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                     SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C.  20549
                          --------------------------------------
                               FORM 10-Q / A

(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,September 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 / A
                       FOR THE QUARTER ENDED MARCH 31,SEPTEMBER 30, 1997


                                                                        Page No.
                                                                        --------
PART I - FINANCIAL INFORMATION

     Item 1.   Financial Statements

           Condensed Balance Sheets as of March 31,September 30, 1997 (Unaudited)
           and December 31, 1996                                             3

           Condensed Statements of Revenues and Expenses (Unaudited)
           for the Three Months and Nine Months Ended
           March 31,September 30, 1997 and 1996                                       5

           Condensed Statements of Cash Flows (Unaudited)
           for the ThreeNine Months Ended March 31,September 30, 1997 and 1996             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 1.   Legal Proceedings                                            17

     Item 6.   Exhibits and Reports on Form 8-K                             1417


SIGNATURES                                                                  1518


                                       2




PART I--FINANCIAL INFORMATION 
Item 1. Financial Statements

Oglethorpe Power Corporation
Condensed Balance Sheets
March 31,September 30, 1997 and December 31, 1996
 
PART I--FINANCIAL INFORMATION
  ITEM 1. FINANCIAL STATEMENTS
 
(dollars(Dollars in thousands) 1997 1996 ASSETS (Unaudited) ------------------------------------------ 1997 1996 Assets (Unaudited) ------------ ------------ Electric plant, at original cost: In service $4,921,498 $5,742,597service......................................................................... $ 4,906,315 $ 5,742,597 Less: Accumulated provision for depreciation (1,333,820)depreciation....................................... (1,382,063) (1,488,272) ------------- -------------- 3,587,678------------ ------------ 3,524,252 4,254,325 Nuclear fuel, at amortized cost 81,883cost.................................................... 86,980 86,722 Plant acquisition adjustments, at amortized costcost................................... -- 4,153 ------------ ------------ Construction work in progress 9,494progress...................................................... 13,059 31,181 ------------- -------------- 3,679,055------------ ------------ 3,624,291 4,376,381 ------------- -------------------------- ------------ Investments and funds: Bond, reserve and construction funds, at market 31,663market.................................... 32,328 53,955 Decommissioning fund, at market 86,654market.................................................... 101,821 86,269 Investment in associated organizations, at cost 15,430cost.................................... 15,407 15,379 Deposit on Rocky Mountain transactions, at cost 58,466cost.................................... 51,325 41,685 Other 4,168 -- ------------- -------------- 196,381------------ ------------ 200,881 197,288 ------------- -------------------------- ------------ Current assets: Cash and temporary cash investments, at cost 52,401cost....................................... 59,981 132,783 Other short-term investments, at market 92,816market............................................ 96,145 91,499 Receivables 99,198Receivables........................................................................ 117,580 113,289 Inventories, at average cost 85,547cost....................................................... 70,872 89,825 Prepayments and other current assets 16,676assets............................................... 22,371 14,625 ------------- -------------- 346,638------------ ------------ 366,949 442,021 ------------- -------------------------- ------------ Deferred charges: Premium and loss on reacquired debt, being amortized 193,700amortized............................... 189,692 201,007 Deferred amortization of Scherer leasehold 92,089leasehold......................................... 94,832 90,717 Deferred debt expense, being amortized 9,511amortized............................................. 13,641 21,703 Other 33,142Other.............................................................................. 36,994 33,058 ------------- -------------- 328,442------------ ------------ 335,159 346,485 ------------- -------------- $4,550,516------------ ------------ $ 4,527,280 $ 5,362,175 ------------- -------------------------- ------------ ------------ ------------
The accompanying notes are an integral part of these condensed statements. 3 Oglethorpe Power Corporation Condensed Balance Sheets March 31,September 30, 1997 and December 31, 1996
