<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT TO STOCKHOLDERS
and
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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 1-13264
TRIGEN ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3378939
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One Water Street
White Plains, New York 10601-1009
(Address of principal executive offices) (Zip Code)
(914) 286-6600
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, Par Value $.01 Per Share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates
of the registrant was $64,624,817.56 based upon the closing sale
price quoted by the New York Stock Exchange on March 25, 1998.
There were 12,393,959 shares of the registrant's Common Stock
outstanding on March 25, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Information called for in Part III of this Form 10-K is
incorporated by reference from the registrant's definitive proxy
statement to be filed in connection with its 1998 annual meeting
of shareholders which will be held on May 13, 1998.
<PAGE>
TABLE OF CONTENTS
Page
Definitions 3
- PART I -
Disclosure Regarding Forward-Looking Statements 4
Item 1. Business 4
Item 2. Properties 10
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a
Vote of Security Holders 12
- PART II -
Item 5. Market for Registrant's Common
Stock and Related Shareholder Matters 13
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 14
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk 19
Item 8. Financial Statements
and Supplementary Data 19
Item 9. Changes in and Disagreements with Accountants
On Accounting and Financial Disclosure 19
- Part III -
Item 10. Directors and Executive Officers of the Company 20
Item 11. Executive Compensation 20
Item 12. Security Ownership of Certain
Beneficial Owners and Management 20
Item 13. Certain Relationships and Related Transactions 20
- Part IV -
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 20
Index to Financial Statements and
Financial Statement Schedules F-1
<PAGE>
DEFINITIONS
The following is a glossary of certain terms used in this Annual
Report :
- -----------------------------------------------------------------
Annual Report This Annual Report to Stockholders and
Form 10-K Annual Report Pursuant to Section
13 Or 15(D) of the Securities Exchange Act
of 1934 for the fiscal year ended December
31, 1997.
Common Stock Trigen Energy Corporation Common Stock,
Par Value $.01 Per Share.
Company Trigen Energy Corporation
together with its wholly owned subsidiaries.
FERC Federal Energy Regulatory Commission.
Grays Ferry
Cogeneration Facility 150 megawatt gas- or oil-fired
combined cycle cogeneration facility located
in downtown Philadelphia which is owned by Grays
Ferry Partnership
Grays Ferry
Partnership Grays Ferry Cogeneration Partnership, a
Pennsylvania single purpose partnership of which
the Company's subsidiary, Trigen-Schuylkill Energy
Corporation holds a one-third interest.
KWH Kilowatt-Hour(S).
MW Megawatt(S).
OG&E Oklahoma Gas and Electric Company
Partnership The Grays Ferry Cogeneration Partnership
(See above).
PECO PECO Energy Company
PURPA The Public Utility Regulatory Policies Act of 1978.
SEC Securities And Exchange Commission
Shareholders Holders Of Common Stock.
Trigen or the
Parent Company Trigen Energy Corporation
Trigen Canada Trigen Energy Canada Inc., a wholly owned
subsidiary of Trigen.
Trigen-Oklahoma
City Trigen-Oklahoma City Energy Corporation
Trigen-Philadelphia Trigen-Philadelphia Energy Corporation
USEPA The United States Environmental
Protection Agency
UTC United Thermal Corporation
<PAGE>
PART I
Disclosure Regarding Forward-Looking Statements
This Annual Report includes historical information as well
as statements regarding the future expectations of Trigen Energy
Corporation and its wholly owned subsidiaries (collectively
referred to as the "Company"). The statements regarding the
future (referred to as "forward-looking statements") include
among other things statements about energy markets in 1998; cost
reduction targets; return on capital goals; development,
production and acceptance of new products and process technologies;
ongoing and planned capacity additions and expansions and joint
ventures. Important factors that could cause actual results to
differ materially from those discussed in such forward-looking
statements include: supply/demand balance for the Company's
products, competitive pricing pressures, weather patterns,
changes in industry laws and regulations, competitive technology
positions and failure to achieve the Company's cost reduction
targets or complete construction projects on schedule. The
Company believes in good faith that the forward-looking
statements in this Annual Report have a reasonable basis,
including without limitation, management's examination of
historical operating trends, data contained in the records of
the Company and other data available from third parties, but
there can be no guarantee that the expectations described in
these forward looking statements will be fulfilled or
accomplished.
Item 1. Business
General
Trigen Energy Corporation was incorporated under the laws of
Delaware on November 21, 1986. The Company develops, owns and
operates commercial district energy systems, industrial thermal
power facilities and cogeneration facilities. As a small part of
its operations, the Company sells small back-pressure steam
turbines and pipeline insulation products which enhance the
efficiency of steam distribution networks. The Company also
provides total energy management services to building owners and
operators by providing operational services and management
expertise with respect to energy production, procurement and
usage.
The Company serves more than 1,500 customers with energy
produced at 30 plants in 22 locations. The Company's major
customers include industrial plants, electric utilities,
commercial and office buildings, government buildings, colleges
and universities, hospitals, residential complexes, hotels, sports
arenas and convention centers. The two largest customers of the
Company are Coors' Brewing Company and Long Island Lighting
Company (See Note #2 to Consolidated Financial Statements,
Revenue and Cost Recognition). A significant portion of the
Company's revenues and operating profit from sales of thermal
energy is subject to seasonal fluctuations (See Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations).
The Company's mission is to provide heating, cooling and
electricity with half the fossil fuel and half the pollution of
conventional generation. The Company considers itself a thermal
sciences company which uses its expertise in thermodynamic
engineering and proprietary cogeneration processes to convert
fuel to various forms of thermal energy and electricity at more
efficient conversion rates than conventional processes.
A district energy system consists of a central production
plant that distributes steam and/or hot water or chilled water to
customer facilities through underground distribution pipes.
Cogeneration is the conversion of a single fuel source into two
useful energy products, such as steam and electricity, with a
greater efficiency than is possible by producing the two products
separately. At six of its cogeneration facilities, the Company
has expanded cogeneration to "trigeneration", which is the
generation of steam or hot water, electricity and chilled water.
In addition, the Company incorporates in its systems innovative
applications for standardized, modular equipment to improve
productivity.
<PAGE>
Growth
The Company's revenues have increased from approximately $1
million in 1987 (its first full year of operation) to $240.6
million in 1997 through acquisition and internal growth. This
Annual Report includes Consolidated Statements of Operations
which report the Company's revenues and operating income for the
last three fiscal years. The Company had total assets at the end
of 1997 of $525,969,000, at the end of 1996 of $494,436,000 and
at the end of 1995 of $454,906,000.
The amount and percentage of total revenue contributed by
thermal energy sales and electric energy sales for the last three
years is reported in Item 7 of this Annual Report ("Management's
Discussion and Analysis of Financial Condition and Results of
Operations"). The amount of revenue, operating profit or loss
attributable to export sales outside the United States for the
last three years was not material to the Company.
In December 1993, the Company acquired United Thermal
Corporation ("UTC"), which operated steam-only district energy
systems in four communities. This acquisition more than doubled
the Company's 1993 revenues on a pro forma basis.
During 1995, the Company acquired a waste-to-energy district
energy system serving the Province of Prince Edward Island in
Canada. In 1995, the Company and a subsidiary of Tucson Electric
Power Company formed a limited partnership which purchased the
energy systems of Coors' Brewing Company and Coors Energy Company
in Golden, Colorado. The Company has a 51% interest in that
partnership.
In January 1996, the Company acquired the privately-held
Ewing Power, a systems integrator of steam turbine cogenerator
systems. In March 1996, the Company's subsidiary,
Trigen-Schuylkill Energy Corporation, acquired a one-third
interest in Grays Ferry Cogeneration Partnership, a Pennsylvania
single purpose partnership that operates a 150 megawatt ("MW")
gas- or oil-fired combined cycle cogeneration facility located in
downtown Philadelphia (the "Grays Ferry Cogeneration Facility").
The Grays Ferry Cogeneration Facility commenced operation on
January 13, 1998. Upon the achievement of full commercial
operation and conversion of the related construction loan to a
term loan, Trigen-Schuylkill will operate the Grays Ferry
Cogeneration Facility as managing partner.
In January 1998, the Company acquired Power Sources, Inc.,
which has been renamed Trigen-BioPower, Inc. Trigen-BioPower
operates seven biomass-to-energy plants, producing steam for
industrial customers from renewable biomass fuels including wood
residues, rice hulls, cotton waste and paper mill sludge.
Joint Ventures
In March 1996, the Company entered into a joint venture with
the privately held Gentor Industries, S.A. de C.V. of
Monterrey, Mexico to complete the installation and utilization of
36 MW of new cogeneration capacity and develop additional
cogeneration opportunities in Mexico.
In November, 1996, the Company entered into a joint venture
with Hydro-Quebec to provide a range of energy services
throughout New England and upstate New York. The Company and
Hydro-Quebec are currently discussing changes to their
relationship in order to further expand their common business in
the U.S. and Canada.
In December 1996, the Company entered into a joint venture
with Cinergy Corp. to build, own and operate cogeneration and
trigeneration facilities throughout the United States, Canada,
the United Kingdom and Ireland, subject to certain exclusions
resulting from pre-existing agreements.
In June 1997, the Company entered into a joint venture with
Nova Scotia Power Incorporated to develop district energy and
co-generation opportunities in Nova Scotia, New Brunswick and
Newfoundland, Canada.
In November 1997, the Company entered into a joint venture
with Stockholm Energi AB to extend the Company's urban steam
systems with hot water distribution to less dense areas outside
of urban centers.
The Company has entered these joint ventures to enable it
to offer a complete package of energy commodity and energy
production services, to reach more customers, and to be in a
position to participate in the anticipated deregulated
electricity market.
Business Strategy
Significant opportunities for the Company's continued growth
include: expanding existing systems to serve additional customers
or the expanded needs of existing customers, acquiring systems or
assuming management of additional systems, adding new services to
its systems and developing new systems to provide district energy
or independent power wherever the Company's expertise provides a
competitive advantage.
Key elements of the Company's growth and profitability have
included the following:
- - Economies of Scale. The Company's growth is attributable in
large part to the inherent economies of scale of district energy
systems (when compared to individual customer production of
heating and cooling). These advantages include the utilization
of large efficient machinery, labor savings, the ability to serve
diverse peak requirements of various customers, and
specialization in energy production and distribution. In many
locations, these advantages outweigh the limitations of district
energy systems, which often involve significant capital
expenditures in the initial stages of construction or expansion
and generally require a high density of customer buildings.
- - Stable Customer Base. The Company's long-term contracts
(i.e., contracts with terms of five years or more) would provide
pro forma consolidated revenues of over $175 million per year for
the five-year period 1998 through 2002 and approximately $3
billion cumulatively for the period 1998 through 2025 (assuming,
among other things, no inflation and no changes in consumption or
prices from 1997 levels). Since customers with short-term
contracts do not operate boiler rooms and chillers, and in most
cases do not even have such equipment, customer attrition has
been low.
- - Technical Innovation and Plant Optimization. The Company
has developed computerized, automated control systems, typically
installed in large-scale generating facilities, which place
real-time production cost information in the hands of its plant
operators. In addition, patents have been granted for certain of
its trigeneration and chilling technologies.
- - Natural Barriers to Entry. Once a system is in place, the
Company benefits from natural barriers to entry by anyone trying
to create a competing system and is able to add customers within
reach of its installed systems at a relatively low additional
cost (although not all potential customers can be added on a
cost-effective basis).
- - Expansion to Industrial Plants. While the Company continues
to grow its business of district heating and cooling, there
appear to be growing opportunities to provide combined heat and
power at industrial sites. The Company's newly acquired
subsidiary Trigen-BioPower produces steam for industrial
customers from renewable biomass fuels, including wood residues,
rice hulls, cotton waste, and paper mill sludge.
- - Rate Structures. Because the Company's rate structures
typically enable it to pass through to its customers fuel and
most other commodity prices, changes in such prices (which
constitute approximately 50% of the Company's costs) have
little impact on operating income. However, the Company is
not a monopoly provider and its rates must remain cost
competitive.
- - Reduced Environmental Impact. The Company produces
substantially less pollutants than would result from conventional
generation of the same heat, electricity, and cooling. This is
due to the fuel efficiency of cogeneration and trigeneration, the
use of biomass fuels (which minimizes the release of carbon
dioxide into the atmosphere), employment of refrigerants other
than CFCs wherever possible, thermal, chemical, and catalytic
destruction of exhaust contaminants, and extensive automation
with continuous emission monitoring in some locations, among
other means.
- - Entrepreneurial Management. The Company's senior management
has extensive experience in the development and operation of
district energy systems and cogeneration technologies, and has a
track record of technical and financial innovation. Senior
management as a group hold approximately 13.7% percent of the
Company's outstanding common stock.
Overview of the Company's Products and Services
The Company's plants have the capacity to produce 4,733MW
equivalent of energy, of which approximately 85% is steam or hot
water, 8% is electricity and 7% is chilled water. These products
are distributed to customers through 126 miles (203 kilometers)
of pipeline, a substantial portion of which was in place when
such systems were acquired by the Company. Separate pipelines
are used for steam, hot water and chilled water.
Where electricity is produced with diesel or gas turbines,
exhaust heat is recovered for production of additional
electricity, steam or hot water and/or chilled water. In
trigeneration plants, chilled water is produced using a
compressor which is powered by the diesel or gas turbine used to
produce electricity, steam or hot water. Because demand for
steam and hot water has daily and yearly cycles, the Company
cannot always use all the waste heat generated by its plants to
produce steam and hot water for immediate use. Trigeneration
plants and innovative use of standard modular equipment enable
the Company to recover and use waste heat to produce electricity
or chilled water for a longer period of time each day, during
both summer and winter.
By generating two or three energy products from a single fuel
source, cogeneration and trigeneration yield more useful energy
output. For example, the average electricity plant in the United
States delivered an estimated 33% of its fuel as useful energy in
1997, releasing the remaining 67% into the environment. The
Company estimates that in the same year its systems converted
approximately 66% of their fuel to useful energy.
Substantially all of the Company's facilities have sufficient
heating capacity so that they can generate peak loads even
without their largest production unit in service, and have the
ability to use two or more different types of fuel in their
systems. Maintaining this capacity, which requires the Company
to increase steam generating capacity from time to time, has
enabled the Company to achieve high levels of reliability of
service.
Steam and Hot Water. The Company produces steam and/or hot
water at substantially all of its systems. Some of this is used
internally to drive chillers; most is sold to customers for space
heating and hot water, for cooling (by powering on-site
steam-driven chillers or absorption chillers), and for
humidification, sterilization and various industrial process
uses.
The States of Maryland, Massachusetts, Missouri, New Jersey
and Pennsylvania regulate the Company's steam service. Maryland
and Pennsylvania require the Company to seek State regulatory
approval of the Company's prices for steam service in those
states. Missouri requires the Company to seek State regulatory
approval of the Company's prices for steam service from the
Company's Kansas City facilities. Massachusetts and New Jersey
do not require the Company to seek State regulatory approval of
the Company's prices for steam service in those States.
Electricity. The Company produces electricity at ten of its
plants. At each of these plants, all of the electricity produced
is either sold to the local utility company or used by the
Company internally in the production of steam and hot water or to
drive mechanical chillers. The Company's electric generating
plants which sell their power are located in Colorado, Nassau
County, Philadelphia, Trenton and Kansas City. Each of these
plants is qualified for an exemption from regulation ("Qualifying
Facilities") under the Public Utility Regulatory Policies Act of
1978 ("PURPA").
Chilled Water. At eight of its facilities, the Company
produces chilled water, which is provided to customers to cool
commercial building space and for process chilling. Chilled
water is produced by converting the energy in hot water, steam,
mechanical energy or electricity into chilled water through the
use of absorption chillers and mechanical chillers. An absorption
chiller uses heat (steam or hot water) to concentrate lithium
bromide, which when mixed with water absorbs heat and thus chills
the water. A mechanical chiller, driven by a steam turbine,
electric motor, diesel engine or gas turbine, uses a compressor
to compress refrigerant gases. When such gases are expanded
chilled water is produced.
The Company adds chilling capacity to its systems in two
ways: it acquires chillers for operation in its central production
facilities and it operates chillers leased from customers
(sometimes powering them with steam produced at the Company's
central plant). The use of leased equipment permits the Company
to establish cooling systems and to add new customers with
reduced capital investments. In most cases, the chilled water is
distributed through the Company's energy system. At present, the
Company owns the chillers used in London, Ontario, Tulsa and
Oklahoma City and leases the chillers used in Nassau County. In
Trenton and Chicago, the Company uses a combination of leased and
owned equipment. Some customers also maintain on-site chillers
to serve solely as backup for their own buildings. In these
cases, the Company may contract to operate such equipment for the
customer and contract for the right to use such capacity to back
up the Company's chilled water production. The Company has
signed contracts with the City of Kansas City, Missouri, Jackson
County, Missouri, and the U.S. General Services Administration to
provide chilled water to eleven buildings in downtown Kansas
City. The Company expects to begin service under these contracts
in May 1998.
Energy Services. The Company also provides energy services to
its customers, consisting of operating supervision, management
and maintenance of facilities as well as advice and assistance
regarding initial design, construction and start-up, with respect
to energy use as well as energy audits.
Fuel and Raw Materials
The Company is a significant purchaser of gas, oil and
biomass fuels, as well as chillers, boilers, generators and other
equipment used for heating, cooling and electric generation.
Most of the Company's gas, oil and biomass fuel requirements, as
well as most of its other supplies, are purchased from local
suppliers. The Company believes that it has adequate sources of
fuel, supplies and equipment.
Competition
Provision of Heating, Electricity and Cooling at Existing Systems
The provision of heating, electricity and cooling services is
highly competitive, although there are currently very few
competing operators of multiple-user district energy systems.
The Company's principal thermal energy competition is from
potential customers who own and operate their own boiler and
chilled water plants, who are often encouraged to install and
retain their own plants by the suppliers of raw energy (such as
local oil, natural gas and electricity companies) and by
equipment suppliers that sell products and services to users who
self-generate thermal energy. In some cases utilities offer cash
incentives to install equipment that will use their electricity
or gas. In several locations, local utilities are competing
directly with the Company through unregulated subsidiaries
offering steam and/or cooling.
The Company believes that competition in each of these areas
is primarily based on customers' perceptions of cost savings and
reliability of service. The Company competes to attract and
retain customers, and also competes for contracts and other
awards to develop new facilities and systems. A significant
additional factor is the high capital cost involved in
constructing a district energy system. While this factor
provides a competitive advantage once the Company is operating a
completed system, high capital costs typically require the
Company to have a significant number of customers, preferably
under long-term contracts, prior to undertaking construction of a
new cooling or heating system.
New Projects
The Company competes directly with a large number of
well-capitalized independent power developers for new electric
generation projects. Competition is based on technical skills,
financing ability and market reputation, among other factors.
In the past, the Company has not generally competed for
single user cogeneration power development projects, but focused
on multi-customer district energy systems. Most of the Company's
cogeneration facilities are in the center of cities and
relatively smaller and more expensive to build (per unit of
electric generation) than plants built to produce the minimum
heat recovery required to be certified as a Qualifying Facility.
The Company selectively pursues generation opportunities where
electricity is a by-product of efficient heat and cooling
production, providing electricity directly to industrial or
commercial customers or selling it to electric utilities.
Internationally, the Company is prepared to pursue selected
opportunities in nations where electricity demand is high and
special conditions make fuel expensive, or where a customer's
location or business favor a power project with high efficiency,
reliability and waste heat recovery.
Technology and Year 2000 Computer Systems Issues.
The Company's research and development efforts have focused
on efficient conversion of fuel to energy and on improved
generating, monitoring, automation and storage technologies.
These efforts have resulted in the trigeneration machine,
innovations in chilled water storage and control systems,
innovative applications of standard modular equipment, and
various incremental operational improvements. Expenditures for
customer-sponsored or Company-sponsored research and development
are not separately reflected in the Company's financial
statements and the Company believes that if such expenditures
were so allocated, the amounts would not be material. The
Company has been granted patents for the trigeneration machine,
its freeze suppression chemical for stratified cold water storage
and a fuel blending system for emissions control. None of these
patents are believed to be material.
