================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number:
Reg. No. 33-69762
CHI ENERGY, INC.
----------------
(Exact name of registrant as specified in its charter)
Delaware 06-1138478
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
680 Washington Boulevard, Stamford, Connecticut 06901
- ----------------------------------------------- -----
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (203) 425-8850
CONSOLIDATED HYDRO, INC.
------------------------
(Former name or former address, 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 __
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No __
Indicate the number of shares of each of the issuer's classes of common stock,
as of the latest practicable date:
Class A Outstanding as of November 7, 1997
- --------------------------------------- ----------------------------------
Common stock, $.01 par value 9,085,290
Class B Outstanding as of November 7, 1997
- --------------------------------------- ----------------------------------
Common stock, $.01 par value 914,710
================================================================================
<PAGE>
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements............................................................ 2
Consolidated Statement of Operations for the three months
ended September 30, 1997 and 1996 (Unaudited)............................... 3
Consolidated Balance Sheet at September 30, 1997
and June 30, 1997 (Unaudited).............................................. 4
Consolidated Statement of Stockholders' Deficit
for the three months ended September 30, 1997 (Unaudited)................... 5
Consolidated Statement of Cash Flows for the three months
ended September 30, 1997 and 1996 (Unaudited)............................... 6-7
Notes to Consolidated Financial Statements (Unaudited) ........................ 8-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................... 11-18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................................. 19
Item 2 Changes in Securities.......................................................... 19
Item 3. Default upon Senior Securities................................................. 19
Item 4. Submission of Matters to a Vote of Security Holders............................ 19
Item 5. Other Information.............................................................. 19
Item 6. Exhibits and Reports on Form 8-K............................................... 19
Signature ............................................................................... 20
</TABLE>
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED HYDRO, INC.
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
2
<PAGE>
CONSOLIDATED HYDRO, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1 9 9 7 1 9 9 6
------- -------
<S> <C> <C>
OPERATING REVENUES:
Power generation revenue $ 6,422 $ 8,855
Management fees and operations & maintenance revenues 1,927 1,540
Equity income in partnership interests and other partnership income 73 117
--------- ---------
8,422 10,512
--------- ---------
COSTS AND EXPENSES:
Operating 4,591 4,942
General and administrative 1,388 1,274
Reorganization costs 3,230 ---
Charge for employee and director equity participation programs --- 25
Depreciation and amortization 2,176 2,175
Lease expense to a related party 923 890
Lease expense to unrelated parties 571 507
Adjustment to impairment of long-lived assets (75) ---
--------- ---------
12,804 9,813
--------- ---------
(Loss)/income from operations (4,382) 699
INTEREST INCOME 540 324
OTHER INCOME 33 19
INTEREST EXPENSE ON INDEBTEDNESS TO RELATED PARTIES (2,447) (2,583)
INTEREST EXPENSE ON INDEBTEDNESS TO UNRELATED PARTIES (4,351) (4,834)
--------- ---------
Loss before provision for income taxes (10,607) (6,375)
PROVISION FOR INCOME TAXES (117) (116)
--------- ---------
NET LOSS (10,724) (6,491)
========= =========
NET LOSS APPLICABLE TO COMMON STOCK:
Net loss $ (10,724) $ (6,491)
Dividends declared on preferred stock (3,370) (3,544)
Accretion of preferred stock (179) (214)
Undeclared dividends on cumulative preferred stock (2,511) (2,454)
--------- ---------
$ (16,784) $ (12,703)
========= =========
NET LOSS PER COMMON SHARE $ (13.05) $ (9.88)
========= =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 1,285,762 1,285,762
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
3
<PAGE>
CONSOLIDATED HYDRO, INC.
CONSOLIDATED BALANCE SHEET
(Amounts in thousands except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
SEPT. 30 JUNE 30
1 9 9 7 1 9 9 7
------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents unrestricted $ 23,091 $ 24,247
Cash and cash equivalents restricted 4,700 8,255
Accounts receivable, net 6,906 6,803
Prepaid expenses and other current assets 2,003 1,698
---------- ---------
Total current assets 36,700 41,003
PROPERTY, PLANT AND EQUIPMENT, NET 125,215 125,954
FACILITIES UNDER DEVELOPMENT 100 100
INTANGIBLE ASSETS, NET 44,570 47,785
ASSETS TO BE DISPOSED OF --- 1,914
INVESTMENTS AND OTHER ASSETS 27,308 26,872
---------- ---------
$ 233,893 $ 243,628
========== =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 5,817 $ 6,458
Current portion of long-term debt payable to a related party 1,055 3,234
Current portion of long-term debt and obligations under capital leases payable to
unrelated parties 4,716 4,232
---------- ---------
Total current liabilities 11,588 13,924
LIABILITIES SUBJECT TO COMPROMISE 301,524 ---
LONG-TERM DEBT PAYABLE TO RELATED PARTIES 29,514 90,918
LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES PAYABLE TO UNRELATED PARTIES 61,817 171,697
DEFERRED CREDIT, STATE INCOME TAXES AND OTHER LONG-TERM LIABILITIES 33,402 42,396
COMMITMENTS --- ---
MANDATORILY REDEEMABLE PREFERRED STOCK, $.01 PAR VALUE, AT REDEMPTION
VALUE OF $1,000 PER SHARE, JUNIOR IN LIQUIDATION PREFERENCE TO SERIES F
PREFERRED STOCK:
Series H, 136,950 shares authorized, issued and outstanding ($0 and $119,923 liquidation
