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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
Commission File Number 33-83618
SELKIRK COGEN PARTNERS, L.P.
(Exact name of Registrant (Guarantor) as specified in its charter)
Delaware 51-0324332
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
SELKIRK COGEN FUNDING CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 51-0354675
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Bowdoin Square, Boston, Massachusetts 02114
(Address of principal executive offices, including zip code)
(617) 788-3000
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b)OR 12 (g) OF THE ACT:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
As of August 11, 2000, there were 10 shares of common stock of Selkirk
Cogen Funding Corporation, $1 par value outstanding.
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<PAGE>
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of June 30, 2000
and December 31, 1999.......................................3
Condensed Consolidated Statements of Operations for the three
and six months ended June 30, 2000 and 1999.................4
Condensed Consolidated Statements of Cash Flows for the three
and six months ended June 30, 2000 and 1999.................5
Notes to Condensed Consolidated Financial Statements........6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations.......................................8
Liquidity and Capital Resources.............................11
Item 3. Quantitative and Qualitative Disclosures About Market Risk .13
PART II. OTHER INFORMATION
Item 5. Other Items..........................................................14
Item 6. Exhibits and Reports on Form 8-K............................14
SIGNATURES....................................................................16
2
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<TABLE>
SELKIRK COGEN PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
(unaudited)
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 1,376 $ 1,732
Restricted funds............................ 4,986 5,516
Accounts receivable, net.................... 19,099 15,505
Due from affiliates......................... 1,333 427
Fuel inventory and supplies................. 6,725 6,831
Other current assets........................ 233 195
-------- ---------
Total current assets.................. 33,752 30,206
Plant and equipment, net........................ 291,433 297,034
Long-term restricted funds...................... 28,710 30,217
Deferred financing charges, net................. 9,068 9,630
-------- ---------
Total assets $ 362,963 $ 367,087
======== =========
LIABILITIES AND PARTNERS' DEFICITS
Current liabilities:
Accounts payable........................... $ 393 $ 2,126
Accrued bond interest payable.............. 372 375
Accrued expenses........................... 13,872 11,389
Due to affiliates.......................... 690 469
Current portion of long-term bonds......... 10,296 7,307
-------- ---------
Total current liabilities............ 25,623 21,666
Long-term liabilities:
Deferred revenue............................ 5,638 5,981
Other long-term liabilities................. 10,040 16,446
Long-term bonds, net of current portion..... 367,816 373,826
-------- ---------
Total liabilities...................... 409,117 417,919
Partners' deficits:
General partners' deficits................... (450) (497)
Limited partners' deficits................... (45,704) (50,335)
-------- ---------
Total partners' deficits............... (46,154) (50,832)
-------- ---------
Total liabilities and partners' deficits $ 362,963 $ 367,087
======== =========
</TABLE>
See notes to condensed consolidated financial statements.
3
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<TABLE>
SELKIRK COGEN PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating revenues:
Electric and steam........................ $ 44,659 $ 37,684 $ 92,740 $ 78,920
Gas resale................................ 5,670 3,280 8,035 4,367
-------- -------- -------- --------
Total operating revenues............ 50,329 40,964 100,775 83,287
Cost of revenues............................ 36,003 29,782 66,629 54,887
-------- -------- -------- --------
Gross profit................................ 14,326 11,182 34,146 28,400
Other operating expenses:
Administrative services, affiliates....... 666 520 1,353 758
Other general and administrative.......... 668 423 1,042 882
Amortization of deferred financing charges 286 289 571 578
-------- -------- -------- --------
Total other operating expenses...... 1,620 1,232 2,966 2,218
-------- -------- -------- --------
Operating income............................ 12,706 9,950 31,180 26,182
Interest (income) expense:
Interest income........................... (840) (582) (1,468) (1,080)
Interest expense.......................... 8,427 8,529 16,856 17,063
-------- -------- -------- --------
Total interest expense, net......... 7,587 7,947 15,388 15,983
-------- -------- -------- --------
Income before cumulative effect of a
change in accounting principle............ 5,119 2,003 15,792 10,199
Cumulative effect of a change in
accounting principle...................... --- --- 7,866 ---
-------- -------- -------- --------
Net income.................................. $ 5,119 $ 2,003 $ 23,658 $ 10,199
