FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended: September 30, 1997
OR
[ ] Transition Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 0-13510
ZOND-PANAERO WINDSYSTEM PARTNERS I
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its charter)
CALIFORNIA 77-003535
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13000 Jameson St., Tehachapi, California 93561
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(805) 822-6835
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
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PART I -- FINANCIAL INFORMATION
Item 1.
Balance Sheets at September 30, 1997 and December 31, 1996.
Statement of Operations for the
Three Months Ended September 30, 1997, and
September 30, 1996.
Statement of Operations for the
Nine Months Ended September 30, 1997, and
September 30, 1996.
Statement of Changes in Partners' Capital
Accounts at September 30, 1997, and December 31, 1996.
Statement of Cash Flows for the Nine Months
Ended September 30, 1997, and September 30, 1996.
Notes to Interim Financial Statements.
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<TABLE>
ZOND-PANAERO WINDSYSTEM PARTNERS I
(A California Limited Partnership)
BALANCE SHEET
(Amounts in thousands)
<CAPTION>
December 31, September 30,
1996 1997
(Audited) (Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 142 $ 1,446
Accounts receivable 682 529
Other current assets 99 10
----------- -----------
Total current assets 923 1,985
----------- -----------
Noncurrent assets:
Building 98 98
Wind turbines 49,561 49,561
Less - Accumulated depreciation (29,743) (31,615)
----------- -----------
Total noncurrent assets 19,916 18,044
----------- -----------
Total assets $ 20,839 $ 20,029
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current portion of
notes payable to related party $ 1,864 $ 1,985
Accounts payable 103 35
Interest payable to related party 4,013 4,673
Amounts payable to related parties 84 -
----------- -----------
Total current liabilities 6,064 6,693
----------- -----------
Notes payable to related party, less
current portion 13,814 12,790
----------- -----------
Partners' capital:
Limited partners 368 (43)
General partner 6 4
Substituted limited partner 6 4
Special limited partner -- --
Contributed capital 581 581
----------- -----------
Total partners' capital 961 546
----------- -----------
Total liabilities and partners' capital $ 20,839 $ 20,029
=========== ===========
<FN>
See accompanying notes to interim financial statements
</TABLE>
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<TABLE>
ZOND-PANAERO WINDSYSTEM PARTNERS I
(A California Limited Partnership)
STATEMENT OF OPERATIONS
(Amounts in thousands except limited partnership units)
<CAPTION>
For the Three Months Ended
September 30,
1996 1997
<S> <C> <C>
Revenues:
Sales of electricity $ 1,110 $ 1,043
Other income 13 11
----------- -----------
1,123 1,054
----------- -----------
Costs and Expenses:
Depreciation 625 625
Interest expense 454 406
Property taxes 8 4
Management fees and land lease 132 114
Maintenance and other operating costs 284 246
Insurance expense 37 32
----------- -----------
1,540 1,427
----------- -----------
Net income $ (417) $ (373)
=========== ===========
Net income per limited
partnership unit $ (0.350) $ (0.313)
=========== ===========
Number of limited partnership
units outstanding 1,190 1,190
=========== ===========
<FN>
See accompanying notes to interim financial statements
</TABLE>
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<TABLE>
ZOND-PANAERO WINDSYSTEM PARTNERS I
(A California Limited Partnership)
STATEMENT OF OPERATIONS
(Amounts in thousands except limited partnership units)
<CAPTION>
For the Nine Months Ended
September 30,
1996 1997
<S> <C> <C>
Revenues:
Sales of electricity $ 4,385 $ 3,782
Other income 30 26
----------- -----------
4,415 3,808
----------- -----------
Costs and Expenses:
Depreciation 1,873 1,873
Interest expense 1,404 1,265
Property taxes 25 16
Management fees and land lease 286 267
Maintenance and other operating costs 810 705
Insurance expense 122 97
----------- -----------
4,520 4,223
----------- -----------
Net income $ (105) $ (415)
=========== ===========
Net income per limited
partnership unit $ (0.088) $ (0.349)
=========== ===========
Number of limited partnership
units outstanding 1,190 1,190
=========== ===========
<FN>
See accompanying notes to interim financial statements
</TABLE>
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<TABLE>
ZOND-PANAERO WINDSYSTEM PARTNERS I
(A California Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Amounts in thousands)
<CAPTION>
<CAPTION>
Substit.
