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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2000
Commission File Number 33-95928
LS POWER FUNDING CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 81-0502366
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
9405 ARROWPOINT BOULEVARD, CHARLOTTE, NC 28273, (704) 525-3800
(Address, including zip code, and telephone
number, including area code,
of registrant's principal executive offices)
LSP-COTTAGE GROVE, L.P.
LSP-WHITEWATER LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
DELAWARE 81-0493289
DELAWARE 81-0493287
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
9405 ARROWPOINT BOULEVARD, CHARLOTTE, NC 28273, (704) 525-3800
(Address, including zip code, and telephone
number, including area code,
of registrant's principal executive offices)
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, and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No[ ]
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LS POWER FUNDING CORPORATION
LSP-COTTAGE GROVE, L.P.
LSP-WHITEWATER LIMITED PARTNERSHIP
INDEX
TO THE QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
PART I
Page
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Item 1. Condensed Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 3
PART II
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
Financial Statement Index F-1
2
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PART I/ITEM 1. CONDENSED FINANCIAL STATEMENTS
The unaudited condensed financial statements contained herein have been
prepared pursuant to the rules and regulations of the United States Securities
and Exchange Commission (the "Commission"). Certain information and footnote
disclosures normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. While the management of LS Power Funding Corporation ("Funding"),
LSP-Cottage Grove, L.P. ("Cottage Grove") and LSP-Whitewater Limited Partnership
("Whitewater"), (Cottage Grove and Whitewater are sometimes referred to herein
individually as a "Partnership" and collectively as the "Partnerships") believes
that the disclosures made are adequate to make the information presented not
misleading, these unaudited condensed financial statements should be read in
conjunction with the audited financial statements included in the Annual Report
on Form 10-K for the year ended December 31, 1999 filed by Funding and the
Partnerships.
PART I/ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
In addition to discussing and analyzing Funding's and the Partnerships'
recent historical financial results and condition, the following "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
includes statements concerning certain trends and other forward-looking
information affecting or relating to Funding and the Partnerships which are
intended to qualify for the protections afforded "Forward-Looking Statements"
under the Private Securities Litigation Reform Act of 1995, Public Law 104-67.
The forward-looking statements made herein are inherently subject to risks and
uncertainties which could cause Funding's and the Partnerships' actual results
to differ materially from the forward-looking statements.
GENERAL
Cottage Grove is a single purpose Delaware limited partnership
established in December 1993 to develop, finance, construct and own a gas-fired
cogeneration facility located in Cottage Grove, Minnesota (the "Cottage Grove
Facility"). The 1% general partner, LSP-Cottage Grove, Inc., and the 72% limited
partner, Cogentrix Cottage Grove, LLC, are indirect subsidiaries of Cogentrix
Energy, Inc. ("Cogentrix Energy"). The other limited partner is TPC Cottage
Grove, Inc. ("TPC Cottage Grove") and is not affiliated with Cogentrix Energy.
Whitewater is a single purpose Delaware limited partnership established in
December 1993 to develop, finance, construct and own a gas-fired cogeneration
facility located in Whitewater, Wisconsin (the "Whitewater Facility", and
collectively with the Cottage Grove Facility, the "Facilities"). The 1% general
partner, LSP-Whitewater I, Inc., and the 73% limited partner, Cogentrix
Whitewater, LLC, are indirect subsidiaries of Cogentrix Energy. The other
limited partner is TPC Whitewater ("TPC Whitewater"), an affiliate of TPC
Cottage Grove that is not affiliated with Cogentrix Energy. The Partnerships
sell electric capacity and energy generated by their Facilities to two utilities
under separate long-term power purchase agreements (individually, the "Power
Purchase Agreement" and collectively, the "Power Purchase Agreements").
Whitewater sells up to 236.5 megawatts of electric capacity and associated
energy generated by the Whitewater Facility to Wisconsin Electric Power Company
("WEPCO") pursuant to a 25-year Power Purchase Agreement. Whitewater may also
sell to third parties up to 12 megawatts of electric capacity and any energy not
dispatched by WEPCO. All of the electric capacity and energy generated by the
Cottage Grove Facility is sold to Northern States Power Company ("NSP") pursuant
to a 30-year Power Purchase Agreement. The Partnerships also have long-term
steam supply agreements with steam hosts to supply thermal energy produced by
the Facilities.
The Whitewater Facility commenced commercial operations on September
18, 1997, and the Cottage Grove Facility commenced commercial operations on
October 1, 1997. The Whitewater and Cottage Grove Power Purchase Agreements meet
the criteria of a "sales-type" capital lease as described in Statement of
Financial Accounting Standards ("SFAS") No. 13, "Accounting for Leases." Cottage
Grove and Whitewater each recognized a gain on sales-type capital lease for the
difference between the estimated fair market value and the historical cost of
the Facilities as of the commencement of each respective Power Purchase
Agreement's terms (commencement of commercial operations). The Partnerships each
recorded a net investment in lease that reflects the present value of future
minimum lease payments. The gross investment in lease (future minimum lease
payments) represents the
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amount of capacity payments due from the utilities under the Power Purchase
Agreements in excess of fixed operating costs (i.e. executory costs). The
difference between the undiscounted future minimum lease payments due from the
utilities and discounted future minimum lease payments represents unearned
income. This unearned income is being recognized as lease revenue over the
respective terms of the Power Purchase Agreements using the effective interest
rate method. The Partnerships will also recognize service revenue related to the
reimbursement of costs incurred in operating the Facilities and providing
electricity and thermal energy. The amount of service revenue recognized by each
Partnership will be directly related to the level of dispatch of the Facilities
by the respective utilities and to a lesser extent the level of thermal energy
required by the steam hosts.
