<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
Commission File Number: 33-74254
COGENTRIX ENERGY, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1853081
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9405 ARROWPOINT BOULEVARD, CHARLOTTE, NORTH CAROLINA 28273-8110
(Address of principal executive offices) (Zipcode)
(704) 525-3800
(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 period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. [X] Yes [ ] No
On May 15, 2000, there were 282,000 shares of common stock, no par value, issued
and outstanding.
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COGENTRIX ENERGY, INC.
INDEX TO QUARTERLY REPORT ON FORM 10Q
PAGE NO.
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PART I: FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements:
Consolidated Balance Sheets at March 31, 2000 (Unaudited)
and December 31, 1999 3
Consolidated Statements of Income for the Three Months
Ended March 31, 2000 and 1999 (Unaudited) 4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2000 and 1999 (Unaudited) 5
Notes to Consolidated Condensed Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
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COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
March 31, 2000 and December 31, 1999
(dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 40,979 $ 80,344
Restricted cash 62,554 81,647
Accounts receivable 64,955 59,360
Inventories 19,748 20,137
Other current assets 1,741 2,252
----------- -----------
Total current assets 189,977 243,740
NET INVESTMENT IN LEASES 500,093 500,195
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $272,409 and $262,963, respectively 428,561 437,483
LAND AND IMPROVEMENTS 6,339 5,764
CONSTRUCTION IN PROGRESS 418,946 350,243
DEFERRED FINANCING COSTS,
net of accumulated amortization of $25,281 and $23,950, respectively 54,140 51,315
INVESTMENTS IN UNCONSOLIDATED AFFILIATES 337,460 325,504
PROJECT DEVELOPMENT COSTS 5,968 7,124
NOTES RECEIVABLE 18,502 19,502
OTHER ASSETS 83,439 57,516
----------- -----------
$ 2,043,425 $ 1,998,386
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 88,200 $ 90,114
Accounts payable 42,320 37,588
Accrued compensation 2,510 8,415
Accrued interest payable 23,406 25,708
Accrued dividends payable -- 8,683
Other accrued liabilities 15,614 15,621
----------- -----------
Total current liabilities 172,050 186,129
LONG-TERM DEBT 1,549,575 1,518,773
DEFERRED INCOME TAXES 82,288 72,980
MINORITY INTERESTS 69,177 69,608
OTHER LONG-TERM LIABILITIES 30,670 29,445
----------- -----------
1,903,760 1,876,935
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, no par value, 300,000 shares authorized;
282,000 shares issued and outstanding 130 130
Accumulated other comprehensive loss (788) (1,144)
Accumulated earnings 140,323 122,465
----------- -----------
139,665 121,451
----------- -----------
$ 2,043,425 $ 1,998,386
=========== ===========
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these balance sheets.
3
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COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2000 and 1999 (Unaudited)
(dollars in thousands, except share and earnings per common share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
2000 1999
--------- ---------
<S> <C> <C>
OPERATING REVENUE:
Electric $ 81,799 $ 74,408
Steam 7,541 6,712
Lease 11,193 11,161
Service 14,090 11,870
Income from unconsolidated investments in power projects,
net of premium amortization 15,226 5,410
Other 4,934 3,878
--------- ---------
134,783 113,439
--------- ---------
OPERATING EXPENSES:
Fuel 26,678 17,696
Operations and maintenance 16,988 16,976
Cost of services 15,135 12,481
General, administrative and development 12,031 12,649
Depreciation and amortization 10,886 10,871
--------- ---------
81,718 70,673
--------- ---------
OPERATING INCOME 53,065 42,766
OTHER INCOME (EXPENSE):
Interest expense (23,297) (23,732)
Investment and other income, net 2,679 2,091
Equity in net loss of affiliates -- (39)
--------- ---------
INCOME BEFORE MINORITY INTERESTS IN INCOME AND
PROVISION FOR INCOME TAXES 32,447 21,086
MINORITY INTERESTS IN INCOME (2,945) (3,826)
--------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES 29,502 17,260
PROVISION FOR INCOME TAXES (11,644) (6,866)
--------- ---------
NET INCOME $ 17,858 $ 10,394
========= =========
EARNINGS PER COMMON SHARE $ 63.33 $ 36.86
========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 282,000 282,000
========= =========
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
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COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2000 and 1999 (Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 17,858 $ 10,394
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 10,886 10,871
Deferred income taxes 9,070 6,234
Minority interests in income, net of dividends (452) 3,767
Equity in net income of unconsolidated affiliates, net of dividends (10,300) (1,186)
Minimum lease payments received 11,298 10,779
Amortization of unearned lease income (11,196) (11,161)
Increase in accounts receivable (5,595) (1,241)
Decrease in inventories 389 203
Increase (decrease) in accounts payable 4,732 (5,960)
Increase (decrease) in accrued liabilities (8,285) 9,927
Decrease in other 6,382 2,910
-------- --------
Net cash flows provided by operating activities 24,787 35,537
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment additions, net (1,101) (208)
Investments in unconsolidated affiliates (1,656) --
Construction in progress and project development costs (67,355) --
Expenditures for turbines (29,620) (2,335)
Decrease (increase) in restricted cash 19,093 (15,431)
-------- --------
Net cash flows used in investing activities (80,639) (17,974)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (8,683) (7,398)
Proceeds from issuance of long-term debt 54,712 15,000
Repayments of long-term debt (26,386) (24,184)
Increase in deferred financing costs (4,156) (395)
Decrease in notes receivable 1,000 --
-------- --------
Net cash flows provided by (used in) financing activities 16,487 (16,977)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (39,365) 586
CASH AND CASH EQUIVALENTS, beginning of period 80,344 48,207
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 40,979 $ 48,793
======== ========
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
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COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements include
the accounts of Cogentrix Energy, Inc. ("Cogentrix Energy") and its
subsidiary companies (collectively, the "Company"). Wholly-owned and
majority-owned subsidiaries, including a 50%-owned joint venture in which
the Company has effective control through majority representation on the
board of directors of the managing general partner, are consolidated.
Less-than-majority-owned subsidiaries and subsidiaries for which control is
deemed to be temporary are accounted for using the equity method.
Investments in unconsolidated affiliates in which the Company has less than
a 20% interest and does not exercise significant influence over operating
and financial policies are accounted for under the cost method. All
material intercompany transactions and balances among Cogentrix Energy, its
subsidiary companies and its consolidated joint ventures have been
eliminated in the accompanying consolidated condensed financial statements.
Information presented as of March 31, 2000 and for the three months
ended March 31, 2000 and 1999 is unaudited. In the opinion of management,
however, such information reflects all adjustments, which consist of normal
recurring adjustments necessary to present fairly the financial position of
the Company as of March 31, 2000, and the results of operations and cash
flows for the three months ended March 31, 2000 and 1999. The results of
operations for these interim periods are not necessarily indicative of
results which may be expected for any other interim period or for the
fiscal year as a whole.
The accompanying unaudited consolidated condensed financial statements
have been prepared pursuant to the rules and regulations of the United
States Securities and Exchange Commission (the "Commission"). Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to those rules and
regulations, although management believes that the disclosures made are
adequate to make the information presented not misleading. It is suggested
that these unaudited consolidated condensed financial statements be read in
conjunction with the audited consolidated financial statements and the
notes thereto included in the Company's most recent report on Form 10-K for
the year ended December 31, 1999, which the Company filed with the
Commission on March 30, 2000.
