FORM 10-QA
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: March 31, 1999
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)
(661) 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 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Year 2000 Disclosure
The Year 2000 problem results from the use in computer hardware and software
of two digits rather than four digits to define the applicable year. The use
of two digits was a common practice for decades when computer storage and
processing was much more expensive than today. When computer systems must
process dates both before and after January 1, 2000, two-digit year "fields"
may create processing ambiguities that can cause errors and system failures.
For example, computer programs that have date-sensitive features may recognize
a date represented by "00" as the year 1900, instead of 2000. These errors or
failures may have limited effects, or the effects may be widespread, depending
on the computer chip, system or software, and its location and function.
State of Readiness:
Enron's Board of Directors has been briefed about the Year 2000 problems
generally and as it may affect Enron and its respective business units. The
Board has adopted a Year 2000 plan (the "Plan") covering all of Enron's
business units (including the Partnership). The aim of the Plan is to take
reasonable steps to prevent the mission-critical functions of Enron and each
of Enron's business units from being impaired due to the Year 2000 problem.
"Mission-critical" functions are those critical functions whose loss would
cause an immediate stoppage of or significant impairment to major business
areas (a major business area is one of material importance to Enron's
business, including the business of Enron's business units).
Implementation of Enron's Year 2000 plan is directly supervised by a Senior
Vice President who is aided by a Year 2000 Project Director. The Project
Director coordinates the implementation of the Plan among Enron's business
units. As part of the overall Plan, each business unit in turn has developed,
and is implementing, a Year 2000 plan specific to it. Enron also has engaged
outside consultants, technicians and other external resources to aid in
formulating and implementing the Plan.
As a portion of one of Enron's business units, EWC is implementing its plan
(the "EWC Plan"), which will be modified as events warrant. Any potential
Year 2000 problems of the Partnership will be addressed under the EWC Plan.
Under the EWC Plan, EWC will continue to inventory its and its subsidiary
entities' (as well as the Partnership's) mission-critical computer hardware
and software systems and embedded chips (computer chips with date-related
functions, contained in a wide variety of devices); assess the effects of Year
2000 problems on the function of EWC's and its subsidiary entities' (as well
as the Partnership's) businesses; remedy systems, software and embedded chips
in an effort to avoid material disruptions or other material adverse effects
on mission-critical functions, processes and systems; verify and test the
mission-critical systems to which remediation efforts have been applied; and
attempt to mitigate those mission-critical aspects of the Year 2000 problem
that are not remediated by January 1, 2000, including the development of
contingency plans to cope with the mission-critical consequences of Year 2000
problems that have not been identified or remediated by that date.
The EWC Plan recognizes that the computer, telecommunications, and other
systems ("Outside Systems") of outside entities ("Outside Entities") have the
potential for major, mission-critical, adverse effects on the conduct of EWC's
and its subsidiary entities' (as well as the Partnership's) businesses. EWC
does not have control of these Outside Entities or Outside Systems. However,
the EWC Plan includes an ongoing process of identifying and contacting Outside
Entities whose systems, in EWC's judgment, have or may have a substantial
effect on EWC's ability to continue to conduct the mission-critical aspects of
EWC's and its subsidiary entities' (as well as the Partnership's) businesses
without disruption from Year 2000 problems. The EWC Plan envisions EWC's
attempting to inventory and assess the extent to which these Outside Systems
may not be "Year 2000 ready" or "Year 2000 compatible". EWC will attempt
reasonably to coordinate with these Outside Entities in an ongoing effort to
obtain assurance that the Outside Systems that are mission-critical to EWC and
its subsidiary entities (as well as the Partnership) will be Year 2000
compatible well before January 1, 2000. Consequently, EWC will work prudently
with Outside Entities in a reasonable attempt to inventory, assess, analyze,
convert (where necessary), test, and develop contingency plans for EWC's and
its subsidiary entities' (as well as the Partnership's) connections to these
mission-critical Outside Systems and to ascertain the extent to which they
are, or can be made to be, Year 2000 ready and compatible with EWC's and its
subsidiary entities' (as well as the Partnership's) mission-critical systems.