Funding
Funding was organized in June 1995 as a special purpose Delaware
corporation to issue debt securities in connection with financing the
construction of the Facilities. Funding's sole business activities are limited
to maintaining its organization and activities necessary pursuant to the
offering of the Senior Secured Bonds (defined below) and its acquisition of the
First Mortgage Bonds (defined below) from the Partnerships.
The Senior Secured Bonds are the following:
7.19% Senior Secured Bonds Due 2010, Series A of LS Power
Funding Corporation
8.08% Senior Secured Bonds Due 2016, Series A of LS Power
Funding Corporation
The First Mortgage Bonds are the following:
7.19% First Mortgage Bonds of LSP-Cottage Grove, L.P. Due 2010
8.08% First Mortgage Bonds of LSP-Cottage Grove, L.P. Due 2016
7.19% First Mortgage Bonds of LSP-Whitewater Limited
Partnership Due 2010
8.08% First Mortgage Bonds of LSP-Whitewater Limited
Partnership Due 2016
Cottage Grove and Whitewater each own 50% of the outstanding stock
of Funding.
RESULTS OF OPERATIONS
Cottage Grove
Operating revenues increased approximately 10.6% to $12.5 million for
the third quarter of 2000 as compared to $11.3 million for the third quarter of
1999. This was the result of an increase in service revenue which was partially
offset by a decrease in commodity sales. The increase in service revenue
resulted from an increase in the variable energy rate charged as a result of an
increase in natural gas prices, which was partially offset by a decrease in
megawatt hours sold to the purchasing utility. The decrease in commodity sales
resulted from a decrease in remarketed fuel sales to third party purchasers.
Operating revenues increased approximately 6.9% to $37.0 million for
the nine-month period ended September 30, 2000 as compared to $34.6 million for
the nine-month period ended September 30, 1999. This increase was the result of
an increase in service revenues and commodity sales. The increase in service
revenue resulted from an increase in the variable energy rate charged as a
result of an increase in natural gas prices, which was partially offset by a
decrease in megawatt hours sold to the purchasing utility. The increase in
commodity sales resulted from an increase in remarketed fuel sales to third
party purchasers.
Operating expenses increased approximately 25.8% to $7.8 million for
the third quarter of 2000 as compared to $6.2 million for the third quarter of
1999. This change was primarily the result of an increase in natural gas prices
which was partially offset by a decrease in megawatt hours sold to the
purchasing utility. The increase was further offset by a decrease in remarketed
fuel sales to third party purchasers.
Operating expenses increased approximately 13.2% to $23.1 million for
the nine-month period ended September 30, 2000 as compared to $20.4 million for
the nine-month period ended September 30, 1999. This change was the result of an
increase in natural gas prices. This increase was partially offset by a decrease
in
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megawatt hours sold to the purchasing utility. Commodity sales expense increased
due to an increase in remarketed fuel sales to third party purchasers.
Whitewater
Operating revenues increased approximately 6.8% to $14.2 million for
the third quarter of 2000 as compared to $13.3 million for the third quarter of
1999. This was the result of an increase in service revenue and commodity
revenues which was partially offset by a decrease in greenhouse revenues. The
increase in service revenue resulted from an increase in the variable energy
rate charged as a result of an increase in natural gas prices, which was
partially offset by a decrease in megawatt hours sold to the purchasing utility.
The increase in commodity sales resulted from an increase in remarketed fuel
sales to third party purchasers. The decrease in greenhouse revenues resulted
from the production of a smaller crop during the third quarter of 2000 as
compared to the corresponding period of 1999.
Operating revenues increased approximately 13.1% to $44.0 million for
the nine-month period ended September 30, 2000 as compared to $38.9 million for
the nine-month period ended September 30, 1999. This change was the result of an
increase in service and commodity revenues. Service revenues increased as the
result of an increase in the variable energy rate charged as the result of an
increase in natural gas prices, which was partially offset by a decrease in
megawatt hours sold to the purchasing utility. The increase in commodity sales
resulted from an increase in remarketed fuel sales to third party purchasers.
Operating expenses increased approximately 10.8% to $8.2 million for
the third quarter of 2000 as compared to $7.4 million for the third quarter of
1999. This change was primarily the result of an increase in natural gas prices
which was partially offset by a decrease in megawatt hours sold to the
purchasing utility. To a lesser extent, the increase resulted from an increased
commodity sales due to an increase in remarketed fuel sales to third party
purchasers.
Operating expenses increased approximately 23.5% to $26.3 million for
the nine-month period ended September 30, 2000 as compared to $21.3 million for
the nine-month period ended September 30, 1999. This increase was a result of
the factors discussed above: an increase in natural gas expense and an increase
in commodity sales expense. To a lesser extent, the change was the result of
increased greenhouse expenses from the introduction of new products at the
greenhouse.
