- - ---------------------------------------------------------------------------------------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------____________
FORM 10-Q
(MARK ONE)
/X/[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,June 30, 1994
OR
/ /[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission File No. 33-7591
--------------------____________
OGLETHORPE POWER CORPORATION
(AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 58-1211925
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
POST OFFICE BOX 1349
2100 EAST EXCHANGE PLACE
TUCKER, GEORGIA 30085-1349
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (404) 270-7600
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 of such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. The Registrant is a
membership corporation and has no authorized or outstanding equity securities.
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OGLETHORPE POWER CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31,JUNE 30, 1994
Page No.PAGE NO.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets at March 31,as of June 30, 1994 (Unaudited)
and December 31, 1993 3
Condensed Statements of Revenues and Expenses (Unaudited)
for the Three Months and Six Months Ended
March 31,June 30, 1994 and 1993 5
Condensed Statements of Cash Flows (Unaudited)
for the ThreeSix Months Ended March 31,June 30, 1994 and 1993 6
Notes to the Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 1315
SIGNATURES 1416
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OGLETHORPE POWER CORPORATION
CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
AT AT
MARCH 31,JUNE 30, DECEMBER 31,
1994 1993
----------- -----------------------
(UNAUDITED)
ELECTRIC PLANT, AT ORIGINAL COST:
IN SERVICE $ 5,049,415 $ 5,047,739$5,071,109 $5,047,739
LESS ACCUMULATED PROVISION FOR DEPRECIATION (1,142,994)(1,174,805) (1,110,296)
---------- ----------
3,906,4213,896,304 3,937,443
NUCLEAR FUEL, AT AMORTIZED COST 107,097104,625 110,177
PLANT ACQUISITION ADJUSTMENTS, AT AMORTIZED COST 7,0716,806 7,336
CONSTRUCTION WORK IN PROGRESS 488,907508,050 450,965
---------- ----------
4,509,4964,515,785 4,505,921
---------- ----------
INVESTMENTS AND FUNDS:
BOND, RESERVE AND CONSTRUCTION FUNDS, AT MARKET 79,01778,976 110,390
DECOMMISSIONING FUND, AT MARKET 55,06954,725 56,911
INVESTMENT IN ASSOCIATED ORGANIZATIONS, AT COST 18,85018,523 19,123
OTHER 486 486
---------- ----------
153,422152,710 186,910
---------- ----------
CURRENT ASSETS:
CASH AND TEMPORARY CASH INVESTMENTS, AT COST 73,843100,131 244,173
RECEIVABLES 81,54792,233 82,274
INVENTORIES, AT AVERAGE COST 85,26195,968 86,468
PREPAYMENTS AND OTHER CURRENT ASSETS 21,70018,047 14,763
---------- ----------
262,351306,379 427,678
---------- ----------
DEFERRED CHARGES:
PREMIUM AND LOSS ON REACQUIRED DEBT, BEING AMORTIZED 165,203163,464 91,981
DEFERRED AMORTIZATION OF SCHERER LEASEHOLD 73,70375,846 71,559
DEFERRED DEBT EXPENSE, BEING AMORTIZED 19,34819,503 21,527
DISCONTINUED PROJECT, BEING AMORTIZED 17,96117,609 18,314
---------- ----------
276,215276,422 203,381
---------- ----------
$ 5,201,484 $ 5,323,890$5,251,296 $5,323,890
---------- ----------
---------- ----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED STATEMENTS.The accompanying notes are an integral part of these condensed statements.