======== ======== ======== ========
Net income allocation:
General partners.......................... $ 51 $ 20 $ 237 $ 102
Limited partners.......................... 5,068 1,983 23,421 10,097
-------- -------- -------- --------
Total............................... $ 5,119 $ 2,003 $ 23,658 $ 10,199
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
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<TABLE>
SELKIRK COGEN PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net cash provided by (used in) operating activities........ $ 4,314 $ (1,162) $ 22,302 $ 15,390
Cash flows from investing activities:
Plant and equipment additions.......................... (282) (265) (657) (310)
-------- --------- -------- --------
Net cash used in investing activities............. (282) (265) (657) (310)
Cash flows from financing activities:
Restricted funds....................................... 18,151 16,945 --- ---
Distributions to partners.............................. (18,980) (13,234) (18,980) (13,234)
Repayment of long-term debt............................ (3,021) (2,023) (3,021) (2,023)
-------- --------- -------- --------
Net cash provided by (used in) financing activities (3,850) 1,688 (22,001) (15,257)
Net increase (decrease) in cash and cash equivalents........ 182 261 (356) (177)
Cash and cash equivalents, beginning of period.............. 1,194 1,401 1,732 1,839
-------- --------- -------- --------
Cash and cash equivalents, end of period.................... $ 1,376 $ 1,662 $ 1,376 $ 1,662
======== ========= ======== ========
Supplemental cash flow information:
Cash paid for interest.................................. $ 16,859 $ 17,067 $ 16,859 $ 17,067
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
SELKIRK COGEN PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include
Selkirk Cogen Partners, L.P. and its wholly-owned subsidiary, Selkirk Cogen
Funding Corporation, (collectively the "Partnership"). All significant
intercompany accounts and transactions have been eliminated.
The condensed consolidated financial statements for the interim periods
presented are unaudited and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. The information furnished
in the condensed consolidated financial statements reflects all normal recurring
adjustments which, in the opinion of management, are necessary for a fair
presentation of such financial statements. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to rules and regulations applicable to interim financial statements.
These condensed consolidated financial statements should be read in conjunction
with the audited consolidated financial statements included in the Partnership's
December 31, 1999 Annual Report on Form 10-K.
Note 2. Cumulative Effect of a Change in Accounting Principle
Effective January 1, 2000, the Partnership changed its method of accounting for
major maintenance and overhaul costs. Beginning January 1, 2000, the cost of
major maintenance and overhauls has been accounted for as incurred. Previously,
the estimated cost of major maintenance and overhauls was accrued in advance in
a systematic and rational manner over the period between major maintenance and
overhauls. The change resulted in the Partnership recording income of
approximately $7.9 million, reflecting the cumulative effect of the change in
accounting principle. The effect on results of operations for the six months
ended June 30, 2000 was immaterial and the pro forma effect on results of
operations for the six months ended June 30, 1999 was immaterial.
Note 3. New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (as amended by SFAS No. 137). SFAS No. 133
establishes
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accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
SFAS No. 133 is effective for the Partnership's fiscal years beginning on
January 1, 2001. Management has not completed an evaluation of the impact on the
Partnership's consolidated financial statements of adopting this new standard.
In December of 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements."
("SAB 101"). SAB 101 provides guidance on the recognition, presentation and
disclosure of revenue in financial statements and it will be effective during
the fourth quarter of fiscal year 2001. Management continues to evaluate SAB 101
and it has not determined what impact , if any, will result from its adoption.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three and Six Months Ended June 30, 2000 Compared to the Three and Six Months
Ended June 30, 1999
Net income for the quarter ended June 30, 2000 was approximately $5.1 million as
compared to approximately $2.0 million for the corresponding period in the prior
year. The $3.1 million increase in net income is primarily due to higher
operating revenues and lower operating and maintenance expenses. Net income for
the six months ended June 30, 2000 was approximately $23.7 million as compared
to approximately $10.2 million for the corresponding period in the prior year.
The $13.5 million increase in net income is primarily due to higher operating
revenues, lower operating and maintenance expenses and the Partnership changing
its method of accounting for major maintenance and overhaul costs.