2. RATHDRUM, IDAHO FACILITY
On March 9, 2000, Rathdrum Power, LLC ("Rathdrum Power") entered into
a credit agreement with a bank, as agent for a group of lending banks, and
a financial institution which provides up to $126.0 million in borrowings
and a $5.0 million debt service reserve letter of credit. Rathdrum Power is
owned 51% by a wholly-owned project subsidiary of the Company and 49% by
Avista Power, Inc. Proceeds from the credit agreement will be used to
construct an approximate 270 megawatt combined-cycle natural gas-fired
generating facility located in Rathdrum, Idaho. The Company has committed
to provide an equity contribution to the project subsidiary of
approximately $16.7 million upon the earliest to occur of (a) an event of
default under the project subsidiary's financing agreement, (b) the
incurrence of construction costs after all project financing has been
expended, or (c) October 1, 2002. This equity contribution commitment is
supported by a letter of credit, which is provided under Cogentrix Energy's
corporate credit facility. An indirect, wholly-owned subsidiary of
Cogentrix Energy has entered into an engineering, procurement and
construction contract (the "EPC Contract") with Rathdrum Power to construct
the Rathdrum facility. Cogentrix Energy is providing a guarantee supporting
the subsidiary's obligations under the EPC Contract. The Company expects
the Rathdrum facility, which the Company will operate, to begin operation
in the third quarter of 2001. Electricity generated by the Rathdrum
facility will be sold under a 25 year power purchase agreement with
Avista Turbine Power, Inc. ("Avista Turbine"). In addition, Avista Turbine
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will supply fuel to the Rathdrum facility. Rathdrum Power has been
consolidated in the accompanying consolidated financial statements.
The credit agreement provides borrowings up to $49.0 million from the
financial institution and $77.0 million from the banks. The financial
institution loans accrue interest at 8.56% per annum and have a term equal
to the construction period plus 25 years and the bank loans accrue interest
at the applicable LIBOR rate plus an applicable margin ranging from 1.25%
to 2.25% and will have a term equal to the construction period plus periods
up to 18 years. At March 31, 2000, $26.9 million of bank loans were
outstanding.
3. CLAIMS AND LITIGATION
One of the Company's indirect, wholly-owned subsidiaries is party to
certain product liability claims related to the sale of coal combustion
by-products for use in various construction projects. Management cannot
currently estimate the range of possible loss, if any, the Company will
ultimately bear as a result of these claims. However, management believes
based on its knowledge of the facts and legal theories applicable to these
claims and after consultations with various counsel retained to represent
these subsidiaries in their defense of such claims - that the ultimate
resolution of these claims should not have a material adverse effect on the
Company's consolidated financial position or results of operations or
Cogentrix Energy's ability to generate sufficient cash flow to service its
outstanding debt.
In addition to the litigation described above, the Company experiences
other routine litigation in the normal course of its business. Management
is of the opinion that none of this routine litigation will have a material
adverse impact on the Company's consolidated financial position or results
of operations.
4. SUBSEQUENT EVENT
Subsequent to March 31, 2000, the Company closed a credit facility
with several banks which provides for loans to be used to construct a 300
megawatt, fuel oil-fired, combined-cycle generating facility located in the
Dominican Republic. The Company will own a 65% interest in the facility,
with the other 35% owned by Commonwealth Development Corporation of Great
Britain. The facility will sell electricity under a 20-year power purchase
agreement with Corporacion Dominicana de Electricidad supported by a
Dominican government guarantee of the payment obligation. The project is
expected to commence operations in 2001.
5. RECLASSIFICATIONS
Certain amounts included in the accompanying consolidated financial
statements for the period ended March 31, 1999 and as of December 31, 1999
have been reclassified from their original presentation to conform with the
presentation as of and for the period ended March 31, 2000.
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
The information called for by this item is hereby incorporated herein
by reference to pages 3 through 7 of this report.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
In addition to discussing and analyzing our recent historical financial
results and condition, the following "Management's Discussion and Analysis of
Financial Condition and Results of Operations" includes statements concerning
certain trends and other forward-looking information affecting or relating to us
which are intended to qualify for the protections afforded "Forward-Looking
Statements" under the Private Securities Litigation Reform Act of 1995, Public
Law 104-67. The forward-looking statements made herein are inherently subject to
risks and uncertainties which could cause our actual results to differ
materially from the forward-looking statements.
7
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GENERAL
Cogentrix Energy, Inc. is an independent power producer that, through
its direct and indirect subsidiaries, acquires, develops, owns and operates
electric generating plants, principally in the United States. We derive most of
our revenue from the sale of electricity, but we also produce and sell steam. We
sell the electricity we generate, primarily under long-term power purchase
agreements, to regulated electric utilities and power marketers. We sell the
steam we produce to industrial customers with manufacturing or other facilities
located near our electric generating plants. We were one of the early
participants in the market for electric power generated by independent power
producers that developed as a result of energy legislation the United States
Congress enacted in 1978. We believe we are one of the larger independent power
producers in the United States based on our total project megawatts in
operation.
We currently own - entirely or in part - a total of 25 electric
generating facilities in operation in the United States. Our 25 facilities are
designed to operate at a total production capability of approximately 4,000
megawatts. After taking into account our part interests in the 16 plants that
are not wholly-owned by us, which range from 1.7% to approximately 74.0%, our
net ownership interests in the total production capability of our 25 electric
generating facilities is approximately 1,840 megawatts. We currently operate 12
of our facilities, 10 of which we developed and constructed.
We also have ownership interests in and will operate four facilities
currently under construction in Mississippi, Oklahoma, Idaho and the Dominican
Republic with an aggregate production capability of approximately 2,170
megawatts. Once these facilities begin operation, we will have ownership
interests in a total of 28 domestic and 1 international electric generating
facilities that are designed with an aggregate production capability of
approximately 6,170 megawatts. Our net equity interest in the total production
capability of those 29 facilities will be approximately 3,380 megawatts.
Unless the context requires otherwise, references in this report to
"we," "us," "our," or "Cogentrix" refer to Cogentrix Energy, Inc. and its
subsidiaries, including subsidiaries that hold investments in other corporations
or partnerships whose financial results are not consolidated with ours. The term
"Cogentrix Energy" refers only to Cogentrix Energy, Inc., which is a development
and management company that conducts its business primarily through
subsidiaries. Cogentrix Energy's subsidiaries that are engaged in the
development, ownership or operation of electric generating facilities are
sometimes referred to individually as a "project subsidiary" and collectively as
Cogentrix Energy's "project subsidiaries."
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------------------
2000 1999
-------------------- --------------------
<S> <C> <C> <C> <C>
Total operating revenues $134,783 100.0% $113,439 100.0%
Operating costs 58,801 43.6 47,153 41.6
General, administrative and development 12,031 8.9 12,649 11.2
Depreciation and amortization 10,886 8.1 10,871 9.6
-------- --------
Operating income $ 53,065 39.4% $ 42,766 37.7%
======== ========
</TABLE>
Total operating revenues increased 18.8% to $134.8 million for the
first quarter of 2000 as compared to the first quarter of 1999. The increase in
operating revenues resulted primarily from a $9.6 million increase in electric
and service revenue related to an increase in megawatt hours sold to the
purchasing utilities at several of our electric generating facilities. The
increase in operating revenues is also attributable to a $9.8 million increase
in income from unconsolidated investments in power projects. This increase is
the result of acquisitions of an additional 40% interest in the Indiantown
facility in the second and third quarter of 1999, increased capacity revenue at
several facilities, an increase in megawatt hours sold to the purchasing utility
at several facilities and a change in accounting for major overhaul expenses at
four of the facilities. The new accounting policy requires major maintenance
overhauls to be expensed as incurred. Previously, the estimated cost of major
maintenance overhauls were reserved
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in advance instead of being expensed as incurred. Upon adoption of this
accounting policy, these entities recorded a benefit in earnings during the
first quarter of 2000. Operating revenues were also impacted, to a lesser
extent, by an increase in other income as a result of excess gas remarketed to
third parties.
Our operating costs increased 24.7% to $58.8 million for the first
quarter of 2000 as compared to the first quarter of 1999. The increase was
primarily attributable to an increase in fuel and cost of services expense,
components of operating costs, as a result of an overall increase in megawatt
hours sold to the purchasing utilities at several of our electric generating
facilities.
General, administrative and development expense decreased 4.9% to $12.0
million for the first quarter of 2000 as compared to the first quarter of 1999.
This decrease related primarily to the capitalization of certain corporate
development costs related to certain project development efforts during the
first quarter of 2000. The decrease in general, administrative and development
expenses was partially offset by an increase in compensation expense related to
an increase in the number of corporate employees and an increase in incentive
compensation expense related to our increased profitability.