3
OGLETHORPE POWER CORPORATION
CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
EQUITY AND LIABILITIES
AT AT
MARCH 31,JUNE 30, DECEMBER 31,
1994 1993
----------- ----------------------- -------------
(UNAUDITED)
CAPITALIZATION:
PATRONAGE CAPITAL AND MEMBERSHIP FEES (NET OF
UNREALIZED LOSSES OF $ 1,5142,583 ON
AVAILABLE-FOR-SALE SECURITIES) $ 308,652321,094 $ 289,982
LONG-TERM DEBT 4,065,9344,101,657 4,058,251
OBLIGATION UNDER CAPITAL LEASES 303,531303,604 303,458
---------- ----------
4,678,1174,726,355 4,651,691
---------- ----------
CURRENT LIABILITIES:
LONG-TERM DEBT DUE WITHIN ONE YEAR 67,40768,379 78,644
DEFERRED MARGINS AND VOGTLE SURCHARGE TO BE
REFUNDED WITHIN ONE YEAR 19,13113,494 26,777
ACCOUNTS PAYABLE 54,58657,267 62,186
ACCRUED INTEREST 22,85326,751 108,702
ACCRUED AND WITHHELD TAXES 7,82814,655 9,401
ENERGY COSTS BILLED IN EXCESS OF ACTUALS 9,6427,361 11,456
OTHER CURRENT LIABILITIES 12,37611,420 40,234
---------- ----------
193,823199,327 337,400
---------- ----------
DEFFERED CREDITS AND OTHER LIABILITIES:
GAIN ON SALE OF PLANT, BEING AMORTIZED 64,96564,380 65,550
GAIN ON SALE OF SCHERER COMMON FACILITIES,
BEING AMORTIZED 5,0962,548 7,644
SALE OF INCOME TAX BENEFITS, BEING AMORTIZED 64,81262,787 66,838
ACCUMULATED DEFERRED INCOME TAXES 65,510 65,510
DEFERRED MARGINS AND VOGTLE SURCHARGE 21,083 21,083
DECOMMISSIONING RESERVE 90,45691,842 90,476
OTHER 17,62217,464 17,698
---------- ----------
329,544325,614 334,799
---------- ----------
$ 5,201,484 $ 5,323,890$5,251,296 $5,323,890
---------- ----------
---------- ----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED STATEMENTS.The accompanying notes are an integral part of these condensed statements.
4
OGLETHORPE POWER CORPORATION
CONDENSED STATEMENTS OF REVENUEREVENUES & EXPENSES
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED MARCH 31,
----------------------SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
1994 1993 1994 1993
-------- -------- -------- --------
OPERATING REVENUES:
SALES TO MEMBERS $ 225,458 $ 212,114$229,157 $223,807 $454,615 $435,921
SALES TO NON-MEMBERS 42,160 60,029
--------- ---------33,878 59,512 76,038 119,541
-------- -------- -------- --------
TOTAL OPERATING REVENUES 267,618 272,143
--------- ---------263,035 283,319 530,653 555,462
-------- -------- -------- --------
OPERATING EXPENSES:
FUEL 51,232 35,87448,600 42,444 99,832 78,318
PRODUCTION 32,118 28,83630,937 37,316 63,055 66,152
PURCHASED POWER 53,539 65,89357,652 70,175 111,192 136,068
DEPRECIATION AND AMORTIZATION 33,051 32,25433,222 32,358 66,273 64,612
TAXES OTHER THAN INCOME TAXES 6,105 6,0625,927 6,014 12,032 12,076
OTHER OPERATING EXPENSES 9,691 9,417
--------- ---------10,993 9,067 20,684 18,484
-------- -------- -------- --------
TOTAL OPERATING EXPENSES 185,736 178,336
--------- ---------187,331 197,374 373,068 375,710
-------- -------- -------- --------
OPERATING MARGIN 81,882 93,807
--------- ---------75,704 85,945 157,585 179,752
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
INTEREST INCOME 2,951 3,7172,183 5,729 5,134 9,446
AMORTIZATION OF DEFERRED MARGINS 6,6414,632 1,035 11,273 2,070
ALLOWANCE FOR EQUITY FUNDS USED
DURING CONSTRUCTION 681 447675 520 1,356 967
OTHER 5,475 5,648
--------- ---------5,819 5,265 11,295 10,913
-------- -------- -------- --------
TOTAL OTHER INCOME 15,748 10,847
--------- ---------13,309 12,549 29,058 23,396
-------- -------- -------- --------
INTEREST CHARGES:
INTEREST ON LONG-TERM OBLIGATIONS 86,302 94,24683,888 95,054 170,190 189,300
ALLOWANCE FOR DEBT FUNDS USED
DURING CONSTRUCTION (8,856) (6,342)
--------- ---------(8,386) (6,580) (17,242) (12,922)
-------- -------- -------- --------
NET INTEREST CHARGES 77,446 87,904
--------- ---------75,502 88,474 152,948 176,378
-------- -------- -------- --------
MARGIN BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 20,184 16,75013,511 10,020 33,695 26,770
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
FOR INCOME TAXES -- -- -- 13,340
--------- ----------------- -------- -------- --------
NET MARGIN $ 20,18413,511 $ 30,090
--------- ---------
--------- ---------10,020 $ 33,695 $ 40,110
-------- -------- -------- --------
-------- -------- -------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED STATEMENTS.The accompanying notes are an integral part of these condensed statements.
