SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
June 30, 2000
For the quarterly period ended. . . . . . . . . . . . . . . . . . . . . . . . .
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from. . . . . . . .to. . . . . . . . . . . . . . . . .
333-89725
Commission file number . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AES Eastern Energy, L.P.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Exact name of registrant as specified in its charter)
Delaware 54-1920088
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1001 N. 19th Street, Arlington, Va. 22209
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Address of principal executive offices) (Zip Code)
(703) 522-1315
Registrant's telephone number, including area code . . . . . . . . . . . . . . .
N/A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Registrant is a wholly owned subsidiary of The AES Corporation. Registrant meets
the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and
is filing this Quarterly Report on Form 10-Q with the reduced disclosure format
authorized by General Instruction H.
<PAGE>
TABLE OF CONTENTS
PART I
Page
Item 1. Condensed Consolidated Financial Statements . . . . . . . . . 3
AES EASTERN ENERGY, L.P.
Condensed Consolidated Financial Statements:
Statements of Income for the periods ended June 30, 2000 and 1999
(unaudited)
Balance Sheets as of June 30, 2000 and December 31, 1999 (unaudited)
Statements of Cash Flows for the period ended June 30, 2000 and 1999
(unaudited)
Statement of Changes in Partners' Capital for the period ended June 30,
2000 (unaudited)
Notes to Condensed Consolidated Financial Statements
AES NY, L.L.C. (General Partner of AES Eastern Energy, L.P.)*
Condensed Consolidated Financial Statements:
Balance Sheets as of June 30, 2000 and December 31, 1999 (unaudited)
Notes to Condensed Consolidated Balance Sheets
* The condensed and consolidated balance sheets of AES NY, L.L.C. contained
in this Quarterly Report on Form 10-Q should be considered only in
connection with its status as the general partner of AES Eastern Energy,
L.P.
Item 2. Discussion and Analysis of Financial Condition
and Results of Operations
(a) Liquidity and Capital Resources . . . . . . . . . . . . 13
(b) Results of Operations . . . . . . . . . . . . . . . . . 14
PART II
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Reports on Form 8-K . . . . . . . . . . . . . . . . . . 15
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
AES Eastern Energy, L.P.
Condensed Consolidated Statements of Income (Unaudited)
Three months Period from May 14,
ended 1999 (inception)
June 30, 2000 to June 30, 1999
------------- -------------------
(Thousands)
Operating Revenues
Energy $80,811 $15,038
Capacity 7,856 2,073
Other 946 114
--------- --------
Total operating revenues 89,613 17,225
Operating Expenses
Fuel 30,396 8,631
Operations and maintenance 6,296 714
General and administrative 14,005 2,792
Depreciation and amortization 8,171 1,947
--------- --------
Total Operating Expenses 58,868 14,084
--------- --------
Operating Income 30,745 3,141
Other Income/(Expense)
Interest expense (15,565) (2,810)
Interest income 723 247
-------- --------
Net Income $15,903 $578
========= ========
The notes are an integral part of the condensed consolidated financial
statements.
3
<PAGE>
Item 1. Condensed Consolidated Financial Statements (Cont'd)
AES Eastern Energy, L.P.
Condensed Consolidated Statement of Income (Unaudited)
Three months Period from May 14,
ended 1999 (inception)
June 30, 2000 to June 30, 1999
------------- -------------------
(Thousands)
Operating Revenues
Energy $152,862 $15,038
Capacity 15,702 2,073
Other 1,145 114
--------- --------
Total operating revenues 169,709 17,225
Operating Expenses
Fuel 59,713 8,631
Operations and maintenance 8,408 714
General and administrative 27,802 2,792
Depreciation and amortization 15,857 1,947
--------- --------
Total Operating Expenses 111,780 14,084
--------- --------
Operating Income 57,929 3,141
Other Income/(Expense)
Interest expense (30,998) (2,810)
Interest income 1,088 247
-------- --------
Net Income $28,019 $578
========= ========
The notes are an integral part of the condensed consolidated financial
statements.
