UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report: May 9, 1996
(Date of earliest event reported)
ENRON GLOBAL POWER & PIPELINES L.L.C.
(Exact name of registrant as specified in its charter)
Delaware 1-13584 76-0456366
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation or Identification No.)
organization)
ENRON BUILDING 77002
1400 SMITH STREET (Zip Code)
HOUSTON, TEXAS
(Address of principal
executive offices)
Registrant's telephone number,
including area code: (713) 853-1937
PAGE
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Acquired Business -
Centragas - Transportadora de Gas de la Regi<o'>n
Central de Enron Development & C<i'>a., S.C.A.
Report of Independent Public Accountants .......................1
Balance Sheets -
December 31, 1994, 1995 and
March 31, 1996 (Unaudited) .....................................2
Statements of Income -
Year Ended December 31, 1995 and Three Months
Ended March 31, 1996 (Unaudited) ...............................4
Statements of Cash Flows -
Period from March 24, 1994 (date of inception)
through December 31, 1994, Year Ended
December 31, 1995 and Three Months Ended
March 31, 1996 (Unaudited) .....................................5
Statements of Changes in Financial Position -
Period from March 24, 1994 (date of inception)
through December 31, 1994, Year Ended
December 31, 1995 and Three Months Ended
March 31, 1996 (Unaudited) .....................................6
Statements of Changes in Shareholders' Equity -
Period from March 24, 1994 (date of inception)
through December 31, 1994, Year Ended
December 31, 1995 and Three Months Ended
March 31, 1996 (Unaudited) .....................................7
Notes to Financial Statements .....................................8
(b) Pro Forma Financial Statements -
Enron Global Power & Pipelines L.L.C.
Pro Forma Consolidated Financial Statements (Unaudited) ..........20
Pro Forma Consolidated Balance Sheet -
March 31, 1996 ................................................21
Pro Forma Consolidated Statements of Income -
Year Ended December 31, 1995 ..................................22
Three Months Ended March 31, 1996 .............................23
Notes to Pro Forma Consolidated Financial Statements ................24
(c) Exhibits
23.1 Consent of Arthur Andersen & C<i'>a.........................27
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(Translation of a report originally issued in Spanish-See Note 2)
To the shareholders of CENTRAGAS - Transportadora de Gas de la Regi<o'>n
Central de Enron Development & C<i'>a., S.C.A.:
We have audited the accompanying balance sheet of CENTRAGAS - TRANSPORTADORA DE
GAS DE LA REGION CENTRAL DE ENRON DEVELOPMENT & CIA., S.C.A. (a development
stage enterprise) as of December 31, 1995 and 1994, the related statements of
income for the year ended December 31, 1995, and the related statements of
changes in shareholders' equity, changes in financial position and cash flows
for the year ended December 31, 1995 and for the period from March 24, 1994
(date of inception) through December 31, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in Colombia, which are in substantial agreement with those in the United States
of America. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CENTRAGAS - Transportadora de
Gas de la Regi<o'>n Central de Enron Development & C<i'>a., S.C.A. (a
development stage enterprise) as of December 31, 1995 and 1994, and the results
of its operations, the changes in shareholders' equity, the changes in its
financial position and its cash flows for the year ended December 31, 1995 and
for the period from March 24, 1994 (date of inception) through December 31,
1994, in conformity with accounting principles generally accepted in Colombia
applied on a consistent basis (See Note 2).
ARTHUR ANDERSEN & CIA
Bogot<a'>, Colombia,
March 4, 1996
(Translation of financial statements originally issued in Spanish - See Note 2)
CENTRAGAS - Transportadora de Gas de la Region Central de
Enron Development & Cia., S.C.A. (A Development Stage Enterprise)
BALANCE SHEETS
(In Thousands of Colombian Pesos)
<TABLE>
<CAPTION>
ASSETS
March 31, DECEMBER 31,
1996 1995 1994
(Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash 9,640,154 4,122,440 903,739
Short-term investments 20,494,388 13,124,453 17,130,957
Accounts receivable 21,181,435 7,047,195 93,690,205
Inventory 75,632 - -
Total current assets 51,391,609 24,294,088 111,724,901
PROPERTY AND EQUIPMENT, net 205,623,512 192,094,432 39,630,357
DEFERRED CHARGES 1,960,415 2,489,738 2,014,264
DEFERRED MONETARY
CORRECTION CHARGE 1,307,528 1,178,138 95,928
Total assets 260,283,064 220,056,396 153,465,450
MEMORANDUM ACCOUNTS 13,786,095 20,771,284 219,913,412
</TABLE>
BALANCE SHEETS
(In Thousands of Colombian Pesos)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, DECEMBER 31,
1996 1995 1994
(Unaudited)
<S> <C> <C> <C>
CURRENT LIABILITIES:
Suppliers 21,563,922 16,359,068 3,096,874
Accounts payable 5,004,373 1,526,213 1,076,243
Accrued liabilities 510 53,763 -
Total current liabilities 26,568,805 17,939,044 4,173,117
LONG TERM LIABILITIES:
Equity advance - 23,522,179 -
Notes payable 175,878,136 163,975,722 142,978,440
Deferred liabilities 1,468,213 1,478,175 -
Deferred monetary correction 1,321,012 1,191,795 119,133
Others 3,190,459 3,003,133 -
Total liabilities 208,426,625 211,110,048 147,270,690
SHAREHOLDERS' EQUITY:
Common stock-Col$1 par
value; 50,000,000,000
shares authorized;
44,037,066,881 issued and paid
as of March 31, 1996,
5,965,641,507 issued
and paid as of December
31, 1995 and 1994 44,037,067 5,965,642 5,965,642
Legal reserves 150,596 - -
Equity revaluation 2,025,409 1,474,743 229,118
Retained earnings 5,643,367 1,505,963 -
Total shareholders'
equity 51,856,439 8,946,348 6,194,760
Total liabilities and
shareholders' equity 260,283,064 220,056,396 153,465,450
MEMORANDUM ACCOUNTS 13,786,095 20,771,284 219,913,412
The accompanying notes are an integral part of these balance sheets.
