SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
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, 1998
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
Indicate by check mark if disclosure of delinquent filer 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. [ ]
As of March 30, 1999, there were 100 shares of common stock of
Indiantown Cogeneration Funding Corporation, $1 par value
outstanding.
<PAGE>
Indiantown Cogeneration, L.P. Indiantown Cogeneration Funding
Corporation
PART I Page Number
Item 1 Business....................................1
Item 2 Properties..................................7
Item 3 Legal Proceedings...........................7
Item 4 Submission of Matters to a Vote of Security
Holders.....................................8
PART II
Item 5 Market for the Registrant's Common Stock and Related
Security Holder Matters................... 8
Item 6 Selected Financial
Data...................................... 9
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations................ 10
Item 8 Financial Statements and Supplementary
Data.................................... 18
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...... 36
PART III
Item 10 Directors and Executive
Officers................................. 37
Item 11 Remuneration of Directors and Officers... 38
Item 12 Security Ownership of Certain Beneficial Owners and
Management............................... 39
Item 13 Certain Relationships and Related
Transactions............................. 39
PART IV
Item 14 Exhibits, Financial Statement
Schedules and Reports on Form
8-K...................................... 39
Signatures....................................... 44
<PAGE>
PART I
Item 1 BUSINESS
The Partnership
Indiantown Cogeneration, L.P. (the "Partnership") is a special
purpose Delaware limited partnership formed on October 4, 1991. The
general partners of the Partnership are Indiantown Project
Investment Partnership, L.P. a Delaware limited partnership
("IPILP"), and Palm Power Corporation ("Palm"), a Delaware
corporation and a special purpose indirect subsidiary of Cogentrix
Energy, Inc. ("Cogentrix"). The limited partners are TIFD III-Y,
Inc. ("TIFD"), a special purpose indirect subsidiary of General
Electric Capital Corporation ("GECC") and Toyan Enterprises
("Toyan"), a California corporation and a wholly-owned special
purpose indirect subsidiary of U.S. Generating Company LLC,
hereinafter referred to collectively as the "Partners". Recent
changes to the ownership structure of the Partnership are detailed
below. 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 ac cordance with the 1994 bond offering discussed in Note 4 to
the consolidated financial statements. ICL Funding has no separate
operations and has only $100 in assets and capitalization.
Except for matters expressly reserved to the Partners in the
Partnership, the Partnership's Board of Control has full and
exclusive power and authority in respect of the management of the
Partnership's business. However, the Board of Control may delegate
such authority to the Chief Executive Officer of the Partnership or
to a third party pursuant to a management services agreement, and
may authorize persons to execute documents on behalf of the
Partnership. Members of the Board of Control are appointed and may
be removed by the partners of the Partnership. No cash compensation
or non-cash compensation was paid in any prior year or will be paid
in the current calendar year to any members of the Board of Control.
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
owned by the Partnership in southwestern Martin County, Florida.
The Partnership is managed by U.S. Generating Company ("USGen")
pursuant to a Management Services Agreement (the "MSA"). The
Facility is operated by U.S. Operating Services Company ("USOSC")
pursuant to an Operation and Maintenance Agreement (the "O&M
Agreement"). USGen and USOSC are general partnerships originally
formed between affiliates of PG&E Enterprises and Bechtel
Enterprises, Inc. On September 19, 1997, USGen and USOSC each
separately redeemed Bechtel Enterprises, Inc.'s interests in USGen
and USOSC so that U.S. Generating Company, LLC now indirectly owns
all of the interests in USGen and USOSC. This will not affect
USGen's obligations under the MSA or USOSC's obligations under the
O&M Agreement. Also on September 19, 1997, Toyan purchased 16.67%
of Palm's interest in the Partnership, which represents a 2%
ownership in the Partnership.
1
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On August 21, 1998, Toyan consummated the transactions contemplated
in the Purchase Agreement dated as of May 29, 1998, with DCC Project
Finance Twelve, Inc. ("PFT"), whereby PFT formed IPILP with Toyan.
IPILP became a new general partner in the Partnership by acquiring a
19.95% interest in the Partnership from Toyan. Prior to the PFT
transaction, Toyan converted its remaining partnership interest from
a general partnership interest into a limited partnership interest
such that Toyan now directly holds only a limited partnership
interest in the Partnership. Separately, Bechtel Generating
Company, Inc. ("Bechtel Generating"), a subsidiary of Bechtel
Enterprises, Inc., entered into a Purchase Agreement dated as of
March 6, 1998, with Cogentrix whereby a wholly owned subsidiary of
Cogentrix purchased from Bechtel Generating, on October 20, 1998,
among other things, 100% of the stock of Palm. Palm directly holds
a 10% interest in the Partnership. In addition, on November 23,
1998, PFT and Toyan consummated t he transaction contemplated in the
Purchase Agreement dated October 27, 1998, whereby Toyan transferred
a 50% interest in IPILP to PFT such that PFT owns 75.188% of IPILP
representing a 15% interest in the Partnership.
The net profits and losses of the Partnership are allocated to
Toyan, Palm, TIFD and, if applicable, IPILP (collectively, the
"Partners") based on the following ownership percentages:
From September From August From October
20, 1997 21,1998 20,1998
Toyan 50% 30.05% 30.05%
Palm 10% 10% 10%*
IPILP -- 19.95%** 19.95%**
TIFD 40% 40% 40%
* Now beneficially owned by Cogentrix. ** PFT's beneficial
ownership in the Partnership through IPILP was equal to 10% as of
August 21, 1998, and 15% as of November 23, 1998.
The changes in ownership as a result of the consummated PFT
transactions were the subject of notices of self-recertification of
Qualifying Facility status filed by the Partnership with the Federal
Energy Regulatory Commission on August 20, 1998 and November 16,
1998. The Cogentrix transaction was the subject of a similar
filing.
All distributions other than liquidating distributions will be
made based on the Partner's 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 of
the Facility commenced in December 1995.
The Partnership began construction of the Facility in October
1992 and was in the development phase through the commencement of
commercial operation. The Facility commenced commercial operation
under its power purchase agreement (the "Power
2
<PAGE>
Purchase Agreement"
or "PPA") with Florida Power & Light Company ("FPL") on December 22,
1995. The Facility synchronized with the FPL system on June 30,
1995 and the Partnership sold to FPL electricity produced by the
Facility during startup and testing. The Partnership's continued
existence is dependent on the ability of the Partnership to maintain
successful commercial operation under the Power Purchase Agreement.
The Partnership has filed a complaint against FPL with respect to
the interpretation of a certain provision of the Power Purchase
Agreement. Please see "Item 3. Legal Proceedings" below.
Management of the Partnership is of the opinion that the assets of
the Partnership are realizable at their current carrying value. The
Partnership has no assets other t han the Facility, the Facility
site, contractual arrangements relating to the Facility (the
"Project Contracts") and the stock of ICL Funding.
Certain Project Contracts
The Facility supplies (i) electric generating capacity and
energy to FPL pursuant to the Power Purchase Agreement and (ii)
steam to Caulkins Indiantown Citrus Company ("Caulkins") pursuant to
a long-term energy services agreement (the "Energy Services
Agreement").
Payments from FPL pursuant to the Power Purchase Agreement
provide approximately 99% of Partnership revenues. Under and
subject to the terms of the Power Purchase Agreement, FPL is
obligated to purchase electric generating capacity made available to
it and associated energy from the Facility beginning with the date
the Facility achieved commercial operation through December 22,
2025.
Payments by FPL consist of capacity payments and energy
payments. FPL is required to make capacity payments to the
Partnership on a monthly basis for electric generating capacity made
available to FPL during the preceding month regardless of the amount
of electric energy actually purchased. The capacity payments have
two components, an un-escalated fixed capacity payment and an
escalated fixed operation and maintenance payment, which together
are expected by the Partnership to cover all of the Partnership's
fixed costs, including debt service. Energy payments are made only
for the amount of electric energy actually delivered to FPL. The
energy payments made by FPL are expected by the Partnership to cover
the Partnership's variable costs of electric energy production but
will be insufficient to cover the variable costs of steam production
for steam supplied to Caulkins. The amount of this shortfall is not
expected by the Partnership to have a material adverse effect on its
ability to service its debt.
The Partnership supplies thermal energy to Caulkins in order for
the Facility to meet the operating and efficiency standards under
the Public Utility Regulatory Policy Act of 1978, as amended, and
the FERC's regulations promulgated thereunder (collectively,
"PURPA"). The Facility has been certified as a Qualifying Facility
under PURPA. Under PURPA, Qualifying Facilities are exempt from
certain provisions of the Public Utility Holding Company Act of
1935, as amended ("PUHCA"), most provisions of the Federal Power Act
(the "FPA"), and, except under certain limited circumstances, rate
and financial regulation under state law. The Energy Services
Agreement with Caulkins requires Caulkins to purchase the lesser of
(i) 525 million pounds of steam per year or (ii) the minimum
quantity of steam per year necessary for the Facility to maintain
its status as a
3
<PAGE>
Qualifying Facility under PURPA (currently estimated
by the Partnership not to exceed 525 million pounds per year).
The Partnership entered into a coal purchase agreement (the
"Coal Purchase Agreement") with Costain Coal, Inc. ("Costain Coal"),
pursuant to which Costain Coal supplies all of the Facility's coal
needs, which are estimated to be 1 million tons of coal per year.
The Partnership has no obligation to purchase a minimum quantity of
coal under the Coal Purchase Agreement. The fuel price escalation
provisions in the Coal Purchase Agreement are substantially the same
as escalation of the fuel price component of the energy price
contained in the Power Purchase Agreement with FPL. This mechanism
is intended to mitigate any mismatch between the price the
Partnership pays for coal and the energy payments received from FPL.
On September 9, 1994, Costain Group PLC, parent company of
Costain Coal, the Facility's primary fuel supplier, announced that
it was proceeding with the sale of its U.S. coal assets. On March
17, 1997, Costain Group PLC announced that it completed the sale of
Costain Coal to Rencoal Inc. for $44.7 million. Costain Coal was
subsequently renamed Lodestar Energy, Inc. ("Lodestar"). Lodestar
remains obligated 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.
During 1997, coal ash produced during operation of the Facility
was disposed of pursuant to the Coal Purchase Agreement and back-up
disposal arrangements with Chambers Waste Systems, Inc. of Florida
("Chambers"). In 1998, the Partnership entered into agreements with
Lodestar and VFL Technology Corporation ("VFL") for ash disposal at
alternative sites. These agreements will reduce the cost of ash
disposal. The Partnership has been informed that Lodestar,
Chambers, and VFL have obtained the permits necessary to receive
such coal ash.
