File No. 69-308
Amendment No. 1
on Form U-3A-2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
Amendment to Statement by Holding Company
Claiming Exemption Under Rule 2 from the
Provisions of the Public Utility Holding
Company Act of 1935
INTERNATIONAL PAPER COMPANY
<PAGE>
CURTIS/PALMER HYDROELECTRIC COMPANY L.P.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
TOGETHER WITH AUDITORS' REPORT
<PAGE>
Report of Independent Public Accountants
To the Partners of Curtis/Palmer Hydroelectric Company L.P.:
We have audited the accompanying balance sheets of Curtis/Palmer Hydroelectric
Company L.P. (a New York limited partnership, the "Partnership") as of December
31, 1998 and 1997, and the related statements of income, cash flows and changes
in partners' capital for the years then ended. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Curtis/Palmer Hydroelectric
Company L.P. as of December 31, 1998 and 1997, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
Memphis, Tennessee,
April 2, 1999.
<PAGE>
CURTIS/PALMER HYDROELECTRIC COMPANY L.P.
BALANCE SHEETS
AS OF DECEMBER 31
ASSETS 1998 1997
------ ----------- -----------
CURRENT ASSETS:
Cash and temporary investments $12,024,134 $ 6,944,845
Accounts receivable 1,952,248 2,422,713
Prepaid expenses and other 1,272,978 1,227,115
----------- -----------
Total current assets 15,249,360 10,594,673
PROPERTY, PLANT AND EQUIPMENT, net 71,794,984 73,702,594
LICENSE AND OTHER CONTRACTS, net 1,442,875 2,527,744
----------- -----------
Total assets $88,487,219 $86,825,011
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Due to International Paper $ 7,120,997 $ 6,458,918
Accounts payable 211,259 40,070
Current maturities of long-term debt 9,508,800 8,218,320
----------- -----------
Total current liabilities 16,841,056 14,717,308
LONG-TERM DEBT 6,384,480 15,893,280
PARTNERS' CAPITAL 65,261,683 56,214,423
----------- -----------
Total liabilities and partners' capital $88,487,219 $86,825,011
=========== ===========
The accompanying notes are an integral
part of these balance sheets.
<PAGE>
CURTIS/PALMER HYDROELECTRIC COMPANY L.P.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31
1998 1997
------------ ------------
REVENUES $ 33,467,299 $ 33,272,794
------------ ------------
COSTS AND EXPENSES:
Operating and management fees 8,744,079 8,317,051
Depreciation and amortization 2,992,479 2,992,479
Property taxes 2,800,184 2,654,232
Insurance 358,394 304,448
Other 668,555 754,921
------------ ------------
Total costs and expenses 15,563,691 15,023,131
------------ ------------
OPERATING INCOME 17,903,608 18,249,663
INTEREST INCOME (EXPENSE):
Interest income 525,796 412,033
Interest expense (1,382,144) (2,098,043)
------------ ------------
NET INCOME $ 17,047,260 $ 16,563,653
============ ============
The accompanying notes are an integral
part of these statements.
<PAGE>
CURTIS/PALMER HYDROELECTRIC COMPANY L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
General Partners Limited Partners
----------------------------- -------------------------------------------
Saratoga HCE- ENI NRG John
Development Hudson, Inc. Curtis Falls PacGen, Inc. Hancock Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 $ 26,325,387 $ 6,581,345 $ 6,581,345 $ -- $ 13,162,693 $ 52,650,770
Transfer of ownership interest -- -- (6,581,345) 6,581,345 -- --
Allocation of net income 8,281,827 2,070,456 -- 2,070,456 4,140,914 16,563,653
Distributions to partners (6,500,000) (1,625,000) -- (1,625,000) (3,250,000) (13,000,000)
------------ ------------ ----------- ------------ ------------ ------------
BALANCE, December 31, 1997 28,107,214 7,026,801 -- 7,026,801 14,053,607 56,214,423
Allocation of net income 8,523,631 2,130,907 -- 2,130,907 4,261,815 17,047,260
Distributions to partners (4,000,000) (1,000,000) -- (1,000,000) (2,000,000) (8,000,000)
------------ ------------ ----------- ------------ ------------ ------------
BALANCE, December 31, 1998 $ 32,630,845 $ 8,157,708 $ -- $ 8,157,708 $ 16,315,422 $ 65,261,683
============ ============ =========== ============ ============ ============
</TABLE>
The accompanying notes are an integral
part of these statements.