General Limited Limited Contrib.
Total Partner Partners Partner Capital
<S> <C> <C> <C> <C> <C>
Profit and loss allocation
percentage 100% .5% 99% .5%
Capital contributions, net
of private placement costs
and cash distributions $27,000 $ 273 $26,146 $ 581
Conversion to
Substituted Limited
Partner (83) $ 83
Loss for the period from
June 29, 1984(inception)
through December 31, 1994 (24,084) (174) (23,843) (67)
Balance at December 31, 1994 2,916 16 2,303 16 581
Net loss (1,412) (7) (1,398) (7)
Balance at December 31, 1995 1,504 9 905 9 581
Net loss (543) (3) (537) (3)
Balance at December 31, 1996 961 6 368 6 581
Net loss (415) (2) (411) (2) --
Balance at September 30, 1997 $ 546 $ 4 $ (43) $ 4 $ 581
<FN>
See accompanying notes to financial statements.
</FN>
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</TABLE>
<TABLE>
ZOND-PANAERO WINDSYSTEM PARTNERS I
(A California Limited Partnership)
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(Amounts in thousands)
<CAPTION>
For the Nine Months Ended
September 30,
1996 1997
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (105) $ (415)
Adjustments to reconcile net income (loss) to cash
provided by (used in) operating activities -
Depreciation 1,873 1,873
Changes in assets and liabilities -
Accounts receivable (354) 153
Other current assets (9) 89
Accounts payable and accrued expenses 26 (69)
Amounts payable to related party (54) (84)
Interest payable to related party 767 660
----------- ---------
Net cash provided (used) 2,144 2,207
Cash flows from financing activities:
Principal payments to related party (796) (903)
----------- ---------
Net increase in cash and cash equivalents 1,348 1,304
Cash & cash equivalents beginning of period 213 142
----------- ---------
Cash and cash equivalents end of period $ 1,561 $ 1,446
=========== =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 637 $ 606
=========== =========
<FN>
See accompanying notes to interim financial statements
</TABLE>
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ZOND-PANAERO WINDSYSTEM PARTNERS I
(A California Limited Partnership)
NOTES TO INTERIM FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying unaudited financial statements reflect
all adjustments which are, in the opinion of the
Partnership's general partner, necessary to a fair statement
of the results for the periods presented. The results of
operations for interim periods are not necessarily
indicative of results for the full year.
2. The Partnership's limited partnership agreement allows the
Partnership's general partner to determine the method for
maintaining the Partnership's accounting records. Until
1987, the records were maintained on a cash basis. However,
Section 481 of the Tax Reform Act of 1986 (the "Act")
prescribed a change, effective January 1, 1987, in the
accounting method for certain tax shelters having corporate
general partners, including the Partnership, to require
tax-basis accrual accounting. In accordance with Section
481 of the Act, differences between the two bases were
recognized for federal income tax purposes ratably by the
Partnership over a three-year period. Below are
reconciliations between the Partnership's tax-basis accrual
financial statements and its GAAP basis accrual financial
statements included herein for both results of operations,
partners' capital balances and total assets.