The Partnership entered into a lime purchase agreement (the
"Lime Purchase Agreement") with Chemical Lime Company ("Chemlime"),
an Alabama corporation, to supply the lime requirements of the
Facility's dry scrubber and sulfur dioxide removal system. The
initial term of the Lime Purchase Agreement is 15 years from the
commercial operation date. Chemlime is obligated to provide all of
the Facility's lime requirements, but the Partnership has no
obligation to purchase a minimum quantity of lime.
Competition
Because the Partnership has a long-term contract to sell
electric generating capacity and energy from the Facility to FPL, it
does not expect competitive forces to have a significant effect on
its business. As discussed under "Energy Prices" below, the cost of
power available to FPL from other sources will affect FPL's dispatch
of the Facility and, therefore, the amount of electric energy FPL
purchases from the Partnership. The Partnership expects that the
capacity payments under the Power Purchase Agreement, which are not
affected by the level of FPL's dispatch of the Facility, will cover
all of the Partnership's fixed costs, including debt service.
4
<PAGE>
Energy Prices
In September 1997, FPL filed with the Florida Public Service
Commission its projections for its 1997-1999 "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 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. The Partnership has filed a
complaint against FPL with respect to the interpretation of a
provision of the Power Purchase Agreement related to this matter.
Please see "Legal Proceedings" below. Such operations may result
in decreased net operating income for such periods. The
Partnership expects that the decrease, if any, will not be
material. For the twelve months ended December 31, 1998, FPL
requested the Partnership to decommit the Facility numerous times
and the Partnership typically exercised its rights to operate at
minimum load (100MW) during such decommit requests. The
Partnership's election to operate at minimum load has not had a
material impact on the Partnership or its financial condition
although energy delivered during such operations is sold at reduced
prices. Based upon FPL's projections, the Partnership does not
expect that, if the filed projections prove to reflect actual
rates, its dispatch rate will change materially during the period
covered by such projections.
Employees
The Partnership has no employees and does not anticipate having
any employees in the future because, under a management services
agreement, USGen acts as the Partnership's representative in all
aspects of managing construction and operation of the Facility as
directed by the Partnership's Board of Control. As noted above,
USOSC is providing operations and maintenance services for the
Partnership.
Business Strategy and Outlook
The Partnership's overall business plan is to safely produce
clean, reliable energy at competitive prices. The Facility
commenced commercial operation on December 22, 1995 and completed
its third full year of operation on December 31, 1998.
5
<PAGE>
During 1998, the Facility produced 1,485,008 MW-hr of energy for
sale to FPL compared to 1,668,959 MW-hr in 1997. This decrease was
due primarily to FPL's reduced dispatch of the Facility. Dispatch
of the Facility by FPL averaged approximately 55.58% over the year
compared to 67.5% for 1997.
The Facility produced approximately 370 million pounds of steam for
sale to Caulkins in 1998 compared to approximately 400 million
pounds in 1997 thereby exceeding the minimum requirements to
maintain Qualifying Facility status. The 30 million pound decrease
in steam deliveries was due primarily to lower production of juice
by Caulkins in 1998.
The Facility ended the year with a twelve-month rolling average
Capacity Billing Factor of 101.038% in 1998 and 100.89% in 1997.
The Capacity Billing Factor measures the overall availability of the
Facility, but gives a heavier weighting to on-peak availability.
Cash flows during 1998 were sufficient to fund all operating
expenses and debt repayment obligations.
Forward Looking Statements
When used in this report, words or phrases which are predictions
of or indicate future events and trends are subject to a number of
risks and uncertainties which could cause actual results to differ
materially from those projected. Given such uncertainties, readers
are cautioned not to place undue reliance on such statements. The
Partnership undertakes no obligation to publicly update or revise
any forward looking statement to reflect current or future events or
circumstances.
The Partnership anticipates that, barring any unforeseeable
adverse events, the results for 1999 will be similar to the results
for 1998. Dispatch of the unit by FPL during the summer months is
expected to be similar to 1998 levels. Dispatch during the winter
is highly dependent on weather and FPL's cost of running its oil and
gas fired units. Steam demand from Caulkins in 1999 is expected to
be similar to 1998 levels.
The Facility is planning on four weeks of scheduled outages
during 1999 to perform routine inspections and maintenance. The
current outage schedule is for a two-week spring outage in May and a
two-week fall outage in November.
The Partnership is not aware of any reason to expect coal
pricing during 1999 to substantially differ from 1998 levels.
In the absence of any major equipment failures, unit
availability is expected to be comparable to 1998 levels. If this
is achieved, the Capacity Billing Factor and associated capacity
bonuses would be similar.
The Partnership believes that its current financial resources
will be adequate to cover operating expenses and debt repayment
obligations in 1999.
6
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Governmental Approvals
The Partnership has obtained all material environmental permits
and approvals required, as of the end of 1998, in order to continue
commercial operation of the Facility. 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. The Partnership timely filed its application for a Title V
air permit on May 24, 1996. The air construction permit will
continue in effect until the Title V permit is issued. A permit is
expected before the end of May 1999.
Item 2 PROPERTIES
The Facility is located in a predominantly industrial area in
southwestern Martin County, Florida, on approximately 240 acres of
land owned by the Partnership (the "Site"). Other than the
Facility, the Site, and the make-up water pipeline and associated
equipment, the Partnership does not own or lease any material
properties.
Item 3 LEGAL PROCEEDINGS
Dispute with FPL
On March 19, 1999, Indiantown Cogeneration, L.P. (the
"Partnership") filed a complaint against Florida Power & Light
Company ("FPL") in the United States District Court for the Middle
District of Florida. The lawsuit stems from a course of action
pursued by FPL since March 10, 1999, in which FPL has purported to
exercise its dispatch and control rights under the power sales
agreement in a manner which the Partnership believes violates the
terms of the power sales agreement. In its complaint, the
Partnership charges that such conduct is deliberately calculated to
cause the Partnership to be unable to meet the requirements to
maintain the Facility's status as a Qualifying Facility under the
Public Utility Regulatory Policies Act of 1978.
The complaint alleges that FPL has taken the position that if the
Facility is off-line for any reason, then FPL is under no obligation
to allow the Facility to reconnect to FPL's system. The complaint
asserts, however, that the Partnership specifically and successfully
negotiated for a contractual right to operate the Facility at 100 MW
("Minimum Load") in order to enable it to cogenerate sufficient
steam to maintain its Qualifying Facility status. While FPL has not
disputed that the Partnership may maintain Minimum Load operations
if the Facility is delivering power when FPL requests the
Partnership to decommit the Facility, the complaint states that FPL
has claimed absolute discretion to deny the Partnership permission
to reconnect the Facility with FPL's system.
Because the loss of Qualifying Facility status may result in an
event of default under the power sales agreement, the Partnership
must take action to address this matter.
7
<PAGE>
The complaint asserts causes of action for (i) FPL's breach of the
power sales agreement, (ii) FPL's anticipatory repudiation of the
power sales agreement, (iii) breach of the implied covenant of good
faith, fair dealing and commercial reasonableness and (iv) a
declaratory judgment by the court of the rights of the parties under
the power sales agreement. The Partnership seeks (a) a declaratory
ruling that FPL's actions constitute a breach of the terms of the
power sales agreement and that the Partnership has the absolute
right to operate the Facility at Minimum Load (except for reasons of
safety or system security) at the rates provided for in the power
sales agreement, (b) injunctive relief preventing FPL from further
violating the power sales agreement, (c) compensatory damages and
(d) other relief as the court may deem appropriate.
Subsequent to the filing of the complaint, FPL reconnected the
Facility to FPL's system on Sunday, March, 28, 1999. FPL has until
April 14, 1999, to file a responsive pleading to the complaint.
This summary of the Partnership's complaint against FPL is qualified
in its entirety by the complaint, which accompanied the
Partnership's Current Report on Form 8-K which was filed on March
22, 1999. This summary does not, nor does it purport to, include
all of the material statements and claims made in the complaint, and
has been provided solely for the reader's convenience. This summary
is not intended to be relied upon for any purpose without reference
to the complaint.
Property Tax Matter
The Partnership was contacted in 1998 by the local Martin County
property appraiser concerning the proper qualification of some its
pollution control equipment, which equipment receives reduced
valuation for property tax purposes. After review by the
Partnership, and discussion directly with the appraiser's office,
the Partnership provided the appraiser with all requested
information. The appraiser has not taken any further action on this
matter.
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders of
the Partnership during 1998.
PART II
Item 5 MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
The Partnership is a Delaware limited partnership wholly owned
by Palm, Toyan, TIFD, and IPILP. Beneficial interests in the
Partnership are not available to other persons except with the
consent of the Partners.
There is no established public market for ICL Funding's common
stock. The 100 shares of $1 par common stock are owned by the
Partnership. ICL Funding has not, and does not, intend to pay
dividends on the common stock.
8
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Item 6 SELECTED FINANCIAL DATA
The selected financial data of the Partnership presented below,
which consists primarily of certain summary consolidated balance
sheet information of the Partnership as of December 31, 1998, 1997,
1996, 1995, and 1994, should be read in conjunction with Item 7 of
this report, "Management's Discussion and Analysis of Financial
Condition And Results of Operations", and with the Partnership's
financial statements appearing elsewhere in this report. The
Partnership, which was in the development stage through December 21,
1995, began construction of the Facility in October 1992 and
declared commercial operation of the Facility on December 22, 1995.
The financial statements and supplementary data required by this
item are presented under Item 8.
The following is a summary of the quarterly results of operations
for the years ended December 31, 1995, 1996, 1997 and 1998.
<TABLE>
<CAPTION>
Three Months Ended (unaudited)
<S> <C> <C> <C> <C> <C>
March 31 June 30 September 30 December 31 Total
(in thousands)
1995
Operating
revenues (a) (a) (a) $4,565 $4,565
Gross Profit (a) (a) (a) 2,421 2,421
Net income (a) (a) (a) 802 802
1996
Operating
revenues $38,767 $40,384 $42,571 $37,124 $158,846
Gross Profit 20,314 18,555 19,272 19,197 77,338
Net income 4,005 2,493 2,894 2,398 11,790
1997
Operating
revenues $37,879 $38,936 $43,907 $41,795 $162,517
Gross Profit 20,173 22,607 22,419 19,124 84,323
Net income 3,950 6,147 6,074 1,837 18,008
1998
Operating
revenues $37,144 $41,466 $43,296 $37,277 $159,183
Gross profit 21,672 22,636 23,342 21,415 89,065
Net income
before
cumulative
change in
accounting
principle 5,181 6,014 6,438 4,541 21,174
Net income 5,181 6,014 6,438 3,722 21,355
<FN>
(a) Data not available as Commercial Operations commenced on
December 22, 1995.
