SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Annual Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2000
Commission File No. 33-95538
SALTON SEA FUNDING CORPORATION
(Exact name of registrant as specified in its charter)
47-0790493
(IRS Employer Identification No.)
(Exact name of Registrants (State or other (I.R.S. Employer
as specified in their charters) jurisdiction of Identification No.)
incorporation or organization)
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
Salton Sea Power LLC Delaware 47-0810713
CalEnergy Minerals LLC Delaware 47-0810718
CE Turbo LLC Delaware 47-0812159
CE Salton Sea Inc. Delaware 47-0810711
Salton Sea Minerals Corp. Delaware 47-0811261
302 S. 36th Street, Suite 400-A, Omaha, NE 68131
(Address of principal executive offices and Zip Code of Salton Sea Funding
Corporation)
Salton Sea Funding Corporation's telephone number, including area code: (402)
231-1641
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_____
All common stock of Salton Sea Funding Corporation is indirectly held by Magma
Power Company. 100 shares of Common Stock were outstanding on September 30,
2000.
<PAGE>
SALTON SEA FUNDING CORPORATION
Form 10-Q
September 30, 2000
_____________
C O N T E N T S
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements Page
SALTON SEA FUNDING CORPORATION
Independent Accountants' Report 4
Balance Sheets, September 30, 2000 and December 31, 1999 5
Statements of Operations for the Three and Nine Months Ended
September 30, 2000 and 1999 6
Statements of Cash Flows for the Nine Months Ended
September 30, 2000 and 1999 7
Notes to Financial Statements 8
SALTON SEA GUARANTORS
Independent Accountants' Report 9
Combined Balance Sheets, September 30, 2000 and December 31, 1999 10
Combined Statements of Operations for the Three and Nine Months Ended
September 30, 2000 and 1999 11
Combined Statements of Cash Flows for the Nine Months Ended
September 30, 2000 and 1999 12
Notes to Combined Financial Statements 13
<PAGE>
PARTNERSHIP GUARANTORS
Independent Accountants' Report 14
Combined Balance Sheets, September 30, 2000 and December 31, 1999 15
Combined Statements of Operations for the Three and Nine Months Ended
September 30, 2000 and 1999 16
Combined Statements of Cash Flows for the Nine Months Ended
September 30, 2000 and 1999 17
Notes to Combined Financial Statements 18
SALTON SEA ROYALTY LLC
Independent Accountants' Report 19
Balance Sheets, September 30, 2000 and December 31, 1999 20
Statements of Operations for the Three and Nine Months Ended
September 30, 2000 and 1999 21
Statements of Cash Flows for the Nine Months Ended
September 30, 2000 and 1999 22
Notes to Financial Statements 23
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 24
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 32
Item 2. Changes in Securities 32
Item 3. Defaults on Senior Securities 32
Item 4. Submission of Matters to a Vote of
Security Holders 32
Item 5. Other Information 32
Item 6. Exhibits and Reports on Form 8-K 32
Signatures 33
Exhibit Index 34
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholder
Salton Sea Funding Corporation
Omaha, Nebraska
We have reviewed the accompanying balance sheet of the Salton Sea Funding
Corporation as of September 30, 2000, and the related statements of operations
for the three and nine month periods ended September 30, 2000 and 1999 and cash
flows for the nine month periods ended September 30, 2000 and 1999. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such financial statements for them to be in conformity with
accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the balance sheet of Salton Sea
Funding Corporation as of December 31, 1999, and the related statements of
operations, stockholder's equity, and cash flows for the year then ended (not
presented herein); and in our report dated January 25, 2000 we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying balance sheet as of December 31, 1999
is fairly stated, in all material respects, in relation to the balance sheet
from which it has been derived.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
October 21, 2000
<PAGE>
SALTON SEA FUNDING CORPORATION
BALANCE SHEETS
(Dollars in Thousands, Except per Share Amounts)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
___________ __________
(unaudited)
ASSETS
<S> <C> <C>
Cash $ 23,935 $ 2,086
Prepaid expenses and other assets 14,091 3,617
Due from affiliates --- 2,118
Current portion of secured project notes from Guarantors 14,350 25,072
Total current assets 52,376 32,893
Secured project notes from Guarantors 532,078 543,908
Investment in 1% of net assets of Guarantors 9,182 8,847
$ 593,636 $ 585,648
============= =============
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accrued liabilities $ 13,873 $ 3,607
Due to affiliates 20,148 ---
Current portion of long term debt 14,350 25,072
Total current liabilities 48,371 28,679
Senior secured notes and bonds 532,078 543,908
Total liabilities 580,449 572,587
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 7,821 7,695
Total stockholder's equity 13,187 13,061
$ 593,636 $ 585,648
============= =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SALTON SEA FUNDING CORPORATION
STATEMENTS OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Interest income $ 10,702 $ 11,625 $ 32,421 $ 35,736
Equity in earnings of Guarantors 279 225 335 433
Total revenues 10,981 11,850 32,756 36,169
_________ ________ _______ _______
Expenses:
General and administrative expenses 234 148 711 551
Interest expense 10,434 11,300 31,831 34,659
_________ ________ _______ _______
Total expenses 10,668 11,448 32,542 35,210
_________ ________ _______ _______
Income before income taxes 313 402 214 959