5
OGLETHORPE POWER CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREESIX MONTHS ENDED MARCH 31,JUNE 30, 1994 AND 1993
(DOLLARS IN THOUSANDS)
1994 1993
---- -------------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET MARGIN $ 20,18433,695 $ 30,090
--------- ---------40,110
---------- ----------
ADJUSTMENTS TO RECONCILE NET MARGIN TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES -- (13,340)
DEPRECIATION AND AMORTIZATION 47,213 46,73593,318 91,135
DEFERRED MARGINS AND AMORTIZATION OF DEFERRED MARGINS (6,641) (1,035)(11,273) (2,070)
ALLOWANCE FOR EQUITY FUNDS USED DURING CONSTRUCTION (681) (447)(1,356) (967)
OTHER (4,690) (3,377)(9,718) (6,829)
DECREASE (INCREASE) IN NET CURRENT ASSETS, EXCLUDING
LONG-TERM DEBT DUE WITHIN ONE YEAR AND DEFERRED MARGINS
AND VOGTLE SURCHARGE TO BE REFUNDED WITHIN ONE YEAR:
RECEIVABLES 727 (3,037)(9,959) (11,594)
INVENTORIES 1,207 (5,503)(9,500) (9,523)
PREPAYMENTS AND OTHER CURRENT ASSETS (6,937) (606)(3,284) 3,828
ACCOUNTS PAYABLE (7,600) (14,611)(4,919) (13,277)
ACCRUED INTEREST (85,849) (22,996)(81,951) (9,878)
ACCRUED AND WITHHELD TAXES (1,573) 4,8455,254 11,301
ENERGY COST BILLED IN EXCESS OF ACTUAL (1,814) (253)(4,095) (6,036)
OTHER CURRENT LIABILITIES (30,095) (4,715)
--------- ---------(28,814) (1,197)
---------- ----------
TOTAL ADJUSTMENTS (96,733) (18,340)
--------- ---------(66,297) 31,553
---------- ----------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (76,549) 11,750
--------- ---------(32,602) 71,663
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
PROPERTY ADDITIONS (48,860) (42,846)(100,213) (102,159)
NET PROCEEDS FROM BOND, RESERVE AND CONSTRUCTION FUNDS 31,373 33,78628,831 31,422
DECREASE (INCREASE) IN INVESTMENT IN ASSOCIATED ORGANIZATIONS 273 (91)
INCREASE600 212
DECREASE IN OTHER SHORT-TERM INVESTMENTS -- (72,076)20,105
DECREASE (INCREASE) IN DECOMMISSIONING FUND 1,842 (1,549)
OTHER (3,434) --
--------- ---------48 (2,856)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (18,806) (82,776)
--------- ---------(70,734) (53,276)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
DEBT PROCEEDS, NET 243,989 --293,731 36,066
DEBT PAYMENTS (318,056) (110,207)(337,176) (121,040)
REFUND OF VOGTLE SURCHARGE (1,005) --(2,010) (1,000)
OTHER 97 (777)
--------- ---------4,749 (2,541)
---------- ----------
NET CASH USED IN FINANCING ACTIVITIES (74,975) (110,984)
--------- ---------(40,706) (88,515)
---------- ----------
NET DECREASE IN CASH AND TEMPORARY CASH INVESTMENTS (170,330) (182,010)(144,042) (70,128)
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 244,173 275,624
--------- ------------------- ----------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $ 73,843100,131 $ 93,614
--------- ---------
--------- ---------205,496
---------- ----------
---------- ----------
CASH PAID FOR:
INTEREST (NET OF AMOUNTS CAPITALIZED) $ 161,096230,599 $ 107,955180,431
INCOME TAXES (REFUND) -- (43)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED STATEMENTS.The accompanying notes are an integral part of these condensed statements.
