMENT
THIS CORPORATE SERVICES AGREEMENT ("Agreement"), by and between EAST
COAST POWER L.L.C., a Delaware limited liability company ("East Coast"), and
ENRON CAPITAL & TRADE RESOURCES CORP., a Delaware corporation ("ECT"), is
effective as of February 5, 1999.
WHEREAS, ECT and East Coast desire by their execution of this Agreement
to evidence their understanding about ECT's providing certain Services (as
defined below) to East Coast.
NOW, THEREFORE, in consideration of the foregoing premises, and the
mutual promises and covenants contained herein, the parties agree as follows:
SECTION 1. SERVICES PROVIDED BY ECT
In exchange for the compensation described herein, ECT agrees to provide or
cause its affiliates to provide East Coast and/or its subsidiaries certain
corporate, administrative and staffing services (the "Services") to the extent
such Services may be reasonably requested by East Coast from time to time. If
such services are requested by East Coast, the Services provided hereunder shall
be those described below.
A. GENERAL SERVICES
(i) Tax Returns for East Coast. ECT shall prepare tax returns,
information statements, and related filings and reports
(collectively, "Returns"), and shall provide tax accounting
and processing services for East Coast. East Coast shall be
responsible for the accuracy of information provided to ECT
and the content of all Returns for East Coast and its
subsidiaries. East Coast shall be solely responsible for
verifying the accuracy of the Returns and for making all
tax-related decisions.
(ii) Human Resources Advisory Services. ECT will provide human
resources services, including advice as to human resources
matters and staffing support (including recruiting
activities such as applicant screening, reference checking,
drug testing, and related activities). All personnel
decisions, such as hiring, termination, and compensation,
shall be made by East Coast management.
(iii) Legal Services. ECT will provide East Coast legal services.
(iv) Office and Related Shared Services. ECT will provide East
Coast with office space for East Coast personnel in office
space that ECT owns, controls, or leases, as well as
incidental services related to the provision of office
space, such as maintenance, security, building services,
operations, construction, churn/relocation, communications
and telephone systems, audio visual and locks, bus/parking
subsidies, utilities, office services, shipping/receiving,
copy center, mail center, concierge services, convenience
copiers, and other such services.
-1-
<PAGE> 2
(v) Cash Management/Treasury Services. ECT will provide
cash management and treasury services to East Coast,
including maintenance of accounts, check
disbursement, execution of wire transfers, and the
short-term investment of funds in accordance with
East Coast's investment policy. All disbursements of
funds shall be authorized and approved by East Coast.
(vi) Information Technology Services. ECT will provide
information technology services to East Coast.
(vii) Structuring and Technical Support Services. ECT will
provide technical support to review and/or develop
capital and maintenance projects, as well as
assistance in the structuring and development of such
projects.
(viii) Liability Insurance. ECT will assist East Coast in
obtaining and maintaining insurance coverage for East
Coast and its subsidiaries.
(ix) Corporate Records. ECT will maintain East Coast's
corporate records on behalf of East Coast. East Coast
shall be responsible for providing information to ECT
and for verifying the accuracy of any documents or
reports maintained by ECT or its designee.
B. EMPLOYEE-RELATED SERVICES
In addition to the human resources advisory services described in
Section 1(A)(ii) above, ECT will do the following:
1. ECT will provide East Coast with payrolling services
for all employees of East Coast, including check
processing and disbursement, direct deposit
processing, issuance of W-2 forms, and related
services.
2. ECT will cause eligible employees of East Coast to be
permitted to participate in the following employee
welfare or benefit plans: Retirement benefits (under
the Enron Corp. Savings Plan and the Enron Corp. Cash
Balance Plan), Long Term Disability Benefits
(pursuant to the terms of the Enron Corp. Long Term
Disability Plan), Medical Benefits (to eligible East
Coast employees and their qualified beneficiaries
under the Enron Corp. Medical Plan for Active
Employees), Dental Benefits (under the Enron Corp.
Dental Plan for Active Employees), Life Insurance
Benefits and Accidental Death and Dismemberment
Benefits (under the Enron Corp. Life and Accidental
Death and Dismemberment Plan), Section 125 Spending
Accounts (under the Enron Corp. Flexible Compensation
Plan), and other benefit or compensation plans that
East Coast may adopt. Nothing in this Agreement,
however, shall require ECT or Enron Corp. to maintain
the plans described in this paragraph; ECT and/or its
affiliates may cancel, modify, or revoke any of these
plans at any time.
-2-
<PAGE> 3
C. SERVICE PROVIDERS
At ECT's election, and with East Coast's prior consent, ECT may cause a
third party contractor to provide the Services requested by East Coast under
this Agreement; provided, however, that ECT shall remain responsible for
providing Services in accordance with this Agreement.
SECTION 2. PERFORMANCE OF SERVICES
2.1 NATURE/QUALITY OF SERVICES. ECT shall perform the Services in a
good and workmanlike manner, and the nature and quality of the Services provided
by ECT shall be similar in quality to comparable services provided by ECT to its
affiliates. East Coast will not provide ECT with any training or instructions
with respect to the Services. Similarly ECT is responsible for providing any
equipment, materials, or supplies that ECT determines is necessary to perform
the Services. ECT has all necessary licenses, permits, and registration required
to perform the Services.
2.2 PROVISION OF INFORMATION. Any data, information, equipment, or
general directions necessary for ECT to perform the Services shall be submitted
in a timely manner.
2.3 LAWS AND REGULATIONS.
(a) East Coast represents and agrees that it will use the
Services provided hereunder only in accordance with all applicable federal,
state, and local laws and regulations, and in accordance with the conditions,
rules, regulations, and specifications that may be set forth in any manuals,
materials, documents, or instructions in existence on the date of this Agreement
and furnished or communicated by the parties on an ongoing basis throughout the
term of this Agreement. ECT reserves the right to take all actions, including
termination of any particular Service, that it reasonably believes to be
necessary to assure compliance with applicable laws and regulations. ECT shall
provide written notice if any such actions will affect the Services.
(b) ECT certifies that it will comply with all applicable
laws, statutes, and regulations relating to providing the Services, including
but not limited to the Foreign Corrupt Practices Act, environmental laws,
employment laws, safety regulations, securities laws and regulations, antitrust
laws, intellectual property laws, and any other applicable laws, statutes, or
regulations.
SECTION 3. COMPENSATION
3.1 PRICE OF THE SERVICES. East Coast, in consideration for the
Services provided by ECT to East Coast or any of its subsidiaries, including,
but not limited to, the entities identified on Schedule "A" hereto, agrees to
pay ECT for the fair market value of the Services provided. The parties agree
that the fair market value of the Services is ECT's cost of providing the
Services plus five percent (5%) of such cost. If, at any time during the term of
this Agreement, a party reasonably and in good faith believes that this method
of determining fair market value no longer accurately reflects the fair market
value of the Services, then upon notice the parties shall negotiate to attempt
to resolve their differences and agree upon an alternate means of determining
fair market value. If no agreement is reached within thirty (30) days after such
notice, the parties will submit the matter to a nationally recognized
independent accounting firm (the "Accountants"), for a determination of an
alternate means to calculate fair market value. The determination by the
Accountants, as set forth in a notice delivered to both parties by the
Accountants, will be binding
-3-
<PAGE> 4
and conclusive on the parties, and the method or formula to determine fair
market value prescribed by the Accountants shall be applied from the date of
determination by the Accountants.
3.2 THIRD PARTY EXPENSES. East Coast agrees to reimburse ECT for the
actual cost, without any premium or margin payable to ECT, of any goods or
materials purchased for East Coast by ECT in the course and scope of performance
of the Services, and all expenses actually incurred by ECT for outsourced
Services or other goods, services or utilities provided by third party
providers.
SECTION 4. PAYMENT OF CHARGES AND REIMBURSEMENTS
4.1 PAYMENT FOR SERVICES. On or before the 15th day of each month
during the term of this Agreement, ECT shall submit an invoice for the Services
provided during the immediately-preceding calendar month. East Coast shall remit
payment of such invoice to ECT within 30 days of the date such invoice is
received.
4.2 DISPUTES OF INVOICES. In the event of a dispute as to the propriety
of invoiced amounts, East Coast shall pay all undisputed amounts on each
invoice, but shall be entitled to withhold payment of any amount in dispute and
shall notify ECT within ten (10) business days from receipt of the disputed
invoice of the disputed amount and the reasons for each such charge. ECT shall
provide East Coast with records relating to the disputed amount so as to enable
the parties to resolve the dispute. So long as the parties are attempting in
good faith to resolve the dispute, ECT shall not be entitled to terminate the
Services by reason of the disputed charge.
SECTION 5. RECORDS AND AUDITS
For at least two years after the termination of any Service or of this
Agreement, as well as for the time period required by applicable laws, each
party shall maintain records and other evidence sufficient to accurately and
properly reflect the performance of the Services and the amounts due in
accordance with this Agreement. Each party or its representatives shall have
access at all reasonable times to such records for the purpose of auditing and
verifying the accuracy of the invoices. Any audits performed by or on behalf of
a party shall be at that party's sole cost and expense. Each party shall have
the right to audit the other party's books for a period of two years after the
termination of this Agreement, except in those circumstances where contracts
with third parties limit the audit period to less than two years.
SECTION 6. TERMINATION; CANCELLATION OR REDUCTION OF SERVICES
6.1 TERMINATION OF AGREEMENT. Either party may terminate this Agreement
for any reason whatsoever by giving the other party at least 30 days' prior
written notice to that effect. Each party shall pay for all charges determined
pursuant to Section 4 and incurred up to the date of termination.
6.2 CANCELLATION OR REDUCTION OF SERVICES. At any time, either party
may terminate or reduce the level of any one or more of the specific Services by
giving at least 30 days' prior written notice. The termination of any one or
more of the specific Services shall have no impact on a party's obligation to
continue to provide any other Service(s).
-4-
<PAGE> 5
SECTION 7. INDEMNIFICATION
SUBJECT TO SECTION 8.12 BELOW, EAST COAST AGREES TO PROTECT, DEFEND,
INDEMNIFY AND HOLD HARMLESS ECT AND ITS EMPLOYEES, OFFICERS, DIRECTORS, AGENTS,
AND REPRESENTATIVES, AT EAST COAST'S COST AND EXPENSE, FROM AND AGAINST ANY AND
ALL CLAIMS, DEMANDS OR CAUSES OF ACTION (COLLECTIVELY, "CLAIMS") ARISING OUT OF
THE SERVICES PROVIDED UNDER THIS AGREEMENT, EXCEPT FOR (A) CLAIMS THAT ARISE AS
A RESULT OF ECT'S FAILURE TO COMPLY WITH THE TERMS AND CONDITIONS OF THIS
AGREEMENT AND (B) CLAIMS THAT ARISE AS A RESULT OF THE NEGLIGENCE OR WILLFUL
MISCONDUCT OF ECT. EAST COAST WILL REIMBURSE ECT FOR ANY AND ALL COSTS,
LIABILITIES, JUDGMENTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) REASONABLY
INCURRED BY ECT IN CONNECTION WITH THE INVESTIGATING, PREPARING FOR, AND
DEFENDING AGAINST ANY SUCH CLAIM, DEMAND, OR CAUSE OF ACTION, WHETHER OR NOT
RESULTING IN ANY LIABILITY, AND ANY AMOUNT PAID IN SETTLEMENT OF ANY LITIGATION,
COMMENCED, OR THREATENED, OR OF ANY SUCH CLAIM, DEMAND, OR CAUSE OF ACTION IF
SUCH SETTLEMENT IS EFFECTED WITH THE WRITTEN CONSENT OF EAST COAST.
SECTION 8. MISCELLANEOUS
8.1 INDEPENDENT CONTRACTOR.
(a) The Services performed by ECT shall be as an independent
contractor.
(b) ECT is not an agent, partner, or joint venturer of East
Coast, and nothing in this Agreement will cause ECT to be an agent, partner, or
joint venturer of East Coast. In its capacity as provider of the Services under
this Agreement, ECT shall not represent itself to third persons to be other than
an independent contractor of East Coast, nor shall ECT offer or agree to incur
or assume any obligations or commitments in the name of East Coast or for East
Coast without the prior written consent and authorization of East Coast.
(c) ECT shall be responsible for payment of all taxes arising
out of ECT's activities under this Agreement, including, by way of illustration
but not limitation, federal and state income tax, Social Security tax,
unemployment insurance taxes, and any other taxes or business license fees as
required, but not any sales tax assessed for the performance of the Services.
East Coast will neither pay unemployment taxes on, nor withhold employment taxes
from, any compensation it pays ECT. Rather, East Coast will report the amounts
it pays ECT on IRS Form 1099, to the extent required to do so under applicable
Internal Revenue Code provisions.
8.2 ASSIGNMENT. Except as provided herein with regard to outsourcing,
neither party shall assign, in whole or in part, any of the rights, obligations,
or benefits arising under this Agreement without the prior written consent of
the other party, except by operation of law, except that either party may assign
its rights, obligations and benefits hereunder to any entity controlled by,
under common control with, or which controls such party, provided the assigning
party shall continue to remain jointly and severally liable for all of its
assignee's obligations hereunder.
-5-
<PAGE> 6
8.3 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
8.4 FORCE MAJEURE. The parties shall not have any obligation to perform
any specific Service hereunder if its failure to do so is caused by or results
from any act of God, governmental action, natural disaster, strikes, failure of
essential equipment, or any other cause or circumstance beyond the control of
the parties. During the term of the force majeure, no party will have to pay for
the specific Service which is subject to the force majeure.
8.5 NOTICES. All notices under this Agreement shall be in writing and
shall be sent by hand delivery, telecopy, or certified mail, return receipt
requested as follows:
<TABLE>
<CAPTION>
If to ECT: If to East Coast:
<S> <C>
Enron Capital & Trade Resources Corp. East Coast Power L.L.C.
1400 Smith Street 711 Louisiana Street, Suite 3200
Houston, Texas 77002 Houston, Texas 77002
(713) 646-8863 (fax) (713) 345-9705 (fax)
Attn: Dave Duran Attn: Joseph Bollinger
</TABLE>
If notice is given by hand delivery or telecopy, such notice shall be deemed
received on the date of delivery or telecopy. Notice by certified mail shall be
deemed received on the tenth day after mailing. Either party may change its
address by giving the other party written notice of the new address in the
manner set forth above.
8.6 SEVERABILITY. In the event any portion of this Agreement shall be
found by a court of competent jurisdiction to be unenforceable, that portion of
this Agreement will be null and void, and the remainder of this Agreement will
be binding on the parties as if the unenforceable provisions had never been
contained herein.
8.7 WAIVER. No waiver by either party of any term or breach of this
Agreement shall be construed as a waiver of any other term or breach hereof or
of the same or a similar term or breach on any other occasion.
8.8 AMENDMENT. No modification or amendment of this Agreement shall be
binding upon either party unless in writing and signed by the parties hereto.
8.9 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties pertaining to the subject matter hereof, and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties hereto regarding the subject matter hereof.
8.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
8.11 NO THIRD PARTY BENEFICIARY. The provisions of this Agreement are
enforceable solely by the parties to this Agreement, and no other shall have the
right to enforce any provision of this Agreement or to compel any party to this
Agreement to comply with the terms of this Agreement.
-6-
<PAGE> 7
8.12 LIMITATION OF LIABILITY. NEITHER ECT OR EAST COAST SHALL BE LIABLE
TO THE OTHER FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE LOSSES OR
DAMAGES, INCLUDING LOST PROFITS AND GOODWILL. EACH PARTY'S MAXIMUM LIABILITY TO
THE OTHER WITH RESPECT TO ALL CLAIMS ARISING OUT OF THIS AGREEMENT SHALL BE
LIMITED IN THE AGGREGATE TO THE AMOUNT PAYABLE HEREUNDER. THE FOREGOING
LIMITATION OF LIABILITY WILL NOT APPLY WITH RESPECT TO (A) THE PAYMENT OF COSTS,
DAMAGES, EXPENSES, AND ATTORNEY'S FEES PAYABLE BY EITHER PARTY, OR (B) CLAIMS
ARISING OUT OF ECT'S OR EAST COAST'S ACTS OF GROSS NEGLIGENCE OR INTENTIONAL
MISCONDUCT.
8.13 ARBITRATION. Except for disputes to be resolved in accordance with
Section 4.2(b) hereof, any claim or dispute arising out of or relating to this
Agreement or the performance of the Services shall be submitted to binding
arbitration. Arbitration shall be conducted in Houston, Texas, under the
Commercial Arbitration Rules then in force of the American Arbitration
Association. The arbitration proceedings shall be conducted before a panel of
three arbitrators. Each party shall designate one arbitrator. If a party fails
to designate an arbitrator, the other party may have an arbitrator appointed by
applying to the senior active United States District Judge for the Southern
District of Texas. The two arbitrators shall select a third arbitrator. If the
two arbitrators chosen by the parties fail to agree upon the third arbitrator,
both or either of the Parties may apply to the senior active United States
District Judge for the Southern District of Texas for the appointment of a third
arbitrator. The parties agree that discovery shall be limited and shall be
handled expeditiously. Discovery proceedings available in litigation before the
courts shall not apply in an arbitration conducted pursuant to this Agreement.
However, each party shall produce relevant and non-privileged documents or
copies thereof requested by the other party within the time limits set and to
the extent required by order of the arbitrators. All disputes regarding
discovery shall be promptly resolved by the arbitrators. Strict rules of
evidence shall not apply in such arbitration. The parties may offer such
evidence as they desire and the arbitrators shall accept such evidence as the
arbitrators deem relevant to the issues and accord it such weight as the
arbitrators deem appropriate. In rendering the award, the arbitrators shall
determine the respective rights and obligations of the parties according to the
laws of the State of Texas. The arbitrators shall award to the prevailing party,
if any, as determined by the arbitrator all of the prevailing party's costs and
fees. "Costs and fees" shall include the reasonable pre-award expenses of the
arbitration, including arbitrator's fees, administrative fees, witness fees and
attorney's fees. The parties and arbitrators shall treat all aspects of the
arbitration proceedings, including without limitation, discovery, testimony and
other evidence, briefs and the award, as strictly confidential. The arbitrators'
decision may include any remedy contemplated by this Agreement. It is the intent
of the parties that, excepting extraordinary circumstances, any arbitration
shall be concluded within four months of the date arbitration is commenced. The
parties may, upon agreement, extend the time limits or the arbitrators may
determine that such an extension is necessary in the interest of justice.
8.14. CONFIDENTIALITY. ECT acknowledges that in connection with its
performance under this Agreement, it may gain access to confidential material
and information that is proprietary to East Coast ("Confidential Information").
Unless otherwise required by law or stock exchange requirement, ECT agrees, to
the extent that any such material and information is provided to ECT or to its
officers, directors, employees, accountants, attorneys, lenders and advisors
(collectively, "Representatives") solely in connection with the provision of
Services under this Agreement:
-7-
<PAGE> 8
(a) to hold Confidential Information in strict confidence and
not make use thereof other than for performance under or enforcement of this
Agreement;
(b) to reveal Confidential Information only to those
Representatives requiring such information in connection with the performance of
the Services; and
(c) not to reveal Confidential Information to any third person
who is not a Representative of ECT, except as necessary in connection with the
performance or evaluation of the Services, and then only to the extent that such
persons agree to be bound by the confidentiality obligations set forth herein.
This confidentiality provision shall survive for a period of five years
following the expiration or termination of this Agreement.
East Coast acknowledges and understands that Enron Capital II Corp. ("ECII"), a
wholly-owned subsidiary of ECT, is General Partner of Enron Capital Management
II Limited Partnership, which is General Partner of Joint Energy Development
Investments II Limited Partnership ("JEDI II"), which is the Class A Member (and
managing member) of East Coast Power Holding Company L.L.C., which is the sole
member of East Coast. In its capacity as an indirect owner of East Coast, and
being responsible for management of East Coast, ECT will be provided with
Confidential Information which may or may not be related to the performance of
the Services under this Agreement. Notwithstanding subparagraphs (a) and (b) of
this Section 8.14, ECT shall not be subject to the limitations set forth in
subparagraphs (a) and (b) of this Section 8.14 to the extent that ECT deems it
necessary to use Confidential Information to evaluate and oversee its investment
in East Coast and to ensure that ECII fulfills its fiduciary responsibility to
the equity owners of JEDI II with respect to management of East Coast.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Agreement, to be
effective as of February 5, 1999.
ENRON CAPITAL & TRADE RESOURCES CORP.
By: /s/ W. David Duran
------------------------------
Name: W. David Duran
----------------------------
Title: Vice President
---------------------------
Date: July 29, 1999
----------------------------
EAST COAST POWER L.L.C.
By: /s/ J.M. Bollinger
------------------------------
Name: J.M. Bollinger
----------------------------
Title: President/ECP Generating
---------------------------
Date: July 28, 1999
----------------------------
-9-
<PAGE> 1
EXHIBIT 10.44
AMENDMENT NO. 2
AMENDMENT NO. 2 dated as of July 31, 1998 (the "Amendment") to the
Amendment and Restatement, dated as of April 1, 1993, of the Construction and
Term Loan Agreement, dated as of February 4, 1992, as amended by Amendment No.
1, dated as of December 22, 1993 (as may be further amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among (i) Camden
Cogen L.P., a Delaware limited partnership (the "Borrower"), of which Cogen
Technologies Camden GP Limited Partnership, a Delaware limited partnership, is
the sole general partner, (ii) the Tranche A Lenders and Tranche B Lenders from
time to time parties thereto (collectively, the "Lenders"), (iii) The Bank of
Tokyo-Mitsubishi Trust Company (formerly known as The Bank of Tokyo Trust
Company), a banking corporation organized and existing under the laws of the
State of New York, as Senior Tranche Agent, (iv) Commerzbank AG, New York
Branch, a New York State licensed branch of a bank organized under the laws of
Germany, as Agent and (v) General Electric Capital Corporation, a New York
corporation ("GE Capital"), as Junior Tranche Agent and as issuer of the Letters
of Credit.
W I T N E S S E T H:
WHEREAS, the parties hereto desire to amend certain provisions of the
Credit Agreement as provided herein;
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
Credit Agreement shall have such defined meanings when used herein.
2. Amendment of Subsection 1.1. Subsection 1.1 is hereby amended by:
(a) amending and restating the definition of "Tranche A Co-Agent" as
follows:
"Tranche A Co-Agent": Commerzbank AG, New York branch or any
successor Tranche A Co-Agent under the Credit Agreement.
<PAGE> 2
(b) amending and restating the definition of "Security Agent" as
follows:
"Security Agent": Commerzbank AG, New York Branch or any
successor security agent under the Security Deposit Agreement.
3. Limited Effect. Except as expressly amended hereby, all of the
provisions of the Credit Agreement shall continue to be, and shall remain, in
full force and effect in accordance with their terms.
4. Counterparts. This Amendment may be executed in any number of
counterparts, all of which shall constitute one and the same instrument.
5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND BE CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed and delivered by their proper and duly authorized officers as of the
date first above written.
CAMDEN COGEN L.P.
Cogen Technologies Camden
GP Limited Partnership, a
Delaware limited partnership,
its general partner
Cogen Technologies
Camden, Inc., a Texas
corporation its general
partners
By: /s/ RICHARD A. LYDECKER, JR.
--------------------------------
Name: Richard A. Lydecker, Jr.
Title: Senior Vice President & Chief
Financial Officer
2
<PAGE> 3
THE BANK OF TOKYO-MITSUBISHI TRUST
COMPANY, as Senior Tranche Agent
and a Tranche A Lender
By: /s/ ROBERT F. MOYLE
---------------------------------
Name: Robert F. Moyle
Title: Vice President
COMMERZBANK AG, NEW YORK BRANCH, as
Agent
By: /s/ ANDREW JACOBYANSKY
---------------------------------
Name: Andrew Jacobyansky
Title: Vice President
By: /s/ ANDREW KJOLLER
---------------------------------
Name: Andrew Kjoller
Title: Assistant Treasurer
COMMERZBANK AG, ATLANTA AGENCY, as a
Tranche A Lender
By: /s/ ANDREW JACOBYANSKY
---------------------------------
Name: Andrew Jacobyansky
Title: Vice President
By: /s/ ANDREW KJOLLER
---------------------------------
Name: Andrew Kjoller
Title: Assistant Treasurer
THE FUJI BANK LIMITED, as a
Tranche A Lender
By: /s/ THOMAS W. BOYLAN
---------------------------------
Name: Thomas W. Boylan
Title: Vice President
CREDIT LYONNAIS, NEW YORK BRANCH, as
a Tranche A Lender
By: /s/ JAMES F. GUIDEIN
---------------------------------
Name: James F. Guidein
Title: Vice President
3
<PAGE> 4
GENERAL ELECTRIC CAPITAL
CORPORATION, as Junior Tranche
Agent, Tranche B Lender and as
issuer of the Letters
of Credit
By: /s/ MICHAEL J. TZOUGRAKIS
-----------------------------
Name: Michael J. Tzougrakis
Title: Manager of Operations
4
<PAGE> 1
EXHIBIT 10.52
EXHIBIT A
AMENDMENT OF THE
AGREEMENT OF LIMITED PARTNERSHIP
OF
CAMDEN COGEN L.P.
THIS AMENDMENT OF THE AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF CAMDEN COGEN L.P. (this "Amendment Agreement") is made and
entered into as of the 4th day of February, 1999 by and between Cogen
Technologies Camden GP Limited Partnership, a Delaware limited partnership (the
"General Partner") and General Electric Capital Corporation, a New York
corporation (the "Limited Partner"). Unless otherwise noted, all defined terms
used herein shall have the same meaning given to such terms in the Agreement of
Limited Partnership of Camden Cogen L.P., dated as of February 9, 1993 (as
heretofore amended, the "Agreement").
W I T N E S S E T H:
WHEREAS, the General Partner and the Limited Partner are parties to
the Agreement;
WHEREAS, pursuant to the Agreement, the limited partnership known as
Camden Cogen L.P. (the "Partnership") was formed pursuant to the Partnership
Act; and
WHEREAS, the General Partner and the Limited Partner desire to amend
the Agreement in order to reflect the termination of the Partnership's
obligation to pay certain management fees and to reflect certain other
agreements between and among the Partners.
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings contained herein, the parties hereto hereby agree as follows:
1. ARTICLE I of the Agreement shall be amended as follows:
(a) The definition of "Management Fee" shall be
deleted.
(b) The following new defined terms shall be added:
"Amendment" shall mean the Amendment of the
Agreement of Limited Partnership of Camden Cogen
L.P. dated as of February 4, 1999.
<PAGE> 2
"Buy-Out Agreements" shall mean that certain
Termination Agreement dated as of the date of this
Amendment, executed by and between the Partnership
and the General Partner and that certain Termination
Agreement dated as of the date of this Amendment,
executed by and between Cogen Technologies Capital
Company, L.P. and H. Fred Levine, copies of which
are attached to the Amendment as Exhibits A and B,
respectively.
(c) The definition of "Capital Account" shall be
amended to insert "5.9," after the word "subsections" in the
12th line of clause (ii).
(d) The definition of "Distributable Cash" shall be
amended to (i) delete ", and the Management Fee" from the
23rd line of the definition and (ii) add "but excluding costs
incurred pursuant to the Buy-Out Agreements" in the 26th line
of the definition after the word "Facility" and before the
close of the parenthesis.
2. The following Section 3.4 shall be added to ARTICLE III of the
Agreement:
3.4 Contribution to Fund Buy-Out Agreements. The General
Partner shall make Capital Contributions in an amount equal
to all funds required to be paid by the Partnership pursuant
to the Buy-Out Agreements at or before the time that such
funds become due and payable.
3. Section 5.9 of the Agreement shall be amended as follows:
(a) The title of said section shall be expanded by
adding the words "and Deductions Attributable to Buy-Out" to
the end of such title.
(b) The existing text of Section 5.9 shall become
subparagraph (a) of Section 5.9 and the following provision
shall be added as subparagraph (b) of Section 5.9:
(b) All deductions attributable to the payments made
under the Buy-Out Agreements shall be allocated to
the General Partner.