</TABLE>
STATEMENTS OF INCOME
(In Thousands of Colombian Pesos)
<TABLE>
<CAPTION>
Three Months
Ended Year Ended
March 31, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
OPERATING REVENUES 15,992,569 6,013,311
OPERATING EXPENSES 3,544,721 2,551,043
Operating income (loss) 12,447,848 3,462,268
OTHER REVENUES (EXPENSES):
Financial revenues 68,720 9,574
Financial expenses (4,020,878) (2,299,147)
Monetary correction 8,675,982 1,784,936
Foreign exchange loss (9,361,884) (1,451,793)
Others - 125
Income before income taxes 7,809,788 1,505,963
COLOMBIAN INCOME TAXES 2,166,421 -
Net income 5,643,367 1,505,963
The accompanying notes are an integral part of these statements.
</TABLE>
STATEMENTS OF CASH FLOWS
(In Thousands of Colombian Pesos)
<TABLE>
<CAPTION>
Period from
March 24,1994
(Date of
Three Months Inception)
Ended Year Ended Through
March 31, December 31, December 31,
1996 1995 1994
(Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Transportation tariff revenues 12,249,200 5,933,860 -
Payments of operating fees (552,219) (206,345) -
Operating expenses, net (234,664) (294,569) -
General and administrative
expenses, net (134,302) (73,544) -
Financial expenses, net (4,249,114) (1,150,710) -
Net cash flows provided by
operating activities 7,078,901 4,208,692 -
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (8,589,033) (115,716,242) (35,940,314)
Additions to deferred charges (41,069) (402,362) (981,288)
Additions to furniture and fixtures (110,396) (127,471) (27,119)
Loans to related parties - 91,840,395 (91,840,395)
Loans to third parties - 1,849,810 (1,849,810)
Net cash flows used in investing
activities (8,740,498) (22,555,870) (130,638,926)
CASH FLOWS FROM FINANCING ACTIVITIES:
Prepayment of notes payable - (5,962,804) -
Equity advance - 23,522,179 -
Issuance of notes - - 142,707,980
Issuance of equity 14,549,246 - 5,965,642
Net cash flows from financing
activities 14,549,246 17,559,375 148,673,622
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 12,887,649 (787,803) 18,034,696
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 17,246,893 18,034,696 -
CASH AND CASH EQUIVALENTS AT END OF
PERIOD 30,134,542 17,246,893 18,034,696
The accompanying notes are an integral part of these statements.
</TABLE>
STATEMENTS OF CHANGES IN FINANCIAL POSITION
(In Thousands of Colombian Pesos)
<TABLE>
<CAPTION>
Period from
March 24, 1994
(Date of
Three Months Inception)
Ended Year Ended Through
March 31 December 31, December 31,
1996 1995 1994
(Unaudited)
<S> <C> <C> <C>
WORKING CAPITAL OBTAINED FROM:
Operations -
Net income 5,643,367 1,505,963 -
Monetary correction (8,675,982) (1,768,115) -
Depreciation and amortization 3,220,736 1,542,112 -
Total obtained from operations 188,121 1,279,960 -
Equity advance - 23,522,179 -
Increase in deferred liabilities 9,962 1,478,175 -
Increase in long-term notes payable 11,902,414 20,997,282 142,707,980
Issuance of equity 14,549,246 - 5,965,642
Other 187,326 3,003,133 -
Total working capital obtained 26,837,069 50,280,729 148,673,622
WORKING CAPITAL USED IN:
Additions to property and equipment (6,792,574) (151,001,995) (39,378,034)
Additions to deferred charges (221,368) (475,474) (1,743,804)
Dividends payable (1,355,367) - -
INCREASE (DECREASE) IN
WORKING CAPITAL 18,467,760 (101,196,740) 107,551,784
CHANGES IN COMPONENTS OF
WORKING CAPITAL:
Cash and cash equivalents 5,517,714 3,218,701 903,739
Short-term investments 7,369,935 (4,006,504) 17,130,957
Accounts receivable 14,134,240 (86,643,010) 93,690,205
Inventory 75,632 - -
Suppliers (5,204,854) (13,262,194) (3,096,874)
Accounts payable (3,478,160) (449,970) (1,076,243)
Accrued liabilities 53,253 (53,763) -
INCREASE IN WORKING CAPITAL 18,467,760 (101,196,740) 107,551,784
The accompanying notes are an integral part of these statements.