4
<PAGE>
Item 1. Condensed Consolidated Financial Statements (Cont'd)
AES Eastern Energy, L.P.
Condensed Consolidated Balance Sheets - (Unaudited)
June 30, Dec. 31,
2000 1999
---- ----
ASSETS (Thousands)
Current Assets
Restricted cash and cash equivalents $81,759 $52,637
Accounts receivable - trade 35,034 22,481
Accounts receivable - affiliates 1 271
Accounts receivable - other 584 322
Inventory 26,752 27,989
Prepaid expenses 4,050 6,189
---------- ----------
Total Current Assets 148,180 109,889
Property, Plant and Equipment
Land 6,850 6,850
Electric generation assets 1,008,591 1,003,941
Accumulated depreciation (33,246) (17,389)
---------- ----------
Total property, plant and equipment 982,195 993,402
Other Assets
Rent reserve account 30,239 29,543
Other 313 -
---------- ----------
Total Assets $1,160,927 $1,132,834
========== ==========
LIABILITIES
Current Liabilities
Accounts payable $2,054 $508
Accrued interest 30,090 38,460
Due to The AES Corporation 6,016 3,250
Other liabilities and accrued expenses 24,292 20,832
---------- ----------
Total Current Liabilities 62,452 63,050
Long-term liabilities
Lease financing - long-term 650,000 650,000
Environmental remediation 11,512 11,080
Defined benefit plan obligation 25,802 23,880
Other liabilities 4,921 6,603
---------- ----------
Total Long-term Liabilities 692,235 691,563
---------- ----------
Total Liabilities 754,687 754,613
Commitments and Contingencies - -
PARTNERS' CAPITAL 406,240 378,221
---------- ----------
Total Liabilities and Partners' Capital $1,160,927 $1,132,834
========== ==========
The notes are an integral part of the condensed consolidated financial
statements.
5
<PAGE>
Item 1. Condensed Consolidated Financial Statements (Cont'd)
AES Eastern Energy, L.P.
Condensed Consolidated Statement of Cash Flow (Unaudited)
<TABLE>
<CAPTION>
Three months Period from May 14,
ended 1999 (inception)
June 30, 2000 to June 30, 1999
------------- ------------------
(Thousands)
<S> <C> <C>
Operating Activities
Net income $28,019 $578
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 15,857 1,947
Interest income accrued in the rent reserve account (696) 2,810
Changes in current operating assets and liabilities
Accounts receivable (12,545) (19,709)
Prepaid expenses 2,139 (4,893)
Inventory 1,237 (120)
Accounts payable and accrued liabilities 74 17,815
Other (313) 100
-------- --------
Net Cash Provided/(Used in) by Operating Activities 33,772 (1,472)
-------- --------
Investing Activities
Acquisition of assets at inception date - (257,090)
Payments for capital additions (4,650) (47,896)
Increase in restricted cash (29,122) (9,488)
-------- --------
Net Cash Used in Investing Activities (33,772) (314,474)
-------- --------
Financing Activities
Cash capital contributions - 344,619
Payments to rent service reserve - (28,673)
-------- --------
Net Cash Provided by Financing Activities - 315,946
-------- --------
Net Change in Cash and Cash Equivalents - -
Cash and Cash Equivalents, Beginning of Period - -
-------- --------
Cash and Cash Equivalents, End of Period - -
======== ========
</TABLE>
The notes are an integral part of the condensed consolidated financial
statements.
6
<PAGE>
Item 1. Condensed Consolidated Financial Statements (Cont'd)
AES Eastern Energy, L.P.
Condensed Consolidated Statement of Changes in Partners' Capital - (Unaudited)
Six Months Ended June 30, 2000
(Thousands)
General Limited
Partner Partner Total
------- ------- -----
Balance, December 31, 1999 $3,782 $374,439 $378,221
Add net income 280 27,739 28,019
-------- -------- --------
Balance, June 30, 2000 $4,062 $402,178 $406,240
======== ======== ========
The notes are an integral part of the condensed consolidated financial
statements.