6
OGLETHORPE POWER CORPORATION
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31,JUNE 30, 1994 AND 1993
(A) The condensed financial statements included herein have been prepared by
Oglethorpe Power Corporation (Oglethorpe), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission (SEC). In
the opinion of management, the information furnished herein reflects all
adjustments (which included only normal recurring adjustments) necessary to
present fairly, in all material respects, the results for the periods ended
March 31,June 30, 1994 and 1993. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such SEC rules and regulations, although Oglethorpe believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed financial statements be
read in conjunction with the financial statements and the notes thereto
included in Oglethorpe's latest Annual Report on Form 10-K, as filed with
the SEC.
(B) Oglethorpe adopted Statement of Financial Accounting Standards Board Statement No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", as of
January 1, 1994. Under this statement,Statement, investment securities held by
Oglethorpe are classified as either available-for-sale or held-to-maturity.
Available-for-sale securities are carried at market value with unrealized
gains and losses, net of any tax effect, added to or deducted from
patronage capital. Unrealized gains and losses from investment securities
held in the decommissioning fund, which are also classified as
available-for-sale, are directly added to or deducted from the
decommissioning reserve. Held-to-maturity securities are carried at cost.
All realized and unrealized gains and losses are determined using the
specific identification method. In accordance with the provisions of this
statement,Statement, the amounts classified as bond, reserve and construction funds
and decommissioning fund on the accompanying Condensed Balance Sheets are
carried at cost as of December 31, 1993.
(C) Oglethorpe's share of the undiscounted cost of decommissioning co-owned
nuclear facilities, assuming decommissioning occurs promptly after the unit
is taken out of service, is estimated at approximately $254 million for
Hatch Unit No. 1, $356 million for Hatch Unit No. 2, $416 million for
Vogtle Unit No. 1 and $543 million for Vogtle Unit No. 2. The years in
which the above plants are expected to begin decommissioning are 2014,
2018, 2027 and 2029, respectively.
The annual provision for decommissioning, which totaled $5.9 million in
1993, is currently recovered from Members as depreciation expense. In
developing these estimates,the amount of the annual provision, the escalation rate was
assumed to be 4% and return on trust assets was assumed to be 8%.
The annual provision for decommissioning, which totaled $5.9 million in
1993, is currently recovered from Members as depreciation expense.
Oglethorpe's management is of the
7
opinion that any changes in cost
estimates of decommissioning will be fully recovered in future rates.
7
Beginning in the years noted above in which the units begin
decommissioning, the expected timing of payments for decommissioning costs
will extend for a period of 9 to 14 years. Oglethorpe's management does
not expect such payments to have an adverse impact on liquidity or capital
resources.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1994
Oglethorpe's net margin for the quarter ended March 31,June 30, 1994 was $20.2$13.5 million as
compared to $30.1$10.0 million for the same period of 1993. Oglethorpe's net margin
for the six months ended June 30, 1994 was $33.7 million as compared to $40.1
million for the first six months of 1993. Net margin was higher in the first
quartersix months of 1993 because of the implementation of Statement of Financial
Accounting Standards Board Statement No. 109, which resulted in the reversal of $13.3 million of
accumulated deferred income taxes which had been previously expensed. This
amount is reflected in the Condensed Statements of Revenues and Expenses as the
cumulative effect of a change in accounting principle.
OPERATING REVENUES
The increaseincreases in Member revenues wasfor the three month and six month periods ended
June 30, 1994 as compared to the same periods of 1993 were due, for the most
part, to a 17% increase in
energy sales in the first quarterincreased billings of 1994 and to the recovery of additional fixed costs resulting from the decline in
sell-backSell-back revenues from Georgia Power Company (GPC) under the plant operating
agreements noted below. Higher
megawatt-hour (MWh) sales were attributable to a colder than normal January in
Georgia in 1994.(as discussed below). Oglethorpe implemented a new rate in January
1994 which will increasehas increased revenues
for 1994 to address the Members' increasing share of
fixed costs. These higher capacity revenues were partially offset by lower
energy revenues derived from the flow through to the Members of reduced energy
costs. (See "Operating Expenses" below for a discussion of average fuel costs.)
