<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q / A
(Mark One)
[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 No. 33-7591
---------------------------
Oglethorpe Power Corporation
(An Electric Membership Corporation)
(Exact name of registrant as specified in its charter)
Georgia 58-1211925
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Post Office Box 1349
2100 East Exchange Place
Tucker, Georgia 30085-1349
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 270-7600
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 ____
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. The Registrant is a
membership corporation and has no authorized or outstanding equity securities.
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<PAGE>
OGLETHORPE POWER CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q / A
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
Page No.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of September 30, 1997 (Unaudited)
and December 31, 1996 3
Condensed Statements of Revenues and Expenses (Unaudited)
for the Three Months and Nine Months Ended
September 30, 1997 and 1996 5
Condensed Statements of Cash Flows (Unaudited)
for the Nine Months Ended September 30, 1997 and 1996 6
Notes to the Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
2
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Oglethorpe Power Corporation
Condensed Balance Sheets
September 30, 1997 and December 31, 1996
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C> <C>
1997 1996
Assets (Unaudited)
------------ ------------
Electric plant, at original cost:
In service......................................................................... $ 4,906,315 $ 5,742,597
Less: Accumulated provision for depreciation....................................... (1,382,063) (1,488,272)
------------ ------------
3,524,252 4,254,325
Nuclear fuel, at amortized cost.................................................... 86,980 86,722
Plant acquisition adjustments, at amortized cost................................... -- 4,153
------------ ------------
Construction work in progress...................................................... 13,059 31,181
------------ ------------
3,624,291 4,376,381
------------ ------------
Investments and funds:
Bond, reserve and construction funds, at market.................................... 32,328 53,955
Decommissioning fund, at market.................................................... 101,821 86,269
Investment in associated organizations, at cost.................................... 15,407 15,379
Deposit on Rocky Mountain transactions, at cost.................................... 51,325 41,685
------------ ------------
200,881 197,288
------------ ------------
Current assets:
Cash and temporary cash investments, at cost....................................... 59,981 132,783
Other short-term investments, at market............................................ 96,145 91,499
Receivables........................................................................ 117,580 113,289
Inventories, at average cost....................................................... 70,872 89,825
Prepayments and other current assets............................................... 22,371 14,625
------------ ------------
366,949 442,021
------------ ------------
Deferred charges:
Premium and loss on reacquired debt, being amortized............................... 189,692 201,007
Deferred amortization of Scherer leasehold......................................... 94,832 90,717
Deferred debt expense, being amortized............................................. 13,641 21,703
Other.............................................................................. 36,994 33,058
------------ ------------
335,159 346,485
------------ ------------
$ 4,527,280 $ 5,362,175
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these condensed statements.
3
<PAGE>
Oglethorpe Power Corporation
Condensed Balance Sheets
September 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C> <C>
1997 1996
Equity and Liabilities (Unaudited)
------------ ------------
Capitalization:
Patronage capital and membership fees (including unrealized
loss of ($515) at September 30, 1997 and ($844) at December 31, 1996 on
available-for-sale securities)................................................... $ 321,771 $ 356,229
Long-term debt..................................................................... 3,171,511 4,052,470
Obligations under capital leases................................................... 289,825 293,682
Obligation under Rocky Mountain transactions....................................... 51,325 41,685
------------ ------------
3,834,432 4,744,066
------------ ------------
Current liabilities:
Long-term debt and capital leases due within one year.............................. 87,847 159,622
Notes payable...................................................................... 92,220 --
Accounts payable................................................................... 53,641 42,891
Accrued interest................................................................... 13,560 15,931
Accrued and withheld taxes......................................................... 19,800 4,940
Other current liabilities.......................................................... 4,891 9,540
------------ ------------
271,959 232,924
------------ ------------
Deferred credits and other liabilities:
Gain on sale of plant, being amortized............................................. 61,375 58,527
Net benefit of sale of income tax benefits, being amortized........................ 36,042 42,049
Net benefit of Rocky Mountain transactions, being amortized........................ 93,171 70,701
Accumulated deferred income taxes.................................................. 60,325 61,985
Decommissioning reserve............................................................ 141,399 124,468
Other.............................................................................. 28,577 27,455
------------ ------------
420,889 385,185
------------ ------------
$ 4,527,280 $ 5,362,175
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these condensed statements.