<PAGE>
CURTIS/PALMER HYDROELECTRIC COMPANY L.P.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 17,047,260 $ 16,563,653
Depreciation and amortization 2,992,479 2,992,479
Changes in current assets and liabilities-
Accounts receivable 470,465 1,524,694
Prepaid expenses and other (45,863) (110,194)
Due to International Paper 662,079 (2,771,203)
Accounts payable 171,189 (13,600)
------------ ------------
Net cash provided by operating activities 21,297,609 18,185,829
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (35,693)
------------ ------------
Net cash used in investing activities -- (35,693)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (8,000,000) (13,000,000)
Principal payments on long-term debt (8,218,320) (6,995,760)
------------ ------------
Net cash used in financing activities (16,218,320) (19,995,760)
------------ ------------
NET CHANGE IN CASH AND TEMPORARY INVESTMENTS 5,079,289 (1,845,624)
CASH AND TEMPORARY INVESTMENTS:
Beginning of year 6,944,845 8,790,469
------------ ------------
End of year $ 12,024,134 $ 6,944,845
============ ============
</TABLE>
The accompanying notes are an integral
part of these statements.
<PAGE>
CURTIS/PALMER HYDROELECTRIC COMPANY L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
1. ORGANIZATION AND NATURE OF OPERATIONS:
Curtis/Palmer Hydroelectric Company L.P. (the "Partnership") was organized in
1985 under the New York Uniform Limited Partnership Act. The general partners
are Saratoga Development Corporation ("SDC"), a wholly-owned subsidiary of
International Paper Company ("International Paper"), and HCE-Hudson, Inc., a
subsidiary of CMS Generation. The voting interests of the general partners are
98% to SDC and 2% to HCE-Hudson, Inc. As of December 31, 1998, the limited
partners include NRG PacGen, Inc. ("NRG"), a subsidiary of Northern States
Power, and John Hancock Mutual Life Insurance Co. ("Hancock"). NRG purchased its
Partnership interest from ENI Curtis Falls during 1997. The general and limited
partners are collectively referred to as the "Partners." The Partnership
operates the Curtis and Palmer hydroelectric generating facilities located on
the Hudson River in the state of New York.
Niagara Mohawk Power Corporation ("NMPC") is required to purchase all available
electricity generated by the Partnership at contractually predetermined rates
(Note 5). The NMPC Power Purchase Agreement permits International Paper to
purchase electricity directly from the Partnership at the same rate charged to
NMPC. As of December 31, 1998, International Paper had not exercised this
option.
The Partnership's license from the Federal Energy Regulatory Commission ("FERC")
to own and operate its hydroelectric stations and dams on the Hudson River will
expire on April 30, 2000. The Partnership has initiated a relicensing program
and has made all necessary filings on a timely basis with the FERC to obtain a
new license.
All net profits or losses and cash distributions are allocated to the Partners
according to their respective ownership interests as follows: 50% to SDC; 25% to
Hancock; 12.5% to HCE-Hudson, Inc. and 12.5% to NRG. Cash distributions are made
at the discretion of the Partnership's management committee.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Accounting
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles, which is not the basis for reporting
taxable income to the Partners. Preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities, at the date of
the financial statements and the reported amounts of revenues and costs and
expenses during the reporting period. Actual results could differ from those
estimates.
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
Temporary Investments
Temporary investments with an original maturity of three months or less are
treated as cash equivalents and are stated at cost, which approximates market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed using the straight-line method and recorded over the
facilities' estimated 50-year useful lives.
License and Other Contracts
Amortization of the cost of the FERC license, NMPC Power Purchase Agreement and
leasehold estate is computed using the straight-line method over the estimated
useful lives of these intangible assets, commencing with the in-service dates of
each phase, through April 30, 2000. Accumulated amortization was approximately
$13,457,000 and $12,372,000 at December 31, 1998 and 1997, respectively.
Income Taxes
The Partnership is not a taxable entity for Federal, state or local income tax
purposes. No provision for income taxes has been recorded in the financial
statements of the Partnership as all earnings or losses are allocated directly
to the individual Partners.
3. PROPERTY, PLANT AND EQUIPMENT:
A summary of property, plant and equipment at December 31 is as follows:
1998 1997
------------ ------------
Hydroelectric dams $ 5,100,000 $ 5,100,000
Hydroelectric plant and equipment 90,316,230 90,316,230
------------ ------------
95,416,230 95,416,230
Less-Accumulated depreciation (23,621,246) (21,713,636)
------------ ------------
Property, plant and equipment, net $ 71,794,984 $ 73,702,594
============ ============
<PAGE>
4. LONG-TERM DEBT AND INTEREST RATE SWAPS:
The Partnership entered into a loan agreement with Toronto-Dominion Bank
("Toronto-Dominion") on December 1, 1985 secured by, among other things, the
assignment by the Partners, excluding Hancock, of their respective partnership
interests, the assignment of gross revenues from the Partnership's Power
Purchase Agreement with NMPC and the assignment of the rights under the
Partnership's management agreement with International Paper. The debt
outstanding under the term loan is payable in increasing annual installments
through March 31, 2000. Scheduled maturities are as follows: 1999 - $9,508,800
and 2000 - $6,384,480. Among other restrictions and requirements, the loan
agreement restricts future liens and indebtedness, sales of assets and
distributions to the Partners. Additionally, the Partnership must maintain a
positive working capital, excluding current maturities of long-term debt, for
the term of the agreement.