Interest expense decreased 1.8% to $23.3 million for the quarter ended
March 31, 2000 as compared to the first quarter of 1999. Our average long-term
debt increased to $1.6 billion, as compared to weighted average long-term debt
of $1.2 billion for the first quarter of 1999. The increase in average long-term
debt is the result of the inclusion of $326.0 million of project financing debt
related to the Batesville facility, and additional construction borrowings
incurred during the quarter of 2000 for projects under construction in Rathdrum,
Idaho, and Jenks, Oklahoma. Interest incurred for these construction borrowings
is being capitalized during the construction phase. The decrease in interest
expense resulted primarily from the scheduled repayments on outstanding project
financing debt at several of our project subsidiaries. The decrease was
partially offset by an increase in interest expense incurred on borrowings
incurred under revolving credit facilities at some of our subsidiaries.
The decrease in minority interest in income for the first quarter of
2000 as compared to the first quarter of 1999 related primarily to a decrease in
earnings at the Hopewell facility as a result of routine maintenance costs
incurred during the quarter. The decrease is also a result of the inclusion of
the losses incurred at the Batesville facility, which is currently under
construction, as a result of our consolidation of its operations beginning in
December 1999.
LIQUIDITY AND CAPITAL RESOURCES
The principal components of operating cash flow for the first quarter
of 2000 were net income of $17.9 million, increases due to adjustments for
depreciation and amortization of $10.9 million, deferred income taxes of $9.1
million and amortization of unearned lease income, net of minimum lease payments
received of $0.1 million, which were partially offset by minority interest in
income, net of dividends of $0.5 million, $10.3 million equity in net income of
unconsolidated affiliates, net of dividends and a net $2.4 million use of cash
reflecting changes in other working capital assets and liabilities. Cash flow
provided by operations of $24.8 million, proceeds from borrowings of $54.7
million, $19.1 million of funds released from escrow, repayments on notes
receivable of $1.0 million and $39.4 million of cash on hand at the beginning of
the period were primarily used to purchase property, plant and equipment of $1.1
million, invest $1.7 million in unconsolidated affiliates, make payments on
construction in progress and project development costs of $67.3 million, make
deposits on turbines of $29.6 million, pay a common stock dividend of $8.7
million, repay project finance borrowings of $26.4 million, and pay deferred
financing costs of $4.2 million.
Historically, we have financed each facility primarily under financing
arrangements and related documents, which generally require the extensions of
credit to be repaid solely from the project's revenues and provide that the
repayment of the extensions of credit (and interest thereon) is secured solely
by the physical assets, agreements, cash flow and, in certain cases, the capital
stock of or the partnership interest in that project subsidiary. This type of
financing is generally referred to as "project financing". The project financing
debt of our subsidiaries and joint ventures (aggregating $1.3 billion as of
March 31, 2000) is non-recourse to Cogentrix Energy and our other project
subsidiaries, except in connection with certain transactions where Cogentrix
Energy has agreed to certain limited guarantees and other obligations with
respect to such projects. These limited guarantees and other obligations
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include agreements for the benefit of the project lenders to three project
subsidiaries to fund cash deficits that the projects may experience as a result
of incurring certain costs, subject to an aggregate cap of $40.6 million.
In addition, Cogentrix, Inc., which is an indirect subsidiary of
Cogentrix Energy, has guaranteed two project subsidiaries' obligations to the
purchasing utility under five power sales agreements. Three of these power sales
agreements provide that in the event of early termination that is not for cause,
the project subsidiary must pay the utility a termination charge equal to the
excess paid for capacity and energy over what would have been paid to the
utility under the utility's published five-year capacity credit and variable
energy rates plus interest. The remaining two power sales agreements provide
that in the event of early termination, the project subsidiary must pay the
utility the cost of replacing the electricity from a third party for the
remainder of the agreement's term. Because these project subsidiaries'
obligations do not by their terms stipulate a maximum dollar amount of
liability, the aggregate amount of potential exposure under these guarantees
cannot be quantified. If we or our subsidiary were required to satisfy all of
these guarantees and other obligations or even one or more of the significant
ones, it could impair Cogentrix Energy's ability to service its outstanding
debt.
Any project we develop in the future, and those electric generating
facilities we may seek to acquire, are likely to require substantial capital
investment. Our ability to arrange financing on a non-recourse basis and the
cost of such capital are dependent on numerous factors. In order to access
capital on a non-recourse basis in the future, we may have to make larger equity
investments in, or provide more financial support for, the project entity.
The ability of our project subsidiaries to pay dividends and management
fees periodically to Cogentrix Energy is subject to certain limitations in our
respective financing documents. Such limitations generally require that: (a)
debt service payments be current, (b) debt service coverage ratios be met, (c)
all debt service and other reserve accounts be funded at required levels and (d)
there be no default or event of default under the relevant financing documents.
There are also additional limitations that are adapted to the particular
characteristics of each subsidiary. Management does not believe that such
restrictions or limitations will adversely affect Cogentrix Energy's ability to
meet its debt obligations.
As of March 31, 2000, we had long-term debt (including the current
portion thereof) of approximately $1.6 billion. With the exception of the $355.0
million of senior notes currently outstanding, substantially all of such
indebtedness is project financing debt, a large portion of which is non-recourse
to Cogentrix Energy. Future annual maturities of long-term debt range from $54.8
million to $105.9 million in the five-year period ending December 31, 2004. We
believe that our project subsidiaries and the project entities in which we have
an investment will generate sufficient cash flow to pay all required debt
service on the project financing debt and to allow them to pay management fees
and dividends to Cogentrix Energy periodically in sufficient amounts to allow
Cogentrix Energy to pay all required debt service on outstanding balances under
the corporate credit facility, the senior notes, to fund a significant portion
of its development activities and meet its other obligations. If, as a result of
unanticipated events, our ability to generate cash from operating activities is
significantly impaired, we could be required to curtail our development
activities to meet our debt service obligations.
On March 3, 2000, our corporate credit facility was amended to increase
available borrowings from $125.0 million to $175.0 million and to modify certain
covenants. The credit facility has been extended through October 2002 and is
unsecured. The corporate credit facility provides direct advances to, or the
issuance of letters of credit for, our benefit in an amount up to $175.0
million. At March 31, 2000, we had utilized approximately $134.0 million of the
credit available under the corporate credit facility for letters of credit
issued in connection with electric generating facilities we purchased during
1998 and 1999 and the projects under construction in Rathdrum, Idaho, and Jenks,
Oklahoma. The balance of the commitment under the corporate credit facility is
available, subject to any limitations imposed by the covenants contained therein
and in the indentures, to be drawn upon by us to repay other outstanding
indebtedness or for general corporate purposes, including equity investments in
new projects or acquisitions of existing electric generating facilities or those
under development.
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Two of our wholly-owned subsidiaries, Cogentrix Eastern America, Inc.
and Cogentrix Mid-America, Inc. ("Mid-America"), formed to hold interests in
electric generating facilities acquired in 1999 and 1998, maintain credit
agreements with banks to provide for $75.0 million and $25.0 million of
revolving credit, respectively. The credit facilities provide for credit in the
form of direct advances and the Mid-America facility provides issuances of
letters of credit. Including the credit facilities described above, and the
revolving credit facility at one of our project subsidiaries, we maintain
revolving credit, which is non-recourse to Cogentrix Energy, Inc., with
aggregate commitments of $143.0 million. As of March 31, 2000, we had
approximately $42.1 million available under these facilities.
On March 9, 2000, a partnership, in which we own a 51% interest, closed
a credit agreement with a bank and a financial institution which provides for a
$126.0 million construction loan and a $5.0 million debt service reserve letter
of credit. Proceeds from the construction loan are being used to construct an
approximate 270 megawatt combined-cycle natural gas-fired generating facility
located in Rathdrum, Idaho. We have committed to provide an equity contribution
to the project subsidiary of approximately $16.7 million upon the earliest to
occur of (a) an event of default under the project subsidiary's financing
agreement, (b) the incurrence of construction costs after all project financing
has been expended, or (c) October 1, 2002. This equity contribution commitment
is supported by a letter of credit, which is provided under the corporate credit
facility. An indirect, wholly-owned subsidiary of Cogentrix Energy has entered
into an engineering, procurement and construction (EPC) contract with the
partnership to construct the Rathdrum facility. Cogentrix Energy is providing a
guarantee supporting the subsidiary's obligations under the EPC contract. We
expect the Rathdrum facility, which we will operate, to begin operation in the
third quarter of 2001. Electricity generated by the Rathdrum facility will be
sold under a long-term power purchase agreement to Avista Turbine Power, Inc.
