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
June 30, 1996
Commission File No. 1-9874
CALENERGY 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.)
302 South 36th Street, Suite 400, Omaha, NE 68131
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (402) 341-4500
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
52,176,408 shares of Common Stock, $0.0675 par value were
outstanding as of June 30, 1996.
CALENERGY COMPANY, INC.
Form 10-Q
June 30, 1996
_____________
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, June 30, 1996
and December 31, 1995 4
Consolidated Statements of Operations for the Three
and Six Months Ended June 30, 1996 and 1995 5
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 28
Item 2. Changes in Securities 28
Item 3. Defaults on Senior Securities 28
Item 4. Submission of Matters to a Vote of
Security Holders 28
Item 5. Other Information 29
Item 6. Exhibits and Reports on Form 8-K 29
Signatures 31
Exhibit Index 32
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholders
CalEnergy Company, Inc.
Omaha, Nebraska
We have reviewed the accompanying consolidated balance sheet of
CalEnergy Company, Inc. and subsidiaries as of June 30, 1996, and
the related consolidated statements of operations for the three
and six month periods ended June 30, 1996 and 1995 and the
related consolidated statements of cash flows for the six month
periods ended June 30, 1996 and 1995. 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 CalEnergy
Company, Inc. and subsidiaries as of December 31, 1995, 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 January 26, 1996, 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, 1995
is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
July 17, 1996
CALENERGY COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
________________________________
June 30 December 31
1996 1995
(unaudited)
ASSETS
Cash and investments $ 253,661 $ 72,114
Joint venture cash and investments 55,828 77,590
Restricted cash 79,237 149,227
Short-term investments 3,295 34,190
Accounts receivable 79,771 57,909
Due from joint ventures 17,215 27,273
Properties, plants, contracts and
equipment, net (Note 3) 2,028,624 1,781,255
Notes receivable - joint ventures 11,909 14,254
Excess of cost over fair
value of net assets acquired, net 297,807 302,288
Equity investment in Casecnan 59,595 60,815
Deferred charges and other assets 88,185 77,123
Total assets $2,975,127 $2,654,038
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 6,753 $ 6,638
Other accrued liabilities 91,575 87,892
Project loans 187,172 257,933
Construction loans 305,870 211,198
Senior Discount Notes 501,798 477,355
Salton Sea notes and bonds 563,035 452,088
Limited recourse senior secured notes 200,000 200,000
Convertible subordinated debentures 100,000 100,000
Convertible debt 64,850 64,850
Deferred income taxes 235,995 226,520
Total liabilities 2,257,048 2,084,474
Deferred income 26,213 26,032
Convertible preferred securities of
subsidiary 103,930 -
Commitments and contingencies (Notes 6, 8 and 9)
Stockholders' equity:
Preferred stock - authorized 2,000 shares, no
par value - -
Common stock - par value $0.0675 per share,
authorized 80,000 shares, issued 52,179 and
50,680 shares, outstanding 52,176 and 50,593
at June 30, 1996 and December 31, 1995,
respectively 3,523 3,421
Additional paid in capital 351,976 343,406
Retained earnings 238,792 205,059
Treasury stock - 3 and 87 common
shares at June 30, 1996 and December 31,
1995, respectively, at cost (61) (1,348)
Unearned compensation - restricted stock (6,294) (7,006)
Total stockholders' equity 587,936 543,532
Total liabilities and stockholders'
equity $2,975,127 $2,654,038
The accompanying notes are an integral part of these financial
statements.
CALENERGY COMPANY, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
________________________________
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
(unaudited) (unaudited)
Revenues:
Sales of electricity and
steam $104,735 $81,756 $180,679 $154,734
Royalty income 1,122 4,912 5,015 8,829
Interest and other income 9,937 10,428 20,456 20,218
Total revenues 115,794 97,096 206,150 183,781
Costs and expenses:
Plant operations 22,431 20,447 41,387 38,873
General and administration 5,117 4,851 9,296 11,277
Royalty expense 5,896 5,922 10,271 10,336
Depreciation and amortization 25,660 15,641 43,713 29,824
Loss on equity investment in
Casecnan 1,812 - 2,774 -
Interest expense 36,725 35,733 71,504 65,295
Less interest capitalized (11,602) (5,637) (23,508) (10,121)
Dividends on convertible
preferred securities of
subsidiary (Note 6) 1,443 - 1,443 -
Total costs and expenses 87,482 76,957 156,880 145,484
Income before income taxes 28,312 20,139 49,270 38,297
Provision for income taxes 9,040 6,248 15,537 11,788
Income before minority
interest 19,272 13,891 33,733 26,509
Minority interest - - - 3,005
Net income 19,272 13,891 33,733 23,504
Preferred dividends
(paid in kind) - - - 1,080
Net income available for
common shareholders $ 19,272 $13,891 $33,733 $22,424
Net income per share-primary $ .35 $ .27 $ .62 $ .48
Net income per share - fully
diluted (Note 5) $ .33 $ .26 $ .59 $ .47
Average number of common and
common equivalent shares
outstanding 55,404 52,156 54,836 46,736
Fully diluted shares (Note 5) 66,472 60,189 64,726 53,259
The accompanying notes are an integral part of these financial
statements.
CALENERGY COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
________________________________
Six Months Ended
June 30
1996 1995
(unaudited)
Cash flows from operating activities:
Net income $ 33,733 $ 23,504
Adjustments to reconcile net cash flow from
operating activities:
Depreciation and amortization 39,849 26,652
Amortization of excess of cost over
fair value of net assets acquired 3,864 3,172
Amortization of original issue discount 24,443 22,108
Amortization of deferred financing costs 4,253 5,377
Amortization of deferred compensation 712 -
Provision for deferred income taxes 6,275 4,594
Loss on equity investment in Casecnan 2,774 -
Changes in other items:
Accounts receivable (11,127) (17,794)
Accounts payable and accrued liabilities 646 (15,041)
Deferred income 181 (50)
Income tax payable 2,091 -
Net cash flows from operating activities 107,694 52,522
Cash flows from investing activities:
Malitbog construction (64,353) (28,412)
Upper Mahiao construction (23,734) (62,736)
Mahanagdong construction (29,451) (16,873)
Salton Sea Unit IV construction (49,223) (27,684)
Indonesian and other development (30,597) (2,812)
Pacific Northwest, Nevada and Utah (2,716) (1,081)
Capital expenditures relating to existing
operating projects (18,630) (6,921)
Purchase of Partnership Interest,
net of cash acquired (58,044) -
Decrease in short-term investments 30,895 82,955
Decrease in restricted cash 83,216 7,483
Decrease in other investments and assets 9,833 5,648
Purchase of Magma, net of cash acquired - (906,226)
Net cash flows from investing activities (152,804) (956,659)
Cash flows from financing activities:
Proceeds from convertible preferred
securities of subsidiary 103,930 -
Proceeds from Salton Sea notes and bonds 135,000 -
Repayment of Salton Sea notes and bonds (24,053) -
Proceeds and net benefits from sale
of common and treasury stock and
exercise of options 13,183 298,987
Repayment of project finance loans (119,053) (54,924)
Construction loans 94,672 57,367
Decrease (increase) in amounts due from
joint ventures 9,003 (2,854)
Purchase of treasury stock (3,221) (1,590)
Proceeds from merger loan - 500,000
Repayment of merger loan - (8,000)
Deferred financing costs (4,566) (22,782)
Net cash flows from financing activities 204,895 766,204
Net increase (decrease) in cash and
cash equivalents 159,785 (137,933)
Cash and cash equivalents at
beginning of period 149,704 308,091
Cash and cash equivalents at
end of period $ 309,489 $ 170,158
Supplemental disclosures:
Interest paid, net of amount
capitalized $ 22,776 $ 34,886
Income taxes paid $ 9,154 $ 6,380
The accompanying notes are an integral part of these financial
statements.
CALENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share and per kWh amounts)
________________________________
1. General:
In the opinion of management of CalEnergy 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 June 30, 1996 and the results of operations for
the three and six months ended June 30, 1996 and 1995, and cash
flows for the six months ended June 30, 1996 and 1995.
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 except for Casecnan which is accounted for
under the equity method.
The results of operations for the three and six months ended June
30, 1996 and 1995 are not necessarily indicative of the results
to be expected for the full year.
Certain amounts in the 1995 financial statements and supporting
footnote disclosures have been reclassified to conform to the
1996 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.
CALENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share and per kWh amounts)
________________________________
3. Properties, Plants, Contracts and Equipment:
Properties, plants, contracts and equipment comprise the following:
June 30 December 31
1996 1995
(unaudited)
Operating project costs:
Power plants $ 843,570 $ 623,778
Wells, resource, and development 382,009 329,414
Power sales agreements 184,258 188,415
Licenses, equipment and other 58,133 58,052
Wells and resource development
in progress 112 465
Total operating facilities 1,468,082 1,200,124
Less accumulated depreciation
and amortization (205,021) (164,184)
Net operating facilities 1,263,061 1,035,940
Mineral and resource reserves 198,927 212,929
Construction in progress:
Upper Mahiao 212,638 188,904
Malitbog 212,471 146,735
Salton Sea Unit IV - 108,769
Mahanagdong 106,011 76,560
Indonesian and other development 35,516 11,418
Total $2,028,624 $1,781,255
4. Income Taxes:
The Company's effective tax rate continues to be less than the
statutory rate primarily due to the depletion deduction and the
generation of energy tax credits in 1996. The significant
components of the deferred tax liability are the temporary
differences between the financial reporting basis and income tax
basis of the power plants 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 six months ended June 30, 1996,
is approximately 60% current tax expense and 40% deferred tax
expense.
CALENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share and per kWh amounts)
________________________________
5. Net Income Per Common Share:
Fully diluted earnings per common share assumes the conversion of
the convertible debt into 3,529 common shares at a conversion
price of $18.375 per share, the conversion of the convertible
subordinated debentures into 4,444 common shares at a conversion
price of $22.50 per share, the conversion of the convertible
preferred securities of subsidiary into 3,477 common shares at a
conversion price of $29.89 per share and the exercise of all
dilutive stock options outstanding at their option prices, with
the option exercise proceeds used to repurchase shares of common
stock at the ending market price.
6. Issuance of Convertible Preferred Securities:
On April 12, 1996, CalEnergy Capital Trust, a special purpose
Delaware business trust organized by the Company (the "Trust")
completed a private placement (with certain shelf registration
rights) of $100,000 of convertible preferred securities
("TIDES"). In addition, an option to purchase an additional 78.6
TIDES, or $3,930, was exercised by the underwriters to cover over-
allotments.
The Trust has issued 2,078.6 of 6 1/4% TIDES with a liquidation
preference of fifty dollars each. The Company owns all of the
common securities of the Trust. The TIDES and the common
securities represent undivided beneficial ownership interests in
the Trust. The assets of the Trust consist solely of the
Company's 6 1/4% Convertible Junior Subordinated Debentures due
2016 in an outstanding aggregate principal amount of $103,930
("Junior Debentures"). Each TIDES will be convertible at the
option of the holder thereof at any time into 1.6728 shares of
CalEnergy Common Stock (equivalent to a conversion price of
$29.89 per share of the Company's Common Stock), subject to
customary anti-dilution adjustments.
Until converted into the Company's Common Stock, the TIDES will
have no voting rights with respect to the Company and, except
under certain limited circumstances, will have no voting rights
with respect to the Trust. Distributions on the TIDES (and
Junior Debentures) are cumulative, accrue from the date of
initial issuance and are payable quarterly in arrears, commencing
June 15, 1996. The Junior Debentures are subordinated in right
of payment to all senior indebtedness of the Company and the
Junior Debentures are subject to certain covenants, events of
default and optional and mandatory redemption provisions, all as
described in the Junior Debenture Indenture.
CALENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share and per kWh amounts)
________________________________
7. Purchase of Edison Mission Energy's Partnership Interest:
On April 17, 1996 the Company completed the acquisition of Edison
Mission Energy's partnership interests ("the Partnership Interest
Acquisition") in four geothermal operating facilities in
California for a cash purchase price of $70,000. The acquisition
will be accounted for as a purchase.
The four projects, Vulcan, Hoch (Del Ranch), Leathers and Elmore,
are located in the Imperial Valley of California. The Company
operates the facilities and sells power to Southern California
Edison ("Edison") under long-term SO4 contracts. Prior to this
transaction, the Company was a 50% owner of these facilities.
The Partnership Interest Acquisition results in CalEnergy owning
an additional 74 net MW of generating capacity.
Unaudited proforma combined revenue, net income and primary
earnings per share of the Company and the Partnership Interest
Acquisition (including the issuance of Salton Sea Funding
Corporation Senior Secured Series D Notes and Series E Bonds
described in Note 8) for the six months ended June 30, 1996 as if
the acquisition had occurred at the beginning of the year after
giving effect to certain proforma adjustments related to the
acquisition were $224,836, $34,825 and $.64, respectively,
compared to $228,576, $27,831 and $.53 for the same period last
year.
8. Debt Offering:
On June 20, 1996 the Salton Sea Funding Corporation, a wholly
owned indirect subsidiary of the Company, (the "Funding
Corporation"), completed a sale to institutional investors of
$135,000 aggregate amount of Senior Secured Series D Notes and
Series E Bonds which are nonrecourse to the Company.
The Funding Corporation Series D Notes and Series E Bonds which
mature in May 2000 and May 2011 respectively, bear an interest
rate of 7.02% and 8.30% respectively.
The proceeds of the offering were used by the Funding Corporation
to refinance $96,584 of existing project level indebtedness, to
fund a portion of the purchase price for certain acquired
partnership interests described in Note 7 and for certain capital
improvements at the Imperial Valley Project.
CALENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share and per kWh amounts)
________________________________
9. Subsequent Events:
On July 8, 1996 the Company executed a definitive agreement for
the purchase of Falcon Seaboard Resources, Inc. for a cash price of
$226,000. Closing was completed on August 7, 1996.
Through the acquisition, the Company will indirectly
acquire a significant ownership interest in three
operating gas-fired cogeneration facilities and a related natural-
gas pipeline. The acquisition will be accounted for as a
purchase. The plants are located in Texas, Pennsylvania and New
York and total 520 MW in capacity.
Also on July 8, 1996 the Company obtained a $100,000 three year
revolving credit facility of which the Company has drawn $35,000
as of July 31, 1996. The facility is unsecured and is available
to fund general operating capital requirements and finance future
business opportunities.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
________________________________
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 statements of operations.
For purposes of consistent financial presentation, plant capacity
factors for Navy I, Navy II, and BLM (collectively the Coso
Project) are based upon a capacity amount of 80 net MW for each
plant. Plant capacity factors for Vulcan, Hoch (Del Ranch),
Elmore and Leathers (collectively the Partnership Project) are
based on contract nameplate amounts of 34, 38, 38, and 38 net MW
respectively, and for Salton Sea I, Salton Sea II, Salton Sea III
and Salton Sea IV plants (collectively the Salton Sea Project)
are based on contract nameplate amounts of 10, 20, 49.8 and 39.6
net MW respectively (the Partnership Project and the Salton Sea
Project are collectively referred to as the Imperial Valley
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.
The Coso Project and the Partnership Project sell all electricity
generated by the respective plants pursuant to seven long-term
SO4 Agreements between the projects and Edison. These SO4
Agreements provide for capacity payments, capacity bonus payments
and energy payments. Edison makes fixed annual capacity payments
to the projects, and to the extent that capacity factors exceed
certain benchmarks is required to make capacity bonus payments.
The price for capacity and capacity bonus payments is fixed for
the life of the SO4 Agreements and are significantly higher in
the months of June through September. Energy is sold at
increasing fixed rates for the first ten years of each contract
and thereafter at Edison's Avoided Cost of Energy.
The fixed energy price periods of the Coso Project SO4 Agreements
extend until at least August 1997, March 1999 and January 2000
for each of the units operated by the Navy I, BLM and Navy II
Partnerships, respectively.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Results of Operations: (continued)
The fixed energy price periods of the Partnership Project SO4
Agreements extend until February 1996, December 1998, December
1998, and December 1999 for each of the Vulcan, Hoch (Del Ranch),
Elmore and Leathers Partnerships, respectively.
The Company's SO4 Agreements provide for scheduled price period
energy rates ranging from 12.7 cents per kWh in 1996 to 15.6 cents
per kWh in 1999.
The Salton Sea I Project sells electricity to Edison pursuant to
a 30 year negotiated power purchase agreement, as amended (the
"Salton Sea I PPA"), which provides for capacity and energy
payments. The initial contract capacity and contract nameplate
are each 10 MW. The energy payment is calculated using a Base
Price which is subject to quarterly adjustments based on a basket
of indices. The time period weighted average energy payment for
Unit 1 was 4.99 cents per kWh during 1995. As the Salton Sea I PPA is
not an SO4 Agreement, the energy payments do not revert to
Edison's Avoided Cost of Energy.
The Salton Sea II and Salton Sea III Projects sell electricity to
Edison pursuant to 30 year modified SO4 Agreements. The contract
capacities and contract nameplates are 15 MW and 20 MW for Salton
Sea II and 47.5 MW and 49.8 MW for Salton Sea III, respectively.
The contracts require Edison to make capacity payments, capacity
bonus payments and energy payments. The price for contract
capacity and contract capacity bonus payments is fixed for the
life of the modified SO4 Agreements. The energy payments for the
first ten year period, which expires April 4, 2000, are levelized
at a time period weighted average of 10.6 cents per kWh and 9.8
cents per kWh for Salton Sea II and Salton Sea III,
respectively. Thereafter, the monthly energy payments will be
at Edison's Avoided Cost of Energy. For Salton Sea II only,
Edison is entitled to receive, at no cost, 5% of all energy
delivered in excess of 80% of contract capacity for the period
April 1, 1994 through June 30, 2004.
The Salton Sea IV Project sells electricity to Edison pursuant to
a modified SO4 agreement which provides for contract capacity
payments on 34 MW of capacity at two different rates based on the
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Results of Operations: (continued)
respective contract capacities deemed attributable to the
original Salton Sea PPA option (20 MW) and to the original Fish
Lake PPA (14 MW). The capacity payment price for the 20 MW
portion adjusts quarterly based upon specified indicies and the
capacity payment price for the 14 MW portion is a fixed levelized
rate. The energy payment (for deliveries up to a rate of 39.6
MW) is at a fixed price for 55.6% of the total energy delivered
by Salton Sea IV and is based on an energy payment schedule for
44.4% of the total energy delivered by Salton Sea IV. The
contract has a 30-year term but Edison is not required to
purchase the 20 MW of capacity and energy originally attributable
to the Salton Sea I PPA option after June 30, 2017, the original
termination date of the Salton Sea I PPA.
For the six months ended June 30, 1996, Edison's average Avoided
Cost of Energy was 2.2 cents per kWh which is substantially below
the contract energy prices earned for the three months ended June
30, 1996. Estimates of Edison's future Avoided Cost of Energy
vary substantially from year to year. The Company cannot predict
the likely level of Avoided Cost of Energy prices under the SO4
Agreements and the modified SO4 Agreements at the expiration of
the scheduled payment periods. The revenues generated by each of
the projects operating under SO4 Agreements could decline
significantly after the expiration of the respective scheduled
energy payment periods.
The following operating data represent the aggregate capacity and
electricity production of the Coso Project:
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
Overall capacity
factor 109.5% 106.1% 109.1% 108.1%
kWh produced
(in thousands) 574,100 555,900 1,144,000 1,126,900
Installed capacity
NMW (average) 240 240 240 240
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Result of Operations: (continued)
The increase in the capacity factor for the second quarter of
1996 from the same period in 1995 was due to increases in
production at all three plants. The Navy II and BLM plants had
experienced scheduled pre-peak outages in the second quarter of
1995, however in 1996 scheduled pre-peak outages occurred in the
first quarter of 1996.
The increase in the capacity factor for the six months ended June
30, 1996 from the same period in 1995 resulted from increased
production at all three plants, but primarily reflects increased
production at the BLM plant due to the execution of a steam
transfer agreement and construction of the related interties in
the third quarter of 1995.
The following operating data represent the aggregate capacity and
electricity production of the Partnership Project:
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
Overall capacity
factor 109.2% 107.5% 103.4% 104.9%
kWh produced
(in thousands) 353,000 347,500 668,600 674,650
Installed capacity
NMW (average) 148 148 148 148
The overall capacity factor for the Partnership Project increased
for the second quarter of 1996 compared to the second quarter of
1995 due to operating improvements at the Leathers plant. The
overall capacity factor decreased for the six months ended June
30, 1996 compared to the same period in 1995 primarily due to
scheduled turbine overhauls at Leathers and Elmore in the first
quarter of 1996.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Result of Operations: (continued)
The following operating data represent the aggregate capacity and
electricity production of the Salton Sea Project:
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
Overall capacity
factor 78.7% 78.3% 83.8% 82.5%
kWh produced
(in thousands) 159,700 136,400 315,900 286,000
Installed capacity NMW
(weighted average)* 92.9 79.8 86.3 79.8
*Weighted average for the commencement of operations at the
Salton Sea Unit IV project.
The overall capacity factor for the Salton Sea Project has
increased for the three and six months ended June 30, 1996
compared to the same periods in 1995 as a result of increased
production at the Salton Sea III Project due to a schedule
turbine overhaul in the second quarter of 1995 and the
commencement of operations at the Salton Sea IV project partially
offset by lower production at the Salton Sea I and Salton Sea II
projects.
Roosevelt Hot Springs steam field supplied 100% of customer power
plant steam requirements in the second quarter of 1996. The
Company has an approximate 70% interest in the Roosevelt Hot
Springs field. The Desert Peak power plant operated at 83% of
its nine net megawatt capacity in the second quarter of 1996.
The Yuma power plant availability was effectively 100% during the
second quarter 1996 and delivered an average of 89% of its 50 net
MW plant capacity, which reflected certain contractual
curtailments.
Sales of electricity and steam increased in the second quarter of
1996 to $104,735 from $81,756 for the same period in 1995, a
28.1% increase. For the six month period ended June 30, 1996,
sales of electricity and steam increased to $180,679 from
$154,734 in 1995,
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Result of Operations: (continued)
a 16.8% increase. These increases were primarily the result of
the Partnership Interest Acquisition and the commencement of
commercial operations at the Salton Sea Unit IV project.
Royalty income decreased in the second quarter of 1996 to $1,122
from $4,912 in the same period in 1995, a 77.2% decrease. For
the six months ended June 30, 1996 royalty income decreased to
$5,015 from $8,829, a 43.2% decrease. These decreases are a
result of the Company no longer recognizing royalty income
received from the Partnership Project as the Partnership Project
is now owned 100% by the Company due to the Partnership Interest
Acquisition. The Company continues to receive royalty income
from the East Mesa Project and the Mammoth Project.
Interest and other income decreased in the second quarter of 1996
to $9,937 from $10,428 for the same period in 1995, a 4.7%
decrease. The decrease reflects that the Company no longer
recognizes management services income received from the
Partnership Project as the Partnership Project is now owned 100%
by the Company due to the Partnership Interest Acquisition. For
the six months ended June 30, 1996, interest and other income
increased to $20,456 from $20,218, a 1.2% increase.
The Company's expenses as a percentage of sales of electricity
and steam were as follows:
Three Months Ended Six Months Ended
June 30 June 30
1996* 1995 1996* 1995
Plant operations (net of
the Company's management
fees and Yuma fuel cost) 19.9% 22.2% 20.6% 21.9%
General and administration 4.9% 5.9% 5.1% 7.3%
Royalties 5.6% 7.2% 5.7% 6.7%
Depreciation and
amortization 24.5% 19.1% 24.2% 19.3%
Interest (less amounts
capitalized) 24.0% 36.8% 26.6% 35.7%
78.9% 91.2% 82.2% 90.9%
*Excludes loss on equity investment in Casecnan (currently in
construction) and dividends on convertible preferred securities
of subsidiary.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Result of Operations: (continued)
Plant operations increased in the second quarter of 1996 to
$22,431 from $20,447 for the same period in 1995, a 9.7%
increase. For the six months ended June 30, 1996, plant
operations increased to $41,387 from $38,873 in 1995, a 6.5%
increase. These increases reflect the Partnership Interest
Acquisition and were partially offset by lower costs at the Coso
Project and the Desert Peak power plant due to continued savings
from the Company's cost control programs.
General and administration costs increased in the second quarter
of 1996 to $5,117 from $4,851 for the same period in 1995, a 5.5%
increase due to increased development expenses. For the six
months ended June 30, 1996, corporate administration decreased to
$9,296 from $11,277 in 1995, a 17.6% decrease. This decrease was
primarily due to the savings realized by consolidating the
corporate functions from the Magma acquisition.
Royalty costs marginally decreased in the second quarter of 1996
to $5,896 from $5,922 for the same period in 1995. For the six
months ended June 30, 1996 royalty expense marginally decreased
to $10,271 from $10,336 in 1995.
Depreciation and amortization increased in the second quarter of
1996 to $25,660 from $15,641 for the same period in 1995, a
64.1% increase. For the six months ended June 30, 1996,
depreciation and amortization increased to $43,713 from $29,824
in 1995, a 46.6% increase. These increases were primarily due to
the amortization of the allocated purchase price and goodwill
related to the Magma and Partnership Interest acquisitions and
the commencement of operations at the Salton Sea Unit IV project.
Loss on equity investment in Casecnan reflects the Company's
share of interest expense in excess of capitalized interest and
interest income at the Casecnan project, which is currently in
construction.
Interest expense, less amounts capitalized, decreased in the
second quarter of 1996 to $25,123 from $30,096 for the same
period in 1995, a 16.5% decrease. For the six months ended June
30, 1996, interest expense, less amounts capitalized decreased to
$47,996 from $55,174 in 1995, a 13.0% decrease. These decreases
were due to the offsetting effects of increased interest expense
associated
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Result of Operations: (continued)
with the senior discount notes, convertible debt, limited
recourse senior secured notes and Salton Sea notes and bonds,
decreased interest expense from merger debt and the associated
increase in capitalized interest on the Company's international
and domestic projects in construction.
Dividends on convertible preferred securities reflect financial
expense related to these securities which were issued in April,
1996.
The provision for income taxes increased in the second quarter of
1996 to $9,040 from $6,248, for the same period in 1995, a 44.7%
increase. For the six months ended June 30, 1996, provisions for
income taxes increased to $15,537 from $11,788 in 1995, a 31.8%
increase. The increase was due to higher income before taxes.
Net income available for common shareholders increased in the
second quarter of 1996 to $19,272 or $.35 per share from $13,891
or $.27 per share for the same period in 1995. For the six
months ended June 30, 1996, net income available to common
shareholders increased to $33,733 or $.62 per share from $22,424
or $.48 per share.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Liquidity and Capital Resources:
The Company's cash and investments were $253,661 at June 30, 1996
as compared to $72,114 at December 31, 1995. In addition, the
Company's share of the Coso Project cash and investments retained
in project control accounts at June 30, 1996 was $55,828. At
December 31, 1995 the Company's share of the Coso Project and the
Partnership Project cash and investments retained in project
control accounts was $77,590. Distributions out of the project
control accounts are made monthly to the Company for operation
and maintenance and capital costs and semiannually to each Coso
Project partner for profit sharing under a prescribed calculation
subject to mutual agreement by the partners. In addition to
these liquid instruments, the Company recorded separately
restricted cash of $79,237 and $149,227 at June 30, 1996 and
December 31, 1995, respectively. The restricted cash balance as
of June 30, 1996 is comprised primarily of amounts deposited in
restricted accounts from which the Company will source its equity
contribution requirements relating to the Upper Mahiao and
Mahanagdong projects, fund certain capital improvements at the
Imperial Valley Project and the Company's proportionate share of
Coso Project cash reserves for the debt service reserve funds.
Also, the Company had $3,295 and $34,190 of short term
investments as of June 30, 1996 and December 31, 1995,
respectively.
The Company repurchased 173 and 102 common shares for aggregate
amounts of $3,221 and $1,590 during the first six months of 1996
and 1995, respectively. At June 30, 1996 the Company holds 3
shares of its common stock at a cost of $61 to provide shares for
issuance under the Company's employee stock option and share
purchase plan and other outstanding convertible securities. The
repurchase plan attempts to minimize the dilutive effect of the
additional shares issued under these plans.
On July 8, 1996 the Company obtained a $100,000 three year
revolving credit facility of which the Company has drawn $35,000
as of July 31, 1996. The facility is unsecured and is available
to fund general operating capital requirements and finance future
business opportunities.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
_________________________________
Liquidity and Capital Resources: (continued)
On June 20, 1996 the Salton Sea Funding Corporation, a wholly
owned indirect subsidiary of the Company, (the "Funding
Corporation"), completed a sale to institutional investors of
$135,000 aggregate amount of Senior Secured Series D Notes and
Series E Bonds which are nonrecourse to the Company.