OPERATIONS AND MAINTENANCE
Operations and Maintenance Agreements
Each facility is operated by its respective general partner pursuant to
operations and maintenance agreements (an "O&M Agreement", and collectively, the
"O&M Agreements") expiring in 2004. Under each O&M Agreement, the general
partners are required to provide certain services during the operation of the
Facilities. As compensation for its services, each general partner is reimbursed
under each O&M Agreement on a monthly basis for certain approved costs incurred
in connection with operating the related Facility. In addition, each general
partner will receive an annual management fee of $350,000 (subject to adjustment
each year based on specified indices). The Partnerships contract directly with
certain subcontractors for materials and services which are outside the scope of
the general partners' obligations under the O&M Agreements, including major
maintenance of the Facilities. The general partners are also subject to an
annual performance bonus or penalty depending upon each Facility's availability
relative to certain performance criteria reflecting aspects of similar criteria
contained in each Facility's Power Purchase Agreement. Furthermore, the general
partners are subject to a penalty payment depending upon each Facility's ability
to produce an uninterrupted supply of thermal energy.
LIQUIDITY AND CAPITAL RESOURCES
Cottage Grove
The principal component of operating cash flow for the nine-month
period ending September 30, 2000 was net income of $5.4 million. Total cash flow
provided by operating activities of $10.4 million and cash on hand at
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the beginning of the period of $0.3 million were primarily used to fund $4.2
million of escrow, repay $0.5 million of first mortgage bonds payable and fund
$5.8 million of distributions to partners.
Whitewater
The principal component of operating cash flow for the nine-month
period ended September 30, 2000 was net income of $8.1 million. Total cash flow
provided by operating activities of $12.6 million was primarily used to fund
$7.0 million of escrow, repay $0.6 million of first mortgage bonds payable and
fund $4.7 million of distributions to partners.
A portion of the proceeds received by the Partnerships from the sale of
the First Mortgage Bonds were used by the Partnerships to maintain a debt
service reserve fund as required by certain financing documents. During 2000 and
1999, the Partnerships transferred the cash held in their debt service reserve
funds to Cogentrix Energy. The required funds of $6.8 million and $7.8 million
for Cottage Grove and Whitewater, respectively, are included on the respective
balance sheets as a Note Receivable from Affiliate at September 30, 2000. The
receivables are backed by an irrevocable letter of credit issued on behalf of a
subsidiary of Cogentrix Energy.
In addition to funds received through the sale of the First Mortgage
Bonds by the Partnerships and through the equity contributions received from the
partners, each Partnership may receive on its behalf certain letters of credit
to be issued pursuant to a letter of credit facility which expires in June 2002.
Each letter of credit facility provides for letters of credit in a face amount
not to exceed $5,000,000 for Whitewater and $5,500,000 for Cottage Grove, which
may be drawn on by the respective Partnership from time to time. Such letters of
credit will satisfy certain requirements of the Partnerships under various
project agreements. Cottage Grove has issued a $500,000 letter of credit under
its letter of credit facility to secure certain obligations under their Power
Purchase Agreement.
In order to provide for the Partnerships' working capital needs, the
Partnerships have each entered into a working capital facility. Each working
capital facility will provide for working capital loans in an aggregate
principal amount not to exceed $3,000,000 for each Partnership. At September 30,
2000, no amounts were outstanding under the working capital facilities.
The Partnerships expect that payments from the utilities under the
Power Purchase Agreements will provide the substantial majority of their cash
flows. Under and subject to the terms of the Power Purchase Agreements, each
utility is obligated to purchase electric capacity made available to it and
energy that it requests from the related Partnership. For additional information
regarding NSP and WEPCO, reference is made to the respective Annual Reports
filed on Form 10-K, the Quarterly Reports filed on Form 10-Q, proxy, and any
other filings made by NSP and WEPCO with the Commission.
The Power Purchase Agreements are dispatchable contracts that provide
the utilities the right to suspend or reduce purchases of electricity from the
Facilities. The Power Purchase Agreements are structured such that the
Partnerships will continue to receive capacity payments during any period of
dispatch. Each Partnership is dependent on capacity payments under its Power
Purchase Agreement to meet its fixed obligations, including the payment of debt
service under each Partnership's First Mortgage Bonds (which will be Funding's
sole source of funds for payment of debt service under the Senior Secured
Bonds). Capacity payments by each of NSP and WEPCO are based on the tested
capacity and availability of the Facilities and are unaffected by levels of
dispatch. Each Facility's capacity is subject to semi-annual verification
through testing. Capacity payments are subject to reduction if a Facility is
operating at reduced or degraded capacity at the time of such test, although
each Facility is permitted a retest subject to certain retest limitations. Also,
capacity payments for each Facility are subject to rebate or reduction if the
respective Facility does not maintain certain minimum levels of availability.
Under the Cottage Grove Power Purchase Agreement, capacity payments are further
adjusted by, among other things, the capacity loss factor which is determined in
accordance with procedures jointly agreed to by Cottage Grove and NSP. The
Partnerships expect to achieve the minimum capacity and availability levels;
however, any material shortfall in tested capacity or availability over a
significant period could result in a shortage of funds to the Partnerships.
Each Partnership presently believes that funds available from cash and
investments on hand, restricted funds, operations and letter of credit and
working capital facilities will be more than sufficient to satisfy each
Partnership's obligations as they come due, pay project debt service and make
required contributions to project reserve accounts.