Interest on the term loan is based on the options selected by the Partnership as
provided for in the loan agreement. The interest rate is variable, based on the
prime lending rate, and is adjusted bi-annually. Until June 30, 1997, the
Partnership utilized an interest rate swap agreement with Toronto-Dominion to
effectively hedge its variable interest rate exposure. Under the agreement, the
Partnership paid to Toronto-Dominion fixed rates ranging from 8.32% to 9.26%
and, in turn, received payments at variable rates. Net gains or losses from the
exchange of interest rate payments were included in interest expense. The
weighted average interest rates for 1998 and 1997, including the effect of the
interest rate swap agreement in place during 1997, were 6.4% and 10.5%,
respectively. Interest payments made during 1998 and 1997 were approximately
$1,382,000 and $2,098,000, respectively. No interest rate swap agreements were
utilized during 1998.
The loan agreement also provides for a working capital commitment of $3,000,000.
A commitment fee of 0.25% on the unused portion of the working capital
commitment is payable quarterly. The entire commitment was available at December
31, 1998 and 1997.
5. POWER PURCHASE AGREEMENT:
The Partnership has a Power Purchase Agreement with NMPC to sell the entire net
output from the facilities to NMPC. In January 1995, this Power Purchase
Agreement was amended and restated which, among other things, provided NMPC with
short-term rate relief in exchange for an extension of the term to December 31,
2027. The agreement may be terminated under certain conditions as provided by
the Power Purchase Agreement. The average purchase price paid by NMPC per
thousand kilowatt hours for 1998 and 1997 was $111.00 and $110.38, respectively.
The price is adjusted as set forth in the Power Purchase Agreement.
NMPC has previously asserted that the amended and restated Power Purchase
Agreement and other power purchase agreements with unrelated power suppliers are
uneconomical and wants to be relieved of its obligations thereunder. To date,
NMPC has continued to acquire the facilities' entire net output and pay the
Partnership under the terms provided in the agreement. There are currently no
negotiations underway between NMPC and the Partnership.
<PAGE>
6. RELATED PARTY TRANSACTIONS:
The Partnership is a party to a management agreement entitling International
Paper to the following:
a. An annual operating and maintenance fee of $900,000 in 1987, with
future escalation based on the percentage change in the producer
price index. The maintenance fees for 1998 and 1997 were
approximately $1,144,000 and $1,155,000, respectively. This fee is
for services, such as repairs, maintenance of books and records, and
other operating and miscellaneous items. International Paper is also
responsible for funding capital expenditures, as defined, up to a
cumulative amount of $3,000,000 over the term of the management
agreement. As of December 31, 1998, International Paper has funded
100% of this obligation. The Partnership is responsible for capital
expenditures above a cumulative amount of $3,000,000.
b. A performance fee for meeting minimum output standards, not to
exceed 5% of the base amount, as defined in the agreement.
Performance fees of approximately $1,769,000 and $1,669,000 were
earned in 1998 and 1997, respectively.
c. An incentive fee of 20% of incremental gross revenues, provided
certain revenue levels are achieved, as outlined in the agreement.
No incentive fees were earned in 1998 or 1997.
In addition, the Partnership is a party to a ground lease agreement under which
the Partnership pays International Paper 2.5% of power sales to lease the land
and water rights. If certain operating levels are achieved, International Paper
receives additional rents as stipulated in the lease. Total rent expense for
1998 and 1997 was approximately $5,831,000 and $5,492,000, respectively,
including approximately $4,920,000 and $4,634,000 of additional rent earned
during 1998 and 1997.
<PAGE>
International Paper Company (claimant) hereby amends its statement dated
February 26, 1999 and filed with the Securities and Exchange Commission February
26, 1999, claiming exemption from the provisions of the Public Utility Holding
Company Act of 1935 as follows:
1. As Exhibit A (1) International Paper Company's annual report to
shareholder's for 1998, as filed with the Commission on March 31,
1999 in claimant's 10-K Report (SEC File Number 001-03157) is herein
incorporated by reference. The annual report contains the
consolidated statements of earnings, cash flows and common
shareholders' equity of the claimant and its subsidiary companies as
of the close of such calendar year.
2. As Exhibit A (3) a copy of the Statements of Income and Balance
Sheets as of December 31, 1998 and December 31, 1997 of
Curtis/Palmer Hydroelectric Company L.P. is attached hereto.
Signature
The above-mentioned claimant has caused this amendment to be duly
signed on its behalf by its authorized officer on the 14th day of September,
1999.
INTERNATIONAL PAPER COMPANY
Name of Claimant
[Corporate Seal]
Attest: By: /s/ Andrew R. Lessin
----------------------------
Vice President & Controller
/s/ Carol M. Samalin
- -----------------------------
Assistant Secretary
