Delaware | 47-0790493 | |||
(State of Incorporation) | (IRS Employer Identification No.) | |||
Salton Sea Brine Processing, L.P. | California | 33-0601721 | ||
Salton Sea Power Generation L.P. | California | 33-0567411 | ||
Fish Lake Power LLC | Delaware | 33-0453364 | ||
Vulcan Power Company | Nevada | 95-2636765 | ||
CalEnergy Operating Corporation | Delaware | 33-0268085 | ||
Salton Sea Royalty LLC | Delaware | 47-0790492 | ||
VPC Geothermal LLC | Delaware | 91-1244270 | ||
San Felipe Energy Company | California | 33-0315787 | ||
Conejo Energy Company | California | 33-0268500 | ||
Niguel Energy Company | California | 33-0268502 | ||
Vulcan/BN Geothermal Power Company | Nevada | 95-3992087 | ||
Leathers, L.P. | California | 33-0305342 | ||
Del Ranch, L.P. | California | 33-0278290 | ||
Elmore, L.P. | California | 33-0278294 | ||
Salton Sea Power L.L.C. | Delaware | 47-0810713 | ||
CalEnergy Minerals LLC | Delaware | 47-0810718 | ||
CE Turbo LLC | Delaware | 47-0812159 | ||
CE Salton Sea Inc. | Delaware | 47-0810711 | ||
Salton Sea Minerals Corp. | Delaware | 47-0811261 |
302 S. 36th Street, Suite 400 Omaha, Nebraska | 68131 | |
(Address of principal executive offices of | (Zip Code of | |
Salton Sea Funding Corporation) | Salton Sea Funding Corporation) | |
(402) 341-4500 | ||
Salton Sea Funding Corporation's telephone number, including area code: |
PART I - FINANCIAL INFORMATION | ||||
Item 1. | Financial Statements | 3 | ||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 32 | ||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 41 | ||
Item 4. | Controls and Procedures | 41 | ||
PART II - OTHER INFORMATION | ||||
Item 1. | Legal Proceedings | 42 | ||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 42 | ||
Item 3. | Defaults Upon Senior Securities | 42 | ||
Item 4. | Submission of Matters to a Vote of Security Holders | 42 | ||
Item 5. | Other Information | 42 | ||
Item 6. | Exhibits | 42 | ||
Signatures | 43 | |||
Exhibit Index | 44 |
As of | |||||||
September 30, | December 31, | ||||||
2004 | 2003 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash | $ | 44,828 | $ | 14,341 | |||
Accrued interest receivable and other current assets | 8,056 | 2,950 | |||||
Current portion secured project notes from Guarantors | 39,478 | 165,215 | |||||
Total current assets | 92,362 | 182,506 | |||||
Secured project notes from Guarantors | 273,315 | 298,377 | |||||
Investment in 1% of net assets of Guarantors | 6,554 | 9,532 | |||||
Total assets | $ | 372,231 | $ | 490,415 | |||
LIABILITIES AND STOCKHOLDER'S EQUITY | |||||||
Current liabilities: | |||||||
Accrued interest | $ | 8,019 | $ | 2,945 | |||
Current portion of long-term debt | 39,478 | 165,215 | |||||
Total current liabilities | 47,497 | 168,160 | |||||
Due to affiliates | 40,800 | 10,225 | |||||
Senior secured notes and bonds | 273,315 | 298,377 | |||||
Total liabilities | 361,612 | 476,762 | |||||
Commitments and contingencies (Note 4) | |||||||
Stockholder's equity: | |||||||
Common stock authorized - 1,000 shares, par value $.01 per share; issued and outstanding 100 shares | - | - | |||||
Additional paid-in capital | 8,231 | 6,317 | |||||
Retained earnings | 2,388 | 7,336 | |||||
Total stockholder's equity | 10,619 | 13,653 | |||||
Total liabilities and stockholder's equity | $ | 372,231 | $ | 490,415 |
Three Months | Nine Months | ||||||||||||