Many computer systems experience problems handling dates
beyond December 31, 1999. Therefore, the Company plans to modify
some of its computer software and hardware prior to the beginning
of the year 2000. The Company expects to successfully implement
the systems and programming changes necessary to address the year
2000 issues. The cost of such actions has not yet been
determined, however, the Company does not believe that such cost
will have a material effect on the Company's results of
operations or financial condition.
Environmental
The Company's operations are subject to extensive federal,
state, provincial and local environmental laws and regulations
that govern, among other matters, emissions into the air, the
discharge of effluents, the use of water, fuel tank management
and the storage, handling and disposal of toxic waste material.
The Company invests substantial funds to modify facilities to
comply with applicable environmental laws and plans additional
capital expenditures for these purposes in the future. The
Company spent approximately $4.4 million and $4.3 million in 1997
and 1996, respectively, to comply with these requirements and
estimates that its expenditures for environmental compliance in
1998 through 2000 will be approximately $9.3 million in the
aggregate. These expenditures include improvements at certain
facilities for air emission control equipment as required by the
United States Clean Air Act, wastewater discharge control
equipment, asbestos control and replacement of CFC refrigerants.
Additional amounts to be spent for environmental control
facilities in future years will depend on new laws and
regulations and other changes in environmental concerns and legal
requirements.
In 1997, the United States Environmental Protection Agency
("USEPA") adopted new regulations with respect to ozone levels in
the atmosphere. Ozone levels increase with increases of oxides
of nitrogen, and these are produced when burning fuels.
Similarly, the USEPA established a standard for another pollutant
that is a by-product of fuel combustion: particulates that are
less than 2.5 microns in diameter. Both of these apply to
emissions from existing, as well as future facilities in the U.S.
It is probable that some of the Company's facilities will be
effected as a result of these changes; however, until evaluations
of air quality are completed for each location, and the States
formulate, submit and receive approval for their implementation
plans, the impact cannot be quantified. When the previous ozone
standard was promulgated, the impact on Trigen was material.
Employees
As of December 31, 1997 the Company had approximately 674
employees, 601 of whom were in the operating subsidiaries and 73
at the corporate headquarters. The Company has collective
bargaining agreements with the International Union of Operating
Engineers (Local 877 in Boston, Local 399 in Chicago, Local 30 in
Nassau County, and Local 68 in Trenton) and the main unit of the
Canadian Union of Operating Engineers in London, Ontario. These
agreements cover 43, 6, 22, 20 and 7 employees, respectively, and
expire in June 2002, January 2000, March 1999, February 2001 and
July 2000, respectively. The Company believes that its relations
with its employees are good.
Item 2. Properties
The following table shows the material properties owned or leased
by Trigen's operating subsidiaries:
Location Facility Description Owned/Leased
- -------------------- -------------------- ------------
Baltimore, MD. (Spring Gardens) Steam Owned
Baltimore, MD. (Saratoga) Steam Owned
Baltimore, MD. (Central Avenue) Steam Owned
Baltimore, MD. (Cherry Hill) Hot Water 20-year leasehold
Boston, MA. (Kneeland) Steam Owned
Boston, MA. (Scotia) Steam Owned
Chicago, IL. (McCormick Place)(1) Trigeneration 25-year leasehold
Cincinnati, OH. (2) Chilled Water Owned/Leased
Colorado, (Golden)(3) Cogeneration Owned
Eden, NC. Steam Leased
Forest City, NC. Steam Leased
Greenville, MS. Steam Leased
Greenwood, SC. Steam Leased
Kansas City, MO. Trigeneration Owned
Lenoir, NC. Steam Leased
London, Ontario, CAN. Trigeneration Owned
Loudon, TN. Steam Leased
Marion, NC. Steam Owned
Nassau County, NY. (Uniondale) Trigeneration Owned
Nassau County, NY. (Central
Utility Plant) Steam and Chilled Water/25-year leasehold
Nassau County, NY. (Medical
Center Plant) Steam and Chilled Water/25-year leasehold
Oklahoma City, OK. Trigeneration Owned
Philadelphia, PA. (Schuylkill) Cogeneration 50-year leasehold
Philadelphia, PA. (Edison) Steam Owned
Philadelphia, PA. (Willow Street)(4)Steam Owned
Philadelphia, PA.
(Petro Site) Oil Terminal and Storage Site Owned
Prince Edward Island, CAN.
(Charlottetown) Cogeneration Owned
St. Louis, MO. (Ashley Street)(5) Steam Owned
Trenton, NJ. Trigeneration 99-year leasehold
Tulsa, OK. Trigeneration Owned
Turners Falls, MA. (Ewing) Small turbine assembly/Owned
(1) This facility is leased by a joint venture with Peoples
Energy Corporation.
(2) This facility is owned in part and leased in part by a joint
venture with Cinergy Corp.
(3) This facility is owned by a joint venture with Nations
Energy Corporation, a wholly-owned subsidiary of Tucson Electric
Power Company.
(4) This facility is inactive.
(5) The steam distribution system associated with this facility
is leased from the Solid Waste Management and Development
Corporation, a Missouri not-for-profit corporation organized in
the City of St. Louis.
See Footnote 10 to the consolidated financial statements of
the Company regarding assets pledged as security under the
Company's financing agreements.
The Company leases approximately 18,691 square feet in White
Plains, New York which houses its executive offices, financial,
engineering, marketing, legal and data processing staffs. The
term of the lease extends through March 31, 2000 and the annual
rent due thereunder is approximately $368,350. The Company
believes that these facilities are adequate to meet its needs for
the foreseeable future, and that suitable replacement space is
readily available.
Item 3. Legal Proceedings
Oklahoma Litigation
In September 1996, the Company's subsidiary, Trigen-Oklahoma
City Energy Corporation ("Trigen-Oklahoma City"), commenced an
antitrust action in Federal District Court in Oklahoma City
seeking injunctions and $21 million in treble damages from the
local utility, Oklahoma Gas and Electric Company ("OG&E") based
on many years of alleged anti-competitive actions against
Trigen-Oklahoma City Energy Corporation by OG&E. These actions
culminated in criminal indictments being brought against two OG&E
officials for allegedly bribing Oklahoma elected officials to
breach a Trigen-Oklahoma City Energy Corporation contract. OG&E
has counterclaimed for $5 million in damages, claiming that OG&E
has been slandered by Trigen-Oklahoma City in connection with the
commencement of the action. Pretrial discovery is currently
being conducted. This case is not expected to come to trial
before the end of 1998.
Kinetic Energy Litigation
On May 2, 1997, following a jury trial in a suit by Kinetic
Energy Development Corporation against the Company in the Circuit
Court of Jackson County, Missouri, in connection with the
Company's acquisition of the Kansas City steam system, a judgment
was entered against the Company in the amount of $4,271,000. On
August 6, 1997, the Court set aside the jury verdict and granted
judgment for the Company. Kinetic Energy Development Corporation
has filed a notice of appeal in this matter. The Company
believes that this judgment in its favor should be sustained upon
appeal. In the event this new judgment in favor of the Company
is vacated or reversed on appeal, a new trial is ordered.
Grays Ferry Litigation
On March 9, 1998, Grays Ferry Cogeneration Partnership,
Trigen-Schuylkill Cogeneration, Inc., NRGG (Schuylkill)
Cogeneration Inc. and Trigen-Philadelphia Energy Corporation
commenced an action against PECO Energy Company ("PECO"), Adwin
(Schuylkill) Cogeneration, Inc. and the Pennsylvania Public
Utility Commission in the United States District Court for the
Eastern District of Pennsylvania. Grays Ferry Cogeneration
Partnership (the "Partnership") is the owner of the Grays Ferry
Cogeneration Facility located in Philadelphia, Pennsylvania.
The Company has an investment of approximately $12 million in
the Partnership, representing a one third interest in the
Partnership through its wholly owned subsidiary, Trigen-
Schuylkill Cogeneration, Inc. NRGG (Schuylkill) Cogeneration Inc.
and Adwin (Schuylkill) Cogeneration, Inc. own the other two thirds
interests in the Partnership. Adwin (Schuylkill) Cogeneration, Inc.
is an indirect wholly owned subsidiary of PECO.
The Partnership commenced this action in reaction to the
wrongful termination by PECO on March 3, 1998, of the electric
power purchase agreement between the Partnership and
PECO. The Partnership is seeking a declaratory judgement to
require PECO to comply with the electric power purchase agreement
and for damages to be proven at trial in an amount in excess of
Two Hundred Million Dollars ($200,000,000). The Partnership is
also seeking a court order declaring any action taken by the
Pennsylvania Public Utility Commission which would change the
terms of the electric power purchase agreement between the Grays
Ferry Partnership and PECO to be null and void.
Trigen-Philadelphia Energy Corporation ("Trigen-Philadelphia")
which operates a district steam heating system, purchases steam
produced at the Grays Ferry Cogeneration Facility. Trigen-
Philadelphia claims that PECO's wrongful termination of its
electric power purchase agreement with the Grays Ferry Partnership
constitutes tortious interference with Trigen-Philadelphia's
agreement to supply steam service to the University of
Pennsylvania, its largest customer.
On March 19, 1998, the United States District Court for the
Eastern District of Pennsylvania dismissed this action before
reaching the merits, determining that it did not have the required
subject matter jurisdiction to hear the case. On March 27, 1998,
the Partnership and Trigen-Philadelphia filed a motion for
reconsideration of the dismissal order and leave to file an amended
complaint. In the event that the court's order of dismissal is
upheld, the Partnership and Trigen-Philadelphia would
have the right to commence an action in state court and/or to
commence proceedings before the Pennsylvania Public Utility
Commission.
On March 17, 1998, The Chase Manhattan Bank issued a notice
of default to the Partnership under the terms of the Credit
Agreement, dated as of March 1, 1996, between the Partnership,
The Chase Manhattan Bank, as agent and certain other commercial
banks. That debt is secured only by the Partnership assets and
the partners' ownership interests in the Partnership. While it
is possible that the Company's investment could become impaired,
at this time the Company does not believe that is likely. The
Company believes that PECO's termination of the electric power
purchase agreement was wrongful and the Company intends to
aggressively pursue the remedies available to it. The banks
have not accelerated the debt and, on March 18, 1998, The Chase
Manhattan Bank commenced its own lawsuit against PECO based upon
PECO's wrongful termination of the electric power purchase
agreement.
In the event the Company is not successful and PECO's
actions are upheld, PECO would be required under PURPA to continue
to purchase power from the Grays Ferry Cogeneration Facility at
PECO's avoided cost. This would generate significantly lower
earnings per share for the Company than the 1998 annual earnings
per share of $0.40 to $0.52 previously forecasted by the Company
based on the contracted power purchase price.
Other Litigation
The Company is subject from time to time to various other
claims that arise in the normal course of business, and the Company
believes that the outcome of these matters (either individually
or in the aggregate) will not have a material adverse effect on
the business results of operation or financial condition of the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for the Registrant's Common Stock and Related
Shareholder Matters
The Company's Common Stock is traded on the New York Stock
Exchange under the symbol TGN. As of March 26, 1998 there were
approximately 1773 shareholders of record.
The following table sets forth the high and low sales prices
for the Company's Common Stock for the periods indicated:
High Low
1997 ---- ---
First Quarter 29 1/4 24 1/8
Second Quarter 25 1/4 23 5/8
Third Quarter 25 3/16 19 3/4
Fourth Quarter 24 1/4 19 1/2
1996
First Quarter 21 3/4 18 1/2
Second Quarter 22 1/4 18 1/8
Third Quarter 22 1/2 18
Fourth Quarter 32 1/4 21 5/8
During 1997 and 1996, the Company declared quarterly dividends in
an aggregate annual amount equal to $0.14 per share of Common
Stock.
Item 6. Selected Financial Data
The following table sets forth selected consolidated financial
data for the Company and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the consolidated financial statements
of the Company, including the notes thereto, appearing elsewhere
in this Annual Report:
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993(a)
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Total revenues $240,651 $243,634 $198,710 $185,627 $90,578
Operating income 28,743 43,138 37,038 29,718 17,100
Interest expense 18,976 18,840 19,890 16,657 9,448
Earnings before
extraordinary item 5,025 14,051 10,564 8,561 4,325
Extraordinary loss (b) -- (1,943) -- -- (4,500)
Net earnings(loss) 5,025 12,108 10,564 8,561 (175)
Basic earnings per common share
Before extraordinary item .42 1.21 .93 .89 .51
Extraordinary loss -- (.17) -- -- (.53)
Net earnings .42 1.04 .93 .89 (.02)
Diluted earnings per common share
Before extraordinary item .41 1.20 .93 .89 .51
Extraordinary loss -- (.17) -- -- (.53)
Net earnings .41 1.03 .93 .89 (.02)
Dividends per common share . .14 .14 .14 .07 --
Balance Sheet Data (at year end)(c):
Working capital (deficit) (2,095) (5,400) 282 9,801 (14,600)
Property, plant and
equipment, net 388,448 371,584 341,188 311,418 300,591
Total assets 525,969 494,436 454,906 424,330 402,669
Long-term debt 256,361 226,487 223,371 220,725 228,320
Stockholders' equity 145,482 140,670 118,830 109,354 61,846
Other Operating Data:
EBITDA 46,996 52,476 51,848 44,175 24,524
Operating margin 11.9% 17.7% 18.6% 16.0% 18.9%
Ratio of earnings to
fixed charges (d) 1.4 2.1 1.8 1.8 1.7
Depreciation expense 16,021 7,595 11,429 10,948 6,436
Capital expenditures 39,415 47,641 18,454 22,920 10,848
Number of employees
(at year end) 674 651 632 560 575
</TABLE>
(a) Statement of Operations Data for 1993 includes the operating
results of UTC for the period from December 1 to December 31,
1993.
(b) The extraordinary losses in 1996 and 1993 result from the
extinguishment of debt.
(c) Certain reclassifications have been made to the prior years'
Balance Sheet Data to conform to the 1997 presentation.
(d) Earnings used in computing the ratio of earnings to fixed
charges consist of earnings before extraordinary item plus income
taxes, fixed charges (excluding capitalized interest) and income
distributions of non-consolidated partnerships on a cash basis.
Fixed charges consist of interest expense, capitalized interest
and a portion of rental expense representative of the interest
factor.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion should be read in conjunction with the
consolidated financial statements of the Company, including the
notes thereto, appearing elsewhere in this Annual Report.
The following table shows revenues and units of megawatt hours
sold for the three years ended December 31, 1997:
<TABLE>
<CAPTION>
1997 1996 1995
------------------- ----------------- ----------------
Revenue Revenue Revenue
------- -------- -------
Amount % Units Amount % Units Amount % Units
------ --- ----- ------ --- ----- ------ -- -----
(Dollars in millions, Units in thousands of megawatt hours)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Thermal energy $179.5 75 5,008 $187.7 77 5,400 $156.2 79 4,327
Electric energy 49.0 20 950 44.7 18 860 34.3 17 693
Fees and other
revenues 12.2 5 -- 11.2 5 -- 8.2 4 --
------ -- ----- ------ -- ----- ----- -- -----
Total $240.7 100 5,958 $243.6 100 6,260 $198.7 100 5,020
====== ==== ===== ======= === ===== ====== === ======
</TABLE>
The following table shows the components of the Statement of
Operations as a percent of total revenues for the three years
ended December 31, 1997:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
----- ----- ------
Total revenues 100.0% 100.0% 100.0%
Fuel and consumables (47.4) (48.6) (42.6)
Production and operating costs(19.6) (18.0) (20.2)
Depreciation ( 6.7) ( 3.1) ( 5.7)
General and administrative (14.4) (12.6) (12.9)
Operating income 11.9 17.7 18.6
Interest expense (7.9) (7.7) (10.0)
Other income, net 1.0 .7 .9
Minority interest in
earnings of subsidiaries (1.5) (1.1) (.5)
Earnings before income taxes
and extraordinary item 3.5% 9.6% 9.0%
</TABLE>
The Company's preferred rate structures for thermal energy
include fixed and variable components. These rate structures are
intended to cause revenues to match the Company's costs of
providing capacity, including projected debt service and return
on equity, thermal losses in the distribution network, taxes,
labor and scheduled maintenance and repair. The capacity
component, which is independent of usage in the period, generally
includes cost escalation provisions. These rate structures also
contain a charge, which varies with usage during the period, and
which is intended to cover directly variable costs, so as to pass
through to customers the Company's cost of fuel. The Company
accounts for its operating expenses based on the average cost to
produce and deliver thermal energy or electricity, on a system by
system basis, over the course of the year.
A significant portion of the Company's revenues and operating
profit are subject to seasonal fluctuation due to peak heating
demand in the winter and peak cooling demand in the summer. This
seasonal fluctuation is accentuated in those acquired steam
systems where the Company's preferred rate structures are not
employed. The Company's strategy of converting old contracts to
the Company's preferred rate structures, adding cooling,
electricity, energy services and industrial process loads will,
if successful, reduce the concentration of revenues in cold
months in the future.
Results of Operations
Year ended December 31, 1997 compared with year ended December
31, 1996
Overview
For the year ended December 31,1997, net earnings were $5.0
million compared with $12.1 million in 1996; and diluted earnings
per common share were $.41 compared with $1.03 per common share
last year. Included in net earnings for 1996 was an
extraordinary loss of $1.9 million, or $.17 per common share,
from the extinguishment of debt. Revenues of $240.7 million were
slightly less than the $243.6 million in 1996. Operating income
was $28.7 million and the operating margin was 11.9% in 1997
compared with operating income of $43.1 million and an operating
margin of 17.7% in 1996. Excluding a condemnation award of $6.4
million and a fee received on completion of a project financing
of $1.9 million, operating income was $34.8 million and the
operating margin was 14.3% in 1996. The unusually mild
winter weather, especially compared with the severe winter of
1996, was a major factor for the lower levels of revenues and
profits in 1997.
Revenues
Revenues of $240.7 million were slightly less than the
$243.6 million in 1996. Thermal energy revenue declined $8.2
million or 4% in 1997 to $179.5 million. Units of thermal energy
sold were down 7% as energy systems in Baltimore, Boston and
Philadelphia were particularly affected by the milder weather.
Contributing to the decline in thermal energy sales were lower
fuel prices, which are passed on to customers.
Electric energy sales were $49.0 million in 1997, an
increase of $4.3 million or 10%. This improvement was due to
increased volume. Units of electric energy sold increased by
90,000 megawatt hours or 10%. In 1997, the trigeneration plant
in Nassau County, NY, was operational for approximately 800
additional hours. This facility in 1996 was taken off line by
the local utility and for an unplanned outage.
Fees earned and other revenue increased 8% in 1997 due to
the expansion of the Trigen-Ewing Power operation, which was
acquired in the first quarter of 1996, and to the sale of a
natural gas pipeline. This increase was offset in part by costs
incurred in connection with the establishment and marketing of
new joint ventures with electric utilities to develop combined
heat and power projects.
Operating Expenses
Fuels and consumables were $114.2 million in 1997 compared
with $118.3 million last year. This $4.1 million decrease was due
to the lower level of thermal energy revenues and to lower fuel
prices. Offsetting in part the decline in fuels and consumables
were increased running hours in 1997 for the Nassau plant. The
Company's rates typically enable it to pass changes in its fuel
and most commodity costs to the customer. As a result such
changes have little impact on operating income. Fuel and
consumables' costs decreased from 48.6% of revenues in 1996 to
47.4% in 1997.
Production and operating costs are those costs incurred to
operate the plants, other than fuel and consumables, and include
labor and supervisory personnel, repair and maintenance costs,
and plant operating costs. Production and operating costs
increased 7% to $47.1 million compared with $44.0 million in
1996; and as a percent of revenues increased to 19.6% from 18.0%.
The higher costs resulted from expansion of Trigen-Ewing Power, a
pipeline rupture in St. Louis and higher pension expense. In
addition, production and operating costs for 1996 were reduced by
a $1.0 million arbitration award. Offsetting the 1997 increase
in part was lower repair and maintenance costs.