The Funding Corporation Series D Notes and Series E Bonds which
mature in May 2000 and May 2011 respectively, bear an interest
rate of 7.02% and 8.30% respectively.
The proceeds of the offering were used by Funding Corporation to
refinance $96,584 of existing project level indebtedness at the
Partnership Project, to fund a portion of the Partnership
Interest Acquisition and for certain capital improvements at the
Imperial Valley.
On April 12, 1996, CalEnergy Capital Trust, a special purpose
Delaware business trust organized by the Company (the "Trust")
completed a private placement (with certain shelf registration
rights) of $100,000 of convertible preferred securities
("TIDES"). In addition, an option to purchase an additional 78.6
TIDES, or $3,930, was exercised by the underwriters to cover over-
allotments.
The Trust has issued 2,078.6 of 6 1/4% TIDES with a liquidation
preference of fifty dollars each. The Company owns all of the
common securities of the Trust. The TIDES and the common
securities represent undivided beneficial ownership interests in
the Trust. The assets of the Trust consist solely of the
Company's 6 1/4% Convertible Junior Subordinated Debentures due
2016 in an outstanding aggregate principal amount of $103,930
("Junior Debentures"). Each TIDES will be convertible at the
option of the holder thereof at any time into 1.6728 shares of
CalEnergy Common Stock (equivalent to a conversion price of
$29.89 per share of the Company's Common Stock), subject to
customary anti-dilution adjustments. Until converted into the
Company's Common Stock, the TIDES will have no voting rights with
respect to the Company and, except under certain limited
circumstances, will have no voting rights with respect to the
Trust. Distributions on the TIDES (and Junior Debentures) are
cumulative, accrue from the date of initial
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
________________________________
Liquidity and Capital Resources: (continued)
issuance and are payable quarterly in arrears, commencing June
15, 1996. The Junior Debentures are subordinated in right of
payment to all senior indebtedness of the Company and the Junior
Debentures are subject to certain covenants, events of default
and optional and mandatory redemption provisions, all as
described in the Junior Debenture Indenture.
In 1995, the Company commenced development of and has obtained
financing for the Casecnan Project, a multipurpose irrigation and
hydroelectric power facility with a rated capacity of
approximately 150 net MW located on the island of Luzon in the
Philippines. The total project cost for the facility is
approximately $495,000. The current capital structure consists
of term loans of $371,500 and $123,836 in equity contributions.
The Company's portion of the contributed equity is approximately
$61,918. The Overseas Private Investment Corporation ("OPIC") is
providing political risk insurance on the equity investment.
The project is structured as a 20 year build-own-operate-transfer
("BOOT"), in which the Company's indirect subsidiary CE Casecnan
Water and Energy Company, Inc., a Philippine corporation, will be
responsible as the BOOT operator. The fixed price, date-certain
turnkey contractor is Hanbo Corporation of South Korea.
In 1995, the Company signed a non-binding Memorandum of
Understanding with an international mining company which
provides, among other things, for the Company, at its option, to
deliver power for the mineral extraction process. The initial
phase of the project would require at least 15 MW. To date the
pilot plant has successfully produced zinc at the Company's
Imperial Valley Project. The mining company is presently
completing construction of its larger demonstration plant. If
successfully developed, the mineral extraction process will
provide an environmentally compatible and low cost minerals
recovery methodology. The project is subject to a number of
uncertainties, including the execution of definitive agreements
with respect to power sales and other mineral recovery
activities, and implementation cannot be assured.
In April 1994, the Company closed the financing for the 119 net
MW Upper Mahiao geothermal power project located in the
Philippines. The total project cost for the facility is
approximately $218,000.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
________________________________
Liquidity and Capital Resources: (continued)
The Company will supply approximately $56,000 of equity and
project debt financing will constitute the balance of
approximately $162,000. A syndicate of international commercial
lenders is providing the construction financing. 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
satisfaction of conditions associated with commercial operation.
As of June 30, 1996, draws on the construction loan totalled
$147,129, equity investments made by subsidiaries of the Company
totalled $56,000 and advances by subsidiaries of the Company
totalled $3,355. These advances will be repaid by draws on the
construction loan. OPIC is providing political risk insurance
on the equity investment by the Company in this project. The
Upper Mahiao project commenced construction in April of 1994, was
deemed complete in June, 1996 and began receiving capacity
payments pursuant to the Upper Mahiao Energy Conversion Agreement
("ECA") in July of 1996. The project is structured as a ten year
BOOT, in which the Company's subsidiary CE Cebu Geothermal Power
Company, Inc. ("CE Cebu"), the project company, was responsible
for implementing construction of the geothermal power plant and,
as owner, for providing operations and maintenance during the ten
year BOOT period. The electricity generated by the Upper Mahiao
geothermal power plant will be sold to the PNOC - Energy
Development Corporation ("PNOC-EDC"), which is also responsible
for supplying the facility with the geothermal steam. After a
ten year cooperation period, and the recovery by the Company of
its capital investment plus incremental return, the plant will be
transferred to PNOC-EDC at no cost. Ormat Inc. of Sparks,
Nevada, is the turnkey contractor for the project.
PNOC-EDC is obligated to pay for electric capacity that is
nominated each year by CE Cebu, irrespective of whether PNOC-EDC
is willing or able to accept delivery of such capacity. PNOC-EDC
pays to CE Cebu a fee (the "Capacity Fee") based on the plant
capacity nominated to PNOC-EDC in any year (which, at the plant's
design capacity, is approximately 95% of total contract revenues)
and a fee (the "Energy Fee") based on the electricity actually
delivered to PNOC-EDC (approximately 5% of total contract
revenues). The Capacity Fee serves to recover the capital costs
of the project, to recover fixed operating costs and to cover
return on investment. The Energy Fee is designed to cover all
variable
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
________________________________
Liquidity and Capital Resources: (continued)
operating and maintenance costs of the power plant. Payments
under the Upper Mahiao ECA are denominated in U.S. dollars, or
computed in U.S. dollars and paid in Philippine pesos at the then-
current exchange rate, except for the Energy Fee, which will be
used to pay Philippine peso-denominated expenses. Significant
portions of the Capacity Fee and Energy Fee are indexed to U.S.
and Philippine inflation rates, respectively. PNOC-EDC's payment
requirements, and its other obligations under the Upper Mahiao
ECA are supported by the Government of the Philippines through a
performance undertaking.