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As with any power generation facility, operation of the Facilities will
involve certain risks, including the performance of a Facility below expected
levels of output or efficiency, interruptions in fuel supply, pipeline
disruptions, disruptions in the supply of thermal or electrical energy, power
shut-downs due to the breakdown or failure of equipment or processes, violation
of permit requirements (whether through operation, or change in law), operator
error, labor disputes or catastrophic events such as fires, earthquakes,
explosions, floods or other similar occurrences affecting a Facility or its
power purchasers, thermal energy purchasers, fuel suppliers or fuel
transporters. The occurrence of any of these events could significantly reduce
or eliminate revenues generated by a Facility or significantly increase the
expenses of that Facility, thereby impacting the ability of a Partnership to
make payments of the amounts necessary to fund principal of and interest on its
First Mortgage Bonds, and, consequently, Funding's ability to make payments of
principal and interest on the Senior Secured Bonds. Not all risks are insured
and the proceeds of such insurance applicable to covered risks may not be
adequate to cover a Facility's lost revenues or increased expenses. In addition,
extended unavailability under the Power Purchase Agreements, which may result
from one or more of such events, may entitle the respective power purchaser to
terminate its Power Purchase Agreement.
IMPACT OF ENERGY PRICE CHANGES, INTEREST RATES AND INFLATION
The Partnerships have attempted to mitigate the risk of increases in
fuel and transportation costs by providing contractually for matching increases
in the energy payments the Partnerships receive from the utilities purchasing
electricity generated by the Facilities. In addition, the Partnerships have
mitigated the risk of fluctuations in interest rates by arranging fixed-rate
financing.
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PART 2/ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Incorporation of LS Power Funding Corporation
(1)
3.2 Bylaws of LS Power Funding Corporation (1)
3.3 Certificate of Limited Partnership of LSP-Cottage Grove, L.P.
(1)
3.4 Amended and Restated Partnership Agreement dated as of June
30, 1995 among LSP-Cottage Grove, Inc., Granite Power
Partners, L.P. and TPC Cottage Grove, Inc. (1)
3.4.1 Amendment No. 1 to the Cottage Grove Partnership Agreement (2)
3.4.2 Consent, Waiver and Amendment No. 2 dated March 20, 1998 to
the Amended and Restated Limited Partnership Agreement of
LSP-Cottage Grove, L.P. (3)
3.4.3 Third Amendment, dated December 11, 1998, to the Amended and
Restated Limited Partnership Agreement of LSP-Cottage Grove,
L.P. (4)
3.5 Certificate of Limited Partnership of LSP-Whitewater Limited
Partnership (1)
3.6 Amended and Restated Partnership Agreement dated as of June
30, 1995 among LSP-Whitewater I, Inc., Granite Power Partners,
L.P. and TPC Whitewater, Inc. (1)
3.6.1 Consent, Waiver and Amendment No. 1 dated March 20, 1998 to
the Amended and Restated Limited Partnership Agreement of
LSP-Whitewater Limited Partnership (3)
3.6.2 Second Amendment, dated December 11, 1998, to the Amended and
Restated Limited Partnership Agreement of LSP-Whitewater
Limited Partnership (3)
4.1 Trust Indenture dated as of May 1, 1995 by and among LS Power
Funding Corporation and IBJ Schroder Bank & Trust Company, as
Trustee, with respect to the Senior Secured Bonds (as
Supplemented by the First Supplemental Indenture dated as of
May 1, 1995 by and among LS Power Funding Corporation and IBJ
Schroder Bank & Trust Company, as Trustee (1)
4.2 Trust Indenture dated as of May 1, 1995 by and among
LSP-Cottage Grove, L.P. and IBJ Schroder Bank & Trust Company,
as Trustee, with respect to the Cottage Grove First Mortgage
Bonds (as supplemented by the First Supplemental Indenture
dated as of May 1, 1995 by and among LSP-Cottage Grove, L.P.
and IBJ Schroder Bank & Trust Company, as Trustee) (1)
4.3 Trust and Indenture dated as of May 1, 1995 by and among
LSP-Whitewater Limited Partnership and IBJ Schroder Bank &
Trust Company, as Trustee, with respect to the Whitewater
First Mortgage Bonds (as supplemented by the First
Supplemental Indenture dated as of May 1, 1995 by and among
LSP-Whitewater Limited Partnership and IBJ Schroder Bank &
Trust Company, as Trustee) (1)
4.4 Registration Rights Agreement dated as of June 30, 1995 by and
among Chase Securities, Inc., Morgan Stanley & Co.
Incorporated, LS Power Funding Corporation, LSP-Cottage Grove,
L.P., and LSP-Whitewater Limited Partnership (1)
4.5 Form of Senior Secured Bond (included in Exhibit 4.1) (1)
4.6 Form of Cottage Grove First Mortgage Bond (included in Exhibit
4.2) (1)
4.7 Form of Whitewater First Mortgage Bond (included in Exhibit
4.3) (1)
27.1 Financial Data Schedule - LS Power Funding Corporation
27.2 Financial Data Schedule - LSP - Cottage Grove, L.P.
27.3 Financial Data Schedule - LSP - Whitewater Limited Partnership
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter covered by this
report.
(1) Incorporated herein by reference to the Registration Statement
on Form S-4 (File No. 33-95928) filed by LS Power Funding
Corporation, LSP-Cottage Grove, L.P. and LSP-Whitewater
Limited Partnership on August 16, 1995, as amended, or to the
Form 10-K (File No. 33-95928) filed for the fiscal year ended
December 31, 1995 by LS Power Funding Corporation, LSP-Cottage
Grove, L.P. and LSP-Whitewater Limited Partnership.
(2) Incorporated herein by reference to the Form 10-Q (File No.
33-95928) filed August 14, 1996.
(3) Incorporated herein by reference to the Form 10-K (File No.
33-95928) filed April 15, 1998.
(4) Incorporated herein by reference to the Form 10-K (File No.
33-95928) filed March 31, 1999.