For the three months and six months ended June 30, 1994, energy revenues from
Members declined by 9.9% and 2.8%, respectively, compared to the prior year
despite increases in megawatt-hour (MWh) sales of 7.2% and 11.7%, respectively.
Sales to non-Members are primarily made pursuant to three different types of
contractual arrangements with GPC and from energy sales to other non-Member
utilities. The following table summarizes the amounts of non-Member revenues
from these sources for the first quarter ofthree months and six months ended June 30, 1994 and
1993:
Three Months Ended March 31,
----------------------------June 30, Six Months Ended June 30,
-------------------------- -------------------------
1994 1993 1994 1993
---- ---- ---- ----
(dollars in thousands)
1994 1993
------- -------
Plant operating agreements $19,094 $34,964$14,425 $31,211 $33,519 $ 66,175
Power supply arrangements 9,237 17,1716,222 13,912 15,459 31,083
Transmission agreements 3,199 5,3112,533 4,003 5,732 9,314
Other utilities 10,630 2,58310,698 10,386 21,328 12,969
------- ------- ------- --------
Total $42,160 $60,029$33,878 $59,512 $76,038 $119,541
------- ------- ------- --------
------- ------- ------- --------
9
The decreasedecreases in revenues from non-Members in the first quarter of 1994 compared
to the same period of 1993 wasfor both comparable periods were
primarily attributable to lower revenues from GPC pursuant to plant operating
agreements. Under the plant operating agreements, GPC purchases capacity and
energy from Oglethorpe on a declining scale in the early years of operation of
certain co-owned generating units. The decreasedecreases in revenues of this type waswere
due to scheduled reductions in sell-back percentages for both of the Plant
Vogtle units and for Plant Scherer Unit No. 2.
9
The second source of non-Member revenues is derived pursuant to power supply
arrangements with GPC. These revenues are derived, for the most part, from
energy sales arising from dispatch situations whereby GPC causes co-owned
steamcoal-fired generating resources to be operated when Oglethorpe's system does not
require all of its contractual entitlement to the generation. These revenues
essentially represent reimbursement of costs to Oglethorpe since, under the
operating agreements, Oglethorpe is responsible for its share of fuel costs any
time a unit operates. See the discussion under "Operating Expenses" below of
the increased operation and lower average fuel costs of the Plant Scherercoal-fired generating units in first quarter 1994.
Revenues from sales of this type to GPC were lower in both comparable periods
due to the fact that Oglethorpe retained much of its share of the output from
the Plant Scherer and Wansley units because the lower average fuel costs made
Plant Schererthose units more attractive than certain purchased resources.
Other revenuesRevenues from non-Membersother non-Member utilities increased significantlysubstantially in the first quartersix
months ended June 30, 1994 as compared to the same period of 1994. This increase reflects greater revenues from off-system sales.1993. Oglethorpe
is continuing to pursue energy and capacity sales to other utilities as a means
of reducing amounts that must be recovered from Members.
OPERATING EXPENSES
The increasedecreases in total operating expenses wasfor the three months and six months
ended June 30, 1994 as compared to the same periods of 1993 were primarily
attributable to increasesreductions in fuelpurchased power expenses and production expenses
which were partially offset somewhat by increases in fuel expenses.
Most of the reduction in purchased power expenses.
The increaseincreases in fuel expenses was due, in large part,for both comparable periods were
attributable to substantially greater generation from Plant Scherer Units No. 1
and 2 in the first quarter of 1994 as
compared to the same period of 1993.2. Output from these units was almost oneapproximately 520,000 and 1.5 million MWh
higher, inrespectively, for the first quarter ofthree months and six months ended June 30, 1994.
Oglethorpe began receiving shipments at Plant Scherer of lower pricedlower-priced coal from
the mining regions of the western United States in the last quarter of 1993.
As a result ofDue primarily to the receiptuse of this lower pricedlower-priced coal, the average fuel cost for
the Scherer units decreased by 16.5%approximately 11% from last year's second quarter
and from the first quarter.six months of 1993. The lower average fuel cost made
utilization of Plant Scherer more attractive than certain purchased resources.
