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, 1994
Commission File No. 1-9874
CALIFORNIA ENERGY COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2213782
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10831 Old Mill Road, Omaha, Nebraska 68154
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (402) 330-8900
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
Former name, former address and former fiscal year, if changed
since last report. N/A
34,323,878 shares of Common Stock, $0.0675 par value were
outstanding as of March 31, 1994.
CALIFORNIA ENERGY COMPANY, INC.
Form 10-Q
March 31, 1994
_____________
C O N T E N T S
PART I: FINANCIAL INFORMATION Page
Item 1. Financial Statements
Report of Independent Accountants 3
Consolidated Balance Sheets, March 31, 1994
and December 31, 1993 4
Consolidated Statements of Operations for the Three
Months Ended March 31, 1994 and 1993 5
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1994 and 1993 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults on Senior Securities 21
Item 4. Submission of Matters to a Vote of
Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 23
Exhibit Index 24
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholders
California Energy Company, Inc.
Omaha, Nebraska
We have reviewed the accompanying consolidated balance sheet of
California Energy Company, Inc. and subsidiaries as of March 31,
1994, and the related consolidated statements of operations and
cash flows for the three month period ended March 31, 1994 and
1993. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review
of interim financial information consists principally of applying
analytical procedures to financial data and of making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to such consolidated financial statements for
them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of California
Energy Company, Inc. and subsidiaries as of December 31, 1993, and
the related consolidated statements of operations, stockholders'
equity, and cash flows for the year then ended (not presented
herein), and in our report dated February 24, 1994, we expressed an
unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 1993 is fairly
stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
DELOITTE & TOUCHE
May 4, 1994
CALIFORNIA ENERGY COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
________________________________
March 31 December 31
1994 1993
(unaudited)
ASSETS
Cash and short-term investments $ 441,263 $ 127,756
Joint venture cash and short-term investments 32,484 14,943
Restricted cash and short-term investments 45,591 48,105
Accounts receivable 21,842 21,658
Due from joint ventures 1,107 1,394
Properties and plants, net (Note 3) 466,152 458,974
Equipment, net of depreciation 4,360 4,540
Notes receivable - joint ventures 11,631 11,280
Other investments 10,780 10,445
Deferred charges and other assets 26,672 16,889
Total assets $1,061,882 $ 715,984
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 539 $ 607
Other accrued liabilities 17,039 19,866
Income taxes payable 1,700 4,000
Project loans 246,880 246,880
Senior Notes - 35,730
Senior Discount Notes (Note 4) 400,671 -
Convertible subordinated debentures 100,000 100,000
Deferred income taxes 18,714 18,310
Total liabilities 785,543 425,393
Deferred income 20,119 20,288
Redeemable preferred stock 59,950 58,800
Commitments and contingencies (Note 5)
Stockholders' equity:
Preferred stock - authorized 2,000 shares, no
par value
Common stock - authorized 60,000 shares,
par value $0.0675 per share, issued and
outstanding 34,324 and 35,446 shares at
March 31, 1994 and December 31, 1993,
respectively 2,406 2,404
Additional paid in capital 101,314 100,965
Retained earnings 116,437 111,031
Treasury stock - 1,315 and 157 common
shares, at March 31, 1994 and
December 31, 1993, respectively, at cost (23,887) (2,897)
Total stockholders' equity 196,270 211,503
Total liabilities and stockholders' equity $1,061,882 $ 715,984
The accompanying notes are an integral part of these financial statements.
