<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to_______________
Commission file number 1-12554
COMPANIA BOLIVIANA DE ENERGIA ELECTRICA S.A. --
BOLIVIAN POWER COMPANY LIMITED
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nova Scotia 13-2691133
-------------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Av. Hernando Siles 5635
Obrajes, La Paz, Bolivia
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Bolivia) 591-2-782474
- --------------------------------------------------------------------------------
(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
------- -------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. On August 11, 1998, there were
4,202,575 outstanding shares.
<PAGE>
COMPANIA BOLIVIANA DE ENERGIA ELECTRICA S.A
BOLIVIAN POWER COMPANY LIMITED
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Part I - Financial Information Page
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<S> <C> <C>
Item 1. Financial Statements
Balance Sheets - June 30, 1998
(unaudited) and December 31, 1997 3
Statements of Income - Three and Six
Months Ended June 30, 1998 and
1997 (unaudited) 4
Statements of Cash Flows -
Six Months Ended March 31, 1998
and 1997 (unaudited) 5
Notes to Interim Financial
Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
Part II - Other Information
- ---------------------------
Item 4. Submission of Matters to a Vote of
Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 16
</TABLE>
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<PAGE>
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1. FINANCIAL STATEMENTS
--------------------
CONSOLIDATED BALANCE SHEETS
June 30, 1998 and December 31, 1997
(in U.S. Dollars)
(amounts in thousands, except share data)
(Unaudited)
-----------
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
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<S> <C> <C>
A S S E T S
-----------
Utility Plan
In Service
Production $105,570 $ 85,329
Transmission 11,409 10,833
Construction work in progress 49,624 54,466
General Property 5,600 5,434
-------- --------
172,203 156,062
Less accumulated depreciation 41,534 39,750
-------- --------
Net utility plant 130,669 116,312
-------- --------
Current assets
Cash and cash equivalents 1,753 1,453
Temporary investments, at fair market value
(includes restricted collateral deposits
of $1,069 in 1998 and $3,410 in 1997) 16,705 66,227
Accounts receivables, net 8,430 7,489
Materials and supplies 1,922 3,004
Prepaid expenses 1,226 1,003
-------- --------
Total Current Assets 30,036 79,176
-------- --------
Other assets 3,280 2,906
-------- --------
$163,985 $198,394
======== ========
SHAREHOLDERS' EQUITY AND LIABILITIES
------------------------------------
Shareholders' equity
Common shares, without par value
(13,066,803 authorized, 4,202,575
issued and outstanding) $ 55,247 $ 55,247
Additional capital 14,493 14,493
Unrealized loss on temporary investments (14) (14)
Earnings reinvested 9,215 6,557
-------- --------
Total Shareholders' Equity 78,941 76,283
-------- --------
Provision for severance indemnities 3,630 3,649
Long-term debt 67,604 70,964
-------- --------
71,234 74,613
-------- --------
Current liabilities
Accounts payable 7,292 6,058
Current portion of long-term debt 4,683 2,647
Dividends payable - 34,965
Taxes on income 828 2,269
Other taxes 826 1,361
Other 181 198
-------- --------
Total Current Liabilities 13,810 47,498
-------- --------
Contingencies and commitments - -
-------- --------
Total Shareholders' Equity and Liabilities $163,985 $198,394
======== ========
</TABLE>
See accompanying notes to interim consolidated financial statements.