preference at September 30 and June 30, 1997, respectively) --- 114,372
---------- ---------
Total liabilities and mandatorily redeemable preferred stock 437,845 433,307
---------- ---------
STOCKHOLDERS' DEFICIT:
Preferred stock, $.01 par value, at redemption value of $1,000 per share:
Series F, 56,279 shares authorized issued and outstanding ($56,279 liquidation preference at
September 30 and June 30, 1997) 49,356 49,356
Series G, 56,279 shares authorized issued and outstanding ($56,279 liquidation preference at
September 30 and June 30, 1997) 49,356 49,356
Class A common stock, $.001 par value, 9,000,000 shares authorized, 3,831,683
unissued shares
reserved, 1,834,235 shares issued and 1,285,762 shares outstanding at September 30 and
June 30, 1997 2 2
Class B common stock, $.001 par value, 1,000,000 shares authorized, 246,510
unissued shares reserved,
no shares issued and outstanding --- ---
Additional paid-in capital, including $5,966 related to warrants 13,497 13,497
Accumulated deficit (294,852) (280,579)
---------- ---------
(182,641) (168,368)
Less: Deferred compensation (250) (250)
Treasury stock (common: 548,473 shares), at cost (21,061) (21,061)
---------- ---------
Total stockholders' deficit (203,952) (189,679)
---------- ---------
$ 233,893 $ 243,628
========== =========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
4
<PAGE>
CONSOLIDATED HYDRO, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997
(Amounts in thousands except shares and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
--------------- ------------
NUMBER NUMBER ADDITIONAL
OF SHARES REPORTED OF SHARES PAR PAID-IN ACCUMULATED
OUTSTANDING AMOUNT OUTSTANDING VALUE CAPITAL DEFICIT
----------- ------ ----------- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE JUNE 30, 1997 112,558 $ 98,712 1,285,762 $ 2 $ 13,497 $ (280,579)
Quarterly dividend of $29.55 per
share, mandatorily redeemable
Series H Preferred - July 1,
1997 to September 14, 1997 (3,370)
Accretion of Series H Preferred (179)
Net loss (10,724)
---------- --------- ---------- ----- --------- -----------
BALANCE SEPTEMBER 30, 1997 112,558 $ 98,712 1,285,762 $ 2 $ 13,497 $ (294,852)
========== ========= ========== ===== ========= ===========
</TABLE>
TABLE CONTINUED FROM ABOVE
--------------------------
TOTAL
DEFERRED TREASURY STOCKHOLDERS'
COMPENSATION STOCK DEFICIT
------------ ----- -------
BALANCE JUNE 30, 1997 $ (250) $ (21,061) $ (189,679)
Quarterly dividend of $29.55 per
share, mandatorily redeemable
Series H Preferred - July 1,
1997 to September 14, 1997 (3,370)
Accretion of Series H Preferred (179)
Net loss (10,724)
------- ---------- -----------
BALANCE SEPTEMBER 30, 1997 $ (250) $ (21,061) $ (203,952)
======= ========== ===========
The accompanying notes are an integral part of the consolidated
financial statements.
5
<PAGE>
CONSOLIDATED HYDRO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1 9 9 7 1 9 9 6
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (10,724) $ (6,491)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Non-cash interest and other charges 4,629 5,045
Reorganization expenses 3,230 ---
Charge for employee and director equity participation programs --- 25
Non-cash adjustment to impairment of long-lived assets (75) ---
Gain on disposal of assets (17) ---
Depreciation and amortization 2,176 2,175
Distributed earnings of affiliates 814 122
(Increase)/decrease in accounts receivable (103) 3,170
Increase in prepaid expenses (305) (524)
Decrease in accounts payable and accrued expenses (641) (1,847)
--------- ---------
Net cash (used in)/provided by operating activities (1,016) 1,675
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of assets 2,006 ---
Cost of development expenditures --- (436)
Capital expenditures (704) (1,133)
Increase in investments and other long-term assets (993) (1,248)
--------- ---------
Net cash provided by/(used in) investing activities 309 (2,817)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings from unrelated parties 7 18
Payments to a related party on long-term borrowings (1,001) (1,161)
Payments to unrelated parties on long-term borrowings (2,271) (1,267)
Cost of reorganization (748) ---
Increase/(decrease) in other long-term liabilities 9 (290)
--------- ---------
Net cash used in financing activities (4,004) (2,700)
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,711) (3,842)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF THE PERIOD 32,502 23,834
--------- ---------
CASH AND CASH EQUIVALENTS, AT END OF THE PERIOD $ 27,791 $ 19,992
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
6
(continued)
<PAGE>
CONSOLIDATED HYDRO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands except share and per share amounts)
(Unaudited)
(continued)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1 9 9 7 1 9 9 6
------- -------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE YEAR FOR:
Interest paid to a related party $ 819 $ 1,736
========== =========
Interest paid to unrelated parties $ 1,237 $ 1,238
========== =========
Income taxes, net $ 379 $ 132
========== =========
</TABLE>
FINANCING:
Series H mandatorily redeemable preferred stock increased $179 and $214 for
the three months ended September 30, 1997 and 1996, respectively, as a
result of the accretion of the difference between the fair market value at
issuance and the redemption value.
Series H mandatorily redeemable preferred stock increased $3,370 and $3,544
for the three months ended September 30, 1997 and 1996, respectively, as a
result of declared dividends which increased the liquidation preference of
the series H preferred stock.
Long-term debt and obligations under capital leases increased by $10,189
and $9,069 for the three months ended September 30, 1997 and 1996,
respectively, as a result of non-cash interest.
In connection with the disposition of certain assets by the Company,
long-term debt was reduced by approximately $2.0 million.
The accompanying notes are an integral part of the consolidated
financial statements.
