SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-Q
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
Commission File Number 33-82034
INDIANTOWN COGENERATION, L.P. (Exact name of co-registrant as specified in
its charter)
Delaware 52-1722490
(State or other jurisdiction of (I.R.S. Employer
Identification Number) incorporation or organization)
INDIANTOWN COGENERATION FUNDING CORPORATION (Exact name of co-registrant as
specified in its charter)
Delaware 52-1889595
(State or other jurisdiction of (I.R.S. Employer
Identification Number) incorporation or organization)
7500 Old Georgetown Road, 13th Floor Bethesda, Maryland 20814-6161
(Registrants' address of principal executive offices)
(301)-718-6800 (Registrants' telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for 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. [ X ] Yes [ ] No
Indiantown Cogeneration, L.P. Indiantown Cogeneration Funding Corporation
PART I FINANCIAL INFORMATION Page No.
Item 1 Financial Statements: Consolidated Balance Sheets as of December
31, 1995 and September 30, 1996
(Unaudited)...........................................................1
Consolidated Statements of Operations for the Three and Nine Months
Ended September 30, 1996
(Unaudited)...........................................................3
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1996 (Unaudited) and September 30, 1995
(Unaudited)...........................................................4
Notes to Consolidated Financial Statements (Unaudited)
......................................................................5
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations................................8
PART II OTHER INFORMATION
Item 1 Legal Proceedings.................................................13
Item 5 Other Information................................................13
Item 6 Exhibits and Reports on Form 8-K..................................14
Signatures...............................................................17
PART I FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Indiantown Cogeneration, L.P. Consolidated Balance Sheets As of December
31, 1995 and September 30, 1996
<S> <C> <C>
ASSETS September 30, 1996 December 31,1995
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 445,354 $2,666,296
Accounts receivable-trade 15,244,423 6,806,299
Inventories 298,351 127,115
Prepaids 107,485 1,844,328
Deposits 193,357 193,357
Investments held by Trustee,
including restricted funds of
$21,205,606 and $958,530,
respectively 73,905,477 59,251,661
Total current assets 90,194,447 70,889,056
INVESTMENTS HELD BY TRUSTEE,
restricted funds 12,501,000 12,501,000
DEPOSITS 60,000 60,000
PROPERTY, PLANT & EQUIPMENT:
Land 8,579,399 8,579,399
Electric and steam generating
facilities 692,187,656 683,536,498
Less accumulated depreciation (15,694,555) (527,742)
Net property, plant &
equipment 685,072,500 691,588,155
FUEL RESERVE 3,522,374 4,662,617
DEFERRED FINANCING COSTS,
net of accumulated amortization
of $40,796,313 and $40,436,799,
respectively 19,390,997 19,750,511
Total assets $810,741,318 $799,451,339
<FN>
The accompanying notes are an integral part of these consolidated
balance sheets.
</TABLE>
<TABLE>
<CAPTION>
Indiantown Cogeneration, L. P.
Consolidated Balance Sheets
As of December 31, 1995 and September 30, 1996
<S> <C> <C>
LIABILITIES AND PARTNERS' CAPITAL September 30, 1996 December 31, 1995
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $6,702,671 $5,885,114
Accrued liabilities 6,105,695 14,740,306
Accrued interest 16,679,625 2,396,324
Current portion - First Mortgage Bonds 9,248,000 8,795,000
Current portion lease payable - railcars 244,016 231,158
Total current liabilities 38,980,007 32,047,902
LONG TERM DEBT:
First Mortgage Bonds 491,355,000 496,205,000
Tax Exempt Facility Revenue Bonds 125,010,000 125,010,000
Lease payable - railcars 5,201,612 5,386,265
Total long term debt 621,566,612 626,601,265
Total liabilities 660,546,619 658,649,167
PARTNERS' CAPITAL:
Toyan Enterprises 72,093,455 67,585,042
Palm Power Corporation 18,023,364 16,896,261
TIFD III-Y, Inc. 60,077,880 56,320,869
Total partners' capital 150,194,699 140,802,172
Total liabilities and partners'
capital $810,741,318 $799,451,339
<FN>
The accompanying notes are an integral part of these consolidated balance
sheets.
</TABLE>
<TABLE>
<CAPTION>
Indiantown Cogeneration, L.P.
Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 1996
<C> <C>
Three Months Ended Nine Months Ended
September 30, 1996 September 30, 1996
<S> (Unaudited) (Unaudited)
Operating Revenues:
Electric capacity and
capacity bonus revenue $28,361,077 $ 85,986,128
Electric energy revenue 14,185,165 35,677,510
Steam revenue 25,001 58,334
Total operating revenues 42,571,243 121,721,972
Cost of Sales:
Fuel and ash 14,647,995 38,276,231
Operating and maintenance 3,639,744 10,305,868
Depreciation 5,011,635 14,999,128
Total cost of sales 23,299,374 63,581,227
Gross Profit 19,271,869 58,140,745
Other Operating Expenses:
General and administrative 672,600 1,982,566
Insurance and taxes 2,017,771 5,739,954
Total other operating expenses 2,690,371 7,722,520
Operating Income 16,581,498 50,418,225
Non-Operating Income (Expenses):
Interest expense (14,688,781) (44,193,814)
Interest income 1,001,650 3,168,116
Net non-operating expense (13,687,131) (41,025,698)
Net Income $ 2,894,367 $ 9,392,527
<FN>
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<TABLE>
<CAPTION>
Indiantown Cogeneration, L.P.
Consolidated Statements of Cash Flows
For the Nine Months Ended June 30, 1996 and 1995
<C> <C>
Nine Months Nine Months
Ended Ended
September 30, 1996 September 30, 1995
(Unaudited) (Unaudited)
<S>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $9,392,527 $ --
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 15,166,813 --
(Increase) Decrease in accounts
receivable (8,438,124) --
(Increase) Decrease in property,
plant & equipment (8,291,643) --
(Increase) Decrease in inventories
and fuel reserves 969,007 --
Decrease in deposits and prepaids 1,736,843 --
Increase (Decrease) in accounts
payable and accrued interest 6,466,247 --
Increase (Decrease) in Bonds Payable (4,397,000) --
Increase (Decrease) in lease payable (171,795) --
Net cash provided by operating
activities 12,432,875 --
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for construction in progress -- (95,548,450)
(Increase) Decrease in investment
held by trustee (14,653,817) 52,256,793
Net cash used in investing activities (14,653,817) (43,291,657)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of debt issuance and
financing costs -- (7,373,690)
Proceeds from GECC loan -- --
Payment of GECC loan -- 53,700,000
Capital contributions -- --
Net cash provided by financing activities -- 46,326,310
INCREASE (DECREASE) IN CASH (2,220,942) 3,034,653
CASH and CASH EQUIVALENTS,
beginning of year 2,666,296 2,113,081
CASH and CASH EQUIVALENTS,
end of period 445,354 5,147,734
SUPPLEMENTAL DISCLOSURE OF INVESTING ACTIVITIES:
Change in total construction in progress -- (106,218,752)
Amortization of deferred financing
costs during construction -- 781,616
Increase in property, plant, and equipment -- --
(Increase) in accounts and
interest receivable -- (2,780,641)
Increase in inventories and fuel reserve -- --
Increase in deposits & prepaids -- (44,000)
Increase in accounts payable and
accrued interest -- 12,713,327
Increase in lease payable -- --
Cash paid for construction in progress $ -- $(95,548,450)
</TABLE>
Indiantown Cogeneration, L.P.
Notes to Consolidated Financial Statements
As of September 30, 1996
(Unaudited)
1. ORGANIZATION AND BUSINESS:
Indiantown Cogeneration, L.P. (the "Partnership") is a special purpose
Delaware limited partnership formed on October 4, 1991. The general
partners are Toyan Enterprises ("Toyan"), a California corporation and a
special purpose indirect subsidiary of PG&E Enterprises, and Palm Power
Corporation ("Palm"), a Delaware corporation and a special purpose indirect
subsidiary of Bechtel Enterprises, Inc.("Bechtel Enterprises"). The sole
limited partner is TIFD III-Y, Inc. ("TIFD"), a special purpose indirect
subsidiary of General Electric Capital Corporation ("GECC"). During 1994,
the Partnership formed its sole, wholly owned subsidiary, Indiantown
Cogeneration Funding Corporation ("ICL Funding"), to act as agent for, and
co-issuer with, the Partnership in accordance with the 1994 bond offering
discussed in Note 4. ICL Funding has no separate operations and has only
$100 in assets and capitalization.
The Partnership was formed to develop, construct, and operate an
approximately 330 megawatt (net) pulverized coal-fired cogeneration
facility (the "Facility") located on an approximately 240 acre site in
southwestern Martin County, Florida. The Facility was designed to produce
electricity for sale to Florida Power & Light Company ("FPL") and will also
supply steam to Caulkins Indiantown Citrus Co. ("Caulkins") for its plant
located near the Facility.
The Partnership was in the development stage through December 21, 1995
and commenced commercial operations on December 22, 1995 (the "Commercial
Operation Date"). The accompanying consolidated statement of operations
for the three and nine months ended September 30, 1996 reflects operations
through the entire quarter and since the end of the last fiscal year,
respectively. The Partnership's continued existence is dependent on the
ability of the Partnership to sustain successful operations. Management of
the Partnership is of the opinion that the assets of the Partnership are
realizable at their current carrying value.
