SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Amendment to Application or Report
Filed Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported)
July 19, 1999
EDISON MISSION ENERGY
(Exact name of registrant as specified in its charter)
CALIFORNIA
(State or other jurisdiction of incorporation or organization)
1-13434 95-4031807
(Commission File Number) (I.R.S. Employer Identification No.)
18101 VON KARMAN AVENUE
IRVINE, CALIFORNIA 92612
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 752-5588
NOT APPLICABLE
(Former name or former address, if changed since last report.)
The undersigned Registrant hereby amends the
following items, financial statement, exhibits or
other portions of its Current Report on Form 8-K dated
July 19, 1999, as set forth in the pages attached
hereto:
Item 7. Financial Statements and Exhibits
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The power stations special-purpose combined balance sheets expressed in
pounds sterling as of 3 January 1999, 29 March 1998 and 30 March 1997, and
the related statements of income ("profit and loss accounts") and cash
flows for the nine month period ended 3 January 1999, the year ended 29
March 1998 and the year ended 30 March 1997, together with the Notes
thereto and the Report of Independent Accountants.
THE FOREIGN EXCHANGE CONVERSION RATES TO BE USED TO TRANSLATE UK STERLING
INTO US DOLLARS ARE AS FOLLOWS:
1999 1998 1997
---- ---- ----
Profit and loss accounts -- average rate 1.66 1.64 1.64
Balance sheets -- closing rate 1.66 1.68 1.64
(B) PRO FORMA FINANCIAL INFORMATION.
- UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1999.
- UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE SIX
MONTHS ENDED JUNE 30, 1999 AND THE YEAR ENDED DECEMBER 31, 1998.
- NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
(C) EXHIBITS. NONE.
<PAGE>
FIDDLERS FERRY AND FERRYBRIDGE C POWER STATIONS
FINANCIAL INFORMATION
<PAGE>
TABLE OF CONTENTS
Page
PART - 1 SPECIAL-PURPOSE COMBINED ACCOUNTS FOR THE THREE PERIODS
TO 3 JANUARY 1999
Special-Purpose Combined Accounts.......................................3
Introduction............................................................3
Auditors' report........................................................5
<PAGE>
POWER STATION SPECIAL-PURPOSE COMBINED ACCOUNTS
INTRODUCTION
These power station special-purpose combined accounts for the two years
ended 30 March 1997 and 29 March 1998 and the nine month period ended 3
January 1999 (the "special-purpose combined accounts") are non- statutory
and present the combined figures for those operations of PowerGen UK plc
("PowerGen") which form part of the Ferrybridge C and Fiddlers Ferry power
stations (together the "Power Stations").
The special-purpose combined accounts have been specifically prepared in
connection with the disposal of the Power Stations by PowerGen to Edison
First Power Limited ("EFP") for the purposes of presenting, as far as
practicable, the assets, liabilities, revenues and costs applicable to the
Power Stations on a stand-alone basis but recognising that the Power
Stations were operated and managed as part of a portfolio of generating
units within the generation division of PowerGen for the whole period
presented. The disposal of the Power Stations by PowerGen to Edison Fist
Power Limited was completed on 19 July 1999 ("the date of disposal").
Activities such as the bidding of individual generation units, including
those of the Power Stations, into the Pool (and therefore the determination
of which generation units within the PowerGen portfolio will operate),
purchasing of all fuel requirements and negotiation of electricity sales
contracts were carried out centrally by PowerGen and outside of the control
of the Power Stations. Whilst certain responsibilities and activities, in
areas such as procurement, personnel and finance, were devolved to
individual Power Stations, a number of services were provided by central
functions within PowerGen and recharged to the Power Stations.
The special-purpose combined accounts are not therefore necessarily
representative or indicative of the financial position, results of
operations or cash flows that would have been obtained had the Power
Stations operated independently or under separate ownership.
The special-purpose combined accounts represent an aggregation of financial
information from the individual operations (which were not legal entities)
which make up the Power Stations. The basis of preparation, combination and
presentation of the financial information of the Power Stations is more
fully described under "Principal Accounting Policies" on pages 9 to 13.
The Power Stations were not required to prepare audited accounts. No such
accounts have been prepared prior to these special-purpose combined
accounts. The financial information set out in the special-purpose combined
accounts is based on management accounts of the operations which comprise
the Power Stations for the relevant periods (which were used for the
purpose of preparing the consolidated financial statements of PowerGen)
after making such adjustments as were considered necessary.
3
<PAGE>
In preparing the special-purpose combined accounts for the purpose stated
above, which have been drawn up on the basis explained above as more fully
described in the Principal Accounting Policies on pages 9 to 13 and which
are intended to present fairly, on that basis, the financial position,
results of operations and cash flows of the Power Stations, the Directors
of PowerGen consider that they have selected appropriate accounting
policies, consistently applied and supported by reasonable and prudent
judgements and estimates, and that all accounting standards which they
consider applicable have been followed, subject to any material departures
disclosed and explained in the special-purpose combined accounts.
The Directors of PowerGen acknowledge that they are responsible for keeping
proper accounting records which disclose with reasonable accuracy at any
time the financial position of PowerGen and its group companies, including
(until the date of disposal) the Power Stations. They are also responsible
for safeguarding the assets of PowerGen and its group companies, including
(until the date of disposal) the Power Stations, and hence for taking
reasonable steps for the prevention and detection of fraud and other
irregularities.
The Directors of PowerGen, after making enquiries, consider that the Power
Stations have adequate resources to continue in operation for the
foreseeable future and that it is appropriate to adopt the going concern
basis in preparing the special-purpose combined accounts.
4
<PAGE>
AUDITORS' REPORT TO THE DIRECTORS OF POWERGEN UK PLC
We have audited the special-purpose power station combined accounts (the
"special-purpose combined accounts") on page 3 and pages 6 to 22 which have
been prepared under the historical cost convention and in accordance with
the basis of preparation as set out under Principal Accounting Policies on
pages 9 to 13. These special-purpose combined accounts have not been
prepared for the purposes of Section 226 of the Companies Act 1985 and were
prepared solely for the purposes described on page 1.
The special-purpose combined accounts represent an aggregation of financial
information for the individual power station operations which make up the
Ferrybridge C and Fiddlers Ferry power stations (the "Power Stations").
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The Directors of PowerGen are responsible, as described on page 4, for
preparing the special-purpose combined accounts. Our responsibilities, as
independent auditors, are established by the Auditing Practices Board and
our profession's ethical guidance.
We report to you our opinion as to whether the special-purpose combined
accounts present fairly, on the basis of preparation set out under the
Principal Accounting Policies on pages 9 to 13, the financial position,
results of operations and cash flows of the Power Stations.