Additional energy was necessary to provide for the Plant
Wansley units also decreased, by almost 18%, in the second quarter of 1994.
This decrease was the result of increased needsspot purchases of the
Members andcoal.
The significant increase in coal-fired generation (prompted by declining average
fuel costs) as well as declining sales from these coal-fired resources to provide for the higher salesGPC
pursuant to other utilitiespower supply arrangements (see discussion under "Operating Revenues"
above). have resulted in substantially lower utilization
10
of purchased power resources. Energy purchases decreased by 47% and 44%,
respectively, in the three months and six months ended June 30, 1994 as compared
to the same periods of 1993.
The increasedecrease in production expenses in the second quarter of 1994 was due to an adjustment in first quartera
lower number of nuclear refueling outages. One of Oglethorpe's nuclear units
underwent a scheduled outage during the spring of 1994 as compared to two
scheduled outages during the same period of the amount of administrative and general costs paid to GPC in connection
with GPC's role as operating agent of co-owned generating units.
Purchased power expenses declined in the first quarter of 1994. This decrease
resulted from a 40.5% reduction in energy purchases. As discussed above, energy
from Plant Scherer was often utilized instead of higher priced purchased
resources.
10
1993.
OTHER INCOME
Other income was higher for the firstsecond quarter of 1994 primarily as a result of
increased
income from amortizationan increase in the amount of deferred margins.margins being amortized. Oglethorpe's
Board of Directors authorizes the amount of deferred margins to be returned to
the Members each year. For 1994, the annual amount authorized was $26.6$19.0 million
as compared to $4.1 million for 1993. Interest income declined due to lower
average cash balances. (See "Assets" under FINANCIAL CONDITION for a discussion
of the change in cash balances.)
INTEREST CHARGES
The decrease in net interest charges resulted from the refinancing efforts
completed during 1993 and in the first quarter of 1994. For a discussion of the
refinancing transactions, see the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in Oglethorpe's Annual Report on
Form 10-K for the year ended December 31, 1993. As a result of Oglethorpe's
refinancing transactions, the average interest rate on long-term debt declined
from 8.10% at June 30, 1993 to 7.15% at June 30, 1994. Allowance for debt funds
used during construction continues to increase in proportion to the level of
investment at the Rocky Mountain Project, a pumped storage hydroelectric
facility.
FINANCIAL CONDITION
Total assets and total equity and liabilities as of March 31,June 30, 1994 were $5.2$5.3
billion as compared to $5.3 billionwhich was
$73 million less than the total at December 31, 1993.
ASSETS
The increase in construction work in progress is primarily the result of
property additions during the six-month period of $40.6 million for Rocky
Mountain Project construction.
The decrease in bond, reserve and construction funds primarily resulted from the
utilization of a portion of the debt service reserve funds for debt service
payments. The available funds resulted from refinancing projects which did not
require a debt service reserve fund or which required a lower debt service
reserve fund than the refunded bonds.
11
The decrease in cash and temporary cash investments is partly due to the
December 31, 1993 Federal Financing Bank (FFB) interest payment being made as
due on January 3, 1994 and partly due to premiums paid in connection with FFB
note modifications and a pollution control bond (PCB) refunding. For a
discussion of the refinancing transactions, see the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Oglethorpe's
Annual Report on Form 10-K for the year ended December 31, 1993.
The increase in receivables resulted primarily from a $6.5 million higher
billing to Oglethorpe's Members for the month of June 1994 compared to December
1993.
Inventories increased primarily as a result of coal inventories for Plants
Scherer and Wansley returning to normal levels at June 30, 1994 from lower
levels at year-end.
Prepayments and other current assets increased primarily due to an $8.5a $2.3 million
increase in the payment made to GPC for estimates of Plant Wansley and Plant
Hatch production expenses and Plant Wansley coal purchases for AprilAugust 1994
compared to the estimate paid for January 1994.
The increase in the premium and loss on reacquired debt resulted from premiums
paid in connection with both FFB note modifications and the PCB refunding.
