=============================================================================================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________--------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31,JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)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 (770) 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.
==============================================================================================================================================================
OGLETHORPE POWER CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31,JUNE 30, 1996
PAGE NO.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of March 31,June 30, 1996 (Unaudited)
and December 31, 1995 3
Condensed Statements of Revenues and Expenses (Unaudited)
for the Three Months and Six Months Ended
March 31,June 30, 1996 and 1995 5
Condensed Statements of Cash Flows (Unaudited)
for the ThreeSix Months Ended March 31,June 30, 1996 and 1995 6
Notes to the Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 1214
SIGNATURES 1315
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Oglethorpe Power Corporation
Condensed Balance Sheets
June 30, 1996 and December 31, 1995
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OGLETHORPE POWER CORPORATION
CONDENSED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
1996 1995
ASSETSAssets (Unaudited)
-------------------------------------------------------------
ELECTRIC PLANT, AT ORIGINAL COST:Electric plant, at original cost:
In service $5,696,887$5,707,194 $5,699,213
Less: Accumulated provision for depreciation (1,389,588)(1,423,852) (1,362,431)
---------- ----------
4,307,299-------------- --------------
4,283,342 4,336,782
Nuclear fuel, at amortized cost 96,07599,313 94,013
Plant acquisition adjustments, at amortized cost 4,9494,684 5,214
Construction work in progress 41,61743,827 35,753
---------- ----------
4,449,940-------------- --------------
4,431,166 4,471,762
---------- ----------
INVESTMENTS AND FUNDS:-------------- --------------
Investments and funds:
Bond, reserve and construction funds, at market 53,07952,448 56,511
Decommissioning fund, at market 75,65276,871 74,492
Investment in associated organizations, at cost 15,50215,464 15,853
---------- ----------
144,233-------------- --------------
144,783 146,856
---------- ----------
CURRENT ASSETS:-------------- --------------
Current assets:
Cash and temporary cash investments, at cost 148,146152,371 201,151
Other short-term investments, at market 89,11889,829 79,165
Receivables 100,927109,716 99,559
Inventories, at average cost 86,08688,062 82,949
Prepayments and other current assets 17,32514,515 14,325
---------- ----------
441,602-------------- --------------
454,493 477,149
---------- ----------
DEFERRED CHARGES:-------------- --------------
Deferred charges:
Premium and loss on reacquired debt, being amortized 207,663205,200 200,794
Deferred amortization of Scherer leasehold 87,99488,855 87,134
Discontinued projects, being amortized 23,79523,286 24,305
Deferred debt expense, being amortized 20,90520,663 21,135
Other 15,77220,950 9,361
---------- ----------
356,129-------------- --------------
358,954 342,729
---------- ----------
$5,391,904-------------- --------------
$5,389,396 $5,438,496
---------- ----------
---------- ----------============= =============
The accompanying notes are an integral part of these condensed statements.
3
OGLETHORPE POWER CORPORATION
CONDENSED BALANCE SHEETS
MARCH 31,
Oglethorpe Power Corporation
Condensed Balance Sheets
June 30, 1996 AND DECEMBERand December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
1996
1995
EQUITIES AND LIABILITIESEquities and Liabilities (Unaudited) -------------------------
CAPITALIZATION:1996
-----------------------------------
Capitalization:
Patronage capital and membership fees (including unrealized
gains of $2,488$2,851 at March 31,June 30, 1996 and $3,570 at
December 31, 1995 on available-for-sale securities) $346,797 $338,891$ 351,893 $ 338,891
Long-term debt 4,181,7794,140,978 4,207,320
Obligations under capital leases 295,779295,080 296,478
---------- ----------
4,824,355-------------- --------------
4,787,951 4,842,689
---------- ----------
CURRENT LIABILITIES:-------------- --------------
Current liabilities:
Long-term debt and capital leases due within one year 98,485121,929 89,675
Deferred margins to be refunded within one year 21,85914,893 32,047
Accounts payable 39,75934,239 48,855
Accrued interest 72,43387,189 91,096
Accrued and withheld taxes 8,16515,471 1,785
Other current liabilities 12,77512,865 18,007
---------- ----------
253,476-------------- --------------
286,586 281,465
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:-------------- --------------
Deferred credits and other liabilities:
Gain on sale of plant, being amortized 60,28359,698 60,868
Sale of income tax benefits, being amortized 48,18646,178 50,194
Accumulated deferred income taxes 65,510 65,510
Decommissioning reserve 115,688118,389 114,049
Other 24,40625,084 23,721
---------- ----------
314,073-------------- --------------
314,859 314,342
---------- ----------
$5,391,904-------------- --------------
$5,389,396 $5,438,496
---------- ----------
---------- ----------============= =============
The accompanying notes are an integral part of these condensed statements.