Provision for income taxes 129 164 88 392
_________ ________ _______ _______
Net income $ 184 $ 238 $ 126 $ 567
========= ======== ======= =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SALTON SEA FUNDING CORPORATION
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
________________________________
2000 1999
___________ _______________
Cash flows from operating activities:
<S> <C> <C>
Net income $ 126 $ 567
Adjustments to reconcile net income to net
cash flows from operating activities:
Equity in earnings of guarantors (335) (433)
Changes in assets and liabilities:
Prepaid expenses and other assets (10,474) (9,054)
Accrued liabilities 10,266 11,105
Net cash flows from operating activities (417) 2,185
Cash flows from investing activities:
Principal repayments of secured project notes
from Guarantors 22,552 28,918
Net cash flows from investing activities 22,552 28,918
Cash flows from financing activities:
Increase in due from affiliates 22,266 15,054
Repayment of senior secured notes and bonds (22,552) (28,918)
Net cash flows from financing activities (286) (13,864)
Net change in cash 21,849 17,239
Cash at the beginning of period 2,086 17,629
Cash at the end of period $ 23,935 $ 34,868
=========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SALTON SEA FUNDING CORPORATION
NOTES TO FINANCIAL STATEMENTS
_____________________
1. General:
In the opinion of management of the Salton Sea Funding Corporation (the "Funding
Corporation"), the accompanying unaudited financial statements contain all
adjustments (consisting only of normal recurring accruals) necessary to present
fairly the financial position as of September 30, 2000 and the results of
operations for the three and nine months ended September 30, 2000 and 1999 and
cash flows for the nine months ended September 30, 2000 and 1999. The results of
operations for the three and nine months ended September 30, 2000 and 1999 are
not necessarily indicative of the results to be expected for the full year.
The unaudited financial statements shall be read in conjunction with the
financial statements included in the Funding Corporation's annual report on Form
10-K for the year ended December 31, 1999.
The Funding Corporation was formed on June 20, 1995 for the sole purpose of
acting as issuer of senior secured notes and bonds.
2. Revolving Credit Agreement:
On July 21, 1995, Salton Sea Funding Corporation obtained a $15 million seven
year revolving credit agreement between Credit Suisse as bank and agent and
other lenders. The interest rate is at the Adjusted Base Rate plus .375% or at
the LIBOR rate plus 100 basis points. On May 26, 2000, Salton Sea Funding
Corporation borrowed $15 million under its revolving credit agreement. The loan
was repaid in two installments, $5 million on July 26, 2000 and $10 million on
August 28, 2000.
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholder
Magma Power Company
Omaha, Nebraska
We have reviewed the accompanying combined balance sheet of the Salton Sea
Guarantors as of September 30, 2000, and the related combined statements of
operations for the three and nine month periods ended September 30, 2000 and
1999 and cash flows for the nine month periods ended September 30, 2000 and
1999. These financial statements are the responsibility of the Salton Sea
Guarantors' management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such combined financial statements for them to be in conformity with
accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the combined balance sheet of the
Salton Sea Guarantors as of December 31, 1999, and the related combined
statements of operations, Guarantors' equity, and cash flows for the year then
ended (not presented herein); and in our report dated January 25, 2000, we
expressed an unqualified opinion on those combined financial statements. In our
opinion, the information set forth in the accompanying combined balance sheet as
of December 31, 1999 is fairly stated, in all material respects, in relation to
the combined balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
October 21, 2000
<PAGE>
SALTON SEA GUARANTORS
COMBINED BALANCE SHEETS
(Dollars in Thousands)
September 30, December 31,
2000 1999
__________ _________
(unaudited)
ASSETS
Accounts receivable $ 22,231 $ 11,537
Prepaid expenses and other assets 9,162 11,695
Total current assets 31,393 23,232
Restricted cash 7,475 10,001
Property, plant, contracts and equipment, net 558,331 552,903
Excess of cost over fair value of net assets
acquired, net 45,900 46,878
$ 643,099 $ 633,014
============ ===========
LIABILITIES AND GUARANTORS' EQUITY
Liabilities:
Accounts payable $ 322 $ 33
Accrued liabilities 12,558 7,862
Current portion of long term debt 9,169 9,737
Total current liabilities 22,049 17,632
Due to affiliates 28,291 27,993
Senior secured project note 275,558 284,217
Total liabilities 325,898 329,842
Total Guarantors' equity 317,201 303,172
$ 643,099 $ 633,014
============ ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
SALTON SEA GUARANTORS
COMBINED STATEMENTS OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
_________________________ _________________________
2000 1999 2000 1999
________ ________ ________ ________
Revenues:
<S> <C> <C> <C> <C>
Sales of electricity $ 32,375 $ 27,043 $ 59,873 $ 64,861
Interest and other income 119 425 332 1,868
_______ _______ _______ _______
Total revenues 32,494 27,468 60,205 66,729
_______ _______ _______ _______
Expenses:
Operating, general and
administration 11,288 7,655 23,852 21,190
Depreciation and amortization 4,751 4,225 13,072 12,668
Interest expense 5,745 6,063 17,376 18,234
Less capitalized interest (1,988) (2,489) (8,124) (6,140)
_______ _______ _______ _______
Total expenses 19,796 15,454 46,176 45,952