-2-
<PAGE> 3
4. Section 6.4 of the Agreement shall be amended by inserting the
words "other than the General Partner's Capital Contributions under Section
3.4" after the word "Partnership" and before the word "shall" in the second
line of such section.
5. Section 7.4 of the Agreement shall be deleted in its entirety.
6. The first sentence of Section 10.1(a) of the Agreement shall be
amended to delete clause (i) beginning on line 15 in its entirety, to delete
subclause (x) of clause (ii), and to delete the word "thereafter" at the end
thereof.
7. Section 14.1(i) of the Agreement shall be restated in its entirety
as follows:
(i) An entity with a net worth of at least
$100,000,000 shall fail to own and control, directly
or indirectly, a beneficial interest of at least
8.2% in the General Partner; or
8. Section 7.2(c) of the Agreement shall be amended by deleting "1600"
in the second line and inserting it with "1400" in replacement therefor.
9. All references to "Cogen Camden" in the Agreement shall be deemed
to be references to the General Partner.
10. The proviso in the first sentence of Section 7.10 of the Agreement
shall be restated in its entirety as follows:
; provided, that each Partner shall conduct its business in a
manner so that the Limited Partner may avoid Public Utility
Status as described in subsection 10.5 hereof.
11. Section 12.2 of the Agreement shall be amended to change the
street address of the General Partner or the Partnership to:
1400 Smith Street, EB2407
Houston, Texas 77002
Attention: Donna Lowry, Compliance Department
Telecopy: (713) 646-4039
12. The General Partner is hereby authorized to execute and deliver
the Buy-Out Agreements on behalf of the Partnership and to make all payments
contemplated thereunder in accordance with the terms thereof. The Partners
agree that the Capital Contributions referred to in Section 3.4 of the
Agreement shall be made outside of any security deposit arrangements that
-3-
<PAGE> 4
otherwise would apply pursuant to the Agreement or any other agreement to which
the Partnership is a party.
13. This Amendment Agreement shall be binding upon, and shall enure to
the benefit of, the parties hereto and their respective successors and assigns.
14. This Amendment Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures were upon the same instrument.
15. Except as specifically hereby amended, the Agreement shall remain
in full force and effect.
16. THIS AMENDMENT AGREEMENT SHALL BE GOVERNED BY, AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
DELAWARE.
IN WITNESS WHEREOF, this Amendment Agreement has been executed as of
the date and year first above written.
COGEN TECHNOLOGIES CAMDEN GP
LIMITED PARTNERSHIP
By: Cogen Technologies Camden, Inc.,
Its: General Partner
By:
---------------------------------
Name: Richard A. Lydecker, Jr.
Title: Senior Vice President and
Chief Financial Officer
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
-4-
<PAGE> 5
EXHIBIT B
MANAGEMENT FEE TERMINATION AGREEMENT
(CAMDEN COGEN)
This Management Fee Termination Agreement dated as of February 4, 1999
(the "Agreement"), by and CAMDEN COGEN, L.P., a Delaware limited partnership
(the "Partnership") and COGEN TECHNOLOGIES CAMDEN GP LIMITED PARTNERSHIP, a
Delaware limited partnership ("CT Camden").
W I T N E S S E T H:
WHEREAS, CT Camden, Robert C. McNair, and General Electric Capital
Corporation ("GECC") entered into that certain Amended and Restated Agreement
of Limited Partnership of Camden Cogen, L.P. dated as of February 9, 1993 (as
amended, the "Partnership Agreement");
WHEREAS, pursuant to the Partnership Agreement, the Partnership, which
was created under an earlier agreement, was continued as a Delaware limited
partnership, with CT Camden as the general partner thereof and GECC as the
limited partner thereof;
WHEREAS, Robert C. McNair has withdrawn as a limited partner of the
Partnership;
WHEREAS, pursuant to the Partnership Agreement, the Partnership agreed
to pay to CT Camden a Management Fee (as defined in the Partnership Agreement);
and
WHEREAS, the Partnership and CT Camden desire to terminate CT Camden's
right to be paid, and the Partnership's obligation to pay, the Management Fee
upon the payment by the Partnership to CT Camden of the sum provided for
herein.
NOW THEREFORE, the parties hereto agree as follows:
1. Payment Amount/Consideration. For and in consideration of the
mutual agreements as herein set forth, the Partnership agrees to pay to CT
Camden, and CT Camden agrees to accept from the Partnership, the sum of
$12,760,000 (the "Payment Amount"). CT Camden acknowledges and agrees that the
Payment Amount will be reported by it as ordinary income for United States
federal tax purposes. The Payment Amount will be paid to CT Camden effectively
immediately prior to the consummation of the transactions contemplated by the
Transaction Agreement dated as of October 25, 1998, as amended by Amendment No.
1 dated as of November 6, 1998, Amendment No. 2 dated as of November 13, 1998
and Amendment No. 3 dated as of February 1, 1999, by and among Enron Corp., an
Oregon corporation; Enron Capital & Trade Resources Corp., a Delaware
corporation; East Coast Power L.L.C., a Delaware limited liability company;
JEDI Camden GP, L.L.C., a Delaware limited liability company; JEDI Camden LP,
L.L.C., a Delaware limited liability company; JEDI Linden GP, L.L.C., a
Delaware limited liability company; JEDI Linden LP, L.L.C., a Delaware limited
liability company; RCM Holdings, Inc. (formerly Cogen Technologies, Inc.), a
Texas corporation; Cogen Technologies Camden, Inc., a Texas corporation; Cogen
Technologies Capital Company, L.P., a Delaware limited partnership; Cogen
Technologies Limited Partners Joint Venture, a Texas general partnership
("CTLPJV"); the partners of CTLPJV; and the shareholders of McNair Energy
Services Corporation, a Texas corporation.
<PAGE> 6
2. Release and Relinquishment. Effective as of the Effective Date (as
defined herein), CT Camden does hereby (i) release and relinquish any and all
claims it or any person or entity claiming by, through or under it may have
against the Partnership relating to the Management Fee and (ii) agrees to
indemnify and hold harmless the Partnership for all claims, costs and expenses
relating to this Agreement and the termination of the Management Fee.
3. Effective Date. The "Effective Date" is the date upon which CT
Camden shall have received the Payment Amount; provided, however, if CT Camden
shall not have received the Payment Amount by 5:00 p.m. Central Time on April
15, 1999, this Agreement shall be null and void and of no further force and
effect.
4. Non-Admission of Liability. The execution of this Agreement and the
payment of the Payment Amount shall not be construed as an admission of
wrongdoing or liability on the part of any party hereto in any respect.
5. Nonassignment. CT Camden represents that it is the only person or
entity entitled to receive the Management Fee and that it has not assigned,
pledged, sold transferred or otherwise conveyed any right, claim or interest
that CT Camden may have in or to the Management Fee (in any other matters
released in this Agreement).
6. GOVERNING LAW. THE VALIDITY, CONSTRUCTION, INTERPRETATION AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE CONTROLLED AND GOVERNED BY THE
SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO ITS CHOICE OF LAW
PRINCIPLES.
7. Integration. This Agreement contains the complete agreement between
the Partnership and CT Camden with respect to the matters contained herein and
supersedes all prior commitments, agreements and understandings, whether
written or oral, with respect to the matters contained herein.
-2-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above.
CAMDEN COGEN, L.P.
By: Cogen Technologies Camden GP Limited Partnership, its
General Partner
By: Cogen Technologies Camden, Inc., its General
Partner
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Address for Correspondence:
711 Louisiana, 33rd Floor
Houston, Texas 77002
Attn: Joseph M. Bollinger
COGEN TECHNOLOGIES CAMDEN GP LIMITED
PARTNERSHIP
By: Cogen Technologies Camden, Inc., its General Partner
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
Address for Correspondence:
711 Louisiana, 33rd Floor
Houston, Texas 77002
Attn: Richard A. Lydecker, Jr.
-3-
<PAGE> 8
EXHIBIT C
MANAGEMENT FEE TERMINATION AGREEMENT
(CT CAMDEN)
This Management Fee Termination Agreement dated as of February 4, 1999
(the "Agreement"), by and between COGEN TECHNOLOGIES CAMDEN GP LIMITED
PARTNERSHIP, a Delaware limited partnership ("CT Camden") and RCM MANAGEMENT
SERVICES, L.P., a Delaware limited partnership.
W I T N E S S E T H:
WHEREAS, CT Camden and Cogen Technologies Management Company, a Texas
corporation ("CTMC") entered into that certain Management Agreement dated as of
July 7, 1992 (the "Management Agreement");
WHEREAS, pursuant to an Assignment and Assumption Agreement dated as
of January 1, 1994, CTMC assigned all of its rights and interests in the
Management Agreement to Cogen Technologies Management Services, L.P., a
Delaware limited partnership ("CTMS");
WHEREAS, pursuant to a Certificate of Amendment to the Certificate of
Limited Partnership of Cogen Technologies Management Services, L.P. filed with
the Secretary of State of the State of Texas, the name of CTMS was changed to
RCM Management Services, L.P. ("RMS"); and
WHEREAS, CT Camden and RMS desire to terminate the Management
Agreement upon the payment by CT Camden to RMS of the sum provided for herein.
NOW THEREFORE, the parties hereto agree as follows:
1. Mutual Termination/Consideration. Effective as of the Effective
Date (as defined herein), the parties hereto mutually agree to terminate the
Management Agreement. For and in consideration of the mutual agreements as
herein set forth, CT Camden agrees to pay to RMS, and RMS agrees to accept from
CT Camden, the sum of $12,760,000 (the "Payment Amount"). RMS acknowledges and
agrees that the Payment Amount will be reported by it as ordinary income for
United States federal tax purposes. The Payment Amount will be paid to RMS
effective immediately prior to the consummation of the transactions
contemplated by the Transaction Agreement dated as of October 25, 1998, as
amended by Amendment No. 1 dated as of November 6, 1998, Amendment No. 2 dated
as of November 13, 1998 and Amendment No. 3 dated as of February 1, 1999, by
and among Enron Corp., an Oregon corporation; Enron Capital & Trade Resources
Corp., a Delaware corporation; East Coast Power L.L.C., a Delaware limited
liability company; JEDI Camden GP, L.L.C., a Delaware limited liability
company; JEDI Camden LP, L.L.C., a Delaware limited liability company; JEDI
Linden GP, L.L.C., a Delaware limited liability company; JEDI Linden LP,
L.L.C., a Delaware limited liability company; RCM Holdings, Inc. (formerly
Cogen Technologies, Inc.), a Texas corporation; Cogen Technologies Camden,
Inc., a Texas corporation; Cogen Technologies Capital Company, L.P., a Delaware
limited partnership; Cogen Technologies Limited Partners Joint Venture, a Texas
general partnership ("CTLPJV"); the partners of CTLPJV; and the shareholders of
McNair Energy Services Corporation, a Texas corporation.
<PAGE> 9
2. Release and Relinquishment. Effective as of the Effective Date, RMS
does hereby release and relinquish any and all claims it or any person or
entity claiming by, through or under it may have against CT Camden or any other
person or entity (including, without limitation, the Partnership) relating to
the Management Agreement or any sums payable thereunder.
3. Effective Date. The "Effective Date" is the date upon which RMS
shall have received the Payment Amount; provided, however, if RMS shall not
have received the Payment Amount by 5:00 p.m. Central Time on April 15, 1995,
this Agreement shall be null and void and of no further force and effect.
4. Non-Admission of Liability. The execution of this Agreement and the
payment of the Payment Amount shall not be construed as an admission of
wrongdoing or liability on the part of any party hereto in any respect.
5. Nonassignment. RMS represents that it is the only person or entity
holding the interests of partnership manager under the Management Agreement and
that it has not assigned, pledged, sold, transferred or otherwise conveyed any
right, claim or interest that RMS may have in or to the Management Agreement
(or any other matters released in this Agreement).
6. GOVERNING LAW. THE VALIDITY, CONSTRUCTION, INTERPRETATION AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE CONTROLLED AND GOVERNED BY THE
SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO ITS CHOICE OF LAW
PRINCIPLES.
7. Integration. This Agreement contains the complete agreement between
CT Camden and RMS with respect to the matters contained herein and supersedes
all prior commitments, agreements and understandings, whether written or oral,
with respect to the matters contained herein.
-2-
<PAGE> 10
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date first written above.
COGEN TECHNOLOGIES CAMDEN GP LIMITED
PARTNERSHIP
By: Cogen Technologies Camden, Inc.,
its General Partner
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Address for Correspondence:
711 Louisiana, 33rd Floor
Houston, Texas 77002
Attn: Richard A. Lydecker, Jr.
RCM MANAGEMENT SERVICES, L.P.
By: Palmetto Management Company,
its General Partner
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Address for Correspondence:
711 Louisiana, 33rd Floor
Houston, Texas 77002
Attn: M. Robert Dussler
-3-
<PAGE> 11
EXHIBIT D
AMENDMENT NO. 3
AMENDMENT NO. 3, dated as of February 4, 1999 (the "Amendment"), to
the Amendment and Restatement, dated as of April 1, 1993, of the Construction
and Term Loan Agreement, dated as of February 4, 1992, as amended by Amendment
No. 1, dated as of December 22, 1993, and Amendment No. 2, dated as of July 31,
1998 (as may be further amended, supplemented or otherwise modified from time
to time, the "Credit Agreement"), among (i) Camden Cogen L.P., a Delaware
limited partnership (the "Borrower"), of which Cogen Technologies Camden GP
Limited Partnership, a Delaware limited partnership, is the sole general
partner, (ii) the Tranche A Lenders and Tranche B Lenders from time to time
parties thereto (collectively, the "Lenders"), (iii) The Bank of
Tokyo-Mitsubishi Trust Company (formerly known as The Bank of Tokyo Trust
Company), a banking corporation organized and existing under the laws of the
State of New York, as Senior Tranche Agent, (iv) Commerzbank AG, New York
Branch, a New York State licensed branch of a bank organized under the laws of
Germany, as Agent and (v) General Electric Capital Corporation, a New York
corporation ("GE Capital"), as Junior Tranche Agent and as issuer of the
Letters of Credit.
W I T N E S S E T H:
WHEREAS, the parties hereto desire to amend certain provisions of the
Credit Agreement as provided herein;
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in
the Credit Agreement shall have such defined meanings when used herein.
2. Amendments to the Credit Agreement.
(i) Section 9(k) of the Credit Agreement is hereby restated
in its entirety to read as follows:
"(k) An entity with a net worth of at least
$100,000,000 shall fail to own and control, directly
or indirectly, a beneficial interest of at least
8.2% in the Borrower."
(ii) Section 11.2 of the Credit Agreement shall be amended to
restate the address of the Borrower as follows:
-1-
<PAGE> 12
"Camden Cogen L.P.
1400 Smith Street, EB 2407
Houston, Texas 77002
Attention: Donna Lowry, Compliance Department
Telecopy: (713) 646-4039"
3. Limited Effect. Except as expressly amended hereby, all of the
provisions of the Credit Agreement shall continue to be, and shall remain, in
full force and effect in accordance with their terms.
4. Counterparts. This Amendment may be executed in any number of
counterparts, all of which shall constitute one and the same instrument.
5. Governing Law. This Amendment shall be governed by, and be
construed and interpreted in accordance with, the laws of the State of New
York.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed and delivered by their proper and duly authorized officers as of the
date first above written.
CAMDEN COGEN, L.P.
By: Cogen Technologies Camden GP Limited
Partnership, a Delaware Limited Partnership,
its General Partner
By: Jedi Camden GP, L.L.C., a Delaware
Limited Liability Company, its
General Partner
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
-2-
<PAGE> 13
COMMERZBANK AG, NEW YORK BRANCH,
as Agent
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
COMMERZBANK AG, ATLANTA AGENCY,
as a Tranche A Lender
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
THE BANK OF TOKYO-MITSUBISHI
TRUST COMPANY, as Senior Tranche Agent
and a Tranche A Lender
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
THE FUJI BANK LIMITED, as a
Tranche A Lender
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
-3-
<PAGE> 14
CREDIT LYONNAIS,
NEW YORK BRANCH,
as a Tranche A Lender
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION, as Junior
Tranche Agent, Tranche B
Lender and issuer of the
Letters of Credit
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
-4-
<PAGE> 15
EXHIBIT E
REAFFIRMATION AGREEMENT
THIS REAFFIRMATION OF THE COGEN PLEDGE AGREEMENT, (this
"Reaffirmation Agreement") is made and entered into as of the 4th day of
February, 1999 by JEDI Camden GP, L.L.C., ("JEDI Camden") as the general
partner of Cogen Technologies Camden GP Limited Partnership ("Camden GPLP").
Unless otherwise defined, all defined terms shall have the same meaning given
to such terms in the Cogen Pledge and Security Agreement, dated as of February
4, 1992, (as amended and assigned, the "Pledge Agreement") by Cogen
Technologies Camden, Inc. in favor of General Electric Capital Corporation
("GECC").
1. The undersigned hereby agrees to be bound by all of the terms
and conditions of the Pledge Agreement as such terms and
conditions apply to Camden GPLP.
2. The undersigned hereby affirms that it assumes all of the
rights, duties and obligations of Camden GPLP under the
Pledge Agreement.
3. The undersigned hereby affirms that the Pledge Agreement is
valid, binding and enforceable in accordance with its terms
and in full force and effect, and has not been amended,
modified or supplemented other than as set forth in the
Amendment No. 1 dated as of April 1, 1993 and Amendment No.2
dated as of December 22, 1993.
JEDI Camden GP, L.L.C., as general partner
of Cogen Technologies Camden GP Limited
Partnership
By:
----------------------------------
Title:
-------------------------------
Date:
--------------------------------
<PAGE> 16
EXHIBIT H
LIMITED WAIVER AGREEMENT
THIS LIMITED WAIVER AGREEMENT, dated as of February 4, 1999, (this
"Limited Waiver Agreement") by and among CAMDEN COGEN, L.P., a Delaware limited
partnership, as Borrower, of which Cogen Technologies Camden GP Limited
Partnership, a Delaware limited partnership, is the sole general partner, COGEN
TECHNOLOGIES CAMDEN GP LIMITED PARTNERSHIP, a Delaware limited partnership, as
General Partner, of which Cogen Technologies Camden, Inc., a Texas corporation,
is the sole general partner, COMMERZBANK, AG, NEW YORK BRANCH, as Tranche A
Co-Agent, Agent and Security Agent, COMMERZBANK AG, ATLANTA AGENCY, as a
Tranche A Lender, THE BANK OF TOKYO-MITSUBISHI TRUST COMPANY, as Senior Tranche
Agent and a Tranche A Lender, THE FUJI BANK LIMITED, as a Tranche A Lender,
CREDIT LYONNAIS, NEW YORK BRANCH, as a Tranche A Lender, and GENERAL ELECTRIC
CAPITAL CORPORATION, as Junior Tranche Agent, Letter of Credit Issuer, Senior
Debt Service Reserve Letter of Credit Issuer, Senior Debt Service Letter of
Credit Issuer, Junior Debt Service Letter of Credit Issuer, Counterparty,
Limited Partner, and Tranche B Lender.
Reference is made to (i) the Amendment and Restatement, dated as of
April 1, 1993, of the Construction and Term Loan Agreement, dated as of
February 4, 1992, as amended by Amendment No. 1, dated as of December 22, 1993,
and Amendment No. 2, dated as of July 31, 1998 among the Borrower, the Tranche
A Lenders, the Tranche B Lenders, the Senior Tranche Agent, the Junior Tranche
Agent, the Agent and the issuer of the Letters of Credit (as such may be
amended, modified or supplemented from time to time, the "Loan Agreement"), and
(ii) the Second Amended and Restated Security Deposit Agreement, dated as of
December 22, 1993, among the Borrower, the General Partner, the Tranche A
Co-Agent, the Agent, the Security Agent, the Junior Tranche Agent, the Letter
of Credit Issuer, the Senior Debt Service Reserve Letter of Credit Issuer, the
Senior Debt Service Letter of Credit Issuer, the Junior Debt Service Letter of
Credit Issuer, the Counterparty, the Limited Partner and the Senior Tranche
Agent Credit (as such may be amended, modified or supplemented from time to
time, the "Security Deposit Agreement"). All capitalized terms used herein and
not otherwise defined herein shall have the respective meanings as defined in
the Security Deposit Agreement.
W I T N E S S E T H :
WHEREAS, the Borrower has requested that the Lenders execute the
Camden Lender Consent dated as of even date herewith (together with all
exhibits thereto, the "Camden Lender Consent"), among the Senior Tranche Agent,
the Agent, the Junior Tranche Agent, the Tranche A Lenders and the Tranche B
Lender;
-1-
<PAGE> 17
WHEREAS, in connection with the Camden Lender Consent, the Borrower
has requested the consent of the Lenders to the Amendment of the Amended and
Restated Agreement of Limited Partnership of Camden Cogen L.P. dated as of even
date herewith (the "Amendment to the Partnership Agreement"), between the
General Partner and General Electric Capital Corporation, which, among other
things, (a) obligates the General Partner to make certain Capital Contributions
(as defined in the Partnership Agreement) to the Borrower (the "Contributions")
and (b) authorizes the General Partner to cause the Borrower to use the
proceeds of the Contributions to make (i) certain payments directly to the
General Partner (the "Management Fee Buy-Out Payment") as set forth in the
Termination Agreement dated as of even date herewith (the "Management Fee Buy-
Out Agreement"), by and between the Borrower and the General Partner, and (ii)
certain payments directly to H. Fred Levine (the "Fuel Management Fee Buy-Out
Payment") as set forth in the Termination Agreement dated as of even date
herewith (the "Fuel Management Fee Buy-Out Agreement"), by and between Cogen
Technologies Capital Company, L.P., a Delaware limited partnership and H. Fred
Levine;
WHEREAS, the Borrower has requested that the Agents and the Required
Lenders permit the Borrower to use the Contributions to make the Management Fee
Buy-Out Payment and the Fuel Management Fee Buy-Out Payment and not to require
the Contributions to first be deposited in the Accounts;
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings contained herein, the parties hereto, acting pursuant to Section
11.1 of the Loan Agreement, hereby agree as follows:
Section 1. Subject to the provisions of Section 2 below, the Agents
and the Required Lenders (a) agree that (i) the Borrower may use the proceeds
of the Contributions to make the Management Fee Buy-Out Payment and the Fuel
Management Fee Buy-Out Payment, and (ii) the Contributions will not be required
to first be deposited in the Accounts (as such term is defined in the Security
Deposit Agreement), and (b) hereby waive the provisions of Sections 7.4, 8.3
and 9(c) of the Loan Agreement and Section 3.02 of the Security Deposit
Agreement solely and only to the extent necessary for the purposes set forth in
clauses (a)(i) and (ii) above.
Section 2.
(a) The waiver contained in Section 1 hereof is given in consideration
of, and its effectiveness is expressly conditioned upon satisfaction of, the
following conditions: (i) the transactions proposed in the Camden Lender
Consent shall have taken place in accordance with the terms thereof, including
but not limited to the delivery of duly executed copies of all exhibits
thereto; (ii) the Contributions shall be in an amount equal to fourteen million
four hundred twelve thousand eight hundred forty eight dollars ($14,412,848)
(which amount equals the sum of the amounts set forth in clauses (iii) and (iv)
below); (iii) the Management Fee Buy-Out Payment shall be in an amount equal to
twelve million seven hundred and sixty thousand dollars ($12,760,000) and shall
be paid in accordance with the terms of the Management Fee Buy-Out Agreement;
and (iv) the Fuel Management Fee Buy-Out Payment shall be in an amount equal to
one million six hundred fifty two thousand eight hundred forty eight dollars
($1,652,848) and shall be paid pursuant to the terms of the Fuel Management Fee
Buy-Out Agreement.
-2-
<PAGE> 18
(b) Nothing herein shall be construed as a waiver of any provision of
the Loan Agreement, the Security Deposit Agreement or any other Basic Document
by any of the parties thereto, other than such as is expressly waived
hereunder. Notwithstanding anything contained herein, the waiver contained in
Section 1 hereof (i) is a limited one, (ii) is effective only with respect to
the transactions described in this Limited Waiver Agreement for the specific
instance and the specific purpose for which it is given, (iii) shall not be
effective for any other purpose or transaction, and (iv) does not constitute an
amendment, or basis for a subsequent waiver, of any of the provisions of the
Basic Documents.
Section 3. The parties hereto confirm that the Basic Documents are
valid, binding and in full force and effect, that no provision of the Basic
Documents is waived except as to the extent and for the limited purpose set
forth in this Limited Waiver Agreement, and that no provision of the Basic
Documents is amended in any way.
Section 4. This Limited Waiver Agreement shall for all purposes be
considered a Basic Document.
Section 5. This Limited Waiver Agreement may be signed in any number
of counterparts, each of which shall be original, with the same effect as if
the signatures hereto and thereto were upon the same instrument.
Section 6. This Limited Waiver Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New
York.
[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK.]
-3-
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have executed this Limited
Waiver Agreement through their duly authorized representatives as of the date
first written above.
CAMDEN COGEN, L.P., as Borrower
By: Cogen Technologies Camden GP
Limited Partnership
Its: General Partner
By: Cogen Technologies Camden, Inc.
Its: General Partner
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
COGEN TECHNOLOGIES CAMDEN GP
LIMITED PARTNERSHIP,
as General Partner
By: Cogen Technologies Camden, Inc.
Its: General Partner
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
THE BANK OF TOKYO-MITSUBISHI
TRUST COMPANY, as Senior Tranche
Agent and a Tranche A Lender
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
-4-
<PAGE> 20
COMMERZBANK, AG, NEW YORK
BRANCH, as Tranche A Co-Agent, Agent
and Security Agent
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
COMMERZBANK AG, ATLANTA
AGENCY, as a Tranche A Lender
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
CREDIT LYONNAIS, NEW YORK
BRANCH, as a Tranche A Lender
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
THE FUJI BANK LIMITED, as a Tranche A
Lender
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
-5-
<PAGE> 21
GENERAL ELECTRIC CAPITAL CORPORATION,
as Junior Tranche Agent, Letter of Credit
Issuer, Senior Debt Service Reserve Letter of
Credit Issuer, Senior Debt Service Letter of
Credit Issuer, Junior Debt Service Letter of
Credit Issuer, Counterparty, Limited Partner,
and Tranche B Lender
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
-6-
<PAGE> 1
EXHIBIT 10.54(b)
========================
ASSIGNMENT OF MORTGAGE
by
TORONTO DOMINION (TEXAS), INC., as Agent
to
COMMERZBANK AG, NEW YORK BRANCH, as Successor Agent
Dated as of July 31, 1998
===============================================================================
This Instrument was prepared by,
and after recording, this Instrument
should be returned to:
<PAGE> 2
ASSIGNMENT OF MORTGAGE
ASSIGNMENT OF MORTGAGE dated as of July 31, 1998 made by TORONTO
DOMINION (TEXAS), INC. (formerly known as The Toronto-Dominion Bank Trust
Company), a Delaware corporation having an address at 31 West 52nd Street, New
York, New York 10019, as agent ("Assignor") to COMMERZBANK AG, NEW YORK BRANCH,
a New York State Licensed Branch of a bank organized under the laws of Germany
having an address at Two World Financial Center, New York, New York 10281-1050,
as successor agent ("Assignee").
W I T N E S S E T H :
WHEREAS, General Electric Capital Corporation ("GECC") was originally
the mortgagee under that certain Mortgage dated as of February 4, 1992 made by
Camden Cogen L.P. ("Mortgagor") to GECC and recorded in the offices of the
Register of Deeds of Camden County, New Jersey on February 4, 1992 in Mortgage
Book 3742, page 1 as amended by the First Amendment to Mortgage by and between
Mortgagor and GECC dated as of April 19, 1993 and recorded in the offices of
the Register of Deeds of Camden County, New Jersey on April 20, 1993 in
Mortgage Book 3964, page 668 and as assigned by GECC to Assignor pursuant to
the Assignment of Mortgage dated as of December 22, 1993 and recorded in the
offices of the Register of Deeds of Camden County in Assignment Book 741, page
901 (collectively, the "Mortgage") encumbering the real property more
particularly described on Exhibit A; and
WHEREAS, pursuant to the Second Successor Agency Agreement dated as of
July 31, 1998 among Assignee, Assignor, The Bank of Tokyo-Mitsubishi Trust
Company, GECC, Mortgagor and various other parties (the "Second Successor
Agency Agreement"), Assignee has been appointed as successor agent to Assignor
and has succeeded to all of Assignor's right, title and interest as agent;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged, Assignor hereby assigns to Assignee,
<PAGE> 3
without recourse or representation (except as is provided for in the Second
Successor Agency Agreement and the Assignment and Acceptance Agreement dated as
of July 31, 1998 among The Toronto-Dominion Bank, Commerzbank AG, Atlanta
Agency and The Bank of Tokyo-Mitsubishi Trust Company), and Assignee takes and
accepts, all of Assignor's right, title and interest as "Mortgagee" under the
Mortgage, together with all instruments and other documents evidencing the
"Indebtedness," as defined in the Mortgage.
Each of the parties to this Assignment of Mortgage agrees that at any
time and from time to time upon the written request of any other party it will
execute and deliver such further documents and do such further acts and things
as such other party may reasonably request in order to effect the purposes of
this Assignment of Mortgage.
IN WITNESS WHEREOF, Assignor has caused this instrument to be executed
in its name and on its behalf by its duly authorized officer as of the day and
year first written above.
ASSIGNOR:
TORONTO DOMINION (TEXAS),
INC., as agent
By: /s/ JANO MOTT
-----------------------------
Name: JANO MOTT
Title: VICE PRESIDENT
ASSIGNEE:
COMMERZBANK AG, NEW YORK
BRANCH, as successor
agent
By: /s/ ANDREW JACOBYANSKY
-----------------------------
Name: Andrew Jacobyansky
Title: Vice President
By: /s/ ANDREW KJOLLER
-----------------------------
Name: Andrew Kjoller
Title: Assistant Treasurer
2
<PAGE> 4
STATE OF TEXAS )
: ss.:
COUNTY OF HARRIS )
BE IT REMEMBERED, that on this 9th day of July, 1998, in the County
and State aforesaid, before me, the subscriber, a Notary Public of the state of
Texas authorized to take acknowledgments and proofs in said State, personally
appeared JANO MOTT who, I am satisfied, is the person who signed the within
instrument as VICE PRESIDENT of TORONTO DOMINION (TEXAS), INC., as agent, the
corporation named therein, and he thereupon acknowledged that the within
instrument signed by the corporation was signed and delivered by him as such
officer and is the voluntary act and deed of the corporation, made by virtue of
authority from its Board of Directors.
Signature /s/ STEPHANIE SLOAN
--------------------------------
===================================== Printed STEPHANIE SLOAN
STEPHANIE SLOAN ----------------------------------
[SEAL] MY COMMISSION EXPIRES Notary Public
APRIL 12, 2002
===================================== My commission expires: 4-12-2002
-------------------
<PAGE> 5
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
BE IT REMEMBERED, that on this 30th day of July, 1998, in the County
and State aforesaid, before me, the subscriber, a Notary Public of the state of
New York authorized to take acknowledgments and proofs in said State, personally
appeared Andrew Jacobyansky and Andrew Kjoller, who, I am satisfied, is the
persons who signed the within instrument as Vice President and Assistant
Treasurer of COMMERZBANK AG, NEW YORK BRANCH, as successor agent, the
corporation named therein, and he thereupon acknowledged that the within
instrument signed by the corporation was signed and delivered by him as such
officer and is the voluntary act and deed of the corporation, made by virtue of
authority from its Board of Directors.
Signature /s/ RENEE PECOT-XENAKIS
--------------------------------
Printed
----------------------------------
Notary Public
My commission expires:
-------------------
RENEE PECOT-XENAKIS
NOTARY PUBLIC, STATE OF NEW YORK
NO. 41-4978638
QUALIFIED IN QUEENS COUNTY
COMMISSION EXPIRES MARCH 11, 1999
2
<PAGE> 6
EXHIBIT A
REAL PROPERTY DESCRIPTION
ALL THAT CERTAIN land or premises situate, lying and being in the City
of Camden, County of Camden and State of New Jersey, the legal description
being more particularly bounded and described as follows:
BEGINNING at a point in the Southeasterly corner of Broadway (66 feet
wide) and Chelton Avenue (50 feet wide); thence
(1) South 88 degrees 33 minutes 00 seconds East along the
Southerly line of Chelton Avenue, a distance of 450 feet to the Westerly line of
Sixth Street (50 feet wide); thence
(2) South 01 degrees 20 minutes 45 seconds West along the Westerly
line of Sixth Street, a distance of 400 feet to a point; thence
(3) North 88 degrees 33 minutes 00 seconds West, a distance of 210
feet to a point in the center line of Fillmore Street (now vacated); thence
(4) North 01 degrees 20 minutes 45 seconds East and along the center
line of Fillmore Street (now vacated) 20 feet to a point; thence
(5) North 88 degrees 33 minutes 00 seconds West, a distance of 115
feet to a point in the center line of Hedley Street (now vacated); thence
(6) North 01 degrees 20 minutes 45 seconds East along the center
line of Hedley Street (now vacated), a distance of 20 feet to a point; thence
(7) North 88 degrees 33 minutes 00 seconds West, a distance of 125
feet to a point in the Easterly line of Broadway; thence
(8) North 01 degrees 20 minutes 45 seconds East along the Easterly
line of Broadway, a distance of 300 feet to the point and place of beginning.
BEING Lot 1, Block 506, Tax Map.
<PAGE> 7
RECORDED-CAMDEN COUNTY
98 AUG 24 PM 2:25
/s/ JAMES BEACH
CLERK
<PAGE> 1
EXHIBIT 10.56
AMENDMENT NO. 1 TO SECOND AMENDED
AND RESTATED SECURITY DEPOSIT AGREEMENT
AMENDMENT NO. 1 TO THE SECOND AMENDED AND RESTATED SECURITY DEPOSIT
AGREEMENT ("Security Deposit Agreement"), dated as of July 31, 1998 (this
"Amendment") among (a) Camden Cogen L.P., a Delaware limited partnership (the
"Partnership" or the "Borrower") of which Cogen Technologies Camden GP Limited
Partnership, a Delaware limited partnership, is the general partner (the
"General Partner"), (b) Toronto Dominion (Texas), Inc. (formerly known as The
Toronto-Dominion Bank Trust Company), a Delaware corporation ("TD Texas"), as
prior agent and as prior collateral agent (in such capacity, the "Prior Agent")
(x) under the Amendment and Restatement, dated as of April 1, 1993 of the
Construction and Term Loan Agreement, dated as of February 4, 1992, as amended
by Amendment No. 1 to Amendment and Restatement of the Construction Loan
Agreement, dated as of December 22, 1993 (as the same may be further amended,
supplemented or otherwise modified, hereinafter referred to as the "Credit
Agreement") (terms defined in the Credit Agreement and not defined herein having
the meaning assigned in the Credit Agreement) among (i) the Partnership, (ii)
the Agent, (iii) The Bank of Tokyo-Mitsubishi Trust Company (formerly known as
The Bank of Tokyo Trust Company) ("BOTT"), as Senior Tranche Agent for the
Tranche A Lenders (in such capacity, the "Senior Tranche Agent"), (iv) General
Electric Capital Corporation, a New York corporation ("GE Capital"), and the
Junior Tranche Agent for the Tranche B Lenders (in such capacity, the "Junior
Tranche Agent"), (v) the lenders from time to time parties thereto (the
"Lenders") and (vi) GE Capital, as Letter of Credit Issuer (the "Letter of
Credit Issuer") and (y) with respect to the Collateral Security Documents, (c)
the General Partner, (d) GE Capital, as the limited partner of the Partnership
(the "Limited Partner"), (e) GE Capital, as lender (the "General Partner Term
Lender") under the General Partner Term Loan Agreement, (f) GE Capital, as
Counterparty under the Interest Rate Hedging Agreement (in such capacity, the
"Counterparty"), (g) GE Capital, as Junior Debt Service Letter of Credit Issuer
(the "Junior Debt Service Letter of Credit Issuer"), (h) GE Capital, as Senior
Debt Service of Credit Issuer (the "Senior Debt Service Letter of Credit
Issuer"), (i) GE Capital, as PSE&G Gas Letter of Credit Issuer (the "Project
Letter of Credit Issuer"), (j) GE Capital, as Senior Debt Service Reserve Letter
of Credit Issuer (the "Senior Debt Service Reserve Letter of Credit Issuer"),
(k) TD Texas, as prior Tranche A Co-Agent (in such capacity, the
<PAGE> 2
"Prior Tranche A Co-Agent"), (1) TD Texas, as prior Security Agent under this
Security Deposit Agreement (in such capacity, the "Prior Security Agent"), (m)
Commerzbank AG, New York Branch ("Commerzbank"), as agent and as collateral
agent (in such capacity, the "Agent") under (x) the Credit Agreement and (y)
with respect to the Collateral Security Documents, (n) Commerzbank, as Tranche
A Co-Agent (in such capacity, the "Tranche A Co-Agent"), (o) Commerzbank, as
Security Agent under this Security Deposit Agreement (in such capacity, the
"Security Agent") and (p) the Lenders (the aforementioned hereinafter,
collectively, "the Parties").
W I T N E S S E T H:
WHEREAS, the Parties were parties to the Security Deposit Agreement;
WHEREAS, the Parties wish to amend certain provisions of the Security
Deposit Agreement;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, receipt of which is hereby acknowledged, the Parties
hereto agree as follows:
1. Definitions. Unless otherwise defined herein, all terms used
herein which are defined in the Security Agreement shall have their
respective meanings as therein defined.
2. Amendment to Article I (Definitions).
a. Clause (b) of the definition of "Permitted Investments" of the
Security Deposit Agreement is hereby modified to read:
"(b) certificates of deposit, domestic time deposits and
eurodollar time deposits with maturities of six months or less from
the date of acquisition, bankers' acceptances with maturities not
exceeding six months and overnight bank deposits, in each case, with
any Lender or with any domestic commercial bank of recognized stature
having capital and surplus in excess of $500,000,000".
2
<PAGE> 3
b. Clause (d) of the definition of "Cash Equivalents" of the
Security Deposit Agreement is hereby modified to read:
"(d) certificates of deposit, domestic time deposits and
eurodollar time deposits with maturities of six months or less from
the date of acquisition, bankers' acceptances with maturities not
exceeding six months and overnight bank deposits, in each case, with
any Lender or with any domestic commercial bank of recognized stature
having capital and surplus in excess of $500,000,000".
3. Amendment to Section 6.02(c)(i) (Resignation or Removal). Section
6.02(c)(i) of the Security Deposit Agreement is hereby amended to read:
"(i) shall be a bank or trust company (a) organized under the
laws of the United States of America or the State of New York, the
State of New Jersey or the State of Connecticut having a capital and
surplus of not less than $100,000,000 or (b) organized under the laws
of any country which is a member of the Organization for Economic
Co-operation and Development ("OECD") acting through a branch
licensed by the United States of America or the State of New York, or
the State of New Jersey or the State of Connecticut, having a capital
and surplus of not less than $100,000,000, and".
[The remainder of this page intentionally left blank]
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to
be duly executed by their duly authorized officers, all as of the day and year
first above written.
CAMDEN COGEN L.P., a Delaware
limited partnership
BY: Cogen Technologies Camden GP
Limited Partnership, its
General Partner
By: Cogen Technologies Camden, Inc.,
its general partner
By: /s/ RICHARD A. LYDECKER, JR.
---------------------------------
Name: Richard A. Lydecker, Jr.
Title: Senior Vice President
Chief Financial Officer
TORONTO DOMINION (TEXAS), INC., as
Prior Tranche A Co-Agent, Prior
Agent and Prior Security Agent
By: /s/ JANO MOTT
---------------------------------
Name: Jano Mott
Title: Vice President
THE TORONTO-DOMINION BANK, as a prior
Tranche A Lender
By: /s/ JANO MOTT
---------------------------------
Name: Jano Mott
Title: Mgr. Syndications &
Credit Admin.
4
<PAGE> 5
GENERAL ELECTRIC CAPITAL CORPORATION,
as Junior Tranche Agent, Project Letter of
Credit Issuer, Senior Debt Service Reserve
Letter of Credit Issuer, Senior Debt
Service Letter of Credit Issuer, Junior
Debt Service Letter of Credit Issuer,
General Partner Term Lender, Counterparty,
Limited Partner and Tranche B Lender
By: /s/ MICHAEL J. TZOUGRAKIS
----------------------------------------
Name: Michael J. Tzougrakis
Title: Manager of Operations
COGEN TECHNOLOGIES CAMDEN GP LIMITED
PARTNERSHIP, as General Partner
By: Cogen Technologies Camden, Inc.,
its General Partner
By: /s/ RICHARD A. LYDECKER, JR.
---------------------------------
Name: Richard A. Lydecker, Jr.
Title: Senior Vice President &
Chief Financial Officer
THE BANK OF TOKYO-MITSUBISHI TRUST
COMPANY, as Senior Tranche Agent and
Tranche A Lender
By: /s/ ROBERT F. MOYLE
----------------------------------------
Name: Robert F. Moyle
Title: Vice President
5
<PAGE> 6
COMMERZBANK AG, NEW YORK
BRANCH, as Tranche A Co-Agent,
Agent and Security Agent
By: /s/ ANDREW JACOBYANSKY
---------------------------------------
Name: Andrew Jacobyansky
Title: Vice President
By: /s/ ANDREW KJOLLER
---------------------------------------
Name: Andrew Kjoller
Title: Assistant Treasurer
COMMERZBANK AG, ATLANTA AGENCY, as a
Tranche A Lender
By: /s/ ANDREW JACOBYANSKY
---------------------------------------
Name: Andrew Jacobyansky
Title: Vice President
By: /s/ ANDREW KJOLLER
---------------------------------------
Name: Andrew Kjoller
Title: Assistant Treasurer
THE FUJI BANK LIMITED, as a Tranche A Lender
By: /s/ THOMAS W. BOYLAN
----------------------------------------
Name: Thomas W. Boylan
Title: Vice President
CREDIT LYONNAIS, NEW YORK BRANCH,
as a Tranche A Lender
BY: /s/ JAMES F. GUIDERA
---------------------------------------
Name: James F. Guidera
Title: Vice President
6
<PAGE> 1
EXHIBIT 10.76
ASSIGNMENT AGREEMENT BY COGEN TECHNOLOGIES NJ, INC.
TO COGEN TECHNOLOGIES NJ VENTURE
ASSIGNMENT, dated as of September 8, 1986, among COGEN TECHNOLOGIES NJ,
INC., a Delaware Corporation, ("Cogen") and COGEN TECHNOLOGIES NJ VENTURE, a New
Jersey joint venture (the "Venture") (collectively, the "Parties").
WITNESSETH
WHEREAS, Cogen has entered into a joint venture under the laws of the
State of New Jersey, the limited purpose of which is to: (i) acquire, construct,
own, maintain, operate, repair, improve, rebuild, alter, replace, lease, sell,
mortgage, hypothecate or otherwise use and deal with a gas-fired cogeneration
plant to be located at Bayonne, New Jersey (the "Cogeneration Facility"); (ii)
produce and sell electricity and steam from the Cogeneration Facility; and (iii)
engage in any and all activities related or incident thereto, including, without
limitation, the acquisition, ownership, improvement, operation, sale, lease,
mortgage, hypothecation or other use of or dealing with all types and kinds of
property, all as evidenced by the Amended and Restated Joint Venture Agreement
of Cogen Technologies NJ Venture, dated as of September 5, 1986 ("Venture
Agreement"); and
<PAGE> 2
-2-
WHEREAS, it is a condition of the Venture Agreement that Cogen assign
to the Venture all of Cogen's rights, title and interests in and to the
Agreement for Purchase of Electric Power Between Cogen Technologies NJ, Inc. and
Jersey Central Power & Light Company, dated October 29, 1985, as amended by
amendment dated September 5, 1986 (the "Power Purchase Agreement");
NOW, THEREFORE, in order to satisfy the conditions of the Venture
Agreement, the Parties hereto agree as follows:
ARTICLE 1
ASSIGNMENT OF RIGHTS, TITLE AND INTEREST
IN THE POWER PURCHASE AGREEMENT
1.1 In satisfaction of the conditions of the Venture Agreement, Cogen
hereby assigns, transfers, conveys, and sets over to the Venture all of Cogen's
rights, title and interests in, to and under the Power Purchase Agreement and
all proceeds thereof, including without limitation:
(a) all payments due and to become due under the Power
Purchase Agreement, whether as contractual obligations, damages payable
to Cogen for any breach thereunder, or otherwise;
(b) all of the Cogen's claims, rights, powers or privileges
and remedies under the Power Purchase Agreement; and
(c) all of Cogen's rights under the Power Purchase Agreement
(i) to make determinations, (ii) to exercise any election (including,
but not limited to, election of
<PAGE> 3
-3-
remedies) or option or to give or receive full power and authority to
demand, receive, enforce, collect or give receipt for any of the
foregoing, (iii) to amend, modify or supplement the Power Purchase
Agreement, (iv) to enforce or execute any checks, or other instruments
or orders, (v) to file any claims and (vi) to take any action which (in
the opinion of the Venture) may be necessary or advisable in connection
with any of the foregoing.
1.2 Cogen hereby represents and warrants with respect to the Power
Purchase Agreement that as of the date of this Assignment:
(a) it is in full force and effect and there is no breach or
default thereunder, and
(b) it has not been transferred or assigned in whole or in
part, save for the assignment herein contained, and no lien arising by,
through, or under Cogen exists with respect to any of them or any
obligation payable or performable thereunder.
1.3 Cogen hereby irrevocably appoints the Venture as its
attorney-in-fact to do in its name all acts which it could do in relation to the
Power Purchase Agreement and in particular, but without limiting the generality
of the foregoing, to ask, require, demand, receive, compound and forgive any and
all moneys and claims for moneys due and to become due under or arising out of
the Power Purchase Agreement, to endorse any checks or other instruments or take
any action to institute any proceedings which
<PAGE> 4
-4-
the agent may deem to be necessary or advisable in the circumstances, which
appointment is coupled with an interest.
ARTICLE 2
ASSUMPTION OF OBLIGATIONS UNDER
THE POWER PURCHASE AGREEMENT
The Venture hereby assumes any and all of Cogen's obligations and
liabilities under the Power Purchase Agreement and undertakes to punctually
perform any and all of Cogen's obligations under the Power Purchase Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
3.1 Representations and Warranties of Cogen. Cogen hereby represents
and warrants to the Venture as follows:
(a) Cogen is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has
all requisite power and authority to execute and deliver this
Assignment;
(b) the execution, delivery and performance of this Assignment
by Cogen have been validly authorized and approved by all requisite
corporate action. This Assignment constitutes the valid binding
agreement of Cogen enforceable against Cogen in accordance with its
terms; and
(c) the execution, delivery and performance by Cogen of this
Assignment will not conflict with or cause a breach of or default under
any other agreement to which Cogen is a party or by which it or its
properties may be bound.
<PAGE> 5
-5-
3.2 Representations and Warranties of the Venture. The Venture hereby
represents and warrants to Cogen as follows:
(a) the Venture is a joint venture duly formed and validly
existing under the laws of the State of New Jersey under a joint
venture agreement dated September __, 1986, with respect to which a
trade name certificate has been filed in the Office of the Clerk of
Hudson County;
(b) the execution, delivery and performance of this Assignment
by the Venture has been duly and validly authorized and approved by all
requisite joint venture action. This Assignment constitutes the valid
and binding agreement of the Venture enforceable against the Venture in
accordance with its terms; and
(c) the execution and delivery of this Assignment by the
Venture and the performance by the Venture of its obligations hereunder
and, as assignee, under the Power Purchase Agreement, will not conflict
with or cause a breach of or default under any other agreement to which
the Venture is a party or by which it or its properties may be bound.
ARTICLE 4
INDEMNIFICATION
4.1 Indemnification of the Venture. Cogen shall indemnify and hold the
Venture and its successors and assigns harmless from and against all damages,
losses, or expenses suffered or paid as a result of any claims, demands, suits,
causes of action, proceedings, judgments, and liabilities, including reasonable
counsel fees incurred in litigation or otherwise, assessed,
<PAGE> 6
-6-
incurred or sustained by or against the Venture and its successors and assigns
with respect to or arising out of an act or omission of Cogen, its employees,
subcontractors, agents or representatives in connection with the Power Purchase
Agreement, which act or omission occurred prior to the date of this Assignment.
4.2 Indemnification of Cogen. The Venture shall indemnify and hold
Cogen and its successors and assigns harmless from and against all damages,
losses, or expenses suffered or paid as a result of any claims, demands, suits,
causes of action, proceedings, judgments, and liabilities, including reasonable
counsel fees incurred in litigation or otherwise, assessed, incurred or
sustained by or against Cogen and its successors and assigns with respect to or
arising out of an act or omission of the Venture, its employees, subcontractors,
agents or representatives in connection with the Power Purchase Agreement, which
act or omission occurred subsequent to the date of this Assignment.
ARTICLE 5
MISCELLANEOUS
5.1 Further Assurances. Cogen hereby undertakes, at its own expense, to
accomplish any appropriate filings relative to the assignments herein contained
and execute, sign, deliver, do and (if required) make any appropriate filings in
connection with such further assurance, instrument, document, act or thing as in
the opinion of the Venture may be necessary or desirable for the purpose of
more effectually assigning the assigned rights and/or
<PAGE> 7
-7-
perfecting the assignments herein contained and/or enabling the Venture to enjoy
the full benefit of the assignments and the rights and the powers herein granted
to the Venture.
5.2 Notices. All notices, requests, demands or other communications to
or upon the respective Parties hereto shall be deemed to have been duly given or
made five (5) calendar days after being deposited in the mails, registered or
certified mail, postage prepaid, or in the case of telex, telegraphic or cable
notice, twenty-four (24) hours after being sent, addressed as follows:
Cogen Technologies NJ, Inc.
14614 Falling Creek Drive
Suite 212
Houston, Texas 77068
Attention: Robert C. McNair
President
Cogen Technologies NJ Venture
14614 Falling Creek Drive
Suite 212
Houston, Texas 77068
Attention: Robert C. McNair
or to such other addresses as any such Parties may hereafter specify to others
in writing.
5.3 No Waiver; Cumulative Remedies. No failure to exercise, and no
delay in exercising, any right, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude or require any other or future exercise thereof or
the exercise of any other right, power or privilege. All rights, powers and
remedies granted to any party hereto and all other agreements, instruments and
documents executed in
<PAGE> 8
-8-
connection with this Assignment shall be cumulative, may be exercised singly or
concurrently and shall not be exclusive of any rights or remedies provided by
law.
5.4 Survival of Agreements. All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Assignment.
5.5 Headings. The section and subsection headings used in this
Assignment are for convenience only and shall not affect the construction of
this Assignment.
5.6 Severability. In case any one or more of the provisions contained
in this Assignment shall be invalid, illegal or unenforceable in any respect
under any law, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby.
5.7 Execution of Counterparts. This Assignment may be executed in any
number of counterparts. All such counterparts shall be deemed to be originals
and shall together constitute but one and the same instrument.
5.8 Binding Effect. This Assignment shall be binding upon and inure to
the benefit of each of the Parties hereto and their respective successors and
assigns.
5.9 Governing Law. This Assignment shall be governed by, and construed
and interpreted in accordance with, the laws of the State of New Jersey.
<PAGE> 9
-9-
5.10 Illegality. In the event that it should transpire that by reason
of any law or regulation in force or to become in force, or by reason of a
ruling of any court whatsoever, or by any other reason whatsoever, the
assignments herein contained are either wholly or partly defective, Cogen hereby
undertakes to furnish the Venture with alternative assignments and/or to do all
such other acts as, in the sole opinion of the Venture, shall be required in
order to ensure and give effect to the full intent and spirit of this
Assignment.
5.11 Waivers, Amendment, Supplements and Other Modifications. The
provisions of this Assignment may be waived, amended, supplemented or otherwise
modified from time to time, in whole or in part, only by a writing signed by
Cogen and the Venture.
<PAGE> 10
-10-
IN WITNESS WHEREOF, this Assignment has been executed and delivered as
of the date and year first above written.
COGEN TECHNOLOGIES NJ, INC.
By: /s/ ROBERT C. MCNAIR
------------------------------------
Robert C. McNair
President
COGEN TECHNOLOGIES NJ VENTURE
By: Cogen Technologies NJ, Inc.,
Venturer
By: /s/ ROBERT C. MCNAIR
------------------------------------
Robert C. McNair
President
By: Enron Cogeneration Five Company,
(formerly known as Northern
Cogeneration Five Company)
Venturer
By: /s/ RICHARD ROBERTS
------------------------------------
Richard Roberts
---------------------------
Vice President
---------------------------
By: CEA Bayonne, Inc., Venturer
By: /s/ [ILLEGIBLE]
------------------------------------
---------------------------
---------------------------
By: PSVO Bayonne, Inc.
Venturer
By: /s/ [ILLEGIBLE]
------------------------------------
[ILLEGIBLE]
---------------------------
Vice President
---------------------------
BY: Transco Cogeneration Company,
Venturer
By: /s/ ROBERT M. CHRISTE
------------------------------------
Robert M. Christe
---------------------------
President
---------------------------
<PAGE> 1
EXHIBIT 10.91
CONSOLIDATED RAIL CORPORATION
LICENSE AGREEMENT FOR WIRE, PIPE AND CABLE TRANSVERSE
CROSSINGS AND LONGITUDINAL OCCUPATIONS
THIS AGREEMENT, made this 21st day of August, 1992, between
CONSOLIDATED RAIL CORPORATION, a Pennsylvania Corporation, party of the first
part (hereinafter called "Railroad") and CAMDEN COGEN L.P., a Delaware Limited
Partnership, as party of the second part (hereinafter called "Licensee").
WITNESSETH, that said Railroad (which when used herein shall include any lessor,
successor or assignee of or operator over its railroad) insofar as it has the
legal right and its present title permits, and in consideration of the covenants
and conditions hereinafter stated on the part of Licensee to be kept and
performed, hereby permits, Licensee to construct, maintain, repair, alter,
renew, relocate and ultimately remove:
One (1) 12-inch steel steam pipe and one (1) 4-inch steel condensation
pipe through the lands and under and across and along the roadway and
tracks of the Bulson Street Yard (off the Beesleys Point Secondary) of
Railroad, Line Code 10-9902, between Valuation Station 67+30 +/- and
Valuation Station 51+60 +/-, with a crossing under the tracks at
Valuation Station 51+60 +/-, together with two (2) manholes, all of
which is located between 120 feet north of and 1450 feet south of Mile
Post 1 (M.P. 0.98 - 1.27) in the City of Camden, Camden County, New
Jersey,
in accordance with construction plan no. 3108X001, Sheets 1, 2 and 3, Revised
July 28, 1992, submitted by Licensee to and approved by the Chief Engineer of
Railroad, incorporated herein by reference; also in accordance with current
issues of Railroad Specifications Nos. CE 4 and/or CE 8; and shown on Plan No.
C-3031, dated August 11, 1992, marked Exhibit "A", attached hereto and made a
part of this Agreement, all and any part thereof being hereafter referred to as
the "FACILITIES"; said license, however, shall be under and subject to the
following terms, covenants and conditions as hereinafter recited, which are
hereby accepted and agreed to, by Licensee, to wit:
PREPARED BY: /s/ M.R. LATCH
----------------------
M.R. Latch
Agreement Investigator
<PAGE> 2
1. The Licensee shall pay to Railroad upon the execution hereof, the
sum of Sixteen Thousand Three Hundred Forty Five Dollars ($16,345.00) as
reimbursement for the rights granted in this Agreement.
2. (a) The FACILITIES shall be located, constructed and maintained in
exact accordance with said construction plans and for the purpose as outlined in
Page 1. No departure shall be made at any time therefrom except upon permission
in writing granted by the Chief Engineer of Railroad, or his designee, provided,
however, that if any commission or other regulatory body duly constituted and
appointed in compliance with the laws of the State in which the crossing or
occupancy herein provided is situate, and having jurisdiction in the premises,
has by ruling or other general order determined and fixed the manner and means
of construction, maintenance, repair, alteration, renewal, relocation or removal
thereof, then said ruling or general order shall prevail for the crossing or
occupancy herein mentioned.
(b) The work of constructing, maintaining, repairing, altering,
renewing, relocating or removing the said FACILITIES shall be done under such
general conditions as will be satisfactory to and approved by the Chief Engineer
of Railroad, or his designee, and as will not interfere with the proper and safe
use, operation and enjoyment of the property of Railroad. Licensee, at its own
cost and expense, shall, when performing any work in connection with the
FACILITIES, furnish any necessary inspectors, flagmen or watchmen to see that
men, equipment and materials are kept a safe distance away from the tracks of
Railroad.
(c) In addition to, but not in limitation of any of the foregoing
provisions, if at any time Railroad should deem inspectors, flagmen or watchmen
desirable or necessary to protect its operations or property, or its employees,
patrons or Licensees during the work of construction, maintenance, repair,
alteration, renewal, relocation or removal of said FACILITIES, of Licensee,
Railroad shall have the right to place such inspectors, flagmen or watchmen at
the sole risk, cost and expense of Licensee, which covenants and agrees to bear
the full cost and expense thereof and to promptly reimburse Railroad upon
demand. The furnishing or failure to furnish inspectors, flagmen or watchmen by
Railroad, however, shall not release Licensee from any and all other liabilities
assumed by Licensee under the terms of this Agreement.
3. If Licensee desires or is required, as herein provided, to revise,
renew, add to or alter in any manner whatsoever the aforementioned FACILITIES,
it shall submit plans to Railroad and obtain the written approval of the Chief
Engineer of Railroad thereto before any work or alteration of the structure is
performed and the term and
- 2 -
<PAGE> 3
conditions of this Agreement with respect to the original construction shall
apply thereto. In that event, Railroad reserves the right to assess additional
charges.
4. (a) Licensee shall at all times be obligated to promptly maintain,
repair and renew said FACILITIES; and shall, upon notice in writing from
Railroad and requiring it so to do, promptly make such repairs and renewals
thereto as may be required by Railroad; or Railroad, for the purpose of
protecting and safeguarding its property, traffic, patrons or employees from
damage or injury, may with or without notice to Licensee at any time make such
repairs and renewals thereto and furnish such material therefor as it deems
adequate and necessary, all at the sole cost and expense of Licensee.
(b) In the event of an emergency, Licensee will take immediate
steps to perform any necessary repairs, and in the event Licensee fails so to
do, Railroad will perform said necessary repairs at the sole cost and expense of
Licensee.
5. (a) The supervision over the location of the construction work and
inspection of the FACILITIES and the approval of the material used in
construction, maintenance, repair, alteration, renewal, relocation and removal
of the aforesaid FACILITIES covered by this Agreement shall be within the
jurisdictional rights of Railroad.
(b) The right of supervision over the location of the construction
work and inspection of the FACILITIES from time to time thereafter by Railroad,
shall extend for an appropriate distance on each side of the property of
Railroad as the method of construction and materials used may have an important
bearing upon the strength and stability of the FACILITIES over, under, upon or
in the property of Railroad.
6. Licensee shall comply with all Federal, State and local laws, and
assume all cost and expense and responsibility in connection therewith, without
any liability whatsoever on the part of Railroad.
7. (a) It is understood between the parties hereto that the operations
of Railroad at or near said FACILITIES involve some risk, and Licensee as part
of the consideration for this license hereby releases and waives any right to
ask for or demand damages for or account of loss of or injury to the FACILITIES
(and contents thereof) of Licensee that are over, under, upon or in the property
and facilities of Railroad including the loss of or interference with service or
use thereof and whether attributable to the fault, failure or negligence of
Railroad or otherwise.
- 3 -
<PAGE> 4
(b) And Licensee also covenants and agrees to and shall at all
times indemnify, protect and save harmless Railroad from and against all cost or
expense resulting from any and all losses, damages, detriments, suits, claims,
demands, costs and charges which the said Railroad may directly or indirectly
suffer, sustain or be subjected to by reason or on account of the construction,
placement, attachment, presence, use, maintenance, repair, alteration, renewal,
relocation or removal of said FACILITIES in, on, about or from the premises of
Railroad whether such losses and damages be suffered or sustained by Railroad
directly or by its employees, patrons or licensees, or be suffered or sustained
by other persons or corporations, including Licensee, its employees and agents
who may seek to hold Railroad liable therefor, and whether attributable to the
fault, failure or negligence of Railroad or otherwise, except when proved by
Licensee to be due directly to the sole negligence of Railroad.
(c) If a claim or action is brought against either party and for
which the other party may be responsible hereunder in whole or in part, such
other party shall be notified and permitted to participate in the handling or
defense of such matter.
8. All cost and expenses in connection with the construction,
maintenance, repair, alteration, renewal, relocation and removal of said
FACILITIES shall be borne by Licensee, and in the event of work being performed
or material furnished by Railroad under the stipulated right to perform such
work of construction, maintenance, repair, alteration, renewal, relocation or
removal under any section hereof, Licensee agrees to pay to Railroad the actual
cost of material plus the current applicable overhead percentages for storage,
handling, transportation, purchasing and other related material management
expenses and the actual cost of labor plus the current applicable overhead
percentages as developed and published by the accounting department of Railroad
for fringe benefits, payroll taxes, administration, supervision, use of tools,
machinery and other equipment, supplies, employers liability insurance, public
liability insurance, and other insurance, taxes and all other indirect expenses.
It is to be understood that the aforementioned material and labor overhead
charges are to be applied at the rates which are effective at the time of the
performance of any work by employees of Railroad on the said FACILITIES.
Licensee agrees to pay such bills within thirty (30) days of the presentation
thereof by Railroad.
9. Licensee shall, at its sole cost and expense, upon request in
writing of Railroad, promptly change the location of said FACILITIES covered by
this Agreement, where located over, upon or in the property and facilities of
Railroad, to another location, to permit and accommodate changes of grade
- 4 -
<PAGE> 5
or alignment and improvement in or additions to the facilities of Railroad upon
land now or hereafter owned or used by Railroad to the intent that said
construction shall at all times comply with the terms and conditions of this
Agreement with respect to the original construction; or in the event of the
lease, sale or disposal of the premises or any part thereof encumbered by this
license, then said Licensee shall make such adjustments or relocations in its
FACILITIES as are over, upon or in the property and facilities of Railroad as
may be required by said Railroad or its grantee; and if Licensee shall fail or
refuse to comply therewith, then the duly authorized agents of Railroad may make
such repairs or adjustments or changes in location and provide necessary
material therefor.
10. Upon termination of this Agreement or upon the removal or
abandonment of the FACILITIES covered hereby, all the rights, title and interest
of Licensee hereunder shall cease and determine, and this instrument shall
thereupon become and be null and void, without any liability on the part of
either party to the other party except only as to any liability accrued prior
thereto, and Licensee shall remove its said FACILITIES and appurtenances from
Railroad property, and right of way and all property of Railroad shall be
restored in good condition and to the satisfaction of Railroad. If Licensee
fails or refuses to remove its FACILITIES and appurtenances under the foregoing
conditions, Railroad shall be privileged to do so at the cost and expense of
Licensee, and Railroad shall not be liable in any manner to Licensee for said
removal.
11. In the event the FACILITIES consist of an underground occupation,
Licensee will be responsible for any settlement caused to the roadbed, right of
way and/or tracks, facilities and appurtenances of Railroad arising from or as a
result of the installation of the said FACILITIES for a period of one (1) year
subsequent to the date of completion of the installation, and Licensee agrees to
pay to Railroad on demand the full cost and expense therefor.
12. In the event the said FACILITIES consist of electrical power or
communication wires and/or appurtenances, Licensee shall at all times be
obligated promptly to remedy any inductive interference growing out of or
resulting from the presence of its FACILITIES; and if Licensee should fail so to
do, then Railroad may do so, and Licensee agrees to pay to Railroad on demand
the full cost and expense therefor.
13. As part of the consideration of the within Agreement, Licensee
covenants and agrees that no assessments, taxes or charges of any kind shall be
made against Railroad or its property by reason of the
- 5 -
<PAGE> 6
construction of said FACILITIES of Licensee, and Licensee further covenants and
agrees to pay to Railroad promptly upon bills rendered therefor the full amount
of any assessments, taxes or charges of any kind which may be levied, charged,
assessed or imposed against Railroad or its property by reason of the
construction and maintenance of said FACILITIES of Licensee.
14. The rights conferred hereby shall be the privilege of Licensee
only, and no assignment or transfer hereof shall be made, or other use be
permitted than for the purpose stated on Page 1 without the consent and
agreement in writing of Railroad being first had and obtained.
15. This Agreement shall be terminable upon mutual consent of the
parties hereto, provided that this Agreement may be terminated by Railroad upon
the violation of any of the terms, covenants and conditions of this Agreement on
the part of Licensee.
16. This Agreement shall take effect as of the First day of September,
1992, subject to the provisions of Article "18".
17. Anything herein contained to the contrary notwithstanding, there
shall be no obligation on the part of Railroad to continue operation of the line
of railroad in the vicinity of the FACILITIES to prevent the termination of
Licensee's occupation rights at any crossing or occupation covered hereunder on
account of an abandonment of line or service by Railroad; nor shall there be
any obligation upon Railroad to perfect its title in order to continue in
existence the said occupation rights after such abandonment of line or service.
18. This Agreement will not become valid until the method of
installation and all related matters have been approved by the Chief Engineer -
Design and Construction of Railroad or his duly designated representative.
19. Automobile mileage charges incurred by aforementioned Railroad
inspectors, flagmen or watchmen in connection with the installation,
maintenance, etc., of said FACILITIES will be based on allowances approved by
the United States Government in effect at the time the expenses are incurred.
20. This Agreement shall not be deemed or construed as transferring to
Licensee any interest in the land of Railroad or any right in the nature of an
interest in land, irrespective or any expenditure by Licensee for the
FACILITIES.
- 6 -
<PAGE> 7
irrespective or any expenditure by Licensee for the FACILITIES.
The terms of this Agreement shall be binding and effective upon all the parties
hereto, and unless and until terminated, as hereinbefore provided, this
Agreement shall inure to the benefit of and be binding upon the parties hereto,
their successors and assigns, subject, however, to the provisions of Article
"14" of this Agreement.
IN WITNESS WHEREOF, the said parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
WITNESS: CONSOLIDATED RAIL
CORPORATION
/s/ LEE B. MCGRAW BY: /s/ J.D. COSSEL
- ------------------------------- -------------------------------
J.D. Cossel
Chief Engineer
Design and Construction
WITNESS: CAMDEN COGEN L.P.
/s/ SARAH DEVASE BY: Cogen Technologies Camden GP
- ------------------------------- Limited Partnership, its
general partner
BY: Cogen Technologies Camden,
Inc., its general partner
By /s/ R CARY MCNAIR JR.
------------------------
Name: R Cary McNair Jr.
----------------------
Title: Vice President
---------------------
- 7 -
<PAGE> 8
ACKNOWLEDGMENT
Commonwealth of PENNSYLVANIA )
: ss.:
County of PHILADELPHIA )
On this 17th day of September, 1992, before me a Notary Public, the undersigned
officer, personally appeared J.D. Cossel, who acknowledged himself to be the
Chief Engineer Design & Construction of Consolidated Rail Corporation, a
corporation, and that he as such, being authorized to do so, executed the
foregoing instrument for the purposes therein contained by signing the name of
the corporation by himself as Chief Engineer Design & Construction.
The full and actual consideration paid or to be paid for the transfer of title
to realty evidenced by the within Agreement, as such consideration is defined in
the License Agreement for Wire, Pipe and Cable Transverse Crossings and
Longitudinal Occupations, Page 2, Paragraph 1, is $16,345.00.
Signature /s/ WILLIAM HENRY SWANNER
Notarial Seal --------------------------
William Henry Swanner, Notary Public
Philadelphia, Philadelphia County Printed William Henry Swanner
My Commission Expires May 2, 1996 ---------------------------
Notary Public
Member, Pennsylvania Association of Notaries
My commission expires: 5-2-96
-------------
STATE OF TEXAS )
: ss.:
COUNTY OF HARRIS )
BE IT REMEMBERED, that on this 14th day of September, 1992, in the County and
State aforesaid, before me, the subscriber, a Notary Public of Harris County,
Texas authorized to take acknowledgments and proofs in said County and State,
personally appeared R. Cary McNair, Jr. who, I am satisfied is the person who
signed the within instrument as Vice President of Cogen Technologies Camden,
Inc., the corporation named therein, and he thereupon acknowledged that the
within instrument signed by the corporation is the voluntary act and deed of the
corporation, made by virtue of authority from its Board of Directors, as a
general partner on behalf of Cogen Technologies Camden GP Limited Partnership, a
Delaware limited partnership, as a general partner on behalf of CAMDEN COGEN
L.P., a Delaware limited partnership the partnership which executed the within
instrument.
Signature /s/ LINDA C. FOX
LINDA C. FOX -------------------------
NOTARY PUBLIC, STATE OF TEXAS
[SEAL] MY COMMISSION EXPIRES Printed Linda C. Fox
MAY 21, 1995 --------------------------
Notary Public
My commission expires: 5-21-95
------------
<PAGE> 9
[DIAGRAM]
<PAGE> 10
[DIAGRAM]
<PAGE> 11
[DIAGRAM]
<PAGE> 12
[DIAGRAM]
<PAGE> 1
EXHIBIT 10.92
LEASE AGREEMENT
BETWEEN
BAYONNE INDUSTRIES, INC.
AND
IMTT-BAYONNE
("LESSOR")
AND
COGEN TECHNOLOGIES NJ, INC.
("LESSEE")
May 22, 1986
Record and return to: Prepared by:
/s/ ROSS D. AIN, ESQ.
-----------------------------------
Martin L. Wiener, Esq. Ross D. Ain, Esq.
Kimmelman, Wolff & Van Ness, Feldman, Sutcliffe
Samson & Curtis
280 Corporate Center 1050 Thomas Jefferson St., N.W.
5 Becker Farm Road Seventh Floor
Roseland, New Jersey 07068 Washington, D.C. 20007
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1
DEFINITIONS................................................. 2
ARTICLE 2
DEMISED PREMISES............................................ 6
ARTICLE 3
TERM........................................................ 6
3.1 Base Term........................................... 6
3.2 Termination......................................... 6
3.3 Renewal of Lease Agreement.......................... 7
3.4 Extension Upon Termination.......................... 7
ARTICLE 4
RENT........................................................ 8
4.1 Base Term Rent .................................... 8
4.2 Renewal Term Rent ................................. 8
4.3 Additional Rent ................................... 9
ARTICLE 5
USE OF PREMISES
AND OWNERSHIP OF IMPROVEMENTS.............................. 10
5.1 Use Limited ...................................... 10
5.2 Safe and Lawful Use .............................. 10
5.3 Maintenance of Governmental Authorizations ....... 11
5.4 Lessee's Right to Contest ........................ 11
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
5.5 Effect on Lessor's Insurance ....................... 12
5.6 Ownership of Improvements .......................... 13
ARTICLE 6
QUIET ENJOYMENT ............................................. 13
6.1 Lessee's Possession ................................ 13
6.2 Access by Lessor ................................... 13
6.3 Access by Lessee for Steam Interconnection ......... 13
ARTICLE 7
TAXES ....................................................... 14
7.1 Payment of Taxes ................................... 14
7.2 Compliance and Evidence of Payment.................. 14
7.3 Tax Appeals ........................................ 15
7.4 Proration .......................................... 15
7.5 Refunds and Rebates ................................ 16
ARTICLE 8
UTILITY EXPENSES ............................................ 16
ARTICLE 9
REIMBURSEMENT ............................................... 16
9.1 Reimbursement of Lessor ............................ 16
9.2 Reimbursement of Lessee ............................ 17
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 10
PRIOR USE; ENVIRONMENTAL RESPONSIBILITY ..................... 17
10.1 Prior Use of Demised Premises ..................... 17
10.2 Environmental Damage Responsibility ............... 18
ARTICLE 11
LIENS ....................................................... 19
ARTICLE 12
INSURANCE ................................................... 20
12.1 Responsibility of Lessee .......................... 20
12.2 Conditions Concerning Insurance Carriers .......... 20
ARTICLE 13
PERMITTED ENCUMBRANCES ON LEASEHOLD
INTERESTS AND IMPROVEMENTS .................................. 21
ARTICLE 14
EMINENT DOMAIN .............................................. 22
14.1 Distribution of Award ............................. 22
14.2 Partial Taking .................................... 23
ARTICLE 15
TERMINATION ................................................. 23
15.1 Lessor's Right to Terminate ....................... 23
15.2 Lessee's Right to Terminate ....................... 24
15.3 Prepaid Rent Nonrefundable ........................ 25
</TABLE>
-iii-
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
15.4 Notice to Financiers and Opportunity to Cure ...... 26
15.5 Written Notice of Termination ..................... 28
15.6 Condition of Demised Premises at Termination ...... 28
ARTICLE 16
REMEDIES UPON LESSEE'S BREACH ............................... 28
ARTICLE 17
ATTENDANT LAND RIGHTS ....................................... 30
ARTICLE 18
MORTGAGE PRIORITY ........................................... 31
ARTICLE 19
NONWAIVER ................................................... 31
ARTICLE 20
FORCE MAJEURE ............................................... 32
20.1 Definition ........................................ 32
20.2 Burden of Proof ................................... 32
20.3 Effect of Force Majeure ........................... 32
20.4 Prepaid Rent Nonrefundable ........................ 33
ARTICLE 21
SUCCESSORS AND ASSIGNS ...................................... 33
ARTICLE 22
MISCELLANEOUS ............................................... 38
22.1 Duplicates; Recordation .......................... 38
</TABLE>
-iv-
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
22.2 Consent Not to be Unreasonably Withheld .......... 38
22.3 Termination of Preexisting Lease ................. 38
22.4 Covenants Running with Land ...................... 38
22.5 Notice ........................................... 39
22.6 Amendments ....................................... 40
22.7 Choice of Law .................................... 40
22.8 Severability ..................................... 40
22.9 Other Agreements.................................. 40
22.10 Captions ........................................ 41
</TABLE>
Exhibits
A. Property Description
B. Map of Demised Premises
C. Example of GNP Deflator Adjustment
-v-
<PAGE> 7
THIS LEASE AGREEMENT made and entered into as of May 22, 1986, by and
between Bayonne Industries, Inc., a New Jersey corporation, and
IMTT-Bayonne, a Delaware partnership (collectively referred to as the
"Lessor"), and Cogen Technologies NJ, Inc., a Delaware corporation and its
successors and assigns (the "Lessee").
WHEREAS, Lessor, IMTT-Bayonne, operates a tank terminal facility
located at Bayonne, New Jersey ("Lessor's Plant" or "Bayonne Facility"),
which Plant utilizes steam for industrial purposes;
WHEREAS, Lessor, Bayonne Industries, Inc., is the owner of the property
whereon the Bayonne Facility is located and IMTT-Bayonne leases such
property from Bayonne Industries, Inc.;
WHEREAS, IMTT-Bayonne and Lessee have entered into an Agreement for the
Sale of Steam and Electricity From a Cogeneration Facility (the "Steam Sale
Agreement"); and
WHEREAS, the Lessor desires to lease to Lessee the land upon which the
Cogeneration Facility will be located;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein and other valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Lessor and Lessee agree
as follows:
<PAGE> 8
-2-
ARTICLE 1
DEFINITIONS
The following terms when used herein shall have the following meanings,
unless a different meaning shall be expressly stated or shall be apparent
from the context:
1.1 "Affiliate" means a corporation or other entity that directly or
indirectly, through one or more intermediaries, controls, or is controlled
by, or is under common control with, another corporation or entity.
1.2 "Annual Period" means any one of a succession of consecutive
12-month periods, the first of which shall begin on the date of execution of
this Lease Agreement if such date is the first day of a calendar month, or
otherwise on the first day of the month immediately following the month in
which such execution occurs.
1.3 "Bayonne Facility" means the tank terminal facility located at
Bayonne, New Jersey, and all appurtenant property owned or leased at that
location by IMTT, BI, or any Affiliates thereof.
1.4 "BI" means Bayonne Industries, Inc., a New Jersey corporation
having its principal place of business at the Foot of East 22nd Street,
Bayonne, New Jersey 07002.
1.5 "Boiler House" means the building located at the Bayonne Facility
that houses the Steam Producing Facilities except that interior portion of
the building unrelated to the Steam Producing Facilities.
<PAGE> 9
-3-
1.6 "Cogen" means Cogen Technologies NJ, Inc., a Delaware corporation,
having its principal place of business at 14614 Falling Creek Drive, Suite
212, Houston, Texas 77068.
1.7 "Cogeneration Facility" means the waste heat boilers, gas and steam
turbines, generators and all appurtenant structures, equipment including
interconnection facilities, owned or leased and operated by Lessee for the
purpose of producing electricity, steam or other forms of useful thermal
output, but such term does not include real property interests.
1.8 "Date of Initial Commercial Operation" means 12:01 A.M. on the day
Lessee designates in writing as the initial date of commercial operation of
the Cogeneration Facility.
1.9 "Easement" means that certain easement of even date herewith from
BI and IMTT to Cogen pursuant to which BI and IMTT grant to Cogen ingress
and egress over the Bayonne Facility to the Boiler House, including all
exhibits and amendments thereto that may be made from time to time, and any
other easements, rights of way or licenses that may be granted to Cogen
under this Lease Agreement.
1.10 "Financier" means any person lending money for the construction
and operation of the Cogeneration Facility, any person providing funds for
refinancing or take-out of any such loans, and the nominee or designee of
any such person.
1.11 "IMTT" means IMTT-Bayonne, a Delaware partnership.
<PAGE> 10
-4-
1.12 "Lease Agreement" or "Ground Lease" means this contract, including
all exhibits and amendments thereto that may be made from time to time.
1.13 "Leasehold Improvements" means the Cogeneration Facility and any
other improvements constructed or placed on the Demised Premises by Lessee.
1.14 "Note" means the promissory note of Cogen dated May 22, 1986,
payable to Bayonne Industries, Inc. in the principal amount of
$2,600,000.00.
1.15 "Option Agreement" means that certain option agreement of even
date herewith between Cogen and BI, including all exhibits and amendments
thereto that may be made from time to time.
1.16 "Party" or "Parties" means the signatories of this Lease Agreement
and their permitted successors and assigns.
1.17 "Prime Rate" means the interest rate (sometimes referred to as the
"Base Rate") for large commercial loans to creditworthy entities published
by First National Bank of Chicago, or its successor bank, as such rate may
be in effect from time to time.
1.18 "Purchase and Sale Agreement" means that certain agreement of even
date herewith pursuant to which Cogen purchases and Lessor sells the Steam
Producing Facilities, including all exhibits and amendments thereto that may
be made from time to time.
<PAGE> 11
-5-
1.19 "Rent Note" means the promissory note of even date herewith of
Cogen dated May 22, 1986, payable to BI in the principal amount of
$600,000.00 delivered pursuant to Article 4.1 hereof.
1.20 "Security Agreement" means that certain agreement of even date
herewith between Cogen and BI executed and delivered by Cogen as security
for the payment of the Note, including all exhibits and amendments that may
be made from time to time.
1.21 "SPF Lease" means that certain Steam Producing Facilities Lease
Agreement of even date herewith between Cogen, as lessor, and IMTT, as
lessee, pursuant to which the Steam Producing Facilities will be leased to
IMTT, including all exhibits and amendments thereto that may be made from
time to time.
1.22 "Steam Producing Facilities" means the existing boilers and
appurtenant structures and equipment located inside the Boiler House, and
all additions, replacements, improvements, substitutions, and increments
thereto, but not including the Boiler House, located at the Bayonne Facility
and operated for the purpose of producing steam for industrial purposes at
the Bayonne Facility.
1.23 "Steam Sale Agreement" means that certain agreement between Cogen
and IMTT dated June 13, 1985, for the sale of steam and electricity from a
cogeneration plant, including all exhibits and amendments thereto that may
be made from time to time.
<PAGE> 12
-6-
ARTICLE 2
DEMISED PREMISES
Upon the terms and conditions hereinafter set forth, and in
consideration of the payment of the rents and the prompt performance by the
Lessee of the covenants and agreements contained herein, the Lessor does
lease, let, and demise to the Lessee and the Lessee hereby leases from the
Lessor, that certain real property situated in the County of Hudson, State
of New Jersey, as described in Exhibit A hereto and as more fully shown on
Exhibit B hereto attached (hereinafter referred to as the "Demised
Premises").
ARTICLE 3
TERM
3.1 Base Term. This Lease Agreement shall be effective upon the date of
execution and shall continue in effect for a Base Term of twenty (20) Annual
Periods after the date of execution.
3.2 Termination. Notwithstanding the preceding paragraph, if the Date
of Initial Commercial Operation of the Cogeneration Facility has not
occurred prior to the last day of the month which is twenty (20) months
following the execution of this Lease Agreement, Lessor may thereafter
terminate this Lease Agreement by providing Lessee and each Financier thirty
(30) days written notice, unless prior to the expiration of such thirty (30)
day
<PAGE> 13
-7-
period, Lessee has commenced a program of continuous construction of the
Cogeneration Facility and does not, of its own volition, subsequently
discontinue such construction program.
3.3 Renewal of Lease Agreement. Upon the expiration of the Base Term,
this Lease Agreement shall automatically be extended for two (2) succeeding
terms (hereinafter referred to as the "Renewal Terms"), unless Lessee elects
to terminate this Lease Agreement at the expiration of the Base Term or the
first Renewal Term. In the event that this Lease Agreement terminates during
the Base Term pursuant to Article 15, Lessee shall not owe Lessor Renewal
Term rent pursuant to Article 4.2. The first Renewal Term shall be for two
(2) Annual Periods and the second Renewal Term shall be for ten (10) Annual
Periods. Termination of this Lease Agreement pursuant to this Article 3.3
shall be valid only if Lessee provides written notice of its intent to
terminate to Lessor at least nine (9) months prior to the expiration of the
Base Term or the first Renewal Term. Upon expiration of the second Renewal
Term, this Lease Agreement may be continued thereafter by mutual agreement
of the Parties.
3.4 Extension Upon Termination. Upon any termination of this Lease
Agreement, it shall be automatically extended for one additional twelve (12)
month period solely for the purposes described in Article 15.6.
<PAGE> 14
-8-
ARTICLE 4
RENT
4.1 Base-Term Rent. This Lease Agreement is made for and in
consideration of a rental amount of Six Hundred Thousand Dollars
($600,000.00) which is due upon the execution of this Lease Agreement, and
payable by delivery to BI of a promissory note (the Rent Note) with Lessee
as maker, due and payable, in full, twenty-four (24) months from the
execution of this Lease Agreement, bearing interest at the rate of one
percent (1%) over the Prime Rate, with interest, due from date of execution
of this Lease Agreement until paid and said interest being payable monthly
commencing thirty (30) days from the execution of this Lease Agreement. In
the event that Lessee elects to terminate this Lease Agreement for any
reason within six (6) months of the execution of this Lease Agreement, and
Lessee pays to Lessor a certified check made to the order of BI in the sum
of Sixty Thousand Dollars ($60,000.00), the above-described Rent Note shall
be returned to Lessee marked "paid" or "cancelled".
4.2 Renewal Term Rent.
A. For the Renewal Terms, Lessee shall pay to Lessor beginning upon
the first day of the first calendar month of the Renewal Term and upon the
first day of each succeeding calendar month for the duration of the Renewal
Term a rental amount of Five Thousand Dollars ($5,000.00) per month, to be
adjusted as provided in Article 4.2B.
<PAGE> 15
-9-
B. The Renewal Term Rent shall be adjusted upward at an
annual percentage rate equal to the annual percentage increase in the GNP
Deflator, if any, which has occurred during the immediately preceding
calendar year, commencing with calendar year 1988 and for each year
thereafter. The increase, if any, will be implemented at the beginning of
each Renewal Term Annual Period. In no event will the Renewal Term Rent ever
be adjusted downward or decreased, provided, however, that in the event of a
decrease in the GNP Deflator, the Renewal Term Rent will not be adjusted
upward until the GNP Deflator has exceeded a level equal to that in the year
immediately preceding the year(s) in which the GNP Deflator decreased.
C. The GNP Deflator is defined as the percentage which when
divided into the then current Gross National Product will yield Gross
National Product in 1982 dollars (or constant dollars for the then
applicable base year). GNP Deflator percentages are published by the U.S.
Department of Commerce in its bulletin "Survey of Current Business" and/or
the Federal Reserve Bulletin. An example of the operation of the GNP
Deflator is attached as Exhibit C.
4.3 Additional Rent. In addition to the rent set forth in Articles 4.1
and 4.2, Lessee shall comply with all of the obligations to pay taxes set
forth in Article 7 and to make payments set forth in Article 8 and Article 9
of this Lease Agreement, which obligations shall be collectively referred to
as
<PAGE> 16
-10-
"Additional Rent." Any payments made by a Financier pursuant to Article
21.7(2)(i) shall also be Additional Rent.
ARTICLE 5
USE OF PREMISES
AND OWNERSHIP OF IMPROVEMENTS
5.1 Use Limited. The Demised Premises shall be used (i) only for the
erection, construction, operation, maintenance, modification,
reconstruction, and replacement of the Cogeneration Facility or (ii) with
the consent of Lessor, for any other lawful use.
5.2 Safe and Lawful Use. Lessee shall not use, occupy, suffer or permit
the Demised Premises or any part thereof to be used during the term hereof
in any manner or occupied for any purpose contrary to any applicable and
duly adopted laws, ordinances, rules and any public authority regulations
nor in derogation, violation or in nonconformity with any safety codes and
recognized Industry Safety Standards and guidelines applicable to Lessee's
operation on the Demised Premises. Lessee shall use, maintain and occupy the
Demised Premises in a careful, safe, lawful and proper manner and will not
commit nor permit any public or private nuisance to be committed on the
Demised Premises. Lessee shall not use nor permit the use of the Demised
Premises in any way which will injure the reputation of the same or which
shall constitute an unreasonable interference with
<PAGE> 17
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Lessor's business or a nuisance, annoyance or inconvenience to the Lessor or
any neighbors of Lessor or which shall damage Lessor or any neighbors of
Lessor. The safe and lawful erection, construction, operation, maintenance,
modification, reconstruction, or replacement of a Cogeneration Facility
shall not be construed to constitute a nuisance, annoyance or inconvenience
on the Demised Premises.
5.3 Maintenance of Governmental Authorizations. Lessee shall be
responsible for obtaining and maintaining all necessary government
authorizations, licenses, permits and certificates for its utilization of
the Demised Premises and shall carry on its operations in compliance with
all such authorizations, licenses, permits and certificates.
5.4 Lessee's Right to Contest.
A. Lessee shall have the right to contest by appropriate legal
proceedings diligently conducted in good faith, in the name of the Lessee,
or Lessor (if legally required and consented to by Lessor), or both (if
legally required and consented to by Lessor), without cost or expense to
Lessor, the validity or application of any law, ordinance, order, rule,
regulation or requirement of the nature referred to in Articles 5.2 and 5.3.
If by the terms of any such law, ordinance, order, rule, regulation or
requirement, compliance therewith may legally be delayed pending the
prosecution of any such proceeding, Lessee may delay such compliance
therewith until the final determination of such proceeding.
<PAGE> 18
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B. Lessor agrees to execute and deliver any appropriate papers or
other instruments which may be necessary or proper to permit Lessee to so
contest the validity or application of any such law, ordinance, order, rule,
regulation or requirement and to fully cooperate with Lessee in such
contest, all at Lessee's expense.
5.5 Effect on Lessor's Insurance. Except with regard to the permitted
uses under Article 5.1, Lessee shall put nothing on the Demised Premises nor
undertake any activity which would forfeit Lessor's insurance on its Bayonne
Facility or the insurance required hereunder. Should any installation made
or action taken by Lessee, whether authorized or unauthorized under this
Lease Agreement, increase the premium of any of Lessor's insurance policies
on its Bayonne Facility or the insurance required hereunder, then Lessee is
obligated to pay such increased premiums on Lessor's insurance policies.
Should the Lessee's operation and maintenance of the Cogeneration Facility
be conducted in an unsafe manner so as to render the Lessor unable to secure
insurance on its Bayonne Facility, then Lessee hereby grants to Lessor the
right to require Lessee, upon written notice from Lessor, to immediately
take such action as is necessary to operate and maintain the Cogeneration
Facility in a safe manner.
<PAGE> 19
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5.6 Ownership of Improvements. Lessee warrants that it or its assignees
will be the owner of any Leasehold Improvements erected, installed, or
located on the Demised Premises by it. Lessor agrees that same shall be the
sole property of the Lessee, and Lessor shall have no legal or equitable
ownership interest therein.
ARTICLE 6
QUIET ENJOYMENT
6.1 Lessee's Possession. Lessor warrants that it has good title to the
Demised Premises free and clear of all liens and encumbrances other than
those set forth in Title Report No. 86-24-60091 of Chicago Title Insurance
Company of even date herewith. Lessor covenants and agrees with Lessee that
so long as the Lessee keeps and performs all of the covenants and conditions
required to be kept and performed by the Lessee, the Lessee shall have quiet
and undisturbed and continued possession of the Demised Premises, free from
any claims against the Lessor and all persons claiming under, by or through
the Lessor.
6.2 Access by Lessor. Lessor, its agents and representatives, at all
reasonable times, may enter the Demised Premises to inspect the same for the
purposes of ascertaining compliance with terms of this Lease Agreement.
6.3 Access by Lessee for Steam Interconnection. Lessee shall have the
right to enter, at reasonable times, the premises
<PAGE> 20
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of the Lessor in order to construct, operate, and maintain steam or electric
interconnection facilities necessary to carry out the Steam Sale Agreement
and any other steam agreement with Exxon Company, U.S.A. or any other
person, or any other electric power sales arrangements, but only in
accordance with the provisions of Article 17 of this Lease Agreement.
ARTICLE 7
TAXES
7.1 Payment of Taxes. Lessee shall be responsible for all taxes
relating to the Demised Premises and any buildings or improvements erected
thereon by Lessee, as well as all equipment and/or fixtures located thereon
by Lessee. Lessor shall deliver to Lessee promptly after receipt copies of
all tax bills relating to the tax lot of which the Demised Premises are a
portion together with a calculation made in accordance with Article 7.4 of
the taxes owed by Lessor on the nonleased portion of the tax lot together
with a check for Lessor's pro rata share of such aforesaid tax bills.
Thereafter, Lessee shall be responsible to remit to the responsible tax
authorities payment of taxes for the entire tax lot of which the Demised
Premises are a portion.
7.2 Compliance and Evidence of Payment. Lessee shall be deemed to have
complied with the covenants of this Article regarding all taxes if payment
of such taxes shall have been made either within any period allowed by law
or by the governmental
<PAGE> 21
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authority imposing the same during which payment is permitted without
penalty or interest or before the same shall become a lien upon the Demised
Premises provided Lessee pays any and all penalties, late charges and/or
interest in connection therewith, and Lessee shall produce and exhibit to
Lessor, if requested to do so in writing by Lessor, satisfactory evidence of
such payment. Notwithstanding the foregoing and subject only to Article 7.1,
Lessee shall promptly pay all such taxes where no legal delay has been
obtained.
7.3 Tax Appeals. Lessee or its designees shall have the right, with
Lessor's knowledge and consent, to contest or review all such taxes by legal
proceedings, or in such other manner as it may deem suitable which, if
necessary, may be in the name of and with the cooperation of the Lessor and
Lessor shall execute all documents necessary to accomplish the foregoing.
Notwithstanding the foregoing and subject only to Article 7.1, Lessee shall
promptly pay all such taxes where no legal delay has been obtained.
7.4 Proration. The Parties hereto understand and agree that the real
property taxes relating to the Demised Premises shall be prorated
proportionately between Lessor and Lessee: (i) for the first and last year
of this Lease Agreement, and (ii) to the extent that the Demised Premises
are not a separately assessed tax lot, based upon the respective percentages
of the acreage of the tax lot compared to the acreage leased herein.
<PAGE> 22
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7.5 Refunds and Rebates. Any refunds or rebates on account of the taxes
paid with respect to the Demised Premises shall be prorated in accordance
with the provisions of Article 7.4(ii). Any such refunds received by Lessor
or Lessee a part of which are for the benefit of the other shall be received
by either Party in trust and paid forthwith to the Party entitled to such
portion of the refund. Lessor will, upon the request of Lessee, sign any
receipts which may be necessary to secure the payment of any such refund or
rebate.
ARTICLE 8
UTILITY EXPENSES
Lessee shall contract separately for and pay when due all the rents or
charges for utilities, including but not limited to electricity, gas, water,
sewerage and sewer assessments, used by the Lessee, which are or may be
assessed or imposed upon the Demised Premises and if not paid, such rents or
charges shall become payable as Additional Rent with the installment of rent
next due or within thirty (30) days of demand therefor, whichever occurs
sooner.
ARTICLE 9
REIMBURSEMENT
9.1 Reimbursement of Lessor. If the Lessee shall fail or refuse to
comply with and perform any conditions and covenants of
<PAGE> 23
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this Lease Agreement, the Lessor may (but shall be under no obligation to)
carry out and perform such conditions and covenants, for the account of the
Lessee. Any cost or expense so incurred by Lessor shall be payable on demand
or shall be added to the installment of rent due immediately thereafter.
This remedy shall be in addition to such other remedies as the Lessor may
have hereunder by reason of the breach by the Lessee of any of the covenants
and conditions of this Lease Agreement.
9.2 Reimbursement of Lessee. If the Lessor shall fail or refuse to
comply with and perform any conditions and covenants of this Lease
Agreement, the Lessee may (but shall be under no obligation to) carry out
and perform such conditions and covenants, for the account of the Lessor.
Any cost and expense paid by Lessee shall be payable by Lessor on demand.
This remedy shall be in addition to such other remedies as the Lessee may
have hereunder by reason of the breach by the Lessor of any of the covenants
and conditions of this Lease Agreement.
ARTICLE 10
PRIOR USE; ENVIRONMENTAL RESPONSIBILITY
10.1 Prior Use of Demised Premises. Lessor makes no warranty that the
Demised Premises are suitable for Lessee's purposes; however, Lessor has no
knowledge that the Demised Premises are unsuitable for Lessee's purposes.
Lessee acknowledges that Lessor: (1) acquired the Demised Premises on
<PAGE> 24
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the 19th day of July, 1984; (2) has not placed any improvements thereon; and
(3) has conducted no activities thereon nor put the Demised Premises to any
use whatsoever from the date of its acquisition thereof through the date of
the execution of this Lease Agreement. If the Demised Premises cannot be
used for Lessee's purposes as specified in Article 5, then Lessee may cancel
this Lease Agreement without liability or penalty to either Party.
10.2 Environmental Damage Responsibility. Lessor agrees that Lessee
shall be liable only for any environmental loss, damage, cost, or expense
arising from its construction, operation, and maintenance of the
Cogeneration Facility and Lessor shall not be entitled to claim any right of
contribution or otherwise hold Lessee liable for any environmental losses,
damages, costs, or expenses which result from actions which occurred prior
to the effective date of this Lease Agreement or which occurred or occurs by
reason of actions of the Lessor or other parties beyond the reasonable
control of the Lessee, it being specifically understood that Exxon Company,
U.S.A. is a party beyond the reasonable control of Lessee. Lessee and Lessor
shall cooperate with each other to assist in the defense of any claim made
against one or both of the Parties to this Lease Agreement which relates to
environmental damage not caused by the Parties, including pursuing any third
parties. Unless prohibited by any applicable insurance policy carried by
either Party,
<PAGE> 25
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Lessor and Lessee agree to subrogate the other Party to any rights that they
may have against third parties with respect to environmental liability in
connection with the Demised Premises.
ARTICLE 11
LIENS
If any mechanics', materialmen's or other liens shall be filed against
the Demised Premises by reason of labor performed or materials furnished to
the Lessee in the erection, construction, completion, alteration, repair or
addition to any building or improvement, the Lessee shall within thirty (30)
days thereafter, at the Lessee's own cost and expense, cause such lien or
liens to be satisfied, removed, cancelled, erased and discharged of record
together with any Notices of Intention that may have been filed either by
payment thereof or by bonding the lien in accordance with the laws of the
State of New Jersey. Should Lessee fail to comply with the foregoing, Lessor
may at its option have the lien removed by bonding same, all at Lessee's
expense. Failure to do so shall entitle the Lessor to resort to such
remedies as are provided herein in the case of any default of this Lease
Agreement, in addition to such as are permitted by law. Lessee shall at no
time cause or permit a mortgage or any other security device of any nature
to be inscribed against the Demised Premises except as otherwise provided in
Article 13 with regard to Lessee's leasehold interest.
<PAGE> 26
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ARTICLE 12
INSURANCE
12.1 Responsibility of Lessee. Lessee shall provide and maintain, for
the joint benefit of the Lessee and Lessor (and mortgagees, if any) during
the entire term of this Lease Agreement, public liability insurance against
claims for: (1) bodily injury and death occurring on or about the Demised
Premises; (2) property damage; and (3) for any claims or acts that Lessee or
Lessor can be held legally liable for, regardless of the jurisdiction.
Lessee shall also provide and maintain Worker's Compensation Insurance in
statutory limits. Lessor shall have the right, from time to time, to make
such reasonable requirements with reference to insurance that will
reasonably cover liabilities to which the Lessor may be exposed by virtue of
this Lease Agreement, but in no event will Lessor require that Lessee carry
limits in excess of those carried by Lessor. Any insurance called for
hereunder shall also provide coverage for any claims resulting from Lessee's
use of any of Lessor's land pursuant to Article 17 hereof.
12.2 Conditions Concerning Insurance Carriers. Insurance companies
issuing policies required in this Lease Agreement shall be qualified to do
business in New Jersey and shall have a financial rating of A12 or better
according to "Best's Insurance Reports, Fire and Casualty," edition current
at the inception date of each policy. To the extent permissible by law, all
<PAGE> 27
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insurance policies required to be furnished by the Lessee hereunder shall
name both Lessee and Lessor (and mortgagees, if any) as named insureds and
each such policy shall be non-cancellable with respect to Lessor without
thirty (30) days written notice to the Lessor. The policy or policies of
insurance or certified copies thereof shall be delivered to Lessor, together
with evidence of the payment of the premiums therefor, not less than fifteen
(15) days prior to the commencement of the term of this Lease Agreement or
the date when the Lessee shall enter into possession of the Demised
Premises, whichever occurs sooner. At least fifteen (15) days prior to the
expiration or termination date of any policy, Lessee shall deliver a renewal
or replacement policy with proof of the payment of the premium therefor;
provided, however, that in the event that Lessee cannot deliver a renewal or
replacement policy within such period, Lessee shall deliver to Lessor a
binder or certificate of insurance as soon as possible.
ARTICLE 13
PERMITTED ENCUMBRANCES ON
LEASEHOLD INTERESTS AND IMPROVEMENTS
Lessee may, at any time and from time to time during the term of this
Lease Agreement and without the consent of Lessor, encumber Lessee's
interest in the leasehold estate created by this Lease Agreement to any
Financier by way of a lien, leasehold
<PAGE> 28
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mortgage or deed of trust containing such provisions as Lessee shall deem
fit and proper. The rights of Lessor will remain superior to those of such
Financiers in all instances except those in which Lessee encumbers Leasehold
Improvements placed upon the Demised Premises by Lessee. Lessee is hereby
specifically granted the right to encumber the Leasehold Improvements and
Lessor hereby subordinates any rights that it may have against said
Leasehold Improvements in favor of a Financier, it being understood that
nothing in this Article 13 shall adversely affect any rights of Lessor or
any Financier under Articles 21.6 and 21.7 of this Lease Agreement.
ARTICLE 14
EMINENT DOMAIN
14.1 Distribution of Award. If the Demised Premises and/or attendant
rights of way or other land rights shall be taken or condemned, in whole or
in part, by any competent authority, the Parties hereto agree to cooperate
in applying for and in prosecuting any claim for such taking and further
agree that the aggregate net award, after a pro rata deduction of all
expenses and costs, including attorneys' fees, incurred in connection
therewith, payable to both Lessor and Lessee (or if required, to any
mortgagee) shall be distributed as follows: (1) the portion of the award (or
moneys received) relating to the taking of the Cogeneration Facility or the
expense of dismantling and moving
<PAGE> 29
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the Cogeneration Facility shall be paid to the Lessee; (2) the portion of
the award (or moneys received) relating to the value of the Demised Premises
for the remainder of the Base Term of this Lease Agreement shall be paid to
Lessee; and (3) the portion of the award (or moneys received) relating to
the value of the land constituting the Demised Premises shall be paid to the
Lessor.
14.2 Partial Taking. In the event of a partial taking of the Demised
Premises and/or attendant rights of way, and if such partial taking renders
the continuation of normal operations at the Cogeneration Facility
impossible, impracticable, or unduly onerous, Lessee may elect to terminate
this Lease Agreement by giving notice to the Lessor within three (3) months
after such taking or condemnation. If such notice of termination is given,
this Lease Agreement shall terminate as of the date on which such notice is
given.
ARTICLE 15
TERMINATION
15.1 Lessor's Right to Terminate. Lessor shall have the right to
terminate this Lease Agreement upon the occurrence of any of the following
events:
A. The Lessee shall fail to make timely payment of any of the rent
pursuant to Articles 4, 7, 8, 9, and 21.7(2)(i) when due and payable, which
failure continues for thirty (30) days after written notice thereof; or
<PAGE> 30
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B. The Lessee shall fail to perform any of the covenants or
obligations of this Lease Agreement required to be kept and performed by
Lessee, other than the payment of rent covered in Paragraph A above, which
failure continues for a period of thirty (30) days after written notice of
such nonperformance; provided, however, that this Lease Agreement shall not
terminate if Lessee shall diligently commence to cure such default within
such thirty (30) day period and for so long as Lessee diligently continues
such efforts.
15.2 Lessee's Right to Terminate. Lessee shall have the right to
terminate this Lease Agreement upon the occurrence of any of the following
events:
A. Lessor shall fail to perform any of the covenants or
obligations of this Lease Agreement required to be kept and performed by
Lessor, which failure continues for a period of thirty (30) days after
written notice of such nonperformance; provided, however, that this Lease
Agreement shall not terminate if Lessor shall diligently commence to cure
such default within such thirty (30) day period and for so long as Lessor
diligently continues such efforts;
B. Lessee terminates the Steam Sale Agreement by reason of
Lessor's breach under Article 15 of the Steam Sale Agreement;
C. The Cogeneration Facility is damaged or destroyed such that the
Cogeneration Facility cannot be made operational at
<PAGE> 31
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normal production capacity within two (2) years after the occurrence;
D. There is a partial taking or condemnation with respect to
the Demised Premises or any building or improvement thereon such that the
continuation of normal operations at the Cogeneration Facility is
impossible, impracticable or unduly onerous;
E. Lessee fails to receive or maintain the authorizations
necessary to lawfully construct, operate and maintain the Cogeneration
Facility;
F. For any reason within six (6) months of the date of
execution of this Lease Agreement, provided Lessee pays Sixty Thousand
Dollars ($60,000.00) to Lessor on or prior to the expiration of such six (6)
month period; or
G. The Demised Premises cannot be used for Lessee's purposes
as specified in Article 5.
15.3 Prepaid Rent Nonrefundable. In the event that Lessee terminates
this Lease Agreement pursuant to Articles 15.2 A, B, C, D, E or G, Lessee
shall not be entitled to any refund of the prepaid rent called for by this
Lease Agreement. However, this Article 15.3 shall not preclude Lessee from
the recovery from Lessor of any damages due as the result of a breach of
this Lease Agreement.
<PAGE> 32
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15.4 Notice to Financiers and Opportunity to Cure.
A. Lessor shall look only to Lessee or to any successor of Lessee
under Article 21.3 to satisfy all obligations hereunder. No Financier shall
have any obligation to satisfy any obligation or indebtedness of Lessee to
Lessor, except the obligations and indebtedness to Lessor required under the
terms of this Lease Agreement.
B. Notwithstanding the provisions of Article 15.4A, a Financier
shall be liable to the Lessor for uninsured liabilities only to the extent
such liabilities represent defaults or breaches hereunder caused by
Financier's actions. Financier's liability to Lessor for uninsured
liabilities which have not been caused by Financier's actions shall be
limited to the extent of such Financier's interest in the Cogeneration
Facility.
C. Lessee shall promptly notify the Lessor of the names and
addresses of all Financiers. Notwithstanding Article 3.2 or Article 15.1,
Lessor shall not terminate this Lease Agreement until it has given thirty
(30) days written notice of any breach thereof to each of such Financiers,
and Lessor hereby agrees to promptly notify all such Financiers of any
breach. If Lessor fails to give such notice, Lessor shall not be liable for
damages to any Financier as a result of such failure, but any termination of
this Lease Agreement shall be of no force and effect. Thereafter, Lessor
shall not terminate this Lease Agreement as a result of any such breach if
within such thirty (30) day period any Financier has either:
<PAGE> 33
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(i) cured the breach if it can be cured by payment of money; or
(ii) if the breach cannot be so cured, caused the initiation of
and is diligently pursuing proceedings to give the Financier possession
of the Demised Premises or has diligently commenced to cure the breach
and for so long as the Financier diligently continues such efforts.
D. If a Financier is prohibited by any process or injunction issued
by any court or by reason of any action by any court having jurisdiction of
any bankruptcy or insolvency proceeding involving the Lessee or by an
automatic stay thereunder from curing such breach (other than a breach that
may be cured by the payment of money), the time specified above in Article
15.4C shall be extended for the period of such prohibition.
E. Nothing in this Lease Agreement shall require a Financier to
cure any default hereunder in advance of entering upon the Demised Premises
with the purpose of continuing to operate the Cogeneration Facility thereon.
Actions by a Financier against Leasehold Improvements under a mortgage or
other security right or encumbrance shall not in themselves be deemed an
election by Financier to continue operation of the Cogeneration Facility.
<PAGE> 34
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15.5 Written Notice of Termination. Termination of this Lease Agreement
shall be valid only if the terminating Party provides written notice of its
intent to terminate to the other Party.
15.6 Condition of Demised Premises at Termination. At the termination of
this Lease Agreement, for any reason, Lessee shall, at its sole cost, remove
all Leasehold Improvements from the Demised Premises and any personal
property owned by Lessee and located at the Bayonne Facility within twelve
(12) months of the termination and shall restore the Demised Premises to its
same condition prior to the commencement of this Lease Agreement, with the
exception of any foundation laid at or near ground level, and shall repair
any damage to the Demised Premises caused during the term of this Lease
Agreement. In the event Lessee's Leasehold Improvements are not so removed,
all such Leasehold Improvements shall be deemed abandoned to Lessor without
any payment being due from Lessor, reserving to Lessor all rights for
damages resulting from Lessee's failure to remove Leasehold Improvements and
restore the Demised Premises as described above.
ARTICLE 16
REMEDIES UPON LESSEE'S BREACH
If there should occur any event under Article 15.1 which results in
Lessor terminating this Lease Agreement, or if during the term hereof the
Demised Premises or any part thereof shall be
<PAGE> 35
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or become abandoned or deserted, vacated or vacant, or should the Lessee be
evicted by summary proceedings or otherwise, the Lessor, in addition to any
other remedies herein contained or as may be permitted by law, including but
not limited to Distress and/or Landlord's Lien Proceedings, may either by
force or otherwise, without being liable for prosecution therefor, or for
damages, re-enter the said Demised Premises and the same have and again
possess and enjoy; and, as agent for the Lessee or otherwise, re-let the
Demised Premises and receive the rents therefor and apply the same, first to
the payment of such expenses, reasonable attorney fees and costs, as the
Lessor may have been put to in re-entering and repossessing the same and in
making such repairs and alterations as may be necessary, and second to the
payment of rents due hereunder. The Lessee shall remain liable for such
rents as may be in arrears and also the rents as may accrue subsequent to
the re-entry by the Lessor, to the extent of the difference between the
rents reserved hereunder and the rents, if any, received by the Lessor
during the remainder of the unexpired term hereof, after deducting the
aforementioned expenses, fees and costs, the same to be paid as such
deficiencies arise and are ascertained each month.
<PAGE> 36
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ARTICLE 17
ATTENDANT LAND RIGHTS
In connection with this Lease Agreement of the Demised Premises and for
so long as this Lease Agreement shall remain effective, Lessor hereby grants
to Lessee all attendant rights of way and other land rights required for
Lessee: (1) to install or erect any equipment or other property to be used
by Lessee to interconnect with Lessor or any third-party purchasers of steam
or electrical power, or to otherwise transmit or receive steam or electrical
power to or from the Demised Premises; and (2) to arrange for the provision
of normal utility services to the Cogeneration Facility. Notwithstanding the
foregoing, Lessor shall retain the right to designate the location of all
such rights of way and/or other land rights. Lessor shall commit such rights
of way and/or land rights otherwise granted to writing in recordable form
and shall provide that the term thereof shall extend for a period of twelve
(12) months following the termination of this Lease Agreement solely for the
purposes set forth in Article 15.6. Lessor shall grant Lessee and its
business invitees and licensees an easement for reasonable ingress and
egress over Lessor's property to the Demised Premises, which ingress and
egress shall not unreasonably interfere with the operation and use of
Lessor's Plant. Lessor agrees to execute any and all documents, agreements
and instruments and to take all other actions, in order to effectuate the
same, all at Lessee's cost and expense.
<PAGE> 37
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ARTICLE 18
MORTGAGE PRIORITY
This Lease Agreement shall be a prior lien against the Demised
Premises with respect to any mortgages that may hereafter be placed upon the
Demised Premises. The recording of this Lease Agreement shall have
preference and precedence and be superior and prior in lien to any mortgage
on the Demised Premises.
ARTICLE 19
NONWAIVER
The various rights, remedies, options, and elections of the Lessor and
Lessee, expressed herein, are cumulative, and the failure of the Lessor or
Lessee to enforce strict performance by the other Party of the conditions
and covenants of this Lease Agreement or to exercise any election or option
or to resort or have recourse to any remedy herein conferred or the
acceptance by the Lessor of any installment of rent after any breach by the
Lessee in any one or more instances, shall not be construed or deemed to be
a waiver or a relinquishment for the future by the Lessor of any such
conditions and covenants, options, elections, or remedies, but the same
shall continue in full force and effect.
<PAGE> 38
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ARTICLE 20
FORCE MAJEURE
20.1 Definition. "Force Majeure" means unforeseeable causes beyond the
reasonable control of and without the willful fault or negligence of the
Party claiming Force Majeure. It shall include failure to perform due to
causes beyond that Party's control, including but not limited to war,
sabotage, acts of God, riots, drought or accidents not reasonably
foreseeable.
20.2 Burden of Proof. The burden of proof as to whether a Force Majeure
has occurred shall be upon the Party claiming the Force Majeure.
20.3 Effect of Force Majeure. If either Party is rendered wholly or
partly unable to perform its obligations under this Lease Agreement because
of Force Majeure, that Party shall be excused from whatever performance is
affected by the Force Majeure to the extent so affected, provided that: (1)
the nonperforming Party, within one (1) week after the occurrence of the
Force Majeure, gives the other Party written notice describing the
particulars of the occurrence; (2) the suspension of performance shall be
of no greater scope and of no longer duration than is required by the Force
Majeure; and (3) no obligations of either Party that matured before the
occurrence of the Force Majeure shall be excused as a result of such
occurrence.
<PAGE> 39
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20.4 Prepaid Rent Nonrefundable. In the event that this Lease Agreement
is terminated or suspended pursuant to the provisions of this Article 20,
Lessee shall not be entitled to any refund of the prepaid rent called for by
this Lease Agreement.
ARTICLE 21
SUCCESSORS AND ASSIGNS
21.1 This Agreement shall be binding upon and inure to the benefit of
the Parties and any permitted assignees as provided herein.
21.2 Except as is expressly set forth in this Lease Agreement, neither
the rights nor the obligations under this Lease Agreement may be assigned,
pledged, hypothecated or otherwise transferred.
21.3 Lessee is expressly permitted to assign this Agreement as provided
in this Article 21.3. Lessee may assign this Agreement to Cogen Technologies
NJ Venture, provided that such assignment shall be of no force and effect
unless and until Cogen Technologies NJ Venture shall have assumed in writing
all of Lessee's obligations under the following instruments and notes, and
shall have agreed in writing to cure any existing defaults and breaches
hereunder and thereunder:
<PAGE> 40
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(1) The Steam Sale Agreement
(2) The Purchase and Sale Agreement
(3) The Option Agreement
(4) The SPF Lease
(5) The Note
(6) The Security Agreement
(7) The Rent Note
Lessee may assign this Agreement to any Financier which shall be obligated
hereunder only as provided in Articles 21.6 and 21.7 of this Lease
Agreement.
21.4 Lessor is expressly permitted to assign this Lease Agreement to any
person or entity, provided that such assignment shall be of no force and
effect unless and until such person or entity shall have assumed in writing
all of Lessor's obligations under this Lease Agreement and under the
agreements referred to in Article 21.3, with the exception of the Note and
the Rent Note, and shall have agreed in writing to cure any defaults and
breaches hereunder and thereunder. In the event that the Bayonne Facility is
assigned, sold, transferred, leased or subleased to any other party, which
action would affect Lessor's ability to fulfill its obligations under the
Steam Sale Agreement, the Purchase and Sale Agreement, the Easement or the
SPF Lease, the Lessor may not do so unless the assignee, buyer, transferee,
lessee or sublessee assumes Lessor's obligations under the foregoing
agreements.
<PAGE> 41
-35-
21.5 Notwithstanding any such assignment by Lessor or Lessee, the
assignor shall remain fully liable for its obligations hereunder.
21.6 No Financier succeeding to Lessee's rights under this Lease
Agreement by reason of the exercise of its remedies against Lessee under a
leasehold mortgage or security agreement shall be required to cure any
defaults under, or assume Lessee's obligations under, any agreement (other
than this Lease Agreement, the Rent Note, the first $2,400,000.00 of
installments of principal, with interest thereon, under the Note, and the
obligations under Article 21.7(2) of this Lease Agreement) in order to
succeed to Lessee's interest under this Lease Agreement. If a Financier
does not cure defaults under, and assume Lessee's obligation under, all such
other agreements, no subsequent assignee of a Financier shall be obligated
to do so and Lessor shall not be obligated to such Financier or any
subsequent assignee of a Financier under any of such agreements. A Financier
shall be entitled to the rights accorded to a Financier under Article 15 of
this Lease Agreement in performing its obligations under Articles 21.6 and
21.7.
21.7 During the period beginning on the date of execution of this Lease
Agreement and ending at the expiration of the Base Term of the Steam Sale
Agreement as specified therein, a Financier may not assume Lessee's
obligations and rights under this Lease Agreement, unless, within ninety
(90) days following
<PAGE> 42
-36-
the date on which it has commenced the exercise of its remedies against
Lessee, the Financier either:
(1) assumes all of the Lessee's obligations under the agreements
referred to in Article 21.3 in which event any termination of any
such instrument by Lessor or any exercise by Lessor of its rights
thereunder shall be null and void and such instruments shall be
reinstated, or
(2) agrees to pay to Lessor on or before the beginning of each
remaining Annual Period, up to the end of the Tenth Annual Period
following the Date of Initial Commercial Operation, the amount of
$500,000.00 as Additional Rent for such period, except that:
(i) with respect to the Annual Period during which such
Financier has commenced its remedies against Lessee, the
amount payable shall be determined by multiplying
$500,000.00 by a factor, which shall be equal to one (1)
minus a fraction the numerator of which is the number of k
lbs. of steam which was furnished by Lessee to Lessor under
the Steam Sale Agreement during such Annual Period up to and
including the expiration of such ninety (90) day period (but
in no event
<PAGE> 43
-37-
greater than 450,000 k lbs. for purposes of this
calculation), and the denominator of which is 450,000 k lbs.
of steam; and
(ii) the Financier may terminate this Lease Agreement and its
obligations hereunder prior to the end of the Tenth Annual
Period following the Date of Initial Commercial Operation by
giving written notice to the Lessor of its election to
terminate the Lease Agreement 90 days prior to the beginning
of any remaining Annual Period for which it would otherwise
be obligated to pay rent under this Article 21.7(2) and
thereafter, the Financier shall have no future obligation to
pay any further rent under this Article 21.7(2).
If within such ninety (90) day period, the Financier does not assume all of
Lessee's obligations referred to in Article 21.7(l) or does not agree to pay
the Additional Rent pursuant to Article 21.7(2), this Lease Agreement shall
terminate effective as of the end of such ninety (90) day period.
<PAGE> 44
-38-
ARTICLE 22
MISCELLANEOUS
22.1 Duplicates; Recordation. The Parties will at any time, at the
request of either Party, promptly execute duplicate originals of an
instrument, in recordable form, which will constitute a short form of this
Lease Agreement, setting forth a description of the Demised Premises, the
term of the Lease Agreement and any other portions thereof, excepting the
rental provisions, as either Party may request.
22.2 Consent Not to be Unreasonably Withheld. Whenever the Lessee
requests any consent, permission, or approval which may be required or
desired by the Lessee pursuant to the provisions hereof, the Lessor shall
not unreasonably withhold or postpone the grant of such consent, permission,
or approval.
22.3 Termination of Preexisting Lease. By executing this Lease
Agreement, BI and IMTT hereby terminate any leasehold interest that may
exist with regard to the Demised Premises and such leasehold interest shall
hereafter be of no force and effect.
22.4 Covenants Running with Land. All covenants, promises, conditions,
and obligations herein contained or implied by law are covenants running
with the land and shall attach and bind and inure to the benefit of the
Lessor and Lessee and their respective successors and assigns, except as
otherwise provided herein.
<PAGE> 45
-39-
22.5 Notice. All notices, including communications and statements which
are required or permitted under the terms of this Lease Agreement, shall be
in writing, except as otherwise provided. Service of a notice may be
accomplished by personal service, telegram or registered or certified mail.
If a notice is sent by registered or certified mail, it shall be deemed
served within three (3) days, excluding Saturdays, Sundays or legal Federal
holidays, except as otherwise demonstrated by a signed receipt. If a notice
is served by telegram, it shall be deemed served eighteen (18) hours after
delivery to the telegram company. Notices may be sent to the Parties at the
following addresses:
(a) Lessee: Cogen Technologies NJ, Inc.
14614 Falling Creek Drive
Suite 212
Houston, Texas 77068
Attn: Mr. Robert C. McNair
President
With information copy to:
Cogen Technologies NJ, Inc.
Foot of E. 22nd Street
Bayonne, New Jersey 07002
Attn: Plant Manager
(b) Lessor: IMTT-Bayonne
Foot of E. 22nd Street
Bayonne, New Jersey 07002
Attn: Glynn Esteves
or
International-Matex Tank Terminals
Ninth Floor
321 St. Charles Avenue
New Orleans, Louisiana 70130
Attn: Mr. Thomas B. Coleman
Partnership Manager
<PAGE> 46
-40-
22.6 Amendments. No amendment or modification of the terms of this
Lease Agreement shall be binding on either the Lessor or Lessee unless
reduced to writing and signed by both Parties.
22.7 Choice of Law. This Lease Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
22.8 Severability. Should any part of this Lease Agreement, for any
reason, be declared invalid, such decision shall not affect the validity of
the remaining portions, which remaining portions shall remain in force and
effect as if this Lease Agreement had been executed with the invalid portion
thereof eliminated, and it is hereby declared the intention of the Parties
hereto that they would have executed the remaining portion of this Lease
Agreement without including therein any such part, parts or portion which
may for any reason be hereafter declared invalid. Notwithstanding the
foregoing sentence, should any term or provision of this Lease Agreement, be
found invalid by any court or regulatory body having jurisdiction thereover,
the Parties shall immediately renegotiate such term or provision of the
Lease Agreement to eliminate such invalidity.
22.9 Other Agreements. This Lease Agreement supercedes any and all
oral or written agreements and understandings heretofore made relating to
the subject matters herein, and this Lease Agreement constitutes the entire
agreement and understanding of the Parties relating to the subject matters
herein.
<PAGE> 47
-41-
22.10 Captions. All indices, titles, subject headings, section titles
and similar items are provided for the purpose of reference and convenience
and are not intended to be inclusive, definitive or to affect the meaning,
content or scope of this Lease Agreement.
IN WITNESS WHEREOF the Parties have entered into this Lease Agreement
to be signed in quadruplicate original as of the date first written above.
[SEAL]
ATTEST: BAYONNE INDUSTRIES, INC.
/s/ BERTRAND F. ARTIGUES BY: /s/ RICHARD B. JURISICH
--------------------------- ------------------------------
Bertrand F. Artigues Richard B. Jurisich
Assistant Secretary Executive Vice President/
Secretary
WITNESS: IMTT-BAYONNE
/s/ BERTRAND F. ARTIGUES BY: /s/ RICHARD B. JURISICH
--------------------------- ------------------------------
Bertrand F. Artigues Richard B. Jurisich
Secretary
[SEAL]
ATTEST: COGEN TECHNOLOGIES NJ, INC.
/s/ JOHN B. WING BY: /s/ ROBERT C. MCNAIR
--------------------------- ------------------------------
John B. Wing Robert C. McNair
Assistant Secretary President
<PAGE> 48
STATE OF NEW YORK :
ss.:
COUNTY OF NEW YORK :
BE IT REMEMBERED, that on this 22nd day of May, 1986, before me, the
subscriber, a notary public personally appeared Richard B. Jurisich, who,
being by me duly sworn on his oath, deposed and made proof to my
satisfaction that he is the Executive Vice-President of Bayonne Industries,
Inc., and the person who has signed the within instrument; and I having
first made known to him the contents thereof, he did acknowledge that he
signed, sealed with the proper corporate seal and delivered the same as such
officer on behalf of the corporation as its voluntary act and deed, made by
virtue of authority from its board of directors, for the uses and purposes
therein expressed.
/s/ [ILLEGIBLE]
-----------------------------
[ILLEGIBLE]
STATE OF NEW YORK :
ss.:
COUNTY OF NEW YORK :
BE IT REMEMBERED, that on this 22nd day of May, 1986, before me, the
subscriber, a notary public personally appeared Robert C. McNair, who, being
by me duly sworn on his oath, deposed and made proof to my satisfaction that
he is the President of Cogen Technologies NJ, Inc., and the person who has
signed the within instrument; and I having first made known to him the
contents thereof, he did acknowledge that he signed, sealed with the proper
corporate seal and delivered the same as such officer on behalf of the
corporation as its voluntary act and deed, made by virtue of authority from
its board of directors, for the uses and purposes therein expressed.
/s/ [ILLEGIBLE]
-----------------------------
[ILLEGIBLE]
<PAGE> 49
STATE OF NEW YORK :
ss.:
COUNTY OF NEW YORK :
BE IT REMEMBERED, that on this 22nd day of May, 1986, before me, the
subscriber, personally appeared Richard B. Jurisich, who, being by me duly
sworn on his oath, deposed and made proof to my satisfaction that he is an
authorized signatory of IMTT-Bayonne, the partnership named in the within
instrument; and I having first made known to him the contents thereof, he
did acknowledge that he signed, sealed and delivered the same as such
authorized signatory on behalf of the partnership as its voluntary act and
deed, being duly authorized to do so under the partnership, agreement, for
the uses and purposes therein expressed.
/s/ [ILLEGIBLE]
-----------------------------
[ILLEGIBLE]
<PAGE> 50
EXHIBIT A
DESCRIPTION OF A PORTION OF
PARCEL 007A
CITY OF BAYONNE, HUDSON COUNTY, NEW JERSEY
BEGINNING at a point in the easterly right-of-way line of Ramp A where the
same is intersected by the southeasterly right-of-way line of the Ingham
Avenue Branch Rail Road as depicted on a map entitled "New Jersey Department
of Transportation General Property Parcel Map, Route 169 (1953), Section 2,"
dated July 1977, Sheet 7 of 14 and from said point running; thence,
1. Curving to the right in a northeasterly line direction, along said
southeasterly right-of-way line of the Ingham Avenue Branch Rail Road,
along a curve having a radius of 443.37 feet and an arc length of
274.21 feet to a point, said curve having a cord bearing of North 48
degrees 07' 05.4" East; thence,
2. North 75 degrees 59' 11" East, along the southerly line of lands now or
formerly Conrail, distant 746.44 feet to a point and a proposed lease
line; thence,
3. South 14 degrees 00' 49" East, distant 214.11 feet to a point on lands
now or formerly Bayonne Industries; thence,
4. South 75 degrees 59' 11" West, along said line of lands now or formerly
Bayonne Industries, distant 945.00 feet to a point marked by a
monument; thence,
5. North 38 degrees 28' 06" West, distant 96.64 feet to the above
described point or place of BEGINNING.
Containing 4.54 acres of land.
The above description is for a piece of property being a portion of Parcel
007A to be leased from Bayonne Industries.
Revised May 1985
<PAGE> 51
EXHIBIT B
<PAGE> 52
EXHIBIT C
GNP DEFLATOR
Example
<TABLE>
<CAPTION>
Current rate Revised rate
------------ ------------
$5,000 $5,204
Calculations
------------
Billions of Dollars
1983 1984
---------- ----------
<S> <C> <C>
I. Gross National Product
A. Current dollars $3,401.6 $3,774.7
B. Constant (in this
case 1982) dollars 3,275.2 3,492.0
II. Deflator (A/B) 1.38593 1.080956
III. Percentage increase
1.080956 - 1.038593 0.042363
------------------- = -------- 0.040789
1.038593 1.038593
</TABLE>
IV. Comments
A. The revised rate is the percentage increase as calculated above and
applied to the current rate.
B. See U.S. Dept. of Commerce, Bureau of Economic Analysis publication
"Survey of Current Business" for December, 1985, Tables 1.1 and 1.2,
page 20.
C. See "Federal Reserve Bulletin" for February, 1986, Table 2.16, page
A51.
<PAGE> 1
EXHIBIT 10.93
[PANHANDLE EASTERN PIPE LINE COMPANY LETTERHEAD]
March 15, 1990
Mr. J. M. Bollinger
Cogen Technologies, Inc.
1600 Smith Street
50th Floor
Houston, Texas 77002
Re: Permission to Enter Upon Lands of Texas
Eastern Cryogenics, Inc. - Staten Island,
New York
Gentlemen:
It is our understanding that Cogen Technologies, Inc., desires to enter
upon that certain tract of land belonging to Texas Eastern Cryogenics, Inc.,
("Texas Eastern"), situated upon Staten Island. Such entry is to be for the
purpose of survey and inspection in connection with projected construction of
subsurface electric lines upon Texas Eastern's property. Texas Eastern is
prepared to permit such entry, subject to the following terms and conditions.
1) Your company will fully reimburse Texas Eastern for any damages
to the subject property, or any improvements or other property
situated thereon, caused by your activities upon the subject property.
2) Your company will indemnify and hold harmless Texas Eastern, its
agents and employees, against any claims, demands or causes of action
brought by any third party, including the agents or employees of
either your company or Texas Eastern, for damage to property, or
injury or death to persons, in any way caused by or pertaining to your
company's activities upon the subject property. This indemnity shall
extend to claims, demands or causes of action attributable to the
concurrent negligence of Texas Eastern, its agents or employees, but
shall not be deemed to indemnify any party against its sole
negligence, gross negligence or willful misconduct. Your company shall
reimburse Texas Eastern, its agents and employees, for any reasonable
costs or attorney's fees attendant to the defense against any claim,
demand or cause of action covered by this indemnity, and any
reasonable costs or attorney's fees attendant to the enforcement of
this indemnity.
<PAGE> 2
3) Your company shall waive any claim for damage or destruction of its
property caused by or pertaining to your activities upon the subject
property, save and except those attributable to the sole or gross
negligence of Texas Eastern, or its willful misconduct.
4) Texas Eastern shall not be deemed to have made any representations
regarding the condition of the subject property, or its safety for any
particular enterprise.
5) THIS LETTER AGREEMENT SHALL BE DEEMED SUBJECT TO, AND SHALL BE
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, EXCEPT
FOR ANY CHOICE OF LAW RULES OF SUCH STATE THAT WOULD MANDATE REFERENCE
TO THE LAWS OF ANOTHER JURISDICTION. PROPER VENUE FOR ANY JUDICIAL
PROCEEDING CONCERNING THIS LETTER AGREEMENT SHALL BE DEEMED TO BE IN
THE APPROPRIATE COURTS OF HARRIS COUNTY, TEXAS.
If this agreement is acceptable to you, please execute both originals
hereof in the space indicated, and return one such executed original to
Texas Eastern.
Yours truly,
TEXAS EASTERN CRYOGENICS, INC.
By: /s/ KIRK B. MICHAEL
------------------------------------
Agreed to and Accepted:
COGEN TECHNOLOGIES, INC.
By: /s/ ROBERT MCNAIR JMB
------------------------------
Title: President
---------------------------
Date: 3-19-90
---------------------------
<PAGE> 1
EXHIBIT 10.94
AGREEMENT FOR MAINTENANCE AND OPERATION
OF IMTT-BAYONNE CHEM SOUTH BOILERS
This AGREEMENT FOR MAINTENANCE AND OPERATION OF IMTT-BAYONNE CHEM SOUTH
BOILERS (this "Agreement") is entered into this 3rd day of April, 1998, by and
between IMTT-BAYONNE, a Delaware partnership ("Owner"), and COGEN TECHNOLOGIES
NJ VENTURE, a New Jersey joint venture ("Contractor").
W I T N E S S E T H:
WHEREAS, Owner owns and operates a tank terminal facility located at
Bayonne, New Jersey (the "Tank Facility"); and
WHEREAS, Contractor owns and operates a cogeneration plant at Bayonne,
New Jersey, located on land leased from Owner (the "Power Plant"); and
WHEREAS, pursuant to that certain Agreement for the Sale of Steam and
Electricity dated June 13, 1985 (as amended from time to time, the "Power/Steam
Purchase Agreement"), by and between Cogen Technologies NJ, Inc., as "Seller,"
and Owner, as "Buyer," Contractor sells steam and electricity to Owner; and
WHEREAS, pursuant to that certain Operation and Maintenance Agreement
dated June 6, 1997 (as amended from time to time, the "O&M Agreement"), by and
between Contractor, as "Owner," and General Electric Company ("GE"), as
"Operator," GE provides operations and maintenance services to Contractor for
the Power Plant; and
WHEREAS, Owner desires to engage the services of Contractor to operate
and maintain the Standby Boilers (hereinafter defined) located at the Chem
South Terminal of the Tank Facility; and
WHEREAS, Contractor desires to operate and maintain the Standby
Boilers; and
WHEREAS, Owner and Contractor desire to enter into this Agreement in
order to set forth their agreements relative to the operation and maintenance
of the Standby Boilers;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. The Standby Boilers. The "Standby Boilers" shall mean the two
Cleaver-Brooks boilers located at the Chem South Terminal (the "Terminal") of
the Tank Facility, each (i) with a capacity of 20,000 lbs. per hour/2 million
BTU/hour, (ii) fired on natural gas or No. 4 fuel oil, (iii) pressure rated
from 125 psi to 150 psi, (iv) 400/500 horsepower and (v) of which are operated
to provide steam to Owner in the event of
<PAGE> 2
the loss of steam from the Power Plant, and shall include the associated water
softening equipment and associated piping, valves, auxiliary equipment and
controls which are required and installed for the purpose of operating the
boilers and located within the physical boundaries of the flanges at which fuel
and water enter the back-up boiler facility or the water softening equipment
and the flanges at which steam leaves the facility, and any mutually agreed
upon replacements of the foregoing.
2. Services. Contractor hereby agrees to maintain, test and operate the
Standby Boilers and arrange for the certification of the Standby Boilers so as
to produce steam in accordance with and subject to (i) all applicable laws and
regulations known to Contractor, (ii) the physical constraints of Standby
Boilers as established by the nameplates and instruction manuals supplied by
Owner to Contractor and (iii) good practice consistent with the safe operation
of industrial boilers of the type, quality, age and condition of the Standby
Boilers, as follows (collectively, the "Services"):
(1) Start-up, operation and shut-down of Standby Boilers;
(2) Monitor and maintain Standby Boilers as required to ensure reliable
operation;
(3) Lubrication, preventative and corrective maintenance of the Standby
Boilers which is required to reasonably ensure the reliability of the
Standby Boilers to supply steam when and if required in the event of
a loss of Owner's primary steam supply;
(4) Operation of the Standby Boilers in compliance with all environmental
laws, regulations and permits applicable to the Standby Boilers;
(5) Arrange for, and coordinate at Owner's expense, all inspections,
maintenance and testing required to maintain certification of the
Standby Boilers and any permits which Owner is required to obtain in
connection therewith;
(6) Test fire each Standby Boiler for at least one hour in each calendar
quarter to demonstrate the reliability of the Standby Boilers;
(7) Coordinate all operation of the Standby Boilers with Owner's Manager
of Power Systems, currently David Schnaper, or in his absence with
Owner's Traffic Department;
(8) In the event that Owner's primary steam supply from Contractor under
the Power/Steam Purchase Agreement is not available to Owner and
Owner notifies Contractor in writing to begin operation of the
Standby Boilers, operate one or both of the Standby Boilers on an
emergency back-up basis ("Emergency Operation");
-2-
<PAGE> 3
(9) Recommend to Owner and cause to be done, upon Owner's approval, any
maintenance activities on the Standby Boilers which are required to
satisfy all existing governmental laws, rules, regulations and codes
known to Contractor pertaining to steam generating equipment and
pressure vessels;
(10) Following timely notification by Contractor to Owner and upon written
approval from Owner, carry out, or cause to be carried out,
operations and testing of the Standby Boilers to enable Owner to
obtain and maintain proper and timely certifications according to
applicable requirements of all existing governmental laws, rules,
regulations and codes known to Contractor;
(11) Staff its maintenance and operations crew with properly certified and
licensed employees to perform the work or recommend to Owner
subcontractors, whom Contractor may employ, as may be required who
possess such licenses or certifications;
(12) Assist Owner in obtaining and maintaining compliance with all permits
applicable to the Standby Boilers, which assistance includes, but is
not limited to, arranging for inspections or testing and obtaining
samples and collecting data; provided, however, Owner shall
ultimately be responsible for all such permits; and
(13) Upon written notification by Owner to Contractor, start-up the
Standby Boilers and proceed without unreasonable delay with such
start-up activities.
3. Term. The term of this Agreement shall commence on the date hereof and,
unless sooner terminated pursuant to the terms hereof, shall terminate on the
date on which the Power/Steam Purchase Agreement terminates.
4. Subcontractors. The parties acknowledge and agree that Contractor will
subcontract the performance of the Services to GE and/or to others, and Owner
hereby approves the subcontracting of the performance of the Services to GE.
All other subcontractors utilized by Contractor in performance of the Services
shall be subject to Owner's prior written approval, which approval shall not be
unreasonably withheld, conditioned or delayed. The provisions of this Agreement
shall apply to all subcontractors and their respective employees as if they
were employees of Contractor. Contractor shall not be responsible if any delay
in approval of subcontractors or other costs by Owner or the non-payment by
Owner of any moneys due hereunder results in the Standby Boilers not being
available to produce steam if requested by Owner.
5. Equipment, Supplies, Materials, Tools and Consumables. Owner shall be
responsible for the payment of cost of all equipment, supplies, materials,
tools and consumables utilized in the performance of the Services. Unless an
emergency dictates otherwise, Contractor shall purchase any tools, materials,
supplies and equipment necessary for performance of the Services, including,
without limitation, spares,
-3-
<PAGE> 4
pursuant to Owner's purchase order number and Owner shall pay for such items
directly to the vendor thereof; provided, however, Contractor may procure
incidentals and consumables routinely used by Contractor in performance of the
Services directly from the vendors thereof, and the cost of such items shall be
reimbursed to Contractor by Owner.
6. Permits. Permit costs shall be paid directly by Owner to the applicable
permit or certification authorities. Owner shall be responsible for obtaining
and maintaining any and all permits and approvals required to operate the
Standby Boilers.
7. Consideration for the Services. For performance of the Services, Owner
shall pay to Contractor (i) a fee of Five Thousand and 00/100 Dollars
($5,000.00) per calendar quarter, ending March 31st, June 30th, September 30th
and December 31st of each year (the "O&M Fee"), (ii) Contractor's actual cost
plus fifteen percent (15%) for all equipment, replacements, supplies, materials,
tools and consumables used in or necessitated by the performance of the
Services and (iii) Contractor's actual cost plus fifteen percent (15%) for all
subcontracted services, exclusive of services provided by GE, used in the
performance of the Services; provided, however, there shall be no markup on the
O&M Fee. The O&M Fee for any partial calendar quarters shall be prorated. In
addition, Owner shall pay to Contractor One Hundred and 00/100 Dollars
($100.00) per hour (the "Emergency Operation/Testing Fee") for (i) Emergency
Operation of the Standby Boilers, commencing when Owner gives notice to
Contractor to begin Emergency Operation and continuing until the Standby
Boilers are shut down and Owner's primary steam supply is restored and (ii)
periods of test firing of the Standby Boilers during routine testing and post
repair testing; provided, however, there shall be no markup on the Emergency
Operation/Testing Fee. Payment for any additional services not included within
the definition of Services and that are agreed to by Owner and Contractor shall
be on the basis of a proposal to be submitted by Contractor.
8. Invoicing. Contractor shall invoice Owner quarterly for all moneys
due Contractor, and Owner shall pay such invoices within thirty (30) days of
receipt thereof. All invoices are to be sent to IMTT-Bayonne, P.O. Box 67,
Bayonne, New Jersey 07002 to the attention of Accounts Payable: Eileen Kierney.
Prior to payment Contractor agrees to provide, if requested by Owner the
following:
(1) A waiver and release of liens arising out of or as a result of the
performance of the Services;
(2) Proof that bills for materials and equipment, and other indebtedness
connected with the Services have been paid or reasonable evidence
thereof; and
(3) Reasonable evidence that work areas have been properly cleaned up
with all debris disposed of properly and legally.
9. Late Payments. All payments that are past due shall accrue interest
from the date such payments are due until such payments are made at a per annum
rate
-4-
<PAGE> 5
equal to the lesser of (i) twelve percent (12%) or (ii) the maximum lawful
nonusurious rate of interest that may be charged under applicable law.
10. Owner's Responsibilities. Owner shall be responsible for, and shall
(i) maintain, the building that houses the Standby Boilers and (ii) operate and
maintain the heating, ventilation and air conditioning system that services
such building.
11. Additional Services. Any and all services additional to the Services
included within the definition of Services must be authorized by Owner's
Manager of Power Systems, David Schnaper, or such other person specified by
Owner in writing, and by an authorized representative of Contractor, in writing
before such additional services are commenced; provided, however, in the event
of an emergency, Contractor may take action and incur costs as necessary, which
costs will be paid by Owner to Contractor or to the provider of same, as
provided for in Section 7 above, provided that Owner's Traffic Department is
notified as soon as reasonably possible.