7
<PAGE>
CONSOLIDATED HYDRO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except per share amounts or
otherwise noted)
(Unaudited)
NOTE 1 - ORGANIZATION
Consolidated Hydro, Inc., now known as CHI Energy, Inc. ("CHI", and
together with its consolidated subsidiaries, the "Company") has, since its
establishment in 1985, been engaged principally in the development, operation
and management of hydroelectric power plants. As of September 30, 1997 and 1996,
it had ownership interests in, leased and/or operated projects with a total
operating capacity of 336 and 344 megawatts ("MW"), respectively. Commencing in
November 1995, the Company began to diversify its business activities to include
the development, ownership and operation of industrial infrastructure
facilities. Currently, all of the Company's revenue is derived from the
ownership and operation of hydroelectric facilities.
On September 15, 1997, CHI commenced a case under chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court") and filed the plan of reorganization (the
"Plan of Reorganization") (see Note 6) and the disclosure statement dated August
8, 1997 (the "Disclosure Statement"). A hearing before the Bankruptcy Court to
consider confirmation of the Plan of Reorganization was held on October 23,
1997, at which the Bankruptcy Court confirmed the Plan of Reorganization. The
Plan of Reorganization became effective on November 7, 1997 (the "Effective
Date").
NOTE 2 - BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such rules and
regulations, although the Company believes that the disclosures herein are
adequate to make the information presented not misleading.
The results of operations for the interim periods shown in this report are
not necessarily indicative of the results to be expected for the fiscal year. In
the opinion of the Company's management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly its financial position as of
September 30, 1997 and June 30, 1997 and the results of its operations and
changes in its financial position for the three months ended September 30, 1997
and 1996. These financial statements should be read in conjunction with the June
30, 1997 Audited Consolidated Financial Statements ("June 1997 Financials") and
Notes thereto.
Certain amounts have been reclassified in fiscal 1997 to conform with
fiscal 1998 presentation.
NOTE 3 - SALE OF CONSOLIDATED HYDRO MAINE, INC.
On December 23, 1996, the Company through its wholly owned subsidiary, CHI
Universal, Inc., a Delaware corporation ("CHI Universal"), sold Consolidated
Hydro Maine, Inc., a Delaware corporation ("CHI Maine"), to Ridgewood Maine
Hydro Partners, L.P., a Delaware limited partnership (the "Partnership"). CHI
Maine owned and operated 15 hydroelectric projects located in the State of Maine
with an aggregate capacity of 11 MW (the "Projects"). The sale was made pursuant
to an Agreement of Merger dated as of July 1, 1996 (the "Merger Agreement"), by
and among CHI Maine, CHI Universal, Ridgewood Maine Hydro Corporation and the
Partnership.
On the Closing Date (as defined in the Merger Agreement), all of the issued
and outstanding capital stock of CHI Maine was sold to the Partnership for cash.
After final adjustments, the total sale price aggregated approximately $12.9
million and the Partnership assumed a long-term lease obligation of
approximately $1.2 million related to one of the Projects. In fiscal 1997, the
carrying value was adjusted upward by $0.7 million as a result of adjustments to
the final sales price of the assets.
8
<PAGE>
NOTE 3 - SALE OF CONSOLIDATED HYDRO MAINE, INC. (CONTINUED)
The following unaudited pro forma financial information for the three
months ended September 30, 1996 has been prepared assuming the disposition of
CHI Maine occurred at the beginning of the period.
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended September 30,
1997 1996
---- ----
(Actual) (Pro forma)
<S> <C> <C>
Operating Revenues $ 8,422 $ 10,111
========= ==========
Net loss $ (10,724) $ (6,648)
========= ==========
Net loss per common share $ (13.05) $ (10.00)
========= ==========
Weighted average number of common shares 1,285,762 1,285,762
========= ==========
</TABLE>
NOTE 4 - DECOMMISSIONING OF CONVENTIONAL HYDROELECTRIC ASSETS
On September 9, 1997, the Company through its wholly owned subsidiary,
Joseph Hydro Company, Inc., a Delaware corporation ("Joseph"), terminated the
Power Purchase Agreement ("PPA") with PacifiCorp, the purchasing utility,
relating to three of its projects located in Oregon, aggregating 7.01 MW of
capacity (the "Joseph Projects"). Joseph received a cash payment of $2,815,
pursuant to a termination agreement between Joseph and PacifiCorp, to terminate
production and delivery of power from the Joseph Projects, surrender the PPA and
remove all facilities associated with the Joseph Projects in accordance with
certain terms and conditions. After payment of certain fees, transaction and
removal costs totaling approximately $840, the Company applied the remaining,
approximately $1,975, as a pre-payment on the General Electric Capital
Corporation B Term Loan (the "GECC Loan") as the assets of the Joseph Projects
secure the GECC Loan. During the three months ended September 30, 1997, an
adjustment to the impairment charge of $75 was recorded (see Note 5). The
Company expects to substantially complete the removal of all facilities of the
Joseph Projects by the end of calendar 1997.
NOTE 5 - ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121
The Company implemented Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of ("SFAS 121") in the second quarter of fiscal 1996. This
statement establishes accounting standards for determining impairment of
long-lived assets and long-lived assets to be disposed of. The Company
periodically assesses the realizability of its long-lived assets and evaluates
such assets for impairment whenever events or changes in circumstances indicate
that the carrying amount of such assets (or group of assets) may not be
recoverable. For assets in use or under development, impairment is determined to
exist if the estimated future cash flow associated with the asset, undiscounted
and without interest charges, is less than the carrying amount of the asset.
When the estimated future cash flow indicates that the carrying amount of the
asset will not be recovered, the asset is written down to its fair value.
In fiscal 1996, in light of the Company's planned sale of certain of its
conventional hydroelectric projects, recent industry trends (including the
continued decline in electricity prices and other factors stemming from the
deregulation of the electric power industry), the timing of the expiration of
the fixed rate period of some of its long-term power sales contracts and other
indications of a decline in the fair value of certain of its conventional
hydroelectric projects, the Company determined, pursuant to SFAS 121, that
certain of these projects (including properties which are not included among
those to be sold) were impaired pursuant to the criteria established under SFAS
121 (see Note 5 to the June 1997 Financials).