Depreciation expense was $16.0 million compared with $7.6
million last year. Included in 1996 depreciation expense was a
$6.4 million gain resulting from a condemnation award. Excluding
this gain, 1997 depreciation expense was higher by $2.0 million
due to the high level of capital expenditures in 1997 and 1996.
General and administrative expenses increased $4.0 million
or 13% in 1997, mainly due to higher legal fees of $1.7 million
and severance and reorganization expenses of $.7 million. Also
contributing to the increase were higher costs incurred in
connection with the Company's acquisition program. As a percent
of revenues, general and administrative expenses were 14.4% in
1997 and 12.6% in 1996.
Other income/(expense)
Interest expense was $19.0 million in 1997 compared with
$18.8 million in 1996. The reduction due to repaying high
interest rate debt was more than offset by the higher level of
debt in 1997.
Other income, net was $.8 million higher in 1997 due mainly
to a $.6 million gain on the sale of marketable securities.
Income taxes
The Company's effective tax rate is determined primarily by
the federal statutory rate of 35%, and state and local income
taxes. The effective tax rate was 41.0% in 1997 and 39.7% in
1996.
Year ended December 31, 1996 compared with year ended December
31, 1995.
Overview
Net earnings for 1996 was $12.1 million, equal to $1.03 in
diluted earnings per common share. This compared with net
earnings of $10.6 million, or $.93 per common share, in 1995.
Net earnings for 1996 included an extraordinary loss of $1.9
million, or $.17 per common share, from the extinguishment of
debt. Sales were $243.6 million in 1996 compared with $198.7
million in 1995. Operating income for 1996 was $43.1 million and
the operating margin was 17.7%. For 1995, operating income was
$37.0 million and the operating margin was 18.6%. Factors
contributing to the improved performance were the colder 1996
winter, the full year effect of two acquisitions made in 1995 and
receipt of an additional gain of $1.6 million in condemnation
awards. In September 1995, the Company in partnership with
Nations Energy Corporation acquired the energy production assets
of Coors Brewing Company. Also in 1995, energy production
facilities and distribution assets in Charlottetown, Prince
Edward Island, Canada were acquired.
Revenues
Revenues were $243.6 million in 1996, an increase of $44.9
million or 23%, from $198.7 million in 1995. The revenue
increase resulting from the full year effect of the two
acquisitions in 1995 was $24.7 million. The remaining increase
was due to the colder winter in 1996 and to the increased price
of fuel. Thermal energy revenue increased 20% to $187.7 million
in 1996, while units of thermal energy sold were up 25%. Sales
of electric energy were $44.7 million in 1996, a 30% increase,
and units of electric energy sold were higher by 24%.
Fees earned and other revenue were $11.2 million in 1996, an
increase of 37% over 1995. The 1996 acquisition of Trigen-Ewing
Power and fees earned from the energy assets of Coors Brewing
Company were the factors contributing to this increase.
Operating Expenses
Fuel and consumables' costs were $118.3 million, or 48.6% of
revenues, in 1996, compared to $84.6 million, or 42.6% of
revenues, in 1995, an increase of $33.7 million. This increase is
due to the full year effect of the two acquisitions in the prior
year and to the increased price of fuel.
Production and operating costs increased to $44.0 million from
$40.1 million in 1995, and as a percentage of revenues decreased
to 18.0% from 20.2% in 1995. Production and operating costs were
higher by $5.1 million due to the full year impact of the 1995
acquisitions. This increase was offset in part by labor
productivity improvements and an arbitration award of $1.0
million.
Depreciation expense was $7.6 million compared to $11.4
million in 1995, a decrease of $3.8 million. Depreciation
expense in 1996 and 1995 included gains of $6.4 million and
$4.8 million, respectively, on condemnation awards received for
one of the Company's facilities in Boston. The additional
condemnation gain of $1.6 million in 1996 and asset write-offs
of $3.7 million in 1995 were the factors resulting in the lower
1996 depreciation expense.
General and administrative costs increased to $30.6 million,
or 12.6% of revenues, in 1996, from $25.6 million, or 12.9% of
revenues, in 1995. This increase was mainly due to additional
staffing, higher development and legal costs, and the full year
effect of the two acquisitions in 1995.
Other income/(expense)
Interest expense declined by $1.1 million to $18.8 million
in 1996, due primarily to lower average interest rates.
Other income, net of $1.6 million was down $.2 million from
1995 on lower interest income.
Income taxes
The effective tax rate for 1996 was 39.7% compared with
40.9% in 1995.
Extraordinary loss
In 1996, $7.0 million of subordinated debt was prepaid and
resulted in an extraordinary loss of $1.9 million, net of an
income tax benefit of $1.1 million.
Liquidity and Financial Position
The Company ended 1997 with total debt of $285.1 million
compared with $258.5 million in 1996. Stockholders' equity of
$145.5 million compares with $140.7 million at year-end 1996.
Working capital was a negative $2.1 million, a $3.3 million
improvement over 1996. At December 31,1997 and 1996, cash and
cash equivalents were $13.7 million and $25.3 million,
respectively, of which $9.7 million and $17.9 million,
respectively was restricted as to use. See Note 4 of the Notes
to Consolidated Financial Statements for information on the
restrictions.
Cash from operations is a principal source of funds for
meeting the Company's operating needs. In 1997, $23.3 million
was generated from operating activities compared with $27.6
million in 1996 and $13.9 million in 1995. The lower cash
generated from operations in 1997 was due mainly to the earnings
decline and higher working capital requirements. Receivables
were higher due primarily to advances made to new joint ventures,
in support of their development and marketing strategies. During
1997, the Company had net borrowings of $26.6 million and
received $3.0 million on the sale of property, $1.3 million on
the net issuance of common stock and $.6 million from the sale of
marketable securities. These funds, along with the $23.3 million
of cash generated from operations and $11.6 million of available
cash at the beginning of the year, were used to invest $39.4
million in capital expenditures and $12.3 million in partnership
investments, purchase a fuel management agreement and related
inventory for $8.9 million, and pay $1.7 million in dividends to
shareholders and $4.1 million to minority interests.
Total debt increased $26.6 million in 1997. On April 4,
1997, the Company entered into a $160.0 million revolving credit
agreement with several banks. This facility is for an initial
period of three years and may be extended by a total of two
one-year periods. Borrowings under the facility bear interest,
at the Company's option, at an annual rate equal to the base rate
or the Eurodollar rate plus 3/4%. The base rate is the higher of
the prime lending rate or the Federal Reserve reported Federal
funds rate plus 1/2%. On June 10, 1997, the Company amended the
$160.0 million revolving credit agreement by reducing the
facility to $125.0 million and entered into a $35.0 million
revolving credit facility with the same group of banks. The new
facility is for an initial 364-day period and may be extended by
another 364-day period. The terms and conditions of both
facilities are the same.
At December 31, 1997, the Company had $85.5 million of
borrowings available under its credit facilities for working
capital and general corporate purposes. The Company's loan
agreements contain various restrictions and conditions, with
which the Company is in compliance. Certain loan agreements
restrict payments by subsidiaries to the Company, unless the
payments are for specified purposes or the subsidiary meets
certain covenants. Management believes that cash generated from
operations, borrowings available under its credit facilities and
access to capital markets provide adequate resources to meet
ongoing operating needs and future capital expenditures related
to the existing business and development of new projects. See
Note 10 of the Notes to Consolidated Financial Statements for
information on long-term debt.
In February 1998, the $14.4 million of Nassau bonds, with a
fixed tax-exempt rate of 7.75%, were refinanced by a new issue of
variable rate demand tax-exempt bonds.
During 1997, stockholders' equity increased $4.8 million to
$145.5 million at December 31, 1997. This increase reflects $5.0
million of net earnings, $1.3 million from the issuance of common
stock, net of stock purchases, and $.2 million increase in the
cumulative translation adjustment; offset by a $1.7 million
dividend payment to shareholders. In 1997, 30,000 shares of
common stock were purchased for the treasury at a cost of $.7
million.
Capital Expenditures
Capital expenditures were $39.4 million in 1997 compared
with $47.6 million in 1996 and $18.5 million in 1995, as the
Company continues to invest in capital improvements to increase
efficiency, reduce costs, pursue new opportunities, expand
production and improve facilities. Capital expenditures during
1997 included upgrading and expanding the distribution system and
plant on Prince Edward Island, construction of a district chilled
water system in downtown Kansas City, a gas turbine inlet air
cooling system at the Nassau plant and improvements to the
distribution system in Philadelphia.
Environmental Expenditures
The Company's facilities are subject to governmental
requirements with respect to the discharge of materials and
otherwise relating to protection of the environment. The Company
spent approximately $4.4 million and $4.3 million in 1997 and
1996, respectively, to comply with these requirements and
estimates that its expenditures for environmental compliance in
1998 through 2000 will be approximately $9.3 million in the
aggregate. These expenditures include improvements at certain
facilities for air emission control equipment as required by the
United States Clean Air Act (the "Clean Air Act"), wastewater
discharge control equipment, asbestos control and replacement of
CFC refrigerants.
Acquisition
On January 22, 1998, the Company acquired all of the capital
stock of Power Sources, Inc. (renamed Trigen-BioPower, Inc.) a
biomass-to-energy power plant developer and operator, for a cash
price of $44.1 million. The acquisition was funded from the
Company's credit facilities. See Note 18 of the Notes to
Consolidated Financial Statements for information on the
acquisition.
Impact of New Accounting Standards
Based on preliminary analyses, the Company does not expect
that the future adoption of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" and No. 131, "Disclosures
about Segments of an Enterprise and Related Information", will
have a material effect on the Company's results of operations and
financial condition.
Additional Information
Many computer systems experience problems handling dates
beyond the year 1999. Therefore, some computer hardware and
software will need to be modified prior to the year 2000 in order
to remain functional. The Company expects to implement
successfully the systems and programming changes necessary to
address year 2000 issues. The cost of such actions has not yet
been determined, however, the Company does not believe that such
cost will have a material effect on the Company's results of
operations or financial condition.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data
The financial statements and financial statement schedules
that are filed as part of this Annual Report begin on page F-1
hereof.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
The principal accountant for the Company for the fiscal
years ending December 31, 1994, December 31, 1995, December 31,
1996 and December 31, 1997 was KPMG Peat Marwick LLP ("KPMG").
The Company has made a decision to change the Company's principal
accountant for the Company's fiscal year ending December 31,
1998, for the reason set forth below. The Audit Committee and the
Board of Directors of the Company have approved this
determination.
KPMG is also in the business of providing consulting
services to clients with respect to issues related to the energy
business. In 1997, a dispute arose between the Company and the
consulting services division of KPMG with respect to the conduct
of consulting services provided to a third party. That dispute
was not resolved to the satisfaction of the Company. The change
in principal accountant is not due to any matter regarding KPMG's
accounting services. KPMG's report on the financial statements
of the Company for the past two years did not contain an adverse
opinion or a disclaimer of opinion, nor was it qualified or
modified as to uncertainty, audit scope or accounting principles.
Neither were there, during the two most recent fiscal years or
the period since December 31, 1997, any disagreement with KPMG on
any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which
disagreement, if not resolved to the satisfaction of KPMG, would
have caused it to make reference to the subject matter of the
disagreement in connection with its report.
The Audit Committee intends to recommend a new principal
accountant for selection by the Board of Directors following an
appropriate set of interviews of various accounting firms being
conducted by the management of the Company and recommendation to
the Audit Committee. Therefore, no accountant will be presented
to the shareholders of the Company for ratification at the
Company's annual meeting of shareholders, which will take place
on May 13, 1998.
PART III
Item 10. Directors and Executive Officers of the Company
Information concerning directors and executive officers of Trigen
is hereby incorporated by reference from Trigen's definitive
proxy statement which will be filed with the Commission within
120 days after the close of the fiscal year. Trigen's definitive
proxy statement will be accompanied by this Annual Report when
mailed to Shareholders.
Item 11. Executive Compensation
Information concerning executive compensation is hereby
incorporated by reference from Trigen's definitive proxy
statement which will be filed with the Commission within 120 days
after the close of the fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information concerning security ownership of certain beneficial
owners and management is hereby incorporated by reference from
Trigen's definitive proxy statement which will be filed with the
Commission within 120 days after the close of the fiscal year.
Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and related
transactions is hereby incorporated by reference from Trigen's
definitive proxy statement which will be filed with the
Commission within 120 days after the close of the fiscal year.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) (1) and (2) The Financial Statements and Financial
Statement Schedules listed under "Index to Financial Statements
and Financial Statement Schedules" on page F-1 hereof are filed as
part of this Annual Report.
(a) (3) The Exhibits listed under "Index of Exhibits" on
pages E-1 to E-4 hereof are filed as part of this Annual Report.
(b) Reports on Form 8-K. None.
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
Page
----
Registrant's Financial Statements
Independent Auditors' Report F-2
Consolidated Balance Sheets as of
December 31, 1997 and 1996 F-3
Consolidated Statements of Operations for
the Years Ended December 31, 1997, 1996 and 1995 F-4
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1997, 1996 and 1995 F-5
Consolidated Statements of Stockholders' Equity for
the Years Ended December 31, 1997, 1996 and 1995 F-6
Notes to Consolidated Financial Statements F-7
Registrant's Financial Statement Schedules
I Condensed Financial Information of the Registrant as
of December 31, 1997 and 1996 and for the Years Ended
December 31, 1997, 1996 and 1995 S-1
II Valuation and Qualifying Accounts for the Years Ended
December 31, 1997, 1996 and 1995 S-6
All other schedules are omitted because they are not applicable
or the required information is shown in the consolidated
financial statements or notes thereto.
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Trigen Energy Corporation:
We have audited the accompanying consolidated balance sheets of
Trigen Energy Corporation and subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1997. In
connection with our audits of the consolidated financial
statements, we also have audited the financial statement
schedules as listed in the accompanying index. These
consolidated financial statements and financial statement
schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedules based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Trigen Energy Corporation and subsidiaries as of
December 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally
accepted accounting principles. Also in our opinion, the related
financial statement schedules, when considered in relation to the
basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth
therein.
As discussed in Note 2 to the consolidated financial
statements, in 1995 the Company adopted the provisions of
Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of".
/s/ KPMG PEAT MARWICK LLP
February 3, 1998, except for Note 18, which is as of March 9, 1998
Stamford, Connecticut
<PAGE>
<TABLE>
<CAPTION>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
(In thousands, except share data)
1997 1996
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,967 $14,598
Accounts receivable
Trade (less allowance for doubtful
accounts of $1,074 in 1997 and
$1,128 in 1996) 34,866 35,436
Other 10,815 3,479
-------- -------
Total accounts receivable 45,681 38,915
Inventories 7,054 6,900
Prepaid expenses and other current assets 7,985 7,346
-------- -------
Total current assets 69,687 67,759
Non-current cash and cash equivalents 4,726 10,678
Property, plant and equipment, net 388,448 371,584
Investment in non-consolidated partnerships 19,560 8,781
Intangible assets, net 21,454 14,390
Deferred costs and other assets, net 22,094 21,244
-------- --------
Total assets $525,969 $494,436
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 14,200 $ 18,500
Current portion of long-term debt 14,499 13,499
Accounts payable 10,053 7,800
Accrued income taxes 3,933 2,353
Accrued fuel 11,545 14,394
Accrued expenses and other current
liabilities 17,552 16,613
-------- -------
Total current liabilities 71,782 73,159
Long-term debt 256,361 226,487
Other liabilities 4,786 7,755
Deferred income taxes 31,237 29,597
------- -------
Total liabilities 364,166 336,998
Minority interests in subsidiaries 16,321 16,768
Stockholders' equity:
Preferred stock--$.01 par value,
authorized and unissued
15,000,000 shares -- --
Common stock--$.01 par value,
authorized 60,000,000 shares,
issued 12,070,162 shares in 1997
and 12,010,597 shares in 1996 121 120
Additional paid-in capital 114,157 112,836
Retained earnings 31,881 28,538
Cumulative translation adjustment 296 136
Treasury stock, at cost, 45,500 shares
in 1997 and 46,140 shares in 1996 (973) (960)
-------- ----------
Total stockholders' equity 145,482 140,670
-------- ----------
Total liabilities and stockholders'equity $525,969 $494,436
-------- ----------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1997, 1996 and 1995
(In thousands, except per share data)
<S> <C> <C> <C>
1997 1996 1995
------ ----- -----
Revenues
Thermal energy $179,527 $187,740 $156,221
Electric energy 48,997 44,663 34,315
Fees earned and other
revenues 12,127 11,231 8,174
Total revenues 240,651 243,634 198,710
Operating expenses
Fuel and consumables 114,168 118,304 84,565
Production and operating
costs 47,086 43,959 40,089
Depreciation 16,021 7,595 11,429
General and administrative 34,633 30,638 25,589
Total operating expenses 211,908 200,496 161,672
Operating income 28,743 43,138 37,038
Other income (expense)
Interest expense (18,976) (18,840) (19,890)
Other income, net 2,448 1,603 1,816
Earnings before minority
interests, income taxes
and extraordinary item 12,215 25,901 18,964
Minority interests in earnings
of subsidiaries (3,699) (2,598) (1,076)
Earnings before income taxes
and extraordinary item 8,516 23,303 17,888
Income taxes 3,491 9,252 7,324
Earnings before extraordinary
item 5,025 14,051 10,564
Extraordinary loss from
extinguishment of debt,
net of income tax benefit -- (1,943) --
Net earnings $ 5,025 $ 12,108 $ 10,564
Basic earnings per common share
Before extraordinary item $ .42 $ 1.21 $ .93
Extraordinary loss -- (.17 ) --
Net earnings $ .42 $ 1.04 $ .93
Diluted earnings per common share
Before extraordinary item $ .41 $ 1.20 $ .93
Extraordinary loss -- (.17) --
Net earnings $ .41 $ 1.03 $ .93
Average common shares
outstanding 12,011 11,612 11,390
Average common and common equiv-
alent shares outstanding 12,130 11,694 11,390
Dividends per common share $ .14 $ .14 $ .14
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997, 1996 and 1995
(In thousands)
<S> <C> <C> <C>
1997 1996 1995
Cash flows from operating activities
Net earnings $ 5,025 $12,108 $10,564
Reconciliation of net earnings
to cash provided by operating
activities
Depreciation and amortization 19,504 10,333 14,070
Deferred income taxes 863 4,871 4,437
Provision for doubtful accounts 331 664 208
Gain on sale of marketable securities (612) -- --
Minority interests in subsidiaries 3,699 2,598 1,076
Changes in assets and liabilities,
net of effects of acquisitions
Accounts receivable (7,097) (984) (12,532)
Inventories and other current assets (422) (1,613) (1,286)
Accounts payable and other current
liabilities 1,866 1,848 3,138
Noncurrent assets and liabilities 173 (2,206) (5,780)
Net cash provided by operating
activities 23,330 27,619 13,895
Cash flows from investing activities
Purchase of marketable securities (4,139) -- --
Sale of marketable securities 4,751 -- 16,361
Proceeds of condemnation award, net -- 6,821 5,265
Acquisition of energy facilities -- -- (18,549)
Capital expenditures (39,415) (47,641) (18,454)
Purchase of a fuel management agreement
and related inventory (8,871) -- --
Proceeds on sale of property, plant
and equipment 3,000 -- --
Investment in non-consolidated
partnerships (12,294) (1,911) (1,460)
Net cash used in investing activities (56,968) (42,731) (16,837)
Cash flows from financing activities
Short-term debt, net (4,300) 4,335 (1,435)
Proceeds of long-term debt 77,253 42,384 16,000
Payments of long-term debt (46,379) (28,934) (10,197)
Sale of interest rate caps -- 1,003 --
Dividends paid (1,682) (1,640) (1,594)
Issuance of common stock, net 1,309 5,949 506
Distribution to minority interests (4,146) (2,884) --
Net cash provided by financing
activities 22,055 20,213 3,280
Cash and cash equivalents
Increase/(decrease) (11,583) 5,101 338
At beginning of period 25,276 20,175 19,837
At end of period $ 13,693 $25,276 $20,175
Current $ 8,967 $14,598 $ 9,984
Noncurrent 4,726 10,678 10,191
At end of period $ 13,693 $25,276 $20,175
Supplemental disclosure of cash
flow information
Non-cash investing activity
Acquisition of subsidiary -- $ 1,037 --
Non-cash financing activity
Issuance of common stock for
acquisition of subsidiary -- $ 1,037 --
Issuance of common stock for
extinguishment of long-term debt -- $ 4,250 --
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
Common Stock Additional
------------------ Paid-In Retained
Shares Amount Capital Earnings
------ ------ ---------- ---------
<S> <C> <C> <C> <S>
Balance, December 31, 1994 11,380,000 $114 $100,288 $ 9,100
Issuance of common stock. 36,418 -- 500 --
Dividends . . . . . . . -- -- -- (1,594)
Net earnings -- -- -- 10,564
---------- ------ -------- ---------
Balance, December 31, 1995 11,416,418 114 100,788 18,070
Issuance of common stock 594,179 6 12,048 --
Repurchase of common stock -- -- -- --
Dividends -- -- -- ( 1,640)
Net earnings -- -- -- 12,108
Cumulative translation adj. -- -- -- --
---------- ---- ------- -------
Balance, December 31, 1996 12,010,597 120 112,836 28,538
Issuance of common stock 59,565 1 1,321 --
Repurchase of common stock -- -- -- --
Dividends -- -- -- ( 1,682)
Net earnings -- -- -- 5,025
Cumulative translation adj. -- -- -- --
--------- ---- ------- -------
Balance, December 31, 1997 12,070,162 $121 $114,157 $31,881
---------- ---- -------- --------
Cumulative Treasury Stock
Translation -----------------
Adjustment Shares Amount Total
------------ ------- ------ -----
Balance, December 31, 1994 $ -- 7,570 $ (148) $109,354
Issuance of common stock -- ( 302) 6 506
Dividends -- -- -- (
1,594)
Net earnings -- -- -- 10,564
---------- ------- ----- --------
Balance, December 31, 1995 -- 7,268 (142) 118,830
Issuance of common stock -- -- -- 12,054
Repurchase of common stock -- 38,872 (818) ( 818)
Dividends -- -- -- ( 1,640)
Net earnings -- -- -- 12,108
Cumulative translation adj. 136 -- -- 136
---------- ------- ------- --------
Balance, December 31, 1996 136 46,140 (960) 140,670
Issuance of common stock -- (30,640) 637 1,959
Repurchase of common stock -- 30,000 (650) ( 650)
Dividends -- -- -- ( 1,682)
Net earnings -- -- -- 5,025
Cumulative translation adj. 160 -- -- 160
---------- ------- ------- --------
Balance, December 31, 1997 $ 296 45,500 $ (973) $145,482
---------- ------- ------- ---------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
Trigen Energy Corporation (the "Parent Company", and together
with its subsidiaries, the "Company") develops, owns and operates
commercial and industrial energy systems in the United States and
Canada. The Company uses its expertise in thermal engineering and
proprietary cogeneration processes to convert fuel to various
forms of thermal energy and electricity. The Company combines
heat and power generation, producing electricity as a by-product,
for use in its facilities and for sale to customers. At December
31, 1997, the Company operated 14 commercial and industrial
energy systems.