Effective January 1, 2000, the Partnership changed its method of accounting for
major maintenance and overhaul costs. Beginning January 1, 2000, the cost of
major maintenance and overhauls has been accounted for as incurred. Previously,
the estimated cost of major maintenance and overhauls was accrued in advance in
a systematic and rational manner over the period between major maintenance and
overhauls. The change resulted in the Partnership recording income of
approximately $7.9 million, reflecting the cumulative effect of the change in
accounting principle. The effect on results of operations for the quarter and
six months ended June 30, 2000 was a reduction of operating and maintenance
expenses of approximately $0.5 million and $0.9 million, respectively.
Total operating revenues for the quarter ended and six months ended June 30,
2000 were approximately $50.3 million and $100.8 million as compared to
approximately $41.0 million and $83.3 million for the corresponding periods in
the prior year.
Electric Revenues (dollars and kWh's in millions):
-------------------------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended
June 30, 2000 June 30, 1999
------------------------------------ -------------------------------------
Dollars kWh's Capacity Dispatch Dollars kWh's Capacity Dispatch
------- ----- -------- -------- ------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit 1 10.4 137.7 79.15% 89.79% 8.4 125.9 73.73% 91.62%
Unit 2 33.8 390.3 67.44% 80.63% 29.1 397.3 68.64% 73.67%
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, 2000 June 30, 1999
------------------------------------ -------------------------------------
Dollars kWh's Capacity Dispatch Dollars kWh's Capacity Dispatch
------- ----- -------- -------- ------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit 1 22.9 289.2 84.21% 92.51% 19.8 278.6 82.15% 95.30%
Unit 2 68.2 862.5 74.51% 87.80% 58.6 863.1 74.97% 81.19%
</TABLE>
8
<PAGE>
Unit 1 revenues increased approximately $2.0 million and $3.1 million for the
quarter and six months ended June 30, 2000 as compared to the corresponding
periods in the prior year. During the quarter and six months ended June 30, 2000
revenues from Niagara Mohawk Power Corporation ("Niagara Mohawk") were
approximately $7.1 million and $18.4 million, respectively, and revenues from
PG&E Energy Trading - Power, L.P. ("PG&E Energy Trading") were approximately
$3.3 million and $4.5 million, respectively. During the quarter and six months
ended June 30, 1999 revenues from Niagara Mohawk were approximately $7.5 million
and $18.2 million, respectively, and revenues from PG&E Energy Trading were
approximately $0.9 million and $1.6 million, respectively. The increase in Unit
1 revenues for the quarter and six months ended June 30, 2000 was primarily due
to higher market energy prices. During the six months ended June 30, 2000 and
1999, with the exception of the month of April in each period, the Partnership
received Monthly Contract Payments and delivered energy up to the monthly
contract quantity to Niagara Mohawk ("Contract Energy"). During the six months
ended June 30, 2000, Contract Energy was sold at market prices established by
the New York Independent System Operator whereas, during the corresponding
period in the prior year, Contract Energy was sold at a proxy market price based
upon Niagara Mohawk's tariff for power purchases from Qualifying Facilities.
During the six months ended June 30, 2000, with the exception of February and
April, the Partnership sold the energy produced by Unit 1 in excess of the
Contract Energy ("Unit 1 Excess Energy") to both Niagara Mohawk and PG&E Energy
Trading. During the month of February 2000 the Partnership sold all of the Unit
1 Excess Energy to Niagara Mohawk and during the month of April 2000 the
Partnership sold all of the Unit 1 Excess Energy to PG&E Energy Trading. During
the month of January 1999 the Partnership sold all of the Unit 1 Excess Energy
to Niagara Mohawk. During the months of February, March and June 1999 the
Partnership sold all of the Unit 1 Excess Energy to PG&E Energy Trading. During
the months of April and May 1999 the Partnership sold Unit 1 Excess Energy to
both Niagara Mohawk and PG&E Energy Trading. Unit 1 Excess Energy delivered to
Niagara Mohawk and PG&E Energy Trading was sold at negotiated market prices.
Amortized deferred revenues of approximately $0.4 million and $0.3 million,
respectively, are also included in revenues from Niagara Mohawk for the six
months ended June 30, 2000 and 1999.
