Securities and Exchange Commission
Washington, DC 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act 1934
Date of Report January 12, 1998
(Date of earliest event reported)
CalEnergy Company, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-9874 94-2213782
(State of other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
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
N/A
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
On January 12, 1998, the Registrant announced that the
Government of Indonesia issued a Presidential Decree which had
the effect of placing unit one of the Patuha geothermal power
project back on reviewed status. The project is majority owned
by Patuha Power Ltd, a wholly owned indirect subsidiary of the
Registrant. A press release issued by the Registrant is attached
hereto as Exhibit 1 and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits
Exhibit 1 - Press Release dated January 12, 1998
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SIGNATURE
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 hereunto duly authorized.
CalEnergy Company, Inc.
By: \s\ Douglas L. Anderson
Douglas L. Anderson
Assistant Secretary and
Assistant General Counsel
Dated: January 12, 1998
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Exhibit 1
FOR IMMEDIATE RELEASE
Craig M. Hammett - Sr. Vice President, Chief Financial Officer 402-341-4500
CALENERGY ANNOUNCES ISSUANCE OF
THE GOVERNMENT OF INDONESIA'S PRESIDENTIAL DECREE NO. 5
OMAHA, NEBRASKA, Monday, January 12, 1998 - CalEnergy
Company, Inc. ("CalEnergy" or the "Company") (NYSE: CE; PCX;
LSE) announced today that the Government of Indonesia issued
Presidential Decree of the Republic of Indonesia No. 5 of
1998 ("PD-5"), attached hereto as Exhibit A, on January 10,
1998. This decree rescinded Presidential Decree No. 47 of
1997 ("PD-47"). The overall effect to CalEnergy of PD-5 is to
place unit one of CalEnergy's Patuha project, as well as
several projects unrelated to CalEnergy, on reviewed status
which was its purported original position under Presidential
Decree No. 39 of 1997 ("PD-39"). PD-47 had moved unit one of
the Patuha project and several unrelated projects to the
continued status under PD-39.
The issuance of PD-5 was apparently in response to the
demands of the International Monetary Fund ("IMF") to provide
greater transparency to various decisions being made by the
Indonesian Government. CalEnergy believes that PD-5, as it
relates to the Patuha project, is inappropriate given that
this project was awarded on an arms length basis (without
regard to political relationships) and with complete
transparency. Furthermore, the project has been financed by
a consortium of international commercial lenders, the project
has been under construction for more than one year including
well drilling, and has obtained all necessary permits,
approvals and governmental consents, including a sovereign
guarantee from the Republic of Indonesia. CalEnergy's
investment in the Patuha project is approximately
$100,000,000 and is insured against political risks by the
Overseas Private Investment Corporation ("OPIC"), which is an
affiliate of the United States Treasury. To the extent that
PD-5 abrogates the Patuha project contracts, resulting in a
covered expropriation by the Government of Indonesia,
CalEnergy will immediately pursue recovery of its lost
investment, minus applicable deductibles, from OPIC and
commercial insurers.
The recent financial situation in Indonesia, coupled with the
overall financial problems throughout Asia, has raised doubt
about the Government of Indonesia's overall willingness
and/or capability to honor its contracts with CalEnergy.
While PLN, the Government of Indonesia's wholly owned
electric utility, has repeatedly confirmed their intention to
honor CalEnergy's contracts for the Dieng, Patuha and Bali
projects, the unexpected issuance of PD-5 creates doubt
regarding such confirmations. CalEnergy will continue to work
closely with the Government of Indonesia, OPIC and the United
States Government to protect CalEnergy's interest in these
projects. CalEnergy has an approximate total investment of
$275,000,000 in Indonesia. After appropriate deductions for
deductibles and non-insured developmental costs, CalEnergy
expects that approximately $210,000,000 would be recoverable
from OPIC and commercial political risk insurers to the
extent that the Government of Indonesia abrogates contracts
or otherwise expropriates all of CalEnergy's assets in
Indonesia. Further, to the extent such an occurrence
actually happens, future earnings growth expected from the
Indonesian projects would obviously not occur. CalEnergy's
total assets are approximately $7.6 billion.