BASIS OF AUDIT OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board which are substantially the same as auditing
standards generally accepted in the United States. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the special-purpose combined accounts. It also includes an
assessment of the significant estimates and judgements made by the
Directors of PowerGen in the preparation of the special-purpose combined
accounts, and of whether the accounting policies are appropriate to the
Power Stations' circumstances, consistently applied and adequately
disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the special-purpose
combined accounts are free from material misstatement, whether caused by
fraud or other irregularity or error. In forming our opinion we also
evaluated the overall adequacy of the presentation of information in the
special- purpose combined accounts.
OPINION
In our opinion the special-purpose combined accounts, drawn up on the basis
explained in the Principal Accounting Policies on pages 9 to 13, present
fairly, on that basis, the financial position of the Power Stations at 30
March 1997, 29 March 1998 and 3 January 1999 and of the results of their
operations and their cash flows for each of the two years ended 29 March
1998 and the nine month period ended 3 January 1999 in accordance with
applicable United Kingdom accounting standards.
The accounting principles adopted in the special-purpose combined accounts
differ in certain respects from accounting principles generally accepted in
the United States. The effect of the differences in the determination of
net income, PowerGen's investment and cash flows is shown on pages 23 to 24
to the special-purposes combined accounts.
PricewaterhouseCoopers
Chartered Accountants
London
30 September 1999
5
<PAGE>
COMBINED PROFIT AND LOSS ACCOUNTS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED 3 JANUARY Year ended 29 Year ended 30
1999 March 1998 March 1997
NOTE (POUND)M (pound)m (pound)m
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TURNOVER 1 231.8 394.6 452.4
Cost of Sales 2,4 (136.9) (244.7) (280.4)
- ------------------------------------------------------------------------------------------
GROSS PROFIT 94.9 149.9 172.0
Operating costs 3,4,5 (40.8) (80.7) (74.1)
Other operating income 1.2 2.8 3.5
- ------------------------------------------------------------------------------------------
OPERATING PROFIT 55.3 72.0 101.4
Net Interest payable 6 (0.8) (1.0) (1.0)
- ------------------------------------------------------------------------------------------
PROFIT ON ORDINARY AC
TIVITIES BEFORE TAXATION 54.5 71.0 100.4
Tax on profit on ordi
nary activities 7 (17.3) (18.7) (33.1)
- ------------------------------------------------------------------------------------------
RETAINED PROFIT ON OR
DINARY ACTIVITIES AFTER
TAXATION 37.2 52.3 67.3
----------------------------------------------------------------
</TABLE>
Turnover, cost of sales, operating costs and other operating income relate
wholly to continuing operations.
There are no recognised gains and losses other than the profit above and
therefore no separate statement of total recognised gains and losses has
been presented.
The basis on which revenues and costs have been derived is outlined under
Principal Accounting Policies on pages 9 to 13. The income and charges
shown above are not necessarily representative of those which might be
incurred by the Power Stations under separate ownership.
The notes on pages 14 to 22 form part of these special-purpose combined
accounts.
6
<PAGE>
<TABLE>
<CAPTION>
COMBINED BALANCE SHEETS
3 JANUARY 29 March 30 March
Note 1999 1998 1997
- ----------------------------------------------------------------------------------------
(POUND)M (pound)m (pound)m
- ----------------------------------------------------------------------------------------
FIXED ASSETS
<S> <C> <C> <C> <C>
Tangible assets 8 164.7 174.1 196.3
- ----------------------------------------------------------------------------------------
164.7 174.1 196.3
- ----------------------------------------------------------------------------------------
CURRENT ASSETS
Stocks 9 50.7 49.3 43.6
Debtors: amounts falling due within one
year 10 36.6 33.0 26.5
- ----------------------------------------------------------------------------------------
87.3 82.3 70.1
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE
YEAR
Trade and other creditors 11 (32.5) (54.3) (61.4)
- ----------------------------------------------------------------------------------------
NET CURRENT ASSETS 54.8 28.0 8.7
- ----------------------------------------------------------------------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 219.5 202.1 205.0
PROVISIONS FOR LIABILITIES AND CHARGES 13 (24.5) (32.1) (21.7)
DEFERRED TAX 14 (25.6) (23.4) (35.7)
- ----------------------------------------------------------------------------------------
NET ASSETS 169.4 146.6 147.6
----------------------------------
POWERGEN'S INVESTMENT IN THE POWER STATIONS 15 169.4 146.6 147.6
----------------------------------
</TABLE>
The basis on which the net investment of PowerGen in the Power Stations
("PowerGen's investment in the Power Stations") has been derived is
outlined under Principal Accounting Policies on pages 9 to 13. The capital
structure shown above is not representative of the capital structure of the
Power Stations under separate ownership.
The notes on pages 14 to 22 form part of these special-purpose combined
accounts.
The special-purpose combined accounts were approved by the Board of
PowerGen on 30 September 1999.
7
<PAGE>
<TABLE>
<CAPTION>
COMBINED CASH FLOW STATEMENTS
NINE MONTHS Year ended Year ended
ENDED 3 JAN 29 March 30 March
UARY 1999 1998 1997
Note (POUND)M (pound)m (pound)m
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES 16 52.4 106.7 113.2
- ------------------------------------------------------------------------------------------------
TAXATION (31.0) (36.2) (39.2)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (7.0) (17.2) (16.2)
- ------------------------------------------------------------------------------------------------
(7.0) (17.2) (16.2)
- ------------------------------------------------------------------------------------------------
NET CASH INFLOW BEFORE USE OF LIQUID RESOURCES
AND FINANCING 14.4 53.3 57.8
- ------------------------------------------------------------------------------------------------
NET CASH GENERATED IN THE PERIOD AND RETAINED BY
POWERGEN 15 14.4 53.3 57.8
- ------------------------------------------------------------------------------------------------
</TABLE>
The basis on which cash flows have been derived is outlined under Principal
Accounting Policies on pages 9 to 13. The cashflows shown above are not
necessarily representative of those which might be incurred by the Power
Stations under separate ownership.
The notes on pages 14 to 22 form part of these special-purpose combined
accounts.
8
<PAGE>
PRINCIPAL ACCOUNTING POLICIES
BASIS OF PREPARATION AND COMBINATION
The special-purpose combined accounts have been prepared from the
accounting records of PowerGen UK plc or its predecessor PowerGen plc (both
referred to as "PowerGen") for the purposes of presenting, as far as
practicable, the financial position, results of operations and cash flows
of the Fiddlers Ferry and Ferrybridge C power stations (together the "Power
Stations") on a stand-alone basis but recognising that the Power Stations
were operated and managed as part of a portfolio of generating units within
the generation division of PowerGen for the whole period covered by these
special-purpose combined accounts. Consequently, the financial performance
of the Power Stations has been affected by PowerGen's operating decisions
in relation to its other power stations.
Activities such as the bidding of individual generation units, including
those of the Power Stations, into the Pool (and therefore the determination
of which generation units within the PowerGen portfolio will operate),
purchasing of all fuel requirements and negotiation of electricity sales
contracts were carried out centrally by PowerGen and outside of the control
of the Power Stations. Whilst certain responsibilities and activities, in
areas such as procurement, personnel and finance, were devolved to
individual Power Stations a number of services were provided by central
functions within PowerGen and recharged to the Power Stations. Against this
background, reasonable allocations and estimates have been made that, in
the opinion of the Directors of PowerGen, include all material costs of
doing business.
