===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1997
OR
( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ______ to ______
<TABLE>
<CAPTION>
<S> <C> <C>
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
33-92776 Mobile Energy Services Company, L.L.C. 63-1148953
(An Alabama Limited Liability Company)
900 Ashwood Parkway, Suite 300
Atlanta, Georgia 30338
(770) 379-7781
33-92776 Mobile Energy Services Holdings, Inc. 58-2133689
(An Alabama Corporation)
900 Ashwood Parkway, Suite 450
Atlanta, Georgia 30338
(770) 379-7730
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</TABLE>
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months(or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No ___
<TABLE>
<CAPTION>
<S> <C> <C>
Description of Shares Outstanding
Registrant Common Stock at October 31, 1997
- ---------- -------------- --------------------
Mobile Energy Services Company, L.L.C. Not Applicable
Mobile Energy Services Holdings, Inc. Par Value $1 Per Share 1,000
</TABLE>
Each of the registrants meets the conditions set forth in General
Instruction H (1) (a) and (b) of Form 10-Q and is therefore filing this form
with reduced disclosure as permitted by such General Instruction H.
2
<PAGE>
Table of Contents
PAGE
PART I
Selected Definitions 4
Item 1. Financial Statements 9
Mobile Energy Services Company, L.L.C.
Management's Opinion as to Fair Statement of Results 9
Statements of Income 10
Statements of Cash Flows 11
Balance Sheets 12
Mobile Energy Services Holdings, Inc.
Management's Opinion as to Fair Statement of Results 13
Consolidated Statements of Income 14
Consolidated Statements of Cash Flows 15
Consolidated Balance Sheets 16
Notes to the Condensed Financial Statements 17
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 19
PART II
Item 6. Exhibits and Reports on Form 8-K
3
<PAGE>
SELECTED DEFINITIONS
When used in this report, the following terms will have the
meanings indicated.
"Air Compressors" means the air compressors and related
facilities that service the compressed air needs of the Mills and the Energy
Complex that are owned by Scott/Kimberly-Clark and located on the property
leased by Scott/Kimberly-Clark to Mobile Energy.
"Common Services Agreement" means the Common Services
Agreement dated December 12, 1994 among Mobile Energy, Scott/Kimberly-Clark, the
Paper Mill Owner, the Tissue Mill Owner and the Pulp Mill Owner, including any
amendments thereto.
"Contractual Demand" means with respect to a particular
Processing Service and a particular Mill, the Demand level for such Processing
Service used to determine the Demand Charges for such Processing Service for
such Mill under the Energy Services Agreement and the Master Operating
Agreement.
"Demand" means with respect to a particular Processing
Service, and a particular Mill, the quantity of the Energy Complex's capacity to
provide such Processing Service that Mobile Energy is obligated to dedicate to
such Mill pursuant to the Energy Services Agreements and the Master Operating
Agreement.
"Demand Charges" means the fixed capacity charges each Mill
Owner is obligated to pay, based upon formulas set forth in the Master Operating
Agreement, to Mobile Energy based upon the level of such Mill Owner's Demand for
each Processing Service.
"Energy Services Agreements" means the three separate Energy
Services Agreements dated December 12, 1994, including any amendments thereto,
between Mobile Energy and each of (1) the Tissue Mill Owner, (2) the Pulp Mill
Owner, and (3) the Paper Mill Owner.
"Financing Documents" means all agreements, documents and
instruments evidencing and/or securing the senior indebtedness of Mobile Energy.
"First Mortgage Bonds" means $255,210,000 principal amount of
8.665% First Mortgage Bonds due 2017 issued by Mobile Energy and unconditionally
guaranteed by Holdings.
"Holdings" means Mobile Energy Services Holdings, Inc.
"IDB" means Industrial Development Board of the City of
Mobile, Alabama.
4
<PAGE>
"Indenture" means the Trust Indenture dated as of August 1,
1995 among Mobile Energy, Holdings, and First Union National Bank of Georgia, as
trustee.
"Intercreditor Agreement" means the Intercreditor and
Collateral Agency Agreement dated as of August 1, 1995 among Bankers Trust
(Delaware) as the collateral agent, Mobile Energy, Holdings, First Union
National Bank of Georgia as trustee under the Indenture, First Union National
Bank of Georgia as trustee under the Tax-Exempt Indenture, the IDB, and Banque
Paribas as the Working Capital Facility Provider.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended.
"Maintenance Expenditures" means all costs and expenses of
operating and maintaining the Energy Complex and, when Mobile Energy is
exercising the Mobile Energy Step-In Rights, the Pulp Mill Step-In Equipment,
other than (i) fuel costs and expenses, (ii) labor and employee expenses,
including fringe benefits and labor relations expense, (iii) payments for
insurance premiums and like insurance-related expenses, (iv) costs and expenses
of consumable items such as process or cleaning chemicals and lubricants, (v)
equipment rental, small tools and vehicle maintenance expenses, (vi) costs and
expenses associated with legal, accounting and other office and administrative
functions, (vii) permitting fees, (viii) costs and expenses of safety supplies,
office supplies and other office expenses, (ix) property taxes and payments made
in lieu of taxes, (x) computer maintenance expenses, (xi) any amounts payable
for services rendered under the Common Services Agreement, (xii) ash disposal
costs, (xiii) certain liquidated damages payable to the Mill Owners under the
Master Operating Agreement, (xiv) amounts payable to the Mill Owners for
reimbursement of costs incurred in connection with the exercise of Mill Owner
Step-In Rights, (xv) any amounts required to be rebated to the United States
government pursuant to Section 148 of the Internal Revenue Code in connection
with any of the Tax-Exempt Indenture Securities and (xvi) payments to the IDB,
including payments required to be made by Mobile Energy with respect to the 1994
Bonds, in each case to the extent the foregoing costs or expenses are not
customarily treated as capital expenditures.