</TABLE>
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM MARCH 24, 1994 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1994, THE YEAR ENDED DECEMBER 31, 1995
AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
(In Thousands of Colombian Pesos)
<TABLE>
Paid in Legal Retained Equity
CAPITAL RESERVES EARNINGS REVALUATION
<CAPTION>
<S> <C> <C> <C> <C>
BALANCES AS OF MARCH 24, 1994 15,000 - - -
Capital contributions 5,950,642 - - -
Inflation adjustment - - - 229,118
BALANCES AS OF
DECEMBER 31, 1994 5,965,642 - - 229,118
Net income - - 1,505,963 -
Inflation adjustment - - - 1,245,625
BALANCES AS OF
DECEMBER 31, 1995 5,965,642 - 1,505,963 1,474,743
Capital contributions 38,071,425 - - -
Net income - - 5,643,367 -
Appropriations approved by
shareholders in general
meeting
Legal reserve - 150,596 (150,596) -
Dividends declared - - (1,355,367) -
Inflation adjustment - - - 550,666
BALANCES AS OF
MARCH 31, 1996 44,037,067 150,596 5,643,367 2,025,409
The accompanying notes are an integral part of these statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995 AND 1994
1. COMPANY OPERATIONS
CENTRAGAS - Transportadora de Gas de la Regi<o'>n Central de Enron Development
& C<i'>a., S.C.A. ("CENTRAGAS" or the "Company") was incorporated on March 24,
1994, under the laws of the Republic of Colombia. On September 12, 1994 the
Company changed its legal structure from a simple limited partnership
("sociedad en comandita simple") to a limited partnership by shares ("sociedad
en comandita por acciones").
The Company's objective is to develop, build and operate a 578 kilometer
pipeline from Ballena, on the northern coast of Colombia, to Barrancabermeja,
in the central region of the country, under the terms of a 15-year
Transportation Services Contract with Empresa Colombiana de Petr<o'>leos
("Ecopetrol"), the Colombian state-owned oil company. Pursuant to this
contract, the Company is obligated to build, operate, maintain and ultimately
transfer the pipeline to Ecopetrol. The total estimated construction cost of
the pipeline is US$217 million.
On September 10, 1995, the Company received approval from Ecopetrol of the
"transportation initiation date" for the first 237 kilometer sector of the
pipeline from Ballena to Valledupar. Starting from that date the Company is
receiving partial payments from Ecopetrol of the transportation tariffs as
stated in the Transportation Services Contract.
On February 24, 1996, the Company obtained official approval of the final
transportation initiation date. Starting from that date, the Company has the
right to receive full tariff payments as stated in the Transportation Services
Contract.
For the construction of the pipeline, the Company signed a US$77 million
contract with Techint International Construction Corporation ("Tenco") on June
11, 1994.
On July 7, 1994, the Company signed two contracts with Promigas S.A.
("Promigas"). The first contract is for the inspection of the pipeline
construction by Tenco and the second is for the operation and maintenance of
the pipeline.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
EXPLANATION ADDED FOR TRANSLATION INTO ENGLISH
These financial statements and notes to financial statements were translated
into English from statements originally issued in Spanish. All amounts are
stated in thousands of Colombian pesos ("Col$") unless otherwise noted. The
statements are presented on the basis of generally accepted accounting
principles in Colombia. Certain accounting principles applied by the Company
that conform with generally accepted accounting principles in Colombia may not
conform with generally accepted accounting principles in other countries.
The principal accounting policies used in the preparation of these financial
statements are the following:
INVESTMENTS
Carried at cost, which does not exceed market value.
PROPERTY AND EQUIPMENT
Carried at cost adjusted for inflation. All costs involved in the construction
of the pipeline, including right-of-way payments, engineering costs, inflation
adjustments and net financing and pre-operating costs are capitalized during
the construction period until the asset is substantially completed and ready
for use. Depreciation of the pipeline is calculated under the straight-line
method over an estimated useful life of 15 years (in accordance with the
duration of the Transportation Services Contract with Ecopetrol). At the end
of the 15-year period, Ecopetrol has the option to purchase the asset for a
nominal amount.
Depreciation of furniture and fixtures is calculated under the straight-line
method over an estimated useful life of ten years.