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SIGNATURES: Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
LS POWER FUNDING CORPORATION
By: /s/ Thomas F. Schwartz
--------------------------------------------
Name: Thomas F. Schwartz
Title: Group Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: November 14, 2000
LSP-COTTAGE GROVE, L.P.
By: LSP-Cottage Grove, Inc.
Its: General Partner
By: /s/ Thomas F. Schwartz
--------------------------------------------
Name: Thomas F. Schwartz
Title: Group Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: November 14, 2000
LSP-WHITEWATER LIMITED PARTNERSHIP
By: LSP-Whitewater I, Inc.
Its: General Partner
By: /s/ Thomas F. Schwartz
--------------------------------------------
Name: Thomas F. Schwartz
Title: Group Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: November 14, 2000
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LS POWER FUNDING CORPORATION
LSP-COTTAGE GROVE, L.P.
LSP-WHITEWATER LIMITED PARTNERSHIP
FINANCIAL STATEMENT INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
LS POWER FUNDING CORPORATION
Balance Sheets as of September 30, 2000 (unaudited) and December 31, 1999 F-2
Statements of Income for the Three Months and Nine Months Ended
September 30, 2000 and 1999 (unaudited) F-3
Statements of Cash Flows for the Nine Months Ended September 30, 2000 and 1999 (unaudited) F-4
Notes to Condensed Financial Statements (unaudited) F-5
LSP-COTTAGE GROVE, L.P.
Balance Sheets as of September 30, 2000 (unaudited) and December 31, 1999 F-6
Statements of Income for the Three Months and Nine Months Ended
September 30, 2000 and 1999 (unaudited) F-7
Statements of Cash Flows for the Nine Months Ended September 30, 2000 and 1999 (unaudited) F-8
Notes to Condensed Financial Statements (unaudited) F-9
LSP-WHITEWATER LIMITED PARTNERSHIP
Balance Sheets as of September 30, 2000 (unaudited) and December 31, 1999 F-11
Statements of Income for the Three Months and Nine Months Ended
September 30, 2000 and 1999 (unaudited) F-12
Statements of Cash Flows for the Nine Months Ended September 30, 2000 and 1999 (unaudited) F-13
Notes to Condensed Financial Statements (unaudited) F-14
</TABLE>
F-1
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LS POWER FUNDING CORPORATION
BALANCE SHEETS
September 30, 2000 and December 31, 1999
(dollars in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 2000 1999
------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSET:
Cash $ 1 $ 1
Interest receivable from First Mortgage Bonds 6,451 --
INVESTMENT IN FIRST MORTGAGE BONDS 330,839 332,000
-------- --------
Total assets $337,291 $332,001
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of First Mortgage Bonds Payable $ 2,818 $ 2,322
Interest payable on First Mortgage Bonds 6,451 --
FIRST MORTGAGE BONDS PAYABLE 328,021 329,678
-------- --------
Total liabilities 337,290 332,000
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 1,000 shares authorized;
100 shares issued and outstanding -- --
Additional paid-in capital 1 1
-------- --------
Total stockholders' equity 1 1
-------- --------
Total liabilities and stockholders' equity $337,291 $332,001
======== ========
</TABLE>
The accompanying notes to the condensed financial statements are an integral
part of these balance sheets.
F-2
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LS POWER FUNDING CORPORATION
STATEMENTS OF INCOME (UNAUDITED)
For the Three Months and Nine Months Ended September 30, 2000 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
2000 1999 2000 1999
------ ------ ------- -------
<S> <C> <C> <C> <C>
Interest income $6,451 $6,472 $19,395 $19,415
Interest expense 6,451 6,472 19,395 19,415
------ ------ ------- -------
Net income $ -- $ -- $ -- $ --
====== ====== ======= =======
Earnings per common share $ -- $ -- $ -- $ --
====== ====== ======= =======
</TABLE>
The accompanying notes to the condensed financial statements are an integral
part of these statements.
F-3
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'
LS POWER FUNDING CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30, 2000 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2000 1999
------- -------
<S> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES $ -- $ --
CASH FLOWS FROM INVESTING ACTIVITIES:
Repayment of principal on investment in First Mortgage Bonds 1,161 --
------- -------
Net cash flows provided by investing activities 1,161 --
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of First Mortgage Bonds (1,161) --
------- -------
Net cash flows used in financing activities (1,161) --
------- -------
NET INCREASE (DECREASE) IN CASH -- --
CASH, beginning of period 1 1
------- -------
CASH, end of period $ 1 $ 1
======= =======
</TABLE>
The accompanying notes to the condensed financial statements are an integral
part of these statements.
F-4
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LS POWER FUNDING CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
UNAUDITED
1. FINANCIAL STATEMENTS
Information presented as of September 30, 2000 and for the three-month
and nine-month periods ended September 30, 2000 and 1999, has been prepared by
LS Power Funding Corporation ("Funding") without audit. In the opinion of
management, these unaudited condensed financial statements include all
adjustments (consisting of normal recurring adjustments) necessary to present
fairly Funding's financial position as of September 30, 2000, and the results of
its operations for the three-month and nine-month periods ended September 30,
2000 and 1999 and cash flows for the nine-month periods ended September 30, 2000
and 1999.
The unaudited condensed financial statements have been prepared
pursuant to the rules and regulations of the United States Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. While management believes
that the disclosures made are adequate to make the information presented not
misleading, these unaudited condensed financial statements should be read in
conjunction with Funding's audited financial statements included in Funding's
Annual Report on Form 10-K for the year ended December 31, 1999.