CALIFORNIA ENERGY COMPANY, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
________________________________
Three Months Ended
March 31
1994 1993
(unaudited)
Revenues:
Sales of electricity and steam $ 30,819 27,617
Interest and other income 4,591 3,544
Total revenues 35,410 31,161
Costs and expenses:
Plant operations 6,149 6,021
General and administration 3,379 3,049
Royalties 1,997 1,586
Depreciation and amortization 4,798 4,145
Interest expense 9,233 6,764
Less interest capitalized (2,803) (1,251)
Total costs and expenses 22,753 20,314
Income before income taxes 12,657 10,847
Provision for income taxes 4,050 3,363
Income before extraordinary item
and change in accounting principle 8,607 7,484
Extraordinary item (less applicable
income taxes of $945) (Note 7) (2,007) -
Cumulative effect of change
in accounting principle - 4,100
Net income 6,600 11,584
Preferred dividends
(paid in kind)* 1,200 1,107
Net income attributable to
common shares $ 5,400 $ 10,477
Income per share before extraordinary
item and change in accounting
principle $ .20 $ .16
Extraordinary item (Note 7) (.06) -
Cumulative effect of change in
accounting principle - .11
Net income per share $ 0.14 $ 0.27
Average number of common and
common equivalent shares
outstanding 37,739 38,661
The accompanying notes are an integral part of these financial statements.
* Reflects dividends on the Company's Series C Redeemable Convertible Preferred
Stock, which are payable in kind.
CALIFORNIA ENERGY COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
March 31
1994 1993
(unaudited)
Cash flows from operating activities:
Net income $ 6,600 $ 11,584
Adjustments to reconcile net cash flow from
operating activities:
Depreciation and amortization 4,798 4,145
Amortization of original issue discount 671 -
Amortization of deferred financing costs 497 195
Provision for deferred income taxes 404 (2,541)
Changes in other items:
Accounts receivable (184) (6,632)
Accounts payable and accrued liabilities (2,895) 3,015
Deferred income (169) (223)
Income tax payable (2,300) -
Net cash flows from operating activities 7,422 9,543
Cash flows from investing activities:
Capital expenditures relating to power plants (435) (1,145)
Well and resource development expenditures for
existing projects (3,272) (5,343)
Acquisition of equipment (52) (56)
Yuma - construction in progress (5,054) (1,747)
Pacific Northwest, Nevada and Utah (2,983) (13,615)
Transmission line deposit - (47)
Decrease in restricted cash 2,514 2,533
Decrease (increase) in other investments
and assets 586 (338)
Net cash flows from investing activities (8,696) (19,758)
Cash flows from financing activities:
Proceeds and net benefits from sale of common,
treasury, and preferred stock and exercise
of options 307 492
Deferred financing costs - Senior Discount Notes (11,201) -
Proceeds from issue of Senior Discount Notes 400,000 -
Defeasance of Senior Notes (35,730) -
Increase in amounts due from joint ventures (64) (2,119)
Purchase of treasury stock (20,990) -
Net cash flows from financing activities 332,322 (1,627)
Net increase (decrease) in cash and
cash equivalents 331,048 (11,842)
Cash and cash equivalents at beginning of period 142,699 63,519
Cash and cash equivalents at end of period $473,747 $ 51,677
Supplemental disclosures
Interest paid, net of amount capitalized $ 5,593 $ 2,104
Income taxes paid $ 5,000 $ 1,805
The accompanying notes are an integral part of these financial statements.
CALIFORNIA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts and per kWh amounts)
________________________________
1. General:
In the opinion of management of California Energy Company, Inc.
(the "Company"), the accompanying unaudited consolidated financial
statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the financial
position as of March 31, 1994 and the results of operations for the
three months ended March 31, 1994 and 1993, and cash flows for the
three months ended March 31, 1994 and 1993.
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, and its proportionate
share of the accounts of the partnerships and joint ventures in
which it has invested.
The results of operations for the three months ended March 31, 1994
and 1993 are not necessarily indicative of the results to be
expected for the full year.
Certain amounts in the 1993 financial statements and supporting
footnote disclosures have been reclassified to conform to the 1994
presentation. Such reclassification did not impact previously
reported net income or retained earnings.
2. Other Footnote Information:
Reference is made to the Company's most recently issued annual
report that included information necessary or useful to the
understanding of the Company's business and financial statement
presentations. In particular, the Company's significant accounting
policies and practices were presented as Note 2 to the consolidated
financial statements included in that report.
CALIFORNIA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts and per kWh amounts)
3. Properties and Plants:
Properties and plants comprise the following:
March 31 December 31
1994 1993
(unaudited)
Project costs:
Power plants and gathering systems $ 246,654 $ 246,219
Wells and resource development 164,985 161,137
411,639 407,356
Less accumulated depreciation
and amortization (72,379) (67,813)
Net facilities 339,260 339,543
Wells and resource construction
in progress 363 939
Total project costs 339,623 340,482
Yuma - Construction in progress 46,515 41,461
Pacific Northwest 43,263 41,539
Nevada and Utah properties costs 36,751 35,492
Total $ 466,152 $ 458,974
4. Senior Discount Notes:
In March 1994, the Company issued $400,000 of 10 1/4% Senior Discount
Notes which accrete to an aggregate principal amount of $529,640 at
maturity in 2004. The original issue discount will be amortized
from issue date through January 15, 1997, during which time no cash
interest will be paid on the Senior Discount Notes. Commencing
July 15, 1997, cash interest on the Senior Discount Notes will be
payable semiannually on January 15 and July 15 of each year. The
Senior Discount Notes are redeemable at any time on or after
January 15, 1999. The redemption prices commencing in the twelve
month period beginning January 15, 1999 (expressed in percentages
of the principal amount) are 105.125%, 103.417%, 101.708%, and 100%
for 1999, 2000, 2001, and 2002, respectively, plus accrued interest
through the redemption date in each case. The Senior Discount
Notes are unsecured senior obligations of the Company.
CALIFORNIA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share and per kWh data)
__________________
5. Commitments and Contingencies:
In April 1994, the Company closed the financing for the 128 MW
Upper Mahiao geothermal power project located in the Philippines.
The total project cost for the facility is approximately $218,000.
The Company will supply $56,000 of equity and the financing will be
for approximately $162,000. A syndicate of international
commercial banks is providing the construction financing and the
Export-Import Bank of the U.S. (Ex-Im Bank) is providing political
risk insurance to the commercial banks on the construction loan and
will provide the preponderance of project term financing upon
commercial operation. The Overseas Private Investment Corporation
(OPIC) is providing political risk insurance on the equity
investment by the Company in this project. The Upper Mahiao
project is scheduled to begin construction shortly, and is expected
to be in service by July of 1996. The project is structured as a
ten year Build-Own-Transfer (BOT), in which the Company's
subsidiary CE Cebu, the project company, will be responsible for
building the power plant and providing the operations and
maintenance during the ten year BOT period. The electricity
generated by the Upper Mahiao geothermal power plant will be
provided to the Philippine National Oil Company - Energy
Development Corporation (PNOC), which is also responsible for
supplying the facility with the geothermal steam. After a ten year
cooperation period, the plant is transferred to PNOC at no cost.
Ormat Inc. of Sparks, Nevada is the turnkey contractor for the
project.
6. Income Taxes:
On January 1, 1993, the Company adopted Statement of Financial
Accounting Standard No. 109 (FAS 109), Accounting for Income Taxes.
The adoption of FAS 109 changed the Company's method of accounting
for income taxes from the deferred method as required by Accounting
Principles Board No. 11 to an asset and liability approach. Under
FAS 109, the net excess deferred tax liability as of January 1,
1993 was determined to be $4,100. This amount is reflected in 1993
CALIFORNIA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share and per kWh data)
__________________
6. Income Taxes: (continued)
income as the cumulative effect of a change in accounting
principle. It primarily represents the recognition of the
Company's tax credit carryforwards as a deferred tax asset. There
was no cash impact to the Company upon the required adoption of FAS
109. Under FAS 109, the effective tax rate has increased to
approximately 32%. The increase is due to the Company's tax credit
carryforwards being recognized as an asset upon the adoption of FAS
109 and unavailable to reduce the current period's effective tax
rate for computing the Company's provision for income taxes.
The Company's effective tax continues to be less than the statutory
rate primarily due to the depletion deduction and the generation of
energy tax credits in 1994. The significant components of the
deferred tax liability are the temporary differences between the
financial reporting basis and income tax basis of the power plant
and the well and resource development costs, and in addition, the
offsetting benefits of operating loss carryforwards and investment
and geothermal energy tax credits. The income tax provision for
the three months ended March 31, 1994, is approximately 80% current
tax expense and 20% deferred tax expense.
7. Extraordinary Item:
In conjunction with the Company's Senior Discount Note offering
(See Note 4), the 12% Senior Notes were defeased. This resulted in
an extraordinary item in the amount of $2,007, after the income tax
effect of $945. The extraordinary item represents the amount
necessary to defease the interest payments on the $35,730 Senior
Notes and the unamortized portion of the deferred financing costs.
The 1994 contingent interest component of these Senior Notes,
calculated by reference to the Company's share of available cash
flow from the Coso Project, remains undefeased and outstanding
through the end of the calculation period, December 31, 1994.
CALIFORNIA ENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh data)
___________________
Results of Operations:
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial
condition and results of operations during the periods included in
the accompanying statement of operations.
For purposes of consistent financial presentation, plant capacity
factors are based upon a capacity amount of 88 gross MW/80 net MW
for each plant at the Coso Project. Each plant possesses an
operating margin which periodically allows for production in excess
of the amount listed above. Utilization of this operating margin
is based upon a variety of factors and can be expected to vary
between calendar quarters, under normal operating conditions.
Sales of electricity and steam increased to $30,819 in the first
quarter of 1994 from $27,617 in the first quarter of 1993, an 11.6%
increase. This improvement was primarily due to an increase in the
Coso Project's electric kilowatt hour sales to 529.1 million kWh
from 503.5 million kWh and an increased price per kWh in accordance
with the S04 Agreements.
The following operating data represent the aggregate capacity and
electricity production of the Coso Project:
Three Months Ended
March 31 Fiscal Year
1994 1993 1993
Overall capacity
factor 102.1% 97.1% 104.0%
kWh produced 529,100,000 503,500,000 2,186,700,000
Installed capacity
NMW (average) 240 240 240
CALIFORNIA ENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh data)
___________________
Results of Operations: (continued)
The Navy I plant capacity factor was 116.3% in the first quarter of
1994 compared to 107.5% in the first quarter of 1993. Several
successful well workovers and the addition of a new deep well
contributed to the improved performance. The Navy II plant
capacity factor was 91.2% in the first quarter of 1994 compared to
98.0% in the first quarter of 1993. Navy II output in the first
quarter of 1994 was reduced due to the scheduled overhaul of its
three turbines. The BLM plant capacity factor was 98.7% in the
first quarter of 1994 compared to 85.8% in the first quarter of
1993. BLM output in the first quarter of 1993 was reduced due to
a scheduled overhaul of its three turbines.
In September 1991 the Great Basin Unified Air Pollution Control
District (GBUAPCD) agreed to provide a one-year variance which
allowed venting of a portion of BLM's noncondensable gas while a
permanent H2S abatement system was being engineered, fabricated and
installed. This variance allowed the plant to operate at a higher
output. The BLM Joint Venture completed the construction of the
permanent H2S abatement system in the second quarter of 1992 and
obtained a 90-day extension to the original one-year variance.
In September 1992 a new Authority to Construct was issued and
subsequently extended to September 1993 to allow operation and
testing for an interim period during which the H2S abatement system
underwent final operational modifications. In September 1993
temporary permits to operate were issued for up to two years during
which the operating performance was to be monitored. In April of
1994 Permits to Operate for the BLM plant were issued. As a
result, the Navy I, Navy II and BLM plants are all operating under
Permits to Operate.
As a result of the successful performance of the BLM H2S abatement
system, the Navy I and Navy II Joint Ventures obtained authority to
construct (ATC) permits for the installation of similar H2S
abatement systems in an effort to enhance operational efficiency
and improve long term reservoir management. Such abatement systems
CALIFORNIA ENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh data)
___________________
Results of Operations: (continued)
are expected to have an aggregate Coso Project capital cost of
approximately $11,000, a portion of which will be funded from the
balance in the Coso Project contingency reserve referred to under
"Liquidity and Capital Resources" below. Completion of
construction of the proposed Navy I and Navy II abatement systems
is currently expected to occur by year end 1994. In conjunction
with the ATC the GBUAPCD agreed to provide an eighteen month
variance to Navy I which allows venting of a portion of Navy I's
non-condensable gas while the abatement system is constructed.
The Coso Projects' average electricity prices per kWh in 1994,
1993, and 1992, were comprised of (in cents):
Capacity
Energy and Bonus Total
Three Months Ended
March 31, 1994 10.85 .70 11.55
March 31, 1993 10.01 .74 10.75
Average Fiscal 1993 10.11 1.93* 12.04*
Average Fiscal 1992 9.23 2.10* 11.33*
* Represents annualized price per kWh. Typically, the capacity
price is significantly higher in the months June through
September.
Roosevelt Hot Springs steam field supplied 100% of customer power
plant steam requirements in the first quarter of 1994. The Company
has approximately 70% interest in the Roosevelt Hot Springs field.
The Desert Peak power plant operated at 109% of its nine net
megawatt capacity in the first quarter of 1994.
Interest and other income increased in the first quarter of 1994 to
$4,591 from $3,544 for the same period in 1993. The increase
reflects higher average cash balances.
CALIFORNIA ENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh data)
___________________
Results of Operations: (continued)
The Company's expenses as a percentage of sales of electricity and
steam were as follows:
Three Months Ended
March 31
1994 1993
Plant operations (net of
Company's operator fees) 16.3% 17.9%
General and administration 11.0% 11.0%
Royalties 6.5% 5.7%
Depreciation and amortization 15.6% 15.0%
Interest (less amounts
capitalized) 20.9% 20.0%
70.3% 69.6%
Plant operations increased to $6,149 in the first quarter of 1994
from $6,021 in the first quarter of 1993, a 2.1% increase.
General and administrative costs increased to $3,379 in the first
quarter of 1994 from $3,049 in the first quarter of 1993, a 10.8%
increase. The increases were due to a higher level of project
development activity.
Royalty costs increased to $1,997 in the first quarter of 1994 from
$1,586 in the first quarter of 1993, a 25.9% increase. The
increases were due to the increase in sales of electricity.
Depreciation and amortization increased to $4,798 in the first
quarter of 1994 from $4,145 in the first quarter of 1993, a 15.8%
increase. The increase was due primarily to capital expenditures
at the Coso Project.
CALIFORNIA ENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh data)
___________________
Results of Operations: (continued)
Interest expense, less amounts capitalized, increased to $6,430 in
the first quarter of 1994 from $5,513 in the first quarter of 1993.
The increase was primarily due to interest on the convertible
subordinated debentures which were issued in June 1993 and the
original issue discount amortization on the Senior Discount Notes
issued in March 1994.
The provision for income taxes increased to $4,050 in the first
quarter of 1994 from $3,363 in the first quarter of 1993. The
increases are due to higher income before taxes. The Company's
effective rate continues to be less than the expected statutory
rate primarily due to the percentage depletion deduction and energy
tax credits generated in the current year.
Income before extraordinary item and the cumulative effect of a
change in accounting principle increased to $8,607 from $7,484, a
15.0% increase. Net income after the extraordinary item of $2,007
was $5,400 or $.14 per share for the first quarter of 1994. Net
income after giving effect to the change in accounting principle
for adoption of FAS 109 was $10,477 or $.27 cents per share for the
first quarter of 1993. Without the effect of these respective non-
recurring items, net income available to common shareholders for
the first quarter of 1994 would have been $.20 per common share
compared to $.16 per common share for the first quarter of 1993.
Liquidity and Capital Resources:
The Company's cash and investments were $441,263 at March 31, 1994
as compared to $127,756 at December 31, 1993. In addition, the
Coso Project retained cash and investments in project control
accounts of which the Company's share at March 31, 1994 and
December 31, 1993 was $32,484 and $14,943, respectively.
Distributions out of the project control account are made monthly
to the Company for operation and maintenance and capital costs and
semiannually to each Coso Joint Venture partner for profit sharing
under a prescribed calculation subject to mutual agreement by the
CALIFORNIA ENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh data)
___________________
Liquidity and Capital Resources: (continued)
partners. In addition, the Company recorded separately restricted
cash and short-term investments of $45,591 and $48,105 at March 31,
1994 and December 31, 1993, respectively. The restricted balances
were comprised primarily of its proportionate share of Coso Project
cash reserves for a debt service reserve fund and a contingency
fund. The Coso Project established these reserves in conjunction
with the refinancing of its previous bank debt.
In March 1994, the Company issued $400,000 of 10 1/4% Senior Discount
Notes which accrete to an aggregate principal amount of $529,640 at
maturity in 2004. The original issue discount will be amortized
from issue date through January 15, 1997, during which time no cash
interest will be paid on the Senior Discount Notes. Commencing
July 15, 1997, cash interest on the Senior Discount Notes will be
payable semiannually on January 15 and July 15 of each year. The
Senior Discount Notes are redeemable at any time on or after
January 15, 1999. The redemption prices commencing in the twelve
month period beginning January 15, 1999 (expressed in percentages
of the principal amount) are 105.125%, 103.417%, 101.708%, and 100%
for 1999, 2000, 2001, and 2002, respectively, plus accrued interest
through the redemption date in each case. The Senior Discount
Notes are unsecured senior obligations of the Company.
In June of 1993, the Company issued $100,000 principal amount of 5%
convertible subordinated debentures ("debentures") due July 31,
2000. The debentures are convertible into shares of the Company's
common stock at any time prior to redemption or maturity at a
conversion price of $22.50 per share, subject to adjustment in
certain circumstances. Interest on the debentures is payable semi-
annually in arrears on July 31 and January 31 of each year, and
commenced on July 31, 1993. The debentures may be redeemed for
cash at any time on or after July 31, 1996 at the option of the
Company. The redemption prices commencing in the twelve month
period beginning July 31, 1996 (expressed in percentages of the
principal amount)
CALIFORNIA ENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh data)
___________________
Liquidity and Capital Resources: (continued)
are 102%, 101%, 100% and 100% for 1996, 1997, 1998 and 1999,
respectively. The debentures are unsecured general obligations of
the Company and subordinated to all existing and future senior
indebtness of the Company.
The Company's Senior Notes in the principal amount of $35,730 which
were due in March 1995, together with the fixed 12% interest due
thereon, were defeased in the first quarter of 1994 in conjunction
with the issuance of the Senior Discount Notes. The 1994
contingent interest component of these Senior Notes, calculated by
reference to the Company's share of available cash flow from the
Coso Project, remains undefeased and outstanding through the end of
the calculation period, December 31, 1994.
Proceeds from options for shares of common stock exercised in the
three months ended March 31, 1994 aggregated approximately $307.
The Company is actively seeking to develop, construct, own and
operate new power projects utilizing geothermal and other
technologies, both domestically and internationally, the completion
of any of which is subject to substantial risk. Development can
require the Company to expend significant sums for preliminary
engineering, permitting, legal and other expenses in preparation
for competitive bids which the Company may not win or before it can
be determined whether a project is feasible, economically
attractive or capable of being financed. Successful development is
contingent upon, among other things, negotiation of construction,
fuel supply and power sales contracts with other project
participants on terms satisfactory to the Company, and receipt of
required governmental permits and consents. Further, there can be
no assurance that the Company will obtain access to the substantial
debt and equity capital required to develop and construct electric
power projects or to refinance projects for which the Company has
provided initial construction financing. The Company's future
growth is dependent, in large part, upon the demand for significant
amounts of additional electrical generating capacity and the
CALIFORNIA ENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh data)
___________________
Liquidity and Capital Resources: (continued)
Company's ability to obtain contracts to supply portions of this
capacity. There can be no assurance that development efforts on
any particular project, or the Company's efforts generally, will be
successful.
The Company believes that the international independent power
market holds the majority of new opportunities for financially
attractive private power development in the next several years.
The financing and development of projects outside the United States
entails significant political and financial risks (including,
without limitation, uncertainties, associated with first time
privatization efforts in the countries involved, currency exchange
rate fluctuations, currency repatriation restrictions, political
instability, civil unrest and expropriation) and other structuring
issues that have the potential to cause substantial delays or
material impairment of value to the project being developed, which
the Company may not be fully capable of insuring against. The
uncertainty of the legal environment in certain foreign countries
in which the Company may develop or acquire projects could make it
more difficult for the Company to enforce its rights under
agreements relating to such projects. In addition, the laws and
regulations of certain countries may limit the ability of the
Company to hold a majority interest in some of the projects that
it may develop or acquire. The Company's international projects
may, in certain cases, be terminated by a government.
In 1993 the Company and the Philippine National Oil Company -
Energy Development Corporation ("PNOC") obtained Energy Conversion
agreements for two separate Philippines geothermal projects
totalling in excess of 300 MW. These "take or pay" power sales
contracts are for a 128 MW geothermal project at the Upper Mahiao
geothermal site which has a target completion date of July 1996 and
a 180 MW project at the Mahanagdong geothermal site with a target
completion date of June 1997. Both projects are structured as ten
year Build-Own-Transfer (BOT), in which the Company will construct
the plants and operate them for ten years. The electricity
generated by the geothermal power plants will be provided to the
CALIFORNIA ENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh data)
___________________
Liquidity and Capital Resources: (continued)
PNOC, which is also responsible for supplying the facilities with
the geothermal steam. After a ten year cooperation period, and the
recovery by the Company of its capital investment plus incremental
return, the plants will be transferred to PNOC at no cost.
In April 1994, the Company closed the financing for the 128 MW
Upper Mahiao geothermal power project located in the Philippines.
The total project cost for the facility is approximately $218,000.
The Company will supply $56,000 of equity and the financing will be
for approximately $162,000. A syndicate of international
commercial banks is providing the construction financing and the
Export-Import Bank of the U.S. (Ex-Im Bank) is providing political
risk insurance to the commercial banks on the construction loan and
will provide the preponderance of project term financing upon
commercial operation. The Overseas Private Investment Corporation
(OPIC) is providing political risk insurance on the equity
investment by the Company in this project. The Upper Mahiao
project is scheduled to begin construction shortly, and is expected
to be in service by July of 1996. The project is structured as a
ten year Build-Own-Transfer (BOT), in which the Company's
subsidiary CE Cebu, the project company, will be responsible for
building the power plant and providing the operations and
maintenance during the ten year BOT period. The electricity
generated by the Upper Mahiao geothermal power plant will be
provided to the Philippine National Oil Company (PNOC), which is
also responsible for supplying the facility with the geothermal
steam. After a ten year cooperation period, the plant is
transferred to PNOC at no cost. Ormat Inc. of Sparks, Nevada is
the turnkey contractor for the project.
The Mahanagdong project will be built, owned and operated by CE
Luzon Geothermal Power Company, a Philippine corporation, that is
expected to be owned post completion as follows: 45% by the
Company, 45% by Kiewit, and up to 10% by another industrial
company. Kiewit Construction Group, Inc. (with an 80% interest)
and The Ben Holt Co., Inc. (with a 20% interest), will be the
consortium acting as the turnkey contractor.
CALIFORNIA ENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh data)
___________________
Liquidity and Capital Resources: (continued)
The Company estimates that Mahanagdong will have a total project
cost of approximately $310 million. The anticipated capital
structure will be a term loan of $225 million and approximately $85
million in equity contributions. The Company is in the process of
arranging financing for the project and the Company may provide all
or part of the construction debt financing on a structural basis
similar to those of the Upper Mahiao construction loan. The
Company also intends to provide its approximately $40 million share
of the equity for the Mahanagdong project from existing cash.
The Company is near completion of the construction of its Yuma
Project, a 50 MW natural gas fired cogeneration project in Yuma,
Arizona. The Yuma project is currently in a start-up phase and the
Company anticipates it to be fully operational late in the second
quarter of 1994.
CALIFORNIA ENERGY COMPANY, INC.
PART II - OTHER INFORMATION
Item 1 - Legal proceedings.
See Note 5 to the 1993 Annual Consolidated Financial
Statements.
Item 2 - Changes in Securities.
Not applicable.
Item 3 - Defaults on Senior Securities.
Not applicable.
Item 4 - Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5 - Other Information.
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit 11 - Calculation of earnings per share.
Exhibit 15 - Awareness letter of Independent Accountants.
(b) Reports on Form 8-K:
During the quarter ended March 31, 1994, the Company filed the
following:
(i) Form 8-K dated March 7, 1994 reporting the filing with
the Securities and Exchange Commission of an S-3
registration statement for the planned offering in March
of its Senior Discount Notes due 2004.
CALIFORNIA ENERGY COMPANY, INC.
PART II - OTHER INFORMATION
(continued)
(ii) Form 8-K dated March 28, 1994 reporting the closing of
its offering of $400,000,000 of 10 1/4% Senior Discount
Notes, which accrete to an aggregate principal amount of
$529,640,000 at maturity and provide gross proceeds to
the Company of $390,000,017.
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.
CALIFORNIA ENERGY COMPANY, INC.
/s/ John G. Sylvia
Date: May 4, 1994
John G. Sylvia
Vice President and
Chief Financial Officer
/s/ Gregory E. Abel
Gregory E. Abel
Assistant Vice President and
Corporate Controller
EXHIBIT INDEX
Exhibit Page
No. No.
11 Calculation of Earnings Per Share 25
15 Awareness Letter of Independent Accountants 26
EXHIBIT 11
CALIFORNIA ENERGY COMPANY, INC.
CALCULATION OF EARNINGS PER SHARE IN ACCORDANCE
WITH INTERPRETIVE RELEASE NO. 34-9083
(dollars in thousands, except per share amounts)
___________________
Three Months Ended
March 31
1994 1993
Actual weighted average shares
outstanding for the period 34,954,703 35,346,084
Dilutive stock options using average
market prices 2,784,330 3,315,390
Total number of shares based on shares
outstanding and the assumption that
dilutive stock options will be exercised
at average stock market prices 37,739,033 38,661,474
Additional dilutive stock options
using ending market price - -
Total shares based on shares outstanding
and the assumption that dilutive stock
options will be exercised at ending
market price if more dilutive 37,739,033 38,661,474
Income before extraordinary item and
change in accounting principle $ 8,607 $ 7,484
Extraordinary item (2,007) -
Cumulative effect of change in
accounting principle - 4,100
Net income 6,600 11,584
Less Series C preferred stock dividends 1,200 1,107
Net income available for common shares $ 5,400 $ 10,477
Primary earnings per share before
extraordinary item and change in
accounting principle $ .20 $ .16
Extraordinary item per share (.06) -
Cumulative effect of change in
accounting principle per share - .11
Primary earnings per share $ .14 $ .27
Fully diluted earnings per share based
on SEC interpretive release No. 34-9083 $ .14 $ .27
California Energy Company, Inc.
Omaha, Nebraska
We have made a review, in accordance with standards established by
the American Institute of Certified Public Accountants, of the
unaudited interim financial information of California Energy
Company, Inc. for the period ended March 31, 1994, as indicated in
our report dated April 14, 1994; because we did not perform an
audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included
in your Quarterly Report on Form 10-Q for the quarter ended March
31, 1994, is incorporated by reference in Registration Statements
No. 33-41152 and No. 33-52147 on Form S-8 and Registration
Statement No. 35-51363 on Form S-3.
We also are aware that the aforementioned report, pursuant to Rule
436(c) under the Securities Act, is not considered a part of the
Registration Statement prepared or certified by an accountant or a
report prepared or certified by an accountant within the meaning of
Section 7 and 11 of that Act.
DELOITTE & TOUCHE
May 4, 1994