4
<PAGE>
Oglethorpe Power Corporation
Condensed Statements of Revenues and Expenses (Unaudited)
For the Three and Nine Months ended September 30, 1997 and 1996
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<TABLE>
<CAPTION>
(dollars in thousands)
Three Months Nine Months
---------------------- ----------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
---------- ---------- ---------- ----------
Operating revenues:
Sales to Members................................................ $ 280,503 $ 268,939 $ 767,714 $ 771,378
Sales to non-Members............................................ 6,076 17,709 33,226 61,187
---------- ---------- ---------- ----------
Total operating revenues......................................... 286,579 286,648 800,940 832,565
---------- ---------- ---------- ----------
Operating expenses:
Fuel............................................................ 61,206 54,807 152,799 158,465
Production...................................................... 34,216 31,296 103,760 93,293
Purchased power................................................. 95,038 67,217 215,350 189,443
Power delivery.................................................. (10) 4,110 3,969 11,974
Depreciation and amortization................................... 30,154 36,684 96,534 109,774
Taxes other than income taxes................................... 5,593 7,035 18,808 21,761
Other operating expenses........................................ 3,629 10,490 13,728 26,764
---------- ---------- ---------- ----------
Total operating expenses......................................... 229,826 211,639 604,948 611,474
---------- ---------- ---------- ----------
Operating margin................................................. 56,753 75,009 195,992 221,091
---------- ---------- ---------- ----------
Other income (expense):
Interest income................................................. 7,247 8,698 21,002 17,438
Amortization of net benefit of sale of income tax benefits...... 2,799 2,008 8,396 6,023
Amortization of deferred margins................................ -- 6,966 -- 24,120
Allowance for equity funds used during construction............. 32 47 81 137
Other........................................................... 457 761 4,025 1,782
---------- ---------- ---------- ----------
Total other income............................................... 10,535 18,480 33,504 49,500
---------- ---------- ---------- ----------
Interest charges:
Interest on long-term debt and other obligations................ 68,488 81,488 216,294 245,848
Allowance for debt funds used during construction............... (328) (507) (873) (1,485)
---------- ---------- ---------- ----------
Net interest charges............................................. 68,160 80,981 215,421 244,363
---------- ---------- ---------- ----------
Net margin....................................................... ($ 872) $ 12,508 $ 14,075 $ 26,228
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed statements.
5
<PAGE>
Oglethorpe Power Corporation
Condensed Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net margin........................................................................... $ 14,075 $ 26,228
----------- -----------
Adjustments to reconcile net margin to net cash provided by operating activities:
Depreciation and amortization...................................................... 139,190 132,565
Net benefit of Rocky Mountain transactions......................................... 22,470 --
Deferred gain from Corporate Restructuring......................................... 4,670 --
Allowance for equity funds used during construction................................ (81) (137)
Amortization of deferred margins................................................... -- (24,120)
Amortization of net benefit of sale of income tax benefits......................... (8,396) (6,023)
Other.............................................................................. 1,445 3,025
Change in net current assets, excluding long-term debt due within one year, notes
payable and deferred margins to be refunded within one year:
Receivables........................................................................ 533 (8,013)
Inventories........................................................................ 9,972 (9,8580
Prepayments and other current assets............................................... (7,816) 37
Accounts payable................................................................... 11,335 (4,897)
Accrued interest................................................................... (2,251) (70,290)
Accrued and withheld taxes......................................................... 14,860 20,701
Other current liabilities.......................................................... (634) (6,299)
----------- -----------
Total adjustments................................................................ 185,297 26,691
----------- -----------
Net cash provided by operating activities.......................................... 199,372 52,919
----------- -----------
Cash flows from investing activities:
Property additions................................................................. (49,874) (69,211)
Net proceeds from bond, reserve and construction funds............................. 21,616 3,060
(Decrease) Increase in investment in associated organizations...................... (28) 429
Increase in other short-term investments........................................... (4,306) (14,629)
Increase in decommissioning fund................................................... (7,709) (4,970)
Net cash received in Corporate Restructuring....................................... 24,539 --
----------- -----------
Net cash used in investing activities............................................ (15,762) (85,321)
----------- -----------
Cash flows from financing activities:
Debt proceeds, net................................................................. 188,030 3,092
Debt payments...................................................................... (394,837) (75,809)
Retirement of patronage capital.................................................... (48,863) --
Other.............................................................................. (742) (168)
----------- -----------
Net cash used in financing activities............................................ (256,412) (72,885)
----------- -----------
Net decrease in cash and temporary cash investments.................................. (72,802) (105,287)
Cash and temporary cash investments at beginning of period........................... 132,783 201,151
----------- -----------
Cash and temporary cash investments at end of period................................. $ 59,981 $ 95,864
----------- -----------
----------- -----------
Cash paid for:
Interest (net of amounts capitalized).............................................. $ 202,400 $ 301,675
Income taxes....................................................................... $ 830 $ --
</TABLE>
The accompanying notes are an integral part of these condensed statements.