The net profits and losses of the Partnership are allocated to Toyan,
Palm and TIFD (collectively, the "Partners") based on the following
ownership percentages:
Toyan 48%
Palm 12%
TIFD 40%
All distributions other than liquidating distributions will be made based
on the Partners' percentage interest as shown above, in accordance with
the project documents and at such times and in such amounts as the
Board of Control of the Partnership determines. The Partners
contributed, pursuant to an equity commitment agreement, approximately
$140,000,000 of equity when commercial operation commenced in December
1995.
2. FINANCIAL STATEMENTS: The consolidated balance sheet as of September
30, 1996, and the consolidated statement of cash flows for the nine
months ended on September 30, 1996 and 1995 and the consolidated
statement of operations for the three and nine months ended September
30, 1996, have been prepared by the Partnership, without audit and in
accordance with the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, these financial
statements include all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position of the
Partnership as of September 30, 1996, results of operations for the
three months and nine months ended September 30, 1996, and cash flows
for the nine months ended September 30, 1996 and 1995.
The financial statements and related notes contained herein should be
read in conjunction with the Partnership's Annual Report on Form 10-K for
the year ended December 31, 1995.
Investments Held by Trustee The investments held by trustee represent bond
and equity proceeds held by a bond trustee/disbursement agent and are
carried at cost which approximates market. The proceeds include
$12,501,000 of restricted tax-exempt debt service reserve required by
the financing documents. The Partnership also maintains restricted
investments in the amount of accrued principal and interest payables.
Property, Plant and Equipment Property, plant and equipment are
recorded at actual cost. Substantially all property, plant and
equipment consist of the Facility, which is depreciated on a
straight-line basis over the useful life of the Facility, estimated to
be 35 years. Other property and equipment are depreciated on a
straight-line basis over the estimated economic or service lives of the
respective assets (ranging from three to ten years). Routine
maintenance and repairs are charged to expense as incurred.
New Accounting Pronouncement
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of" ("SFAS No. 121"). SFAS No. 121, which will be adopted for the
Partnership's 1996 annual financial statements, establishes criteria for
recognizing and measuring impairment losses when recovery of recorded
long-lived asset values is uncertain. Management anticipates that adoption
of this pronouncement will not impact the Partnership's financial condition
or results of operations.
Equity Contribution Agreement Pursuant to an Equity Contribution Agreement,
dated as of November 1, 1994, between TIFD and NationsBank of Florida,
N.A. (succeeded by The Bank of New York Trust Company of Florida, N.A.)
(the "Trustee"), the Partners contributed approximately $140,000,000 of
equity on December 26, 1995. Proceeds were used to repay the
$139,000,000 outstanding under the Equity Loan Agreement. The
remaining $1,000,000 was deposited with the Trustee according to a
disbursement agreement among the Partnership, the Trustee and the other
lenders and is included in investments held by trustee in the
accompanying consolidated balance sheet as of December 31, 1995 and
September 30, 1996.
3. DEPOSITS: In 1991, in accordance with a contract between the
Partnership and Martin County, the Partnership provided Martin County
with a security deposit in the amount of $149,357 to secure
installation and maintenance of required landscaping materials. This
amount is included in current assets as of December 31, 1995 and in
noncurrent assets as of December 31, 1994. The landscaping has been
completed and the Partnership has applied to the County for a return of
funds in excess of the required deposit as security for the first year
maintenance.
In 1991, in accordance with the Planned Unit Development Zoning
Agreement between the Partnership and Martin County, the Partnership
deposited $1,000,000 in trust with the Board of County Commissioners of
Martin County (the "PUD Trustee"). Income from this trust will be used
solely for projects benefiting the community of Indiantown. On July 23,
2025, the PUD Trustee is required to return the deposit to the Partnership.
As of December 31, 1995, the estimated present value of this deposit of
approximately $60,000 has been included in deposits in the accompanying
balance sheets. The remaining balance has been included in property plant,
and equipment as part of total construction expenses. 4. FAIR VALUE OF
FINANCIAL INSTRUMENTS The following table presents the carrying amounts and
estimated fair values of the Partnership's financial instruments at
September 30, 1996. Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments", defines the fair
market value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between willing
parties.
Carrying Amount Fair Value
Financial Liabilities
Tax-Exempt Bonds $ 125,010,000 $141,684,705
Taxable Bonds $ 500,603,000 $563,326,062
For the Tax Exempt Bonds and First Mortgage Bonds, the fair values of the
Partnership's bonds payable are based on the stated rates of the Tax
Exempt Bonds and First Mortgage Bonds and current market interest rates
to estimate market values for the Tax Exempt Bonds and the First
Mortgage Bonds.