The special-purpose combined accounts present the financial information of
the two power stations in aggregation and have been prepared as if the
Power Stations in their present form had existed for the entire period
presented.
The special-purpose combined accounts are not therefore necessarily
representative or indicative of the financial position, results of
operations or cash flows that would have been attained had the Power
Stations operated independently or under separate ownership. Further
details of the way income or charges, assets or liabilities and cashflows
have been determined is set out in the following paragraphs.
No allowance has been taken of the effect the disposal of the Power
Stations by PowerGen might have on the financial position, results of
operations or cash flows shown by the special-purpose combined accounts.
The special-purpose combined accounts are prepared under the historical
cost convention and in accordance with applicable UK accounting standards.
There is no difference between the profit on ordinary activities before
taxation and the retained profit for the period stated on the face of the
profit and loss account and their historical cost equivalents. Values of
assets and liabilities vested in PowerGen (and hence the Power Stations) on
31 March 1990 under the Transfer Scheme made pursuant to the Electricity
Act 1989 (the Transfer Scheme) are based on their historical cost to the
Central Electricity Generating Board (CEGB).
9
<PAGE>
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results can differ from those
estimates.
TURNOVER
Turnover comprises sales of electricity and other services to the
Electricity Pool in England and Wales ("the Pool") and represents actual
output generated during each half-hour period valued at prevailing Pool
prices for that same half-hour period and is recognised when earned.
PowerGen enters into a portfolio of contracts for differences ("CFDs") to
act as a hedge against both the output of its portfolio of power stations
taken as whole and volatility in pool prices. Since the CFDs are not linked
to the output of specific power stations, either when the CFDs are entered
into or when the fees receivable and difference payments are calculated,
the Directors of PowerGen do not consider it appropriate or feasible to
apportion the net revenues received under the CFDs to an individual power
station.
Similarly, PowerGen enters into contracts to make sales direct to large
customers of electricity purchased through the Pool. These contracts are
not linked to the output of any individual power station and the Directors
of PowerGen do not consider it appropriate or feasible to apportion any
revenue under such contracts to an individual power station.
Accordingly, turnover (and hence operating profit) in the profit and loss
account does not include any fees receivable or difference payments made
under CFDs with purchasers from the Pool or revenues under direct sales
contracts, and are therefore not necessarily representative of the income
of the Power Stations operating independently or under separate ownership.
COST OF SALES - FUEL BURN
Fuel burn costs in the profit and loss account have been determined by
reference to actual coal usage and the actual cost of coal purchases.
In the five year period up to and including the two years ended 29 March
1998, PowerGen received a supple ment in certain CFDs with customers to
reflect the higher (above world market prices) cost of coal purchased from
British Coal Corporation and its successor entities (the "BC Supplement").
As explained above, turnover in the profit and loss account excludes
revenues earned by PowerGen under CFDs, whilst fuel burn costs reflect the
higher actual costs incurred. Accordingly, fuel costs may be higher, and
gross profits may be lower, than would have been attained had the Power
Stations operated independently or under separate ownership.
10
<PAGE>
RESTRUCTURING COSTS
Amounts are set aside for restructuring programmes which involve the
reorganisation or future closure of power station units and specific
reductions in staff numbers, where there is a demonstrable commitment to
such actions.
OPERATING COSTS
Operating costs include staff costs, operational rates, repairs and
maintenance costs, and allocated common costs. Operating costs have, where
appropriate, been directly attributed to the Power Stations, or to the
extent that direct attribution has not been possible, have been allocated
on the basis of an appropriate incremental or proportionate allocation
methodology and the Directors of PowerGen believe that they include all
substantive costs that should be allocated for the purpose of the
special-purpose combined accounts. No attribution or allocation has been
made for costs that are driven by corporate level activities such as the
Chief Executive's Office and Company Secretarial Department.
TANGIBLE FIXED ASSETS
Tangible fixed assets, including plant spares, are stated at original cost
less accumulated depreciation and provisions for impairment and permanent
diminution in value.
DEPRECIATION
Provision for depreciation of generating and other assets is made so as to
write off, on a straight-line basis, the book value of tangible fixed
assets. Assets are depreciated over their estimated useful lives. No
depreciation is provided on freehold land. The estimated total discounted
cost of decommissioning the Power Stations is capitalised as part of
generating assets and depreciated on a straight-line basis over their
remaining useful economic life.
The estimated useful lives for the other principal categories of fixed
assets are:
Asset Life in years
Generating assets 25-40
Other buildings 40
Other operating and short term assets 3-15
- -----------------------------------------------------------------
OVERHAUL OF GENERATION PLANT
Overhaul costs are capitalised as part of generating assets and depreciated
on a straight-line basis over their estimated useful life, typically the
period until the next major overhaul. That period is usually four years.
11
<PAGE>
FUEL STOCKS AND STORES
Fuel stocks and stores are stated at the lower of cost and net realisable
value. In general, stocks are recognised in the profit and loss account on
a weighted average cost basis.
CAPITAL STRUCTURE AND FINANCING
Because the Power Stations have not in the past formed a separate legal
entity or group, the proportion of share capital and retained profits of
the PowerGen Group attributable to the Power Stations have been shown in
the balance sheet as part of "PowerGen's investment in the Power Stations".
The Power Stations have not been charged with any financing costs in
respect of the amounts included within "PowerGen's investment in the Power
Stations" during the period covered by the special-purpose combined
accounts. The Power Stations have generated sufficient cash during each of
the periods covered by the special-purpose combined accounts to cover all
working capital and capital expenditure requirements.
Although separate bank accounts are maintained by each of the Power
Stations, these are used for sundry de minimus local expenses with all
significant cash flows for items of income and expenditure received or
settled directly by PowerGen centrally. For this reason, the cash flows
shown, which reflect amounts paid or received by PowerGen on behalf of the
Power Stations, are not necessarily representative of the cash flows had
the Power Stations operated independently or under separate ownership. The
net cash movement in each period has been included in "PowerGen's
investment in the Power Stations".
All other financing requirements during the periods covered were met
centrally by PowerGen and have not been specifically attributed to an
individual power station. The interest charges shown are therefore not
necessarily representative of the interest charges of the Power Stations
under separate ownership.
TAXATION
The Power Stations are not separate legal entities and were not subject to
full taxation of their results. The taxation charge in the special-purpose
combined accounts has been calculated on a 'separate return' basis to
reflect the tax that would have been incurred on the profits as shown in
these special-purpose combined accounts. The taxation charges shown are
therefore not necessarily representative of the tax payable by the Power
Stations under separate ownership. The tax cash flows for each period
represent the assumed payment of the Corporation Tax liability from the
previous period.
