Securities and Exchange Commission
Washington, DC 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act 1934
Date of Report October 22, 1998
(Date of earliest event reported)
CalEnergy Company, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-9874 94-2213782
(State of other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
302 South 36th Street, Suite 400, Omaha, NE 68131
(Address of principal executive offices) Zip Code
Registrant's Telephone Number, including area code: (402) 341-4500
N/A
(Former name or former address, if changed since last report)
Item 5. Other Events
On October 22, 1998, the Registrant reported results for the
three and nine months ended September 30, 1998. A copy of the
press release issued by the Registrant is attached hereto as
Exhibit 1 and is incorporated herein by reference.
Certain information included in this report contains forward-
looking statements made pursuant to the Private Securities
Litigation Reform Act of 1995 ("Reform Act"). Such statements are
based on current expectations and involve a number of known and
unknown risks and uncertainties that could cause the actual results
and performance of the Registrant to differ materially from any
expected future results or performance, expressed or implied, by
the forward-looking statements including expectations regarding the
future results of operations of Registrant and MidAmerican Energy
Holdings Company and the combined company, the intended financing
of the merger and receipt of regulatory approvals. In connection
with the safe harbor provisions of the Reform Act, the Registrant
has identified important factors that could cause actual results to
differ materially from such expectations, including development
uncertainty, operating uncertainty, acquisition uncertainty,
uncertainties relating to doing business outside of the United
States, uncertainties relating to geothermal resources,
uncertainties relating to domestic and international (and in
particular, Indonesian) economic and political conditions and
uncertainties regarding the impact of regulations, changes in
government policy, industry deregulation and competition.
Reference is made to all of the Registrant's SEC Filings, including
the Proxy Statement and the Registrant's Report on Form 8-K dated
March 6, 1998, incorporated herein by reference, for a description
of such factors. The Company assumes no responsibility to update
forward-looking information contained herein.
Item 7. Financial Statements and Exhibits
Exhibit 1 - Press Release dated October 22, 1998
SIGNATURE
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 hereunto duly authorized.
CalEnergy Company, Inc.
By: \s\ Douglas L. Anderson
Douglas L. Anderson
Assistant Secretary and
Assistant General Counsel
Dated: November 10, 1998
EXHIBIT 1
FOR IMMEDIATE RELEASE
Craig M. Hammett - Senior Vice President, Chief Financial Officer 402-341-4500
Craig S. Allen - Manager, Investor Relations 402-341-4500
Diana Nelson - Brunswick, Media Relations 212-333-3810
CalEnergy Reports 14% Increase in Revenues
and 10% Increase in Earnings Per Share
OMAHA, NEBRASKA, October 22, 1998 -- CalEnergy Company, Inc.
("CalEnergy" or the "Company") (NYSE: CE; PCX and LSE) today
reported results for the three and nine months ended September 30,
1998. Highlights are as follows:
Three Months Ended September 30, 1998 (compared to same period
in 1997)
Revenues increased 14% to $627.7 million from $551.9 million
in 1997
Net income increased 3% to $47.6 million from $46.4 million in
1997 (1)
Net income per basic share increased 10% to $0.80 from $0.73
in 1997 (1)
Diluted earnings per share increased 8% to $0.72 from $0.67 in
1997 (1)
Earnings before interest, taxes, depreciation and amortization
increased 16% to $253.0 million from $218.2 million in 1997
Nine Months Ended September 30, 1998 (compared to same period
in 1997)
Revenues increased 15% to $1.89 billion from $1.64 billion in
1997
Net income increased 3% to $107.4 million from $104.7 million
in 1997 (1)
Net income per basic share increased 8% to $1.78 from $1.65 in
1997 (1)
Diluted earnings per share increased 7% to $1.67 from $1.56 in
1997 (1)
Earnings before interest, taxes, depreciation and amortization
increased 16% to $698.8 million from $604.3 million in 1997
(1) Before extraordinary item in 1997.