</TABLE>
9
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<TABLE>
<CAPTION>
Indiantown Cogeneration, L.P.
as of December 31,
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
Total Assets 708,139,691 $735,468,011 $753,669,863 $799,451,339 $637,944,198
Long-Term
Debt 595,835,699 606,119,747 616,651,805 626,601,265 630,010,000
Total
Liabilities 616,339,161 629,342,447 637,472,694 658,649,167 637,944,098
Capital
Distributions 35,680,000 28,080,382 36,395,054 -- --
Total Partners'
Capital 91,800,530 106,125,564 116,197,169 140,802,172 100
Construction
in Progress -- -- -- -- 515,298,762
Property, Plant
& Equipment,
Net 654,188,458 668,464,373 682,214,731 691,588,155 --
Operating
Revenues 159,183,399 162,517,435 158,845,947 4,564,860 --
Net Income 21,354,967 18,008,777 11,790,051 802,172 --
</TABLE>
Item 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
Year ended December 31, 1998 Compared to the Year Ended December
31,1997
The Partnership is primarily engaged in the ownership and
operation of a non-utility electric generating facility. From 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 December 31, 1998 and 1997 the Partnership had approximately
$654.2 million and $668.5 million, respectively, 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. This decrease is due
primarily to depreciation of $14.8 million and start-up costs
expensed according to the American Institute of Certified Public
Accountant's Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities," of $0.8 million, offset by $1.4 million of
capital improvements.
For the three months ended December 31, 1998 and 1997, the
Partnership had total operating revenues of approximately $37.3
million and $41.8 million, respectively. This $4.5 million decrease
was due primarily to lower dispatch by FPL resulting in decreased
energy revenues. For the three months ending December 31, 1998 and
1997, the Partnership had total operating costs of $18.8 million and
$25.0 million respectively. This $6.2 million decrease was due
primarily to decreased variable costs associated with lower dispatch
by FPL and savings from the new ash disposal agreements. Total net
interest expense was approximately $14.0 million and $15.0 million
for the three months ended December 31,
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<PAGE>
1998 and 1997, respectively.
This decrease was due primarily to the maturity of Series A-5 of the
First Mortgage Bonds on June 15, 1998 and Series A-6 of the First
Mortgage Bonds on December 15, 1998. Net income was approximately
$3.7 million and $1.8 million for three months ended December 31,
1998 and 1997, respect ively. This increase was due primarily to
decreases in operating and maintenance expenses of $2.5 million and
net interest expense of $0.4 million offset by increases in
depreciation of $0.4 million, year 2000 expenses, taxes of
approximately $0.6 million and $0.8 million of start-up costs.
For the years ended December 31, 1998 and 1997, the Partnership
had total operating revenues of $159.2 million and $162.5 million,
respectively. This decrease was attributable primarily to decreased
energy revenues of $4.5 million offset by increased capacity bonus
and capacity revenues of $1.2 million. The increased revenues from
capacity is due primarily to a higher Capacity Billing Factor under
the PPA resulting from improved plant performance. The lower energy
revenues are due primarily to reduced dispatch levels. Total
operating costs were $80.6 million and $87.7 million for the years
ended December 31, 1998 and 1997, respectively. This decrease was
due primarily to a reduction of $7.3 million in fuel and ash costs
resulting from lower dispatch by FPL and savings from the new ash
disposal agreements, and a decrease of $0.8 million in operations
and maintenance expenses offset by increases in support services for
operations, environmental and safety initiatives and for year 2000
related costs. For the years ended December 31, 1998 and 1997, the
total net interest expense was approximately $56.4 million and $56.8
million, respectively. The decrease was primarily due to a $0.7
million reduction in bond interest expense offset by a reduction in
interest income and an increase in working capital loan interest.
Net income was $21.4 million and $18.0 million for the twelve months
ended December 31, 1998 and 1997, respectively. This $3.4 million
increase was primarily attributable to the decreased revenues of
$3.3 million, start-up costs of $0.8 million, offset by a $7.1
million decrease in operating costs and a $0.4 million decrease in
net interest expense.
Year Ended December 31, 1997 Compared to the Year Ended December 31,
1996
As of December 31, 1997 and 1996, the Partnership had
approximately $668.5 million and $682.2 million, respectively, 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. This decrease is due
primarily to depreciation of $15 million offset by $1.3 million of
capital improvements.
For the three months ended December 31, 1997 and 1996, the
Partnership had total operating revenues of approximately $41.8
million and $37.1 million, respectively. This $4.7 million increase
was due primarily to higher dispatch by FPL and a higher Capacity
Billing Factor under the PPA resulting in increased energy revenues
and bonuses of $2.9 million and $1.8 million, respectively.
For the three months ending December 31, 1997 and 1996, the
Partnership had total operating costs of $25.0 million and $20.3
million, respectively. This $4.7 million increase was due primarily
to increased variable costs of $2.3 million associated with higher
dispatch by FPL and $2.2 million of equipment write-offs. Total net
interest expense was approximately $15.0 million and $14.4 million
for the three months ended December 31, 1997 and 1996, respectively.
This increase was due primarily to the maturity of Series A-3 of
11
<PAGE>
the
First Mortgage Bonds on June 15, 1997 offset by lower interest
income. Net income was approximately $1.8 million and $2.4 million
for the three months ended December 31, 1997 and 1996, respectively.
This decrease was due primarily to the increase in net interest
expense.
For the years ended December 31, 1997 and 1996, the Partnership
had total operating revenues of $162.5 million and $158.8 million,
respectively. This increase was attributable primarily to a $7.0
million increase in the capacity bonus and higher capacity payments
of $0.3 million offset by a $3.7 million reduction in energy
revenues. The increased revenues from capacity is due primarily to
a higher Capacity Billing Factor under the PPA resulting from
improved plant performance. The lower energy revenues are due
primarily to reduced dispatch levels, especially in the second
quarter of 1997. Total operating costs were $87.7 million and
$91.6 million for the years ended December 31, 1997 and 1996,
respectively. This decrease was due primarily to a reduction of
$3.3 million in fuel and ash costs resulting from lower dispatch by
FPL, a decrease of $0.8 million in insurance premiums and a
decrease of $4.5 million in depreciation (due to a change in
estimate), partially offset by an increase of $2.2 million due to
equipment write-offs and an increase of $2.4 million due to
increases in operations and maintenance expenses. The change in
depreciation expense from 1996 to 1997 is not indicative of future
trends because it is the result of a change in estimate. The
depreciation expense is expected to remain comparable to 1997
levels in future years. For the years ended December 31, 1997 and
1996, the total net interest expense was approximately $56.8
million and $55.4 million, respectively. The increase was
primarily due to a $0.7 million reduction in bond interest expense
offset by a reduction of $1.6 million in interest income and an
increase in amortization of deferred financing costs of $0.4
million. Net income was $18.0 million and $11.8 million for the
twelve months ended December 31, 1997 and 1996, respectively. This
$6.2 million increase was primarily attributable to the increased
revenues and decreased operating costs, offset by the increased net
interest expense.
Results of Operations
Year ended December 31, 1998 Compared to the Year Ended December 31,
1997
For the three months ending December 31, 1998 and 1997, the
Facility achieved an average Capacity Billing Factor of 101.55% and
100.89% respectively. For the years ending December 31, 1998 and
1997, the Facility achieved an average Capacity Billing Factor of
101.28% and 98.29% respectively. These increases were primarily
attributable to better mechanical operations. This resulted in
earning full monthly capacity payments aggregating $28.1 million for
the quarter and $112.2 million for the year in 1998 and $28.0
million for the quarter and $112.0 million for the year in 1997.
Bonuses aggregated $2.8 million for the quarter and $11.2 million
for the year in 1998 and $2.8 million for the quarter and $10.3
million for the year in 1997. These increases were due primarily to
a higher Capacity Billing Factor resulting from better plant
performance. During 1998 and 1997, the Facility was dispatched by
FPL and generated 1,485,008 megawatt-hours and 1,668,959
megawatt-hour respectively. The monthly average disp atch rate was
51.6% and 67.5% for the twelve months ended December 31, 1998 and
1997, respectively. The reduced dispatch levels were primarily the
result of moderate winter weather.
12
<PAGE>
Year Ended December 31, 1997 Compared to the Year Ended December 31,
1996
For the three months ending December 31, 1997 and 1996, the
Facility achieved an average Capacity Billing Factor of 100.89% and
93.87%, respectively. For the years ending December 31, 1997 and
1996, the Facility achieved an average Capacity Billing Factor of
98.29% and 93.75%, respectively. These increases were primarily
attributable to better mechanical operations. This resulted in
earning full monthly capacity payments aggregating $28.0 million for
the quarter and $112.0 million for the year in 1997 and $28.0
million for the quarter and $111.7 million for the year in 1996.
Bonuses aggregated $2.8 million for the quarter and $10.3 million
for the year in 1997 and $1.0 million for the quarter and $3.3
million for the year in 1996. These increases were due primarily to
a higher Capacity Billing Factor resulting from better plant
performance. During 1997 and 1996, the Facility was dispatched by
FPL and generated 1,668,959 megawatt-hours and 1,862,439
megawatt-hours, respectively. The monthly average dis patch rate
was 67.5% and 77% for the twelve months ended December 31, 1997 and
1996, respectively. The reduced dispatch levels were primarily the
result of milder winter weather in 1997.
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"). Of this amount, $236.6
million of the First Mortgage Bonds bear an average interest rate of
9.05% 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 colle ctively
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
used: (i) to finance completion of construction, testing, and
initial operation of the Facility; (ii) to finance construction
interest and construction-related contingencies; 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
13
<PAGE>
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 total borrowings from inception through
December 1998 were $769 million. The equity loan of $139 million
was repaid on December 26, 1995. As of December 31, 1998, the
borrowings included $125 million from the 1994 Tax Exempt Bonds and
all of the available First Mortgage Bond proceeds. The First
Mortgage Bonds have matured as follows:
Series Aggregate Principal Amount Date Matured and Paid
A-1 $4,397,000 June 15, 1996
A-2 4,398,000 December 15, 1996
A-3 4,850,000 June 15, 1997
A-4 4,851,000 December 15, 1997
A-5 5,132,000 June 15, 1998
A-6 5,133,000 December 15, 1998
The weighted average interest rate paid by the Partnership on its
debt for the years ended December 31, 1998 and 1997, was 9.174% and
9.176% respectively.