Unit 2 revenues increased approximately $4.7 million and $9.6 million for the
quarter and six months ended June 30, 2000 as compared to the corresponding
periods in the prior year. During the quarter and six months ended June 30, 2000
all of the Unit 2 revenues were from Consolidated Edison Company of New York,
Inc. ("Con Edison"). During the quarter and six months ended June 30, 1999,
revenues from Con Edison were $29.1 million and $58.3 million, respectively, and
revenues from PG&E Energy Trading were approximately $0.0 million and $0.3
million, respectively. The increase in Unit 2 revenues for the quarter and six
months ended June 30, 2000 was primarily due to the increase in the Con Edison
contract price for delivered energy resulting from higher index fuel prices.
During the six months ended June 30, 1999, revenues from PG&E Energy Trading
resulted from the sale of other energy-related products.
9
<PAGE>
Steam revenues for the quarter and six months ended June 30, 2000 of
approximately $0.4 million and $1.6 million were reduced by a reserve of
approximately $46.3 thousand. Steam revenues for the quarter and six months
ended June 30, 1999 of approximately $0.3 million and $0.6 million were reduced
by a reserve of approximately $69.2 thousand. The reserves were recorded to
reflect the estimated annual true-up so that General Electric would be charged a
nominal amount which is the annual equivalent of 160,000 lbs/hr. Delivered steam
for the quarter and six months ended June 30, 2000 was approximately 412.2
million pounds and 960.3 million pounds as compared to approximately 403.4
million pounds and 813.2 million pounds for the corresponding periods in the
prior year. The increase in steam revenues for the quarter and six months ended
June 30, 2000 was primarily due to the increase in the General Electric contract
price for delivered steam resulting from higher index fuel prices.
Gas resale revenues for the quarter ended June 30, 2000 were approximately $5.7
million on sales of approximately 1.5 million MMBtu's as compared to
approximately $3.3 million on sales of approximately 1.4 million MMBtu's for the
corresponding period in the prior year. Gas resale revenues for the six months
ended June 30, 2000 were approximately $8.0 million on sales of approximately
2.2 million MMBtu's as compared to approximately $4.4 million on sales of
approximately 2.0 million MMBtu's for the corresponding period in the prior
year. The increase in gas resale revenues for the quarter and six months ended
June 30, 2000 was primarily due to higher natural gas resale prices. The
increase in natural gas resale prices during the six months ended June 30, 2000
generally resulted from higher market pricing for both gas and oil as well as
increased demand for electric generation. Gas resales occurred during periods
when Units 1 and 2 were not operating at full capacity.
Cost of revenues for the quarter ended June 30, 2000 were approximately $36.0
million on gas purchases of approximately 7.1 million MMBtu's as compared to
$29.8 million on gas purchases of approximately 6.9 million MMBtu's for the
corresponding period in the prior year. Cost of revenues for the six months
ended June 30, 2000 were approximately $66.6 million on gas purchases of
approximately 14.2 million MMBtu's as compared to $54.9 million on gas purchases
of approximately 13.9 million MMBtu's for the corresponding period in the prior
year. The largest component of the increase for the quarter and six months ended
June 30, 2000 was fuel costs, which increased approximately $7.1 million and
$13.2 million from the corresponding periods in the prior year, respectively.
The increase in the cost of fuel was primarily due to the higher price of gas
under the firm fuel supply agreements and higher demand costs under the firm
fuel transportation agreements. The increase in fuel costs was partially offset
by lower operating and maintenance expenses. The decrease in operating and
maintenance expenses was primarily due to differences in the scheduling of
planned maintenance and the elimination of the accrual for major maintenance and
overhaul costs. The Partnership has foreign currency swap agreements to hedge
against future exchange rate fluctuations under fuel transportation agreements
which are denominated in Canadian dollars. During the six months ended June 30,
2000 and 1999, fuel costs were increased by approximately $1.2 million as a
result of the currency swap agreements.
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<PAGE>
Total other operating expenses for the quarter and six months ended June 30,
2000 were approximately $1.6 million and $3.0 million as compared to
approximately $1.2 million and $2.2 million for the corresponding periods in the
prior year. The increase in other operating expenses for the quarter and six
months ended June 30, 2000 was primarily due to higher affiliate administrative
services and higher other general and administrative expenses. Additionally,
affiliate administrative services during the quarter ended March 31, 1999, were
reduced by the write-off of a reserve of approximately $0.2 million for amounts
no longer claimed by an affiliate.