Suez Lyonnaise Des Eaux, a French corporation, through its
energy services affiliate Elyo, a French corporation, owns 54% of
the Company's common stock. Elyo and the Company have entered into
a licensing agreement to provide technical assistance to the
Company to construct, operate and maintain community energy
systems within North America, as well as the right to use patents
and licenses of Elyo in connection with the generation and
distribution of electricity, chilled water and waste
incineration.
The Company has established joint ventures with electric
utilities to develop and operate combined heat and power plants.
The Company's equity share in the operating results of these
joint ventures is reported in fees earned and other revenues in
the Consolidated Statements of Operations.
A significant portion of the Company's revenues and
operating profit are subject to seasonal fluctuation due to peak
heating demand in the winter and peak cooling demand in the
summer.
2. Summary of Accounting Policies
Accounting Changes
In December 1997, the Company adopted SFAS 128, "Earnings Per
Share", which requires dual presentation of basic and diluted
earnings per common share in the Consolidated Statements of
Operations and a reconciliation of earnings and shares between
the basic and diluted computations.
In October 1995, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock-Based Compensation". As allowable
by SFAS No. 123, the Company elected to continue following the
recognition provisions of Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees" (note
13).
In 1995, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" (note 6).
Principles of Consolidation
The consolidated financial statements include the accounts of
the Parent Company and all wholly-and majority-owned subsidiaries.
Intercompany accounts and transactions are eliminated.
Certain reclassifications have been made to the prior years'
financial statements to conform to the 1997 presentation.
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Use of Estimates
The preparation of financial statements in accordance with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Revenue and Cost Recognition
Revenue for energy sold includes both fixed charges and
amounts based on energy delivered. Contract rates are either
directly negotiated with the customer or approved by the
applicable regulatory authority. Sales not billed by month-end
are accrued based upon estimated usage. Fees earned are
recognized as services are performed.
Cost of energy sold for each energy system is based on
average costs to produce and deliver either heating,
electricity or cooling during the year.
There are two customers whose revenues were more than 10% of
total Company revenues. Revenues for one customer were 13%, 12%
and 13% of total Company revenues in 1997, 1996 and 1995,
respectively. The other customer accounted for 13% and 12% of
total revenues in 1997 and 1996, respectively. These two
customers accounted for 19% of the total receivable balance at
December 31, 1997.
Cash and Cash Equivalents
Cash and cash equivalents include demand deposits and
temporary investments in high-grade instruments with original
maturities at date of purchase of three months or less.
Fuel Expense and Deferred Fuel
Certain of the Company's subsidiaries, either as a result of
regulation or contractual agreements with their customers, are
allowed to recover all or substantially all of their fuel costs,
which is the Company's largest expense. Certain of these
subsidiaries estimate the future cost of fuel in current contract
rates. Differences between the estimated fuel costs and actual
fuel costs are deferred and subsequently charged to or rebated to
the customer through future rate adjustments.
Inventories
Inventories are comprised principally of fuel, operating
supplies and spare parts. Fuel inventories are stated at cost
determined on a first-in, first-out basis and materials and
supplies are stated at average cost. The portion of spare parts
inventories not expected to be used within one year are classified
as noncurrent.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost.
Depreciation is computed by the straight-line method over the
estimated useful lives commencing when assets, or major components
thereof, are placed in service. Renewals or betterments are
capitalized, while maintenance and repair costs are expensed.
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred Cost and Other Assets
Included in deferred costs and other assets are capitalized
costs associated with debt financing, development projects and
other non-current assets. Financing costs are capitalized and
amortized over the debt term using methods that approximate the
interest method. Costs incurred in developing energy generation
facilities prior to the execution of binding contracts are
accumulated by project and included in the acquisition cost or as
construction in process for that project.
Intangible Assets
Included in intangible assets are the costs in excess of the
net assets of acquired companies, a non-compete agreement with the
former majority owner of an acquired company, a fuel management
contract and organization costs. The costs in excess of the net
assets of acquired companies is being amortized over periods not
exceeding 30 years. The non-compete and fuel management
agreements are being amortized over the terms of the agreements,
15 and 19 years, respectively. The Company continuously assesses
the recoverability of these intangible assets by evaluating
whether the amortization of the intangible assets over the
remaining lives can be recovered through expected future results.
Expected future results are based on projected undiscounted
operating results before the effects of intangible amortization.
The amount of impairment, if any, is measured based on projected
discounted future results, using a discount rate reflecting the
Company's average cost of funds. Organization costs are
amortized over 5 years.
Foreign Currency Translation
Income and expenses of Canadian subsidiaries are translated
to U.S. dollars at rates in effect during the year, and assets and
liabilities at year-end rates. Translation adjustments are
included in stockholders' equity in the Consolidated Balance
Sheet. Foreign currency transaction gains and losses are
included in net earnings.
Financial Instruments
The Company uses financial instruments to limit the
financial risk of increases in interest rates on its floating
rate debt. The differential to be paid or received under
financial instruments is accrued and recognized in interest
expense as interest rates change.
Income Taxes
The Company uses the asset and liability method of
accounting for income taxes. Under this method, deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities, and
their respective tax bases. Deferred income tax assets and
liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences
are expected to be recovered or settled.
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Environmental Expenditures
Expenditures that relate to an existing condition, which
do not contribute to current or future revenue generation and
expenditures incurred for environmental compliance with respect
to pollution prevention and ongoing monitoring programs, are
expensed as incurred. Expenditures that increase the value of
the property are capitalized.
Earnings Per Common Share
Following is a reconciliation of basic earnings per common share
to diluted earnings per common share for the two years ended
December 31, 1997 (in thousands, except per share data).
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
Basic Diluted Basic Diluted
<S> <C> <C> <C> <C>
Earnings before extraordinary item $5,025 $5,025 $14,051 $14,051
------- ------ ------ ------
Average equivalent shares
Common shares outstanding 12,011 12,011 11,612 11,612
Stock options -- 119 -- 82
------- ------ ------ ------
Average equivalent shares 12,011 12,130 11,612 11,694
------- ------ ------ ------
Earnings per common share $.42 $.41 $1.21 $1.20
------- ------ ------ ------
</TABLE>
For the year ended December 31, 1995, earnings per common share
were the same for both the basic and diluted computation.
Certain potentially dilutive stock options are not considered in
the above computations due to the fact that they would be
anti-dilutive.
3. Acquisitions
In 1995, the Company formed a partnership with a subsidiary
of Nations Energy Corporation to purchase the energy production
assets of Coors Brewing Company ("Coors") and to provide steam
and electricity to Coors over a 25-year period. The purchase
price of these assets was $22.0 million. Also in 1995, the
Company purchased energy production facilities and distribution
assets in Charlottetown, Prince Edward Island ("PEI") from the
PEI Energy Corporation and the government of PEI for $7.3
million. These acquisitions were accounted for under the purchase
method.
4. Restricted Funds
Under the terms of the Company's debt agreements, a portion of
the cash of the operating subsidiaries is restricted in use,
first to paying the operating costs of the respective subsidiary,
then its debt service obligations, in the priority stipulated in
the respective debt agreements. Restricted funds at December 31,
1997 and 1996 were (in thousands):
<TABLE> 1997 1996
--------------------- ---------------------
Current Non-Current Current Non-Current
------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Restricted $5,006 $4,726 $ 7,180 $10,678
Unrestricted 3,961 -- 7,418 --
------- ----------- ------- -----------
Cash and cash equivalents $8,967 $4,726 $14,598 $10,678
------ ------- ------- -------
</TABLE>
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Under the terms of the debt agreements, payments from
subsidiaries to affiliated companies, including the Parent
Company, are permitted, provided no default exists or would be
created by the payment and either (a) the payment is to reimburse
the Parent Company for management costs as permitted by the
respective debt agreement or (b) the subsidiary meets financial
tests, which may include debt coverage, working capital or equity
tests, as specified in the respective agreement.
5. Inventories
Inventories at December 31, 1997 and 1996 were (in thousands):
1997 1996
----- -----
Fuel $2,055 $2,370
Operating supplies and spare parts 4,999 4,530
------ ------
Total $7,054 $6,900
------ ------
At December 31, 1997, the Company had purchase commitments
for fuel at prices discounted from the spot market and at fixed
prices. The aggregate commitment under these contracts is
estimated to be $11.3 million based on current spot prices.
These contracts expire at varying dates from October 1998 through
December 1998.
The Company has fuel cost pass-through clauses in its rates with
customers for all of these commitments.
6. Property, Plant and Equipment
Property, plant and equipment at December 31, 1997 and 1996 was
(in thousands):
<TABLE>
<CAPTION>
Estimated Useful
Lives (Years) 1997 1996
---------------- ---- ----
<S> <C> <C> <C>
Land -- 10,418 $10,448
Plant, machinery and
equipment 15-35 392,643 365,887
Buildings 40 34,607 31,216
Furniture, fixtures and
leasehold improvements 3-5 7,611 7,488
Construction in process -- 20,421 18,541
------- -------
465,700 433,580
Less: Accumulated depreciation (77,252) (61,996)
------- -------
$388,448 $371,584
------- -------
</TABLE>
Substantially all of the Company's assets are pledged as
collateral under the Company's debt agreements (note 10).
In 1996 and 1995, the Company received condemnation awards
related to one of its facilities in Boston, Massachusetts and
recognized gains of $6.4 million and $4.8 million, respectively,
based on the excess of condemnation proceeds received, net of
expenses, over the net book value of the condemned assets. In
1995, the Company also recognized an asset impairment loss of
$2.7 million ($1.6 million net of tax). This loss is the
difference between the carrying value of one of its Canadian
subsidiaries long-lived assets and the fair value of these assets
based on discounted estimated future cash flows. In 1995, the
Company also wrote-off certain other assets at a loss of $1.0
million. The respective gains and losses are included in
depreciation expense.
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Intangible Assets
Intangible assets at December 31, 1997 and 1996 were (in
thousands):
1997 1996
------ -------
Costs in excess of net assets acquired $5,599 $ 5,373
Non-compete agreement 10,000 10,000
Fuel management agreement 8,500 --
Organization costs 3,496 3,507
------ -------
27,595 18,880
Less: Accumulated amortization (6,141) (4,490)
------- -------
$21,454 $14,390
------- -------
Amortization expense for the years ended December 31, 1997, 1996
and 1995 was $1,651,000, $1,415,000, and $1,053,000,
respectively.
8. Deferred Costs and Other Assets
Deferred costs and other assets at December 31, 1997 and 1996
were (in thousands):
1997 1996
---- ----
Deferred financing costs $18,066 $17,088
Less: Accumulated amortization ( 7,928) ( 6,098)
------- --------
10,138 10,990
Project development costs 1,855 1,516
Noncurrent receivables 3,480 1,666
Noncurrent inventories 2,038 2,057
Other 4,583 5,015
------- -------
$22,094 $21,244
------- -------
Amortization expense for the years ended December 31, 1997, 1996
and 1995 was $1,830,000, $1,323,000 and $1,588,000, respectively.
9. Short-term Debt
United Thermal Corporation, a wholly-owned subsidiary of the
Parent Company, together with its affiliated companies ("UTC")
have a $14.2 million revolving credit facility available (the
"UTC Revolver") through December 31, 1998, and, upon approval of
the lender, for additional one year periods thereafter. The UTC
Revolver is secured pro rata with the UTC Term Loan (note 10).
UTC is required to have 60 consecutive days each year with no
outstanding borrowings under the UTC Revolver. UTC has several
interest rate options under the UTC Revolver including LIBOR.
The balances outstanding under this facility at December 31, 1997
and 1996 were $14.2 million and $13.5 million, respectively, and
the average rates on these borrowings were 6.6% in 1997, 6.4% in
1996 and 7.1% in 1995. The effective rate at December 31, 1997
was 7.0%.
The Company had a $22.5 million bank credit facility which
expired March 1997. At December 31, 1996, $5.0 million was
outstanding under this facility.
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Long-term Debt
Long-term debt outstanding at December 31 was (in thousands):
1997 1996
---- ----
1997 credit facility (a) $74,500 $ --
1995 credit facility (repaid in 1997) -- 29,000
UTC term loan (b) 58,441 66,440
Nassau term loan (c) 44,939 47,789
Nassau bonds (c) 14,350 14,350
Trenton bonds (d) 35,995 37,280
Oklahoma term loan (e) 17,579 18,743
Oklahoma bonds (e) 4,920 9,000
Trigen Energy Canada term loan (f) 20,136 17,384
------- -------
270,860 239,986
Less: Current portion included above (14,499) (13,499)
-------- --------
$256,361 $226,487
-------- --------
(a) On April 4, 1997, the Company entered into a $160.0 million
revolving credit agreement with several banks. This facility was
used to repay indebtedness outstanding under a $62.5 million
credit facility entered into in 1995. The $160.0 million
facility is for an initial period of three years and may be
extended by a total of two one-year periods. Borrowings under
the facility bear interest, at the Company's option, at an annual
rate equal to the base rate or the Eurodollar rate plus 3/4%. The
base rate is the higher of the prime lending rate or the Federal
Reserve reported Federal funds rate plus 1/2%. The average
effective rate on the facility was 6.5% in 1997 and the rate at
December 31, 1997 was 6.7%. On June 10, 1997, the Company
amended the $160.0 million credit agreement by reducing the
facility to $125.0 million and entered into a $35.0 million
revolving credit facility with the same group of banks. The new
facility is for an initial 364-day period and may be extended by
another 364-day period. The terms and conditions of both
facilities are the same.
(b) The UTC term loan and the UTC Revolver (note 9) (together
the "UTC Debt") are secured by all the assets and revenues of
UTC. The Parent Company has guaranteed the UTC Debt in an amount
which is limited, except for liabilities of UTC arising from
environmental matters, to the lesser of $31.7 million and
one-third of the UTC Debt commitments.
Interest on the UTC term loan is at variable rates based on
LIBOR. The average effective rate was 7.3% in 1997, 7.6% in 1996
and 7.7% in 1995. The rate at December 31, 1997 was 7.8%. UTC
has purchased interest rate protection agreements (note 11).
Principal repayments commenced in June 1994, with final maturity
in September 2004.
(c) Interest on the Nassau term loan is at variable rates based
on LIBOR. The average effective rate was 6.7% in 1997, 6.8% in
1996 and 7.2% in 1995. At December 31, 1997, the effective rate
was 6.9%. Principal repayments commenced in June 1992, with
final maturity in December 2003.
The Nassau bonds were issued by the Town of Hempstead
Industrial Development Authority. Interest is 7.75% per year.
Principal payments are due from 2012 through 2015. A bank has
issued a letter of credit in favor of the bondholders in the
event of default. In February 1998, the Nassau bonds were
refinanced as variable rate demand tax-exempt industrial
development bonds.
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Nassau term loan and the Nassau bonds are without
recourse to the Parent Company. All the assets and revenues of
Trigen-Nassau Energy Corporation, a wholly-owned subsidiary of
the Parent Company ("Trigen-Nassau") are pledged to secure the
term loan and bonds. Upon certain events, Trigen-Nassau will be
required to enter into interest rate protection agreements the
effect of which is to fix the rate on 50% of the aggregate
outstanding principal amounts of the term loan and bonds for a
minimum of five years.
(d) The Trenton bonds were issued by the New Jersey Economic
Development Authority, and are payable solely from revenues and
other funds pledged by Trigen-Trenton Energy Company, a
majority-owned subsidiary of the Parent Company. The bonds
require annual sinking fund payments that began December 1993
with final maturity in December 2010. The interest rates were
fixed to maturity at 6.1%-6.2% on $35.2 million of the bonds (the
tax-exempt portion), and 7.3% on the balance (the taxable
portion).
(e) Interest on the Oklahoma term loan is at variable rates
based on LIBOR. The average effective rate was 7.1% in 1997,
6.9% in 1996 and 7.5% in 1995. The rate at December 31, 1997,
was 7.2%. Principal repayments commenced in December 1994, with
final maturity in September 2007.
The Oklahoma bonds were issued by the Oklahoma City
Industrial and Cultural Facilities Trust. Interest is 6.75% per
year. Principal payments are due from 2008 through 2017. A bank
has issued a letter of credit in favor of the bondholders in the
event of default.
The Oklahoma term loan and the Oklahoma bonds are without
recourse to the Parent Company. All the assets of
Trigen-Oklahoma Energy Corporation, a wholly-owned subsidiary of
the Parent Company, ("Trigen-Oklahoma") are pledged to secure the
term loan and bonds. Upon certain events, Trigen-Oklahoma will
be required to enter into interest rate protection agreements the
effect of which is to fix the rate on 75% of the aggregate
outstanding principal amounts of the term loan and bonds for an
average life of seven years.