_______ _______ _______ _______
Net income $ 12,698 $ 12,014 $ 14,029 $ 20,777
======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SALTON SEA GUARANTORS
COMBINED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 14,029 $ 20,777
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 13,072 12,668
Changes in assets and liabilities:
Accounts receivable (10,694) (2,369)
Prepaid expenses and other assets 2,533 (103)
Accounts payable and accrued liabilities 4,985 185
Net cash flows from operating activities 23,925 31,158
Cash flows from investing activities:
Capital expenditures (17,522) (59,410)
Decrease in restricted cash 2,526 51,048
Net cash flows from investing activities (14,996) (8,362)
Cash flows from financing activities:
Increase (decrease) in due to affiliates 298 (14,758)
Repayments of senior secured project note (9,227) (8,038)
Net cash flows from financing activities (8,929) (22,796)
Net change in cash --- ---
Cash at beginning of period --- ---
Cash at end of period $ --- $ ---
============ ============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SALTON SEA GUARANTORS
NOTES TO COMBINED FINANCIAL STATEMENTS
____________________
1. General:
In the opinion of management of the Salton Sea Guarantors (the "Guarantors"),
the accompanying unaudited combined financial statements contain all adjustments
(consisting only of normal recurring accruals) necessary to present fairly the
financial position as of September 30, 2000 and the results of operations for
the three and nine months ended September 30, 2000 and 1999 and cash flows for
the nine months ended September 30, 2000 and 1999. The results of operations for
the three and nine months ended September 30, 2000 and 1999 are not necessarily
indicative of the results to be expected for the full year.
The unaudited combined financial statements shall be read in conjunction with
the financial statements included in the Funding Corporation's annual report on
Form 10-K for the year ended December 31, 1999.
The combined financial statements include the accounts of the partnerships in
which the Guarantors have a 100% interest.
2. Related Party Transactions:
Salton Sea Power LLC ("Salton Sea Power"), a Salton Sea Guarantor, and El Paso
Merchant Energy L.P. ("EPME") entered into a power marketing agreement
commencing June 13, 2000 and ending on June 30, 2000. Under the terms of the
agreement, EPME purchased and Salton Sea Power sold all available power from the
Salton Sea Unit V project. EPME sold the available power into the bulk power
market. The purchase price of the available power is the value of the cash
actually received by EPME for the sale of such power, plus any realized
renewable premiums.
On June 9, 2000, Salton Sea Power, entered into an agreement to sell all
available power from the Salton Sea Unit V project to EPME. Under the terms of
the agreement commencing on July 1, 2000 and ending on September 30, 2000, EPME
purchased up to 25 MW of available power for $53 per MWh, together with any
premiums related to such power. EPME also marketed any available power which
exceeded 25 MW on behalf of Salton Sea Power.
On September 29, 2000, Salton Sea Power entered into an agreement to sell all
available power from the Salton Sea Unit V project to EPME. Under the terms of
the agreement, commencing October 1, 2000 and ending September 30, 2001, EPME
will purchase all available power and sell available power on behalf of Salton
Sea Power, into the PX or California ISO markets. The purchase price for the
available power shall be equivalent to the value actually received by EPME for
the sale of such power, including renewable premiums.
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholder
Magma Power Company
Omaha, Nebraska
We have reviewed the accompanying combined balance sheet of the Partnership
Guarantors as of September 30, 2000, and the related combined statements of
operations for the three and nine month periods ended September 30, 2000 and
1999 and cash flows for the nine month periods ended September 30, 2000 and
1999. These financial statements are the responsibility of the Partnership
Guarantors' management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such combined financial statements for them to be in conformity with
accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the combined balance sheet of the
Partnership Guarantors as of December 31, 1999, and the related combined
statements of operations, Guarantors' equity and cash flows for the year then
ended (not presented herein); and in our report dated January 25, 2000, we
expressed an unqualified opinion on those combined financial statements. In our
opinion, the information set forth in the accompanying combined balance sheet as
of December 31, 1999 is fairly stated, in all material respects, in relation to
the combined balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
October 21, 2000
<PAGE>
PARTNERSHIP GUARANTORS
COMBINED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(unaudited)
ASSETS
<S> <C> <C>
Accounts receivable $ 23,599 $ 16,295
Prepaid expenses and other assets 23,802 18,959
Total current assets 47,401 35,254
Restricted cash 4,986 60,454
Due from affiliates 43,490 75,274
Property, plant, contracts and equipment, net 629,951 531,427
Management fee 70,917 71,489
Excess of cost over fair value of net assets acquired, net 125,321 127,994
$ 922,066 $ 901,892
============= ============
LIABILITIES AND GUARANTORS' EQUITY
Liabilities:
Accounts payable $ 4,487 $ 3,925
Accrued liabilities 18,070 13,534
Current portion of long term debt 2,954 10,562
Total current liabilities 25,511 28,021
Senior secured project notes 249,696 250,650