Subsequent to March 31, 2000, we made a $5.0 million equity
contribution to the project subsidiary engaged in the construction of the
electric generating facility in Batesville, Mississippi. We currently own an
approximate 51% interest in the project facility. We have committed to provide
an additional $49.0 million to the project subsidiary. The remainder of the
commitment is supported by a letter of credit provided under the corporate
credit facility. The $5.0 million contribution was made from corporate cash
balances.
On April 28, 2000, a partnership, in which we own a 65% interest,
closed a credit facility with a group of lending banks that will provide
construction loans to be used to construct an approximate 300 megawatt electric
generating plant in the Dominican Republic. This project will utilize fuel
oil-fired, combined-cycle technology. We have committed to provide an equity
contribution to the project subsidiary of approximately $50.0 million upon the
earliest to occur of (a) an event of default under the project subsidiary's
financing agreement, (b) completion of construction of the facility, or (c)
February 2003. This equity commitment is supported by a letter of credit, which
is provided under the corporate credit facility.
We have entered into commitments with a turbine supplier to purchase a
specified number of turbines with specified delivery dates. We have made
approximately $29.6 million in non-refundable deposits related to these
commitments during the first quarter of 2000. We expect to make additional
progress payments of $49.7 million in 2000 of which approximately $46.2 million
would be repaid or funded from proceeds of financings we anticipate closing.
For the fiscal year ended December 31, 1999, our board of directors
declared a dividend on our outstanding common stock of $8.7 million. The
dividend was paid in March 2000. The board of directors' policy, which is
subject to change at any time, provides for a dividend payout ratio of no more
than 20% of our net income for the immediately preceding fiscal year. In
addition, under the terms of the indentures for the senior notes and the
corporate credit facility, our ability to pay dividends and make other
distributions to our shareholders is restricted.
IMPACT OF ENERGY PRICE CHANGES, INTEREST RATES AND INFLATION
Energy prices are influenced by changes in supply and demand, as well
as general economic conditions, and therefore tend to fluctuate significantly.
Through various hedging mechanisms, we have attempted to mitigate the impact of
changes on the results of operations of most of our projects. The basic hedging
mechanism against increased fuel and transportation costs is to provide
contractually for matching increases in the energy payments our project
subsidiaries receive from the utility purchasing the electricity generated by
the facility.
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Under the power sales agreements for certain of our facilities, energy
payments are indexed, subject to certain caps, to reflect the purchasing
utility's solid fuel cost of producing electricity or provide periodic,
scheduled increases in energy prices that are designed to match periodic,
scheduled increases in fuel and transportation costs that are included in the
fuel supply and transportation contracts for the facilities.
Changes in interest rates could have a significant impact on us.
Interest rate changes affect the cost of capital needed to construct projects as
well as interest expense of existing project financing debt. As with fuel price
escalation risk, we attempt to hedge against the risk of fluctuations in
interest rates by arranging either fixed-rate financing or variable-rate
financing with interest rate swaps, collars or caps on a portion of its
indebtedness.
Although hedged to a significant extent, our financial results will
likely be affected to some degree by fluctuations in energy prices, interest
rates and inflation. The effectiveness of the hedging techniques implemented by
us is dependent, in part, on each counterparty's ability to perform in
accordance with the provisions of the relevant contracts. We have sought to
reduce the risk by entering into contracts with creditworthy organizations.
Other Financial Ratio Data
Set forth below are other financial data and ratios for the periods
indicated (in thousands, except ratio data):
Last Twelve-Months Ended
March 31, 2000
--------------
Parent EBITDA $93,192
Parent Fixed Charges $32,728
Parent EBITDA/Parent Fixed Charges 2.85
Parent EBITDA represents cash flow to Cogentrix Energy prior to debt
service and income taxes of Cogentrix Energy. Parent Fixed Charges include cash
payments made by Cogentrix Energy related to outstanding indebtedness of
Cogentrix Energy and the cost of funds associated with Cogentrix Energy's
guarantees of some of its subsidiaries' indebtedness. Parent EBITDA is not
presented here as a measure of operating results. Our management believes Parent
EBITDA is a useful measure of Cogentrix Energy's ability to service debt. Parent
EBITDA should not be construed as an alternative either (a) to operating income
(determined in accordance with generally accepted accounting principles) or (b)
to cash flows from operating activities (determined in accordance with generally
accepted accounting principles).
Interest Rate Sensitivity
We routinely enter into derivative financial instruments and other
financial instruments to hedge our risk against interest rate fluctuations. As
of March 31, 2000, there have been no significant changes in the portfolio of
instruments as disclosed in our report on Form 10-K for the year ended December
31, 1999 filed with the Commission on March 30, 2000.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
One of our indirect, wholly-owned subsidiaries is party to certain
product liability claims related to the sale of coal combustion by-products for
use in various construction projects. Management cannot currently estimate the
range of possible loss, if any, we will ultimately bear as a result of these
claims. However, our management believes - based on its knowledge of the facts
and legal theories applicable to these claims and after consultations with
various counsel retained to represent these subsidiaries in its defense of such
claims - that the ultimate resolution of these claims should not have a material
adverse effect on our consolidated financial position, results of operations or
on Cogentrix Energy's ability to generate sufficient cash flow to service its
outstanding debt.
In addition to the litigation described above, we experience other
routine litigation in the normal course of its business. Our management is of
the opinion that none of this routine litigation will have a material adverse
effect on our financial position or results of operation.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description of Exhibit
----------- ----------------------
3.1 Articles of Incorporation of Cogentrix
Energy, Inc. (3.1) (1)
3.2 Amended and Restated Bylaws of Cogentrix
Energy, Inc., as amended (3.2) (5)
4.1 Indenture, dated as of March 15, 1994,
between Cogentrix Energy, Inc. and First
Union National Bank of North Carolina, as
Trustee, including form of 8.10% 2004 Senior
Note (4.1) (2)
4.2 Indenture, dated as of October 20, 1998,
between Cogentrix Energy, Inc. and First
Union National Bank, as Trustee, including
form of 8.75% Senior Note (4.2) (3)
4.3 First Supplemental Indenture, dated as of
October 20, 1998, between Cogentrix Energy,
Inc. and First Union National Bank, as
Trustee (4.3) (3)
4.4 Registration Agreement, dated as of October
20, 1998, by and among Cogentrix Energy,
Inc., Salomon Smith Barney Inc., Goldman,
Sachs & Co. and CIBC Oppenheimer Corp. (4.4)
(3)
4.5 Registration Agreement, dated as of November
25, 1998, between Cogentrix Energy, Inc. and
Salomon Smith Barney, Inc. (4.5) (3)
4.6 Amendment No. 1 to the First Supplemental
Indenture, dated as of November 25, 1998,
between Cogentrix Energy, Inc. and First
Union National Bank, as Trustee (4.6) (4)
10.1 Guarantee, dated as of June 30, 1999,
between Cogentrix Energy, Inc. in favor of
Rathdrum Power, LLC.
10.1(a) First Amendment to Guarantee dated as of
March 8, 2000 between Cogentrix Energy, Inc.
and Rathdrum Power, LLC.
27 Financial Data Schedule, which is submitted
electronically to the U.S. Securities and
Exchange Commission for information only and
is not filed.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter covered
by this report.
(1) Incorporated by reference to Registration Statement
on Form S-1 (File No. 33-74254) filed January 19,
1994. The number designating the exhibit on the
exhibit index to such previously-filed report is
enclosed in parentheses at the end of the description
of the exhibit above.
(2) Incorporated by reference to the Form 10-K (File No.
33-74254) filed September 28, 1994. The number
designating the exhibit on the exhibit index to such
previously-filed report is enclosed in parentheses at
the end of the description of the exhibit above.
(3) Incorporated by reference to the Registration
Statement on Form S-4 (File No. 33-67171) filed
November 12, 1998. The number designating the exhibit
on the exhibit index to such previously-filed report
is enclosed in parentheses at the end of the
description of the exhibit above.
