<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission file number 333-91391
AES IRONWOOD, L.L.C.
(Exact name of registrant as specified in its charter)
Delaware 54-145-7537
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
305 Prescott Road, Lebanon, PA 17042
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (717) 228-1328
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
--- ___
(Page 1 of 14)
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AES IRONWOOD, L.L.C.
TABLE OF CONTENTS
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Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements (unaudited)
Condensed Statements of Operations --
Quarter ended March 31, 2000 and the period from
June 25, 1999 (inception) through March 31, 2000 .................3
Condensed Statements of Changes in Member's Deficit --
Quarter ended March 31, 2000 and the period from
June 25, 1999 (inception) through March 31, 1999 .................4
Condensed Balance Sheets --
March 31, 2000 and the period from
June 25, 1999 (inception) through December 31, 1999................5
Condensed Statements of Cash Flows --
Quarter ended March 31, 2000 and the period from
June 25, 1999 (inception) through March 31, 2000 ..................6
Notes to the Condensed Financial Statements.......................7-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............................10-12
Item 3. Quantitative and Qualitative Disclosures
About Market Risk..................................................13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..........................................14
SIGNATURES............................................................................15
</TABLE>
(Page 2 of 14)
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements.
AES IRONWOOD, L.L.C. (A Development Stage Enterprise)
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2000 AND THE PERIOD FROM
JUNE 25, 1999 (INCEPTION) THROUGH MARCH 31, 2000
(In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended June 25, 1999
March 31, (Inception) through
2000 March 31, 2000
<S> <C> <C>
OPERATING EXPENSES:
General and administrative costs $ (1) $ (170)
------- -------
Operating loss (1) (170)
OTHER INCOME/EXPENSE:
Interest income 945 4,228
Interest expense (1,418) (7,173)
------- -------
NET LOSS $ (474) $(3,115)
======= =======
</TABLE>
See notes to condensed financial statements.
(Page 3 of 14)
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AES IRONWOOD, L.L.C. (A Development Stage Enterprise)
CONDENSED STATEMENTS OF CHANGES IN MEMBER'S DEFICIT (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2000, AND THE PERIOD FROM
JUNE 25, 1999 (INCEPTION) THROUGH MARCH 31, 2000
(In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Accumulated
----------------------------------- -------------------------------------
Shares Amount Deficit Total
<S> <C> <C> <C> <C>
BALANCE, JUNE 25, 1999 - $ - $ - $ -
Net Loss - - (2,641) (2,641)
------------- ----------- -------------- -------------
BALANCE, DECEMBER 31, 1999 - - (2,641) (2,641)
Net Loss - - (474) (474)
-------------- -------------
BALANCE, MARCH 31, 2000 - $ - $(3,115) $(3,115)
------------- ----------- ============== =============
See notes to condensed financial statements.
</TABLE>
(Page 4 of 14)
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AES IRONWOOD, L.L.C. (A Development Stage Enterprise)
CONDENSED BALANCE SHEETS (UNAUDITED)
MARCH 31, 2000, AND DECEMBER 31, 1999
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
<S> <C> <C>
ASSET
CURRENT ASSETS:
Cash $ 46 $ 633
Interest receivable 258 437
Accounts receivable - other 743 -
Investments held by trustee - at cost, which approximates market
value
8,501 22,568
------------- --------------
Total current assets 9,548 23,638
LAND 528 528
CONSTRUCTION IN PROGRESS 258,146 244,563
CERTIFICATE OF DEPOSIT 385 385
DEFERRED FINANCING COSTS - Net of accumulated amortization of $65
and $44, respectively 3,037 2,447
INVESTMENTS HELD BY TRUSTEE - At cost, which approximates market
value 53,978 68,145
OTHER ASSETS 410 317
------------- --------------
TOTAL ASSETS $ 326,032 $ 340,023
============= ==============
LIABILITIES AND MEMBER'S DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 5,967 $ 20,139
Accrued interest 2,534 2,429
Payable to affiliates 1,228 918
Payable to parent 442 442
------------- --------------
Total current liabilities 10,171 23,928
RETENTION PAYABLE 10,476 10,236
BONDS PAYABLE 308,500 308,500
Total liabilities 329,147 342,664
------------- --------------
COMMITMENTS (Notes 4 and 5)
MEMBER'S DEFICIT:
Common stock, $1 par value - 10 shares authorized, none issued or
outstanding - -
Deficit accumulated during the development stage (3,115) (2,641)
------------- --------------
Total member's deficit (3,115) (2,641)
------------- --------------
TOTAL LIABILITIES AND MEMBER'S DEFICIT $ 326,032 $ 340,023
============= ==============
</TABLE>
See notes to condensed financial statements.