4
Oglethorpe Power Corporation
Condensed Statements of Revenues and Expenses (Unaudited)
For the Three and Six Months Ended June 30, 1996 and 1995
- --------------------------------------------------------------------------------
OGLETHORPE POWER CORPORATION
CONDENSED STATEMENTS OF REVENUES AND EXPENSES (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
- -------------------------------------------------------------------------------------
(dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 ------------------------------1996 1995
--------- --------- -------- ---------
OPERATING REVENUES:
Operating revenues:
Sales to Members $ 246,458 $ 227,849$255,981 $252,468 $502,439 $480,317
Sales to non-Members 29,243 29,69819,247 28,760 43,478 58,459
--------- --------- TOTAL OPERATING REVENUES 275,701 257,547-------- ---------
Total operating revenues 275,228 281,228 545,917 538,776
--------- --------- OPERATING EXPENSES:-------- ---------
Operating expenses:
Fuel 48,240 47,51755,418 54,154 103,658 101,671
Production 30,369 32,24331,628 29,623 61,997 61,865
Purchased power 69,076 59,94758,162 61,567 122,226 121,514
Power delivery 3,658 3,9214,206 4,146 7,864 8,067
Depreciation and amortization 36,526 32,88436,564 34,255 73,090 67,139
Taxes other than income taxes 7,384 5,8917,342 6,529 14,726 12,420
Other operating expenses 6,880 6,4629,394 8,906 16,274 15,368
--------- --------- TOTAL OPERATING EXPENSES 202,133 188,865-------- ---------
Total operating expenses 202,714 199,180 399,835 388,044
--------- --------- OPERATING MARGIN 73,568 68,682-------- ---------
Operating margin 72,514 82,048 146,082 150,732
--------- --------- OTHER INCOME (EXPENSE)-------- ---------
Other income (expense):
Interest income 4,060 3,3124,680 4,599 8,740 7,911
Amortization of deferred margins 10,188 6,4626,966 4,958 17,154 11,420
Allowance for equity funds used during construction 47 76143 806 90 1,567
Other 2,642 2,8342,394 3,429 5,036 6,263
--------- --------- TOTAL OTHER INCOME 16,937 13,369-------- ---------
Total other income 14,083 13,792 31,020 27,161
--------- --------- INTEREST CHARGES:-------- ---------
Interest charges:
Interest on long-term-debt and other obligations 82,031 83,00882,329 85,524 164,360 168,532
Allowance for debt funds used during construction (514) (9,419)(464) (9,976) (978) (19,395)
--------- --------- NET INTEREST CHARGES 81,517 73,589-------- ---------
Net interest charges 81,865 75,548 163,382 149,137
--------- --------- NET MARGIN $ 8,988 $ 8,462-------- ---------
---------
--------- ---------Net margin $4,732 $20,292 $13,720 $28,756
======== ======== ======= =========
The accompanying notes are an integral part of these condensed statements.