(f) Interest on the term loan for Trigen Energy Canada Inc., a
wholly-owned subsidiary of the Parent Company, ("Trigen-Canada")
was at variable rates during 1997 based on Canadian bankers'
acceptances. The average effective rate was 4.6% in 1997 and
4.7% in 1996. At December 31, 1997, Trigen-Canada entered into
an interest rate swap agreement fixing the rate on the
outstanding principal amount (Note 11). The rate at December 31,
1997 was 5.3%. The term loan is secured by the assets of
Trigen-Canada, with limited recourse to the Parent Company in the
event of any shortfall in debt service payments by Trigen-Canada.
The Company's debt agreements limit or restrict cash payments,
the payment of dividends, capital expenditures, incurrence of new
debt and transactions with affiliates. At December 31, 1997, the
Company was in compliance with all covenants contained in its
debt agreements.
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Maturities of long-term debt for the next five years are as
follows (in thousands):
1998 $14,499
1999 16,451
2000 17,365
2001 18,508
2002 93,065
Based upon the debt balances at December 31, 1997, a change
in the LIBOR rate of .25% would have a corresponding change in
interest expense of approximately $505,000 per year when
three-month LIBOR is under 6.0% ranging to approximately $416,000
per year when three-month LIBOR is over 7.5%. Three-month LIBOR
at December 31, 1997 was 5.9%.
Cash paid for interest (net of amounts capitalized) was $17.3
million, $17.5 million and $18.1 million in 1997, 1996 and 1995,
respectively.
11. Financial Instruments
The fair value of long-term debt, including the current portion,
and interest rate swap, cap and collar agreements, was estimated
based on the future cash flows associated with each instrument
discounted using the Company's current borrowing rate for similar
instruments of comparable maturity. The estimated fair value of
long term debt and related financial instruments approximates
carrying value at December 31, 1997.
The fair value of receivables, payables and short-term debt
approximates carrying value at December 31, 1997 due to the
short-term maturity of these instruments.
As of December 31, 1997, the Company had outstanding
interest rate swap, cap and collar agreements having a total
notional amount of $49.4 million, an average fixed interest rate
of 6.8% and an average remaining life of 7 years.
In addition to the letters of credit issued with respect to
the Nassau and Oklahoma bonds (Note 10), the Company had
outstanding a contingent liability for letters of credit of $17.2
million at December 31, 1997. In January 1998, $10.0 million of
the letters of credit outstanding were canceled.
12. Leases
The Company has entered into various leasing arrangements for
office space, land and equipment. These arrangements are
accounted for as operating leases.
Future minimum rental payments under operating leases with
remaining noncancelable terms in excess of one year at December
31, 1997 are (in thousands):
1998 $2,959
1999 2,858
2000 2,846
2001 2,751
2002 2,425
Thereafter 13,155
Total minimum payments $26,994
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Excluded from the above future minimum rental payments are two
operating leases, one for a term of 25 years and the other for 99
years. The 25-year lease is for land, facilities and equipment
and the 99-year lease is for land. The current annual rental
payments for these leases are $912,000 and the total remaining
commitments at December 31, 1997 are estimated to be $29.3
million.
Rental expense was $3,473,000 in 1997, $2,932,000 in 1996 and
$2,080,000 in 1995.
13. Stock Options
The Company's stock incentive plan provides for the granting
of stock options, stock appreciation rights, performance shares,
restricted stock and other stock awards to officers and key
employees and stock options to non-employee directors. In 1997,
shareholders approved an increase in the number of shares of
common stock that may be issued under the stock incentive plan to
2,000,000 shares.
Stock options outstanding under the stock incentive plan were
granted at a price equal to 100% of the market price on the date
of grant. Stock options granted to non-employee directors are
exercisable six months from the date of grant, and are
exercisable until the earlier of the tenth anniversary of the
date of grant, or the first anniversary of leaving the Board of
Directors. Stock options granted to employees vest at the rate
of 20% per year, starting on the first anniversary of the grant
date and are exercisable over a period of ten years from the date
of grant, with the exception of grants of stock options in 1995
for 18,800 shares, which vest immediately.
Information relating to stock options granted during 1997,
1996 and 1995 is summarized as follows:
Average
Number of Exercise
Shares Price
--------- --------
Outstanding December 31, 1994 491,000 $15.92
Granted 90,500 19.82
Canceled (14,200) 15.75
---------
Outstanding December 31, 1995 567,300 16.54
Granted 67,200 20.05
Exercised (38,500) 16.05
Canceled (31,940) 16.95
---------
Outstanding December 31, 1996 564,060 17.05
Granted 371,500 21.37
Exercised (24,740) 17.08
Canceled (43,290) 18.34
---------
Balance December 31, 1997 867,530 18.83
---------
The following summarizes information about stock options
outstanding at December 31, 1997.
<TABLE>
<CAPTION>
Outstanding Exercisable
--------------------------- -----------------
Average Average
Range of Average Exercise Exercise
Exercise Prices Options Life(a) Price Options Price
- --------------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
$15.75 - 19.75 441,530 8.0 $17.88 272,374 $16.15
20.00 - 24.00 396,500 8.9 21.82 34,700 21.55
24.25 - 27.75 29,500 9.2 25.86 4,800 25.67
------- --- ------ ------- ------
Total 867,530 8.7 $18.83 311,874 $16.90
------- --- ------ ------- ------
(a) Average contractual life remaining in years.
</TABLE>
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company applies APB 25 in accounting for its stock
option plan. Accordingly, compensation expense would be recorded
on the date of grant only if the current market price of the
Company's common stock exceeded the exercise price. Had
compensation expense for stock option plan been determined based
on the fair value at the grant dates for awards under the plan
consistent with SFAS No. 123, net earnings would have decreased
by $341,000 ($.03 per common share) and $156,000 ($.01 per common
share) in 1997 and 1996, respectively.
The fair value of each option was estimated on the date of
grant using the Black Scholes option-pricing model with the
following assumptions: risk free interest rates of 6.2% and 6.5%
for 1997 and 1996, respectively; annual dividend yields of .7%
and .5% for 1997 and 1996, respectively; expected option life of
8.4 years for 1997 and 8.3 years for 1996; and volatility of 31%
and 33% for 1997 and 1996, respectively. The weighted average
fair value of an option granted during 1997 and 1996 was $10.15
and $10.10 per share, respectively.
In connection with the employee stock purchase plan, the
Company allocated 200,000 shares of common stock for purchases
pursuant to such plan. Stock purchased in 1997, 1996 and 1995
pursuant to the employee stock purchase plan was 32,028, 28,325
and 25,768 shares, respectively. The acquisition price of the
stock is 85% of the lower of the closing market price on the first
and last day of the six-month purchase period.
14. Retirement Plans
The Company sponsors a 401(k) Plan which allows participants
to make contributions pursuant to Section 401(k) of the Internal
Revenue Code. The Company matches employee contributions in
varying percentages according to a schedule up to an annual
maximum Company contribution of approximately $1,260 per
employee. Employees vest immediately in both employee and
Company contributions. Company contributions to the 401(k) Plan
were $1,099,000 (including the cost of 23,902 shares of Company
common stock), $1,375,000 (including the cost of 27,460 shares of
Company common stock), and $1,064,000 (including the cost of
26,253 shares of Company common stock) in 1997, 1996 and 1995,
respectively. Effective January 1, 1995, the 401(k) Plan was
open to all Company employees excluding certain employees covered
by other retirement plans.
Benefits payable under a defined benefit plan were frozen as
of December 31, 1994 pending vesting and distribution to
participants. Benefits under the plan are based primarily on
salary during the term of employment and length of service.
Pension expense was $316,000, $122,000 and $75,000 in 1997, 1996
and 1995, respectively. The Company's net obligation under the
plan at December 31, 1997 was not significant.
15. Income Taxes
The provision for income taxes was (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
Current Deferred Total Current Deferred Total Current Deferred Total
------- -------- ----- ------- -------- ----- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
State/Local $ 738 $ 45 $ 783 $1,081 $492 $1,573 $1,395 $ 703 $2,098
U.S. Federal 1,890 818 2,708 3,300 4,379 7,679 1,492 3,734 5,226
------ ---- ----- ------ ----- ------ ------ ------ -------
Total $2,628 $863 $3,491 $4,381 $4,871 $9,252 $2,887 $4,437 $7,324
------ ---- ------ ------- ----- ------ ------ ------ ------
</TABLE>
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tax effects of temporary differences that give rise to
deferred tax liabilities and assets at December 31, 1997 and 1996
are (in thousands):
1997 1996
---- ----
Deferred income tax liabilities
Property, plant and equipment $35,193 $34,790
Deferred income tax assets
AMT credit carryforwards 3,744 3,060
Tax loss carryforwards 874 1,209
Environmental costs 832 1,663
Revenue and receivable allowances 1,502 358
Other, net 1,830 2,816
----- -----
Gross deferred income tax assets 8,782 9,106
Valuation allowances (409) (273)
------ -------
Net deferred income tax assets 8,373 8,833
------- -------
Net deferred income tax liability $26,820 $25,957
------- -------
Net current deferred income tax assets of $4,417,000 and
$3,640,000 at December 31, 1997 and 1996, respectively are
included in prepaid expenses and other current assets, net in the
Consolidated Balance Sheet.
At December 31, 1997 a loss carryforward of $451,000 was
available through 2009 to offset U.S. taxable income. In
addition, at December 31, 1997 a loss carryforward of $1,707,000
was available to offset Canadian taxable income expiring $149,000
in 1999, $391,000 in 2000, $137,000 in 2001 and $1,030,000 in
2003. At December 31, 1997 an alternative minimum tax credit
carryforward of $3,744,000 was available to offset future U.S.
regular income taxes, if any, over an indefinite period.
Valuation allowances were primarily for tax loss carryforwards in
state, local and Canadian jurisdictions that may expire before
being used. Management believes that it is more than likely that
the Company will generate taxable income sufficient to realize
the loss carryforwards prior to their expiration. This belief is
based upon projected taxable income and available tax planning
strategies.
A reconciliation of tax at the U.S. statutory rate to income
taxes follows:
1997 1996 1995
---- ---- ----
Tax at U.S. statutory rate 35.0% 35.0% 35.0%
State/local income taxes, net of
Federal benefit 6.2 5.7 7.6
Taxes related to foreign operations (1.3) (.1) (1.2)
(Increase)/decrease in valuation
allowances 1.6 (3.6) (1.4)
Other items, net (.5) 2.7 .9
----- ----- -----
Income taxes 41.0% 39.7% 40.9%
----- ----- -----
The Company made income tax payments of $2,213,000,
$2,267,000 and $3,101,000 in 1997, 1996 1995, respectively.
Taxes on receipts or capital, imposed by some jurisdictions in
lieu of taxes on income are included in general and
administrative expenses. These taxes were $799,000; $810,000 and
$734,000 in 1997, 1996 and 1995, respectively.
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Selected Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
For the Quarter
March 31 June 30 Sept. 30 Dec. 31
(In thousands,except per share data)
<S> <C> <C> <C> <C>
1997
Revenues $83,521 $48,107 $43,024 $65,999
Operating income 8,577 6,174 6,519 7,473
Net earnings 2,234 693 348 1,750
Basic earnings per
common share .19 .06 .03 .15
Diluted earnings per
common share .18 .06 .03 .14
------- ------ ------- -------
1996
Revenues $86,219 $48,685 $41,646 $67,084
Operating income 12,143 9,322 12,762 8,911
Earnings before
extraordinary item 4,181 2,498 4,757 2,615
Extraordinary loss (a) -- -- (1,943) --
------- ------ ------ ------
Net earnings 4,181 2,498 2,814 2,615
Basic earnings per
common share
Before extraordinary
item .36 .22 .41 .22
Extraordinary loss -- -- (.17) --
------- ------ ------- -------
Net earnings .36 .22 .24 .22
------- ------ ------- -------
Diluted earnings per
common share
Before extraordinary
item .36 .21 .41 .22
Extraordinary loss -- -- (.17) --
------- ------ ------- -------
Net earnings .36 .21 .24 .22
------- ------ ------- -------
1995
Revenues $65,176 $35,775 $30,998 $66,761
Operating income 10,002 7,975 7,507 11,554
Net earnings 3,258 2,140 1,594 3,572
Basic and diluted
earnings per
common share .29 .19 .14 .31
------- ------- ------- --------
(a) The extraordinary loss of $1,943,000, net of a $1,046,000
tax benefit, was incurred in connection with the early
retirement of debt.
</TABLE>
17. Contingencies
The Company is subject from time to time to legal
proceedings and other claims that arise in the normal course of
business, and the Company believes, except as set forth in Note
18, that the outcome of these matters will not have a material
adverse effect on the results of operations or financial
condition of the Company.
18. Subsequent Events
Acquisition (Unaudited)
On January 22, 1998, the Company acquired all of the capital
stock of Power Sources, Inc. ("PSI"), a biomass-to-energy power
plant developer and operator, for a total cash investment of
$44,100,000, funded from the Company's existing credit facility.
This amount includes $3,568,000 of additional consideration
resulting from purchase price adjustments and expenses of the
acquisition. PSI had revenues of $18,967,000 and net income of
$2,441,000 for the twelve-month period ended December 31, 1997.
Results for PSI will be included with those of the Company for
periods subsequent to the date of acquisition.
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The acquisition will be accounted for in 1998 under the
purchase method of accounting. The purchase price has been
allocated to the assets acquired and liabilities assumed based on
fair market value at the date of acquisition. The excess of the
purchase price over the net assets acquired was $10,398,000 and
will be amortized over a period not exceeding 30 years. The fair
value of the assets acquired and liabilities assumed is as
follows (in thousands):
Current assets $ 3,325
Property, plant and equipment 32,265
Intangibles 11,687
Costs in excess of net assets acquired 10,398
Current liabilities (2,147)
Long-term debt (4,290)
Other liabilities (7,138)
--------
Total purchase price $44,100
========
The following unaudited pro forma summary presents the
consolidated results of operations as if the acquisition had
occurred at the beginning of the years presented(in thousands,
except per share data):
1997 1996
---- ----
Revenues $259,618 $259,183
Net earnings 5,325 13,023
Diluted earnings per common
share--before extraordinary item .44 1.11
The pro forma results included certain adjustments for
depreciation expense as a result of a step up in the basis of
property, plant and equipment and an increase in the remaining
lives, amortization expense as a result of goodwill and other
intangible assets and interest expense on borrowings to finance
the acquisition. The pro forma results do not purport to be
indicative of the results of operations which actually would have
resulted had the acquisition been made at the beginning of the
years presented, or of results which may occur in the future.
Legal Proceeding
On March 9, 1998, Grays Ferry Cogeneration Partnership,
Trigen-Schuylkill Cogeneration, Inc., NRGG (Schuylkill)
Cogeneration, Inc. and Trigen-Philadelphia Energy Corporation, a
wholly owned subsidiary of the Company, commenced an action
against PECO Energy Company ("PECO"), Adwin (Schuylkill)
Cogeneration, Inc. and the Pennsylvania Public Utility Commission
in the United States District Court for the Eastern District of
Pennsylvania. Grays Ferry Cogeneration Partnership (the
"Partnership") is the owner of the Grays Ferry Cogeneration
Facility located in Philadelphia, Pennsylvania. The Company has
an investment of approximately $12 million in the Partnership,
representing a one third interest in the Partnership through its
wholly owned subsidiary, Trigen-Schuylkill Cogeneration, Inc. NRGG
(Schuylkill) Cogeneration Inc. and Adwin (Schuylkill)
Cogeneration, Inc. own the other two thirds interests in the
Partnership. Adwin (Schuykill) Cogeneration, Inc. is
an indirect wholly owned subsidiary of PECO.
<PAGE>
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Partnership commenced this action in reaction to the
wrongful termination by PECO on March 3, 1998, of the electric
power purchase agreement between the Grays Ferry Partnership and
PECO. The Partnership is seeking a declaratory judgment to
require PECO to comply with the electric power purchase agreement
and for damages to be proven at trial in an amount in excess of
$200 million. The Partnership is also seeking a court order
declaring any action taken by the Pennsylvania Public Utility
Commission which would change the terms of the electric power
purchase agreement between the Grays Ferry Partnership and PECO
to be null and void.
Trigen-Philadelphia Energy Corporation ("Trigen-Philadelphia")
which operates a district steam heating system, purchases steam
produced at the Grays Ferry Cogeneration Facility. Trigen-
Philadelphia claims that PECO's wrongful termination of its
electric power purchase agreement with the Grays Ferry Partnership
constitutes tortious interference with Trigen-Philadelphia's agreement
to supply steam service to the University of Pennsylvania, its largest
customer.
On March 19, 1998, the United States District Court for the
Eastern District of Pennsylvania dismissed this action before
reaching the merits, determining that it did not have the required
subject matter jurisdiction to hear the case. On March 27, 1998,
the Partnership and Trigen-Philadelphia filed a motion for
reconsideration of the dismissal order and leave to file an amended
complaint. In the event that the court's order of dismissal is
upheld, the Grays Ferry Partnership and Trigen-Philadelphia would
have the right to commence an action in state court and/or to
commence proceedings before the Pennsylvania Public Utility
Commission.
On March 17, 1998, The Chase Manhattan Bank issued a notice
of default to the Partnership under the terms of the Credit
Agreement, dated as of March 1, 1996, between the Partnership,
The Chase Manhattan Bank, as agent and certain other commercial
banks. That debt is secured only by the Partnership assets and
the partners' ownership interests in the Partnership. While it is
possible that the Company's investment could become impaired, at
this time the Company does not believe that is likely. The Company
believes that PECO's termination of the electric power purchase
agreement was wrongful and the Company intends to aggressively
pursue the remedies available to it. The banks have not accelerated
the debt and, on March 18, 1998, The Chase Manhattan Bank commenced
its own lawsuit against PECO based upon PECO's wrongful
termination of the electric power purchase agreement.
In the event the Company is not successful and PECO's actions
are upheld, PECO would be required under PURPA to continue to
purchase power from the Grays Ferry cogeneration facility at PECO's
avoided cost. This would generate significantly lower earnings per
common share for the Company than the 1998 annual unaudited earnings
per common share of $.40 to $.52 previously forecasted by the Company
based on the contracted power purchase price.