- 3 -
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Three Months and Six Months Ended June 30, 1998 and 1997
(in U.S. Dollars)
(amounts in thousands, except share and per share data)
(Unaudited)
-----------
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
1998 1997 1998 1997
------------------------------ -----------------------------
<S> <C> <C> <C> <C>
Operating revenues $ 5,740 $ 5,473 $ 11,997 $ 11,176
---------- ---------- ---------- ----------
Operating expenses
Operations 2,270 2,727 4,500 5,108
Maintenance 555 423 974 890
Depreciation 1,046 817 2,002 1,607
Taxes 210 206 428 408
---------- ---------- ---------- ----------
Total operating expense 4,081 4,173 7,904 8,013
---------- ---------- ---------- ----------
Operating income 1,659 1,300 4,093 3,163
---------- ---------- ---------- ----------
Other income
Interest capitalized 1,079 648 2,340 1,234
Other, principally
interest income 468 708 853 1,338
---------- ---------- ---------- ----------
Total other income 1,547 1,356 3,193 2,572
---------- ---------- ---------- ----------
Income before interest
and tax 3,206 2,656 7,286 5,735
Interest charges 1,894 369 3,796 737
---------- ---------- ---------- ----------
Income before taxes 1,312 2,287 3,490 4,998
Tax provision 292 675 832 1,425
---------- ---------- ---------- ----------
Net income $ 1,020 $ 1,612 $ 2,658 $ 3,573
========== ========== ========== ==========
Average common shares
outstanding 4,202,575 4,202,575 4,202,575 4,202,575
========== ========== ========== ==========
Earnings per common share $.24 $.38 $.63 $.85
========== ========== ========== ==========
Dividends per common share - - - 5.00
========== ========== ========== ==========
</TABLE>
See accompanying notes to interim consolidated financial statements.
- 4 -
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1998 and 1997
(in U.S. Dollars)
(amounts in thousands)
(Unaudited)
-----------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1998 DECEMBER 31, 1997
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<S> <C> <C>
Cash flows from (used in) operating activities
Net income $ 2,658 $ 3,573
Adjustment to reconcile net income to
cash provided by (used in) operating
activities
Depreciation 2,002 1,607
Provision for indemnities 243 294
Interest capitalized (2,340) (1,234)
Other - Net (374) (532)
(Increase) Decrease in accounts receivable (942) 1,070
Decrease in materials and supplies 1,082 443
(Increase) in prepaid expenses (222) (270)
Increase (Decrease) in accounts payable 1,234 (1,445)
(Decrease) in taxes payable (1,976) (3,138)
(Decrease) in other liabilities (17) (23)
Indemnities paid (262) (165)
-------- --------
Net cash provided by operating activities 1,086 180
-------- --------
Cash flows from (used in) investing activities
Utility plant additions (14,196) (13,524)
Net Decrease in temporary investments 49,522 32,675
Other - net 176 538
-------- --------
Net cash provided by investing activities 35,502 19,689
-------- --------
Cash flows from (used in) financing activities
Payment of long term debt (1,323)
Payment of dividends (34,965) (21,013)
-------- --------
Net cash (used in) financing activities (36,288) (21,013)
-------- --------
Net Increase (Decrease) in cash and cash equivalents 300 (1,144)
Cash and cash equivalents at beginning of period 1,453 3,024
-------- --------
Cash and cash equivalents at end of period $ 1,753 $ 1,880
======== ========
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest (net of amount capitalized) $ 1,456 $ (497)
Income tax $ 2,223 $ 4,372
</TABLE>
See accompanying notes to interim consolidated financial statements.
- 5 -
<PAGE>
COMPANIA BOLIVIANA DE ENERGIA ELECTRICA S.A.
BOLIVIAN POWER COMPANY LIMITED
NOTES TO INTERIM FINANCIAL STATEMENTS
(in U.S. Dollars)
(Amounts in thousands, except share and per share data)
(Unaudited)
The unaudited Interim Financial Statements, which reflect all adjustments
(consisting only of normal recurring items) that management believes necessary
to present fairly results of interim operations, should be read in conjunction
with the Notes to Financial Statements (including the summary of significant
accounting policies) included in the Company's audited Financial Statements for
the year ended December 31, 1997, which are included in the Company's Form 10-K
for such year (the "1997 10-K"). Results of operations for interim periods are
not necessarily indicative of annual results of operations. The Balance Sheet
at December 31, 1997 was extracted from the audited annual financial statements
in the 1997 10-K and does not include all disclosures required by generally
accepted accounting principles for annual financial statements.