2. ORGANIZATION
Funding was established on June 23, 1995 as a special purpose Delaware
corporation to issue debt securities in connection with financing construction
of two gas-fired cogeneration facilities, one located in Cottage Grove,
Minnesota and the other located in Whitewater, Wisconsin. LSP-Cottage Grove,
L.P. ("Cottage Grove") and LSP-Whitewater Limited Partnership ("Whitewater") are
single purpose Delaware limited partnerships established to develop, finance,
construct and own the facilities at Cottage Grove and Whitewater, respectively.
Cottage Grove and Whitewater each own 50% of the outstanding stock of Funding.
Funding's sole business activities are limited to maintaining its organization,
the offering of the Senior Secured Bonds and its acquisition of the First
Mortgage Bonds issued by Cottage Grove and Whitewater.
3. RECLASSIFICATION
Certain reclassifications have been made to the prior period financial
statements to conform with the classification used in the financial statements
as of September 30, 2000, and for the three months and nine months then ended.
F-5
<PAGE> 15
LSP-COTTAGE GROVE, L.P.
BALANCE SHEETS
September 30, 2000 and December 31, 1999
(dollars in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 2000 1999
------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 684 $ 957
Restricted cash 4,474 244
Accounts receivable - trade 3,277 4,591
Fuel inventories 150 1,280
Fuel held for resale 1,695 711
Spare parts inventories 534 511
Other current assets 267 122
-------- --------
Total current assets 11,081 8,416
NET INVESTMENT IN LEASE (Note 3) 236,788 236,655
DEBT ISSUANCE AND FINANCING COSTS, net of accumulated
amortization of $1,427 and $1,184, respectively 5,695 5,938
NOTE RECEIVABLE FROM AFFILIATE 6,777 6,585
INVESTMENT IN UNCONSOLIDATED AFFILIATE 1 1
-------- --------
Total assets $260,342 $257,595
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Current portion of bonds payable $ 1,316 $ 1,084
Accounts payable 2,741 1,395
Accrued interest payable 3,012 --
Other accrued expenses 132 794
-------- --------
Total current liabilities 7,201 3,273
FIRST MORTGAGE BONDS PAYABLE 153,142 153,916
-------- --------
Total liabilities 160,343 157,189
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL 99,999 100,406
-------- --------
Total liabilities and partners' capital $260,342 $257,595
======== ========
</TABLE>
The accompanying notes to the condensed financial statements are an integral
part of these balance sheets.
F-6
<PAGE> 16
LSP-COTTAGE GROVE, L.P.
STATEMENTS OF INCOME (UNAUDITED)
For the Three Months and Nine Months ended September 30, 2000 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Lease revenue $ 5,331 $ 5,318 $ 15,991 $ 15,936
Service revenue 6,650 5,238 18,196 16,214
Commodity sales 512 725 2,592 2,260
Other -- -- 233 233
----------- ----------- ----------- -----------
12,493 11,281 37,012 34,643
OPERATING EXPENSES:
Cost of services 7,267 5,517 20,629 18,170
Commodity sales expense 512 725 2,446 2,199
----------- ----------- ----------- -----------
7,779 6,242 23,075 20,369
OPERATING INCOME 4,714 5,039 13,937 14,274
NON-OPERATING INCOME (EXPENSE):
Interest expense (3,119) (3,116) (9,353) (9,319)
Interest income 352 286 767 707
----------- ----------- ----------- -----------
NET INCOME $ 1,947 $ 2,209 $ 5,351 $ 5,662
=========== =========== =========== ===========
</TABLE>
The accompanying notes to the condensed financial statements are an integral
part of these statements.
F-7
<PAGE> 17
LSP-COTTAGE GROVE, L.P.
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months ended September 30, 2000 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,351 $ 5,662
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of debt issuance and financing costs 243 208
Amortization of unearned lease income (15,991) (15,936)
Minimum lease payments received 15,858 15,129
Decrease in accounts receivable - trade 1,314 1,314
(Increase) decrease in accounts receivable - other (112) 783
(Increase) decrease in fuel inventories 146 (207)
(Increase) decrease in spare parts inventories (23) 45
(Increase) decrease in other current assets (33) 75
Increase (decrease) in accounts payable 1,346 (2,067)
Increase in accrued expenses 2,350 4,511
----------- -----------
Net cash flows provided by operating activities 10,449 9,517
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in restricted cash (4,230) (3,287)
----------- -----------
Net cash flows used in investing activities (4,230) (3,287)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on First Mortgage Bonds (542) --
Partner distributions (5,758) (6,110)
Increase in note receivable from affiliate (192) (542)
----------- -----------
Net cash flows used in financing activities (6,492) (6,652)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (273) (422)
CASH AND CASH EQUIVALENTS, beginning of period 957 918
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 684 $ 496
=========== ===========
</TABLE>
The accompanying notes to the condensed financial statements are an integral
part of these statements.
F-8
<PAGE> 18
LSP-COTTAGE GROVE, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
UNAUDITED
1. FINANCIAL STATEMENTS
Information presented as of September 30, 2000 and for the three-month
and nine-month periods ended September 30, 2000 and 1999, has been prepared by
LSP-Cottage Grove, L.P. (the "Partnership") without audit. In the opinion of
management, these unaudited condensed financial statements include all
adjustments (consisting of normal recurring adjustments) necessary to present
fairly the Partnership's financial position as of September 30, 2000, and the
results of its operations for the three-month and nine-month periods ended
September 30, 2000 and 1999 and cash flows for the nine-month periods ended
September 30, 2000 and 1999.