"Master Operating Agreement" means the Amended and Restated
Master Operating Agreement (including any amendments thereto or restatements
thereof) dated as of July 13, 1995 among Mobile Energy, Scott/Kimberly-Clark,
the Tissue Mill Owner, the Pulp Mill Owner, and the Paper Mill Owner.
"Mill Owner Maintenance Reserve Account Agreement" means the
Mill Owner Maintenance Reserve Account Agreement dated as of August 1, 1995
among Mobile Energy, Southern, the Pulp Mill Owner, the Paper Mill Owner, and
the Tissue Mill Owner.
"Mill Owners" means the Paper Mill Owner, the Pulp Mill Owner,
and the Tissue Mill Owner.
"Mill Owner Step-In Rights" means the rights granted to the
Mill Owners by the Master Operating Agreement to assume operational
responsibility for the Energy Complex under certain circumstances where Mobile
5
<PAGE>
Energy fails to meet the needs of the Mills for Processing Services and that
failure is not excused under the Master Operating Agreement.
"Mobile Energy" means Mobile Energy Services Company, L.L.C.
"Mobile Energy Step-In Rights" means the right granted to
Mobile Energy under the Master Operating Agreement to assume operational
responsibility for the Pulp Mill Step-In Equipment if the Pulp Mill Owner fails
to perform its obligations under the Water Agreement (and if certain other
conditions are satisfied).
"1994 Bonds" means $117,000,000 principal amount of Industrial
Development Revenue Bonds 1994 Series A due December 1, 2014 issued by the IDB
and Scott.
"Operation and Maintenance Costs" means all costs and expenses
of operating and maintaining the Energy Complex and, when Mobile Energy is
exercising the Mobile Energy Step-In Rights, the Pulp Mill Step-In Equipment,
including and together with, without limitation, Maintenance Expenditures and
any costs and expenses specified in clauses (i) through (xvi) of the definition
of Maintenance Expenditures (other than rent payments under the lease agreement
between the IDB and Mobile Energy that secures the Tax-Exempt Bonds and payments
of principal, premium and interest on the 1994 Bonds).
"Paper Mill Owner" means S.D. Warren acting in its capacity as
the owner of the Paper Mill.
"Peak Usage" (i) with respect to Liquor Processing Services,
means the amount of Liquor Processing Services utilized by the Pulp Mill
(measured in millions of pounds of virgin dry black liquor solids sent to the
precipitation mix tanks) during the one (1) week interval of time in which the
Liquor Processing Services consumed by the Pulp Mill were at the highest levels;
(ii) with respect to Power Processing Services, means with regard to a
particular Mill, the average of the amount of Power Processing Services utilized
by that Mill (measured in kilowatts) during the five (5) fifteen (15) minute
intervals of time (which intervals do not overlap) in which the Power Processing
Services utilized by that Mill were at the highest levels; and (iii) with
respect to Steam Processing Services, means with regard to a particular Mill,
the average amount of Steam Processing Services utilized by that Mill (measured
in millions of BTUs per hour) during the five (5) one (1) hour intervals of time
(which intervals do not overlap) in which the Steam Processing Services utilized
by that Mill were at the highest level.
"Processing Sales" means the usage charges that the Mill
Owners are required to pay to Mobile Energy under the Energy Services Agreements
based upon formulas set forth in the Master Operating Agreement and which vary
from month to month in accordance with the amount of Processing Services
required by, and provided to, such Mill Owner and Mobile Energy's efficiency
with respect to fuel usage.
6
<PAGE>
"Processing Services" means Power Processing Services, Steam
Processing Services and Liquor Processing Services.
"Process Water Plant" means the plant owned by the Pulp Mill
Owner which supplies water to the Energy Complex and the Mills.
"Pulp Mill Owner" means Scott/Kimberly-Clark acting in its
capacity as the owner of the Pulp Mill.
"Pulp Mill Step-In Equipment" means the Process Water Plant,
the Waste Water Treatment Plant, the Air Compressors (if any of the Mill Owners
are operating the Air Compressors) and the Pulp Mill's truck scales.
"Scott" means Scott Paper Company.
"Scott/Kimberly Clark" means Scott, the wholly owned
subsidiary of Kimberly-Clark, Inc.
"S.D. Warren" means S.D. Warren Company.
"SEC" means the Securities and Exchange Commission.
"Southern" means The Southern Company.
"Southern Energy" means Southern Energy, Inc. (formerly known
as Southern Electric International, Inc.)
"Step-In Rights" means Mill Owner Step-In Rights or Mobile
Energy Step-In Rights, as the context may require.
"Tax-Exempt Bonds" means $85,000,000 principal amount of 6.95%
Solid Waste Revenue Refunding Bonds (Mobile Energy Services Company, L.L.C.
Project) Series 1995 due 2020 issued by the IDB.
"Tax-Exempt Indenture" means the Amended and Restated Trust
Indenture dated as of August 1, 1995 between the IDB and First Union National
Bank of Georgia, as trustee, under which the Tax-Exempt Bonds were issued in
August 1995.
"Tax-Exempt Indenture Securities" means the Tax-Exempt Bonds
and any additional senior indebtedness issued pursuant to the Tax-Exempt
Indenture.
"Tissue Mill Owner" means Scott/Kimberly-Clark acting in its
capacity as the owner of the Tissue Mill.
7
<PAGE>
"Waste Water Treatment Plant" means the treatment plant owned
by the Pulp Mill Owner and used to treat waste water from the Energy Complex and
the Mills.
