SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
Commission File No. 33-95538
SALTON SEA FUNDING CORPORATION
(Exact name of registrant as specified in its charter)
47-0790493
(IRS Employer
Identification No.)
Salton Sea Brine Processing, L.P. California 33-0601721
Salton Sea Power Generation, L.P. California 33-0567411
Fish Lake Power Company Delaware 33-0453364
Vulcan Power Company Nevada 95-3992087
CalEnergy Operating Company Delaware 33-0268085
Salton Sea Royalty Company Delaware 47-0790492
BN Geothermal Inc. Delaware 91-1244270
San Felipe Energy Company California 33-0315787
Conejo Energy Company California 33-0268500
Niguel Energy Company California 33-0268502
Vulcan/BN Geothermal Power Company Nevada 33-3992087
Leathers, L.P. California 33-0305342
Del Ranch, L.P. California 33-0278290
Elmore, L.P. California 33-0278294
(Exact name of Registrants (State or other (I.R.S. Employer
as specified in their charters) jurisdiction of Identification No.)
incorporation or
organization)
302 S. 36th Street, Suite 400-A, Omaha, NE 68131
(Address of principal executive offices and Zip Code of Salton Sea
Funding Corporation)
Salton Sea Funding Corporation's telephone number,
including area code: (402) 231-1641
Securities registered pursuant to Section 12(b) of the Act: N/A
Securities registered pursuant to Section 12(g) of the Act: N/A
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days:
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be containeed,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
All common stock of Salton Sea Funding Corporation is indirectly held by
Magma Power Company.
100 Shares of Common Stock were outstanding on March 17, 1997
Documents incorporated by reference: N/A
TABLE OF CONTENTS
PART I 2
ITEM 1. Business 2
The Exchange Offer 3
Structure of and Collateral for the Securities 4
The Projects 6
Transaction Structure 7
Salton Sea Projects 7
Partnership Projects 7
Royalties and Royalty Projects 8
Reliance on Single Utility Customer 8
Terms of the New Securities and the Old Securities 9
Priority of Payments 12
Debt Service Reserve Fund 12
Optional Redemption 13
Mandatory Redemption 13
Distributions 13
Ranking and Security for the Securities 14
Recourse Only to the Funding Corporation and the
Guarantors 14
Incurrence of Additional Debt 14
Principal Covenants 15
The Project Notes 15
Principal Covenants 16
Considerations Regarding Limitation on Remedies 16
Uncertainties Relating to Exploration and
Development of Geothermal Energy Resources 16
Insurance 17
Regulatory and Environmental Matters 17
Employees 18
ITEM 2: Properties 18
ITEM 3: Legal Proceedings 18
ITEM 4: Submission of Matters to a Vote of Security
Holders 18
PART II 19
ITEM 5: Market for Registrant's Common Equity and
Related Stockholder's Matters 19
ITEM 6: Selected Financial Data 19
Salton Sea Funding Corporation 19
Salton Sea Guarantors 20
Partnership Guarantors 21
Royalty Guarantor 22
ITEM 7: Management's Discussion and Analysis of
Financial Condition and Results
of Operations 23
Factors Affecting Results of Operations 23
Power Purchase Agreements 23
Capacity Utilizations 24
Results of Operations for the Years Ended December 31,
1996 and 1995 25
Revenues 25
Operating Expenses 25
Depreciation and Amortization 26
Interest Expense 26
Income Tax Provision 26
Net Income 27
Results of Operations for the Years Ended December 31,
1995 and 1994 27
Revenues 27
Operating Expenses 27
Depreciation and Amortization 28
Interest Expense 28
Income Tax Provision 28
Net Income 29
Capital Resources and Liquidity 29
Changing Prices and the Effect of Inflation 30
ITEM 8: Financial Statements and Supplementary Data 31
Index to Financial Statements - Salton Sea Funding
Corporation 31
Index to Financial Statements - Salton Sea Guarantors 31
Index to Financial Statements - Partnership Guarantors 32
Index to Financial Statements - Salton Sea Royalty
Company 32
Index to Financial Statements - Salton Sea Royalty
Company - Predecessor 32
ITEM 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 82
PART III 83
ITEM 10. Directors and Executive Officers of the
Registrant 83
ITEM 11. Executive Compensation 84
ITEM 12. Security Ownership of Certain Beneficial
Owners and Management 84
Description of Capital Stock 84
Principal Holders 84
ITEM 13. Certain Relationships and Related
Transactions 84
Other Relationships and Related Transactions 84
Relationship of the Funding Corporation and the
Guarantors to Magma and CalEnergy 84
PART IV 86
ITEM 14. Exhibits, Financial Statements Schedule and
Reports on Form 8-K 86
Signatures 87
Index to Exhibits 102
PART 1
ITEM 1. Business
Salton Sea Funding Corporation ("Funding Corporation") is a
special purpose Delaware corporation and an indirect wholly-owned
subsidiary of CalEnergy Company, Inc. ("CalEnergy") formed for
the sole purpose of issuing securities in its individual capacity
as principal and as agent acting on behalf of the Guarantors (as
defined below). The principal executive office of the Funding
Corporation is located at 302 South 36th Street, Suite 400-A,
Omaha, Nebraska 68131 and its telephone number is (402) 231-1641.
CalEnergy was formed in 1971 and is engaged in the exploration
for, and development and operation of, environmentally
responsible independent power production facilities worldwide
utilizing geothermal resources or other energy sources, such as
hydroelectric, natural gas, oil and coal. CalEnergy owns all of
the capital stock of Magma Power Company ("Magma"). CalEnergy
has an aggregate net ownership interest of 1,623 MW of electrical
generating capacity in power plants in operation or under
construction in the United States and overseas, which have an
aggregate net capacity of 3,765 MW (including its interests in
the Salton Sea Projects and the Partnership Projects as defined
below). As of December 31, 1996, CalEnergy had over $5.7 billion
in assets and its common stock is publicly traded on the New
York, Pacific and London Stock Exchanges under the symbol "CE".
Approximately 32% of CalEnergy's common stock is beneficially
owned, through indirect subsidiaries, by Peter Kiewit Sons, Inc.
("Kiewit"), a privately held construction, mining and
telecommunications company headquartered in Omaha, Nebraska.
In February 1995, CalEnergy completed the acquisition of all
the outstanding stock of Magma (the "Magma Acquisition"). Magma
had previously owned or controlled substantially all of the
assets of the Guarantors, including the three Salton Sea
Projects then in operation and 50% partnership interests in each
of the four Partnership Projects. At the time of the Magma
Acquisition, Magma's interests in the Guarantors generated
substantially all of Magma's earnings. The purchase price for
the Magma Acquisition was $958 million, of which $458 million was
funded by CalEnergy and $500 million was provided by an interim
bank facility which was borrowed on a non-recourse basis to
CalEnergy and secured by the stock of Magma. The Magma
Acquisition loan was subsequently refinanced with a portion of
the proceeds of the offering of the Securities (defined below)
and other cash provided by CalEnergy and Magma.
Since the Magma Acquisition, the operations of the Salton Sea
Projects and the Partnership Projects acquired in such
acquisition have substantially improved, and significant cost
savings and efficiencies have been realized. On April 17, 1996,
a subsidiary of CalEnergy acquired all of the stock of BN
Geothermal, Inc. ("BNG"), Niguel Energy Company ("Niguel"), San
Felipe Energy Company ("San Felipe") and Conejo Energy Company
("Conejo") from Edison Mission Energy ("Mission") for $70
million. Such acquired partnership companies owned 50%
partnership interests in each of the Partnership Projects. As a
result of such acquisition (the "Partnership Interest
Acquisition"), CalEnergy obtained full operating and ownership
control of all of the Partnership Projects.
Magma directly or indirectly owns all of the capital stock of
or partnership interests in the Funding Corporation and the
Guarantors. CalEnergy Operating Company ("CEOC"), a subsidiary
in which Magma owns a 99% interest and the Funding Corporation
owns a 1% interest, currently operates each of the Salton Sea
Projects and the Partnership Projects. Affiliates of Magma
control, through a variety of fee, leasehold, and royalty
interests, rights to geothermal resources for power production in
the Salton Sea Known Geothermal Resource Area ("SSKGRA"). The
Funding Corporation believes that such resources will be
sufficient to operate the Salton Sea Projects and the Partnership
Projects at contract capacity under their respective power
purchase agreements through the final maturity date of the
Securities.
Each of the Salton Sea Guarantors, the Partnership Guarantors
and the Royalty Guarantor is an indirect wholly-owned subsidiary
of CalEnergy. Salton Sea Brine Processing, L.P. ("SSBP"), Salton
Sea Power Generation, L.P. ("SSPG") and Fish Lake Power Company
("Fish Lake") (collectively, the "Salton Sea Guarantors") own
four geothermal power plants located in Imperial Valley,
California known as Salton Sea Unit I, Salton Sea Unit II, Salton
Sea Unit III and Salton Sea Unit IV (collectively, the "Salton
Sea Projects"). Each of the Vulcan/BN Geothermal Power Company
("Vulcan"), Elmore, L.P. ("Elmore"), Leathers, L.P. ("Leathers")
and Del Ranch, L.P. ("Del Ranch" and, collectively with Vulcan,
Elmore and Leathers, the "Partnership Project Companies") owns a
geothermal power plant located in Imperial Valley, California
known as the Vulcan Project, the Elmore Project, the Leathers
Project and the Del Ranch Project, respectively (such projects,
collectively, the "Partnership Projects"). As is more fully
described below, the other Partnership Guarantors (as defined
below) collectively own or have the right to receive cash flow
from 100% of the equity in such Partnership Project Companies.
Vulcan Power Company ("VPC") and its wholly-owned subsidiary,
BNG, own 100% of the partnership interests in Vulcan. CEOC and
its wholly-owned subsidiaries, Niguel, San Felipe and Conejo,
collectively own 90% partnership interests in each of Elmore,
Leathers and Del Ranch, respectively. Magma owns all of the
remaining 10% interests in each of Elmore, Leathers and Del
Ranch. CEOC is entitled to receive from Magma, as payment for
certain data and services provided by CEOC, all of the
partnership distributions Magma receives with respect to its 10%
ownership interests in each of the Elmore, Leathers and Del Ranch
and Magma's special distributions equal to 4.5% of total energy
revenues from the Leathers Project. BNG, Niguel, San Felipe and
Conejo and their interest in the Partnership Project Companies
(collectively, the "Additional Partnership Guarantors"), together
with CEOC and VPC and their original interest in the Partnership
Project Companies (collectively the "Initial Partnership
Guarantors"), are collectively referred to as the "Partnership
Guarantors".
Salton Sea Royalty Company ("SSRC" or the "Royalty Guarantor")
received an assignment of certain fees and royalties
("Royalties") paid by three Partnership Projects, Elmore,
Leathers and Del Ranch. In addition, the Royalty Guarantor
received an assignment of certain Royalties payable by certain
geothermal power plants located in Imperial Valley, California
which are owned by an unaffiliated third party (the "East Mesa
Project", and together with the Salton Sea Projects and the
Partnership Projects, the "Projects"). Such Royalties are subject
to netting and reduction from time to time to reflect various
operating costs, as reflected in the financial statements herein.
The principal executive offices of the Salton Sea Guarantors
are located at 302 South 36th Street, Suite 400-B, Omaha,
Nebraska 68131. The principal executive offices of the
Partnership Guarantors is 302 South 36th Street, Suite 400-C,
Omaha, Nebraska 68131. The principal executive office of the
Royalty Guarantor is 302 South 36th Street, Suite 400-D, Omaha,
Nebraska 68131. The Salton Sea Guarantors, Partnership
Guarantors and the Royalty Guarantor are sometimes referred to
collectively herein as the "Guarantors".
The Exchange Offer
In 1996, Funding Corporation issued $70,000,000 aggregate
principal amount of the Old Series D Securities and $65,000,000
aggregate principal amount of the Old Series E Securities.
Subsequently, the Funding Corporation exchanged (i) $70,000,000
aggregate principal amount of Old Series D Securities for an
equal principal amount of New Series D Securities, and
$65,000,000 aggregate principal amount of Old Series E Securities
for an equal amount of New Series E Securities. In 1995, the
Funding Corporation exchanged (i) $232,750,000 aggregate
principal amount of Old Series A Securities for an equal
principal amount of New Series A Securities, (ii) $133,000,000
aggregate principal amount of Old Series B Securities for an
equal principal amount of New Series B Securities, and (iii)
$109,250,000 aggregate principal amount of Old Series C
Securities for an equal principal amount of New Series C
Securities. The Old Series A Securities, the Old Series B
Securities, the Old Series C Securities, the Old Series D
Securities and the Old Series E Securities are sometimes referred
to herein as the "Old Securities", and the New Series A
Securities, New Series B Securities, the New Series C Securities,
New Series D Securities and New Series E Securities are sometimes
referred to herein as the "New Securities". The exchange offer
of New Securities for the Old Securities is sometimes referred to
herein as the "Exchange Offer". The New Securities are
obligations of the Funding Corporation evidencing the same
indebtedness as the Old Securities and will be entitled to the
benefits of the Indenture, which governs both the Old Securities
and the New Securities. The form and terms (including principal
amount, interest rate, maturity and ranking) of the New
Securities are the same as the form and terms of the Old
Securities, except that (i) the New Securities have been
registered under the Securities Act and therefore will not be
subject to certain restrictions on transfer applicable to the Old
Securities and will not be entitled to registration rights, and
(ii) the New Securities will not provide for any increase in the
interest rate thereon. Capitalized terms not otherwise defined
herein shall have the meaning set forth in the Indenture, as
amended, between Chemical Trust Company of California and Funding
Corporation.
The Funding Corporation received no proceeds from the exchange
pursuant to the Exchange Offers. The net proceeds received by the
Funding Corporation from the issuance of the Old Securities to
the Initial Purchasers in the two separate offerings (after
deduction of certain transaction costs) was approximately $604
million and was used for the following purposes: (a)
approximately $253 million to repay certain non-recourse
indebtedness of CalEnergy incurred in connection with the Magma
Acquisition; (b) approximately $102 million to refinance existing
indebtedness of the Salton Sea Projects; (c) approximately $115
million to finance the Salton Sea Expansion, (d) approximately
$96 million to refinance all of the existing project-level
indebtedness under credit agreements of the Partnership Project
Companies; (e) approximately $15 million to fund the Capital
Expenditure Fund to be used for certain capital improvements to
the Partnership Projects and the Salton Sea Projects, and (f)
approximately $23 million to fund a portion of the purchase price
payable by the Initial Partnership Guarantors for the Acquired
Partnership Companies.
There is no existing trading market for the New Securities and
there can be no assurance regarding the future development of
such a market for the New Securities or the ability of holders of
the New Securities to sell their New Securities or the price at
which such holders may be able to sell their New Securities. If
such a market were to develop, future trading prices will depend
on many factors, including, among other things, prevailing
interest rates, the operating results of the Funding Corporation
and the Guarantors, and the market for similar securities. The
Funding Corporation does not intend to apply for listing or
quotation of the New Securities on any securities exchange or
stock market.
Structure of and Collateral for the Securities
The New Securities and any additional securities issued
pursuant to the Indenture (the "Securities") will be payable from
the proceeds of payments made in respect of principal and
interest on the Project Notes by the Guarantors to the Funding
Corporation. The Securities are secured by the capital stock of
the Funding Corporation and guaranteed by the Guarantors. The
Guarantees (which are unlimited in the case of the Salton Sea
Guarantors and which are limited to Available Cash Flow, in the
case of the Partnership Guarantors and the Royalty Guarantor) are
secured:
(i) in the case of the Salton Sea Guarantee, by a senior first
priority lien on substantially all of the assets of the
Salton Sea Guarantors, a pledge of the equity interests in
the Salton Sea Guarantors and an assignment of the cost
overrun funding commitment provided by CalEnergy to the
Salton Sea Guarantors in connection with the substantial
completion of the Salton Sea Expansion (the "Cost Overrun
Commitment");
(ii)in the case of the Partnership Guarantee, by a senior first
priority Lien on substantially all of the assets of the
Partnership Project Companies, a senior first priority Lien
on the Equity Cash Flows and Royalties of the Initial
Partnership Guarantors and a pledge of the stock and of
other equity interests in the Partnership Guarantors; and
(iii) in the case of the Royalty Guarantee, by a senior first
priority lien on all Royalties paid to the Royalty Guarantor
and a pledge of the capital stock of the Royalty Guarantor.
CEOC, VPC and the Royalty Guarantor receive various Royalties
and Equity Cash Flows from the Partnership Project Companies and
an unaffiliated third party. At the time of the initial offering
of the Old Series A Securities, Old Series B Securities and Old
Series C Securities, CEOC and VPC owned or had the right to
receive (among other things) equity distributions relating to 50%
of the Partnership Project Companies. In connection with such
initial offering of the Old Series A Securities, Old Series B
Securities and Old Series C Securities, CEOC, VPC and the Royalty
Guarantor pledged all such Royalties and Equity Cash Flows as
Collateral for their obligations under the Project Notes and
Guarantees (the "Existing Partnership Collateral"). Similarly,
in connection with such initial offering of the Old Series A
Securities, Old Series B Securities and Old Series C Securities,
CEOC, VPC and the Royalty Guarantor agreed to deposit all such
Royalties and Equity Cash Flows with the Depositary Agent
pursuant to the Depositary Agreement for purposes of paying,
inter alia, their obligations under the Project Notes (the
"Existing Partnership Cash Flow Deposits").
In connection with the offering of the Old Series D Securities
and Old Series E Securities, CEOC and VPC acquired the remaining
50% equity interests in the Partnership Project Companies and
retired existing non-recourse debt of the Partnership Project
Companies. As security for the Partnership Project Note and the
Partnership Guarantee, the Partnership Project Companies pledged
all of their revenues and assets as Collateral for their
obligations under the Partnership Project Note and the
Partnership Guarantee (the "Additional Partnership Collateral")
and agreed to deposit all of their revenues with the Depositary
Agent pursuant to the Depositary Agreement for purposes of
paying, inter alia, their obligations under the Project Notes
(the "Additional Partnership Revenue Deposits"). The Funding
Corporation believed that these changes benefit Security holders
by increasing the revenues available to pay the Securities, and,
by refinancing existing Del Ranch, Elmore and Leathers
indebtedness, removing the structural subordination of the
Project assets. However, since the Royalties and Equity Cash
Flows constituting the Existing Partnership Collateral (other
than the East Mesa Royalties) are payable solely out of the
revenues of the Partnership Project Companies pledged as
Additional Partnership Collateral, the supplemental benefits of
such Existing Partnership Collateral and Existing Partnership
Cash Flow Deposits are, as a practical matter, largely subsumed
and included within the grant of the Additional Partnership
Collateral and Additional Partnership Revenue Deposits.
Accordingly, the Additional Partnership Collateral and Additional
Partnership Revenue Deposits should be viewed as comprising all
of the material Partnership Project Note and Partnership
Guarantee.
The structure has been designed to cross-collateralize cash
flows from each Guarantor without cross- collateralizing all of
the Guarantor's assets. Therefore, if a Guarantor defaults on its
Credit Agreement, Project Notes or its Guarantee, without causing
a payment default on the Securities, then the Trustee may direct
the Collateral Agent to exercise remedies only with respect to
the Collateral securing such Credit Agreement, Project Notes and
Guarantee. If, however, such default causes a payment default on
the Securities, then the Trustee may accelerate the Securities
and direct the Collateral Agent to exercise remedies against all
such Collateral and, if different, the Collateral from the Salton
Sea Guarantors.
The Funding Corporation and the Guarantors are initially
obligated to maintain a Debt Service Reserve Fund and/or a Debt
Service Reserve Fund Letter of Credit in an aggregate initial
amount equal to the maximum remaining semiannual scheduled debt
service on the Securities. After January 1, 2000, the Debt
Service Reserve Fund Required Balance will increase to the
maximum remaining annual scheduled debt service on the
Securities.
The Funding Corporation is a special purpose finance subsidiary
of Magma. Its ability to make payments on the Securities will be
entirely dependent on the Guarantors' performance of their
obligations under the Project Notes and the Guarantees. As is
common in non-recourse, project finance structures, the assets
and cash flows of the Guarantors are the sole source of repayment
of the Project Notes and the Guarantees. The Salton Sea
Guarantors conduct no other business and own no other significant
assets except those related to the ownership or operation of the
Salton Sea Projects. The Partnership Guarantors conduct no
business other than owning their respective ownership interests
in the Partnership Projects and providing operation, maintenance,
administrative and technical services for Magma, the Salton Sea
Projects and the Partnership Projects. The Royalty Guarantor has
been organized solely to receive royalty payments owed by the
Partnership Projects and the East Mesa Project and conducts no
other business and owns no other assets. In the event of a
default by any Guarantor under a Project Note, Credit Agreement
or Guarantee, there is no assurance that the exercise of remedies
under such Project Note, Credit Agreement or Guarantee, including
foreclosure on the assets of such Guarantor, would provide
sufficient funds to pay such Guarantor's obligation under the
Project Notes and the Guarantees. Moreover, unless such default
causes a payment default under the Indenture (in which case
remedies may be exercised against the defaulting Guarantor's and
the Salton Sea Guarantors' assets), remedies may be exercised
only against the assets of the defaulting Guarantors. No
shareholders, partners or affiliates of the Funding Corporation
(other than the Guarantors) and no directors, officers or
employees of the Funding Corporation or the Guarantors will
guarantee or be in any way liable for the payment of the
Securities, the Project Notes or the Guarantees. In addition, the
obligations of the Partnership Guarantors and the Royalty
Guarantor under the Guarantees are limited to the Available Cash
Flows of such Guarantors. As a result, payment of amounts owed
pursuant to the Project Notes, the Guarantees and the Securities
is dependent upon the availability of sufficient revenues and
royalty payments from the Guarantors' businesses or holdings,
after the payment of operating expenses and the satisfaction of
certain other obligations.
The Projects
Set forth below is a table describing certain characteristics
of the Salton Sea Projects and the Partnership Projects, and the
Guarantors' collective interests therein. All the Salton Sea
Projects and Partnership Projects are located in the Imperial
Valley, California and sell power to Southern California Edison
Company ("Edison").
FACILITY
CAPACITY
AND NET
PROJECT OWNERSHIP DATE OF CONTRACT CONTRACT
INTEREST OF COMMERCIAL EXPIRATION TYPE
GUARANTORS OPERATION
(IN MW)(1)(2)
Salton Sea Projects
Salton Sea Unit I 10.0 7/1987 6/2017 Negotiated
Salton Sea Unit II 20.0 4/1990 4/2020 SO4
Salton Sea Unit III 49.8 2/1989 2/2019 SO4
Salton Sea Unit IV 39.6 6/1996 5/2026 Negotiated
Subtotal 119.4
Partnership Projects
Vulcan 34.0 2/1986 2/2016 SO4
Elmore 38.0 1/1989 12/2018 SO4
Leathers 38.0 1/1990 12/2019 SO4
Del Ranch 38.0 1/1989 12/2018 SO4
Subtotal 148.0
Total 267.4
(1)Facility Capacity does not necessarily reflect electric output
available for sale to Edison.
(2) CEOC and its wholly-owned subsidiaries collectively own an
aggregate 90% interest in, and CEOC is entitled to receive the
additional 10% equity distribution payable to Magma by, each of Elmore,
Leathers and Del Ranch. VPC and its wholly-owned subsidiary own Vulcan.
Transaction Structure
Salton Sea Projects
The Salton Sea Guarantors collectively own the four Salton Sea
Projects with an aggregate net generating capacity of
approximately 119.4 MW. All of the Salton Sea Projects have
executed long term power purchase agreements, providing for the
sale of capacity and energy to Edison.
Salton Sea Unit II and Salton Sea Unit III have modified SO4
Agreements with Edison. These contracts provide for fixed price
capacity payments for the life of the contract, and fixed price
energy payments for the first 10 years. Thereafter, the energy
payments paid by Edison will be based on Edison's then-current,
published short-run avoided cost of energy (the "Avoided Cost of
Energy"). The fixed price energy periods expire on April 4, 2000
and February 13, 1999 for Salton Sea Unit II and Salton Sea Unit
III, respectively.
Salton Sea Unit I and Salton Sea Unit IV have negotiated
contracts with Edison. The Salton Sea Unit I contract provides
for a capacity payment and energy payment for the life of the
contract. Both payments are based upon an initial value that is
subject to quarterly adjustment by reference to various
inflation-related indices. The Salton Sea Unit IV contract also
provides for fixed price capacity payments for the life of the
contract. Approximately 56% of the kWhs are sold under the Salton
Sea Unit IV PPA at a fixed energy price, which is subject to
quarterly adjustment by reference to various inflation-related
indices, through June 20, 2017 (and at Edison's Avoided Cost of
Energy thereafter), while the remaining 44% of the Salton Sea
Unit IV kWhs are sold according to a 10-year fixed price schedule
followed by payments based on a modified Avoided Cost of Energy
for the succeeding 5 years and at Edison's Avoided Cost of Energy
thereafter.
All of the Salton Sea Projects, other than Salton Sea Unit IV,
have been operating for at least 5 years. The three operating
Salton Sea Projects operated at a combined facility capacity
factor of 90.8% in 1994, 86.5% in 1995 and 90.4% in 1996.
The Salton Sea Guarantors recently expanded the capacity of the
Salton Sea Projects through the construction of Salton Sea Unit
IV adjacent to the site where Salton Sea Unit III is currently
located. Such construction and the installation of the pH
modification process at Salton Sea Units I and III is referred to
herein as the "Salton Sea Expansion". The pH Modification Process
has been in use at Salton Sea Unit II for over 5 years. The
process lowers the pH of the geothermal resource thereby
significantly reducing the amount of solids in the geothermal
fluid which precipitate out of solution. This is expected to
result in significantly lower operation and maintenance costs.
Partnership Projects
The Partnership Projects have an aggregate facility generating
capacity of 148 MW. The Partnership Guarantors own 100% of the
Vulcan Project and 90% partnership interests in the Elmore,
Leathers and Del Ranch Projects. Magma owns the remaining 10%
interests in each of the Elmore, Leathers and Del Ranch Projects
and has agreed to pay to CEOC the partnership distributions it
receives from such interests in exchange for certain proprietary
data and services provided by CEOC. Magma has collaterally
assigned to CEOC Magma's right to such payments and such payments
are collateral for the Securities. The 50% interest of the
Partnership Projects previously owned by certain affiliates of
Edison were acquired by a subsidiary of CalEnergy on April 17,
1996 and subsequently transferred to CEOC and VPC.