Net interest expense for the quarter and six months ended June 30, 2000 was
approximately $7.6 million and $15.4 million as compared to approximately $7.9
million and $16.0 million for the corresponding periods in the prior year. The
decrease in net interest expense is due to higher interest income and lower
interest expense resulting from the lower principal balance outstanding.
Liquidity and Capital Resources
Net cash provided by operating activities for the quarter ended June 30, 2000
was approximately $4.3 million as compared to net cash used in operating
activities of approximately $1.2 million for the corresponding period in the
prior year. Net cash flows provided by operating activities for the six months
ended June 30, 2000 was approximately $22.3 million as compared to approximately
$15.4 million for the corresponding period in the prior year. Net cash provided
by and used in operating activities primarily represents net income plus the net
effect of recurring changes in cash receipts and disbursements within the
Partnership's operating assets and liability accounts.
Net cash used in investing activities for the quarter ended June 30, 2000 was
approximately $282.0 thousand as compared to approximately $265.0 thousand for
the corresponding period in the prior year. Net cash used in investing
activities for the six months ended June 30, 2000 was approximately $657.0
thousand as compared to approximately $310.0 thousand for the corresponding
period in the prior year. Net cash used in investing activities primarily
represents additions to plant and equipment.
Net cash used in financing activities for the quarter ended June 30, 2000 was
approximately $3.9 million as compared to net cash provided by financing
activities of approximately $1.7 million for the corresponding period in the
prior year. Net cash used in financing activities for the six months ended June
30, 2000 was approximately $22.0 million as compared to approximately $15.3
million for the corresponding period in the prior year. The increase in net cash
used in financing activities for the quarter and six months ended June 30, 2000
was primarily due to more cash becoming available to distribute to the Partners
and the increase in the semi-annual payment of principal on long-term debt.
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<PAGE>
In 1994 and 1995 Con Edison claimed the right to acquire that portion of Unit
2's firm natural gas supply not used in operating Unit 2, when Unit 2 is
dispatched off-line or at less than full capability ("non-plant gas"), or
alternatively to be compensated for 100% of the margins derived from non-plant
gas sales. The Con Edison Power Purchase Agreement contains no express language
granting Con Edison any rights with respect to such excess natural gas.
Nevertheless, Con Edison argued that, since payments under the contract include
fixed fuel charges which are payable whether or not Unit 2 is dispatched
on-line, Con Edison is entitled to exercise such rights. The Partnership
vigorously disputes the position adopted by Con Edison, and since the
commencement of Unit 2's operation in 1994, the Partnership has made and
continues to make, from time to time, non-plant gas sales from Unit 2's gas
supply. Although representatives of Con Edison have expressly reserved all
rights that Con Edison may have to pursue its asserted claim with respect to
non-plant gas sales, the Partnership has received no further formal
communication from Con Edison on this subject since 1995. In the event Con
Edison were to pursue its asserted claim, the Partnership would expect to pursue
all available legal remedies, but there can be no certainty that the outcome of
such remedial action would be favorable to the Partnership or, if favorable,
would provide for the Partnership's full recovery of its damages. The
Partnership's cash flows from the sale of electric output would be materially
and adversely affected if Con Edison were to prevail in its claim to Unit 2's
excess natural gas volumes and the related margins.
On July 21, 1998, the New York Public Service Commission ("NYPSC") approved a
plan submitted by Con Edison for the divestiture of certain of its generating
assets (the "Con Edison Divestiture Plan"). Although the Con Edison Divestiture
Plan does not include any proposal by Con Edison for the sale or other
disposition of its contractual obligations for purchasing power from non-utility
generators, like the Partnership, the NYPSC has ordered Con Edison to submit a
report regarding the feasibility of divesting its non-utility generator
entitlements. At this time, the Partnership has insufficient information to
determine whether, in the course of these proceedings at the NYPSC, Con Edison
may seek to assign its rights and obligations under the Con Edison Power
Purchase Agreement with the Partnership to a third party or to take some other
action for the purpose of divesting itself of the power purchase obligations
under such contract; nor can the Partnership evaluate the impact which any such
assignment or other action, if proposed, may ultimately have on the Con Edison
Power Purchase Agreement.
Future operating results and cash flows from operations are also dependent on,
among other things, the performance of equipment; levels of dispatch; the
receipt of certain capacity and other fixed payments; electricity prices;
natural gas resale prices; and fuel deliveries and prices. A significant change
in any of these factors could have a material adverse effect on the results of
operations for the Partnership.