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 December 31, 1998, 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. This agreement has a 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 December 31, 1998, no drawings have been made on the
debt service reserve letter of credit. On January 11, 1999, in
accordance with the Partnership's financi ng documents, the debt
service reserve letter of credit was reduced to approximately $30
million, which, together with cash in the debt service reserve
account, represents the maximum remaining semi-annual debt service
on the First Mortgage Bonds and the 1994 Tax Exempt Bonds.
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,
14
<PAGE>
1994. This 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. During 1998, working capital
loans were made to the Partnership under the working capital loan
facility. All working capital loans were repaid in a timely manner.
Year 2000
The Partnership is, with the assistance of USOSC and USGen,
conducting a program of its computer systems to identify, test where
necessary, and remediate the systems that could be affected by the
new millennium. The year 2000 may pose problems in software
applications because many computer systems and applications
currently use two-digit date fields to designate a year. As the
century date occurs, date sensitive systems may recognize the year
2000 as 1900 or not at all. This potential inability to recognize
or properly treat the year 2000 may cause systems to process
financial or operational information incorrectly. Management has
inventoried those systems which it reasonably believes may be
adversely affected and prioritized them based on the extent of any
potential disruption in operations and the resulting potential
impact on the Partnership's ability to generate and deliver
electricity or steam.
To date, the Partnership has inventoried ninety-one potentially
affected systems, of which forty-eight have been classified as
having the highest priority based upon likelihood and extent of
impact. Among these priority systems is the Facility's Distributed
Control System ("DCS"), which is the primary computerized control
system for the Facility. The manufacturer of the Facility's DCS is
Westinghouse Electric Corporation ("Westinghouse"). Westinghouse
visited the Facility to determine what remediation would be required
for the DCS to be insulated from disruptions due to the year 2000
and installed hardware and software code as required to address the
year 2000 issue. On October 17, 1998, the Partnership conducted a
year 2000 test on the DCS by, among other things, manually resetting
the internal calendar to experience the transition from December 31,
1999 to January 1, 2000. The DCS handled this simulated transition
with no significant interruptions in power production or ordinary
operation. Other system s that have been remediated include the
HART communicators and the Continuous Emissions Monitoring System.
In addition, the Partnership is utilizing a network test environment
developed by the Partnership with support from USGen to test other
information technology systems. This testing is conducted on an
integrated and unit basis. The integrated system test is intended
to replicate the Partnership's typical business processes. The unit
tests supplement the integrated test to evaluate remaining functions
which were not part of the integrated test. The Partnership has
either retired or upgraded all of its computer servers and the
computer for the Turbine Vibration Analysis System has been
replaced. The telephone system was successfully tested.
Through December 31, 1998, the Partnership spent approximately
$325,613 on year 2000 related projects. The Partnership currently
estimates that the completion of its year 2000 efforts will cost
approximately $403,000 (including amounts spent to date),
encompassing remediation and replacement of equipment (including the
DCS described above), the performance of Facility testing,
communication with and evaluation of third
15
<PAGE>
party readiness and the
development of required contingency plans. Of course, this estimate
is based solely upon information currently available to the
Partnership and is likely to be revised as more information becomes
available. The Partnership has no employees and has been utilizing
employees of USGen provided pursuant to the MSA.
In addition, the Partnership recognizes that it is dependent upon
numerous third parties in the conduct of its business. A
significant interruption in services or resources provided by such
third parties could have material adverse financial consequences on
the Partnership. These third parties include those supplying fuel
and other operating supplies, as well as FPL and its ability to
continue to accept the output of the Facility. Therefore, the
Partnership has sent out 187 inquiries to vendors, suppliers,
customers and other businesses seeking information on the status of
such companies' equipment and year 2000 remediation efforts. The
Partnership believes that FPL's preparedness to perform under the
PPA is the most important status of any of these parties. The
Partnership has sent FPL two inquiries with respect to its year
2000 preparedness but has not yet received a response. The
Partnership has also reviewed FPL's internet and securities filings
disclosure on this matter. To date, the responses and disclosures
have not identified any year 2000 issues of which the Partnership
had been unaware. However, the responses and disclosures have also
not been sufficient to ensure that there will be no impacts on the
Partnership as a result of the year 2000 affecting parties doing
business with the Partnership. To the extent that the Partnership
is not able to gain such adequate assurances, the Partnership
anticipates developing contingency plans to mitigate the
consequences of potential disruptions.
These contingency plans are also required because testing, by its
nature cannot comprehensively address all future combinations of
dates and events. Some uncertainty will remain after testing as to
the ability of code to process future dates, as well as the ability
of remediated systems to work in an integrated fashion with other
systems. In addition, until the year 2000 occurs, no certainty can
be assured with respect to external party preparedness. The
Partnership's contingency plans will take into account the
possibility of multiple system failures, both internal and external,
due to the year 2000. These contingency plans will build upon
existing emergency and business restoration plans. Although no
definitive list of scenarios for this planning has yet been
developed, the events that the Partnership is considering for
planning purposes include increased frequency and duration of
interruptions of the power, computing, financial and communications
infrastructure. Due to the speculative nature of conti ngency
planning, it is uncertain whether the Partnership's contingency
plans to address failure of external parties or internal systems
will be sufficient to reduce the risk of material impacts on the
Partnership's operations due to year 2000 problems. The Partnership
expects to complete risk assessment and contingency planning in the
second quarter of 1999. Based on the Partnership's current schedule
for the completion of year 2000 tasks, the Partnership expects
The Partnership is unable to identify a "most reasonably likely
worst case scenario". Such identification requires not only
identifying a worst case scenario (for example, total failure of the
electric transmission grid in Florida), but also identifying its
likelihood. The Partnership is not, and does not expect to be, in a
position to speculate on such matters.
Notwithstanding the Partnership's efforts, management of the
Partnership is unable to determine whether or not, as a result of
the year 2000, disruptions will occur or whether
16
<PAGE>
such disruptions,
if they do occur, will materially impair the ability of the
Partnership to conduct its business.
Item 7A Qualitative and Quantitative Disclosures About Market Risk
The only material market risk to which the Partnership is exposed is
interest rate risk. The Partnership's exposure to market risk for
changes in interest rates relates primarily to the opportunity costs
of long-term fixed rate obligations in a falling interest rate
environment.
The table below presents principal, interest and related
weighted average interest rates by year of maturity.
<TABLE>
<CAPTION>
Cash Flows
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DEBT (all fixed rate)
1999 2000 2001 2002 2003 After Total Fair
2003 Value
In thousands
Tax Exempt Bonds
Principal $0.0 $0.0 $0.0 $0.0 $0.0 125,010 $125,010 146,750
Interest $9,866 $9,865 $9,865 $9,865 9,865 190,482 $239,807
Average Interest
Rate 7.9% 7.9% 7.9% 7.9% 7.9% 7.9%
First Mortgage Bonds
Principal $9,997 11,533 11,141 11,460 14,566 417,642 476,239 564,778
Interest $45,174 44,276 43,217 42,178 41,045 359,667 575,557
Average Interest
Rate 9.54% 9.55% 9.56% 9.57% 9.58% 9.71%
</TABLE>
17
<PAGE>
Item 8 Financial Statements and Supplementary Data
Index to Financial Statements Page
Report of Independent Public Accountants 19
Consolidated Balance Sheets 20
Consolidated Statements of Operations 22
Consolidated Statements of Changes in
Partners' Capital 23
Consolidated Statements of Cash Flows 24
Notes to Consolidated
Financial Statements 25
18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Indiantown Cogeneration, L.P.:
We have audited the accompanying consolidated balance sheets of
Indiantown Cogeneration, L.P., (a Delaware limited partnership) and
subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, changes in partners' capital
and cash flows for each of the three years in the period ended
December 31, 1998. These financial statements are the
responsibility of the Partnership's management. Our responsibility
is to express an opinion on these financial statements 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 financial statements referred to above
present fairly, in all material respects, the financial position of
Indiantown Cogeneration, L.P. and subsidiaries as of December 31,
1998 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles.
As explained in Note 2 to the financial statements, the Partnership
changed its method of accounting for costs of start-up activities.
Arthur Andersen LLP
Washington, D.C. January 19, 1999 (except with respect to the matter
discussed in Note 9, as to which the date is March 19, 1999)
19
<PAGE>
<TABLE>
<CAPTION>
Indiantown Cogeneration, L.P.
Consolidated Balance Sheets
As of December 31, 1998 and December 31, 1997
<S> <C> <C>
ASSETS 1998 1997
CURRENT ASSETS:
Cash and cash equivalents $2,419,089 $3,234,379
Accounts receivable-trade 12,369,594 14,483,090
Inventories 940,125 337,001
Prepaid expenses 736,700 1,025,372
Deposits 44,000 193,357
Investments held by Trustee,
including restricted funds
of $2,718,549 and $2,764,745
respectively 2,770,774 13,009,289
Total current assets 19,280,282 32,282,488
INVESTMENTS HELD BY TRUSTEE,
Restricted funds 14,001,428 13,501,000
DEPOSITS 75,000 65,000
PROPERTY, PLANT & EQUIPMENT:
Land 8,582,363 8,582,363
Electric and steam
generating facilities 695,929,380 695,386,424
Less: accumulated depreciation (50,323,285) (35,504,414)
Net property, plant & equipment654,188,458 668,464,373
FUEL RESERVE 3,428,403 3,140,989
DEFERRED FINANCING COSTS,
net of accumulated amortization
of $43,020,796 and $42,173,149
respectively 17,166,120 18,014,161
Total assets $708,139,691 $735,468,011
<FN>
The accompanying notes are an integral part of these consolidated
balance sheets.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Indiantown Cogeneration, L.P.
Consolidated Balance Sheets
As of December 31, 1998 and December 31, 1997
<S> <C> <C>
LIABILITIES AND PARTNERS'
CAPITAL 1998 1997
CURRENT LIABILITIES:
Accounts payable and
accrued liabilities $7,405,610 $10,023,620
Accrued interest 2,302,048 2,337,078
Current portion -
First Mortgage Bonds 9,997,000 10,265,000
Current portion lease
payable - railcars 287,048 267,058
Total current liabilities 19,991,706 22,892,756
LONG TERM DEBT:
First Mortgage Bonds 466,242,000 476,239,000
Tax Exempt Facility
Revenue Bonds 125,010,000 125,010,000
Lease payable - railcars 4,583,699 4,870,747
Total long term debt 595,835,699 606,119,747
RESERVE: Major Maintenance 511,756 329,944
Total liabilities 616,339,161 629,342,447
PARTNERS' CAPITAL:
Toyan Enterprises 27,586,061 53,062,783
Palm Power Corporation 9,180,052 10,612,556
TIFD III-Y, Inc. 36,720,212 42,450,225
Indiantown Project
Investment L.P. 18,314,205 --
Total partners' capital 91,800,530 106,125,564
Total liabilities
and partners' capital $708,139,691 $735,468,011
<FN>
The accompanying notes are an integral part of these consolidated
balance sheets.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Indiantown Cogeneration, L.P.