All of the Partnership Projects have executed SO4 Agreements
for the sale of capacity and energy to Edison which contracts
provide for fixed price capacity payments for the life of the
contract and scheduled price energy payments for the first 10
years. Thereafter, the energy payments paid by Edison will be
based on Edison's Avoided Cost of Energy. The scheduled price
energy period for the Vulcan Project expired on February 9, 1996
and will expire on December 31, 1998 for the Del Ranch and Elmore
Projects, and December 31, 1999 for the Leathers Project.
All of the Partnership Projects have been operating for at
least 5 years. The Partnership Projects operated at a combined
facility capacity factor of 103.8% in 1994, 105.9% in 1995 and
104.8% in 1996.
Royalties and Royalty Projects
The Royalty Guarantor has received an assignment from Magma of
certain royalties ("Royalties") received from the Leathers, Del
Ranch and Elmore Projects and the East Mesa Project in exchange
for the provision to those projects of the rights to use certain
geothermal resources, as well as the assignment of a power
purchase agreement. Substantially all of the assigned Royalties
are based on a percentage of energy and capacity revenues of the
respective projects. Pursuant to the assignment, the Royalty
Guarantor is entitled to receive the aggregate percentages of
such project's energy and capacity revenues as illustrated in the
chart below. The Partnership Guarantors are also entitled to
receive Royalties from the Partnership Projects as illustrated in
the chart below. Royalties are subject to netting and reduction
from time to time to reflect various operating costs, as
reflected in the financial statements herein. All such Royalties
(other than the various operating costs, as reflected in the
financial statements) are payable from revenues which will
constitute Partnership collateral.
ROYALTIES TO BE PAID TO ROYALTIES TO BE PAID TO
ROYALTY GUARANTOR PARTNERSHIP GUARANTORS(1)
PROJECT FACILITY % ENERGY % CAPACITY % ENERGY% CAPACITY
CAPACITY REVENUES REVENUES REVENUES REVENUES
(MW)
Del Ranch 38 23.33 1.00 5.67 3.00
Elmore 38 23.33 1.00 5.67 3.00
Leathers 38 21.50 0.00 7.50 3.00
Vulcan 34 0.00 0.00 4.17 0.00
East Mesa Sr.
Royalty(2) 37 4.00 4.00 0.00 0.00
Jr. Royalty -- 10.00 10.00 0.00 0.00
Total 185
(1) CEOC is also entitled to receive Royalties as described
herein. Such Royalties are payable from revenues that will
constitute Partnership collateral.
(2)The East Mesa Junior Royalties (which are due but have not
been paid to date), are junior to debt service of the East Mesa
Project. The East Mesa Senior Royalties are senior to debt
service of the East Mesa Project.
The East Mesa Project has executed a long term power sales
agreement with Edison providing for fixed price capacity payments
for the life of the agreement and fixed price energy payments for
the first 10 years. Thereafter, the energy payments will be based
on Edison's Avoided Cost of Energy. The fixed price energy period
for the East Mesa Project expires on December 31, 1999. The East
Mesa Project has been operating for over 5 years.
Reliance on Single Utility Customer
Each of the Projects relies on an agreement with Edison to
generate 100% of its operating revenues. The payments under these
agreements have constituted 100% of the operating revenues of
each Project since its inception, and are expected to continue to
do so for the life of the Securities. Any material failure of
Edison
to fulfill its contractual obligations under the Power Purchase
Agreements could have a material adverse effect on the ability of
the Funding Corporation to pay principal of and interest on the
Securities.
The power purchase agreements pursuant to which all of the
Projects (other than Salton Sea Unit I and Salton Sea Unit IV)
sell electricity to Edison are SO4 Agreements. The SO4 Agreements
provide for both capacity payments and energy payments for a term
of 30 years. While the basis for the capacity payment of each SO4
Agreement is fixed for the entire 30-year term, the price of
energy payments is fixed only for the first ten years of the term
(the "Scheduled Price Period"). Thereafter, the required energy
payment converts to Edison's Avoided Cost of Energy, as filed
with the California Public Utility Commission ("CPUC"). The
Scheduled Price Period expired in 1996 for Vulcan and will expire
in 1999 for Salton Sea Unit III, Del Ranch and Elmore and in 2000
for Salton Sea Unit II, Leathers and East Mesa.
Estimates of Edison's future Avoided Cost of Energy vary
substantially from year to year. The Funding Corporation and the
Guarantors cannot predict the likely level of Avoided Cost of
Energy prices under the SO4 Agreements with Edison at the
expiration of the Scheduled Price Periods. Edison's Avoided Cost
of Energy as determined by the CPUC is currently substantially
below the scheduled energy prices for the Scheduled Price Periods
under the respective SO4 Agreements. For the year ended December
1996, the time period-weighted average of Edison's Avoided Cost
of Energy was 2.5 cents per kWh, compared to the time period-
weighted average for 1996 energy selling prices
pursuant to the SO4 Agreements of approximately 9.7 cents per
kWh, for the combined Salton Sea and Partnership Projects. Thus,
the revenues generated by each of the Projects operating under
SO4 Agreements are likely to decline significantly after the
expiration of the relevant Scheduled Price Period.
Terms of the New Securities and the Old Securities
The New Securities were issued as part of two separate Exchange
Offers which applied to the recapitalization of $610,000,000
aggregate principal amount of the Old Securities. On July 21,
1995 Funding Corporation issued $475,000,000 of Salton Sea Notes
and Bonds Series A, B and C, the Old Series A Securities, Old
Series B Securities and Old Series C Securities. On June 20,
1996 Funding Corporation issued additional securities of
$135,000,000 of Salton Sea Notes and Bonds Series D and E, the
Old Series D Securities and the Old Series E Securities. The New
Securities are obligations of the Funding Corporation evidencing
the same indebtedness as the Old Securities and will be entitled
to the benefits of the Indenture, which governs both the Old
Securities and the New Securities. The form and terms (including
principal amount, interest rate, maturity and ranking) of the New
Securities are the same as the form and terms of the Old
Securities, except that (i) the New Securities have been
registered under the Securities Act and therefore will not be
subject to certain restrictions on transfer applicable to the Old
Securities and will not be entitled to registration rights, and
(ii) the New Securities will not provide for any increase in the
interest rate thereon.
The Securities are issued by Funding Corporation. Payment of
the Securities is guaranteed by the Partnership Guarantors and
the Royalty Guarantor to the extent of their Available Cash Flow,
and the Salton Sea Guarantors. The Interest Payment Dates for
the Securities are May 30 and November 30, commencing November
30, 1995.
The Old Securities were rated "Baa3" by Moody's Investors
Service, Inc. ("Moody's") and "BBB-" by Standard & Poor's Ratings
Group ("S&P"). The initial average life of the Series A
Securities was 2.42 years. The initial average life of the Series
B Securities was 6.89 years. The initial average life of the
Series C Securities was 12.36 years. The initial average life of
the Series D Securities was 2.01 years. The initial average life
of the Series E Securities was 10.01 years.
The $232,750,000 principal of the 6.69% Series A Securities due
May 30, 2000 are payable in semiannual installments, which
commenced November 30, 1995, as follows:
PAYMENT DATE PERCENTAGE OF
PRINCIPAL AMOUNT
PAYABLE
November 30, 1995 9.8440386681%
May 30, 1996 10.3342642320%
November 30, 1996 10.3342642320%
May 30, 1997 13.8298603652%
November 30, 1997 13.8298603652%
May 30, 1998 10.5087003222%
November 30, 1998 10.5087003222%
May 30, 1999 6.4240601504%
November 30, 1999 6.4240601504%
May 30, 2000 7.9621911923%
The $133,000,000 principal of the 7.37% Series B Securities due
May 30, 2005 will be payable in semiannual installments,
commencing May 30, 1998, as follows:
PAYMENT DATE PERCENTAGE OF
PRINCIPAL AMOUNT
PAYABLE
May 30, 1998 9.7819548872%
November 30, 1998 9.7819548872%
May 30, 1999 1.9563909774%
November 30, 1999 1.9563909774%
May 30, 2000 0.3909774436%
November 30, 2000 0.3909774436%
May 30, 2001 8.0360902256%
November 30, 2001 8.0360902256%
May 30, 2002 8.5330827068%
November 30, 2002 8.5330827068%
May 30, 2003 5.6390977444%
November 30, 2003 5.6390977444%
May 30, 2004 7.5781954887%
November 30, 2004 7.5781954887%
May 30, 2005 16.1684210526%
The $109,250,000 principal of the 7.84% Series C Securities due
May 30, 2010 will be payable in semiannual installments,
commencing May 30, 2003, as follows:
PAYMENT DATE PERCENTAGE OF
PRINCIPAL AMOUNT
PAYABLE
May 30, 2003 3.3116704805%
November 30, 2003 3.3116704805%
May 30, 2004 1.6558352403%
November 30, 2004 1.6558352403%
May 30, 2005 0.8283752860%
November 30, 2005 0.8283752860%
May 30, 2006 9.8572082380%
November 30, 2006 9.8572082380%
May 30, 2007 9.8425629291%
November 30, 2007 9.8425629291%
May 30, 2008 10.0851258581%
November 30, 2008 10.0851258581%
May 30, 2009 10.0118993135%
November 30, 2009 10.0118993135%
May 30, 2010 8.8146453090%
The $70,000,000 principal of the 7.02% Series D Securities due
May 30, 2000 will be payable in semiannual installments,
commencing May 30, 1997, as follows:
PAYMENT DATE PERCENTAGE OF
PRINCIPAL AMOUNT
PAYABLE
May 30, 1997 18.4642857143%
November 30, 1997 18.4642857143%
May 30, 1998 22.8571428571%
November 30, 1998 22.8571428571%
May 30, 1999 7.6071428571%
November 30, 1999 7.6071428571%
May 30, 2000 2.1428571430%
The $65,000,000 principal of the 8.30% Series E Securities due
May 30, 2011 will be payable in semiannual installments,
commencing May 30, 1999, as follows:
PAYMENT DATE PERCENTAGE OF
PRINCIPAL AMOUNT
PAYABLE
May 30, 1999 9.2907692308%
November 30, 1999 9.2907692308%
May 30, 2000 3.0769230769%
November 30, 2000 3.0769230769%
May 30, 2001 0.7692307692%
November 30, 2001 0.7692307692%
May 30, 2002 1.2307692308%
November 30, 2002 1.2307692308%
May 30, 2003 2.3076923077%
November 30, 2003 2.3076923077%
May 30, 2004 2.5000000000%
November 30, 2004 2.5000000000%
May 30, 2005 2.6923076923%
November 30, 2005 2.6923076923%
May 30, 2006 1.9230769231%
November 30, 2006 1.9230769231%
May 30, 2007 1.9230769231%
November 30, 2007 1.9230769231%
May 30, 2008 2.6923076923%
November 30, 2008 2.6923076923%
May 30, 2009 2.5000000000%
November 30, 2009 2.5000000000%
May 30, 2010 10.3846153846%
November 30, 2010 10.3846153846%
May 30, 2011 17.4184615384%
Priority of Payments
All revenues received by the Salton Sea Guarantors from the
Salton Sea Projects, all revenues received by the Partnership
Project Companies from the Partnership Projects,all Equity Cash
Flows and Royalties received by the Initial Partnership
Guarantors and all Royalties received by the Royalty Guarantor
shall be paid into a Revenue Fund maintained by a Depositary.
Amounts paid into the Revenue Fund shall be distributed in the
following order of priority: (a) to pay Operating and Maintenance
Costs of the Guarantors; (b) to pay certain administrative costs
of the agents for the secured parties under the Financing
Documents; (c) to pay principal of, premium (if any) and interest
on the Securities and the Debt Service Reserve Bonds, if any, and
interest and certain fees payable to the Debt Service Reserve LOC
Provider; (d) to pay principal of Debt Service Reserve LOC Loans
and certain related fees and charges; (e) to replenish any
shortfall in the Debt Service Reserve Fund; (f) to pay certain
breakage costs in respect of Debt Service Reserve LOC Loans, and
indemnification and other expenses to the Secured Parties, and
(g) to the Distribution Fund or Distribution Suspense Fund, as
applicable.
Debt Service Reserve Fund
A Debt Service Reserve Fund for the benefit of the Security
Holders and the Debt Service Reserve Letter of Credit Provider
has been established under the Depositary Agreement. The amounts
available to be drawn under the Debt Service Reserve Letter of
Credit and all other amounts held in the Debt Service Reserve
Fund shall at all times (a) on or prior to December 31, 1999, be
required to equal the remaining maximum semiannual scheduled
principal and interest payments on the Securities and (b)
subsequent to December 31, 1999, be required to equal the
remaining maximum annual scheduled principal and interest
payments on the Securities. The Debt Service Reserve Letter of
Credit must be issued by a financial institution rated at least
"A" by S&P and "A2" by Moody's. Drawings on the Debt Service
Reserve Letter of Credit will be available to pay principal of
and interest on the Securities and interest on loans created by
drawings on such Debt Service Reserve Letter of Credit.
Optional Redemption
The Series E Securities are subject to optional redemption, in
whole or in part, pro rata at par plus accrued interest to the
Redemption Date plus a premium calculated to "make whole" to
comparable U.S. Treasury securities plus 50 basis points. The
Series B Securities and Series C Securities are subject to
optional redemption, in whole or in part, pro rata at par plus
accrued interest to the Redemption Date plus a premium calculated
to "make whole" to comparable U.S. treasury securities plus 50
basis points. The Series A Securities and Series D Securities
are not subject to optional redemption.
Mandatory Redemption
The Securities are subject to mandatory redemption, pro rata
within each maturity, at par plus accrued interest to the
Redemption Date, (a) if a Permitted Power Contract Buy-Out occurs
unless the Rating Agencies confirm the then current Rating of the
Securities; (b) upon the acceleration of a Project Note in an
amount equal to the principal amount of such note plus accrued
interest; (c) upon the occurrence of certain events of loss,
condemnation, title defects or similar events related to the
Salton Sea Projects or the Partnership Projects or (d) upon the
foreclosure by the Collateral Agent of Collateral securing the
Guarantor's obligations under the Salton Sea Guarantee, the
Partnership Guarantee or Royalty Guarantee.
Distributions
Distributions may be made only from and to the extent of monies
on deposit in the Distribution Fund. Such distributions are
subject to the prior satisfaction of the following conditions:
(a) the amounts contained in the Principal Fund and the
Interest Fund shall be equal to or greater than the aggregate
scheduled principal and interest payments next due on the
Securities;
(b) no Default or Event of Default under the Indenture shall
have occurred and be continuing;
(c) the Debt Service Coverage Ratio for the preceding four
fiscal quarters, measured as one annual period (or, with respect
to any proposed distribution date prior to the first anniversary
of the Closing Date, using a combination of historical and
projected results, as provided in the Indenture), is equal to or
greater than 1.4 to 1, if such distribution date occurs prior to
the year 2000, and, if in or subsequent to the year 2000, is
equal to or greater than 1.5 to 1, as certified by an officer of
the Funding Corporation;
(d) the projected Debt Service Coverage Ratio of the Securities
for the succeeding four fiscal quarters measured as one annual
period is equal to or greater than 1.4 to 1, if such distribution
date occurs prior to the year 2000, and, if such distribution
date occurs in or subsequent to the year 2000, is equal to or
greater than 1.5 to 1, as certified by an officer of the Funding
Corporation;
(e) the Debt Service Reserve Fund shall have a balance equal to
or greater than the Debt Service Reserve Letter (or Letters) of
Credit shall be equal to or greater than (collectively with the
balance, if any, in the Debt Service Reserve Fund) the Debt
Service Reserve Fund Required Balance;
(f) an officer of the Funding Corporation provides a
certificate (based on customary assumptions) that there are
sufficient geothermal resources to operate the Salton Sea
Projects and the Partnership Projects at contract capacity
through the Final Maturity Date; and
(g) Substantial Completion of the Salton Sea Expansion has
occurred on or prior to January 1, 1997; provided that, if such
condition is not satisfied, no distributions shall be made unless
and until (i) Substantial Completion of the Salton Sea Expansion
occurs prior to January 1, 1998, or (ii) Series B Securities and
Series C Securities having an aggregate principal amount of $150
million are redeemed or (iii) the Funding Corporation and the
Guarantors take such actions as the Rating Agencies require to
confirm the Investment Grade Rating of the Securities; provided
further, that this condition to distribution shall only apply
after January 1, 1997, unless the Salton Sea Guarantors have
previously notified the Trustee that the Salton Sea Expansion has
been abandoned.
Ranking and Security for the Securities
The Securities shall be senior debt of the Funding Corporation.
Payment of the Securities is provided for by payments to be made
by the Guarantors under their Project Notes, and the Securities
are secured by a pledge to the Collateral Agent of all of the
outstanding capital stock of the Funding Corporation and the
Guarantees.
Recourse Only to the Funding Corporation and the Guarantors
The obligations to pay principal, premium, if any, and interest
on the Securities are obligations solely of the Funding
Corporation, secured by a pledge of the capital stock of the
Funding Corporation and entitled to the benefits of the
Guarantees. None of CalEnergy or Magma (nor any stockholder,
officer, director or employee thereof or of the Funding
Corporation, or of the Guarantors nor any affiliate thereof other
than the Guarantors pursuant to their Guarantees) will guarantee
the payment of the Securities or has any obligation with respect
to the payment of the Securities.
Incurrence of Additional Debt
The Funding Corporation shall not incur any Debt other than
"Permitted Debt". "Permitted Debt" means:
(a) The Securities;
(b) Debt incurred to acquire the East Mesa Project in whole or
in part; provided that no such Debt may be incurred unless at the
time of such incurrence (i) no Default or Event of Default has
occurred and is continuing and (ii) the Rating Agencies confirm
that the incurrence of such Debt will not result in a Rating
Downgrade;
(c) Debt incurred to develop, construct, own, operate or
acquire additional Permitted Facilities in the Imperial Valley
("Additional Projects"); provided that no such debt may be
incurred unless at the time of such incurrence (i) no Default or
Event of Default has occurred and is continuing and (ii) the
Rating Agencies confirm that the Securities will maintain an
Investment Grade Rating after giving effect to such Debt;
(d) Debt incurred to finance the making of capital improvements
to the Salton Sea Projects, the Partnership Projects or
Additional Projects required to maintain compliance with
applicable law or anticipated changes therein; provided that no
such Debt may be incurred unless at the time of such incurrence
the Independent Engineer confirms as reasonable (i) a
certification by the Funding Corporation (containing customary
qualifications) that the proposed capital improvements are
reasonably expected to enable such Project to comply with
applicable or anticipated legal requirements and (ii) the
calculations of the Funding Corporation that demonstrate, after
giving effect to the incurrence of such Debt, the minimum
projected Debt Service Coverage Ratio (x) for the next four
consecutive fiscal quarters, commencing with the quarter in which
such Debt is incurred, taken as one annual period, and (y) for
each subsequent fiscal year through the Final Maturity Date, will
not be less than 1.2 to 1;
(e) Debt incurred to finance the making of capital improvements
to the Salton Sea Projects, the Partnership Projects or
Additional Projects not required by applicable law so long as
after giving effect to the incurrence of such Debt (i) no Default
or Event of Default has occurred and is continuing, and (ii) (A)
the Independent Engineer confirms as reasonable (x) the
calculations of the Funding Corporation that demonstrate that the
minimum projected Debt Service Coverage Ratio for the next four
consecutive quarters, taken as one annual period, and each
subsequent fiscal year, will not be less than 1.4 to 1, and (y)
the calculations of the Funding Corporation that demonstrate the
average projected Debt Service Coverage Ratio for all succeeding
fiscal years until the Final Maturity Date will not be less than
1.7 to 1 or (B) the Rating Agencies confirm that the incurrence
of such Debt will not result in a Rating Downgrade;
(f) Working Capital Debt in an aggregate amount not to exceed
$15,000,000;
(g) Debt incurred under the Debt Service Reserve LOC
Reimbursement Agreement;
(h) Debt incurred in connection with certain permitted interest
rate swap arrangements;
(i) Debt incurred by the Funding Corporation in an aggregate
amount not to exceed $30,000,000, in connection with the
development, construction, ownership, operation, maintenance or
acquisition of Permitted Facilities;
(j) Subordinated Debt from Affiliates in an aggregate amount
not to exceed $200,000,000 which shall be used to finance
capital, operating or other costs with respect to the Projects or
Additional Projects; and
(k) Debt incurred to support a Working Capital Facility.
All Permitted Debt incurred by the Funding Corporation shall
be loaned to the Guarantors and guaranteed by the Guarantors.
Principal Covenants
Principal covenants under the Indenture require the Funding
Corporation to agree, subject to certain exceptions and
qualifications, (a) not to exercise any remedies or waive any
defaults under the Credit Agreements and the Project Notes,
except as otherwise permitted under the Indenture; (b) not to
incur (i) any Debt except Permitted Debt or (ii) any Lien upon
any of its properties except Permitted Liens and (c) not to enter
into any transaction of merger or consolidation or change its
form of organization or its business.
The Project Notes
The Salton Sea Guarantors jointly and severally issued a
Project Note in an initial principal amount of $325,000,000; the
Partnership Guarantors jointly and severally issued a Project
Note in an initial principal amount of $75,000,000, and an
additional project note in an amount of $135,000,000, and the
Royalty Guarantor issued a Project Note in an initial principal
amount of $75,000,000.
The Guarantee and Project Notes issued by the Salton Sea
Guarantors are senior secured Debt of the Salton Sea Guarantors.
Security for payment of the Guarantee and Project Notes issued by
the Salton Sea Guarantors includes: (a) an assignment of all
revenues received by the Salton Sea Guarantors from the Salton
Sea Projects which will be applied in accordance with the
priorities of payment established under the Depositary Agreement;
(b) a Lien on the geothermal property interests of each of the
Salton Sea Guarantors and the Salton Sea Projects; (c) a
collateral assignment of certain material contracts; (d) a pledge
of the equity interests in the Salton Sea Guarantors; and (e) a
Lien on the Expansion Fund and any other funds of the Salton Sea
Guarantors on deposit under the Depositary Agreement. The assets
described in clauses (a) through (e) and any other assets
securing the Guarantee and Project Notes issued by the Salton Sea
Guarantors at any time are collectively referred to herein as the
"Salton Sea Collateral."
The Guarantee and Project Notes issued by the Partnership
Guarantors are senior secured Debt of the Partnership Guarantors.
Security for payment of the Guarantee and Project Notes issued by
the Partnership Guarantors includes: (a) an assignment of all
revenues received by the Partnership Project Companies from the
Partnership Projects and of all available Equity Cash Flows and
Royalties of the Initial Partnership Guarantors which will be
applied in accordance with the priorities of payment established
under the Depositary Agreement; (b) a Lien on substantially all
of the assets of each of the Partnership Project Companies and
the Partnership Projects; (c) a collateral assignment of certain
material contracts and payment rights; (d) a pledge of the
capital stock of (or other equity interests in) the Partnership
Guarantors; and (e) a Lien on the Capital Expenditure Fund and
any other funds of the Partnership Guarantors on deposit under
the Depositary Agreement. The assets described in clauses (a)
through (e) and any other assets securing the Guarantee and the
Project Notes issued by the Partnership Guarantors at any time
are collectively referred to herein as the "Partnership
Collateral."
The Guarantee and Project Note issued by the Royalty Guarantor
are senior secured Debt of the Royalty Guarantor. Security for
the payment of the Guarantee and Project Note or Notes issued by
the Royalty Guarantor includes: (a) an assignment of all
Royalties paid to the Royalty Guarantor which will be applied in
accordance with the priorities of payment established under the
Depositary Agreement; (b) a collateral assignment of certain
material contracts; (c) a pledge of the capital stock of the
Royalty Guarantor; and (d) a Lien on any funds of the Royalty
Guarantor on deposit under the Depositary Agreement. The assets
described in clauses (a) through (d) and any other assets
securing the Guarantee and Project Note issued by the Royalty
Guarantor at any time are collectively referred to herein as the
"Royalty Collateral."
Principal Covenants
Principal covenants under the Credit Agreements require each
Guarantor to agree, subject to certain exceptions and
qualifications, (a) not to enter into any transaction of merger
or consolidation, change its form of organization, liquidate,
wind-up or dissolve itself; (b) not to enter into non-arm's
length transactions or agreements with Affiliates; (c) not to
incur (i) any Debt except Permitted Guarantor Debt and (ii) any
Liens except for Permitted Liens; (d) not to engage in any
business other than as contemplated by the respective Credit
Agreement; and (e) not to amend, terminate or otherwise modify
certain of the Project Documents to which they are a party except
as permitted under the respective Credit Agreements. In addition
to these principal covenants, in the Salton Sea Credit Agreement
and the Partnership Credit Agreement, the Salton Sea Guarantors
and the Partnership Guarantors have agreed (a) not to sell, lease
or transfer any property or assets material to the Salton Sea
Projects or the Partnership Projects, as applicable, except in
the ordinary course of business; and (b) to maintain insurance as
is generally carried by companies engaged in similar businesses
and owning similar properties.
Considerations Regarding Limitation on Remedies
A significant portion of the proceeds of the Initial Offering
have been distributed to CalEnergy to repay certain non-recourse
indebtedness incurred by CalEnergy in connection with the
acquisition of Magma (including the Guarantors). The Royalty
Guarantor has purchased an assignment of the Royalties from Magma
pursuant to the Magma Assignment Agreement. Magma has also agreed
to make certain payments to CEOC pursuant to the Magma Services
Agreement and to secure such payment obligation with a collateral
assignment of certain cash flows. The Guarantors have executed
Guarantees with respect to the entire amount of Securities. Under
certain circumstances (including a proceeding under Title 11 of
the United States Code or any similar proceeding), it is possible
that a creditor of a Guarantor or Magma could make a claim, under
federal or state fraudulent conveyance laws, that the Funding
Corporation's claims under the Credit Agreements, the Security
Holders' claims under the Guarantees, the Royalty Guarantor's
interest pursuant to the Magma Assignment Agreement or CEOC's
rights under the Magma Services Agreement should be subordinated
or not enforced in accordance with such instruments' terms or
that payments thereunder (including payments to the Holders of
the Securities) should be recovered. In order to prevail on such
a claim, a claimant would have to demonstrate that the
obligations incurred under any Guarantor's Credit Agreement or
Guarantee or the transfers made under the Magma Assignment
Agreement or the Magma Services Agreement were not incurred in
good faith or that any Guarantor or Magma did not receive fair
consideration in connection with such obligations and transfers,
and that any Guarantor or Magma is and was insolvent at the time
of entering into the Credit Agreement, Guarantee, the Magma
Assignment Agreement and/or the Magma Services Agreement or that
it did not have and will not have sufficient capital for carrying
on its business or was not and will not be able to pay its debts
as they mature.