(4) Incorporated by reference to Amendment No. 1 to the
Registration Statement on Form S-4 (File No.
33-67171) filed January 27, 1999. The number
designating the exhibit on the exhibit index to such
previously-filed report is enclosed in parentheses at
the end of the description of the exhibit above.
(5) Incorporated by reference to the Form 10-K (File No.
33-74254) filed March 30, 1998. The number
designating the exhibit on the exhibit index to such
previously-filed report is enclosed in parentheses at
the end of the description of the exhibit above.
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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.
COGENTRIX ENERGY, INC.
(Registrant)
May 15, 2000 /s/Thomas F. Schwartz
--------------------------------------------
Thomas F. Schwartz
Group Senior Vice President, and
Chief Financial Officer
(Principal Financial and Accounting Officer)
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Exh. 10.1
GUARANTEE
This GUARANTEE dated as of June 30, 1999 (as amended, supplemented or
otherwise modified from time to time, this "Guarantee"), is made by COGENTRIX
ENERGY, INC., a North Carolina corporation (the "Guarantor"), in favor of
RATHDRUM POWER, LLC, a Delaware limited liability company (the "Obligee"). This
Guarantee is delivered pursuant to Section 44 of the EPC Agreement described
below. Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned thereto in the EPC Agreement.
W I T N E S S E T H
A. Obligee intends to construct and own the Project.
B. Pursuant to the Turnkey Engineering, Procurement and
Construction Agreement dated as of June 30, 1999 (as amended, supplemented,
restated or otherwise modified from time to time, the "EPC Agreement"), between
Rathdrum Construction Company, Inc., a Delaware corporation (the "Contractor"),
and Obligee, Contractor has agreed to provide design, engineering, procurement,
construction, start-up and testing for the Project on a turn-key fixed-sum
basis.
C. Obligee has agreed to enter into the EPC Agreement on the
condition, among others, that Guarantor executes and delivers this Guarantee.
D. The Guarantor, as the indirect owner of all the outstanding
shares of the capital stock of Contractor, will derive substantial economic
benefit from the EPC Agreement and is willing irrevocably and unconditionally to
guarantee certain payment obligations of Contractor under the EPC Agreement as
provided herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth above and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Guarantor hereby consents and agrees as follows:
1. Guarantee.
(a) The Guarantor hereby unconditionally and irrevocably:
(i) guarantees to the Obligee, and its respective
successors and assigns, the prompt payment in full when due of
any and all monetary liabilities (subject to the limitations
of liability specified in Section 1(c) and Section 1(d) below)
payable by Contractor under the EPC Agreement (such
obligations being
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referred to herein as the "Guaranteed Obligations"), strictly
in accordance with the terms set forth therein; and
(ii) agrees that if Contractor shall fail to pay in
full when due any of the Guaranteed Obligations, the Guarantor
will pay the same within ten (10) Business Days after notice
as provided in Section 11, and that in the case of any
extension of time of payment of any of the Guaranteed
Obligations, the same will be promptly paid in full when due
in accordance with the terms of such extension.
(b) All payments made pursuant to this Guarantee shall be made free and
clear of, and without deduction or withholding for, or on account of, any Taxes,
commissions, expenses or other charges.
(c) Notwithstanding anything to the contrary in this Guarantee, the
liability of Guarantor under this Guaranty shall not exceed:
(i) in the case of Guaranteed Obligations arising out
of (A) Capacity Liquidated Damages payable by the Contractor
pursuant to Section 19.3 of the EPC Agreement or (B) Heat Rate
Liquidated Damages payable by the Contractor pursuant to
Section 19.4 of the EPC Agreement, in each case an amount
equal to Fifteen Million Nine Hundred Thousand Dollars
($15,900,000), which limit shall be reduced dollar-for-dollar
by the amount of payments made by Contractor to Obligee in
respect of Capacity Liquidated Damages or Heat Rate Liquidated
Damages, as applicable;
(ii) in the case of Guaranteed Obligations arising
out of Schedule Liquidated Damages payable by the Contractor
pursuant to Section 20.2, an amount equal to Eight Million Six
Hundred Thousand Dollars ($8,600,000), which limit shall be
reduced dollar-for-dollar by the amount of payments made by
Contractor to Obligee in respect of Schedule Liquidated
Damages; and
(iii) in the aggregate with respect to all payments
arising out of Capacity Liquidated Damages, Heat Rate
Liquidated Damages and Schedule Liquidated Damages,
notwithstanding the limits specified in clauses (i) and (ii)
of this Section 1(c), an amount equal to twenty percent (20%)
of the Contract Amount, which limit shall be reduced
dollar-for-dollar by the amount of payments made by Contractor
to Obligee in respect of Capacity Liquidated Damages, Heat
Rate Liquidated Damages or Schedule Liquidated Damages.
(d) The aggregate liability of Guarantor under this Guarantee shall not
exceed an amount equal to twenty-five percent (25%) of the Contract Amount,
which limit shall be reduced dollar-for-dollar by the amount of payments made by
Contractor in respect of its liabilities under the EPC Contract (as so reduced
from time to time, the "Maximum Guaranteed Amount"); provided that expenditures
by Contractor or Guarantor which are reimbursed or paid from the
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proceeds of Obligee's All-Risk insurance policy shall not be credited towards
the Maximum Guaranteed Amount under this Section 1(d).
(e) This Guarantee is a guarantee of payment and not of collectibility
and is in no way conditioned on or contingent upon any attempt to enforce in
whole or in part Contractor's liabilities and obligations to Obligee subject to
Section 5(b) below and to the limitation of liability set forth in Section 1(c)
and 1(d) above. If Contractor shall fail to pay or perform any of the Guaranteed
Obligations to Obligee as and when they are due, Guarantor shall forthwith pay
(in immediately available funds) and perform such Guaranteed Obligations. Each
failure by Contractor to pay or perform any Guaranteed Obligations shall give
rise to a separate cause of action herewith, and separate suits may be brought
hereunder as each cause of action arises.
2. Obligations Absolute and Unconditional.
(a) The Guarantee is a primary obligation of Guarantor and shall be
irrevocable, absolute and unconditional and shall remain in full force and
effect until such time as all the covenants, terms and agreements of any kind or
nature whatsoever set forth in the EPC Agreement shall have been absolutely and
completely discharged and performed; and the Guaranteed Obligations of Guarantor
shall not be affected, modified or impaired upon the happening from time to time
of any event, including, without limitation, any one or more of the following
whether or not with notice to or consent of any of Guarantor or Contractor:
(i) the compromise, settlement, release (unless based
upon performance by Contractor), change, modification or
termination of any of the covenants, terms or agreements of
Contractor set forth in the EPC Agreement;
(ii) the waiver by Obligee of the payment,
performance or observance of any of the covenants, terms or
agreements of Contractor set forth in the EPC Agreement;
(iii) the extension of time for payment of any
amounts due or of the time for performance of any of the
covenants, terms or agreements of Contractor set forth in the
EPC Agreement;
(iv) the modification or amendment (whether material
or otherwise) of any covenants, terms and agreements set forth
in the EPC Agreement;
(v) the failure, omission, delay or lack on the part
of Obligee to enforce, ascertain or exercise any right, power
or remedy under or pursuant to the terms of the EPC Agreement
or this Guarantee;
(vi) the bankruptcy, insolvency or other similar or
dissimilar failure or financial disability of Contractor;
(vii) the addition, substitution or partial or entire
release (unless based upon performance by Contractor), of any
guarantor, maker or other party
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<PAGE> 4
(including Contractor) primarily or secondarily liable or
responsible for the performance and observance of any of the
covenants, terms or agreements set forth in the EPC Agreement
or by any extension, waiver, amendment or thing whatsoever
which may release a guarantor (other than performance);
(viii) the invalidity, nonbinding effect or
unenforceability of any covenant, term or agreement set forth
herein or in the EPC Agreement (other than with respect solely
to such covenant, term or agreement); or
(ix) the addition, substitution, subordination, or
partial or entire release of any security for the performance
and observance of any of the covenants, terms or agreements
set forth in the EPC Agreement.