The carrying amounts of the Partnership's cash and cash equivalents,
accounts receivable, deposits, prepaid expenses, investments held by
trustee, accounts payable, accrued liabilities and accrued interest
approximate fair value because of the short maturities of these
instruments.
Item 2 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 Partnership and the notes thereto
included elsewhere in this report.
General
The Partnership is primarily engaged in the completion of construction,
ownership and operation of a non-utility electric generating facility.
Since its inception, and until December 21, 1995, the Partnership was in
the development stage and had no operating revenues or expenses. On
December 22, 1995 the Facility commenced commercial operation. As of
September 30, 1996, the Partnership had approximately $704 million of
property, plant and equipment consisting primarily of purchased equipment,
construction-related labor and materials, interest during construction,
financing costs and other costs directly associated with the construction
of the Facility. For the three months ended September 30, 1996, the
Partnership had total operating revenues of approximately $42.6 million,
total operating costs of $26 million, and total net interest expenses of
approximately $13.7 million resulting in net income of approximately $2.9
million.
The Partnership has obtained all material environmental permits and
approvals required as of September 1996 for the operation of the Facility.
Certain of such permits and approvals are subject to periodic renewal. The
Partnership filed its application for a Title V air permit on May 24, 1996.
A permit is expected within the next two years. Certain additional permits
and approvals will be required in the future for the continued operation of
the Facility. The Partnership is not presently aware of any technical
circumstances that would prevent the issuance of such permits and approvals
or the renewal of currently existing permits.
On September 9, 1994 Costain Group PLC, parent company of Costain Coal,
Inc. ("Costain Coal"), the Facility's primary fuel supplier, announced that
it was proceeding with the sale of its U.S. coal assets. As of the end of
the second quarter of 1996, no purchase offers had been accepted, though
Costain Group PLC continued to hold discussions with interested parties.
As of the end of the third quarter of 1996, no sale had been completed. If
Costain Coal were to be sold to or merged with another entity, any
surviving corporation in a merger of Costain Coal, or any transferee of its
assets, will be required to assume Costain Coal's obligations under the
Coal Purchase Agreement. In light of the terms of the Coal Purchase
Agreement compared with similar coal supply and ash disposal agreements
which the Partnership believes are currently obtainable in the market, the
Partnership currently does not believe that the sale of Costain Coal will
have an adverse effect on the Partnership's ability to arrange for coal
supply and ash disposal services.
Results of Operations
Because the Facility entered commercial operation on December 22, 1995,
no operating results from the third quarter of last year are available.
For its first ten days of operation ending December 31, 1995, the Facility
achieved an average Capacity Billing Factor of 99.86%. For its first two
full quarters of commercial operation ending March 31, 1996, and June 30,
1996, the Facility achieved an average Capacity Billing Factor of 95.13%
and 91.82%, respectively. For the third quarter ending September 30,
1996, the Facility achieved an average Capacity Billing Factor of 92.79%.
This resulted in earning full monthly capacity payments aggregating $27.9
million and bonuses aggregating $425,885 for the quarter. The Capacity
Billing Factor measures the overall availability of the Facility, but
gives a heavier weighting to on-peak availability. During the quarter,
the Facility was dispatched by FPL and generated 611,626 megawatt-hours.
The monthly dispatch rate for the third quarter of 1996 ranged from 85% in
July to 91% in September.
Liquidity and Capital Resources
On November 22, 1994 the Partnership and ICL Funding issued first
mortgage bonds in an aggregate principal amount of $505 million (the "First
Mortgage Bonds"). $236.6 million of the First Mortgage Bonds bear an
average interest rate of 9.26% and $268.4 million of the First Mortgage
Bonds bear an interest rate of 9.77%. Concurrently with the Partnership's
issuance of its First Mortgage Bonds, the Martin County Industrial
Development Authority issued $113 million of Industrial Development
Refunding Revenue Bonds (Series 1994A) which bear an interest rate of
7.875% (the "1994A Tax Exempt Bonds"). A second series of tax exempt bonds
(Series 1994B) in the approximate amount of $12 million, which bear an
interest rate of 8.05%, were issued by the Martin County Industrial
Development Authority on December 20, 1994 (the "1994B Tax Exempt Bonds"
and, together with the 1994A Tax Exempt Bonds, the "1994 Tax Exempt
Bonds"). The First Mortgage Bonds and the 1994 Tax Exempt Bonds are
hereinafter collectively referred to as the "Bonds."