"Water Agreement" means the Water Procurement and Effluent
Services Agreement dated December 12, 1994 among Mobile Energy, the Pulp Mill
Owner, the Tissue Mill Owner, and the Paper Mill Owner, including any amendments
thereto.
8
<PAGE>
Item 1. FINANCIAL STATEMENTS
MOBILE ENERGY SERVICES COMPANY, L.L.C.
MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS
The condensed financial statements of Mobile Energy included herein have
been prepared by Mobile Energy without audit, pursuant to the rules and
regulations of the SEC. In the opinion of Mobile Energy's management, the
information furnished herein reflects all adjustments (which included only
normal recurring adjustments) necessary to present fairly the results for the
periods ended September 30, 1996 and September 30, 1997. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the SEC, although Mobile Energy
believes that the disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed financial statements be read in
conjunction with the financial statements and the notes thereto included in
Mobile Energy's Report on Form 10-K for the year ended December 31, 1996.
9
<PAGE>
<TABLE>
<CAPTION>
MOBILE ENERGY SERVICES COMPANY, L.L.C.
STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
<S> <C> <C>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------- --------------------
1997 1996 1997 1996
---- ---- ---- ----
OPERATING REVENUES:
Demand charges $14,167 $14,350 $42,649 $43,276
Processing sales 6,504 6,068 20,691 18,809
Other 180 200 540 643
------- ------- ------- -------
Total operating revenues 20,851 20,618 63,880 62,728
------- ------- ------- -------
OPERATING EXPENSES:
Operations and maintenance 6,135 6,490 19,329 18,642
Fuel 1,594 1,351 6,130 5,260
Depreciation and amortization 3,248 3,135 9,760 9,340
------- ------- ------- -------
Total operating expenses 10,977 10,976 35,219 33,242
------- ------- ------- -------
OPERATING INCOME 9,874 9,642 28,661 29,486
INTEREST EXPENSE (7,231) (7,497) (22,005) (22,622)
OTHER INCOME 164 132 484 601
------- ------- ------- -------
NET INCOME $2,807 $2,277 $7,140 $7,465
======= ======= ======= =======
The accompanying notes as they relate to Mobile Energy are an integral part of these condensed statements.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
MOBILE ENERGY SERVICES COMPANY, L.L.C.
STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
<S> <C> <C>
For the Nine Months For the Nine Months
Ended Sept 30, 1997 Ended Sept 30, 1996
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,140 $ 7,465
----------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,814 10,355
Change in operating assets and liabilities:
Accounts receivable 546 33
Prepaid expenses and other current assets 8,198 (7,362)
Accounts payable 342 (1,014)
Accrued interest and other current liabilities (7,206) (3,490)
--------- --------
Total adjustments 12,694 (1,478)
--------- --------
Net cash provided by operating activities 19,834 5,987
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and equipment (936) (8,997)
--------- --------
Net cash used in investing activities (936) (8,997)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (repayments) of notes payable, net (20,962) (1,612)
Equity contributions 7,071 0
Repayment of long-term debt (7,350) (5,895)
Payment of member distributions (12,782) (23,004)
--------- --------
Net cash used in financing activities (34,023) (30,511)
--------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (15,125) (33,521)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 19,896 40,990
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,771 $ 7,469
========= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, net of amount capitalized $ 27,944 $24,585
======== =======
The accompanying notes as they relate to Mobile Energy are an integral part of these condensed statements.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
MOBILE ENERGY SERVICES COMPANY, L.L.C.
BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
<S> <C> <C>
At September 30, 1997 At December 31,
(Unaudited) 1996
--------------------- --------------
CURRENT ASSETS
Cash and cash equivalents $ 4,771 $ 19,896
Restricted deposits 8,712 17,414
Trade accounts receivable 13,921 14,467
Materials and supplies 3,081 2,854
Prepaid expenses and other 307 30
------- --------
Total current assets 30,792 54,661
------- --------
PROPERTY, PLANT AND EQUIPMENT 377,340 374,988
Less accumulated depreciation (32,745) (23,667)
Construction work in process 2,152 3,568
-------- --------
Property, plant and equipment, net 346,747 354,889
-------- --------
DEFERRED LOAN COST
Net of accumulated amortization of $1,481 and $968 at
September 30, 1997 and December 31, 1996 respectively 13,675 14,188
-------- --------
Total assets $391,214 $423,738
======== ========
LIABILITIES AND MEMBERS' EQUITY
At September 30, 1997 At December 31,
(Unaudited) 1996
--------------------- ---------------
CURRENT LIABILITIES
Trade accounts payable $ 1,594 $ 2,006
Account payable - associated company 4,770 4,016
Distribution payable 0 12,782
Note payable1,883 22,845
Current portion - long-term debt 7,885 7,350
Accrued interest 6,738 13,846
Other 1,595 1,524
-------- --------
Total current liabilities 24,465 64,369
-------- --------
LONG-TERM DEBT 289,630 296,461
COMMITMENTS AND CONTINGENCIES
MEMBERS' EQUITY 77,119 62,908
-------- --------
Total liabilities and members' equity $391,214 $423,738
======== ========
The accompanying notes as they relate to Mobile Energy are an integral part of these condensed statements.
</TABLE>
12
<PAGE>
MOBILE ENERGY SERVICES HOLDINGS, INC. AND SUBSIDIARY
MANAGEMENT'S OPINION AS TO FAIR STATEMENT OF RESULTS
The condensed consolidated financial statements of Holdings included herein
have been prepared by Holdings without audit, pursuant to the rules and
regulations of the SEC. In the opinion of Holdings' management, the information
furnished herein reflects all adjustments (which included only normal recurring
adjustments) necessary to present fairly the results for the periods ended
September 30, 1996 and September 30, 1997. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the SEC, although Holdings believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements and the notes
thereto included in Holdings Report on Form 10-K for the year ended December 31,
1996.
