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, 1998
Commission File No. 33-95538
SALTON SEA FUNDING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 47-0790493
(State of (IRS Employer
Incorporation) Identification No.)
Salton Sea Brine Processing L.P. California 33-0601721
Salton Sea Power Generation L.P. California 33-0567411
Fish Lake Power LLC Delaware 33-0453364
Vulcan Power Company Nevada 95-3992087
CalEnergy Operating Corporation Delaware 33-0268085
Salton Sea Royalty LLC Delaware 47-0790492
VPC Geothermal LLC 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
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) 231-1644
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 contained, 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 held
by Magma Power Company.
100 shares of Common Stock were outstanding on March 30,1999.
Documents incorporated by reference: N/A
<PAGE>
TABLE OF CONTENTS
PART I 2
ITEM 1. Business 2
The Projects 3
Salton Sea Projects 4
Partnership Projects 5
Zinc Recovery Project 6
Royalty Projects 6
Terms of the Securities 7
The Securities 7
Structure of and Collateral for the
Securities 8
Priority of Payments 12
Debt Service Reserve Fund 13
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 Indenture Covenants 15
Equity Commitment 15
The Project Notes 15
Principal Credit Agreement Covenants 16
Considerations Regarding Limitation on Remedies 16
Reliance on Single Utility Customer 17
Power Price and Sales Uncertainty 17
Zinc Price and Sales Uncertainty 17
Construction Uncertainty 18
Uncertainties Relating to Exploration and
Development of Geothermal Energy Resources 18
Insurance 19
Regulatory and Environmental Matters 19
Employees 19
ITEM 2: Properties 19
ITEM 3: Legal Proceedings 19
ITEM 4: Submission of Matters to a Vote of Security
Holders 20
PART II 21
ITEM 5: Market for Registrant's Common Equity and
Related Stockholder's Matters 21
ITEM 6: Selected Financial Data 21
Salton Sea Funding Corporation 21
Salton Sea Guarantors 22
Partnership Guarantors 23
Royalty Guarantor 24
ITEM 7: Management's Discussion and Analysis of
Financial Condition and Results of Operations 25
Factors Affecting Results of Operations 25
Power Purchase Agreements 25
Capacity Utilizations 26
Results of Operations for the Years Ended December 31,
1998, 1997 and 1996 27
Revenues 27
Operating Expenses 27
Depreciation and Amortization 27
Interest Expense 28
Income Tax Provision 28
Net Income 28
Capital Resources and Liquidity 29
<PAGE>
ITEM 7A: Qualitative and Quantitative Disclosures About
Market Risk 31
ITEM 8: Financial Statements and Supplementary Data 32
Index to Financial Statements - Salton Sea Funding
Corporation 32
Index to Financial Statements - Salton Sea Guarantors 32
Index to Financial Statements - Partnership Guarantors 33
Index to Financial Statements - Salton Sea Royalty
Company 33
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 76
PART III 77
ITEM 10. Directors and Executive Officers of the
Registrant 77
ITEM 11. Executive Compensation 78
ITEM 12. Security Ownership of Certain Beneficial
Owners and Management 78
Description of Capital Stock 78
Principal Holders 78
ITEM 13. Certain Relationships and Related Transactions 78
Other Relationships and Related Transactions 78
Relationship of the Funding Corporation and
the Guarantors to Magma and MidAmerican 78
PART IV 80
ITEM 14. Exhibits, Financial Statements Schedule and
Reports on Form 8-K 80
Signatures 81
Index to Exhibits 96
<PAGE>
PART 1
ITEM 1. Business
Salton Sea Funding Corporation ("Funding Corporation") is a
special purpose Delaware corporation, an indirect wholly-owned
subsidiary of CE Generation, LLC ("CE Generation") and 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) 231-1644.
CE Generation owns all of the capital stock of Magma Power
Company ("Magma") which in turn owns all of the outstanding
capital stock of Funding Corporation. Through its subsidiaries,
CE Generation is primarily engaged in the development, ownership
and operation of environmentally responsible independent power
production facilities in the United States utilizing geothermal
and natural gas resources. CE Generation has an aggregate net
ownership interest of 821 MW of electrical generating capacity in
power plants in operation or under construction in the United
States, which have an aggregate net capacity of 897 MW (including
its interests in the Salton Sea Projects and the Partnership
Projects as defined below).
All of the outstanding stock of Magma was contributed by
MidAmerican Energy Holdings Company, the successor of CalEnergy
Company, Inc. ("MidAmerican") to CE Generation in February 1999.
Magma had been acquired by MidAmerican in 1995 (the "Magma
Acquisition"). In March 1999, MidAmerican sold a 50% interest in
CE Generation to an affiliate of El Paso Energy Corporation ("El
Paso"). Prior to the formation of Funding Corporation, Magma
owned or controlled substantially all of the assets of the Salton
Sea Guarantors, Partnership Guarantors and Salton Sea Royalty LLC
(as defined below and collectively the "Guarantors"), including
the three Salton Sea Projects then in operation and 50%
partnership interests in each of the four Partnership Projects
then operating. At the time of the Magma Acquisition, Magma's
interests in the Guarantors generated substantially all of
Magma's earnings. 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 MidAmerican acquired all of
the stock of VPC Geothermal LLC (formerly BN Geothermal, Inc.)
("VPCG"), 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 then operating. As a result of such
acquisition (the "Partnership Interest Acquisition"), CE
Generation affiliates 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, except for Minerals LLC. CalEnergy Operating
Corporation ("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 CE Generation, except for Minerals LLC. Salton Sea Brine
Processing L.P. ("SSBP"), Salton Sea Power Generation L.P.
("SSPG") and Fish Lake Power LLC (formerly Fish Lake Power
Company) ("Fish Lake") (collectively, the "Initial Salton Sea
Guarantors") own four operating geothermal power plants located
in Imperial Valley, California known as Salton Sea I, Salton Sea
II, Salton Sea III and Salton Sea IV. Salton Sea Power L.L.C.
("Power LLC" together with the Initial Salton Sea Guarantors, the
"Salton Sea Guarantors") is constructing a geothermal power plant
in the Imperial Valley, California known as Salton Sea V (such
project together with Salton Sea I, II, III and IV, the "Salton
Sea Projects").
<PAGE>
Each of the Vulcan/BN Geothermal Power Company ("Vulcan"),
Elmore, L.P. ("Elmore"), Leathers, L.P. ("Leathers") and Del
Ranch, L.P. ("Del Ranch") owns an operating 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 (together with the CE Turbo Project
and the Zinc Recovery Project, the "Partnership Projects"). CE
Turbo LLC ("Turbo LLC") is constructing a geothermal power plant
in the Imperial Valley, California. CalEnergy Minerals LLC
("Minerals LLC") is constructing the Zinc Recovery Project
described below (Minerals LLC together with CE Turbo, Vulcan, Del
Ranch, Leathers, Elmore, CEOC, VPC, San Felipe, Niguel, Conejo
and VPCG, the "Partnership Guarantors"). As is more fully
described below, the other Partnership Guarantors 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 VPCG, collectively own 100% of
the partnership interests in Vulcan. CEOC and 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
Projects and Magma's special distributions equal to 4.5% of total
energy revenues from the Leathers Project.
Salton Sea Royalty LLC, formerly 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. 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, Suites 400-B, 400-D, 400-E,
400-K and 400-N, Omaha, Nebraska 68131. The principal executive
offices of the Partnership Guarantors is 302 South 36th Street,
Suite 400-F, 400-G, 400-I, 400-J, 400-L, 400-M, 400-N, 400-O, 400-
P, 400-Q, 400-R, 400-S, 400-T, and 400-U, Omaha, Nebraska 68131.
The principal executive office of the Royalty Guarantor is 302
South 36th Street, Suite 400-H, Omaha, Nebraska 68131. The
Salton Sea Guarantors, Partnership Guarantors and the Royalty
Guarantor are sometimes referred to collectively herein as the
"Guarantors".
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 Initial Salton
Sea Projects and Vulcan, Elmore, Leathers and Del Ranch Projects
are located in the Imperial Valley, California and sell power to
Southern California Edison Company ("Edison").
<PAGE>
DATE OF
PROJECT FACILITY COMMERICAL CONTRACT CONTRACT POWER
CAPACITY (1)(2) OPERATION EXPIRATION TYPE PURCHASERS(3)
Salton Sea Projects
Salton Sea I 10.0 7/1987 6/2017 Negotiated Edison
Salton Sea II 20.0 4/1990 4/2020 SO4 Edison
Salton Sea III 49.8 2/1989 2/29/19 SO4 Edison
Salton Sea IV 39.6 6/1996 5/2026 Negotiated Edison
Salton Sea V 49.0 Mid-2000 N/A N/A Px/Zinc
Recovery
Project
Subtotal 168.4
Partnership Projects
Vulcan 34.0 2/1986 2/2016 SO4 Edison
Elmore 38.0 1/1989 12/2018 SO4 Edison
Leathers 38.0 1/1990 12/2019 SO4 Edison
Del Ranch 38.0 1/1989 12/2018 SO4 Edison
CE Turbo 10.0 Mid-2000 N/A N/A Px
Subtotal 158.0
Total Power
Projects 326.4
Zinc Recovery
Project 30,000 Mid-2000 N/A N/A N/A
(1)Power capacity is a nominal number that varies with operating and
reservoir conditions.
(2) Power Capacities are measured in MW; zinc recovery capacity
is measured in tons per year.
(3) Edison is Southern California Edison Company and Px is the
California Power Exchange.
Salton Sea Projects
The Salton Sea Guarantors collectively own the four operating
Salton Sea Projects and the Salton Sea V project under
construction with an aggregate net generating capacity of
approximately 168.4 MW. Each of the four operating Salton Sea
Projects has an executed long term power purchase agreement,
providing for the sale of capacity and energy to Edison.
Salton Sea II and Salton Sea 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 period expired on February 13, 1999 for
Salton Sea III and expires on April 4, 2000 for Salton Sea II.
Salton Sea I and Salton Sea IV have negotiated contracts with
Edison. The Salton Sea 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 IV contract also provides for fixed price capacity
payments for the life of the contract. Approximately 56% of the
<PAGE>
kWhs are sold under the Salton Sea 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 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.
Salton Sea V is being constructed as a 49 MW geothermal power
plant which will extract unutilized geothermal energy from
geothermal brine that has previously passed through the other
Salton Sea projects. Salton Sea V has a negotiated power sale
contract with the Zinc Recovery Project entity for a portion of
its output and will sell the remainder into the California Power
Exchange ("PX") or such other markets as may develop. Salton Sea
V is being constructed pursuant to a date certain, fixed price,
turn-key engineering, procurement and construction contract (the
"Salton Sea V EPC Contract") by Stone & Webster Engineering
Corporation ("SWEC"). SWEC is one of the world's leading
engineering and construction firms for the construction of
electric power plants and, in particular, geothermal power
plants. SWEC provided the engineering for the construction of
Salton Sea III and has completed engineering, procurement,
construction or other related work on twenty-seven other
geothermal power plants over the past few years. SWEC's
obligations under the Salton Sea V EPC Contracts, including
provisions for liquidated damages of up to 20% of the contract
price for certain delays or failures to meet performance
guarantees, are guaranteed by SWEC's parent, Stone & Webster,
Incorporated. Salton Sea V is scheduled to commence Commercial
Operation in mid-2000.
The Salton Sea I through IV operated at a combined facility
capacity factor of 90.4% in 1996, 95.6% in 1997 and 94.2% in
1998.
Partnership Projects
The Partnership Projects have an aggregate facility generating
capacity of 158 MW. The Partnership Guarantors own 100% of the
Vulcan Project, the CE Turbo Project, the Zinc Recovery 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.
All of the Partnership Projects except the CE Turbo Project and
the Zinc Recovery Project 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
fixed 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 fixed price energy period for the
Vulcan Project expired on February 9, 1996, and for each of the
Del Ranch and Elmore Projects on December 31, 1998, and will
expire on December 31, 1999 for the Leathers Project.
Turbo LLC, one of the Partnership Guarantors, is constructing
the CE Turbo Project (the "CE Turbo Project"), which will have a
capacity of 10 net MW. The net output of the CE Turbo Project
will be sold to the Zinc Recovery Project (if Salton Sea V is not
delivering power) or sold through the PX.
The Partnership Guarantors are upgrading the geothermal brine
processing facilities at the Vulcan and Del Ranch Projects with
the Region 2 Brine Facilities Construction (the "Region 2 Brine
Facilities Construction"). In addition to incorporating the pH
modification process, which has reduced operating costs at the
Salton Sea Projects, the new facilities will achieve economies of
scale through improved brine processing systems and the
utilization of more modern equipment.
The CE Turbo Project and the Region 2 Brine Facilities
Construction are being constructed by SWEC pursuant to a date
certain, fixed-price, turnkey engineering, procurement and
construction contract (the "Region 2 Upgrade EPC Contract"). The
obligations of SWEC will be guaranteed by Stone & Webster,
Incorporated. The CE Turbo Project is scheduled to commence
initial operations in mid-2000 and the Region 2 Brine Facilities
Construction is scheduled to be completed in early-2000.
<PAGE>
The existing Partnership Projects operated at a combined
facility capacity factor of 104.8% in 1996, 102.2% in 1997 and
101.3% in 1998.