Uncertainties Relating to Exploration and Development of
Geothermal Energy Resources
Geothermal exploration, development and operations are subject
to uncertainties which vary among different geothermal reservoirs
and are similar to those typically associated with oil and gas
exploration and development, including dry holes and uncontrolled
releases. Because of the geological complexities of geothermal
reservoirs, the geographic area and sustainable output of
geothermal reservoirs can only be estimated and cannot be
definitively established. There is, accordingly, a risk of an
unexpected decline in the capacity of geothermal wells and a risk
of geothermal reservoirs not being sufficient for sustained
generation of the electrical power capacity desired.
In addition, both the cost of operations and the operating
performance of geothermal power plants may be adversely affected
by a variety of operating factors. Production and injection wells
can require frequent maintenance or replacement. Corrosion caused
by high-temperature and high-salinity geothermal fluids may
require the replacement or repair of certain equipment, vessels
or pipelines. New production and injection wells may be required
for the maintenance of current operating levels, thereby
requiring substantial capital expenditures.
Insurance
The Salton Sea Projects and the Partnership Projects currently
possess property, business interruption, catastrophic and general
liability insurance. Proceeds of insurance received in connection
with the Salton Sea Projects will be payable to the Depositary
for the account of the Salton Sea Guarantors and will be applied
as required under the Financing Documents. However, proceeds of
insurance received in connection with the Partnership Projects
will be payable to or for the account of the Partnership Project
Companies and will not be payable to the Partnership Guarantors
except in the event that such proceeds are paid to the
Partnership Guarantors as an equity distribution. There can be
no assurance that such comprehensive insurance coverage will be
available in the future at commercially reasonable costs or terms
or that the amounts for which the Salton Sea Guarantors and the
Partnership Guarantors are or will be insured will cover all
potential losses.
Because geothermally active areas such as the area in which the
Projects are located are subject to frequent low-level seismic
disturbances, and serious seismic disturbances are possible, the
power generating plants and other facilities at the Projects are
designed and built to withstand relatively significant levels of
seismic disturbance. However, there is no assurance that seismic
disturbances of a nature and magnitude so as to cause material
damage to the Projects or gathering systems or a material change
in the nature of the geothermal resource will not occur, that
insurance with respect to seismic disturbances will be maintained
by or on behalf of all of the Projects, that insurance proceeds
will be adequate to cover all potential losses sustained, or that
insurance will continue to be available in the future in amounts
adequate to insure against such seismic disturbances.
Regulatory and Environmental Matters
The Guarantors are subject to a number of environmental laws
and regulations affecting many aspects of their present and
future operations, including the disposal of various forms of
materials resulting from geothermal reservoir production, the
construction of the Salton Sea Expansion and the drilling and
operation of new wells. Such laws and regulations generally
require the Guarantors to obtain and comply with a wide variety
of licenses, permits and other approvals. In addition, regulatory
compliance for the construction of new facilities is a costly and
time-consuming process, and intricate and rapidly changing
environmental regulations may require major expenditures for
permitting and create the risk of expensive delays or material
impairment of project value if projects cannot function as
planned due to changing regulatory requirements or local
opposition. The Guarantors and the Projects also remain subject
to a varied and complex body of environmental and energy
regulations that both public officials and private individuals
may seek to enforce. There can be no assurance that existing
regulations will not be revised or that new regulations will not
be adopted or become applicable to the Guarantors and the
Projects which could have an adverse impact on their operations.
In particular, the independent power market in the United States
is dependent on the existing energy regulatory structure,
including the Public Utility Regulatory Policies Act ("PURPA")
and its implementation by utility commissions in the various
states. The structure of such federal and state energy
regulations has in the past, and may in the future, be the
subject of various challenges and restructuring proposals by
utilities and other industry participants. The implementation of
regulatory changes in response to such challenges or
restructuring proposals, or otherwise imposing more comprehensive
or stringent requirements on the Guarantors and Projects, which
would result in increased compliance costs could have a material
adverse effect on the Guarantors' and the Projects' results of
operations.
Employees
Employees necessary for the operation of the Salton Sea
Projects and the Partnership Projects are provided by CEOC, under
the operation and maintenance agreements described below. As of
December 31, 1996, CEOC employed approximately 209 people at the
Salton Sea Projects and the Partnership Projects, collectively.
CEOC employees are not covered by any collective bargaining
agreement. The Funding Corporation believes that CEOC's employee
relations are good.
CEOC maintains a qualified technical staff covering a broad
range of disciplines including geology, geophysics, geochemistry,
hydrology, volcanology, drilling technology, reservoir
engineering, plant engineering, construction management,
maintenance services, production management and electric power
operation.
Administrative services for the Salton Sea Guarantors and the
Partnership Project Companies are provided pursuant to the
administrative services agreements described below. CalEnergy
employees provide corporate level managerial, financial,
accounting, technical and other administrative services and CEOC
employees provide certain accounting, purchasing and payroll
services.
Item 2. Properties
The Funding Corporation does not separately own or lease office
space but has arranged for a separate suite at CalEnergy's
offices in Omaha, Nebraska. (See page 6 for a schedule of the
Guarantors facilities.)
Item 3. Legal Proceedings
The Funding Corporation is not a party to any material legal
proceedings.
Item 4.Submission of Matters to a Vote of Security Holders.
Not applicable.
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder's Matters
Not applicable.
Item 6. Selected Financial Data (Dollars in thousands)
Salton Sea Funding Corporation
The following tables set forth selected historical financial
and operating data of the Funding Corporation. The data should
be read in conjunction with the financial statements and related
notes and other financial information appearing elsewhere in this
Form 10-K.
Year Ended
December 31, From June 20, 1995 (Inception Date)
1996 (2) through December 31, 1995 (1)
---------------- -----------------------------------
Total revenues $40,567 $17,577
Interest expense 36,761 15,022
Provision for income taxes 1,273 1,048
Total expenses 38,746 16,070
Net income 1,821 1,507
December 31, December 31,
1996(2) 1995
------------------- ------------------
Notes receivables from affiliates $538,982 $452,088
Total assets 575,989 522,521
Senior secured notes and bonds 538,982 452,088
Total liabilities 567,295 515,571
Stockholder's equity 8,694 6,950
(1) Funding Corporation was formed on June 20, 1995 for the
sole purpose of acting as issuer of senior notes and bonds and
issued $475,000 of senior secured notes and bonds.
(2) On June 20, 1996 Funding Corporation issued additional
securities of $135,000 of Salton Sea Notes and Bonds Series D
and E.
Salton Sea Guarantors
The following tables set forth selected historical combined
financial and operating data of the Salton Sea Guarantors. The
information contained therein was extracted from certain
historical information of Magma Power Company and certain of its
affiliates. The data should be read in conjunction with the
financial statements and related notes and other financial
information appearing elsewhere in this Form 10-K.
Nine Months Ended
Year Ended December 31, December 31
1996(1) 1995(2) 1994 1993(3)
Sales of electricity $ 90,982$ 71,605 $ 74,576 $ 60,158
Total revenues 91,123 71,605 74,998 60,158
Operating expenses 27,175 26,096 24,766 19,336
Depreciation and
amortization 14,272 10,556 10,049 7,425
Interest expense, net of
capitalized interest 14,645 15,605 8,240 4,267
Total expenses 56,092 52,257 43,055 31,027
Net income 35,031 17,955 31,943 29,131
Property, plant, contracts
and equipment, net 484,182 417,287 204,329 211,409
Total assets 565,934 500,400 232,914 223,066
Loans payable -- -- 114,308 140,000
Senior secured project
note 299,840 321,500 -- --
Total liabilities 374,562 330,801 114,936 140,566
Guarantors' equity 191,372 169,599 117,978 82,500
(1) In June 1996, Salton Sea Unit IV commenced operations.
(2) Information as of December 31, 1995 and for the year then
ended reflects adjustments which have been made to the net
assets of the Salton Sea Guarantors to reflect the effect of
the acquisition of Magma accounted for as a purchase business
combination pushed down to the Salton Sea Guarantors.
(3) On March 31, 1993, the Salton Sea Corporations completed
their acquisition of Salton Sea Units I, II and III.
Partnership Guarantors
The following tables set forth selected historical combined
financial and operating data of the Partnership Guarantors. The
information contained therein was extracted from certain
historical information of Magma Power Company and certain of its
affiliates. The data should be read in conjunction with the
financial statements and related notes, and other financial
information appearing elsewhere in this Form 10-K.
Year Ended December 31,
1996(1) 1995(2) 1994 1993 1992
Sales of electricity $132,212 $76,909 $70,692 $65,579 $60,979
Total revenues 140,226 87,483 76,050 70,057 65,523
Operating expenses 58,945 32,143 35,306 35,597 34,357
Depreciation and amortization 33,974 18,958 9,037 9,249 8,597
Interest expense, net of
capitalized interest 4,848 8,826 3,285 3,712 4,782
Total expenses 97,767 59,927 47,628 48,558 47,736
Provision for income taxes 16,700 11,492 11,284 8,405 6,973
Net income 25,759 14,637 17,138 13,094 6,620
Property, plant, contracts
and equipment, net 364,849 298,956 137,265 138,664 145,060
Total assets 742,183 602,172 180,443 178,894 183,899
Loans payable - 43,766 52,340 60,119 67,365
Senior secured project note 182,204 62,706 - - -
Total liabilities 314,121 228,440 74,048 75,507 78,192
Guarantors' equity 428,062 373,732 106,395 103,387 105,707
(1) On April 17, 1996 the remaining 50% interest of the
Partnership Projects was acquired from Edison Mission Energy.
(2)Information as of December 31, 1995 and for the year then
ended reflects adjustments which have been made to the net
assets of the Partnership Guarantors to reflect the effect of
the acquisition of Magma accounted for as a purchase business
combination pushed down to the Partnership Guarantors.
Royalty Guarantor
The following tables set forth selected historical financial
and operating data of the Royalty Guarantor. The information
contained therein was extracted from certain historical
information of Magma and certain of its affiliates. The data
should be read in conjunction with the financial statements and
related notes and other financial information appearing elsewhere
in this Form 10-K.
Year Ended December 31,
1996 1995 (2) 1994 (3) 1993 1992
Total revenues(1) $30,143 $28,383 $29,410 $26,942 $29,355
Operating expenses 7,288 6,822 20,753 5,710 5,203
Depreciation and amortization 10,280 11,239 - - -
Interest expense 5,246 4,757 - - -
Provision for income taxes 2,560 963 N/A N/A N/A
Total expenses(1) (3) 25,374 24,873 20,753 5,710 5,203
Net income(1) 4,769 3,510 8,657 21,232 24,152
Royalty stream, net 44,372 53,744
Total assets 91,073 117,341
Senior secured project note 56,936 67,882
Total liabilities 81,233 89,290
Guarantor's equity 9,840 28,051
(1)The historical summaries of revenues and related expenses for
periods prior to 1995, which were prepared on the basis
described in the financial statements appearing elsewhere
herein, are not intended to be complete presentation of the
predecessor's revenues and expenses.
(2)Information as of December 31, 1995 and for the year then
ended reflects adjustments which have been made to the net
assets of the Royalty Guarantor to reflect the effect of the
acquisition of Magma accounted for as a purchase business
combination pushed down to the Royalty Guarantor.
(3)During 1994, the Royalty Guarantor charged off is entire
outstanding accrued Junior SO4 royalty receivable from GEO
East Mesa. The charge amounted to $14,502 and is included in
operating expenses. Excluding the one time charge, operating
expenses would have been $6,251 and net income would have been
$23,159.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Dollars in thousands)
Factors Affecting Results of Operations
Funding Corporation was organized for the sole purpose of
acting as issuer of the Securities. The Securities are payable
from the proceeds of payments made of principal and interest on
the Senior Secured Notes and Bonds by the Guarantors, to the
Funding Corporation. The Securities are guaranteed on a joint
and several basis by the Guarantors. The guarantees of the
Partnership Guarantors and Royalty Guarantor are limited to
available cash flow. The Funding Corporation does not conduct
any operations apart from issuing the Securities.
The periodic results of operations for the Guarantors are
influenced to varying degrees by a number of factors, principally
the level of revenues received under the power purchase
agreements, project capacity utilization, the level of operating
expenses and capital expenditures.
Power Purchase Agreements
Each of the Projects sells electricity to Edison pursuant to a
separate SO4 Agreement or a negotiated power purchase agreement.
Each power purchase agreement is independent of the others, and
performance requirements specified within one such agreement
apply only to the Project which is subject to that agreement.
The power purchase agreements provide for three basic types of
payments: energy payments, capacity payments and, in certain
cases, capacity bonus payments. Edison makes fixed annual
capacity payments to the projects, and, to the extent that
capacity factors exceed certain benchmarks, is required to make
capacity bonus payments. The price for capacity and capacity
bonus payments is fixed for the life of the SO4 Agreements and
are significantly higher in the months of June through September.
Energy is sold at increasing fixed rates for the first ten years
of each contract and thereafter at Edison's Avoided Cost of
Energy.
The Partnership Projects sell all electricity generated by the
respective plants pursuant to four long-term SO4 Agreements
between the project and Edison. These SO4 Agreements provide for
capacity payments, capacity bonus payments and energy payments.
Edison makes fixed annual capacity payments to the projects, and
to the extent that capacity factors exceed certain benchmarks is
required to make capacity bonus payments. The price for capacity
and capacity bonus payments is fixed for the life of the SO4
Agreements. Energy is sold at increasing fixed rates for the
first ten years of each contract and thereafter at Edison's
Avoided Cost of Energy.
The scheduled energy price periods of the Partnership Projects'
SO4 Agreements extended until February 1996 for the Vulcan
Partnership and extend until December 1998, December 1998, and
December 1999 for each of the Del Ranch, Elmore and Leathers
Partnerships, respectively. Excluding Vulcan, which is receiving
Edison's Avoided Cost of Energy, the Parthership Projects' SO4
Agreements provide for energy rates ranging from 12.6 cents per
kWh in 1996 to 15.6 cents per kWh in 1999.
The Salton Sea I Project sells electricity to Edison pursuant
to a 30-year negotiated power purchase agreement, as amended (the
"Salton Sea I PPA"), which provides for capacity and energy
payments. The energy payment is calculated using a Base Price
which is subject to quarterly adjustments based on a basket of
indices. The time period weighted average energy payment for
Unit I was 5.1 cents per kWh during 1996. As the Salton Sea I
PPA is not an SO4 Agreement, the energy payments do not revert to
Edison's Avoided Cost of Energy. The capacity payment is
approximately $1,100 per annum.
The Salton Sea II and Salton Sea III Projects sell electricity
to Edison pursuant to 30-year modified SO4 Agreements that
provide for capacity payments, capacity bonus payments and energy
payments. The price for contract capacity and contract capacity
bonus payments is fixed for the life of the modified SO4
Agreements. The energy payments for the first ten year period,
which period expires in April 2000 and February 1999, are
levelized at a time period weighted average of 10.6 cents per kWh
and 9.8 cents per kWh for Salton Sea II and Salton Sea III,
respectively. Thereafter, the monthly energy payments will be at
Edison's Avoided Cost of Energy. For Salton Sea II only, Edison
is entitled to receive, at no cost, 5% of all energy delivered in
excess of 80% of contract capacity for the period April 1, 1994
through March 31, 2004. The annual capacity and bonus payments
for Salton Sea II and Salton Sea III are approximately $3,300 and
$9,700, respectively.
The Salton Sea IV Project sells electricity to Edison pursuant
to a modified SO4 agreement which provides for contract capacity
payments on 34 MW of capacity at two different rates based on the
respective contract capacities deemed attributable to the
original Salton Sea PPA option (20 MW) and to the original Fish
Lake PPA (14 MW). The capacity payment price for the 20 MW
portion adjusts quarterly based upon specified indices and the
capacity payment price for the 14 MW portion is a fixed levelized
rate. The energy payment (for deliveries up to a rate of 39.6
MW) is at a fixed price for 55.6% of the total energy delivered
by Salton Sea IV and is based on an energy payment schedule for
44.4% of the total energy delivered by Salton Sea IV. The
contract has a 30 year term but Edision is not required to
purchase the 20 MW of capacity and energy originally attributable
to the Salton Sea I PPA option after September 30, 2017, the
original termination date of the Salton Sea I PPA.
For the year ended December 31, 1996, Edison's average Avoided
Cost of Energy was 2.5 cents per kWh which is substantially below
the contract energy prices earned for the year ended December 31,
1996. Estimates of Edison's future Avoided Cost of Energy vary
substantially from year to year. The Company cannot predict the
likely level of Avoided Cost of Energy prices under the SO4
Agreements and the modified SO4 Agreements at the expiration of
the scheduled payment periods. The revenues generated by each of
the projects operating under SO4 Agreements could decline
significantly after the expiration of the respective scheduled
payment periods.
Capacity Utilizations
For purposes of consistency in financial presentation, plant
capacity factors for Vulcan, Hoch (Del Ranch), Elmore, Leathers
plants are based on nominal capacity amounts of 34, 38, 38, and
38 net MW respectively, and for Salton Sea I, Salton Sea II,
Salton Sea III and Salton Sea IV plants, are based on nominal
capacity amounts of 10, 20, 49.8 and 39.6 net MW, respectively.
Each plant possesses an operating margin which allows for
production in excess of the amount listed above. Utilization of
this operating margin is based upon a variety of factors and can
be expected to vary throughout the year under normal operating
conditions.
The following data represents the aggregate capacity and
electricity production of Salton Sea Units I and II, Salton Sea
Unit III and Salton Sea Unit IV:
Year Ended December 31,
1996 1995 1994
Overall capacity factor 90.4% 86.5% 90.8%
Capacity NMW (average) 103.0 79.8 79.8
Kwh produced (in thousands) 817,400 604,300 634,890
The following data represents the aggregate capacity and
electricity production of Vulcan, Del Ranch, Elmore and Leathers:
Year Ended December 31,
1996 1995 1994
Operating capacity factor 104.8% 105.9% 103.8%
Capacity NMW (average) 148.0 148.0 148.0
Kwh produced (in thousands) 1,361,800 1,373,310 1,346,000
Results of Operations for the Years Ended December 31, 1996 and 1995
Revenues
The Salton Sea Guarantors' sales of electricity increased to
$90,982 for the year ended December 31, 1996 from $71,605 for the
same period last year, a 27.1% increase. This increase was due
primarily to the addition of Salton Sea IV which commenced
operations in June 1996 and increased electric production at the
other plants.
The Partnership Guarantors' sales of electricity increased
to $132,212 for the year ended December 31, 1996 from $76,909 for
the same period in 1995, a 71.9% increase. This increase was due
primarily to the Partnership Interest Acquisition in April 1996.
This increase was offset by a decline in revenue from Vulcan
which reached the end of its scheduled price period and started
receiving revenue at avoided cost rates in February 1996.
The Royalty Guarantor revenue increased to $30,143 for the
year ended December 31, 1996 from $28,383 for the same period
last year. The increase in royalty revenue is the result of the
higher energy sales at the Partnership Projects compared to the
prior year resulting in higher royalties.
Interest and other income for the Partnership Guarantors
decreased to $8,014 for the year ended December 31, 1996 from
$10,574 for the same period in 1995. The decrease was
attributable to lower cash balances.
Operating Expenses
The Salton Sea Guarantors' operating expenses, which include
royalty, operating, and general and administrative expenses,
increased to $27,175, or 3.32 cents per kWh, for the year ended
December 31, 1996, from $26,096 or 4.32 cents per kWh for the
same period in 1995. The increase in expenses was due primarily
to the addition of Salton Sea Unit IV which began operations in
June 1996.
The Partnership Guarantors' operating expenses, which
include royalty, operating, and general and administrative
expenses, increased to $58,945, or 4.90 cents per kWh, for the
year ended December 31, 1996, from $32,143 or 5.52 cents per kWh
for the same period in 1995. The 83.4% increase in costs was due
primarily to the Partnership Interest Acquisition.
The Royalty Guarantor's operating expenses increased to
$7,288 for the year ended December 31, 1996 from $6,822 for the
same period of 1995, a 6.8% increase. This increase was due to a
scheduled increase in third party lessor royalties related to the
increases in the Partnership Projects' sales of electricity.
Depreciation and Amortization
The Salton Sea Guarantors' depreciation and amortization
increased to $14,272 for the year ended December 31, 1996 from
$10,556 for the year ended December 31, 1995, an increase of
35.2%. This increase was primarily due to the commencement of
operations at Salton Sea Unit IV. Depreciation and amortization
for the year ended December 31, 1996 was 1.75 cents per kWh
compared to 1.75 cents per kWh in the year ended December 31,
1995.
The Partnership Guarantors' depreciation and amortization
increased to $33,974 for the year ended December 31, 1996 from
$18,958 for the same period in 1995, a 79.2% increase. This
increase was primarily due to the Partnership Interest
Acquisition in April 1996.
The Royalty Guarantor's amortization was $10,280 for the year
ended December 31, 1996 compared with $11,239 for the year ended
December 31, 1995. This decrease is consistent with Company's
scheduled amortization of the royalty stream and the excess of
cost over fair value related to the Magma acquisition.
Interest Expense
The Salton Sea Guarantors' interest expense, net of
capitalized amounts, decreased to $14,645 for the year ended
December 31, 1996 from $15,605 for the same period in 1995. This
decrease is due primarily to the capitalization of interest
related to the Salton Sea Unit IV expansion during the
construction period and the mineral extraction project and the
timing of current year debt payments partially offset by
increased indebtedness from the issuance of the senior secured
project notes in July of 1995.
The Partnership Guarantors' interest expense, net of
capitalized amounts, decreased to $4,848 for the year ended
December 31, 1996 from $8,826 for the same period in 1995. The
decrease is a result of scheduled debt repayments and
capitalization of interest on the mineral extraction project,
partially offset by the issuance of $135,000 of senior secured
project notes in June of 1996.
The Royalty Guarantors' interest expense increased to $5,246
for the year ended December 31, 1996 from $4,757 for the same
period in 1995. This increase can be attributed to the related
debt being outstanding for a full year in 1996.
Income Tax Provision
The Salton Sea Guarantors are substantially comprised of
partnerships. Income taxes are the responsibility of the
partners and Salton Sea Guarantors have no obligation to provide
funds to the partners for payment of any tax liabilities.
Accordingly, the Salton Sea Guarantors have no tax obligations.
The Partnership Guarantors' income tax provision increased
to $16,700 for the year ended December 31, 1996 from $11,492 for
the same period in 1995. The increase in the provision is a
result of the additional income from the Partnership Interest
Acquisition. Income taxes will be paid by the parent of the
Guarantors from distributions to the parent company by the
Guarantors which occur after operating expenses and debt service.
The Royalty Guarantor's income tax provision increased to
$2,560 for the year ended December 31, 1996 from $963 for the
same period in 1995. The increase in the provision can be
attributed to an increase in current year earnings. Tax
obligations of the Royalty Guarantor will be remitted to the
parent company only to the extent of cash flows available after
operating expenses and debt service.
Net Income
The Funding Corporation's net income was $1,821 for the year
ended December 31, 1996 compared to $1,507 for the period June
20, 1995 (inception date) to December 31, 1995, which represented
interest income and expense, net of applicable tax, and the
Funding Corporation's 1% equity in earnings of the Guarantors.
The Salton Sea Guarantors' net income increased to $35,031
for the year ended December 31, 1996, compared to $17,955 for the
year ended December 31, 1995 due primarily to increased earnings
resulting from the addition of Salton Sea Unit IV.
The Partnership Guarantors' net income increased to $25,759
for the year ended December 31, 1996, compared to $14,637 for the
year ended December 31, 1995 due primarily to increased earnings
from the Partnership Interest Acquisition.
The Royalty Guarantor's net income increased to $4,769 for
the year ended December 31, 1996, compared to $3,510 for the year
ended December 31, 1995 due primarily to increased royalty
revenue.
Results of Operations for the Years Ended December 31, 1995 and
1994
Revenues
The Salton Sea Guarantors' sales of electricity decreased to
$71,605 for the year ended December 31, 1995 from $74,576 for the
same period last year, a 4.0% decrease. This was due to a 4.8%
decrease in electric kWh sales to 604.3 million kWh from 634.9
million kWh, which was a result of the scheduled overhauls at
Salton Sea Units I, II and III, partially offset by an increase
in the energy price for Salton Sea Unit I.
The Partnership Guarantors' sales of electricity increased
to $76,909 for the year ended December 31, 1995 from $70,692 for
the same period in 1994, an 8.8% increase. This was due to a
2.0% increase in electric kWh sales to 1,373.3 million kwh from
1,346.0 million kWh and an increased price per kWh in accordance
with the SO4 Agreements.
The Royalty Guarantor revenue decreased to $28,383 for the
year ended December 31, 1995 from $29,410 for the same period
last year. The decrease in royalty revenue is the result of the
Royalty Guarantor no longer recording the earned but unpaid East
Mesa Junior Royalties, which is a result of the uncertainty
related to the East Mesa Project obtaining the long-term
financing which is a prerequisite to the payment of these
royalties.
Interest and other income for the Partnership Guarantors
increased to $10,574 for the year ended December 31, 1995 from
$5,358 for the same period in 1994. The increase was
attributable to higher cash balances and the Magma Services
Agreement which went into effect on July 20, 1995. Fee income
related to the Magma Services Agreement for the year ended
December 31, 1995 was $4,457.
Operating Expenses
The Salton Sea Guarantors' operating expenses, which include
royalty, operating, and general and administrative expenses,
increased to $26,096, or 4.32 cents per kWh, for the year ended
December 31, 1995, from $24,766 or 3.90 cents per kWh for the
same period in 1994. The increase in expenses was due to
scheduled overhauls at Salton Sea Units I, II and III.
The Partnership Guarantor' operating expenses, which include
royalty, operating, and general and administrative expenses,
decreased to $32,143, or 5.52 cents per kWh, for the year ended
December 31, 1995, from $35,306 or 6.21 cents per kWh for the
same period in 1994. The 9.0% decrease in costs was primarily
due to the implementation of certain cost savings measures at the
partnership level, including a reduction in labor costs at the
time of the Magma acquisition.
The Royalty Guarantor's operating expenses increased to
$6,822 for the year ended December 31, 1995 from $6,251 for the
same period of 1994, a 9.1% increase. This increase was due to a
scheduled increase in third party lessor royalties related to the
increases in the Partnership Projects' sales of electricity.
Depreciation and Amortization
The Salton Sea Guarantors' depreciation and amortization
increased to $10,556 for the year ended December 31, 1995 from
$10,049 for the year ended December 31, 1994, an increase of
5.0%. Depreciation and amortization for the year ended December
31, 1995 was 1.75 cents per kWh compared to 1.58 cents per kWh in
the year ended December 31, 1994.