13
<PAGE>
<TABLE>
<CAPTION>
MOBILE ENERGY SERVICES HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Stated in Thousands of Dollars)
<S> <C> <C>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------- --------------------
1997 1996 1997 1996
---- ---- ---- -----
OPERATING REVENUES:
Demand charges $14,167 $14,350 $42,649 $43,276
Processing sales 6,504 6,068 20,691 18,809
Other 180 200 540 643
------- --- ------- -------
Total operating revenues 20,851 20,618 63,880 62,728
------- ------- ------- -------
OPERATING EXPENSES:
Operations and maintenance 6,135 6,390 19,329 18,542
Fuel 1,594 1,351 6,130 5,260
Depreciation and amortization 3,248 3,135 9,760 9,340
------- ------- ------- -------
Total operating expenses 10,977 10,876 35,219 33,142
------- ------- ------- -------
OPERATING INCOME 9,874 9,742 28,661 29,586
INTEREST EXPENSE (7,231) (7,497) (22,005) (22,622)
OTHER INCOME 220 195 560 681
MINORITY INTEREST (28) (23) (71) (75)
------- ------- ------ ------
INCOME BEFORE TAXES 2,835 2,417 7,145 7,570
PROVISION FOR INCOME TAXES
1,084 886 2,733 2,857
------- ------- ------- -------
NET INCOME $ 1,751 $ 1,531 $ 4,412 $ 4,713
======= ======= ======= =======
The accompanying notes as they relate to Holdings are an integral part of these condensed statements.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
MOBILE ENERGY SERVICES HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in Thousands of Dollars)
<S> <C> <C>
For the Nine Months For the Nine Months
Ended Sept 30, 1997 Ended Sept 30, 1996
--------------------- ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,412 $ 4,713
-------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,814 10,355
Deferred income taxes 7,516 7,814
Changes in operating assets and liabilities:
Accounts receivable 545 33
Prepaid expenses and other current assets 8,742 (7,361)
Accounts payable (400) (4,740)
Accrued interest and other current liabilities (5,355) (1,328)
-------- ---------
Total adjustments 21,862 4,773
-------- ---------
Net cash providedby operating activities 26,274 9,486
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and equipment (936) (8,997)
-------- ---------
Net cash used in investing activities (936) (8,997)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (repayments) of notes payable (20,962) 1,612
Repayment of long-term debt (7,350) (5,895)
Payment of dividends & return of capital (16,012) (23,004)
-------- ---------
Net cash used in financing activities (44,324) (30,511)
-------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (18,986) (30,022)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 26,679 41,118
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,693 $11,096
======== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, net of amount capitalized $ 27,817 $ 24,585
======== =========
Cash received during period for:
Cash received from income tax refunds $ 6,934 $ 7,144
======== =========
The accompanying notes as they relate to Holdings are an integral part of these condensed statements.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
MOBILE ENERGY SERVICES HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Stated in Thousands of Dollars)
ASSETS
<S> <C> <C>
At September 30, 1997 At December 31,
(Unaudited) 1996
--------------------- -------------
CURRENT ASSETS
Cash and cash equivalents $ 7,693 $ 26,679
Restricted deposits 8,712 17,414
Trade accounts receivable 13,922 14,467
Materials and supplies 3,081 2,854
Prepaid expenses and other 807 1,074
-------- --------
Total current assets 34,215 62,488
-------- --------
PROPERTY, PLANT AND EQUIPMENT 377,340 374,988
Less accumulated depreciation (32,745) (23,667)
Construction work in process 2,152 3,568
-------- --------
Property, plant and equipment, net 346,747 354,889
-------- --------
DEFERRED LOAN COST
Net of accumulated amortization of $1,481 and $968 at
September 30, 1997 and December 31, 1996 respectively 13,675 14,188
-------- --------
Total assets $394,637 $431,565
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
At September 30, 1997 At December 31,
(Unaudited) 1996
--------------------- ---------------
CURRENT LIABILITIES
Trade accounts payable $ 1,594 $ 2,006
Account payable - associated company 953 941
Dividends payable 0 16,012
Note payable 1,883 22,845
Current portion - long-term debt 7,885 7,350
Accrued interest 6,738 13,846
Other 2,467 1,454
-------- --------
Total current liabilities 21,520 64,454
-------- --------
DEFERRED INCOME TAXES 46,930 39,414
-------- --------
LONG-TERM DEBT 289,630 296,461
MINORITY INTEREST 771 629
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Common stock, $1 par value; 1,000 shares
authorized and outstanding 1 1
Paid-in capital 31,373 30,623
Retained earnings (deficit) 4,412 (17)
-------- --------
Total stockholder's equity 35,786 30,607
-------- --------
Total liabilities and stockholder's equity $394,637 $431,565
======== ========
The accompanying notes as they relate to Holdings are an integral part of these condensed statements.
</TABLE>
16
<PAGE>
MOBILE ENERGY SERVICES COMPANY, L.L.C.
MOBILE ENERGY SERVICES HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS:
(A) Mobile Energy is contractually obligated under three energy service
agreements (the "Agreements") to provide Power Processing Services and Steam
Processing Services to a tissue mill (the "Tissue Mill"), a pulp mill (the "Pulp
Mill"), and a paper mill (the "Paper Mill," and together with the Tissue Mill
and the Pulp Mill, the "Mills") and Liquor Processing Services to the Pulp Mill
for a period of 25 years beginning December 16, 1994. Under the terms of the
Agreements, the Mill Owners are obligated to pay monthly fixed demand charges
for dedicated capacity of the Energy Complex and also variable charges for
actual amounts purchased.