In August 1994, the Company closed the financing for the 165 net
MW Mahanagdong project located in the Philippines. The total
project cost for the facility is approximately $320 million. The
capital structure consists of a term loan of $240 million and
approximately $80 million in equity contributions. OPIC and a
consortium of international commercial lenders is providing the
construction debt financing facility. The debt provided by the
commercial lenders is insured against political risk by the Ex-Im
Bank. Ten year term debt financing (which will replace the
construction debt) will be provided by Ex-Im Bank and by OPIC.
The Mahanagdong project has commenced construction and as of June
30, 1996, the Company's proportionate share of draws on the
construction loan totalled $65,005, equity investments made by a
subsidiary of the Company totalled $31,580 and advances by
subsidiaries of the Company totalled $2,566. OPIC is providing
political risk insurance on the equity. The Mahanagdong project
is targeted for service in July, 1997. As with the Upper Mahiao
project, the Mahanagdong project is structured as a ten year
BOOT, in which the Company will be responsible for implementing
construction of the geothermal power plant and, as owner, for
providing operations and maintenance for the ten year BOOT
period. After a ten year cooperation period, and the recovery by
the Company of its capital investment plus incremental return,
the plant will be transferred to PNOC-EDC at no cost.
The electricity generated by the Mahanagdong project will be sold
to PNOC-EDC, on a "take or pay" basis, which is also responsible
for supplying the facility with the geothermal steam. The terms
of the Mahanagdong ECA are substantially similar to those of the
Upper Mahiao ECA. All of PNOC-EDC's obligations under the
Mahanagdong
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
________________________________
Liquidity and Capital Resources: (continued)
ECA are supported by the Government of the Philippines through a
performance undertaking. The Capacity Fees are expected to be
approximately 97% of total revenues at the design capacity levels
and the Energy Fees are expected to be approximately 3% of such
total revenues. 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. The turnkey contractor consortium
consists of Kiewit Construction Group, Inc. (with an 80%
interest) and CE Holt Co., a wholly owned subsidiary of the
Company (with a 20% interest).
In December 1994, financing was closed and construction commenced
on the Malitbog Project, a 216 net MW geothermal project, located
on the island of Leyte. The Malitbog Project will be built,
owned and operated by Visayas Geothermal Power Company ("VGPC"),
a Philippine general partnership that is wholly owned,
indirectly, by the Company. VGPC will sell 100% of its capacity
on substantially the same basis as described above for the Upper
Mahiao Project to PNOC-EDC, which will in turn sell the power to
the National Power Corporation of the Philippines.
The Malitbog Project has a total project cost of approximately
$280 million, including interest during construction and project
contingency costs. A consortium of international lenders and
OPIC have provided a total of $210 million of construction and
term loan facilities, the $135 million international commercial
bank portion of which is supported by political risk insurance
from OPIC. As of June 30, 1996, draws on the construction loan
totalled $93,736, the equity investments made by subsidiaries of
the Company totalled $70,000 and advances by subsidiaries of the
Company totalled $5,069. The advances will be repaid by draws on
the construction loan. The Company's equity contribution to VGPC
of $70,000 is covered by political risk insurance from OPIC and
the Multilateral Investment Guarantee Agency ("MIGA"). As with
the Upper Mahiao project, the Malitbog project is structured as a
ten year BOOT, in which the Company will be responsible for
implementing construction of the geothermal power plant and, as
owner, for providing operations and maintenance for the ten year
BOOT period. After a ten year cooperation period, and the
recovery by the Company of its capital investment plus
incremental return, the plant will be transferred to PNOC-EDC at
no cost.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
________________________________
Liquidity and Capital Resources: (continued)
The Malitbog Project is being constructed by Sumitomo Corporation
pursuant to a fixed-price, date-certain, turnkey supply and
construction contract. Unit 1 was deemed complete in late July
1996 and commercial operation of Unit 2 and Unit 3 is scheduled
to commence in July 1997.
Magma is seeking new long-term final SO4 power purchase
agreements in southern California through the bidding process
adopted by the CPUC under its 1992 Biennial Resource Plan Update
("BRPU"). In its 1992 BRPU, the CPUC cited the need for an
additional 9,600 MW of power production through 1999 among
California's three investor-owned utilities, Edison, SDG&E and
Pacific Gas and Electric Company (collectively, the "IOUs"). Of
this amount, 275 MW was set aside for bidding by independent
power producers (such as Magma) utilizing renewable resources.
Pursuant to an order of the CPUC dated June 22, 1994 (confirmed
on December 21, 1994), Magma was awarded 163 MW for sale to
Edison (69 net MW) and SDG&E (94 net MW), with in-service dates
in 1997 and 1998.
However, the IOUs have to date challenged and may continue to
challenge the order and there can be no assurance that power
sales contracts will be executed or that any such projects will
be completed.
In light of the regulatory uncertainty concerning the BRPU awards
resulting from such IOU challenges, in March 1995 Magma entered
into a settlement agreement with Edison relating to the 69 net MW
of capacity awarded to Magma as a winning bidder in the BRPU
solicitation. The agreement (which is subject to CPUC approval)
provides for three lump sum termination payments in lieu of
signing a power sales contract with Edison for the 69 net MW of
BRPU capacity. The amount of the termination payments is subject
to a confidentiality agreement but provides Edison's ratepayers
with very significant savings when compared to payments that
would otherwise be made to Magma over the life of the proposed
BRPU power sales contract.