Deferred income taxes 106,706 98,907
Total liabilities 381,913 377,578
Guarantors' equity:
Common stock 3 3
Additional paid-in capital 387,663 387,663
Retained earnings 152,487 136,648
Total Guarantors' equity 540,153 524,314
$ 922,066 $ 901,892
============== ============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
PARTNERSHIP GUARANTORS
COMBINED STATEMENTS OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
_________ _________ _________ _________
Revenues:
<S> <C> <C> <C> <C>
Sales of electricity $ 35,063 $ 35,940 $ 65,080 $ 82,192
Interest and other income 1,783 1,467 2,884 5,941
_________ _________ _________ ___________
Total revenues 36,846 37,407 67,964 88,133
_________ _________ _________ ___________
Expenses:
Operating, general and
administration 12,119 12,483 29,427 35,548
Depreciation and amortization 4,966 6,241 14,459 18,721
Interest expense 4,984 5,483 15,124 16,818
Less capitalized interest (4,855) (3,662) (14,684) (10,409)
_________ _________ _________ ___________
Total expenses 17,214 20,545 44,326 60,678
_________ _________ _________ ___________
Income before income taxes 19,632 16,862 23,638 27,455
Provision for income taxes 6,477 7,318 7,799 11,449
_________ _________ _________ ___________
Net income $ 13,155 $ 9,544 $ 15,839 $ 16,006
========= ========= ========= ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
PARTNERSHIP GUARANTORS
COMBINED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Nine Months Ended
September 30,
2000 1999
_________ _______
Cash flows from operating activities:
Net income $ 15,839 $ 16,006
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 14,459 18,721
Deferred income taxes 7,799 11,449
Changes in assets and liabilities:
Accounts receivable (7,304) 7,833
Prepaid expenses and other assets (4,843) 5,957
Accounts payable and accrued
liabilities 5,098 1,307
_________ _________
Net cash flows from operating activities 31,048 61,273
_________ _________
Cash flows from investing activities:
Capital expenditures (108,201) (84,837)
Decrease in restricted cash 55,468 51,254
Management fee (1,537) (2,283)
_________ _________
Net cash flows from investing activities (54,270) (35,866)
_________ _________
Cash flows from financing activities:
Repayments of senior secured project notes (8,562) (16,182)
Decrease (increase) in due from affiliates 31,784 (9,225)
_________ _________
Net cash flows from financing activities 23,222 (25,407)
_________ _________
Net change in cash --- ---
Cash at beginning of period --- ---
_________ _________
Cash at end of period $ --- $ ---
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
PARTNERSHIP GUARANTORS
NOTES TO COMBINED FINANCIAL STATEMENTS
____________________
1. General:
In the opinion of management of the Partnership Guarantors (the "Guarantors"),
the accompanying unaudited combined financial statements contain all adjustments
(consisting only of normal recurring accruals) necessary to present fairly the
financial position as of September 30, 2000 and the results of operations for
the three and nine months ended September 30, 2000 and 1999 and cash flows for
the nine months ended September 30, 2000 and 1999. The results of operations for
the three and nine months ended September 30, 2000 and 1999 are not necessarily
indicative of the results to be expected for the full year.
The unaudited combined financial statements shall be read in conjunction with
the financial statements included in the Funding Corporation's annual report on
Form 10-K for the year ended December 31, 1999.
The combined financial statements include the proportionate share of the
accounts of the partnerships in which the Guarantors have an interest.
2. Property:
The increase in property, plant, contracts and equipment is primarily due to the
Zinc Recovery Project and Region II Brine Facility construction costs. The
decrease in restricted cash is due to expenditures on these projects.
3. Revenue:
The decrease in revenue was due to the expiration of the scheduled price period
at Leathers at December 31, 1999.
4. Related Party Transaction:
On September 29, 2000, CE Turbo LLC entered into an agreement to sell all
available power from the CE Turbo project to El Paso Merchant Energy. Under the
terms of the agreement, commencing October 1, 2000 and ending September 30,
2001, El Paso Merchant Energy will purchase all available power and sell
available power on behalf of CE Turbo, into the PX or California ISO markets.
The purchase price for the available power shall be equivalent to the value
actually received by El Paso Merchant Energy for the sale of such power,
including renewable premiums.
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholder
Magma Power Company
Omaha, Nebraska
We have reviewed the accompanying balance sheet of the Salton Sea Royalty LLC as
of September 30, 2000, and the related statements of operations for the three
and nine month periods ended September 30, 2000 and 1999 and cash flows for the
nine month periods ended September 30, 2000 and 1999. These financial statements
are the responsibility of the Salton Sea Royalty LLC's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such financial statements for them to be in conformity with
accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the balance sheet of the Salton Sea
Royalty LLC as of December 31, 1999, and the related statements of operations,
equity, and cash flows for the year then ended (not presented herein); and in
our report dated January 25, 2000, we expressed an unqualified opinion on those
financial statements. In our opinion, the information set forth in the
accompanying balance sheet as of December 31, 1999 is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.