(B) Mobile Energy is subject to dynamic federal, state and local environmental
laws and regulations. For example, the Environmental Protection Agency ("EPA")
has proposed (1) certain effluent limitations guidelines and standards for the
control of waste water pollutants from pulp and paper industry facilities and
(2) a national emission standard for hazardous air pollutants from facilities
which would include the Mills (the "Cluster Rule"). If promulgated as proposed,
the Cluster Rule (which would principally apply to the Mills) probably will
require significant modifications to the Mills. The EPA also plans to propose
regulations applicable to combustion sources at pulp and paper facilities. These
regulations, collectively referred to as the "Combustion Rule," will likely
consist of effluent guidelines and hazardous air pollutant emission standards.
The EPA currently plans to propose the Combustion Rule during 1997.
Accordingly, the Cluster Rule could have a materially adverse impact on
the economic status of the Mills and the amount of processing services they
require, and the Combustion Rule could have a materially adverse impact on
Mobile Energy directly by requiring Mobile Energy to modify its equipment or
operations in order to comply with the Combustion Rule's provisions. Under the
Master Operating Agreement, Mobile Energy generally is permitted to charge the
Mills the reasonable cost of capital expenditures and operations and maintenance
expenses incurred by Mobile Energy as a result of the Cluster Rule or the
Combustion Rule. Nevertheless, there can be no assurance that a Mill Owner would
not abandon its Mill rather than incur the costs imposed by the Cluster Rule (or
any other environmental or nonenvironmental law or regulation) or would have the
ability to comply with its obligations under the Master Operating Agreement
associated with the Combustion Rule. Either such result could have a materially
adverse impact on Mobile Energy's financial condition and results of operations.
As regulatory agencies have not yet promulgated final standards for
some existing programs, and as some proposed requirements(such as the Cluster
Rule) have not yet been enacted or adopted, Mobile Energy cannot at this time
reasonably estimate its costs of compliance with these additional programs and
requirements (some of which will not take effect for several years or may not be
promulgated at all) or the timing of any such costs.
17
<PAGE>
(C) In connection with the Acquisition, Mobile Energy entered into noncancelable
land leases (the "Leases") with Scott/Kimberly-Clark. Rent expense under the
Leases approximates $1 per year from 1995 through 2019. Also contained in the
Leases is a right to purchase the land from Scott/Kimberly-Clark at the end of
the lease term for $10. However, retention of the property is not under the
control of Mobile Energy due to Scott/Kimberly-Clark's superseding option to
repurchase the Energy Complex from Mobile Energy at the end of the lease term at
fair market value. Accordingly, Mobile Energy's repurchase option is not
reasonable assured and therefore is not considered a bargain purchase option
under SFAS No. 13, "Accounting for Leases."
18
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Background
Mobile Energy and Holdings were formed to acquire, own and manage the energy and
black liquor recovery complex (the "Energy Complex") located at an integrated
pulp, paper and tissue manufacturing facility in Mobile, Alabama (the "Mobile
Facility"). Holdings acquired the Energy Complex (the "Acquisition") and
commenced operations on December 16, 1994 (the "Acquisition Closing Date").
Holdings transferred all its interests in the Energy Complex to Mobile Energy on
July 14, 1995. Mobile Energy's sole business consists exclusively of the
ownership and management of the Energy Complex. Holdings, which owns 99% of the
equity interests in Mobile Energy, does not conduct any independent operations.
Southern Energy owns the remaining equity interest in Mobile Energy.
The Mobile Facility is a physically integrated complex that produces tissue
and paper products from timber that is processed into bleached and unbleached
pulp. The Mobile Facility is comprised of the Energy Complex, a tissue mill (the
"Tissue Mill"), a pulp mill (the "Pulp Mill"), and a paper mill (the "Paper
Mill," and together with the Tissue Mill and the Pulp Mill, the "Mills"). The
Mills currently obtain all of their aggregate steam processing needs and 98
percent of their aggregate power processing needs from the Energy Complex. In
addition, the Energy Complex processes weak black liquor delivered by the Pulp
Mill Owner into green liquor, a necessary component of the pulp making process
(this process, the "Liquor Processing Services"). The conversion of weak black
liquor into green liquor involves a combustion process which provides heat that
is further used to generate steam (the "Steam Processing Services") and
electricity (the "Power Processing Services"). Mobile Energy's revenues are
comprised almost entirely of Demand Charges and Processing Sales for services
provided to the Mills.
Demand Charges represent compensation to Mobile Energy for dedicating a
portion of the Energy Complex's capacity to the Mills. Demand Charges are
designed generally to cover, among other things, costs that are in the nature of
fixed costs, including debt service. Processing Sales are paid by each Mill
Owner to Mobile Energy based on formulary usage charges which vary from month to
month, based on the amount of Processing Services required by, and provided to,
each Mill Owner, and on Mobile Energy's efficiency with respect to fuel usage.
Processing Sales are designed generally to cover the balance of Mobile Energy's
costs that are not projected to be covered by Demand Charges, including fuel
expenses.
Results of Operations
Because the Energy Complex was not operated as an independent business prior to
its acquisition by Holdings, Holdings did not purchase a business from Scott
but, rather, purchased assets. Since the Acquisition, Holdings and subsequently
Mobile Energy have operated such assets as an independent business. The business
with respect to the Energy Complex commenced on December 16, 1994 when Holdings
began operations. As a consequence of the relatively short time period Holdings
and Mobile Energy have operated the Energy Complex, discussion and analysis of
their results of operations are necessarily limited in scope, and may not be
indicative of their future results of operations and financial condition. Thus,
the financial information contained herein is not necessarily representative of
the future results of operations and financial condition of Mobile Energy or
Holdings.