TRANSACTIONS IN FOREIGN CURRENCIES
Monetary assets and liabilities denominated in foreign currencies are
translated into Colombian pesos at the exchange rate in effect at period end
(Col$987.65 per US$1 on December 31, 1995, and Col$831.27 per US$1 on December
31, 1994). Foreign exchange losses generated by liabilities denominated in
foreign currencies obtained to finance the cost of construction in process are
capitalized until the asset is in condition to be used, as determined by
official approval from Ecopetrol. All other foreign exchange gains and losses
are included in results of operations.
INCOME TAXES
The provision for Colombian income taxes is based on book income, in order to
properly match income for the period with the related costs and expenses.
The tax consequences of timing differences which imply the payment of a higher
or lower current income tax are based on tax rates currently in effect, and are
recorded as deferred income tax assets or liabilities and will be reversed to
operations when the related timing differences reverse.
INFLATION ADJUSTMENTS
The historical costs of property, plant and equipment, equity, and other non-
monetary items, as well as the revenues and expenses in the income statement,
are adjusted for the inflation of the year. These adjustments are calculated
using the inflation rate as determined by the National Administrative
Department of Statistics ("DANE"). The inflation rate published by the DANE
was 20.28% for 1995 and 12.73% for the period from April 1, 1994 through
December 31, 1994.
Gains and losses from monetary corrections thus determined are included in
results of operations. However, the inflation adjustment of capitalized
construction costs is recorded as a deferred monetary correction credit during
the pre-operating period. When the asset is placed in service, this deferred
credit is amortized to income using the same method and useful life used to
calculate depreciation of the capitalized costs. During the period in which
the inflation adjustment on the capitalized construction cost is deferred, a
proportional share of the inflation adjustment on equity will also be deferred.
That adjustment is recorded as a deferred monetary correction charge and will
be amortized over the useful life of the related assets.
The inflation adjusted amounts of the non-monetary assets do not purport to
reflect current market values or replacement values. The Colombian inflation
accounting rules do not alter the asset valuation criteria of the lower of cost
or net realizable value. Amounts in the financial statements of the prior year
are not restated in terms of the purchasing power of the currency at the close
of the current year.
ADDITIONAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Payments of income taxes during the year 6,404,119 39,901
Payments of interest 16,202,355 -
22,606,474 39,901
</TABLE>
RECLASSIFICATIONS
Certain items in the 1994 financial statements have been reclassified to
conform to the 1995 financial statement presentation.
3. SHORT-TERM INVESTMENTS
As of December 31 short-term investments are detailed as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Overnight operations 12,962,760 17,091,816
Trust funds 161,693 39,141
13,124,453 17,130,957
</TABLE>
4. ACCOUNTS RECEIVABLE
As of December 31 accounts receivable are detailed as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Enron International Development
Services, Inc. 476,813 746,117
Enron Development Corp. 7,994 36,039
Enron Wenchang Power C.V. - 61,931,058
Smith/Enron Cogeneration Limited - 29,127,181
484,807 91,840,395
Tax advances 6,450,809 39,901
Others 111,579 1,809,909
7,047,195 93,690,205
</TABLE>
The above amounts include dollar denominated receivables amounting to
US$482,775 in 1995 and US$112,184,996 in 1994.
As of December 31, 1994, the related party accounts receivable balances
correspond mainly to short-term loans of funds obtained from the issuance of
the Notes (see Note 10). Additionally, the Company made payments amounting to
US$25,604,235 in 1995 and US$32,730,159 in 1994 to a wholly owned subsidiary of
Enron International Inc., which provided certain services to the Company
including technical assistance, security, community integration, pipe
procurement and project development assistance.
5. PROPERTY AND EQUIPMENT
As of December 31 the detail of property and equipment is the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Pipeline 75,376,407 -
Furniture and fixtures 163,924 27,119
Construction in process 118,117,573 39,605,781
193,657,904 39,632,900
Less-accumulated depreciation (1,563,472) (2,543)
192,094,432 39,630,357
</TABLE>
As of December 31, 1995, construction in process includes engineering costs,
mainline pipe, telecommunications and security systems, construction costs, net
financing costs, right-of-way costs and inflation adjustments, incurred in the
construction of the second and third sectors of the pipeline.
6. DEFERRED CHARGES
As of December 31 deferred charges are detailed as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Insurance 773,656 1,743,804
Discount on issuance of notes 216,368 270,460
Right-of-way and non-insurable
excusable events 1,478,175 -
Other 21,539 -
2,489,738 2,014,264
</TABLE>
7. SUPPLIERS
As of December 31 suppliers include the following balances denominated in
foreign currency:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Enron International
Development Services, Inc. US$12,866,056 US$ -
Enron Development Corp. 642,458 -
Techint International Construction 1,425,832 -
Skandia Seguros Generales S.A. - 917,290
John L. Wortham & Son - 300,355
Lehman Brothers - 82,203
Standard & Poor's Ratings Group - 64,455
Other 84,194 115,130
US$15,018,540 US$ 1,479,433
</TABLE>
8. ACCOUNTS PAYABLE
As of December 31 accounts payable are detailed as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Stamp taxes 2,238 372,239
Accrued financial costs 1,455,284 638,108
Withholding taxes payable 68,691 65,896
1,526,213 1,076,243
</TABLE>
9. INCOME TAXES
The Company is subject to income taxes equivalent to 30% of taxable income.