9
<PAGE>
NOTE 5 - ADOPTION OF SFAS 121 (CONTINUED)
The carrying value of the Joseph Projects has been adjusted upward by $75
for the three months ended September 30, 1997 to reflect adjustments to the
final cash payment for the decommissioning of the assets. This adjustment has
been included in Adjustment to impairment of long-lived assets on the Statement
of Operations.
NOTE 6 - PLAN OF REORGANIZATION
On August 8, 1997, pursuant to the Disclosure Statement, CHI commenced the
solicitation of votes from holders of CHI's outstanding 12% Senior Discount
Notes due 2003 (the "Senior Discount Notes") and existing preferred stock for
the acceptance or rejection of the Plan of Reorganization. This solicitation was
conducted prior to the filing by CHI of a case under chapter 11 of the
Bankruptcy Code so as to significantly shorten the pendency of the case and to
simplify its administration. The solicitation was successfully completed on
September 9, 1997. On September 15, 1997, CHI commenced a case under chapter 11
of the Bankruptcy Code in the Bankruptcy Court and filed the Plan of
Reorganization and the Disclosure Statement. None of CHI's subsidiaries
commenced a case under the Bankruptcy Code. Pursuant to an order of the
Bankruptcy Court signed on September 15, 1997, a hearing before the Bankruptcy
Court to consider confirmation of the Plan of Reorganization was held on October
23, 1997. The Bankruptcy Court entered an order confirming the Plan of
Reorganization on October 23, 1997 and the Plan of Reorganization became
effective on the November 7, 1997 Effective Date.
Through the implementation of the Plan of Reorganization on and after the
Effective Date, CHI's most significant financial obligations were restructured
as follows: $202 million in face amount of the Senior Discount Notes were
converted into, among other things, $15 million in cash ($10 million of which
was paid on the Effective Date with the balance due by March 31, 1998) and all
of the issued and outstanding shares of CHI's new common stock, consisting of
shares of Class A Common Stock and shares of Class B Common Stock (the "New
Common Stock"), subject to dilution from the New Warrants and the Management
Options (each as defined below). CHI's existing preferred stock was exchanged
for warrants to purchase up to 12.5% of the New Common Stock (the "New
Warrants"), subject to dilution from the Management Options; and CHI's old
common stock was canceled. CHI's senior management received options to purchase
up to an aggregate of 7.5% of the New Class A Common Stock (the "Management
Options"), subject to dilution from the New Warrants. As a result of the
restructuring, as of the Effective Date, CHI has no significant corporate debt
obligations, although a new working capital facility is anticipated to be
entered into soon thereafter.
As of the Effective Date, CHI adopted the Amended By-laws and a Restated
Certificate of Incorporation. Pursuant to CHI's Restated Certificate of
Incorporation, as of the Effective Date, CHI's name was changed from
Consolidated Hydro, Inc. to CHI Energy, Inc. Pursuant to the Plan of
Reorganization, CHI's fiscal year-end was changed from June 30 to December 31.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Consolidated Hydro, Inc., now known as CHI Energy, Inc. ("CHI", and
together with its consolidated subsidiaries the "Company") is principally
engaged in the development, operation and management of hydroelectric power
plants. The Company's operating hydroelectric projects are located in 15 states
and one Canadian province. In November 1995, the Company established a
subsidiary, CHI Power, Inc., for the purpose of developing, acquiring, operating
and managing industrial energy facilities and related industrial assets.
The Company's existing U.S. projects are clustered in four regions: the
Northeast, Southeast, Northwest and West, with a concentration in the Northeast.
CHI has developed what it believes to be an efficient "hub" system of project
management designed to maximize the efficiency of each facility's operations.
The economies of scale created by this system include reduced costs related to
centralized administration, operations, maintenance, engineering, insurance,
finance and environmental and regulatory compliance. The hub system and the
Company's operating expertise have enabled the Company to successfully integrate
acquisitions within its current portfolio and increase the efficiency and
productivity of its projects.
The Company has expanded primarily by acquiring existing hydroelectric
facilities in the United States. On September 30, 1997, the Company had a 100%
ownership or long-term lease interest in 51 projects (138 megawatts), a partial
ownership interest in 11 projects (82 megawatts), and operations and maintenance
("O&M") contracts with 24 projects (116 megawatts).
CHI sells substantially all of the electric energy and capacity from its
U.S. projects to public utility companies pursuant to take and pay power
purchase agreements. These contracts vary in their terms, but typically provide
scheduled rates throughout the life of the contracts, which are generally for a
term of 15 to 40 years from inception.
The Company continues to seek opportunities to provide energy-related
products and services to industrial and utility customers in an effort to
respond to changing market conditions. Such opportunities, if available, would
permit the Company to move away from relying exclusively on hydropower ownership
and operation in a business climate driven largely by legislation and regulation
and the structural industry trends described below in which the Company
currently believes that acquisition and development opportunities are
increasingly limited, particularly with regard to hydroelectric facilities.
Currently, all of the Company's revenue is derived from the ownership and
operation of hydroelectric facilities. See "-- Liquidity and Capital Resources."
Power Generation Revenue
The Company's revenues are derived principally from selling electrical
energy and capacity to utilities under long-term power purchase agreements which
require the contracting utilities to purchase energy generated by the Company.
The Company's present power purchase agreements have remaining terms ranging
from approximately 90 days to 30 years. Fluctuations in revenues and related
cash flows are generally attributable to increasing megawatts in operation,
coupled with variations in water flow and the effect of escalating and declining
contract rates in the Company's power purchase agreements.
Management Fees and Operations & Maintenance Revenues
O&M contracts, from which management fees and operations and maintenance
revenues are derived, generally enable the Company to maximize the use of its
available resources and to generate additional income.