5
Oglethorpe Power Corporation
Condensed Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, 1996 and 1995
OGLETHORPE POWER CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
1996 1995
--------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:Cash flows from operating activities:
Net margin $ 8,98813,720 $ 8,462
-------- --------
ADJUSTMENTS TO RECONCILE NET MARGIN TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:28,756
------------- -------------
Adjustments to reconcile net margin to net cash
provided by operating activities:
Depreciation and amortization 39,425 47,70488,441 98,020
Amortization of deferred margins (10,188) (6,462)(17,154) (11,420)
Allowance for equity funds used during construction (47) (761)(90) (1,567)
Other (859) (843)
CHANGE IN NET CURRENT ASSETS, EXCLUDING
LONG-TERM DEBT DUE WITHIN ONE YEAR AND DEFERRED MARGINS
TO BE REFUNDED WITHIN ONE YEAR:(1,232) (573)
Change in net current assets, excluding
long-term debt due within one year and deferred margins
to be refunded within one year:
Receivables (1,368) (1,484)(10,157) (31,136)
Inventories (3,137) (8,291)(5,113) (7,838)
Prepayments and other current assets (3,000) 3,465(189) 2,920
Accounts payable (9,096) (11,099)(14,616) (23,678)
Accrued interest 6,380 6,235(3,907) (78,959)
Accrued and withheld taxes (18,663) (79,781)13,686 13,775
Other current liabilities (5,232) (7,260)
-------- --------
TOTAL ADJUSTMENTS (5,785) (58,577)
-------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 3,203 (50,115)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:(5,142) (1,662)
------------- -------------
Total adjustments 44,527 (42,118)
------------- -------------
Net cash provided by (used in) operating activities 58,247 (13,362)
------------- -------------
Cash flows from investing activities:
Property additions (24,824) (36,086)(51,727) (84,070)
Net proceeds from bond, reserve and construction funds 2,397 11,7122,664 11,200
Decrease in investment in associated organizations 351 636389 912
Increase in other short-term investments (10,000) (17,107)(9,984) (28,130)
Increase (decrease) in decommissioning fund 729 (1,041)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (31,347) (41,886)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:(3,245) (3,274)
------------- -------------
Net cash used in investing activities (61,903) (103,362)
------------- -------------
Cash flows from financing activities:
Debt proceeds, net - 88,545397 142,112
Debt payments (25,366) (124,534)(42,430) (139,424)
Other 505 (412)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (24,861) (36,401)
-------- --------
NET DECREASE IN CASH AND TEMPORARY CASH INVESTMENTS (53,005) (128,402)
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD(3,091) (19)
------------- -------------
Net cash used in (provided by) financing activities (45,124) 2,669
------------- -------------
Net decrease in cash and temporary cash investments (48,780) (114,055)
Cash and temporary cash investments at beginning of period 201,151 190,642
-------- --------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $148,146------------- -------------
Cash and temporary cash investments at end of period $ 62,240
======== ========
CASH PAID FOR:152,371 $ 76,587
============ ============
Cash paid for:
Interest (net of amounts capitalized) $96,769 $149,265$ 157,883 $ 218,475
Income taxes - -
The accompanying notes are an integral part of these condensed statements.
6
OGLETHORPE POWER CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31,JUNE 30, 1996 AND 1995
(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, 1996 and 1995. 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.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Proposed Restructuring
As reported in its Annual Report on Form 10-K for the fiscal year ended December
31, 1995, Oglethorpe is planning to divide itself into three specialized
companies to respond to increasing competition in the electric industry. In June
and July of 1996, the Boards of Directors of Oglethorpe, Georgia Transmission
Corporation (GTC) and Georgia System Operations Corporation (GSOC) unanimously
approved a First Amended and Restated Restructuring Agreement (the Restructuring
Agreement) which sets forth the terms and conditions on which the restructuring
and related changes would occur. The current target date for full implementation
of the restructuring is January 1, 1997.
Under the Restructuring Agreement, Oglethorpe would transfer its transmission
business and assets to GTC, a newly formed Electric Member Corporation, which
would thereafter own and operate the transmission system and provide
transmission services to the Members, Oglethorpe and third parties.