Zinc Recovery Project
Minerals LLC, one of the Partnership Guarantors, is
constructing the Zinc Recovery Project which will recover zinc
from the geothermal brine (the "Zinc Recovery Project"). Four
facilities will be installed near Existing Project sites to
extract a zinc chloride solution from the brine through an ion
exchange process. This solution will be transported to a central
processing plant where zinc ingots will be produced through
solvent extraction, electrowinning and casting processes. The
Zinc Recovery Project is designed to have a capacity of
approximately 30,000 tons per year and is scheduled to commence
commercial operation in mid-2000. The zinc produced by the Zinc
Recovery Project is expected to be sold primarily to U.S. West
Coast customers such as steel companies, alloyers and
galvanizers.
The Zinc Recovery Project is being constructed by Kvaerner U.S.
Inc. ("Kvaerner") pursuant to a date certain, fixed-price,
turnkey engineering, procurement and construction contract (the
"Zinc Recovery Project EPC Contract"). Kvaerner is a wholly-
owned indirect subsidiary of Kvaener ASA, an internationally
recognized engineering and construction firm experienced in the
metals, mining and processing industries. The payment
obligations of Kvaerner, including payment of liquidated damages
of up to 20% of the contract price for certain delays or failures
to meet performance guarantees, are secured by a letter of credit
issued by Union Europeenne de CIC (or another financial
institution rated "A" or better by S&P or "A2" or better by
Moody's and otherwise acceptable to Minerals LLC) in an initial
aggregate amount equal to $29.6 million. The Zinc Recovery
Project is scheduled to commence initial operations in mid-2000.
Royalty Projects
The Royalty Guarantor has received an assignment from Magma of
certain payments ("Royalties") received from the Leathers, Del
Ranch and Elmore Projects in exchange for the provision to those
projects of the rights to use certain geothermal resources.
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
Guarantors 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
Total 148
(1) CEOC is also entitled to receive Royalties as described
herein. Such Royalties are payable from revenues that will
constitute Partnership collateral.
<PAGE>
Terms of the Securities
The Securities
In 1995, 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. 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 1998, Funding Corporation issued $285,000,000
aggregate principal amount of its Senior Secured Series F Bonds
("Series F Securities"). Funding Corporation is required to use
reasonable best efforts to register the Series F Securities in a
comparable manner and expects to do so pursuant to the terms of
the Indenture.
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 offers of New Securities for
the Old Securities are sometimes referred to herein as the
"Exchange Offers". 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 all the 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 for failure to be so registered.
Capitalized terms not otherwise defined herein shall have the
meaning set forth in the Indenture, as amended, between Chase
Manhattan Bank and Trust Company, National Association and
Funding Corporation.
The Funding Corporation received no proceeds from the exchange
pursuant to the Exchange Offers and will not receive proceeds
from the expected exchange offer in respect to the Series F
Securities. The net proceeds received by the Funding Corporation
from the issuance of the Old Securities and Series F Securities
to the Initial Purchasers in the three separate offerings (after
deduction of certain transaction costs) were approximately $889
million and were loaned to the Guarantors in return for the
issuance of certain notes (the "Project Notes"), and were used
for the following purposes: (a) approximately $253 million to
repay certain non-recourse indebtedness of MidAmerican 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 IV 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, (f) approximately $23
million to fund a portion of the purchase price payable by the
Initial Partnership Guarantors for the Acquired Partnership
Companies, and (g) $285 million to fund in part construction of
the Zinc Recovery Project, CE Turbo Project and Salton Sea V
Project, as well as associated capital improvements and finance
costs .
There is no existing trading market for the New Securities and
the Series F Securities and there can be no assurance regarding
the future development of such a market for the New Securities
and the Series F Securities or the ability of holders of the New
Securities and the Series F Securities to sell their Securities
or the price at which such holders may be able to sell their New
Securities and the Series F Securities. If such a market were to
<PAGE>
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
Securities on any securities exchange or stock market.
Structure of and Collateral for the Securities
The New Securities and the Series F 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 and 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 and a pledge of the equity interests
in the Salton Sea Guarantors;
(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.
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
until payment in full of the New Securities, whereupon the Debt
Service Fund Requirement Balance may be reduced to the maximum
remaining semiannual principal and interest on the Securities for
the remaining term if the Rating Agencies confirm that a rating
downgrade will not occur as a result thereof.
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 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
<PAGE>
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 except the guarantee by MidAmerican for the direct
and indirect owners of the Zinc Recovery Project of a specified
portion of the scheduled debt service on the Series F Securities
including the current principal amount of $140.52 million and
associated interest. 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 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.
The New Securities and the Series F Securities are rated "Baa2"
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 initial average life of the Series F Securities
was 15.50 years.
The $232,750,000 initial principal amount of the 6.69% Series A
Securities due May 30, 2000 is 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%
<PAGE>
The $133,000,000 initial principal amount of the 7.37% Series B
Securities due May 30, 2005 is 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 initial principal amount of the 7.84% Series C
Securities due May 30, 2010 is 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%
<PAGE>
The $70,000,000 initial principal amount of the 7.02% Series D
Securities due May 30, 2000 is 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 initial principal amount of the 8.30% Series E
Securities due May 30, 2011 is 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%
<PAGE>
The $285,000,000 initial principal amount of the 7.475% Series F
Securities due November 30, 2018 is payable in semiannual
installments, commencing May 30, 2001 as follows:
PAYMENT DATE PERCENTAGE OF
PRINCIPAL AMOUNT
PAYABLE
May 30, 2001 0.225%
November 30, 2001 0.225%
May 30, 2002 0.750%
November 30, 2002 0.750%
May 30, 2003 0.500%
November 30, 2003 0.500%
May 30, 2004 0.625%
November 30, 2004 0.625%
May 30, 2005 0.625%
November 30, 2005 0.625%
May 30, 2006 0.650%
November 30, 2006 0.650%
May 30, 2007 0.375%
November 30, 2007 0.375%
May 30, 2008 0.875%
November 30, 2008 0.875%
May 30, 2009 0.375%
November 30, 2009 0.375%
May 30, 2010 1.250%
November 30, 2010 1.250%
May 30, 2011 3.000%
November 30, 2011 3.000%
May 30, 2012 5.750%
November 30, 2012 5.750%
May 30, 2013 5.075%
November 30, 2013 5.075%
May 30, 2014 6.000%
November 30, 2014 6.000%
May 30, 2015 6.550%
November 30, 2015 6.550%
May 30, 2016 7.050%
November 30, 2016 7.050%
May 30, 2017 6.875%
November 30, 2017 6.875%
May 30, 2018 3.450%
November 30, 2018 3.450%
Priority of Payments
All revenues received by the Salton Sea Guarantors from the
Salton Sea Projects, all revenues received by the Partnership
Guarantors and all Royalties received by the Royalty Guarantor
shall be paid into a Revenue Fund maintained by a Depository.
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
<PAGE>
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 from time to time equal (a) on or prior to December
31, 1999, the maximum semiannual scheduled principal and interest
payments on the Securities, (b) after December 31, 1999 through
payment in full of the New Securities, the maximum annual
principal and interest payments on the Securities for the
remaining term, and (c) after payment in full of the New
Securities, (i) the maximum annual principal and interest
payments on the Series F Securities for the remaining term or
(ii) if the rating agencies confirm that no Rating Downgrade will
occur as a result thereof, the maximum semiannual principal and
interest payments on the Series F Securities for the remaining
term. 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 resulting from drawings on such
Debt Service Reserve Letter of Credit.
Optional Redemption
The Series B Securities, Series C Securities, Series E
Securities and Series F 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) in
certain circumstances if any New Project fails to achieve
Substantial Completion by the applicable Guaranteed Substantial
Completion Date or receives certain net performance liquidated
damages under the construction contract for such Project or (e)
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;
<PAGE>
(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 each New Project shall have
occurred on or prior to such New Project's Guaranteed Substantial
Completion Date unless the required amount of Securities shall
have been redeemed as described above under "Mandatory
Redemption" or (ii) the Rating Agencies shall have confirmed that
no Rating Downgrade would result from such delay; provided that
such condition will apply to a New Project only (x) after such
New Project's Guaranteed Substantial Completion Date or (y) if
such New Project has been abandoned.
Ranking and Security for the Securities
The Securities are 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 MidAmerican 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 except the guarantee by
MidAmerican for the direct and indirect owners of the Zinc
Recovery Project of a specified portion of the scheduled debt
service on the Series F Securities including the current
principal amount of $140.52 million and associated interest.
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
<PAGE>
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; and
(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.
All Permitted Debt incurred by the Funding Corporation shall
be loaned to the Guarantors and guaranteed by the Guarantors.
Principal Indenture 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.
Equity Commitment
Pursuant to the Equity Commitment Agreement executed by
MidAmerican in favor of the Guarantors and the Collateral Agent,
MidAmerican agreed to contribute cash equity to the Guarantors in
an amount of up to $122,513,000 to fund a portion of the budgeted
costs for construction of the New Projects and Additional Capital
Improvements.
The Project Notes
The Salton Sea Guarantors jointly and severally issued a
Project Note in an initial principal amount of $325,000,000 and
an additional project note in the amount of $83,272,000; the
Partnership Guarantors jointly and severally issued a Project
Note in an initial principal amount of $75,000,000, and
additional project notes in amounts of $135,000,000 and
$201,728,000, respectively, 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;
<PAGE>
(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 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 Credit Agreement 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
were distributed to MidAmerican to repay certain non-recourse
indebtedness incurred by MidAmerican 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
<PAGE>
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.
Reliance on Single Utility Customer
Each of the operating Existing 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 operating Existing Project since its
inception, and may 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.
Power Price and Sales Uncertainty
The Power Purchase Agreements pursuant to which all of the
Existing Projects (other than Salton Sea I and Salton Sea IV)
sell electricity to SCE 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 "Fixed Price Period"). Thereafter, the required energy
payment converts to SCE's Avoided Cost of Energy, as determined
by a methodology approved by, and subject to change by, the
California Public Utility Commission ("CPUC"). The Fixed Price
Period expired in February 1996 for Vulcan, in December 1998 for
Del Ranch and Elmore; and in February 1999 for Salton Sea III and
will expire in December 1999 for Leathers and in April 2000 for
Salton Sea II.
For the year ended December 1998 and 1997, Edison's average
Avoided Cost of Energy was 3.0 cents and 3.3 cents per kWh,
respectively, which is substantially below the contract energy
prices earned for the year ended December 31, 1998. 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 and the modified SO4 Agreements at the
expiration of the Fixed Price Periods. The revenues generated by
each of the Projects operating under SO4 Agreements will likely
decline significantly after the expiration of the relevant Fixed
Price Periods.
Although approximately one-third of the net electrical output
of Salton Sea V is expected to be sold for use by the Zinc
Recovery Project, neither Salton Sea V nor the CE Turbo Project
currently has any power sales agreements for the rest of the
capacity of such Projects. The strategy for Salton Sea V and the
CE Turbo Project is to sell output not needed by the Zinc
Recovery Project in short term transactions through the PX or in
such other transactions from time to time as may be found to be
more advantageous than those conducted through the PX. The PX
was recently created to establish markets for the sale of power
on a daily and an hourly basis. Thus, PX prices are expected to
have the characteristics of short term spot prices and to
fluctuate from time to time in a manner that cannot be predicted
with accuracy and is not within the control of the Funding
Corporation, the Guarantors or any other person.
Zinc Price and Sales Uncertainty
Because most of the Zinc Recovery Project's revenues will be
derived from the sale of zinc, earnings will be directly related
to the price of zinc in the domestic and world markets. However,
zinc prices fluctuate and are affected by numerous factors,
including expectations of inflation, speculative activities,
currency exchange rates, interest rates, global and regional
<PAGE>
demand and production, political and economic conditions,
discovery of new deposits, and production costs in major
producing regions. The aggregate effect of these factors, all of
which are beyond the control of the Funding Corporation or the
Guarantors, is impossible for the Funding Corporation to predict.
Construction Uncertainty
Although the eight Existing Projects have been operating for a
number of years, the three New Projects have commenced
construction pursuant to fixed price, date certain turnkey
engineering, procurement and construction contracts and are
subject to customary risks associated with the construction of
power and metals processing plants including risks of delays in
completion, cost overruns and failures to perform in accordance
with contract terms. In addition, while each of the individual
process steps to be utilized in the Zinc Recovery Project
(including ion exchange, solvent extraction and electrowinning)
has been in operation for more than twenty years and the
demonstration plant at the SSKGRA has successfully recovered zinc
through this integrated process, the integrated process for the
production of zinc from geothermal brine has not been attempted
in a large scale commercial facility. Any material unremedied
delay in or unsatisfactory completion of the New Projects could
have an adverse effect on the applicable Guarantors' results of
operations.
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
<PAGE>
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 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, 1998, CEOC employed 166 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 Guarantors are provided
pursuant to the administrative services agreements described
below. MidAmerican 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 MidAmerican's
offices in Omaha, Nebraska. (See page 4 for a schedule of the
Guarantors facilities.)
Item 3. Legal Proceedings
The Funding Corporation is not a party to any material legal
proceedings.
<PAGE>
Item 4.Submission of Matters to a Vote of Security Holders.
Not applicable.
<PAGE>
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 Year Ended Year Ended From June 20, 1995
December 31, December 31, December 31, (Inception Date)
1998(1) 1997 1996(2) through
December 31, 1995(3)
Total revenues $39,329 $40,674 $40,567 $17,577
Net income 1,783 1,461 1,821 1,507
December 31, December 31, December 31, December 31,
1998(1) 1997 1996(2) 1995(3)
Total assets $659,337 $474,289 $575,989 $522,521
Senior secured notes
and bonds 626,816 448,754 538,982 452,088
Total liabilities 647,399 464,134 567,295 515,571
Total stockholder's
equity 11,938 10,155 8,694 6,950
(1)On October 13, 1998 Funding Corporation issued additional
securities of $285,000 of Salton Sea Notes
and Bonds Series F.
(2) On June 20, 1996 Funding Corporation issued additional
securities of $135,000 of Salton Sea Notes and Bonds
Series D and E.
(3)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.
<PAGE>
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.
Year Ended December 31,
1998 1997 1996(1) 1995(2) 1994
Sales of electricity $106,274 $106,252 $90,982 $71,605 $74,576
Total revenues 107,091 106,425 91,123 71,605 74,998
Net income 45,939 42,816 35,031 17,955 31,943
Total assets 628,515 556,353 565,934 500,400 232,914
Loans payable -- -- -- -- 114,308
Senior secured
project note 310,030 266,208 299,840 321,500 --
Total liabilities 348,388 322,165 374,562 330,801 114,936
(1) In June 1996, Salton Sea 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.
<PAGE>
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,
1998 1997 1996(1) 1995(2) 1994
Sales of electricity $165,779 $158,125 $132,212 $76,909 $70,692
Total revenues 172,565 162,315 140,226 87,483 76,050
Net income 37,134 33,637 25,759 14,637 17,138
Total assets 945,576 736,783 742,183 602,172 180,443
Loans payable - - - 43,766 52,340
Senior secured
project note 293,576 143,610 182,204 62,706 -
Total liabilities 446,743 275,084 314,121 228,440 74,048
(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.
<PAGE>
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,
1998(2) 1997 1996 1995(3) 1994(4)
Total revenues(1) $51,703 $32,231 $30,143 $28,383 $29,410
Net income(1) 19,497 8,661 4,769 3,510 8,657
Total assets 107,561 86,009 91,073 117,341
Senior secured project note 23,210 38,934 56,936 67,882
Total liabilities 69,563 67,508 81,233 89,290
(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)In 1998, the Royalty Guarantor received $25,000 in a
settlement related to the GEO East Mesa royalties.
(3)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.
(4)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.
<PAGE>
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 senior secured notes and bonds. On October
13, 1998, June 20, 1996 and July 21, 1995, the Funding
Corporation issued $285,000, $135,000 and $475,000, respectively,
of senior secured notes and bonds (the "Securities"). The
Securities are payable from payments made of principal and
interest on the Project Notes 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
The Imperial Valley Project consists of the Partnership Project
and the Salton Sea Project located in the Imperial Valley in
California. The operating Partnership Project consists of the
Vulcan, Hoch (Del Ranch), Elmore, and Leathers Partnerships. The
operating Salton Sea Project consist of Salton Sea I, Salton Sea
II, Salton Sea III and Salton Sea IV.
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 energy payments,
capacity payments and capacity bonus payments. Edison makes
fixed annual capacity payments and capacity bonus payments to the
projects to the extent that capacity factors exceed certain
benchmarks. The price for capacity is fixed for the life of the
SO4 Agreements and are significantly higher in the months of June
through September. Energy payments are at increasing fixed rates
for the first ten years after firm operation 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, December 1998 for the Del Ranch and Elmore
Partnerships and extend until December 1999 for the Leathers
Partnerships. The SO4 Agreements for Leathers provides for energy
rates of 15.6 cents per kWh in 1999.
Salton Sea I 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 5.4
cents per kWh during 1998. 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.
Salton Sea II and Salton Sea III 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 through September 30, 2004.
The annual capacity and bonus payments for Salton Sea II and
Salton Sea III are approximately $3,300 and $9,700, respectively.
<PAGE>
Salton Sea IV 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, 1998 and 1997, Edison's average
Avoided Cost of Energy was 3.0 cents and 3.3 cents per kWh,
respectively, which is substantially below the contract energy
prices earned for the year ended December 31, 1998. 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 will likely 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 and
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 operating data represents the aggregate capacity
and electricity production of Salton Sea I and II, Salton Sea III
and Salton Sea IV:
Years Ended December 31,
1998 1997 1996
Overall capacity factor 94.2% 95.6% 90.4%
Capacity NMW (average) 119.4 119.4 103.0*
Kwh produced (in thousands) 985,500 999,400 817,400
* Weighted average for the commencement of operations at Salton
Sea IV in 1996.
The following operating data represents the aggregate capacity
and electricity production of Vulcan, Del Ranch, Elmore and
Leathers:
Years Ended December 31,
1998 1997 1996
Operating capacity factor 101.3% 102.2% 104.8%
Capacity NMW (average) 148.0 148.0 148.0
Kwh produced (in thousands) 1,313,900 1,324,400 1,361,800
<PAGE>
Results of Operations for the Years Ended December 31, 1998, 1997
and 1996
Revenues
The Salton Sea Guarantors' sales of electricity increased
marginally to $106,274 for the year ended December 31, 1998 from
$106,252 for the same period in 1997. The Salton Sea Guarantors'
sales of electricity increased to $106,252 for the year ended
December 31, 1997 from $90,982 for the same period in 1996, a
16.8% increase. This increase was due primarily to the addition
of Salton Sea IV which commenced operations in June 1996 and
increased electricity production at the other plants.
The Partnership Guarantors' sales of electricity increased
to $165,779 for the year ended December 31, 1998 from $158,125
for the same period in 1997, a 4.8% increase. The Partnership
Guarantors' sales of electricity increased to $158,125 for the
year ended December 31, 1997 from $132,212 for the same period in
1996, a 19.6% increase. This increase was due primarily to the
acquisition of the remaining 50% interest of the Partnerships
owned by Edison Mission Energy (the "Partnership Interest
Acquisition") in April 1996.
Interest and other income for the Partnership Guarantors
increased to $6,786 for the year ended December 31, 1998 from
$4,190 for the same period in 1997. The increase in 1998 was due
to interest income on the restricted cash. Interest and other
income for the Partnership Guarantors decreased to $4,190 for the
year ended December 31, 1997 from $8,014 for the same period in
1996. The decrease was attributable to lower cash balances and
the fact that the Partnership Guarantor is no longer recognizing
management fee income because of the Partnership Interest
Acquisition in April 1996.
The Royalty Guarantor revenue increased to $51,703 for the
year ended December 31, 1998 from $32,231 for the same period in
1997 and $30,143 for the same period in 1996. The increases in
royalty revenue were primarily due to an increase in East Mesa
royalty income related to a royalty settlement agreement and the
result of the higher energy sales at the Partnership Projects
resulting in higher royalties.
Operating Expenses
The Salton Sea Guarantors' operating expenses, which include
royalty, operating, and general and administrative expenses,
decreased to $30,306, or 3.08 cents per kWh, for the year ended
December 31, 1998, from $30,865 or 3.09 cents per kWh for the
same period in 1997 and $27,175 or 3.32 cents per kWh for the
same period in 1996. The increase in expenses from 1996 to 1997
was due primarily to the addition of Salton Sea IV which began
operations in June 1996.
The Partnership Guarantors' operating expenses, which
include royalty, operating, and general and administrative
expenses, decreased to $63,717, or 5.26 cents per kWh, for the
year ended December 31, 1998, from $64,103 or 5.25 cents per kWh
for the same period in 1997 and $58,945 or 5.36 cents per kWh for
the same period in 1996. The increase in costs from 1996 to 1997
was due primarily to the Partnership Interest Acquisition and the
increase in royalty expense due to higher revenue.
The Royalty Guarantor's operating expenses increased to
$8,120 for the year ended December 31, 1998 from $7,769 for the
same period of 1997 and $7,288 for the same period of 1996.
These increases were due to scheduled increases 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 $14,857 for the year ended December 31, 1998 from
$14,689 for the year ended December 31, 1997 and $14,272 for the
year ended December 31, 1996. The increase in 1997 was primarily
due to the commencement of operations at Salton Sea IV which
commenced operations in June 1996.
<PAGE>
The Partnership Guarantors' depreciation and amortization
increased to $48,615 for the year ended December 31, 1998 from
$38,771 for the same period in 1997 and $33,974 for the same
period in 1996. The 1998 increase was due to an acceleration in
the step up depreciation related to the acquisition of Magma. The
1997 increase was due to a full year of depreciation related to
the Partnership interest acquisition in April 1996.
The Royalty Guarantor's amortization was $9,794 for the years
ended December 31, 1998 and 1997 compared with $10,280 for the
year ended December 31, 1996. The decrease in 1997 is consistent
with the 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 $15,989 for the year ended
December 31, 1998 from $18,055 for the same period in 1997. The
decrease was due primarily to the repayment of debt. The Salton
Sea Guarantors' interest expense, net of capitalized amounts,
increased to $18,055 for the year ended December 31, 1997 from
$14,645 for the same period in 1996. The increase was due
primarily to the capitalization of interest related to the Salton
Sea IV expansion during the construction period and the mineral
extraction project and the repayment of debt.
The Partnership Guarantors' interest expense, net of
capitalized amounts, decreased to $3,570 for the year ended
December 31, 1998 from $4,430 for the same period in 1997 and
$4,848 for the same period in 1996. The decreases are a result
of repayment of debt and capitalization of interest on the
mineral extraction project, partially offset by the issuance of
$135,000 and $201,768 of senior secured project notes in June
1996 and October 1998.
The Royalty Guarantors' interest expense decreased to $2,784
for the year ended December 31, 1998 from $4,179 for the same
period in 1997 and $5,246 for the same period in 1996. These
decreases are due to the repayment of debt.
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 decreased
to $19,529 for the year ended December 31, 1998 from $21,374 for
the same period in 1997 and $16,700 for the same period in 1996.
Income taxes will be paid by the parent of the Guarantors from
distributions to the parent company by the Guarantors which occur
after payment of operating expenses and debt service.
The Royalty Guarantor's income tax provision increased to
$11,508 for the year ended December 31, 1998 from $1,828 for the
same period in 1997. The increase in the provision can be
attributed to higher revenues. The Royalty Guarantor's income
tax provision decreased to $1,828 for the year ended December 31,
1997 from $2,560 for the same period in 1996. The decrease in
the provision can be attributed to lower royalty stream income.
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 $1,783 for the year
ended December 31, 1998 compared to $1,461 for the year ended
December 31, 1997 and $1,821 for the period ended December 31,
1996, which represented interest income and expense, net of
applicable tax, and the Funding Corporation's 1% equity in
earnings of the Guarantors.
<PAGE>
The Salton Sea Guarantors' net income increased to $45,939
for the year ended December 31, 1998, compared to $42,816 for the
year ended December 31, 1997 and $35,031 for the year ended
December 31, 1996.
The Partnership Guarantors' net income increased to $37,134 for
the year ended December 31, 1998, compared to $33,637 for the
year ended December 31, 1997 and $25,759 for the year ended
December 31, 1996.
The Royalty Guarantor's net income increased to $19,497 for
the year ended December 31, 1998, compared to $8,661 for the year
ended December 31, 1997 and $4,769 for the year ended December
31, 1996.
Capital Resources and Liquidity
Minerals LLC, a Partnership Guarantor ("Minerals LLC")
developed and owns the rights to proprietary processes for the
extraction of zinc from elements in solution in the geothermal
brine and fluids utilized at its Imperial Valley plants (the
"Zinc Recovery Project") as well as the production of power to be
used in the extraction process. A pilot plant has successfully
produced commercial quality zinc at the Company's Imperial Valley
Project.
Minerals LLC is constructing the Zinc Recovery Project which
will recover zinc from the geothermal brine (the "Zinc Recovery
Project"). Four facilities will be installed near Imperial
Valley Project sites to extract a zinc chloride solution from the
brine through an ion exchange process. This solution will be
transported to a central processing plant where zinc ingots will
be produced through solvent extraction, electrowinning and
casting processes. The Zinc Recovery Project is designed to have
a capacity of approximately 30,000 metric tonnes per year and is
scheduled to commence commercial operation in mid-2000. The zinc
produced by the Zinc Recovery Project is expected to be sold
primarily to U.S. West Coast customers such as steel companies,
alloyers and galvanizers.
The Zinc Recovery Project is being constructed by Kvaerner U.S.
Inc. ("Kvaerner") pursuant to a date certain, fixed-price,
turnkey engineering, procurement and construction contract (the
"Zinc Recovery Project EPC Contract"). Kvaerner is a wholly-
owned indirect subsidiary of Kvaerner ASA, an internationally
recognized engineering and construction firm experienced in the
metals, mining and processing industries. Total project costs of
the Zinc Recovery Project are expected to be approximately
$200,900 million. The Company has incurred $24,200 of such costs
through December 31, 1998.
Power LLC, a Salton Sea Guarantor, is constructing Salton Sea
V. Salton Sea V will be a 49 net MW geothermal power plant which
will sell approximately one-third of its net output to the Zinc
Recovery Project. The remainder will be sold through the
California Power Exchange ("PX").
Salton Sea V is being constructed pursuant to a date certain,
fixed price, turn-key engineering, procurement and construction
contract (the "Salton Sea V EPC Contract") by Stone & Webster
Engineering Corporation ("SWEC"). SWEC is one of the world's
leading engineering and construction firms for the construction
of electric power plants and, in particular, geothermal power
plants. Salton Sea V is scheduled to commence commercial
operation in mid-2000. Total project costs of Salton Sea V are
expected to be approximately $119,100.
Turbo LLC, a Partnership Guarantor, is constructing the CE
Turbo Project. The CE Turbo Project will have a capacity of 10
net MW. The net output of the CE Turbo Project will be sold to
the Zinc Recovery Project or sold through the PX.
The Partnership Projects are upgrading the geothermal brine
processing facilities at the Vulcan and Del Ranch Projects with
the Region 2 Brine Facilities Construction. In addition to
incorporating the pH modification process, which has reduced
<PAGE>
operating costs at the Salton Sea Projects, the new, more
efficient facilities will achieve economies through improved
brine processing systems and the utilization of more modern
equipment. The Partnership Projects expect these improvements to
reduce brine-handling operating costs at the Vulcan Project and
the Del Ranch Project.
The CE Turbo Project and the Region 2 Brine Facilities
Construction are being constructed by SWEC pursuant to a date
certain, fixed price, turnkey engineering, procurement and
construction contract (the "Region 2 Upgrade EPC Contract"). The
obligations of SWEC will be guaranteed by Stone & Webster,
Incorporated. The CE Turbo Project is scheduled to commence
initial operations in mid-2000 and the Region 2 Brine Facilities
Construction is scheduled to be completed in early-2000. Total
project costs for both the CE Turbo Project and the Region 2
Brine Facilities Construction are expected to be approximately
$63,700.
On October 13,1998, the Funding Corporation completed a sale to
institutional investors of $285,000 aggregate amount of 7.475%
Senior Secured Series F Bonds due November 30, 2018. The
proceeds from the offering will be used to fund construction of
the Zinc Recovery Project, Salton Sea V, the CE Turbo Project,
the Region 2 Brine Facilities Construction, additional capital
improvements and financing costs. Total equity funding for these
projects is expected to be approximately $122,500.
The operating 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
operating Partnership Guarantors' primary source of revenue is
payments received pursuant to long term power sales agreements
with Edison. 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.
What is generally known as the year 2000 ("Y2K") computer
issue arose because many existing computer programs and embedded
systems use only the last two digits to refer to a year.
Therefore, those computer programs do not properly distinguish
between a year that begins with "20" instead of "19". If not
corrected, many computer applications could fail or create
erroneous results. The failure to correct a material Y2K item
could result in an interruption in, or a failure of, certain
normal business activities or operations including the
generation, distribution, and supply of electricity. Such
failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition.
The Y2K issue creates uncertainty for the Company from
potential issues with its own computer systems and from third
parties with whom the Company deals on transactions worldwide.
The Company's operations utilize systems and equipment provided
by other organizations. As a result, Y2K readiness of suppliers,
vendors, service providers or customers could impact the
Company's operations. The Company is assessing the readiness of
such constituent entities and the impacts on those entities that
rely upon the Company's services. The Company is unable to
determine at this time whether the consequences of Y2K failures
of third parties will have a material impact on the Company's
results of operations, liquidity or financial condition.
The Company has commenced, for all of its information systems,
a Y2K date conversion project to address all necessary code
changes, testing and implementation in order to resolve the Y2K
issue. The Company created a Y2K project team to identify,
assess and correct all of its information technology (IT) and non-
IT systems, as well as, identify and assess third party systems.
The Company has identified and assessed substantially all of its
IT and non-IT systems and is currently in the process of
repairing or replacing those systems which it believes are not
year 2000 compliant. Through December 31, 1998, the Company is
approximately 93% complete in repairing or replacing those
systems. The Company expects to be 100% complete of correcting,
testing, and compliance of those systems by June, 1999.
<PAGE>
Total Y2K expenditures, for both repairing or replacing non-
compliant systems, are expected to total approximately $100. The
Company is not aware of any additional material costs needed to
be incurred to bring all of its systems into compliance; however,
there is no assurance that additional costs will not be incurred.
Although management believes that the Y2K project will be
substantially complete before January 1, 2000, any unforeseen
failures of the Company's and/or third parties' computer systems
could have a material impact on the Company's ability to conduct
its business. Accordingly, the Company is developing a formal
contingency plan that is expected to be completed by mid year
1999 to mitigate any potential business interruption.
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 7A. Qualitative and Quantitative Disclosures About Market
Risk
The following discussion of the Company's exposure to various
market risks contains "forward-looking statements" that involve
risks and uncertainties. These projected results have been
prepared utilizing certain assumptions considered reasonable in
the circumstances and in light of information currently available
to the Company. Actual results could differ materially from
those projected in the forward-looking information.
Interest Rate Risk
At December 31, 1998, the Funding Corporation had fixed-rate
long-term debt of $626,816 in principal amount and having a fair
value of $646,397. These instruments are fixed-rate and
therefore do not expose the Company to the risk of earnings loss
due to changes in market interest rates. However, the fair value
of these instruments would decrease by approximately $34,800 if
interest rates were to increase by 10% from their levels at
December 31, 1998. In general, such a decrease in fair value
would impact earnings and cash flows only if the Company were to
reacquire all or a portion of these instruments prior to their
maturity.
Certain information included in this report contains forward-
looking statements made pursuant to the Private Securities
Litigation Reform Act of 1995 ("Reform Act"). Such statements
are based on current expectations and involve a number of known
and unknown risks and uncertainties that could cause the actual
results and performance of the Company to differ materially from
any expected future results or performance, expressed or implied,
by the forward-looking statements. In connection with the safe
harbor provisions of the Reform Act, the Company has identified
important factors that could cause actual results to differ
materially from such expectations, including development
uncertainty, operating uncertainty, acquisition uncertainty,
uncertainties relating to doing business outside of the United
States, uncertainties relating to geothermal resources,
uncertainties relating to domestic and international economic and
political conditions and uncertainties regarding the impact of
regulations, changes in government policy, industry deregulation
and competition. Reference is made to all of the Company's SEC
filings incorporated herein by reference. The Company assumes no
responsibility to update forward-looking information contained
herein.
<PAGE>
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 34
Balance sheets as of December 31, 1998 and 1997 35
Statements of operations for the three years ended
December 31,1998 36
Statements of stockholder's equity for the
three years ended December 31, 1998 37
Statements of cash flows for the three years
ended December 31,1998 38
Notes to financial statements 39
SALTON SEA GUARANTORS
Independent auditors' report--Deloitte & Touche LLP 41
Combined balance sheets as of December 31, 1998 and 1997 42
Combined statements of operations for the
three years ended December 31, 1998 43
Combined statements of Guarantors' equity for the
three years ended December 31, 1998 44
Combined statements of cash flows for the
three years ended December 31, 1998 45
Notes to combined financial statements 46
<PAGE>
PARTNERSHIP GUARANTORS
Independent auditors' report--Deloitte & Touche LLP 51
Combined balance sheets as of December 31, 1998 and 1997 52
Combined statements of operations for the
three years ended December 31, 1998 53
Combined statements of Guarantors' equity for the
three years ended December 31, 1998 54
Combined statements of cash flows for the
three years ended December 31, 1998 55
Notes to combined financial statements 56
SALTON SEA ROYALTY COMPANY
Independent auditors' report--Deloitte & Touche LLP 67
Balance sheets as of December 31, 1998 and 1997 68
Statements of operations for the three years
ended December 31, 1998 69
Statements of equity for the three years ended
December 31, 1998 70
Statements of cash flows for the three years
ended December 31, 1998 71
Notes to financial statements 72
<PAGE>
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, 1998 and 1997 and the
related statements of operations, stockholder's equity and cash
flows for each of the three years in the period ended December
31, 1998. 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, 1998 and 1997 and the
results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
January 28, 1999 (March 3, 1999 as to Note 4)
<PAGE>
SALTON SEA FUNDING CORPORATION
BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
December 31,
1998 1997
ASSETS
Cash $ 17,629 $ 15,568
Prepaid expenses and other assets 6,768 2,823
Secured project notes from Guarantors 626,816 448,754
Investment in 1% of net assets of Guarantors 8,124 7,144
----------- -----------
$ 659,337 $474,289
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accrued liabilities $ 3,971 $ 2,782
Due to affiliates 16,612 12,598
Senior secured notes and bonds 626,816 448,754
----------- -----------
Total liabilities 647,399 464,134
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 5,366
Retained earnings 6,572 4,789
----------- -----------
Total stockholder's equity 11,938 10,155
----------- -----------
$659,337 $474,289
======= =======
The accompanying notes are an integral part of the financial statements.
<PAGE>
SALTON SEA FUNDING CORPORATION
STATEMENTS OF OPERATIONS
(Dollars in Thousands)
For the Year Ended December 31,
1998 1997 1996
Revenues:
Interest income $38,349 $39,823 $39,911
Equity in earnings of Guarantors 980 851 656
----------- ---------- ---------
39,329 40,674 40,567
Expenses:
General and administrative expenses 804 748 712
Interest expense 35,495 37,443 36,761
---------- ---------- --------
Total expenses 36,299 38,191 37,473
---------- ---------- ---------
Income before income taxes 3,030 2,483 3,094
Provision for income taxes 1,247 1,022 1,273
---------- ---------- ---------
Net income $ 1,783 $ 1,461 $ 1,821
====== ====== ======
The accompanying notes are an integral part of the financial statements.
<PAGE>
SALTON SEA FUNDING CORPORATION
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(Dollars in Thousands)
Additional
Common Stock Paid-in Retained Total
Shares Amount Capital Earnings Equity
--------- ----------- ----------- ----------- -------
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
Net income - - - 1,461 1,461
-------- -------- -------- -------- --------
Balance, December 31, 1997 100 - 5,366 4,789 10,155
Net income - - - 1,783 1,783
-------- -------- -------- -------- --------
Balance, December 31, 1998 100 $ - $ 5,366 $ 6,572 $11,938
===== ===== ===== ===== =====
The accompanying notes are an integral part of the financial statements.
<PAGE>
SALTON SEA FUNDING CORPORATION
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
For the Years Ended December 31,
1998 1997 1996
Cash flows from operating activities:
Net income $ 1,783 $ 1,461 $ 1,821
Adjustments to reconcile net income to net
cash flows from operating activities:
Equity in earnings of guarantors (980) (851) (656)
Changes in assets and liabilities:
Prepaid expenses and other assets (3,945) 629 (382)
Accrued liabilities 1,189 (509) (598)
-------- ---------- --------
Net cash flows from operating activities (1,953) 730 185
-------- ---------- --------
Cash flows from investing activities:
Decrease (increase) in restricted cash --- 14,044 43,212
Secured project notes from Guarantors (285,000) --- (135,000)
Principal repayments of secured project
notes from Guarantors 106,938 90,228 48,106
--------- ---------- ---------
Net cash flows from investing activities (178,062) 104,272 (43,682)
--------- ---------- ---------
Cash flows from financing activities:
Proceeds from offering of senior secured
notes and bonds 285,000 --- 135,000
Repayment of senior secured
notes and bonds (106,938) (90,228) (48,106)
Due to affiliates 4,014 (12,424) (34,572)
---------- --------- ---------
Net cash flows from financing activities 182,076 (102,652) 52,322
---------- --------- ---------
Net change in cash 2,061 2,350 8,825
Cash at the beginning of period 15,568 13,218 4,393
---------- --------- ---------
Cash at the end of period $ 17,629 $ 15,568 $ 13,218
======== ======= =======
Non-cash investing and financing activities:
Adjustments resulting from capital
transactions of Guarantors $ --- $ --- $ (77)
======== ======= =======
The accompanying notes are an integral part of the financial statements.
<PAGE>
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 was wholly-owned by MidAmerican Energy Holdings
Company, the successor to CalEnergy Company, Inc. ("MidAme
rican"). See Note 4. The Funding Corporation was organized for
the sole purpose of acting as issuer of senior secured notes and
bonds. On October 31, 1998, July 21, 1995 and June 20, 1996, the
Funding Corporation issued $285,000, $475,000 and $135,000,
respectively, 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 Secured Project Notes from the
Guarantors to the Funding Corporation. The Securities are also
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.
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.
<PAGE>
3. SENIOR SECURED NOTES AND BONDS
The Funding Corporation's debt securities (the "Notes and Bonds")
are as follows:
Senior Final Maturity December 31, December 31,
Secured Series Date Rate 1998 1997
July 21, 1995 A Notes May 30, 2000 6.69% $48,436 $97,354
July 21, 1995 B Bonds May 30, 2005 7.37% 106,980 133,000
July 21, 1995 C Bonds May 30, 2010 7.84% 109,250 109,250
June 20, 1996 D Notes May 30, 2000 7.02% 12,150 44,150
June 20, 1996 E Bonds May 30, 2011 8.30% 65,000 65,000
October 13, 1998 F Bonds November 30, 2018 7.475% 285,000 -
$626,816 $448,754
Principal and interest payments are made in semi-annual
installments. Principal maturities of the Senior Secured Notes
and Bonds are as follows:
1999 $ 57,836
2000 25,072
2001 23,658
2002 28,572
2003 28,086
Thereafter 463,592
-----------
$626,816
=======
On October 13, 1998 the Funding Corporation completed a sale
to institutional investors of $285,000 aggregate amount of 7.475%
Senior Secured Series F Bonds due November 30, 2018. The
proceeds from the offering will be used to fund construction of
two new geothermal power projects, a related zinc recovery
project, certain upgrades for brine processing facilities and
other capital improvements and financing costs.
Pursuant to a depository agreement, Funding Corporation
established a debt service reserve fund in the form of a letter
of credit in the amount of $42,457 from which scheduled interest
and principal payments can be made.
The estimated fair values of the Senior Secured Notes and
Bonds at December 31, 1998 and 1997 were $646,397 and $463,720,
respectively.
4. SUBSEQUENT EVENTS
On February 8, 1999, MidAmerican created a new subsidiary, CE
Generation LLC ("CE Generation") and subsequently transferred its
interest in the Company's power generation assets in the Imperial
Valley to CE Generation. On March 3, 1999, MidAmerican closed
the sale of 50% of its ownership interests in CE Generation to an
affiliate of El Paso Energy Corporation.
<PAGE>
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, 1998 and 1997, and
the related combined statements of operations, Guarantors' equity
and cash flows for each of the three years in the period ended
December 31, 1998. 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, 1998 and 1997 and the
results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
January 28, 1999 (March 3, 1999 as to Note 6)
<PAGE>
SALTON SEA GUARANTORS
COMBINED BALANCE SHEETS
(Dollars in Thousands)
December 31,
1998 1997
Restricted cash $ 71,673 $ ---
Accounts receivable 15,957 15,823
Prepaid expenses and other assets 12,410 13,043
Property, plant, contracts and equipment, net 480,293 478,001
Excess of cost over fair value of net assets
acquired, net 48,182 49,486
---------- ---------
$628,515 $556,353
======= =======
LIABILITIES AND GUARANTORS' EQUITY
Liabilities:
Accounts payable $ 504 $ 390
Accrued liabilities 7,166 7,826
Due to affiliates 30,688 47,741
Senior secured project note 310,030 266,208
----------- ----------
Total liabilities 348,388 322,165
Commitments and contingencies (Notes 4 and 5)
Total Guarantors' equity 280,127 234,188
----------- -----------
$628,515 $556,353
======= =======
The accompanying notes are an integral part of the combined
financial statements.
<PAGE>
SALTON SEA GUARANTORS
COMBINED STATEMENTS OF OPERATIONS
(Dollars in Thousands)
Year Ended December 31,
1998 1997 1996
Revenues:
Sales of electricity $106,274 $106,252 $90,982
Interest and other income 817 173 141
------ -------- --------
Total Revenues 107,091 106,425 91,123
------- -------- --------
Expenses:
Operating, general and
administrative expenses 30,306 30,865 27,175
Depreciation and amortization 14,857 14,689 14,272
Interest expense 21,730 23,004 24,866
Less capitalized interest (5,741) (4,949) (10,221)
-------- -------- --------
Total expenses 61,152 63,609 56,092
--------- -------- --------
Net income $45,939 $42,816 $35,031
====== ====== ======
The accompanying notes are an integral part of the combined
financial statements.
<PAGE>
SALTON SEA GUARANTORS
COMBINED STATEMENTS OF GUARANTORS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
(Dollars in Thousands)
Balance, December 31, 1995 $ 169,599
Distributions (13,258)
Net income 35,031
------------
Balance, December 31, 1996 191,372
Net income 42,816
------------
Balance, December 31, 1997 234,188
Net income 45,939
------------
Balance, December 31, 1998 $ 280,127
========
The accompanying notes are an integral part of the combined
financial statements.
<PAGE>
SALTON SEA GUARANTORS
COMBINED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Years Ended December 31,
1998 1997 1996
Cash flows from operating activities:
Net income $ 45,939 $ 42,816 $ 35,031
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 14,857 14,689 14,272
Changes in assets and liabilities:
Accounts receivable (134) (869) (4,518)
Prepaid expenses and other assets 633 2,965 4,121
Accounts payable and accrued liabilities (546) (2,415) 5,649
------------ ----------- ------------
Net cash flows from operating activities 60,749 57,186 54,555
------------ ----------- ------------
Cash flows from investing activities:
Capital expenditures (15,845) (7,204) (79,863)
Increase in restricted cash (71,673) - -
------------ ----------- ------------
Net cash flows from investing activities (87,518) (7,204) (79,863)
------------ ----------- ------------
Cash flows from financing activities:
Repayments of senior secured project note (39,450) (33,632) (21,660)
Proceeds from offering of senior secured
project note 83,272 - -
Distributions to parent - - (13,258)
Due to (from) affiliates (17,053) (16,350) 59,772
------------ ---------- ------------
Net cash flows from financing activities 26,769 (49,982) 24,854
------------ ---------- ------------
Net change in cash - - (454)
Cash at beginning of period - - 454
------------ ---------- ------------
Cash at end of period $ - $ - $ -
============ ========== ============
The accompanying notes are an integral part of the combined
financial statements.
<PAGE>
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 four operating geothermal
electric power generating plants (Salton Sea I, II, III and IV)
and a fifth plant (Salton Sea V or the Salton Sea Expansion)
which is currently under construction (collectively, the "Salton
Sea Projects"). All five plants are located in the Imperial
Valley of California. The Salton Sea Projects guarantee loans
from Salton Sea Funding Corporation ("Funding Corporation"), an
indirect wholly-owned subsidiary of Magma Power Company ("Magma")
which in turn was wholly-owned by MidAmerican Energy Holdings
Company, the successor of CalEnergy Company, Inc.
("MidAmerican"). See Note 6.
The financial statements consist of the combination of (1)
Salton Sea Brine Processing, L.P., a California limited
partnership between 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, (3) assets and liabilities
attributable to Salton Sea IV which are held 59% by Salton Sea
Power Generation, L.P. and 41% by Fish Lake Power Company
("FLPC") and (4) Salton Sea Power L.L.C., a Delaware limited
liability company. 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 and indirect
subsidiaries of MidAmerican.
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 financial statements reflect the acquisition of Magma and
the resulting push down to the Guarantors of the accounting as a
purchase business combination.
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 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 III and 2000
for Salton Sea II), the energy payment per kWh throughout the
remainder of the contract period will be at Edison's Avoided Cost
of Energy.
Salton Sea I 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 5.4
cents per kWh during 1998. 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.
Salton Sea II and Salton Sea III 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
<PAGE>
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 through September 30, 2004. The annual
capacity and bonus payments for Salton Sea II and Salton Sea III
are approximately $3,300 and $9,700, respectively.
Salton Sea IV 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.
For the year ended December 31, 1998 and 1997, Edison's average
Avoided Cost of Energy was 3.0 cents and 3.3 cents per kWh,
respectively, which is substantially below the contract energy
prices earned in 1998. 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 will likely decline significantly
after the expiration of the relevant scheduled payment periods.
Restricted Cash
The restricted cash balance primarily included commercial paper,
money market securities and mortgage backed securities and was
composed of amounts deposited in restricted accounts which the
Guarantors will use to fund capital expenditures.
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.
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 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 fixed 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.
The Salton Sea reservoir contains commercial quantities of
extractable minerals. The carrying value of the mineral reserves
will be amortized 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, 1998 and 1997,
accumulated amortization of the excess of cost over fair value
was $5,089 and $3,785, respectively.
<PAGE>
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, 1998, 1997 and 1996
was $21,434, $21,591 and $23,301, 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
The Guarantors review long-lived assets and certain
identifiable intangibles for impairments whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. An impairment loss would be
recognized wherever evidence exists that the carrying value is
not recoverable.
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.
<PAGE>
3. PROPERTY, PLANT, CONTRACTS AND EQUIPMENT
Property, plant, contracts and equipment consisted of the following:
December 31,
1998 1997
----------- ----------
Plant and equipment $331,230 $330,306
Power sale agreements 64,609 64,609
Mineral reserves 77,521 71,780
Wells and resource development 43,549 43,627
----------- ----------
516,909 510,322
Less accumulated depreciation
and amortization (45,874) (32,321)
----------- ----------
471,035 478,001
Construction in progress:
Salton Sea V 9,258 -
----------- ----------
$480,293 $478,001
======= =======
4. SENIOR SECURED PROJECT NOTE
The Guarantors have a project note payable to Salton Sea
Funding Corporation with interest rates ranging from 6.69% to
7.84%. They have also guaranteed, along with other guarantors,
the debt of Salton Sea Funding Corporation, which amounted to
$626,816 at December 31, 1998. The guarantee issued is
collateralized by a lien on substantially all the assets of and a
pledge of the equity interests in the Guarantors. The structure
has been designed to cross collateralize cash flows from each
guarantor without cross collateralizing all of the guarantors'
assets.
On October 13, 1998, the Salton Sea Funding Corporation issued
an additional investment grade offering for $285,000. In
connection with this offering the Guarantors issued an additional
project note in the amount of $83,272 with an interest rate of
7.475% with a final maturity of November 30, 2018.
Principal maturities of the senior secured project note are as
follows:
1999 $ 16,076
2000 9,737
2001 17,319
2002 20,487
2003 22,765
Thereafter 223,646
------------
$310,030
=======
The estimated fair values of the senior secured projects notes
at December 31, 1998 and 1997 were $323,122 and $275,079,
respectively.
5. RELATED PARTY TRANSACTIONS
The Guarantors have entered into the following agreements:
* Easement Grant Deed and Agreement Regarding Rights for
<PAGE>
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, 1998, 1997 and 1996 was
$4,938, $4,944 and $4,215, respectively.
* Administrative Services Agreement dated April 1, 1993 with
Magma, whereby Magma will provide to the Guarantors, excluding
Salton Sea IV, administrative and management services. Fees
payable to Magma amount to 3% of total electricity revenues. The
amount expensed for the years ended December 31, 1998, 1997 and
1996 was $2,287, $2,307 and $2,202, respectively.
* Operating and Maintenance Agreement dated April 1, 1993
with CalEnergy Operating Corporation ("CEOC"), 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 1998, 1997 and 1996,
the Guarantors reimbursed CEOC for expenses of $6,348, $7,467 and
$9,854, respectively.
6. SUBSEQUENT EVENTS
On February 8, 1999, MidAmerican created a new subsidiary, CE
Generation LLC ("CE Generation") and subsequently transferred
its interest in the Company's power generation assets in the
Imperial Valley to CE Generation. On March 3, 1999,
MidAmerican closed the sale of 50% of its ownership interests
in CE Generation to an affiliate of El Paso Energy
Corporation.
<PAGE>
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, 1998 and 1997, and the
related combined statements of operations, Guarantors' equity and
cash flows for each of the three years in the period ended
December 31, 1998. 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 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, 1998 and 1997 and the
results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
January 28, 1999 (March 3, 1999 as to Note 10)
<PAGE>
PARTNERSHIP GUARANTORS
COMBINED BALANCE SHEETS
(Dollars in Thousands)
December 31,
1998 1997
ASSETS
Restricted cash $164,983 $ -
Accounts receivable 33,404 23,481
Prepaid expenses and other assets 23,088 13,121
Due from affiliates 121,130 124,311
Property, plant, contracts and
equipment, net 399,817 370,666
Management fee 71,596 70,082
Excess of fair value over net assets
acquired, net 131,558 135,122
------------ ----------
$945,576 $736,783
======= =======
LIABILITIES AND GUARANTORS' EQUITY
Liabilities:
Accounts payable $ 1,879 $ 1,338
Accrued liabilities 53,647 23,285
Senior secured project note 293,576 143,610
Deferred income taxes 97,641 106,851
----------- ---------
Total liabilities 446,743 275,084
Commitments and contingencies (Notes 5, 6 and 7)
Guarantors' equity:
Common stock 3 3
Additional paid-in capital 387,663 387,663
Retained earnings 111,167 74,033
----------- ---------
Total Guarantors' equity 498,833 461,699
----------------------
$945,576 $736,783
======= =======
The accompanying notes are an integral part of the combined
financial statements.
<PAGE>
PARTNERSHIP GUARANTORS
COMBINED STATEMENTS OF OPERATIONS
(Dollars in Thousands)
Years Ended December 31,
1998 1997 1996
Revenues:
Sales of electricity $165,779 $158,125 $132,212
Interest and other income 6,786 4,190 8,014
---------- --------- ---------
Total revenues 172,565 162,315 140,226
Costs and expenses:
Operating, general and administrative
costs 63,717 64,103 58,945
Depreciation and amortization 48,615 38,771 33,974
Interest expense 13,836 13,753 13,697
Less capitalized interest (10,266) (9,323) (8,849)
---------- ---------- --------
Total expenses 115,902 107,304 97,767
---------- ---------- --------
Income before income taxes 56,663 55,011 42,459
Provision for income taxes 19,529 21,374 16,700
---------- ---------- --------
Net income $ 37,134 $ 33,637 $ 25,759
======= ====== ======
The accompanying notes are an integral part of the combined
financial statements.
<PAGE>
PARTNERSHIP GUARANTORS
COMBINED STATEMENTS OF GUARANTORS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
(Dollars in Thousands)
Additional
Common Stock Paid-in Retained Total
Shares Amount Capital Earnings Equity
------------------------------------------------------------
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
Net income - - - 33,637 33,637
--------------- --------- ------------- ---------- ----------
Balance, December 31, 1997 3 3 387,663 74,033 461,699
Net income - - - 37,134 37,134
--------------- --------- ------------- ---------- ----------
Balance, December 31, 1998 3 $ 3 $387,663 $111,167 $498,833
===== ====== ======= ======= =======
The accompanying notes are an integral part of the combined
financial statements.
<PAGE>
PARTNERSHIP GUARANTORS
COMBINED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Years Ended December 31,
1998 1997 1996
Cash flows from operating activities:
Net income $37,134 $ 33,637 $ 25,759
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 48,615 38,771 33,974
Deferred income taxes (9,210) (1,426) 321
Changes in assets and liabilities:
Accounts receivable (9,923) (715) 3,552
Prepaid expenses and other assets (9,967) 5,962 (615)
Accounts payable and accrued liabilities 30,903 983 3,278
-------- --------- --------
Net cash flows from operating activities 87,552 77,212 66,269
-------- --------- --------
Cash flows from investing activities:
Capital expenditures (74,202) (39,556) (18,483)
Decrease (increase) in restricted cash (164,983) - 23,085
Management fee (1,514) (4,029) (4,736)
-------- ---------- --------
Net cash flows from investing activities (240,699) (43,585) (134)
-------- ---------- --------
Cash flows from financing activities:
Repayments of senior secured project notes (51,762) (38,594) (107,560)
Proceeds of offering from senior
secured project notes 201,728 - 135,000
Distributions to parent - - (42,429)
Decrease (increase) in amounts due
from affiliates 3,181 4,967 (62,292)
--------- ---------- --------
Net cash flows from financing activities 153,147 (33,627) (77,281)
--------- ---------- --------
Net change in cash - - (11,146)
Cash at beginning of period - - 11,146
--------- ---------- --------
Cash at the end of period $ - $ - $ -
======== ======== =======
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.
<PAGE>
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"), CalEnergy Operating Corporation ("CEOC"), both 99% owned
by Magma Power Company ("Magma") and 1% owned by Salton Sea
Funding Corporation (the "Funding Corporation"), CE Turbo LLC,
indirectly wholly-owned by Magma, and CalEnergy Minerals LLC, a
Delaware limited liability company ("Minerals LLC"), formerly
indirectly owned by Magma and currently owned indirectly by
MidAmerican Energy Holdings Company, the successor of CalEnergy
Company, Inc. ("MidAmerican"). 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 have guaranteed the loans to such
partnerships from Funding Corporation, an indirect wholly-owned
subsidiary of Magma, which in turn was wholly-owned by
MidAmerican. See Note 9.
VPC and its subsidiary hold a 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.
Turbo LLC is constructing the CE Turbo Project. The CE Turbo
Project will have a capacity of 10 net MW. The net output of the
CE Turbo Project will be sold to the Zinc Recovery Project or
sold through the California Power Exchange.
Minerals LLC is constructing the Zinc Recovery Project which
will recover zinc from the geothermal brine (the "Zinc Recovery
Project"). Four facilities will be installed near Imperial
Valley Project sites to extract a zinc chloride solution from the
brine through an ion exchange process. This solution will be
transported to a central processing plant where zinc ingots will
be produced through solvent extraction, electrowinning and
casting processes. The Zinc Recovery Project is designed to have
a capacity of approximately 30,000 metric tonnes per year and is
scheduled to commence commercial operation in mid-2000. The zinc
produced by the Zinc Recovery Project is expected to be sold
primarily to U.S. West Coast customers such as steel companies,
alloyers and galvanizers.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements of the Guarantors
present the accounts of CEOC, VPC, CE Turbo LLC and Minerals LLC
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 financial statements reflect the acquisition of Magma
and the resulting push down to the Guarantors of the accounting
as a purchase business combination.
Revenue Recognition
The Guarantors recognize revenues and related accounts
receivable from sales of electricity on an accrual basis using
<PAGE>
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 fixed energy price periods of the Partnership
Project SO4 Agreements extended until February 1996 for Vulcan,
December 1998 for Hoch (Del Ranch) and Elmore and extend until
December 1999 for the Leathers Partnership. For 1999, Vulcan,
Hoch and Elmore are receiving Edison's Avoided Cost of Energy
pursuant to their respective SO4 Agreements. The SO4 Agreement
for Leathers provides for energy rates of 15.6 cents per kWh in
1999. The weighted average energy rate for the Partnership
Project was 11.7 cents per kWh in 1998.
For the year ended December 31, 1998 and 1997, Edison's average
Avoided Cost of Energy was 3.0 cents and 3.3 cents per kWh,
respectively, which is substantially below the contract energy
prices earned in 1997. 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 will likely decline significantly
after the expiration of the relevant scheduled payment periods.
Restricted Cash
The restricted cash balance primarily included commercial paper,
money market securities and mortgage backed securities and was
composed of amounts deposited in restricted accounts which the
Guarantors will use to fund capital expenditures.
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.
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 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 fixed 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 carrying value of the mineral reserves
will be amortized upon commencement of commercial production.
The process license represents the economic benefits expected
to be realized from the installation of the license and related
technology at the Imperial Valley. The carrying value of the
process license is amortized using the straight line method over
the remaining estimated useful life of the license.
<PAGE>
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, 1998 and 1997
accumulated amortization of the excess of cost over fair value of
net assets acquired was $13,929 and $10,365, 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 1998, 1997 and 1996 was $13,361, $13,165 and
$10,314, 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
The Guarantors review long-lived assets and certain
identifiable intangibles for impairment whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. An impairment loss would be
recognized whenever evidence exists that the carrying value is
not recoverable.
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. ACQUISITION
Edison Mission Energy's Partnership Interest
On April 17, 1996, MidAmerican 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.
<PAGE>
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.
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 acquisition had occurred
on January 1, 1996 after giving effect to certain pro forma
adjustments related to the acquisition, were $158,912 and
$26,852, respectively.
4. PROPERTY, PLANT, CONTRACTS AND EQUIPMENT
Property, plant, contracts and equipment consisted of the
following:
December 31,
1998 1997
Plant and equipment $ 92,920 $ 73,830
Power sale agreements 123,588 123,588
Process license 46,290 46,290
Mineral reserves 140,790 130,522
Wells and resource development 91,990 75,978
----------- -----------
495,578 450,208
Less accumulated depreciation
and amortization (121,980) (79,542)
----------- -----------
373,598 370,666
Construction in progress:
Zinc recovery project 23,507 -
Region 2 brine plant upgrade 2,712 -
$399,817 $370,666
======= =======
5. SENIOR SECURED PROJECT NOTE
The Guarantors have a project note payable to Salton Sea
Funding Corporation with interest rates ranging from 6.69% to
8.30%. They have also guaranteed, along with other guarantors,
the debt of Salton Sea Funding Corporation, which amounted to
$626,816 at December 31, 1998. The guarantee is collateralized
by a lien on the available cash flow of and a pledge of stock in
the Guarantors. The structure has been designed to cross
collateralize cash flows from each guarantor without cross
collateralizing all of the guarantors' assets.
On October 13, 1998 the Salton Sea Funding Corporation issued
an additional investment grade offering for $285,000. In
connection with this offering, the Guarantors issued an
additional project note in the amount of $201,728 with an
interest rate of 7.475% with a final maturity on November 30,
2018.
<PAGE>
Principal maturities of the senior secured project note are as
follows:
1999 $ 32,364
2000 10,562
2001 1,907
2002 4,625
2003 5,017
Thereafter 239,101
-----------
$293,576
=======
The estimated fair values of the senior secured project note
at December 31, 1998 and 1997 were $299,737 and $148,390,
respectively.
6. 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
$363 and $416, respectively, for the year ended December 31,
1998, $403 and $456, respectively, for the year ended December
31, 1997, and $370 and $425, respectively, for the year ended
December 31, 1996.
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
1998, 1997 and 1996 were $22,594, $21,108 and $16,980,
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 for
1998, 1997 and 1996 were $70, $70 and $60, respectively.
* 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 1998, 1997 and 1996 amounted to $4,543,
$4,290 and $3,545, 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 1998, 1997 and 1996 reimbursed CEOC
<PAGE>
for expenses of $8,945, $8,956 and $8,547, respectively, and
accrued a guaranteed capacity payment of $4,695, $4,492 and
$3,888 at December 31, 1998, 1997 and 1996, respectively.
7. CONTINGENCIES
On February 26, 1998, Del Ranch and Elmore initiated an action
against Edison in Imperial County Superior Court for payment for
energy delivered to Edison pursuant to long term power sale
agreements at the escalated rate of 14.6 cents for 1998. For the
Elmore and Del Ranch partnerships, Edison has asserted that
prices should not be escalated for 1998 and is currently making
payments for energy deliveries at 13.6 cents per kWh. That
action is in the early discovery stages and the Del Ranch and
Elmore partnerships intend to vigorously prosecute all available
claims.
<PAGE>
8. CONDENSED FINANCIAL INFORMATION
Condensed balance sheet information of the Guarantors' pro rata interest
in the respective entities
as of December 31, 1998 and 1997 is as follows:
Vulcan
Power CEOC Elmore Del Ranch
----------- --------- --------- -----------
December 31, 1998
Assets:
Restricted cash $ - $ - $ - $ -
Accounts receivable
and other assets - 15,695 12,648 12,655
Due from affiliates 849 23,634 17,042 22,294
Property, plant, contracts
and equipment, net 179 17,326 64,680 59,194
Management fee and
goodwill, net - - - -
Investments in
partnerships 86,524 268,449 - -
---------- --------- --------- -----------
$ 87,552 $ 325,104 $ 94,370 $ 94,143
====== ====== ====== ======
Liabilities and Equity:
Accounts payable, accrued
liabilities and deferred taxes $ 51 $ 7,869 $ 1,229 $ 2,109
Senior secured project note - - - -
---------- --------- --------- -----------
Total liabilities 51 7,869 1,229 2,109
Guarantors' equity 87,501 317,235 93,141 92,034
---------- --------- --------- -----------
$ 87,552 $ 325,104 $ 94,370 $ 94,143
======= ======= ======= ======
<PAGE>
8. CONDENSED FINANCIAL INFORMATION (Continued)
Condensed balance sheet information of the Guarantors' pro rata interest
in the respective entities as of December 31, 1998 and 1997 is as follows:
Vulcan Adjustments/ Combined
Leathers BNG Eliminations Total
------------ ------- ------------ ----------
December 31, 1998
Assets:
Restricted cash $ - $ - $ 164,983 $ 164,983
Accounts receivable
and other assets 12,571 3,356 (433) 56,492
Due from affiliates 3,116 22,934 31,261 121,130
Property, plant, contracts
and equipment, net 69,084 57,320 132,034 399,817
Management fee and
goodwill, net - - 203,154 203,154
Investments in
partnerships - - (354,973) -
--------- --------- ------------ -----------
$ 84,771 $ 83,610 $ 176,026 $ 945,576
====== ====== ======= =======
Liabilities and Equity:
Accounts payable, accrued
liabilities and deferred taxes $ 1,497 $ 1,582 $ 138,830 $ 153,167
Senior secured project note - - 293,576 293,576
--------- --------- ----------- ------------
Total liabilities 1,497 1,582 432,406 446,743
Guarantors' equity 83,274 82,028 (256,380) 498,833
--------- --------- ------------ ----------
$ 84,771 $ 83,610 $ 176,026 $ 945,576
====== ====== ======= =======
<PAGE>
8. CONDENSED FINANCIAL INFORMATION (Continued)
Vulcan
Power CEOC Elmore Del Ranch
--------- -------- --------- -----------
December 31, 1997
Assets:
Accounts receivable and other assets $ - $ 8,802 $ 8,381 $ 9,972
Due from affiliates 424 22,631 14,286 14,002
Property, plant, contracts
and equipment, net 204 15,027 60,828 55,481
Management fee and
goodwill, net - - - -
Investments in partnerships 76,877 231,311 - -
------- --------- --------- ---------
$77,505 $ 277,771 $ 83,495 $ 79,455
====== ====== ====== ======
Liabilities and Equity:
Accounts payable, accrued
liabilities and deferred taxes $ 40 $ 7,541 $ 982 $ 1,663
Due to affiliates - - - -
Senior secured project note - - - -
------- --------- --------- --------
Total liabilities 40 7,541 982 1,663
Guarantors' equity 77,465 270,230 82,513 77,792
------- --------- --------- --------
$77,505 $277,771 $83,495 $79,455
======= ======= ======= ======
<PAGE>
8. CONDENSED FINANCIAL INFORMATION (Continued)
Vulcan Adjustments/ Combined
Leathers BNG Eliminations Total
----------- ------- ------------ --------
December 31, 1997
Assets:
Accounts receivable
and other assets $ 8,204 $ 4,391 $ (3,148) $ 36,602
Due from affiliates - 21,262 51,706 124,311
Property, plant, contracts
and equipment, net 70,500 51,749 116,877 370,666
Management fee and
goodwill, net - - 205,204 205,204
Investments in
partnerships - - (308,188) -
--------- --------- ----------- ---------
$78,704 $77,402 $62,451 $736,783
====== ====== ======= =======
Liabilities and Equity:
Accounts payable, accrued
liabilities and deferred taxes $ 1,522 $ 525 $ 119,201 $ 131,474
Due to affiliates 6,176 - (6,176) -
Senior secured project note - - 143,610 143,610
--------- -------- ------------ ---------
Total liabilities 7,698 525 256,635 275,084
Guarantors' equity 71,006 76,877 (194,184) 461,699
--------- -------- ------------ ---------
$ 78,704 $ 77,402 $ 62,451 $ 736,783
====== ====== ======= =======
<PAGE>
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, 1998, 1997 and 1996 is as follows:
Vulcan
Power CEOC Elmore Del Ranch
----------- -------- -------- ----------
December 31, 1998
Revenues $ 772 $ 47,009 $ 49,212 $ 52,241
Expenses 383 - 38,583 37,998
----------- -------- -------- ----------
Net income $ 389 $ 47,009 $ 10,629 $ 14,243
====== ====== ====== ======
December 31, 1997
Revenues $ 859 $ 45,533 $ 48,114 $ 47,068
Expenses 436 - 35,484 33,139
---------- --------- -------- ---------
Net income $ 423 $ 45,533 $ 12,630 $ 13,929
====== ====== ====== ======
December 31, 1996
Revenues $ 3,157 $ 49,399 $ 39,627 $ 40,235
Expenses 431 - 25,762 25,382
---------- --------- -------- --------
Net income $ 2,726 $ 49,399 $ 13,865 $ 14,853
====== ====== ====== ======
<PAGE>
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, 1998, 1997 and 1996 is as follows:
Vulcan Adjustments/ Combined
Leathers BNG Eliminations Total
-----------------------------------------------
December 31, 1998
Revenues $50,436 $14,608 $(41,713) $172,565
Expenses 38,166 9,458 10,843 135,431
-------- -------- ------------ ----------
Net income $12,270 $ 5,150 $(52,556) $37,134
====== ====== ======= =====
December 31, 1997
Revenues $47,899 $15,208 $(42,366) $162,315
Expenses 38,209 8,903 12,507 128,678
-------- -------- ------------ ----------
Net income $ 9,690 $ 6,305 $(54,873) $ 33,637
====== ====== ======= ======
December 31, 1996
Revenues $39,126 $ 14,271 $(45,589) $140,226
Expenses 27,055 12,102 23,735 114,467
--------- ------- ----------- -----------
Net income $12,071 $ 2,169 $(69,324) $ 25,759
====== ====== ======= ======
9. INCOME TAXES
The provision for income taxes for the years ended December 31,
1998, 1997 and 1996 consisted of the following:
Current Deferred Total
--------- --------- --------
1998
- --------------------
Federal $22,021 $(7,212) $14,809
State 6,718 (1,998) 4,720
--------- -------------------
Total $28,739 $(9,210) $19,529
===== ===== ======
1997
- --------------------
Federal $17,563 $(1,222) $16,341
State 5,237 (204) 5,033
--------- -------------------
Total $22,800 $(1,426) $21,374
===== ===== ======
1996
- --------------------
Federal $10,945 $ 1,976 $12,921
State 5,434 (1,655) 3,779
--------- -------------------
Total $16,379 $ 321 $16,700
====== ====== ======
Deferred tax liabilities at December 31, 1998 and 1997
consisted of differences between book and tax methods relating to
depreciation and amortization.
The effective tax rate differs from the federal statutory tax
rate due primarily to percentage depletion in excess of cost
depletion and goodwill amortization.
10. SUBSEQUENT EVENTS
On February 8, 1999, MidAmerican created a new subsidiary, CE
Generation, LLC ("CE Generation") and subsequently transferred
its interest in the Company's power generation assets in the
Imperial Valley to CE Generation. On March 3, 1999, MidAmerican
closed the sale of 50% of its ownership interests in CE
Generation to an affiliate of El Paso Energy Corporation.
<PAGE>
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, 1998 and 1997 and
the related statements of operations, equity and cash flows for
each of the three years in the period ended December 31, 1998.
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, 1998 and 1997 and the results
of its operations and its cash flows for each of the three years
in the period ended December 31, 1998 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
January 28, 1999 (March 3, 1999 as to Note 5)
<PAGE>
SALTON SEA ROYALTY COMPANY
BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
December 31,
1998 1997
ASSETS
Due from affiliates $ 50,928 $ 19,114
Royalty stream, net 22,932 31,818
Excess of cost over fair value of net assets
acquired, net 33,188 34,096
Prepaid expenses and other assets 513 981
----------- -----------
$107,561 $ 86,009
======= =======
LIABILITIES AND EQUITY
Liabilities:
Accrued liabilities $ 39,584 $ 21,306
Senior secured project note 23,210 38,934
Deferred income taxes 6,769 7,268
----------- ----------
Total liabilities 69,563 67,508
Commitments and contingencies (Note 3)
Equity:
Common stock, par value $.01 per share; 100 shares
authorized, issued and outstanding - -
Additional paid-in capital 1,561 1,561
Retained earnings 36,437 16,940
----------- ---------
Total equity 37,998 18,501
----------- ---------
$107,561 $ 86,009
======= =======
The accompanying notes are an integral part of the financial statements.
<PAGE>
SALTON SEA ROYALTY COMPANY
STATEMENTS OF OPERATIONS
(Dollars in Thousands)
Year ended December 31,
1998 1997 1996
Revenues:
Royalty income $51,703 $32,231 $30,143
Expenses:
Operating, general and administrative
expenses 8,120 7,769 7,288
Amortization of royalty stream and goodwill 9,794 9,794 10,280
Interest expense 2,784 4,179 5,246
-------- --------- ---------
Total expenses 20,698 21,742 22,814
-------- --------- ---------
Income before income taxes 31,005 10,489 7,329
Provision for income taxes 11,508 1,828 2,560
-------- --------- ---------
Net income $19,497 $ 8,661 $ 4,769
======= ======= =======
The accompanying notes are an integral part of the financial statements.
<PAGE>
SALTON SEA ROYALTY COMPANY
STATEMENTS OF EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
(Dollars in Thousands)
Additional
Common Stock Paid-in Retained
Shares Amount Capital Earnings Total
-------------------------------------------------------
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
Net income - - - 8,661 8,661
------- -------- --------- --------- -----------
Balance, December 31, 1997 100 - 1,561 16,940 18,501
Net income - - - 19,497 19,497
------- -------- --------- --------- -----------
Balance, December 31, 1998 100 $ - $ 1,561 $36,437 $37,998
===== ======= ======= ====== ======
The accompanying notes are an integral part of the financial statements.
<PAGE>
SALTON SEA ROYALTY COMPANY
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Year End December 31,
1998 1997 1996
Cash flow from operating activities:
Net income $ 19,497 $ 8,661 $ 4,769
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization of royalty stream
and goodwill 9,794 9,794 10,280
Deferred income taxes (499) (4,959) (3,233)
Changes in assets and liabilities:
Prepaid expenses and other assets 468 4,376 886
Accrued liabilities 18,280 9,236 6,122
---------- ---------- ----------
Net cash flows from operating activities 47,540 27,108 18,824
---------- ---------- ----------
Net cash flows from financing activities:
Decrease (increase) in due from affiliates (31,814) (9,106) 15,102
Distribution to parent - - (22,980)
Repayment of senior secured project note (15,726) (18,002) (10,946)
---------- ---------- ----------
Net cash flows from financing activities (47,540) (27,108) (18,824)
---------- ---------- ----------
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.
<PAGE>
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"). Magma was a wholly-owned subsidiary of
MidAmerican Energy Holdings Company, the successor of CalEnergy
Company, Inc. ("MidAmerican"). See Note 5.
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, MidAmerican 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 East Mesa Project has entered into
a Termination Agreement, to which Magma consented, which will
terminate its SO4 Agreement upon CPUC approval becoming final.
The Partnership 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), 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, 1998 and 1997, Edison's average
Avoided Cost of Energy was 3.0 cents and 3.3 cents per kWh,
respectively, which is substantially below the contract energy
prices earned in 1998. 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 will likely 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, guarantee loans from the Funding Corporation, a
wholly-owned subsidiary of Magma.
<PAGE>
The financial statements reflect the acquisition of Magma and
the resulting push down to the Royalty Company of the accounting
as a purchase business combination.
Royalty Stream
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 fixed 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. At December 31, 1998 and 1997, accumulated amortization
was $37,555 and $28,669, respectively.
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, 1998 and 1997,
accumulated amortization of the excess of cost over fair value
was $3,553 and $2,645, 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
The Royalty Company reviews long-lived assets and certain
identifiable intangibles for impairment whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. An impairment loss would be
recognized whenever evidence exists that the carrying value is
not recoverable.
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 PROJECT NOTE
The Royalty Company has a project note payable to Salton Sea
Funding Corporation at interest rates ranging from 6.69% to
7.37%. They have also guaranteed, along with other guarantors,
the debt of Salton Sea Funding Corporation, which amounted to
$626,816 at December 31, 1998. The guarantee issued is
<PAGE>
collateralized by a lien on substantially all the assets of and a
pledge of stock in the Guarantor. The structure has been
designed to cross collateralize cash flows from each guarantor
without cross collateralizing all of the guarantors' assets.
Principal maturities of the senior secured project note are as
follows:
1999 $ 9,396
2000 4,773
2001 4,434
2002 3,460
2003 304
Thereafter 843
----------
$23,210
======
The estimated fair values of the senior secured project note at
December 31, 1998 and 1997 were $23,537 and $40,251,
respectively.
4. INCOME TAXES
The provision for income taxes for the year ended December 31,
1998, 1997 and 1996, consisted of the following:
Current Deferred Total
--------- ----------- --------
1998
Federal $ 9,267 $ (294) $ 8,973
State 2,740 (205) 2,535
--------- ----------- --------
Total $12,007 $ (499) $11,508
===== ====== =====
1997
Federal $5,292 $(4,159) $1,133
State 1,495 (800) 695
--------- ----------- --------
Total $6,787 $(4,959) $1,828
===== ====== =====
1996
Federal $4,517 $(2,390) $2,127
State 1,276 (843) 433
--------- ----------- --------
Total $5,793 $(3,233) $2,560
===== ====== =====
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 (assets) at December 31, 1998 and 1997
consisted of the following:
1998 1997
Deferred liabilities:
Depreciation and amortization $9,368 $12,568
Deferred assets:
Jr. SO4 royalty receivable - (5,300)
Deferred income (2,599) -
----------- ---------
Net deferred tax liability $6,769 $ 7,268
======= ======
<PAGE>
5. SUBSEQUENT EVENTS
On February 8, 1999, MidAmerican created a new subsidiary, CE
Generation, LLC ("CE Generation") and subsequently transferred
its interest in the Company's power generation assets in the
Imperial Valley to CE Generation. On March 3, 1999,
MidAmerican closed the sale of 50% of its ownership interests
in CE Generation to an affiliate of El Paso Energy
Corporation.
<PAGE>
Item 9.Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
<PAGE>
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; Director
Gregory E. Abel President and Chief Operating
Officer, Director
Steven A. McArthur Senior Vice President,
General Counsel and Secretary; Director
Alan L. Wells Senior Vice President and Chief
Financial Officer
Frederick L. Manuel Senior Vice President, Operations
Patrick J. Goodman Senior Vice President and
Chief Accounting Officer
DAVID L. SOKOL, 42, Chairman of the Board and Chief
Executive Officer. Mr. Sokol has been Chief Executive Officer
since April 19, 1993 and served as President of MidAmerican from
April 19, 1993 until January 21, 1995. He has been Chairman of
the Board of Directors since May 1994 and a director of
MidAmerican since March 1991. Formerly, among other positions
held in the independent power industry, Mr. Sokol served as
President and Chief Executive Officer of Kiewit Energy Company,
which at that time was a wholly owned subsidiary of PKS, and
Ogden Projects, Inc.
GREGORY E. ABEL, 36, President and Chief Operating Officer.
Mr. Abel joined MidAmerican 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.
STEVEN A. McARTHUR, 41, Senior Vice President, General
Counsel and Secretary. Mr. McArthur joined MidAmerican 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.
ALAN L. WELLS, 39, Senior Vice President and Chief
Financial Officer. Mr. Wells served as Vice President of
MidAmerican Energy from November 1, 1996 to October 31, 1997 and
held various executive and management positions with MidAmerican
Energy and Iowa-Illinois from 1993 to October 31, 1996.
FREDERICK L. MANUEL, 40, Senior Vice President -
Operations. Prior to joining MidAmerican, he was employed by
Chevron Corporation with responsibilities including land and
offshore drilling, reservoir and production engineering, project
management and technical research.
PATRICK J. GOODMAN, 32, Senior Vice President and Chief
Accounting Officer. Mr. Goodman joined MidAmerican in June 1995,
and served as Manager of Consolidation Accounting until September
1996 when he was promoted to Controller. Prior to joining
MidAmerican, Mr. Goodman was a financial manager for National
Indemnity Company and a senior associate at Coopers & Lybrand.
<PAGE>
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, 1998, 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, 1998, 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.
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 MidAmerican
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, SSPG, Elmore, Leathers,
Del Ranch and Vulcan, the general partners thereof) have been
organized and are operated as legal entities separate and apart
from MidAmerican, Magma and any other Affiliates of MidAmerican
or Magma, and, accordingly, the assets of the Funding Corporation
and the Guarantors (and, in the case of SSBP, SSPG, Elmore,
Leathers, Del Ranch and Vulcan, the general partners thereof)
<PAGE>
will not be generally available to satisfy the obligations of
MidAmerican, Magma or any other Affiliates of MidAmerican 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 MidAmerican, Magma or Affiliates thereof.
<PAGE>
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
The Company filed a Current Report on Form 8-K dated October
13, 1998 reporting the completion of the institutional placement
of $285 million principal amount of its 7.475% Senior Secured
Series F Bonds due November 30, 2018.
(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
<PAGE>
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 30, 1999.
SALTON SEA FUNDING CORPORATION
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board
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 30, 1999
David L. Sokol
Director, Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
/s/ Gregory E. Abel * March 30, 1999
Gregory E. Abel
Director, President and Chief Operating Officer
/s/ Steven A. McArthur March 30, 1999
Steven A. McArthur
Director, Senior Vice President and Secretary
/s/ Alan L. Wells* March 30, 1999
Alan L. Wells
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Patrick J. Goodman* March 30, 1999
Patrick J. Goodman
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
* By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
<PAGE>
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 30, 1999.
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
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 30, 1999
David L. Sokol
Director, Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
/s/ Gregory E. Abel * March 30, 1999
Gregory E. Abel
Director, President and Chief Operating Officer
/s/ Steven A. McArthur March 30, 1999
Steven A. McArthur
Director, Senior Vice President and Secretary
/s/ Alan L. Wells* March 30, 1999
Alan L. Wells
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Patrick J. Goodman* March 30, 1999
Patrick J. Goodman
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
* By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
<PAGE>
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 30, 1999.
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
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 30, 1999
David L. Sokol
Director, Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
/s/ Gregory E. Abel * March 30, 1999
Gregory E. Abel
Director, President and Chief Operating Officer
/s/ Steven A. McArthur March 30, 1999
Steven A. McArthur
Director, Senior Vice President and Secretary
/s/ Alan L. Wells* March 30, 1999
Alan L. Wells
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Patrick J. Goodman* March 30, 1999
Patrick J. Goodman
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
* By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
<PAGE>
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 30, 1999.
FISH LAKE POWER COMPANY
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board
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 30, 1999
David L. Sokol
Director, Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
/s/ Gregory E. Abel * March 30, 1999
Gregory E. Abel
Director, President and Chief Operating Officer
/s/ Steven A. McArthur March 30, 1999
Steven A. McArthur
Director, Senior Vice President and Secretary
/s/ Alan L. Wells* March 30, 1999
Alan L. Wells
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Patrick J. Goodman* March 30, 1999
Patrick J. Goodman
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
* By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
<PAGE>
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 30, 1999.
VULCAN POWER COMPANY
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board
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 30, 1999
David L. Sokol
Director, Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
/s/ Gregory E. Abel * March 30, 1999
Gregory E. Abel
Director, President and Chief Operating Officer
/s/ Steven A. McArthur March 30, 1999
Steven A. McArthur
Director, Senior Vice President and Secretary
/s/ Alan L. Wells* March 30, 1999
Alan L. Wells
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Patrick J. Goodman* March 30, 1999
Patrick J. Goodman
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
* By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
<PAGE>
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 30, 1999.
CALENERGY OPERATING CORPORATION
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board
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 30, 1999
David L. Sokol
Director, Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
/s/ Gregory E. Abel * March 30, 1999
Gregory E. Abel
Director, President and Chief Operating Officer
/s/ Steven A. McArthur March 30, 1999
Steven A. McArthur
Director, Senior Vice President and Secretary
/s/ Alan L. Wells* March 30, 1999
Alan L. Wells
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Patrick J. Goodman* March 30, 1999
Patrick J. Goodman
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
* By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
<PAGE>
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 30, 1999.
SALTON SEA ROYALTY COMPANY
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board
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 30, 1999
David L. Sokol
Director, Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
/s/ Gregory E. Abel * March 30, 1999
Gregory E. Abel
Director, President and Chief Operating Officer
/s/ Steven A. McArthur March 30, 1999
Steven A. McArthur
Director, Senior Vice President and Secretary
/s/ Alan L. Wells* March 30, 1999
Alan L. Wells
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Patrick J. Goodman* March 30, 1999
Patrick J. Goodman
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
* By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
<PAGE>
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 30, 1999.
LEATHERS, L.P., a
California limited partnership
By: CalEnergy Operating Corporation, a
Delaware corporation, its
general partner
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board
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 30, 1999
David L. Sokol
Director, Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
/s/ Gregory E. Abel * March 30, 1999
Gregory E. Abel
Director, President and Chief Operating Officer
/s/ Steven A. McArthur March 30, 1999
Steven A. McArthur
Director, Senior Vice President and Secretary
/s/ Alan L. Wells* March 30, 1999
Alan L. Wells
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Patrick J. Goodman* March 30, 1999
Patrick J. Goodman
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
* By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
<PAGE>
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 30, 1999.
ELMORE L.P., a California limited partnership
By: CalEnergy Operating Corporation, a
Delaware corporation, its
general partner
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board
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 30, 1999
David L. Sokol
Director, Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
/s/ Gregory E. Abel * March 30, 1999
Gregory E. Abel
Director, President and Chief Operating Officer
/s/ Steven A. McArthur March 30, 1999
Steven A. McArthur
Director, Senior Vice President and Secretary
/s/ Alan L. Wells* March 30, 1999
Alan L. Wells
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Patrick J. Goodman* March 30, 1999
Patrick J. Goodman
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
* By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
<PAGE>
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 30, 1999.
DEL RANCH L.P., a
California limited partnership
By: CalEnergy Operating Corporation, a
Delaware corporation, its
general partner
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board
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 30, 1999
David L. Sokol
Director, Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
/s/ Gregory E. Abel * March 30, 1999
Gregory E. Abel
Director, President and Chief Operating Officer
/s/ Steven A. McArthur March 30, 1999
Steven A. McArthur
Director, Senior Vice President and Secretary
/s/ Alan L. Wells* March 30, 1999
Alan L. Wells
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Patrick J. Goodman* March 30, 1999
Patrick J. Goodman
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
* By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
<PAGE>
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 30, 1999.
BN GEOTHERMAL INC., a
Delaware corporation
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board
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 30, 1999
David L. Sokol
Director, Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
/s/ Gregory E. Abel * March 30, 1999
Gregory E. Abel
Director, President and Chief Operating Officer
/s/ Steven A. McArthur March 30, 1999
Steven A. McArthur
Director, Senior Vice President and Secretary
/s/ Alan L. Wells* March 30, 1999
Alan L. Wells
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Patrick J. Goodman* March 30, 1999
Patrick J. Goodman
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
* By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
<PAGE>
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 30, 1999.
NIGUEL ENERGY COMPANY, a
California corporation
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board
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 30, 1999
David L. Sokol
Director, Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
/s/ Gregory E. Abel * March 30, 1999
Gregory E. Abel
Director, President and Chief Operating Officer
/s/ Steven A. McArthur March 30, 1999
Steven A. McArthur
Director, Senior Vice President and Secretary
/s/ Alan L. Wells* March 30, 1999
Alan L. Wells
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Patrick J. Goodman* March 30, 1999
Patrick J. Goodman
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
* By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
<PAGE>
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 30, 1999.
CONEJO ENERGY COMPANY, a
California corporation
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board
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 30, 1999
David L. Sokol
Director, Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
/s/ Gregory E. Abel * March 30, 1999
Gregory E. Abel
Director, President and Chief Operating Officer
/s/ Steven A. McArthur March 30, 1999
Steven A. McArthur
Director, Senior Vice President and Secretary
/s/ Alan L. Wells* March 30, 1999
Alan L. Wells
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Patrick J. Goodman* March 30, 1999
Patrick J. Goodman
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
* By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
<PAGE>
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 30, 1999.
SAN FELIPE ENERGY COMPANY, a
California corporation
By:/s/ David L. Sokol*
David L. Sokol
Director, Chairman of the Board
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 30, 1999
David L. Sokol
Director, Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
/s/ Gregory E. Abel * March 30, 1999
Gregory E. Abel
Director, President and Chief Operating Officer
/s/ Steven A. McArthur March 30, 1999
Steven A. McArthur
Director, Senior Vice President and Secretary
/s/ Alan L. Wells* March 30, 1999
Alan L. Wells
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Patrick J. Goodman* March 30, 1999
Patrick J. Goodman
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
* By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
<PAGE>
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 30, 1999.
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
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 30, 1999
David L. Sokol
Director, Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
/s/ Gregory E. Abel * March 30, 1999
Gregory E. Abel
Director, President and Chief Operating Officer
/s/ Steven A. McArthur March 30, 1999
Steven A. McArthur
Director, Senior Vice President and Secretary
/s/ Alan L. Wells* March 30, 1999
Alan L. Wells
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Patrick J. Goodman* March 30, 1999
Patrick J. Goodman
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
* By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-fact
<PAGE>
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).
3.10 By-laws of CEOC (incorporated by reference to Exhibit 3.10
to the Funding Corporation Form S-4).
3.11 Articles of Incorporation of the Royalty Guarantor
(incorporated by reference to Exhibit 3.11 to the Funding
Corporation Form S-4).
3.12 By-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).
<PAGE>
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).
4.1(e) Fourth Supplemental Indenture between Chemical Trust
Company of California and the Funding Corporation. *
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).
4.3(c) Second Amended and Restated Partnership Secured
Limited Guarantee, dated as of October 13, 1998 by by CEOC,
and VPC, Conejo, Niguel, Sal Felipe, BNG, Del Ranch, Elmore,
Leathers and Vulcan in favor of Chemical Trust Company of
California. *
<PAGE>
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).
4.6(c) Second Amendment to the Collateral Agency and
Intercreditor Agreement, dated as of October 13, 1998, by
and among Credit Suisse, Chemical Trust Company of
California, the Funding Corporation and the Guarantors. *
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).
4.8(c) Purchase Agreement, dated October 13, 1998 by and
among CS First Boston Corporation, the Guarantors and the
Funding Corporation. *
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).
4.10 Debt 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).
4.10(a) Amendment to Notes and to Amended Debt Service Reserve
Letter of Credit and Reimbursement Agreement, dated October
13, 1998, by and among the Funding Corporation, certain
banks and Credit Suisse, as agent. *
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).
<PAGE>
4.12 Salton 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).
4.13 Salton 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).
4.13(a) Salton Sea Project Note (SSI), dated October 13, 1998,
by SSBP, SSPG and Fish Lake in favor of the Funding
Corporation. *
4.13(b) Salton Sea Project Note (SSIII), dated October 13,
1998, by SSBP, SSPG and Fish Lake in favor of the Funding. *
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).
4.14(c) Amended and Restated Deposit and Disbursement
Agreement, dated as of October 13, 1998, by and among the
Funding Corporation, Chemical Trust Company of California
and the Guarantors. *
4.15 Partnership 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).
4.16 Partnership 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).
4.17 Stock 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).
4.18 Cost Overrun Commitment, dated as of July 21, 1995, between
MidAmerican, 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).
4.19(c) Second Amended and Restated Partnership Guarantors
Credit Agreement, dated October 13, 1998, by and among the
Partnership Guarantors and the Funding Corporation. *
4.20 Partnership 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).
<PAGE>
4.21 Stock 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).
4.22 Stock 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).
4.23 Royalty 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).
4.24 Royalty 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).
4.25 Royalty 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).
4.26 Royalty 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).
4.27 Stock 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).
4.28 Collateral 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).
4.29 Collateral 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).
4.30 Debt 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).
4.31 Partnership Project Note, dated July 21, 1995, by VPC and
CEOC in favor of the Funding Corporation.
4.31(a) Partnership Project Note (SSI), dated October 13,
1998, by VPC and CEOC in favor of the Funding Corporation. *
4.31(b) Partnership Project Note (SSII), dated October 13,
1998, by VPC and CEOC in favor of the Funding Corporation. *
4.31(c) Partnership Project Note (SSIII), dated October 13,
1998, by VPC and CEOC in favor of the Funding Corporation. *
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
<PAGE>
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).
4.37(a) First Amendment to Deed of Trust, dated October 13,
1998 by Vulcan to Chicago Title Company for the use and
benefit of Chemical Trust Company of California. *
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).
4.38(a) First Amendment to Deed of Trust, dated October 13,
1998, by Elmore to Chicago Title Company for the use and
benefit of Chemical Trust Company of California. *
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).
4.39(a) First Amendment to Deed of Trust, dated October 13,
1998, by Leathers to Chicago Title Company for the use and
benefit of Chemical Trust Company of California. *
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).
4.40(a) First Amendment to Deed of Trust, dated October 13,
1998, by Del Ranch to Chicago Title Company for the use and
benefit of Chemical Trust Company of California. *
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,
<PAGE>
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).
10.1(c) Second Amendment to Salton Sea Deed of Trust,
Assignment of Rents, Security Agreement and Fixed Filing,
dated as of October 13, 1998, by SSBP, SSPG and Fish Lake to
Chicago Title Company for the use and benefit of Chemical
Trust Company of California. *
10.2 Collateral 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).
10.3 Contract 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).
10.4 Amendment 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).
10.5 Amendment 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).
10.6 Contract 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).
10.7 Amendment 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).
10.8 Power Purchase Contract, dated April 16, 1985 (the "Unit 3
<PAGE>
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).
10.9 Power 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).
<PAGE>
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
<PAGE>
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.
* Denotes documents to be filed with an amendment to this Form 10-K.
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, 1997 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 27, 1998.
/s/ David L. Sokol /s/ Gregory E. Abel
________________________________ ________________________________
DAVID L. SOKOL GREGORY E. ABEL
/s/ Frederick L. Manuel /s/ Alan J. Wells
________________________________ ________________________________
FREDERICK L. MANUEL ALAN J. WELLS
/s/ Patrick J. Goodman
________________________________
PATRICK J. GOODMAN
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