Certain proceeds from the issuance of the First Mortgage Bonds were
used to repay $421 million of the Partnership's indebtedness and financing
fees and expenses incurred in connection with the development and
construction of the Facility and the balance of the proceeds were deposited
in various restricted funds that are being administered by an independent
disbursement agent pursuant to trust indentures and a disbursement
agreement. Funds administered by such disbursement agent are invested in
specified investments. These funds together with other funds available to
the Partnership were being used: (i) to finance completion of
construction, testing, and initial operation of the Facility; (ii) to
finance construction interest and contingency; and (iii) to provide for
initial working capital.
The proceeds of the 1994 Tax Exempt Bonds were used to refund $113
million principal amount of Industrial Development Revenue Bonds (Series
1992A and Series 1992B) previously issued by the Martin County Industrial
Development Authority for the benefit of the Partnership, and to fund, in
part, a debt service reserve account for the benefit of the holders of its
tax-exempt bonds and to complete construction of certain portions of the
Facility.
The Partnership's borrowings through September 1996 were $769 million,
of which the $139 million equity loan was repaid on December 26, 1995.
Table I illustrates the current application of borrowings (as of September
1996) compared to estimated sources and uses of funds through the
Guaranteed Completion Date (January 21, 1996) found in the Partnership's
Registration Statement (No. 33-82034) filed with the Securities and
Exchange Commission.
TABLE I Sources and Uses of Funds
The following table sets forth the budgeted sources and uses of funds
by the Partnership as of September 30, 1996. Certain actual uses of funds
through the Substantial Completion Date shown below under "Uses as of
9/30/96" differ from the budgeted amounts shown under "Total Funds"
because, among other things, the budget was based upon a Substantial
Completion Date of January 21, 1996 (the Guaranteed Completion Date)
instead of the actual Substantial Completion Date of December 22, 1995. In
addition, certain uses for completion of construction and other costs under
the Construction Contract remain indeterminable.
<TABLE>
<CAPTION>
Estimated Sources and Uses of Funds
(in thousands)
<S> <C> <C> <C>
SOURCES OF FUNDS Total Funds Uses as of 9/30/96 Remaining Funds
First Mortgage Bonds $505,000 $505,000 $ --
1994 Tax-Exempt Bonds 125,010 125,010 --
Equity Contribution of
Partners 140,000 140,000 --
Total sources of funds $770,010 $770,010 $31,429 (1)
Uses of Funds
CAPITAL COSTS
Engineering, Procurement,
and Construction Costs $438,730 $440,822 $ (2,092)(2)
Electrical, Potable Water
and Sewer Interconnection 6,850 6,318 532
Property Acquisition Costs 8,811 8,579 232
Steam Host Modification 14,500 14,500 --
Development Costs and Fees 30,442 30,442 --
Mobilization and
Spare Parts 10,618 15,771 (5,153)(2)
General & Administrative
Costs and Fees 13,057 10,636 2,421
Taxes 8,827 4,756 4,071
Startup Consumables 3,584 7,639 (4,055)(2)
Initial Working Capital 3,450 4,916 (1,466)(2)
Fuel Reserve 5,000 5,101 (101)(2)
Title Insurance 3,187 2,751 436
Other Construction-
Related Costs 4,223 2,314 1,909
FPL Delay Damages -- 508 (508)(2)
Contractor Performance
Bonus -- 8,461 (3) (8,461)(2)
Contractor Schedule Bonus -- 6,100 (6,100)(2)
Total capital cost 551,279 569,614 (18,335)(2)
FINANCING COSTS
Initial Bank Financing
Interest and Related
Expenses 58,441 50,081 8,360
Termination of Interest
Rate Hedging Agreements (7,046) (7,046) --
First Mortgage Bonds and
Tax-Exempt Bonds Interest
and Related Expenses 84,311 81,633 2,678
Equity Loan Interest and
Related Expenses 33,524 31,798 1,726
Tax-Exempt Bond Debt
Service Reserve Account 12,501(4) 12,501(4) --
Total financing costs 181,731 168,967 12,764
Total uses of funds $733,010 $738,581(5) $(5,571)(5)
Owners' Contingency(6) 37,000 -- 37,000
Totals $770,010 $738,581(5) $31,429(5)
<FN>
(1) Pursuant to the Disbursement Agreement, $44.7 million remaining of
construction funds at commercial operation were transferred into a
completion account for the payment of remaining construction expenses
(including contractor bonuses) and $1 million was transferred to the
Revenue Account for use in connection with the operation of the Facility.
As of 9/30/96, $31.4 million remained in the completion account.
