Securities and Exchange Commission
Washington, DC 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act 1934
Date of Report January_8, 2001
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(Date of earliest event reported)
CE Generation, LLC
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(Exact name of registrant as specified in its charter)
Delaware 333-89521 47-0818523
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation or
organization)
302 South 36th Street, Suite 400 Omaha, NE 68131
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (402) 341-4500
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N/A
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
On January 8, 2001, Standard & Poor's Ratings Group and Moody's
Investors Service, Inc. each announced that they had placed their ratings of the
senior secured bonds of CE Generation, LLC ("CE Generation") on CreditWatch
Negative and under review for possible downgrade, respectively. The announced
basis for these decisions was the downgrade by Standard & Poor's and Moody's of
their ratings for Southern California Edison Company ("Edison") as a result of
Edison's financial condition. The CE Generation bonds are secured by the
distributions received from thirteen power projects: ten operating geothermal
power plants in the Imperial Valley, California (the "Geothermal Projects"),
with an approximate aggregate capacity of 326 MW, and three gas-fired plants,
with an aggregate net rated capacity of 490 MW (the "Gas Projects"). Eight of
the Geothermal Projects with an approximate aggregate net rated capacity of 267
MW sell their capacity and energy to Edison under long-term power sales
contracts.
CE Generation is aware that there have been public announcements that
Edison's financial condition has deteriorated as a result of reduced liquidity
because of Edison's inability to recover from its retail customers the entire
cost of wholesale power purchased by Edison for those customers. CE Generation
does not have information to be able to verify these announcements as to
Edison's financial condition. CE Generation is monitoring this situation
closely.
The eight Geothermal Projects having contracts with Edison have not yet
received payment from Edison for capacity and energy delivered during November
2000. These contracts provide for billing and payment on a schedule where
payment would normally be received in early January 2001. Edison has provided no
assurance as to when it will make these payments. A failure by Edison to make
these payments as well as subsequent monthly payments, for a substantial period
of time after the payments are due, is not expected to have a material adverse
effect on the ability of CE Generation to make payments on the CE Generation
bonds due to cash flows from the Gas Projects. However, there can be no
assurance that such a failure by Edison would not cause such a material adverse
effect.
Certain information included in this report contains forward-looking
statements made pursuant to the Private Securities Litigation Reform Act of 1995
("Reform Act"). Such statements are based on current expectations and involve a
number of known and unknown risks and uncertainties that could cause the actual
results and performance of the Registrants to differ materially from any
expected future results or performance, expressed or implied, by the
forward-looking statements including expectations regarding the future results
of operations of Registrants. In connection with the safe harbor provisions of
the Reform Act, the Registrants have identified important factors that could
cause actual results to differ materially from such expectations, including
development and construction uncertainty, operating uncertainty, acquisition
uncertainty, uncertainties relating to geothermal resources, uncertainties
relating to economic and political conditions and uncertainties regarding the
impact of regulations, changes in government policy, industry deregulation and
competition. Reference is made to all of the Registrants' SEC Filings,
incorporated herein by reference, for a description of such factors. The
Registrants assume no responsibility to update forward-looking information
contained herein.
Item 7. Financial Statements and Exhibits
Exhibit 1 - Standard & Poor's Press Release dated January 8, 2001
Exhibit 2 - Moody's Press Release dated January 8, 2001
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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.
CE GENERATION, LLC
Dated: January 15, 2001 By: /s/ Douglas L. Anderson
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Douglas L. Anderson
Vice President and General Counsel
<PAGE>
NEW YORK (Standard & Poor's CreditWire) Jan. 8, 2001--Standard & Poor's today
placed its triple-`B'-minus rating on CE Generation LLC's $400 million senior
secured bonds, due 2018, on CreditWatch Negative.
This rating action reflects last week's rating downgrade of (SoCalEd:
triple-`B'-minus/Watch Neg/`A-3') to triple-`B'-minus as a result of the
extraordinary events in California's power markets, which have brought the
state's two largest investor-owned utilities to the brink of bankruptcy (see
related stories). SoCalEd is a primary counterparty to Salton Sea Funding Corp.,
which is a wholly owned subsidiary of CE Generation LLC. CE Generation is owned
50% by (MEC, triple-`B'-minus/Watch Pos/--) and 50% by
(triple-`B'-plus/Stable/`A-2'). Salton Sea makes accounts for 40%-50% of CE
Generation's cash flows. Salton Sea Funding is the financing vehicle for MEC's
Southern California-based geothermal power projects, which total about 304 gross
MW.