Ended September 30, | Ended September 30, | ||||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||
(Unaudited) | |||||||||||||
Revenue: | |||||||||||||
Interest income | $ | 6,085 | $ | 9,217 | $ | 20,386 | $ | 28,145 | |||||
Equityinearnings of Guarantors | (4,674 | ) | 37 | (4,892 | ) | (172 | ) | ||||||
Total revenue | 1,411 | 9,254 | 15,494 | 27,973 | |||||||||
Costs and expenses: | |||||||||||||
General and administrative expenses | 98 | 107 | 206 | 297 | |||||||||
Interest expense | 6,014 | 9,188 | 20,195 | 27,750 | |||||||||
Total costs and expenses | 6,112 | 9,295 | 20,401 | 28,047 | |||||||||
Loss before income taxes | (4,701 | ) | (41 | ) | (4,907 | ) | (74 | ) | |||||
Provision (benefit) for income taxes | 125 | (17 | ) | 41 | (30 | ) | |||||||
Net loss | $ | (4,826 | ) | $ | (24 | ) | $ | (4,948 | ) | $ | (44 | ) |
Nine Months | |||||||
Ended September 30, | |||||||
2004 | 2003 | ||||||
(Unaudited) | |||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (4,948 | ) | $ | (44 | ) | |
Adjustments to reconcile net loss to net cash flows from operating activities: | |||||||
Equity in earnings of Guarantors | 4,892 | 172 | |||||
Changes in assets and liabilities: | |||||||
Accrued interest receivable and other current assets | (5,106 | ) | (8,918 | ) | |||
Accrued interest payable | 5,074 | 8,980 | |||||
Net cash flows from operating activities | (88 | ) | 190 | ||||
Cash flows from investing activities: | |||||||
Principal repayments of secured project notes from Guarantors | 150,799 | 14,039 | |||||
Cash flows from financing activities: | |||||||
Decrease in restricted cash | - | 46,293 | |||||
Due to affiliates, net | 30,575 | (35,301 | ) | ||||
Repayment of senior secured notes and bonds | (150,799 | ) | (14,039 | ) | |||
Net cash flows from financing activities | (120,224 | ) | (3,047 | ) | |||
Net change in cash | 30,487 | 11,182 | |||||
Cash at the beginning of period | 14,341 | 19,583 | |||||
Cash at the end of period | $ | 44,828 | $ | 30,765 |
As of | |||||||
September 30, | December 31, | ||||||
2004 | 2003 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Trade accounts receivable, net | $ | 21,421 | $ | 14,070 | |||
Trade accounts receivable from affiliates | 53 | 1,131 | |||||
Prepaid expenses and other current assets | 3,915 | 4,255 | |||||
Total current assets | 25,389 | 19,456 | |||||
Properties, plants, contracts and equipment, net | 401,056 | 507,983 | |||||
Total assets | $ | 426,445 | $ | 527,439 | |||
LIABILITIES AND GUARANTORS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 479 | $ | 146 | |||
Accrued interest | 5,380 | 1,421 | |||||
Other accrued liabilities | 4,457 | 6,566 | |||||
Current portion of long-term debt | 34,697 | 24,409 | |||||
Total current liabilities | 45,013 | 32,542 | |||||
Due to affiliates | 40,476 | 45,652 | |||||
Senior secured project note | 176,746 | 199,238 | |||||
Total liabilities | 262,235 | 277,432 | |||||
Commitments and contingencies (Note 5) | |||||||
Guarantors' equity | 164,210 | 250,007 | |||||
Total liabilities and guarantors' equity | $ | 426,445 | $ | 527,439 |
Three Months | Nine Months | ||||||||||||
Ended September 30, | Ended September 30, | ||||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||
(Unaudited) | |||||||||||||
Revenue: | |||||||||||||
Operating revenue | $ | 35,945 | $ | 26,646 | $ | 79,448 | $ | 64,611 | |||||
Interest and other income (loss) | - | 12 | 130 | (467 | ) | ||||||||