(Page 5 of 14)
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AES IRONWOOD, L.L.C. (A Development Stage Enterprise)
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2000, AND THE PERIOD FROM
JUNE 25, 1999 (INCEPTION) THROUGH MARCH 31, 2000
(IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months ended June 25, 1999
March 31, (Inception) through
2000 March 31, 2000
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (474) $ (3,115)
Amortization of deferred financing costs 21 65
Change in:
Interest receivable 179 (258)
Accrued interest 105 1,847
Other receivables (743) (743)
-------- ---------
Net cash used in operating activities (912) (2,204)
-------- ---------
INVESTING ACTIVITIES:
Payments for construction in progress (27,206) (239,731)
Payments for land - (528)
Change in debt service reserve 28,234 (62,479)
Purchase of other assets (93) (410)
-------- ---------
Net cash provided by (used in) investing activities 935 (303,148)
-------- ---------
FINANCING ACTIVITIES:
Proceeds from project debt issuance - 308,500
Payments for deferred financing costs (611) (3,102)
-------- ---------
Net cash provided by (used in) financing activities (611) 305,398
-------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (587) 46
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 633 -
---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 46 $ 46
======== =========
SUPPLEMENTAL DISCLOSURE:
Interest paid $ 7,069 $ 18,833
======== =========
</TABLE>
See notes to condensed financial statements.
(Page 6 of 14)
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AES IRONWOOD, L.L.C. (A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2000, AND THE
PERIOD FROM JUNE 25, 1999 (INCEPTION) THROUGH MARCH 31, 2000
- --------------------------------------------------------------------------------
1. ORGANIZATION
AES Ironwood, L.L.C. was incorporated on October 30, 1998, in the State of
Delaware, to develop, construct and operate a 705-megawatt (MW) gas-fired,
combined cycle electric generating facility in South Lebanon Township,
Pennsylvania. AES Ironwood, L.L.C. was considered dormant until June 25,
1999, at which time it consummated a project financing and certain related
agreements. The facility, currently under construction, will consist of two
Westinghouse 501G combustion turbines, two heat recovery steam generators
and one steam turbine. The facility will produce and sell electricity, as
well as provide fuel conversion and ancillary services, solely to Williams
Energy under a power purchase agreement with a term of 20 years that will
commence on the facility's anticipated commercial operation date, June 30,
2001.
AES Ironwood, L.L.C. is in the development stage and is not expected to
generate any operating revenues until the facility achieves commercial
operation. As with any new business venture of this size and nature,
operation of the facility could be affected by many factors. Management of
AES Ironwood, L.L.C. believes that the assets of the company are
realizable.