The Partnership believes, based on current conditions and circumstances, it will
have sufficient cash flows from operations to fund existing debt obligations and
operating costs.
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Cautionary Statement Regarding Forward-Looking Statements
Certain statements included herein are forward-looking statements concerning the
Partnership's operations, economic performance and financial condition. Such
statements are subject to various risks and uncertainties. Actual results could
differ materially from those currently anticipated due to a number of factors,
including general business and economic conditions; the performance of
equipment; levels of dispatch; the receipt of certain capacity and other fixed
payments; electricity prices; natural gas resale prices; fuel deliveries and
prices and whether Con Edison were to prevail in its claim to Unit 2's excess
natural gas volumes, and the related margins.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership is exposed to market risk from changes in interest rates and
foreign currency exchange rates, which could affect its future results of
operations and financial condition. The Partnership manages its exposure to
these risks through its regular operating and financing activities.
Interest Rates
The Partnership's cash and restricted cash are sensitive to changes in interest
rates. Interest rate changes would result in a change in interest income due to
the difference between the current interest rates on cash and restricted cash
and the variable rate that these financial instruments may adjust to in the
future. A 10% decrease in interest rates for the quarter ended and six months
ended June 30, 2000 would have resulted in a negative impact of approximately
$84.0 thousand and $147.8 thousand, respectively on the Partnership's net income
for that period.
The Partnership's long-term bonds have fixed interest rates. Changes in the
current market rates for the bonds would not result in a change in interest
expense due to the fixed coupon rate of the bonds.
Foreign Currency Exchange Rates
The Partnership's currency swap agreements hedge against future exchange rate
fluctuations which could result in additional costs incurred under fuel
transportation agreements which are denominated in a foreign currency. In the
event a counterparty fails to meet the terms of the agreements, the
Partnership's exposure is limited to the currency exchange rate differential.
During the quarter and six months ended June 30, 2000, the currency exchange
rate differential resulted in a negative impact of approximately $0.6 million
and $1.2 million, respectively on the Partnership's net income.
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PART II. OTHER INFORMATION
ITEM 5. OTHER ITEMS
A written Consent of Directors in lieu of a meeting was executed on June 12,
2000 for both Selkirk Cogen Funding Corporation and JMC Selkirk, Inc. ("The
Managing General Partner"). The following tables set forth the names and
positions of newly appointed officers.
Selkirk Cogen Funding Corporation:
---------------------------------
Name Position
---- --------
Ernest K. Hauser* Senior Vice President
The Managing General Partner:
----------------------------
Name Position
---- --------
Ernest K. Hauser* Senior Vice President
* Ernest K. Hauser replaced Gary W. Weidinger.
Ernest K. Hauser is Senior Vice President and Northeast Regional
Business Manager, of PG&E Generating, an affiliate of the Partnership, and has
been with PG&E Generating since 1989. Mr. Hauser is responsible for all PG&E
Generating business activities in the Northeast. Prior to his present
assignment, he was regional vice president for marketing, development and asset
management. Prior to joining PG&E Generating, Mr. Hauser was project director
for co-generation and alternative fuel technology projects at Coastal Power
Production. He also worked for more than ten years as energy project manager and
senior engineer for the Combustion Engineering family of companies.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
Exhibit No. Description
----------- -----------
10.1 Amendment No. 5 to Credit Agreement, dated August
1, 2000, between the Partnership and Dresdner Bank
AG, New York Branch
14
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10.4 Second Amended and Restated O&M Agreement dated
July 18, 2000, between the Partnership and GE
International Inc.
27 Financial Data Schedule (For electronic filing
purposes only)
(B) Reports on Form 8-K
Not applicable.
Omitted from this Part II are items which are not applicable or to which the
answer is negative for the periods covered.
15
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SELKIRK COGEN PARTNERS, L.P.
JMC SELKIRK, INC.
General Partner
Date: August 14, 2000 /s/ JOHN R. COOPER
------------------
Name: John R. Cooper
Title: Senior Vice President and
Chief Financial Officer
16
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SELKIRK COGEN FUNDING
CORPORATION
Date: August 14, 2000 /s/ JOHN R. COOPER
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Name: John R. Cooper
Title: Senior Vice President
Chief Financial Officer
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