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: June 30, 1998
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 June 30, 1998 and December 31, 1997.
Statement of Operations for the
Three Months Ended June 30, 1998, and
June 30, 1997.
Statement of Operations for the
Six Months Ended June 30, 1998, and
June 30, 1997.
Statement of Changes in Partners' Capital
Accounts at June 30, 1998, and December 31, 1997.
Statement of Cash Flows for the Six Months
Ended June 30, 1998, and June 30, 1997.
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, June 30,
1997 1998
(Audited) (Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 183 $ 26
Accounts receivable 368 1,670
Other current assets 36 7
----------- -----------
Total current assets 587 1,703
----------- -----------
Noncurrent assets:
Building 98 98
Wind turbines 49,561 49,561
Less - Accumulated depreciation (32,240) (33,488)
----------- -----------
Total noncurrent assets 17,419 16,171
----------- -----------
Total assets $ 18,006 $ 17,874
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current portion of
notes payable to related party $ 2,114 $ 2,251
Accounts payable 29 87
Interest payable to related party 4,103 4,430
Amounts payable to related parties 160 52
----------- -----------
Total current liabilities 6,406 6,820
----------- -----------
Notes payable to related party, less
current portion 11,700 10,539
----------- -----------
Partners' capital:
Limited partners (683) (74)
General partner 1 4
Substituted limited partner 1 4
Special limited partner -- --
Contributed capital 581 581
----------- -----------
Total partners' capital (100) 515
----------- -----------
Total liabilities and partners' capital $ 18,006 $ 17,874
=========== ===========
<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
June 30,
1997 1998
<S> <C> <C>
Revenues:
Sales of electricity $ 1,713 $ 2,150
Other income 10 5
----------- -----------
1,723 2,155
----------- -----------
Costs and Expenses:
Depreciation 624 624
Interest expense 428 376
Property taxes 6 4
Management fees and land lease
to related parties 76 90
Maintenance and other operating
costs to related parties 248 218
Other operating costs 2 5
Insurance expense 33 28
----------- -----------
1,417 1,345
----------- -----------
Net income $ 306 $ 810
=========== ===========
Net income per limited
partnership unit $ 0.257 $ 0.681
=========== ===========
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 Six Months Ended
June 30,
1997 1998
<S> <C> <C>
Revenues:
Sales of electricity $ 2,739 $ 3,219
Other income 15 14
----------- -----------
2,754 3,233
----------- -----------
Costs and Expenses:
Depreciation 1,248 1,248
Interest expense 859 756
Property taxes 12 9
Management fees and land lease
to related parties 153 134
Maintenance and other operating
costs to related parties 452 406
Other operating costs 7 8
Insurance expense 65 57
----------- -----------
2,796 2,618
----------- -----------
Net (loss) income $ (42) $ 615
=========== ===========
Net (loss) income per limited
partnership unit $ (0.035) $ 0.517
=========== ===========
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, 1995 (25,496) (181) (25,241) (74) -
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 (1,061) (5) (1,051) (5) -
Balance at December 31, 1997 (100) 1 (683) 1 581
Net income 615 3 609 3 -
Balance at June 30, 1998 $ 515 $ 4 $ (74) $ 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 Six Months Ended
June 30,
1997 1998
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (42) $ 615
Adjustments to reconcile net loss to cash
provided by (used in) operating activities -
Depreciation 1,248 1,248
Changes in assets and liabilities -
Accounts receivable (527) (1,302)
Prepaid insurance and other 34 29
Accounts payable and accrued expenses (85) 58
Amounts payable to related party (81) (108)
Accrued interest payable
to related party 253 327
----------- ---------
Net cash provided (used) 800 867
Cash flows from financing activities:
Principal payments on notes payable
to related party (903) (1,024)
----------- ---------
Net increase in cash and cash equivalents (103) (157)
Cash & cash equivalents beginning of period 142 183
----------- ---------
Cash and cash equivalents end of period $ 39 $ 26
=========== =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 606 $ 429
=========== =========
<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 $ 1,849,000
Less: Depreciation less for tax than GAAP (1,246,000)
Other, net 12,000
---------------
GAAP basis loss $ 615,000
===============
Tax basis partners' capital
at June 30, 1998 $ (9,404,000)
Plus:
GAAP basis loss less than taxable loss net,
June 24, 1984 (inception)
through December 31, 1997 11,153,000
GAAP basis loss versus taxable income
January 1, 1998 through June 30, 1998 (1,234,000)
---------------
GAAP basis partners' capital $ 515,000
===============
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3. Reconciliation of GAAP Basis and Tax Basis Financial
Statements:
Tax basis total assets $ 7,938,000
Cumulative tax depreciation in excess of
GAAP depreciation 9,936,000
---------------
GAAP basis total assets
at June 30, 1998 $ 17,874,000
===============
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. 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").
On January 3, 1997 Zond's parent, Zond Corporation, became a wholly-owned
subsidiary of Enron Renewable Energy Corporation, which is majority owned by
Enron Corp. In May 1997, the name of Zond Corporation was changed to Enron
Wind Corp. Enron Corp., headquartered in Houston, Texas, is one of the
world's leading integrated energy company. Enron Corp., which owns
approximately $23 billion in energy related assets, delivers physical
commodities and risk management and financial services to provide energy
solutions to customers around the world.