11
EQUITY AND LIABILITIES
For a discussion of unrealized losses on available-for-sale securities see Note
B of Notes to the Condensed Financial Statements.
Long-term debt due within one year decreased due to normal maturities of PCBs
and mortgage notes payable to the FFB.
Deferred margins and Vogtle surcharge to be refunded within one year decreased
by $7.6$13.3 million, which is the amount that was refunded to Members for the threesix
months ended March 31,June 30, 1994. See "Other Income" under RESULTS OF OPERATIONS for
a discussion of the 1994 amortization of deferred margins. For a description of
the Vogtle Surcharge, see Note 1 of Notes to Financial Statements in
Oglethorpe's Annual Report on Form 10-K for the year ended December 31, 1993.
Accounts payable declined as of March 31, 1994 as a result of normal variations
in the timing of payables activity.
Accrued interest decreased as discussed under cash and temporary investments
above.
Accrued and withheld taxes increased as a result of the normal monthly accruals
of property taxes, which are generally paid in the last quarter of the year.
Energy costs billed in excess of actuals decreased as a net result of the
refunding to Members of approximately $10 million of amounts over-collected in 1993 and the realization of
$8 million of energy cost savings compared to budgeted amounts.
12
The decrease in other current liabilities is partly due to an $11 million refund
to GPC of an option payment related to the canceled Pickens County Pumped
Storage Hydroelectric Project and partly due to normal variations in the timing of liabilities activity.
12variations.
13
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
As stated in Oglethorpe's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, the electric utility industry is becoming increasingly
competitive, and this increasing competition presents a challenge to companies
in the electric utility industry, including Oglethorpe and its Members, to
reduce costs and improve the management of resources. The 1993 Form
10-K reports a number of actions taken and being taken by Oglethorpe to
accomplish these objectives.
Oglethorpe and the Members believe that the changes in the industry, along with
the growing diversity of needs of the Members, make it beneficial to study the
feasibility of altering certain aspects of the relationship between Oglethorpe
and the Members, so as to allow for the possibility that the Members could
satisfy some or all of their additional future needs from sources other than
Oglethorpe. The Members currently discussing these matters with Oglethorpe have
stated their commitment to Oglethorpe and the Rural Electrification
Administration (REA) to honor their current financial obligations to
Oglethorpe under the Wholesale Power Contracts.
The study of these matters has recently been initiated. The results of the
study and any action Oglethorpe and the Members might take based thereon cannot
be predicted at this time. However, Oglethorpe's Board of Directors must
approve any changes to the current Wholesale Power Contracts and intends that
any new arrangement be structured so as not to have an adverse effect on
Oglethorpe or the other Members. REA must also approve any changes to these
contracts.
Recently, one of the Members prepaid all of its REA indebtedness, and thus, is
no longer an REA borrower. This prepayment does not affect this Member's
relationship with Oglethorpe under its Wholesale Power Contract. Certain other
Members may prepay all of their REA indebtedness in the future.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Number Description
- - ------ -----------
10.11(a) Amendment No. 1 to Interconnection Agreement between Alabama
Electric Cooperative, Inc. and Oglethorpe, dated as of April 22,
1994.
14
Number Description
- - ----- -----------
10.11(b) Letter of Commitment (Firm Power Sale) Under Service Schedule J -
Negotiated Interchange Service between Alabama Electric
Cooperative, Inc. and Oglethorpe, dated March 31, 1994.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by Oglethorpe for the quarter ended
March 31,June 30, 1994.
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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.
Oglethorpe Power Corporation
(An Electric Membership
Generation & Transmission
Corporation)
Date: May 13,AUGUST 12, 1994 By: /s/ T. D. Kilgore
------------ ----------------------------------------------------------------------------
T. D. Kilgore
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 13,AUGUST 12, 1994 /s/ John S. Dean, Sr.
------------ ----------------------------------------------------------------------------
John S. Dean, Sr.
Secretary-Treasurer
(Principal Financial Officer)
Date: May 13,AUGUST 12, 1994 /s/ Eugen Heckl
------------ ----------------------------------------------------------------------------
Eugen Heckl
Senior Vice President and Chief
Financial Officer (Principal Financial
Officer)
1416