(dollars(Dollars in thousands) 1997 1996 EQUITIES AND LIABILITIES (Unaudited) --------------------------- 1997 1996 Equity and Liabilities (Unaudited) ------------ ------------ Capitalization: Patronage capital and membership fees (including unrealized loss of ($1,791)515) at March 31,September 30, 1997 and $(844)($844) at December 31, 1996 on available-for-sale securities) $315,855 $356,229................................................... $ 321,771 $ 356,229 Long-term debt 3,314,890debt..................................................................... 3,171,511 4,052,470 Obligations under capital leases 292,397leases................................................... 289,825 293,682 Obligation under Rocky Mountain transactions 58,466transactions....................................... 51,325 41,685 ------------ ------------- 3,981,608------------ 3,834,432 4,744,066 ------------ ------------------------- Current liabilities: Long-term debt and capital leases due within one year 88,875year.............................. 87,847 159,622 Notes payable...................................................................... 92,220 -- Accounts payable 40,308payable................................................................... 53,641 42,891 Accrued interest 14,243interest................................................................... 13,560 15,931 Accrued and withheld taxes 8,982taxes......................................................... 19,800 4,940 Other current liabilities 9,442 14,022liabilities.......................................................... 4,891 9,540 ------------ ------------- 161,850 237,406 ------------ -------------271,959 232,924 ------------ ------------ Deferred credits and other liabilities: Gain on sale of plant, being amortized 62,699amortized............................................. 61,375 58,527 Net benefit of sale of income tax benefits, being amortized 40,046amortized........................ 36,042 42,049 Net benefit of Rocky Mountain transactions, being amortized 94,764amortized........................ 93,171 70,701 Accumulated deferred income taxes 60,623taxes.................................................. 60,325 61,985 Decommissioning reserve 125,298reserve............................................................ 141,399 124,468 Other 23,628 22,973Other.............................................................................. 28,577 27,455 ------------ ------------- 407,058 380,703 ------------ -------------420,889 385,185 ------------ ------------ $ 4,550,5164,527,280 $ 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) For the Three Monthand Nine Months ended March 31,September 30, 1997 and 1996 - ----------------------------------------------------------------
(dollars in thousands) 1997 1996 ------------------------------Three Months Nine Months ---------------------- ---------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Operating revenues: Sales to MembersMembers................................................ $ 257,031280,503 $ 243,952268,939 $ 767,714 $ 771,378 Sales to non-Members 14,454 24,231 ----------- -------------non-Members............................................ 6,076 17,709 33,226 61,187 ---------- ---------- ---------- ---------- Total operating revenues 271,485 268,183 ----------- -------------revenues......................................... 286,579 286,648 800,940 832,565 ---------- ---------- ---------- ---------- Operating expenses: Fuel 44,889 48,240 Production 35,595 30,369Fuel............................................................ 61,206 54,807 152,799 158,465 Production...................................................... 34,216 31,296 103,760 93,293 Purchased power 57,991 64,064power................................................. 95,038 67,217 215,350 189,443 Power delivery 3,878 3,658delivery.................................................. (10) 4,110 3,969 11,974 Depreciation and amortization 36,239 36,526amortization................................... 30,154 36,684 96,534 109,774 Taxes other than income taxes 7,620 7,384taxes................................... 5,593 7,035 18,808 21,761 Other operating expenses 7,455 4,374 ----------- -------------expenses........................................ 3,629 10,490 13,728 26,764 ---------- ---------- ---------- ---------- Total operating expenses 193,667 194,615 ----------- -------------expenses......................................... 229,826 211,639 604,948 611,474 ---------- ---------- ---------- ---------- Operating margin 77,818 73,568 ----------- -------------margin................................................. 56,753 75,009 195,992 221,091 ---------- ---------- ---------- ---------- Other income (expense): Interest income 7,434 4,060income................................................. 7,247 8,698 21,002 17,438 Amortization of net benefit of sale of income tax benefits 2,798benefits...... 2,799 2,008 8,396 6,023 Amortization of deferred marginsmargins................................ -- 10,1886,966 -- 24,120 Allowance for equity funds used during construction 84construction............. 32 47 Other 1,507 634 ----------- -------------81 137 Other........................................................... 457 761 4,025 1,782 ---------- ---------- ---------- ---------- Total other income 11,823 16,937 ----------- -------------income............................................... 