6
<PAGE>
Oglethorpe Power Corporation
Notes to Condensed Financial Statements
September 30, 1997 and 1996
(A) The condensed financial statements included herein have been prepared by
Oglethorpe Power Corporation (Oglethorpe), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission (SEC). In
the opinion of management, the information furnished herein reflects all
adjustments (which include only normal recurring adjustments) necessary to
present fairly, in all material respects, the results for the periods ended
September 30, 1997 and 1996. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such SEC rules and regulations, although Oglethorpe believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed financial statements be
read in conjunction with the financial statements and the notes thereto
included in Oglethorpe's latest Annual Report on Form 10-K, as filed with
the SEC. Certain amounts for 1996 have been reclassified to conform with
the current period presentation.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
Corporate Restructuring
As reported in its Annual Report on Form 10-K for the fiscal year ended December
31, 1996, Oglethorpe and its 39 retail electric distribution cooperative members
(the Members) completed a corporate restructuring (the Corporate Restructuring)
on March 11, 1997, in which Oglethorpe was divided into three specialized
operating companies to respond to increasing competition and regulatory changes
in the electric industry. As part of the Corporate Restructuring, Oglethorpe's
transmission business was sold to and is now owned and operated by Georgia
Transmission Corporation (An Electric Membership Corporation) (GTC), a recently
formed Georgia electric membership corporation. Oglethorpe's system operations
business was sold to and is now owned and operated by Georgia System Operations
Corporation (GSOC), a recently formed Georgia nonprofit corporation. Oglethorpe
continues to operate its power supply business. Oglethorpe retained all of its
owned and leased generation assets. Oglethorpe also continues to administer its
power purchase contracts and provide marketing support functions to the Members.
Immediately after the Corporate Restructuring, Oglethorpe's corporate name was
changed from "Oglethorpe Power Corporation (An Electric Membership Generation &
Transmission Corporation)" to "Oglethorpe Power Corporation (An Electric
Membership Corporation)".
Power Marketer Arrangements
Oglethorpe utilizes long-term power marketer arrangements to reduce the cost of
power to the Members. Oglethorpe has entered into power marketer agreements
with LG&E Energy Marketing Inc. (LEM) effective January 1, 1997, for
approximately 50% of the load requirements of the Members and with Morgan
Stanley Capital Group Inc. (Morgan Stanley) effective May 1, 1997, with respect
to 50% of the forecasted load requirements of the Members. The LEM agreements
are based on the actual requirements of the Members during the contract term,
whereas the Morgan Stanley agreement represents a fixed supply obligation.
Under these power marketer agreements, Oglethorpe purchases energy at fixed
prices covering a portion of the costs of energy to its Members. LEM and Morgan
Stanley, in turn, have certain rights to market excess energy from the
Oglethorpe system. All of Oglethorpe's existing generating facilities and power
purchase arrangements are available for use by LEM and Morgan Stanley for the
term of the respective agreements. Oglethorpe continues to be responsible for
all the costs of its system resources but receives revenue from LEM and Morgan
Stanley for the use of the resources.
Results of Operations
Corporate Restructuring
As a result of the Corporate Restructuring, the Condensed Statements of Revenues
and Expenses for the nine months ended September 30, 1997 reflect operations as
a combined power supply, transmission and
8
<PAGE>
system operations company through March 31, 1997, and operations solely as a
power supply company thereafter. Although the Corporate Restructuring was
completed on March 11, 1997, pursuant to the restructuring agreement among
Oglethorpe, GTC and GSOC, all transmission-related and systems
operations-related revenues were assigned to Oglethorpe, and all
transmission-related and systems operations-related costs were paid or
reimbursed by Oglethorpe during the period March 11, 1997 through March 31,
1997. Decreases in operating revenues, power delivery expenses, depreciation
and amortization, taxes other than income taxes, operating margin and net
interest charges from 1996 to 1997 are primarily attributable to the
Corporate Restructuring. See Oglethorpe's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 for a pro forma presentation of the
Statement of Revenues and Expenses reflecting the exclusion of the
transmission and system operations businesses, as though the Corporate
Restructuring had occurred at the beginning of 1996, for the year ended
December 31, 1996 (Note 11 of Notes to Financial Statements).
For the Three Months and Nine Months Ended September 30, 1997 and 1996
Oglethorpe's net margin (loss) for the three months and nine months ended
September 30, 1997 was($0.9) million and$14.1 million, respectively, compared to
$12.5 million and $26.2 million for the same periods of 1996. In August 1997,
due to achieving a year-to-date net margin higher than required by its
Indenture, the Oglethorpe Board of Directors adjusted the 1997 budget thereby
lowering the revenue requirement by a total of $4.0 million. Such reduction in
revenues was implemented by reducing the capacity charges for August 1997.
Year-to-date net margin for 1997, after this adjustment, is sufficient to meet
margin requirements. The higher net margin in 1996 resulted primarily from
unbudgeted savings in interest and decommissioning costs and from higher than
expected interest income.
