FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended: June 30, 1996
OR
[ ] Transition Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 0-13510
ZOND-PANAERO WINDSYSTEM PARTNERS I
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its charter)
CALIFORNIA 77-003535
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13000 Jameson St., Tehachapi, California 93561
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(805) 822-6835
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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 to such filing
requirements for the past 90 days.
YES X NO
PART I -- FINANCIAL INFORMATION
Item 1.
Balance Sheets at June 30, 1996 and December 31, 1995.
Statement of Operations for the
Three Months Ended June 30, 1996, and
June 30, 1995.
Statement of Operations for the
Six Months Ended June 30, 1996 and
June 30, 1995.
Statement of Changes on Partners' Capital
Accounts at June 30, 1996, and December 31, 1995.
Statement of Cash Flows for the Six Months
Ended June 30, 1996, and June 30, 1995.
Notes to Interim Financial Statements.
ZOND-PANAERO WINDSYSTEM PARTNERS I
(A California Limited Partnership)
BALANCE SHEET
(Amounts in thousands)
December 31, June 30,
1995 1996
(Audited) (Unaudited)
ASSETS
Current assets:
Cash $ 213 $ 32
Accounts receivable 307 1,477
Other current assets 128 75
----------- -----------
Total current assets 648 1,584
----------- -----------
Noncurrent assets:
Building 98 98
Wind turbines 49,561 49,561
Less - Accumulated depreciation (27,246) (28,494)
----------- -----------
Total noncurrent assets 22,413 21,165
----------- -----------
Total assets $ 23,061 $ 22,749
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current portion of
notes payable to related party $ 1,643 $ 1,750
Accounts payable 109 30
Interest payable to related party 4,048 4,361
Amounts payable to related parties 79 17
----------- -----------
Total current liabilities 5,879 6,158
----------- -----------
Notes payable to related party, less
current portion 15,678 14,775
----------- -----------
Partners' capital:
Limited partners 905 1,213
General partner 9 11
Substituted limited partner 9 11
Special limited partner -- --
Contributed capital 581 581
----------- -----------
Total partners' capital 1,504 1,816
----------- -----------
Total liabilities and partners' capital $ 23,061 $ 22,749
=========== ===========
<FN>
See accompanying notes to interim financial statements
ZOND-PANAERO WINDSYSTEM PARTNERS I
(A California Limited Partnership)
STATEMENT OF OPERATIONS
(Amounts in thousands except limited partnership units)
For the Three Months Ended
June 30,
1995 1996
Revenues:
Sales of electricity $ 2,005 $ 2,003
Other income 5 10
----------- -----------
2,010 2,013
----------- -----------
Costs and Expenses:
Depreciation 624 624
Interest expense 514 474
Property taxes 7 9
Management fees and land lease 85 104
Maintenance and other operating costs 220 268
Insurance expense 53 43
----------- -----------
1,503 1,522
----------- -----------
Net income $ 507 $ 491
=========== ===========
Net income per limited
partnership unit $ 0.426 $ 0.413
=========== ===========
Number of limited partnership
units outstanding 1,190 1,190
=========== ===========
<FN>
See accompanying notes to interim financial statements
ZOND-PANAERO WINDSYSTEM PARTNERS I
(A California Limited Partnership)
STATEMENT OF OPERATIONS
(Amounts in thousands except limited partnership units)
For the Six Months Ended
June 30,
1995 1996
Revenues:
Sales of electricity $ 2,845 $ 3,275
Other income 6 17
----------- -----------
2,851 3,292
----------- -----------
Costs and Expenses:
Depreciation 1,248 1,248
Interest expense 1,030 950
Property taxes 17 17
Management fees and land lease 138 154
Maintenance and other operating costs 488 526
Insurance expense 107 85
----------- -----------
3,028 2,980
----------- -----------
Net income (loss) $ (177) $ 312
=========== ===========
Net income per limited
partnership unit $ (0.149) $ 0.262
=========== ===========
Number of limited partnership
units outstanding 1,190 1,190
=========== ===========
<FN>
See accompanying notes to interim financial statements
PAGE>
ZOND-PANAERO WINDSYSTEM PARTNERS I
(A California Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Amounts in thousands)
Substituted
General Limited Limited Contributed
Total Partner Partners Partner Capital
Profit and
loss percentage 100% 0.5% 99.0% 0.5% --
======== ======= ======== ======= ======
Accumulated capital
contributions, net of private
placement costs and
cash distributions $ 27,000 $ 273 $ 26,146 $ -- $ 581
Conversion to Substituted
Limited Partner -- (83) -- 83
Accumulated tax basis losses
from June 29, 1984
(inception) through
December 31, 1993 (22,341) (165) (22,118) (58)
---------- --------- ---------- --------- --------
Balance at:
December 31, 1993 4,659 25 4,028 25 581
Net loss (1,743) (9) (1,725) (9)
---------- --------- ---------- --------- --------
December 31, 1994 2,916 16 2,303 16 581
Net loss (1,412) (7) (1,398) (7)
---------- --------- ---------- --------- --------
December 31, 1995 1,504 9 905 9 581