SoCalEd is facing imminent default unless California regulators and
politicians can immediately craft a viable financial solution that restores
liquidity to the utility. Because SoCalEd is a counterparty to long-term
contracts indirectly associated with CE Generation, a bankruptcy filing by the
utility could trigger a default under these offtake contracts or a stay of
payments, which in turn could weaken the credit worthiness of CE Generation.
Standard & Poor's notes that the CE Generation does not face immediate
liquidity problems because it has a six-month debt service reserve in place. In
addition, in the unlikely event of a complete loss of distributions from Salton
Sea, CE Generation would still be able to meet debt service obligations from
distributions from its other project holdings.
Total capacity of CE Generation's 13-project portfolio, which includes
2 combined-cycle gas generation plants in Texas and New York, is about 745 MW.
It is concentrated in the Southern California, New York, and Texas markets. As
part of the financing of CE Generation, MEC also carved out $140 million of the
series F Salton Sea Funding Corp. debt that was issued in 1998, and guaranteed
it through a separate debt service agreement in connection with the zinc
recovery operation at Salton Sea.
Over the next few weeks, Standard & Poor's will be assessing each of
the underlying project contracts and long-term equilibrium economic positions of
the plants, as well as the potential for selling into alternative offtake
arrangements that may protect the projects' credit positions. - Standard &
Poor's said. -- CreditWire
CE Generation LLC
$400 mil sr secd bnds due 2018 'T' BBB-
On CreditWatch Neg
<PAGE>
Susan D. Abbott A.J. Sabatelle
Managing Director Vice President - Senior Analyst
Moody's Investors Service Moody's Investors Service
MOODY'S LOWERS DEBT RATINGS FOR PROJECTS EXPOSED TO COUNTERPARTY RISK OF
CALIFORNIA UTILITIES
New York, January 08, 2001 -- Moody's Investor Service has lowered its
project debt ratings for Edison Mission Energy Funding Corp. to Baa3 from Baa1,
FPL Energy Caithness Funding Corp. to Baa3 from Baa2 and Salton Sea Funding
Corp. to Baa3 from Baa2 and placed them under review for further downgrade.
Separately, Moody's placed the project debt ratings for Caithness Coso Funding
Corp. (short term senior secured tranche rated Ba1 and long-term senior secured
tranche rated Ba2), CE Generation LLC (senior secured Baa3), and Juniper
Generation LLC (senior secured Baa3) on review for possible downgrade. Moody's
downgrade of Southern California Edison Company (SCE) and Pacific Gas and
Electric Company (PGE) announced late last week has prompted these rating
actions.
It is Moody's practice for the credit rating of a project whose cash flow is
largely derived from a single source to be capped by the unsecured rating of the
respective source of funds. All projects noted above have substantial cash flow
exposure to either SCE or PGE. Therefore, Moody's has lowered those projects
whose credit ratings were above the current senior unsecured rating of the two
California utilities to reflect the deterioration of the credit quality of those
cash flows. The deterioration in credit quality at SCE and PGE has resulted from
the atypically high cost of wholesale power in California which was further
exacerbated by a weak CPUC rate order issued on January 4. This rate order
provides only a modest interim rate increase and fails to adequately address
other issues critical to effecting a working power market. (Please refer to
Moody's press releases of Jan. 5, 2001 for further discussion of these rating
actions.)
The ratings for each of these projects have been placed on review for downgrade
to reflect the possibility that the ratings of SCE and PGE could decline further
if the near term liquidity crisis facing the utilities is not averted, and other
corrective measures are not implemented. Moody's believes that the best chance
for such a crisis to be averted is for legislative, state, or federal actions to
establish a near-term liquidity plan that will strengthen and extend the
utilities' financial viability. Absent such an event, all parties' credit
ratings are likely to be negatively affected.
New York
Susan D. Abbott
Managing Director
Corporate Finance
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653
New York
A.J. Sabatelle
Vice President - Senior Analyst
Corporate Finance
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653
Moody's Investors Service
Moody's Investors Service
<PAGE>
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