11
<PAGE>
Equity Income In Partnership Interests and Other Partnership Income
In accordance with generally accepted accounting principles, certain of the
Company's partnership interests are accounted for under the equity and the cost
methods of accounting. Fluctuations in equity income and other partnership
income are generally attributable to variations in results of operations and
timing of cash distributions of certain partnerships.
Operating Expenses
Operating expenses consist primarily of project-related costs such as
labor, repairs and maintenance, supplies, insurance and real estate taxes.
Operating expenses include direct expenses related to the production of power
generation revenue as well as direct costs associated with O&M contracts which
are rebillable to applicable third party owners directly or not rebillable if
they are covered through an established management fee.
Lease Expense
Lease expense includes operating leases associated with some of the
hydroelectric projects as well as leases for the corporate and regional
administrative offices. Certain leases provide for payments that are based upon
power sales revenue or cash flow for specific projects. Hence, varying project
revenues will impact overall lease expense, year-to-year.
12
<PAGE>
CERTAIN KEY OPERATING RESULTS AND TRENDS
The information provided in the tables below is included to provide an
overview of certain key operating results and trends which, when read in
conjunction with the narrative discussion that follows, is intended to provide
an enhanced understanding of the Company's results of operations. These tables
include information regarding the Company's ownership by region of projects as
well as information on regional precipitation. As presented, the Company's
project portfolio is concentrated in the Northeastern United States, a region
characterized by relatively consistent long-term water flow and power purchase
contract rates which are higher than in most other regions of the country.
This information should be read in conjunction with the June 30, 1997
Audited Consolidated Financial Statements and Notes thereto.
Power Producing Facilities
<TABLE>
<CAPTION>
AS OF AS OF AS OF
SEPTEMBER 30, 1997 JUNE 30, 1997 SEPTEMBER 30, 1996
------------------ ------------- ------------------
MWS #PROJECTS MWS #PROJECTS MWS #PROJECTS
--- --------- --- --------- --- ---------
<S> <C> <C> <C> <C> <C> <C>
Northeast:
100% Ownership (1) 90.88 29 90.88(4) 29(4) 102.20 44
Partial Ownership (2) 52.37 8 52.37 8 52.37 8
O&M Contracts (3) 92.16 19 92.16(4) 19(4) 80.84 4
--------- ---- --------- ---- --------- ----
Total 235.41 56 235.41 56 235.41 56
====== === ====== === ====== ===
Southeast:
100% Ownership (1) 27.42 13 27.42 13 27.42 13
Partial Ownership (2) -- -- -- -- -- --
O&M Contracts (3) -- -- -- -- -- --
--------- ---- --------- ---- --------- ----
Total 27.42 13 27.42 13 27.42 13
====== === ====== === ====== ===
West:
100% Ownership (1) 5.38(6) 3(6) 5.48 4 1.35 1
Partial Ownership (2) 4.20 1 4.20 1 8.33 4
O&M Contracts (3) 19.08 4 19.08 4 19.08 4
--------- ---- --------- ---- --------- ----
Total 28.66 8 28.76 9 28.76 9
====== === ====== === ====== ===
Northwest:
100% Ownership (1) 14.71(5) 6(5) 21.72 9 21.72 9
Partial Ownership (2) 24.96 2 24.96 2 24.96 2
O&M Contracts (3) 4.34 1 4.34 1 6.09 2
--------- ---- --------- ---- --------- ----
Total 44.01 9 51.02 12 52.77 13
====== === ====== === ====== ===
Total:
100% Ownership (1) 138.39(5) 51(5) (6) 145.50(4) 55(4) 152.69 67
(6)
Partial Ownership (2) 81.53 11 81.53 11 85.66 14
O&M Contracts (3) 115.58 24 115.58(4) 24(4) 106.01 10
----------- ---- ----------- ---- ----------- ----
Total 335.50 86 342.61 90 344.36 91
====== === ====== === ====== ===
</TABLE>
- ------------
(1) Defined as projects in which the Company has 100% of the economic interest.
(2) Defined as projects in which the Company's economic interest is less than
100%.
(3) Defined as projects in which the Company is an operator pursuant to O&M
contracts with the project's owner or owners. The Company does not have any
ownership interest in such projects.
(4) Reflects the sale of 15 projects (11.32 megawatts) on December 23, 1996
and the addition of those same projects as O&M contracts.
(5) Reflects the decommissioning of 3 projects (7.01 megawatts) on September 9,
1997. (6) Reflects the sale of one project (0.10 megawatts) on
July 17, 1997.
13
<PAGE>
Selected Operating Information:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
1997 1996
------------ -----------
<S> <C> <C>
Power generation revenues (thousands) (1) $ 6,422 $ 8,855
Kilowatt hours produced (thousands)(1) 95,852 125,197
Average rate per kilowatt hour (1) 6.7(cent) 7.1(cent)(2)
</TABLE>
- ---------
(1) Limited to projects included in consolidated revenues.
(2) Excluding the fiscal 1997 results of the CHI Maine projects, the average
rate per kilowatt hour was 6.9(cent)for the three months ended
September 30, 1996.
Precipitation, Water Flow and Seasonality
The amount of hydroelectric energy generated at any particular facility
depends upon the quantity of water flow at the site of the facility. Dry periods
tend to reduce water flow at particular sites below historical averages,
especially if the facility has low storage capacity. Excessive water flow may
result from prolonged periods of higher than normal precipitation, or sudden
melting of snow packs, possibly causing flooding of facilities and/or a
reduction of generation until water flow return to normal.
Water flow is generally consistent with precipitation. However, snow and
other forms of frozen precipitation will not necessarily increase water flow in
the same period of such precipitation if temperatures remain at or below
freezing. "Average", as it relates to water flow, refers to the actual long-term
average of historical water flow at the Company's facilities for any given year.