As discussed in Note 1 to the financial statements, Salton Sea Royalty LLC was
converted to a limited liability company during 1999 and as such the statements
of operations for the three and nine months ended September 30, 2000 and 1999
and cash flows for the nine months ended September 30, 2000 and 1999 are not
comparable due to the change in reporting entity which results in no tax expense
in fiscal 2000.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
October 21, 2000
<PAGE>
SALTON SEA ROYALTY LLC
BALANCE SHEETS
(Dollars in Thousands, Except per Share Amounts)
September 30, December 31,
2000 1999
___________ ___________
(unaudited)
ASSETS
Prepaid expenses and other assets $ 120 $ 235
Total current assets 120 235
Royalty stream, net 15,983 16,776
Excess of cost over fair value of net assets
acquired, net 31,599 32,280
Due from affiliates 22,383 21,825
$ 70,085 $ 71,116
============= =============
LIABILITIES AND EQUITY
Liabilities:
Accrued liabilities $ 223 $ 82
Current portion of long term debt 2,227 4,773
Total current liabilities 2,450 4,855
Senior secured project note 6,826 9,041
Total liabilities 9,276 13,896
Equity:
Common stock, par value $.01 per share; 100
share authorized, issued and outstanding - -
Additional paid-in capital 1,561 1,561
Retained earnings 59,248 55,659
Total equity 60,809 57,220
$ 70,085 $ 71,116
============= =============
The accompanying notes are an integral part of these financial statements.
<PAGE>
SALTON SEA ROYALTY LLC
STATEMENTS OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
________________________ ______________________
2000 1999 2000 1999
_______ _______ _______ _______
Revenues:
<S> <C> <C> <C> <C>
Royalty income $ 3,816 $ 4,495 $ 8,083 $ 21,724
Expenses:
Operating, general and
administrative expenses 1,099 1,258 2,272 3,412
Amortization of royalty stream
and goodwill 491 1,425 1,474 6,322
Interest expense 206 398 748 1,312
__________ __________ __________ __________
Total expenses 1,796 3,081 4,494 11,046
__________ __________ __________ __________
Income before income taxes 2,020 1,414 3,589 10,678
Provision for income taxes --- 488 --- 4,165
__________ __________ __________ __________
Net income $ 2,020 $ 926 $ 3,589 $ 6,513
========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SALTON SEA ROYALTY LLC
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
__________________________
2000 1999
_________ ________
Cash flows from operating activities:
<S> <C> <C>
Net income $ 3,589 $ 6,513
Adjustments to reconcile net income to net
cash flows from operating activities:
Amortization of royalty stream and goodwill 1,474 6,322
Changes in assets and liabilities:
Prepaid expenses and other assets 115 209
Accrued liabilities and deferred income taxes 141 (5,183)
Net cash flows from operating activities 5,319 7,861
Net cash flows from financing activities:
Increase in due from affiliates (558) (3,163)
Repayment of senior secured project note (4,761) (4,698)
_________ _________
Net cash flows from financing activities (5,319) (7,861)
Net change in cash --- ---
Cash at beginning of period --- ---
_________ _________
Cash at end of period $ --- $ ----
========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SALTON SEA ROYALTY LLC
NOTES TO FINANCIAL STATEMENTS
____________________
1. General:
In the opinion of management of the Salton Sea Royalty LLC (the "Company"), the
accompanying unaudited financial statements contain all adjustments (consisting
only of normal recurring accruals) necessary to present fairly the financial
position as of September 30, 2000 and the results of operations for the three
and nine months ended September 30, 2000 and 1999 and cash flows for the nine
months ended September 30, 2000 and 1999. The results of operations for the
three and nine months ended September 30, 2000 and 1999 are not necessarily
indicative of the results to be expected for the full year.
The Company was converted to a limited liability company during 1999 and as such
the statements of operations for the three and nine months ended September 30,
2000 and 1999 and cash flows for the nine months ended September 30, 2000 and
1999 are not comparable due to the change in reporting entity which results in
no tax expense in fiscal 2000. Income taxes are now the responsibility of the
partners and the Company has no obligation to provide funds to the partners for
payment of any tax liabilities. Accordingly, the Company has no tax obligations.
The unaudited financial statements shall be read in conjunction with the
financial statements included in the Funding Corporation's annual report on Form
10-K for the year ended December 31, 1999.
2. Revenues:
The third quarter and year to date decreases were due primarily to a reduction
in royalty income from Leathers due to lower revenues from the expiration of the
scheduled price period on December 31, 1999. The year to date decrease was also
due to a decrease in East Mesa royalty income related to a royalty settlement.
<PAGE>
SALTON SEA FUNDING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per kwh data)
_________________________________
Results of Operations:
The following is management's discussion and analysis of certain significant
factors which have affected the Salton Sea Funding Corporation's (the "Funding
Corporation"), the Salton Sea Guarantors, the Partnership Guarantors and the
Salton Sea Royalty LLC's (collectively, the "Guarantors") financial condition
and results of operations during the periods included in the accompanying
statements of operations.
Funding Corporation was organized for the sole purpose of acting as issuer of
senior secured notes and bonds (the "Securities"). The Securities are payable
from the proceeds of payments made of principal and interest on the senior
secured 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 Salton Sea Royalty LLC are limited
to available cash flow. The Funding Corporation does not conduct any operations
apart from the Securities.
The Vulcan, Leathers, Del Ranch and Elmore partnerships (collectively, the
"Partnership Projects") sell all electricity generated by the respective plants
pursuant to four long-term SO4 Agreements between the projects and Southern
California Edison Company ("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 and the capacity payments are significantly higher in the months of
June through September.