Consolidated Statements of Operations
For the Years Ended December 31, 1998, 1997 and 1996
<S> <C> <C> <C>
1998 1997 1996
Operating Revenues:
Electric capacity and
capacity bonus $123,461,237 $122,285,655 $114,982,519
Electric energy revenue 35,549,353 40,098,446 43,780,095
Steam 172,809 133,334 83,333
Total operating revenues 159,183,399 162,517,435 158,845,947
Cost of Sales:
Fuel and ash 36,220,511 43,505,182 46,841,508
Operating and maintenance 18,807,227 19,600,378 15,035,599
Depreciation 15,091,155 15,088,413 19,631,413
Total cost of sales 70,118,893 78,193,973 81,508,520
Gross Profit 89,064,506 84,323,462 77,337,427
Other Operating Expenses:
General and administrative 3,826,290 2,830,813 2,661,431
Insurance and taxes 6,689,843 6,705,113 7,482,925
Total other operating
expenses 10,516,133 9,535,926 10,144,356
Operating Income 78,548,373 74,787,536 67,193,071
Non-Operating Income (Expense):
Interest expense (58,868,345) (59,390,569) (59,648,059)
Interest income 2,493,655 2,611,810 4,245,039
Net non-operating expense(56,374,690) (56,778,759) (55,403,020)
Income before cumulative
effect of change in
accounting principle 22,173,683 18,008,777 11,790,051
Cumulative effect of a
change in accounting for
costs of start-up
activities (818,716) -- --
Net Income $21,354,967 $18,008,777 $11,790,051
<FN>
The accompanying notes are an integral part of these consolidated
statements.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Indiantown Cogeneration, L. P.
Consolidated Statements of Changes in Partners' Capital
For the Years Ended December 31, 1998, 1997 and 1996
<S> <C> <C> <C> <C> <C>
Toyan Palm Power TIFD III-Y
Enterprises Corporation Inc. IPILP Total
Partners'
capital,
December
31, 1995 $ 67,585,042 $ 16,896,261 $ 56,320,869 -- $140,802,172
Net income 5,659,225 1,414,806 4,716,020 -- 11,790,051
Capital
distributions(17,469,625) (4,367,407) (14,558,022) -- (36,395,054)
Partners'
capital,
December
31, 1996 55,774,642 13,943,660 46,478,867 -- 116,197,169
Net income
(1/1/97
through
9/19/97) 7,390,612 1,847,654 6,158,843 -- 15,397,109
Capital
distributions
(1/1/97
through
9/19/97) (7,813,463) (1,953,365) (6,511,218) -- (16,278,046)
Partners'
capital,
September 19,
1997 55,351,791 13,837,949 46,126,492 -- 115,316,232
Transfer Palm
Power 1/6
Interest to
Toyan 2,306,325 (2,306,325) -- -- 0
Net income
(9/20/97
through
12/31/97) 1,305,835 261,166 1,044,667 -- 2,611,668
Capital
distributions
(9/20/97
through
12/31/97) (5,901,168) (1,180,234) (4,720,934) -- (11,802,336)
Partners'
capital,
December
31, 1997 53,062,783 10,612,556 42,450,225 -- 106,125,564
Net Income
(1/1/98
through
8/21/98) 7,228,833 1,445,767 5,783,066 -- 14,457,666
Capital
Distributions
(1/1/98
through
8/21/98) (13,240,000) (2,648,000)(10,592,000) -- (26,480,000)
Partners'
capital 47,051,616 9,410,322 37,641,292 -- 94,103,230
August 21,
1998
Transfer
Toyan 19.95%
interest to
IPILP (18,773,594) -- -- 18,773,594 --
Net Income
(8/22/98
through
12/31/98) 2,072,639 689,730 2,758,920 1,376,011 6,897,300
Capital
Distributions
(8/22/98
through
12/31/98) (2,764,600) (920,000) (3,680,000)(1,835,400)(9,200,000)
Partners'
Capital
December
31, 1998 $27,586,061 $9,180,052 $36,720,212 $18,314,205 $91,800,530
<FN>
The accompanying notes are an integral part of these consolidated
statements.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Indiantown Cogeneration, L.P.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1998, 1997 and 1996
<S> <C> <C> <C>
1998 1997 1996
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income $21,354,967 $18,008,777 $11,790,051
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Cumulative effect of a
change in accounting
principle 818,716 -- --
Depreciation and
amortization 15,666,912 15,950,248 20,505,928
(Increase) Decrease in
accounts receivable-trade 2,113,496 376,789 (8,053,580)
(Increase) Decrease in
inventories and fuel
reserve (890,538) 1,332,079 (20,337)
Decrease (Increase) in
deposits and prepaid
expenses 428,029 (470,004) 1,283,960
Increase (Decrease) in
accounts payable, accrued
liabilities, accrued
interest and major
maintenance reserve (2,471,228) 1,819,213 (12,150,315)
Net cash provided by
operating activities 37,020,354 37,017,102 13,355,707
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of property,
plant & equipment (1,361,673) (1,338,055) (10,257,989)
Decrease in investments
held by trustee 9,738,087 5,240,851 40,001,521
Net cash provided by
investing activities 8,376,414 3,902,796 29,743,532
CASH FLOWS FROM
FINANCING ACTIVITIES:
Decrease in lease
payable-railcars (267,058) (248,460) (231,158)
Payment of bonds (10,265,000) (9,701,000) (8,795,000)
Capital distributions (35,680,000) (28,080,382) (36,395,054)
Net cash used in
financing activities (46,212,058) (38,029,842) (45,421,212)
INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS (815,290) 2,890,056 (2,321,973)
Cash and cash equivalents,
beginning of year 3,234,379 344,323 2,666,296
Cash and cash equivalents,
end of year $2,419,089 $3,234,379 $344,323
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
Cash paid for interest $55,879,716 $56,665,646 $57,349,533
<FN>
The accompanying notes are an integral part of these consolidated
statements.
</TABLE>
24
<PAGE>
Indiantown Cogeneration, L.P.
Notes to Consolidated Financial Statements
As of December 31, 1998 and 1997
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 Indiantown Project Investment Partnership, L.P.
a Delaware limited partnership ("IPILP"), and Palm Power Corporation
("Palm"), a Delaware corporation and a special purpose indirect
subsidiary of Cogentrix Energy, Inc. ("Cogentrix"). The limited
partners are TIFD III-Y, Inc. ("TIFD"), a special purpose indirect
subsidiary of General Electric Capital Corporation ("GECC") and
Toyan Enterprises ("Toyan"), a California corporation and a
wholly-owned special purpose indirect subsidiary of U.S. Generating
Company LLC ("USGen LLC"). The general and limited partners are
hereinafter collectively referred to as the "Partners." Recent
changes to the ownership structure of the Partnership are detailed
below. 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 also to supply steam to Caulkins Indiantown Citrus Co.
("Caulkins") for its plant located near the Facility.
The Partnership is managed by U.S. Generating Company ("USGen")
pursuant to a Management Services Agreement (the "MSA"). The
Facility is operated by U.S. Operating Services Company ("USOSC")
pursuant to an Operation and Maintenance Agreement (the "O&M
Agreement"). USGen and USOSC are general partnerships originally
formed between affiliates of PG&E Enterprises and Bechtel
Enterprises, Inc. On September 19, 1997, USGen and USOSC each
separately redeemed Bechtel Enterprises, Inc.'s interests in USGen
and USOSC so that U.S. Generating Company, LLC now indirectly owns
all of the interests in USGen and USOSC. This will not affect
USGen's obligations under the MSA or USOSC's obligations under the
O&M Agreement. Also, on September 19, 1997, Toyan purchased 16.67%
of Palm's interest in the Partnership, which represents a 2%
ownership interest in the Partnership.
On August 21, 1998, Toyan consummated the transactions
contemplated in the Purchase Agreement dated as of May 29, 1998,
with DCC Project Finance Twelve, Inc. ("PFT"), whereby PFT formed
IPILP with Toyan. IPILP became a new general partner in the
Partnership by acquiring a 19.95% interest in the Partnership from
Toyan. Prior to the PFT transaction, Toyan converted its remaining
partnership interest from a general
25
<PAGE>
partnership interest into a
limited partnership interest such that Toyan now directly holds only
a limited partnership interest in the Partnership. Separately,
Bechtel Generating Company, Inc. ("Bechtel Generating"), a
subsidiary of Bechtel Enterprises, entered into a Purchase Agreement
dated as March 6, 1998, with Cogentrix whereby a wholly owned
subsidiary of Cogentrix purchased from Bechtel Generating, on
October 20, 1998, among other things, 100% of the stock of Palm.
Palm holds a 10% interest in the Partnership. In addition, on
October 27, 1998, PFT and Toyan entered into an Asset Purcha se
Agreement pursuant to which, Toyan transferred, on November 23,
1998, a portion of its interest in IPILP to PFT such that PFT will
own 75.188% of IPILP representing a 15% interest in the Partnership.
The net profits and losses of the Partnership are allocated to
Toyan, Palm, TIFD, and IPILP (collectively, the "Partners") based on
the following ownership percentages:
From September 20, 1997 From August 21, 1998
Toyan 50% 30.05%
Palm 10% 10%
IPILP ---- 19.95%**
TIFD 40% 40%
*Now beneficially owned by Cogentrix. **PFT's beneficial ownership
in the Partnership through IPILP was equal to 10% on August 21,
1998, and as of November 23, 1998, is equal to 15%.
The changes in ownership as a result of the consummated PFT
transactions were the subject of notices of self-rectification of
Qualifying Facility status filed by the Partnership with the Federal
Energy Regulatory Commission on August 20, 1998 and November 16,
1998. The Cogentrix transaction was the subject of a similar
filing.
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. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The Partnership's financial statements are prepared on
the accrual basis of accounting in accordance with generally
accepted accounting principles. The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect reported amounts of assets and
26
<PAGE>
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. The accompanying consolidated financial
statements include the accounts of the Partnership and ICL Funding.