Typically, these averages are based upon hydrologic studies done by qualified
engineers for periods of 20 to 50 years or more, depending on the flow data
available with respect to a particular site. Over an extended period (e.g., 10
to 15 years) water flow would be expected to be average, whereas for shorter
periods (e.g., three months to three years) variation from average is likely.
Each of the regions in which the Company operates has distinctive precipitation
and water flow characteristics, including the degree of deviation from average.
Geographic diversity helps to minimize short-term variations.
Water Flow by Region (1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
1997 1996
---------------- -----------------
<S> <C> <C>
Northeast Below Average Above Average
Southeast Below Average Below Average
West Below Average Below Average
Northwest Average Above Average
</TABLE>
- ---------
(1) These determinations were made based upon water flow in areas where the
Company's projects are located and may not be applicable to the entire
region.
Production of energy by the Company is typically greatest in its third and
fourth fiscal quarters (January through June), when water flow is at its highest
at most of the Company's projects, and lowest in the first fiscal quarter (July
through September). The amount of water flow in any given period will have a
direct effect on the Company's production, revenues and cash flow.
The following tables, which show revenues (in thousands) from power sales
and kilowatt hour production by fiscal quarter, respectively, highlight the
seasonality of the Company's revenue stream. These tables should be reviewed in
conjunction with the water flow information included above.
Power Generation Revenues (1)
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997
----------------- ---------------------
$ % $ %
- - - -
<S> <C> <C> <C> <C>
First Fiscal Quarter $ 6,422 100.0 $ 8,855 17.5
Second Fiscal Quarter 13,271 26.2
Third Fiscal Quarter 15,078 29.8
Fourth Fiscal Quarter 13,461 26.5
---------- -------
Total $ 50,665(2) 100.0
========== =======
</TABLE>
- -----------------
(1) Limited to projects included in consolidated revenues.
(2) Includes business interruption revenue of $604 representing claims for lost
generation recoverable from an insurance company for the fiscal year ended
June 30, 1997.
14
<PAGE>
Kilowatt Hours Produced (1)
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997
----------------- ---------------------
KWH % KWH %
--- - --- -
<S> <C> <C> <C> <C>
First Fiscal Quarter 95,852 100.0 125,197 18.9
Second Fiscal Quarter 166,323 25.0
Third Fiscal Quarter 193,576 29.2
Fourth Fiscal Quarter 178,824 26.9
----------- ------
Total 663,920(2) 100.0
=========== ======
</TABLE>
- -------------
(1) Limited to projects included in consolidated revenues.
(2) Includes the production equivalent of 9,412 kWh of the business
interruption revenue recoverable as a result of insurance claims for the
fiscal year ended June 30, 1997.
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1996
Operating Revenues
Power Generation Revenue. Power generation revenue decreased by $2.4
million (27.3%), from $8.8 million to $6.4 million for the three months ended
September 30, 1996 and 1997, respectively. Excluding the fiscal 1996 results of
CHI Maine, sold on December 23, 1996, power generation revenue decreased by $1.7
million (21.0%), from $8.1 million to $6.4 million for the three months ended
September 30, 1996 and 1997, respectively.
The Northeast region experienced decreased revenues of $1.1 million, due to
below average water flow and precipitation for the three months ended September
30, 1997 as compared to above average water flow and precipitation for the three
months ended September 30, 1996.
The Southeast region experienced decreased revenues of $0.3 million, due to
decreased water flow and precipitation for the three months ended September 30,
1997 as compared to the three months ended September 30, 1996.
The West and Northwest regions combined experienced decreased revenues of
$0.3 million, primarily as a result of average water flow and precipitation in
the Northwest region, an area which contributes significantly to total revenues
of the combined regions, for the three months ended September 30, 1997 as
compared to above average water flow and precipitation for the three months
ended September 30, 1996.
The Company as a whole experienced decreased revenue per kilowatt hour of
0.4(cent) (5.6%), from 7.1(cent) to 6.7(cent) for the three months ended
September 30, 1996 and 1997, respectively. Excluding in the fiscal 1997 results
of CHI Maine revenue per kilowatt hour decreased by 0.2(cent) (2.9%) from
6.9(cent) to 6.7(cent) for the three months ended September 30, 1996 and 1997,
respectively, primarily as a result of variations in the production mix and
contract rates among the various projects.
Management Fees and Operation & Maintenance Revenues. Management fees and
O&M contract revenue increased by $0.4 million (26.7%), from $1.5 million to
$1.9 million for the three months ended September 30, 1996 and 1997,
respectively. Excluding the addition of the CHI Maine O&M contract, management
fees and O&M contract revenue increased by $0.1 million (6.7%), from $1.5
million to $1.6 million for the three months ended September 30, 1996 and 1997,
respectively.
Costs and Expenses
Operating Expenses. Operating expenses decreased $0.3 million (6.1%), from
$4.9 million to $4.6 million for the three months ended September 30, 1996 and
1997, respectively. Excluding the fiscal 1997 results of the CHI Maine projects
and the fiscal 1998 addition of the CHI Maine O&M contract, operating expenses
decreased by $0.1 million (2.2%) from $4.5 million to $4.4 million for the three
months ended September 30, 1996 and 1997, respectively.
15
<PAGE>
General and Administrative Expenses. General and Administrative expenses
remained relatively constant increasing by $0.1 million (7.7%), from $1.3
million to $1.4 million for the three months ended September 30, 1996 and 1997,
respectively.
Reorganization Costs. Reorganization costs amounted to $3.2 million for the
three months ended September 30, 1997. These costs were as a result of $0.7
million paid for corporate reorganization costs, coupled with a $2.5 million
non-cash write-off of loan acquisition costs related to CHI's 12% Senior
Discount Notes due 2003 (the "Senior Discount Notes") which had previously been
capitalized.