The scheduled energy price periods of the Partnership Project SO4 Agreements
extended until February 1996 for the Vulcan Partnership, December 1998 for the
Hoch (Del Ranch) and Elmore Partnerships, and December 1999 for the Leathers
Partnership.
For 2000, the Partnership Projects are receiving Edison's Avoided Cost of Energy
pursuant to their respective SO4 Agreements.
<PAGE>
SALTON SEA FUNDING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per kwh data)
_________________________________
Results of Operations: (continued)
The Salton Sea I Project sells electricity to Edison pursuant to a 30-year
negotiated power purchase agreement, as amended (the "Salton Sea I PPA"), which
provides for capacity and energy payments. The energy payment is calculated
using a Base Price which is subject to quarterly adjustments based on a basket
of indices. The time period weighted average energy payment for Salton Sea I was
5.6 cents per kWh during the nine months ended September 30, 2000. 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 Salton Sea II and Salton Sea III Projects sell electricity to Edison
pursuant to 30-year modified SO4 Agreements that provide for capacity payments,
capacity bonus payments and energy payments. The price for contract capacity and
contract capacity bonus payments is fixed for the life of the modified SO4
Agreements. The energy payments for the first ten year period, which expired
April 4, 2000 for Salton Sea II and expired on February 13, 1999 for Salton Sea
III, were 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. Currently,
the monthly energy payments are 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 March 31, 2004.
The Salton Sea IV Project sells electricity to Edison pursuant to a modified SO4
agreement which provides for contract capacity payments on 34 MW of capacity at
two different rates based on the respective contract capacities deemed
attributable to the original Salton Sea PPA option (20 MW) and to the original
Fish Lake PPA (14 MW). The capacity payment price for the 20 MW portion adjusts
quarterly based upon specified indices and the capacity payment price for the 14
MW portion is a fixed levelized rate. The energy payment (for deliveries up to a
rate of 39.6 MW) is at a fixed price for 55.6% of the total energy delivered by
Salton Sea IV and is based on an energy payment schedule for 44.4% of the total
energy delivered by Salton Sea IV. The contract has a 30-year term but Edison is
not required to purchase the 20 MW of capacity and energy originally
attributable to the Salton Sea I PPA option after September 30, 2017, the
original termination date of the Salton Sea I PPA.
The Salton Sea Unit V Project will sell approximately one-third of its net
output to a Zinc facility, which is owned by a subsidiary of MidAmerican and is
expected to commence operation in the fourth quarter of 2000. The remainder of
the Salton Sea Unit V output will be sold through the California Power Exchange
(the "PX") or in other market transactions. The PX was created to establish
markets for the sale of power on a daily and 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.
For the nine months ended September 30, 2000 and 1999, Edison's average Avoided
Cost of Energy was 4.6 and 2.9 cents respectively per kWh. Estimates of Edison's
future Avoided Cost of Energy vary substantially from year to year, and
therefore cannot be predicted with accuracy.
<PAGE>
SALTON SEA FUNDING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per kwh data)
_________________________________
Results of Operations: (continued)
The following data includes the aggregate capacity and electricity production of
Salton Sea Units I, II, III, IV and V:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
_____________________ _____________________
2000 1999 2000 1999
_____ _____ _____ ______
<S> <C> <C> <C> <C>
Overall capacity factor 77.6% 96.4% 67.5% 91.2%
Capacity (NMW) (weighted average) 168.4 119.4 138.5 119.4
kWh produced (in thousands) 288,400 254,200 614,400 713,500
</TABLE>
The overall capacity factor for the Salton Sea Projects decreased for the three
and nine months ended September 30, 2000 compared to the same period in 1999 due
to scheduled overhauls in 2000 which were more extensive compared to 1999, a
lower capacity factor for Salton Sea Unit V related to start up activities.
The following data includes the aggregate capacity and electricity production of
Vulcan, Del Ranch, Elmore and Leathers:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
_____________________ _____________________
2000 1999 2000 1999
_____ _____ _____ _____
<S> <C> <C> <C> <C>
Overall capacity factor 103.7% 105.2% 95.5% 102.2%
Capacity (NMW) (weighted average) 154.6 148.0 150.2 148.0
kWh produced (in thousands) 353,900 343,600 943,100 991,000
</TABLE>
The overall capacity factor for the Partnership Projects decreased for the three
months ended September 30, 2000 compared to the same period in 1999 due to
production and transmission line limitations. The overall capacity factor for
the Partnership Projects decreased for the nine months ended September 30, 2000
compared to the same period in 1999 due to scheduled overhauls at all plants in
the first quarter of 2000.
<PAGE>
SALTON SEA FUNDING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per kwh data)
_________________________________
Results of Operations: (continued)
Revenues:
The Salton Sea Guarantors' sales of electricity increased to $32,375 for the
three months ended September 30, 2000 from $27,043 for the same period in 1999,
a 19.7% increase. The increase was due to the addition of Salton Sea Unit V in
July, 2000. For the nine months ended September 30, 2000, sales of electricity
decreased to $59,873 from $64,861 in 1999, a 7.7% decrease. The decrease was
primarily due to scheduled overhauls in 2000 which were more extensive compared
to 1999 and the expiration of the fixed price periods at Salton Sea Unit II and
III in April, 2000 and February, 1999, respectively partially offset by the
addition of Salton Sea Unit V.