- 6 -
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- CONDITION AND RESULTS OF OPERATIONS
(in US Dollars)
The following should be read in conjunction with the Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in the 1997
10-K.
GENERAL
The Company operates its electric generation business under a 40-year concession
(the "Concession") from the Bolivian Government which was granted in 1990 and
subsequently amended in December 1994 and March 1995.
In December 1994, a new Electricity Law was enacted which required the Company
to separate its generation, transmission and distribution activities. In order
to comply with the new Electricity Law the Company formed a new subsidiary,
Electricidad de La Paz S.A. ("ELECTROPAZ"), which held the Company's La Paz
Division distribution assets and which was divested, together with two other
Company subsidiaries, Empresa de Luz y Fuerza Electrica de Oruro S.A ("ELF") and
Compania Administradora de Empresas ("CADE"), on January 11, 1996.
On February 2, 1995 a 40 year distribution concession (the "Distribution
Concession") for the cities of La Paz and El Alto and surrounding areas was
granted to the Company by a Supreme Resolution of the Bolivian Government.
Pursuant to the provisions of the Distribution Concession, the Company
transferred the Distribution Concession to ELECTROPAZ in December 1995.
The Company has entered into an Electricity Supply Contract with ELECTROPAZ
dated June 6, 1995 which, as amended, provides that the Company shall sell to
ELECTROPAZ, and ELECTROPAZ shall purchase from the Company, all of the
electricity that the Company can supply, up to the maximum amount of the
electricity required by ELECTROPAZ to supply the requirements of its concession
area. The Electricity Supply Contract expires in December, 2008.
The Company also sells power on a wholesale basis to ELF, which distributes
electricity to the city of Oruro and surrounding areas. On January 10, 1996,
the then Government regulatory board, Direccion Nacional de Electricidad,
granted ELF a 40-year concession for the distribution of electricity in the City
of Oruro. On February 26, 1996 the Company and ELF entered into a long-term
Electricity Supply Contract on terms substantially similar to the Electricity
Supply Contract between the Company and ELECTROPAZ.
- 7 -
<PAGE>
EXPANSION AND MODERNIZATION PROJECTS
a) Under the terms of the Concession, the Company is obligated to expand its
hydroelectric generating capacity in the Zongo Valley. This expansion
consists of adding generation facilities, modernizing existing facilities
and constructing transmission lines to transmit the increased generation
capacity as required by the Concession (the "Zongo Project"). The Zongo
Project is expected to add approximately 65 MW to the Company's generating
capacity and is expected to be fully completed in mid 1999. Several
facilities of the Zongo expansion - totaling 35 MW of generating capacity -
have already been completed.
b) Under the terms of the Concession, the Company has the right to expand its
facilities in the Miguillas Basin (the "Miguillas Expansion") which, if
completed, could add over 200 MW of generation capacity. In accordance with
its obligations under the Concession, in late 1995 the Company presented to
the Government a technical-economic feasilibity study for the Miguillas
Expansion. In May 1998, the Company received bids from certain selected
contractors for an engineering, procurement and construction contract for
the first stage of the Miguillas Expansion which would add approximately 160
MW of generating capacity, principally for the domestic market, and which is
expected to be completed in mid 2002. The Company is currently evaluating
and negotiating the terms of these bids, with a view of commencing
construction in late 1998. The Company is also very active in exploring the
financing alternatives for the Miguillas Expansion, and will make a decision
as to whether or not it should proceed with the Miguillas Expansion in the
near future.
c) In September 1997 the current Government regulatory board, the
Superintendency of Electricity, granted the Company a non exclusive
provisional license to perform the necessary studies for the installation of
gas-fired generation facilities in Puerto Suarez in the province of Santa
Cruz on the Brazilian border (the "Puerto Suarez Project"). The license
grants the Company the right to perform studies in order to generate and
sell electricity in Puerto Suarez and surrounding areas and to sell
electricity for export to the Brazilian market. The Company is currently
conducting those studies in cooperation with three other companies. The
Puerto Suarez project is at a preliminary stage, and there can be no
assurance that the Project will be undertaken.