(2) Overruns in these categories have been funded by cost underruns in
other budget categories where spending is considered complete or are
anticipated to underrun allocated costs. The reallocation of certain
underruns is reflected in the Owners' Contingency row. (3) A final payment
of $3.9 million was made in September 1996, for Contractor performance
bonuses. (4) The Debt Service Reserve Letter of Credit is available to
serve as a debt service reserve for the holders of the First Mortgage Bonds
and the Tax-Exempt Bonds. (5) The difference between the Total Sources
and Total Uses of Funds as of 9/30/96 is reflected in the Remaining Funds
column. (6) The net overrun in TOTAL USES OF FUNDS has been paid out
of remaining Owners' Contingency.
</TABLE>
As of September 30, 1996, the borrowings included all of the available
$125 million of the proceeds of the 1994 Tax Exempt Bonds and all of the
available First Mortgage Bond proceeds. Series A-1 of the First Mortgage
Bonds, in the aggregate principal amount of $4,397,000, matured and were
repaid on June 15, 1996. Series A-2 of the First Mortgage Bonds, in the
aggregate principal amount of $4,398,000, is scheduled to mature and be
repaid on December 15, 1996. The weighted average interest rate paid by
the Partnership on its debt for the three months ended September 30, 1996,
was 9.09%. The comparable rate, including the equity loan, was 9.71% for
the same period in 1995.
The Partnership, pursuant to certain of the Project Contracts, is
required to post letters of credit which, in the aggregate, will have a
face amount of no more than $65 million. Certain of these letters of
credit have been issued pursuant to a Letter of Credit and Reimbursement
Agreement with Credit Suisse and the remaining letters of credit will be
issued when required under the Project Contracts, subject to conditions
contained in such Letter of Credit and Reimbursement Agreement. As of
September 30, 1996, no drawings have been made on any of these letters of
credit. The Letter of Credit and Reimbursement Agreement has a term of
seven years subject to extension at the discretion of the banks party
thereto.
The Partnership entered into a debt service reserve letter of credit
and reimbursement agreement, dated as of November 1, 1994, with Banque
Nationale de Paris pursuant to which a debt service reserve letter of
credit in the amount of approximately $60 million was issued. Such
agreement has a rolling term of five years, subject to extension at the
discretion of the banks party thereto. Drawings on the debt service
reserve letter of credit became available on the Commercial Operation Date
of the Facility to pay principal and interest on the First Mortgage Bonds,
the 1994 Tax Exempt Bonds and interest on any loans created by drawings on
such debt service reserve letter of credit. Cash and other investments
held in the debt service reserve account will be drawn on for the Tax
Exempt Bonds prior to any drawings on the debt service reserve letter of
credit. As of September 30, 1996, no drawings have been made on the debt
service reserve letter of credit.
In order to provide for the Partnership's working capital needs, the
Partnership entered into a Revolving Credit Agreement with Credit Suisse
dated as of November 1, 1994. Such Agreement has a term of seven years
subject to extension at the discretion of the banks party thereto. The
revolving credit agreement has a maximum available amount of $15 million
and may be drawn on by the Partnership from time to time. The interest
rate is based upon various short term indices at the Partnership's option
and is determined separately for each draw. As of September 30, 1996, no
working capital loans have been made to the Partnership under the working
capital loan facility.
The Partnership believes that it has adequate sources of capital to
complete final construction of the Facility.
PART II OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS
The Partnership is not currently aware of any pending or threatened
litigation that it anticipates would have a material adverse effect on the
Partnership. The Partnership has been named as a co-defendant with Bechtel
Power in a suit brought by the spouse of an employee of Bechtel Power who
died in an accident which occurred on the Facility's site. A defense
motion for summary judgment was denied as to Bechtel Power; no ruling was
made as to the Partnership. The litigation has been stayed pending the
appeal of this decision. Pursuant to the terms of the Construction
Contract, Bechtel Power has notified the Partnership that it has assumed
the defense in this case on behalf of the Partnership. Although the
ultimate resolution of this action is not currently determinable, the
Partnership believes that Bechtel Power maintains insurance coverage
adequate to cover any resulting liability and that any resulting liability
in excess of such insurance coverage should not have a material adverse
effect on the Part nership's financial position.
The Partnership's steam host, Caulkins, has been named as a defendant in a
law suit by various Florida citrus growers. The plaintiffs allege that
Caulkins did not pay the growers the proper amounts for their crops at
various times from 1989 through 1994 and are claiming $10 million in
damages. Caulkins, without admitting the veracity of the plaintiffs'
allegations, has settled with citrus growers not involved in the litigation
which represent over 95% of the fruit processed during the period which is
the subject of the lawsuit and, therefore, over 95% of the damages alleged.