For taxable years from 1994 to 1995 the Company is also subject to a 25%
surcharge which is computed on the net income tax determined for each taxable
year. This results in a combined statutory rate of 37.5%. This surcharge is
itself deductible for income tax purposes in the year it is completely paid.
Starting in 1996 the income tax rate will be 35%. Income taxes are computed
taking into account the tax effects of inflation adjustments.
During 1995 and 1994 the Company did not compute income taxes based on
presumptive minimum taxable income because it was a Development Stage
Enterprise for tax purposes, as defined by Colombian tax rules. The effective
income tax rate for 1995 differs from the 37.5% statutory rate due to permanent
differences between book profits and taxable income. The main permanent
difference is the "theoretical deduction" established in the tax code to reduce
the tax effects of the application of taxable inflation adjustments.
10. NOTES PAYABLE
In order to obtain funds to finance the construction of the pipeline, on
December 16, 1994, the Company issued notes amounting to US$172 million. The
notes are secured by the pipeline and related assets. The notes will be paid
in equal quarterly installments starting June 1, 1998, through December 1,
2010. Interest on the notes will be payable quarterly in arrears starting
March 1, 1995, at a 10.65% annual interest rate.
Interest payable on these notes amounts to US$1,473,482 as of December 31, 1995
(US$763,250 as of December 31, 1994).
Pursuant to the issuance of the notes, the Company executed an Indenture
Contract with The Bank of New York (Trustee for the funds from the issuance)
which establishes that the Company is subject to various covenants covering,
among others, the Company's legal structure, information requirements,
insurance coverage and debt service coverage ratios.
On December 1, 1995, the Company made a prepayment of the principal of the
notes amounting to US$5,973,855. This prepayment was made to comply with
certain special clauses stated in the Indenture Contract signed with The Bank
of New York and related to the terms of payment of the notes.
11. SHAREHOLDERS' EQUITY
As of December 31, 1995, the common shares of the Company are represented by
50,000,000,000 common shares with a par value of Col$1 per share, of which
5,965,641,507 common shares are authorized, issued and paid.
As of December 31, 1994, the shareholders of the Company are detailed as
follows:
<TABLE>
<CAPTION>
Number of
SHARES PERCENTAGE
<S> <C> <C>
Enron Development Corp., Colombia
Branch (General Partner) 59,655,217 1.000
Enron Pipeline Colombia C.V. 5,666,764,066 94.990
Enron Colombia Investments C.V. 238,327,378 3.995
Enron International Inc. 298,282 0.005
Enron International Development
Services, Inc. 298,282 0.005
Enron Pipeline Company Colombia G.P. Inc. 298,282 0.005
5,965,641,507 100.000
</TABLE>
As of December 31, 1995, the shareholders of the Company are detailed as
follows:
<TABLE>
<CAPTION>
Number of
SHARES PERCENTAGE
<S> <C> <C>
Enron Development Corp., Colombia
Branch (General Partner) 59,655,217 1.000
Enron Pipeline Colombia
Limited Partnership 3,728,525,942 62.500
Enron Colombia Investments Limited
Partnership 2,176,565,502 36.485
Enron International Inc. 298,282 0.005
Enron International Development
Services, Inc. 298,282 0.005
Enron Pipeline Company
Colombia S.P. Inc. 298,282 0.005
5,965,641,507 100.000
In December 1995, some of the shareholders agreed to sell their shares in
Centragas to Tomen Corp. and to Promigas based on subscribed capital. In 1996
when this operation has been completed, Tomen and Promigas will each own 25% of
the subscribed and paid capital of Centragas.
Under the terms of the Transportation Services Contract with Ecopetrol, the
General Partner (the Colombia branch of Enron Development Corp.) must maintain
its participation of 1% in the total equity of the Company.
An agreement signed between the Company and The Bank of New York obliges the
shareholders to make any additional contributions required to pay any
additional costs incurred in the construction of the pipeline.
Until such time as the Company is dissolved or otherwise terminated, Enron
Development Corp. shall be the General Partner and, as such, undertakes to
administer and represent the Company directly or through one or more delegates
appointed under its exclusive responsibility and according to the terms of the
By-laws, and shall have joint and unlimited liability, together with the
Company, for the operations of the Company. The General Partner may acquire
and sell shares without losing its capacity as General Partner. In addition to
the General Partner, the Company has limited liability shareholders whose
liability for the obligations of the Company is limited to the sum of their
respective shareholdings.
The Colombian tax rate on dividends paid to non-resident foreigners is 8% in
1995 and 7% in 1996 and subsequent years.