The agreement also provides Edison with an option, which can be
exercised at any time prior to February 1, 2002, to negotiate a
power sales contract for 69 net MW of geothermal capacity and
energy on commercially reasonable prices and terms, without
giving effect to termination payments previously paid.
CALENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share and per kWh amounts)
________________________________
Liquidity and Capital Resources: (continued)
The Company is actively seeking to develop, construct, own and
operate new power projects and infrastructure 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, field development,
permitting, legal and other financing related costs. The
Company's future growth is dependent, in large part, upon the
demand for significant amounts of additional electrical
generating capacity and the Company's ability to obtain contracts
to supply portions of this capacity. There can be no assurance
that development, financing or construction 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, construction and development of projects outside
the United States entail 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.
Projects in operation, construction and development are subject
to a number of uncertainties more specifically described in the
Company's Form 8-K, dated April 2, 1996, filed with the
Securities Exchange Commission.
CALENERGY COMPANY, INC.
PART II - OTHER INFORMATION
Item 1 - Legal proceedings.
As of June 30, 1996, there are no material outstanding
lawsuits.
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.
a. The Company's Annual Meeting of Stockholders
was held on May 16, 1996.
b. Directors elected at the Company's Annual
Meeting of Stockholders on May 16, 1996 are named below
as follows:
Judith E. Ayres
Richard K. Davidson
Bernard W. Reznicek
David L. Sokol
David E. Wit
Directors whose term of office as a
Director continued after the meeting are named below as
follows:
Edgar D. Aronson
James Q. Crowe
Ben Holt
Richard R. Jaros
Everett B. Laybourne, Esq. (Director Emeritus)
Walter Scott, Jr.
Barton W. Shackelford (Director Emeritus)
John R. Shiner
c. The following proposals were voted on at the
annual meeting:
(i) Proposal 1 - Election of
Directors (with terms expiring at the 1999 annual
meeting) for each of the persons named below as
follows:
Withholding
Nominees For Authority
Judith E. Ayres 40,347,221 235,277
Richard K. Davidson 40,347,616 234,882
Bernard w. Reznicek 40,346,475 236,023
David L. Sokol 40,290,820 291,678
David E. Wit 40,344,411 238,087
(ii) Proposal 2 - Ratification and approval of amended
stock option plan
Such proposal passed with 36,334,525 affirmative
votes. 4,138,995 votes were cast against such
proposal with 108,978 shares abstaining.
(iii) Proposal 3 - Ratification of the appointment of
Deloitte & Touche LLP as independent auditors for
the fiscal year 1996.
Such proposal passed with 40,458,514 affirmative
votes. 76,076 votes were cast against such
proposal with 47,908 shares abstaining.
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.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
During the quarter ended June 30, 1996, the Company filed
the following:
(i) Form 8-K dated April 1, 1996 announcing
the formation of CalEnergy Capital Trust and the
proposed TIDES Offering, the sizing and pricing of
the proposed offering of TIDES and its Credit
Rating Upgrade from Moody's.
(ii) Form 8-K dated April 2, 1996 announcing
the Registrant is filing cautionary statements
identifying important factors that could cause the
Registrant's actual results to differ materially
from those projected in forward-looking
statements.
(iii) Form 8-K dated April 12, 1996
announcing that CalEnergy Capital Trust completed
a private placement of $100 million of 6 1/4%
convertible preferred securities with a
liquidation preference of $50 each.
(iv) Form 8-K dated April 17, 1996 announcing
the Registrant completed the acquisition of Edison
Mission Energy 50% interest in four geothermal
facilities at Imperial Valley, California for a
cash purchase price of $70 million.
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.
CALENERGY COMPANY, INC.
Date: August 14, 1996 /s/ John G. Sylvia
John G. Sylvia
Senior Vice President and
Chief Financial Officer
/s/ Gregory E. Abel
Gregory E. Abel
Senior Vice President, Controller
and Chief Accounting Officer
EXHIBIT INDEX
Exhibit Page
No. No.
11 Calculation of Earnings Per Share 33
15 Awareness Letter of Independent Accountants 34
27 Financial Data Schedule 35
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)
___________________
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Actual weighted average shares
outstanding for the period 52,056,951 49,948,545 51,608,292 44,388,076
Dilutive stock options and warrants
using average market prices 3,346,753 2,207,440 3,227,441 2,348,418
Primary shares outstanding 55,403,704 52,155,985 54,835,733 46,736,494
Additional dilutive stock options
using ending market price and
assuming conversion of convertible
debt, convertible subordinated
debenture and convertible preferred
securities of subsidiary 11,068,567 8,033,038 9,890,187 6,522,714
Fully dilutive shares out-
standing 66,472,271 60,189,023 64,725,920 53,259,208
Net income $ 19,272 $ 13,891 $ 33,733 $ 23,504
Less: Series C preferred stock
dividends - - - 1,080
Net income available for common
shareholders $ 19,272 $ 13,891 $ 33,733 $ 22,424
Primary earnings per share $ .35 $ .27 $ .62 $ .48
Fully diluted earnings per share
based on SEC interpretive release
No. 34-9083* $ .33 $ .26 $ .59 $ .47
</TABLE>
*The net income available for common shareholders for the three and six months
ended June 30, 1996 was increased by the interest expense, net of tax effect,
associated with the convertible debt and convertible subordinated debenture
of $1,698 and $3,397, respectively. Net income available for common share-
holders for the three and six months ended June 30, 1996 was increased by
dividends on convertible preferred securities of subsidiary, net of tax effect
of $875.
*The net income available for common shareholders for the three and six months
ended June 30, 1995 was increased by the interest expense, net of tax,
associated with the convertible debt and convertible subordinated debenture
of $1,698 and $2,600, respectively.
Exhibit 15
CalEnergy 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 CalEnergy Company, Inc. for the three and six month periods ended
June 30, 1996 and 1995 as indicated in our report dated July 17, 1996; 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 June 30, 1996, 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 a Registration Statement
prepared or certified by an accountant or a report prepared or certified by
an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
August 12, 1996
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