The Partnership Guarantors' sales of electricity decreased to $35,063 for the
three months ended September 30, 2000 from $35,940 for the same period in 1999,
a 2.4% decrease. For the nine month period ended September 30, 2000, sales of
electricity decreased to $65,080 from $82,192 in 1999, a 20.8% decrease. These
decreases were due to the expiration of the scheduled price period at Leathers
on December 31, 1999 offset by increases resulting from higher avoided cost
rates and the commencement of operations of CE Turbo in the third quarter of
2000.
The Royalty Guarantor revenue decreased to $3,816 for the three months ended
September 30, 2000 from $4,495 for the same period last year. This decrease was
due primarily to a reduction in royalty income from Leathers due to lower
revenue. For the nine month period ended September 30, 2000, revenue decreased
to $8,083 from $21,724 in 1999. This decrease was due primarily to a decrease in
East Mesa royalty income related to a royalty settlement and, to a lesser
extent, reduction in royalty income from Leathers due to lower revenue.
Operating Expenses:
The Salton Sea Guarantors' operating expenses, which include royalty, operating,
and general and administrative expenses, increased to $11,288, for the three
months ended September 30, 2000 from $7,655 for the same period in 1999. For the
nine month period ended September 30, 2000, operating expenses increased to
$23,852 from $21,190 in 1999. This increase was due to higher operating costs
resulting from Salton Sea Unit V start up activities and higher brine disposal
costs.
The Partnership Guarantors' operating expenses, which include royalty,
operating, and general and administrative expenses, decreased to $12,119 for the
three months ended September 30, 2000 from $12,483 for the same period in 1999.
For the nine month period ended September 30, 2000, operating expenses decreased
to $29,427 from $35,548 in 1999, a 17.2% decrease. These decreases were
primarily due to a reduction in royalty expenses due to the lower revenues.
The Royalty Guarantors' operating expenses decreased to $1,099 for the three
months ended September 30, 2000 from $1,258 for the same period in 1999, a 12.6%
decrease. For the nine month period ended September 30, 2000, operating expenses
decreased to $2,272 from $3,412 in 1999, a 33.4% decrease. These decreases were
due to lower royalty costs due to the end of the scheduled price period at
Leathers.
<PAGE>
SALTON SEA FUNDING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per kwh data)
_________________________________
Results of Operations: (continued)
Depreciation and Amortization:
The Salton Sea Guarantors' depreciation and amortization increased to $4,751 for
the three months ended September 30, 2000 from $4,225 for the same period of
1999, a 12.4% increase. For the nine month period ended September 30, 2000,
depreciation and amortization increased to $13,072 from $12,668 in 1999. The
increases were due to the commencement of operations of Salton Sea Unit V in the
third quarter of 2000.
The Partnership Guarantors' depreciation and amortization decreased to $4,966
for the three months ended September 30, 2000 from $6,241 for the same period in
1999. For the nine month period ended September 30, 2000, depreciation and
amortization decreased to $14,459 from $18,721 in 1999. The decreases were due
primarily to lower step up depreciation and amortization after the end of the
scheduled price period at Leathers.
The Royalty Guarantors' amortization was $491 for the three months ended
September 30, 2000 compared to $1,425 for the same period of 1999. For the nine
month period ended September 30, 2000, amortization was $1,474 compared to
$6,322 in 1999. The decreases were due to lower amortization after the end of
the scheduled price period at the partnership plants.
Interest Expense:
The Salton Sea Guarantors' interest expense, net of capitalized amounts,
increased to $3,757 for the three months ended September 30, 2000 from $3,574
for the same period in 1999, a 5.1% increase. The increase was due to lower
capitalized interest on completed construction projects offset by reduced
indebtedness. For the nine month period ended September 30, 2000, interest
expense, net of capitalized amounts, decreased to $9,252 from $12,094 in 1999.
The decrease was due to reduced indebtedness and higher capitalized interest on
construction projects.
The Partnership Guarantors' interest expense, net of capitalized amounts,
decreased to $129 for the three months ended September 30, 2000 from $1,821 for
the same period in 1999. For the nine month period ended September 30, 2000,
interest expense, net of capitalized amounts, decreased to $440 from $6,409. The
decreases were primarily due to reduced indebtedness and higher capitalized
interest on construction projects.
The Royalty Guarantors' interest expense decreased to $206 for the three months
ended September 30, 2000 from $398 from the same period in 1999. For the nine
month period ended September 30, 2000, interest expense decreased to $748 from
$1,312 in 1999. The decreases were due to reduced indebtedness. Income Tax
Provision:
The Salton Sea Guarantors are 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.
<PAGE>
SALTON SEA FUNDING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per kwh data)
_________________________________
Results of Operations: (continued)
The Partnership Guarantors income tax provision decreased to $6,477 for the
three months ended September 30, 2000 from $7,318 for the same period in 1999,
an 11.5% decrease. For the nine month period ended September 30, 2000, the
provision for income taxes decreased to $7,799 from $11,449 in 1999. The
decreases were primarily due to a lower pre-tax income and the generation of
energy tax credits. Income taxes will be paid by the parent of the Guarantors
from distributions to the parent company by the Guarantors which occur after
operating expenses and debt service.