Companies are required to appropriate at least 10% of net income to the legal
reserve until such reserve amounts to at least 50% of subscribed capital. This
reserve cannot be distributed as dividends but can be used to absorb losses.
The equity revaluation, which results from the inflation adjustment of equity,
cannot be distributed as dividends, although it can be capitalized free of
taxes.
12. EFFECTS OF INFLATION ACCOUNTING
The effects of the inflation adjustment on the balance sheets as of December
31, 1995 and 1994 and in the statement of income for the periods then ended are
detailed as follows:
</TABLE>
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Property and equipment, net (1,931,530) (2,852)
Equity revaluation 163,415 133,190
Net effect of inflation adjustment on
operations (1,768,115) 130,338
Inflation adjustments of income statement
accounts (458,467) (226)
Total monetary correction (2,226,582) 130,112
Monetary correction capitalized
as Property, Plant & Equipment 395,176 (130,112)
Monetary correction included
in operations (1,831,406) -
</TABLE>
13. MEMORANDUM ACCOUNTS
As of December 31, 1995 and 1994 memorandum accounts correspond mainly to the
estimated value of the Company's pending contractual obligations as established
by the contracts signed with Promigas, Ecopetrol, Tenco, and Enron
International Development Services, Inc., in relation to the construction of
the pipeline. Additionally, in 1994 these accounts included the funds
deposited by Ecopetrol in an emergency account, as established in the
Transportation Services Contract signed between Ecopetrol and the Company.
These funds can only be used by the Company to cover certain future events,
called "non-insurable excusable events."
14. INTERIM FINANCIAL STATEMENTS (UNAUDITED)
The interim financial statements as of March 31, 1996, have been prepared by
the Company's management without audit. Such financial statements reflect all
adjustments (consisting only of normal recurring entries) which are, in the
opinion of management, necessary for a fair presentation of the financial
position, results of operations, changes in shareholders' equity, changes in
working capital and cash flows at and for such interim period. Interim period
results are not necessarily indicative of the results to be achieved for an
entire year.
The preparation of financial statements 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 could differ from the estimates.
Pursuant to agreements signed in 1995, during the first quarter of 1996 Enron
Pipeline Colombia Limited Partnership sold shares representing a 25% interest
in Centragas to Tomen Corp. and Enron Colombia Investments Limited Partnership
sold shares representing a 25% interest in Centragas to Promigas. During May
of 1996, Enron Corp. ("Enron") sold its remaining 50% indirect interest in
Centragas to Enron Global Power & Pipelines L.L.C. ("EPP"). In July 1996, Enron
received notice from Ecopetrol consenting to Enron's transfer of its general
partnership interest to EPP or a designated subsidiary of EPP. Once these
transactions are consummated, Centragas will be owned, directly or indirectly,
by EPP (50%), Promigas (25%) and Tomen Corp. (25%).
The exchange rate in effect at March 31, 1996, was Col$1,048 per US$1.
Supplemental cash flow information:
During the quarter ended March 31, 1996, cash paid for interest was 4,289,694
and no cash was paid for income taxes.
15. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN COLOMBIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
The accompanying financial statements have been prepared in accordance with
Colombian GAAP which differs in certain respects from those applicable in the
United States of America ("U.S. GAAP").
The differences have been reflected in the financial information provided below
and principally relate to the following items:
(a)ADJUSTMENT OF FINANCIAL STATEMENTS FOR INFLATION:
As further discussed in Note 2, Colombian GAAP requires that non-monetary
asset, liability and equity accounts and all income statement accounts be
adjusted for the current year impacts of inflation.
This adjustment affects current year financial statement amounts only and does
not affect prior period financial statement balances. U.S. GAAP generally
requires the use of the historical cost basis of accounting and does not allow
the recognition of the effects of inflation on financial statement balances.
(b) FUNCTIONAL CURRENCY:
The functional currency of the Company is the U.S. dollar. These Colombian
GAAP financial statements have been prepared using the Colombian Peso. To
appropriately state the results of the Company in U.S. Dollars in accordance
with U.S. GAAP, the balances and transactions of the Company have been
remeasured in accordance with Statement of Financial Accounting Standards No.
52 - "Foreign Currency Translation" (SFAS No. 52). In connection with the
remeasurement process, all transaction gains and losses in the Colombian Peso
financial statements resulting from transactions denominated in the U.S. Dollar
have been eliminated.
(c) CAPITALIZATION OF INTEREST DURING CONSTRUCTION:
Colombian GAAP allows for the capitalization of all interest costs incurred
during the development stage of an entity. Under U.S. GAAP, Statement of
Financial Accounting Standards No. 34 - "Capitalization of Interest Cost"
allows for the capitalization of interest cost on expenditures made during the
construction phase of an asset on a theoretical avoided cost basis.