The Partnership Guarantors' depreciation and amortization
increased to $18,958 for the year ended December 31, 1995 from
$9,037 for the same period in 1994, a 109.8% increase. This
increase was due to the Magma Acquisition purchase accounting
effect which results in the allocation of goodwill, including
amortization, and the additional depreciation due to the excess
of fair market value assigned to assets over the previous book
value.
The Royalty Guarantor's amortization totaled $11,239 for the
year ended December 31, 1995 and represented amortization of the
royalty stream and goodwill.
Interest Expense
The Salton Sea Guarantors' interest expense, net of
capitalized amounts, increased to $15,605 for the year ended
December 31, 1995 from $8,240 for the same period in 1994. The
increase is a result of increased indebtedness from the issuance
of the Senior Secured Project Notes and the purchase accounting
allocation of the indebtedness incurred in conjunction with the
Magma Acquisition.
The Partnership Guarantors' interest expense, net of
capitalized amounts, increased to $8,826 for the year ended
December 31, 1995 from $3,285 for the same period in 1994. The
increase is a result of increased indebtedness from the issuance
of the Senior Secured Project Notes and the purchase accounting
allocation of the indebtedness incurred in conjunction with the
Magma Acquisition.
The Royalty Guarantors' interest expense for the year ended
December 31, 1995 was $4,757 which related to the issuance of the
Senior Secured Project Notes and the aforementioned allocation of
indebtedness incurred in conjunction with the Magma acquisition.
Income Tax Provision
The Salton Sea Guarantors are comprised of partnerships and
one company which has a partial interest in the Salton Sea
expansion. Income taxes are the responsibility of the partners
and Salton Sea Guarantors have no obligation to provide funds to
the partners for payment of any tax liabilities. Accordingly,
the Salton Sea Guarantors have no tax obligations.
The Partnership Guarantor income tax provision increased to
$11,492 for the year ended December 31, 1995 from $11,284 for the
same period in 1994. Income taxes will be paid by the parent of
the Guarantors from distributions to the parent company by the
Guarantors which occur after operating expenses and debt service.
The Royalty Guarantor's income tax provision was $963 for the
year ended December 31, 1995. Tax obligations of the Royalty
Guarantor will be remitted to the parent company only to the
extent of cash flows available after operating expenses and debt
service.
Net Income
The Funding Corporation's net income for the period June 20,
1995 (inception date) to December 31, 1995 was $1,507 which
represented interest income and expense, net of applicable tax,
and the Funding Corporation's 1% equity in earnings of the
Guarantors.
The Salton Sea Guarantors' net income decreased to $17,955
for the year ended December 31, 1995, compared to $31,943 for the
year ended December 31, 1994 due primarily to increased interest
expense and depreciation and amortization resulting from the
Magma Acquisition.
The Partnership Guarantors' net income decreased to $14,637
for the year ended December 31, 1995, compared to $17,138 for the
year ended December 31, 1994 due primarily to increased interest
expense and depreciation and amortization resulting from the
Magma Acquisition.
The Royalty Guarantor's net income decreased to $3,510 for
the year ended December 31, 1995, compared to $8,657 for the year
ended December 31, 1994 due primarily to increased interest
expense and amortization resulting from the Magma Acquisition.
Capital Resources and Liquidity
The Salton Sea Guarantors' only source of revenue is payments
received pursuant to long term power sales agreements with
Edison, other than interest earned on funds on deposit. The
Partnership Guarantors' primary source of revenue is payments
received pursuant to long term power sales agreements with
Edison. The Partnership Guarantors' also receive Royalties from
the Partnership Projects. The Royalty Guarantor's only source of
revenue is Royalties received pursuant to resource lease
agreements with the Partnership Projects and the East Mesa
Project. These payments, for each of the Guarantors, are
expected to be sufficient to fund operating and maintenance
expenses, payments of interest and principal on the Securities,
projected capital expenditures and debt service reserve fund
requirements.
On April 17, 1996 CalEnergy completed the indirect acquisition
of Edison Mission Energy's partnership interests (the
"Partnership Interest Acquisition") in four geothermal operating
facilities in California for a cash purchase price of $71,000
including acquisition costs and transferred these interests to
Vulcan Power Company and CalEnergy Operating Company. The four
projects, Vulcan, Hoch (Del Ranch), Leathers and Elmore are
located in the Imperial Valley of California. Prior to this
transaction, Magma was a 50% owner of these facilities.
CalEnergy had acquired all of the outstanding equity
interest in Magma in a two-step transaction accounted for as a
purchase according to the terms of a merger agreement whereby on
January 10, 1995, CalEnergy acquired approximately 51% of the
outstanding shares of Magma common stock (the "Magma Common
Stock") through a cash tender offer (the "Magma Tender Offer")
and on February 24, 1995 CalEnergy acquired the remaining 49% of
Magma Common Stock not owned by CalEnergy through a merger (the
"Merger").
In July 1995 CalEnergy recapitalized Magma and the debt
required to complete the Magma Acquisition ("the Merger
Facilities") from proceeds received through the issuance of notes
and bonds as described below.
On July 21,1995 CalEnergy issued $200,000 of 9 7/8% Limited
Recourse Senior Secured Notes Due 2003 (the "Notes"). The Notes
are secured by an assignment and pledge of 100% of the
outstanding capital stock of Magma. On or prior to June 30,
1998, CalEnergy may, at its option, redeem up to an aggregate of
35% of the principal amount of the Notes originally issued at a
redemption price equal to 109.875% of the
principal amount thereof plus accrued interest to the redemption
date. The Notes are redeemable at the option of CalEnergy, in
whole or in part, at the redemption prices of 104.9375%,
102.46875% and 100%, on or after June 30, 2000, 2001 and 2002,
respectively, plus accrued interest to the date of redemption.
On June 20, 1996 and July 21, 1995, the Funding Corporation
completed sales to institutional investors of $135,000 and
$475,000, respectively, of Salton Sea Notes and Bonds (the "Notes
and Bonds"). The Funding Corporation debt securities were
offered as follows:
Senior Secured Series Due Rate Amount
July 21, 1995 A Notes May 30, 2000 6.69% $232,750
July 21, 1995 B Bonds May 30, 2005 7.37% 133,000
July 21, 1995 C Bonds May 30, 2010 7.84% 109,250
June 20, 1996 D Notes May 30, 2000 7.02% 70,000
June 20, 1996 E Bonds May 30, 2011 8.30% 65,000
The Salton Sea Notes and Bonds are secured by the Company's
four existing Salton Sea plants as well as an assignment of the
right to receive various royalties payable to Magma in connection
with its Imperial Valley properties and distributions from the
Partnership Project.
Changing Prices and the Effect of Inflation
Inflation has not had a significant impact on the Guarantors'
operating revenue and costs; energy payments for the Guarantors
(excluding Vulcan) will continue to be based on scheduled rates
and are not adjusted for inflation through the initial ten-year
period of each power purchase agreement.
Item 8. Financial Statements and Supplementary Data.
SALTON SEA FUNDING CORPORATION
INDEX TO FINANCIAL STATEMENTS
SALTON SEA FUNDING CORPORATION
Independent auditors' report--Deloitte & Touche LLP 33
Balance sheets as of December 31, 1996 and 1995 34
Statements of operations for the year ended December 31,
1996 and for the period from June 20, 1995 (inception
date) through December 31, 1995 35
Statements of stockholder's equity for the year ended
December 31, 1996 and for the period from June 20, 1995
(inception date) through December 31, 1995 36
Statements of cash flows for the year ended December 31,
1996 and for the period from June 20, 1995 (inception
date) through December 31, 1995 37
Notes to financial statements 38
SALTON SEA GUARANTORS
Independent auditors' report--Deloitte & Touche LLP 40
Reports of independent accountants--Coopers
& Lybrand L.L.P. 41
Combined balance sheets as of December 31, 1996 and 1995 42
Combined statements of operations for the years
ended December 31, 1996 and 1995 (Successor) and
1994 (Predecessor) 43
Combined statements of Guarantors' equity for the
years ended December 31, 1996 and 1995 (Successor)
and 1994 (Predecessor) 44
Combined statements of cash flows for the years
ended December 31, 1996 and 1995 (Successor) and
1994 (Predecessor) 45
Notes to combined financial statements 46
PARTNERSHIP GUARANTORS
Independent auditors' report--Deloitte & Touche LLP 52
Reports of independent accountants--Coopers
& Lybrand L.L.P. 53
Combined balance sheets as of December 31, 1996 and 1995 54
Combined statements of operations for the years
ended December 31, 1996 and 1995 (Successor) and
1994 (Predecessor) 55
Combined statements of Guarantors' equity for the
years ended December 31, 1996 and 1995 (Successor)
and 1994 (Predecessor) 56
Combined statements of cash flows for the years
ended December 31, 1996 and 1995 (Successor) and
1994 (Predecessor) 57
Notes to combined financial statements 58
SALTON SEA ROYALTY COMPANY
Independent auditors' report--Deloitte & Touche LLP 69
Balance sheets as of December 31, 1996 and 1995 70
Statements of operations for the years ended
December 31, 1996 and 1995 71
Statements of equity for the years ended December 31,
1996 and 1995 72
Statements of cash flows for the years ended December 31,
1996 and 1995 73
Notes to financial statements 74
SALTON SEA ROYALTY COMPANY--PREDECESSOR
Report of independent accountants--Coopers & Lybrand L.L.P. 78
Predecessor summary of revenues and related expenses for
the year ended December 31, 1994 79
Notes to predecessor summary of revenues and related
expenses 80
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholder
Salton Sea Funding Corporation
Omaha, Nebraska
We have audited the accompanying balance sheets of Salton Sea
Funding Corporation as of December 31, 1996 and 1995 and the
related statements of operations, stockholder's equity and cash
flows for the year ended December 31, 1996 and for the period
from June 20, 1995 (inception date) through December 31, 1995.
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 audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in
all material respects, the financial position of Salton Sea
Funding Corporation as of December 31, 1996 and 1995 and the
results of its operations and its cash flows for the year ended
December 31, 1996 and for the period from June 20, 1995
(inception date) through December 31, 1995 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
January 31, 1997
SALTON SEA FUNDING CORPORATION
BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
December 31,
1996 1995
ASSETS
Cash $ 13,218 $ 4,393
Restricted cash 14,044 57,256
Prepaid expenses and other assets 3,452 3,070
Secured project notes from Guarantors 538,982 452,088
Investment in 1% of net assets of
Guarantors 6,293 5,714
----------- -----------
$575,989 $522,521
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accrued liabilities $ 3,291 $ 3,889
Due to affiliates 25,022 59,594
Senior secured notes and bonds 538,982 452,088
----------- -----------
Total liabilities 567,295 515,571
Stockholder's equity:
Common stock--authorized 1,000
shares, par value $.01 per share;
issued and outstanding 100 shares - -
Additional paid-in capital 5,366 5,443
Retained earnings 3,328 1,507
----------- -----------
Total stockholder's equity 8,694 6,950
----------- -----------
$575,989 $522,521
======= =======
The accompanying notes are an integral part of the financial statements.
SALTON SEA FUNDING CORPORATION
STATEMENTS OF OPERATIONS
(Dollars in Thousands)
For the Period
From June 20, 1995
For the Year (inception date)
Ended through
December 31, 1996 December 31, 1995
Revenues:
Interest income $39,911 $17,306
Equity in earnings of Guarantors 656 271
--------- ---------
40,567 17,577
Expenses:
General and administrative expenses 712 ---
Interest expense 36,761 15,022
--------- ---------
Total expenses 37,473 15,022
--------- ---------
Income before income taxes 3,094 2,555
Provision for income taxes 1,273 1,048
-------- ---------
Net income $ 1,821 $ 1,507
===== =====
The accompanying notes are an integral part of the financial statements.
SALTON SEA FUNDING CORPORATION
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE PERIOD FROM JUNE 20, 1995 (INCEPTION DATE)
THROUGH DECEMBER 31, 1995
(Dollars in Thousands)
Additional
Common Stock Paid-in Retained Total
Shares Amount Capital Earnings Equity
--------------------------------------------------
Issuance share of common stock 100 $ - $ - $ - $ -
Investment in 1% of net assets of
Guarantors at inception - - 3,267 - 3,267
--------------------------------------------------
Balance, June 20, 1995
(inception date) 100 - 3,267 - 3,267
Adjustments resulting from
capital transactions of
Guarantors - - 2,176 - 2,176
Net income - - - 1,507 1,507
--------------------------------------------------
Balance, December 31, 1995 100 - 5,443 1,507 6,950
Adjustments resulting from capital
transactions of Guarantors - - (77) - (77)
Net income - - - 1,821 1,821
-------- -------- -------- ---------- --------
Balance, December 31, 1996 100 $ - $5,366 $3,328 $8,694
===== ===== ===== ========== ========
The accompanying notes are an integral part of the financial statements.
SALTON SEA FUNDING CORPORATION
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
For the Period
For the From June 20, 1995
Year Ended (Inception Date) through
December 31, 1996 December 31, 1995
Cash flows from operating activities:
Net income $ 1,821 $ 1,507
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in earnings of guarantors (656) (271)
Changes in assets and liabilities:
Prepaid expenses and other assets (382) (3,070)
Accrued liabilities (598) 3,889
----------- ------------
Net cash flows from operating activities 185 2,055
----------- ------------
Cash flows from investing activities:
Decrease (increase) in restricted cash 43,212 (57,256)
Secured project notes of Guarantors (135,000) (475,000)
Principal repayments of secured project
notes of Guarantors 48,106 22,912
------------ ------------
Net cash flows from investing activities (43,682) (509,344)
------------ ------------
Cash flows from financing activities:
Proceeds from offering of senior secured notes
and bonds 135,000 475,000
Repayment of senior secured project notes
and bonds (48,106) (22,912)
Due to affiliates (34,572) 59,594
----------- ------------
Net cash flows from financing activities 52,322 511,682
----------- ------------
Net change in cash 8,825 4,393
Cash at the beginning of period 4,393 -
---------- ------------
Cash at the end of period $ 13,218 $ 4,393
======= =======
Non-cash investing and financing activities:
Adjustments resulting from capital transactions
of Guarantors $ (77) $ 2,176
======= =======
The accompanying notes are an integral part of the financial statements.
SALTON SEA FUNDING CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Dollars in Thousands)
1. THE PURPOSE AND BUSINESS OF SALTON SEA FUNDING CORPORATION
Salton Sea Funding Corporation (the "Funding Corporation"),
which was formed on June 20, 1995, is a special purpose Delaware
corporation and a wholly-owned, subsidiary of Magma Power
Company, which in turn is wholly-owned by CalEnergy Company, Inc.
(" CalEnergy"). The Funding Corporation was organized for the
sole purpose of acting as issuer of senior secured notes and
bonds. On June 20, 1996 and July 21, 1995, the Funding
Corporation issued $135,000 and $475,000 of Senior Secured Notes
and Bonds (collectively, the "Securities").
The Securities are payable from the proceeds of payments made
of principal and interest on the Senior Secured Notes and Bonds
by the Guarantors, as defined, to the Funding Corporation. The
Securities are guaranteed on a joint and several basis by the
Salton Sea Guarantors, the Partnership Guarantors and Salton Sea
Royalty Company (collectively the "Guarantors"). The guarantees
of the Partnership Guarantors and Salton Sea Royalty Company are
limited to available cash flow. The Funding Corporation does not
conduct any operations apart from issuing the Securities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment in Guarantors
Since the Funding Corporation has the ability to assert
significant influence over the operations of the Guarantors, it
accounts for its one percent investment in the Guarantors using
the equity method of accounting.
Restricted Cash
The restricted cash balance primarily includes commercial paper,
money market securities and mortgage backed securities and is
composed of amounts deposited in restricted accounts from which
the Funding Corporation will source its debt service requirements
for the Securities.
Income Taxes
The Funding Corporation is included in the consolidated income
tax returns with its parent and affiliates. Income taxes are
provided on a separate return basis, however, tax obligations of
the Funding Corporation will be remitted to the parent only to
the extent of cash flows available after operating expenses and
debt service.
Fair Values of Financial Instruments
Fair values have been estimated based on quoted market prices
for debt issues listed on exchanges. Fair values of financial
instruments that are not actively traded are based on market
prices of similar instruments and/or valuation techniques using
market assumptions. Unless otherwise noted, the estimated fair
value amounts do not differ significantly from recorded values.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
3. SENIOR SECURED NOTES AND BONDS
On June 20, 1996 and July 21, 1995, the Funding Corporation
completed sales to institutional investors of $135,000 and
$475,000, respectively, of Salton Sea Notes and Bonds (the "Notes
and Bonds"). The Funding Corporation's debt securities were
offered as follows:
Senior Secured Series Due Rate Amount
July 21, 1995 A Notes May 30, 2000 6.69% $232,750
July 21, 1995 B Bonds May 30, 2005 7.37% 133,000
July 21, 1995 C Bonds May 30, 2010 7.84% 109,250
June 20, 1996 D Notes May 30, 2000 7.02% 70,000
June 20, 1996 E Bonds May 30, 2011 8.30% 65,000
Principal maturities of the Senior Secured Notes and Bonds are as follows:
1997 $ 90,228
1998 106,938
1999 57,836
2000 25,072
2001 22,376
Thereafter 236,532
-----------
$538,982
=======
The carrying amounts and estimated fair values of the Senior
Secured Notes and Bonds at December 31, 1996 and 1995 were
$538,982 and $531,807 and $452,088 and $459,629, respectively.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholder
Magma Power Company
Omaha, Nebraska
We have audited the accompanying combined balance sheets of
the Salton Sea Guarantors as of December 31, 1996 and 1995, and
the related combined successor statements of operations,
Guarantors' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Salton
Sea Guarantors' management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such combined financial statements present
fairly, in all material respects, the financial position of the
Salton Sea Guarantors as of December 31, 1996 and 1995 and the
results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
January 31, 1997
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholder
Magma Power Company
Omaha, Nebraska
We have audited the accompanying combined predecessor
statements of operations, Guarantors' equity and cash flows of
Salton Sea Guarantors for the year ended December 31, 1994.
These financial statements are the responsibility of the Salton
Sea Guarantors' 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. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the combined predecessor financial
statements referred to above present fairly, in all material
respects, the historical combined results of operations and cash
flows of the Salton Sea Guarantors for the year ended December
31, 1994 in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
San Diego, California
June 19, 1995,
SALTON SEA GUARANTORS
COMBINED BALANCE SHEETS
(Dollars in Thousands)
December 31,
1996 1995
Cash $ - $ 454
Accounts receivable 14,954 10,436
Prepaid expenses and other assets 16,008 20,129
Property, plant, contracts and equipment, net4 84,182 417,287
Excess of cost over fair value of net assets
acquired, net 50,790 52,094
------------------------
$565,934 $500,400
======= =======
LIABILITIES AND GUARANTORS' EQUITY
Liabilities:
Accounts payable $ 642 $ 939
Accrued liabilities 9,989 4,043
Due to affiliates 64,091 4,319
Senior secured project note 299,840 321,500
------------------------
Total liabilities 374,562 330,801
Commitments and contingencies (Notes 2,5 and 6)
Total Guarantors' equity 191,372 169,599
------------------------
$565,934 $500,400
======= =======
The accompanying notes are an integral part of the combined financial
statements.
SALTON SEA GUARANTORS
COMBINED STATEMENTS OF OPERATIONS
(Dollars in Thousands)
Year Ended December 31,
1996 1995 1994
Successor Predecessor
Revenues:
Sales of electricity $90,982 $71,605 $74,576
Interest and other income 141 - 422
------------------------------
Total Revenues 91,123 71,605 74,998
------------------------------
Expenses:
Operating, general and
administrative expenses 27,175 26,096 24,766
Depreciation and amortization 14,272 10,556 10,049
Interest expense 24,866 24,783 8,240
Less capitalized interest (10,221) (9,178) -
--------------------- ----------
Total expenses 56,092 52,257 43,055
------------------------------
Income before minority interest 35,031 19,348 31,943
Minority interest - 1,393 -
------------------------------
Net income $35,031 $17,955 $31,943
====== ====== ======
The accompanying notes are an integral part of the combined financial
statements.
SALTON SEA GUARANTORS
COMBINED STATEMENTS OF GUARANTORS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
(Dollars in Thousands)
Predecessor:
Balance, January 1, 1994 $ 82,500
Contributions 12,285
Distributions (8,750)
Net income 31,943
------------
Balance, December 31, 1994 117,978
Net income in 1995 prior to acquisition 1,393
Successor:
Contributions 10,606
Distributions (5,000)
Purchase accounting push-down adjustment, net 26,667
Net income 17,955
------------
Balance, December 31, 1995 169,599
Distributions (13,258)
Net income 35,031
------------
Balance, December 31, 1996 $ 191,372
========
The accompanying notes are an integral part of the combined financial
statements.
SALTON SEA GUARANTORS
COMBINED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Year Ended December 31,
1996 1995 1994
Successor
Predecessor
Cash flows from operating activities:
Net income $ 35,031 $ 17,955 $31,943
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interest - 1,393 -
Depreciation and amortization 14,272 10,556 10,049
Changes in assets and liabilities:
Accounts receivable (4,518) 169 (993)
Prepaid expenses and other assets 4,121 (19,236) (869)
Accounts payable and accrued liabilities 5,649 4,354 62
Other - (583)
------------------------------------
Net cash flows from operating activities 54,555 15,191 39,609
------------------------------------
Cash flows from investing activities:
Purchase of Guarantors by CalEnergy,
net of cash acquired - (171,964) -
Capital expenditures (79,863) (68,677) (4,493)
Net decrease (increase) in marketable
securities - 4,988 (4,945)
Decrease (Increase) restricted cash - 3,400 (3,400)
------------------------------------
Net cash flows from investing activities (79,863) (232,253) (12,838)
------------------------------------
Cash flows from financing activities:
Repayments of senior secured project note (21,660) (302,172) (155,692)
Loan proceeds - 509,364 130,000
Contributions from parent - 10,606 12,285
Distributions to parent (13,258) (5,000) (8,750)
Due to (from) affiliates 59,772 4,718 (399)
------------------------------------
Net cash flows from financing activities 24,854 217,516 (22,556)
------------------------------------
Net change in cash (454) 454 4,215
Cash at beginning of period 454 - -
------------------------------------
Cash at end of period $ - $ 454 $ 4,215
======= ======= =======
The accompanying notes are an integral part of the combined financial
statements.
SALTON SEA GUARANTORS
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars in Thousands)
1. ORGANIZATION AND OPERATIONS
Salton Sea Guarantors (the "Guarantors") (not a legal entity) is
comprised of 100% interests in three geothermal electric power
generating plants (Salton Sea Units I, II and III) and a fourth
plant (Salton Sea Unit IV or the Salton Sea Expansion) which
became operational in June 1996 (collectively, the "Salton Sea
Projects"). Salton Sea Unit IV was created upon combining and
consolidating the Salton Sea Unit I power purchase agreement and
the Fish Lake modified SO4. All four plants are located in the
Imperial Valley of California. The Salton Sea Projects will
serve to guarantee loans from Salton Sea Funding Corporation
("Funding Corporation"), an indirect wholly-owned subsidiary of
CalEnergy Company, Inc. ("CalEnergy").
The financial statements consist of the combination of (1)
Salton Sea Brine Processing, L.P., a California limited
partnership between Magma Power Company ("Magma"), as a 99%
limited partner and Salton Sea Power Company ("SSPC"), a
wholly-owned subsidiary of Magma, as a 1% general partner, (2)
Salton Sea Power Generation, L.P., a California limited
partnership between Salton Sea Brine Processing, L.P., as a 99%
limited partner, and Salton Sea Power Company, as a 1% general
partner and (3) assets and liabilities attributable to Salton Sea
Unit IV which are held 59% by Salton Sea Power Generation, L.P.
and 41% by Fish Lake Power Company ("FLPC"). Effective in June
of 1995, 1% interests in SSPC and FLPC were transferred to
Funding Corporation. All of the entities in the combination are
affiliates of Magma.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements present the combined
accounts of the Salton Sea Projects described above. All
significant intercompany transactions and accounts have been
eliminated.
The December 31, 1995 successor financial statements reflect the
acquisition of Magma (see Note 3), the resulting push down to the
Guarantors of the accounting as a purchase business combination
and minority interest for the non-owned periods consisting of
100% for the period January 1-9, 1995 and 49% for the period
January 10, 1995-February 23, 1995.
Revenue Recognition
The Guarantors recognize revenues and related accounts
receivable with respect to their four operating facilities from
sales of electricity to Southern California Edison Company
("Edison") on an accrual basis. Edison is the sole customer of
the Guarantors.
The Salton Sea I project sells electricity to Edison pursuant to
a 30-year negotiated power purchase agreement, as amended (the
"Salton Sea I PPA"), which provides for capacity and energy
payments. The energy payment is calculated using a Base Price
which is subject to quarterly adjustments based on a basket of
indices. The time period weighted average energy payment for
Salton Sea I was 5.1 cents per kWh during 1996. As the Salton
Sea I PPA is not an SO4 Agreement, the energy payments do not
revert to Edison's Avoided Cost of Energy. The capacity payment
is approximately $1,100 per annum.
The Salton Sea II and Salton Sea III projects sell electricity
to Edison pursuant to 30-year modified SO4 Agreements that
provide for capacity payments, capacity bonus payments and energy
payments. The price for contract capacity and contract capacity
bonus payments is fixed for the life of the modified SO4
Agreements. The energy payments for the first ten year period,
which period expires in April 2000 and February 1999 are
levelized at a time period weighted average of 10.6 cents per kWh
and 9.8 cents per kWh for Salton Sea II and Salton Sea III,
respectively. Thereafter, the monthly energy payments will be
Edison's Avoided Cost of Energy. For Salton Sea II only, Edison
is entitled to receive, at no cost, 5% of all energy delivered in
excess of 80% of contract capacity for the period April 1, 1994
through March 31, 2004. The annual capacity and bonus payments
for Salton Sea II and Salton Sea III are approximately $3,300 and
$9,700, respectively.
The Salton Sea IV Project sells electricity to Edison pursuant
to a modified SO4 agreement which provides for contract capacity
payments on 34 MW of capacity at two different rates based on the
respective contract capacities deemed attributable to the
original Salton Sea PPA option (20 MW) and to the original Fish
Lake PPA (14 MW). The capacity payment price for the 20 MW
portion adjusts quarterly based upon specified indices and the
capacity payment price for the 14 MW portion is a fixed levelized
rate. The energy payment (for deliveries up to a rate of 39.6
MW) is at a fixed price for 55.6% of the total energy delivered
by Salton Sea IV and is based on an energy payment schedule for
44.4% of the total energy delivered by Salton Sea IV. The
contract has a 30-year term but Edison is not required to
purchase the 20 MW of capacity and energy originally attributable
to the Salton Sea I PPA option after September 30, 2017, the
original termination date of the Salton Sea I PPA.