The third quarter of 1998 contained many notable events which are
described in greater detail below:
MidAmerican Merger Agreement
On August 12, 1998, CalEnergy announced the approval of a
definitive merger agreement with MidAmerican Energy Holdings
Company ("MidAmerican"). The Company will pay $27.15 in cash for
each MidAmerican common share outstanding, valuing MidAmerican at
approximately $4.2 billion, including $1.6 billion of debt and
preferred stock which will remain outstanding at MidAmerican after
the acquisition. MidAmerican, a leading regional provider of low-
cost energy and related services, provides electricity to 648,000
customers and natural gas to 619,000 customers in Iowa, Illinois,
Nebraska and South Dakota. In the year ended December 31, 1997,
MidAmerican generated revenues of over $1.9 billion and had assets
of approximately $4.3 billion.
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CalEnergy Company, Inc
October 22, 1998
Page -2-
MidAmerican Merger Agreement (Cont.)
All of the necessary regulatory applications and notifications
have been filed with the Federal Energy Regulatory Commission, the
Nuclear Regulatory Commission, the Department of Justice, the
Federal Trade Commission and the Iowa Utilities Board. On October
13, 1998, the Company announced that the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 expired and
that federal antitrust clearance had therefore been obtained. The
Company has scheduled a special shareholders meeting on October 30,
1998 to obtain approval to reincorporate CalEnergy as an Iowa
corporation and approve the proposed merger.
Completion of the merger is expected to occur by the end of
the first quarter 1999. The combined enterprise is expected to
have total assets of approximately $13 billion, total annual
revenues of more than $5 billion and will serve over 3.3 million
retail customers. The transaction is expected to be accretive to
earnings in the first full year of combined operations.
Successful Completion of a $1.4 Billion Senior Note and Bond
Offering
On September 22, 1998, CalEnergy closed the sale of $1.4
billion aggregate principal amount of its Senior Notes and Bonds
with a weighted average maturity of 15.5 years and a weighted
average interest rate of 7.7%. The Senior Notes and Bonds were
rated BB+, Ba1 and BB+ by Standard & Poor's, Moody's and Duff &
Phelps, respectively, and CalEnergy's long term senior debt was
placed on credit watch with positive implications for a possible
upgrade by all three rating agencies following the proposed
MidAmerican merger.
Approximately $830 million in net proceeds of the Senior Note
and Bond Offering (the "Offering") is expected to be utilized as a
component of the funding necessary to complete the pending
MidAmerican merger. In addition, approximately $543 million of the
net proceeds of the Offering is expected to be used to refinance
the Company's outstanding 10 1/4% Senior Discount Notes, which become
callable on January 15, 1999. In October, the Company repurchased
approximately $156 million of the 10 1/4% Senior Discount Notes.
Operations
United States
The Company's Coso and Imperial Valley geothermal projects in
the U.S. continued to operate at high efficiencies and received the
maximum capacity payments allowed by their Power Purchase
Agreements during the third quarter of 1998. These 11 projects,
representing 532 net megawatts, operated with a high degree of
availability and without any major interruptions during the quarter
- --- the period of heaviest demand for electricity in the region and
which yields the highest revenue for delivered power.
United Kingdom
Northern Electric, the Company's subsidiary in the U.K.,
continues to expand its gas customers and has increased gas supply
revenues by $86.1 million to $99.6 million for the nine months
ended September 30, 1998, compared to $13.5 million for the nine
months ended September 30, 1997. Also, included in the nine month
results are initial customer acquisition costs of $31.1 million
related to commissions and opening meter reads. Northern has
acquired over 600,000 new gas customers since the inception of its
`Dual Fuel' marketing campaign in 1997. Over 400,000 of these gas
customers are on supply with the remaining 200,000 gas customers
currently progressing through the registration process.
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CalEnergy Company, Inc
October 22, 1998
Page -3-
Operations - United Kingdom (Cont.)
Northern Electric has also continued to grow the above 100
kilowatt market. The last three major contract rounds produced the
following results:
Volume to Sales
Renew (GWh) Achieved (GWh)
Increase
October, 1997 1,808 2,366 31%
April, 1998 1,631 2,386 46%
October, 1998 2,000 4,330 116%
Total gas (GWh equivalent) and electricity supplied has
increased by 47% to 16,505 GWh for the nine months ended September
30, 1998 from 11,248 GWh for the same period in 1997.
In addition, Northern's service territory is scheduled to open
to retail electricity competition for the less than 100 kilowatt
market on November 4, 1998. The Company believes that Northern is
fully prepared to engage in cost-effective marketing of their
widely-respected brand name.