FINANCING EXPANSION AND MODERNIZATION PROJECTS
The Company estimates that from 1998 through 1999 approximately $44 million will
be required for completion of the Zongo Project and for the Company's regular
capital expenditure program. The Company estimates that in such years it will
be required to spend approximately $28 million to complete the Zongo Project
generation facilities, $9 million to complete the Zongo Project transmission
facilities and approximately $7 million of its regular capital expenditure
program.
- 8 -
<PAGE>
The Company intends to fund the Zongo Project and its regular capital
expenditure program with borrowings from financial institutions or possible
equity financing, equipment financing, the proceeds it received from the sale of
ELECTROPAZ, ELF and CADE, and from internal cash generation. At June 30, 1998,
$15 million of loan proceeds under the CAF Agreement was available for this
purpose. See "Liquidity and Capital Resources" below. During 1997 and in the
first six months of 1998, the Company expended $39 million and $12 million
respectively, on the Zongo Project.
The Company is also currently engaged in discussions with Corporacion Andina de
Fomento ("CAF") for loans of up to $170 million for the construction of the
first stage of the Miguillas Expansion and expects to conclude its discussions
with CAF in the near future. The total cost of the first stage of the Miguillas
Expansion is expected to be approximately $300 million and the Company is
exploring additional sources of long-term debt and equity financing for this
project.
The capital requirements discussed above do not include possible funding
requirements of the Puerto Suarez Project referred to above.
REGULATION AND RATE SETTING
The Electricity Law and the Sectorial Regulatory Law, both enacted in 1994,
created a new Government agency, known as the Superintendency of Electricity,
which is responsible for performing the regulatory functions previously
performed by the Government regulatory board, Direccion Nacional de
Electricidad.
The Company's Concession provides that until December 2001 the Company shall be
entitled to the rate of return established under the old Electricity Code.
Thereafter, until December 2008 the Company shall be entitled to the rate of
return provided under the old Electricity Code or, at its option, to price and
sell its generated power under the marginal cost pricing system established
under the new Electricity Law. Thereafter, the Company shall be subject to the
marginal cost pricing system established under the new Electricity Law. The new
Electricity Law provides that rates will be determined on an unregulated,
competitive marginal cost basis, similar to systems operating in Argentina,
Chile and the United Kingdom, rather than the present regulated rate of return
basis.
Since 1990, the Company's rates have been set in accordance with the old
Electricity Code, which provides for a 9% rate of return on the Company's Rate
Base (approximately the depreciated book value of the Company's utility plant
and equipment plus an allowance for materials not exceeding 3% of tangible
assets and an allowance for working capital of 12.5% of gross revenues) and for
adjustments in rates to compensate for shortfalls or excesses in the rate of
return in prior years.
- 9 -
<PAGE>
The generation rates granted to the Company by the Superintendency of
Electricity in February 1996 - subsequent to the divestiture of the Company's
distribution activities - enabled the Company to earn a 9.15% return in 1996.
Based on a further rate increase granted to the Company in February 1997, the
Company's return in such year was 9.5%.
In addition, on October 31, 1997 the Company presented to the Superintendency of
Electricity a rate case study which requests rate increases of 20.9% in 1998 and
20.7% in 1999, with no increases required in 2000 and 2001. The Superintendency
of Electricity has not ruled on the Company's rate increase request. The Company
expects that a final resolution on its rate case study will be issued in the
near future but cannot predict the outcome of its discussions with the
Superintendency of Electricity on this matter.
The Company's rates are indexed to the U.S. dollar so that they are
automatically adjusted on a monthly basis to reflect changes in the exchange
rate between the Boliviano and the U.S. dollar thereby mitigating the effect of
fluctuations in the exchange rate. The Company is also entitled to include in
its rates an amount equal to the excess of the rate of interest paid over 6% on
the financing which has already been approved by the regulatory authority. In
approving the CAF Agreement, the Government approved the inclusion of this
excess in rates of the interest on only $55.6 million of borrowings under the
CAF Agreement.