While the Partnership is not and does not anticipate being involved with
this action, a significant judgment against Caulkins could have an adverse
impact on Caulkins' ability to continue purchasing steam from the
Partnership and, therefore, require the Partnership to take certain
actions, under the steam sales agreement with Caulkins and otherwise, to
preserve the Facility's status as a qualifying facility. Caulkins has
informed the Partnership of its view that the magnitude of the remaining
exposure with respect to this litigation is not material to Caulkins'
financial position. The Partnership does not, and cannot, express any
opinion as to the likelihood or remoteness of a decision being rendered
against Caulkins in this case.
Item 5 OTHER INFORMATION
Governmental Approvals
The Partnership has obtained all material environmental permits and
approvals required, as of September 1996, in order to continue commercial
operation of the Facility. The Partnership timely filed its application
for a Title V air permit on May 24, 1996. A permit is expected within the
next two years. Certain of such permits and approvals are subject to
periodic renewal. Certain additional permits and approvals will be
required in the future for the continued operation of the Facility. The
Partnership is not aware of any technical circumstances that would prevent
the issuance of such permits and approvals or the renewal of currently
issued permits.
Energy Prices
On October 1, 1996, FPL filed with the Florida Public Service
Commission its most recent projections for its 1996-1999 "as available"
energy costs (in this context, "as available" energy costs reflect actual
energy production costs avoided by FPL resulting from the purchase of
energy from the Facility and other Qualifying Facilities). The
projections filed by FPL are lower for certain periods than the energy
prices specified in the Power Purchase Agreement for energy actually
delivered by the Facility. At other times, the projections exceed the
energy prices specified in the Power Purchase Agreement. Should FPL's "as
available" energy cost projections prove to reflect actual rates, FPL may
elect, pursuant to its dispatch and control rights over the Facility set
forth in the Power Purchase Agreement, to run the Facility less frequently
or at lower loads than if the Facility's energy prices were lower than the
cost of other energy sources available to FPL. Because capacity payments
under the Power Purchase Agreement are not affected by FPL's dispatch of
the Facility and because capacity payments are expected by the Partnership
to cover all of the Partnership's fixed costs, including debt service, the
Partnership currently expects that, if the recently filed projections
prove to reflect actual rates, such rates and the resulting dispatch of
the Facility will not have a material adverse effect on the Partnership's
ability to service its debt. To the extent the Facility is not operated
by FPL during Caulkins' processing season (November to June), the
Partnership may elect to run the Facility at a minimum load or shut down
the Facility and run auxiliary boilers to produce steam for Caulkins in
amounts required under the Partnership's steam agreement with Caulkins.
Such operations may result in decreased net operating income for such
periods. The Partnership expects that the decrease, if any, will not be
material. To date, the Facility has not been dispatched off-line by FPL
and the Partnership has not been pe nalized for running at minimum load in
order to provide steam to Caulkins. Based upon FPL's projections, the
Partnership does not expect that, if the recently filed projections prove
to reflect actual rates, its dispatch rate will change materially during
the period covered by such projections.
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
a) Reports on Form 8-K: The Partnership filed a Form 8-K and press
release on January 3, 1996 announcing the commencement of commercial
operation.
b) Exhibits:
Exhibit No. Description
3.1 Certificate of Incorporation of Indiantown Cogeneration
Funding Corporation.*
3.2 By-laws of Indiantown Cogeneration Funding Corporation.*
3.3 Certificate of Limited Partnership of Indiantown
Cogeneration, L.P.*
3.4 Amended and Restated Limited Partnership Agreement of
Indiantown Cogeneration, L.P., among Palm Power
Corporation, Toyan Enterprises and TIFD III-Y Inc.*
3.5 Form of First Amendment to Amended and Restated Limited
Partnership Agreement of Indiantown Cogeneration, L.P.*
4.1 Trust Indenture, dated as of November 1, 1994, among
Indiantown Cogeneration Funding Corporation, Indiantown
Cogeneration, L.P., and NationsBank of Florida, N.A., as
Trustee, and First Supplemental Indenture thereto.**
4.2 Amended and Restated Mortgage, Assignment of Leases, Rents,
Issues and Profits and Security Agreement and Fixture
Filing among Indiantown Cogeneration, L.P., as Mortgagor,
