SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 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 33-46795
OLD DOMINION ELECTRIC COOPERATIVE
(Exact Name of Registrant as Specified in Its Charter)
VIRGINIA 23-7048405
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4201 Dominion Boulevard, Glen Allen, Virginia 23060
(Address of Principal Executive Offices) (Zip Code)
----------
(804) 747-0592
(Registrant's Telephone Number, Including Area Code)
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 [ ]
The Registrant is a membership corporation and has no authorized or outstanding
equity securities.
<PAGE>
OLD DOMINION ELECTRIC COOPERATIVE
INDEX
<TABLE>
<CAPTION>
Page
Number
<S> <C>
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1997 (Unaudited)
and December 31, 1996 3
Consolidated Statements of Revenues, Expenses and
Patronage Capital (Unaudited) - Three and Six Months Ended
June 30, 1997 and 1996 5
Consolidated Statements of Cash Flows (Unaudited) - Six
Months Ended June 30, 1997 and 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. Other Information
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signature 15
Exhibit Index 16
</TABLE>
<PAGE>
OLD DOMINION ELECTRIC COOPERATIVE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------------- ------------
<S> <C>
ASSETS: (unaudited) (*)
Electric Plant:
In service $ 882,755 $ 882,879
Less accumulated depreciation (103,578) (91,525)
----------- -----------
779,177 791,354
Nuclear fuel, at amortized cost 5,576 8,311
Plant acquisition adjustment, at amortized cost 23,755 24,790
Construction work in progress 15,222 11,106
----------- -----------
Net Electric Plant 823,730 835,561
----------- -----------
Decommissioning Fund 42,095 39,298
Other Investments and Funds, Available for Sale 5,307 35,112
Restricted Investments and Funds 112,271 109,019
Current Assets:
Cash and cash equivalents 68,804 46,217
Note receivable, net of allowance of $1.6 million
in 1997 and 1996 -- 6,992
Receivables, net of allowance of $4.4 million in 1997
and $5.1 million in 1996 33,459 36,084
Fuel stock 4,662 3,052
Materials and supplies, at average cost 5,236 5,186
Prepayments 1,302 1,187
----------- -----------
Total Current Assets 113,463 98,718
----------- -----------
Deferred Charges 26,596 27,412
Other Assets 14,384 11,226
----------- -----------
Total Assets $ 1,137,846 $ 1,156,346
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
(*) The Consolidated Balance Sheet at December 31, 1996, has been taken from the
audited financial statements at that date, but does not include all
disclosures required by generally accepted accounting principles.
<PAGE>
OLD DOMINION ELECTRIC COOPERATIVE
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ --------------
<S> <C>
CAPITALIZATION AND LIABILITIES: (unaudited) (*)
Capitalization:
Patronage capital $ 190,367 $ 184,753
Long-term debt 633,875 664,490
---------- ----------
Total Capitalization 824,242 849,243
---------- ----------
Current Liabilities:
Long-term debt due within one year 17,928 17,928
Accounts payable 73,183 45,717
Construction contract payable -- 15,283
Deferred energy 3,993 1,771
Accrued interest 4,212 4,445
Accrued taxes 1,605 497
Other 4,394 4,342
---------- ----------
Total Current Liabilities 105,315 89,983
---------- ----------
Decommissioning Reserve 42,095 39,298
Deferred Credits 50,155 64,868
Obligations under Long-Term Leases 115,290 112,202
Other Liabilities 749 752
Commitments and Contingencies
---------- ----------
Total Capitalization and Liabilities $1,137,846 $1,156,346
========== ==========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
(*) The Consolidated Balance Sheet at December 31, 1996, has been taken
from the audited financial statements at that date, but does not
include all disclosures required by generally accepted accounting
principles.