The unaudited condensed financial statements have been prepared
pursuant to the rules and regulations of the United States Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. While management believes
that the disclosures made are adequate to make the information presented not
misleading, these unaudited condensed financial statements should be read in
conjunction with the Partnership's audited financial statements included in the
Partnership's Annual Report on Form 10-K for the year ended December 31, 1999.
2. ORGANIZATION
The Partnership is a Delaware limited partnership that was formed on
December 14, 1993 to develop, finance, construct and own a gas-fired
cogeneration facility with a design capacity of approximately 245 megawatts
located in Cottage Grove, Minnesota (the "Facility"). Construction and start-up
of the Facility was substantially completed and commercial operation commenced
October 1, 1997 (the "Commercial Operations Date"). The 1% general partner of
the Partnership is LSP-Cottage Grove, Inc., ("Cottage Grove"), a wholly-owned
subsidiary of Cogentrix Cottage Grove, LLC, ("Cogentrix Cottage Grove").
Cogentrix Cottage Grove and TPC Cottage Grove, Inc., are the sole limited
partners of the Partnership, owning approximately 72% and 27% limited
partnership interests, respectively. The ultimate parent of Cogentrix Cottage
Grove is Cogentrix Energy, Inc. ("Cogentrix Energy"), a North Carolina
corporation.
The Partnership holds a 50% equity ownership interest in LS Power
Funding Corporation ("Funding"), which was established on June 23, 1995 as a
special purpose funding corporation to issue debt securities (the "Senior
Secured Bonds") in connection with financing construction of the Facility and a
similar gas-fired cogeneration facility located in Whitewater, Wisconsin. On
June 30, 1995, a portion of the proceeds from the offering and sale of the
Senior Secured Bonds issued by Funding was used to purchase $155 million of
First Mortgage Bonds issued simultaneously by the Partnership.
All of the electric capacity and energy generated by the Facility is
sold to Northern States Power Company, (the "Utility") under a 30-year power
purchase agreement (the "Power Purchase Agreement"). The thermal energy
generated by the Facility is sold in the form of steam to Minnesota Mining and
Manufacturing Company (the "Steam Purchaser") under a 30-year thermal energy
sales agreement.
3. SALES-TYPE CAPITAL LEASE
The components of the net investment in lease at September 30, 2000,
are as follows (dollars in thousands):
Gross Investment in Lease $ 511,775
Unearned Income on Lease (274,987)
---------
Net Investment in Lease $ 236,788
=========
F-9
<PAGE> 19
Gross investment in lease represents total capacity payments receivable
over the remaining term of the Power Purchase Agreement, net of executory costs,
which are considered minimum lease payments in accordance with SFAS No. 13.
4. RECLASSIFICATION
Certain reclassifications have been made to the prior period financial
statements to conform with the classification used in the financial statements
as of September 30, 2000, and for the three months and nine months then ended.
F-10
<PAGE> 20
LSP-WHITEWATER LIMITED PARTNERSHIP
BALANCE SHEETS
September 30, 2000 and December 31, 1999
(dollars in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 2000 1999
---------- ----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,527 $ 1,446
Restricted cash 7,299 253
Accounts receivable - trade 4,338 4,381
Accounts receivable - other 1,722 5,858
Fuel inventories 648 470
Fuel held for resale 1,214 370
Spare parts inventories 732 758
Other current assets 222 310
---------- ----------
Total current assets 17,702 13,846
NET INVESTMENT IN LEASE (Note 3) 263,095 263,540
GREENHOUSE FACILITY, net of accumulated depreciation
of $1,254 and $953, respectively 7,541 7,816
DEBT ISSUANCE AND FINANCING COSTS, net of accumulated
amortization of $1,451 and $1,205, respectively 5,772 6,018
NOTE RECEIVABLE FROM AFFILIATE 7,739 7,519
INVESTMENT IN UNCONSOLIDATED AFFILIATE 1 1
---------- ----------
Total assets $ 301,850 $ 298,740
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Current portion of bonds payable $ 1,502 $ 1,238
Accounts payable 442 1,116
Accrued interest payable 3,439 --
Other accrued expenses 4,031 6,457
---------- ----------
Total current liabilities 9,414 8,811
FIRST MORTGAGE BONDS PAYABLE 174,879 175,762
---------- ----------
Total liabilities 184,293 184,573
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL: 117,557 114,167
---------- ----------
Total liabilities and partners' capital $ 301,850 $ 298,740
========== ==========
</TABLE>
The accompanying notes to the condensed financial statements are an integral
part of these balance sheets.
F-11
<PAGE> 21
LSP-WHITEWATER LIMITED PARTNERSHIP
STATEMENTS OF INCOME (UNAUDITED)
For the Three Months and Nine Months Ended September 30, 2000 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Lease revenue $ 5,857 $ 5,860 $ 17,582 $ 17,573
Service revenue 7,506 6,852 22,561 18,770
Commodity sales 425 16 1,425 206
Greenhouse revenue 193 344 1,774 1,771
Other 207 199 628 601
----------- ----------- ----------- -----------
14,188 13,271 43,970 38,921
OPERATING EXPENSES:
Cost of services 7,368 6,862 23,240 19,541
Greenhouse operating expenses 440 476 1,694 1,553
Commodity sales expense 425 16 1,340 193
----------- ----------- ----------- -----------
8,233 7,354 26,274 21,287
OPERATING INCOME 5,955 5,917 17,696 17,634
NON-OPERATING INCOME (EXPENSE):
Interest expense (3,539) (3,557) (10,641) (10,642)
Interest income 454 200 999 670
----------- ----------- ----------- -----------
NET INCOME $ 2,870 $ 2,560 $ 8,054 $ 7,662
=========== =========== =========== ===========
</TABLE>
The accompanying notes to the condensed financial statements are an integral
part of these statements.