All significant intercompany balances have been eliminated in
consolidation.
Cash and Cash Equivalents
For the purposes of reporting cash flows, cash equivalents
include short-term investments with original maturities of three
months or less.
Inventories
Coal and lime inventories are stated at the lower of cost or
market using the average cost method.
Prepaid Expenses
Prepaid expenses of $736,700 as of December 31, 1998, include
$500,000 for operation and maintenance funding, $167,634 for
insurance costs related to property damage and other general
liability policies and $69,066 for prepayments of the annual
administrative fees for the letters of credit and for the trustee.
Prepaid expenses of $1,025,372 as of December 31, 1997, include
$750,000 for operations and maintenance funding, $212,986 for
insurance costs related to property damage and other liability
policies and $62,386 for prepayments of the annual administrative
fees for the letters of credit and for the trustee.
Deposits
Deposits are stated at cost and include amounts required under
certain of the Partnership's agreements as described in Note 3.
Investments Held by Trustee
The investments held by the trustee represent bond and equity
proceeds held by a bond trustee/disbursement agent and are carried
at cost, which approximates market. All funds are invested in
either Nations Treasury Fund-Class A or other permitted investments
for longer periods. The Partnership also maintains restricted
investments covering a portion of the Partnership's debt as required
by the financing documents. The proceeds include $12,501,000 of
restricted tax-exempt debt service reserve required by the financing
documents and are classified as a noncurrent asset on the
accompanying balance sheets. The Partnership maintains restricted
investments covering a portion of debt principal and interest
payable, as required by the financing documents. These investments
are classified as current assets in the accompanying consolidated
balance sheets. A qualifying facility ("QF") reserve of
approximately $1.5 million is also held and included as long term
assets in the accompanying balance sheet at December 31, 1998 (see
Note 4).
27
<PAGE>
Property, Plant and Equipment
Property, plant and equipment, which consist primarily of the
Facility, are recorded at actual cost. The Facility is depreciated
on a straight-line basis over 35 years. As of January 1, 1997, the
Partnership prospectively revised its calculation of depreciation to
include a residual value on the Facility approximating 25 percent of
the gross Facility costs.
Other property, plant and equipment are depreciated on a
straight-line basis over the estimated economic or service lives of
the respective assets (ranging from five to seven years). Routine
maintenance and repairs are charged to expense as incurred.
Fuel Reserve
The fuel reserve, carried at cost, represents at December 31,
1998, an approximate thirty-day supply of coal held for emergency
purposes. In 1999, this reserve is being reduced by using the fuel
in current production. The reserve now represents approximately a
twenty-day supply.
Major Maintenance Reserve
The major maintenance reserve represents an accrual for
anticipated expenditures for scheduled significant maintenance of
the Facility. The expense is recognized ratably over the
maintenance cycle of the related equipment. The major maintenance
reserve, was $511,756 and $329,944 at December 31, 1998 and 1997,
respectively and is included in the accompanying consolidated
balance sheets.
Deferred Financing Costs
Financing costs, consisting primarily of the costs incurred to
obtain project financing, are deferred and amortized using the
effective interest method over the term of the related permanent
financing.
Income Taxes
Under current law, no Federal or state income taxes are paid
directly by the Partnership. All items of income and expense of the
Partnership are allocable to and reportable by the Partners in their
respective income tax returns. Accordingly, no provision is made in
the accompanying consolidated financial statements for Federal or
state income taxes.
New Accounting Pronouncement
In April 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-5, "Reporting on the
Costs of Start-up Activities" ("SOP 98-5"). SOP 98-5 requires costs
of start-up activities and organizational costs to be expensed as
incurred. In the period of adoption, start-up costs previously
capitalized are to be expensed and reflected as a cumulative effect
of change in accounting principle. The Partnership adopted SOP 98-5
for 1998, with an income statement impact of $818,716.
28
<PAGE>
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"). SFAS 133 establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging
activities. It requires that entities recognize all derivative
instruments as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. If
certain conditions are met, a derivative may be specifically
designated as (a) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized firm
commitment, or (b) a hedge of the exposure to variable cash flows of
a forecasted transaction. At December 31, 1998, the Partnership had
not entered into any derivative instruments. The Partnership has
also entered into certain other contracts which may meet the
definition of derivative instruments under SFAS
133. The Partnership is assessing the potential impact of adoption.
SFAS 133 is effective for the Partnership beginning January 1, 2000.
Reclassifications
Certain prior year balances have been reclassified to conform to the
current year presentation.
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. In January 1998,
the Partnership received a refund of funds in excess of the required
deposit as security for the first year maintenance as set forth in
the contract between the Partnership and Martin County. The
remaining deposit in the amount of $39,804 was included in current
assets in the consolidated balance sheet as of December 31, 1997.
These funds were returned in September 1998 when the Partnership
submitted a surety bond for the refund amount.
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, 1998 and 1997, estimated
present values of this deposit of $75,000 and $65,000, respectively,
are included in deposits in the accompanying consolidated balance
sheets.
4. BONDS AND NOTES PAYABLE:
First Mortgage Bonds
The Partnership and ICL Funding jointly issued $505,000,000 of
First Mortgage Bonds (the "First Mortgage Bonds") in a public
issuance registered with the Securities and Exchange Commission.
Proceeds from the issuance were used to repay outstanding
29
<PAGE>
balances
of $273,513,000 on a prior construction loan and to complete the
project. The First Mortgage Bonds are secured by a lien on and
security interest in substantially all of the assets of the
Partnership. The First Mortgage Bonds were issued in 10 separate
series with interest rates ranging from 7.38 to 9.77 percent and
with maturities ranging from 1996 to 2020. Interest is payable
semi-annually on June 15 and December 15 of each year. Interest
expense related to the First Mortgage Bonds was $46,014,161,
$46,800,091, and $47,456,604 in 1998, 1997, and 1996, respectively.
In November 1998, the Partnership and ICL Funding entered into a
second Supplemental Indenture, which included a detail of the
payment schedule of the First Mortgage Bonds.
Tax Exempt Facility Revenue Bonds
The proceeds from the issuance of $113,000,000 of Series 1992A
and 1992B Industrial Development Revenue Bonds (the "1992 Bonds")
through the Martin County Industrial Development Authority (the
"MCIDA") were invested in an investment portfolio with Fidelity
Investments Institutional Services Company. On November 22, 1994,
the Partnership refunded the 1992 Bonds with proceeds from the
issuance of $113,000,000 Series 1994A and of $12,010,000 Series
1994B Tax Exempt Facility Refunding Revenue Bonds which were issued
on December 20, 1994 (the Series 1994A Bonds and the Series 1994B
Bonds, collectively, the "1994 Tax Exempt Bonds").
The 1994 Tax Exempt Bonds were issued by the MCIDA pursuant to
an Amended and Restated Indenture of Trust between the MCIDA and
NationsBank of Florida, N.A. (succeeded by The Bank of New York
Trust Company of Florida, N.A.) as trustee (the "Trustee").
Proceeds from the 1994 Tax Exempt Bonds were loaned to the
Partnership pursuant to the MCIDA Amended and Restated Authority
Loan Agreement dated as of November 1, 1994 (the "Authority Loan").
The Authority Loan is secured by a lien on and a security interest
in substantially all of the assets of the Partnership. The 1994 Tax
Exempt Bonds, which mature December 15, 2025, carry fixed interest
rates of 7.875 percent and 8.05 percent for Series 1994A and 1994B,
respectively. Total interest expense related to the 1994 Tax Exempt
Bonds was $9,865,555 for each of the years ended December 31, 1998,
1997 and 1996. The 1994 Tax Exempt Bonds and the First Mortgage
Bonds are equal in seniority.
Future minimum payments related to outstanding First Mortgage Bonds
and 1994 Tax Exempt Bonds at December 31, 1998 are as follows (in
thousands):
1999 $ 9,997
2000 11,533
2001 11,141
2002 11,460
2003 14,566
Thereafter 542,552
Total $601,249
30
<PAGE>
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 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 the
disbursement agreement among the Partnership, the Trustee and the
other lenders to the Partnership and is included in current
investments held by trustee in the accompanying consolidated balance
sheets as of December 31, 1997. The funds were distributed on June
15, 1998, in accordance with the Disbursement Agreement.
Revolving Credit Agreement
The Revolving Credit Agreement provides for the availability of
funds for the working capital requirements of the Facility. It has
a term of seven years from November 1, 1994, subject to extension
at the discretion of the bank party thereto. The interest rate is
based upon various short-term indices chosen at the Partnership's
option and is determined separately for each draw. This credit
facility includes commitment fees, to be paid quarterly, of .375
percent on the unborrowed portion. The face amount of the original
working capital letter of credit was increased in November 1994
from $10 million to $15 million. Under the original and new
working capital credit facilities, the Partnership paid $54,274,
$57,031, and $57,187 in commitment fees in 1998, 1997 and 1996,
respectively. At December 31, 1997, no draws for working capital
had been made to the Partnership under the Revolving Credit
Agreement. One working capital loan was made in May and two in
June of 1998. They were repaid in July of 1998. Another working
capital loan was made in November 1998 and was repaid in December
1998.
FPL Termination Fee Letter of Credit On or before the Commercial
Operation Date, the Partnership was required to provide FPL with
a letter of credit equal to the total termination fee as defined
in the Power Purchase Agreement in each year not to exceed
$50,000,000. Pursuant to the terms of the Letter of Credit and
Reimbursement Agreement, the Partnership obtained a commitment
for the issuance of this letter of credit. At the Commercial
Operation Date, this letter of credit replaced the completion
letter of credit outlined below. The initial amount of
$13,000,000 was issued for the first year of operations and
increased to $32,000,000 in January of 1998. During 1998, 1997
and 1996 no draws were made on this letter of credit.
Commitment fees of $643,076, $572,819 and $509,395, were paid on
this letter of credit in 1998, 1997 and 1996, respectively.
FPL QF Letter of Credit
Within 60 days after the Commercial Operation Date, the
Partnership was required to provide a letter of credit for use in
the event of a loss of QF status under the Public Utility Regulatory
Policies Act of 1978 ("PURPA"). The initial amount was $500,000
increasing by $500,000 per agreement year to a maximum of
$5,000,000. Pursuant to the terms of the
31
<PAGE>
Letter of Credit and
Reimbursement Agreement, the Partnership obtained a commitment for
the issuance of this letter of credit. The amount will be used by
the Partnership as necessary to maintain or reinstate the Facility's
qualifying facility status. The Partnership may, in lieu of a
letter of credit, make regular cash deposits to a dedicated account
in amounts totaling $500,000 per agreement year to a maximum of
$5,000,000. In February 1996, the Partnership established a QF
account with the trustee. The balance in this account at December
31, 1998 and 1997, was $1,500,000 and $1,000,000, respectively, and
is included in noncurrent restricted investments h eld by trustee in
the accompanying consolidated balance sheets.