The relationship between Holdings and Mobile Energy is a parent-subsidiary
relationship. Holdings' material assets are comprised solely of its ownership
19
<PAGE>
interest in Mobile Energy and its rights in respect of a tax sharing agreement
(the "Southern Master Tax Sharing Agreement"), which apportions consolidated
income tax among Southern and its corporate subsidiaries, including Holdings.
Accordingly, the consolidated financial statements of Holdings reflect the
assets, liabilities, and operating results of Mobile Energy.
Revenues
Operating revenues for the third quarter of 1997 increased $0.2 million, or
1.1%, compared to the third quarter 1996. The increase is primarily due to an
increase in Processing Sales resulting from an increase in gas consumption. For
year to date 1997 versus year to date 1996, operating revenues increased $1.2
million or 1.8% primarily due to increased Processing Sales revenue and
increased gas prices and consumption. The level of Processing Sales for both
periods reflects utilization of the Energy Complex near capacity levels. Demand
Charges and Processing Sales for the third quarters of 1997 and 1996, and year
to date 1997 and 1996 in thousands of dollars and expressed as a percent of
total revenues, were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Quarter Ended Year to Date
--------------------------------------- ---------------------------------------------
September 30, 1997 September 30, 1996 September 30, 1997 September 30, 1996
Dollars Percent Dollars Percent Dollars Percent Dollars Percent
------- ------- ------- ------- ------- -------- ------- -------
(in thousands) (in thousands)
Demand Charges:
Pulp Mill $9,011 43.2% $9,223 44.7% $27,147 42.5% $27,942 44.5%
Tissue Mill 2,554 12.2% 2,533 12.3% 7,620 11.9% 7,573 12.1%
Paper Mill 2,602 12.5% 2,594 12.6% 7,793 12.2% 7,761 12.4%
------- ------- ------- ----- ------- ------- ------- ------
14,167 67.9% 14,350 69.6% 42,560 66.6% 43,276 69.0%
Processing Charges:
Pulp Mill 1,329 6.4% 1,117 5.4% 4,596 7.2% 3,913 6.2%
Tissue Mill 2,556 12.3% 2,479 12.0% 7,934 12.4% 7,461 11.9%
Paper Mill 2,620 12.6% 2,472 12.0% 8,251 12.9% 7,436 11.9%
------- ------- ------- ----- ------- ------- ------- -------
6,504 31.2% 6,068 29.4% 20,780 32.5% 18,810 30.0%
Other revenues 180 0.9% 200 1.0% 540 0.8% 643 1.0%
------- ------- ------- ----- ------- ------- ------- ------
Total revenues $20,851 100.0% $20,618 100.0% $63,881 100.0% $62,729 100.0%
======= ====== ======= ===== ======= ====== ======= =====
The Mills' peak usage of Processing Services for year to date of 1997 and
1996 were as follows:
YTD 9-30--97 YTD 9-30-96
------------------------- ----------------------
Peak Contractual Peak Contractual
Mill Processing Services Usage Demand Usage Demand
---- ------------------- ----- ----------- ----- ----------
Pulp Liquor Conversion
MMLBs/week 46.5 44.45 44.6 42.7
Steam
MMBTUs/hr 627.0 500.0 618.0 500.0
Electricity
MW/hr 29.8 32.0 30.0 32.0
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
YTD 9-30-97 YTD 9-30-96
-------------------------- ----------------------
Peak Contractual Peak Contractual
Mill Processing Services Usage Demand Usage Demand
---- ------------------- ----- ------------ ----- -----------
Tissue Steam
MMBTUs/hr 313.0 280.0 293.0 280.0
Electricity
MW/hr 39.2 39.5 38.9 39.5
Paper Steam
MMBTUs/hr 484.0 420.0 507.0 420.0
Electricity
MW/hr 22.3 22.5 22.3 22.5
</TABLE>
Prior to the installation of certain electrical meters, which was completed
in February 1996, Mobile Energy could not precisely determine the peak usage of
each Mill for Power Processing Services. The Pulp Mill's Contractual Demand for
Liquor Processing Services increased from 42.7 MMLBs per week to 44.45 MMLBs per
week beginning January 1, 1997, pursuant to the terms of the Master Operating
Agreement.
Expenses
Total operating expenses did not vary in the three month period ended September
30, 1997 compared to the same period for 1996. Total operating expenses
increased $2.0 million or 5.9% from $33.2 million to $35.2 million for the nine
month period ended September 30, 1997 compared to the prior year period. These
increases are primarily due to the increase in Operation and Maintenance Costs
and fuel expenses. The Operation and Maintenance Costs decreased from $6.5
million in the third quarter of 1996 to $6.1 million the third quarter in 1997,
a 5.5% decrease. For the nine month period ended September 30, 1997, Operation
and Maintenance Costs increased $1.0 million or 3.7% from the prior year period.
Operation and Maintenance Costs increased, due to a 3% salaries increase, an
increase in overtime due to training in the utility line of progression, and two
unscheduled outages, one related to a power boiler tube failure and the second
related to a breaker failure. In addition, fuel expenses increased $0.8 million,
or 16.5%, for the nine month period ended September 30, 1997 compared to the
same period in 1996 as a result of increased gas prices and consumption. Fuel
expense increased for the three month period ended September 30, 1997 compared
to the same period in 1996 by $.2 million from $1.4 million to $1.6 million.