The Guarantors earn energy payments based on kilowatt hours
("kWhs") of energy provided to Edison. During the first 10
years, the Guarantors earn payments for energy as scheduled in
their SO4 Agreements. After the 10-year scheduled payment period
has expired (in 1999 for Salton Sea Unit III and 2000 for Salton
Sea Unit II), the energy payment per kWh throughout the remainder
of the contract period will be at Edison's Avoided Cost of
Energy. For the year ended December 31, 1996, Edison's average
Avoided Cost of Energy was 2.5 cents per kWh which is
substantially below the contract energy prices earned in 1996.
Estimates of Edison's future Avoided Cost of Energy vary
substantially from year to year. The Guarantors cannot predict
the likely level of Avoided Cost of Energy prices under the SO4
Agreements at the expiration of the scheduled payment periods.
The revenues generated by each of the units operating under SO4
Agreements could decline significantly after the expiration of
the relevant scheduled payment period. Under the negotiated
contract, the energy payment is calculated using a base price, as
defined, which is subject to quarterly adjustments based on a
basket of indices for the term of the agreement.
Property, Plant, Contracts and Equipment
Property, plant, contracts and equipment are carried at cost
less accumulated depreciation. The Guarantors follow the full
cost method of accounting for costs incurred in connection with
the exploration and development of geothermal resources. The
Guarantors provide depreciation and amortization of property,
plants, contracts and equipment upon the commencement of revenue
production over the estimated useful life of the assets.
Depreciable lives for the periods through 1994 were as follows:
Plant and plant equipment 20 years
Office furniture and equipment 5-10 years
Other equipment 7-10 years
Exploration and development costs 20 years
Power purchase contracts were amortized on the straight line
method over 20 years which is the lesser of the remaining life of
the contract or the remaining useful life of plant and plant
equipment.
As a result of the purchase business combination, the assets
and liabilities were adjusted to fair value and are depreciated
over the remaining useful lives. See "Purchase Accounting" below
and Note 4, "Property, Plant, Contracts and Equipment."
Purchase Accounting
As a result of the purchase business combination accounted for
on a push down basis by the Guarantors during the year ended
December 31, 1995, all identifiable assets and liabilities are
stated at fair value (see Note 3).
Depreciation of the operating power plant costs, net of salvage
value, is computed on the straight line method over the estimated
useful lives, between 10 and 30 years. Depreciation of
furniture, fixtures and equipment, which are recorded at cost, is
computed on the straight line method over the estimated useful
lives of the related assets, which range from three to ten years.
Power sale agreements have been assigned values separately for
each of (1) the remaining portion of the scheduled price periods
of the power sales agreements and (2) the 20 year avoided cost
periods of the power sales agreements and are being amortized
separately over such periods using the straight line method; and
(3) the 163 net MW BRPU Award for which the related plants will
either be constructed or the contract rights will be bought out;
amortization of such values has been deferred until the plants
have been constructed and production commences or the buyout
proceeds have been applied against such values.
The Salton Sea reservoir contains commercial quantities of
extractable minerals. The fair value allocated to mineral
extraction was based on the estimated net cash flows generated
from producing such minerals. The fair value assigned to the
mineral reserves will be amortized on the units of production
method upon commencement of commercial production.
Excess of Cost over Fair Value
Total acquisition costs in excess of the fair values assigned
to the net assets acquired are amortized over a 40 year period
using the straight line method. At December 31, 1996 and 1995,
accumulated amortization of the excess of cost over fair value
was $2,481 and $1,177, respectively.
Income Taxes
The Guarantors are comprised substantially of partnership
interests. The income or loss of each partnership for income tax
purposes, along with any associated tax credits, is the
responsibility of the individual partners. Accordingly, no
recognition has been given to federal or state income taxes in
the accompanying combined financial statements.
Statements of Cash Flows
For purposes of the statements of cash flows, the Guarantors
consider only demand deposits at banks to be cash. Cash paid for
interest during the years ended December 31, 1996 , 1995 and 1994
was $23,301, $4,716 and $7,163, respectively.
Fair Values of Financial Instruments
Fair values of financial instruments that are not actively
traded are based on market prices of similar instruments and/or
valuation techniques using market assumptions. Unless otherwise
noted, the estimated fair value amounts do not differ
significantly from recorded values.
Impairment of Long-Lived Assets
On January 1, 1996, the Guarantor adopted Statement of
Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" which requires that long-lived assets and
certain identifiable intangibles be reviewed for impairments
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The adoption
of SFAS 121 did not have a material effect on the Guarantors'
financial statements.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
3. PURCHASE OF MAGMA POWER COMPANY
On January 10, 1995, CalEnergy acquired approximately 51% of
the outstanding shares of common stock of Magma (the "Magma
Common Stock") through a cash tender offer (the "Magma Tender
Offer") and completed the Magma acquisition on February 24, 1995
by acquiring approximately 49% of the outstanding shares of Magma
Common Stock not owned by CalEnergy through a merger.
The transaction was accounted for as a purchase business
combination. All identifiable assets acquired and liabilities
assumed were assigned a portion of the cost of acquiring Magma,
equal to their fair values at the date of the acquisition. The
adjustments which have been made to the net assets of the
Guarantors to reflect the effect of the acquisition of Magma
accounted for as a purchase business combination pushed down to
the Guarantors are as follows:
Property, plant, contracts and equipment $ 153,660
Goodwill 53,271
Deferred financing cost 6,412
Severance, relocation and litigation reserve (2,312)
Debt (184,364)
------------
Net increase in assets $ 26,667
============
Unaudited pro forma combined revenue and net income of the
Guarantors on a purchase, push down basis of accounting, for the
year ended December 31, 1995, as if the acquisition had occurred
on January 1, 1994 after giving effect to certain pro forma
adjustments related to the acquisition, were $71,605 and $18,465,
respectively.
4. PROPERTY, PLANT, CONTRACTS AND EQUIPMENT
Property, plant, contracts and equipment consisted of the following:
December 31,
1996 1995
--------------------------
Plant and equipment $329,458 $173,509
Salton Sea Unit IV construction
in progress - 108,632
Power sale agreements 64,609 64,609
Mineral extraction 66,831 60,577
Exploration and development costs 42,220 17,793
-----------------------
503,118 425,120
Less accumulated depreciation
and amortization (18,936) (7,833)
-----------------------
$484,182 $417,287
======= =======
5. SENIOR SECURED PROJECT NOTE
The Guarantors assumed their proportionate share of the secured
bank financing incurred in connection with the purchase of Magma
(see Note 3). On July 21, 1995, CalEnergy recapitalized Magma
and the related Merger Facilities from proceeds received through
a $200,000 high yield offering and a $475,000 investment grade
offering of the Salton Sea Funding Corporation. Proceeds from
the offering of Salton Sea Funding Corporation investment grade
securities were used to repay certain loans of the Guarantors.
The Guarantors issued a project note in the amount of $325,000
payable to Salton Sea Funding Corporation with interest rates
ranging from 6.69% to 7.84%, and guaranteed the investment grade
securities. The guarantee issued is collateralized by a lien on
substantially all the assets of and a pledge of the equity
interests in the Guarantors.
Principal maturities of the senior secured project note are as
follows:
1997 $ 33,632
1998 39,450
1999 16,076
2000 9,737
2001 16,944
Thereafter 184,001
------------
$299,840
=======
The carrying amounts and estimated fair values of the senior
secured projects notes at December 31, 1996 and 1995 were
$299,840 and $295,849 and $321,500 and $326,337, respectively.
6. RELATED PARTY TRANSACTIONS
The Guarantors have entered into the following agreements:
Easement Grant Deed and Agreement Regarding Rights for
Geothermal Development dated April 1, 1993, whereby the
Guarantors acquired from Magma Land I, a wholly-owned subsidiary
of Magma, rights to extract geothermal brine from the geothermal
lease rights property which is necessary to operate the Salton
Sea Power Generation, L.P. facilities in return for 5% of all
electricity revenues received by the Guarantors. The amount
expensed for the years ended December 31, 1996, 1995 and 1994 was
$4,215, $3,579 and $3,732, respectively.
Administrative Services Agreement dated April 1, 1993 with
Magma, whereby Magma will provide to the Guarantors adminis
trative and management services. Fees payable to Magma amount to
3% of total electricity revenues per month. The amount
expensed for the years ended December 31, 1996, 1995 and 1994 was
$2,202, $2,153 and $2,239, respectively.
Operating and Maintenance Agreement dated April 1, 1993
with CalEnergy Operating Company ("CEOC") (formerly Magma
Operating Co.), whereby the Guarantors retain CEOC to operate the
Salton Sea facilities for a period of 32 years. Payment is made
to CEOC in the form of reimbursements of expenses incurred.
During 1996, 1995 and 1994, the Guarantors reimbursed CEOC for
expenses of $9,854, $6,939 and $5,973, respectively.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholder
Magma Power Company
Omaha, Nebraska
We have audited the accompanying combined balance sheets of the
Partnership Guarantors as of December 31, 1996 and 1995, and the
related combined successor statements of operations, Guarantors'
equity and cash flows for the years then ended. These financial
statements are the responsibility of the Guarantors' management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such combined financial statements present
fairly, in all material respects, the financial position of the
Partnership Guarantors as of December 31, 1996 and 1995 and the
results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
January 31, 1997
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholder
Magma Power Company
Omaha, Nebraska
We have audited the accompanying Partnership Guarantors (the
"Guarantors") combined predecessor statements of operations,
Guarantors' equity and cash flows for the year ended December 31,
1994. These financial statements are the responsibility of the
Partnership Guarantors' 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. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the combined predecessor financial statements
referred to above present fairly, in all material respects, the
historical combined results of operations and cash flows of the
Partnership Guarantors for the year ended December 31, 1994, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Diego, California
June 19, 1995,
PARTNERSHIP GUARANTORS
COMBINED BALANCE SHEETS
(Dollars in Thousands)
December 31,
1996 1995
ASSETS
Cash $ - $ 11,146
Restricted cash - 9,859
Accounts receivable 22,766 11,841
Prepaid expenses and other assets 19,083 9,651
Due from affiliates 129,278 54,949
Property, plant, contracts and equipment,
net 364,849 298,956
Management fee 67,521 63,520
Excess of fair value over net assets
acquired, net 138,686 142,250
----------------------
$742,183 $602,172
======= =======
LIABILITIES AND GUARANTORS' EQUITY
Liabilities:
Accounts payable $ 663 $ 3,566
Accrued liabilities 22,977 19,995
Loans payable - 43,766
Senior secured project note 182,204 62,706
Deferred income taxes 108,277 98,407
----------------------
Total liabilities 314,121 228,440
Commitments and contingencies (Notes 2, 6 and 7)
Guarantors' equity:
Common stock 3 3
Additional paid-in capital 387,663 359,092
Retained earnings 40,396 14,637
----------------------
Total Guarantors' equity 428,062 373,732
----------------------
$742,183 $602,172
======= =======
The accompanying notes are an integral part of the combined financial
statements.
PARTNERSHIP GUARANTORS
COMBINED STATEMENTS OF OPERATIONS
(Dollars in Thousands)
Year Ended December 31,
1996 1995 1994
Successor Predecessor
Revenues:
Sales of electricity $132,212 $76,909 $70,692
Interest and other income 8,014 10,574 5,358
--------------------------------
Total revenues 140,226 87,483 76,050
Costs and expenses:
Operating, general and administrative costs 58,945 32,143 35,306
Depreciation and amortization 33,974 18,958 9,037
Interest expense 13,697 16,726 3,285
Less capitalized interest (8,849) (7,900) ---
--------------------------------
Total expenses 97,767 59,927 47,628
--------------------------------
Income before income taxes 42,459 27,556 28,422
Provision for income taxes 16,700 11,492 11,284
--------------------------------
Income before minority interest 25,759 16,064 17,138
Minority interest - 1,427 -
--------------------------------
Net income 25,759 14,637 17,138
Pro forma adjustment to reflect fee
payable from affiliates, net of income taxes N/A N/A 1,956
-------------------------------
Pro forma net income N/A N/A $19,094
======= ====== =======
The accompanying notes are an integral part of the combined financial
statements.
PARTNERSHIP GUARANTORS
COMBINED STATEMENTS OF GUARANTORS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
(Dollars in Thousands)
Additional
Common Stock Paid-in Retained Total
Shares Amount Capital Earnings Equity
--------------------------------------------------------
Predecessor:
Balance, January 1, 1994 3 $ 3 $103,384 $ - $ 103,387
Cash distributions to Magma - - (1,062) (17,138) (18,200)
Other distributions - - (3,315) - (3,315)
Contribution for income taxes - - 7,385 - 7,385
Net income - - - 17,138 17,138
----------------------------------------------------
Balance, December 31, 1994 3 3 106,392 - 106,395
Net income in 1995 prior to
acquisition - - - 1,427 1,427
Successor:
Purchase accounting push-down
adjustment, net - - 68,617 (1,427) 67,190
Distributions - - (13,860) - (13,860)
Contributions - - 197,943 - 197,943
Net income - - - 14,637 14,637
----------------------------------------------------
Balance, December 31, 1995 3 3 359,092 14,637 373,732
Distributions - - (42,429) - (42,429)
Contribution of partnership
interest - - 71,000 - 71,000
Net income - - - 25,759 25,759
----------------------------------------------------
Balance, December 31, 1996 3 $ 3 $387,663 $40,396 $428,062
===== ====== ======= ====== =======
The accompanying notes are an integral part of the combined financial
statements.
PARTNERSHIP GUARANTORS
COMBINED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Year Ended December31,
1996 1995 1994
(Successor) (Predecessor)
Cash flows from operating activities:
Net income $ 25,759 $ 14,637 $ 17,138
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interest - 1,427 -
Depreciation and amortization 33,974 18,958 9,037
Deferred taxes 321 1,011 3,899
Changes in assets and liabilities:
Accounts receivable 3,552 (993) (3,103)
Prepaid expenses and other assets (615) (5,779) 178
Accounts payable and accrued liabilities 3,278 12,047 2,421
Other, net - - 8,251
--------------------------------
Net cash flows from operating activities 66,269 41,308 37,821
--------------------------------
Cash flows from investing activities:
Capital expenditures (18,483) (4,066) (10,495)
Purchase of Guarantors by CalEnergy,
net of cash acquired - (197,810) -
Net (increase) decrease in marketable securities - 7,457 (4,826)
Decrease (increase) in restricted cash 23,085 (1,206) (3,058)
Management fee (4,736) (30,485) -
--------------------------------
Net cash flow from investing activities (134) (226,110) (18,379)
--------------------------------
Cash flows from financing activities:
Loan repayments (107,560) (225,479) (7,779)
Loan proceeds 135,000 288,185 -
Contributions from parent - 197,943 -
Distributions to parent (42,429) (13,860) (18,200)
Decrease (increase) in amounts due from
affiliates (62,292) (50,841) 4,077
--------------------------------
Net cash flows from financing activities (77,281) 195,948 (21,902)
--------------------------------
Net increase (decrease) in cash (11,146) 11,146 (2,460)
Cash at beginning of period 11,146 - 8,121
--------------------------------
Cash at the end of period $ - $ 11,146 $ 5,661
======= ====== ======
During 1996, CalEnergy Company, Inc. contributed $71,000 of net
assets acquired from Edison Mission Energy, of which $12,956 was
cash, to the Partnership Guarantors (see Note 3).
The accompanying notes are an integral part of these combined financial
statements.
PARTNERSHIP GUARANTORS
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars in Thousands)
1. ORGANIZATION AND OPERATIONS
Partnership Guarantors (the "Guarantors") (not a legal
entity) consists of the combination of Vulcan Power Company
("VPC") and CalEnergy Operating Company ("CEOC"), both 99% owned
by Magma Power Company ("Magma") and 1% owned by Salton Sea
Funding Corporation (the "Funding Corporation"). VPC's and
CEOC's principal assets are interests in certain partnerships
which are engaged in the operation of geothermal power plants in
the Imperial Valley of California. The Guarantors will serve to
guarantee loans to such partnerships from Funding Corporation, a
wholly-owned subsidiary of CalEnergy Company, Inc. ("CalEnergy").
VPC and its subsidiary holda 100% interest in Vulcan/BN Geothermal
Power Company, a Nevada general partnership, and CEOC and its
subsidiaries hold a 90% general partner interest in Leathers,
L.P., a California limited partnership, Del Ranch, L.P., a
California limited partnership and Elmore, L.P. a California
limited partnership (collectively, the "Partnerships"). Magma
owns a 10% limited partnership interest in each of Leathers L.P.,
Elmore L.P. and Del Ranch L.P. and has entered into an agreement
to pay to the Guarantors the distributions it receives related to
such 10% interests, in addition to a special distribution equal to
4.5% of total energy sales from the Leathers Project.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements of the Guarantors
present the accounts of CEOC, VPC and their proportionate share
of the Partnerships in which they have an undivided interest in
the assets and are proportionately liable for their share of the
liabilities. All significant intercompany balances and
transactions have been eliminated.
The December 31, 1995 successor financial statements reflect
the acquisition of Magma (see Note 3), the resulting push down to
the Guarantors of the accounting as a purchase business
combination and minority interest for the non-owned periods
consisting of 100% for the period January 1-9, 1995 and 49% for
the period January 10, 1995--February 23, 1995.
Revenue Recognition
The Guarantors recognize revenues and related accounts
receivable from sales of electricity on an accrual basis using
stated contract prices. All of the Guarantors sales of
electricity are to Southern California Edison Company ("Edison")
and are under long-term power purchase contracts.
The Partnership Projects sell all electricity generated by the
respective plants pursuant to four long-term power purchase
agreements ("SO4 Agreements") between the projects and Edison.
These SO4 Agreements provide for capacity payments, capacity
bonus payments and energy payments. Edison makes fixed annual
capacity payments to the projects, and to the extent that
capacity factors exceed certain benchmarks is required to make
capacity bonus payments. The price for capacity and capacity
bonus payments is fixed for the life of the SO4 Agreements.
Energy is sold at increasing fixed rates for the first ten years
of each contract and thereafter at Edison's Avoided Cost of
Energy.
The scheduled energy price periods of the Partnership Projects'
SO4 Agreements extended until February 1996 for the Vulcan
Partnership and extend until December 1998, December 1998, and
December 1999 for each of the Del Ranch, Elmore and Leathers
Partnerships, respectively. Excluding Vulcan, which is receiving
Edison's Avoided Cost of Energy, the Partnership Projects' SO4
Agreements provide for energy rates ranging from 12.6 cents per
kWh in 1996 to 15.6 cents per kWh in 1999. The weighted average
energy rate for all of the Partnership Projects' SO4 Agreements
was 9.7 cents per kWh in 1996.
The Guarantors earn energy payments based on kilowatt hours
("kWhs") of energy provided to Edison. During the first 10 years,
the Guarantors earn payments for energy as scheduled in their SO4
Agreements. After the 10-year scheduled payment period has
expired (in 1996 for Vulcan, 1998 for Del Ranch and Elmore and
1999 for Leathers), the energy payment per kWh throughout the
remainder of the contract period will be at Edison's Avoided Cost
of Energy. For the year ended December 31, 1996, Edison's
average Avoided Cost of Energy was 2.5 cents per kWh which is
substantially below the contract energy prices earned in 1996.
Estimates of Edison's future Avoided Cost of Energy vary
substantially from year to year. The Guarantors cannot predict
the likely level of Avoided Cost of Energy prices under the SO4
Agreements at the expiration of the scheduled payment periods.
The revenues generated by each of the projects operating under
SO4 Agreements could decline significantly after the expiration
of the relevant scheduled payment periods.
Property, Plant, Contracts and Equipment
Property, plant, contracts and equipment are carried at cost
less accumulated depreciation. The Guarantors follow the full
cost method of accounting for costs incurred in connection with
the exploration and development of geothermal resources. The
Guarantors provide depreciation and amortization of property,
plants, contracts and equipment upon the commencement of revenue
production over the estimated useful life of the assets.
Depreciable lives for the periods through 1994 were as
follows:
Plant and plant equipment 20 years
Office furniture and equipment 5-10 years
Other equipment 7-10 years
Exploration and development costs 20 years
Power purchase contracts were amortized on the straight line
method over 20 years which is the lesser of the remaining life of
the contract or the remaining useful life of plant and plant
equipment.
As a result of the purchase of Magma, the assets and
liabilities were adjusted to fair value and are depreciated over
the remaining useful lives. See "Purchase Accounting" below and
Note 4, "Property, Plant, Contracts and Equipment".
Purchase Accounting
Depreciation of the operating power plant costs, net of salvage
value, is computed on the straight line method over the estimated
useful lives, between 10 and 30 years. Depreciation of
furniture, fixtures and equipment, which are recorded at cost, is
computed on the straight line method over the estimated useful
lives of the related assets, which range from three to ten years.
Power sale agreements have been assigned values separately for
each of (1) the remaining portion of the scheduled price periods
of the power sales agreements and (2) the 20 year avoided cost
periods of the power sales agreements and are amortized
separately over such periods using the straight line method.
The Salton Sea reservoir contains commercial quantities of
extractable minerals. The fair value allocated to mineral
extraction was based on the estimated net cash flows generated
from such production. The fair value assigned to the mineral
reserves will be amortized using the units of production method
upon commencement of commercial production.
A process license was allocated fair value which represents the
economic benefits expected to be realized from the installation
of the license and related technology at the Imperial Valley.
The fair value assigned to the process license is amortized using
the straight line method over the remaining estimated useful life
of the license.
Excess of Cost over Fair Value
Total acquisition costs in excess of the fair values assigned
to the net assets acquired are amortized over a 40 year period
using the straight line method. At December 31, 1996 and 1995
accumulated amortization of the excess of cost over fair value of
net assets acquired was $6,801 and $3,237, respectively.
Income Taxes
The entities comprising the Guarantors are included in
consolidated income tax returns with their parent and affiliates;
however, income taxes are provided on a separate return basis.
Tax obligations of the Guarantors will be remitted to the parent
only to the extent of cash flows available after operating
expenses and debt service.
Management Fee
Pursuant to the Magma Services Agreement, Magma has agreed to
pay CEOC all equity cash flows and certain royalties payable by
the Guarantors in exchange for providing data and services to
Magma. As security for the obligations of Magma under the Magma
Services Agreement, Magma has collaterally assigned to CEOC its
rights to such equity cash flows and certain royalties.
Statements of Cash Flows
For purposes of the statement of cash flows, the Guarantors
consider only demand deposits at banks to be cash. Cash paid for
interest during 1996, 1995 and 1994 was $10,314, $3,235 and
$2,949, respectively.
Fair Values of Financial Instruments
Fair values of financial instruments that are not actively
traded are based on market prices of similar instruments and/or
valuation techniques using market assumptions. Unless otherwise
noted, the estimated fair value amounts do not differ
significantly from recorded values.
Pro Forma Adjustments (Unaudited)
The accompanying combined predecessor statements of operations
contain a proforma adjustment to reflect a fee for data and
services management to CEOC from Magma under an agreement entered
into in June 1995, equal to distributions to Magma from its 10%
interest in Leathers, Del Ranch and Elmore and 4.5% of total
energy sales from the Leathers Project as if such agreement were
in effect during all periods presented. (See Note 7).
Impairment of Long-Lived Assets
On January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121 ("SFAS 121"), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" which requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The adoption of SFAS
121 did not have a material effect on the Guarantors' financial
statements.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
3. ACQUISITIONS
Magma Power Company
On January 10, 1995, CalEnergy acquired approximately 51% of
the outstanding shares of common stock of Magma (the "Magma
Common Stock") through a cash tender offer (the "Magma Tender
Offer") and completed the Magma acquisition on February 24, 1995
by acquiring approximately 49% of the outstanding shares of Magma
Common Stock not owned by CalEnergy through a merger.
The transaction was accounted for as a purchase business
combination. All identifiable assets acquired and liabilities
assumed were assigned a portion of the cost of acquiring Magma,
equal to their fair values at the date of acquisition. The
adjustments which have been made to the net assets of the
Guarantors to reflect the effect of the acquisition of Magma
accounted for as a purchase business combination pushed down to
the Guarantors are as follows:
Property, plant, contracts and equipment $ 214,513
Goodwill 145,487
Deferred financing cost 9,714
Other assets (2,137)
Severance, relocation and litigation reserve (3,313)
Deferred income taxes (83,889)
Debt (213,185)
------------
Net increase in assets $ 67,190
============
Edison Mission Energy's Partnership Interest
On April 17, 1996, CalEnergy completed the indirect acquisition
of the remaining 50% interest of the Partnerships owned by Edison
Mission Energy (the "Partnership Interest Acquisition") for a
cash purchase price of $71,000 including acquisition costs and
transferred these interests to VPC and CEOC.
The Partnership Interest Acquisition has been accounted for as
a purchase business combination. All identifiable assets
acquired and liabilities assumed were assigned a portion of the
cost of acquiring the Partnership Interest, equal to their fair
values at the date of the acquisition.
The adjustments which have been made to the net assets of the
Guarantors to reflect the effect of the Partnership Interest
Acquisition accounted for as a purchase business combination are
as follows:
Cash $ 12,956
Restricted cash 13,226
Power sales agreements 78,036
Other assets 20,254
Project loans (48,161)
Liabilities (5,311)
$ 71,000
Unaudited pro forma combined revenue and net income of the
Guarantors on a purchase, push down basis of accounting, for the
year ended December 31, 1996, as if the acquisitions had occurred
on January 1, 1994 after giving effect to certain pro forma
adjustments related to the acquisition, were $158,912 and
$26,852, respectively, compared to $179,103 and $28,869,
respectively, for the year ended December 31, 1995.
4. PROPERTY, PLANT, CONTRACTS AND EQUIPMENT
Property, plant, contracts and equipment consisted of the
following:
December 31,
1996 1995
Plant and equipment $ 60,272 $ 58,532
Power sale agreements 123,588 44,966
Process license 46,290 46,290
Mineral reserves 121,199 112,350
Exploration and development costs 59,303 53,449
----------- -----------
410,652 315,587
Less accumulated depreciation
and amortization (45,803) (16,631)
----------- -----------
$364,849 $298,956
======= =======
5. LOANS PAYABLE
Loans payable at December 31, 1995 included the Guarantors' pro
rata share of the debt of the Del Ranch, Elmore and Leathers
partnerships which were repaid in 1996.