7
<PAGE>
Item 1. Condensed Consolidated Financial Statements (Cont'd)
Note 1. Unaudited Condensed Consolidated Financial Statements
The accompanying unaudited condensed consolidated financial statements of
AES Eastern Energy, L.P. (the Partnership) reflect all adjustments which are
necessary, in the opinion of management, for a fair presentation of the
Partnership's consolidated results for the interim periods. All such adjustments
are of a normal recurring nature. The unaudited condensed consolidated financial
statements should be read in conjunction with the Partnership's consolidated
financial statements and notes contained therein, for the period from May 14,
1999 (inception) to December 31, 1999. Due to the seasonal nature of the
Partnership's operations, financial results for interim periods are not
necessarily indicative of trends for a 12-month period.
Note 2. Reclassifications
Certain amounts have been reclassified on the condensed consolidated
financial statements to conform with the 2000 presentation.
Note 3. Commitments and Contingencies
Coal Purchases - In connection with the acquisition of the Partnership's
four coal-fired electric generating stations (the Plants), the Partnership has
assumed from New York State Electric & Gas Corporation (NYSEG) an agreement to
purchase the coal required by the Somerset and Cayuga Plants. Each year, either
party can request renegotiation of the price of one-third of the coal supplied
pursuant to this agreement. During 2000, the coal suppliers are committed to
sell and the Partnership is committed to purchase all three lots of coal and
either party may request renegotiation of one lot of coal for the following
year. If either party requested renegotiation during 2000 but the parties failed
to reach agreement, then the parties would have commitments with respect to only
two lots in 2001. If the same thing happened in 2001, the parties would have
commitments with respect to only one lot in 2002. Either party could terminate
the contract in its sole discretion at the end of 2002. As of May 14, 1999, the
acquisition date of the Plants, the contract prices were above the market price,
and the Partnership recorded a purchase accounting liability for approximately
$15.7 million related to the fulfillment of its obligation to purchase coal
under this agreement. As of June 30, 2000, the remaining liability was
approximately $10.0 million.
Environmental - The Partnership has recorded a liability for environmental
remediation associated with the acquisition of the Plants. On an ongoing basis,
the Partnership monitors its compliance with environmental laws. Because of the
uncertainties associated with environmental compliance and remediation
activities, future costs of compliance or remediation could be higher or lower
than the amount currently accrued.
On October 14, 1999, the Partnership received an information request letter
from the New York State Attorney General, which seeks detailed operating and
maintenance history for the Westover and Greenidge Plants. On January 13, 2000,
the Partnership received a subpoena from New York State Department of
Environmental Conservation (DEC) seeking similar operating and maintenance
history for all four of the Plants. This information is being sought in
connection with the Attorney General's and the DEC's investigations of several
electricity generating stations in New York that are suspected of undertaking
modifications in the past without undergoing an air permitting review.
8
<PAGE>
On April 14, 2000, the Partnership received a request for information
pursuant to Section 114 of the Clean Air Act from the U.S. Environmental
Protection Agency (EPA) seeking detailed operating and maintenance history data
for the Cayuga and Somerset Plants. EPA has commenced an industry-wide
investigation of coal-fired electric power generators to determine compliance
with environmental requirements under the Clean Air Act associated with repairs,
maintenance, modifications and operational changes made to coal-fired facilities
over the years. The EPA's focus is on whether the changes were subject to new
source review or new source performance standards, and whether best available
control technology was or should have been used. EPA is requesting information
similar to that previously requested by the DEC for all four of the Plants and
by the New York State Attorney General with respect to the Westover and
Greenidge Plants. The Partnership is cooperating with the request and will
provide the appropriate documentation.