Operating Revenues
Revenues from sales to Members for the three months and nine months ended
September 30, 1997 were 4.3% higher for the three months and 0.5% lower
year-to-date compared to the same periods of 1996. While revenues from Members
have been reduced due to the removal of capacity revenues relating to the
transmission business, this decrease has been offset by an increase in energy
revenues from sales to Members. Such energy revenues were 65.1% higher for the
three months ended September 30, 1997 compared to the same period of 1996 and
33.7%higher for the nine-month period compared to 1996. Megawatt-hour (MWh)
sales to the Members were 11.4% and 2.2% higher in the current three-month and
nine-month periods compared to the same periods of 1996. Consequently,
Oglethorpe's average energy revenue per MWh from sales to Members for the
three-month and nine-month periods were 48.3% and 30.8% higher in 1997 compared
to 1996, respectively. This increase was primarily because the short-term
power marketer arrangements with Duke/Louis Dreyfus (DLD) and Enron Power
Marketing Inc. (EPMI) had allowed Oglethorpe to pass through significant savings
in the first nine months of 1996. During the first nine months of 1996,
Oglethorpe had power marketer arrangements with DLD and EPMI to supply 100% of
the load requirements of the Members. As noted under "General Power Marketer
Arrangements" above, Oglethorpe has entered into power marketer arrangements
with LEM effective January 1, 1997 for approximately 50% of the load
requirements of the Members and with Morgan Stanley effective May 1, 1997 with
respect to 50% of the forecasted load requirements of the Members.
9
<PAGE>
Sales to non-Members were primarily made pursuant to contractual arrangements
with Georgia Power Company (GPC) and from energy sales to other utilities and
power marketers. The following table summarizes the amounts of non-Member
revenues from these sources for the three months and nine months ended September
30, 1997 and 1996:
Three Months Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
------- ------- ------- -------
(dollars in thousands)
GPC- Power supply arrangements $ 283 $ 2,947 $12,847 $10,872
Sales to other utilities 5,021 11,795 14,691 34,595
Sales to power marketers 772 1,150 3,508 8,846
ITS transmission agreements -- 1,817 2,180 6,874
------- ------- ------- -------
Total $ 6,076 $17,709 $33,226 $61,187
------- ------- ------- -------
The revenues from power supply arrangements with GPC were primarily derived from
energy sales arising from dispatch situations whereby GPC caused Plant Wansley
to be operated when Oglethorpe's system did not require all of its contractual
entitlement to the generation. These revenues compensated Oglethorpe for its
costs because, under the operating agreement (before it was recently amended),
Oglethorpe was responsible for its share of fuel costs any time a unit operated.
Such sales to GPC were higher in the first nine months of 1997 compared to the
same periods of 1996. With the commencement of the separate dispatch of Plant
Wansley as of May 1, 1997, this type of sale to GPC has ended.
Sales to other non-Member utilities in 1997 represent sales made directly by
Oglethorpe. Oglethorpe sells for its own account any energy available from the
portion of its resources dedicated to Morgan Stanley that is not scheduled by
Morgan Stanley pursuant to its power marketer arrangement. Such sales during
the first nine months of 1996 were initiated by DLD and EPMI. Where DLD or EPMI
did not have a contractual relationship with the purchaser and Oglethorpe did,
Oglethorpe recorded the sale and credited the revenues to DLD or EPMI in its
monthly billing.
Under the current LEM and Morgan Stanley power marketer arrangements, and
previously, under the DLD and EPMI power marketer arrangements, sales to the
power marketers represented the net energy transmitted on behalf of LEM, Morgan
Stanley, DLD and EPMI off-system on a daily basis from Oglethorpe's total
resources. Such energy was sold to LEM, Morgan Stanley,DLD and EPMI at
Oglethorpe's cost, subject to certain limitations. The volume of sales to power
marketers depends primarily on the power marketers' decisions for servicing
their load requirements.
Another source of non-Member revenues was payments received from GPC for use of
the Integrated Transmission System (ITS) and related transmission interfaces.
GPC compensated Oglethorpe to the extent that Oglethorpe's percentage of
investment in the ITS exceeded its percentage use of the system. In such case,
Oglethorpe was entitled to income as compensation for the use of its investment
by the
10
<PAGE>
other ITS participants. As a result of the Corporate Restructuring, all of
the revenues in this category have accrued to GTC since April 1, 1997.
Operating Expenses
Operating expenses were 8.6% higher in the current quarter and 1.1% lower for
the nine months ended September 30, 1997 compared to the same periods of 1996.