Oglethorpe's investment in transmission and distribution plant less accumulated
depreciation as of December 31, 1995 was approximately $650 million. The
purchase price for the transmission business would be based on an appraisal of
the fair market value of such business as of January 1, 1997, determined by an
independent appraiser. The purchase price would be paid by GTC's assumption of
a portion of Oglethorpe's long-term secured debt and by cash obtained through
third-party borrowing. Oglethorpe also would make a special patronage capital
distribution to the Members which could be used by the Members to establish
equity in and to provide initial working capital to GTC.
Oglethorpe would transfer its system operations business, consisting of its
operations center and related computer and dispatch equipment (with
approximately $10 million of net book value), to GSOC, a newly formed non-profit
corporation. GSOC would thereafter own and operate the operations center and
provide system operations services to the Members, Oglethorpe, GTC and third
parties.
Under the restructuring, it is expected that Oglethorpe's Members would become
members of GTC and GSOC and execute an agreement (the Member Agreement) as to
those matters contemplated in the Restructuring Agreement that directly involve
the Members in their capacities as separate corporations. In June and July of
1996, the Boards of Directors of Oglethorpe, GTC and GSOC unanimously approved
the Member Agreement. The Member Agreement specifies the form of the new
wholesale power contract, transmission contracts and system operations contracts
to be signed by the Members. The Member Agreement and related contracts and
documents have been distributed to the Members for consideration and approval by
their own Boards of Directors. The Member Boards have been requested to take
action on the documents by early September 1996.
8
In addition to continuing to serve as Chief Executive Officer (CEO) of
Oglethorpe, T.D. Kilgore will also serve as CEO of both GTC and GSOC. The GTC
Board of Directors recently elected G. Stanley Hill, currently Sr. Vice
President - External Affairs, as the Interim Chief Operating Officer (COO) of
GTC. Mr. Hill, who is retiring from Oglethorpe this fall after a 20-year career,
will serve in the new position while a search for a permanent COO proceeds. The
GTC Board also elected Barbara Hampton, formerly Manager of Corporate Planning
for Oglethorpe, as GTC's Vice President of Finance & Administration. Jerry J.
Saacks, who has recently served as a consultant in Oglethorpe's system
operations function and previously was employed by Entergy, was elected by the
GSOC Board of Directors as Interim COO.
The restructuring remains subject to a number of conditions, including (1)
receiving a favorable ruling from the Internal Revenue Service that
implementation of the new governance structure would not affect Oglethorpe's
status as a cooperative for federal income tax purposes, (2) execution of the
Member Agreement by the Members and execution of new wholesale power contracts,
transmission contracts and system operations contracts as specified in the
Member Agreement, (3) RUS approval of the restructuring, (4) governmental,
lender and other third party consents, authorizations, waivers, orders and
approvals, (5) receipt by GTC of certain capital contributions by the Members
and (6) assurances from rating agencies that the ratings on Oglethorpe's
outstanding fixed rate pollution control revenue bonds (PCBs) would not be
lowered as a result of the restructuring and that such rating agencies would
assign to any comparable bonds issued by GTC the same or better credit rating as
assigned to Oglethorpe's fixed rate PCBs. Most of these conditions could be
waived by Oglethorpe's Board, subject to RUS approval in certain instances.
In light of the significant conditions that remain to be satisfied, including
RUS and other governmental and third-party approvals and assurances and receipt
of various agreements from the Members, Oglethorpe cannot now predict the actual
timing of or the ultimate likelihood of full implementation of the restructuring
or governance changes. Until implementation of the restructuring, Oglethorpe
will continue its current operations, and until satisfaction of the conditions
applicable to the new governance structure, Oglethorpe will continue under its
existing governance structure.
Power Supply Arrangements
As a means of reducing the cost of power provided to the Members, on January
3, 1996, Oglethorpe has
entered into a short-term power supply swap agreement with Enron Power
Marketing, Inc. (EPMI). The initial agreement, effective January 4, 1996
through April 30, 1996, required EPMI to sell to Oglethorpe at a favorable fixed
rate all the energy necessary to meet the Members' requirements.