<PAGE>
OLD DOMINION ELECTRIC COOPERATIVE
CONSOLIDATED STATEMENTS OF REVENUES,
EXPENSES AND PATRONAGE CAPITAL (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
1997 1996 1997 1996
--------- -------- --------- -----------
<S> <C>
Operating Revenues:
Sales to Members $ 79,873 $ 81,828 $168,691 $180,957
Sales to non-members 275 205 302 207
-------- ------ -------- --------
80,148 82,033 168,993 181,164
-------- ------ -------- --------
Operating Expenses:
Operation-
Fuel 7,924 9,950 18,365 18,600
Purchased power 35,935 35,638 79,303 103,605
Other 5,537 6,531 11,012 8,866
-------- ------ --------- --------
49,396 52,119 108,680 131,071
Maintenance 2,364 1,808 4,287 3,890
Administrative and general 4,174 3,330 8,126 7,075
Depreciation and amortization 7,041 6,424 13,556 11,087
Amortization of lease gains (689) (358) (1,378) (358)
Decommissioning cost 170 170 340 340
Taxes other than income taxes 1,791 1,282 3,595 2,992
-------- ------ --------- --------
Total Operating Expenses 64,247 64,775 137,206 156,097
-------- ------ --------- --------
Operating Margin 15,901 17,258 31,787 25,067
-------- ------ --------- --------
Other (Expense)/Income, net (152) (30) (34) 5,688
-------- ------ --------- --------
Investment Income:
Interest 677 1,099 1,647 2,753
Other -- 297 96 545
-------- ------ --------- --------
Total Investment Income 677 1,396 1,743 3,298
-------- ------ --------- --------
Interest Charges:
Interest on long-term debt, net 13,724 15,427 27,983 31,291
Other 49 94 85 187
Allowance for borrowed funds
used during construction (100) -- (186) (3,720)
-------- ------ --------- --------
Net Interest Charges 13,673 15,521 27,882 27,758
-------- ------ --------- --------
Net Margin 2,753 3,103 5,614 6,295
Patronage Capital-beginning of period 187,614 175,705 184,753 172,513
-------- ------ --------- --------
Patronage Capital-end of period $190,367 $178,808 $190,367 $178,808
======== ====== ========= ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
OLD DOMINION ELECTRIC COOPERATIVE
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------------
1997 1996
-------------- -----------------
<S> <C>
Cash Provided by Operating Activities:
Net margin $ 5,614 $ 6,295
Adjustments to reconcile net margin to net cash
provided by operating activities:
Depreciation 12,472 9,990
Amortization 5,513 5,590
Decommissioning cost 340 340
Amortization of lease obligation 3,904 1,204
Gain from lease transactions (1,378) (6,123)
Changes in Current Assets and Current Liabilities:
Change in current asssets 7,842 (402)
Change in current liabilities 30,615 (8,060)
Decrease in deferred charges 255 297
Increase in other assets (3,251) (1,555)
(Decrease) increase in deferred credits (13,335) 23,624
Decrease in other liabilities (3) (43)
------- -------
Net Cash Provided by Operating Activities 48,588 31,157
------- -------
Cash (Used for) Provided by Financing Activities:
Additions to long-term debt -- 23,884
Obligations under long-term lease (816) 51,498
Reductions of long-term debt, net (31,703) (52,194)
------- -------
Net Cash (Used for) Provided by Financing Activities (32,519) 23,188
------- -------
Cash Provided by (Used for) Investing Activities:
Additions to electric plant (19,740) (21,878)
Decommissioning fund deposits (340) (340)
Reductions of (additions to) other investments and funds, net 29,805 (37,088)
Additions to restricted investments and funds, net (3,252) --
Retirement work in progress 45 (5)
------- -------
Net Cash Provided by (Used for) Investing Activities 6,518 (59,311)
------- -------
Net Increase (Decrease) in Cash and Cash Equivalents 22,587 (4,966)
Beginning of Period Cash and Cash Equivalents 46,217 63,670
------- -------
End of Period Cash and Cash Equivalents $68,804 $58,704
======= =======
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
OLD DOMINION ELECTRIC COOPERATIVE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the management of Old Dominion Electric Cooperative
("Old Dominion"), the accompanying unaudited consolidated financial
statements contain all adjustments, which include only normal recurring
adjustments, necessary for a fair statement of Old Dominion's
consolidated financial position as of June 30, 1997, its consolidated
results of operations for the three and six months ended June 30, 1997 and
1996, and its consolidated cash flows for the six months ended June 30,
1997 and 1996. The consolidated results of operations for the six
months ended June 30, 1997, are not necessarily indicative of the
results to be expected for the entire year. These financial statements
should be read in conjunction with the financial statements and notes
thereto included in Old Dominion's 1996 Annual Report on Form 10-K
filed with the Securities and Exchange Commission (the "SEC").