<PAGE>
<TABLE>
<CAPTION> Schedule I
TRIGEN ENERGY CORPORATION (Parent Company)
CONDENSED BALANCE SHEETS
December 31, 1997 and 1996
(In thousands)
1997 1996
---- ----
<S> <C> <C>
Assets
Cash and cash equivalents $ 402 $ 5,853
Other current assets 4,402 588
Property, plant and equipment, net 10,438 12,287
Deferred costs and other assets, net 3,496 4,116
Investments in and amounts due from
subsidiaries, net 205,008 156,434
-------- --------
Total assets $223,746 $179,278
-------- --------
Liabilities and Stockholders' Equity
Short-term debt $ -- $ 5,000
Long-term debt 74,500 29,000
Other liabilities 3,764 4,608
-------- --------
Total liabilities 78,264 38,608
Stockholders' equity:
Preferred stock -- --
Common stock 121 120
Additional paid-in capital 114,157 112,836
Retained earnings 31,881 28,538
Cumulative translation adjustment 296 136
Treasury stock, at cost (973) (960)
-------- --------
Total stockholders' equity 145,482 140,670
-------- --------
Total liabilities and
stockholders' equity $223,746 $179,278
-------- --------
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule I--(Continued)
TRIGEN ENERGY CORPORATION (Parent Company)
CONDENSED STATEMENTS OF OPERATIONS
Years Ended December 31, 1997, 1996 and 1995
(In thousands)
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues
Management fees and costs
recovered from subsidiaries $12,472 $11,156 $ 4,918
Interest income from subsidiaries 2,276 2,015 706
------- ------- -------
Total revenues 14,748 13,171 5,624
Costs and expenses
General and administrative 15,555 14,262 9,544
Interest expense 3,247 1,689 426
Other (income) expense, net (1,034) (436) 75
------- ------- -------
Total costs and expenses 17,768 15,515 10,045
------- ------- -------
Loss before income tax benefit,
equity in earnings of subsidiaries
and extraordinary item (3,020) (2,344) (4,421)
Income tax benefit 1,057 820 1,547
Equity in earnings of subsidiaries, net 6,988 15,575 13,438
------- ------- -------
Earnings before extraordinary item 5,025 14,051 10,564
Extraordinary loss from extinguishment
of subsidiaries' debt, net of
subsidiaries' income tax benefits -- (1,943) --
------- ------- --------
Net earnings $ 5,025 $12,108 $10,564
------- ------- --------
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule I--(Continued)
TRIGEN ENERGY CORPORATION (Parent Company)
CONDENSED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1997, 1996 and 1995
(In thousands)
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Increase (decrease) in cash and
cash equivalents
Cash flows from operating activities
Net earnings $ 5,025 $12,108 $10,564
Reconciliation of net earnings to cash
provided by operating activities:
Equity in earnings of subsidiaries (6,988) (15,575) (13,438)
Dividends received from subsidiaries -- -- 7,000
Other, net ( 2,029) (1,266) 2,110
------- ------- -------
Net cash (used in) provided by
operating activities ( 3,992) (4,733) 6,236
------- ------- -------
Cash flows from investing activities
Capital expenditures ( 992) (10,800) --
Purchase of a fuel management agreement
and related inventory ( 8,871) -- --
Acquisition of energy facilities,
net of cash acquired -- -- (18,549)
Investments in and advances to
subsidiaries, net (19,429) ( 7,272) 5,627
Investment in non-consolidated
partnerships (12,294) (1,911) ( 1,460)
------- ------- -------
Net cash used in investing activities (41,586) (19,983) (14,382)
------- ------- -------
Cash flows from financing activities
Short-term debt, net ( 5,000) 5,000 (7,500)
Proceeds of long-term debt 45,500 17,250 16,000
Dividends paid ( 1,682) (1,640) (1,594)
Issuance of common stock, net 1,309 5,949 506
------- ------- -------
Net cash provided by financing activities 40,127 26,559 7,412
------- ------- -------
Cash and cash equivalents
Increase/(decrease) ( 5,451) 1,843 ( 734)
At beginning of year 5,853 4,010 4,744
------- ------- -------
At end of year $ 402 $ 5,853 $ 4,010
------- ------- -------
Supplemental disclosure of cash
flow information
Non-cash investing activity
Acquisition of subsidiary -- $ 1,037 --
------- ------- -------
Non-cash financing activity
Issuance of common stock for acquisition
of subsidiary -- $ 1,037 --
------- ------- -------
Issuance of common stock for extinguishment
of long-term debt -- $ 4,250 --
------- ------- -------
See accompanying notes to condensed financial statements.
</TABLE?
<PAGE>
Schedule I--(Continued)
TRIGEN ENERGY CORPORATION (Parent Company)
NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(1) Trigen Energy Corporation (Parent Company) Financial
Statements
The accompanying condensed financial information has been
prepared in accordance with Regulation S-X of the Securities Act
of 1933 and does not include all information and notes necessary
for a fair presentation of financial position, results of
operations and cash flows in conformity with generally accepted
accounting principles since the user of these statements is
assumed to read them in conjunction with Trigen Energy
Corporation's consolidated financial statements and the notes
thereto for the year ended December 31, 1997 included elsewhere
in this document.
Certain reclassifications have been made to the prior years'
financial statements to conform to the 1997 presentation.
(2) Transactions with Subsidiaries
The Parent Company derives cash from management fees and
costs recovered from its subsidiaries, distributions by its
subsidiaries and, at times, repayment to the Parent Company from
proceeds of long-term financing obtained by the subsidiaries for
funds previously advanced to subsidiaries for construction in
advance of obtaining permanent financing. Certain subsidiaries
have restrictive debt agreements which generally permit
distributions to the Parent Company only when certain ratios and
other financial covenants are satisfied. Cash available to the
Parent Company without restrictions as to use, including amounts
distributable by subsidiaries was $4.0 million at December 31,
1997, and $7.4 million at December 31, 1996.
(3) Debt
The Parent Company had a $22.5 million bank credit facility
which expired March 1997. At December 31, 1996, $5.0 million was
outstanding under this facility.
On April 4, 1997, the Parent Company entered into a $160.0
million revolving credit agreement with several banks. This
facility was used to repay indebtedness outstanding under a $62.5
million credit facility entered into in 1995. The $160.0 million
facility is for an initial period of three years and may be
extended by a total of two one-year periods. Borrowings under
the facility bear interest, at the Parent Company's option, at an
annual rate equal to the base rate or the Eurodollar rate plus
3/4%. The base rate is the higher of the prime lending rate or
the Federal Reserve reported Federal funds rate plus 1/2%. The
average effective rate on the facility was 6.5% in 1997 and the
rate at December 31, 1997 was 6.7%. On June 10, 1997, the Parent
Company amended the $160.0 million credit agreement by reducing
the facility to $125.0 million and entered into a $35.0 million
revolving credit facility with the same group of banks. The new
facility is for an initial 364-day period and may be extended by
another 364-day period. The terms and conditions of both
facilities are the same.
The Parent Company has issued certain guarantees relating to the
debt of UTC. The Parent Company has guaranteed the UTC debt in
an amount which is limited, except for liabilities of UTC arising
from environmental matters, to the lesser of $31.7 million and
one-third of the UTC debt commitments.
<PAGE>
Schedule I--(Continued)
TRIGEN ENERGY CORPORATION (Parent Company)
NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(5) Income Taxes
The Parent Company and its domestic subsidiaries file a
consolidated U.S. Federal income tax return. The Parent
Company's state income taxes are filed on a separate return
basis. A valuation allowance for state tax loss carryforwards
has been provided because there are carryforwards which may
expire before being used.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Schedule II
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Balance at Charged to Balance
Beginning Costs and at End
Description of Year Expenses Deductions of Year
- --------------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Year ended December
31, 1995:
Allowance for
doubtful accounts $568 208 ( 79) $ 697
Year ended December
31, 1996:
Allowance for
doubtful accounts $697 664 (233) $1,128
Year ended December
31, 1997:
Allowance for
doubtful accounts $1,128 331 (385) $1,074
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on March 30, 1998.
TRIGEN ENERGY CORPORATION
By: /S/ THOMAS R. CASTEN
---------------------------------
Thomas R. Casten
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities indicated on
March 30, 1998.
Signature Title
--------- -----
/s/ Thomas R. Casten
- ------------------------
Thomas R. Casten Director, President and Chief
Executive Officer(Principal Executive
Officer)
/s/ David H. Kelly
- ------------------------
David H. Kelly Vice President--Finance,
Chief Financial Officer
/s/ Daniel J. Samela
- ------------------------
Daniel J. Samela Controller (Principal Accounting Officer)
/s/ Richard E. Kessel
- ------------------------
Richard E. Kessel Director, Executive Vice President,
Chief Operating Officer
/s/ George F. Keane
- ------------------------
George F. Keane Director and Chairman of the Board
/s/ Philippe Brongniart
- ----------------------------
Philippe Brongniart Director
/s/ Dominique Mangin d'Ouince
- ----------------------------
Dominique Mangin d'Ouince Director
/s/ Patrick Desnos
- ----------------------------
Patrick Desnos Director
/s/ Michel Bleitrach
- ----------------------------
Michel Bleitrach Director
/s/ Francois Faessel
- ----------------------------
Francois Faessel Director
/s/ Michel Cassou
- ----------------------------
Michel Cassou Director
/s/ Charles E. Bayless
- ----------------------------
Charles E. Bayless Director
/s/ Jonathan O'Herron
- ----------------------------
Jonathan O'Herron Director
<PAGE>
TRIGEN ENERGY CORPORATION
INDEX OF EXHIBITS
Exhibit Description
- ------- ---------------------------------------
2.1** -- Stock Purchase Agreement, dated December 9, 1997,
between Canal Industries, Inc. and ChemFirst Inc.
as Sellers, and Trigen Energy Corporation, as Buyer
(Form 8-K Current Report dated January 27, 1998.)
3.1** -- Restated Certificate of Incorporation of Trigen
(Registration Statement No. 33-80410).
3.2** -- Restated and Amended By-Laws of Trigen (Registration
Statement No. 33-80410).
4.1** -- Credit Agreement, dated as of December 2, 1993,
among Trigen Acquisition Inc., Trigen, the Lenders
named therein, and Toronto Dominion (Texas), Inc.,
as Agent (Registration Statement No. 33-80410).
4.2** -- Loan Agreement, dated as of June 1, 1993, between
Trigen-Trenton District Energy Company, L.P. and
the New Jersey Economic Development Authority
(District Heating and Cooling Revenue Bonds)
(Registration Statement No. 33-80410).
4.3* -- Agreement of Trigen Energy Corporation to provide
a copy of long term debt arrangement to the
Securities and Exchange Commission upon request.
4.4** -- See Exhibits 3.1 and 3.2 (Registration Statement
No. 33-80410).
4.5** -- Revolving Credit Facility, Dated as of April 4,
1997 between the Company, Banks Listed on the
Signature Page and Societe Generale as Issuing
Bank and Agent. (Form 10-Q Quarterly Report for
the quarterly period ended June 30, 1997).
4.6** -- Amendment No.1, Dated as of June 10, 1997, to
the Revolving Credit Facility Dated as of April 4,
1997. (Form 10-Q Quarterly Report for the quarterly
period ended June 30, 1997).
4.7** -- Revolving Credit Facility, Dated as of June 10,
1997 between the Company, Banks Listed on the
Signature Page and Societe Generale as Issuing
Bank and Agent. (Form 10-Q Quarterly Report for
the quarterly period ended June 30, 1997).
4.7** -- Construction and Term Loan Agreement dated as of
August 11, 1995 between Trigen-Peoples District
Energy Company and The Prudential Insurance Company
of America. (Form 10-K Annual Report for 1995).
4.8** -- Amended and Restated Credit and Acceptance
Agreement dated as of December 20, 1996 among
Trigen Energy Canada Inc., Certain Commercial
Lending Institutions as the Lenders, Societe
Generale, New York Branch, as the Administrative
Agent for the Lenders and Societe Generale (Canada)
as the Collateral Agent for the Lenders. (Form 10-K
Annual Report for 1996).
E-1
<PAGE>
Exhibit Description
- ------- ---------------------------------------
9.1** -- Stockholders' Agreement, dated August 10, 1994
by and among Trigen, Thomas R. Casten, Michael
Weiser, Eugene E. Murphy, Richard E. Kessel,
John J. Ludwig, Cofreth American Corporation and
Compagnie Parisienne de Chauffage Urbain, S.A.
(Registration Statement No. 33-80410).
9.2** -- Stockholder's Agreement dated as of January 17,
1996 by and between Thomas Ewing and Trigen Energy
Corporation.
10.1** -- Reimbursement and Credit Agreement, dated as of
September 1, 1992, among Trigen-Oklahoma District
Energy Corporation, the Banks named therein, and
Societe Generale, Southwest Agency, as Agent and
Collateral Agent (Registration Statement No.
33-80410).
10.2** -- Loan Agreement, dated as of September 1, 1992,
between Oklahoma City Industrial and Cultural
Facilities Trust, as Lender and Trigen-Oklahoma
District Energy Corporation, as Borrower (District
Heating and Cooling Revenue Bonds, Series 1992)
(Registration Statement No. 33-80410).
10.3** -- Lease Agreement, dated as of August 1, 1990,
between Town of Hempstead Industrial Development
Agency and Nassau District Energy Corporation
(Industrial Development Revenue Bonds)
(Registration Statement No. 33-80410).
10.4** -- Letter Agreement, dated February 24, 1994, between
Trigen and Credit Commerciale de France, New York
Branch, (Registration Statement No. 33-80410).
10.5** -- Standby Letter of Credit Agreement, dated November
16, 1993, between Trigen and Societe Generale, New
York Branch (Registration Statement No. 33-80410).
10.6** -- Application and Agreement for Irrevocable Standby
Letter of Credit, dated December 14, 1992, between
Societe Generale, New York Branch, and Trigen-Chicago
District Energy Corporation (Registration Statement
No. 33-80410).
10.7** -- Noncompetition Agreement, dated December 3, 1993,
among Catalyst Energy Corporation, Great Lakes Power
Limited, Century Power Corporation, Trigen Acquisition,
Inc. and Trigen (Registration Statement No. 33-80410).
10.8** -- Site Lease Agreement, dated as of December 16,
1992, between Metropolitan Pier and Exposition
Authority and Trigen-Peoples District Energy
Company (Registration Statement No. 33-80410).
10.9** -- Lease Agreement, dated as of November 30, 1993,
between Housing Authority of Baltimore City and
Baltimore Thermal Energy Corporation (Registration
Statement No. 33-80410).
10.10** -- Spring Gardens Land Lease, dated February 28,
1985, between Baltimore Gas and Electric Company and
Baltimore Steam Company (Registration Statement
No. 33-80410).
E-2
<PAGE>
Exhibit Description
- ------- ---------------------------------------
10.11** -- Lease Agreement, dated as of June 26, 1991,
between King Real Estate Corporation, Trustee of
King Terminal Trust and Boston Thermal Energy
Corporation, as amended by the First Amendment
to Lease, dated July 5, 1991, and by the Second
Amendment to Lease, dated June 23, 1992.
(Registration Statement No. 33-80410).
10.12** -- Lease Agreement, dated as of April 1, 1991,
between Aetna Life Insurance Company and Boston
Thermal Energy Corporation (Registration
Statement No. 33-80410).
10.13** -- Lease Agreement, dated March 29, 1990, between
Kansas City Power & Light Company and Trigen-Kansas
City District Energy Corporation (Registration
Statement No. 33-80410).
10.14** -- Indenture, dated September 14, 1993, between
George Chioros Holdings Ltd., as Lessor, and
Trigen-London District Energy Corporation, as
Lessee (Registration Statement No. 33-80410).
10.15** -- Standard Lease, dated as of August 7, 1990,
between the United States Postal Service and
Trigen-Oklahoma District Energy Corporation
(Registration Statement No. 33-80410).
10.16** -- Schuylkill Station Lease Agreement, dated January
30, 1987, between Philadelphia Electric Company
and Philadelphia Thermal Corporation (Registration
Statement No. 33-80410).
10.17** -- Amended and Restated Site Lease, dated September
17, 1993, between Philadelphia Thermal Energy
Corporation and Grays Ferry Cogeneration
Partnership (Registration Statement No. 33-80410).
10.18** -- Lease Agreement, dated as of March 5, 1975,
between the City of St. Louis and Union Electric
Company (Registration Statement No. 33-80410).
10.19** -- Ground Lease, dated as of December 1, 1982,
between the City of Trenton and Trenton District
Energy Company (Registration Statement No.
33-80410).
10.20** -- Thermal Energy Agreement, dated July 22, 1981,
between Mercer Medical Center and Trenton District
Energy Company, as amended September 1981, as
amended August 22, 1984, and as further amended
May 27, 1986 (Registration Statement No. 33-80410).
10.21** -- See Exhibits 4.1, 4.2 and 4.3 (Registration
Statement No. 33-80410).
10.22** -- Trigen Energy Corporation 1994 Director Stock Plan
(Registration Statement No. 33-80410).
10.23** -- Trigen Energy Corporation 1994 Stock Incentive
Plan (Registration Statement No. 33-80410).
10.24** -- Intercompany Services and License Agreement, dated
August 10, 1994, between Ufiner-Cofreth, S.A. and
Trigen (Registration Statement No. 33-80410).
10.25** -- Form of Employment Agreement, dated as of August
12, 1994 between Trigen and Thomas R. Casten (Form
10-K Annual Report for 1994).
E-3
<PAGE>
Exhibit Description
- ------- ---------------------------------------
10.26** -- Form of Employment Agreement, dated as of August
12, 1994, between Trigen and Richard E. Kessel
(Form 10-K Annual Report for 1994).
10.27** -- Form of Employment Agreement, dated as of August
12, 1994, between Trigen and Eugene E. Murphy
(Form 10-K Annual Report for 1994).
10.28** -- Form of Employment Agreement, dated as of August
12, 1994, between Trigen and Michael Weiser
(Form 10-K Annual Report for 1994).
10.29** -- Acquisition Agreement dated March 1, 1996 among
Adwin (Schuylkill) Cogeneration, Inc., O'Brien
(Schuylkill) Cogeneration, Inc. and Trigen-
Schuylkill Cogeneration, Inc.
10.30** -- Amended and Restated Partnership Agreement dated
March 1, 1996 among Adwin (Schuylkill)
Cogeneration, Inc., O'Brien (Schuylkill)
Cogeneration, Inc. and Trigen--Schuylkill
Cogeneration, Inc.
10.31* -- Form of Employment Agreement, dated as of December
5, 1994, between Trigen and David H. Kelly.
10.32* -- Form of Employment Agreement, dated as of March 1,
1995, between Trigen and James F. Lowry.
11* -- Computation of Earnings Per Share.
12.1* -- Computation of Ratio of Earnings to Fixed Charges.
21* -- Subsidiaries of Trigen Energy Corporation.
23.1* -- Consent of KPMG Peat Marwick LLP.
27* -- Financial Data Schedule (for electronic filing only)
* Filed herewith.
** Incorporated by reference to the corresponding exhibit to
the indicated prior filing.
E-4
<PAGE>
EXHIBIT 4.3
Trigen Energy Corporation hereby agrees to file a copy of
the Term Loan and Reimbursement Agreement dated as of August 21,
1990 as Amended and Restated as of February 1, 1998 among
Trigen-Nassau Energy Corporation, the banks named herein, The
Toronto-Dominion Bank, as Letter of Credit Issuing Bank and
Toronto Dominion (Texas), Inc., as Agent and Security
Representative, with the Securities and Exchange Commission upon
request.
<PAGE>
EXHIBIT 10.31
FORM OF EMPLOYMENT AGREEMENT
THIS AGREEMENT dated as of December 5, 1994 is between Trigen
Energy Corporation, a Delaware corporation, (the "Company"),
having its principal office at One Water Street, White Plains,
New York and David H. Kelly ("Executive") an individual residing
at 1285 Stonesthrow Road, Bethlehem, PA 18015 (the "Agreement").
In consideration of the premises and the mutual agreements
hereinafter set forth, the parties agree as follows:
1. Employment. The Company shall employ Executive to act as
Vice President-Finance, Chief Financial Officer for a period
commencing on the date hereof (the "Effective Date") to August 9,
1997; provided, however, that, on said later date and on each
succeeding anniversary of said later date, such employment shall,
pursuant to the terms of this Agreement, be extended
automatically for additional one year periods unless one party
shall advise the other in writing at least 90 days before such
anniversary date that this Agreement shall no longer be so
extended, in which event this Agreement shall terminate on the
day before such anniversary date (such initial period and any
extensions being defined herein as the "Employment Term"). The
giving of such notice of non-extension by the Company shall be
deemed a termination pursuant to Section 6(f)(ii). Executive's
employment by the Company during the Employment Term shall be
subject to earlier termination as set forth in Section 6 of this
Agreement; provided, that for the purpose of calculating any
payments hereunder the Employment Term shall be the period in
effect prior to such termination.
2. Duties. Executive agrees to serve the Company faithfully
and to perform such services as shall from time to time be
assigned by the Company's Chief Executive Officer and, in the
absence of such assignment, such services as Executive reasonably
believes are appropriate in light of his office and as are
necessary to the operations of the Company. Executive agrees to
use his best efforts to promote the interests of the Company in a
reasonable and lawful manner and to devote substantially all of
Executive's business time and energies to the business and
affairs of the Company during the Employment Term.
3. Compensation. During the Employment Term, Executive will
be compensated for all his services hereunder, including any
services as a member of the Board of Directors, as follows:
(a) Base salary, initially at the annual rate of $175,000,
subject to increase from time to time by the Board of Directors
in its sole discretion ("Base Salary"). In making any such
increase, the Board of Directors may take into account any and
all information it may deem relevant including, but not limited
to, the recommendation of the Compensation Committee, or any
other committee of the Board of Directors to whom review of
compensation is delegated, informed by a survey of companies
deemed by such committee to be a representative sampling of peer
group companies.