Since April 1, 1997, certain operating expenses have been reduced due to the
elimination of expenses relating to the transmission business assumed by GTC in
connection with the Corporate Restructuring. However, the changes in fuel
expense and the increases in production operations and maintenance costs were
unaffected by the Corporate Restructuring. Fuel costs increased 11.7% in the
third quarter and decreased 3.6% for the nine months ended September 30, 1997
from the same periods of the prior year, respectively. Total megawatt-hours
(MWhs) of generation increased 7.4% in the current quarter and decreased
1.0%year-to-date. For the current quarter, fossil generation was 11.6% higher
compared to the same period of 1996 due to a maintenance outage at Scherer Unit
No. 1 in July 1996 and due to higher utilization of Plant Wansley in 1997. The
higher fossil generation in the third quarter resulted in higher average fuel
costs. For the nine months ended September 30, 1997 the mix of generation was
more nuclear and less fossil generation than in 1996 resulting in lower average
fuel costs. The decrease in fossil generation resulted primarily from a
maintenance outage during February and March 1997 at Plant Scherer Unit No. 1.
Also, the higher nuclear generation during 1997 compared to 1996 was achieved as
a result of having three refueling outages in the first nine months of 1996
compared to two in 1997. Conversely, the increase in production operations and
maintenance costs was partly attributable to the 1997 maintenance outage at
Plant Scherer Unit No. 1. In addition, effective January 1, 1996, the costs of
nuclear refueling outages are deferred and amortized over the 18-month period
following the outage. Such change in accounting resulted in a $12.9 million
deferral of maintenance costs in the first nine months of 1996.
Purchased power cost for the three months and nine months ended September 30,
1997 were 41.4% and 13.7% higher compared to the same periods of 1996,
respectively. A total of 11.6% more MWhs were purchased in the third quarter of
1997 compared to 1996. Year-to-date, 4.9% fewer MWhs were purchased than the
same period of the prior year. Consequently, the average cost of purchased power
per MWh has increased by 26.7% and 19.5%, respectively. As noted under
"Operating Revenues" above, significant energy cost savings were derived in the
first nine months of 1996 from the DLD and EPMI power supply arrangements.
The decrease in other operating expenses for 1997 compared to the same periods
of the prior year was due primarily to transfer of administrative and general
expenses relating to the transmission and system operations businesses in
connection with the Corporate Restructuring.
11
<PAGE>
Other Income
Other income for the three months and nine months ended September 30, 1997
decreased compared to the same periods of 1996 primarily as a result of
Oglethorpe utilizing, as planned, all remaining amounts available under its
deferred margin rate mechanism during 1996. (For a discussion of deferred
margins, see Note 1 of Notes to Financial Statements in Oglethorpe's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996.) Interest
income was higher for the nine months ended September 30,1997 compared to the
same period of 1996 partly due to higher earnings from the decommissioning fund
and partly due to income from the deposits from the Rocky Mountain transactions.
The deposits were made in December 1996 and January 1997.
Financial Condition
Corporate Restructuring
As of March 11, 1997, Oglethorpe sold its transmission business and assets to
GTC. Thereafter, the assets, liabilities and equity of GTC were no longer a
part of Oglethorpe. The purchase price for the transmission business was based
on an appraisal of the fair market value of such business, as determined by an
independent appraiser, and was approximately $709 million. The purchase price
was paid primarily by GTC's assumption of a portion (approximately 16.86%) of
Oglethorpe's long-term secured debt in an amount equal to approximately $686
million. Approximately $541 million of this debt (payable to RUS, Federal
Financing Bank (FFB) and CoBank, ACB (CoBank)) became the sole obligation of
GTC, and Oglethorpe was released from all liability with regard to this
indebtedness. The remaining debt assumed by GTC in connection with the
Corporate Restructuring, approximately $145 million, relates to Oglethorpe's
pollution control revenue bonds (PCBs). While GTC assumed and agreed to pay
this $145 million of debt, Oglethorpe is not legally released from its liability
for this debt. The remainder of the purchase price was paid by GTC from cash
obtained through a borrowing from National Rural Utilities Cooperative Finance
Corporation (CFC) and the assumption of approximately $2 million of other
Oglethorpe liabilities. Oglethorpe also made a special patronage capital
distribution of approximately $49 million to the Members which was used by the
Members to establish equity in and to provide initial working capital to GTC.
On October 1, 1996, Oglethorpe sold to GSOC its system operations assets,
consisting of its system control center and related energy control and revenue
metering systems equipment. The purchase price of these assets totaled
approximately $9.4 million and was funded by GSOC's assumption of Oglethorpe's
obligations under an existing note held by the Rural Utilities Service (RUS), by
delivery of a purchase money note payable to Oglethorpe and by the assumption of
certain other liabilities of Oglethorpe. From October 1, 1996 to March 11,
1997, Oglethorpe was the sole member of GSOC; therefore, the assets sold to GSOC
remained in the consolidated balance sheet of Oglethorpe. The Members and GTC
became members of GSOC on March 11, 1997; and thereafter the assets, liabilities
and equity of GSOC were no longer a part of Oglethorpe.