AES Ironwood, L.L.C. is a wholly-owned subsidiary of AES Ironwood, Inc.,
which is a wholly-owned subsidiary of The AES Corporation. AES Ironwood, Inc.
has no assets other than its ownership interests in AES Ironwood, L.L.C. and
AES Prescott, L.L.C. It has no operations and is not expected to have any
operations. Its only income will be from distributions it receives from AES
Ironwood, L.L.C. and AES Prescott, L.L.C. once the facility achieves
commercial operation. The equity that AES Ironwood, Inc. is to provide to AES
Ironwood, L.L.C. will be provided to AES Ironwood, Inc. by The AES
Corporation. The AES Corporation files quarterly and annual audited reports
with the Securities and Exchange Commission under the Securities Exchange Act
of 1934, which are publicly available. AES Ironwood Inc.'s equity
contribution obligations are required to be supported by either an insurance
bond or letter of credit. Currently those obligations are supported by an
insurance bond issued to the collateral agent.
On June 25, 1999, AES Ironwood, L.L.C. issued $308.5 million in senior
secured bonds in order to finance the construction of the facility and to
fund, through the construction period, interest payments to the bondholders.
Pursuant to an equity subscription agreement, AES Ironwood, Inc. has agreed
to contribute up to approximately $50.1 million to AES Ironwood, L.L.C. to
fund construction after the bond proceeds have been fully utilized.
(Page 7 of 14)
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2. BASIS OF PRESENTATION
In AES Ironwood, L.L.C.'s opinion, all adjustments necessary for a fair
presentation of the unaudited results of operations for the three months
ended March 31, 2000, are included. All such adjustments are accruals of a
normal and recurring nature. The results of operations for the period ended
March 31, 2000 are not necessarily indicative of the results of operations to
be expected for the full year. The financial statements are unaudited and
should be read in conjunction with the audited financial statements for the
period ended December 31, 1999.
3. EQUITY SUBSCRIPTION AGREEMENT
AES Ironwood, L.L.C. has entered into an equity subscription agreement with
AES Ironwood, Inc. pursuant to which AES Ironwood, Inc. has agreed to
contribute up to approximately $50.1 million to AES Ironwood, L.L.C. to fund
project costs. This amount is secured by an acceptable bond issued by AES
Ironwood, Inc. AES Ironwood, Inc. will fund these amounts as they come due
upon the earlier of (a) expenditure of all funds that have been established
for construction or (b) the occurrence, and during the continuation of, an
event of default, as defined under the indenture. A portion of this equity
requirement may be made in the form of affiliate debt, which would be
subordinate to the bonds.
4. POWER PURCHASE AGREEMENT
AES Ironwood, L.L.C. and Williams Energy have entered into a power purchase
agreement for the sale of all electric energy and capacity produced by the
facility, as well as ancillary services and fuel conversion services. The
term of the power purchase agreement is 20 years, commencing when the
construction of the facility is complete and the facility is commercially
viable to produce electricity and related capacity, as well as to provide
ancillary and fuel conversion services. Payment obligations to AES Ironwood,
L.L.C. are guaranteed by The Williams Companies, Inc. Such payment
obligations under the guaranty are capped at an amount equal to 125% of the
sum of the principal amounts of the bonds plus the maximum debt service
reserve account required balance. AES Ironwood, L.L.C. has provided Williams
Energy a guaranty issued by The AES Corporation of specific payment
obligations should the facility not achieve commercial operation by June 30,
2001. The AES Corporation's liability under the guaranty is capped at $30
million. AES Ironwood, L.L.C. has the option, and may be required under
specific conditions described in the power purchase agreement, to replace the
guaranty issued by The AES Corporation with a letter of credit issued by a
commercial bank. In such case, the repayment obligations with respect to
drawings under the letter of credit are to be a senior debt obligation of AES
Ironwood, L.L.C.
5. COMMITMENTS AND CONTINGENCIES
Construction - AES Ironwood, L.L.C. has entered into a fixed-price turnkey
construction agreement with Siemens Westinghouse for the design, engineering,
procurement and construction of the facility. Siemens Westinghouse will
provide AES Ironwood, L.L.C. with specific combustion turbine maintenance
services and spare parts for an initial term of between eight and ten years
under a maintenance service agreement. As of December 31, 1999, and March
31,
(Page 8 of 14)
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2000, AES Ironwood, L.L.C. was liable to Siemens Westinghouse for a
retention payment as part of the total contract price due at the completion
of the construction agreement for approximately $10.2 million and $10.5
million, respectively.