It is important to recognize that the processes of inventorying, assessing,
analyzing, converting (where necessary), testing, and developing contingency
plans for mission-critical items in anticipation of the Year 2000 event are
necessarily iterative processes. That is, the steps are repeated as EWC
learns more about the Year 2000 problem and its effects on EWC's and its
subsidiary entities' (as well as the Partnership's) internal systems and on
Outside Systems. As the steps are repeated, it is likely that new problems
will be identified and addressed. EWC anticipates that it will continue with
these processes through January 1, 2000 and, if necessary based on experience,
into the Year 2000 in order to assess and remediate problems that reasonably
can be identified only after the start of the new century.
EWC is in the process of inventorying and assessing all of EWC's and its
subsidiary entities' (as well as the Partnership's) internal systems including
hardware and software systems and embedded chips that are mission critical as
it relates to the Partnership. EWC also is in the process of contacting
Outside Entities that it believes are mission-critical to the Partnership's
business, including Southern California Edison Company ("SCE"), the entity
that purchases the electricity generated by the Windsystem, to determine their
state of Year 2000 readiness.
Costs to Address Year 2000 issues:
The Partnership has not incurred material historical costs for Year 2000
awareness, assessment, analysis, conversion, testing, or contingency planning.
Further, ZWMC anticipates that the Partnership's future costs for these
purposes, including those for implementing its Year 2000 contingency plans,
will not be material.
Although management believes that its estimates are reasonable, there can be
no assurance, for the reasons stated in the Summary section below, that the
actual costs of implementing the EWC Plan will not differ materially from the
estimated costs or that the Partnership will not be materially adversely
affected by Year 2000 issues.
Year 2000 Risk Issues:
Potential shortcoming. EWC estimates that its and its subsidiary entities'
(as well as the Partnership's) internal systems will be Year 2000-ready
substantially before January 1, 2000. However, there is no assurance that the
EWC Plan will succeed in accomplishing its purposes or that unforeseen
circumstances will not arise during implementation of the EWC Plan that would
materially and adversely affect the Partnership.
Cascading effect. EWC is taking reasonable steps to identify, assess, and,
where appropriate, replace devices that contain embedded chips. Despite these
reasonable efforts, EWC anticipates that it will not be able to find and
remediate all embedded chips in EWC's and its subsidiary entities' (as well as
the Partnership's) internal systems. Further, EWC anticipates that Outside
Entities on which EWC and its subsidiary entities (as well as the Partnership)
depend also will not be able to find and remediate all embedded chips in their
systems. Some of the embedded chips that fail to operate or that produce
anomalous results may create system disruptions or failures. Some of these
disruptions or failures may spread from the systems in which they are located
to other systems in a cascade. These cascading failures may have adverse
effects on ZWMC's ability to manage the Windsystem and to otherwise operate
the Partnership's business. The embedded chip problem is widely recognized as
one of the more difficult aspects of the Year 2000 problem across industries
and throughout the world. EWC believes that the possible adverse impact of
the embedded chip problem is not, and will not be, unique to EWC and its
subsidiary entities, as well as the Partnership.
Third parties. EWC cannot assure that suppliers upon which it and its
subsidiary entities (as well as the Partnership) depends for essential goods
and services will convert and test their systems and processes in a timely and
effective manner. Failure or delay to do so by all or some of these entities,
including U.S. federal, state or local governments could create substantial
disruptions having a material adverse effect on the Partnership's business.
Particularly, EWC cannot assure that the Year 2000 problem will not negatively
impact SCE's ability to accept electricity generated by the Windsystem, or
negatively impact the electrical grid which allows the Windsystem to operate
and distribute electricity.
Contingency Plans:
As part of the EWC Plan, EWC is developing contingency plans that deal with
two aspects of the Year 2000 problem: (1) that EWC, despite its good-faith,
reasonable efforts, may not have satisfactorily remediated all of its and its
subsidiary entities' (as well as the Partnership's) internal systems; and (2)
that Outside Systems may not be Year 2000 ready, despite EWC's good-faith,
reasonable efforts to work with Outside Entities. EWC's contingency plans are
being designed to minimize the disruptions or other adverse effects resulting
from Year 2000 incompatibilities regarding these functions or systems, and to
facilitate the early identification and remediation of Year 2000 problems that
first manifest themselves after January 1, 2000.