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 June 30, 1998 in the aggregate amount of
$4,380,000. 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 June 30, 1998, Compared to Three
Months Ended June 30, 1997.
Revenues from power sales in the three months ended June 30, 1998 were
25.5% higher than for the corresponding 1997 period. As reported by Southern
California Edison Company, the Windsystem produced 21,078 megawatt hours in
the three months ended June 30, 1998, in comparison to production of 16,928
megawatt hours in the corresponding 1997 period, representing an increase in
production of approximately 24.5%.
<PAGE>
The Partnership received approximately $5,000 in "other income" from
interest earned on cash balances in the three months ended June 30, 1998, and
approximately $10,000 in the corresponding 1997 period.
Total expenses for the three months ended June 30, 1998 were approximately
5.1% lower than the corresponding 1997 period. Interest expense decreased due
to lower average principal balances on the Purchase Notes outstanding.
Management fees and land lease expenses increased 18%, directly related to the
increase in electricity sales. Maintenance and other operating costs
decreased 10.8%, substantially due to decreased generator parts replacement
and crane rental expense. Insurance expense decreased 15%, which is
attributable to historical low loss experience, asset devaluation, and the
packaging of all turbine projects Zond operates under one policy with Enron
Corp.
Overall, the Partnership reported income of $810,000 for the three months
ended June 30, 1998, in comparison to income of $306,000 for the corresponding
1997 period.
The Partnership's financial condition improved during the three months
ended June 30, 1998. The change in overall financial condition is primarily
due to the income earned during the quarter. During the three months ended
June 30, 1998, total partners' capital increased $810,000 from ($295,000) at
March 31, 1998, to $515,000. Limited Partners' capital increased $802,000
from ($876,000) at March 31, 1998, to ($74,000). This represents a total
increase of approximately $681 per unit of partnership. Although the
Partnership's financial condition improved during this interim period, 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.
Six Months Ended June 30, 1998, Compared to Six
Months Ended June 30, 1997.
Revenues from power sales in the six months ended June 30, 1998 were 17.1%
higher than for the corresponding 1997 period. As reported by Southern
California Edison Company, the Windsystem produced 31,460 megawatt hours in
the six months ended June 30, 1998, in comparison to production of 26,856
megawatt hours in the corresponding 1997 period, representing an increase in
production of approximately 17.1%.
The Partnership received approximately $14,000 in "other income" from
interest earned on cash balances in the six months ended June 30, 1998, and
approximately $15,000 in the corresponding 1997 period.
<PAGE>
Total expenses for the six months ended June 30, 1998 were approximately
6.4% lower than the corresponding 1997 period. Interest expense decreased due
to lower average principal balances on the Purchase Notes outstanding.
Management fees and land lease expenses decreased 12%. Management fees are 2%
of sales receipts and land lease is 5% of sales receipts. Sales receipts lag
behind the accrued sales revenue by about two months. Receipts of electricity
sales in the six months ended June 30, 1998 were down 13.7% as a result of
lower wind energy levels from November 1997 through April 1998 compared to
November 1996 through April 1997. Maintenance and other operating costs
decreased 9.8%, substantially due to decreased generator parts replacement and
crane rental expense. Insurance expense decreased 12.3%, which is
attributable to historical low loss experience, asset devaluation, and the
packaging of all turbine projects Zond operates under one policy with Enron
Corp.
Overall, the Partnership reported income of $615,000 for the six months
ended June 30, 1998, in comparison to a loss of $42,000 for the corresponding
1997 period.
The Partnership's financial condition improved during the six months ended
June 30, 1998. The change in overall financial condition is primarily due to
the income earned during the six month period. During the six months ended
June 30, 1998, total partners' capital increased $615,000 from ($100,000) at
December 31, 1997, to $515,000. Limited Partners' capital increased $609,000
from ($683,000) at December 31, 1997, to ($74,000). This represents a total
increase of approximately $517 per unit of partnership. Although the
Partnership's financial condition improved during this interim period, 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.
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>
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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: August 13, 1998 By:/S/ KENNETH C. KARAS
Kenneth C. Karas
President and
Chief Financial Officer
Date: August 13, 1998 By:/S/ D. MICHAEL WESTBELD
D. Michael Westbeld
Vice President-Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 26
<SECURITIES> 0
<RECEIVABLES> 1,670
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,703
<PP&E> 49,659
<DEPRECIATION> (33,488)
<TOTAL-ASSETS> 17,874
<CURRENT-LIABILITIES> 6,820
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 515 <F1>
<TOTAL-LIABILITY-AND-EQUITY> 17,874
<SALES> 3,219
<TOTAL-REVENUES> 3,233
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,618
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 756
<INCOME-PRETAX> 615
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 615
<EPS-PRIMARY> 0.517 <F2>
<EPS-DILUTED> 0.517 <F2>
<FN>
<F1> Partner equity - 1,190 Partnership units outstanding.
<F2> Per Partnership Unit in thousands.
</FN>
</TABLE>