Total revenue | 35,945 | 26,658 | 79,578 | 64,144 | |||||||||
Costs and expenses: | |||||||||||||
Royalty, operating, general and administrative expense | 13,013 | 17,373 | 42,547 | 45,646 | |||||||||
Depreciation and amortization | 6,215 | 4,871 | 18,309 | 14,632 | |||||||||
Interest expense | 4,169 | 4,682 | 12,885 | 14,255 | |||||||||
Total costs and expenses | 23,397 | 26,926 | 73,741 | 74,533 | |||||||||
Income (loss) from continuing operations | 12,548 | (268 | ) | 5,837 | (10,389 | ) | |||||||
Loss from discontinued operations (Note 3) | (91,466 | ) | (23 | ) | (91,634 | ) | (41 | ) | |||||
Net loss | $ | (78,918 | ) | $ | (291 | ) | $ | (85,797 | ) | $ | (10,430 | ) |
Nine Months | |||||||
Ended September 30, | |||||||
2004 | 2003 | ||||||
(Unaudited) | |||||||
Cash flows from operating activities: | |||||||
Income (loss) from continuing operations | $ | 5,837 | $ | (10,389 | ) | ||
Adjustments to reconcile income (loss) from continuing operations to cash flows | |||||||
from continuing operations: | |||||||
Depreciation and amortization | 18,309 | 14,632 | |||||
Other | 180 | 172 | |||||
Changes in assets and liabilities: | |||||||
Trade accounts receivable, net | (6,273 | ) | 103 | ||||
Prepaid expenses and other current assets | 340 | 1,838 | |||||
Accounts payable and accrued liabilities | 2,183 | 5,595 | |||||
Net cash flows from operating activities | 20,576 | 11,951 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures, net of warranty settlement | (3,196 | ) | (710 | ) | |||
Cash flows from financing activities: | |||||||
Repayment of senior secured project note | (12,204 | ) | (11,382 | ) | |||
Increase (decrease) in due to affiliates | (5,176 | ) | 141 | ||||
Net cash flows from financing activities | (17,380 | ) | (11,241 | ) | |||
Net change in cash | - | - | |||||
Cash at the beginning of period | - | - | |||||
Cash at the end of period | $ | - | $ | - |
As of | |||||||
September 30, | December 31, | ||||||
2004 | 2003 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Trade accounts receivable, net | $ | 21,662 | $ | 13,500 | |||
Trade accounts receivable from affiliate | - | 433 | |||||
Inventory | 18,480 | 19,616 | |||||
Prepaid expenses and other current assets | 1,670 | 3,641 | |||||
Total current assets | 41,812 | 37,190 | |||||
Restricted cash | 121 | 441 | |||||
Properties, plants, contracts and equipment, net | 260,608 | 636,710 | |||||
Management fee | 62,860 | 66,603 | |||||
Due from affiliates | 193,809 | 157,531 | |||||
Goodwill | 56,528 | 99,653 | |||||
Total assets | $ | 615,738 | $ | 998,128 | |||
LIABILITIES AND GUARANTORS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 3,125 | $ | 1,883 | |||
Accrued interest | 2,624 | 1,519 | |||||
Other accrued liabilities | 15,627 | 12,812 | |||||
Current portion of long-term debt | 4,140 | 140,398 | |||||
Total current liabilities | 25,516 | 156,612 | |||||
Senior secured project note | 96,569 | 98,702 | |||||
Deferred income taxes | 99,035 | 130,610 | |||||
Total liabilities | 221,120 | 385,924 | |||||
Commitments and contingencies (Note 7) | |||||||
Guarantors' equity: | |||||||
Common stock | 3 | 3 | |||||
Additional paid-in capital (Note 8) | 674,246 | 482,814 | |||||
Retained earnings (deficit) | (279,631 | ) | 129,387 | ||||
Total guarantors' equity | 394,618 | 612,204 | |||||
Total liabilities and guarantors' equity | $ | 615,738 | $ | 998,128 |