This increase is attributable to an increase in the volume of gas used in 1997
versus 1996.
Interest expense decreased $.3 million, or 3.5%, in the third quarter 1997
compared to the same period for 1996. Interest expense decreased $.6 million or
2.7% to $22.0 million for the nine months ended September 30, 1997 from $22.6
million in the prior year period. The decrease reflects the $22.2 million
repayment of short-term notes payable in 1997.
Mobile Energy's net income for the third quarter of 1997 was $2.8 million,
representing an increase of $0.5 million, or 23.3%, compared to the third
quarter of 1996, which increase was mainly due to a decrease in Operation and
Maintenance Costs. For the nine month period ended September 30, 1997 Mobile
Energy's net income was $7.1 million, representing a decrease of $0.3 million or
4.4% from the same period in 1996. Holding's net income for the third quarter of
1997 increased 14.4%, or $0.2 million, compared to the third quarter of 1996 and
reflects comparable increases in minority interest and income taxes. Holding's
net income for the nine month period ended September 30, 1997 was $4.4 million
representing a $0.3 million or 6.4% decrease from the same period in 1996.
Income taxes were provided based on a combined 38.25% state and federal rate
applied to pretax income of $2.8 million for the third quarter of 1997, $2.3
21
<PAGE>
million for the third quarter of 1996, $7.1 million for the nine month period
ended September 30, 1997, and $7.5 million for the nine month period ended
September 30, 1996.
Liquidity and Capital Resources
As of September 30, 1997, Holdings had $7.7 million in cash and cash equivalents
and total debt of $299.4 million. This level of liquidity (as applied to Mobile
Energy) will be affected by Mobile Energy's operating performance, capital
expenditures and dividend policies.
Mobile Energy's working capital needs generally relate to Operation and
Maintenance Costs and debt service. In accordance with the Intercreditor
Agreement, Mobile Energy will reserve funds for certain operation and
maintenance activities in a separate account (the "Maintenance Reserve Account")
before such operation and maintenance activities are performed for Mobile
Energy.
Operation and Maintenance Costs are budgeted at $26.2 million and $26.5
million for 1997 and 1998, respectively. During the nine month period ended
September 30, 1997, actual Operation and Maintenance Costs aggregated $19.3
million compared to a budget of $19.2 million due to a 3% salaries increase,
training in the utility line of progression, and maintenance costs for two
unscheduled outages.
Mobile Energy's projected accrued obligations for required payments of
principal and interest on long-term debt for calendar years 1997 and 1998 are
$34.7 million and $34.5 million, respectively. Payments of principal and
interest on long-term debt for the nine month periods ended September 30, 1997
and 1996 aggregated $34.7 million, and $29.7 million, respectively.
Mobile Energy's principal sources of working capital are cash flow from
operations, borrowings under a revolving credit facility providing working
capital loans to Mobile Energy (which is limited to $15.0 million), balances in
the Maintenance Reserve Account and drawings under a Southern guaranty in
respect of the Maintenance Reserve Account and/or under any revolving credit
facility maintained by Southern to provide liquidity with respect to such
Southern guaranty. Since December 31, 1996, Mobile Energy has drawn an aggregate
of $8.8 million under such a revolving credit facility maintained by Southern
with Banque Paribas. As of September 30, 1997, $7.0 million of this amount had
been repaid by Southern.
Mobile Energy has established a separate account (the "Mill Owner
Maintenance Reserve Account") pursuant to the Master Operating Agreement and the
Mill Owner Maintenance Reserve Account Agreement for the benefit of Mobile
Energy and, while the Mill Owners are exercising the Mill Owner Step-In Rights,
the Mill Owners. The Mill Owner Maintenance Reserve Account is currently funded
in an amount equal to $2.0 million. In lieu of funding the Mill Owner
Maintenance Reserve Account with cash, Mobile Energy provided capital infusion
arrangements executed by Southern in favor of Mobile Energy and the Mill Owners
in an amount equal to $2.0 million in the aggregate. The Mill Owner Maintenance
Reserve Account and monies on deposit therein, or otherwise credited thereto, do
not secure Mobile Energy's senior indebtedness. Nevertheless, given that the
Master Operating Agreement and the Mill Owner Maintenance Reserve Account
Agreement permit funds on deposit in the Mill Owner Maintenance Reserve Account
to be used, under certain limited circumstances, for, among other things,
operations and maintenance expenses, amounts on deposit therein, or otherwise
credited thereto, will be credited against Mobile Energy's funding obligation in
respect of the Maintenance Reserve Account.
22
<PAGE>
Cash flow from operations is expected to consist almost exclusively of
payments of Demand Charges and Processing Sales by the Mill Owners for
Processing Services. Accordingly, the loss of revenues from any one Mill,
whether due to a mill closure or otherwise, could have a material adverse impact
on Mobile Energy's financial condition.
The Energy Services Agreements and the Master Operating Agreement require
the Mill Owners to pay Demand Charges and Processing Sales. The Demand Charges
were designed generally to cover, among other things, Mobile Energy's projected
costs that are in the nature of fixed costs (including the payment of debt
service), assuming that certain operating performance standards are satisfied.
The Processing Sales were designed generally to cover the balance of Mobile
Energy's costs that are not projected to be covered by Demand Charges, including
variable costs such as fuel related expenses.