Most of the remaining comparisons of the balance sheets as of September 30, 1997
and December 31, 1996 are in addition to the effects of the Corporate
Restructuring described above. See Oglethorpe's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 for a pro forma presentation
12
<PAGE>
of the Balance Sheet of the post-restructuring Oglethorpe as of December 31,
1996 (Note 11 of Notes to Financial Statements).
Total assets and total equity plus liabilities as of September 30, 1997 were
$4.5 billion which, after adjustment for the Corporate Restructuring, was $102
million less than the comparable total at December 31, 1996 due to depreciation
of plant and due to the decrease in cash and temporary cash investments.
Assets
Property additions for the nine months ended September 30, 1997 totaled $49.9
million and included additions, replacements and improvements to transmission
and distribution facilities (subsequently sold to GTC) for the first three
months of 1997 and existing generation facilities.
All plant acquisition adjustments were related to transmission plant. As a
result of the Corporate Restructuring discussed above, Oglethorpe no longer has
any plant acquisition adjustments.
The decrease in construction work in progress resulted from the projects sold to
GTC and GSOC in the Corporate Restructuring.
The decrease in the bond, reserve and construction funds was attributable to the
utilization of available excess debt service reserve funds for debt service
payments.
The increase in the decommissioning investment fund and the decommissioning
reserve resulted from earnings of the fund. An amount equal to the earnings of
the fund was accrued as an increase to the decommissioning reserve.
The increases in the deposit on, the obligation under and net benefit of the
Rocky Mountain transactions resulted from the completion of the lease
transactions for the remainder of Oglethorpe's interest in Rocky Mountain in
January 1997. For a discussion of the Rocky Mountain transactions, see Notes 1
and 2 of Notes to Financial Statements in Oglethorpe's Annual Report on Form
10-K for the fiscal year ended December 31, 1996.
The decrease in cash and temporary cash investments was partly due to the
payment of the $49 million special patronage capital distribution made in
connection with the Corporate Restructuring discussed above and partly due to a
prepayment in 1997 of Federal Financing Bank (FFB) debt made from the proceeds
of the December 1996 and January 1997 Rocky Mountain transactions.
Inventories decreased as a result of lower coal inventories at Plants Scherer
and Wansley primarily due to recent problems associated with rail transportation
in the current quarter and due to the seasonal demands of summer. The rail
transportation providers expect operations to return to normal by the beginning
of 1998. Should deliveries of coal be subject to ongoing delay or disruption,
there is a potential for upward price pressure on such coal with a consequent
possibility of increased prices for energy.
13
<PAGE>
Prepayments and other current assets increased due to a $9.9 million increase in
the estimated payment made to GPC for Plant Hatch operations and maintenance
costs for October 1997 compared to the estimate paid for January 1997. The
increase in the estimate paid related to planned refueling outage and uprate
costs at Plant Hatch Unit No. 2.
The change in premium and loss on reacquired debt resulted partly from premiums
paid in connection with FFB debt prepayment and a PCB refunding, excluding the
effect of the portion of these costs assumed by GTC in the Corporate
Restructuring.
The decrease in deferred debt expense resulted partly from unamortized issuance
cost related to the PCB refunding being converted to premium and loss on
reacquired debt and partly from the portion of these costs assumed by GTC in the
Corporate Restructuring.
Equity and Liabilities
The decrease in patronage capital and membership fees is the result of the $49
million special patronage capital distribution made in connection with the
Corporate Restructuring, discussed above.
The decrease in long-term debt due within one year resulted primarily from the
prepayment of FFB debt, discussed above. In addition, the balance reflects the
impact of the Corporate Restructuring.
The $92 million classified as Notes Payable on the Condensed Balance Sheet
relates to commercial paper outstanding which was issued to defease
approximately $92 million in principal amount of Series 1992 PCBs. It is
Oglethorpe's intent to refinance this commercial paper on a long-term basis by
issuing medium term notes or PCBs. However, as no formal financing agreement is
in place for this longer term refinancing, the $92 million has been classified
as a current liability.
Accounts payable increased due to normal variations in the timing of payables
activity.
Accrued and withheld taxes increased as a result of the normal monthly accruals
of property taxes, which are generally paid in the fourth quarter of the year.
Other current liabilities decreased partly due to the year-end accrual for
employee incentive pay
(subsequently paid in March 1997) and partly due to the Corporate Restructuring.
Competition
The electric utility industry in the United States is undergoing fundamental
change and is becoming increasingly competitive. See "BUSINESS OF
OGLETHORPE--Certain Factors Affecting the Utility Industry in General" in
Oglethorpe's Annual Report on Form 10-K for the fiscal year ended December 31,
1996.