Three Months | Nine Months | ||||||||||||
Ended September 30, | Ended September 30, | ||||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||
(Unaudited) | |||||||||||||
Revenue: | |||||||||||||
Operating revenue | $ | 33,382 | $ | 33,113 | $ | 73,179 | $ | 75,364 | |||||
Interest and other income | 1,353 | 1,073 | 845 | 944 | |||||||||
Total revenue | 34,735 | 34,186 | 74,024 | 76,308 | |||||||||
Costs and expenses: | |||||||||||||
Royalty, operating, general and administrative costs | 11,532 | 12,733 | 46,188 | 42,400 | |||||||||
Depreciation and amortization | 7,171 | 6,200 | 20,823 | 17,897 | |||||||||
Interest expense | 1,997 | 2,079 | 6,032 | 6,149 | |||||||||
Total costs and expenses | 20,700 | 21,012 | 73,043 | 66,446 | |||||||||
Income from continuing operations before income taxes | 14,035 | 13,174 | 981 | 9,862 | |||||||||
Provision for income taxes | 8,229 | 5,363 | 125 | 4,051 | |||||||||
Income from continuing operations | 5,806 | 7,811 | 856 | 5,811 | |||||||||
Loss from discontinued operations, net of tax benefits (Note 3) | (396,326 | ) | (5,995 | ) | (409,874 | ) | (18,865 | ) | |||||
Net income (loss) | $ | (390,520 | ) | $ | 1,816 | $ | (409,018 | ) | $ | (13,054 | ) |
Nine Months | |||||||
Ended September 30, | |||||||
2004 | 2003 | ||||||
(Unaudited) | |||||||
Cash flows from operating activities: | |||||||
Income from continuing operations | $ | 856 | $ | 5,811 | |||
Adjustments to reconcile income from continuing operations to cash | |||||||
flows from continuing operations: | |||||||
Depreciation and amortization | 20,823 | 17,897 | |||||
Deferred income taxes | (1,297 | ) | 3,038 | ||||
Other | 2,634 | 1,179 | |||||
Changes in assets and liabilities: | |||||||
Trade accounts receivable, net | (7,740 | ) | (8,361 | ) | |||
Prepaid expenses and other current assets | (470 | ) | 952 | ||||
Accounts payable and accrued liabilities | 6,972 | 5,835 | |||||
Net cash flows fromcontinuing operations | 21,778 | 26,351 | |||||
Net cash flows from discontinued operations | (28,437 | ) | (31,197 | ) | |||
Net cash flows from operating activities | (6,659 | ) | (4,846 | ) | |||
Cash flows from investing activities: | |||||||
Capital expenditures related to operating projects | (11,010 | ) | (12,299 | ) | |||
Management fee | 42 | (862 | ) | ||||
Net cash flows from continuing operations | (10,968 | ) | (13,161 | ) | |||
Net cash flows from discontinued operations | 845 | (10,269 | ) | ||||
Net cash flows from investing activities | (10,123 | ) | (23,430 | ) | |||
Cash flows from financing activities: | |||||||
Increase in due from affiliates | (8,802 | ) | (11,384 | ) | |||
Repayment of senior secured project notes | (2,008 | ) | (1,806 | ) | |||
Net cash flows from continuing operations | (10,810 | ) | (13,190 | ) | |||
Net cash flows from discontinued operations | 27,592 | 41,466 | |||||
Net cash flows from financing activities | 16,782 | 28,276 | |||||
Net change in cash | - | - | |||||
Cash at beginning of period | - | - | |||||
Cash at the end of period | $ | - | $ | - | |||
Supplemental disclosure- Forgiveness of amounts borrowed from MEHC to fund Zinc Recovery Project operating losses (Note 8) | $ | 41,708 | $ | - |
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||
Total revenue | $ | 564 | $ | 184 | $ | 2,509 | $ | 384 | |||||
Losses from discontinued operations | $ | (9,712 | ) | $ | (10,118 | ) | $ | (32,577 | ) | $ | (31,840 | ) | |