2. On April 17, 1997, the turbine generator unit on Clover Power Station's
("Clover") Unit 2 was damaged when necessary auxiliary power was not
available after the unit tripped off-line. The damage, repairs for which
are approximately $5.8 million (Old Dominion's share being $2.9 million),
is covered by insurance. Old Dominion's share of the insurance deductible
is $250,000. Repairs to the unit have been completed and the unit was back
in operation on July 2, 1997. During the outage, replacement power was
purchased from Virginia Power at supplemental rates.
3. In 1996, Old Dominion entered into two long-term lease and leaseback
transactions. The net benefit to Old Dominion of these transactions was
approximately $63.0 million. After the transactions closed, the staff of
the Virginia State Corporation Commission ("SCC") assessed a 2.1% gross
receipts tax on the approximately $635.0 million base value of the
leaseback transactions. Old Dominion paid the $13.3 million gross receipts
tax assessment under protest on June 1, 1997. A hearing with the SCC has
been set for September 9, 1997, for review of the assessment of gross
receipts taxes.
4. In 1995, Old Dominion and 10 of its 12 member distribution systems
established an affiliate, CSC Services, Inc. ("CSC"), to explore
alternative business opportunities on behalf of the cooperatives. During
1996, CSC invested in an approximate one-half interest in Seacoast Power
LLC, whose wholly-owned subsidiary, Seacoast, Inc. ("Seacoast"),
executed a six-month power sales contract with INECEL, the state-owned
electric utility in Ecuador. CSC and the other participants in Seacoast
Power LLC also formed Power Ventures LLC. Through loans of approximately
$17.5 million to Seacoast, Old Dominion and CSC funded approximately
one-half the cost to construct and operate the generating assets
necessary to fulfill the power sales contract with INECEL.
Because of contract disputes, INECEL did not pay invoices rendered by
Seacoast for energy made available under the terms of the power sales
contract. Accordingly, in July 1996, Seacoast filed a $26.0 million lawsuit
in Ecuador against INECEL seeking to recover approximately $16.3 million in
amounts owed under the power sales contract, plus damages and fees.
Management of Seacoast plans to pursue this matter; however, a trial date
has not been set.
On May 24, 1996, a default judgment of approximately $27.0 million was
rendered against Seacoast pursuant to a claim filed in the District Court
of Travis County, Texas, by an entity seeking damages for breach of an oral
contract by the former owners of Seacoast. Seacoast's registered agent in
Texas failed to notify the current owners of Seacoast of the claim in a
timely manner. On appeal, the judgment was remanded back to the District
Court in December 1996; however, in January 1997, the appellate court
reversed its decision and agreed to hear the appeal. No rehearing date has
been scheduled. Management of Seacoast expects to prevail in having the
judgment overturned.
<PAGE>
5. On February 27, 1997, Southside Electric Cooperative ("Southside"), one of
two member distribution systems that did not participate in forming CSC,
raised a question as to whether the loss, with respect to Old Dominion's
interest in Seacoast, should be borne totally by Old Dominion, thus
resulting in a greater financial burden on Southside. Southside asserts
that their share of the loss should be limited to the amount of Old
Dominion's 30% participation in CSC, which may be less than their
proportionate share as an Old Dominion member. Management believes that
this issue will be favorably resolved.
6. On July 29, 1997, Old Dominion and Virginia Electric & Power Company signed
an Amended and Restated Interconnection & Operating Agreement ("I&O
Agreement"). This I&O Agreement will become effective on the later of
January 1, 1998, or the date on which the Federal Energy Regulatory
Commission accepts the agreement for filing and permits the agreement to
become effective.