-1-
<PAGE>
(b) Incentive bonus to a target of 30% of Base Salary, payable
after the end of each calendar year as determined by the Board of
Directors in its sole discretion ("Incentive Compensation" and,
together with Base Salary, "Compensation"). In determining the
amount of any Incentive Compensation, the Board of Directors may
take into account any and all information it may deem relevant
including, but not limited to, Executive's performance measured
against incentive targets recommended by the Compensation
Committee, or any other committee of the Board of Directors to
whom review of compensation is delegated, informed by a survey of
companies deemed by such committee to be a representative
sampling of peer group companies.
4. Other Benefits. (a) General. So long as Executive
remains qualified to participate therein in accordance with the
terms of the underlying benefit plans, the terms of this Agreement
and applicable law, the Company shall provide to Executive such
benefits (including, without limitation, dental, medical, medical
reimbursement and hospital plans, pension plans, 401-k Plans,
employee stock purchase plans, stock option plans, insurance and
vacation) as the Company shall make generally available to its
senior executives.
(b) Automobile Allowance. The Company will provide a fixed
monthly allowance to the Executive for an automobile which will
also cover the cost of the Executive's vehicle insurance. The
Company will require the Executive to account for business
connected driving expenses and will provide the standard IRS
approved mileage reimbursement to cover all operating expenses.
(c) Flexible Perquisite Program. The Company shall provide a
Flexible Perquisite Program for the Executive. Current elements
of the program are Long Term Disability coverage, a yearly
physical examination, and a cellular phone. Additional elements
of the Flexible Perquisite Program will be identified and
implemented with approval of a designated member of the Board of
Directors.
(d) Initial Stock Option Grant. The Company shall make an
initial stock option grant to Executive pursuant to a separate
Option Agreement between the parties, dated as of the Effective
Date of this Agreement, which shall provide, inter alia, that
Executive shall have options to purchase all or part of 5000
shares of common Stock of the Company effective and vesting on
each of the first five anniversaries of the Effective Date of
this Agreement for an aggregate of 25,000 shares of said Common
Stock and said options shall be exercisable at $19.00 per share,
which is the closing price of said Common Stock on the New York
Stock Exchange on the Effective Date. All options shall be
exercisable from and after the respective dates of vesting
thereof until the day preceding the eleventh anniversary of the
Effective Date of this agreement, subject to the conditions set
forth in the said Option Agreement.
(e) Relocation Benefits. In the event of Executive's permanent
relocation to the White Plains area he shall be entitled to the
standard relocation package then offered Corporate Vice
Presidents.
(f) Vacation. The current corporate policy entitles
Executive, as a Corporate Vice President, to four weeks vacation.
-2-
<PAGE>
5. Reimbursable Expenses.
(a) Business Expenses. Subject to such conditions as might
be set from time to time by the Board of Directors with respect to
Executive and to any generally applicable Company policy on
expense reimbursements, the Company will reimburse Executive for
the ordinary and necessary business expenses incurred by him
incidental to his rendering services to the Company pursuant to
this Agreement.
(b) Substantiation. To the extent to and in the manner which
the Board of Directors shall require, Executive shall submit to
the Company a report of all expenditures for which he seeks
reimbursement pursuant to this Agreement.
6. Termination of Employment.
(a) For Cause. The Board of Directors may terminate Executive's
employment hereunder and remove Executive from his position with
the Company at any time "for cause," which shall mean (i) any
material breach of Sections 7 and 8 of this Agreement, (ii)
conviction of any act which the Board of Directors reasonably
deems to involve fraud or other misdemeanor or felony involving
moral turpitude, or (iii) without limiting the effect of clauses
(i) or (ii) above, any act or omission which the Board of
Directors reasonably deems to constitute gross negligence or
misconduct inimical to the best interests of the Company in the
performance of Executive's obligations, duties and responsibilities
hereunder. Discharge for cause will be effective immediately upon
Executive's receipt of written notice of termination of employment
or at such later date as may be specified in that notice; provided,
that the notice contains the specific reasons and the specific event
or events upon which the discharge is predicated.
(b) Disability. If, in the judgment of the Board of Directors,
Executive fails (with or without reasonable accommodation) to
render the services contemplated hereby because of illness or
other incapacity for a period of six consecutive months, or for
shorter periods aggregating to more than six months in any
consecutive twelve-month period, the Board of Directors may
discharge Executive.
(c) Death. In the event of Executive's death during the term
hereof, his employment shall be deemed to terminate on the date
of such Executive's death.
(d) Certain Changes Affecting Executive's Employment.
"Certain Changes Affecting Executive's Employment" shall mean any
material diminution in status, compensation, benefits (unless such
diminution is made generally applicable to all senior executives
of the Company) or employment conditions as a result of which
Executive voluntarily terminates this Agreement and Executive's
employment hereunder, including, without limitation, any of the
following:
-3-
<PAGE>
(i) the assignment to Executive of any duties inconsistent
with, or substantially adverse to, his status and duties; provided,
however, that a change in title or office which is equal to or
superior to that recited in Section 2 hereof, shall not be deemed
Certain Changes Affecting Executive's Employment contemplated by
this Section 6(d).
(ii) the Company's failure without Executive's consent to
pay to Executive any portion of his Compensation within fourteen (14)
days of the date that payment of such Compensation is due;
(iii) the Company's failure to provide Executive with benefits
in accordance with this Agreement;
(iv) a material breach by the Company of its obligations under
this Agreement.
(e) Payment Upon Termination of Employment. Subject to Section
10 of this Agreement if (i) Executive voluntarily terminates
Executive's employment hereunder other than as a result of
Certain Changes Affecting Executive's Employment pursuant to
Section 6(d), (ii) Executive's employment is terminated pursuant
to Section 6(a), or (iii) Executive's employment is deemed
terminated pursuant to Section 6(c), Executive shall receive
Compensation and benefits, plus any accrued but unreimbursed or
unsubmitted expenses, through the termination date of Executive's
employment hereunder; provided, however, to the extent that some
benefits remain effective thereafter, Executive shall continue to
receive such benefits in accordance with the terms of such
underlying benefit plans.
(f) Severance. If either
(i) Executive voluntarily terminates his employment hereunder
as a result of Certain Changes Affecting Executive's Employment
pursuant to Section 6(d), or
(ii) Executive is terminated or deemed terminated for any
reason other than pursuant to Section 6(a) or 6(c), then the
Company shall pay Executive as severance pay one-twelfth of his
annual Base Salary (the "Monthly Severance Payment"), less the
appropriate deductions described in the following paragraph, for
each full month occurring from the date of termination of
employment until the earlier of (i) the date of Executive's
employment at an annual base salary greater than the Base Salary
or (ii) the end of the Employment Term.
If Executive's employment hereunder is terminated for disability
in accordance with Section 6(b) hereof, each Monthly Severance
Payment shall be reduced by the pro rata amount of gross
proceeds, if any, of disability insurance received by Executive
only if the premiums for the policies providing these benefits
have been paid by the Company. If Executive is reemployed while
receiving Monthly Severance Payments Executive shall notify the
Company, and the Company shall have the right to ascertain
Executive's annual base salary from Executive's new employer and
to deduct one-twelfth of Executive's new annual base salary from
each remaining Monthly Severance Payment.
-4-
<PAGE>
In addition to the foregoing benefits, if Executive is entitled
to any Severance Payments pursuant to this Section 6(f), he shall
also be entitled to: (i) receive any vacation pay earned up to
the termination date, (ii) senior executive outplacement support
for a period of one year or until the cost thereof equals
$25,000, (iii) the right to continued participation in the
Company's 401-K program, (iv) continuation of all insurance
coverages, including life, disability, medical, and
administrative support; the cost of which shall be paid by the
Company for the length of Executive's severance period, after
which in the case of medical benefits, COBRA coverage will apply
and be paid for by the Company for a period not exceeding
eighteen months. (The current annual cost of such COBRA coverage
is $9,250.)
Notwithstanding the foregoing, Monthly Severance Payments
shall not be less than the corresponding amount that Executive
would receive under the Company severance policy for Key Employees
in effect at the time such payment is made; provided, however, that
if Executive commits a material breach of Section 7 or 8 of this
Agreement subsequent to termination of Executive's employment
hereunder, then Executive shall not be entitled to any further
severance payments of any kind payable after the date of the
occurrence of such material breach, and the Company shall be
entitled to reimbursement of any payment made to Executive
subsequent to such date.
(g) Voluntary Termination Notice. Executive shall give the
Company 60 days notice prior to voluntary termination of
Executive's employment other than pursuant to Section 6(d) (a
"Voluntary Termination"). Upon receipt of such notice, the
Company may waive the notice period and accelerate the
termination date by payment to Executive of compensation and
other benefits covering the full notice period.
(h) Termination of directorships and offices. If the
Executive's employment is terminated hereunder for any reason,
the Executive shall be deemed to have tendered his resignation
from all of his positions as a director and officer of the
Company or any of its subsidiaries or affiliates, effective
immediately upon such termination, and agrees to provide any
documentation reasonably required by the Company to give effect
to such termination.
7. Confidentiality of Information.
(a) Executive's obligations pursuant to this Section 7 shall
remain in full force and effect until the 10th anniversary of the
termination date of Executive's employment hereunder.
(b) In connection with his employment hereunder, Executive
will have access to confidential information including, without
limitation, the following categories:
(i) financial information, including but not limited to,
information relating to the Company's earnings, assets, debts,
prices, pricing structure, volume of purchases or sales or other
financial data whether related to the Company generally, or to
particular products, services, geographic areas, or time periods;
-5-
<PAGE>
(ii) supply and service information, including but not limited
to, information relating to goods and services, suppliers' names
or addresses, terms of supply or service contracts or particular
transactions, or related information about potential suppliers to
the extent that the combination of suppliers or use of particular
supplier, though generally known or available, yields advantages
to the Company the details of which are not generally known;
(iii) marketing information, including but not limited to,
information relating to details about ongoing or proposed
marketing programs or agreements by or on behalf of the Company,
sales forecasts, advertising formats and methods, results of
marketing efforts, or information about impending transactions;
(iv) personnel information, including but not limited to,
information relating to employees' personal or medical histories,
compensation or other terms of employment, actual or proposed
promotion, hiring, resignation, disciplinary action, termination
or reasons therefor, training methods, performance, or other
employee information;
(v) customer information, including but not limited to,
information relating to past, existing or prospective customers'
names, addresses or backgrounds, records of agreements and
prices, proposals or agreements between customers and the
Company, status of customers' accounts or credit, or related
information about actual or prospective customers including, but
not limited to, customer lists;
(vi) intellectual information, including but not limited to,
inventions, discoveries, improvements, tools, machines,
compounds, formulae, methods or products, whether or not patented
or patentable, computer software programs and management systems
and methods not generally known to the public or recognized as
standard practice;
(vii) any information, of any character obtained from
third parties, concerning which the Company is bound by a written
confidentiality agreement, in which case the Executive shall
comply with the terms thereof; and
(viii) project development information, including but not
limited to details about ongoing or proposed projects or joint
ventures by or on behalf of the Company.
All of the foregoing are hereinafter referred to as "Trade
Secrets." Executive acknowledges that the maintenance of
confidentiality with respect to Trade Secrets constitutes a
fundamental part of this Agreement, and the failure of Executive
to perform his obligations pursuant to this Section 7 shall
constitute immediate and irreparable harm to the Company.
(c) During and after employment by the Company, regardless
of any reason or reasons for which such employment ends, Executive
agrees:
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<PAGE>
(i) to hold all Trade Secrets in confidence and not discuss,
communicate or transmit to others, or make any copy of the Trade
Secrets in any capacity, position or business except as it
directly relates to Executive's employment by the Company;
(ii) to use the Trade Secrets only in connection with the
proper employment-related furtherance of the Company's interests;
(iii) to take all reasonable actions that the Company deems
necessary or appropriate to prevent unauthorized use or
disclosure of, or to protect the Company's interest in, the Trade
Secrets; and
(iv) that any of the Trade Secrets, whether prepared by
Executive or which may come into Executive's possession during
Executive's employment hereunder, are and remain the property of
the Company and its affiliates, and all such Trade Secrets,
including copies thereof, shall be delivered to or left with the
Company.
(d) Excepted from Executive's obligations of confidence
hereunder is such Trade Secret:
(i) that is known, or becomes known, to the general public
without fault or negligence of Executive;
(ii) that was in the possession of Executive on a
non-confidential basis prior to employment by the Company under
this Agreement;
(iii) that is obtained by Executive other than in connection
with his employment without an obligation of confidence from a
third party who, to the best knowledge of Executive, is
rightfully in possession of such information and is under no
obligation of confidentiality to the Company; or
(iv) that Executive discloses to government authorities or
courts to the extent legally required as a result of operation of
law, regulation or court order or to the extent which disclosure
is deemed necessary in the reasonable judgment of Executive;
provided, that notice of such requirement for disclosure is given
to the Board of Directors prior to making such disclosure, and
Executive requests confidential treatment in connection with such
disclosure.
(e) Upon the request of the Company or any authorized
officers thereof, and, in any event, upon the termination of his
employment hereunder, Executive shall deliver to the Company, or
erase, any confidential information recorded on computer or other
media as well as all memoranda, notes, records, manuals or other
documents, including all copies of such materials and all
documentation prepared or produced in connection therewith,
pertaining to the performance of Executive's services hereunder
or the Company's business, or containing Trade Secrets or
confidential information regarding the Company's business,
whether made or compiled by Executive or furnished to Executive
from another source by
-7-
<PAGE>
virtue of Executive's relationship with the Company. For
purposes of this Section 7, the term "Company" shall include its
subsidiaries and affiliates.
8. Covenant Not to Compete.
(a) Executive acknowledges that Executive's covenant not to
compete with the Company provided pursuant to this Section 8 is
materially significant and essential to the Company's entry into
this Agreement. Executive further acknowledges and agrees that
during Executive's employment hereunder and for a period of two
years after the date of the termination of Executive's
employment, Executive will not engage, directly or indirectly,
including, without limitation, as an employee, independent
contractor, consultant, investor, partner, shareholder, director
of officer of any other entity, in the Industry (as defined
below) in any of the Territories (as defined below); provided,
however, that the foregoing provisions shall not prevent
Executive from investing in, or acquiring ownership of, public
companies that compete in the Industry where such investments
shall constitute in the aggregate less than 5% of the outstanding
securities or voting interest of such companies.
For purposes of Section 8, the term "Industry" shall mean
district heating and cooling and/or cogeneration relating to
district heating and cooling and/or the business of providing
building management services with respect to heating, ventilating
or air conditioning; the term "Territories" shall mean the eleven
municipalities where the Company presently has operations plus
those municipalities or other locations where the Company has
operations (or projects under construction or bid) on the date of
termination of Executive's employment,
(b) Executive and the Company intend that this Section 8 be
enforceable to the maximum permissible extent and, if a court
determines that any provision of this Section 8 is unenforceable
for any reason, Executive and the Company intended that the court
construe such provision so as to make this Section 8 enforceable
to the maximum permissible extent. For purposes of this Section
8, the term "Company" shall include its subsidiaries and
affiliates.
9. Assignment; Survival.
(a) This Agreement is a personal contract and, except as
specifically set forth herein, the rights and interests of
Executive herein may not be sold, transferred, assigned, pledged
or hypothecated. The rights and obligations of the Company
hereunder shall be binding upon, and inure to the benefit of, the
successors or assigns of the Company, which acquires all, or
substantially all, of the assets or business of the Company or
with or into which the Company may be consolidated or merged.
(b) In the event that Executive shall die after becoming
entitled to payment of the benefits hereunder, and to the extent
that payments are accrued but unpaid in accordance with Sections
6(c) and 6(e), such payments shall be made by the Company to
Executive's estate.
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<PAGE>
(c) The respective rights and obligations of the parties
hereunder will survive any termination of Executive's employment
hereunder. This Agreement shall terminate upon the full and
complete satisfaction and performance by each party of their
respective obligations hereunder.
10. Effect of Termination by Change in Control.
(a) If within a one (1) year period immediately following a
Change in Control (as defined below) Executive's employment
terminates for any reason other than: (1) cause, pursuant to
Sections 6(a)(i), (a)(ii) or (only for acts which occur after the
date of a Change in Control) (a)(iii), (2) disability, pursuant
to Section 6(b), (3) death, pursuant to Section 6(c), or (4)
Voluntary Termination as defined in Section 6(g), then the
Company shall pay Executive in one payment in lieu of Monthly
Severance Payments an amount equal to the total of all Monthly
Severance Payments payable pursuant to Section 6(f) hereof,
subject of the appropriate deductions, plus one additional year
of Executive's Base Salary.
(b) The amount payable to Executive under Section 10(a) shall
be reduced if, and only to the extent that, a person reasonably
satisfactory to the Company and Executive determines that such
reduction is required in order to avoid any deduction issue for
the Company under Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") with respect to any and all
payments to Executive which such person deems a part of a
"parachute payment" under Section 280G of the Code and to avoid
any excise tax issue for Executive under Section 4999 of the
Code.
(c) For the purposes of this Agreement, a "Change in Control"
shall be deemed to have taken place if after the date of
execution of this Agreement (i) any person, including a "group"
as described in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended, (other than Ufiner-Cofreth, S.A. and its
affiliates) becomes the owner or beneficial owner of the
Company's common stock, having 40% or more of the combined voting
power of the then outstanding common stock of the Company that
may be cast for the election of directors of the Company (other
than as a result of an issuance of securities initiated by the
Company), or (ii) the persons who were directors of the Company
before such transactions shall cease to constitute a majority of
the Board of Directors of the Company, or any successor to the
Company, as the direct or indirect result of, or in connection
with, any cash tender or exchange offer, merger or other business
combination, sale of assets or contested election, or any
combination of the foregoing transactions.
11. Indemnification and Insurance.
(a) The Company agrees to indemnify Executive to the fullest
extent permitted by law in the event such Executive becomes, or
is threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding whether civil, criminal,
administrative or investigative (other than an action by or in
right of the Company) by reason of his employment at the Company
or of
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<PAGE>
his serving at the request of the Company as a director, officer,
employee or agent of any subsidiary, affiliate, joint venture or
other enterprise of the Company, against expenses (including
reasonable attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding; provided, however, this
Section 11 shall not apply to a claim for indemnification by
Executive if the Company can show that the act or commission for
which Executive seeks indemnification was attributable to
Executive's gross negligence, willful misconduct or bad faith.
(b) The Company further agrees to maintain in effect for the
duration of the Employment Term the current directors' and
officers' liability insurance maintained by or on behalf of the
Company and the Company's subsidiaries; provided, that, in the
event that any claim or claims remain outstanding and unresolved
at the end of such period, such insurance shall be continued with
respect to any such claim or claims until the final disposition
of any and all such claims.
12. Entire Agreement. This Agreement constitutes the sole
and entire agreement between Executive and the Company, and
supersedes all prior agreements, negotiations and discussions
between the parties hereto and/or their respective counsel, with
respect to any matter relating to the employment of Executive by
the Company.
13. Severability. The invalidity or unenforceability of any
term or provision of this Agreement shall not affect the validity
or enforceability of the remaining terms or provisions thereof,
which shall remain in full force and effect, and, should any
tribunal having jurisdiction determine that any such term or
provision is unenforceable, by reason of its overbreadth, whether
as to time, geographical scope or otherwise, then such term or
provision shall be deemed to be amended to reduce its scope by
the degree of such overbreadth.
14. Arbitration. Any dispute arising out of, or relating to,
this Agreement or the breach thereof, or regarding the
interpretation thereof, shall be finally settled in arbitration
by a single arbitrator under the rules and regulations then in
application by the American Arbitration Association. Arbitration
shall be conducted in the English language in New York City and
judgment upon any award rendered therein may be entered and
enforcement obtained thereon in any court having jurisdiction.