Costs of disposal activities, net | (1,019 | ) | - | (1,019 | ) | - | |||||||
Asset impairment charges | (363,432 | ) | - | (363,432 | ) | - | |||||||
Goodwill impairment charges | (43,125 | ) | - | (43,125 | ) | - | |||||||
Income tax benefits | 20,962 | 4,123 | 30,279 | 12,975 | |||||||||
Loss from discontinued operations, net of tax | $ | (396,326 | ) | $ | (5,995 | ) | $ | (409,874 | ) | $ | (18,865 | ) |
Accrued disposal costs at December 31, 2003 | $ | - | ||
Costs of disposal activities | 1,019 | |||
Payments of disposal costs | (420 | ) | ||
Proceeds from sales of assets | - | |||
Accrued disposal costs at September 30, 2004 | $ | 599 |
September 30, 2004 | December 31, 2003 | ||||||||||||
Gross Carrying | Accumulated | Gross Carrying | Accumulated | ||||||||||
Amount | Amortization | Amount | Amortization | ||||||||||
Power Purchase Contracts | $ | 123,002 | $ | 99,640 | $ | 123,002 | $ | 98,463 | |||||
Patented Technology | 46,290 | 18,761 | 46,290 | 17,314 | |||||||||
Total | $ | 169,292 | $ | 118,401 | $ | 169,292 | $ | 115,777 |
September 30, | December 31, | ||||||
2004 | 2003 | ||||||
(As reclassified) | |||||||
Deferred tax liabilities - | |||||||
Properties, plant, contracts and equipment | $ | (111,219 | ) | $ | (195,267 | ) | |
Deferred tax assets: | |||||||
Net operating loss carryforwards | - | 53,115 | |||||
Accruals not currently deductible for tax purposes | 2,929 | 2,929 | |||||
Energy credits | 7,198 | 6,556 | |||||
Alternative minimum tax credits | 2,057 | 2,057 | |||||
Total deferred tax assets | 12,184 | 64,657 | |||||
Net deferred tax liabilities | $ | (99,035 | ) | $ | (130,610 | ) |
As of | |||||||
September 30, | December 31, | ||||||
2004 | 2003 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Prepaid expenses and other current assets | $ | - | $ | 5 | |||
Royalty stream, net | 12,185 | 13,002 | |||||
Goodwill | 30,464 | 30,464 | |||||
Due from affiliates | 54,639 | 48,413 | |||||
Total assets | $ | 97,288 | $ | 91,884 | |||
LIABILITIES AND MEMBERS' EQUITY | |||||||
Current liabilities: | |||||||
Accrued interest | $ | 16 | $ | 5 | |||
Current portion of long-term debt | 641 | 408 | |||||
Total current liabilities | 657 | 413 | |||||
Senior secured project note | - | 437 | |||||
Total liabilities | 657 | 850 | |||||
Commitments and contingencies | |||||||
Members' equity: | |||||||
Common stock, par value $.01 per share; | |||||||
100 shares authorized, issued and outstanding | - | - | |||||
Additional paid-in capital | 1,561 | 1,561 | |||||
Retained earnings | 95,070 | 89,473 | |||||
Total members' equity | 96,631 | 91,034 | |||||
Total liabilities and members' equity | $ | 97,288 | $ | 91,884 |
Three Months | Nine Months | ||||||||||||
Ended September 30, | Ended September 30, | ||||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||
(Unaudited) | |||||||||||||
Revenue - royalty income | $ | 3,206 | $ | 3,284 | $ | 8,773 | $ | 9,427 | |||||
Costs and expenses: | |||||||||||||
Royalty, operating, general and administrative expenses | 874 | 857 | 2,312 | 2,466 | |||||||||
Amortization of royalty stream | 272 | 214 | 817 | 641 | |||||||||
Interest expense | 12 | 21 | 47 | 66 | |||||||||
Total costs and expenses | 1,158 | 1,092 | 3,176 | 3,173 | |||||||||
Net income | $ | 2,048 | $ | 2,192 | $ | 5,597 | $ | 6,254 |
Nine Months | |||||||
Ended September 30, | |||||||
2004 | 2003 | ||||||