-more-
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CalEnergy Company, Inc.
January 12, 1998
Page 2
Separately, on January 9, 1998, Standard & Poor's ("S&P")
affirmed its double "B" plus corporate credit and senior debt
ratings on CalEnergy Company, Inc. and its double "B" minus
rating on CalEnergy Capital Trust's preferred securities (see
attached Exhibit B). S&P's affirmed ratings assume, in a
worst-case scenario, that CalEnergy could potentially lose
its entire investment in Indonesia.
"The economic situation in Indonesia has significantly
worsened recently and the confusion newly created over the
potential Presidential succession and the IMF rescue package
makes the situation difficult to predict," stated David L.
Sokol, Chairman and Chief Executive Officer. "While we
continue to expect that the Government of Indonesia will
honor its contractual obligations, we must recognize the
severity of the financial situation in Indonesia, the
confusion caused thereby and take all steps necessary to
protect our investment. Given the issuance of Presidential
Decree No. 5 we caution investors not to assume that the
Indonesia situation will be clarified in less than six to
twelve months."
The Company will hold an analyst/investor conference call to
discuss Indonesia on January 29, 1998, the date the Company
releases earnings for the fourth quarter of 1997.
CalEnergy, which manages and owns interests in over 5,000 net
MW of power generation facilities in operation, construction
and development worldwide, currently operates 20 generating
facilities and also supplies and distributes electricity to
more than 1.5 million customers.
www.calenergy.com
# # #
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Exhibit A
PRESIDENTIAL DECREE OF THE REPUBLIC OF INDONESIA
NO. 5 OF 1998
REGARDING
CANCELLATION OF PRESIDENTIAL DECREE NO. 47 OF 1997 REGARDING
CHANGE OF STATUS OF IMPLEMENTATION OF GOVERNMENTAL PROJECTS,
STATE-OWNED COMPANIES AND PRIVATE PROJECTS RELATED WITH THE
GOVERNMENT/STATE-OWNED COMPANIES THAT WERE PREVIOUSLY POSTPONED
OR REVIEWED
PRESIDENT OF THE REPUBLIC OF INDONESIA,
Considering:
a)that, in the effort to overcome the monetary crisis that
occurred in Indonesia in the recent months, it is considered
necessary to take steps in retrenchment of expenditures in all
sectors;
b)that, after conducting a more thorough review on the
decision to continue several governmental projects, state-
owned companies and private projects related with the
government/state-owned companies which was previously decreed
to be continued in Presidential Decree No. 47 of 1997,
apparently require large amounts of funding and make the
effort to overcome the crisis more difficult;
c)that, related to the aforementioned, it is considered
necessary to cancel Presidential Decree No. 47 of 1997
regarding change of status of implementation of governmental
projects, state-owned companies and private projects related
with the government/state-owned companies that were previously
postponed or reviewed;
Remembering:
1.Chapter 4 article 1 of the Basic Regulations of 1945;
2.Presidential Decree No. 39 Year 1997 regarding
Postponement/Review of Governmental Projects, State-Owned
Companies and Private Projects Related to the Government/State-
Owned Companies;
DECIDED:
Determined: PRESIDENTIAL DECREE ON CANCELLATION OF PRESIDENTIAL
DECREE NO. 47 OF 1997 REGARDING CHANGE OF STATUS OF
IMPLEMENTATION OF GOVERNMENTAL PROJECTS, STATE-OWNED
COMPANIES AND PRIVATE PROJECTS RELATED WITH THE
GOVERNMENT/STATE-OWNED COMPANIES THAT WERE PREVIOUSLY
POSTPONED OR REVIEWED
FIRST:
Cancel Presidential Decree No. 47 of 1997 regarding Change
of Implementation of Governmental Projects, State-Owned
Companies' Projects, and Private Projects Related to the
Government/State-Owned Companies That Were Previously
Postponed or Reviewed.