The arbitrator shall have authority to grant any form of
appropriate relief, whether legal or equitable in nature,
including specific performance. Nothing herein shall limit the
right of either party, before and during such arbitration, to
have recourse to such provisional judicial remedies, including
preliminary injunction and attachment, as would be available in
the absence of this Section 14. To protect confidential
information and any other matter that either party would normally
not reveal to third parties, the arbitrator shall maintain the
secrecy of the proceedings and shall enter a protective order in
such form as the arbitrator shall determine is suitable. The
protective order shall stipulate, among other things, that the
arbitrator shall receive any information designated as
"confidential" solely for purposes of assessing the facts and law
for purposes of issuing an award, and shall not otherwise use or
disclose such information. Neither party shall make any public
disclosure regarding the arbitration,
-10-
<PAGE>
any issues or evidence presented or award granted in the
arbitration, or any information designated as confidential,
without the express prior written consent of the other party.
Each of the parties hereto irrevocably agrees that service of
process in such arbitration proceedings or in any court action
ancillary to such proceedings shall be satisfactorily made upon
it if sent by registered mail addressed to it at the address set
forth in Section 15 hereof.
15. Notices. All notices, demands, requests, consents,
approvals or other communications required or permitted hereunder
shall be in writing and shall be delivered by hand, registered or
certified mail with return receipt requested or by a nationally
recognized overnight delivery service, in each case with all
postage or other delivery charges prepaid, and to the address of
the party to whom it is directed as indicated below, or to such
other address as such party may specify by giving notice to the
other in accordance with the terms hereof. Any such notice shall
be deemed to be received (i) if by hand, upon receipt, (ii) if
sent by registered or certified mail, return receipt requested,
on the fifth day after the day on which such notice was mailed,
and (iii) if sent by telecopier or telex, upon transmission with
receipt confirmed.
If to the Company: Trigen Energy Corporation, One Water Street,
White Plains, New York 10601, Attention: General Counsel
If to Executive: David Kelly, 1285 Stonesthrow Road, Bethlehem,
Pennsylvania 18015
16. Governing Law. This Agreement shall be interpreted and
construed under the laws of the State of New York. The parties
hereto consent to the jurisdiction of the courts, Federal and
State, in the City and State of New York.
IN WITNESS WHEREOF, the parties have executed this agreement
as of the date first above written.
TRIGEN ENERGY CORPORATION
By: /s/ Richard E. Kessel
-----------------------------------
Name: Richard E. Kessel
Title: Executive Vice President & COO
DAVID H. KELLY
/s/ David H. Kelly
-----------------------------------
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<PAGE>
EXHIBIT 10.32
DEFERRED COMPENSATION AGREEMENT
Section 1.
PURPOSE
The purpose of this Deferred Compensation Agreement is to set
forth the terms and conditions under which Trigen Energy
Corporation agrees to provide deferred compensation to James F.
Lowry.
Section 2.
DEFINITIONS
2.1. Account. The term "Account" for purposes of this
Agreement shall mean the bookkeeping account established by Trigen
as part of Trigen's ordinary books and records to show the dollar
amount which Trigen agrees to pay Lowry under this Agreement.
2.2. Agreement. The term "Agreement" shall mean this Deferred
Compensation Agreement as signed by Trigen and by Lowry, as
thereafter amended in writing by mutual agreement between Trigen
and Lowry.
2.3. Beneficiary. The term "Beneficiary" for purposes of this
Agreement shall mean Lowry's children who survive him and who can
be found by Trigen based on information in Trigen's file on Lowry
or, if none of Lowry's children survive him or none can be found
by Trigen based on the information in Trigen's file on Lowry
within three months after Lowry's death, Lowry's estate.
2.4. Interest Credit. The term "Interest Credit" for purposes of
this Agreement shall mean twenty-five percent (25%) of the Prime
Rate as reported in the Wall Street Journal for the last business
day in each calendar quarter.
2.5. Trigen. The term "Trigen" shall mean Trigen Energy
Corporation, or any successor to Trigen Energy Corporation.
2.6. Lowry. The term "Lowry" shall mean James F. Lowry.
Section 3.
ACCOUNT CREDITS
3.1. Compensation. The purpose of this Agreement is to
provide for the deferral of the payment of all or a part of Lowry's
compensation which is otherwise payable to Lowry in cash. Lowry's
cash and other compensation for services as a Trigen employee
shall be determined independent of this Agreement and shall be
payable in accordance with Trigen's executive compensation
practices and policies as in effect from time to time.
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<PAGE>
3.2. 1995 Deferrals. If the cash compensation otherwise
payable to Lowry by Trigen for any calendar month in 1995 exceeds
$5,000, the payment of such excess shall be deferred and paid
under the terms of this Agreement. Trigen shall credit such excess
to Lowry's Account as of the last day of each calendar month in
lieu of paying such excess to Lowry.
3.3. Post-1995 Deferrals.
(a) Election. Lowry shall have the right for any calendar
year beginning after 1995 to defer that part of his monthly cash
compensation which is otherwise payable to him in each calendar
month in such calendar year which exceeds the amount set forth in
an effective election made by Lowry, and an election shall
(subject to Section 3.3(c)) be effective for a calendar year if
made in writing and delivered to Trigen's General Counsel or his
or her delegate before the beginning of such calendar year. If
Lowry makes an effective election under this Section 3.3(a) for a
calendar year, Trigen in lieu of paying such excess to Lowry
shall credit such excess to Lowry's Account as of the last day of
each calendar month in such calendar year in which such excess
otherwise would have been payable. An election which is
effective for a calendar year shall after the beginning of such
calendar year be irrevocable for such calendar year.
(b) Automatic Deferrals. The deferrals called for under
Section 3.2 for 1995 shall remain in effect for each subsequent
calendar year until the first calendar year in which an election
under Section 3.3(a) becomes effective. Furthermore, if such
deferrals remain in effect for any calendar year after 1995, such
deferrals shall be irrevocable for such calendar year. This
Section 3.3(b) shall have no further force or effect after an
election has become effective under Section 3.3(a).
(c) Amendment or Revocation. If Lowry makes an election
under Section 3.3(a) for any calendar year, such election shall
remain in effect until amended or revoked. Lowry shall have the
right to amend or revoke an election under Section 3.3(a) effective
for any calendar year if such amendment or revocation is made in
writing and delivered to Trigen's General Counsel or his or her
delegate before the beginning of such calendar year. An
amendment or a revocation which is effective for any calendar
year shall after the beginning of such calendar year be
irrevocable for such calendar year.
(d) Termination. Any election under this Section 3.3 shall
terminate automatically as of the date Lowry's employment by
Trigen terminates for any reason.
3.4 Interest Credit. Trigen as of the last day of each calendar
quarter shall credit to Lowry's Account an amount equal to the
Interest Credit multiplied by Lowry's Account balance immediately
before effecting such Interest Credit. Any deferrals under
Section 3.1 or Section 3.2 or 3.3 for such period shall be
credited to Lowry's Account before the Interest Credit for such
period is effected under this Section 3.3.
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<PAGE>
Section 4.
PAYMENT
4.1. General. Trigen upon Lowry's termination of employment
(for any reason) as an employee of Trigen shall pay, or shall begin
to pay, the balance credited to Lowry's Account. Such payment
shall be made over a five (5) year period in quarterly installments
pursuant to Section 4.4(a) unless
(a) Lowry has made an effective election pursuant to Section
4.2 to receive payment in a single lump sum as provided in Section
4.3 or over ten (10) years in quarterly installments as provided
in Section 4.4(b), or
(b) Lowry's Account balance is less than $25,000, in which
case Trigen shall automatically pay Lowry's Account balance in a
single lump sum as soon as practicable after Lowry's termination
of employment.
4.2. Election. Lowry shall have the right to elect that
Lowry's Account balance be paid in a single lump sum payment or
in installments over five (5) or ten (10) years on a form provided
for this purpose by Trigen. Lowry may make such an election or
revoke such an election at any time, but any such election or
revocation shall be effective only if delivered to Trigen at
least one (1) year prior to the date Lowry's employment
terminates. No election or revocation which is made within one
(1) year of the date Lowry's employment terminates shall be
effective under this Agreement.
4.3. Lump Sum Payment. If Lowry makes an effective election
to receive a lump sum, Trigen shall pay to Lowry the amount
credited to Lowry's Account in a lump sum. Trigen shall make such
payment as soon as possible after the date Lowry's employment
terminates.
4.4. Installment Payments.
(a) Five-Year Installments. If Lowry makes an effective
election to receive payment in quarterly installments over five
(5) years or fails to make an effective election for a lump sum
payment or installments over ten (10) years, Trigen shall pay to
Lowry the amount credited to Lowry's Account over five (5) years
in quarterly installments. Such installments shall begin as of
the first day of the calendar year which follows the date Lowry's
employment terminates and shall continue to be paid as of the
first day of each calendar quarter thereafter until Lowry's
Account balance has been paid in full. The amount of each such
installment shall equal the balance credited to Lowry's Account
as of the last day of the immediately preceding calendar quarter
multiplied by a fraction, the numerator of which shall be one
(1), and the denominator of which shall be the number of
installments remaining to be paid after the current quarter, if
any, plus one (1). Each installment payment shall reduce the
balance credited to Lowry's Account.
(b) Ten-Year Installments. If Lowry makes an effective
election to receive payment in quarterly installments over ten
(10) years, Trigen shall pay to Lowry the amount credited to
Lowry's Account over ten (10) years in quarterly installments.
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<PAGE>
Such installments shall begin as of the first day of the calendar
year which follows the date Lowry's employment terminates and
shall continue to be paid as of the first day of each calendar
quarter thereafter until Lowry's Account balance has been paid in
full. The amount of each such installment shall equal the
balance credited to Lowry's Account as of the last day of the
immediately preceding calendar quarter multiplied by a fraction,
the numerator of which shall be one (1), and the denominator of
which shall be the number of installments remaining to be paid
after the current quarter, if any, plus one (1). Each
installment payment shall reduce the balance credited to Lowry's
Account.
4.5. Death.
(a) Beneficiary is an Individual. If Lowry dies before the
balance of Lowry's Account has been paid in full to Lowry and
Lowry's Beneficiary is an individual, Trigen shall continue to
pay, or shall pay, Lowry's Account balance to Lowry's Beneficiary
on the same basis that payment was being made to Lowry or, if
Lowry dies before payment has begun, on the basis called for
under this Section 4 on the date Lowry's employment terminated.
If Lowry's Beneficiary consists of more than one individual, such
payments shall be divided equally between such individuals.
b) Beneficiary is Not an Individual. If Lowry dies before
the balance of Lowry's Account has been paid in full to Lowry and
Lowry's Beneficiary is not an individual, Trigen shall pay
Lowry's Account balance to Lowry's Beneficiary in a single lump
sum as soon as practicable after Lowry's death.
Section 5.
MISCELLANEOUS
5.1. General Creditor Status. Lowry, and (after Lowry's death)
Lowry's Beneficiary, each shall be a general and unsecured
creditor of Trigen with respect to the payment to Lowry or, in
the event of Lowry's death, to Lowry's Beneficiary.
5.2. Assignment. Neither Lowry nor Lowry's Beneficiary shall
have any right to alienate, assign or otherwise transfer any
interest Lowry or Lowry's Beneficiary might have in the payment
called for under Section 4 of this Agreement, and Trigen's
obligation to make such payment shall terminate if Lowry or
Lowry's Beneficiary attempts to alienate, assign or otherwise
transfer any interest in such payment.
5.3. Withholding. Trigen shall have the right to make any
tax deductions or withholdings which Trigen deems necessary or
appropriate under applicable law from the payment called for
under Section 4 of this Agreement and, further, shall have the
right to offset against such payment any amounts which the Board
of Directors reasonably determines to be legally due and owing to
Trigen by Lowry.
5.4. Amendment and Termination. Trigen and Lowry by mutual
agreement shall have the right to amend any part of this
Agreement (other than the rules with respect to how a deferred
election becomes effective and how an effective election
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<PAGE>
can be revised) from time to time only in writing and shall have
the right to terminate this Agreement at any time; provided,
however, this Agreement automatically shall terminate immediately
after the payment called for under Section 4 of this Agreement
has been made to Lowry or, in the event of Lowry's death, to
Lowry's Beneficiary.
5.5. Construction. This Agreement shall be construed in
accordance with the laws of the State of New York.
5.6. Entire Agreement. This Agreement sets forth the entire
agreement and understanding between Trigen and Lowry respecting
Trigen's willingness to defer the payment of compensation to
Lowry and supersedes and replaces any and all prior agreements or
understanding of any kind or description with respect to such
compensation.
5.7. Binding Effect. This Agreement has been entered into by
Trigen and by Lowry with the intention that all of the terms and
conditions set forth in this Agreement shall be binding on Trigen
and on Lowry and their respective heirs, successors, and assigns.
IN WITNESS WHEREOF, Trigen and Lowry have executed this
Agreement as of this 1st day of March, 1995.
TRIGEN ENERGY CORPORATION
By: /s/ Thomas R. Casten
---------------------------------------
Title: President
/s/ James F. Lowry
---------------------------------------
James F. Lowry
-6-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
Trigen Energy Corporation and Subsidiaries
Computation of Earnings Per Share
(In thousands, except per share data)
Year ended December 31,
------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Basic earnings per common share
- --------------------------------
<S> <C> <C> <C> <C> <C>
Earnings before extraordinary item $5,025 $14,051 $10,564 $8,561 $4,325
Average equivalent shares
Common shares outstanding 12,011 11,612 11,390 9,619 8,500
Basic earnings per common share $0.42 $1.21 $0.93 $0.89 $.051
Diluted earnings per common share
Earnings before extraordinary item $5,025 $14,051 $10,564 $8,561 $4,325
Average equivalent shares
Common shares outstanding 12,011 11,612 11,390 9,619 8,500
Stock option 119 82 -- -- --
------ ------ ------ ----- -----
Average equivalent shares 12,130 11,694 11,390 9,619 8,500
------ ------ ------ ----- -----
Diluted earnings per common share $0.41 $1.20 $0.93 $0.89 $0.51
------ ------ ------ ----- -----
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12.1
Trigen Energy Corporation and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(in thousands)
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Earnings before extra-
ordinary item $ 5,025 $14,051 $10,564 $8,561 $4,325
Add (deduct):
Income taxes 3,491 9,252 7,324 5,949 3,391
Fixed charges 20,508 20,145 20,883 17,774 10,215
Interest capitalization ( 374) ( 328) ( 300) ( 250) ( 200)
(Income)/losses of less
than 50% owned companies 266 ( 322) ( 316) ( 224) -0-
Distributions from less
than 50% owned companies -0- -0- -0- -0- -0-
---------------------------------------------------
Earnings before extraordi-
nary item, as adjusted $28,916 $42,798 $38,155 $31,810 $17,731
---------------------------------------------------
Fixed charges
Interest expense $18,976 $18,840 $19,890 $16,657 $9,448
Interest capitalized 374 328 300 250 200
Portion of rents representa-
tive of interest factor(1) 1,158 977 693 867 567
---------------------------------------------------
Total fixed charges $20,508 $20,145 $20,883 $17,774 $10,215
---------------------------------------------------
Ratio of earnings to
fixed charges 1.4 2.1 1.8 1.8 1.7
---------------------------------------------------
Note:
(1) Estimated to be 1/3 of total rent expense.
</TABLE>
<PAGE>
EXHIBIT 21
TRIGEN ENERGY CORPORATION & SUBSIDIARIES
U.S. Corporations Incorporated
- ----------------- ------------
Baltimore Thermal Development Corporation Maryland
Catalyst Steam Corporation Delaware
Trigen-Ewing Power, Inc. Delaware
Ohio Thermal Energy Corporation Ohio
Philadelphia Steam Development Corporation Pennsylvania
Philadelphia Thermal Development Corporation Pennsylvania
Philadelphia Thermal Services Corporation Pennsylvania
Philadelphia United Power Corporation Delaware
St. Louis Thermal Development Corporation Missouri
Trenton Energy Corporation Delaware
Trigen-BioPower, Inc. North Carolina
Trigen Building Services Corporation Delaware
Trigen-College Park Energy Corporation Maryland
Trigen Development Corporation Delaware
Trigen Energy Corporation Delaware
Trigen Energia, Inc. Delaware
Trigen Fuels Corporation Delaware
Trigen-Glen Cove Energy Corporation Delaware
Trigen Insulation Corporation Delaware
Trigen Lindbergh Corporation Delaware
Trigen M/I Corporation Delaware
Trigen Services Corporation Delaware
Trigen-Services of Illinois, Inc. Delaware
Trigen-Services of Missouri, Inc. Delaware
Trigen-Services of Ohio, Inc. Delaware
Trigen Solutions, Inc. Delaware
Trigen-Baltimore Energy Corporation Maryland
Trigen-Boston Energy Corporation Delaware
Trigen-Chicago Energy Corporation Delaware
Trigen-Colorado Energy Corporation Delaware
Trigen-Kansas City Energy Corporation Delaware
Trigen-Missouri Energy Corporation Delaware
Trigen-Nassau Energy Corporation Delaware
Trigen-New England Energy Corporation Delaware
Trigen-Oklahoma City Energy Corporation Delaware
Trigen-Oklahoma Energy Corporation Delaware
Trigen-Philadelphia Energy Corporation Pennsylvania
Trigen-Schuylkill Cogeneration, Inc. Pennsylvania
Trigen-St. Louis Energy Corporation Missouri
Trigen-Tulsa Energy Corporation Delaware
Tulsa Cold Storage, Inc. Delaware
United Thermal Corporation Delaware
United Thermal Development Corporation Delaware
United Thermal Services Corporation Delaware
Canadian Corporations
- ---------------------
Trigen Energy Canada, Inc. Canada
Trigen-London District Energy Corporation Canada
3003252 Nova Scotia Limited Nova Scotia
Partnerships
- ------------
Baltimore Steam Company Maryland
Trigen-Nations Energy Company, LLLP Colorado
Trigen-Trenton Energy Company, L.P. Delaware
Grays Ferry Cogeneration Partnership
Trigen-Cinergy Solutions LLC
Trigen-Cinergy Solutions of Cincinnati LLC
Trigen-Cinergy Solutions of Illinois LLC
Trigen-HQ Energy Services LLC
Trigen-PCS Company LLC
Trigen-Peoples District Energy Company LLP
Canadian Partnerships
- ---------------------
NSP Trigen Incorporated
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Trigen Energy Corporation
We consent to incorporation by reference in the registration
statements No. 333-4198 on Form S-3; and No. 33-92468, No.
333-36151, and No. 33-83736 on Form S-8 of Trigen Energy
Corporation and subsidiaries of our report dated February 3,
1998, except for Note 18, which is as of March 9, 1998 relating
to the consolidated balance sheets of Trigen Energy Corporation
and subsidiaries as of December 31, 1997, and 1996, and the
related consolidated statements of operations, stockholders'
equity and cash flows for each of the years in the three-year
period ended December 31, 1997, and the related schedules, which
report appears in the December 31, 1997 Annual Report on Form
10-K of Trigen Energy Corporation. Our report on the
consolidated financial statements refers to a change in
accounting for the impairment of long-lived assets in 1995.
KPMG Peat Marwick LLP
March 27, 1998
Stamford, CT
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC
Form 10-K for the fiscal year ended December 31, 1997 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 8,967
<SECURITIES> 0
<RECEIVABLES> 46,755
<ALLOWANCES> 1,074
<INVENTORY> 7,054
<CURRENT-ASSETS> 7,985
<PP&E> 465,700
<DEPRECIATION> (77,252)
<TOTAL-ASSETS> 525,969
<CURRENT-LIABILITIES> 71,782
<BONDS> 256,361
0
0
<COMMON> 121
<OTHER-SE> 145,361
<TOTAL-LIABILITY-AND-EQUITY> 525,969
<SALES> 240,651
<TOTAL-REVENUES> 240,651
<CGS> 177,275
<TOTAL-COSTS> 211,908
<OTHER-EXPENSES> 3,699
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,528
<INCOME-PRETAX> 8,516
<INCOME-TAX> 3,491
<INCOME-CONTINUING> 5,025
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<EPS-PRIMARY> .42
<EPS-DILUTED> .41
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