(Unaudited) | |||||||
Cash flows from operating activities: | |||||||
Net income | $ | 5,597 | $ | 6,254 | |||
Adjustments to reconcile net income to net cashflows from operating activities: | |||||||
Amortization of royalty stream | 817 | 641 | |||||
Changes in assets and liabilities: | |||||||
Prepaid expenses and other current assets | 5 | 6 | |||||
Accrued interest | 11 | 17 | |||||
Net cash flows from operating activities | 6,430 | 6,918 | |||||
Net cash flows from financing activities: | |||||||
Increase in due from affiliates | (6,226 | ) | (6,766 | ) | |||
Repayment of senior secured project note | (204 | ) | (152 | ) | |||
Net cash flows from financing activities | (6,430 | ) | (6,918 | ) | |||
Net change in cash | - | - | |||||
Cash at beginning of period | - | - | |||||
Cash at the end of period | $ | - | $ | - |
· | On September 10, 2004, management made the decision to cease operations of the facilities installed near the geothermal energy generation facilities located in the Imperial Valley of California designed to recover zinc from the geothermal brine through an ion exchange, solvent extraction, electrowinning and casting process (“the Zinc Recovery Project”), effective immediately. The Zinc Recovery Project began limited production during December 2002. Based on this decision, a non-cash, after-tax, impairment charge of $390.0 million and $91.4 million for the Partnership Guarantors and Salton Sea Guarantors, respectively, has been recorded to write-off the Zinc Recovery Project, rights to quantities of extractable minerals, and allocated goodwill (collectively, the “Mineral Assets”); |
· | On March 1, 2004 Funding Corporation completed the redemption of approximately $136.4 million of its 7.475% Senior Secured Series F Bonds (“Series F Bonds”) due on November 30, 2018. Funding Corporation made a demand on MidAmerican Energy Holdings Company (“MEHC”) and MEHC performed under that demand in order to fund the redemption; and |
· | The settlement agreement in regards to the Salton Sea V Project reached in April 2003 with Stone & Webster Inc. (“Stone & Webster”) resulted in the receipt of $12.1 million from Stone & Webster. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2004 | 2003 | 2004 | 2003 | ||||
Overall capacity factor | 92.4% | 72.1% | 82.7% | 69.4% | |||
Megawatt hour ("MWh") produced | 343,700 | 268,200 | 916,200 | 765,800 | |||
Capacity (net MW) (weighted average) | 168.4 | 168.4 | 168.4 | 168.4 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2004 | 2003 | 2004 | 2003 | ||||
Overall capacity factor | 101.7% | 102.6% | 94.3% | 99.4% | |||
Megawatt hour ("MWh") produced | 354,700 | 357,800 | 979,700 | 1,028,800 | |||
Capacity (net MW) (weighted average) | 158.0 | 158.0 | 158.0 | 158.0 |
The exhibits listed on the accompanying Exhibit Index are filed as part of this Quarterly Report. | ||
Salton Sea Funding Corporation | ||
(Registrant) | ||
Date: November 12, 2004 | /s/ Wayne F. Irmiter | |
Wayne F. Irmiter | ||
Vice President and Controller |
Exhibit No. | ||
31.1 | Chief Executive Officer's Certificate Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Chief Accounting Officer's Certificate Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Chief Executive Officer's Certificate Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Chief Accounting Officer's Certificate Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |