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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, 1997
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 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 ofto 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, 1997
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of March 31,June 30, 1997 (Unaudited)
and December 31, 19961996...................................... 3
Condensed Statements of Revenues and Expenses (Unaudited)
for the Three Months and Six Months Ended
March 31,June 30, 1997 and 19961996..................................... 5
Condensed Statements of Cash Flows (Unaudited)
for the ThreeSix Months Ended March 31,June 30, 1997 and 19961996............ 6
Notes to the Condensed Financial StatementsStatements................ 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of OperationsOperations......... 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings..................................... 15
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES8-K...................... 15
SIGNATURES.......................................................... 16
2
PART I--FINANCIAL INFORMATION
ItemITEM 1. Financial Statements
Oglethorpe Power Corporation
Condensed Balance Sheets
March 31,FINANCIAL STATEMENTS
OGLETHORPE POWER CORPORATION
CONDENSED BALANCE SHEETS
June 30, 1997 and December 31, 1996
- ------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
(dollars in thousands)
1997 1996
ASSETS (Unaudited)
------------------------------------------(UNAUDITED)
------------ -----------
Electric plant, at original cost:
In service $4,921,498service............................................ $4,904,500 $5,742,597
Less: Accumulated provision for depreciation (1,333,820)depreciation.......... (1,350,645) (1,488,272)
------------ -------------
--------------
3,587,6783,553,855 4,254,325
Nuclear fuel, at amortized cost 81,883cost....................... 86,793 86,722
Plant acquisition adjustments, at
amortized costcost...................................... -- 4,153
Construction work in progress 9,494progress......................... 13,928 31,181
------------ -------------
--------------
3,679,0553,654,576 4,376,381
------------ ------------- --------------
Investments and funds:
Bond, reserve and construction funds, at
market 31,663market.............................................. 32,331 53,955
Decommissioning fund, at market 86,654market....................... 94,782 86,269
Investment in associated organizations, at
cost 15,430cost................................................ 15,395 15,379
Deposit on Rocky Mountain transactions, at
cost 58,466cost................................................ 59,436 41,685
Other 4,168 -------------- -------------
--------------
196,381201,944 197,288
------------ ------------- --------------
Current assets:
Cash and temporary cash investments, at
cost 52,401cost................................................ 41,532 132,783
Other short-term investments, at market 92,816market............... 93,682 91,499
Receivables 99,198Receivables........................................... 120,105 113,289
Inventories, at average cost 85,547cost.......................... 85,907 89,825
Prepayments and other current assets 16,676assets.................. 12,133 14,625
------------ -------------
--------------
346,638353,359 442,021
------------ ------------- --------------
Deferred charges:
Premium and loss on reacquired debt, being
amortized 193,700amortized........................................... 191,153 201,007
Deferred amortization of Scherer
leasehold 92,089leasehold........................................... 93,460 90,717
Deferred debt expense, being amortized 9,511amortized................ 12,748 21,703
Other 33,142Other................................................. 36,795 33,058
------------ -------------
--------------
328,442334,156 346,485
------------ -------------
--------------
$4,550,516 $ 5,362,175$4,544,035 $5,362,175
------------ -------------
-------------------------- -------------
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, 1997 and December 31, 1996
- ------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
(dollars in thousands)
1997
1996
EQUITIESEQUITY AND LIABILITIES (Unaudited)
---------------------------(UNAUDITED) 1996
------------ -------------
Capitalization:
Patronage capital and membership fees (including
unrealized loss of ($1,791)1,302) at March 31,June 30, 1997 and
$(844)($844) at December 31, 1996 on available-for-sale
securities) $315,855 $356,229securities.......................................... $ 321,855 $ 356,229
Long-term debt 3,314,890debt........................................ 3,279,702 4,052,470
Obligations under capital leases 292,397leases...................... 291,111 293,682
Obligation under Rocky Mountain transactions 58,466transactions.......... 59,436 41,685
------------ -------------
3,981,6083,952,104 4,744,066
------------ -------------
Current liabilities:
Long-term debt and capital leases due
within one year 88,875year..................................... 97,724 159,622
Accounts payable 40,308payable...................................... 49,733 42,891
Accrued interest 14,243interest...................................... 7,995 15,931
Accrued and withheld taxes 8,982taxes............................ 14,160 4,940
Other current liabilities 9,442 14,022liabilities............................. 6,077 9,540
------------ -------------
161,850 237,406175,689 232,924
------------ -------------
Deferred credits and other liabilities:
Gain on sale of plant, being amortized 62,699amortized................ 61,993 58,527
Net benefit of sale of income tax benefits,
being amortized 40,046amortized..................................... 38,044 42,049
Net benefit of Rocky Mountain transactions,
being amortized 94,764amortized..................................... 93,967 70,701
Accumulated deferred income taxes 60,623taxes..................... 60,325 61,985
Decommissioning reserve 125,298reserve............................... 133,945 124,468
Other 23,628 22,973Other................................................. 27,968 27,455
------------ -------------
407,058 380,703416,242 385,185
------------ -------------
$ 4,550,516 $ 5,362,175$4,544,035 $5,362,175
------------ -------------
------------ -------------
The accompanying notes are an integral part of these condensed statements.