Pursuant to the agreement,requirements and upon request
Oglethorpe was required to sell to EPMI at cost, subject to certain limitations, upon request
all energy available from Oglethorpe's total power resources. Under the
agreement, Oglethorpe maintained the responsibility of operating the power
supply system and continued to dispatch the generating resources to ensure
system reliability. See "OPERATING REVENUES" and "OPERATING EXPENSES" below for a discussion of
the impact of the power supply swap agreement on first quarter 1996 results
of operations. On April 30, 1996, Oglethorpe and EPMI entered into an
agreement which extended the term of
this power supply swap agreement, with certain modifications, from May 1, 1996
through August 31, 1996. See "Operating Revenues" and "Operating Expenses"
below for a discussion of the impact of the power supply swap agreement on the
results of operations for the first six months of 1996. Oglethorpe may enter
into additional short-term power supply swap arrangements while it considers
long-term arrangements.
9
On February 7, 1996,a longer term basis, Oglethorpe issuedis considering a Request for Proposals (RFP)number of alternatives
relating to selected bidders forits power supply resources to keep the Members' power costs as low
as possible. Among the alternatives being considered is a long-term power
supply arrangement. This RFP did not
seek a specific amount of power; instead, it requested proposals for meeting
the combined power needs of the Membersswap arrangement with term options ranging from two to 15 years.
Currently, discussionsDiscussions relating to such a swap arrangement are currently focused on
proposals from EPMI and LG&E Power Marketing Inc.
Rocky Mountain Leveraged Lease Transaction
Oglethorpe is in the process of negotiating a leveraged lease transaction, which
would be characterized as a sale for income tax purposes and as a joint proposallease for
state law purposes, for Oglethorpe's 74.61% ownership interest in the Rocky
Mountain pumped storage hydroelectric facility (Rocky Mountain). This
transaction would provide a substantial upfront cash payment to Oglethorpe which
would be amortized over the term of the lease to reduce revenue requirements
from Duke/Louis Dreyfus LLC &
Georgia Power Company (GPC). The current four-month agreement with EPMI will
provide the energy neededMembers. Oglethorpe expects to serve the Members while Oglethorpe finalizes a
long-term power supply arrangement.close this transaction in 1996.
RESULTS OF OPERATIONS
For the Three Months and Six Months Ended June 30, 1996 and 1995
Oglethorpe's net margin for the quarterthree months and six months ended March 31,June 30, 1996
was $9.0$4.7 million and $13.7 million compared to $8.5$20.3 million and $28.8 million
for the firstsame periods of 1995. Net margin was higher in the second quarter of
1995 compared to 1996 primarily due to unbudgeted savings in 1995 from the
continued capitalization of costs of Rocky Mountain due to the delay in
commercial operation of the initial unit from April 1995 to June 1995. OPERATING REVENUESSuch net
margin for 1995 was, therefore, abnormally high; net margin for 1996 is
consistent with expectations.
Operating Revenues
The increase in Member revenues for the three months and six months ended March 31,June
30, 1996 compared to the same periodperiods of 1995 was due to the recovery of
additional fixed costs of the Rocky Mountain Project (Rocky Mountain) and the increased fixed cost
responsibility resulting from the scheduled end of Sell-back revenues from
GPCGeorgia Power Company (GPC) under the plant operating agreements (discussed
below). Energy revenues from sales to Members for the three-month period ofthree months and six
months ended June 30, 1996 were virtually unchanged from the same periodperiods of the
prior year despite the fact that megawatt-hour (MWh) sales increased 15.5% due11.0% and
13.1%, respectively. Under the EPMI power supply swap agreement, EPMI sold to
prolonged colder than
normal weather. Oglethorpe achieved substantialat a favorable fixed rate all of the energy necessary to meet the
Members' requirements, which resulted in savings in energy costs of
approximately $12.8 million in the first quarter under the power supply swap agreement with EPMI whichsix months of 1996. These savings were
immediately passed through to the Members. Oglethorpe's average Member energy
revenue per MWh for the first quarter ofthree months and six months ended June 30, 1996 was 14%8.3%
and 11.0% less than the same period of 1995.