(d) DEFERRED TAXES:
Colombian GAAP requires the use of the deferred method to account for deferred
taxes. U.S. GAAP requires the use of the asset and liability approach to
account for deferred taxes. Under U.S. GAAP, Statement of Financial Accounting
Standards No. 109 - "Accounting for Income Taxes" requires that deferred tax
assets and liabilities are recognized based on anticipated future tax
consequences attributable to differences between financial statement carrying
amounts of assets and liabilities and their respective tax basis. The primary
difference between the book and tax basis of assets and liabilities relates to
the capitalization for Colombian tax purposes of all interest costs as
discussed above.
(e)RECONCILIATION OF NET INCOME AND SHAREHOLDERS' EQUITY TO U.S. GAAP:
The following is a summary of the significant adjustments to net income for the
year ended December 31, 1995, and the three months ended March 31, 1996 and to
shareholders' equity as of December 31, 1994, 1995 and March 31, 1996, which
would be required if U.S. GAAP had been applied instead of Colombian GAAP in
the accompanying financial statements. Had U.S. GAAP been applied to the net
income for 1994, the results would not have materially differed from those
under Colombian GAAP.
<TABLE>
<CAPTION>
Quarter Ended Year Ended
March 31, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
Net Income in accordance with Colombian
GAAP Col$ 5,643,367 Col$ 1,505,963
U.S. GAAP adjustments:
Elimination of transaction losses
related to U.S. Dollar denominated
transactions 9,361,884 1,451,793
Elimination of effects of inflation (8,772,738) (1,831,406)
Others, not individually
significant (126,218) 45,489
COL$ 6,106,295 COL$ 1,171,839
Equivalent amount after remeasurement
according to SFAS No. 52 US$ 5,510,651 US$ 950,937
Interest capitalized for Colombian GAAP 30,606 (1,836,397)
Deferred Income Taxes (10,713) 642,739
Approximate net income (loss) in
accordance with U.S. GAAP US$ 5,530,544 US$ (242,721)
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31, December 31,
1996 1995 1994
(Unaudited)
<S> <C> <C> <C>
Shareholders' equity in
accordance with Colombian
GAAP Col$ 51,856,439 Col$ 8,946,348 Col$ 6,194,760
U.S. GAAP adjustments:
Elimination of effects of
inflation on the equity
revaluation (2,025,409) (1,474,743) (229,118)
Elimination of transaction
losses related to U.S.
Dollar denominated
transactions 10,813,677 1,451,793 -
Elimination of effects
of inflation included
in net income (10,604,144) (1,831,406) -
Others, not individually
significant (80,729) 45,489 -
COL$ 49,959,834 COL$ 7,137,481 COL$ 5,965,642
Equivalent amount after
remeasurement according
to SFAS No. 52 US$ 50,168,780 US$ 8,200,804 US$ 7,249,867
Interest capitalized for
Colombian GAAP (1,805,791) (1,836,397) -
Deferred Income Taxes 632,026 642,739 -
Approximate shareholders'
equity in accordance with
U.S. GAAP US$ 48,995,015 US$ 7,007,146 US$ 7,249,867
</TABLE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following pro forma consolidated financial statements reflect the
acquisition by Enron Global Power & Pipelines L.L.C. ("EPP") of a 50% equity
interest in the net assets of CENTRAGAS - Transportadora de Gas de la Regi<o'>n
Central de Enron Development & C<i'>a S.C.A. ("Centragas") on May 9, 1996, as
more fully discussed in the related notes. The pro forma consolidated
financial statements should be read in conjunction with the historical
financial statements of EPP included in its Annual Report on Form 10-K for the
year ended December 31, 1995, EPP's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996, and the historical financial statements of
Centragas included elsewhere in this Form 8-K. The pro forma adjustments have
been revised from those previously included in EPP's 10-Q and are based on
current information about Centragas' assets, liabilities and results of
operations. The pro forma consolidated financial statements are not intended
to be indicative of actual operating results or financial position had the
transactions occurred earlier, nor do they purport to indicate operating
results or financial position which may be attained in the future.
ENRON GLOBAL POWER & PIPELINES L.L.C.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996
(In Thousands of United States Dollars)
(Unaudited)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 34,106 $ - $ 34,106
Accounts receivable 3,595 - 3,595
Total Current Assets 37,701 - 37,701
Investments in and Advances to
Unconsolidated Subsidiaries 155,339 25,144 (A) 180,483
Other 620 - 620
Total Assets $ 193,660 $ 25,144 $ 218,804
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 6,357 $ 850 (B) $ 7,207
Accrued taxes 3,079 - 3,079
Total Current Liabilities 9,436 850 10,286
Deferred Income Taxes 2,790 186 (C) 2,976
Shareholders' Equity
Common shares 156,738 22,500 (A) 179,238
Retained earnings 24,696 1,608 (A) 26,304
Total Shareholders' Equity 181,434 24,108 205,542
Total Liabilities and Shareholders'
Equity $ 193,660 $ 25,144 $ 218,804
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
ENRON GLOBAL POWER & PIPELINES L.L.C.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(In Thousands of United States Dollars, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C>
Technical Assistance Fees $ 10,033 $ - $ 10,033
Equity in Earnings of
Unconsolidated Subsidiaries:
Pipeline operations 22,154 (121) (D) 22,033
Power operations 11,274 - 11,274
Equity in Earnings and Technical
Assistance Fees 43,461 (121) 43,340
General and Administrative Expenses (6,036) - (6,036)
Taxes Other Than Income (600) - (600)
Other Income (Expense), net 1,773 (850) (B) 923
Income Before Income Taxes 38,598 (971) 37,627
Income Taxes 3,571 (8) (C) 3,563
Net Income $ 35,027 $ (963) $ 34,064
Net Income Per Common Share $ 1.68 $ 1.52
Average Number of Common Shares
Used in Computation 20,842 22,419
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
ENRON GLOBAL POWER & PIPELINES L.L.C
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(In Thousands of United States Dollars,
Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C>
Technical Assistance Fees $ 2,604 $ - $ 2,604
Equity in Earnings of
Unconsolidated Subsidiaries:
Pipeline operations 6,090 2,765 (D) 8,855
Power operations 2,277 - 2,277
Equity in Earnings and Technical
Assistance Fees 10,971 2,765 13,736
General and Administrative Expenses (1,592) - (1,592)
Taxes Other Than Income (143) - (143)
Other Income (Expense), net 323 - 323
Income Before Income Taxes 9,559 2,765 12,324
Income Taxes 1,019 194 (C) 1,213
Net Income $ 8,540 $ 2,571 $ 11,111
Net Income Per Common Share $ 0.41 $ 0.50
Average Number of Common Shares
Used in Computation 20,863 22,440
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
Enron Global Power & Pipelines L.L.C.
Notes to Pro Forma Consolidated Financial Statements
On May 9, 1996 Enron Global Power & Pipelines L.L.C. (EPP) purchased (a) 100%
of the common stock of Enron Commercial Finance, Ltd. (ECFL) and (b) the right
to later acquire at no cost (once certain third party consents are obtained) a
1% general partnership interest in Centragas (as defined below) from Enron
Corp. in exchange for 1,576,808 common shares of EPP. ECFL owns 100% of the
common stock of Enron Colombia Transportation, Ltd. (ECTL), a .015% limited
partnership interest in CENTRAGAS - Transportadora de Gas de la Regi<o'>n
Central de Enron Development & C<i'>a S.C.A. (Centragas) and 99% limited
partnership interests in Enron Pipeline Colombia Limited Partnership (EPCLP)
and Enron Colombia Investments Limited Partnership (ECILP). ECTL owns a 1%
general partner interest in EPCLP and ECILP. EPCLP and ECILP own a 37.5% and a
11.485% limited partnership interest in Centragas, respectively. Enron
Development Corp. - Colombia Branch currently owns a 1% general partnership
interest in Centragas.
The pro forma consolidated financial statements illustrate the effects of EPP's
acquisition of an indirect 50% equity interest in Centragas and the related
financing of the transaction. The pro forma consolidated financial statements
have been prepared as if the transactions had taken place on March 31, 1996 in
the case of the pro forma consolidated balance sheet, or as of January 1, 1995
in the case of the pro forma consolidated statements of income.
As the acquisitions were made from Enron Corp. they will be accounted for in a
manner similar to a pooling of interest. EPP's investment will be based on the
historical investment balance of Enron Corp. The difference between the
acquisition price and the historical investment balance will be included as an
adjustment to EPP's equity account. Since prior period earnings are not
material, prior period opening retained earnings will be restated for the
related equity in earnings.
Centragas reached full commercial operations on February 24, 1996, and
accordingly, the results for the quarter ended March 31, 1996 will not be
indicative of the results anticipated for future quarters or annual periods of
operations. Additionally, included in the results of Centragas for the quarter
ended March 31, 1996 are equity in earnings of $1.5 million related to a bonus
for the early completion of construction of the pipeline assets.
(A) Reflects the investment in Centragas and the issuance of EPP common
shares related to the purchase of the 50% equity interest in Centragas.
The investment includes EPP's proportionate share of dividends declared
but not distributed by Centragas.
(B) Reflects the estimated costs incurred by EPP associated with the purchase
of the interest in Centragas.
(C) Reflects deferred income taxes associated with a 7% Colombian withholding
tax which will be assessed when Centragas earnings are dividended to EPP.
(D) Reflects EPP's 50% share in the equity in earnings of Centragas.
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.
ENRON GLOBAL POWER & PIPELINES L.L.C.
Date: July 19, 1996 By: /S/ PAULA H. RIEKER
Paula H. Rieker
Vice President and
Chief Financial Officer
INDEX TO EXHIBITS
Exhibit
NO. METHOD OF
FILING
23.1 -Consent of Arthur Andersen Filed herewith
electronically
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report included in the Form 8-K, into the Company's previously filed
Registration Statement File No. 33-99384.
ARTHUR ANDERSEN & CIA
Bogot<a'>, Colombia
July 18, 1996