EWC's contingency plans will contemplate an assessment of all its and its
subsidiary entities' (as well as the Partnership's) mission-critical internal
information technology systems and its internal operational systems that use
computer-based controls. This process will commence in the early minutes of
January 1, 2000, and continue for hours, days, or weeks as circumstances
require. Further, EWC will in that time frame assess any mission-critical
disruptions due to Year 2000-related failures that are external to EWC. The
assessment process will cover, for example, loss of electrical power from
utilities and telecommunications services from carriers.
Worst Case Scenario:
The Securities and Exchange Commission requires that public companies forecast
the most reasonably likely worst case Year 2000 scenario. In doing so, the
Partnership is assuming that EWC's Year 2000 plan will not be effective.
Analysis of the most reasonably likely worst case Year 2000 scenarios the
Partnership may face leads to contemplation of the following possibilities
which, though unlikely in some or many cases, must be included in any
consideration of worst cases: widespread failure of electrical, gas, and
similar supplies by utilities serving EWC and its subsidiary entities (as well
as the Partnership); widespread disruption of the services of communications
common carriers; similar disruptions to means and modes of transportation for
EWC and its subsidiary entities (as well as the Partnership) and their
respective employees, contractors, suppliers, and customers; significant
disruption to EWC's and its subsidiary entities' ability to gain access to,
and remain working in, office buildings and other facilities; the failure of
substantial numbers of EWC's and its subsidiary entities' (including the
Partnership's) information (computer) hardware and software systems, including
both internal business systems and systems (such as those with embedded chips)
controlling operational facilities such as electrical generation,
transmission, and distribution systems; and the failure of Outside Systems,
the effects of which would have a cumulative material adverse impact on EWC's
and its subsidiary entities' (including the Partnership's) systems. Among
other things, the Partnership could face loss of revenues due to service
interruptions, inability to account for certain revenues or obligations or to
bill SCE accurately and on a timely basis, and increased expenses associated
with litigation, stabilization of operations following failures, and the
execution of contingency plans. The Partnership could also experience an
inability by SCE to pay, on a timely basis or at all, obligations owed to the
Partnership. Under these circumstances, the adverse effect on the
Partnership, and the diminution of the Partnership's revenues, would be
material, although not quantifiable at this time.
EWC will continue to monitor business conditions with the aim of assessing and
quantifying material adverse effects on the Partnership, if any, that result
or may result from the Year 2000 problem.
Summary:
EWC has a plan to deal with the Year 2000 challenge and believes that it will
be able to achieve substantial Year 2000 readiness with respect to the
internal systems that it controls. However, from a forward-looking
perspective, the extent and magnitude of the Year 2000 problem as it will
affect the Partnership, both before and for some period after January 1, 2000,
are difficult to predict or quantify for a number of reasons. Among these
are: the difficulty of locating "embedded" chips that may be in a great
variety of hardware used for process or flow control, environmental,
transportation, access, communications and other systems; the difficulty of
inventorying, assessing, remediating, verifying and testing Outside Systems;
the difficulty in locating all software (computer code) internal to EWC and
its subsidiary entities (as well as the Partnership) that is not Year 2000
compatible; and the unavailability of certain necessary internal or external
resources, including but not limited to trained hardware and software
engineers, technicians, and other personnel to perform adequate remediation,
verification and testing of EWC's and its subsidiary entities' (as well as the
Partnership's) internal systems or Outside Systems. Accordingly, there can be
no assurance that all of EWC's and its subsidiary entities' (as well as the
Partnership's) systems and all Outside Systems will be adequately remediated
so that they are Year 2000 ready by January 1, 2000, or by some earlier date,
so as not to create a material disruption to the Partnership's business. If,
despite EWC's reasonable efforts under its Year 2000 Plan, there are Year
2000-related failures that create substantial disruptions to the Partnership's
business, the adverse impact on the Partnership's business could be material.
Additionally, Year 2000 costs are difficult to estimate accurately because of
unanticipated vendor delays, technical difficulties, the impact of tests of
Outside Systems and similar events. Moreover, the estimated costs of
implementing the EWC Plan do not take into account the costs, if any, that
might be incurred as a result of Year 2000-related failures that occur despite
EWC's implementation of the EWC Plan.
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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: September 20, 1999 By:/S/ KENNETH C. KARAS
Kenneth C. Karas
President and
Chief Financial Officer
Date: September 20, 1999 By:/S/ D. MICHAEL WESTBELD
D. Michael Westbeld
Vice President-Controller