RESULTS OF OPERATIONS
Six months ended June 30, 1998 as compared to
Six months ended June 30, 1997
Sales in the first six months of 1998 were 463,048 MWh, an increase of 0.7% when
compared to MWh sales in the first six months of 1997. Operating revenue,
however, increased by 7.3% in 1998 when compared to 1997, principally due to a
more favorable mix of MWh sales by category.
Operating expenses did not vary significantly in absolute amounts in the first
six months 1998 when compared to the first six months of 1997. Expenses in the
Company's Bolivian branch remained relatively stable, but there has been a
decrease in expenses incurred by the Company's Head Office, as certain fees paid
in 1997 to the Company's former shareholders in the amount of $378,000 are not
recurring in 1998. In addition, the depreciation charge increased by 24% due to
the addition of new facilities to the rate base.
As a result of the above, operating income in the first six months of 1998
increased by 30% over the first six months of 1997.
- 10 -
<PAGE>
Interest capitalized during construction increased significantly in the first
six months of 1998 when compared to the first six months of 1997 because as from
January 1, 1998 the Company is capitalizing interest in work in progress at the
rate stipulated in the CAF Agreement (approximately 10.2%), instead of the rate
stipulated by the Bolivian Electricity Code (6%).
Interest charges also increased significantly because of the accrual - as from
December 1997 - of interest on long-term debt related to the CAF Agreement.
Monthly interest charges on this loan are approximately $525,000.
The Company's statutory income tax rate is 34.375% which is comprised of an
income tax rate of 25% relating to the Bolivian branch profits and a 12.5%
withholding tax relating to net branch profits after the 25% income tax. The
effective tax rate of 24% in the first six months of 1998 differs from the
abovementioned statutory rate because the Company has income and expenses
outside Bolivia which are not subject to or deductible against Bolivian taxes.
The tax charge decreased in 1998 when compared to 1997 due to a 30% reduction in
the Company's net income before taxes. This reduction arose principally because
of the significant increase in interest charges mentioned above.
Net income in the first six months of 1998 was $2,658,271 or $.63 per common
share compared to net income of $3,573,514 or $.85 per common share for the
first six months of 1997.
Three months ended June 30, 1998 as compared to
Three months ended June 30, 1997
MWh sales in the second quarter of 1998 were 209,856 MWh, with no increase in
MWh sales when compared to the second quarter of 1997. Operating revenue,
however, increased by 4.9%, principally due to a more favorable mix of MWh
sales by category.
Operating expenses did not vary significantly in absolute amounts in the second
quarter of 1998 when compared to the second quarter of 1997. Expenses in the
Company's Bolivian branch remained relatively stable, but there has been a
decrease in expenses incurred by the Company's Head Office, as certain fees paid
in 1997 to the Company's former shareholders in the amount of $160,000 are not
recurring in 1998. In addition, the depreciation charge increased by 28% due to
the addition of new facilities to the rate base.
As a result of the above, operating income in the second quarter of 1998
increased by 28% over the second quarter of 1997.
- 11 -
<PAGE>
Interest capitalized during construction increased significantly in the second
quarter of 1998 when compared to the second quarter of 1997 because as from
January 1, 1998 the Company is capitalizing interest on work in progress at the
rate stipulated in the CAF Agreement (approximately 10.2%), instead of the rate
stipulated by the Bolivian Electricity Code (6%).
Interest charges increased significantly in the second quarter of 1998 when
compared to the second quarter of 1997 because of the accrual - as from December
1997 - of interest on long-term debt related to the CAF Agreement. Monthly
interest charges on this loan are approximately $525,000.