6. SENIOR SECURED PROJECT NOTES
The Guarantors assumed their proportionate share of the
secured bank financing incurred in connection with the purchase
of Magma (see Note 3). On July 21, 1995, CalEnergy recapitalized
Magma and the related Merger Facilities from proceeds received
through a $200,000 high yield offering and a $475,000 investment
grade offering of Salton Sea Funding Corporation. The Guarantors
issued a project note in the amount of $75,000 payable to Salton
Sea Funding Corporation at an interest rate of 6.69%, and
guaranteed, to the extent of available cash flow, the investment
grade securities. The guarantee is collateralized by a lien on
the available cash flow of and a pledge of stock in the
Guarantors. On June 20, 1996, the Salton Sea Funding Corporation
issued an additional investment grade offering for $135,000. In
connection with this offering, the Guarantors issued an
additional project note in the amount of $135,000 with interest
rates ranging between 7.02% and 8.30%.
Principal maturities of the senior secured project notes are
as follows:
1997 $38,594
1998 51,762
1999 32,364
2000 10,562
2001 1,000
Thereafter 47,922
-----------
$182,204
=======
The carrying amounts and estimated fair values of the Senior
Secured Project Notes at December 31, 1996 and 1995 were $182,204
and $179,779 and $62,706 and $64,348, respectively.
7. RELATED PARTY TRANSACTIONS
The Guarantors are party to a 30-year brine supply agreement
through the Vulcan/BN Geothermal Power Company partnership and a
technology license agreement for the rights to use the technology
necessary for the construction and operation of the Vulcan Plant.
Under the brine supply agreement, the Guarantors will pay VPC
4.167% of the contract energy component of the price of
electricity provided by the Vulcan Plant. In addition, VPC has
been designated as operator of the Vulcan Plant and receives
agreed-upon compensation for such services.
Charges to the Guarantors related to the brine supply
agreement and operator's fees on a pro rata basis amounted to
$370 and $425, respectively, for the year ended December 31,
1996, $745 and $620, respectively, for the year ended December
31, 1995, and $516 and $438, respectively, for the year ended
December 31, 1994.
In addition, the Guarantors entered into the following agreements:
Easement Grant Deed and Agreement Regarding Rights for
Geothermal Development, whereby the Guarantors acquired from
Magma rights to extract geothermal brine from the geothermal
lease rights property which is necessary to operate the Leathers,
Del Ranch and Elmore Plants in return for 17.333%, on a pro rata
basis, of all energy revenues received by each plant. The
Guarantors' share of amounts expensed under this agreement for
1996, 1995 and 1994 were $16,980, $8,115 and $7,488,
respectively.
Ground Leases dated March 15 and August 15, 1988 with Magma
whereby the Guarantors lease from Magma for 32 years the surface
of the land as described in the Imperial County Assessor's
official records. Amounts expensed under the ground leases were
$60 in 1996 and $30 in each of 1995 and 1994.
Administrative Services Agreements whereby CEOC will
provide to the Partnerships administrative and management
services for a period of 32 years through 2020. Fees payable to
CEOC amount to the greater of 3% of total electricity revenues or
$60 per month. The minimum monthly payments for years subsequent
to 1989 are increased based on the consumer price index of the
Bureau of Labor and Statistics. Amounts expensed related to
these agreements for 1996, 1995 and 1994 amounted to $3,545,
$1,687, and $1,573, respectively.
Operating and Maintenance Agreements whereby the Guarantors
retain CEOC to operate the plants for a period of 32 years
through 2020. Payment is made to CEOC in the form of
reimbursements of expenses incurred and a guaranteed capacity
payment ranging from 10% to 25% of energy revenues over stated
amounts. The Guarantors in 1996, 1995 and 1994 reimbursed CEOC
for expenses of $8,547, $4,471, and $2,391, respectively, and
accrued a guaranteed capacity payment of $3,888, $1,731 and
$1,548 at December 31, 1996, 1995 and 1994, respectively.
8. CONDENSED FINANCIAL INFORMATION
Condensed balance sheet information of the Guarantors' pro rata interest in
the respective entities as of December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
Vulcan Vulcan Adjustments/ Combined
Power CEOC Elmore Del Ranch Leathers BNG Eliminations Total
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1996
Assets:
Accounts receivable and
other $ - $11,773 $ 9,479 $ 9,198 $10,130 $ 3,214 $(1,945) $ 41,849
Due from affiliates - 17,219 2,678 2,707 - 14,579 92,095 129,278
Property, plant, contracts and
equipment, net 230 6,940 58,540 53,635 70,850 53,310 121,344 364,849
Management fee and
goodwill, net - - - - - - 206,207 206,207
Investments in
partnerships 70,571 195,061 - - - - (265,632) -
---------------------------------------------------------------------------------
$70,801 $230,993 $70,697 $65,540 $80,980 $71,103 $152,069 $742,183
====== ======= ====== ====== ====== ====== ======= =======
Liabilities and equity:
Accounts payable and
accrued liabilities $ 65 6,296$ 815$ 1,678$ 1,282$ 532 $121,249 $131,917
Due to affiliate - - - - 18,382 - (18,382) -
Senior secured project note - - - - - - 182,204 182,204
----------------------------------------------------------------------------------
Total liabilities 65 6,296 815 1,678 19,664 532 285,071 314,121
Guarantors' equity 70,736 224,697 69,882 63,862 61,316 70,571 (133,002) 428,062
--------------------------------------------------------------------------------
$70,801 $230,993 $70,697 $65,540 $80,980 $71,103 $152,069 $742,183
====== ======= ====== ======= ====== ====== ====== =======
</TABLE>
8. CONDENSED FINANCIAL INFORMATION (Continued)
<TABLE>
<CAPTION>
Vulcan Vulcan Adjustments/ Combined
Power CEOC Elmore Del Ranch Leathers BNG Eliminations Total
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1995
Assets:
Cash and investments $ - $ - $ 7,060 $ 6,896 $ 6,772 $ 277 $ - $ 21,005
Accounts receivable
and other - 792 4,899 4,951 5,631 6,826 (1,607) 21,492
Due from affiliates (232) 71,976 (988) (763) (1,066) 116 (14,094) 54,949
Property, plant, contracts
and equipment, net 265 1,294 27,744 25,508 32,466 29,224 182,455 298,956
Management fee - - - - - - 63,520 63,520
Goodwill, net - - - - - - 142,250 142,250
Investments in
partnerships 36,074 73,455 - - - - (109,529) -
-------------------------------------------------------------------------------
$36,107 $147,517 $38,715 $36,592 $43,803 $36,443 $262,995 $602,172
====== ======= ====== ====== ====== ====== ======= =======
Liabilities and Equity:
Accounts payable and
accrued liabilities $ 369 $ 8,557 $ 443 $ 794 $ 652 $ 369 $110,784 $121,968
Loans payable - - 11,450 10,930 21,386 - - 43,766
Senior secured project note - - - - - - 62,706 62,706
-------------------------------------------------------------------------------
Total liabilities 369 8,557 11,893 11,724 22,038 369 173,490 228,440
Guarantors' equity 35,738 138,960 26,822 24,868 21,765 36,074 89,505 373,732
-------------------------------------------------------------------------------
$36,107 $147,517 $38,715 $36,592 $43,803 $36,443 $262,995 $602,172
====== ======= ====== ===== ====== ====== ======= =======
</TABLE>
8. CONDENSED FINANCIAL INFORMATION (Continued)
Condensed combining statements of operations including information of the
Guarantors' pro rata interest in the respective entities for the years ended
December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
Vulcan Vulcan Adjustments/ Combined
Power CEOC Elmore Del Ranch Leathers BNG Eliminations Total
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUCCESSOR:
December 31, 1996
Revenues $ 3,157 $49,399 $39,627 $40,235 $39,126 $14,271 $(45,589) $140,226
Expenses 431 - 25,762 25,382 27,055 12,102 23,735 114,467
-----------------------------------------------------------------------------------
Net income $ 2,726 $49,399 $13,865 $14,853 $12,071$ 2,169 $(69,324) $25,759
====== ====== ====== ====== ====== ====== ======= ======
December 31, 1995
Revenues $15,634 $24,121 $19,336 $18,941 $19,101 $20,878 $(30,528) $87,483
Expenses 1,547 - 12,866 12,523 14,161 7,974 23,775 72,846
---------------------------------------------------------------------------------
Net income $14,087 $24,121$ 6,470 $ 6,418 $ 4,940 $12,904 $(54,303) $14,637
====== ====== ====== ====== ====== ====== ======= =====
PREDECESSOR:
December 31, 1994
Revenues $10,423 $19,290 $17,611 $18,116 $17,538 $18,430 $(25,358) $76,050
Expenses 4,901 7,674 12,973 12,908 14,241 10,395 (4,180) 58,912
---------------------------------------------------------------------------------
Net income $ 5,522 $11,616 $4,638 $ 5,208 $ 3,297 $ 8,035 $(21,178) $17,138
====== ====== ====== ====== ====== ====== ======= =====
</TABLE>
9. INCOME TAXES
The provision for income taxes for the years ended December 31,
1996, 1995 and 1994 consisted of the following:
Current Deferred Total
--------- --------------------
Successor:
1996
- - --------------------
Federal $10,945 $ 1,976 $12,921
State 5,434 (1,655) 3,779
--------- -------------------
Total $16,379 $ 321 $16,700
====== ====== ======
1995
- - --------------------
Federal $ 6,697 $ 2,264 $ 8,961
State 3,784 (1,253) 2,531
--------- -------------------
Total $10,481 $ 1,011 $11,492
===== ===== ======
Predecessor:
1994
- - --------------------
Federal $ 6,277 $ 3,314 $ 9,591
State 1,108 585 1,693
--------- -------------------
Total $ 7,385 $ 3,899 $11,284
===== ===== ======
Deferred tax liabilities and assets at December 31, 1996 and 1995
consisted of the following:
1996 1995
------------ -----------
Deferred liabilities:
Depreciation and amortization $108,277 $106,238
Deferred assets:
Tax credits --- 7,831
------------ -----------
Net deferred tax liability $108,277 $ 98,407
======= ======
The effective tax rate differs from the federal statutory tax
rate due primarily to percentage depletion in excess of cost
depletion, goodwill amortization and the realization for income
tax purposes of certain tax credits.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholder
Magma Power Company
Omaha, Nebraska
We have audited the accompanying balance sheets of the
Salton Sea Royalty Company as of December 31, 1996 and 1995 and
the related statements of operations, equity and cash flows for
the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on those financial statements based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in
all material respects, the financial position of the Salton Sea
Royalty Company as of December 31, 1996 and 1995 and the results
of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
January 31, 1997
SALTON SEA ROYALTY COMPANY
BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
December 31,
1996 1995
ASSETS
Due from affiliates $ 10,008 $ 25,110
Royalty stream, net 44,372 53,744
Excess of cost over fair value
of net assets acquired, net 35,004 35,912
Prepaid expenses and other assets 1,689 2,575
----------------------
$ 91,073 $117,341
======= =======
LIABILITIES AND EQUITY
Liabilities:
Accrued liabilities $12,070 $ 5,948
Senior secured project note 56,936 67,882
Deferred income taxes 12,227 15,460
----------------------
Total liabilities 81,233 89,290
Commitments and contingencies (Notes 2 and 4)
Equity:
Common stock, par value $.01 per share; 100 shares
authorized, issued and outstanding - -
Additional paid-in capital 1,561 24,541
Retained earnings 8,279 3,510
----------------------
Total equity 9,840 28,051
----------------------
$91,073 $117,341
======= =======
The accompanying notes are an integral part of the financial statements.
SALTON SEA ROYALTY COMPANY
STATEMENTS OF OPERATIONS
(Dollars in Thousands)
Year ended December 31,
1996 1995
Revenues:
Royalty income $30,143 $28,383
Expenses:
Operating, general and administrative
expenses 7,288 6,822
Amortization of royalty stream and
goodwill 10,280 11,239
Interest expense 5,246 4,757
--------------------
Total expenses 22,814 22,818
---------- ----------
Income before income taxes 7,329 5,565
Provision for income taxes 2,560 963
---------- ----------
Income before minority interest 4,769 4,602
Minority interest - 1,092
---------- ----------
Net income $ 4,769 $ 3,510
====== ======
The accompanying notes are an integral part of the financial statements.
SALTON SEA ROYALTY COMPANY
STATEMENTS OF EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(Dollars in Thousands)
Additional
Common Stock Paid-in Retained
Shares Amount Capital Earnings Total
-------------------------------------------------------
Balance, January 1, 1995 - $ - $ 5,300 $ - $ 5,300
Net income in 1995 prior to
acquisition - - - 1,092 1,092
Purchase accounting push-down
adjustment, net - - 38,043 (1,092) 36,951
Distributions - - (20,501) - (20,501)
Contributions - - 1,699 - 1,699
Issuance of common stock 100 - - - -
Net income - - - 3,510 3,510
---------------------------------------------------
Balance, December 31, 1995 100 - 24,541 3,510 28,051
Distributions - - (22,980) - (22,980)
Net income - - - 4,769 4,769
---------------------------------------------------
Balance, December 31, 1996 100 $ - $ 1,561 $ 8,279 $ 9,840
===== ======= ======= ====== ======
The accompanying notes are an integral part of the financial statements.
SALTON SEA ROYALTY COMPANY
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Year Ended December 31,
1996 1995
Cash flow from operating activities:
Net income $ 4,769 $ 3,510
Adjustments to reconcile net income to net cash provided by
operating activities:
Minority interest - 1,092
Amortization of royalty stream and goodwill 10,280 11,239
Deferred income taxes (3,233) (4,581)
Changes in assets and liabilities:
Prepaid expenses and other assets 886 (2,575)
Accrued liabilities 6,122 5,948
--------------------
Net cash flows from operating activities 18,824 14,633
--------------------
Net cash flow from investing activities:
Purchase of Company by CalEnergy, net of cash acquired - (38,603)
--------------------
Net cash flows from investing activities - (38,603)
--------------------
Net cash flows from financing activities:
Proceeds from issuance of debt - 115,446
(Increase) decrease in due from affiliates 15,102 (25,110)
Contributions from parent - 1,699
Distribution to parent (22,980) (20,501)
Loan repayments (10,946) (47,564)
--------------------
Net cash flows from financing activities (18,824) 23,970
--------------------
Net change in cash - -
Cash at beginning of period - -
--------------------
Cash at end of period $ - $ -
====== ======
The accompanying notes are an integral part of the financial statements.
SALTON SEA ROYALTY COMPANY
NOTES TO FINANCIAL STATEMENTS
(Dollars in Thousands)
1. ORGANIZATION
Salton Sea Royalty Company (the " Royalty Company") is a
single-purpose entity, 99% owned by Magma Power Company ("Magma")
and 1% owned by Salton Sea Funding Corporation (the "Funding
Corporation"). Effective February 24, 1995, Magma became a
wholly-owned subsidiary of CalEnergy Company, Inc. ("CalEnergy")
(see Note 3).
In June 1995, the Royalty Company received an assignment of
royalties and certain fees paid by three partnership projects,
Del Ranch, Elmore and Leathers (collectively, the "Partnership
Projects"). On April 17, 1996, CalEnergy acquired the remaining
50% interest in the Partnership Projects. Prior to this
transaction, Magma and its affiliates had a 50% interest in the
Partnership Projects. In addition, the Royalty Company has
received an assignment of certain resource-related royalties and
contract assignment royalties payable by the geothermal power
plant located in Imperial Valley, California which is owned by an
unaffiliated third party (East Mesa, together with the
Partnership Projects, the "Projects"). All of the Projects are
engaged in the operation of geothermal power plants in the
Imperial Valley in Southern California. Substantially all of the
assigned royalties are based on a percentage of energy and
capacity revenues of the Projects. With the exception of
royalties from East Mesa, the royalties are senior to debt
service and are pari passu with other operating and maintenance
expenses of the Projects.
All of the Projects have executed long-term power purchase
agreements ("SO4 Agreements") providing for capacity and energy
sales to Southern California Edison Company ("Edison"). Each of
these agreements provides for fixed price capacity payments for
the life of the contract.
The Projects earn energy payments based on kilowatt hours (kWhs)
of energy provided to Edison. During the first 10 years of the
agreement, the Projects earn payments for energy as scheduled in
the SO4 Agreements. After the 10-year scheduled payment period
has expired (1998 for Del Ranch and Elmore; 1999 for Leathers and
East Mesa), the energy payment per kWh throughout the remainder
of the contract period will be at Edison's Avoided Cost of
Energy. For the year ended December 31, 1996, Edison's average
Avoided Cost of Energy was 2.5 cents per kWh which is
substantially below the contract energy prices earned in 1996.
Estimates of Edison's future Avoided Cost of Energy vary
substantially from year to year. The Royalty Company cannot
predict the likely level of Avoided Cost of Energy prices under
the SO4 Agreements at the expiration of the scheduled payment
periods. The revenues generated by each of the units operating
under SO4 Agreements could decline significantly after the
expiration of the relevant scheduled payment period which would
have a direct effect on the related royalty streams.
As discussed above, all revenues except those derived from East
Mesa are from, and all operating expenses are paid by, related
parties.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying statement of operations presents revenues and
expenses which have been assigned to the Royalty Company under
the arrangements described above on the accrual method of
accounting. This presentation is a "carve out" of information
from Magma and certain of its affiliates. Such revenues, net of
related expenses, will serve to guarantee loans from the Funding
Corporation, a wholly-owned subsidiary of CalEnergy.
The December 31, 1995 financial statements reflect the
acquisition of Magma (see Note 3), the resulting push down to the
Royalty Company of the accounting as a purchase business
combination and minority interest for the non-owned periods
consisting of 100% for the period January 1-9, 1995 and 49% for
the period January 10, 1995--February 23, 1995.
Purchase Accounting
As a result of the purchase business combination accounted for
on a push down basis by the Royalty Company during the year ended
December 31, 1995, all identifiable assets and liabilities are
stated at fair value (see Note 3).
The Royalty Company's policy is to provide amortization expense
beginning upon the commencement of revenue production over the
estimated remaining useful life of the identifiable assets.
The royalty streams have been assigned values separately for
each of (1) the remaining portion of the scheduled price periods
of the Projects' power sales agreements and (2) the 20 year
avoided cost periods of the Projects' power sales agreements and
are amortized separately over such periods using the straight
line method.
Excess of Cost over Fair Value
Total acquisition costs in excess of the fair values assigned to
the net assets acquired are amortized over a 40 year period using
the straight line method. At December 31, 1996 and 1995,
accumulated amortization of the excess of cost over fair value
was $1,737 and $829, respectively.
Income Taxes
The Royalty Company is included in consolidated income tax
returns with its parent and affiliates. Income taxes are
provided on a separate return basis, however, tax obligations of
the Royalty Company will be remitted to the parent only to the
extent of cash flows available after operating expenses and debt
service.
Fair Values of Financial Instruments
Fair values of financial instruments that are not actively
traded are based on market prices of similar instruments and/or
valuation techniques using market assumptions. Unless otherwise
noted, the estimated fair value amounts do not differ
significantly from recorded values.
Impairment of Long-Lived Assets
On January 1, 1996, the Royalty Company adopted Statement of
Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" which requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The adoption
of SFAS 121 did not have a material effect on the Royalty
Company's financial statements.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
3. PURCHASE OF MAGMA POWER COMPANY
On January 10, 1995, CalEnergy acquired approximately 51% of the
outstanding shares of common stock of Magma (the "Magma Common
Stock") through a cash tender offer (the "Magma Tender Offer")
and completed the Magma acquisition on February 24, 1995 by
acquiring approximately 49% of the outstanding shares of Magma
Common Stock not owned by CalEnergy through a merger.
The transaction was accounted for as a purchase business
combination. All identifiable assets acquired and liabilities
assumed were assigned a portion of the cost of acquiring Magma,
equal to their fair values at the date of the acquisition. The
adjustments which have been made to the net assets of the Royalty
Company to reflect the effect of the acquisition of Magma
accounted for as a purchase business combination pushed down to
the Royalty Company are as follows:
Royalty stream $64,155
Goodwill 36,740
Deferred financing costs 1,843
Deferred income taxes (25,341)
Debt (40,446)
----------
Net increase in assets $36,951
======
Unaudited pro forma combined revenue and net income of the
Royalty Company on a purchase, push down basis of accounting, for
the year ended December 31, 1995, as if the acquisition had
occurred on January 1, 1994 after giving effect to certain pro
forma adjustments related to the acquisition, were $28,383 and
$3,753, respectively.
4. SENIOR SECURED PROJECT NOTE
The Royalty Company assumed its proportionate share of the
secured bank financing incurred in connection with the purchase
of Magma (see Note 3). On July 21, 1995, CalEnergy recapitalized
Magma and the related Merger Facilities from proceeds received
through a $200,000 high yield offering and a $475,000 investment
grade offering of the Salton Sea Funding Corporation. The
Royalty Company issued a project note in the amount of $75,000
payable to Salton Sea Funding Corporation at interest rates
ranging from 6.69% to 7.37%, and guaranteed to the extent of
available cash flow, the investment grade securities. The
guarantee issued is collateralized by a lien on substantially all
the assets of and a pledge of stock in the Guarantor.
Principal maturities of the senior secured project note are as
follows:
1997 $18,001
1998 15,726
1999 9,396
2000 4,773
2001 4,434
Thereafter 4,606
----------
$56,936
======
The carrying amounts and estimated fair values of the senior
secured project note at December 31, 1996 and 1995 were $56,936
and $56,178 and $67,882 and $68,944, respectively.
5. Income Taxes
The provision for income taxes for the year ended December 31,
1996 and 1995, consisted of the following:
Current Deferred Total
--------- ----------- --------
1996
Federal $4,517 $(2,390) $2,127
State 1,276 (843) 433
--------- ----------- --------
Total $5,793 $(3,233) $2,560
===== ====== =====
1995
Federal $4,323 $(3,644) $679
State 1,221 (937) 284
--------- ----------- --------
Total $5,544 $(4,581) $963
===== ====== =====
The Royalty Company's effective tax rate differs from the
statutory federal income tax rate due primarily to percentage
depletion in excess of cost depletion and goodwill amortization.
Deferred tax liabilities and assets at December 31, 1996 and
1995, consisted of the following:
1996 1995
Deferred liabilities:
Depreciation and amortization $17,527 $20,760
Deferred assets:
Jr. SO4 royalty receivable 5,300 5,300
----------- ----------
Net deferred tax liability $12,227 $15,460
====== ======
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholder
Magma Power Company
Omaha, Nebraska
We have audited the accompanying Predecessor Summary of
Revenues and Related Expenses (the "Predecessor Summary") of
Salton Sea Royalty Company (the "Company") for the year ended
December 31, 1994. The Predecessor Summary is the responsibility
of the Company's management. Our responsibility is to express an
opinion on the Predecessor Summary based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the Predecessor Summary is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Predecessor Summary. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall presentation of the Predecessor Summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying Predecessor Summary was prepared for inclusion
in the Prospectus of Salton Sea Funding Corporation on the basis
of presentation as described in Note 2, and is not intended to be
a complete presentation of the Company's assets, liabilities,
revenues and expenses.
In our opinion, the Predecessor Summary referred to above
presents fairly, in all material respects, the revenues and
related expenses described in Notes 1 and 2 of the Company for
the year ended December 31, 1994, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Diego, California
June 19, 1995,
SALTON SEA ROYALTY COMPANY
PREDECESSOR SUMMARY OF REVENUES AND RELATED EXPENSES
(Dollars in Thousands)
Year Ended
December 31,
1994
---------
Royalty income $29,410
Operating expenses 20,753
---------
Excess of revenues over expenses $ 8,657
======
The accompanying notes are an integral part of the summary.
SALTON SEA ROYALTY COMPANY
NOTES TO PREDECESSOR SUMMARY OF REVENUES AND RELATED EXPENSES
(Dollars in Thousands)
1. ORGANIZATION
Salton Sea Royalty Company (the "Royalty Company") is a
single-purpose entity, 99% owned by Magma Power Company ("Magma")
and 1% owned by Salton Sea Funding Corporation (the "Funding
Corporation"). Effective February 24, 1995, Magma became a
wholly-owned subsidiary of CalEnergy Company, Inc. ("CalEnergy")
(see Note 3).
In June 1995, the Royalty Company received an assignment of
royalties and certain fees paid by three partnership projects,
Del Ranch, Elmore and Leathers (collectively, the "Partnership
Projects"). Magma and its affiliates have a 50% interest in the
Partnership Projects. In addition, the Royalty Company has
received an assignment of certain resource-related royalties and
contract assignment royalties payable by the geothermal power
plant located in Imperial Valley, California which is owned by an
unaffiliated third party (East Mesa, together with the
Partnership Projects, the "Projects"). All of the Projects are
engaged in the operation of geothermal power plants in the
Imperial Valley in Southern California. Substantially all of the
assigned royalties are based on a percentage of energy and
capacity revenues of the Projects. With the exception of
royalties from East Mesa (Note 2), the royalties are senior to
debt service and are pari passu with other operating and
maintenance expenses of the Projects.
All of the Projects have executed long-term Interim Standard
Offer No. 4 power purchase agreements ("ISO4s") providing for
capacity and energy sales to Southern California Edison Company
("Edison"). Each of these agreements provides for fixed price
capacity payments for the life of the contract.
The Projects earn energy payments based on kilowatt hours
(kWhs) of energy provided to Edison. During the first 10 years
of the agreement, the Projects earn payments for energy as
scheduled in their ISO4s. After the 10-year scheduled payment
period has expired (1998 for Del Ranch and Elmore; 1999 for
Leathers and East Mesa), the energy payment per kWh throughout
the remainder of the contract period will be at Edison's Avoided
Cost of Energy. For the year ended December 31, 1994, Edison's
average Avoided Cost of Energy was 2.5 cents per kWh which is
substantially below the contract energy prices earned in 1994.
Estimates of Edison's future Avoided Cost of Energy vary
substantially from year to year. The Royalty Company cannot
predict the likely level of Avoided Cost of Energy prices under
the ISO4s at the expiration of the scheduled payment periods.
The revenues generated by each of the units operating under ISO4s
could decline significantly after the expiration of the relevant
scheduled payment period.
As discussed above, all revenues except those derived from East
Mesa are from or through related parties.
2. BASIS OF PRESENTATION
The accompanying Predecessor Summary of Revenues and Related
Expenses present predecessor revenues and expenses for the period
indicated which have been assigned to the Royalty Company under
the arrangements described above on the accrual method of
accounting. This presentation is a "carve out" of historical
information from Magma and certain of its affiliates. The basis
of presentation described herein is not intended to be a complete
presentation of the Royalty Company's assets, liabilities,
revenues and expenses. Such revenues, net of related expenses,
will serve to guarantee loans from Funding Corporation, a
wholly-owned subsidiary of CalEnergy (see Note 4).
During 1994, the entire $14,502 balance due from junior
royalties from East Mesa was written off due to uncertainty as to
their collectibility. The write-off was considered necessary due
to the inability of the East Mesa plant to convert its
construction loans to term loans as had been expected during
1994. The timing of such conversion, which is a prerequisite to
the collection of the junior royalties, is uncertain. Revenues
related to the East Mesa junior royalties for the year ended
December 31, 1994 were $3,412.
3. PURCHASE OF MAGMA POWER COMPANY
On January 10, 1995, CalEnergy acquired approximately 51% of
the outstanding shares of common stock of Magma (the "Magma
Common Stock") through a cash tender offer (the "Magma Tender
Offer") and completed the Magma acquisition on February 24, 1995
by acquiring approximately 49% of the outstanding shares of Magma
Common Stock not owned by CalEnergy through a merger. The
transaction was accounted for as a purchase business combination.
4. SENIOR SECURED PROJECT NOTE
The Royalty Company assumed its proportionate share of the
secured bank financing incurred in connection with the purchase
of Magma (see Note 3). On July 21, 1995, CalEnergy recapitalized
Magma and the related Merger Facilities from proceeds received
through a $200,000 high yield offering and a $475,000 investment
grade offering by Funding Corporation. The Royalty Company
issued a project note in the amount of $75,000 payable to Funding
Corporation with maturities of $7,118, $10,946, $18,001, $15,725,
$9,396, and $13,814 in 1995, 1996, 1997, 1998, 1999 and
thereafter, respectively, at interest rates ranging from 6.69% to
7.37% and guaranteed, to the extent of available cash flow, the
investment grade securities. The guarantee issued is
collateralized by a lien on substantially all the assets of and a
pledge of stock in the Guarantor.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Set forth below are the current executive officers of the
Funding Corporation and the Guarantors and their positions with
the Funding Corporation and each of the Guarantors (or general
partner thereof):
EXECUTIVE OFFICER POSITION
David L. Sokol Chairman of the Board and Chief Executive Officer
Thomas R. Mason President and Chief Operating Officer, CalEnergy Americas
Gregory E. Abel President and Chief Operating Officer, CalEnergy Europe
and Chief Accounting Officer, CalEnergy
Edward F. Bazemore Vice President, Human Resources
Steven A. McArthur Senior Vice President, General Counsel and Secretary
John G. Sylvia Senior Vice President and Chief Financial Officer
DAVID L. SOKOL, 40, Chairman of the Board of Directors and
Chief Executive Officer. Mr. Sokol has been Chief Executive
Officer since April 19, 1993 and served as President of CalEnergy
from April 19, 1993 until January 21, 1995. He has been Chairman
of the Board of Directors since May 1994. Mr. Sokol has been a
director of CalEnergy since March 1991. Formerly, Mr. Sokol was
Chairman, President and Chief Executive Officer of CalEnergy from
February 1991 until January 1992. Mr. Sokol was the President and
Chief Operating Officer of, and a director of, JWP, Inc., from
January 27, 1992 to October 1, 1992. From November 1990 until
February 1991, Mr. Sokol was the President and Chief Executive
Officer of Kiewit Energy Company, the largest stockholder of
CalEnergy and a wholly owned subsidiary of PKS.
THOMAS R. MASON, 53, President and Chief Operating Officer,
CalEnergy Americas. Mr. Mason joined CalEnergy in March 1991.
From October 1989 to March 1991, Mr. Mason was Vice President and
General Manager of Kiewit Energy Company. Prior to that,
Mr. Mason was Director of Marketing for Energy Factors, Inc. (now
Sithe Energies U.S.A., Inc.), a non-utility developer of power
facilities. Prior to that Mr. Mason was a worldwide Market
Manager of power generation for Caterpillar's Solar Gas Turbines,
a gas turbine manufacturer.
GREGORY E. ABEL, 34, President and Chief Operating Officer,
CalEnergy Europe and Chief Accounting Officer, CalEnergy.
Mr. Abel joined CalEnergy in 1992. Mr. Abel is a Chartered
Accountant and from 1984 to 1992 he was employed by Price
Waterhouse. As a Manager in the San Francisco office of Price
Waterhouse, he was responsible for clients in the energy
industry.
EDWARD F. BAZEMORE, 60, Vice President, Human Resources.
Mr. Bazemore joined CalEnergy in July 1991. From 1989 to 1991, he
was Vice President, Human Resources, at Ogden Projects, Inc. in
New Jersey. Prior to that, Mr. Bazemore was Director of Human
Resources for Ricoh Corporation, also in New Jersey. Previously,
he was Director of Industrial Relations for Scripto, Inc. in
Atlanta, Georgia.
STEVEN A. McARTHUR, 39, Senior Vice President, General
Counsel and Secretary. Mr. McArthur joined CalEnergy in February
1991. From 1988 to 1991 he was an attorney in the Corporate
Finance Group at Shearman & Sterling in San Francisco. From 1984
to 1988 he was an attorney in the Corporate Finance Group at
Winthrop, Stimson, Putnam & Roberts in New York.
JOHN G. SYLVIA, 38, Senior Vice President and Chief
Financial Officer. Mr. Sylvia joined CalEnergy in 1988. From 1985
to 1988, Mr. Sylvia was a Vice President of an international
financial institution with responsibility for global corporate
and capital markets banking. From 1986 to 1990, Mr. Sylvia served
as an Adjunct Professor of Applied Economics at the University of
San Francisco. From 1982 to 1985, Mr. Sylvia held various
corporate finance positions with investment and financial firms.
Item 11. Executive Compensation
The Funding Corporation's and the Guarantors' directors and
executive officers receive no remuneration for serving in such
capacities.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Description of Capital Stock
As of December 31, 1996, the authorized capital stock of the
Funding Corporation consisted of 1,000 shares of common stock,
par value $.01 per share (the "Common Stock"), of which 100
shares were outstanding. There is no public trading market for
the Common Stock. As of December 31, 1996, there was one holder
of record of the Common Stock. Holders of Common Stock are
entitled to one vote per share on any matter coming before the
stockholders for a vote.
The Funding Corporation does not expect in the foreseeable
future to pay any dividends on the Common Stock. The Indenture
contains certain restrictions on the payment of dividends with
respect to the Common Stock.
Principal Holders
Since the formation of the Funding Corporation in June 1995,
all of the outstanding shares of Common Stock have been owned by
Magma. Magma directly or indirectly owns all of the capital stock
of or partnership interests in the Funding Corporation and the
Guarantors. CalEnergy owns all of the capital stock of Magma.
CalEnergy's common stock is publicly traded on the New York,
Pacific and London Stock Exchanges.
Item 13. Certain Relationships and Related Transactions
Other Relationships and Related Transactions
The Salton Sea Projects' and the Partnership Projects'
geothermal power plants are owned, administered and operated by
Magma or subsidiaries of Magma. Geothermal fluid supplying these
facilities is provided from Magma's (or a subsidiary's)
geothermal resource holdings in the SSKGRA.
In providing rights to geothermal resources and/or geothermal
fluids, administering and operating the geothermal power plants,
and disposing of solids from these facilities, Magma (directly
and through subsidiaries) receives certain royalties, cost
reimbursements and fees for its services and the rights it
provides. See the financial statements attached hereto.
The Funding Corporation believes that the transactions with
related parties described above, taking into consideration all of
the respective terms and conditions of each of the relevant
contracts and agreements, are at least as favorable to the
Guarantors as those which could have been obtained from unrelated
parties in arms' length negotiations.
Relationship of the Funding Corporation and the Guarantors to
Magma and CalEnergy
The Funding Corporation is a wholly owned direct subsidiary of
Magma organized for the sole purpose of acting as issuer of the
Securities. The Funding Corporation is restricted, pursuant to
the terms of the Indenture, to acting as issuer of the Securities
and other indebtedness as permitted under the Indenture, making
loans to the Guarantors pursuant to the Credit Agreements, and
transactions related thereto. The Funding Corporation and each of
the Guarantors (and, in the case of SSBP and SSPG, the general
partners thereof) have been organized and are operated as legal
entities separate and apart from CalEnergy, Magma and any other
Affiliates of CalEnergy or Magma, and, accordingly, the assets of
the Funding Corporation and the Guarantors (and, in the case of
SSBP and SSPG, the general partners thereof) will not be
generally available to satisfy the obligations of CalEnergy,
Magma or any other Affiliates of CalEnergy or Magma; provided,
however, that unrestricted cash of the Funding Corporation and
the Guarantors or other assets which are available for
distribution may, subject to applicable law and the terms of
financing arrangements of such parties, be advanced, loaned, paid
as dividends or otherwise distributed or contributed to
CalEnergy, Magma or Affiliates thereof.
PART IV
Item 14. Exhibits, Financial Statements Schedule and Reports on
Form 8-K
(a) Financial Statements and Schedules
(i) Financial Statements
Financial Statements are included in Part II of this Form
10-K
(ii) Financial Statement Schedules
Financial Statement Schedules are not included
because they are not required or the information required
is included in Part II of this Form 10-K.
(b) Reports on Form 8-K
None.
(c) Exhibits
The exhibits listed on the accompanying Exhibit Index are
filed as part of this Annual Report.
For the purposes of complying with the amendments to the
rules governing Form S-4 effective July 13, 1990 under the
Securities Act of 1933, the undersigned hereby undertakes as
follows, which undertaking shall be incorporated by reference
into the Funding Corporation's currently effective Registration
Statements on Form S-4.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant, the registrant has
been advised that in the opinion the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
(d) Financial statements required by Regulations S-X, which
are excluded from the Annual Report by Rule 14a-3(b).
Not Applicable
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Omaha, State of
Nebraska, on March 27, 1997.
SALTON SEA FUNDING CORPORATION
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, each thereunto duly authorized in the City of
Omaha, State of Nebraska, on the dates indicated.
Signature Date
/s/ David L. Sokol* March 27, 1997
David L. Sokol
Director, Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ John G. Sylvia* March 27, 1997
John G. Sylvia,
Director, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Gregory E. Abel* March 27, 1997
Gregory E. Abel
Chief Accounting Officer and President
and Chief Operating Officer, CalEnergy Europe,
(Principal Accounting Officer)
/s/ Thomas R. Mason* March 27, 1997
Director, President and Chief Operating Officer,
CalEnergy Americas
/s/ Steven A. McArthur March 27, 1997
Steven A. McArthur
Director, Senior Vice President,
General Counsel and Secretary
*By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Omaha, State of
Nebraska, on March 27, 1997.
SALTON SEA BRINE PROCESSING, L.P.
a California limited partnership
By: Salton Sea Power Company,
a California corporation, its
general partner
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, each thereunto duly authorized in the City of
Omaha, State of Nebraska, on the dates indicated.
Signature Date
/s/ David L. Sokol* March 27, 1997
David L. Sokol
Director, Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ John G. Sylvia* March 27, 1997
John G. Sylvia,
Director, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Gregory E. Abel* March 27, 1997
Gregory E. Abel
Chief Accounting Officer and President
and Chief Operating Officer, CalEnergy Europe,
(Principal Accounting Officer)
/s/ Thomas R. Mason* March 27, 1997
Director, President and Chief Operating Officer,
CalEnergy Americas
/s/ Steven A. McArthur March 27, 1997
Steven A. McArthur
Director, Senior Vice President,
General Counsel and Secretary
*By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Omaha, State of
Nebraska, on March 27, 1997.
SALTON SEA POWER GENERATION, L.P., a
California limited partnership
By: Salton Sea Power Company, a
California corporation, its
general partner
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, each thereunto duly authorized in the City of
Omaha, State of Nebraska, on the dates indicated.
Signature Date
/s/ David L. Sokol* March 27, 1997
David L. Sokol
Director, Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ John G. Sylvia* March 27, 1997
John G. Sylvia,
Director, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Gregory E. Abel* March 27, 1997
Gregory E. Abel
Chief Accounting Officer and President
and Chief Operating Officer, CalEnergy Europe,
(Principal Accounting Officer)
/s/ Thomas R. Mason* March 27, 1997
Director, President and Chief Operating Officer,
CalEnergy Americas
/s/ Steven A. McArthur March 27, 1997
Steven A. McArthur
Director, Senior Vice President,
General Counsel and Secretary
*By:/s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Omaha, State of
Nebraska, on March 27, 1997.
FISH LAKE POWER COMPANY
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, each thereunto duly authorized in the City of
Omaha, State of Nebraska, on the dates indicated.
Signature Date
/s/ David L. Sokol* March 27, 1997
David L. Sokol
Director, Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ John G. Sylvia* March 27, 1997
John G. Sylvia,
Director, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Gregory E. Abel* March 27, 1997
Gregory E. Abel
Chief Accounting Officer and President
and Chief Operating Officer, CalEnergy Europe,
(Principal Accounting Officer)
/s/ Thomas R. Mason* March 27, 1997
Director, President and Chief Operating Officer,
CalEnergy Americas
/s/ Steven A. McArthur March 27, 1997
Steven A. McArthur
Director, Senior Vice President,
General Counsel and Secretary
*By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Omaha, State of
Nebraska, on March 27, 1997.
VULCAN POWER COMPANY
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, each thereunto duly authorized in the City of
Omaha, State of Nebraska, on the dates indicated.
Signature Date
/s/ David L. Sokol* March 27, 1997
David L. Sokol
Director, Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ John G. Sylvia* March 27, 1997
John G. Sylvia,
Director, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Gregory E. Abel* March 27, 1997
Gregory E. Abel
Chief Accounting Officer and President
and Chief Operating Officer, CalEnergy Europe,
(Principal Accounting Officer)
/s/ Thomas R. Mason* March 27, 1997
Director, President and Chief Operating Officer,
CalEnergy Americas
/s/ Steven A. McArthur March 27, 1997
Steven A. McArthur
Director, Senior Vice President,
General Counsel and Secretary
*By: /s/ Steven A. McAthur
Steven A. McArthur
Attorney-in-fact
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Omaha, State of
Nebraska, on March 27, 1997.
CALENERGY OPERATING COMPANY
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, each thereunto duly authorized in the City of
Omaha, State of Nebraska, on the dates indicated.
Signature Date
/s/ David L. Sokol* March 27, 1997
David L. Sokol
Director, Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ John G. Sylvia* March 27, 1997
John G. Sylvia,
Director, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Gregory E. Abel* March 27, 1997
Gregory E. Abel
Chief Accounting Officer and President
and Chief Operating Officer, CalEnergy Europe,
(Principal Accounting Officer)
/s/ Thomas R. Mason* March 27, 1997
Director, President and Chief Operating Officer,
CalEnergy Americas
/s/ Steven A. McArthur March 27, 1997
Steven A. McArthur
Director, Senior Vice President,
General Counsel and Secretary
*By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Omaha, State of
Nebraska, on March 27, 1997.
SALTON SEA ROYALTY COMPANY
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, each thereunto duly authorized in the City of
Omaha, State of Nebraska, on the dates indicated.
Signature Date
/s/ David L. Sokol* March 27, 1997
David L. Sokol
Director, Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ John G. Sylvia* March 27, 1997
John G. Sylvia,
Director, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Gregory E. Abel* March 27, 1997
Gregory E. Abel
Chief Accounting Officer and President
and Chief Operating Officer, CalEnergy Europe,
(Principal Accounting Officer)
/s/ Thomas R. Mason* March 27, 1997
Director, President and Chief Operating Officer,
CalEnergy Americas
/s/ Steven A. McArthur March 27, 1997
Steven A. McArthur
Director, Senior Vice President,
General Counsel and Secretary
*By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Omaha, State of
Nebraska, on March 27, 1997.
LEATHERS, L.P., a
California limited partnership
By: CalEnergy Operating Company, a
Delaware corporation, its
general partner
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, each thereunto duly authorized in the City of
Omaha, State of Nebraska, on the dates indicated.
Signature Date
/s/ David L. Sokol* March 27, 1997
David L. Sokol
Director, Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ John G. Sylvia* March 27, 1997
John G. Sylvia,
Director, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Gregory E. Abel* March 27, 1997
Gregory E. Abel
Chief Accounting Officer and President
and Chief Operating Officer, CalEnergy Europe,
(Principal Accounting Officer)
/s/ Thomas R. Mason* March 27, 1997
Director, President and Chief Operating Officer,
CalEnergy Americas
/s/ Steven A. McArthur March 27, 1997
Steven A. McArthur
Director, Senior Vice President,
General Counsel and Secretary
*By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Omaha, State of
Nebraska, on March 27, 1997.
ELMORE L.P., a California limited partnership
By: CalEnergy Operating Company, a
Delaware corporation, its
general partner
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, each thereunto duly authorized in the City of
Omaha, State of Nebraska, on the dates indicated.
Signature Date
/s/ David L. Sokol* March 27, 1997
David L. Sokol
Director, Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ John G. Sylvia* March 27, 1997
John G. Sylvia,
Director, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Gregory E. Abel* March 27, 1997
Gregory E. Abel
Chief Accounting Officer and President
and Chief Operating Officer, CalEnergy Europe,
(Principal Accounting Officer)
/s/ Thomas R. Mason* March 27, 1997
Director, President and Chief Operating Officer,
CalEnergy Americas
/s/ Steven A. McArthur March 27, 1997
Steven A. McArthur
Director, Senior Vice President,
General Counsel and Secretary
*By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Omaha, State of
Nebraska, on March 27, 1997.
DEL RANCH L.P., a
California limited partnership
By: CalEnergy Operating Company, a
Delaware corporation, its
general partner
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, each thereunto duly authorized in the City of
Omaha, State of Nebraska, on the dates indicated.
Signature Date
/s/ David L. Sokol* March 27, 1997
David L. Sokol
Director, Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ John G. Sylvia* March 27, 1997
John G. Sylvia,
Director, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Gregory E. Abel* March 27, 1997
Gregory E. Abel
Chief Accounting Officer and President
and Chief Operating Officer, CalEnergy Europe,
(Principal Accounting Officer)
/s/ Thomas R. Mason* March 27, 1997
Director, President and Chief Operating Officer,
CalEnergy Americas
/s/ Steven A. McArthur March 27, 1997
Steven A. McArthur
Director, Senior Vice President,
General Counsel and Secretary
*By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Omaha, State of
Nebraska, on March 27, 1997.
BN GEOTHERMAL INC., a
Delaware corporation
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, each thereunto duly authorized in the City of
Omaha, State of Nebraska, on the dates indicated.
Signature Date
/s/ David L. Sokol* March 27, 1997
David L. Sokol
Director, Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ John G. Sylvia* March 27, 1997
John G. Sylvia,
Director, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Gregory E. Abel* March 27, 1997
Gregory E. Abel
Chief Accounting Officer and President
and Chief Operating Officer, CalEnergy Europe,
(Principal Accounting Officer)
/s/ Thomas R. Mason* March 27, 1997
Director, President and Chief Operating Officer,
CalEnergy Americas
/s/ Steven A. McArthur March 27, 1997
Steven A. McArthur
Director, Senior Vice President,
General Counsel and Secretary
*By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Omaha, State of
Nebraska, on March 27, 1997.
NIGUEL ENERGY COMPANY, a
California corporation
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, each thereunto duly authorized in the City of
Omaha, State of Nebraska, on the dates indicated.
Signature Date
/s/ David L. Sokol* March 27, 1997
David L. Sokol
Director, Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ John G. Sylvia* March 27, 1997
John G. Sylvia,
Director, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Gregory E. Abel* March 27, 1997
Gregory E. Abel
Chief Accounting Officer and President
and Chief Operating Officer, CalEnergy Europe,
(Principal Accounting Officer)
/s/ Thomas R. Mason* March 27, 1997
Director, President and Chief Operating Officer,
CalEnergy Americas
/s/ Steven A. McArthur March 27, 1997
Steven A. McArthur
Director, Senior Vice President,
General Counsel and Secretary
*By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Omaha, State of
Nebraska, on March 27, 1997.
CONEJO ENERGY COMPANY, a
California corporation
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, each thereunto duly authorized in the City of
Omaha, State of Nebraska, on the dates indicated.
Signature Date
/s/ David L. Sokol* March 27, 1997
David L. Sokol
Director, Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ John G. Sylvia* March 27, 1997
John G. Sylvia,
Director, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Gregory E. Abel* March 27, 1997
Gregory E. Abel
Chief Accounting Officer and President
and Chief Operating Officer, CalEnergy Europe,
(Principal Accounting Officer)
/s/ Thomas R. Mason* March 27, 1997
Director, President and Chief Operating Officer,
CalEnergy Americas
/s/ Steven A. McArthur March 27, 1997
Steven A. McArthur
Director, Senior Vice President,
General Counsel and Secretary
*By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Omaha, State of
Nebraska, on March 27, 1997.
SAN FELIPE ENERGY COMPANY, a
California corporation
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, each thereunto duly authorized in the City of
Omaha, State of Nebraska, on the dates indicated.
Signature Date
/s/ David L. Sokol* March 27, 1997
David L. Sokol
Director, Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ John G. Sylvia* March 27, 1997
John G. Sylvia,
Director, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Gregory E. Abel* March 27, 1997
Gregory E. Abel
Chief Accounting Officer and President
and Chief Operating Officer, CalEnergy Europe,
(Principal Accounting Officer)
/s/ Thomas R. Mason* March 27, 1997
Director, President and Chief Operating Officer,
CalEnergy Americas
/s/ Steven A. McArthur March 27, 1997
Steven A. McArthur
Director, Senior Vice President,
General Counsel and Secretary
*By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Omaha, State of
Nebraska, on March 27, 1997.
VULCAN/BN GEOTHERMAL POWER COMPANY, a
Nevada general partnership
By: VULCAN POWER COMPANY, a
Nevada corporation, Partner
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the
Board of Directors and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, each thereunto duly authorized in the City of
Omaha, State of Nebraska, on the dates indicated.
Signature Date
/s/ David L. Sokol* March 27, 1997
David L. Sokol
Director, Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ John G. Sylvia* March 27, 1997
John G. Sylvia,
Director, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Gregory E. Abel* March 27, 1997
Gregory E. Abel
Chief Accounting Officer and President
and Chief Operating Officer, CalEnergy Europe,
(Principal Accounting Officer)
/s/ Thomas R. Mason* March 27, 1997
Director, President and Chief Operating Officer,
CalEnergy Americas
/s/ Steven A. McArthur March 27, 1997
Steven A. McArthur
Director, Senior Vice President,
General Counsel and Secretary
*By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
3.1 Articles of Incorporation of the Funding Corporation
(incorporated by reference to Exhibit 3.1 to the Funding
Corporation Registration Statement on Form S-4 dated August
9, 1995, 33-95538 ("Form S-4")).
3.2 By-laws of the Funding Corporation (incorporated by
reference to Exhibit 3.2 to the Funding Corporation Form S-
4).
3.3 Limited Partnership Agreement of SSBP (incorporated by
reference to Exhibit 3.3 to the Funding Corporation Form S-
4).
3.4 Limited Partnership Agreement of SSPG (incorporated by
reference to Exhibit 3.4 to the Funding Corporation Form S-
4).
3.5 Articles of Incorporation of Fish Lake (incorporated by
reference to Exhibit 3.5 to the Funding Corporation Form S-
4).
3.6 By-laws of Fish Lake (incorporated by reference to Exhibit
3.6 to the Funding Corporation Form S-4).
3.7 Articles of Incorporation of VPC (incorporated by reference
to Exhibit 3.7 to the Funding Corporation Form S-4).
3.8 By-laws of VPC (incorporated by reference to Exhibit 3.8 to
the Funding Corporation Form S-4).
3.9 Articles of Incorporation of CEOC (incorporated by reference
to Exhibit 3.9 to the Funding Corporation Form S-4).
3.10By-laws of CEOC (incorporated by reference to Exhibit 3.10
to the Funding Corporation Form S-4).
3.11Articles of Incorporation of the Royalty Guarantor
(incorporated by reference to Exhibit 3.11 to the Funding
Corporation Form S-4).
3.12By-laws of the Royalty Guarantor (incorporated by reference
to Exhibit 3.12 to the Funding Corporation Form S-4).
3.13 Certificate of Amendment of Certificate of
Incorporation dated as of March 26, 1996
3.14 Articles of Incorporation of BNG (incorporated by
reference to Exhibit 3.13 to the Funding Corporation
Registration Statement on Form S-4 dated July 2, 1996, 333-07527
("Funding Corporation II Form S-4")).
3.15 By-laws of BNG (incorporated by reference to Exhibit 3.14 to
the Funding Corporation II Form S-4).
3.16 Articles of Incorporation of San Felipe
(incorporated by reference to Exhibit 3.15 to the Funding
Corporation II Form S-4).
3.17 By-laws of San Felipe (incorporated by reference to
Exhibit 3.16 to the Funding Corporation II Form S-4).
3.18 Articles of Incorporation of Conejo (incorporated by
reference to Exhibit 3.17 to the Funding Corporation II Form
S-4).
3.19 By-laws of Conejo (incorporated by reference to
Exhibit 3.18 to the Funding Corporation II Form
S-4).
3.20 Articles of Incorporation of Niguel (incorporated by
reference to Exhibit 3.19 to the Funding Corporation II Form
S-4).
3.21 By-laws of Niguel (incorporated by reference to Exhibit 3.20
to the Funding Corporation II Form S-4).
3.22 General Partnership Agreement of Vulcan (incorporated by
reference to Exhibit 3.21 to the Funding Corporation II Form
S-4).
3.23 Limited Partnership Agreement of Leathers (incorporated by
reference to Exhibit 3.22 to the Funding Corporation II Form
S-4).
3.24 Amended and Restated Limited Partnership Agreement
of Del Ranch (incorporated by reference to Exhibit 3.23 to
the Funding Corporation II Form S-4).
3.25 Amended and Restated Limited Partnership Agreement of Elmore
(incorporated by reference to Exhibit 3.24 to the Funding
Corporation II Form S-4).
4.1(a) Indenture, dated as of July 21, 1995, between Chemical
Trust Company of California and the Funding Corporation
(incorporated by reference to Exhibit 4.1(a) to the Funding
Corporation Form S-4).
4.1(b) First Supplemental Indenture, dated as of October 18,
1995, between Chemical Trust Company of California and the
Funding Corporation (incorporated by reference to Exhibit
4.1(b) to the Funding Corporation Form S-4).
4.1(c) Second Supplemental Indenture, dated as of June 20,
1996, between Chemical Trust Company of California and the
Funding Corporation (incorporated by reference to Exhibit 4.1(c)
to the Funding Corporation II Form S-4).
4.1(d) Third Supplemental Indenture between Chemical Trust
Company of California and the Funding Corporation (incorporated
by reference to Exhibit 4.1(d) to the Funding Corporation II Form
S-4).
4.2 Salton Sea Secured Guarantee, dated as of July 21, 1995, by
SSBP, SSPG and Fish Lake in favor of Chemical Trust Company
of California (incorporated by reference to Exhibit 4.2 to
the Funding Corporation Form S-4).