Philippines
CalEnergy's projects in the Philippines, representing 500 net
megawatts, continue to deliver electricity to the Republic of the
Philippines and have received all monthly payments as scheduled.
Salton Sea Expansion
Zinc Recovery Project
Construction of the Zinc Recovery Project has commenced. The
project will extract minerals, initially zinc, from geothermal
brine. The zinc extraction process will use ion exchange, solvent
extraction and electrowinning to extract and plate zinc from spent
geothermal fluid after it is used to generate electricity at the
existing Imperial Valley geothermal projects.
Debt Offering
On October 13, 1998, CalEnergy announced that the Salton Sea
Funding Corporation had closed the sale of $285 million principal
amount of its 7.475% Senior Secured Series F Bonds due November 30,
2018.
Proceeds from the issuance of Funding Corporation Bonds will
be used to fund construction of two new geothermal projects at the
Salton Sea totaling 59 net megawatts, to partially fund the costs
of construction of the related Zinc Recovery Project, to fund a
portion of the costs associated with the upgrade of certain brine
processing facilities and for other capital improvements to the
steamfield and related facilities at the existing Salton Sea Projects.
Moody's Investor's Service raised the Funding Corporation Bonds' investment
grade rating from Baa3 to Baa2, and Standard & Poor's reaffirmed
the ratings at BBB-.
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CalEnergy Company, Inc.
October 22, 1998
Page -4-
$60 Million of New Renewable Resource Funding Awarded
On July 13, 1998, the Company announced that three of its
subsidiaries had been selected as winning bidders for financial
incentives by the California Energy Commission from funds set aside
under AB 1890, California's landmark electric deregulation
legislation, which was passed in 1996. Each of the three CalEnergy
subsidiaries is proposing to develop, own and operate a separate
geothermal power project in California, for a total of 107 net
megawatts of new capacity. The total financial incentive payment
available to CalEnergy is approximately $60 million and will be
received by the Company over a five year
period following the completion of the new geothermal projects.
CE Casecnan's Senior Secured Debt Rating Upgraded by Standard
& Poor's
On July 14, 1998, CalEnergy announced that Standard & Poor's
upgraded its subsidiary CE Casecnan Water and Energy Company, Inc.
("CE Casecnan") senior secured debt rating to "BB+ with negative
outlook" from "BB with negative Credit Watch". CE Casecnan is
constructing a combined hydroelectric and irrigation project in the
Philippines. The project is on schedule and on budget for
completion by mid 2000. The negative outlook is solely based on
the foreign currency rating of the Republic of the Philippines, the
guarantor of the project's contractual payments.
Indonesia
On August 14, 1998, the Dieng and Patuha projects filed for
arbitration under the United Nations Commission on International
Trade Law rules against PLN, the Government of Indonesia's wholly-
owned electric utility, and the Government of Indonesia for failure
to pay for electricity under the Company's "take or pay" contract
and failure to honor its sovereign guarantees. Arbitration
proceedings represent a contractually required step in the process
of collecting monies due from PLN and the Government of Indonesia.
Stock Repurchase Program
Since November 1997, the Company has repurchased approximately
3.7 million common shares in open market transactions. On February
23, 1998, CalEnergy announced that it had increased the authorized
purchase amounts in its stock repurchase program to three million
shares of its common stock. During the third quarter 1998, the
Company repurchased 497,000 common shares and has approximately 2.3
million shares remaining of the three million shares approved for
repurchase.
Commenting on the results and the events during the third quarter
1998, David L. Sokol, Chairman and Chief Executive Officer, stated:
"This has been a record quarter for operations at CalEnergy
and we are very excited about the opportunities that lie ahead. We
are particularly pleased with the strong performance and progress
made at Northern Electric, our U.K. electric and gas utility. Our
projects in the Philippines also continue to perform well and are
showing strong operating results."
"We believe our nine month financial results, which
demonstrate continued growth in EBITDA and EPS, are particularly
noteworthy in light of the fact that during the period earnings
were negatively impacted by severe winter weather conditions in
upstate New York, the continuing Indonesian uncertainty,
significant customer acquisition costs incurred at Northern and the
pricing of two of the Company's ISO4 contracts have decreased to
avoided cost."
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CalEnergy Company, Inc.