4
Oglethorpe Power Corporation
Condensed Statements of Revenues and Expenses (Unaudited)OGLETHORPE POWER CORPORATION
CONDENSED STATEMENTS OF REVENUES AND EXPENSES (UNAUDITED)
For the Three Monthand Six Months ended March 31,June 30, 1997 and 1996
- -----------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
(dollars in thousands)THREE MONTHS SIX MONTHS
---------------------- ----------------------
1997 1996 ------------------------------1997 1996
---------- ---------- ---------- ----------
Operating revenues:
Sales to Members $ 257,031 $ 243,952Members...................................... $230,180 $255,981 $487,211 $502,439
Sales to non-Members 14,454 24,231
----------- -------------non-Members.................................. 12,696 19,247 27,150 43,478
---------- ---------- ---------- ----------
Total operating revenues 271,485 268,183
----------- -------------revenues................................ 242,876 275,228 514,361 545,917
---------- ---------- ---------- ----------
Operating expenses:
Fuel 44,889 48,240
Production 35,595 30,369Fuel.................................................. 46,704 55,418 91,593 103,658
Production............................................ 33,948 31,628 69,544 61,997
Purchased power 57,991 64,064power....................................... 62,321 58,162 120,311 122,226
Power delivery 3,878 3,658delivery........................................ 101 4,206 3,979 7,864
Depreciation and amortization 36,239 36,526amortization......................... 30,142 36,564 66,381 73,090
Taxes other than income taxes 7,620 7,384taxes......................... 5,595 7,342 13,215 14,726
Other operating expenses 7,455 4,374
----------- -------------expenses.............................. 2,642 9,394 10,098 16,274
---------- ---------- ---------- ----------
Total operating expenses 193,667 194,615
----------- -------------expenses................................ 181,453 202,714 375,121 399,835
---------- ---------- ---------- ----------
Operating margin 77,818 73,568
----------- -------------margin........................................ 61,423 72,514 139,240 146,082
---------- ---------- ---------- ----------
Other income (expense):
Interest income 7,434 4,060income....................................... 6,320 4,680 13,755 8,740
Amortization of net benefit of sale of income
tax benefits 2,798benefits........................................ 2,799 2,008 5,597 4,015
Amortization of deferred marginsmargins...................... -- 10,1886,966 -- 17,154
Allowance for equity funds used during construction 84 47
Other 1,507 634
----------- -------------construction... (35) 43 49 90
Other................................................. 2,061 386 3,569 1,021
---------- ---------- ---------- ----------
Total other income 11,823 16,937
----------- -------------income...................................... 11,145 14,083 22,970 31,020
---------- ---------- ---------- ----------
Interest charges:
Interest on long-term debt and other obligations 80,557 82,031obligations...... 67,251 82,329 147,808 164,360
Allowance for debt funds used during construction (352) (514)
----------- -------------construction..... (193) (464) (545) (978)
---------- ---------- ---------- ----------
Net interest charges 80,205 81,517
----------- -------------charges.................................... 67,058 81,865 147,263 163,382
---------- ---------- ---------- ----------
Net marginmargin.............................................. $ 9,4365,510 $ 8,988
----------- -------------
----------- -------------4,732 $ 14,947 $ 13,720
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
The accompanying notes are an integral part of these condensed statements.