12. Insurance. In connection with the performance of the Services,
Contractor shall cause GE to provide insurance as required of GE pursuant to
the O&M Agreement, which insurance certificate need not name Owner as an
additional insured. A certificate setting forth such insurance is attached
hereto as Exhibit A. Owner shall secure and maintain during the term of this
Agreement Property and Boiler and Machinery Insurance on an "All Risk" basis
covering physical damage or loss to all real and personal property of Owner
located at the Tank Facility, including, without limitation, the Standby
Boilers, in an amount not less than one hundred percent (100%) of the full
replacement value of such property.
13. Owner's Representative. Owner's representative for the Services shall
be Owner's Manager of Power Systems, David Schnaper. Contractor's
representative for the Services shall be Contractor's employee who is the
manager of the Power Plant.
14. Purchase Order Identification. Owner's Project Number (AFE) for this
Agreement is N/A, and such number shall be required on all invoices and
documentation relating to the Services. Owner's purchase order number
8048870-25 shall apply to the Services and Tax Forms ST-4 and ST-8 shall be
attached to Owner's purchase orders.
15. Termination. Owner and Contractor reserve the option to terminate this
Agreement at any time upon thirty (30) days' written notice delivered to the
other party. Upon termination of this Agreement, Contractor shall be reimbursed
for its costs incurred through the date of the termination and for unavoidable
costs for which Contractor has become obligated prior to the date of
termination pursuant to its performance of the Services, plus applicable
overheads and reasonable profit based on the Services completed through the
date of termination; provided, however, in no event shall Contractor be
reimbursed for prospective profits for Services unperformed.
16. Force Majeure. Neither Owner nor Contractor shall be deemed in default
of this Agreement to the extent that any delay or failure in the performance of
either Owner's or Contractor's obligations results from any cause beyond its
reasonable
-5-
<PAGE> 6
control, including, without limitation, acts of God, acts of civil or military
authority, embargoes, epidemics, war, riots, insurrections, fires, explosions,
earthquakes, floods, adverse weather conditions, strikes or lockouts, acts of
government agencies or officials, and changes in laws, statutes, regulations or
ordinances.
17. Delays. Contractor agrees that if it or its subcontractors should fail
to prosecute diligently the Services because of failure of it or its employees
or such subcontractor or its employees to cross any union picket line or lines
on or about Owner's premises then, in such event, Contractor shall have no
liability to Owner arising out of such failure to cross such picket line, and
Owner shall have the right, at its option, to terminate this Agreement upon
three (3) days' written notice to Contractor, in which event Contractor shall
only be entitled to payment through the date of termination for Services
actually rendered; provided, however, in no event shall Contractor be
reimbursed for prospective profits for Services unperformed.
18. Utilities and Boiler Fuel. Owner shall provide as and when needed by
Contractor, at no cost to Contractor, electrical power, support utilities, fuel
and water required to fire and operate the Standby Boilers. Contractor shall
not be responsible, and has no liability to Owner, if electrical power, support
utilities, fuel or water are not supplied by Owner in quantity and quality
sufficient for Contractor to perform the Services.
19. Access to Work. Owner shall provide and shall make every reasonable
attempt to provide safe, convenient access, at all times, to the areas
necessary for Contractor to perform the Services; provided, however, if
Contractor is not given such access to the areas necessary to perform the
Services, then Contractor shall have no liability for failure to perform the
Services as a consequence thereof. Contractor shall enter and leave the
Terminal via a terminal gate and roads to be specified by Owner.
20. Safety. Contractor agrees to abide by all reasonable safety rules in
the Terminal, including, but not limited to, the following:
(1) No smoking is permitted in the tank farm or vehicles. Smoking is
allowed only in authorized smoking areas;
(2) No bringing in, consuming or being under the influence of
intoxicating beverages or drugs;
(3) Vehicles are to obey all traffic signs and posted 15 mph speed
limits;
(4) Littering is not permitted. Refuse is to be deposited in the
available containers; and
(5) When applicable, Contractor shall abide by industry regulations
pertaining to confined space entry.
-6-
<PAGE> 7
Contractor understands that there is storage of flammable liquids in the
general vicinity of the Standby Boilers. Any welding or burning shall be
performed in a safe manner in accordance with Owner's hot work procedures.
Contractor agrees to obtain a hot work permit from Owner's Director of Safety,
Michael Koscelnak, or his designee on a daily basis, which permit shall not be
unreasonably withheld, delayed nor conditioned.
Contractor shall submit a site safety plan to Owner prior to the
commencement of any Services at the Terminal.
Contractor represents that it is aware of Owner's "Drug and Alcohol Policy
for Contractors" and agrees to the provisions thereof.
21. Clean Site. Contractor shall leave its work areas in a clean condition
and free of all debris and material upon completion of the Services.
22. Hot Work Permits Procedure. Prior to performing any "Hot Work",
Contractor shall first obtain dike entry permission, which permission shall not
be unreasonably withheld, delayed nor conditioned. Such permission shall be
issued between 7:00 a.m. and 7:45 a.m., daily, by Owner's Director of Safety,
Michael Koscelnak, or his designee. After the hour of 8:00 a.m., "Hot Work
Permits" shall be issued in the field after a site inspection by Owner's
Fire-Safety Manager or his designee has been made to insure the area is safe and
that fire protection equipment is on site, i.e., fire hose nozzles and fire
extinguishers, unless special arrangements are made with the Fire and Safety
Department in advance. "Hot Work" by Contractor shall not begin without
following the above procedure.
23. Diked Access Security. Contractor shall obtain permission from Owner
prior to vehicles and equipment entering any tank dike area, which permission
shall not be unreasonably withheld, delayed nor conditioned. Dike chains shall
be secured at all times.
24. Notice. Any notice to either party required or permitted hereunder
shall be in writing and shall be given by (i) personal delivery, (ii)
commercial courier (iii) registered or certified U.S. mail, return receipt
requested, postage prepaid, or (iv) telecopy if also given by personal
delivery, commercial courier or registered or certified U.S. mail, return
receipt requested, postage prepaid within three (3) days after the telecopied
transmission, all such notices to be addressed as follows:
If to Owner:
IMTT-Bayonne
Foot of East 22nd Street
Bayonne, New Jersey 07002
Telecopier Number: (201) 339-4703
Attention: Terminal Manager
-7-
<PAGE> 8
If to Contractor:
Cogen Technologies NJ Venture
c/o Cogen Technologies NJ, Inc.
1600 Smith Street, Suite 4300
Houston, Texas 77002
Telecopier Number: (713) 951-7747
Attention: Senior Vice President and Chief
Operating Officer
with copy to:
Cogen Technologies NJ Venture
10 Hook Road
Bayonne, New Jersey 07002
Telecopier Number: (201) 437-0593
Attention: Plant Manager
Notice by personal delivery shall be effective when made and notice by
commercial courier or by mail shall be deemed effective upon receipt. A copy of
each such notice shall, to the extent reasonably practicable, also be forwarded
by telecopier.
25. Limitation of Liability. NOTWITHSTANDING ANY PROVISION CONTAINED IN
THIS AGREEMENT TO THE CONTRARY, NEITHER PARTY NOR ITS SHAREHOLDERS, OFFICERS,
DIRECTORS, PRINCIPALS, AGENTS, EMPLOYEES, CONTRACTORS, SUBCONTRACTORS, VENDORS,
OR RELATED OR AFFILIATED ENTITIES SHALL BE LIABLE TO THE OTHER HEREUNDER FOR
ANY PUNITIVE, CONSEQUENTIAL, SPECIAL, INCIDENTAL OR INDIRECT LOSS OR DAMAGE,
INCLUDING COST OF CAPITAL, LOSS OF GOODWILL, LOSS OF PROFIT OR REVENUE, COST OF
REPLACEMENT POWER OR STEAM OR INCREASED OPERATING COSTS.
NOTWITHSTANDING ANY PROVISION CONTAINED IN THIS AGREEMENT TO THE CONTRARY,
CONTRACTOR SHALL NOT BE LIABLE TO OWNER (WHETHER BY CONTRACT, EQUITY, WARRANTY,
TORT, STATUTE OR OTHERWISE) FOR AN AMOUNT IN EXCESS OF TWENTY THOUSAND AND
00/100 DOLLARS ($20,000.00). THE PARTIES FURTHER AGREE THAT THE WAIVERS AND THE
DISCLAIMERS OF LIABILITY, INDEMNITIES, RELEASES FROM LIABILITY AND LIMITATIONS
ON LIABILITY EXPRESSED IN THIS AGREEMENT SHALL SURVIVE THE TERMINATION OR
EXPIRATION OF THIS AGREEMENT AND SHALL APPLY (WHETHER IN CONTRACT, EQUITY,
WARRANTY, TORT, STATUTE OR OTHERWISE) EVEN IN THE EVENT OF THE FAULT,
NEGLIGENCE (INCLUDING THE SOLE NEGLIGENCE), STRICT LIABILITY OR BREACH OF
WARRANTY OF THE PARTY INDEMNIFIED, RELEASED OR WHOSE LIABILITIES ARE LIMITED
AND SHALL EXTEND TO THE OFFICERS, DIRECTORS, PRINCIPALS, AGENTS, CONTRACTORS,
SUBCONTRACTORS, VENDORS, EMPLOYEES OR RELATED OR AFFILIATED ENTITIES OF SUCH
PARTY.
-8-
<PAGE> 9
26. Indemnification. OWNER SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS
CONTRACTOR AND ITS PARTNERS, JOINT VENTURERS, OFFICERS, AGENTS, EMPLOYEES,
SUBCONTRACTORS, CONTRACTORS, VENDORS, SUCCESSORS AND ASSIGNS FROM AND AGAINST
ANY AND ALL SUITS, ACTIONS, LEGAL OR ADMINISTRATIVE PROCEEDINGS, CLAIMS,
DEMANDS, PENALTIES, COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES, COURT COSTS
AND ALL COSTS OR EXPENSES RELATED TO ENVIRONMENTAL CLEAN-UP, CONTAINMENT,
REMEDIATION OR REMOVAL OF HAZARDOUS WASTE OR POLLUTION TO PROPERTY OF THIRD
PARTIES) OF ANY NATURE FOR PERSONAL INJURY OR DEATH OR PHYSICAL DAMAGE TO
PROPERTY OF ANY THIRD PARTY (INCLUDING EMPLOYEES OF OWNER AND ITS
SUBCONTRACTORS) ARISING OUT OF OR RESULTING FROM THIS AGREEMENT OR THE
PERFORMANCE OR NON-PERFORMANCE HEREOF, EVEN IF CAUSED BY THE NEGLIGENT ACT OR
NEGLIGENT OMISSION OF CONTRACTOR, ITS SUBCONTRACTORS OR SUPPLIERS, OR ANYONE
EMPLOYED BY ANY OF THEM, OR ANYONE FOR WHOSE ACTS ANY OF THEM MAY BE LIABLE.
27. Arbitration. Any controversy, claim or dispute between the parties
affecting or relating to the subject matter or performance of the rights,
duties and obligations of the parties under this Agreement or the breach
thereof, including any dispute as to whether a matter is arbitral, shall be
settled pursuant to arbitration pursuant to the terms hereof. All such
controversies, claims and disputes shall be decided by arbitrators selected as
hereinafter provided and all such arbitrations shall be conducted in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
then obtaining, unless the parties mutually agree otherwise. The arbitration
shall be held in Houston, Texas, and any arbitration demand must be filed with
the American Arbitration Association office located closest to Houston, Texas.
Each controversy, claim or dispute shall be submitted to three (3) arbitrators,
one (1) arbitrator being selected by Owner, one (1) arbitrator being selected
by Contractor, and the third arbitrator being selected by the two (2) so
selected. The party initiating the arbitration shall include in its
notification the designation of its selected arbitrator and the party receiving
such notification shall designate its arbitrator within fifteen (15) days
thereafter and notify the initiating party and its arbitrator of the selection.
If the arbitrators selected by Owner and Contractor cannot agree on a third
arbitrator within fifteen (15) days after the second arbitrator is selected,
the third arbitrator shall be selected by the American Arbitration Association.
In the event the party receiving notification of a demand for arbitration shall
not have selected its arbitrator and given notice thereof to the other party
and its arbitrator within fifteen (15) days after receiving such notification,
such arbitrator shall be selected by the American Arbitration Association.
Notice of demand for arbitration shall be filed in writing with the other party
and with the American Arbitration Association. The demand shall be made within
a reasonable time after the controversy, claim or dispute in question has
arisen. In no event shall the demand for arbitration be made after the date
when the applicable statute of limitations would bar institution of a legal or
equitable proceeding based on such controversy, claim or dispute. This
agreement to arbitrate shall be specifically enforceable under the prevailing
arbitration law. The award rendered by
-9-
<PAGE> 10
the arbitrators shall be final and judgment may be entered upon it in
accordance with applicable law in any court having jurisdiction thereof.
28. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey, without giving effect to
the conflict of laws principles thereof.
29. Severability. Every provision of this Agreement is intended to be
severable such that if any term or provision hereof is illegal or invalid for
any reason, such provision shall be severed from this Agreement and shall not
affect the validity of the remainder of this Agreement.
30. Entire Agreement. This Agreement constitutes the entire agreement
between Owner and Contractor relating to the subject matter hereof and
supersedes and replaces all prior and contemporaneous agreements and
understandings not incorporated herein by reference thereto, whether written or
oral.
31. Amendments. No amendment or modification hereof shall be valid or
binding upon the parties hereto unless evidenced in writing and signed by a
duly authorized representative of Owner and Contractor.
32. Waive. No failure by either party to insist upon the strict
performance of any term, covenant or condition of this Agreement, or to
exercise any right or remedy upon breach of any provision, and no acceptance of
payment or performance during the continuation of any such breach, shall
constitute a waiver of any term, covenant or condition herein or a waiver of
any subsequent breach or default in the performance of any term, covenant or
condition herein.
33. Original and Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original for all purposes, but
all of which shall constitute one and the same instrument.
34. Independent Contractor. Operator shall perform its duties and
obligations hereunder as an independent contractor, and nothing contained
herein shall be deemed to create a relationship of employer/employee,
master/servant, agency (except as otherwise expressly set forth herein),
partnership or joint venture.
35. Limited Recourse. Any claim against either party that may arise under
this Agreement shall be made only against, and shall be limited to the assets
of, such party, and no judgment, order or execution entered in any suit, action
or proceeding thereon shall be obtained or enforced against any partner or
joint venturer of such party or the assets of such partner or joint venturer or
any incorporator, shareholder or other equity holder, employee, officer or
director thereof, whether acting individually or in a representative capacity
hereunder or in connection with the ownership, operation or maintenance of the
Power Plant or the Tank Facility, as the case may be (or, in the case of such
partners or joint venturers that are partnerships, of any partner thereof), or
against any direct or indirect parent corporation, subsidiary or affiliate or
any incorporator, shareholder or other equity holder, employee, officer or
director of
-10-
<PAGE> 11
any thereof, whether acting individually or in a representative capacity
hereunder or in connection with the ownership, operation or maintenance of the
Power Plant or the Tank Facility, as the case may be, for the purpose of
obtaining satisfaction of any payment of any amount owing under this Agreement.
36. Captions. The captions contained in this Agreement are for convenience
and reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision contained herein.
37. No Effect on Power/Steam Purchase Agreement. This Agreement shall not
amend or modify the Power/Steam Purchase Agreement in any respect.
38. Survival. Sections 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36,
37 and 38 of this Agreement shall survive termination of this Agreement, and,
until all payments due by Owner pursuant to this Agreement have been paid in
full, Section 7 of this Agreement shall also survive the termination of this
Agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed as of the date and year first above written.
IMTT-BAYONNE
By: /s/ R. R. FISETTE
----------------------------------------
Name: R. R. FISETTE
--------------------------------------
Title: Terminal Manager
-------------------------------------
"OWNER"
COGEN TECHNOLOGIES NJ VENTURE
By: Cogen Technologies NJ, Inc., its
Managing Venturer
By: /s/ J.M. BOLLINGER
------------------------------------
Name: J.M. BOLLINGER
----------------------------------
Title: SR. VP - COO
---------------------------------
"CONTRACTOR"
-11-
<PAGE> 12
EXHIBIT A
---------
CERTIFICATE OF INSURANCE
THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO
RIGHTS UPON THE CERTIFICATE HOLDER.
<TABLE>
<CAPTION>
THIS CERTIFICATE DOES NOT AMEND, EXTEND COMPANIES AFFORDING COVERAGES
OR ALTER THE COVERAGE AFFORDED BY THE
POLICIES LISTED BELOW.
NAME AND ADDRESS OF AGENCY:
<S> <C>
SEDGEWICK JAMES OF NEW YORK, INC. A ELECTRIC INSURANCE CO
1285 AVENUE OF THE AMERICAS, COMPANY
NY, NY 10013 LETTER
FOR REVISIONS, RENEWALS OR QUESTIONS
ON THIS CERTIFICATE CONTACT:
B NATIONAL UNION FIRE INS CO
STEPHEN G. PALENSCAR PH# (978) 524-5210 COMPANY
152 CONANT ST. FAX (978) 524-5278 LETTER
BEVERLY, MA 01915
NAME AND ADDRESS OF INSURED: C
GENERAL ELECTRIC COMPANY COMPANY
LETTER
1 River Road, Schenectady, NY 12345 D
COMPANY
LETTER
</TABLE>
This is to certify that the insurance companies listed above have issued
policies of insurance, as described below and identified by a policy number,
to the insured named above, and to certify that such policies are in full
force and effect at this time. This certificate of insurance does not amend,
extend or alter the coverage afforded by the policies designated below.
<TABLE>
<CAPTION>
COMPANY TYPE OF INSURANCE POLICY NUMBER POLICY LIMITS OF LIABILITY
LETTER ----------------- ------------- PERIOD --------------------------------------------
- ------- ------ EACH AGGREGATE
OCCURRENCE
---------- ---------
<S> <C> <C> <C> <C> <C>
B GENERAL LIABILITY RMGL 1439616 1/1/98
TO
[X] COMMERCIAL FORM 1/1/99 BODILY INJURY
[X] PREMISES-OPERATIONS AND $ 2,500,000
[X] XCU PROPERTY
[X] PRODUCTS/COMPLETED DAMAGE
OPERATIONS HAZARD COMBINED
[X] BLANKET CONTRACTUAL
INSURANCE
[X] BROAD FORM PROPERTY
DAMAGE
[X] INDEPENDENT
CONTRACTORS
[X] PERSONAL INJURY
[X] OCCURRENCE FORM
A AUTOMOBILE LIABILITY ML 98-2 1/1/98
TO BODILY INJURY
[X] COMPREHENSIVE FORM 1/1/99 AND $ 2,500,000
[X] OWNED PROPERTY
[X] HIRED DAMAGE
[X] NON-OWNED COMBINED
B EXCESS LIABILITY RMGLX 1439607 12/1/97
TO BODILY INJURY $22,500,000
[X] FOLLOWING FORM 12/1/98 AND
PROPERTY
DAMAGE
COMBINED
A WORKERS COMPENSATION WC 98-1 1/1/98 [X] STATUTORY
AND TO LIMITS
EMPLOYERS LIABILITY 1/1/99
EACH ACCIDENT $ 2,500,000
DISEASE - POLICY $ 2,500,000
LIMIT
DISEASE - EACH $ 2,500,000
EMPLOYEE
</TABLE>
REMARKS: SUBJECT TO THEIR TERMS AND CONDITIONS POLICIES RMGL 1439619, ML 98-2
AND RMGLX 1439617 INCLUDE COGEN TECHNOLOGIES NJ VENTURES, THEIR OFFICERS,
DIRECTORS AND EMPLOYEES AND PRUDENTIAL POWER FUNDING AS ADDITIONAL INSUREDS BUT
ONLY TO THE EXTENT REQUIRED BY OPERATIONS AND MAINTENANCE CONTRACTS. POLICIES
RMGL 1439616, RMGLX 1439617 AND WC 98-1 INCLUDE A WAIVER OF SUBROGATION AGAINST
THE ADDITIONAL INSUREDS, THEIR OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND
REPRESENTATIVES.
Cancellation: If any of these policies are canceled or changed during the
period of coverage as stated herein in such manner as to affect this
certificate, THIRTY (30) days written notice of such cancellation or change
will be given to the party to whom this certificate is addressed.
NAME AND ADDRESS OF CERTIFICATE HOLDER:
DATE ISSUED 2/2/98
SEE REVERSE SIDE
/s/ SPENCER BROWN
--------------------
SPENCER BROWN
AUTHORIZED REPRESENTATIVE
COGENTCH
<PAGE> 13
EXHIBIT 10.94
[COGEN TECHNOLOGIES ENERGY GROUP LETTERHEAD]
April 3, 1998
Mr. Richard Stoney
Manager
GE Global O&M Services
1095 Cranbury South River Road
Suite 10
Jamesburg, New Jersey 08831
Dear Rich:
Attached please find a copy of the Agreement for Maintenance and Operations of
the IMTT Bayonne Chem South Boilers (IMTT Boiler O&M Agreement) by and between
IMTT/Bayonne (IMTT) as "Owner" and Cogen Technologies NV Venture (Cogen) as
"Contractor" to maintain and operate two 20,000 lbs/hr Cleaver-Brooks boilers
and related facilities at the IMTT facility in Bayonne. This is the current
draft of the agreement that IMTT and Cogen are discussing and which Cogen's
Brian Peteler discussed with you in November. At that time, GE Global O&M
Services (GE) indicated that its insurance certificate could be forwarded to
IMTT but, that IMTT would not be an additional insured under the GE policy. IMTT
has agreed to accept the GE certificate without being an additional insured.
The intent of this agreement is to provide that the IMTT boilers be operated by
GE on the identical terms and provisions applicable to the operation of the
Standby Boilers referenced in the existing Operations and Maintenance Agreement
between GE and Cogen dated June 6, 1997, (the "O&M Agreement") and in accordance
with the terms and provisions of the IMTT Boiler O&M Agreement. The IMTT boilers
will be fired periodically to ensure their reliability and will be run only when
and if the cogeneration facility is unable to produce steam. I don't anticipate
that this agreement will significantly increase GE's work load on the site. I
trust that upon your inspection of the attached draft, you will agree.
Confirming our earlier discussions and correspondence, GE hereby agrees that the
operation of the IMTT boilers shall be considered part of GE's scope under and
subject to the terms of the O&M Agreement, including without limitation, Article
XVII Limit of Liability. GE further agrees that the contract between Cogen and
IMTT shall be a Related Agreement under the O&M Agreement. In consideration of
the above GE shall not be liable for any damage to the above property not
withstanding any other provision of the O&M Agreement. This agreement is
conditional upon the completion by IMTT and the acceptance by GE of the work
shown on the attached Safety Inspection list.
<PAGE> 14
Mr. Richard Stoney
April 3, 1998
Page 2
Please signify your receipt and review of the attached draft of the IMTT
Boiler O&M Agreement and agreement with, and acceptance of, the terms and
provisions of this letter by signing below and returning same to me at your
earliest convenience.
Sincerely
/s/ ART STAPPENBECK
Art Stappenbeck
Director of Operations
Agreed and accepted this 3rd day of April, 1998 by:
General Electric O&M Services
Name: Richard F. Stoney
Title: Manager - Cogen Technology Project
Signature: /s/ RICHARD F. STONEY
------------------------------
<PAGE> 15
IMTT CLEAVER BROOKS BOILER
SAFETY INSPECTION
ENTRANCE/EGRESS
1. Exit signs not illuminated.
2. No exit sign at east door.
3. East door locked with padlock from outside.
4. Verify that windows will open.
5. Northside window blocked by equipment on ground outside.
FIRE PREVENTION
1. Fire extinguisher at each door last serviced 1/96.
2. Fire suppression system?
GENERAL HOUSEKEEPING
1. Several boxes of drawing documents and other papers stored on top of file
cabinet near front door.
2. Desk/small file cabinet near front door are covered with dirt and black
material.
3. Floor throughout building needs to cleaned of dirt and debris, as well as
oil in some locations.
4. Sink has running water but drain pipe is broken.
5. Deaerator pumps leaking oil onto concrete floor.
6. Back wall between boilers, four inch drain in floor needs cover/grating.
7. Tar on floor at front overhead gate.
EQUIPMENT
1. Not all piping and valves are labeled/color coded.
2. Natural Gas line painted yellow in some areas and black others.
3. Where do drains go? Permits for running equipment?
4. Northeast corner, fuel oil valves are leaking:
Oil stained floor.
Bucket full of oil.
Bucket sitting in hole (no concrete) - possible ground contamination.
Leak along floor/wall seam - possible ground contamination.
5. Breaker cabinet near east door has conflicting information for boiler
switches - label written on panel identifies switch as boiler #1 breaker; label
on door indicates switch as boiler #2 breaker.
6. Guardrail on top of both boilers are open on one side.
EMERGENCY PREPAREDNESS
1. Phone does not work.
2. Eyewash station near sink does not work well.
<PAGE> 16
CHEMICAL MANAGEMENT
- -------------------
1. Ten bottles of various reagents stored on small file cabinet are expired.
2. Three day tanks currently have material in them.
3. No material safety data sheets available at the site for the various
chemicals.
4. Open end pipe on blue deaerator day tank.
5. No label on blue deaerator day tank.
6. Two chemical drums stored on drum holding for pouring material not on spill
pallet.
<PAGE> 1
EXHIBIT 10.95
SECURITY AGREEMENT
BETWEEN
COGEN TECHNOLOGIES NJ, INC.
AND
BAYONNE INDUSTRIES, INC.
MAY 22, 1986
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1
DEFINITIONS................................................ 2
ARTICLE 2
SECURITY INTEREST.......................................... 6
2.1 Grant of Security Interest.................. 6
2.2 Further Assurances.......................... 6
2.3 Term........................................ 6
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COGEN.................... 7
3.1 Organization and Good Standing.............. 7
3.2 Authority................................... 7
3.3 No Violation of Other Agreements............ 7
3.4 Title to Assets............................. 8
3.5 Valid Security Interest..................... 8
3.6 Location of Collateral...................... 8
3.7 Access to Collateral........................ 9
ARTICLE 4
EVENTS OF DEFAULT; REMEDIES................................ 9
4.1 Events of Default........................... 9
4.2 Remedies on Default......................... 12
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 5
NON-WAIVER................................................. 16
ARTICLE 6
SUCCESSORS AND ASSIGNS..................................... 16
ARTICLE 7
MISCELLANEOUS.............................................. 18
7.1 Notice...................................... 18
7.2 Amendments.................................. 19
7.3 Choice of Law............................... 19
7.4 Other Agreements............................ 19
7.5 Captions.................................... 19
7.6 Security Agreement.......................... 20
</TABLE>
-ii-
<PAGE> 4
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of May 22, 1986 by and between COGEN
TECHNOLOGIES NJ, INC., a corporation organized under the laws of the State of
Delaware, having an office at 14614 Falling Creek Drive, Suite 212, Houston,
Texas 77068 ("Cogen") and BAYONNE INDUSTRIES, INC., a corporation organized
under the laws of the State of New Jersey and having an office at the Foot of
East 22nd Street, Bayonne, New Jersey 07002 ("BI").
Background
Pursuant to a certain Purchase and Sale Agreement of even date herewith,
BI and IMTT have sold to Cogen and Cogen has purchased from BI and IMTT the
Steam Producing Facilities together with certain other assets. Pursuant to the
Purchase and Sale Agreement, IMTT has assigned to BI its interest in the
proceeds of the sale of the Steam Producing Facilities to Cogen. Payment of the
purchase price for the Steam Producing Facilities and other such assets has
been evidenced by the Note. A condition to such sale is the execution and
delivery of this Security Agreement to secure payment of the Note.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and representations hereinafter contained, the Parties hereto agree as follows:
<PAGE> 5
-2-
ARTICLE 1
DEFINITIONS
The following terms when used herein shall have the following meanings,
unless a different meaning shall be expressly stated or apparent from the
context:
"Affiliate" means a corporation or other entity that directly or
indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, another corporation or entity.
"Agreement" means this contract, including all exhibits and amendments
thereto that may be made from time to time.
"Bayonne Facility" means the tank terminal facility located at Bayonne,
New Jersey, and all appurtenant property owned or leased at that location by
IMTT, BI, or any Affiliates thereof.