10,535 18,480 33,504 49,500 ---------- ---------- ---------- ---------- Interest charges: Interest on long-term debt and other obligations 80,557 82,031obligations................ 68,488 81,488 216,294 245,848 Allowance for debt funds used during construction (352) (514) ----------- -------------construction............... (328) (507) (873) (1,485) ---------- ---------- ---------- ---------- Net interest charges 80,205 81,517 ----------- -------------charges............................................. 68,160 80,981 215,421 244,363 ---------- ---------- ---------- ---------- Net marginmargin....................................................... ($ 872) $ 9,43612,508 $ 8,988 ----------- ------------- ----------- -------------14,075 $ 26,228 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes are an integral part of these condensed statements. 5 Oglethorpe Power Corporation Condensed Statements of Cash Flows (Unaudited) For the ThreeNine Months ended March 31,Ended September 30, 1997 and 1996
(dollars in thousands)(DOLLARS IN THOUSANDS) 1997 1996 ----------------------------------- ----------- Cash flows from operating activities: Net marginmargin........................................................................... $ 9,43614,075 $ 8,98826,228 ----------- ----------- Adjustments to reconcile net margin to net cash provided by operating activities: Depreciation and amortization 56,911 39,425amortization...................................................... 139,190 132,565 Net benefit of Rocky Mountain transactions 24,859transactions......................................... 22,470 -- Deferred gain from Corporate Restructuring 4,757Restructuring......................................... 4,670 -- Allowance for equity funds used during construction (84) (47)construction................................ (81) (137) Amortization of deferred marginsmargins................................................... -- (10,188)(24,120) Amortization of net benefit of sale of income tax benefits (2,798) (2,008) Other 280 1,149benefits......................... (8,396) (6,023) Other.............................................................................. 1,445 3,025 Change in net current assets, excluding long-term debt due within one year, notes payable and deferred margins to be refunded within one year: Receivables 14,092 (1,368) Inventories (1,530) (3,137)Receivables........................................................................ 533 (8,013) Inventories........................................................................ 9,972 (9,8580 Prepayments and other current assets (2,413) (3,000)assets............................................... (7,816) 37 Accounts payable (1,930) (9,096)payable................................................................... 11,335 (4,897) Accrued interest (1,568) 6,380interest................................................................... (2,251) (70,290) Accrued and withheld taxes 4,042 (18,663)taxes......................................................... 14,860 20,701 Other current liabilities (3,356) (5,232)liabilities.......................................................... (634) (6,299) ----------- ----------- Total adjustments 91,262 (5,785)adjustments................................................................ 185,297 26,691 ----------- ----------- Net cash provided by operating activities 100,698 3,203activities.......................................... 199,372 52,919 ----------- ----------- Cash flows from investing activities: Property additions (24,962) (24,824)additions................................................................. (49,874) (69,211) Net proceeds from bond, reserve and construction funds 21,793 2,397 Decrease (increase)funds............................. 21,616 3,060 (Decrease) Increase in investment in associated organizations (51) 351organizations...................... (28) 429 Increase in other short-term investments (1,766) (10,000) Decrease (increase)investments........................................... (4,306) (14,629) Increase in decommissioning fund (2,423) 729fund................................................... (7,709) (4,970) Net assets soldcash received in Corporate Restructuring 716,365 -- Net liabilities extinguished in Corporate Restructuring (696,190) -- Other (4,168)Restructuring....................................... 24,539 -- ----------- ----------- Net cash provided by (used in)used in investing activities 8,598 (31,347)activities............................................ (15,762) (85,321) ----------- ----------- Cash flows from financing activities: Debt proceeds, net 101,149 --net................................................................. 188,030 3,092 Debt payments, net (239,805) (25,366)payments...................................................................... (394,837) (75,809) Retirement of patronage capitalcapital.................................................... (48,863) -- Other (2,159) 505Other.............................................................................. (742) (168) ----------- ----------- Net cash used in financing activities (189,678) (24,861)activities............................................ (256,412) (72,885) ----------- ----------- Net decrease in cash and temporary cash investments (80,382) (53,005)investments.................................. (72,802) (105,287) Cash and temporary cash investments at beginning of periodperiod........................... 132,783 201,151 ----------- ----------- Cash and temporary cash investments at end of periodperiod................................. $ 52,40159,981 $ 148,14695,864 ----------- ----------- ----------- ----------- Cash paid for: Interest (net of amounts capitalized).............................................. $ 76,871202,400 $ 96,769301,675 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,September 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,September 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 OPERATIONS GENERAL CORPORATE RESTRUCTURINGManagement'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,1997, in which 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 sold 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 sold 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. POWER SUPPLY SWAP ARRANGEMENTSImmediately 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 Marketer Arrangements Oglethorpe utilizes 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 Energy Marketing Inc. (LEM) 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.requirements of the Members. The LEM agreements are based on the actual requirements of the Members during the contract term, whereas the Morgan Stanley agreement was effective May 1, 1997. The agreement obligatesrepresents a fixed supply obligation. 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. LEM 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 LEM and Morgan Stanley for the term of the output of each Member's percentage capacity responsibility (PCR) share (for the term and portion selected) of the "must run" units (primarily nuclear units). Oglethorpe is also obligated to make available the same share 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 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. Pursuant to the amendments, Oglethorpe 8 began separately dispatching Wansley Units No. 1 and No. 2 on May 1, 1997.agreements. Oglethorpe continues to be responsible for all the costs of its system resources but receives revenue from LEM and Morgan Stanley for the use Georgia Power Company (GPC) as its agent for fuel procurement. RESULTS OF OPERATIONS CORPORATE RESTRUCTURING Oglethorpe andof the Members completedresources. Results of Operations Corporate Restructuring As a result of the Corporate Restructuring, the Condensed Statements of Revenues and Expenses for the nine months ended September 30, 1997 reflect operations as a combined power supply, transmission and 8 system operations company through March 31, 1997, and operations solely as a power supply company thereafter. Although the Corporate Restructuring was completed on March 11, 1997. As of that date, Oglethorpe transferred its transmission business and assets1997, pursuant to a separate entity, GTC, and reflected the transfer of its system operations assets to a separate entity, GSOC. However, the Boards of Directors ofrestructuring agreement among 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,Decreases in operating revenues, power delivery expenses, depreciation and amortization, taxes other than income taxes, operating margin and net interest charges from 1996 to 1997 are primarily attributable to the Condensed Statements of Revenues and Expenses for the three months ended March 31, 1997 includes fully 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 Nine Months Ended March 31,September 30, 1997 and 1996 Oglethorpe's net margin (loss) for the three months and nine months ended March 31,September 30, 1997 was $9.4was($0.9) million and$14.1 million, respectively, compared to $9.0$12.5 million and $26.2 million for the same periodperiods of 1996. OPERATING REVENUES MemberIn August 1997, due to achieving a year-to-date net margin higher than required by its Indenture, the Oglethorpe Board of Directors adjusted the 1997 budget thereby lowering the revenue requirement by a total of $4.0 million. Such reduction in revenues was implemented by reducing the capacity charges for the three months ended March 31,August 1997. Year-to-date net margin for 1997, were 5.4%after this adjustment, is sufficient to meet margin requirements. The higher compared to the same period of 1996. While capacity revenues were slightly lowernet margin in the three months ended March 31, 1997 compared to 1996 energy revenuesresulted primarily from unbudgeted savings in interest and decommissioning costs and from higher than expected interest income. Operating Revenues Revenues from sales to Members for the three months ofand nine months ended September 30, 1997 were 20.0%4.3% higher thanfor the three months and 0.5% lower year-to-date compared to the same periods of 1996. While revenues from Members have been reduced due to the removal of capacity revenues relating to the transmission business, this decrease has been offset by an increase in energy revenues from sales to Members. Such energy revenues were 65.1% higher for the three months ended September 30, 1997 compared to the same period of 