8
1995, respectively.
Sales to non-Members were primarily made pursuant to three different types of
contractual arrangements with GPC and from energy sales to other non-Member
10
utilities. The following table summarizes the amounts of non-Member revenues
from these sources for the three months and six months ended March 31,June 30, 1996 and
1995:
Three Months Six Months
Ended March 31,June 30, Ended June 30,
------------------- ----------------
1996 1995 --------------------------1996 1995
---------- ------- ------- -------
(dollars in thousands)
GPC- Plant operating agreements $ - $ 5,8921,781 $ - $ 7,674
GPC- Power supply arrangements 4,718 7,316
Transmission3,208 11,257 7,925 18,573
ITS transmission agreements 3,372 2,995
Other1,685 2,612 5,057 5,607
Sales to EPMI 3,837 - 7,697 -
Sales to other utilities 21,153 13,49510,517 13,110 22,799 26,605
------- ------- ------- -------
Total $29,243 $29,698$19,247 $28,760 $43,478 $58,459
======= ======= ======= =======
While totalThe first two types of non-Member revenues were derived from non-Members were virtually the same, revenues from
sales to utilities other than GPC increased significantly and revenues from
the plant operatingcontractual
agreements and power supply arrangements with GPC were
significantly lower.GPC. Under the plant operating agreements, GPC purchased
capacity and energy from Oglethorpe on a declining scale in the early years of
operation of certain co-owned generating units. As scheduled, effective June 1,
1995, revenues from GPC pursuant to all of the plant operating agreements ended.
The second source of non-Member revenues is derived pursuant to power supply
arrangements with GPC. These revenues are derived from energy sales arising
from dispatch situations whereby GPC causes Plant Wansley to be operated when
Oglethorpe's system does not require all of its contractual entitlement to the
generation. These revenues compensate Oglethorpe for its costs since, under the
operating agreements, Oglethorpe is responsible for its share of fuel costs any
time a unit operates. Such sales were significantly lower in the first quarter of 1996 compared to
the same period of 1995.
RevenuesThe third source of non-Member revenues was primarily payments from salesGPC for use
of the Integrated Transmission System (ITS) and related transmission interfaces.
GPC compensates Oglethorpe to non-Member utilities (other than GPC) increased
substantially due to a 12.5% increase in MWh salesthe extent that Oglethorpe's percentage of
investment in the ITS exceeds its percentage use of the system. In such case,
Oglethorpe is entitled to income as compensation for the use of its investment
by the other ITS participants. The decline in these revenues for the three
months ended
March 31, 1996month and six month periods of 1995 compared to 1996 was the same periodresult of
1995. As discussed under
"General" above, this increase was duerelatively greater usage by Oglethorpe compared to EPMI marketing available energy
from Oglethorpe's total power resources.its relative investment.
Under the EPMI power supply swap agreement, sales to EPMI represented the net
energy transmitted on behalf of Enron off-system on a daily basis from
Oglethorpe's total resources. Such energy was sold to EPMI at Oglethorpe's
cost, subject to certain limitations. Sales to other non-Member utilities are effectively transacted withwere
initiated by EPMI in 1996 while in 1995 these sales were made by Oglethorpe
directly with the non-Member utilities. AllWhile Oglethorpe maintains the
contractual relationship with these other utilities and administers the
transactions, all profits on these sales made by EPMI to other utilities from Oglethorpe's
total resources accrue to EPMI.
OPERATING EXPENSES11
Operating Expenses
The increase in operating expenses for the three months and six months ended
March 31,June 30, 1996 compared to the same periodperiods of 1995 was primarily attributable to
an increase in purchased power. In 1996, purchased power energy costs and MWhs increased
by 42% and 39%, respectively, as EPMI utilized purchased resources to provide
Oglethorpe's Member load and for increased sales to other utilities.