By letter dated May 25, 2000, the DEC issued a Notice of Violation (NOV) to
NYSEG for violations of the Clean Air Act and the Environmental Conservation Law
at the Greenidge and Westover plants related to repairs and improvements at
those plants which occurred prior to their acquisition by the Partnership and
which are alleged by the DEC to have been made without required air permitting
reviews. Pursuant to the Asset Purchase Agreement relating to the acquisition of
the Plants from NYSEG, the Partnership agreed to assume responsibility for most
environmental liabilities that arose while NYSEG owned the Plants. The
Partnership is in discussions with NYSEG and the DEC concerning a response to
the NOV. The Partnership is unable to estimate the effect of this NOV on its
financial condition or results of future operations.
The NOV issued by the DEC, and any additional enforcement actions that might
be brought by the New York State Attorney General, the DEC or the EPA, against
the Somerset, Cayuga, Greenidge or Westover Plants, might result in the
imposition of penalties and might require further emission reductions at those
Plants. The Partnership is unable to estimate the effect, if any, of these
matters on its financial condition or results of future operations.
Nitrogen Oxide and Sulfur Dioxide Emission Allowances - The Plants emit
nitrogen oxide (NOx) and sulfur dioxide (SO2) as a result of burning coal to
produce electricity. The Plants have been allocated allowances by the DEC to
emit NOx during the ozone season, which runs from May 1 to September 30. Each
NOx allowance authorizes the emission of one ton of NOx during the ozone season.
The Plants are also subject to SO2 emission allowance requirements imposed by
the EPA. Each SO2 allowance authorizes the emission of one ton of SO2 during the
calendar year. All of the Plants are required to hold sufficient allowances to
emit SO2. Both NOx and SO2 allowances may be bought, sold, or traded. If NOx
and/or SO2 emissions exceed the allowance amounts allocated to the Plants, then
the Partnership may need to purchase additional allowances on the open market or
otherwise reduce its production of electricity to stay within the allocated
amounts.
9
<PAGE>
Item 1. Condensed Consolidated Financial Statements (Cont'd)
AES NY, L.L.C.
Condensed Consolidated Balance Sheets - (Unaudited)
June 30, Dec. 31,
2000 1999
---- ----
ASSETS (Thousands)
Current Assets
Restricted cash and cash equivalents $85,543 $54,711
Accounts receivable - trade 37,067 25,072
Accounts receivable - other 607 368
Inventory 29,155 30,524
Prepaid expenses 4,214 6,327
---------- ----------
Total Current Assets 156,586 117,002
Property, Plant and Equipment
Land 7,300 7,300
Electric generation assets 1,013,628 1,008,969
Accumulated depreciation (35,175) (18,596)
---------- ----------
Total property, plant and equipment 985,753 997,673
Other Assets
Rent reserve account 30,239 29,543
Other 364 -
---------- ----------
Total Assets $1,172,942 $1,144,218
========== ==========
LIABILITIES AND MEMBER'S EQUITY
Current Liabilities
Accounts payable $2,074 $552
Accrued interest 30,090 38,460
Due to The AES Corporation 6,061 3,250
Other liabilities and accrued expenses 25,992 21,954
---------- ----------
Total Current Liabilities 64,217 64,216
Long-term liabilities
Lease financing - long-term 650,000 650,000
Environmental remediation 14,073 13,641
Defined benefit plan obligation 30,025 28,046
Other liabilities 4,921 6,603
---------- ----------
Total Long-term Liabilities 699,019 698,290
---------- ----------
Total Liabilities 763,236 762,506
Commitments and Contingencies - -
Minority Interest 405,609 377,895
Member's Equity 4,097 3,817
---------- ----------
Total Liabilities and Member's Equity $1,172,942 $1,144,218
========== ==========
The notes are an integral part of the condensed consolidated financial
statements.
10
<PAGE>
Item 1. Condensed Consolidated Financial Statements (Cont'd)
Note 1. Unaudited Condensed Consolidated Balance Sheets
The accompanying unaudited condensed consolidated balance sheets of AES NY,
L.L.C. (the Company) reflect all adjustments which are necessary, in the opinion
of management, for a fair presentation of the Company's consolidated results for
the interim periods. All such adjustments are of a normal recurring nature. The
unaudited condensed consolidated balance sheets should be read in conjunction
with the Company's consolidated balance sheet and notes contained therein, as of
December 31, 1999. Due to the seasonal nature of the Company's operations,
financial results for interim periods are not necessarily indicative of trends
for a 12-month period.