1996 and 33.7%higher for the prior year.nine-month period compared to 1996. Megawatt-hour (MWh) sales to the Members were virtually unchanged for11.4% and 2.2% higher in the current quarter versusthree-month and nine-month periods compared to the same periodperiods of 1996. However,Consequently, Oglethorpe's average energy revenue per MWh from sales to Members was 20.8%for the three-month and nine-month periods were 48.3% and 30.8% higher in 1997 compared to 1996, respectively. This increase was primarily due tobecause the passthrough of significant savings derived from the transactionshort-term power marketer arrangements with Duke/Louis Dreyfus (DLD) and Enron Power Marketing Inc. (EPMI) had allowed Oglethorpe to pass through significant savings in the first quarternine months of 1996. During the first eightnine months of 1996, Oglethorpe had a power supply arrangementmarketer arrangements with DLD and 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 LEM 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 requirements of the Members. 9 Sales to non-Members were primarily made pursuant to two different types of contractual arrangements with GPCGeorgia Power Company (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 nine months ended March 31,September 30, 1997 and 1996: 9 THREE MONTHS ENDED MARCH 31, -------------------Three Months Nine Months Ended September 30, Ended September 30, 1997 1996 --------- --------- (DOLLARS IN THOUSANDS) GPC- Power supply arrangements...................... $ 7,802 $ 4,717 Sales to other utilities............................ 4,040 12,282 ITS transmission agreements......................... 2,180 3,372 Sales to power marketers............................ 432 3,860 ------- ------- Total............................................... $14,454 $24,2311997 1996 ------- ------- ------- ------- For the three months ended March 31, 1997, the largest source of non-Member(dollars in thousands) GPC- Power supply arrangements $ 283 $ 2,947 $12,847 $10,872 Sales to other utilities 5,021 11,795 14,691 34,595 Sales to power marketers 772 1,150 3,508 8,846 ITS transmission agreements -- 1,817 2,180 6,874 ------- ------- ------- ------- Total $ 6,076 $17,709 $33,226 $61,187 ------- ------- ------- ------- The revenues was derived pursuant tofrom power supply arrangements with GPC. These revenues areGPC were primarily 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 the first nine months of 1997 compared to the same periodperiods of 1996. As noted above under "General", withWith 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 nine months of 1996 were initiated by DLD and EPMI. Where DLD or EPMI did not have a result ofcontractual relationship with the Corporate Restructuring, all ofpurchaser and Oglethorpe did, Oglethorpe recorded the sale and credited the revenues to DLD or EPMI in this category will accrue to GTC effective April 1, 1997.its monthly billing. Under the current LPMLEM and Morgan Stanley power supply arrangement,marketer arrangements, and previously, under the DLD and EPMI power supply arrangement,marketer arrangements, sales to the power marketers represented the net energy transmitted on behalf of LPMLEM, Morgan Stanley, DLD and EPMI off-system on a daily basis from Oglethorpe's total resources. Such energy was sold to LPMLEM, Morgan Stanley,DLD 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. SalesAnother source of non-Member revenues was payments received from GPC for use of the Integrated Transmission System (ITS) and related transmission interfaces. GPC compensated Oglethorpe to the extent that Oglethorpe's percentage of investment in the ITS exceeded its percentage use of the system. In such case, Oglethorpe was entitled to income as compensation for the use of its investment by the 10 other non-Member utilitiesITS participants. As a result of the Corporate Restructuring, all of the revenues in this category have accrued to GTC since April 1, 1997. Operating Expenses Operating expenses were 8.6% higher in the current quarter and 1.1% lower for the nine months ended September 30, 1997 represent sales made directlycompared to the same periods of 1996. Since April 1, 1997, certain operating expenses have been reduced due to the elimination of expenses relating to the transmission business assumed by Oglethorpe onlyGTC in connection with the Corporate Restructuring. However, the changes in fuel expense and the increases in production operations and maintenance costs were unaffected by the Corporate Restructuring. Fuel costs increased 11.7% in the third quarter and decreased 3.6% for the nine months ended September 30, 1997 from the 50%same periods of the power supply resources not sold to LPM. LPM now administers all third-party transactions directly with such parties for its 50% portionprior year, respectively. Total megawatt-hours (MWhs) of the resources. Such salesgeneration increased 7.4% in the first three months of 1996 were initiated by EPMI while Oglethorpe maintainedcurrent quarter and decreased 1.0%year-to-date. For the contractual relationship with these other utilities and reflected the sales transactions in its revenues. 