7. Certain reclassifications have been made to the accompanying prior year's
consolidated financial statements to conform to the current year's
presentation.
<PAGE>
OLD DOMINION ELECTRIC COOPERATIVE
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Operating Revenues. Old Dominion's operating revenues are derived from
power sales to its Members and to non-members. Revenues from sales to Members
are a function of the requirement for power by the Members' consumers and Old
Dominion's cost of service in meeting that requirement. The major factors
affecting Members' consumers' demand for power are the growth in the number of
consumers and seasonal weather fluctuations.
The following table illustrates the changes (increases (decreases)) in
operating revenues by component:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
1997 vs 1996 1997 vs 1996
------------ ------------
(in thousands)
<S> <C>
Sales to Members:
Power sales volume $ (744) $ (11,821)
Blended rates (868) (1,059)
Fuel adjustment revenues (919) (3,273)
Margin stabilization plan adjustment 576 3,887
-------- -----
(1,955) (12,266)
Sales to Non-members 70 95
-------- ---------
$ (1,885) $ (12,171)
======== =========
</TABLE>
Operating revenues for the three months ended June 30, 1997, decreased as
compared to the same period in 1996 primarily due to a 2.7% decrease in demand
sales. The slight decrease was the result of below normal temperatures during
the second quarter of 1997 compared to below normal temperatures in April 1996
and a prolonged period of extreme heat in May 1996. Additionally, there was a 1%
reduction in the base demand rate effective April 1, 1997. Energy sales were
virtually unchanged from the second quarter of 1996. Old Dominion's demand sales
for the three month periods ended June 30, 1997 and 1996, were 3,412,698 KW and
3,455,972 KW, respectively. Energy sales for the three month periods ended June
30, 1997 and 1996, were 1,671,767 MWh and 1,672,478 MWh, respectively. The
decrease in operating revenues was partially off-set by a $.6 million change in
the margin stabilization plan adjustment.
Operating revenues for the six month period ended June 30, 1997, decreased
as compared to the same period in 1996 primarily due to a 7.7% decrease in
demand sales and a 4.1% decrease in energy sales. The decrease in demand and
energy sales was the result of relatively mild weather in 1997 compared to
extreme temperatures in February and May 1996, and below normal temperatures in
March and April 1996. Demand sales for the six month periods ended June 30, 1997
and 1996, were 7,216,650 KW and 7,753,695 KW, respectively. Energy sales for the
six month periods ended June 30, 1997 and 1996, were 3,636,887 MWh and 3,790,417
MWh, respectively. The decrease in operating revenues was partially off-set by a
$3.9 million change in the margin stabilization plan adjustment.
<PAGE>
Operating Expenses. Old Dominion has an 11.6% ownership interest in the
North Anna Nuclear Power Station ("North Anna"). While nuclear power plants,
such as North Anna, generally have relatively high fixed costs, such facilities
operate with relatively low variable costs due to lower fuel costs and
technological efficiencies. Owners of nuclear power plants, including Old
Dominion, incur the embedded fixed costs of these facilities whether or not the
units operate.
Old Dominion also holds a 50% undivided interest in the Clover Power
Station ("Clover"), which became fully operational when Unit 2 began commercial
operation on March 28, 1996.
When either North Anna or Clover is off-line, Old Dominion must purchase
replacement power that is more costly. Any change in the amount of Old
Dominion's energy output from North Anna or Clover displaces or is replaced by
higher cost supplemental energy purchases from Virginia Electric and Power
Company ("Virginia Power"). As a result, Old Dominion's operating expenses, and
therefore its energy rates to the Members, are significantly impacted by the
operations of North Anna and Clover.