Taxable income year to date $ 1,439,000
Less: Depreciation less for tax than GAAP (1,870,000)
Other, net 16,000
---------------
GAAP basis income(loss) $ (415,000)
===============
Tax basis partners' capital
at September 30, 1997 $ (11,236,000)
Plus:
GAAP basis loss less than taxable loss net,
June 24, 1984 (inception)
through December 31, 1996 13,636,000
GAAP basis loss versus taxable income
January 1, 1997 through September 30, 1997 (1,854,000)
---------------
GAAP basis partners' capital $ 546,000
===============
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3. Reconciliation of GAAP Basis and Tax Basis Financial
Statements:
Tax basis total assets $ 8,222,000
Cumulative tax depreciation in excess of
GAAP depreciation 11,807,000
---------------
GAAP basis total assets
at September 30, 1997 $ 20,029,000
===============
4. During all periods presented in these financial statements,
1,190 units of limited partnership interests were
outstanding.
5. As a "Special Limited Partner" of the Partnership, Dean
Witter Reynolds, Inc. is entitled to receive 5% of all
Partnership distributions made after the date on which the
cumulative aggregate distributions to the Partnership's
limited partners exceed $10,000,000.
6. Following its removal as a general partner of the
Partnership effective June 24, 1988, PanAero Management
Corporation became a substituted limited partner of the
Partnership with the same capital account and interest in
profits and losses as it had as a general partner.
7. In accordance with the 1988 agreement between Zond Systems,
Inc.("Zond") and the placement agent, Zond forgave its
share, as a joint venture partner of Mesa Wind Developers,
of certain indebtedness owed by the Partnership to such
joint venture representing management fees, easement
royalties and other miscellaneous expenses related to
windsystem operations.
8. No provision has been made for income taxes in the
accompanying financial statements. The Partnership, as an
entity, is not assessed taxes based upon income generated by
its operations. Income taxes, if any, are the
liability of the individual partners.
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Zond-PanAero Windsystem Partners I, a California Limited
Partnership (the "Partnership") was formed in 1984 to purchase,
own, and operate a wind-driven electric power generating facility
located near Palm Springs, California (the "Windsystem"). The
Partnership's payment for the purchase, construction, and
installation of the Windsystem was comprised of $22,430,000 in
cash and $26,500,000 in the form of eighteen-year notes payable
(the "Purchase Notes"). The electricity generated by the
Windsystem is sold to Southern California Edison Company. The
general partner of the Partnership is Zond Windsystems Management
Corporation, a wholly-owned subsidiary of Zond Systems, Inc.
("Zond").
Liquidity and Capital Resources
The Partnership continues to experience a lack of liquidity
primarily due to a continued short-fall in revenues from
operations in comparison to the costs and expenses of operations.
Accordingly, interest payments on the Purchase Notes were in
arrears at September 30, 1997 in the aggregate amount of
$4,209,000. The Partnership expects that it will continue to
experience poor liquidity and to defer certain payments on the
Purchase Notes. See "Results of Operations."
Results of Operations
Three Months Ended September 30, 1997, Compared to Three
Months Ended September 30, 1996.
Revenues from power sales in the three months ended September
30, 1997 were 6% lower than for the corresponding 1996 period. As
reported by Southern California Edison Company, the Windsystem
produced 10,206 megawatt hours in the three months ended September
30, 1997, in comparison to production of 10,885 megawatt hours in
the corresponding 1996 period, representing a decrease in
production of approximately 6%.
The Partnership received approximately $11,000 in "other
income" from interest earned on cash balances in the three months
ended September 30, 1997, and approximately $13,000 in the
corresponding 1996 period.
Total expenses for the three months ended September 30, 1997
were approximately 7.3% lower than the corresponding 1996 period.
Interest expense decreased due to lower average principal balances
on the Purchase Notes outstanding. Management fees and land lease
expenses, which are based on gross proceeds from power sales,
decreased 13.6%. Maintenance and other operating costs decreased
13%, substantially due to decreased yaw parts replacement, along
<PAGE>
with the associated reduction in labor costs and outside services
expenses. Insurance expense decreased 14% due to lower property
values and improved market conditions.
Overall, the Partnership reported a loss of $373,000 for the
three months ended September 30, 1997, in comparison to a loss of
$417,000 for the corresponding 1996 period.