10 OPERATING EXPENSES Operating expenses decreased slightly for the three months ended March 31, 1997current quarter, fossil generation was 11.6% higher compared to the same period of 1996.1996 due to a maintenance outage at Scherer Unit No. 1 in July 1996 and due to higher utilization of Plant Wansley in 1997. The decrease was attributable to decreaseshigher fossil generation in the third quarter resulted in higher average fuel and purchased power costs, offset by higher production operations and maintenance (O&M) costs. Fuel costs decreased 6.9% inFor the nine months ended September 30, 1997 compared to 1996 even though total generation decreased only 2.1%. Such savings resulted from the difference in the mix of generation withwas more nuclear and less fossil generation.generation than in 1996 resulting in lower average fuel costs. The decrease in fossil generation resulted primarily from a maintenance outage during February and March 1997 at Plant Scherer Unit No. 1. TheAlso, the higher nuclear generation during the first quarter of 1997 compared to 1996 was achieved as a result of having twothree refueling outages in the first quarternine months of 1996 compared to nonetwo in 1997. Conversely, the increase in production O&Moperations and maintenance costs was primarilypartly attributable to the 1997 maintenance outage at Plant Scherer Unit No. 1. EffectiveIn addition, 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% decreaseSuch change in purchased poweraccounting resulted in a $12.9 million deferral of maintenance costs in the first nine months of 1996. Purchased power cost for the three months and nine months ended September 30, 1997 were 41.4% and 13.7% higher compared to the same periods of 1996, respectively. A total of 11.6% more MWhs were purchased in the third quarter of 1997 compared to 1996. Year-to-date, 4.9% fewer MWhs were purchased than the same period of 1996 resulted from the savings in capacity costs underprior year. Consequently, 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 were virtually unchanged. A totalaverage cost of 22.2% fewer MWhs were purchased power in the first three months of 1997 compared to the same period of 1996; however, the average purchased power cost per MWh was significantly higher.has increased by 26.7% and 19.5%, respectively. As discussednoted under "Operating Revenues" above, significant energy cost savings were realizedderived in the first threenine months of 1996 from the DLD and EPMI power supply arrangement; such average purchased power cost per MWh was 16.4% higherarrangements. 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 nine months ended March 31,September 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 infor the first threenine months of 1997ended September 30,1997 compared to the same period 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 transferredsold 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$709 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, ABCACB (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$2 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 transferredsold 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 transferredsold 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,September 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 presentation 12 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,September 30, 1997 were $4.6$4.5 billion which, after adjustment for the Corporate Restructuring, was $127$102 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 threenine months ended March 31,September 30, 1997 totaled $25.0$49.9 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 decommissioning investment fund and the decommissioning reserve resulted from earnings of the fund. An amount equal to the earnings of the fund was accrued as an increase to the decommissioning reserve. The increases 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. Inventories decreased as a result of lower coal inventories at Plants Scherer and Wansley primarily due to recent problems associated with rail transportation in the current quarter and due to the seasonal demands of summer. The rail transportation providers expect operations to return to normal by the beginning of 1998. Should deliveries of coal be subject to ongoing delay or disruption, there is a potential for upward price pressure on such coal with a consequent possibility of increased prices for energy. 13 Prepayments and other current assets increased due to a $9.9 million increase in the estimated payment made to GPC for Plant Hatch operations and maintenance costs for October 1997 compared to the estimate paid for January 1997. The increase in the estimate paid related to planned refueling outage and uprate costs at Plant Hatch Unit No. 2. The change in premium and loss on reacquired debt resulted partly from premiums paid in connection with FFB debt prepayment and thea 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. 