Under the Energy Services Agreements, the Demand Charges in effect at any
given time are due and payable on a monthly basis regardless of whether a Mill
Owner actually utilizes any or all of the Processing Services corresponding to
its dedicated Demand and are subject to automatic reduction due to a shortfall
in the provision of Processing Services by Mobile Energy that is not excused by
the Master Operating Agreement. The Processing Sales vary from month to month in
accordance with the amount of Processing Services required by, and provided to,
the Mill Owners and Mobile Energy's efficiency with regard to fuel usage. For
the quarter ended September 30, 1997, 67.9% of Mobile Energy's total operating
revenues were attributable to Demand Charges with almost all of the remainder
attributable to Processing Sales.
The Demand Charges and the Processing Sales, collectively, were designed so
as to result in Mobile Energy having net income. There can be no assurance,
however, that (i) the assumptions with respect to operating performance
standards that underlie the design of the Demand Charges and the Processing
Sales will at all times be satisfied, (ii) the Demand Charges will at all times
cover Mobile Energy's costs that are in the nature of fixed costs, including
debt service payments, (iii) the Processing Sales will at all times cover the
costs that are not covered by Demand Charges, including variable costs such as
fuel related expenses, or (iv) the payment of Demand Charges and Processing
Sales will at all times result in Mobile Energy having net income.
Mobile Energy believes that its cash flow from operations, together with
its other available sources of liquidity, will be adequate to make all required
payments of principal of and interest on its debt, to permit anticipated capital
expenditures and to fund working capital and other cash requirements for the
foreseeable future.
Funding of the Maintenance Reserve Account
The Intercreditor Agreement requires Mobile Energy to make certain deposits into
the Maintenance Reserve Account, and permits Mobile Energy to make additional,
discretionary deposits into the Maintenance Reserve Account. The amount of such
required and discretionary deposits in any given fiscal year may be greater than
the maintenance expenses actually incurred by Mobile Energy in such fiscal year.
For purposes of calculating debt service coverage ratios under Mobile Energy's
Financing Documents, deposits into the Maintenance Reserve Account and the Mill
Owner Maintenance Reserve Account are deemed to be operating expenses in the
fiscal year such deposits are made, rather than in the fiscal year funds are
withdrawn from the Maintenance Reserve Account or the Mill Owner Maintenance
Reserve Account to pay maintenance expenses. The effect of deeming such deposits
to be operating expenses in the fiscal year the deposits are made (together with
the funding provisions set forth in the Intercreditor Agreement that may cause
or permit such deposits to be higher than actual maintenance expenses in any
23
<PAGE>
given fiscal year) is to levelize debt service coverage ratios over the term of
the First Mortgage Bonds and the Tax-Exempt Bonds.
24
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 27 - Financial Data Schedules
(a) Mobile Energy
(b) Holdings
(b) Reports on Form 8-K.
Neither registrant filed a Form 8-K during the third quarter
of 1997.
25
<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. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.
MOBILE ENERGY SERVICES COMPANY L.L.C.
/s/ Thomas G. Boren
By Thomas G. Boren
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Raymond D. Hill
By Raymond D. Hill
Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: November 14, 1997
- ------------------------------------------------------------------------------
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. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.
MOBILE ENERGY SERVICES HOLDINGS, INC.
/s/ Thomas G. Boren
By Thomas G. Boren
President and Chief Executive Officer
/s/ Raymond D. Hill
By Raymond D. Hill
Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: November 14, 1997
26
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the Form
10-Q for June 30, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK>0000948362
<NAME>MOBILE ENERGY SERVICES CO LLC
<S> <C>
<PERIOD-TYPE> 6-Mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 346,747
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 30,792
<TOTAL-DEFERRED-CHARGES> 13,675
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 391,214
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 77,119
<TOTAL-COMMON-STOCKHOLDERS-EQ> 77,119
0
0
<LONG-TERM-DEBT-NET> 297,515
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> (7,885)
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 16,580
<TOT-CAPITALIZATION-AND-LIAB> 391,214
<GROSS-OPERATING-REVENUE> 63,880
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 35,219
<TOTAL-OPERATING-EXPENSES> 35,219
<OPERATING-INCOME-LOSS> 28,661
<OTHER-INCOME-NET> 484
<INCOME-BEFORE-INTEREST-EXPEN> 29,145
<TOTAL-INTEREST-EXPENSE> 22,005
<NET-INCOME> 7,140
0
<EARNINGS-AVAILABLE-FOR-COMM> 7,140
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 19,834
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE>UT
<LEGEND>
This schedule contains summary financial information extracted from the Form
10-Q for June 30, 1997, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK>0000945979
<NAME>MOBILE ENERGY HOLDINGS, INC.
<S> <C>
<PERIOD-TYPE> 6-Mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 346,747
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 34,215
<TOTAL-DEFERRED-CHARGES> 13,675
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 394,637
<COMMON> 1
<CAPITAL-SURPLUS-PAID-IN> 31,373
<RETAINED-EARNINGS> 4,412
<TOTAL-COMMON-STOCKHOLDERS-EQ> 35,786
0
0
<LONG-TERM-DEBT-NET> 297,515
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> (7,885)
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 61,336
<TOT-CAPITALIZATION-AND-LIAB> 394,637
<GROSS-OPERATING-REVENUE> 63,880
<INCOME-TAX-EXPENSE> 2,733
<OTHER-OPERATING-EXPENSES> 35,290
<TOTAL-OPERATING-EXPENSES> 38,023
<OPERATING-INCOME-LOSS> 25,857
<OTHER-INCOME-NET> 560
<INCOME-BEFORE-INTEREST-EXPEN> 26,417
<TOTAL-INTEREST-EXPENSE> 22,005
<NET-INCOME> 4,412
0
<EARNINGS-AVAILABLE-FOR-COMM> 4,412
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 26,274
<EPS-PRIMARY> 4,412
<EPS-DILUTED> 4,412
</TABLE>