(b) This is a continuing Guarantee and all obligations to which it
applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. In the event that, notwithstanding the
provisions of Section 2(a) hereof, this Guarantee shall be deemed revocable in
accordance with applicable law, then any such revocation shall become effective
only upon receipt by Obligee of written notice of revocation signed by
Guarantor. No revocation or termination hereof shall affect in any manner rights
arising under this Guarantee with respect to Guaranteed Obligations (i) arising
prior to receipt by Obligee of written notice of such revocation or termination,
and the sole effect of revocation and termination hereof shall be to exclude
from this Guarantee those Guaranteed Obligations thereafter arising which are
unconnected with Guaranteed Obligations theretofore arising or transactions
theretofore entered into or (ii) arising as a result of an Event of Default
under the EPC Agreement occurring by reason of the revocation or termination of
this Guarantee.
3. Representations and Warranties. Guarantor makes the representations and
warranties set forth below to Obligee as of the date hereof (all of which shall
survive the execution and delivery of this Guarantee):
(a) Guarantor is duly formed, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has the power and
authority to execute and deliver this Guarantee, to perform its obligations
hereunder and to own and operate its properties and to carry out its business as
now being conducted, and Guarantor is duly qualified and authorized to do
business and in good standing in all other jurisdictions in which it transacts
business or in which the failure to do so could have a material adverse effect
on its business;
(b) Guarantor has taken all necessary corporate and legal action to
authorize the execution and delivery of this Guarantee and the performance of
its obligations hereunder;
(c) all governmental authorizations and actions necessary in connection
with the execution and delivery by Guarantor of this Guarantee and the
performance of its obligations hereunder have been obtained or performed and
remain valid and in full force and effect;
(d) this Guarantee has been duly executed and delivered by Guarantor
and constitutes the legal, valid and binding obligation of Guarantor,
enforceable against Guarantor in accordance
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<PAGE> 5
with the terms of this Guarantee, subject to applicable bankruptcy, insolvency
and other similar laws affecting creditors' rights generally;
(e) the execution, delivery and performance of this Guarantee (i) do
not and shall not contravene any provisions of Guarantor's certificate of
incorporation or bylaws, or any law, rule, regulation, order, judgment or decree
applicable to or binding on Guarantor or any of its affiliates or properties;
(ii) do not and shall not contravene, or result in any breach of or constitute
any default under, any agreement or instrument to which Guarantor is a party or
by which Guarantor or any of its properties may be bound or affected; (iii) do
not and shall not require the consent of any person, or declaration of filing
with any person, under any existing law or agreement which has not already been
obtained; and (iv) do not and shall not result in or require the creation of any
lien upon or with respect to any property now or hereafter owned by Guarantor
(except as contemplated by this Guarantee);
(f) there is no pending or, to the best of Guarantor's knowledge,
threatened action or proceeding affecting Guarantor before any court,
governmental agency or arbitrator, which might reasonably be expected to
materially and adversely affect the financial condition, results of operations,
business or prospects of Guarantor or the ability of Guarantor to perform its
obligations under this Guarantee;
(g) Guarantor possesses all franchises, certificates, licenses, permits
and other governmental authorizations and approvals necessary for it to own its
properties, conduct its businesses and perform its obligations under this
Guarantee;
(h) Guarantor is not an investment company or a company controlled by
an investment company, within the meaning of the Investment Company Act of 1940;
(i) Guarantor has established adequate means of obtaining financial and
other information pertaining to the businesses, operations and condition
(financial and otherwise) of Contractor and its properties on a continuing
basis, and Guarantor now is and hereafter shall be completely familiar with the
businesses, operations and condition (financial and otherwise) of Contractor and
its properties;
(j) (i) Guarantor is not, and shall not as a result of the execution
and delivery of this Guarantee, be rendered insolvent, (ii) Guarantor does not
intend to incur, or believe it is incurring, obligations beyond its ability to
pay and (iii) Guarantor's property remaining after the delivery and performance
of this Guarantee shall not constitute unreasonably small capital; and
(k) all information, reports and other data with respect to Guarantor
furnished to Obligee were, at the time the same were so furnished, complete and
correct in all material respects, to the extent necessary to give Obligee a true
and accurate description of the subject matter therein. No fact is known to
Guarantor which materially or adversely affects or in the future may (so far as
it can reasonably foresee) materially and adversely affect the business, assets
and liabilities, financial condition, results of operations or business
prospects of Guarantor which has not been otherwise disclosed in writing to
Obligee.
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4. Covenants. So long as any Guaranteed Obligations are outstanding,
Guarantor agrees that:
(a) it shall maintain in full force and effect all consents of any
governmental or other authority that are required to be obtained by it with
respect to this Guarantee and shall obtain any that may become necessary in the
future;
(b) it shall comply in all material respects with all applicable laws
and orders to which it may be subject if failure so to comply would materially
impair its ability to perform its obligations under this Guarantee;
(c) promptly, and in any event within thirty (30) business days after
obtaining knowledge thereof, it shall give to Obligee notice of the occurrence
of any event or of any litigation or governmental proceeding pending (i) against
Guarantor or any of its affiliates which could affect the business, operations,
property, assets or condition (financial or otherwise) of Guarantor so as to
materially and adversely affect the ability of Guarantor to perform its
obligations hereunder or (ii) with respect to this Guarantee, which event or
pending proceeding is likely to materially and adversely affect the business,
operations, property, assets or condition (financial or otherwise) of Guarantor
taken as a whole; and
(d) it shall comply with its certificate of incorporation.
5. Waiver.
(a) To the extent permitted by applicable law, Guarantor hereby waives
and relinquishes all rights and remedies accorded by applicable law to sureties
or guarantors and agrees not to assert or take advantage of any such rights or
remedies, including without limitation (i) any right to require Obligee to
proceed against Contractor or any other person or to proceed against or exhaust
any security held by Obligee at any time or to pursue any other remedy in
Obligee's power before proceeding against Guarantor, (ii) any defense that may
arise by reason of the incapacity, lack of power or authority, death,
dissolution, merger, termination or disability of Contractor or any other Person
or the failure of Obligee to file or enforce a claim against the estate (in
administration, bankruptcy or any other proceeding) of Contractor or any other
Person, (iii) demand, presentment, protest and notice of any kind, including,
without limitation, notice of the existence, creation or incurring of any new or
additional indebtedness or obligation or of any action or non-action on the part
of Contractor, Obligee, any endorser or creditor of Contractor or Guarantor or
on the part of any other person under this or any other instrument in connection
with any obligation or evidence of indebtedness held by Obligee as collateral or
in connection with any Guaranteed Obligations, (iv) any defense based upon an
election of remedies by Obligee, (v) any defense based on any offset against any
amounts which may be owed by any Person to Guarantor for any reason whatsoever,
other than offsets to which Contractor is entitled under the EPC Agreement, (vi)
any defense based on any act, failure to act, delay or omission whatsoever on
the part of Contractor or the failure by Contractor to do any act or thing or to
observe or perform any covenant, condition or agreement to be observed or
performed by it under the EPC Agreement, (vii) any defense based upon any
statute or rule of law which
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provides that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal, provided that, upon
payment in full of the Guaranteed Obligations, this Guarantee shall no longer be
of any force or effect, (viii) any duty on the part of Obligee to disclose to
Guarantor any facts Obligee may now or hereafter know about Contractor,
regardless of whether Obligee has reason to believe that any such facts
materially increase the risk beyond that which Guarantor intends to assume, or
has reason to believe that such facts are unknown to Guarantor, or has a
reasonable opportunity to communicate such facts to Guarantor, since Guarantor
acknowledges that it is fully responsible for being and keeping informed of the
financial condition of Contractor and of all circumstances bearing on the risk
of non-payment of any obligations and liabilities hereby guaranteed, (ix) the
fact that Guarantor may at any time in the future dispose of all or part of its
direct or indirect interest in Contractor, (x) any defense based on any change
in the time, manner or place of any payment under, or in any other term of, the
EPC Agreement or any other amendment, renewal, extension, acceleration,
compromise or waiver of or any consent or departure from the terms of the EPC
Agreement, (xi) any defense arising because of Obligee's election, in any
proceeding instituted under the Federal Bankruptcy Code, of the application of
Section 1111(b)(2) of the Bankruptcy Law, or equivalent provisions of the laws
or regulations of any other jurisdiction with respect to actions or other
proceedings, or any successor provision of law of similar import, (xii) any
defense based upon any borrowing or grant of a security interest under Section
364 of the Bankruptcy Law, or equivalent provisions of the laws or regulations
of any other jurisdiction with respect to actions or other proceedings, or any
successor provision of law of similar import, or (xiii) any protection it may be
entitled to under Sections 365 (c)(1) and 365 (c)(2) of the Bankruptcy Law, or
equivalent provisions of the laws or regulations of any other jurisdiction with
respect to actions or other proceedings, or any successor provision of law of
similar import.