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 transaction.Restructuring. The $92 million classified as Notes Payable on the Condensed Balance Sheet relates to commercial paper outstanding which was issued to defease approximately $92 million in principal amount of Series 1992 PCBs. It is Oglethorpe's intent to refinance this commercial paper on a long-term basis by issuing medium term notes or PCBs. However, as no formal financing agreement is in place for this longer term refinancing, the $92 million has been classified as a current liability. Accounts payable increased due to normal variations in the timing of payables activity. 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. Competition The electric utility industry in the United States is undergoing fundamental change and is becoming increasingly competitive. See "BUSINESS OF OGLETHORPE--Certain Factors Affecting the Utility Industry in General" in Oglethorpe's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. Several states are in the process of implementing varying forms of "retail wheeling" (the transmission of power for a third party directly to a retail customer) and most others are in various stages of considering retail competition. Proposed federal legislation could mandate retail wheeling in every state. No 14 legislation related to retail wheeling has yet been enacted in Georgia, and, currently, no bill is pending in the Georgia legislature which would amend the Georgia Territorial Electric Service Act (Territorial Act) or otherwise affect the exclusive right of the Members to supply power to their current service territories. In 1997, the staff of the Georgia Public Service Commission (GPSC) conducted a series of workshops to solicit views from the various parties impacted by electric industry restructuring and to discuss potential resolutions of these issues. The GPSC staff anticipates presenting a report to the GPSC that will identify electric industry restructuring issues, potential resolutions and the views of the parties who participated in the workshops. The GPSC does not have the authority under Georgia law to order retail wheeling or amend the Territorial Act. Oglethorpe and the Members participated in the GPSC staff workshops and are actively monitoring and studying legislative initiatives in Congress and in other states to take advantage of the experiences of cooperatives and other utilities in other states to protect their interests in future legislative activities in Georgia. Under current Georgia law, the Members generally have the exclusive right to provide retail electric service in their respective territories. Since 1973, however, Georgia has permitted limited competition among electric utilities located in Georgia for sales of electricity to certain large commercial or industrial customers. Pursuant to the Territorial Act, the owner of any new facility may receive electric service from the power supplier of its choice if the facility is located outside of municipal limits and has a connected demand upon initial full operation of 900 kilowatts or more. See "THE MEMBERS--Service Area and Competition" in Oglethorpe's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. The Members, with Oglethorpe's support, are actively engaged in competition with other retail electric suppliers for these new commercial and industrial loads. While the competition for 900 kilowatt loads represents only limited competition in Georgia, this competition has given Oglethorpe and the Members the opportunity to develop resources and strategies to operate in an increasingly competitive market. Over the past years, Oglethorpe has taken several steps to prepare for and adapt to the fundamental changes which have occurred or are likely to occur in the electric utility industry and to reduce the possibility of incurring stranded costs. Most importantly, Oglethorpe completed the Corporate Restructuring transaction. 13and divided itself into generation, transmission and system operations companies in order to better serve its Members in a deregulated and competitive environment. See "General--Corporate Restructuring" herein. Since 1992, Oglethorpe also has pursued an interest cost reduction program. As a result of this program, Oglethorpe has prepaid $222 million of FFB debt and refinanced $1.1 billion of PCB debt and $1.2 billion of FFB debt. These steps have reduced Oglethorpe's interest costs significantly. See "Financial Condition--Refinancing Transactions" in Oglethorpe's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. Oglethorpe and the Members also amended the Wholesale Power Contracts in connection with the Corporate Restructuring. The Wholesale Power Contracts provide that the Members are jointly and severally responsible for all costs and expenses of all of the generation and purchased power resources of Oglethorpe existing on March 11, 1997, as well as certain future power resources. See "BUSINESS OF OGLETHORPE--New Wholesale Power Contracts" in Oglethorpe's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. Each Wholesale Power Contract specifically provides that the Member must make payments whether or not power has been delivered and whether or not a plant has been sold or is otherwise unavailable. The formulary rate established by Oglethorpe in the rate 15 schedule to the Wholesale Power Contracts employs a rate methodology under which all categories of costs are specifically separated as components of a formula to determine Oglethorpe's