5
Oglethorpe Power Corporation
Condensed Statements of Cash Flows (Unaudited)OGLETHORPE POWER CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the ThreeSix Months ended March 31,Ended June 30, 1997 and 1996
- -----------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
(dollars in thousands)
1997 1996
---------------------------------- ----------
Cash flows from operating activities:
Net marginmargin.................................................................................. $ 9,43614,947 $ 8,988
----------- -----------13,720
---------- ----------
Adjustments to reconcile net margin to net cash provided by operating activities:
Depreciation and amortization 56,911 39,425amortization............................................................. 99,558 88,441
Net benefit of Rocky Mountain transactions 24,859transactions................................................ 23,266 --
Deferred gain from Corporate Restructuring 4,757Restructuring................................................ 4,670 --
Allowance for equity funds used during construction (84) (47)construction....................................... (49) (90)
Amortization of deferred marginsmargins.......................................................... -- (10,188)(17,154)
Amortization of net benefit of sale of income tax benefits (2,798) (2,008)
Other 280 1,149benefits................................ (5,597) (4,015)
Other..................................................................................... (1,556) 2,783
Change in net current assets, excluding long-term debt due within one year and deferred
margins to be refunded within one year:
Receivables 14,092 (1,368)
Inventories (1,530) (3,137)Receivables............................................................................... (6,815) (10,157)
Inventories............................................................................... (5,063) (5,113)
Prepayments and other current assets (2,413) (3,000)assets...................................................... 2,062 (189)
Accounts payable (1,930) (9,096)payable.......................................................................... 7,495 (14,616)
Accrued interest (1,568) 6,380interest.......................................................................... (7,816) (3,907)
Accrued and withheld taxes 4,042 (18,663)taxes................................................................ 9,220 13,686
Other current liabilities (3,356) (5,232)
----------- -----------liabilities................................................................. 2,869 (5,142)
---------- ----------
Total adjustments 91,262 (5,785)
----------- -----------adjustments....................................................................... 122,244 44,527
---------- ----------
Net cash provided by operating activities 100,698 3,203
----------- -----------activities................................................. 137,191 58,247
---------- ----------
Cash flows from investing activities:
Property additions (24,962) (24,824)additions.......................................................................... (39,386) (51,727)
Net proceeds from bond, reserve and construction funds 21,793 2,397funds...................................... 21,378 2,664
Decrease (increase) in investment in associated organizations (51) 351organizations.......................................... (16) 389
Increase in other short-term investments (1,766) (10,000)
Decrease (increase)investments.................................................... (2,395) (9,984)
Increase in decommissioning fund (2,423) 729fund............................................................ (4,521) (3,245)
Net assets sold in Corporate Restructuring 716,365Restructuring.................................................. 717,907 --
Net liabilities extinguished in Corporate Restructuring (696,190)Restructuring..................................... (694,412) --
Other (4,168) --
----------- --------------------- ----------
Net cash provided by (used in)used in investing activities 8,598 (31,347)
----------- -----------activities..................................................... (1,445) (61,903)
---------- ----------
Cash flows from financing activities:
Debt proceeds, net 101,149 --net.......................................................................... 111,306 397
Debt payments, net (239,805) (25,366)payments............................................................................... (286,397) (42,430)
Retirement of patronage capitalcapital............................................................. (48,863) --
Other (2,159) 505
----------- -----------Other....................................................................................... (3,043) (3,091)
---------- ----------
Net cash used in financing activities (189,678) (24,861)
----------- -----------activities..................................................... (226,997) (45,124)
---------- ----------
Net decrease in cash and temporary cash investments (80,382) (53,005)investments........................................... (91,251) (48,780)
Cash and temporary cash investments at beginning of periodperiod.................................... 132,783 201,151
----------- --------------------- ----------
Cash and temporary cash investments at end of periodperiod.......................................... $ 52,40141,532 $ 148,146
----------- -----------
----------- -----------152,371
---------- ----------
---------- ----------
Cash paid for:
Interest (net of amounts capitalized)....................................................... $ 76,871145,392 $ 96,769157,883
Income taxes 3,525taxes................................................................................ $ 830 $ --
The accompanying notes are an integral part of these condensed statements.
6
Oglethorpe Power Corporation
Notes to Condensed Financial Statements
March 31,June 30, 1997 and 1996
(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 includedinclude only normal recurring
adjustments) necessary to present fairly, in all material respects,
the results for the periods ended March 31,June 30, 1997 and 1996. 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. Certain amounts for 1996 have been reclassified to
conform with the current period presentation.
7
ITEMItem 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONSManagement's Discussion and Analysis of Financial Condition
and Results of Operations
GENERAL
CORPORATE RESTRUCTURING
As reported in its Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, Oglethorpe and the Membersits 39 retail electric distribution
cooperative members (the Members) completed a corporate restructuring (the
Corporate Restructuring) on March 11, 1997. Pursuant to the Corporate
Restructuring, Oglethorpe was divided itself into three specialized operating
companies to respond to increasing competition and regulatory changes in the
electric industry. As part of the Corporate Restructuring, theOglethorpe's transmission business was transferred to,
and is now owned and operated by, a newly formed Georgia
electric membership corporation, Georgia Transmission Corporation (An
Electric Membership Corporation) (GTC), and thea recently formed Georgia electric
membership corporation. Oglethorpe's system operations business was
transferred to, and is now owned and operated by, a newly formed Georgia nonprofit corporation,
Georgia System Operations
Corporation (GSOC)., a recently formed Georgia nonprofit corporation.
Oglethorpe continues to operate theits power supply business. Oglethorpe
retained all of its owned and leased generation assets. Oglethorpe also
continues to administer its power purchase contracts and provide marketing
support functions to the Members. Immediately after the Corporate
Restructuring, Oglethorpe's corporate name was changed from "Oglethorpe Power
Corporation (An Electric Membership Generation & Transmission Corporation)"
to "Oglethorpe Power Corporation (An Electric Membership Corporation)".
POWER SUPPLY SWAPMARKETER ARRANGEMENTS
Oglethorpe is utilizing long-term power marketer arrangements to reduce the
cost of power to the Members. Oglethorpe has entered into a power marketer
agreementagreements with LG&E Power Marketing Inc. (LPM) effective January 1, 1997,
for approximately 50% of the load requirements of the Members and with Morgan
Stanley Capital Group Inc. (Morgan Stanley) effective May 1, 1997, with
respect to cover 50% of the Members'forecasted load requirements. The agreement was effective May 1, 1997. The agreement
obligatesrequirements of the Members. Under
these power marketer agreements, Oglethorpe to purchase fixed quantities ofpurchases energy at fixed prices
initially averaging 50%covering a portion of the Members' forecasted requirements. Each Member
selected a term forcosts of energy to its obligation, as well as the portion of its forecasted
requirements to be purchased as a fixed quantity. Oglethorpe is obligated to
sellMembers. LPM and Morgan
Stanley, is obligatedin turn, have certain rights to buy 50%market excess energy from the
Oglethorpe system. All of Oglethorpe's existing generating facilities and
power purchase arrangements are available for use by LPM and Morgan Stanley
for the term of the outputrespective agreements. Oglethorpe continues to be
responsible for all the costs of each
Member's percentage capacity responsibility (PCR) share (forits system resources but receives revenue
from LPM and Morgan Stanley for the term and
portion selected)use of the "must run" units (primarily nuclear units).
Oglethorpe is also obligated to make available the same shareresources.
8
Separate Dispatch of all other
resources, which Morgan Stanley may schedule for each 24-hour day. This
schedule is set the day prior based on availability limitations in the
contract. After the schedule is set, Oglethorpe must make available the
scheduled energy without regard to the actual availability of the units.
Morgan Stanley does not have the right to the output of upgrades to these
resources. Morgan Stanley must pay a contractually fixed amount each month
and an amount for the scheduled energy based on contractually fixed prices.
The agreement has an initial term extending to March 31, 2000. Upon the
approval of the Rural Utilities Service (RUS), which is pending, the
agreement will be extended to March 31, 2005, with the purchase for certain
Members declining to zero prior to that date. Initially, Oglethorpe will
manage the system through purchases and/or sales to balance the fixed
purchase obligation against the actual requirements.
SEPARATE DISPATCH OF PLANT WANSLEYPlant Wansley
As discussed in its Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, the Plant Wansley ownership and operating agreements were
amended in 1996 to allow each co-owner to dispatch separately its respective
ownership interest.interest in conjunction with contracting separately for long-term
coal purchases procured by Georgia Power Company (GPC) and to procure
separately long-term coal purchases. Pursuant to the amendments, Oglethorpe
8
began separately dispatching Wansley Units No. 1 and No. 2 on May 1, 1997.
Oglethorpe continues to use Georgia Power Company (GPC)GPC as its agent for fuel procurement.
RESULTS OF OPERATIONS
CORPORATE RESTRUCTURINGResults of Operations
Corporate Restructuring
Oglethorpe and the Members completed the Corporate Restructuring on March 11,
1997. As of that date, Oglethorpe transferred its transmission business and
assets to a separate entity, GTC and reflected the transfer of its system operations assets to a separate entity,
GSOC. However, the Boards of Directors of Oglethorpe, GTC and GSOC
determined that for ratemaking purposes all revenues and expenses related to
operations of GTC and GSOC would remain with Oglethorpe until April 1, 1997.
Pursuant to this approach, all transmission-related and systems
operations-related revenues were assigned to Oglethorpe, and all
transmission-related and systems operations-related costs were paid or
reimbursed by Oglethorpe during the period March 11, 1997 through March 31,
1997. As a result, the Condensed Statements of Revenues and Expenses for the
threesix months ended June 30, 1997 reflect operations as a combined power supply,
transmission and system operations company through March 31, 1997, includes fullyand
operations solely as a power supply company thereafter. Therefore, decreases
in operating revenues, power delivery expenses, depreciation and
amortization, taxes other than income taxes, operating margin, other
operating income and net interest charges from 1996 to 1997 are primarily
attributable to the revenues and expenses of the undivided, pre-restructuring Oglethorpe.Corporate Restructuring. See Oglethorpe's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996 for a pro-formapro forma
presentation of the Statement of Revenues and Expenses reflecting the
exclusion of the post-restructuring Oglethorpetransmission and system operations businesses, as though the
Corporate Restructuring had occurred at the beginning of 1996, for the year
ended December 31, 1996 (Note 11 of Notes to Financial Statements).
For the Three Months and Six Months Ended March 31, 1997 and 1996
Oglethorpe's net margin for the three months and six months ended March 31,June 30, 1997
was $9.4$5.5 million and $14.9 million, respectively, compared to $9.0$4.7 million and
$13.7 million for the same periodperiods of 1996.
OPERATING REVENUES
Member revenuesOperating Revenues
Revenues from sales to Members for the three months and six months ended March 31,June
30, 1997 were 5.4% higher10.1% and 3.0% lower compared to the same period of 1996. WhileThe
decrease in revenues from Members was attributable to reduced capacity revenues
were slightly
lowerrelating to the transmission business, however, this decrease was offset
somewhat by an increase in the three months ended March 31, 1997 compared to 1996, energy revenues from sales to Members for the three
months and six months ended June 30, 1997 of 1997 were 20.0% higher
than9.7% and 14.6% compared to the same
periodperiods of the prior year.1996, respectively. Megawatt-hour (MWh) sales to the Members were
virtually unchanged for6.1% and
9
3.5% lower in the current quarter versusthree-month and six-month periods compared to the
same periodperiods of 1996. However,As a result, Oglethorpe's average energy revenue per
MWh from sales to Members was 20.8%for the three-month and six-month periods were
16.8% and 19.0% higher in 1997 compared to 1996, respectively, primarily due
to the passthroughexpiration of significant savings derived from the transactionshort-term power marketer arrangement with Enron
Power Marketing Inc. (EPMI) that had allowed Oglethorpe to passthrough
significant savings in the first quartersix months of 1996. During the first eight
months of 1996, Oglethorpe had a power supplymarketer arrangement with EPMI to
supply 100% of the load requirements of the Members. As reported in its
Annual Report on Form 10-K for the fiscal year ended December 31, 1996,noted under
"General--Power Marketer Arrangements" above, Oglethorpe has entered into
power marketer arrangements with LPM effective January 1, 1997 Oglethorpe entered into a power supply arrangement
with LG&E Power Marketing Inc. (LPM) for
approximately 50% of the load requirements of the Members and with Morgan
Stanley effective May 1, 1997 with respect to 50% of the forecasted load
requirement of the Members.
Sales to non-Members were primarily made pursuant to two different types of
contractual arrangements
with GPC and from energy sales to other non-Member utilities.utilities and power
marketers. 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, 1997 and
1996:
9
THREE MONTHS
ENDED MARCH 31,Three Months Six Months
Ended June 30, Ended June 30,
----------------- -------------------
1997 1996 --------- ---------
(DOLLARS IN THOUSANDS)
GPC- Power1997 1996
------ ------ ------- -------
(dollars in thousands)
GPC-Power supply arrangements......................arrangements $4,763 $3,208 $12,565 $ 7,802 $ 4,7177,925
Sales to other utilities............................ 4,040 12,282
ITS transmission agreements......................... 2,180 3,372utilities 5,629 10,517 9,663 22,799
Sales to power marketers............................ 432 3,860marketers 2,304 3,837 2,736 7,697
ITS transmission agreements -- 1,685 2,186 5,057
------ ------ ------- -------
Total............................................... $14,454 $24,231Total $12,696 $19,247 $27,150 $43,478
------ ------ ------- -------
------ ------ ------- -------
For the three months ended March 31, 1997, the largest source of non-MemberThe revenues was derived pursuant tofrom power supply arrangements with GPC. These
revenues areGPC were derived from energy
sales arising from dispatch situations whereby GPC causescaused Plant Wansley to be
operated when Oglethorpe's system doesdid not require all of its contractual
entitlement to the generation. These revenues compensatecompensated Oglethorpe for its
costs since,because, under the operating agreements,agreement (before it was recently
amended), Oglethorpe iswas responsible for its share of fuel costs any time a
unit operates.operated. Such sales to GPC were higher in 1997 compared to the same
periodperiods of 1996. As noted above under "General","General--Separate Dispatch of Plant
Wansley" above, with the commencement of the separate dispatch of Plant
Wansley as of May 1, 1997, this type of salessale to GPC will cease.
Another source ofhas ended.
Sales to other non-Member revenues was payments receivedutilities in 1997 represent sales made directly by
Oglethorpe. Oglethorpe sells for its own account any energy available from
GPC for use
of the Integrated Transmission System (ITS) and related transmission
interfaces. GPC compensates Oglethorpe to the 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 useportion of its investmentresources dedicated to Morgan Stanley that is not
scheduled by the other ITS participants. The decline in these revenues
for the three month period of 1997 compared to 1996 was the result of
relatively greater usage by Oglethorpe comparedMorgan Stanley pursuant to its relative investment.