North Anna and Clover capacity factors for the three and six month periods
ended June 30, 1997 and 1996, were as follows:
<TABLE>
<CAPTION>
North Anna Clover
Three Six Three Six
Months Ended Months Ended Months Ended Months Ended
June 30, June 30, June 30, June 30,
-------- -------- -------- --------
<S> <C>
1997 1996 1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ---- ---- ----
Unit 1 63.8% 100.4% 82.3% 78.0% 82.8% 73.0% 72.9% 64.1%
Unit 2 100.3 100.8 100.5 101.0 14.3 74.4 42.3 73.7
Combined 82.1 101.1 91.4 89.5 48.6 73.7 57.6 68.9
</TABLE>
During the six month period ended June 30, 1997, North Anna Unit 1 was
off-line 31 days for scheduled refueling. Unit 2 was not off-line during the
first six months of 1997. During the six month period ended June 30, 1996, North
Anna Unit 1 was off-line 30 days due to scheduled maintenance and refueling.
Unit 2 was not off-line during the first six months of 1996.
During the six month period ended June 30, 1997, Clover Unit 1 was off-line
16 days for repairs to the chimney's titanium liner, two days for other minor
unscheduled maintenance and five days for scheduled maintenance. Clover Unit 2
was off-line 11 days for a scheduled warranty inspection, three days for
unscheduled maintenance and 75 days for repairs resulting from the damage
incurred on April 17, 1997, when the unit tripped off-line. During the six month
period ended June 30, 1996, Clover Unit 1 was off-line 30 days for replacement
of the burners and repairs to the chimney's titanium liner. Unit 2 was off-line
5 days for scheduled maintenance.
Old Dominion's energy supply for the three and six month periods
ended June 30, 1997 and 1996, was as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
(MWh) (MWh) (MWh) (MWh)
<S> <C>
North Anna 372,016 21.5% 458,241 26.8% 824,325 22.0% 811,840 20.8%
Clover 467,662 27.0 544,428 31.9 1,089,322 29.0 1,015,228 26.0
Purchased Power:
Virginia Power 494,527 28.6 318,499 18.7 968,198 25.8 1,162,894 29.8
Delmarva Power 77,711 4.5 75,602 4.4 245,784 6.6 274,494 7.0
PSE&G Contract 274,145 15.9 271,350 15.9 528,170 14.1 551,982 14.2
Other 42,960 2.5 39,165 2.3 95,409 2.5 85,636 2.2
--------- ----- --------- ----- --------- ----- --------- -----
Total Available Energy 1,729,021 100.0% 1,707,285 100.0% 3,751,208 100.0% 3,902,074 100.0%
========= ===== ========= ===== ========= ===== ========= =====
</TABLE>
Fuel costs decreased during the second quarter of 1997 as compared to the
second quarter of 1996 because Clover Unit 2 was off-line for repairs after the
damage incurred on April 17, 1997. Fuel costs for the first half of 1997 were
virtually unchanged from the same period in 1996 even though Clover Unit 2 was
off-line for most of the second quarter of 1997, because Unit 2 did not begin
operating until March 28, 1996.
Purchased power costs were virtually unchanged in the second quarter of
1997 as compared to the second quarter of 1996 because the cooler than normal
temperatures in May and June off-set the need for purchased power that normally
would have been required while Clover Unit 2 was off-line for repairs. Purchased
power decreased for the six month period ended June 30, 1997, as compared to the
corresponding period in 1996 primarily because Clover Units 1 and 2 were in
operation during 1997, while in 1996 only Unit 1 was in operation during the
first quarter. Additionally, an increase in the ratings of Clover Units 1 and 2
since the first quarter of 1996 reduced the amount of supplemental demand
purchases from Virginia Power.
Other operating costs decreased in the second quarter of 1997 as compared
to 1996 primarily due to a decrease in production because Clover Unit 2 was
off-line for repairs. Other operating costs increased during the first half of
1997 as compared to the same period in 1996 because of an increase in Clover
transmission expense. The increase in transmission expense was due to the
commercial operation of Clover Unit 2 and an increase in the ratings of Clover
Units 1 and 2.
Maintenance expense increased in the second quarter and first half of 1997
as compared to the same periods in 1996 primarily due to the $250,000 insurance
deductible on Clover Unit 2.
Administrative and general and depreciation expense increased during the
second quarter and the first half of 1997 as compared to the same periods in
1996 mainly due to Clover operations in 1997.
Amortization of lease gains represents the recognition of the portion of
the gains attributable to the second quarter and first half of 1997 on the two
long-term lease transactions completed in 1996. The gains are being amortized
ratably into income over the operating lease terms of 21.8 years and 23.4 years
for Clover Units 1 and 2, respectively.
The increase in taxes for the second quarter and first half of 1997 as
compared to the same periods in 1996 is the result of property taxes on Clover
and an increase in the estimate of gross receipts taxes for 1997.
Other (Expense)/Income decreased due to the cross-border tax benefit lease
income recognition in 1996.
Investment income decreased during the second quarter and the first half of
1997 as compared to the same periods in 1996 due to lower investment balances.
Interest on long-term debt decreased in 1997 due to the purchase, in April
1997, of $32.0 million of outstanding debt and due to the purchase, in 1996, of
$83.1 million of outstanding debt combined with $18.4 million in debt service
payments. The 1997 and 1996 debt purchases resulted in net interest savings of
$42.7 million and $138.2 million, respectively, over the life of the debt.
Allowance for borrowed funds used during construction decreased in the
second quarter and first half of 1997 as compared to the same periods in 1996
due to completion of Clover Unit 2.
<PAGE>
Liquidity and Capital Resources
Operating Activities. Net cash provided by operating activities increased
in the six month period ended June 30, 1997, as compared to the same period in
1996 primarily due to changes between periods in non-cash working capital
accounts, mainly notes receivable, receivables and accounts payable.
Financing Activities. In April 1997, Old Dominion purchased a total of
$32.0 million of its 8.76% First Mortgage Bonds, Series 1992 A. The transaction
resulted in a net loss of approximately $2.0 million, including the write-off of
original issuance costs. The losses have been deferred and are being amortized
over the life of the remaining bonds.
Investing Activities. Net cash provided by investing activities
increased primarily as a result of liquidating investments for the purchase
of $32.0 million of outstanding debt.
Other Matters
On April 17, 1997, the turbine generator unit on Clover Unit 2 was damaged
when necessary auxiliary power was not available after the unit tripped
off-line. The damage, repairs for which are approximately $5.8 million (Old
Dominion's share being $2.9 million), is covered by insurance. Old Dominion's
share of the insurance deductible is $250,000. Repairs to the unit have been
completed and the unit was back in operation on July 2, 1997. During the outage,
replacement power was purchased from Virginia Power at supplemental rates.
In 1996, Old Dominion entered into two long-term lease and leaseback
transactions. The net benefit to Old Dominion of these transactions was
approximately $63.0 million. After the transactions closed, the staff of the
Virginia State Corporation Commission ("SCC") assessed a 2.1% gross receipts tax
on the approximately $635.0 million base value of the leaseback transactions.
Old Dominion paid the $13.3 million gross receipts tax assessment under protest
on June 1, 1997. A hearing with the SCC has been set for September 9, 1997, for
review of the assessment of gross receipts taxes.
In 1995, Old Dominion and 10 of its 12 member distribution systems
established an affiliate, CSC Services, Inc. ("CSC"), to explore alternative
business opportunities on behalf of the cooperatives. During 1996, CSC invested
in an approximate one-half interest in Seacoast Power LLC, whose wholly-owned
subsidiary, Seacoast, Inc. ("Seacoast"), executed a six-month power sales
contract with INECEL, the state-owned electric utility in Ecuador. CSC and the
other participants in Seacoast Power LLC also formed Power Ventures LLC. Through
loans of approximately $17.5 million to Seacoast, Old Dominion and CSC funded
approximately one-half the cost to construct and operate the generating assets
necessary to fulfill the power sales contract with INECEL.
Because of contract disputes, INECEL did not pay invoices rendered by
Seacoast for energy made available under the terms of the power sales contract.
Accordingly, in July 1996, Seacoast filed a $26.0 million lawsuit in Ecuador
against INECEL seeking to recover approximately $16.3 million in amounts owed
under the power sales contract, plus damages and fees. Management of Seacoast
plans to pursue this matter; however, a trial date has not been set.
On May 24, 1996, a default judgment of approximately $27.0 million was
rendered against Seacoast pursuant to a claim filed in the District Court of
Travis County, Texas, by an entity seeking damages for breach of an oral
contract by the former owners of Seacoast. Seacoast's registered agent in Texas
failed to notify the current owners of Seacoast of the claim in a timely manner.
On appeal, the judgment was remanded back to the District Court in December
1996; however, in January 1997, the appellate court reversed its decision and
agreed to hear the appeal. No rehearing date has been scheduled. Management of
Seacoast expects to prevail in having the judgment overturned.
<PAGE>
On February 27, 1997, Southside Electric Cooperative ("Southside"), one of
two member distribution systems that did not participate in forming CSC, raised
a question as to whether the loss, with respect to Old Dominion's interest in
Seacoast, should be borne totally by Old Dominion, thus resulting in a greater
financial burden on Southside. Southside asserts that their share of the loss
should be limited to the amount of Old Dominion's 30% participation in CSC,
which may be less than their proportionate share as an Old Dominion member.
Management believes that this issue will be favorably resolved.
Subsequent Event
On July 29, 1997, Old Dominion and Virginia Power signed an Amended and
Restated Interconnection & Operating Agreement ("I&O Agreement"). The I&O
Agreement will become effective on the later of January 1, 1998, or the date on
which the Federal Energy Regulatory Commission accepts the agreement for filing
and permits the agreement to become effective, and extends through 2005. The I&O
Agreement covers the supply of supplemental, peaking and reserve power plus a
new power transmission relationship that takes into account a national policy of
opening power lines to competing wholesale power suppliers. It also allows the
two companies to make the transition to a competitive electric power market over
a five-year period. Old Dominion estimates that this new wholesale power
contract with Virginia Power could save its members millions of dollars over
current rates.
<PAGE>
15
OLD DOMINION ELECTRIC COOPERATIVE
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Other than certain legal proceedings arising out of the ordinary
course of business, which management believes will not have a
material adverse impact on the results of operations or financial
condition of Old Dominion, there is no other litigation pending or
threatened against Old Dominion. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Other
Matters" for a discussion of certain disputes relating to Old
Dominion's interest in Seacoast and the assertion by the staff of the
Virginia State Corporation Commission that gross receipts tax is
payable in connection with certain lease and leaseback transactions.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27.Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Registrant during the
quarter ended June 30, 1997.
<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 thereunto duly authorized.
OLD DOMINION ELECTRIC COOPERATIVE
Registrant
Date: August 13, 1997 /s/ Daniel M. Walker
----------------------------------------
Daniel M. Walker
Vice President of Accounting and Finance
(Chief Financial Officer)
<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Description of Exhibit Number
27. Financial Data Schedule 17
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF OLD DOMINION ELECTRIC COOPERATIVE AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 823,730
<OTHER-PROPERTY-AND-INVEST> 159,673
<TOTAL-CURRENT-ASSETS> 113,463
<TOTAL-DEFERRED-CHARGES> 26,596
<OTHER-ASSETS> 14,384
<TOTAL-ASSETS> 1,137,846
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 190,367<F1>
<TOTAL-COMMON-STOCKHOLDERS-EQ> 0
0
0
<LONG-TERM-DEBT-NET> 633,875
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 17,928
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 295,676
<TOT-CAPITALIZATION-AND-LIAB> 1,137,846
<GROSS-OPERATING-REVENUE> 168,993
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 137,206
<TOTAL-OPERATING-EXPENSES> 137,206
<OPERATING-INCOME-LOSS> 31,787
<OTHER-INCOME-NET> 1,709
<INCOME-BEFORE-INTEREST-EXPEN> 33,496
<TOTAL-INTEREST-EXPENSE> 27,882
<NET-INCOME> 5,614
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 48,588
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Old Dominion is organized and operated as a cooperative. Patronage capital
is the retained net margins of Old Dominion which have been allocated to its
members based on their respective power purchases in accordances with Old
Dominion's bylaws.
</FN>
</TABLE>