9
Depreciationdepreciation and amortization and taxes other than income taxes
(property taxes), with offsetting variations in purchased power. Depreciation
and amortization and property taxes increased due to the commercial operation of
Rocky Mountain in June 1995. OTHER INCOMEWhile purchased power energy costs varied in total
very little from 1995 to 1996, such results reflected offsetting cost savings
and additional amounts of power purchased. As noted under "Operating Revenues"
above, energy cost savings of $12.8 million were realized in the first six
months of 1996 from the EPMI power supply swap agreement. In addition, EPMI
utilized 24.5% greater MWhs of purchased power in the first six months of 1996
compared to 1995 to provide for Oglethorpe's Member load and for sales to other
utilities
Other Income
Other income for the first quarter ofsix months ended June 30, 1996 increased compared to the
same period of 1995 primarily as a result of higher income from amortization of
deferred margins. Oglethorpe's Board of Directors authorizes the amount of
deferred margins to be returned to the Members each year. For 1996, the
remaining amount of $32 million was authorized as compared to $16 million for
1995.
Interest income increased due to higher average cash balances during
the first quarter of 1996 compared to the same period of 1995.
INTEREST CHARGESCharges
The increase in net interest charges for the three months and six months ended
March 31,June 30, 1996 compared to 1995 resulted from Rocky Mountain becoming
commercially operable in June 1995.
FINANCIAL CONDITION
Total assets and total equity plus liabilities as of March 31,June 30, 1996 were $5.4
billion which was $47$49 million less than the total at December 31, 1995.
ASSETS1995
due to depreciation.
Assets
Property additions for the threesix months ended March 31,June 30, 1996 totaled $25$51.7 million
and included additions, replacements and improvements to transmission and
distribution facilities and existing generation facilities.
The decrease in cash and temporary cash investments was partly due to property
additions funded from cash, premiums paid on refinanced debt and scheduled debt
service payments.
Other short-term investments represent investments whose maturity periods exceed
Oglethorpe's policy of three months for classification as cash equivalents.
During the first quarter of 1996, an additional $10 million was transferred into
investments with maturities of more than three months.
Prepayments and other current assets increased primarily due to a $3 million
increase in the payment made to GPC for estimates of Plant Hatch and Plant
Wansley operations and maintenance costs for April 1996 compared to the
estimate paid for January 1996.12
The increase in other deferred charges primarily resulted from the deferral of
$6.3$11.3 million of nuclear refueling outage costs related to Vogtle Unit No. 1 and
Hatch Unit No. 1 which will beare being recovered through rates over a period of
eighteen months.
10
EQUITY AND LIABILITIESmonths starting May 1996.
Equity and Liabilities
Deferred margins to be refunded within one year decreased by $10.2$17.2 million which
is the amount that was refunded to the Members for the first threesix months of 1996.
Accounts payable declined as of March 31,June 30, 1996 as a result of normal variations
in the timing of payables activity.
Accrued interest decreased primarily due to normal payments and accruals of
interest.
Accrued and withheld taxes increased as a result of the normal monthly accruals
of property taxes, which are generally paid in the fourth quarter of the year.
Other current liabilities decreased partly due to the year-end accrual for
employee incentive pay (subsequently paid in March 1996) and partly due to
normal activity.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Number Description
----------- ----------- -----------
*10.27(a) Extension and Modification Agreement between Enron Power
Marketing, Inc. and Oglethorpe, dated as of April 30, 1996.
27.1 Financial Data Schedule (for SEC use only).
_______________________
* Certain portions of this document have been omitted as confidential and
filed separately with the SEC.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by Oglethorpe for the quarter ended March
31,June 30,
1996.
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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: MayAugust 14, 1996 By: /s/ T. D. Kilgore
--------------------------------------------------------------
T. D. Kilgore
President and Chief Executive Officer
(Principal Executive Officer)
Date: MayAugust 14, 1996 /s/ Gary M. Bullock
--------------------------------------------------------------
Gary M. Bullock
Secretary-Treasurer
(Principal Financial Officer)
Date: MayAugust 14, 1996 /s/ Eugen Heckl
---------------------------------------------------------------
Eugen Heckl
Senior Vice President and Chief
Financial Officer (Principal Financial
Officer)
13
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