Aspower marketer arrangement. Such
sales during the first six months of 1996 were initiated by EPMI. Where EPMI
did not have a
result of10
contractual relationship with the Corporate Restructuring, all ofpurchaser and Oglethorpe did, Oglethorpe
recorded the sale and credited the revenues to EPMI in this
category will accrue to GTC effective April 1, 1997.its monthly billing.
Under the current LPM and Morgan Stanley power supply arrangement,marketer arrangements, and
previously, under the EPMI power supplymarketer arrangement, sales to the power
marketers represented the net energy transmitted on behalf of LPM, Morgan
Stanley and EPMI off-system on a daily basis from Oglethorpe's total
resources. Such energy was sold to LPM, Morgan Stanley and EPMI at
Oglethorpe's cost, subject to certain limitations. The volume of sales to
power marketers depends primarily on the power marketers' decisions for
servicing their load requirements.
Sales to otherAnother source of non-Member utilities in 1997 represent sales made directly by
Oglethorpe onlyrevenues was payments received from the 50%GPC for use
of the power supply resources not soldIntegrated Transmission System (ITS) and related transmission
interfaces. GPC compensated Oglethorpe to LPM.
LPM now administers all third-party transactions directly with such parties
forthe extent that Oglethorpe's
percentage of investment in the ITS exceeded its 50% portionpercentage use of the
resources. Such salessystem. In such case, Oglethorpe was entitled to income as compensation for
the use of its investment by the other ITS participants. As a result of the
Corporate Restructuring, all of the revenues in the first three months of
1996 were initiated by EPMI while Oglethorpe maintained the contractual
relationship with these other utilities and reflected the sales transactionsthis category have accrued to
GTC since April 1, 1997.
Operating Expenses
The overall decrease in its revenues.
10
OPERATING EXPENSES
Operatingoperating expenses decreased slightly for the three months and six
months ended March 31,June 30, 1997 compared to the same periodperiods of 1996. The decrease1996 was primarily
attributable to decreasesthe elimination of expenses relating to the transmission
business assumed by GTC in connection with the Corporate Restructuring.
However, the decrease in fuel expense and purchased power costs, offset by higherthe increase in production
operations and maintenance (O&M) costs.costs were unaffected by the Corporate
Restructuring. Fuel costs decreased 6.9% in 1997
compared to 199615.7% and 11.6% from the same periods of
the prior year, respectively, even though total generation decreased only
2.1%.9.1% and 5.7%, respectively. Such savings in average fuel costs resulted
from the difference in the mix of generation, with more nuclear and less
fossil generation.generation in 1997. The decrease in fossil generation resulted
primarily from a maintenance outage during February and March 1997 at Plant
Scherer Unit No. 1. The higher nuclear generation during the first
quarter of 1997 compared to
1996 was achieved as a result of having two refueling outages in the first
quartersix months of 1996 compared to noneone in 1997. Conversely, the increase in
production O&Moperations and maintenance costs was primarily attributable to the
maintenance outage at Plant Scherer Unit No. 1. Effective January 1, 1996,
the costs of nuclear refueling outages are deferred and amortized over the
18-month period following the outage.
The 9.5% decrease in purchasedPurchased power costs incost for the first threesix months ofended June 30, 1997 compared to the
same period of 1996 resulted from the savings in capacity
costs under the Block Power Sale Agreement (BPSA) with GPC. Effective
September 1, 1996, Oglethorpe reduced its purchase commitment by a 250 MW
Component Block. Purchased power energy costs werewas virtually unchanged. A total of 22.2%16.8% fewer MWhs
were purchased power in the first three months of 1997 compared to the same period of 1996; however, the1996, but average purchased power cost per MWh was significantly higher.expense
increased by 18.4%. As discussednoted under "Operating Revenues" above, significant
energy cost savings were realizedderived in the first threesix months of 1996 from the
EPMI power supply arrangement; such average
purchased power cost per MWh was 16.4% higherarrangement.
The decrease in the first three months ofother operating expenses for 1997 compared to the same
periodperiods of 1996.
The increase in other operating expenses for the three months ended March 31,
1997prior year was due primarily to coststransfer of administrative and
general expenses relating to the transmission and system operations
businesses in connection with the Corporate Restructuring.
OTHER INCOME11
Other Income
Other income for the three months and six months ended March 31,June 30, 1997
decreased compared to the same periodperiods of 1996 primarily as a result of
Oglethorpe utilizing, as planned, all remaining amounts available under its
deferred margin rate mechanism during 1996. (For a discussion of deferred
margins, see Note 1 of Notes to Financial Statements in Oglethorpe's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996.) Interest
income was higher in the first three monthsthree-month and six-month periods of 1997 compared
to the same periodperiods of 1996 partly due to higher average investment balancesearnings from the
decommissioning fund and partly due to higher interest rates.