The Company's statutory income tax rate is 34.375% which is comprised of an
income tax rate of 25% relating to the Bolivian branch profits and a 12.5%
withholding tax relating to net branch profits after the 25% income tax. The
effective tax rate of 22% in the second quarter of 1998 differs from the
abovementioned statutory rate because the Company has income and expenses
outside Bolivia which are not subject to or deductible against Bolivian taxes.
The tax charge decreased in 1998 when compared to 1997 due to a 42% reduction in
the Company's net income before taxes. This reduction arose principally because
of the significant increase in interest charges mentioned above.
Net income in the second quarter of 1998 was $1,020,227 or $.24 per common share
compared to net income of $1,612,431 or $.38 per common share for the second
quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
In the first six months of 1998 and 1997 the Company incurred capital
expenditures of $14 million and $13 million, respectively. These expenditures
related primarily to contracts for purchase of equipment and civil works related
to the Zongo Project and to routine replacement and upgrading of equipment and
existing facilities. The Company funded these expenditures from internally
generated funds and from proceeds received from the sale of its distribution
subsidiaries and in 1998 from funds received under the CAF Agreement.
At June 30, 1998 the Company had purchase commitments with suppliers for the
purchase of equipment for the Zongo Project and its routine capital expenditure
amounting to approximately $2.7 million. The Company has sufficient liquid
assets to meet its purchase commitments as well as its other current operating
obligations and to perform necessary maintenance of its facilities.
The Company paid a special dividend of $5 per share (an aggregate of
$21,012,875) in January 1997 and $8.32 per share (an aggregate of $34,965,424)
in January 1998. The Company has no present plan to pay any additional
dividends.
- 12 -
<PAGE>
On August 13, 1997 the Company entered into the CAF Agreement pursuant to which
the Company has borrowed $61,700,000. If the Company elected to borrow any
additional amounts under the CAF Agreement it would be required to prepay a
corresponding amount of other indebtedness currently outstanding.
Under the CAF Agreement, the Company is now prohibited from declaring or paying
any dividend or making any distribution on its share capital or purchasing,
redeeming or otherwise acquiring any shares of capital stock of the Company or
any option over the same, unless (i) immediately prior to declaring and paying
such dividend or distribution the Company is in compliance with all material
obligations under the loan documents, (ii) after making such payment or
distribution, the Company is in compliance with certain financial ratios
described below, (iii) the Debt Service Coverage Ratio (as defined in the CAF
Agreement) for the four fiscal quarters most recently ended is not less than
1.25/1 and (iv) a default or event of default has not occurred and is not
continuing, provided that the Company may, at any time that no default or event
of default has occurred and is continuing, declare or pay dividends to the
extent of the Unrestricted Dividend Balance (as defined in the CAF Agreement).
The CAF Agreement imposes on the Company the following obligations, among
others: (1) not to allow the Leverage Ratio (as defined in the CAF Agreement)
to exceed 0.60/1; (2) to maintain the Tangible Net Worth (as defined in the CAF
Agreement) of at least $65 million or except as may result from payment of the
special dividend paid in January 1998, allow a cumulative reduction of Tangible
Net Worth (as defined in the CAF Agreement) in excess of 15% over any period of
four consecutive fiscal quarters; (3) to maintain a Current Ratio (as defined in
the CAF Agreement) of at least 1.00/1; and (4) not to allow the Collateral Value
Ratio (as defined in the CAF Agreement) to fall below 1.25/1 at any time.
The Company estimates that from 1998 through 1999 approximately $44 million will
be required for completion of the Zongo Project and the Company's regular
capital expenditure program. The Company estimates that in such years it will
be required to spend approximately $28 million to complete the Zongo Project
generation facilities, $9 million to complete the Zongo Project transmission
facilities and approximately $7 million on its regular capital expenditure
program.
The Company intends to fund the Zongo Project and its regular capital
expenditure program with the borrowings from CAF, possible equity financings,
equipment financing, the proceeds it received from the sale of ELECTROPAZ, ELF
and CADE, and from internal cash generation. At June 30, 1998, $15 million of
loan under the CAF Agreement was available for this purpose. During 1997 and in
the first six months of 1998 the Company expended $39 million and $12 million,
respectively, on the Zongo Project.