Interest Expense
Interest expense decreased by $0.6 million (8.1%), from $7.4 million to
$6.8 million for the three months ended September 30, 1996 and 1997,
respectively. The decrease was primarily due to the cessation of accruing
interest on the Senior Discount Notes as of September 15, 1997, the date the
Company commenced its case under chapter 11 of the Bankruptcy Code (see Note 1
to the Consolidated Financial Statements).
LIQUIDITY AND CAPITAL RESOURCES
As more fully described in the September 30, 1997 Unaudited Consolidated
Financial Statements and related Notes thereto included herein, the cash flow of
the Company was comprised of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
---------------------- ----------------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Cash provided by/(used in):
Operating activities....... $ (1,016) $ 1,675
Investing activities....... 309 (2,817)
Financing activities....... (4,004) (2,700)
------------ ------------
Net decrease in cash........... $ (4,711) $ (3,842)
============ ============
</TABLE>
For the three months ended September 30, 1997, the cash flow used in
operating activities was principally the result of the $10.7 million net loss
for such period, coupled with a $0.3 million dollar increase in prepaid
expenses, a $0.6 million decrease in accounts payable and accrued expenses,
offset by $4.6 million from a charge for non-cash interest, $3.2 million from a
charge for reorganization costs, $2.2 million of depreciation and amortization
and $0.8 million in distributed earnings of affiliates. The cash flow provided
by investing activities was primarily attributable to $2.0 in proceeds from
disposition of assets, offset by a $1.0 million increase in other long term
assets and $0.7 million of investments in upgrading existing conventional
projects during the first quarter of fiscal 1998. The cash flow used in
financing activities was due primarily to repayment of $3.3 million of project
debt and a $0.7 million charge for cost of reorganization.
Cash provided by operating activities decreased by $2.7 million for the
three months ended September 30, 1997 as compared to the three months ended
September 30, 1996. The decrease resulted from a $0.8 million decrease in income
before non-cash charges, coupled with a $1.9 million decrease in other operating
items (receivables, prepaid expenses, accounts payable and accrued expenses).
For the three months ended September 30, 1996, the cash flow provided by
operating activities was principally the result of the $6.5 million net loss for
such period, coupled with a $1.8 million decrease in accounts payable and
accrued expenses and a $0.5 million increase in prepaid expenses, offset by $5.0
million from a charge for non-cash interest, a $3.2 million decrease in accounts
receivable and $2.2 million of depreciation and amortization. The cash flow used
in investing activities was primarily attributable to a $1.1 million investment
in upgrading existing conventional projects during the first quarter of fiscal
1997 and a $1.2 million increase in other long term assets. The cash flow used
in financing activities was due primarily to repayment of $2.4 million of
project debt.
16
<PAGE>
Cash provided by operating activities increased by $2.6 million for the
three months ended September 30, 1996 as compared to the three months ended
September 30, 1995. The increase resulted from a $2.8 million increase in income
before non-cash charges, offset by a $0.2 million decrease in other operating
items (receivables, prepaid expenses, accounts payable and accrued expenses).
Summary of Indebtedness
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OUTSTANDING AS OF
SEPTEMBER 30, 1997 JUNE 30, 1997
--------------------- ---------------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Company debt, excluding non-recourse debt
of subsidiaries $ -- (1) $ 169,813
Non-recourse debt of subsidiaries 97,102 100,268
Current portion of long-term debt (5,771) (7,466)
------------ ------------
Total long-term debt obligations $ 91,331 $ 262,615
============ ============
</TABLE>
- -------------
(1) Approximately $180 million was included as part of Liabilities
subject to compromise on the Consolidated Balance Sheet.
In October 1993, one of the Company's former senior lenders, Den norske
Bank AS ("DnB"), provided the Company with a $20.0 million unsecured working
capital facility (the "DnB Facility"), which originally had an expiration date
of June 30, 1997. Under certain limited circumstances, pursuant to the terms of
the credit agreement, DnB had the right, upon notice to the Company, to limit
any further borrowings under the DnB Facility and require the Company to repay
any and all outstanding indebtedness thereunder within one year from the date
DnB provides such notice to the Company.
On December 3, 1996, the Company amended the DnB Facility (the
"Amendment"), which Amendment, among other things, waived previous defaults by
the Company, changed the final expiration date of the DnB Facility to June 30,
1998, reduced (in steps) the total commitment under the DnB Facility from
approximately $5.9 million at June 30, 1996 to zero at June 30, 1998, limited
the use of the DnB Facility solely to letters of credit and modified certain
financial covenants. Since the execution of the Amendment, the Company has
reduced the outstanding letters of credit under the DnB Facility to
approximately $1.9million in accordance with the terms of the Amendment. Under
the Plan of Reorganization, the DnB Facility is still in effect per the terms of
the Amendment. The Company is currently negotiating a new working capital
facility to replace the DnB Facility, although no assurance can be given that
the Company will be able to secure such new working capital facility. However,
the Company does not expect that it will require a revolving credit facility for
additional working capital during fiscal 1998.
On August 8, 1997, pursuant to a disclosure statement dated August 8, 1997,
CHI commenced the solicitation of votes from holders of the Senior Discount
Notes and existing preferred stock for the acceptance or rejection of the plan
of reorganization (the "Plan of Reorganization"). This solicitation was
conducted prior to the filing by CHI of a case under chapter 11 of the
Bankruptcy Code so as to significantly shorten the pendency of the case and to
simplify its administration. The solicitation was successfully completed on
September 9, 1997, and CHI commenced the chapter 11 case on September 15, 1997
in the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court"). A hearing before the Bankruptcy Court to consider
confirmation of the Plan of Reorganization was held on October 23, 1997 at which
the Bankruptcy Court confirmed the Plan of Reorganization. The Plan of
Reorganization became effective on November 7, 1997 (the "Effective Date"). None
of CHI's subsidiaries has commenced a case under the Bankruptcy Code.