FINANCIAL CONDITION
CORPORATE RESTRUCTURINGincome from the deposits from the
Rocky Mountain transactions. The deposits were made in December 1996 and
January 1997.
Financial Condition
Corporate Restructuring
As of March 11, 1997, Oglethorpe transferred its transmission business and
assets to GTC. Thereafter, the assets, liabilities and equity of GTC arewere no
longer a part of Oglethorpe. The purchase price for the transmission
business was based on an appraisal of the fair market value of such business,
as determined by an independent appraiser, and was approximately $708
million.
11
The purchase price was paid primarily by GTC's assumption of a
portion (approximately 16.86%) of Oglethorpe's long-term secured debt in an
amount equal to approximately $686 million. Approximately $541 million of
this debt (payable to RUS, Federal Financing Bank (FFB) and CoBank, ABC
(CoBank)) became the sole obligation of GTC, and Oglethorpe was released from
all liability with regard to this indebtedness. The remaining debt assumed
by GTC in connection with the Corporate Restructuring, approximately $145
million, relates to Oglethorpe's pollution control revenue bonds (PCBs).
While GTC assumed and agreed to pay this $145 million of debt, Oglethorpe is
not legally released from its liability for this debt. The remainder of the
purchase price was paid by GTC from cash obtained through a borrowing from
National Rural Utilities Cooperative Finance Corporation (CFC) and the
assumption of approximately $1 million of other Oglethorpe liabilities.
Oglethorpe also made a special patronage capital distribution of
approximately $49 million to the Members which was used by the Members to
establish equity in and to provide initial working capital to GTC.
On October 1, 1996, Oglethorpe transferred to GSOC its system operations
assets, consisting of its system control center and related energy control
and revenue metering systems equipment. The purchase price of these assets
totaled approximately $9.4 million and was funded by GSOC's assumption of
Oglethorpe's obligations under an existing note held by the Rural Utilities
Service (RUS), by delivery of a purchase money note payable to Oglethorpe and
by the assumption of certain other liabilities of Oglethorpe. From October
1, 1996 to March 11, 1997, Oglethorpe was the sole member of GSOC; therefore,
the assets transferred to GSOC remained in the consolidated balance sheet of
Oglethorpe. The Members and GTC became members of GSOC on March 11, 1997;
and thereafter the assets, liabilities and equity of GSOC arewere no longer a
part of Oglethorpe.
Most of the remaining comparisons of the balance sheets as of March 31,June 30, 1997
and December 31, 1996 excludeare in addition to the effects of the Corporate
Restructuring described above. See Oglethorpe's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 for a pro-formapro forma
12
presentation of the Balance Sheet of the post-restructuring Oglethorpe as of
December 31, 1996 (Note 11 of Notes to Financial Statements).
Total assets and total equity plus liabilities as of March 31,June 30, 1997 were $4.6$4.5
billion which, after adjustment for the Corporate Restructuring, was $127$85
million less than the comparable total at December 31, 1996 due to
depreciation of plant and due to the decrease in cash and temporary cash
investments.
ASSETSAssets
Property additions for the threesix months ended March 31,June 30, 1997 totaled $25.0$39.4
million and included additions, replacements and improvements to transmission
and distribution facilities (subsequently sold to GTC) for the first three
months of 1997 and existing generation facilities.
All plant acquisition adjustments were related to transmission plant. As a
result of the Corporate Restructuring discussed above, Oglethorpe no longer has
any plant acquisition adjustments.
The decrease in construction work in progress resulted from the projects sold to
GTC and GSOC in the Corporate Restructuring.
12
The decrease in the bond, reserve and construction funds was attributable to the
utilization of available excess debt service reserve funds for debt service
payments.
The increase in the deposit on, the obligation under and net benefit of the
Rocky Mountain transactions resulted from the completion of the lease
transactions for the remainder of Oglethorpe's interest in Rocky Mountain in
January 1997. For a discussion of the Rocky Mountain transactions, see Notes 1
and 2 of Notes to Financial Statements in Oglethorpe's Annual Report on Form
10-K for the fiscal year ended December 31, 1996.
The decrease in the bond, reserve and construction funds was attributable to
the utilization of a portion of the debt service reserve funds for debt
service payments. The available funds resulted from Pollution Control Revenue
Bond (PCB) refinancing projects in March 1997 for which the refunded PCBs did
not require debt service reserve funds.
The decrease in cash and temporary cash investments was partly due to the
payment of the $48.9$49 million special patronage capital distribution made in
connection with the Corporate Restructuring discussed above and partly due to a
prepayment in 1997 of Federal Financing Bank (FFB) debt made from the proceeds
of the December 1996 and January 1997 Rocky Mountain transactions.