12
<PAGE>
Deferred taxation arises in respect of items where there is a timing
difference between their treatment for accounting purposes and their
treatment for taxation purposes. Provision for deferred taxation, using the
liability method, is made to the extent that it is probable that a
liability or asset will crystallise in the foreseeable future.
PENSIONS
Pension costs are charged to the profit and loss account on the basis of
contributions payable to PowerGen's pension schemes in respect of the
employees employed by the Power Stations. Differences between the amounts
funded and the amounts charged to the profit and loss account are treated
as either creditors or debtors in the balance sheet. The pension charges
shown are therefore not necessarily representative of the pension charges
for employees of the Power Stations under separate ownership.
13
<PAGE>
1. TURNOVER
Turnover, which arises from generation activities wholly in the UK, is
analysed as follows:
NINE MONTHS Year ended Year ended
ENDED 3 29 March 30 March
JANUARY 1999 1998 1997
(POUND)M (pound)m (pound)m
- ------------------------------------------------------------------------
Sales through the Pool 228.7 389.5 448.9
Other sales 3.1 5.1 3.5
- ------------------------------------------------------------------------
231.8 394.6 452.4
--------------------------------------
Wholesale electricity trades in England and Wales are conducted according
to a multilateral agreement between the electricity generators, such as
PowerGen, and the wholesale electricity purchasers. This multilateral
agreement specifies the charges on each purchaser and the payments to each
generator and ensures that the total charges equal the total payments. All
such payments and charges are settled through a daily clearing account (the
Pool) without passing through the ownership of a third party. Therefore
although the customers of a specific generator are identified collectively
as the purchasers who have signed the multilateral agreement, it is not
possible to quantify the actual sales from one specific generator, or
station, to one specific purchaser.
2. COST OF SALES
Cost of sales were as follows:
<TABLE>
<CAPTION>
NINE MONTHS Year ended
ENDED 3 Year ended 29 30 March
JANUARY 1999 March 1998 1997
(POUND)M (pound)m (pound)m
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fuel burn 102.9 181.2 228.6
Depreciation and amortisation 16.8 26.0 24.9
Grid system charges and pool purchases 17.2 24.1 24.7
Exceptional cost of sales (note 4) - 13.4 2.2
- ---------------------------------------------------------------------------------------------------
136.9 244.7 280.4
--------------- ------------------- ---------------
3. OPERATING COSTS
Operating costs were as follows:
NINE MONTHS Year ended
ENDED 3 JAN Year ended 29 30 March
UARY 1999 March 1998 1997
(POUND)M (pound)m (pound)m
- ---------------------------------------------------------------------------------------------------
Staff costs (note 5) 12.4 16.9 16.2
Operational rates 14.3 20.2 18.0
Repairs and maintenance costs 10.8 15.1 17.3
Allocated common costs 1.4 3.1 4.1
Other operating charges - before
exceptional items 7.5 14.6 18.5
Exceptional operating charges (note 4) (5.6) 10.8 -
- --------------------------------------------------------------------------------------------------
40.8 80.7 74.1
--------------- ------------------- ---------------
14
<PAGE>
Operating costs include:
NINE
MONTHS Year
ENDED 3 ended 29 Year ended
JANUARY March 30 March
1999 1998 1997
(POUND)M (pound)m (pound)m
- --------------------------------------------------------------------------------------------------
Research and development costs 0.1 0.2 0.2
4. EXCEPTIONAL ITEMS
Exceptional items comprise:
NINE
MONTHS Year
ENDED 3 ended 29 Year ended
JANUARY March 30 March
1999 1998 1997
(POUND)M (pound)m (pound)m
- --------------------------------------------------------------------------------------------------
Plant rationalisation and restructuring
Write down of fixed assets - 13.4 2.2
Severance (5.6) 10.8 -
- -------------------------------------------------------------------------------------------------
(5.6) 24.2 2.2
-------------- ------------- -----------
</TABLE>
Following a review of PowerGen's plant portfolio in the light of increased
competition and market changes, unit 4 at Ferrybridge C was closed at the
end of March 1998 with an associated write off of the remaining net book
value of (pound)13.4 million, and business restructuring costs of
(pound)10.8million. Following PowerGen's undertaking, in November 1998, to
dispose of 4GW of its portfolio of coal-fired stations the restructuring
plans were scaled back, leading to a reversal of (pound)5.6 million of
restructuring costs in the nine months ended 3 January 1999. In the year
ended 30 March 1997 (pound)2.2 million of accelerated depreciation on
Ferrybridge unit 4 was charged against profits as a result of a revision to
the estimated useful life of the unit.
5. EMPLOYEE INFORMATION
The average number of persons employed during the period at the Power
Stations was:
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED 3 Year ended Year ended
JANUARY 29 March 30 March
1999 1998 1997
- ----------------------------------------------------------- ---- ------------- ---- --------------
<S> <C> <C> <C>
Number of employees 444 485 488
- ----------------------------------------------------------- ---- ------------- ---- --------------
444 485 488
------------- ------------- --------------
The salaries and related costs of employees were:
NINE
MONTHS
ENDED 3 Year ended Year ended
JANUARY 29 March 30 March
1999 1998 1997
(POUND)M (pound)m (pound)m
- ---------------------------------------------------------------------------------------------------
Wages and salaries 10.6 14.2 13.8
Social security costs 0.8 1.2 1.1
Other pension costs (note 12) 1.0 1.5 1.3
- ---------------------------------------------------------------------------------------------------
12.4 16.9 16.2
------------- ------------- --------------
15
<PAGE>
6. NET INTEREST PAYABLE
NINE MONTHS Year ended Year ended
ENDED 3 JAN 29 March 30 March
UARY 1999 1998 1997
(POUND)M (pound)m (pound)m
- ---------------------------------------------------------------------------------------------------
Unwinding of discount in provisions 0.8 1.0 1.0
----------- --------------- --------------
0.8 1.0 1.0
----------- --------------- --------------
</TABLE>
The basis on which the interest charge has been derived is set out in
'Capital structure and financing' under Principal Accounting Policies on
page 12.
7. TAX ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
NINE
MONTHS Year Year
ENDED 3 ended 29 ended 30
JANUARY March March
1999 1998 1997
(POUND)M (pound)m (pound)m
- -------------------------------------------------------------------------------------------------
United Kingdom corporation tax at 31%
(year to March 1998 31%, year to
March 1997 33%)
<S> <C> <C> <C>
Current 15.1 31.0 36.2
Deferred (note 14) 2.2 (12.3) (3.1)
- -------------------------------------------------------------------------------------------------
17.3 18.7 33.1
---------------- ---------------- ---------------
</TABLE>
The actual rate of tax reconciles with the applicable United Kingdom
corporate tax rate as follows:
<TABLE>
<CAPTION>
NINE
MONTHS Year Year
ENDED 3 ended 29 ended 30
JANUARY March March
1999 1998 1997
% % %
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United Kingdom corporation tax rate 31 31 33
Impact of change in tax rates on deferred tax 1 (5) -
- -------------------------------------------------------------------------------------------------
32 26 33
------------- ------------ -------------
</TABLE>
The basis on which the tax charge has been calculated is set out in
'Taxation' under Principal Accounting Policies on page 12.