"BI" means Bayonne Industries, Inc., a New Jersey corporation, having its
principal place of business at the Foot of East 22nd Street, Bayonne, New Jersey
07002.
"BI Documents" means this Agreement, the Bill of Sale, the Option
Agreement, the SPF Lease, the Easement Agreement, and all other documents
executed and delivered by BI in connection herewith and therewith.
"Boiler House" means the building located at the Bayonne Facility that
houses the Steam Producing Facilities, except that interior portion of the
building unrelated to the Steam Producing Facilities.
<PAGE> 6
-3-
"Cogen" means Cogen Technologies NJ, Inc., a Delaware corporation, having
its principal place of business at 14614 Falling Creek Drive, Suite 212,
Houston, Texas 77068.
"Cogen Documents" means this Agreement, the Purchase and Sale Agreement,
the Note, the Rent Note, the SPF Lease, the Option Agreement and all other
documents executed and delivered by Cogen in connection herewith and therewith.
"Cogeneration Facility" means the waste heat boilers, gas and steam
turbines, generators and all appurtenant structures, equipment, including
Cogen's interconnection facilities, and real property interests owned or leased
and operated by Cogen at the Bayonne Facility, for purposes of generating
electricity, steam, or other forms of useful thermal output.
"Collateral" means collectively, the Steam Producing Facilities, all
additions, replacements, improvements, substitutions and increments thereto,
and the Proceeds.
"Easement" means that certain easement of even date herewith from BI and
IMTT to Cogen pursuant to which BI and IMTT grant to Cogen ingress and egress
to the Boiler House, including all exhibits and amendments thereto as may be
made from time to time, and any other easements, rights of way or licenses that
may be granted to Cogen under the Ground Lease.
"Financier" means any person lending money for the construction and
operation of the Cogeneration Facility, any person providing funds for
refinancing or take-out of any such loans, and any nominee or designee of any
such person.
<PAGE> 7
-4-
"Ground Lease" means that certain lease agreement between BI and IMTT,
as lessor, and Cogen as lessee, dated as of even date herewith for property
located in Bayonne, New Jersey, including all exhibits and amendments thereto
that may be made from time to time.
"IMTT" means IMTT-Bayonne, a Delaware partnership.
"Note" means a promissory note of even date herewith of Cogen, payable
to BI in the principal amount of $2,600,000.00.
"Obligations" means all indebtedness and liabilities of Cogen under
this Agreement and under the Note.
"Option Agreement" means that certain option agreement of even date
herewith by and between BI and Cogen, including all exhibits and amendments
thereto that may be made from time to time.
"Party" or "Parties" means the signatories to this Agreement and their
successors and assigns.
"Proceeds" means (i) all proceeds received or payable to Cogen upon
the sale, transfer or other disposition of the Steam Producing Facilities,
other than proceeds received by Cogen from the sale or transfer of the Steam
Producing Facilities from an entity to which it may assign this Agreement
pursuant to Article 6.3 hereof and other than any revenues which Cogen may
receive by reason of the sale of any output of the Collateral, and (ii) all
insurance proceeds received payable to Cogen upon the loss, damage or
destruction of the Steam
<PAGE> 8
-5-
Producing Facilities, or any part thereof, as well as all claims relating to the
payment of such insurance proceeds.
"Purchase and Sale Agreement" means that certain agreement of even date
herewith pursuant to which Cogen purchases and BI sells the Assets, including
all exhibits and amendments thereto that may be made from time to time.
"Rent Note" means that certain promissory note of even date herewith of
Cogen, payable to BI in the principal amount of $600,000.00.
"SPF Lease" means that certain steam producing facilities lease agreement
of even date herewith between Cogen, as lessor, and IMTT, as lessee, pursuant
to which the Steam Producing Facilities will be leased to IMTT, including all
exhibits and amendments thereto that may be made from time to time.
"Steam Producing Facilities" means the existing boilers and appurtenant
structures and equipment located inside the Boiler House, more particularly
described in Exhibit A annexed hereto, but not including the Boiler House,
located at the Bayonne Facility and operated for the purpose of producing steam
for industrial purposes at the Bayonne Facility, and all additions,
replacements, improvements, substitutions and increments thereto.
"Steam Sale Agreement" means that certain agreement between Cogen and IMTT
dated as of June 13, 1985, for the sale of steam and electricity from a
cogeneration plant, including
<PAGE> 9
-6-
all exhibits and amendments thereto that may be made from time to time.
ARTICLE 2
SECURITY INTEREST
2.1 Grant of Security Interest. As security for the payment and
performance by Cogen of the Obligations, Cogen hereby creates and grants to BI a
security interest in the Collateral.
2.2 Further Assurances. Cogen will perform any and all steps reasonably
requested by BI to create and maintain in BI's favor a valid and perfected
security interest in the Collateral, including, without limitation, the
execution and delivery, filing and refiling of financing statements and
continuation statements, and any other documents necessary, in the reasonable
opinion of BI, to protect its interest in the Collateral.
2.3 Term. This Agreement shall remain in full force and effect until the
Obligations have been paid and/or performed in full.
<PAGE> 10
-7-
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COGEN
Cogen hereby represents and warrants to BI as follows:
3.1 Organization and Good Standing. Cogen is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite power and authority to own and operate its
properties as now being conducted.
3.2 Authority. The execution, delivery and performance of the Cogen
Documents have been duly and validly authorized and approved by the board of
directors and, to the extent necessary, the shareholders of Cogen. The Cogen
Documents constitute the valid and binding agreement of Cogen enforceable
against it in accordance with its terms.
3.3 No Violation of Other Agreements. The execution, delivery and
performance by Cogen of the Cogen Documents will not conflict with or cause a
breach of or default under any other agreement to which Cogen is a party or by
which its properties may be bound. Cogen has no reason to believe that any
consents or approvals of any other persons, firms, corporations, entities, or
governmental authorities are required in connection with its execution or
delivery of the Cogen Documents.
<PAGE> 11
-8-
3.4 Title to Collateral. There does not exist on the date hereof any
judgment, lien or other encumbrance or other lien against Cogen or any of its
assets which will attach to the Collateral prior in right to the security
interest granted herein or otherwise adversely affect such security interest.
Except for the execution and delivery of the SPF Lease and the Option
Agreement, Cogen has not taken any steps or executed any documents to convey or
encumber title to the Collateral or grant a lien or security interest therein
to any other party since the acquisition thereof by it from BI.
3.5 Valid Security Interest. This Agreement constitutes a valid and
continuing security interest in the Collateral in favor of BI.
3.6 Location of Collateral.
A. Cogen's principal place of business and the place where its
records concerning the Collateral are kept is at 14614 Falling Creek Drive,
Suite 212, Houston, Texas 77068, and Cogen will not change such principal place
of business or remove such records except upon thirty (30) days prior written
notice to BI.
B. The Steam Producing Facilities are located in the Boiler
House and Cogen will not move the Steam Producing Facilities to any other
location.
<PAGE> 12
-9-
3.7 Access to Collateral. Cogen shall grant BI and its duly authorized
agents and representatives from time to time during normal business hours the
right to enter and examine all facilities where the Collateral or any books and
records relating to compliance by Cogen with its duties under this Agreement
and under the SPL Lease are located. BI and its authorized agents and
representatives shall also be permitted to inspect, examine and make copies of
such books and records or any part thereof.
ARTICLE 4
EVENTS OF DEFAULT; REMEDIES
4.1 Events of Default. Any one or more of the following shall constitute
an "Event of Default" hereunder:
A. failure by Cogen to make any payment of principal or interest that
has become due and payable as and when due pursuant to any provisions of the
Note within thirty (30) days after notice of nonpayment given by BI.
B. Failure by Cogen to make any payment of principal or interest that
has become due and payable as and when due pursuant to any provisions of the
Rent Note within thirty (30) days after notice of nonpayment given by BI.
C. Cogen shall have applied for or consented to the appointment of a
custodian, receiver, trustee or liquidator, or other court appointed fiduciary
of all or a substantial part of
<PAGE> 13
-10-
its properties; or a custodian, receiver, trustee or liquidator or other court
appointed fiduciary shall have been appointed without the consent of Cogen, or
Cogen is generally not paying its debts as they become due by means of available
assets and the fair use of credit, or has made a general assignment for the
benefit of creditors; or Cogen has committed an act of bankruptcy, or has filed
a voluntary petition in bankruptcy, or a petition or an answer seeking
reorganization or an arrangement with creditors or seeking to take advantage of
any insolvency law, or any answer admitting the material allegations of a
petition in any bankruptcy, reorganization or insolvency proceeding or has taken
action for the purpose of effecting any of the foregoing; or if within
forty-five (45) days after the commencement of any proceeding against Cogen
seeking any reorganization, rehabilitation, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the federal
bankruptcy code or any present or future applicable federal, state or other
statute or law, such proceeding shall not have been dismissed; or if, within
ninety (90) days after the entry of an Order for Relief under the federal
bankruptcy code or similar order under future similar legislation, the
appointment of any trustee, receiver, custodian, liquidator, or other court
appointed fiduciary of Cogen or of all or any substantial part of its
properties, such order or appointment shall not have been vacated or stayed on
<PAGE> 14
-11-
appeal or otherwise or if, within ninety (90) days after the expiration of any
such stay, such order or appointment shall not have been vacated.
D. The occurrence of an "Event of Default" on the part of Cogen under
the Steam Sale Agreement, the Ground Lease, the SPF Lease or the Option
Agreement.
E. Any sale, assignment, or transfer of the Collateral or the grant
of any lien, security interest or encumbrance therein to any entity other than
one to whom this Agreement may be assigned under Article 6.
F. If any representation or warranty by Cogen pursuant to or in
connection with this Agreement shall be false or misleading in any material
respect when made; provided, however, that such breach or misrepresentation must
first be recognized in a nonappealable judgement by a court of competent
jurisdiction.
G. Any breach or violation by Cogen of the provisions of Article
3.6.B hereof.
H. The failure of Cogen to perform any of the other covenants under
this Agreement which failure continues for a period of thirty (30) days after
written notice of such nonperformance; provided, however, that Cogen shall not
be in default hereunder if Cogen shall diligently commence to cure such failure
to perform within such thirty day period and for so long as Cogen diligently
continues such efforts.
<PAGE> 15
-12-
4.2 Remedies on Default.
A. Whenever any Event of Default shall have occurred and be
continuing, BI may take any one or more of the following steps:
(i) declare all amounts payable hereunder and pursuant to the
Note and the Rent Note to be immediately due and payable, whereupon the same
shall be immediately due and payable, without presentment, demand, protest, or
notice of any kind, all of which are expressly waived hereby, anything in the
Note, the Rent Note or this Agreement to the contrary notwithstanding;
(ii) take any action at law or in equity to collect the
payments then due and thereafter to become due hereunder or under the Note and
the Rent Note and to enforce payment, performance and observance of any
obligations, agreement or covenant of Cogen hereunder or under the Note and the
Rent Note;
(iii) exercise all rights of Cogen under the Option Agreement
and the SPF Lease;
(iv) exercise any and all rights and remedies of a creditor
under the Uniform Commercial Code or other applicable law; or
(v) take all of Cogen's right, title and interest in and to
the Collateral and sell, assign, or otherwise dispose of the Collateral or
Cogen's right, title and
<PAGE> 16
-13-
interest therein. In connection with any sale or other disposition, BI shall
give Cogen and each Financier reasonable notice of the time and place of any
public sale of such Collateral or of the time after which any private sale or
other intended disposition thereof is to be made. The requirement of reasonable
notice shall be met if notice of the sale or other intended disposition is given
to Cogen and each Financier at least ten (10) days prior to the time of such
sale or disposition. At such sale, BI may sell the Collateral for cash or upon
credit or otherwise, at such prices and upon such terms as it deems advisable
and BI may bid or become the purchaser at such sale, free of the right of
redemption, which is hereby waived. BI may adjourn such sales at the time and
place fixed therefor without further notice or advertisement, and may sell such
Collateral as an entirety or in separate lots as it deems advisable, but BI
shall not be obligated to sell all or any part of such Collateral at the time
and place fixed for such sale if it determines not to do so. Any sale may be
conducted at the Boiler House premises without cost or charge for rent, use,
occupancy, store, or other claim by Cogen, its landlord, or any ground lessor
or mortgagee.
B. Without limiting the foregoing, in exercising its remedies upon the
occurrence of an Event of Default, BI (i) shall not be responsible nor liable
for any shortage, discrepancy, damage, loss or destruction of any part of the
<PAGE> 17
-14-
Collateral wherever the same may be located regardless of the cause thereof
unless the same shall happen through its gross negligence or willful
misconduct; (ii) shall be entitled to the appointment (without notice and
without proof of diminution in value of the Collateral) of a receiver to take
possession of all or any portion of the Collateral and to exercise such powers
as the court shall confer upon the receiver, and (iii) generally may perform all
acts necessary or proper to carry out the intention of this Agreement, as fully
and completely as though BI were the absolute owner of the Collateral for all
purposes, and Cogen hereby ratifies and confirms all that BI shall do by virtue
of this grant of power.
C. Whenever an Event of Default shall have occurred, Cogen will perform any
and all steps necessary to effectuate the transfer, issue or reissue to BI of
all Governmental Authorizations with regard to the Steam Producing Facilities so
as to allow BI to Operate and Maintain the Steam Producing Facilities and/or to
evidence its ownership interest therein and shall not take any act or omit to
take any act the effect of which would be to limit BI's ability to effectuate
such transfer, issue or reissue; provided, however, that the failure of any such
Governmental Authorization to be transferred, issued or reissued due to no fault
of Cogen shall not result in any liability to Cogen. In the event that any such
Governmental Authorization shall fail to be transferred,
<PAGE> 18
-15-
issued or reissued, Cogen hereby appoints BI as its agent and attorney in fact
to take all actions necessary to effectuate such transfer, issue or reissue and
prospectively ratifies and approves any actions taken pursuant to such
authority.
D. All proceeds received from the sale or other disposition of the
Collateral shall be applied as follows:
(i) First, to the payment of all fees, costs and expenses relating
to such sale or other disposition;
(ii) Second, to the payment in full of the first $2,400,000.00 of
principal of the Note and accrued and unpaid interest thereon (in such order as
BI may determine);
(iii) Third, to the payment of the remaining $200,000.00 principal
amount of the Note;
(iv) Fourth, the payment of accrued and unpaid interest on such
$200,000.00 principal amount (the "Deferred Interest"); and
(v) Fifth, the balance, if any, of such proceeds remaining after
payment in full of the foregoing items, to Cogen or as a court of competent
jurisdiction may otherwise direct.
In the event that the proceeds received from the sale or other
disposition of the Collateral shall be insufficient to satisfy the payment in
full of the Deferred Interest, neither Cogen nor its officers, directors or
shareholders (nor the officers, directors, shareholders or partners of any
assignee
<PAGE> 19
-16-
of Cogen) shall be liable for any deficiency and BI shall not institute any
action or proceeding against Cogen or such persons to collect the same.
ARTICLE 5
NON-WAIVER
The various rights, remedies, options, and elections of BI and Cogen,
expressed herein, are cumulative, and the failure of BI or Cogen to enforce
strict performance by the other Party of the conditions and covenants of this
Agreement or to exercise any election or option or to resort or have recourse
to any remedy herein conferred or the acceptance by BI of any payment pursuant
to the Note after any Event of Default by Cogen in any one or more instances,
shall not be construed or deemed to be a waiver or a relinquishment for the
future by BI of any such conditions and covenants, options, elections, or
remedies, but the same shall continue in full force and effect.
ARTICLE 6
SUCCESSORS AND ASSIGNS
6.1 This Agreement shall be binding upon and inure to the benefit of
the Parties and any permitted assignees as provided herein.
6.2 Except as is expressly set forth in this Agreement, neither the
rights nor the obligations of any Party under this
<PAGE> 20
-17-
Agreement may be assigned, pledged, hypothecated or otherwise transferred.
6.3 Cogen is expressly permitted to assign this Agreement as provided in
this Article 6.3. Cogen may assign this Agreement to Cogen Technologies NJ
Venture, provided that such assignment shall be of no force and effect unless
and until Cogen Technologies NJ Venture shall have assumed in writing all of
Cogen's obligations under the following instruments and notes, and shall have
agreed in writing to cure any existing defaults and breaches of Cogen hereunder
and thereunder:
(1) The Steam Sale Agreement
(2) The Ground Lease
(3) The Option Agreement
(4) The SPF Lease
(5) The Note
(6) The Purchase and Sale Agreement
(7) The Rent Note
Cogen may assign this Agreement to any Financier which shall be obligated
hereunder only as provided in Articles 21.6 and 21.7 of the Ground Lease.
6.4 BI is expressly permitted to assign this Agreement to any person or
entity, provided that such assignment shall be of no force and effect unless
and until such person or entity shall have assumed in writing all of BI's
obligations under this Agreement and under the instruments referred to in
<PAGE> 21
-18-
Article 6.3, with the exception of the Note and the Rent Note, and shall have
agreed in writing to cure any defaults and breaches hereunder and thereunder.
ARTICLE 7
MISCELLANEOUS
7.1 Notice. All notices, including communications and statements
which are required or permitted under the terms of this Agreement, shall be in
writing, except as otherwise provided. Service of a notice may be accomplished
by personal service, telegram or registered or certified mail. If a notice is
sent by registered or certified mail, it shall be deemed served within three
(3) days, excluding Saturdays, Sundays or legal Federal holidays, except as
otherwise demonstrated by a signed receipt. If a notice is served by telegram,
it shall be deemed served eighteen (18) hours after delivery to the telegram
company. Notices may be sent to the Parties at the following addresses:
(a) Cogen: Cogen Technologies NJ, Inc.
14614 Falling Creek Drive
Suite 212
Houston, Texas 77068
Attention: Mr. Robert C. McNair,
President
With information copy to:
Cogen Technologies NJ, Inc.
Foot of East 22nd Street
Bayonne, New Jersey 07002
Attention: Plant Manager
<PAGE> 22
-19-
(b) BI: Bayonne Industries, Inc.
Foot of East 22nd Street
Bayonne, New Jersey 07002
Attention: Glynn Esteves
-or-
International-Maytex Tank
Terminals
Ninth Floor
321 St. Charles Avenue
New Orleans, Louisiana 70130
Attention: Mr. Thomas B. Coleman,
Partnership Manager
7.2 Amendments. No amendment or modification of the terms of this
Agreement shall be binding on either BI or Cogen unless reduced to writing and
signed by both Parties.
7.3 Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.
7.4 Other Agreements. This Agreement supersedes any and all oral or
written agreements and understandings heretofore made relating to the subject
matters herein, and together with the BI Documents and the Cogen Documents
constitutes the entire agreement and understanding of the Parties relating to
the subject matters herein.
7.5 Captions. All indices, titles, subject headings, section titles and
similar items are provided for the purpose of reference and convenience and are
not intended to be inclusive, definitive or to affect the meaning, content or
scope of this Agreement.
<PAGE> 23
-20-
7.6 Security Agreement. This Agreement shall constitute a security
agreement within the meaning of the Uniform Commercial Code as in force and
effect in the State of New Jersey.
IN WITNESS WHEREOF, the Parties have entered into this Agreement to be
signed in quadruplicate original as of the date first written above.
[SEAL]
<TABLE>
<CAPTION>
ATTEST: BAYONNE INDUSTRIES, INC.
<S> <C>
/s/ BERTRAND F. ARTIGUES By: /s/ RICHARD B. JURISICH
- ----------------------------------- -------------------------------
Bertrand F. Artigues Richard B. Jurisich
Assistant Secretary Executive Vice-President/
Secretary
[SEAL]
ATTEST: COGEN TECHNOLOGIES NJ, INC.
/s/ JOHN B. WING By: /s/ ROBERT C. McNAIR
- ----------------------------------- -------------------------------
John B. Wing Robert C. McNair
Assistant Secretary President
</TABLE>
<PAGE> 24
EXTRACT OF SPECIAL MEETING
OF THE BOARD OF DIRECTORS OF
BAYONNE INDUSTRIES, INC.
HELD AT NEW ORLEANS, LOUISIANA
ON MAY 1, 1986
-------------------------------
RESOLVED, that Bayonne Industries, Inc., a New Jersey corporation,
shall enter into an agreement with Cogen Technologies NJ, Inc., a
Delaware corporation, creating, granting and preserving to Bayonne
Industries, Inc. a security interest in those certain steam producing
facilities to be sold to Cogen Technologies NJ, Inc.; which steam
producing facilities are situated within the boilerhouse on the tank
terminal facility at Bayonne, New Jersey, presently operated by
IMTT-Bayonne and owned by Bayonne Industries, Inc., and are described
in detail in the Security Agreement.
FURTHER RESOLVED, that Thomas B. Coleman, President and/or Richard B.
Jurisich, Executive Vice-President/Secretary, or either of them, are
authorized, empowered and directed for and in behalf of the corporation
to execute, furnish and deliver, a document styled "Security Agreement
Between Cogen Technologies NJ, Inc. and Bayonne Industries, Inc.,"
carrying into effect the foregoing resolution; and the President and/or
Executive Vice-President/Secretary are further authorized to do all
things necessary and appropriate in connection therewith, including
particularly, the President and/or Executive Vice-President/Secretary
are authorized, empowered and directed to include within the said
Security Agreement such terms, provisions and conditions as they shall
deem meet and appropriate and in the best interest of the corporation,
all in their sole discretion.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
I, Howard W. Streiffer, Executive Vice-President-Finance of
Bayonne Industries, Inc., do hereby certify that the above and foregoing
constitutes a true and correct copy of certain resolutions passed at a special
meeting of the Board of Directors of Bayonne Industries, Inc. held on May 1,
1986 at 9th Floor, 321 St. Charles Avenue, New Orleans, Louisiana 70130; that
all Directors were present and voting at said meeting; that said resolutions
were passed unanimously and have been spread upon the minutes of the
corporation; that said resolutions have not been revoked, rescinded or altered.
New Orleans, Louisiana, May 2, 1986.
/s/ HOWARD W. STREIFFER
-----------------------------------
HOWARD W. STREIFFER
Executive Vice-President-Finance
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------------
COMPANY COGEN TECH GROUP
PRO FORMA COMPANY ----------- ---------------------------
--------------------------- PERIOD FROM
NINE MONTHS YEAR FEBRUARY 4, PERIOD NINE MONTHS
ENDED ENDED 1999 TO ENDED ENDED
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, FEBRUARY 4, SEPTEMBER 30,
1999 1998 1999 1999 1998
-------------- ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
INCOME FOR FIXED CHARGE COVERAGE
Income (Loss) Before Tax $ (76.6) $ (55.5) $ 1.4 $ (56.0) $ 65.5
--------- ---------- --------- --------- ---------
Income for Fixed Charge Coverage $ (76.6) $ (55.5) $ 1.4 $ (56.0) $ 65.5
========= ========== ========= ========= =========
FIXED CHARGES
Group Interest Expense $ 76.3 $ 100.6 $ 65.6 $ 2.0 $ 14.4
Group Share of Interest Expense of
Affiliates (1)
Bayonne Venture 5.0 7.1 4.3 0.7 4.8
Camden Venture 4.1 5.4 3.5 0.6 4.2
Portion of Rent Expense Representative
of Interest Factor -- 0.1 -- -- --
--------- ---------- --------- --------- ---------
Total Fixed Charges $ 85.4 $ 113.2 $ 73.4 $ 3.3 $ 23.4
========= ========== ========= ========= =========
INCOME FOR FIXED CHARGE COVERAGE PLUS
TOTAL FIXED CHARGES $ 8.8 $ 57.7 $ 74.8 $ (52.7) $ 88.9
========= ========== ========= ========= =========
FIXED CHARGE COVERAGE (Income for Fixed Charge
Coverage Plus Total Fixed Charges divided by
Total Fixed Charges) 0.1 0.5 1.0 (16.0) 3.8
========= ========== ========= ========= =========
(1) The Company's / Group's share of interest
expense of affiliates is computed as follows
(millions of dollars, except as noted):
Bayonne Venture Interest Expense $ 5.5 $ 7.7 $ 4.7 $ 0.8 $ 5.5
% of earnings allocated to Group 91.75% 91.75% 91.75% 91.75% 87.00%
Company's / Group's Share of Bayonne Venture
Interest Expense $ 5.0 $ 7.1 $ 4.3 $ 0.7 $ 4.8
Camden Venture Interest Expense $ 5.2 $ 7.4 $ 4.5 $ 0.7 $ 5.6
% of earnings allocated to Group 78.84% 72.80% 78.84% 80.65% 75.27%
Company's / Group's Share of Camden Venture
Interest Expense $ 4.1 $ 5.4 $ 3.5 $ 0.6 $ 4.2
<CAPTION>
HISTORICAL
--------------------------------------------------
COGEN TECH GROUP
--------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
INCOME FOR FIXED CHARGE COVERAGE
Income (Loss) Before Tax $ 88.6 $ 78.3 $ 73.1 $ 79.7 $ 55.8
------- ------- ------- ------- -------
Income for Fixed Charge Coverage $ 88.6 $ 78.3 $ 73.1 $ 79.7 $ 55.8
======= ======= ======= ======= =======
FIXED CHARGES
Group Interest Expense $ 19.3 $ 21.8 $ 23.3 $ 26.5 $ 25.9
Group Share of Interest Expense of Affiliates (1)
Bayonne Venture 6.8 7.0 7.4 7.6 7.8
Camden Venture 5.4 7.0 7.7 8.2 8.7
Portion of Rent Expense Representative
of Interest Factor 0.1 0.1 0.2 0.1 0.1
------- ------- ------- ------- -------
Total Fixed Charges $ 31.6 $ 35.9 $ 38.6 $ 42.4 $ 42.5
======= ======= ======= ======= =======
INCOME FOR FIXED CHARGE COVERAGE PLUS
TOTAL FIXED CHARGES $120.2 $114.2 $111.7 $122.1 $ 98.3
======= ======= ======= ======= =======
FIXED CHARGE COVERAGE (Income for Fixed Charge
Coverage Plus Total Fixed Charges divided by
Total Fixed Charges) 3.8 3.2 2.9 2.9 2.3
======= ======= ======= ======= =======
(1) The Company's / Group's share of interest expense of
affiliates is computed as follows (millions of dollars,
except as noted):
Bayonne Venture Interest Expense $ 7.7 $ 8.1 $ 8.5 $ 8.8 $ 9.0
% of earnings allocated to Group 88.10% 86.50% 86.50% 86.50% 86.50%
Company's / Group's Share of Bayonne Venture Interest Expense $ 6.8 $ 7.0 $ 7.4 $ 7.6 $ 7.8
Camden Venture Interest Expense $ 7.4 $ 7.7 $ 8.2 $ 8.4 $ 8.8
% of earnings allocated to Group 72.80% 91.20% 93.80% 97.10% 98.30%
Company's / Group's Share of Camden Venture Interest Expense $ 5.4 $ 7.0 $ 7.7 $ 8.2 $ 8.7
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
November 18, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE EAST
COAST POWER L.L.C. CONSOLIDATED BALANCE SHEET AS OF THE DATE INDICATED AND THE
RELATED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE PERIOD INDICATED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH EAST COAST POWER L.L.C. AMENDMENT
NO. 2 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AS
FILED WITH THE SEC ON NOVEMBER 19, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> OTHER OTHER
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-START> FEB-04-1999 FEB-04-1999
<PERIOD-END> SEP-30-1999 MAR-31-1999
<CASH> 24,800 25,200
<SECURITIES> 0 0
<RECEIVABLES> 100 8,600
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 39,000 114,100
<PP&E> 300 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1,316,900 1,421,900
<CURRENT-LIABILITIES> 43,200 95,400
<BONDS> 1,192,300 1,250,100
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 81,400 76,400
<TOTAL-LIABILITY-AND-EQUITY> 1,316,900 1,421,900
<SALES> 0 0
<TOTAL-REVENUES> 62,000 14,700
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 5,500 1,400
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 65,600 17,200
<INCOME-PRETAX> 1,400 (3,600)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 1,400 (3,600)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,400 (3,600)
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