Note 2. Commitments and Contingencies
Coal Purchases - In connection with the acquisition by AES Eastern Energy,
L.P. (AEE) of its four coal-fired electric generating stations (the AEE Plants),
AEE has assumed from New York State Electric & Gas Corporation (NYSEG) an
agreement to purchase the coal required by the Somerset and Cayuga Plants. Each
year, either party can request renegotiation of the price of one-third of the
coal supplied pursuant to this agreement. During 2000, the coal suppliers are
committed to sell and AEE is committed to purchase all three lots of coal and
either party may request renegotiation of one lot of coal for the following
year. If either party requested renegotiation during 2000 but the parties failed
to reach agreement, then the parties would have commitments with respect to only
two lots in 2001. If the same thing happened in 2001, the parties would have
commitments with respect to only one lot in 2002. Either party could terminate
the contract in its sole discretion at the end of 2002. As of the acquisition
date, the contract prices were above the market price, and the Company recorded
a purchase accounting liability for approximately $15.7 million related to the
fulfillment of its obligation to purchase coal under this agreement. As of June
30, 2000, the remaining liability was approximately $10.0 million.
Environmental - The Company has recorded a liability for environmental
remediation associated with the acquisition of the AEE Plants and the
acquisition by AES Creative Resources, L.P. (ACR) of two additional coal-fired
electric generating stations (the ACR Plants). On an ongoing basis, the Company
monitors its compliance with environmental laws. Because of the uncertainties
associated with environmental compliance and remediation activities, future
costs of compliance or remediation could be higher or lower than the amount
currently accrued.
On October 14, 1999, AEE received an information request letter from the New
York State Attorney General, which seeks detailed operating and maintenance
history for the Westover and Greenidge Plants. On January 13, 2000, the Company
received a subpoena from New York State Department of Environmental Conservation
(DEC) seeking similar operating and maintenance history from the AEE Plants and
the ACR Plants. This information is being sought in connection with the Attorney
General's and the DEC's investigations of several electricity generating
stations in New York that are suspected of undertaking modifications in the past
without undergoing an air permitting review.
On April 14, 2000, AEE received a request for information pursuant to
Section 114 of the Clean Air Act from the U.S. Environmental Protection Agency
(EPA) seeking detailed operating and maintenance history data for the Cayuga and
Somerset Plants. EPA has commenced an industry-wide investigation of coal-fired
electric power generators to determine compliance with environmental
requirements under the Clean Air Act associated with repairs, maintenance,
modifications and operational changes made to coal-fired facilities over the
years. The EPA's focus is on whether the changes were subject to new source
review or new source performance standards, and whether best available control
technology was or should have been used. EPA is requesting information similar
11
<PAGE>
to that previously requested by the DEC for the AEE Plants and the ACR Plants
and by the New York State Attorney General with respect to the Westover and
Greenidge Plants. AEE is cooperating with the request and will provide the
appropriate documentation.
By letter dated May 25, 2000, the DEC issued a Notice of Violation (NOV) to
NYSEG for violations of the Clean Air Act and the Environmental Conservation Law
at the Greenidge and Westover plants related to repairs and improvements at
those plants which occurred prior to their acquisition by AEE and which are
alleged by the DEC to have been made without required air permitting reviews.
Pursuant to the Asset Purchase Agreement relating to the acquisition of the
Plants from NYSEG, the Company agreed to assume responsibility for most
environmental liabilities that arose while NYSEG owned the Plants. The Company
is in discussions with NYSEG and the DEC concerning a response to the NOV. The
Company is unable to estimate the effect of this NOV on its financial condition
or results of future operations.