16
<PAGE>
8. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Generating Overhaul Other Total
assets assets
(excluding
overhaul)
(pound)m
(pound)m (pound)m (pound)m (pound)m
COST
<S> <C> <C> <C> <C> <C>
As 30 March 1997 287.8 42.4 82.7 412.9
Additions 8.1 8.7 0.4 17.2
Disposals (0.5) (11.1) (0.3) (11.9)
- --------------------------------------------------------------------------------------
At 29 March 1998 295.4 40.0 82.8 418.2
Additions 2.1 4.6 0.3 7.0
Transfers from stores 2.2 - - 2.2
- --------------------------------------------------------------------------------------
AT 3 JANUARY 1999 299.7 44.6 83.1 427.4
-----------------------------------------------------
Depreciation
As at 30 March 1997 (148.3) (16.0) (52.3) (216.6)
Charge for year (13.1) (10.5) (2.4) (26.0)
Exceptional charge - closure
of unit 4 at Ferrybridge C (11.4) - (2.0) (13.4)
Disposals 0.5 11.1 0.3 11.9
- --------------------------------------------------------------------------------------
At 29 March 1998 (172.3) (15.4) (56.4) (244.1)
Charge for period (8.0) (7.5) (1.3) (16.8)
Transfers from stores (1.8) - - (1.8)
- -------------------------------- -----------------------------------------------------
AT 3 JANUARY 1999 (182.1) (22.9) (57.7) (262.7)
-----------------------------------------------------
Net book value at 3 January
1999 117.6 21.7 25.4 164.7
-----------------------------------------------------
Net book value at 29 March
1998 123.1 24.6 26.4 174.1
-----------------------------------------------------
Net book value at 30 March 139.5 26.4 30.4 196.3
1997
-----------------------------------------------------
</TABLE>
Generating assets (excluding overhaul) include freehold land and buildings
with a net book value of (pound)29.6 million (at 29 March 1998 (pound)25.6
million and at 30 March 1997 (pound)24.2 million).
17
<PAGE>
9. STOCKS
<TABLE>
<CAPTION>
AT At At
3 JANUARY 1999 29 March 1998 30 March 1997
(POUND)M (pound)m (pound)m
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fuel stocks 42.9 41.8 35.6
Stores 7.8 7.5 8.0
- --------------------------------------------------------------------------------------------------------------------
50.7 49.3 43.6
------------------ ------------------- --------------------
</TABLE>
Stores are shown net of a slow-moving and obsolescence provision of
(pound)5.9 million (at 29 March 1998 (pound)5.4 million and at 30 March
1997 (pound)5.1 million).
10. DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
AT At At
3 JANUARY 1999 29 March 1998 30 March 1997
(POUND)M (pound)m (pound)m
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pool debtors 32.6 32.4 25.8
Other debtors 1.5 0.6 0.7
Prepayments and accrued income 2.5 - -
- --------------------------------------------------------------------------------------------------------------------
36.6 33.0 26.5
------------------ ------------------- --------------------
11. TRADE AND OTHER CREDITORS FALLING DUE WITHIN ONE YEAR
AT At At
3 JANUARY 1999 29 March 1998 30 March 1997
(POUND)M (pound)m (pound)m
- --------------------------------------------------------------------------------------------------------------------
Trade creditors 12.1 15.9 17.1
Corporation tax 15.1 31.0 36.2
Other taxation and social security 0.4 0.4 0.4
Accruals and other creditors 4.9 7.0 7.7
- --------------------------------------------------------------------------------------------------------------------
32.5 54.3 61.4
------------------- -------------------- -------------------
</TABLE>
Debtors and trade and other creditors are received or settled by PowerGen
as they fall due.
12. PENSION SCHEME ARRANGEMENTS
PowerGen participates in the industry-wide scheme, the Electricity Supply
Pension Scheme (ESPS), for the majority of its employees, including those
employed at the Power Stations. This is a funded defined benefit scheme,
with assets invested in separate trustee administered funds.
An actuarial valuation of the ESPS is normally carried out every three
years by the Scheme's independent professionally qualified actuary, who
recommends the rates of contribution payable by each group participating in
the scheme. In intervening years the actuary reviews the continuing
appropriateness of the rates.
18
<PAGE>
Detailed accounting for these pensions arrangements takes place in PowerGen
and not at individual power stations. The charge for the period will
therefore normally represent contributions payable to the ESPS determined
on an actuarial basis so that the annual charge is a substantially level
percentage of current pensionable payroll.
In recent years, the ESPS has shown significant surpluses. Accounting for
the amortisation of these surpluses, other than the impact on regular costs
and contributions payable, is dealt with in the accounts of PowerGen, not
in these special-purpose combined accounts.
13. PROVISIONS FOR LIABILITIES AND CHARGES
Movements on provisions comprise:
<TABLE>
<CAPTION>
Charged to
30 profit and Excep- Amortisa- Provisions
March loss tional tion of utilised 29 March
1997 account charge discount 1998
(pound)m (pound)m (pound)m (pound)m (pound)m (pound)m
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rationalisation and re
structuring 1.5 1.3 10.8 - (2.7) 10.9
Decommissioning 20.2 - - 1.0 - 21.2
- ----------------------------------------------------------------------------------------------------------------------
21.7 1.3 10.8 1.0 (2.7) 32.1
----------- ------------- ----------- ------------- ----------- -----------
Charged to
29 profit and Excep Amortisa- Provi-
March loss tional tion of sions 3 JAN-
1998 account credit discount utilised UARY 1999
(pound)m (pound)m (pound)m (pound)m (pound)m (POUND)M
- ----------------------------------------------------------------------------------------------------------------------
Rationalisation and re
structuring 10.9 - (5.6) - (2.8) 2.5
Decommissioning 21.2 - - 0.8 - 22.0
- ----------------------------------------------------------------------------------------------------------------------
32.1 - (5.6) 0.8 (2.8) 24.5
----------- ------------- ----------- ------------- ----------- -----------
</TABLE>
Rationalisation and restructuring provisions will be utilised within the
next year, and decommissioning provisions over the remaining lives of the
power stations.