F-12
<PAGE> 22
LSP-WHITEWATER LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30, 2000 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,054 $ 7,662
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of debt issuance and financing costs 246 253
Depreciation 275 327
Amortization of unearned lease income (17,582) (17,573)
Minimum lease payments received 18,027 17,208
Decrease in accounts receivable - trade 43 580
Decrease in accounts receivable - other 4,136 597
Increase in fuel inventories (1,022) (198)
Decrease in spare parts inventories 26 24
(Increase) decrease in other current assets 88 (31)
Decrease in accounts payable (674) (1,980)
Increase in accrued expenses 1,013 4,312
----------- -----------
Net cash flows provided by operating activities 12,630 11,181
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in restricted cash (7,046) (6,795)
----------- -----------
Net cash flows used in investing activities (7,046) (6,795)
----------- -----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Payment on First Mortgage Bonds (619) --
Partner distributions (4,664) (3,840)
Increase in note receivable from affiliate (220) (619)
----------- -----------
Net cash used in financing activities (5,503) (4,459)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 81 (73)
CASH AND CASH EQUIVALENTS, beginning of period 1,446 1,181
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 1,527 $ 1,108
=========== ===========
</TABLE>
The accompanying notes to the condensed financial statements are an integral
part of these statements.
F-13
<PAGE> 23
LSP-WHITEWATER LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS
UNAUDITED
1. FINANCIAL STATEMENTS
Information presented as of September 30, 2000 and for the three-month
and nine-month periods ended September 30, 2000 and 1999, has been prepared by
LSP-Whitewater Limited Partnership (the "Partnership") without audit. In the
opinion of management, these unaudited condensed financial statements include
all adjustments (consisting of normal recurring adjustments) necessary to
present fairly the Partnership's financial position as of September 30, 2000 and
the results of its operations for the three-month and nine-month periods ended
September 30, 2000 and 1999 and cash flows for the nine-month periods ended
September 30, 2000 and 1999.
The unaudited condensed financial statements have been prepared
pursuant to the rules and regulations of the United States Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. While management believes
that the disclosures made are adequate to make the information presented not
misleading, these unaudited condensed financial statements should be read in
conjunction with the Partnership's audited financial statements included in the
Partnership's Annual Report on Form 10-K for the year ended December 31, 1999.
2. ORGANIZATION
LSP-Whitewater Limited Partnership is a Delaware limited partnership
that was formed on December 14, 1993 to develop, finance, construct and own a
gas-fired cogeneration facility with a design capacity of approximately 245
megawatts located in Whitewater, Wisconsin (the "Facility"). Construction and
start-up of the Facility was substantially completed and commercial operation
commenced September 18, 1997 (the "Commercial Operations Date"). The 1% general
partner of the Partnership is LSP-Whitewater I, Inc., a wholly-owned subsidiary
of Cogentrix Whitewater, LLC ("Cogentrix Whitewater"). Cogentrix Whitewater and
TPC Whitewater, Inc. are the sole limited partners of the Partnership, owning
approximately 73% and 26% limited partnership interests, respectively. The
ultimate parent of Cogentrix Whitewater is Cogentrix Energy, Inc. ("Cogentrix
Energy"), a North Carolina corporation.
The Partnership holds a 50% equity ownership interest in LS Power
Funding Corporation ("Funding"), which was established on June 23, 1995 as a
special purpose Delaware corporation to issue debt securities (the "Senior
Secured Bonds") in connection with financing construction of the Facility and a
similar gas-fired cogeneration facility located in Cottage Grove, Minnesota. On
June 30, 1995, a portion of the proceeds from the offering and sale of the
Senior Secured Bonds issued by Funding was used to purchase $177 million of
First Mortgage Bonds issued simultaneously by the Partnership.
The Partnership sells up to 236.5 megawatts of electric capacity and
associated energy generated by the Facility to Wisconsin Electric Power Company
("WEPCO" or, as the context requires, the "Utility") pursuant to a 25-year power
purchase agreement (the "Power Purchase Agreement"). The Partnership may also
sell to third parties up to 12 megawatts of electric capacity and any energy
that is not dispatched by WEPCO. The thermal energy generated by the Facility is
provided in the form of steam to the University of Wisconsin - Whitewater under
a steam supply agreement expiring on June 30, 2005 and in the form of hot water
to a greenhouse owned by the Partnership (collectively, the "Steam Purchasers").
F-14
<PAGE> 24
3. SALES-TYPE CAPITAL LEASE
The components of the net investment in lease at September 30, 2000 are
as follows (dollars in thousands):
Gross Investment in Lease $ 552,127
Unearned Income on Lease (289,032)
---------
Net Investment in Lease $ 263,095
=========
Gross investment in lease represents total capacity payments receivable
over the remaining term of the Power Purchase Agreement, net of executory costs,
which are considered minimum lease payments in accordance with SFAS No. 13.
4. RECLASSIFICATION
Certain reclassifications have been made to the prior period financial
statements to conform with the classification used in the financial statements
as of September 30, 2000 and for the three months and nine months then ended.
F-15