and Bankers Trust Company as Mortgagee, and NationsBank of
Florida, N.A., as Disbursement Agent and, as when and to
the extent set forth therein, as Mortgagee with respect
to the Accounts, dated as of November 1, 1994.**
4.3 Assignment and Security Agreement between Indiantown
Cogeneration, L.P., as Debtor, and Bankers Trust
Company as Secured Party, and NationsBank of Florida, N.A.,
as Disbursement Agent and, as when, and to the extent set
forth therein, a Secured Party with respect to the
Accounts, dated as of November 1, 1994.**
10.1.1 Amended and Restated Indenture of Trust between Martin
County Industrial Development Authority, as Issuer, and
NationsBank of Florida, N.A., as Trustee, dated as of
November 1, 1994.**
10.1.2 Amended and Restated Authority Loan Agreement by and
between Martin County Industrial Development Authority and
Indiantown Cogeneration, L.P., dated as of November 1,
1994.**
10.1.3 Letter of Credit and Reimbursement Agreement among
Indiantown Cogeneration, L.P., as Borrower, and the Banks
Named Therein, and Credit Suisse, as Agent, dated as of
November 1, 1994.**
10.1.4 Disbursement Agreement, dated as of November 1, 1994,
among Indiantown Cogeneration, L.P., Indiantown
Cogeneration Funding Corporation, NationsBank of Florida,
N.A., as Tax-Exempt Trustee, NationsBank of Florida, N.A.,
as Trustee, Credit Suisse, as Letter of Credit Provider,
Credit Suisse, as Working Capital Provider, Banque
Nationale de Paris, as Debt Service Reserve Letter of
Credit Provider, Bankers Trust Company, as Collateral
Agent, Martin County Industrial Development Authority, and
NationsBank of Florida, N.A., as Disbursement Agent.**
10.1.5 Revolving Credit Agreement among Indiantown Cogeneration,
L.P., as Borrower, and the Banks Named Therein, and Credit
Suisse, as Agent, dated as of November 1, 1994.**
10.1.6 Collateral Agency and Intercreditor Agreement, dated as of
November 1, 1994, among NationsBank of Florida, N.A., as
Trustee under the Trust Indenture, dated as of November 1,
1994, NationsBank of Florida, N.A., as Tax-Exempt Trustee
under the Tax Exempt Indenture, dated as of November 1,
1994, Credit Suisse, as letter of Credit Provider,
Credit Suisse, as Working Capital Provider, Banque
Nationale de Paris, as Debt Service Reserve Letter of
Credit Provider, Indiantown Cogeneration, L.P., Indiantown
Cogeneration Funding Corporation, Martin County Industrial
Development Authority, NationsBank of Florida, N.A., as
Disbursement Agent under the Disbursement Agreement dated
as of November 1, 1994, and Bankers Trust Company, as
Collateral Agent.**
10.1.7 Amended and Restated Equity Loan Agreement dated as of
November 1, 1994, between Indiantown Cogeneration, L.P.,
as the Borrower, and TIFD III-Y Inc., as the Equity Lender.**
10.1.8 Equity Contribution Agreement, dated as of November
1, 1994, between TIFD III-Y Inc. and NationsBank of
Florida, N.A., as Disbursement Agent.**
10.1.9 GE Capital Guaranty Agreement, dated as of November
1, 1994, between General Electric Capital Corporation, as
Guarantor, and NationsBank of Florida, N.A., as
Disbursement Agent.**
10.1.11 Debt Service Reserve Letter of Credit and Reimbursement
Agreement among Indiantown Cogeneration, L.P., as
Borrower, and the Banks Named Therein, and Banque
Nationale de Paris, as Agent, dated as of November 1, 1994.**
10.2.18 Amendment No. 2 to Coal Purchase Agreement, dated as of
April 19, 1995.***
10.2.19 Fourth Amendment to Energy Services Agreement, dated as of
January 30, 1996.*****
21 Subsidiaries of Registrant*
27 Financial Data Schedule. (For electronic filing purposes
only.)
99 Copy of Registrants' press release dated January
3, 1996.****
* Incorporated by reference from the Registrant Statement on Form S-1, as
amended, file no. 33-82034 filed by the Registrants with the SEC in July
1994.
** Incorporated by reference from the quarterly report on Form 10-Q,
file no. 33-82034 filed by the Registrants with the SEC in December 1994.
*** Incorporated by reference from the quarterly report on Form 10-Q, file
no. 33-82034 filed by the Registrants with the SEC in May 1995.
**** Incorporated by reference from the current report on Form 8-K, file
no. 33-82034 filed by the Registrants with the SEC in January 1996.
***** Incorporated by reference from the quarterly report on Form 10-Q,
file no. 33-82034 filed by the Registrants with the SEC in May 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized
INDIANTOWN COGENERATION, L.P.
(Co-Registrant)
Date: November 14, 1996 /s/ John Cooper
John R. Cooper
Vice President (Chief Financial Officer)
INDIANTOWN COGENERATION FUNDING CORPORATION
(Co-Registrant)
Date: November 14, 1996 /s/ John Cooper
John R. Cooper
Vice President (Chief Financial Officer)
3rd10q96.003
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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Exhibit 27: Financial Data Schedule
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