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Exhibit A
Page 2
SECOND:
Projects referred to in the first decision are again
projects with the status whose implementation are:
A. Reviewed:
1. The Semarang Section C toll road project
2. The Ujung Pandang toll road project
3. The Pondok Aren - Serpong toll road project
4. The JAMSOSTEK tower project
5. Patuha Unit 1 PLTP
6. Asahan 1 PLTA
7. Tanjung Jati "A" PLTU
8. Tanjung Jati "C" PLTU
B. Postponed:
1. The Aloha Waru - Tanjung Perak toll road project
2. Karaha PLTP (Stage 1 PLN)
3. Sarulla PLTP
4. Darajat PLTP Units 1 & 2
5. East Palembang PLTGU
6. Construction and Management of a New Airport to
Replace the Polonia, Medan Airport Project.
7. Improvement of the Meteorological and Geophysical
Equipment project
THIRD:
This Presidential Decree is valid from the date decreed.
Decreed in Jakarta
On 10 January 1998
President of the Republic of Indonesia
(signed)
Suharto
(unofficial translation)
<PAGE>
Exhibit B
Friday January 9, 8:06 pm Eastern Time
Company Press Release
SOURCE: Standard & Poor's CreditWire
S&P Affirms CalEnergy `BB+', CalEnergy Capital Trust `BB-`
Ratings
NEW YORK, Jan. 9 /PRNewswire/ -- Standard & Poor's today affirmed
its double -`B'- plus corporate credit and senior debt ratings on
CalEnergy Co. Inc. and its double-`B' minus rating on CalEnergy
Capital Trust's preferred securities.
The affirmations follow Standard & Poor's downgrade of CE
Indonesia Funding Corp.'s bank loan rating to double-`B' from
double-`B'-plus and the downgrade of Republic of Indonesia's
foreign currency sovereign credit rating to double -`B' from
double-`B'-plus. Both ratings are under review for possible
further rating downgrades (see earlier press release on
Indonesia).
The economic and political environment in Indonesia increases the
uncertainty that CalEnergy might realize a substantially
different dividend stream than forecast from the Dieng, Patuha,
and Bali geothermal projects. The Indonesian downgrades, for
instance, reflect the increased risk of inconvertibility of the
Rupiah to U.S. dollars and the transferability of U.S. dollars
out of Indonesia. In addition, uncertainty, due in part to the
political crisis, exists about the Indonesian government's
continued support of the Indonesian independent power producers
(IPPs), particularly the support of the electricity sales
contracts executed by the state-owned electricity company, PT
Perusahaan Listrik Negara (Persero) (PLN).
In a worst-case scenario, CalEnergy could potentially lose its
investment and not receive dividends from the Indonesian projects
for any number of reasons. While the loss of that revenue stream
would be substantial, CalEnergy's diversified equity cash flows
from such projects and investments as Northern Electric PLC
(triple-`B'-plus/stable/A-2), Coso Funding Corp. (triple-`B'
senior notes), Salton Sea Funding Corp. (triple-`B'-minus senior
notes), and the Falcon Seaboard IPPs and Philippine geothermal
projects provide adequate cash flows to cover CalEnergy's senior
debt at the double-`B'-plus rating level and the preferred
securities at the double-`B'-minus level. Standard & Poor's
emphasizes that the complete loss of the Indonesian projects is a
worst-case situation and is unlikely to happen.
Standard & Poor's is conducting a comprehensive review of
CalEnergy's Southeast Asian exposure and expects to comment in
greater detail in coming weeks.
OUTLOOK: STABLE
Standard & Poor's expects that CalEnergy's construction projects
and operating projects will continue as forecast. The quality
and certainty of current cash flow generation and attendant debt
service abilities remain stable. However, the combination of
near-term high leverage levels, reduced interest coverage as a
result of the Kiewit Diversified Group acquisition, and
CalEnergy's emerging economies exposure will limit upwards
ratings movement in the near term, Standard & Poor's said. --
CreditWire
SOURCE: Standard & Poor's CreditWire
Contact: Peter Rigby, New York (1) 212-208-8241
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