revenue requirements. The rate schedule also allocates to the Members the responsibility for all of Oglethorpe's fixed costs. Oglethorpe's charges under the Wholesale Power Contracts may be adjusted by the Board of Directors. With respect to Oglethorpe, the RUS has retained certain approval rights over the changes to the Wholesale Power Contracts, including the rate schedule. See "BUSINESS OF OGLETHORPE--Electric Rates" in Oglethorpe's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. As a result of these contractual agreements, the Members ultimately are liable for the existing power resources of Oglethorpe. Oglethorpe has also entered into arrangements with power marketers to obtain the value that can be brought by power marketers and to provide for future load requirements without taking all the risk associated with traditional suppliers. See "MEMBER REQUIREMENTS AND POWER SUPPLY RESOURCES--Power Purchase and Sale Arrangements--Power Marketer Arrangements" in Oglethorpe's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and "General--Power Supply Swap Arrangements" in Item 2 in Oglethorpe's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997. Oglethorpe and the Members continue to consider and evaluate a wide array of other potential actions to reduce costs and to maintain their competitiveness in anticipation of future competition. These activities on the part of Oglethorpe and the Members are in various stages of study or preliminary consideration. Many Members are now providing or considering proposals to provide non-traditional products and services such as telecommunications and other services. Depending on the nature of future competition in Georgia, there could be reasons for the Members to separate their physical distribution business from their energy business, or otherwise restructure their current businesses to operate effectively under retail competition. Oglethorpe continues to seek to identify and evaluate opportunities to reduce the cost of wholesale power to the Members. Oglethorpe currently defers certain costs of providing services to the Members pursuant to Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation." Note 1 of Notes to Financial Statements in Oglethorpe's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, sets forth the regulatory assets and liabilities reflected on Oglethorpe's balance sheet as of December 31, 1996. Regulatory assets represent probable future revenues to Oglethorpe associated with certain costs which will be recovered from Members through the rate-making process. Regulatory liabilities represent probable future reduction in revenues associated with amounts that are to be credited to Members through the rate-making process. In the event that Oglethorpe is no longer subject to the provisions of SFAS No. 71, Oglethorpe would be required to write off regulatory assets and liabilities. In addition, Oglethorpe would be required to determine any impairment to other assets, including plant, and write down the assets, if impaired, to their fair value. At this time, Oglethorpe cannot predict the outcome of the various developments that may lead to increased competition in the electric utility industry or the effect of such developments on Oglethorpe or its Members. 16 Year 2000 Issue Many information systems have been designed to function based on years that begin with "19". Oglethorpe expects that by the year 2000 it will have adapted its systems, to the extent it considers necessary, to process years that begin with "20", and does not expect that the year 2000 issue will have a material adverse effect on its financial condition or results of operations. PART II--OTHERII - OTHER INFORMATION ITEMItem 1. Legal Proceedings Oglethorpe's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 reported on an action by PECO Energy Company Power Team filed on June 17, 1997 with the Federal Energy Regulatory Commission relating to Oglethorpe and GTC. Item 6. EXHIBITS AND REPORTS ON FORMExhibits and Reports on Form 8-K (a) Exhibits NUMBER DESCRIPTION - --------------Number Description ------- ----------- *10.34 Power Purchase and Sale Agreement between Morgan Stanley Capital Group Inc. and Oglethorpe,4.8.1(b) First Supplemental Indenture, dated as of April 7,October 1, 1997, made by Oglethorpe to SunTrust Bank, Atlanta, as trustee, relating to the Series 1997B (Burke) Note.(Filed as Exhibit 4.8.1(b) to the Registrant's Form 10-Q for the quarterly period ended September 30, 1997. File No. 33-7591.) 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,September 30, 1997. 1417 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,November 25, 1997 By: /s/ T. D. Kilgore ------------------------------------------------------------------------- T. D. Kilgore President and Chief Executive Officer (Principal Executive Officer) Date: May 14,November 25, 1997 /s/ Mac F. Oglesby -------------------------------------------------------------------------- Mac F. Oglesby Treasurer and Director (Principal Financial Officer) Date: May 14,November 25, 1997 /s/ Robert D. Steele -------------------------------------------------------------------------- Robert D. Steele Controller (Principal(Chief Accounting Officer) 15