19
<PAGE>
14. DEFERRED TAX
An analysis of the full potential liability (which represents the US GAAP
deferred tax liability) and the net deferred tax liability recognised at 3
January 1999 and 29 March 1998 under UK GAAP is as follows:
<TABLE>
<CAPTION>
3 January 1999 29 March 1998 30 March 1997
---------------------- ----------------------- ----------------------
Full potential liabi- Full potential liabi- Full potential liabi-
lity and Liability lity and Liability lity and Liability
recognised recognised recognised
(pound)m (pound)m (pound)m
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Accelerated capital allowances 34.6 35.1 45.5
Other timing differences (9.0) (11.7) (9.8)
- ------------------------------------------------------------------------------------------------------------------
25.6 23.4 35.7
====================== ======================= ======================
</TABLE>
Assets and liabilities have been recognised for those timing differences
which are expected to crystallise in the foreseeable future. The liability
in respect of accelerated capital allowances is calculated at 30% (year
ended 29 March 1998 30%, year ended 30 March 1997 33%). The liability in
respect of other timing differences is calculated at 30% (year ended 29
March 1998 31%, year ended 30 March 1997 33%).
15. POWERGEN'S INVESTMENT IN THE POWER STATIONS
Movements in PowerGen's investment in the Power Stations comprise:
<TABLE>
<CAPTION>
3 January 29 March 30 March
1999 1998 1997
(pound)m (pound)m (pound)m
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Profit for the financial period 37.2 52.3 67.3
Net cash generated in the period and retained by PowerGen (14.4) (53.3) (57.8)
Net increase/(decrease) in PowerGen's investment in the Power
Stations for the period 22.8 (1.0) 9.5
PowerGen's opening investment in the Power Stations 146.6 147.6 138.1
- --------------------------------------------------------------------------------------------------------------------
PowerGen's closing investment in the Power Stations 169.4 146.6 147.6
------------ ------------ ------------
</TABLE>
20
<PAGE>
16. CASH FLOW
Reconciliation of operating results to cash flow from operating
activities:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED Year ended Year ended
3 JANUARY 29 March 30 March
1999 1998 1997
(POUND)M (pound)m (pound)m
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating profit 55.3 72.0 101.4
Depreciation (including exceptional charges) 16.8 39.4 27.1
Increase in stocks (1.8) (5.7) (16.0)
(Increase)/decrease in debtors (3.6) (6.5) 0.6
(Decrease)/increase in creditors (5.9) (1.9) 0.9
(Decrease)/increase in provisions (8.4) 9.4 (0.8)
- ---------------------------------------------------------------------------------------------------------------------
52.4 106.7 113.2
---------------- --------------- ---------------
</TABLE>
The movement in provisions for the nine months ended 3 January 1999
includes cash outflows of (pound)2.8million (year ended 29 March 1998
(pound)nil million, year ended 30 March 1997 (pound)nil million) relating
to exceptional charges arising in previous years.
17. COMMITMENTS
At 3 January 1999, the combined power stations had commitments of
(pound)28.0 million (29 March 1998 (pound)nil, 30 March 1997 (pound)5.9
million) for capital expenditure, none of which related to expenditure to
be incurred after one year.
18. POST BALANCE SHEET EVENT
On 30 April 1999 PowerGen announced the disposal, under 199-year leases, of
Fiddler's Ferry and Ferrybridge C power stations to Edison Mission Energy
("Mission"). PowerGen will supply coal to the stations for a four- year
period on terms consistent with PowerGen's overall coal commitments.
PowerGen have provided Mission with a six month Contract for Differences in
respect of part of the capacity of the plant, a Technical Support
Agreement, a Transitional Services Agreement and an agreement to provide
access to PowerGen's coal import terminal at Gladstone Dock, Liverpool.
Mission have taken on all the employees at the two stations. The disposal
was completed on 19 July 1999.
21
<PAGE>
19. TRANSACTIONS AND BALANCES WITH POWERGEN
Throughout the period covered by these special-purpose combined accounts
the Power Stations have entered into a number of transactions with other
PowerGen business units. Substantially all of these transactions are exempt
from the disclosure provisions of FRS 8 "Related Party Disclosures" as they
have been undertaken between business units of PowerGen UK plc and are
eliminated in the consolidated accounts of PowerGen UK plc. However, brief
details of the nature of these transactions are set out below.
As described in the basis of preparation of the special-purpose combined
accounts as set out under Principal Accounting Policies on pages 9 to 13,
the Power Stations were operated and managed as part of a portfolio of
generating units within the generation division of PowerGen for the whole
period covered by these special- purpose combined accounts. With the
exception of a number of sundry de minimus local expenses, all income and
expenditure, in terms of cash flows, was received or settled directly by
PowerGen centrally.
In addition, the Power Stations may have indirectly benefited from the
corporate level activities (as opposed to central functions) of PowerGen.
No charges have been recognised in these special-purpose combined accounts
in respect of these activities.
22
<PAGE>
20. SUMMARY OF DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The special-purpose combined accounts have been prepared in accordance with
UK GAAP, and on the basis described under Principal Accounting Policies on
pages 9 to 13, which differs in certain significant respects from US GAAP.
These differences relate principally to the following items, and the effect
of the adjustments to net income and PowerGen's investment in the Power
Stations which would be required under US GAAP are set out in the tables
below.
(a) DEFERRED TAXATION UK GAAP requires provision for deferred taxation
only when it is expected that a liability will become payable or
an asset will crystallise in the foreseeable future and then at
the known future rates of tax. US GAAP requires full provision for
deferred taxes to be made using enacted future tax rates.
(b) SEVERANCE COSTS. Under UK GAAP, voluntary severance costs for
employees leaving as part of an ongoing restructuring programme
are accrued and recognised in the profit and loss account once an
irrevocable commitment has been made to such a programme and
implementation has commenced. Voluntary severance costs include
severance payments, payments in lieu of notice and the costs of
providing incremental pension benefits in respect of staff
reductions. Under US GAAP, voluntary termination benefits are
generally charged in the period in which the employees accept the
terms under which they will leave the station's employment. In
addition, where the number of employees leaving results in a
significant reduction in the accrual of pension benefits for
employees' future service (a "curtailment" under US GAAP), the
effects are reflected as part of the cost of such termination
benefits.
(c) CASH FLOW STATEMENT Under US GAAP, various items would be
reclassified within the cash flow statement. In particular,
interest and taxation would form part of net cash flows from
operating activities.
23
<PAGE>
EFFECT ON NET INCOME OF DIFFERENCES BETWEEN UK GAAP AND US GAAP:
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED 3 Year ended Year ended
JANUARY 29 March 30 March
1999 1998 1997
(POUND)M (pound)m (pound)m
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income under UK GAAP 37.2 52.3 67.3
US GAAP adjustments:
Severance costs (8.0) 6.5 (0.8)
Taxation effects on the foregoing adjustment 2.5 (2.0) 0.3
Deferred taxation 1.1 (1.1) -
- --------------------------------------------------------------------------------------------------------------------
Net income under US GAAP 32.8 55.7 66.8
--------------- --------------- ---------------
</TABLE>
There are no recognised gains and losses other than as set out above and
therefore no separate comprehensive statement of net income is shown.