Several states are in the process of implementing varying forms of "retail
wheeling" (the transmission of power for a third party directly to a retail
customer) and most others are in various stages of considering retail
competition. Proposed federal legislation could mandate retail wheeling in
every state. No
14
<PAGE>
legislation related to retail wheeling has yet been enacted in Georgia, and,
currently, no bill is pending in the Georgia legislature which would amend
the Georgia Territorial Electric Service Act (Territorial Act) or otherwise
affect the exclusive right of the Members to supply power to their current
service territories. In 1997, the staff of the Georgia Public Service
Commission (GPSC) conducted a series of workshops to solicit views from the
various parties impacted by electric industry restructuring and to discuss
potential resolutions of these issues. The GPSC staff anticipates presenting
a report to the GPSC that will identify electric industry restructuring
issues, potential resolutions and the views of the parties who participated
in the workshops. The GPSC does not have the authority under Georgia law to
order retail wheeling or amend the Territorial Act. Oglethorpe and the
Members participated in the GPSC staff workshops and are actively monitoring
and studying legislative initiatives in Congress and in other states to take
advantage of the experiences of cooperatives and other utilities in other
states to protect their interests in future legislative activities in Georgia.
Under current Georgia law, the Members generally have the exclusive right to
provide retail electric service in their respective territories. Since 1973,
however, Georgia has permitted limited competition among electric utilities
located in Georgia for sales of electricity to certain large commercial or
industrial customers. Pursuant to the Territorial Act, the owner of any new
facility may receive electric service from the power supplier of its choice if
the facility is located outside of municipal limits and has a connected demand
upon initial full operation of 900 kilowatts or more. See "THE MEMBERS--Service
Area and Competition" in Oglethorpe's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996. The Members, with Oglethorpe's support, are
actively engaged in competition with other retail electric suppliers for these
new commercial and industrial loads. While the competition for 900 kilowatt
loads represents only limited competition in Georgia, this competition has given
Oglethorpe and the Members the opportunity to develop resources and strategies
to operate in an increasingly competitive market.
Over the past years, Oglethorpe has taken several steps to prepare for and adapt
to the fundamental changes which have occurred or are likely to occur in the
electric utility industry and to reduce the possibility of incurring stranded
costs. Most importantly, Oglethorpe completed the Corporate Restructuring and
divided itself into generation, transmission and system operations companies in
order to better serve its Members in a deregulated and competitive environment.
See "General--Corporate Restructuring" herein. Since 1992, Oglethorpe also has
pursued an interest cost reduction program. As a result of this program,
Oglethorpe has prepaid $222 million of FFB debt and refinanced $1.1 billion of
PCB debt and $1.2 billion of FFB debt. These steps have reduced Oglethorpe's
interest costs significantly. See "Financial Condition--Refinancing
Transactions" in Oglethorpe's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
Oglethorpe and the Members also amended the Wholesale Power Contracts in
connection with the Corporate Restructuring. The Wholesale Power Contracts
provide that the Members are jointly and severally responsible for all costs
and expenses of all of the generation and purchased power resources of
Oglethorpe existing on March 11, 1997, as well as certain future power
resources. See "BUSINESS OF OGLETHORPE--New Wholesale Power Contracts" in
Oglethorpe's Annual Report on Form 10-K for the fiscal year ended December
31, 1996. Each Wholesale Power Contract specifically provides that the
Member must make payments whether or not power has been delivered and whether
or not a plant has been sold or is otherwise unavailable. The formulary rate
established by Oglethorpe in the rate
15
<PAGE>
schedule to the Wholesale Power Contracts employs a rate methodology under
which all categories of costs are specifically separated as components of a
formula to determine Oglethorpe's revenue requirements. The rate schedule
also allocates to the Members the responsibility for all of Oglethorpe's
fixed costs. Oglethorpe's charges under the Wholesale Power Contracts may be
adjusted by the Board of Directors. With respect to Oglethorpe, the RUS has
retained certain approval rights over the changes to the Wholesale Power
Contracts, including the rate schedule. See "BUSINESS OF OGLETHORPE--Electric
Rates" in Oglethorpe's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996. As a result of these contractual agreements, the Members
ultimately are liable for the existing power resources of Oglethorpe.
Oglethorpe has also entered into arrangements with power marketers to obtain the
value that can be brought by power marketers and to provide for future load
requirements without taking all the risk associated with traditional suppliers.
See "MEMBER REQUIREMENTS AND POWER SUPPLY RESOURCES--Power Purchase and Sale
Arrangements--Power Marketer Arrangements" in Oglethorpe's Annual Report on Form
10-K for the fiscal year ended December 31, 1996 and "General--Power Supply Swap
Arrangements" in Item 2 in Oglethorpe's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997.
Oglethorpe and the Members continue to consider and evaluate a wide array of
other potential actions to reduce costs and to maintain their competitiveness in
anticipation of future competition. These activities on the part of Oglethorpe
and the Members are in various stages of study or preliminary consideration.