Steam Host Letter of Credit
At financial closing in October 1992, the Partnership provided
Caulkins a letter of credit in the amount of $10,000,000 pursuant to
the Energy Services Agreement (see Note 6). This letter of credit
was terminated in 1994 and a new one was issued with essentially the
same terms. In the event of a default under the Energy Services
Agreement, the Partnership is required to pay liquidated damages in
the amount of $10,000,000. Failure by the Partnership to pay the
damages within 30 days allows the steam host to draw on the letter
of credit for the amount of damages suffered by Caulkins. As of
December 31, 1998, 1997 and 1996, no draws had been made on this
letter of credit. Commitment fees of $60,833 were paid relating to
this letter of credit in each of 1998, 1997 and 1996. Debt Service
Reserve Letter of Credit
On November 22, 1994, the Partnership also entered into a debt
service reserve letter of credit and reimbursement agreement 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 are available 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 prior to
any drawings on the debt service reserve letter of credit. As of
December 31, 1998 and 1997, no draws had been made on this letter of
credit. Commitment fees of $877,901, $875,496 and $835,435 were
paid on this letter of credit in 1998, 1997 and 1996, respectively.
In 1999, the Debt Service Re serve Letter of Credit was reduced.
See Note 9.
5. PURCHASE AGREEMENTS: Coal Purchase and Transportation Agreement
The Partnership entered into a 30-year purchase contract with
Lodestar Energy, Inc. (formerly known as Costain Coal, Inc.)
("Lodestar"), commencing from the first day of the calendar month
following the Commercial Operation Date, for the purchase of the
Facility's annual coal requirements at a price defined in the
agreement, as well as for the disposal of ash residue. The
Partnership has no obligation to purchase a minimum quantity of coal
under this agreement.
32
<PAGE>
In 1997, the Partnership entered into an arrangement with Lodestar
and the coal transporter to compensate the Partnership for reduced
FPL revenues when the Facility runs at minimum load during decommit
periods. In exchange for the Partnership's continued purchase and
transportation of coal during these periods, Lodestar and the coal
transporter each pay the Partnership a portion of the foregone FPL
revenues.
On June 8, 1998, the Partnership entered into a 3-year agreement
with Lodestar which established an arrangement for the disposal of
ash at alternative locations. On June 8, 1998, the Partnership also
entered an agreement with VFL Technology Corporation for the
disposal of ash.
Lime Purchase Agreement
On May 1, 1992, the Partnership entered into a lime purchase
agreement with Chemical Lime Company of Alabama, Inc. for supply of
the Facility's lime requirements for the Facility's dry scrubber
sulfur dioxide removal system. The initial term of the agreement is
15 years from the Commercial Operation Date and may be extended for
successive 5-year periods. Either party may cancel the agreement
after January 1, 2000, upon proper notice. The Partnership has no
obligation to purchase a minimum quantity of lime under the
agreement.
6. SALES AND SERVICES AGREEMENTS: Power Purchase Agreement On May
21, 1990, the Partnership entered into a Power Purchase Agreement
with FPL for sales of the Facility's electric output. As amended,
the agreement is effective for a 30-year period, commencing with the
Commercial Operation Date. The pricing structure provides for both
capacity and energy payments.
Capacity payments remain relatively stable because the amounts
do not vary with dispatch. Price increases are contractually
provided. Capacity payments include a bonus or penalty payment if
actual capacity is in excess of or below specified levels of
available capacity. Energy payments are derived from a contractual
formula defined in the agreement based on the actual cost of
domestic coal at another FPL plant, St. Johns River Power Park.
Energy Services Agreement On September 30, 1992, the Partnership
entered into an energy services agreement with Caulkins.
Commencing on the Commercial Operation Date and continuing
throughout the 15-year term of the agreement, Caulkins is
required to purchase the lesser of 525 million pounds of steam
per year or the minimum quantity of steam per year necessary for
the Facility to maintain its status as a Qualifying Facility
under PURPA. The Facility declared Commercial Operation with
Caulkins on March 1, 1996.
33
<PAGE>
7. RELATED PARTY TRANSACTIONS: Construction Contract
The Partnership entered into a construction agreement with
Bechtel Power Corporation ("Bechtel Power"), an affiliate of Bechtel
Enterprises, for the design, engineering, procurement, construction,
start-up and testing of the Facility (the "Construction Contract").
As of December 31, 1998, the total contract value was $440,442,879
including change orders to date. Payments of $440,442,879 have been
made to Bechtel Power under the Construction Contract since
inception. $900,000 had been retained in 1996 for punch list items.
In 1997, a final settlement of $450,000 was paid for these items.
Bechtel Power guaranteed that Substantial Completion would occur
on or prior to January 21, 1996, the Guaranteed Completion Date.
Substantial Completion is achieved when the Facility demonstrates
that it has met emissions guarantees and has achieved 88 percent of
guaranteed net electrical output during required test periods. A
schedule bonus for Substantial Completion prior to the Guaranteed
Completion Date is provided in the Construction Contract.
Substantial Completion was declared as of December 22, 1995 and a
$6.1 million schedule bonus was paid on April 4, 1996. Performance
bonuses of $4.5 million were paid on April 4, 1996, as a portion of
the estimate of the total performance bonuses and a final payment of
$3.9 million was made on September 17, 1996. Final completion
occurred on December 13, 1996.
Management Services Agreement
The Partnership has an MSA with USGen, a California general
partnership and a wholly owned indirect subsidiary of USGen LLC, for
the day-to-day management and administration of the Partnership's
business relating to the Facility. The agreement has a term of 34
years. Compensation to USGen under the agreement includes an annual
base fee of $650,000 (adjusted annually), wages and benefits for
employees performing work on behalf of the Partnership and other
costs directly related to the Partnership. Payments of $2,800,644,
$1,981,174, and $2,769,570 in 1998, 1997 and 1996, were made to
USGen respectively. At December 31, 1998 and 1997, the Partnership
owed USGen $420,605 and $254,433, respectively, which are included
in accounts payable and accrued liabilities in the accompanying
consolidated balance sheets.
Operations and Maintenance Agreement
The Partnership has an Operation and Maintenance Agreement with
USOSC, a California general partnership and a wholly owned indirect
subsidiary of USGen LLC, for the operations and maintenance of the
Facility for a period of 30 years. Thereafter, the agreement will
be automatically renewed for periods of 5 years until terminated by
either party with 12 months notice. If targeted plant performance
is not reached, USOSC will pay liquidated damages to the
Partnership. Compensation to USOSC under the agreement includes an
annual base fee of $1.5 million ($900,000 of which is subordinate to
debt service and certain other costs), certain earned fees and
bonuses based on the Facility's performance and reimbursement for
certain costs including payroll, supplies, spare parts, equipment,
35
<PAGE>
certain taxes, licensing fees, insurance and indirect costs
expressed as a percentage of payroll and personnel costs. The fees
are adjusted quarterly by a measure of inflation as defined in the
agreement. Payments of $9,605,917, $ 9,708,409, and $7,210,201 were
made to USOSC in 1998, 1997 and 1996, respectively. At December 31,
1998 and 1997, the Partnership owed USOSC $646,888 and $212,458,
respectively, which is included in accounts payable and accrued
liabilities in the accompanying consolidated balance sheets.
Consulting Services In 1996 the Partnership paid engineering
consulting fees of $10,159, to Bechtel Generating Company, a
wholly owned subsidiary of Bechtel Enterprises. No engineering
consulting fees were paid in 1998 or 1997.
Railcar Lease The Partnership entered into a 15 year Car Leasing
Agreement with GE Capital Railcar Services Corporation, an
affiliate of GECC, to furnish and lease 72 pressure differential
hopper railcars to the Partnership for the transportation of fly
ash and lime. The cars were delivered starting in April 1995,
at which time the lease was recorded as a capital lease. The
leased asset of $5,753,375 and accumulated depreciation of
$1,400,905 is included in property, plant and equipment at
December 31, 1998. Payments of $629,856, including principal
and interest, were made in 1998, 1997 and 1996 and the lease
obligation of approximately $4,870,747 and $5,137,805 at
December 31, 1998 and 1997, is reported as a lease payable in
the accompanying consolidated balance sheets.
Future minimum payments related to the Car Leasing Agreement at
December 31, 1998 are approximately as follows:
1999 $287,048
2000 308,533
2001 331,628
2002 356,450
2003 383,131
Thereafter 3,203,957
Total $4,870,747
Distribution to Partners
On June 15 and December 15, 1998, as provided in the Partnership
Agreement, the Partnership distributed approximately $26.5 million
and $9.2 million, respectively, to the Partners. An additional $0.8
million of distributable cash was retained for capital projects and
is included in cash and cash equivalents as of December 31, 1998, on
the accompanying consolidated balance sheet.
35
<PAGE>
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated
fair values of certain of the Partnership's financial instruments at
December 31, 1998 and 1997.
Financial Liabilities December 31, 1998
Carrying Amount Fair Value
1994 Tax Exempt Bonds $125,010,000 $146,749,907
First Mortgage Bonds $476,239,000 $564,777,850
Financial Liabilities December 31, 1997
Carrying Amount Fair Value
1994 Tax Exempt Bonds $125,010,000 $146,016,272
First Mortgage Bonds $486,504,000 $590,214,789
For the 1994 Tax Exempt Bonds and First Mortgage Bonds, the fair
values of the Partnership's bonds payable are estimated based on the
stated rates of the 1994 Tax Exempt Bonds and First Mortgage Bonds
and current market interest rates.
The carrying amounts of the Partnership's cash and cash
equivalents, accounts receivable, deposits, investments held by
trustee, accounts payable, accrued liabilities and accrued interest
approximate fair value because of the short maturities of these
instruments.
9. SUBSEQUENT EVENTS On January 11, 1999, pursuant to the
Disbursement Agreement, the Debt Service Reserve Letter of
Credit was reduced to approximately $30 million.