Water Supply - AES Ironwood, L.L.C. has entered into a an agreement with the
City of Lebanon Authority for the purchase of 50 percent of the water use of
the facility. The agreement has a term of 25 years. Costs associated with the
use of water by the facility under this agreement are based on gallons used
per day at prices specified under the contract terms. AES Ironwood, L.L.C.
has also entered into an agreement with Pennsy Supply, Inc. which will
provide the remaining 50 percent of the water use of the facility.
Interconnection Agreement - AES Ironwood, L.L.C. has entered into an
interconnection agreement with Metropolitan Edison Company to transmit the
electricity generated by the facility to the transmission grid so that it may
be sold as prescribed under AES Ironwood, L.L.C.'s power purchase agreement.
The agreement is in effect for the life of the facility, yet may be
terminated by mutual consent of both Metropolitan Edison Company and AES
Ironwood, L.L.C. under certain circumstances as detailed in the agreement.
Costs associated with the agreement are based on electricity transmitted via
Metropolitan Edison Company at a variable price, the tariff imposed by the
Pennsylvania/New Jersey/Maryland power pool market, as charged by
Metropolitan Edison Company to AES Ironwood, L.L.C., which is comprised of
both service cost and asset recovery cost, as determined by Metropolitan
Edison Company and approved by the Federal Energy Regulatory Committee.
Water Supply Pipeline - AES Ironwood, L.L.C. has entered into two agreements
in relation to the construction of the water supply pipeline. The first
agreement is with G.L. Marks Contracting, Inc., for the construction of the
water pipeline, for approximately $2.5 million. The second agreement is with
Conewago Enterprises, Inc., for the construction of the pumping station, at
an estimated cost of approximately $3.2 million.
Letter of Credit - AES Ironwood, L.L.C. has a letter of credit outstanding to
fund the construction of an access road to the facility during construction.
In connection with this letter of credit, AES Ironwood, L.L.C. has made a
collateral deposit into a certificate of deposit account of approximately
$385,000, which equals the amount available under the letter of credit.
Surety Bond Agreement - AES Ironwood, Inc. has a surety bond for $50.1
million in connection with the equity subscription agreement. Annual
commitment fees will be assessed based on the amount outstanding during the
year.
* * * * * *
(Page 9 of 14)
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
AES Ironwood, L.L.C. was formed on October 30, 1998 to develop, construct, own,
operate and maintain our facility. We were dormant until June 25, 1999, the
date of the sale of the bonds. We are in the development stage and have no
operating revenues. We obtained $308,500,000 of project financing from the sale
of the bonds. The total cost of the construction of our facility is estimated
to be approximately $359 million, which will be financed by the proceeds from
the sale of the bonds and the equity contribution described below. On May 12,
2000, we consummated an exchange offer whereby the holders of the bonds were
able to exchange their bonds for new registered bonds.
Our facility is still under construction and we expect it to be completed and
operational by approximately June 30, 2001.
Equity Contributions
Under the equity subscription agreement, AES Ironwood, Inc. is obligated to
contribute up to approximately $50.1 million to us to fund project costs. AES
Ironwood, Inc.'s obligation to make the contributions is, and will be, supported
by an acceptable letter of credit or an acceptable bond.
Results of Operations
For the period from June 25, 1999 (inception) through March 31, 2000, costs in
the amount of $258,146,000 pertaining to the construction of our facility have
been capitalized as Construction Work in Progress and are included as assets on
the balance sheet. Interest capitalized during this period was approximately $14
million. The cost of purchasing land for construction of our facility has been
separately identified on the balance sheet.
From June 25, 1999 through March 31, 2000, general and administrative costs of
$170,000 were incurred. These costs did not directly relate to construction and
are included as expenses in the Statement of Operations.
A portion of the proceeds from the sale of the bonds have not yet been expended
on construction and were invested by the trustee. The interest income earned on
these invested funds is included in the Statement of Operations.
The interest expense incurred on the portion of the bond proceeds expended
during the construction period is capitalized to Construction in Progress and is
included on the balance sheet. Interest expense incurred on the bond proceeds
not spent on construction of our facility are included as interest expense in
the Statement of Operations.
For the period from June 25, 1999 through March 31, 2000, non-capitalizable
costs plus interest expense and less interest income resulted in a net loss on
the June 25, 1999 (Inception) through March 31, 2000 Statement of Operations of
approximately $3.1 million. The results of operations may not be comparable
with the results of operations during future periods, especially when our
facility begins commercial operations in 2001.
(Page 10 of 14)
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Liquidity and Capital Resources
We believe that the net proceeds from the sale of the bonds, together with the
equity contribution, will be sufficient to (1) fund the engineering,
procurement, construction, testing and commissioning of our facility until it is
placed in commercial operation, (2) pay certain fees and expenses in connection
with the financing and development of our project and (3) pay project costs,
including interest on the bonds. After our facility is placed in commercial
operation, we will depend on our revenues under the power purchase agreement,
and after the power purchase agreement expires, we will depend on market sales
of electricity.
In order to provide liquidity in the event of cash flow shortfalls, the debt
service reserve account will contain an amount equal to the debt service reserve
account required balance through cash funding, issuance of the debt service
reserve letter of credit or a combination of the two.
As of March 31, 2000, we have commitments totaling $240 million arising from the
construction of our facility. In addition, we have committed to two additional
capital expenditures totaling $5.7 million. One is for the pipeline for $2.5
million and the other is for a pumping station for $3.2 million. Of these two
commitments, $3.2 million has been paid as of March 31, 2000. The remainder of
the committed amounts are expected to be paid in fiscal years 2000 and 2001.
The amounts are expected to be paid out of the proceeds from the sale of the
bonds and the equity contribution.
Business Strategy and Outlook
Our overall business strategy is to market and sell all of our net capacity,
fuel conversion and ancillary services to Williams Energy during the term of the
power purchase agreement. After expiration of the power purchase agreement, we
anticipate selling our facility's capacity, ancillary services and energy under
a power purchase agreement or into the Pennsylvania/New Jersey/Maryland power
pool market. We intend to cause our facility to be managed, operated and
maintained in compliance with the project contracts and all applicable legal
requirements.
(Page 11 of 14)
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Item 3 QUANTITATIVE AND QUALIFICATION DISCLOSURES ABOUT MARKET RISK.
AES Ironwood, L.L.P.'s market risks are not materially different from
those market risks described in the final prospectus dated March 31, 2000 (File
No. 333-91391).
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit 27 Financial data schedule
<PAGE>
SIGNATURES
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 IRONWOOD, L.L.C.
(Registrant)
Date: May 15, 2000 By: /s/ John Ruggirello
-------------------
John Ruggirello
President
Date: May 15, 2000 By: /s/ Barry Sharp
---------------
Barry Sharp
Vice President and Chief Financial Officer (and
principal accounting officer)
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed statement of operations, condensed balance sheet and condensed
statement of cash flows included in AES Ironwood, L.L.C.'s Form 10-Q for the
fiscal quarter ending March 31, 2000, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 46
<SECURITIES> 0
<RECEIVABLES> 1,001
<ALLOWANCES> 326,032
<INVENTORY> 0
<CURRENT-ASSETS> 9,548
<PP&E> 258,531
<DEPRECIATION> 0
<TOTAL-ASSETS> 326,032
<CURRENT-LIABILITIES> 10,171
<BONDS> 308,500
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 326,032
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,418
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (474)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