4.3(a) Partnership Guarantors Secured Limited Guarantee, dated
as of July 21, 1995, by CEOC and VPC in favor of Chemical
Trust Company of California (incorporated by reference to
Exhibit 4.3 to the Funding Corporation Form S-4).
4.3(b) Amended and Restated Partnership Guarantors Secured
Limited Guarantee, dated as of June 20, 1996 by CEOC, and
VPC, Conejo, Niguel, Sal Felipe, BNG, Del Ranch, Elmore, Leathers
and Vulcan in favor of Chemical Trust Company of California
(incorporated by reference to Exhibit 4.3 to the Funding
Corporation II Form S-4).
4.4 Royalty Guarantor Secured Limited Guarantee, dated as of
July 21, 1995, by the Royalty Guarantor in favor of Chemical
Trust Company of California (incorporated by reference to
Exhibit 4.4 to the Funding Corporation Form S-4).
4.5(a) Exchange and Registration Rights Agreement, dated July
21, 1995, by and among CS First Boston Corporation, Lehman
Brothers Inc. and the Funding Corporation (incorporated by
reference to Exhibit 4.5 to the Funding Corporation Form S-
4).
4.5(b) Exchange and Registration Rights Agreement, dated June
20, 1996, by and between CS First Boston Corporation and the
Funding Corporation (incorporated by reference to Exhibit 4.5 to
the Funding Corporation II Form S-4).
4.6(a) Collateral Agency and Intercreditor Agreement, dated as
of July 21, 1995, by and among Credit Suisse, Chemical Trust
Company of California, the Funding Corporation and the
Guarantors (incorporated by reference to Exhibit 4.6 to the
Funding Corporation Form S-4).
4.6(b) First Amendment to the Collateral Agency and
Intercreditor Agreement, dated as of June 20, 1996, by and
among Credit Suisse, Chemical Trust Company of California, the
Funding Corporation and the Guarantors (incorporated by
reference to Exhibit 4.6(b) to the Funding Corporation II Form S-
4).
4.7 Stock Pledge Agreement, dated as of July 21, 1995, by Magma
Power Company in favor of Chemical Trust Company of
California (incorporated by reference to Exhibit 4.7 to the
Funding Corporation Form S-4).
4.8(a) Purchase Agreement, dated July 18, 1995, by and among
CS First Boston Corporation, Lehman Brothers Inc., the
Guarantors and the Funding Corporation (incorporated by
reference to Exhibit 4.8 to the Funding Corporation Form S-
4).
4.8(b) Purchase Agreement, dated June 17, 1996, by and among
CS First Boston Corporation, the Guarantors and the Funding
Corporation (incorporated by reference to Exhibit 4.8 to the
Funding Corporation II Form S-4).
4.9 Support Letter, dated as of July 21, 1995, by and among
Magma Power Company, the Funding Corporation and the
Guarantors (incorporated by reference to Exhibit 4.9 to the
Funding Corporation Form S-4).
4.10Debt Service Reserve Letter of Credit and Reimbursement
Agreement, dated as of July 21, 1995, by and among the
Funding Corporation, certain banks and Credit Suisse, as
agent (incorporated by reference to Exhibit 4.10 to the
Funding Corporation Form S-4).
4.11 Revolving Credit Agreement, dated as of July 21,
1995, by and among Credit Suisse and the Funding Corporation
(incorporated by reference to Exhibit 4.11 to the Funding
Corporation Form
S-4).
4.12Salton Sea Credit Agreement, dated July 21, 1995, by and
among SSBP, SSPG and Fish Lake (incorporated by reference to
Exhibit 4.12 to the Funding Corporation Form S-4).
4.13Salton Sea Project Note, dated July 21, 1995, by SSBP, SSPG
and Fish Lake in favor of the Funding Corporation
(incorporated by reference to Exhibit 4.13 to the Funding
Corporation Form S-4).
4.14(a) Deposit and Disbursement Agreement, dated as of July
21, 1995, by and among the Funding Corporation, Chemical
Trust Company of California and the Guarantors (incorporated
by reference to Exhibit 4.14 to the Funding Corporation Form
S-4).
4.14(b) Amendment No. 1 to Deposit and Disbursement Agreement,
dated as of June 20, 1996, by and among the Funding Corporation,
Chemical Trust Company of California and the Guarantors
(incorporated by reference to Exhibit 4.14(b) to the Funding
Corporation II Form S-4).
4.15Partnership Interest Pledge Agreement, dated as of July 21,
1995, by Magma Power Company and Salton Sea Power Company in
favor of Chemical Trust Company of California (incorporated
by reference to Exhibit 4.15 to the Funding Corporation Form
S-4).
4.16Partnership Interest Pledge Agreement, dated as of July 21,
1995, by SSBP and Salton Sea Power Company in favor of
Chemical Trust Company of California (incorporated by
reference to Exhibit 4.16 to the Funding Corporation Form S-
4).
4.17Stock Pledge Agreement (Pledge of Stock of Fish Lake by
Magma Power Company and the Funding Corporation), dated as
of July 21, 1995, by Magma Power Company and the Funding
Corporation in favor of Chemical Trust Company of California
(incorporated by reference to Exhibit 4.17 to the Funding
Corporation Form S-4).
4.18Cost Overrun Commitment, dated as of July 21, 1995, between
CalEnergy, SSPG, SSBP and Fish Lake (incorporated by
reference to Exhibit 4.18 to the Funding Corporation Form S-
4).
4.19(a) Partnership Guarantors Credit Agreement, dated July 21,
1995, by and among CEOC, VPC and the Funding Corporation
(incorporated by reference to Exhibit 4.19 to the Funding
Corporation Form
S-4).
4.19(b) Amended and Restated Partnership Guarantors Credit
Agreement, dated June 20, 1996, by and among the Partnership
Guarantors and the Funding Corporation (incorporated by reference
to Exhibit 4.19 to the Funding Corporation II Form S-4).
4.20Partnership Guarantors Security Agreement and Assignment of
Rights, dated as of July 21, 1995, by CEOC and VPC in favor
of Chemical Trust Company of California (incorporated by
reference to Exhibit 4.20 to the Funding Corporation Form S-
4).
4.21Stock Pledge Agreement (Pledge of Stock of CEOC by Magma
Power Company and the Funding Corporation), dated as of July
21, 1995, by Magma Power Company and Funding Corporation in
favor of Chemical Trust Company of California (incorporated
by reference to Exhibit 4.21 to the Funding Corporation Form
S-4).
4.22Stock Pledge Agreement (Pledge of Stock of VPC by Magma
Power Company and the Funding Corporation), dated as of July
21, 1995, by Magma Power Company and the Funding Corporation
in favor of Chemical Trust Company of California
(incorporated by reference to Exhibit 4.22 to the Funding
Corporation Form S-4).
4.23Royalty Guarantor Credit Agreement, among the Royalty
Guarantor and the Funding Corporation, dated as of July 21,
1995 (incorporated by reference to Exhibit 4.23 to the
Funding Corporation Form S-4).
4.24Royalty Project Note, dated as of July 21, 1995, by the
Royalty Guarantor in favor of the Funding Corporation
(incorporated by reference to Exhibit 4.24 to the Funding
Corporation Form S-4).
4.25Royalty Security Agreement and Assignment of Revenues, dated
as of July 21, 1995, by the Royalty Guarantor in favor of
Chemical Trust Company of California (incorporated by
reference to Exhibit 4.25 to the Funding Corporation Form S-
4).
4.26Royalty Deed of Trust, dated as of July 21, 1995, by the
Royalty Guarantor to Chicago Title Company for the use and
benefit of Chemical Trust Company of California
(incorporated by reference to Exhibit 4.26 to the Funding
Corporation Form S-4).
4.27Stock Pledge Agreement (Pledge of Stock of Royalty Guarantor
by Magma Power Company and the Funding Corporation), dated
as of July 21, 1995, by Magma Power Company and the Funding
Corporation in favor of Chemical Trust Company of California
(incorporated by reference to Exhibit 4.27 to the Funding
Corporation Form S-4).
4.28Collateral Assignment of the Imperial Irrigation District
Agreements, dated as of July 21, 1995, by SSBP, SSPG and
Fish Lake in favor of Chemical Trust Company of California
(incorporated by reference to Exhibit 4.28 to the Funding
Corporation Form S-4).
4.29Collateral Assignments of Certain Salton Sea Agreements,
dated as of July 21, 1995, by SSBP, SSPG and Fish Lake in
favor of Chemical Trust Company of California (incorporated
by reference to Exhibit 4.29 to the Funding Corporation Form
S-4).
4.30Debt Service Reserve Letter of Credit by Credit Suisse in
favor of Chemical Trust Company of California (incorporated
by reference to Exhibit 4.30 to the Funding Corporation Form
S-4).
4.31Partnership Project Note, dated July 21, 1995, by VPC and
CEOC in favor of the Funding Corporation (incorporated by
reference to Exhibit 4.31 to the Funding Corporation Form S-
4).
4.32 Collateral Assignment of the Imperial Irrigation District
Agreements, dated as of June 20, 1996, by Vulcan, Elmore,
Leathers, VPC and Del Ranch in favor of Chemical Trust Company of
California (incorporated by reference to Exhibit 4.29 to the
Funding Corporation II Form S-4).
4.33 Collateral Assignments of Certain Partnership Agreements,
dated as of June 20, 1996, by Vulcan Elmore, Leathers and Del
Ranch in favor of Chemical Trust Company of California
(incorporated by reference to Exhibit 4.31 to the Funding
Corporation II Form S-4).
4.34 Debt Service Reserve Letter of Credit by Credit Suisse in
favor of Chemical Trust Company of California (incorporated
by reference to Exhibit 4.32 to the Funding Corporation II Form S-
4).
4.35 Partnership Project Note, dated June 20, 1996, by the
Partnership Guarantors in favor of the Funding Corporation in
the principal amount of $54,956,000 (incorporated by reference to
Exhibit 4.33 to the Funding Corporation II Form S-4).
4.36 Partnership Project Note, dated June 20, 1996, by the
Partnership Guarantors in favor of the Funding Corporation in
the principal amount of $135,000,000 (incorporated by reference
to Exhibit 4.34 to the Funding Corporation II Form S-4).
4.37 Deed of Trust, dated as of June 20, 1996, by Vulcan to
Chicago Title Company for the use and benefit of Chemical Trust
Company of California (incorporated by reference to Exhibit 4.35
to the Funding Corporation II Form S-4).
4.38 Deed of Trust, dated as of June 20, 1996, by Elmore to
Chicago Title Company for the use and benefit of Chemical Trust
Company of California (incorporated by reference to Exhibit 4.36
to the Funding Corporation II Form S-4).
4.39 Deed of Trust, dated as of June 20, 1996, by Leathers to
Chicago Title Company for the use and benefit of Chemical Trust
Company of California (incorporated by reference to Exhibit 4.37
to the Funding Corporation II Form S-4).
4.40 Deed of Trust, dated as of June 20, 1996, by Del Ranch to
Chicago Title Company for the use and benefit of Chemical Trust
Company of California (incorporated by reference to Exhibit 4.38
to the Funding Corporation II Form S-4).
4.41 Stock Pledge Agreement, Dated as of June 20, 1996, by CEOC,
pledging the stock of Conejo, Niguel and San Felipe in favor
of Chemical Trust Company of California for the benefit of the
Secured Parties and the Funding Corporation (incorporated by
reference to Exhibit 4.39 to the Funding Corporation II Form S-
4).
4.42 Stock Pledge Agreement, dated as of June 20, 1996, by VPC,
pledging the stock of BNG in favor of Chemical Trust Company of
California for the benefit of the Secured Parties and the Funding
Corporation (incorporated by reference to Exhibit 4.40 to the
Funding Corporation II Form S-4).
4.43 Partnership Interest Pledge Agreement, dated as of June 20,
1996, by VPC and BNG, pledging the partnership interests in
Vulcan in favor of Chemical Trust Company of California for the
benefit of the Secured Parties and the Funding Corporation
(incorporated by reference to Exhibit 4.41 to the Funding
Corporation II Form S-4).
4.44 Partnership Interest Pledge Agreement, dated as of
June 20, 1996, by Magma, CEOC and each of Conejo, Niguel, San
Felipe, respectively, pledging the partnership interests in Del
Ranch, Elmore and Leathers, respectively, in favor of
Chemical Trust Company of California for the benefit of the
Secured Parties and the Funding Corporation (incorporated by
reference to Exhibit 4.42 to the Funding Corporation II Form
S-4).
4.45 Agreement regarding Security Documents, dated as of June 20,
1996, by and among the Initial Guarantors, Magma, SSPC, the
Funding Corporation and Chemical Trust Company of California
(incorporated by reference to Exhibit 4.43 to the Funding
Corporation II Form S-4).
10.1(a) Salton Sea Deed of Trust, Assignment of Rents, Security
Agreement and Fixture Filing, dated as of July 21, 1995, by
SSBP, SSPG and Fish Lake to Chicago Title Company for the
use and benefit of Chemical Trust Company of California
(incorporated by reference to Exhibit 10.1 to the Funding
Corporation Form S-4) .
10.1(b) First Amendment to Salton Sea Deed of Trust, Assignment
of Rents, Security Agreement and Fixed Filing, dated as of June
20, 1996, by SSBP, SSPG and Fish Lake to Chicago Title Company
for the use and benefit of Chemical Trust Company of California
(incorporated by reference to Exhibit 10.2 to the Funding
Corporation II Form S-4).
10.2Collateral Assignment of Southern California Edison Company
Agreements, dated as of July 21, 1995, by SSPG and Fish Lake
in favor of Chemical Trust Company of California
(incorporated by reference to Exhibit 10.2 to the Funding
Corporation Form S-4).
10.3Contract for the Purchase and Sale of Electric Power from
the Salton Sea Geothermal Facility, dated May 9, 1987 (the
"Unit 1 Power Purchase Agreement"), between Southern
California Edison Company and Earth Energy, Inc.
(incorporated by reference to Exhibit 10.3 to the Funding
Corporation Form S-4).
10.4Amendment No. 1 to the Unit 1 Power Purchase Agreement,
dated as of March 30, 1993, between Southern California
Edison Company and Earth Energy, Inc. (incorporated by
reference to Exhibit 10.4 to the Funding Corporation Form S-
4).
10.5Amendment No. 2 to Unit 1 Power Purchase Agreement, dated
November 29, 1994, between Southern California Edison
Company and SSPG (incorporated by reference to Exhibit 10.5
to the Funding Corporation Form S-4).
10.6Contract for the Purchase and Sale of Electric Power, dated
April 16, 1985 (the "Unit 2 Power Purchase Agreement"),
between Southern California Edison Company and Westmoreland
Geothermal Associates (incorporated by reference to Exhibit
10.6 to the Funding Corporation Form S-4).
10.7Amendment No. 1 to Unit 2 Power Purchase Agreement, dated as
of December 18, 1987, between Southern California Edison
Company and Earth Energy, Inc. (incorporated by reference to
Exhibit 10.7 to the Funding Corporation Form S-4).
10.8Power Purchase Contract, dated April 16, 1985 (the "Unit 3
Power Purchase Agreement"), between Southern California
Edison Company and Union Oil Company of California
(incorporated by reference to Exhibit 10.8 to the Funding
Corporation Form S-4).
10.9Power Purchase Contract (the "Unit 4 Power Purchase
Agreement"), dated November 29, 1994, between Southern
California Edison Company, SSPG and Fish Lake (incorporated
by reference to Exhibit 10.9 to the Funding Corporation Form
S-4).
10.10 Plant Connection Agreement (Unit 2), dated October 3,
1989, between the Imperial Irrigation District and Earth
Energy, Inc. (incorporated by reference to Exhibit 10.10 to
the Funding Corporation Form S-4).
10.11 Plant Connection Agreement, dated August 2, 1988 (Unit
3), between the Imperial Irrigation District and Desert
Power Company (incorporated by reference to Exhibit 10.11 to
the Funding Corporation Form S-4).
10.12 Imperial Irrigation District Funding and Construction
Agreements as amended (Units 2 and 3), dated as of June 29,
1987, among the Imperial Irrigation District, Earth Energy,
Inc., Chevron Geothermal Company of California, Geo East
Mesa No. 3, Inc., Magma Power Company, Desert Power Company,
Geo East Mesa No. 2, Inc., Heber Geothermal Company, Ormesa
Geothermal, Ormesa Geothermal II, Vulcan/BN Geothermal Power
Company, Union Oil Company of California, Del Ranch L.P.,
Elmore L.P., Leathers L.P., Geo East Mesa Limited
Partnership and Imperial Resource Recovery Associates, L.P.
(incorporated by reference to Exhibit 10.12 to the Funding
Corporation Form S-4).
10.13 Transmission Service Agreement, dated as of October 3,
1989 (Unit 2), between the Imperial Irrigation District and
Earth Energy, Inc. (incorporated by reference to Exhibit
10.13 to the Funding Corporation Form S-4).
10.14 Transmission Service Agreement, dated as of August 2,
1988 (Unit 3), between the Imperial Irrigation District and
Desert Power Company (incorporated by reference to Exhibit
10.14 to the Funding Corporation Form S-4).
10.15 Plant Connection Agreement (Unit 4), dated as of July
14, 1995, by and between the Imperial Irrigation District,
SSPG and Fish Lake (incorporated by reference to Exhibit
10.15 to the Funding Corporation Form S-4).
10.16 Letter Agreement, dated February 2, 1995, between Magma
Power Company and the Imperial Irrigation District
(incorporated by reference to Exhibit 10.16 to the Funding
Corporation Form S-4).
10.17 Transmission Service Agreement (Unit 4), dated as of
July 14, 1995, by and between the Imperial Irrigation
District, SSPG and Fish Lake (incorporated by reference to
Exhibit 10.17 to the Funding Corporation Form S-4).
10.18 Transmission Line Construction Agreement (Unit 4),
dated July 14, 1995, between the Imperial Irrigation
District, SSPG and Fish Lake (incorporated by reference to
Exhibit 10.18 to the Funding Corporation Form S-4).
10.19 Funding Agreement, dated June 15, 1988 (Unit 2),
between Southern California Edison Company and Earth Energy,
Inc. (incorporated by reference to Exhibit 10.19 to the
Funding Corporation Form S-4).
10.20 Second Amended and Restated Administrative Services
Agreement, by and among CEOC, SSBP, SSPG and Fish Lake,
dated as of July 15, 1995 (incorporated by reference to
Exhibit 10.20 to the Funding Corporation Form S-4).
10.21 Second Amended and Restated Operating and Maintenance
Agreement, dated as of July 15, 1995, by and among Magma
Power Company, SSBP, SSPG and Fish Lake (incorporated by
reference to Exhibit 10.21 to the Funding Corporation Form S-
4).
10.22 Intentionally Omitted.
10.23 Collateral Assignment of Southern California Edison
Company Agreements, dated as of June 20, 1996, by Vulcan,
Elmore, Leathers and Del Ranch in favor of Chemical Trust Company
of California (incorporated by reference to Exhibit 10.23 to the
Funding Corporation II Form S-4).
10.24 Administrative Services Agreement, dated as of June 17,
1996, between CEOC and Vulcan (incorporated by reference to
Exhibit 10.24 to the Funding Corporation II Form S-4).
10.25 Amended and Restated Construction, Operating and
Accounting Agreement, dated as of June 17, 1996, between VPC
and Vulcan (incorporated by reference to Exhibit 10.25 to the
Funding Corporation II Form S-4).
10.26 Long Term Power Purchase Contract, dated March 1,
1984, as amended, between SCE and Vulcan, as successor to Magma
Electric Company (incorporated by reference to Exhibit 10.26 to
the Funding Corporation II Form S-4).
10.27 Transmission Service Agreement, dated December 1, 1988,
between VPC and IID (incorporated by reference to Exhibit
10.27 to the Funding Corporation II Form S-4).
10.28 Plant Connection Agreement, dated as of December 1,
1988, between VPC and IID (incorporated by reference to Exhibit
10.28 to the Funding Corporation II Form S-4).
10.29 Amended and Restated Administrative Services
Agreement, dated as of June 17, 1996 between CEOC and Elmore
(incorporated by reference to Exhibit 10.29 to the Funding
Corporation II Form
S-4).
10.30 Amended and Restated Operating and Maintenance
Agreement, dated as of June 17, 1996, between CEOC and Elmore
(incorporated by reference to Exhibit 10.30 to the Funding
Corporation II Form S-4).
10.31 Long Term Power Purchase Contract, dated June 15, 1984,
as amended, between SCE and Elmore, as successor to Magma
Electric Company (incorporated by reference to Exhibit 10.31 to
the Funding Corporation II Form S-4).
10.32 Transmission Service Agreement, dated as of August 2,
1988, as amended, between Elmore and IID (incorporated by
reference to Exhibit 10.32 to the Funding Corporation II Form S-
4).
10.33 Plant Connection Agreement, dated as of August 2, 1988,
between Elmore and IID (incorporated by reference to Exhibit
10.33 to the Funding Corporation II Form S-4).
10.34 Amended and Restated Administrative Services Agreement,
dated as of June 17, 1996, between CEOC and Leathers
(incorporated by reference to Exhibit 10.34 to the Funding
Corporation II Form S-4).
10.35 Amended and Restated Operating and Maintenance
Agreement, dated as of June 17, 1996, between CEOC and Leathers
(incorporated by reference to Exhibit 10.35 to the Funding
Corporation II Form S-4).
10.36 Long Term Power Purchase Contract, dated August 16,
1985, as amended, between SCE and Leathers, as successor to
Imperial Energy Corporation (incorporated by reference to Exhibit
10.36 to the Funding Corporation II Form S-4).
10.37 Transmission Service Agreement, dated as of October
3, 1989, as amended, between Leathers and
IID (incorporated by reference to Exhibit 10.37 to the
Funding Corporation II Form S-4).
10.38 Plant Connection Agreement, dated as of October 3,
1989, between Leathers and IID (incorporated by reference to
Exhibit 10.38 to the Funding Corporation II Form S-4).
10.39 Amended and Restated Administrative Services Agreement,
dated as of June 17, 1996, between CEOC and Del Ranch
(incorporated by reference to Exhibit 10.39 to the Funding
Corporation II Form S-4).
10.40 Amended and Restated Operating and Maintenance
Agreement, dated as of June 17, 1996, between CEOC and Del
Ranch (incorporated by reference to Exhibit 10.40 to the Funding
Corporation II Form S-4).
10.41 Long Term Power Purchase Contract, dated February 22,
1984, as amended, between SCE and Del Ranch, as successor to
Magma (incorporated by reference to Exhibit 10.41 to the Funding
Corporation II Form S-4).
10.42 Transmission Service Agreement, dated as of August 2,
1988, as amended, between Del Ranch and IID (incorporated by
reference to Exhibit 10.42 to the Funding Corporation II Form S-
4).
10.43 Plant Connection Agreement, dated as of August 2, 1988,
between Del Ranch and IID (incorporated by reference to
Exhibit 10.43 to the Funding Corporation II Form S-4).
10.44 Funding Agreement, dated May 18, 1990, between SCE and
Del Ranch (incorporated by reference to Exhibit 10.44 to the
Funding Corporation II Form S-4).
10.45 Funding Agreement, dated May 18, 1990, between SCE and
Elmore (incorporated by reference to Exhibit 10.45 to the
Funding Corporation II Form S-4).
10.46 Funding Agreement, dated June 15, 1990, between SCE and
Leathers (incorporated by reference to Exhibit 10.46 to the
Funding Corporation II Form S-4).
10.47 Funding Agreement, dated May 18, 1990, between SCE and
Leathers (incorporated by reference to Exhibit 10.47 to the
Funding Corporation II Form S-4).
10.48 Funding Agreement, dated May 18, 1990, between SCE and
Vulcan (incorporated by reference to Exhibit 10.48 to the
Funding Corporation II Form S-4).
24. Power of Attorney
27. Financial Data Schedule.
Exhibit 3.13
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * * * * * *
California Energy Operating Company, a corporation organized
and existing under and by virtue of the General Corporation Law
of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That in lieu of a meeting, the sole stockholder of
said corporation has given unanimous written consent to the
following amendment to the Certificate of Incorporation of said
corporation:
RESOLVED, that the Certificate of Incorporation of
California Energy Operating Company be amended by changing
the first sentence thereof so that, as amended, said
sentence shall be and read as follows:
"The name of the Corporation is CalEnergy Operating Company
(the "Company")."
SECOND: That the aforesaid amendment was duly adopted in
accordance with the applicable provisions of Sections 242 and 228
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Certificate of Amendment of
Certificate of Incorporation has caused this certificate to be
signed by Steven A. McArthur, its Senior Vice President, and
attested by Douglas L. Anderson, Assistant Secretary, as of this
26th day of March, 1996.
CALIFORNIA ENERGY OPERATING COMPANY, INC.
By: /s/ Steven A. McArthur
Steven A. McArthur
Senior Vice President
ATTEST
By: /s/ Douglas L. Anderson
Douglas L. Anderson
Assistant Secretary
Exhibit 24
POWER OF ATTORNEY
The undersigned, members of the Board of Directors and
Officers of SALTON SEA FUNDING CORPORATION, a Delaware
corporation (the "Company"), and the following companies:
Salton Sea Brine Processing, L.P.
Salton Sea Power Generation, L.P.
Fish Lake Power Company
Vulcan Power Company
CalEnergy Operating Company
Salton Sea Royalty Company
BN Geothermal Inc.
San Felipe Energy Company
Conejo Energy Company
Niguel Energy Company
Vulcan/BN Geothermal Power Company
Leathers, L.P.
Del Ranch, L.P.
Elmore, L.P.
hereby constitute and appoint Steven A. McArthur as his true and
lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for and in his stead, in any and
all capacities, to sign on his behalf the Company's Form 10-K
Annual Report for the fiscal year ending December 31, 1996 and to
execute any amendments thereto and to file the same, with all
exhibits thereto, and all other documents in connection
therewith, with the Securities and Exchange Commission and
applicable stock exchanges, with the full power and authority to
do and perform each and every act and thing necessary or
advisable to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-
fact and agent or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Dated as of March 26, 1997.
________________________________ _______________________________
DAVID L. SOKOL THOMAS R. MASON
________________________________ _______________________________
JOHN G. SYLVIA GREGORY E. ABEL
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 27,262
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 575,989
<CURRENT-LIABILITIES> 0
<BONDS> 538,982
0
0
<COMMON> 0
<OTHER-SE> 8,694
<TOTAL-LIABILITY-AND-EQUITY> 575,989
<SALES> 0
<TOTAL-REVENUES> 40,567
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 712
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,761
<INCOME-PRETAX> 3,094
<INCOME-TAX> 1,273
<INCOME-CONTINUING> 1,821
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,821
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