(b) Except as expressly waived hereunder, Guarantor retains the right
to assert and take advantage of any right or remedy not expressly waived
pursuant hereto, including without limitation the defenses, offsets or claims
available to Contractor under the EPC Agreement but excluding any defense, right
or remedy that would otherwise be available to Guarantor (but not Contractor) by
virtue of Guarantor's status as a surety or guarantor hereunder.
6. No Subrogation. Unless and until all obligations of Contractor under
the EPC Agreement have been indefeasibly paid in full, Guarantor shall not have
any right of subrogation and Guarantor waives any claim, right or remedy which
Guarantor may now have or hereafter acquire against Contractor that arises
hereunder and/or from the performance by Guarantor hereunder whether or not such
claim, right or remedy arises in equity, under contract, by statute, under
common law or otherwise.
7. Bankruptcy.
(a) So long as any of the Guaranteed Obligations are owed to Obligee,
Guarantor shall not, without the prior written consent of Obligee, commence, or
join with any other Person in commencing, any bankruptcy, reorganization, or
insolvency proceeding against Contractor. The obligations of Guarantor under
this Guarantee shall not be altered, limited or affected by any proceeding,
voluntary or involuntary, involving the bankruptcy, reorganization, insolvency,
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receivership, liquidation or arrangement of Contractor, or by any defense which
Contractor may have by reason of any order, decree or decision of any court or
administrative body resulting from any such proceeding.
(b) So long as any Guaranteed Obligations are owed to Obligee, to the
extent of such Guaranteed Obligations, Guarantor shall file, in any bankruptcy
or other proceeding in which the filing of claims is required or permitted by
law, all claims which Guarantor may have against Contractor relating to any
indebtedness of Contractor to Guarantor, and hereby assigns to Obligee all
rights of Guarantor thereunder. If Guarantor does not file any such claim,
Obligee, as attorney-in-fact for Guarantor, is hereby authorized to do so in the
name of Guarantor or, in Obligee's discretion, to assign the claim to a nominee
and to cause proofs of claim to be filed in the name of Obligee's nominee. The
foregoing power of attorney is coupled with an interest and cannot be revoked.
Obligee or its nominee shall have the sole right to accept or reject any plan
proposed in any such proceeding and to take any other action which a party
filing a claim is entitled to take. In all such cases, whether in
administration, bankruptcy or otherwise, the person authorized to pay such a
claim shall pay the same to Obligee to the extent of any Guaranteed Obligations
which then remain unpaid, and, to the full extent necessary for that purpose,
Guarantor hereby assigns to Obligee all of Guarantor's rights to all such
payments or distributions to which Guarantor would otherwise be entitled;
provided, however, that Guarantor's obligations hereunder shall not be satisfied
except to the extent that Obligee receives cash by reason of any such payment or
distribution. If Obligee receives anything hereunder other than cash, the same
shall be held as collateral for amounts due under this Guarantee.
8. Successions or Assignments.
(a) This Guarantee shall inure to the benefit of the successors or
assigns of Obligee who shall have, to the extent of their interest, the rights
of Obligee hereunder. Obligee is entitled to assign its rights under this
Guarantee to any person without the consent of Guarantor.
(b) This Guarantee is binding upon Guarantor and its successors and
assigns. Guarantor is not entitled to assign its obligations hereunder to any
other person without the written consent of Obligee, and any purported
assignment in violation of this provision shall be void.
9. Waivers.
(a) No delay on the part of Obligee in exercising any of its rights
(including those hereunder) and no partial or single exercise thereof and no
action or non-action by Obligee with or without notice to Guarantor or anyone
else shall constitute a waiver of any rights or shall affect or impair this
Guarantee.
(b) GUARANTOR HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTEE OR RELATING TO THE
SUBJECT MATTER OF THIS GUARANTEE AND THE RELATIONSHIP BETWEEN GUARANTOR AND
OBLIGEE THAT IS BEING
8
<PAGE> 9
ESTABLISHED. GUARANTOR ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT OBLIGEE HAS ALREADY RELIED ON THE
WAIVER IN ENTERING INTO THIS GUARANTEE, AND THAT OBLIGEE SHALL CONTINUE TO RELY
ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. GUARANTOR FURTHER WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.
10. Interpretation. The section headings in this Guarantee are for
convenience of reference only and shall not affect the meaning or construction
of any provision hereof.
11. Notices. All notices in connection with this Guarantee shall be given
by telex or cable or by notice in writing hand-delivered or sent by facsimile
transmission or by certified mail return-receipt requested (airmail, if
overseas), postage prepaid. All such notices shall be sent to the appropriate
telex or telecopier number or address, as the case may be, set forth in Section
15 below or to such other number or address as shall have been subsequently
specified by written notice to the other party, and shall be sent with copies,
if any, as indicated below. All such notices shall be effective upon receipt,
and confirmation by answerback of any such notice so sent by telex shall be
sufficient evidence of receipt thereof.
12. Amendments. This Guarantee may be amended only with the written consent
of the parties hereto.
13. Jurisdiction; Governing Law.
(a) Any action or proceeding relating in any way to this Guarantee may
be brought and enforced in the courts of the State of New York sitting in the
County of New York or of the United States for the Southern District of New
York. Any such process or summons in connection with any such action or
proceeding may be served by mailing a copy thereof by certified or registered
mail, or any substantially similar form of mail, or in any other manner
permitted by law addressed to Guarantor as provided for notices hereunder.
(b) This Guarantee and the rights and obligations of Obligee and of
Guarantor shall be governed by and construed in accordance with the law of the
State of New York without reference to principles of conflicts of laws (other
than Section 5-1401 of the New York General Obligations Law).
14. Integration of Terms. This Guarantee contains the entire agreement
between Guarantor and Obligee relating to the subject matter hereof and
supersedes all oral statements and prior writings with respect hereto.
9
<PAGE> 10
15. Addresses.
The address of Guarantor for notices is:
Cogentrix Energy, Inc.
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273-8110
Attention: General Counsel
Telephone Number: (704) 525-3800
Telecopier Number: (704) 529-1006
The address of Obligee for notices is:
Rathdrum Power, LLC
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273-8110
Attention: General Counsel
Telephone Number: (704) 525-3800
Telecopier Number: (704) 529-1006
with a copy to:
Avista Rathdrum, LLC
201 W. North River Drive, Suite 610
Spokane, Washington 99201
Attn: President
Phone: (509) 495-8700
Telefax:(509) 495-8103
and
Cogentrix of Rathdrum, Inc.
9405 Arrowpoint Boulevard
Charlotte, North Carolina 28273-8110
Attn: General Counsel
Phone: (704) 525-3800
Telefax:(704) 529-1006
16. Interest; Collection Expenses. Any amount required to be paid by
Guarantor pursuant to the terms hereof shall bear interest at the maximum rate
permitted by law from the date due until paid in full. If Obligee is required to
pursue any remedy against Guarantor hereunder, Guarantor shall pay to Obligee,
upon demand, all reasonable attorneys' fees and expenses and all other costs and
expenses incurred by Obligee in enforcing this Guarantee.
17. Reinstatement of Guarantee. This Guarantee shall continue to be
effective or be reinstated, as the case may be, if at any time any payment to or
on behalf of Contractor or to
10
<PAGE> 11
Obligee by Contractor under the EPC Agreement or by Guarantor hereunder is
rescinded or must otherwise be returned by Obligee upon the insolvency,
bankruptcy, reorganization, dissolution or liquidation of Contractor or
otherwise, all as though such payment had not been made.