Prepayments and other current assets decreased due to a $1.1 million decrease in
the estimated payment made to GPC for Plant Hatch and Plant Wansley
operations and maintenance costs for July 1997 compared to the estimate paid for
January 1997.
The change in premium and loss on reacquired debt resulted partly from premiums
paid in connection with FFB debt prepayment and the PCBPollution Control Bond (PCB)
refunding, excluding the effect of the portion of these costs assumed by GTC in
the Corporate Restructuring.
The decrease in deferred debt expense resulted partly from unamortized issuance
cost related to the PCB refunding being converted to premium and loss on
reacquired debt and partly from the portion of these costs assumed by GTC in the
Corporate Restructuring transaction.
EQUITY AND LIABILITIESRestructuring.
13
Equity and Liabilities
The decrease in patronage capital and membership fees is the result of the $48.9$49
million special patronage capital distribution made in connection with the
Corporate Restructuring, discussed above.
The decrease in long-term debt due within one year resulted primarily from the
prepayment of FFB debt, discussed above. In addition, the balance reflects the
impact of the Corporate Restructuring.
Accounts payable increased due to normal variations in the timing of payables
activity.
The decrease in accrued interest resulted partly from the portion of debt
assumed by GTC in the Corporate Restructuring transaction.and partly from other factors.
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 1997) and partly due to the
Corporate Restructuring transaction.
13Restructuring.
14
PART II--OTHERII - OTHER INFORMATION
ITEMItem 1. Legal Proceedings
On June 17, 1997, PECO Energy Company--Power Team ("PECO") filed an
application with the Federal Energy Regulatory Commission ("FERC") pursuant
to Section 211 of the Federal Power Act requesting FERC to compel Oglethorpe
and/or GTC to provide PECO with 250 MW of firm point-to-point transmission
service from the Tennessee Valley Authority ("TVA")-Integrated Transmission
System ("ITS") interface to the Florida-ITS interface for an initial
three-year period, with an automatic roll-over provision. PECO also seeks
$10,000 per day in penalties from Oglethorpe and/or GTC, alleging bad faith
and delays in negotiations. In their FERC response, GTC and
Oglethorpe contend that they negotiated with PECO in good faith, and thus
there is no reasonable basis for imposing the penalties sought by PECO. GTC
also responded that it does not have firm "available transfer capability"
at the TVA-ITS interface to fulfill PECO's request, after taking into account
the need to protect system reliability, existing firm commitments, and use of
the TVA-ITS interface to serve "native load," in accordance with North
American Electric Reliability Council guidelines. In the event GTC is ordered
by FERC to provide the requested service, PECO would be required to
compensate GTC at rates set by FERC in the order. As a consequence of any
such order, power purchased by Oglethorpe for delivery through the TVA-ITS
interface would probably be curtailed, and could result in higher purchased
power cost than would otherwise be the case. Although FERC transmission
pricing policy is designed to ensure that a transmission provider is fully
compensated for the cost of providing transmission service, potentially
including opportunity cost, there can be no assurance that rates ordered by
FERC for service to PECO would fully compensate GTC, Oglethorpe and the
Members for the use of the transmission system and for any resulting increase
in the cost of power.
Item 6. EXHIBITS AND REPORTS ON FORMExhibits and Reports on Form 8-K
(a) Exhibits
NUMBER DESCRIPTIONNumber Description
- -------------- ----------- *10.34-----------
10.8.6 Supplemental Agreement to the Amended and Restated Wholesale
Power Purchase and Sale Agreement between
Morgan Stanley Capital Group Inc. and Oglethorpe,Contract, dated as of April 7, 1997.May 1, 1997 by and between
Oglethorpe and Altamaha Electric Membership Corporation,
together with a Schedule identifying 38 other
substantially identical Supplemental Agreements.
27.1 Financial Data Schedule (for SEC use only).
------------------------
* Certain portions of this document have been omitted as confidential and
filed separately with the Commission.- ----------------------------
(b) Reports on Form 8-K
No reports on Form 8-K were filed by Oglethorpe for the quarter ended March
31,June 30,
1997.
1415
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 Corporation)
Date: May 14,August 11, 1997 By: /s/ T. D. Kilgore
------------------------------------------------------------------------------
T. D. Kilgore
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 14,August 11, 1997 /s/ Mac F. Oglesby
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Mac F. Oglesby
Treasurer and Director
(Principal Financial Officer)
Date: May 14,August 11, 1997 /s/ Robert D. Steele
-------------------------------------------------------------------------------
Robert D. Steele
Controller
(Principal(Chief Accounting Officer)
1516