Many Members are now providing or considering proposals to provide
non-traditional products and services such as telecommunications and other
services. Depending on the nature of future competition in Georgia, there could
be reasons for the Members to separate their physical distribution business from
their energy business, or otherwise restructure their current businesses to
operate effectively under retail competition. Oglethorpe continues to seek to
identify and evaluate opportunities to reduce the cost of wholesale power to
the Members.
Oglethorpe currently defers certain costs of providing services to the Members
pursuant to Statement of Financial Accounting Standards (SFAS) No. 71,
"Accounting for the Effects of Certain Types of Regulation." Note 1 of Notes
to Financial Statements in Oglethorpe's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, sets forth the regulatory assets and
liabilities reflected on Oglethorpe's balance sheet as of December 31, 1996.
Regulatory assets represent probable future revenues to Oglethorpe associated
with certain costs which will be recovered from Members through the rate-making
process. Regulatory liabilities represent probable future reduction in revenues
associated with amounts that are to be credited to Members through the
rate-making process. In the event that Oglethorpe is no longer subject to the
provisions of SFAS No. 71, Oglethorpe would be required to write off regulatory
assets and liabilities. In addition, Oglethorpe would be required to determine
any impairment to other assets, including plant, and write down the assets, if
impaired, to their fair value.
At this time, Oglethorpe cannot predict the outcome of the various developments
that may lead to increased competition in the electric utility industry or the
effect of such developments on Oglethorpe or its Members.
16
<PAGE>
Year 2000 Issue
Many information systems have been designed to function based on years that
begin with "19". Oglethorpe expects that by the year 2000 it will have adapted
its systems, to the extent it considers necessary, to process years that begin
with "20", and does not expect that the year 2000 issue will have a material
adverse effect on its financial condition or results of operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Oglethorpe's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997
reported on an action by PECO Energy Company Power Team filed on June 17, 1997
with the Federal Energy Regulatory Commission relating to Oglethorpe and GTC.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
------- -----------
4.8.1(b) First Supplemental Indenture, dated as of October 1, 1997, made
by Oglethorpe to SunTrust Bank, Atlanta, as trustee, relating to the
Series 1997B (Burke) Note.(Filed as Exhibit 4.8.1(b) to the
Registrant's Form 10-Q for the quarterly period ended September 30,
1997. File No. 33-7591.)
27.1 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
No reports on Form 8-K were filed by Oglethorpe for the quarter ended September
30, 1997.
17
<PAGE>
SIGNATURES
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.
Oglethorpe Power Corporation
(An Electric Membership Corporation)
Date: November 25, 1997 By: /s/ T. D. Kilgore
-----------------------------
T. D. Kilgore
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 25, 1997 /s/ Mac F. Oglesby
-----------------------------
Mac F. Oglesby
Treasurer and Director
(Principal Financial Officer)
Date: November 25, 1997 /s/ Robert D. Steele
-----------------------------
Robert D. Steele
Controller
(Chief Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OGLETHORPE
POWER CORPORATION'S CONDENSED BALANCE SHEET AS OF SEPTEMBER 30, 1997 AND RELATED
STATEMENTS OF REVENUES AND EXPENSES AND CASH FLOWS FOR THE PERIOD ENDED
SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK<F1>
<TOTAL-NET-UTILITY-PLANT> 3,624,291
<OTHER-PROPERTY-AND-INVEST> 200,881
<TOTAL-CURRENT-ASSETS> 366,949
<TOTAL-DEFERRED-CHARGES> 335,159
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 4,527,280
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 321,771
<TOTAL-COMMON-STOCKHOLDERS-EQ> 0
0
0
<LONG-TERM-DEBT-NET> 3,171,511
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 92,220
<LONG-TERM-DEBT-CURRENT-PORT> 81,999
0
<CAPITAL-LEASE-OBLIGATIONS> 289,825
<LEASES-CURRENT> 5,848
<OTHER-ITEMS-CAPITAL-AND-LIAB> 564,106
<TOT-CAPITALIZATION-AND-LIAB> 4,527,280
<GROSS-OPERATING-REVENUE> 800,940
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 604,948
<TOTAL-OPERATING-EXPENSES> 604,948
<OPERATING-INCOME-LOSS> 195,992
<OTHER-INCOME-NET> 33,504
<INCOME-BEFORE-INTEREST-EXPEN> 229,496
<TOTAL-INTEREST-EXPENSE> 215,421
<NET-INCOME> 14,075
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 41,538
<CASH-FLOW-OPERATIONS> 199,372
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>$321,771 REPRESENTS TOTAL RETAINED PATRONAGE CAPITAL. THE REGISTRANT IS A
MEMBERSHIP CORPORATION AND HAS NO AUTHORIZED OR OUTSTANDING EQUITY SECURITIES.
</FN>
</TABLE>