- 13 -
<PAGE>
The Company is also currently engaged in discussions with CAF for loans of up to
$170 million for the construction of the first stage of the Miguillas Expansion
and expects to conclude its discussions with CAF in the near future. The total
cost of the first stage of the Miguillas Expansion is expected to be
approximately $300 million and the Company is exploring additional sources of
long-term debt and equity financing for this project.
In order to update its data processing facilities, the Company is currently in
the process of acquiring a software package which will satisfy the Company's
current information requirements and which will render such facilities ready for
the year 2000. The Company believes that the change of the century issue will
be adequately addressed and that it will not have any significant impact on the
Company's financial condition or results of operation.
EFFECT OF INFLATION
Bolivia has suffered in the past from hyperinflation. However, since 1987 the
Bolivian government has been successful in containing inflation and, therefore,
the Company believes that inflation will not have a material adverse effect on
results of operations in the near future. The inflation rate was 6.7% in 1997
and 3.29% in the first six months of 1998. The effect of inflation and currency
devaluation on the Company's results is mitigated by indexing the Company's
rates to the U.S. dollar so that the Company's rates are automatically adjusted
on a monthly basis to reflect changes in the exchange rate between the Bolivian
currency and the U.S. dollar.
- 14 -
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders.
- ------- ----------------------------------------------------
The Company held its annual meeting of shareholders on June 4, 1998. The
following is a summary of the matters voted on at the meeting.
(a) The three management nominees for Director were elected to serve three-year
terms ending in 2001, as follows:
<TABLE>
<CAPTION>
Nominee For Withhold Vote
- ------------------- --------- -------------
<S> <C> <C>
Leonard A. Bluhm 4,136,755 1,670
Mats Fagerlund 4,136,754 1,671
Mauricio Gonzalez 4,136,754 1,671
</TABLE>
The terms of office of the following directors continued after the meeting:
Robert McClenachan, David H. Peterson, Joachim Platzer, Gunnar Vallin, Ronald J.
Will, Edwin G. Corr.
In July 1998, Robert McClenachan resigned as Chief Executive Officer of the
Company and as a director of the Company. On August 7, 1998, the Board of
Directors of the Company accepted Mr. McClenachan's resignation and elected
David H. Peterson to serve as Chief Executive Officer of the Company.
(b) The appointment of Moreno, Munoz y Cia, correspondents of Price Waterhouse
in La Paz, Bolivia, as the Company's independent auditors for the year
ending December 31, 1998 was ratified by the following shareholder vote:
<TABLE>
<CAPTION>
<S> <C>
For: 4,137,154
Against: 421
Abstain: 850
</TABLE>
Item 5. Other Information.
- ------- ------------------
The Securities and Exchange Commission (the "SEC") recently amended Rule 14a-4,
which governs the use by the Company of discretionary voting authority with
respect to shareholder proposals. SEC Rule 14a-4(c)(1) provides that, if the
proponent of a shareholder proposal fails to notify the Company at least 45 days
prior to the month and day of mailing the prior year's proxy statement, the
proxies of the Company's management would be permitted to use their
discretionary authority at the Company's next annual meeting of shareholders if
the proposal were raised at the meeting without any discussion of the matter in
the proxy statement. For purposes of the Company's 1999 Annual Meeting of
Shareholders, this deadline is March 22, 1999.
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
- ------- ---------------------------------
(a) No exhibit is filed with this report.
(b) No report on Form 8-K was filed during the quarter for which
this report is filed.
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<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.
Compania Boliviana de Energia
Electrica S.A. - Bolivian
Power Company Limited
-----------------------------
/S/ ROLAND C. GIBSON
-----------------------------
ROLAND C. GIBSON
Vice President - Finance
Authorized Signatory and
Principal Financial and
Accounting Officer.
DATE: August 13, 1998
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