18. Further Assurances. Guarantor and Obligee hereby agree to execute and
deliver such other instruments, and take such other action, as the other party
may reasonably request in furtherance of the transactions contemplated by this
Guarantee.
19. Tax. In addition to any amount due to Obligee by Contractor under the
EPC Agreement, and payable by Guarantor under the terms of this Guarantee,
Guarantor shall be liable for any duty, impost, levy, charge, fee, or tax of
whatsoever nature ("Tax") levied or imposed by a governmental entity on or with
regard to any payment hereunder unless the payment, if made by Contractor, would
itself have been subject to the Tax. If under applicable law Guarantor is unable
to pay the Tax and Obligee is required to pay the Tax, the amount to be paid to
Obligee hereunder shall be increased by an amount sufficient so that such
payment, net of the Tax, would equal the payment Obligee would have received
from Contractor, net of any Taxes applicable to payment from Contractor to
Obligee. Obligee agrees to take all reasonable steps to mitigate or eliminate
any tax payable by Guarantor under this Section 19.
20. Counterparts. The Guarantee may be executed in one or more duplicate
counterparts, and when executed and delivered by all of the parties listed below
shall constitute a single binding agreement.
IN WITNESS WHEREOF, Guarantor has caused this Guarantee to be duly
executed and delivered as of the day and year first written above.
COGENTRIX ENERGY, INC.,
as Guarantor
By:
------------------------------
Name:
Title:
Agreed to and accepted by:
RATHDRUM POWER, LLC,
as Obligee
By: Cogentrix of Rathdrum, Inc.,
its Manager
By:
---------------------------
Name:
Title:
11
<PAGE> 1
Exh. 10.1(a)
FIRST AMENDMENT TO GUARANTEE
This FIRST AMENDMENT TO GUARANTEE (this "First Amendment"),
dated as of March 8, 2000, by Cogentrix Energy, Inc., a North Carolina
corporation ("Guarantor"), and Rathdrum Power, LLC, a Delaware limited liability
company ("Obligee").
W I T N E S S E T H:
WHEREAS, Pursuant to the Turnkey Engineering, Procurement and
Construction Agreement dated as of June 30, 1999 (as amended, supplemented,
restated or otherwise modified from time to time, the "EPC Agreement"), between
Rathdrum Construction Company, Inc., a Delaware corporation ("Contractor") and
Obligee, Contractor has agreed to provide design, engineering, procurement,
construction, start-up and testing for the Project on a turn-key fixed-sum
basis.
WHEREAS, Guarantor is the 100% indirect owner of Contractor.
WHEREAS, Guarantor has executed and delivered a Guarantee in
favor of Obligee dated as of June 30, 1999, (as amended, supplemented, restated
or otherwise modified from time to time, the "Parent Guarantee"); and
WHEREAS Guarantor and Obligee desire to amend the Parent
Guarantee pursuant to the terms set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree to amend the Parent
Guarantee as follows:
A G R E E M E N T:
SECTION 1. DEFINITIONS AND INTERPRETATION. Capitalized terms used and
not otherwise defined herein shall have the meanings assigned to them in Section
1.1 of the EPC Agreement.
SECTION 2. GUARANTEE. Section 1 of the Parent Guarantee is hereby
amended by:
(a) replacing the phrase "any and all monetary liabilities" in Section
1(a)(i) thereof with the phrase "any and all payments that are required to be
made by Contractor", and by deleting the phrase "payable by Contractor" in such
Section 1(a)(i)";
(b) replacing the phrase "ten (10) Business days" in Section 1(a)(ii)
thereof with the phrase "five (5) Business Days";
<PAGE> 2
(c) deleting the phrase "an amount equal to twenty percent (20%) of the
Contract Amount" in Section 1(c)(iii) thereof and replacing it with the
following:
"an amount equal to twenty three percent (23%) of the Contract Amount";
and
(d) deleting Section 1(d) in its entirety and replacing it with the
following:
(e) The aggregate liability of Guarantor under this Guarantee,
including, without limitation, its maximum liability for liquidated
damages set forth in Section 1(c)(iii), shall not exceed an amount
equal to one hundred percent (100%) of the Contract Amount, which limit
shall be reduced dollar-for-dollar by the amount of payments made by
Contractor in respect of its liabilities under the EPC Contract (as so
reduced from time to time, the "Maximum Guaranteed Amount"). Any
expenditures by Contractor or Guarantor which are reimbursed or paid
from the proceeds of Obligee's All-Risk insurance policy shall not be
credited towards the Maximum Guaranteed Amount under this Section 1(d).
SECTION 3. OBLIGATIONS ABSOLUTE AND UNCONDITIONAL. Section 2(b) of the
Parent Guarantee is hereby amended by deleting the second and third sentences
thereof.
SECTION 4. MISCELLANEOUS.
(a) Execution and Effectiveness of this First Amendment. This First
Amendment is executed and shall be construed as a first amendment to the Parent
Guarantee and, as provided in the Parent Guarantee, this First Amendment forms a
part thereof. This First Amendment shall be effective as of the date hereof upon
the execution and delivery of this First Amendment by Guarantor and Obligee.
(b) Representations and Warranties. Guarantor and Obligee hereby
represent and warrant to each other that (i) all consents, approvals and
authorizations necessary for such Person's execution, delivery and performance
of this First Amendment have been obtained or made and (ii) this First Amendment
has been duly executed and delivered by, and constitutes a legal, valid and
binding obligation of, such Person enforceable against such Person in accordance
with its terms.
(c) Waiver. This First Amendment is made in amendment and modification
of, but not extinguishment of, the obligations set forth in the Parent Guarantee
and, except as specifically modified pursuant to the terms of this First
Amendment, the terms and conditions of the Parent Guarantee remain in full force
and effect.
(d) Counterparts. This First Amendment may be executed in counterparts,
all of which shall constitute one agreement binding on all parties hereto and
shall have the same
2
<PAGE> 3
force and effect as an original instrument, notwithstanding that each party may
not be signatories to the same original or the same counterpart.
(e) Severability. If any term or provision of this First Amendment or
the application thereof to any Person or circumstance is held to be illegal,
invalid or unenforceable under any present or future Applicable Law or by any
governmental authority, (i) such term or provision shall be fully severable,
(ii) this First Amendment shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (iii) the
remaining provisions of this First Amendment shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) the parties shall negotiate in
good faith to enter into such modifications of this First Amendment as may be
necessary to preserve the economic and other benefits of this First Amendment to
the affected party to the greatest extent possible and permissible.
(f) Governing Law. This First Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York (exclusive of
conflicts of laws provisions).
(g) Headings. The headings contained in this First Amendment are solely
for the convenience of the parties hereto and should not be used or relied upon
in any manner in the construction or interpretation of this First Amendment.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be duly executed by their respective authorized officers as of the day and
year first above written.
COGENTRIX ENERGY, INC.
By:
--------------------------------------
Name:
Title:
RATHDRUM POWER, LLC
By: Cogentrix of Rathdrum, Inc.,
its Manager
By:
------------------------------
Name:
Title:
4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COGENTRIX
ENERGY, INC.'S CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 103,533
<SECURITIES> 0
<RECEIVABLES> 64,955
<ALLOWANCES> 0
<INVENTORY> 19,748
<CURRENT-ASSETS> 189,977
<PP&E> 700,970
<DEPRECIATION> 272,409
<TOTAL-ASSETS> 2,043,425
<CURRENT-LIABILITIES> 172,050
<BONDS> 1,549,575
0
0
<COMMON> 130
<OTHER-SE> 139,535
<TOTAL-LIABILITY-AND-EQUITY> 2,043,425
<SALES> 89,340
<TOTAL-REVENUES> 137,462
<CGS> 81,718
<TOTAL-COSTS> 81,718
<OTHER-EXPENSES> 2,945
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,297
<INCOME-PRETAX> 29,502
<INCOME-TAX> 11,644
<INCOME-CONTINUING> 17,858
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,858
<EPS-BASIC> 63.33
<EPS-DILUTED> 63.33
</TABLE>