The NOV issued by the DEC, and any additional enforcement actions that might
be brought by the New York State Attorney General, the DEC or the EPA, against
the Somerset, Cayuga, Greenidge, Westover or ACR Plants, might result in the
imposition of penalties and might require further emission reductions at those
Plants. The Company is unable to estimate the effect, if any, of these matters
on its financial condition or results of future operations.
In October 1999, ACR entered into a consent order with the DEC to resolve
alleged violations of the water quality standards in the groundwater down
gradient of an ash disposal site. The consent order includes a suspended $5,000
civil penalty and a requirement to submit a work plan to initiate closure of the
landfill by October 8, 2000. The consent order also calls for a site
investigation and there is a possibility that some groundwater remediation at
the site may be required. AEE2, L.L.C., a subsidiary of AEE, will contribute
two-thirds of the costs to close the landfill, which are anticipated to be
approximately $3 million, as additional costs for long term groundwater
monitoring. While the actual closure costs may exceed $3 million, which is
included in the environmental remediation liability, the Company does not expect
any added closure costs to be material.
Nitrogen Oxide and Sulfur Dioxide Emission Allowances - The AEE Plants and
the ACR Plants emit nitrogen oxide (NOx) and sulfur dioxide (SO2) as a result of
burning coal to produce electricity. The AEE Plants and the ACR Plants have been
allocated allowances by the DEC to emit NOx during the ozone season, which runs
from May 1 to September 30. Each NOx allowance authorizes the emission of one
ton of NOx during the ozone season. The AEE Plants and the ACR Plants are also
subject to SO2 emission allowance requirements imposed by the EPA. Each SO2
allowance authorizes the emission of one ton of SO2 during the calendar year.
All of the AEE Plants and the ACR Plants are required to hold sufficient
allowances to emit SO2. Both NOx and SO2 allowances may be bought, sold, or
traded. If NOx and/or SO2 emissions exceed the allowance amounts allocated to
the AEE Plants and the ACR Plants, then AEE and ACR may need to purchase
additional allowances on the open market or otherwise reduce their production of
electricity to stay within the allocated amounts.
12
<PAGE>
Item 2. Discussion and analysis of financial condition and results of
operations
(a) Liquidity and Capital Resources
Operations
Cash flow from our operations during the first half of 2000 was sufficient
to cover the aggregate rental payments under the leases on the Somerset
Generating Station and the Cayuga Generating Station due July 3, 2000. We
believe that cash flow from our operations will be sufficient to cover aggregate
rental payments on each rent payment date thereafter.
We have entered into contracts for the sale of an aggregate of 450 megawatts
(MW) of electric energy on a 24-hour per day basis through December 31, 2000 at
set prices that exceed historical average prices for all months except June,
July and August. These contracts provide a set price for a portion of our
available power while reducing our exposure to market price fluctuations during
the year. We have also entered into additional contracts for the sale of
electric energy during 2000. The maximum capacity that we have committed under
these additional contracts during any month is an aggregate of 480MW. These
contracts allowed us to lock-in the price of our electric energy at prices we
considered favorable. These contracts represent less than our total generating
capacity of 1,268MW during those periods. This provides us with the flexibility
to use our remaining generating capacity to take advantage of any significant
price increases during peak demand periods while minimizing the risk of having
to purchase replacement power due to a forced outage. Since we have committed to
sell a significant percentage of our generating capacity during the summer peak
season at fixed prices, our ability to take advantage of significant price
increases during that period will be limited.
We are obligated to make payments under the Coal Hauling Agreement with
Somerset Railroad Corporation, an affiliated company, in an amount sufficient,
when added with funds available from other sources, to enable Somerset Railroad
to pay, when due, all of its operating expenses and other expenses, including
interest on and principal of outstanding indebtedness. Somerset Railroad
received an extension until August 24, 2000 on its 364-day term loan, originally
due May 5, 2000, of $26 million from an affiliate of CIBC World Markets.
Somerset Railroad is negotiating a long-term note to replace that loan.