October 22, 1998
Page -5-
"The situation in Indonesia is contained. In the fourth
quarter of last year, we announced a full write off of our equity
exposure. We have subsequently commenced arbitration proceedings
and also carry political risk insurance coverage on our Indonesian
assets."
"The MidAmerican Energy transaction is proceeding smoothly and
we look forward to a speedy completion and the combination of the
skills of two strong management teams. We believe MidAmerican will
provide an excellent platform for growth as the U.S. energy markets
restructure. Our enlarged company will be a powerful entity,
positioned for growth in the energy markets worldwide."
This press release contains forward-looking statements made
pursuant to the Private Securities Litigation Reform Act of 1995
("Reform Act"). Such statements are based on current expectations
and involve a number of known and unknown risks and uncertainties
that could cause the actual results and performance of the Company
to differ materially from any expected future results or
performance, expressed or implied, by the forward-looking
statements. In connection with the safe harbor provisions of the
Reform Act, the Company has identified important factors that could
cause actual results to differ materially from such expectations,
including development uncertainty, operating uncertainty,
uncertainties relating to doing business outside of the United
States, uncertainties relating to geothermal resources,
uncertainties relating to domestic and international (and in
particular, Indonesian) economic and political conditions and
uncertainties regarding the impact of regulations, changes in
government policy, industry deregulation and competition.
Reference is made to all of the Company's SEC filings, including
the Company's Report on Form 8-K dated March 6, 1998, incorporated
herein by reference, for a description of such factors. The
Company assumes no responsibility to update forward-looking
information contained herein.
CalEnergy is a global energy company that manages and owns
interests in over 5,000 net megawatts of power generation
facilities in operation, construction and development worldwide.
The Company develops and produces energy from diversified fuel
sources including geothermal, natural gas and hydroelectric.
Through its subsidiary Northern Electric, CalEnergy supplies and
distributes electricity and gas to 2.0 million customers in the
United Kingdom. CalEnergy conducts business in the U.S., U.K., the
Philippines, Indonesia, Poland and Australia, and employs more than
4,200 people worldwide. For the year ended December 31, 1997,
CalEnergy generated revenues of over $2.2 billion and had assets of
approximately $7.5 billion.
www.calenergy.com
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CalEnergy Company, Inc.
October 22, 1998
Page -6-
CALENERGY COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, expect per share amounts)
(unaudited)
Three Months Nine Months
Ended Ended
September 30 September 30
1998 1997 1998 1997
Revenues:
Operating revenue $ 600,862 $ 527,896 $1,813,302 $1,576,407
Interest and other income 26,885 23,997 79,274 66,456
Total revenues 627,747 551,893 1,892,576 1,642,863
Costs and Expenses:
Cost of sales 265,605 239,081 848,018 746,626
Operating expense 99,052 82,513 312,830 254,389
General and administration 10,085 12,068 32,943 37,560
Depreciation and
amortization 81,449 69,877 247,033 207,789
Net interest expense 81,286 64,361 241,015 187,824
Total costs and expenses 537,477 467,900 1,681,839 1,434,188
Income before income taxes 90,270 83,993 210,737 208,675
Provision for income taxes 32,112 27,929 72,595 74,520
Income before minority
interest 58,158 56,064 138,142 134,155
Minority interest 10,535 9,656 30,758 29,410
Net income before
extraordinary item 47,623 46,408 107,384 104,745
Extraordinary item, net of
minority interest
of $58,222 - (135,850) - (135,850)
Net income (loss)available
for common shareholders $ 47,623 $ (89,442) $ 107,384 $ (31,105)
Net income per share before
extraordinary item - basic $ 0.80 $ 0.73 $ 1.78 $ 1.65
Extraordinary item - - (2.14) (2.14)
Net income (loss) per
share - basic $ 0.80 $ (1.41) $ 1.78 $ (0.49)
Average number of common
shares outstanding 59,674 63,380 60,330 63,474
Net income per share
before extraordinary
item - diluted $ 0.72 $ 0.67 $ 1.67 $ 1.56
Extraordinary item-diluted - (1.80) - (1.87)
Net income (loss) per
share - diluted $ 0.72 $ (1.13) $ 1.67 $ (0.31)
Diluted shares 73,540 75,555 74,274 72,758
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