17
<PAGE>
Pursuant to the Plan of Reorganization, on the Effective Date, CHI's Senior
Discount Notes were converted into, among other things, $15 million in cash ($10
million of which was paid on the Effective Date with the balance due by March
31, 1998) and 100% of the outstanding shares of CHI's new common stock (the "New
Common Stock"), subject to dilution from the New Warrants and the Management
Options (each as described below); the holders of CHI's existing preferred stock
exchanged such stock for warrants to purchase up to 12.5% of the New Common
Stock (the "New Warrants"), subject to dilution from the Management Options;
CHI's old common stock was canceled; and CHI's senior management received
options to purchase up to an aggregate of 7.5% of the New Class A Common Stock
(the "Management Options"), subject to dilution from the New Warrants. In
addition, certain members of CHI's senior management team entered into new
employment agreements in connection with the restructuring.
The electric power industry in the United States is undergoing significant
structural changes, evolving from a highly regulated industry dominated by
monopoly utilities to a deregulated, competitive industry providing energy
customers with an increasing degree of choice among sources of electric power
supply. The Company will seek to become a provider of reliable, low-cost energy
and related products and services to industrial and utility customers, by taking
advantage of its existing technical and financial expertise and using its
geographic presence to realize economies of scale in administration, operation,
maintenance and insurance of facilities.
Federal regulators and a number of states, including some in which the
Company operates, have opened access to the transmission grid and are exploring
ways in which to further increase competition in electricity markets, most
notably by instituting customer choice of power suppliers at the retail level.
Although the character and extent of this deregulation are as yet unclear, the
Company expects that these efforts will increase uncertainty with respect to
future power prices and make it more difficult to obtain long-term power
purchase contracts.
Certain statements contained herein that are not related to historical
facts may contain "forward looking" information, as that term is defined in the
Private Securities Litigation Reform Act of 1995. Such statements are based on
the Company's current beliefs as to the outcome and timing of future events, and
actual results may differ materially from those projected or implied in the
forward looking statements. Further, certain forward looking statements are
based upon assumptions of future events which may not prove to be accurate. The
forward looking statements involve risks and uncertainties including, but not
limited to, the uncertainties relating to the Company's existing debt, industry
trends and financing needs and opportunities; risks related to hydroelectric,
industrial energy, pumped storage and other acquisition and development
projects; risks related to the Company's power purchase contracts; risks and
uncertainties related to weather conditions; and other risk factors detailed
herein and in other of the Company's Securities and Exchange Commission filings.
18
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
CHI was a debtor-in-possession in a chapter 11 Reorganization Case (No.
97-1924) in the Bankruptcy Court and has been involved in routine proceedings
attendant thereto. At a hearing held on October 23, 1997, the Bankruptcy Court
confirmed the Plan of Reorganization. The Plan of Reorganization became
effective on November 7, 1997.
In addition, CHI is involved in various legal proceedings which are routine
and incidental to the conduct of its business. CHI's management currently
believes that none of the pending claims against the Company will have a
material adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES
As of the Effective Date, a restated Certificate of Incorporation was filed
with the Delaware Secretary of State which provides that the total number of all
classes of stock which CHI shall have the authority to issue is 30 million
shares, of which 20 million shares are of new common stock, having a par value
of $0.01 per share, and 10 million shares are of new preferred stock having a
par value of $.01 per share. All of CHI's shares of common stock and preferred
stock, which were outstanding prior to the Effective Date, were canceled on the
Effective Date.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 8, 1997, CHI commenced a solicitation of votes with respect to
the Plan of Reorganization. On September 9, 1997, CHI completed such
solicitation. See Note 6 to the Consolidated Financial Statements for a
description of the terms of the Plan of Reorganization. The holders of CHI's
Senior Discount Notes and preferred stock voted to accept the Plan by the
requisite majorities required by the Bankruptcy Code.
At the conclusion of the solicitation period, the Plan of Reorganization
had been accepted by holders of 100% of the Senior Discount Notes and by holders
of greater than 97% of CHI's existing series F preferred stock, greater than 97%
of CHI's existing series G preferred stock and greater than 98% of CHI's
existing series H preferred stock, that were entitled to vote on the Plan of
Reorganization.
ITEM 5. OTHER INFORMATION
NONE
19
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K on November 7, 1997,
reporting an order confirming the Plan of Reorganization (the "Plan") under
chapter 11 of the Bankruptcy Code proposed by the Company as well as the
Effective Date of the Plan as November 7, 1997.
20
<PAGE>
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.
Date: November 14, 1997 CONSOLIDATED HYDRO, INC.
By: /s/ Neil A. Manna
--------------------------------------
Neil A. Manna
Vice President - Finance,
Controller and Treasurer
signing on behalf of the registrant
and as Principal Accounting Officer
21
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
27.1 Financial Data Schedule
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27.1
CONSOLIDATED HYDRO INC.
SEC - 10Q ADDITIONAL FINANCIAL INFORMATION
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 27,791
<SECURITIES> 0
<RECEIVABLES> 6,906
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 36,700
<PP&E> 152,910
<DEPRECIATION> (27,694)
<TOTAL-ASSETS> 233,893
<CURRENT-LIABILITIES> 11,588
<BONDS> 97,102
0
98,712
<COMMON> 2
<OTHER-SE> (302,666)
<TOTAL-LIABILITY-AND-EQUITY> 233,893
<SALES> 0
<TOTAL-REVENUES> 8,422
<CGS> 0
<TOTAL-COSTS> 8,261
<OTHER-EXPENSES> 4,543
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (10,607)
<INCOME-TAX> (117)
<INCOME-CONTINUING> (10,724)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,724)
<EPS-PRIMARY> (13.05)
<EPS-DILUTED> 0
</TABLE>