On March 19, 1999, Indiantown Cogeneration, L.P. (the
"Partnership") filed a complaint against Florida Power & Light
Company ("FPL") in the United States District Court for the Middle
District of Florida. The lawsuit stems from a course of action
pursued by FPL since March 10, 1999, in which FPL has purported to
exercise its dispatch and control rights under the power sales
agreement in a manner which the Partnership believes violates the
terms of the power sales agreement. In its complaint, the
Partnership charges that such conduct is deliberately calculated to
cause the Partnership to be unable to meet the requirements to
maintain the Facility's status as a Qualifying Facility under the
Public Utility Regulatory Policies Act of 1978. Although the
Partnership intends to vigorously pursue this matter, the outcome of
this action is uncertain at this time.
Item 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
36
<PAGE>
PART III
Item 10 DIRECTORS AND EXECUTIVE OFFICERS
Indiantown Cogeneration, L.P. Board of Control
The following table sets forth the names, ages and positions of
the members of the Board of Control of the Partnership. Members of
the Board of Control are selected from time to time by, and serve at
the pleasure of, the Partners of the Partnership.
Name Age Position
Thomas J. Bonner....... 44 Palm Representative
Thomas F. Schwartz ............ 37 Palm Representative
P. Chrisman Iribe.................. 47 IPILP Representative
Stephen A. Herman.............. 55 IPILP Representative
William D. Strittmatter......... 42 TIFD Representative
Michael J. Tzougrakis........... 57 TIFD Representative
Thomas J. Bonner is Vice President - Asset Management for
Cogentrix Energy, Inc. and has been with Cogentrix since 1987.
Prior to joining Cogentrix Energy, Inc., Mr. Bonner spent five years
as a utilities manager in an integrated fiber and chemical
production facility. Mr. Bonner holds a B.S. from the U.S. Naval
Academy, and an M.B.A. from Old Dominion University.
Thomas F. Schwartz is Senior Vice President - Finance and
Treasurer of Cogentrix Energy, Inc. He is responsible for the areas
of corporate finance and tax planning. Mr. Schwartz joined
Cogentrix Energy, Inc. in 1991, and has held various positions in
accounting and finance. Prior to joining Cogentrix Energy, Inc.,
Mr. Schwartz was Audit Manager with Arthur Andersen, LLP. Mr.
Schwartz holds a B.A. degree in accounting from the University of
North Carolina - Charlotte.
P. Chrisman Iribe is President of U.S. Generating Company and
has been with U.S. Generating Company since it was formed in 1989.
Prior to joining U.S. Generating Company, Mr. Iribe was senior vice
president for planning, state relations and public affairs with ANR
Pipeline Company, a natural gas pipeline company and a subsidiary of
the Coastal Corporation. Mr. Iribe holds a B.A. degree in Economics
from George Washington University.
Stephen A. Herman, as Senior Vice President and General Counsel
of U.S. Generating Company, oversees all legal services for U.S.
Generating Company's projects and activities. Prior to joining U.S.
Generating Company, Mr. Herman was a partner for 15 years with the
Washington, D.C. law firm of Kirkland & Ellis. Mr. Herman has a
B.S. from the Wharton School of Finance and Commerce at the
University of Pennsylvania and an LL.B. from the University of
Virginia. He has been an instructor at the University of Chicago
Law School, has served as President of the Federal Energy Bar
Association, and was Vice Chair of the Energy Industry
Restructuring, Finance, and Mergers & Acquisitions Committee,
American Bar Association, Section on Natural Resources, Energy and
Environmental Law.
37
William D. Strittmatter is a Vice President of GE Capital and
Managing Director and Chief Credit Officer of GE Capital
Services Structured Finance Group, Inc. ("SFG"). He is
responsible for the worldwide credit and risk management
function of SFG's project and structured financing activities in
the energy, infrastructure and industrial sectors. Mr.
Strittmatter joined GE Capital in 1982, and has held various
positions in finance, operations and marketing. He received a
B.S. degree in business from the Rochester Institute of
Technology and earned an M.B.A. from the Harvard Business
School.
Michael J. Tzougrakis is a Managing Director of Structured
Finance Group, Inc. ("SFG"), a unit of GE Capital, and is currently
responsible for technical portfolio, technical underwriting and
construction loan management for SFG. During his 26 year career
with GE Capital, Mr. Tzougrakis has held management positions with
responsibility for operations, preparation of proposals, project
development and Facility installation and start-up in the United
States and abroad. Mr. Tzougrakis is a graduate of General
Electric's Installation and Service Engineering Program and holds a
B.S.E.E. degree from Pratt Institute.
ICL Funding Corporation Board of Directors
The following table sets forth the names, ages and positions of
the directors and executive officers of ICL Funding . Directors are
elected annually and each elected director holds office until a
successor is elected. Officers are elected from time to time by
vote of the Board of Directors.
Name Age Position
P. Chrisman Iribe 46 Director, President
Stephen A. Herman 55 Director
Michael J. Tzougrakis56 Director, Vice President
John R. Cooper 50 Vice President, Chief Financial
Officer and Principal Accounting Officer
Item 11 REMUNERATION OF DIRECTORS AND OFFICERS
No cash compensation or non-cash compensation was paid in any
prior year or is currently proposed to be paid in the current
calendar year by ICL Funding or the Partnership to any of the
officers and directors listed above. Accordingly, the Summary
Compensation Table and other tables required under Item 402 of the
Securities and Exchange Commission's Regulation S-K have been
omitted, as presentation of such tables would not be meaningful.
Management services for the Partnership are being performed by
USGen on a cost-plus basis in addition to the payment of a base fee.
Operation and maintenance services for the Partnership will be
performed by USOSC on a cost-plus basis. In addition to a base fee,
USOSC may earn certain additional fees and bonuses based on
specified performance criteria.
39
<PAGE>
Item 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Partnership interests in the Partnership are held as follows:
Toyan 30.05% L.P.
IPILP 19.95% G.P.
Palm 10% G.P.
TIFD 40% L.P.
All of the outstanding shares of common stock of ICL Funding are
owned by the Partnership.
Item 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership has several material contracts with affiliated
entities. These contracts, which include the Construction Contract,
the Management Services Agreement, the Operations and Maintenance
Agreement and the Railcar Lease, are described elsewhere in this
report, most notably in Note 7 to the Partnership's consolidated
financial statements.
PART IV
Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
a) Documents filed as of this Report Page
(1) Consolidated financial statements:
Report of Independent Public Accountants....... 19
Consolidated Balance Sheets as of December 31, 1998 and
December 31, 1997 .................... 20
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996................ 22
Consolidated Statements of Changes in Partners' Capital
for the years ended December 31, 1998, 1997 and
1996............................ 23
Consolidated Statements of Cash Flows for the years
ended December 31, 1998, 1997 and 1996 24
Notes to Consolidated Financial
Statements.......................................25
(2) Consolidated Financial Statement
Schedules..................................... None
39
<PAGE>
b) Reports on Form 8-K:
The Partnership filed Reports on Form 8-K on July 15, 1998, and
September 10, 1998, regarding changes in the ownership of the
Partnership.
The Partnership filed a Report on Form 8-K on March 22, 1999,
regarding the filing of a complaint against FPL.
The Partnership filed a Report on Form 8-K on March 29, 1999,
regarding the reconnection of the FAcility to the FPL system.
c) 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.**
40
<PAGE>
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.**
41
<PAGE>
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.****
16 Letter from Arthur Andersen LLP to Securities and Exchange
Commission
21 Subsidiaries of Registrant*
27 Financial Data Schedule. (For electronic filing purposes only.)
99 Copy of Registrants' press release dated January 3, 1996.****
99.1 Copy of Registrant's complaint against FPL filed March 19,
1999.*****
* 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. ***** Incorporated by reference from the current report on
Form 8-K file no. 33-82034 filed by the Registrants with the SEC in
March 1999.
42
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the co-registrant has duly caused this Form 10-K to be signed
on its behalf by the undersigned, thereunto duly authorized, in the
city of Bethesda, state of Maryland, on March 30, 1999.
INDIANTOWN COGENERATION, L.P.
Date: March 30, 1999 /s/ John R. Cooper
Name: John R. Cooper
Title: Chief Financial Officer,
Principal Accounting Officer
and Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Form 10-K has been signed by the following persons in the capacities
and on the dates indicated.
Signature Title Date
/s/ P. Chrisman Iribe Member of Board of
Control, March 30, 1999
P. Chrisman Iribe President and Secretary
/s/ John R. Cooper Chief Financial
Officer, March 30, 1999
John R. Cooper Principal Accounting
Officer and Senior
Vice President
/s/ Thomas J. Bonner Member of Board of
Control March 30, 1999
Thomas J. Bonner
/s/ Thomas F. Schwartz Member of Board of
Control March 30, 1999
Thomas F. Schwartz
/s/ Stephen A. Herman Member of Board of
Control March 30, 1999
Stephen A. Herman and Senior Vice President
/s/ William D. Strittmatter Member of Board of
Control March 30, 1999
William D. Strittmatter
/s/ Michael Tzougrakis Member of Board of
Control March 30, 1999
Michael J. Tzougrakis
43
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the co-registrant has duly caused this Form 10-K to be signed
on its behalf by the undersigned, thereunto duly authorized, in the
city of Bethesda, state of Maryland, on March 30, 1999.
INDIANTOWN COGENERATION
FUNDING CORPORATION
Date: March 30, 1999 /s/ John R. Cooper
Name: John R. Cooper
Title: Chief Financial Officer,
Principal Accounting Officer
and Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Form 10-K has been signed by the following persons in the capacities
and on the dates indicated.
Signature Title Date
/s/ P. Chrisman Iribe Director and President March 30, 1999
P. Chrisman Iribe
/s/ John R. Cooper Chief Financial Officer, March 30, 1999
John R. Cooper Principal Accounting
Officer and Vice President
/s/ Michael J. Tzougrakis Director and Vice President March 30, 1999
Michael J. Tzougrakis
44
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE>5
<MULTIPLIER>1
<CAPTION>
Exhibit 27: Financial Data Schedule
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 5,189,863
<SECURITIES> 0
<RECEIVABLES> 12,369,594
<ALLOWANCES> 0
<INVENTORY> 940,125
<CURRENT-ASSETS> 19,280,282
<PP&E> 654,188,458
<DEPRECIATION> 50,323,285
<Total Assets> 708,139,691
<CURRENT-LIABILITIES> 19,991,706
<BONDS> 601,249,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 708,139,691
<SALES> 159,183,399
<TOTAL-REVENUES> 159,183,399
<CGS> 70,118,893
<TOTAL-COSTS> 80,635,026
<Other-Costs> 10,516,133
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,868,345
<Income-before-taxes> 21,354,967
<INCOME-TAX> 0
<INCOME-CONTINUING> 21,354,967
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,354,967
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