Investing Activities
During the first six months of 2000, we incurred approximately $5 million in
capital expenditures. These expenditures were primarily for work to prepare for
the possible installation of a selective catalytic reduction system at the
Cayuga Generating Station and other necessary expenditures under our life
extension program. We expect capital expenditures to be $8.1 million in 2000,
$15.0 million in 2001 and $4.4 million in 2002.
Financing Activities
During May 2000, we reduced our working capital credit facility with Credit
Suisse First Boston from $50 million to $20 million. This credit facility was
established at the date of acquisition of our electricity generating stations to
ensure we had sufficient resources while undergoing the Somerset Generating
Station outage during May and June 1999 for installation of a selective
catalytic reduction system and for other improvements to the station's turbine
and boiler and while commencing operations. We believe the $20 million working
capital credit facility is sufficient for our operations.
The pass through trust certificates accrued additional interest at a rate of
0.50% per annum from November 10, 1999 until March 27, 2000, when we completed
13
<PAGE>
an exchange offer for the pass through trust certificates. The additional
interest accrued as a result of our failure to complete the exchange offer on or
prior to November 10, 1999. This additional interest was approximately $1
million with the amount due through December 31, 1999 being paid in April 2000.
The remaining additional interest was paid on the scheduled rent payment date,
July 3, 2000.
Cash flow from operations in excess of the aggregate rental payments under
our leases is permitted, if certain criteria are met, to be paid in the form of
a dividend to AES NY, LLC. On July 11, 2000, we made a dividend payment of $35
million.
(b) Results of Operations
We began operations on May 14, 1999. There are no separate financial
statements available with regard to our electricity generating stations prior to
May 14, 1999 because their operations were fully integrated with, and therefore
results of operation consolidated into, New York State Electric & Gas
Corporation.
During the three months ended June 30, 2000, compared to the period from May
14, 1999 to June 30, 1999, energy revenues increased $61 million and capacity
revenues increased $6 million. These increases were primarily due to the 2000
period covering twice as many days and our having all of our electricity
generating stations in operation in 2000. In 1999 three plants, representing 47%
of our generating capacity, began operations on May 14 and our largest plant,
Somerset began operations at the end of June after having been out of operation
since May 14, 1999, while a selective catalytic reduction system was being
constructed and other improvements were being made. Operating expenses for the
three months ended June 30, 2000, compared to the period from May 14, 1999 to
June 30, 1999, increased $45 million due to the limited operations in 1999. Net
income increased $15 million.
During the six months ended June 30, 2000, compared to the period from May
14, 1999 to June 30, 1999, energy revenues increased $138 million and capacity
revenues increased $14 million while operating expenses increased $98 million
due to the limited operations in 1999. Net income increased $27 million.
Forward-looking Statements
Certain statements contained in this Form 10-Q are forward-looking
statements as that term is defined in the Private Securities Litigation Reform
Act of 1995. These forward-looking statements speak only as of the date hereof.
Forward-looking statements can be identified by the use of forward-looking
terminology such as "believe," "expects," "may," "intends," "will," "should" or
"anticipates" or the negative forms or other variations of these terms or
comparable terminology, or by discussions of strategy. Future results covered by
the forward-looking statements may not be achieved. Forward-looking statements
are subject to risks, uncertainties and other factors, which could cause actual
results to differ materially from future results expressed or implied by such
forward-looking statements. The most significant risks, uncertainties and other
factors are discussed under the heading "Business--General Development of
Business" in our Annual Report on Form 10-K, and you are urged to read this
section and carefully consider such factors.
14
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Note 3 to our Condensed Consolidated Financial Statements in Part I.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Exhibit Index.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AES EASTERN ENERGY, L.P.
By: AES NY, L.L.C., as General Partner
By: /s/ Dan Rothaupt
-------------------------------
Dan Rothaupt
President
By: /s/ Barry Sharp
-------------------------------
Barry Sharp
Chief Financial Officer (and chief
accounting officer)
Date: August 7, 2000
15
<PAGE>
EXHIBIT INDEX
(a) The following exhibits are delivered with this report:
Exhibit No.
27 - Financial Data Schedule.
16