The Royalty Guarantor's income tax provision was $0 for the three months ended
September 30, 2000 compared to $488 for the same period in 1999. For the nine
month period ended September 30, 2000, the income tax provision was $0 compared
to $4,165 in 1999. The decrease in the provision is due to the change in the
Royalty Guarantor from a corporation to a limited liability company which is not
taxed. Income taxes are the responsibility of the partners and Royalty Guarantor
has no obligation to provide funds to the partners for payment or any tax
liabilities. Accordingly, the Royalty Guarantor has no tax obligations.
Net Income:
The Salton Sea Funding Corporation's net income for the three months ended
September 30, 2000 decreased to $184 compared from $238 for the same period in
1999. For the nine month period ended September 30, 2000, net income was $126
compared to net income of $567 in 1999. The net income primarily represents
interest income and expense, net of applicable tax, and the Salton Sea Funding
Corporation's 1% equity in earnings of the Guarantors.
The Salton Sea Guarantors' net income increased to $12,698 for the three months
ended September 30, 2000 compared to $12,014 for the same period of 1999. For
the nine month period ended September 30, 2000, net income decreased to $14,029
compared to $20,777 in 1999.
The Partnership Guarantors' net income increased to $13,155 for the three months
ended September 30, 2000 compared to $9,544 for the same period of 1999. For the
nine month period ended September 30, 2000, net income decreased to $15,839 from
$16,006 in 1999.
The Royalty Guarantors' net income was $2,020 for the three months ended
September 30, 2000 compared to a net income of $926 for the same period of 1999.
For the nine month period ended September 30, 2000, net income decreased to
$3,589 from $6,513 in 1999.
Liquidity and Capital Resources:
On July 21, 1995, Salton Sea Funding Corporation obtained a $15 million seven
year revolving credit agreement between Credit Suisse as bank and agent and
other lenders. The interest rate is at the Adjusted Base Rate plus .375% or at
the LIBOR rate plus 100 basis points. On May 26, 2000, Salton Sea Funding
Corporation borrowed $15 million under its revolving credit agreement. The loan
was repaid in two installments, $5 million on July 26, 2000 and $10 million
on August 28, 2000.
<PAGE>
SALTON SEA FUNDING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per kwh data)
_________________________________
Liquidity and Capital Resources: (continued)
Salton Sea 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 have
been 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 expected to commence commercial operation by the end of
2000 or early 2001. In September 1999, Minerals LLC entered into a sales
agreement whereby certain grades of zinc produced by the Zinc Recovery Project
will be sold to Cominco, Ltd. at market value plus a premium. The initial term
of the agreement expires in December 2005.
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"). Total project costs of the Zinc Recovery Project are expected to be
approximately $200,900, which is being funded by $140,500 of debt and $60,400
from equity contributions. The Company has incurred $172,200 of such costs
through September 30, 2000.
Salton Sea Power LLC, a Salton Sea Guarantor, has constructed Salton Sea V which
is now in operation. Salton Sea V is a 49 net MW geothermal power plant which
will sell approximately one-third of its net output to the Zinc Recovery Project
when the Zinc Project is completed. The remainder is being sold through the
California Power Exchange ("PX") or in other market transactions.
CE Turbo LLC, a Partnership Guarantor, completed construction and began
operation of the CE Turbo Project. The CE Turbo Project has a capacity of 10 net
MW. The net output of the CE Turbo Project is being sold to the Zinc facility or
sold through the PX or in other market transactions.
The Partnership Projects have upgraded the geothermal brine processing
facilities at the Vulcan and Del Ranch Projects with the brine facilities
construction.
<PAGE>
SALTON SEA FUNDING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per kwh data)
_________________________________
Liquidity and Capital Resources: (continued)
The operating Salton Sea Guarantors' only source of revenue is payments received
pursuant to long term power sales agreements with Edison, other than Unit 5
revenue and 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, other than CE Turbo and Zinc revenue and
interest earned on funds on deposit. The Royalty Guarantor's only source of
revenue is Royalties received pursuant to resource lease agreements with the
Partnership Projects. 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.
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 and construction
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, for a description of such factors. The Company assumes no
responsibility to update forward-looking information contained herein.
<PAGE>
SALTON SEA FUNDING CORPORATION
PART II - OTHER INFORMATION
Item 1 - Legal proceedings.
Neither the Salton Sea Funding Corporation nor the Guarantors are parties
to any material legal matters.
Item 2 - Changes in Securities.
Not applicable.
Item 3 - Default on Senior Securities.
Not applicable.
Item 4 - Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5 - Other Information.
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit 27 - Financial Data Schedule
(b) Report on Form 8-K:
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SALTON SEA FUNDING CORPORATION
Date: August 11, 2000 /s/ Joseph M. Lillo
Joseph M. Lillo
Vice President and
Controller
<PAGE>
EXHIBIT INDEX
Exhibit Page
No. No.
27 Financial Data Schedule 36