The Partnership's financial condition worsened during the
three months ended September 30, 1997. The change in overall
financial condition is primarily due to the three month loss.
During the three months ended September 30, 1997, total partners'
capital decreased $373,000 from $919,000 at June 30, 1997, to
$546,000. Limited Partners' capital decreased $369,000 from
$326,000 at June 30, 1997, to ($43,000). This represents a total
decrease of approximately $313 per unit of partnership. Based on
historical average wind energy and current cost levels, the
Partnership expects to continue to suffer net annual operating
losses and expects that its overall financial condition will
worsen annually for the foreseeable future.
Nine Months Ended September 30, 1997, Compared to Nine
Months Ended September 30, 1996.
Revenues from power sales in the nine months ended September
30, 1997 were 14% lower than for the corresponding 1996 period.
As reported by Southern California Edison Company, the Windsystem
produced 37,062 megawatt hours in the nine months ended September
30, 1997, in comparison to production of 43,007 megawatt hours in
the corresponding 1996 period, representing a decrease in
production of approximately 14%.
The Partnership received approximately $26,000 in "other
income" from interest earned on cash balances in the nine months
ended September 30, 1997, and approximately $30,000 in the
corresponding 1996 period.
Total expenses for the nine months ended September 30, 1997
were approximately 6.6% lower than the corresponding 1996 period.
Interest expense decreased due to lower average principal balances
on the Purchase Notes outstanding. Management fees and land lease
expenses, which are based on gross proceeds from power sales,
decreased 6.6%. Maintenance and other operating costs decreased
13%, substantially due to decreased yaw and nacelle parts
replacement, along with the associated reduction in labor costs
and outside services expenses. Accounting fees were less due to
the reversal of excess amounts accrued during 1996. Insurance
expense decreased 20% due to lower property values and improved
market conditions.
Overall, the Partnership reported a loss of $415,000 for the
nine months ended September 30, 1997, in comparison to a loss of
$105,000 for the corresponding 1996 period.
<PAGE>
The Partnership's financial condition worsened during the nine
months ended September 30, 1997. The change in overall financial
condition is primarily due to the net loss during the year.
During the nine months ended September 30, 1997, total partners'
capital decreased $415,000 from $961,000 at December 31, 1996, to
$546,000. Limited Partners' capital decreased $411,000 from
$368,000 at December 31, 1996, to ($43,000). This represents a
total decrease of approximately $349 per unit of partnership.
Based on historical average wind energy and current cost levels,
the Partnership expects to continue to suffer net annual operating
losses and that its overall financial condition will worsen
annually for the foreseeable future.
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: Exhibit 27. Financial Data Schedule.
b. Reports on Form 8-K: No reports on Form 8-K
have been filed by the Registrant.
<PAGE>
<PAGE>
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.
ZOND-PANAERO WINDSYSTEM PARTNERS I
A CALIFORNIA LIMITED PARTNERSHIP
By: Zond Windsystems Management
Corporation, General Partner
Date: November 14, 1997 By:/S/ KENNETH C. KARAS
Kenneth C. Karas
President and
Chief Financial Officer
Date: November 14, 1997 By:/S/ D. MICHAEL WESTBELD
D. Michael Westbeld
Vice President-Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,446
<SECURITIES> 0
<RECEIVABLES> 529
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,985
<PP&E> 49,659
<DEPRECIATION> (31,615)
<TOTAL-ASSETS> 20,029
<CURRENT-LIABILITIES> 6,693
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 546 <F1>
<TOTAL-LIABILITY-AND-EQUITY> 20,029
<SALES> 3,782
<TOTAL-REVENUES> 3,808
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,223
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,265
<INCOME-PRETAX> (415)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (415)
<EPS-PRIMARY> (0.349)<F2>
<EPS-DILUTED> (0.349)<F2>
<FN>
<F1> Partner equity - 1,190 Partnership units outstanding.
<F2> Per Partnership Unit in thousands.
</FN>
</TABLE>