Effect on PowerGen's investment in the Power Stations of differences
between UK GAAP and US GAAP:
<TABLE>
<CAPTION>
29 JANUARY 29 March 30 March
1999 1998 1997
(POUND)M (pound)m (pound)m
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PowerGen's investment in the Power Stations under UK GAAP 169.4 146.6 147.6
US GAAP adjustments:
Severance costs - 8.0 1.5
Taxation effects on the foregoing adjustment - (2.5) (0.5)
Deferred taxation - (1.1) -
- -------------------------------------------------------------------------------------------------------------------
PowerGen's investment in the Power Stations under US GAAP 169.4 151.0 148.6
------------ ------------ ------------
</TABLE>
STATEMENT OF CASH FLOWS
The table below summarises the combined cash flow statements as if
presented in accordance with US GAAP, and includes the adjustment to
reconcile cash and cash equivalents under US GAAP to cash under UK GAAP.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED Year ended Year ended
3 JANUARY 29 March 30 March
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------
(POUND)M (pound)m (pound)m
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net cash provided by operating activities 21.4 70.5 74.0
Net cash used in investing activities (7.0) (17.2) (16.2)
Net cash used in financing activities (14.4) (53.3) (57.8)
--------------- --------------- --------------
Net movement in cash and cash equivalents 0.0 0.0 0.0
Cash and cash equivalents under US GAAP at the begin 0.0 0.0 0.0
ning and end of the period
=============== =============== ==============
</TABLE>
There are no significant non-cash investing or financing activities during
the period.
24
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated financial statements reflect
the acquisition by Edison First Power Limited, a wholly owned subsidiary of
Edison Mission Energy ("EME"), of Fiddler's Ferry and Ferrybridge C Power
Stations on July 19, 1999. The unaudited pro forma consolidated financial
statements should be read in conjunction with the historical financial
statements of EME included in its Annual Report on Form 10-K for the year
ended December 31, 1998, EME's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999, and the historical special-purpose combined
accounts of Fiddler's Ferry and Ferrybridge C Power Stations included
elsewhere in this Form 8-K/A. The pro forma adjustments are based on
current information about Fiddler's Ferry and Ferrybridge C Power Stations
net assets and results of operations.
EME's total acquisition cost of (Pounds) 1.384 billion (approximately $2.2
billion) was funded by a $500 million capital contribution by Edison
International and the issuance of long-term debt and the use of existing
working capital.
Fiddler's Ferry and Ferrybridge C Power Stations present their financial
statements based on UK GAAP denominated in British pounds sterling. The
financial statements have been converted to US GAAP and US dollars for the
purposes of the following pro forma presentation. Fiddler's Ferry and
Ferrybridge C Power Stations' balance sheet denominated in British pounds
sterling was translated to US dollars at a rate of 1.5770, which was the
exchange rate at July 4, 1999. British pounds sterling amounts in the
income statement were translated at the rate of 1.6182 for the six months
ended July 4, 1999 and 1.6568 for the year ended January 3, 1999, which
were the average exchange rates for the respective periods combined.
The following unaudited pro forma consolidated financial statements have
been prepared as if the acquisition of Fiddler's Ferry and Ferrybridge C
Power Stations had taken place on June 30, 1999, in the case of the pro
forma consolidated balance sheet, and as of January 1, 1998 for the
consolidated pro forma income statements for the six months ended June 30,
1999 and the year ended December 31, 1998. EME will account for the
acquisition as a purchase for financial reporting purposes. Accordingly,
the purchase price has been allocated to the assets and liabilities based
upon the estimated fair value as of the acquisition date. The allocation of
purchase price is preliminary, subject primarily to working capital true-up
adjustments pursuant to the asset purchase agreement and the completion of
the final determination of all transaction related costs. However,
management does not anticipate that the final allocation will materially
affect the EME's financial position or results of operations.
These unaudited pro forma financial statements should be read in
conjunction with the notes thereto and with the historical financial
statements and related notes of EME and Fiddler's Ferry and Ferrybridge C
Power Stations. The unaudited pro forma financial statements have been
prepared based upon assumptions deemed appropriate by management and are
for informational purposes only and are not necessarily indicative of the
actual or future results of operations or financial conditions that would
have been achieved had the acquisition occurred at the dates assumed.
25
<PAGE>
<TABLE>
<CAPTION>
EDISON MISSION ENERGY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(In thousands)
Fiddlers
Ferry and
Ferrybridge
Edison C Power
Mission Stations Pro Forma Pro Forma
Energy (USD) Adjustments Consolidated
---------------- --------------- ---------------- ----------------
Assets
<S> <C> <C> <C> <C>
Current Assets.......................... $1,039,294 $119,770 $ (771,066(D) $ 387,998
---------------- --------------- ---------------- ----------------
Investments
Energy projects.................... 1,887,859 - - 1,887,859
Oil and gas........................ 68,987 - - 68,987
---------------- --------------- ---------------- ----------------
Total Investments.............. 1,956,846 - - 1,956,846
Equipment............................... 4,716,070 252,164 2,757,355(B) 7,725,589
---------------- --------------- ---------------- ----------------
Other Assets............................ 445,981 - 31,540(C) 477,521
---------------- --------------- ---------------- ----------------
Total Assets............................ $8,158,191 $371,934 $2,017,829 $10,547,954
================ =============== ================ ================
Liabilities and
Shareholder's Equity
Current Liabilities..................... $1,151,781 $ 57,913 $ 97,485(E) $ 1,307,179
---------------- --------------- ---------------- ----------------
Net of Current
Maturities.............................. 4,161,114 - 1,308,910(A) 5,470,024
---------------- --------------- ---------------- ----------------
Liabilities............................. 1,227,765 75,901 849,554(F) 2,153,220
---------------- --------------- ---------------- ----------------
Total Liabilities.............. 6,540,660 133,814 2,255,949 8,930,423
Preferred Securities of
Subsidiaries............................ 352,135 - - 352,135
---------------- --------------- ---------------- ----------------
Shareholder's Equity.................... 1,265,396 238,120 (238,120(G) 1,265,396
---------------- --------------- ---------------- ----------------
Total Liabilities and $8,158,191 $371,934 $2,017,829 $10,547,954
Shareholder's Equity....................
================ =============== ================ ================
</TABLE>
6
26
<PAGE>
<TABLE>
<CAPTION>
t
EDISON MISSION ENERGY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(In thousands)
Fiddlers
Ferry and
Ferrybridge
Edison C Power
Mission Stations Pro Forma Pro Forma
Energy (USD) Adjustments Consolidated
---------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Operating Revenues
Electric Revenues $ 415,525 $ 223,953 $ - $ 639,478
Equity in income from energy pro
jects 95,999 - - 95,999
Equity in income from oil and gas 9,760 - - 9,760
Operation and maintenance services 17,844 - - 17,844
---------------- --------------- ---------------- ----------------
Total operating revenues 539,128 223,953 - 763,081
---------------- --------------- ---------------- ----------------
Operating Expenses
Fuel 127,647 97,302 (6,910)(H) 218,039
Plant Operations 81,389 67,398 - 148,787
Operations and Maintenance services 14,013 - - 14,013
Depreciation and amortization 59,743 15,887 35,158(I) 110,788
Administrative and general 69,064 - - 69,064
Restructuring Costs - (9,062) - (9,062)
---------------- --------------- ---------------- ----------------
Total operating expenses 351,856 171,525 28,248 551,629
---------------- --------------- ---------------- ----------------
Income from operations 187,272 52,428 (28,248) 211,452
---------------- --------------- ---------------- ----------------
Other Income (Expense)
Interest and other income 20,584 1,133 - 21,717
Interest expense (123,392) (971) (52,492)(J) (176,855)
Dividends on preferred securities (7,378) - - (7,378)
---------------- --------------- ---------------- ----------------
Total other income (expense) 110,186 162 (52,492) (162,516)
---------------- --------------- ---------------- ----------------
Income before taxes 77,086 52,590 (80,740) 48,936
Provision (benefit) for income taxes 13,675 13,269 (21,714)(K) 5,230
Income before change in accounting
principle $ 63,411 $ 39,321 $ (59,026) $ 43,706
Cumulative effect on prior years of
change in accounting for start-up costs (13,840) - - (13,840)
---------------- --------------- ---------------- ----------------
Net Income $ 49,571 $ 39,321 $ (59,026) $ 29,866
================ =============== ================ ================
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
EDISON MISSION ENERGY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(In thousands)
Fiddlers
Ferry and
Ferrybridge
Edison C Power
Mission Stations Pro Forma Pro Forma
Energy (USD) Adjustments Consolidated
---------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Operating Revenues
Electric Revenues $ 664,055 $ 554,100 $ - $ 1,218,155
Equity in income from energy pro
jects 171,819 - - 171,819
Equity in income from oil and gas 17,613 - - 17,613
Operation and maintenance services 40,293 - - 40,293
---------------- --------------- ---------------- ----------------
Total operating revenues 893,780 554,100 - 1,447,880
---------------- --------------- ---------------- ----------------
Operating Expenses
Fuel 176,954 241,475 (13,966)(H) 404,463
Plant Operations 127,711 138,917 - 266,628
Operations and Maintenance services 28,386 - - 28,386
Depreciation and amortization 87,339 38,020 66,499(I) 191,858
Administrative and general 122,925 - - 122,925
Restructuring Costs - 22,200 - 22,200
---------------- --------------- ---------------- ----------------
Total operating expenses 543,315 440,612 52,533 1,036,460
---------------- --------------- ---------------- ----------------
Income from operations 350,465 113,488 (52,533) 411,420
---------------- --------------- ---------------- ----------------
Other Income (Expense)
Interest and other income 49,785 - - 49,785
Interest expense (182,901) (1,740) (111,220)(J) (295,861)
Dividends on preferred securities (14,770) - - (14,770)
---------------- --------------- ---------------- ----------------
Total other income (expense) (147,886) (1,740) (111,220) (260,846)
---------------- --------------- ---------------- ----------------
Income before taxes 202,579 111,748 (163,753) 150,574
Provision (benefit) for income taxes 70,445 35,145 (50,747)(K) 54,843
---------------- --------------- ---------------- ----------------
Net Income $ 132,134 $ 76,603 $ (113,006) $ 95,731
================ =============== ================ ================
</TABLE>
28
<PAGE>
EDISON MISSION ENERGY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The above unaudited pro forma consolidated financial statements reflect
Edison Mission Energy's results of operations for the year ended December
31, 1998 as included in its Annual Report on Form 10-K, as well as its
results of operations for the six month's ended June 30, 1999 and its
financial position as of June 30, 1999 as included in its Quarterly Report
on Form 10-Q. The results of Fiddler's Ferry and Ferrybridge C power
stations included in the above unaudited pro forma consolidated financial
statements for the year ended December 31, 1998 combine the audited results
of its operations for the nine months ended January 3, 1999, contained
elsewhere in this Form 8-K/A, and the unaudited results of its operations
for the three months ended March 29, 1998. The unaudited pro forma
consolidated income statement for the six months ended June 30, 1999
include the stations' unaudited results of operations for the six months
ended July 4, 1999. The unaudited pro forma consolidated balance sheet as
of June 30, 1999 contains Fiddler's Ferry and Ferrybridge C power stations'
unaudited financial position as of July 4, 1999.
(A) To reflect the long-term debt issued by an EME subsidiary to fund
the acquisition of Fiddler's Ferry and Ferrybridge C power
stations.
(B) To reflect adjustment to fair value resulting from the preliminary
purchase price allocation of the Fiddler's Ferry and Ferrybridge C
power stations.
(C) To reflect the deferred financing costs related to the issuance of
the long-term debt.
(D) To reflect the net cash consideration paid in connection with the
acquisition of Fiddler's Ferry and Ferrybridge C power stations
($1,958 million) and related transaction costs ($242 million)
including financial advisor, legal and accounting, offset by the
net cash received in connection with the issuance of the long-term
debt ($1,309 million) and elimination of current assets not
acquired ($120 million).
(E) To reflect accrual of transaction costs due after the consummation
of the acquisition ($155 million) offset by the elimination of
certain current liabilities not assumed ($58 million).
(F) To reflect 1) an accrual of approximately $90 million related to the
obligations under the asset purchase agreement to purchase local
high cost coal, 2) the establishment of a deferred tax liability
of approxi mately $835 million associated with the difference
between the book and tax basis of the assets acquired and 3) a
reduction of approximately $75 million related to liabilities not
assumed by EME. Under the terms of the asset purchase agreement,
EME was required to source a fixed portion of its coal needs from
high cost domestic sources. The accrual was based on a comparison
of prices for domestic and international coal, considering
locational price differences, and the quantity of domestic coal
required to be purchased under the agreement. Under current
operating levels, it is estimated that the provision will be
amortized over approximately four and one-half years.
(G) To reflect the elimination of PowerGen's investment in Fiddler's
Ferry and Ferrybridge C power stations.
(H) Represents the reduction of Fiddler's Ferry and Ferrybridge C
power stations' above market fuel costs to market levels (see note
(F) above).
(I) Reflects pro forma increase in depreciation and amortization
resulting from amortization of the fair value of Fiddler's Ferry
and Ferrybridge C power stations over periods from 5 to 32 years.
(J) Reflects the pro forma interest expense associated with the
issuance of $1,309 million of long-term debt and use of $240
million on existing credit lines to finance the acquisition of
Fiddler's Ferry and Ferrybridge C power stations. The long-term
debt bears interest at the London Interbank Offer Rate plus 1.5%
(approximately 6.7% at 6/30/99). EME's average credit line bore
interest at approximately 6.25% on June 30, 1999.
(K) Reflects the adjustment necessary to provide income taxes at the
effective UK corporate tax rate of 30%.
29
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Edison Mission Energy
---------------------
(Registrant)
BY /S/ KEVIN M. SMITH
-------------------------------------
KEVIN M. SMITH,
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
DATE: FEBRUARY 8, 2000
30