Net income 312 2 308 2
---------- --------- ---------- --------- --------
June 30, 1996 $ 1,816 $ 11 $ 1,213 $ 11 $ 581
========== ========= ========== ========= ========
<FN>
See accompanying notes to interim financial statements
ZOND-PANAERO WINDSYSTEM PARTNERS I
(A California Limited Partnership)
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(Amounts in thousands)
For the Six Months Ended
June 30,
1995 1996
Cash flows from operating activities:
Net income (loss) $ (177) $ 312
Adjustments to reconcile net income (loss) to cash
provided by (used in) operating activities -
Depreciation 1,248 1,248
Changes in assets and liabilities -
Accounts receivable (886) (1,170)
Other current assets 68 53
Accounts payable and accrued expenses (107) (79)
Amounts payable to related party (66) (62)
Interest payable to related party 612 313
----------- ------------
Net cash provided (used) 692 615
Cash flows from financing activities:
Principal payments to related party (702) (796)
----------- ------------
Net increase in cash and cash equivalents (10) (181)
Cash & cash equivalents beginning of period 37 213
----------- ------------
Cash and cash equivalents end of period $ 27 $ 32
=========== ============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 418 $ 637
=========== ============
<FN>
See accompanying notes to interim financial statements
ZOND-PANAERO WINDSYSTEM PARTNERS I
(A California Limited Partnership)
NOTES TO INTERIM FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying unaudited financial statements reflect
all adjustments which are, in the opinion of the
Partnership's general partner, necessary to a fair statement
of the results for the periods presented. The results of
operations for interim periods are not necessarily indicative
of results for the full year.
2. The Partnership's limited partnership agreement allows the
Partnership's general partner to determine the method for
maintaining the Partnership's accounting records. Until
1987, the records were maintained on a cash basis. However,
Section 481 of the Tax Reform Act of 1986 (the "Act")
prescribed a change, effective January 1, 1987, in the
accounting method for certain tax shelters having corporate
general partners, including the Partnership, to require
tax-basis accrual accounting. In accordance with Section
481 of the Act, differences between the two bases were
recognized for federal income tax purposes ratably by the
Partnership over a three year period. Below are
reconciliations between the Partnership's tax-basis accrual
financial statements and its GAAP basis accrual financial
statements included herein for both results of operations,
partners' capital balances and total assets.
Taxable income year to date $ 1,558,000
Less: Depreciation less for tax than GAAP (1,247,000)
Other, net 1,000
---------------
GAAP basis income(loss) $ 312,000
===============
Tax basis partners' capital
at June 30, 1996 $ (13,080,000)
Plus:
GAAP basis loss less than taxable loss net,
June 24, 1984 (inception)
through December 31, 1995 16,141,000
GAAP basis loss versus taxable income
January 1, 1996 through June 30, 1996 (1,245,000)
---------------
GAAP basis partners' capital $ 1,816,000
===============
3. Reconciliation of GAAP Basis and Tax Basis Financial
Statements:
Tax basis total assets $ 7,825,000
Cumulative tax depreciation in excess of
GAAP depreciation 14,924,000
---------------
GAAP basis total assets
at June 30, 1996 $ 22,749,000
===============
4. During all periods presented in these financial statements,
1,190 units of limited partnership interests were
outstanding.
5. As a "Special Limited Partner" of the Partnership, Dean
Witter Reynolds, Inc. is entitled to receive 5% of all
Partnership distributions made after the date on which the
cumulative aggregate distributions to the Partnership's limited
partners exceed $10,000,000.
6. Following its removal as a general partner of the
Partnership effective June 24, 1988, PanAero Management
Corporation became a substituted limited partner of the
Partnership with the same capital account and interest in
profits and losses as it had as a general partner.
7. In accordance with the 1988 agreement between Zond Systems,
Inc.("Zond") and the placement agent, Zond forgave its
share, as a joint venture partner of Mesa Wind Developers,
of certain indebtedness owed by the Partnership to such
joint venture representing management fees, easement
royalties and other miscellaneous expenses related to
windsystem operations.
8. No provision has been made for income taxes in the
accompanying financial statements. The Partnership, as an
entity, is not assessed taxes based upon income generated by
its operations. Income taxes, if any, are the
liability of the individual partners.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Zond-PanAero Windsystem Partners I, a California Limited Partnership (the
"Partnership") was formed in 1984 to purchase, own, and operate a wind-driven
electric power generating facility located near Palm Springs, California (the
"Windsystem"). The electricity generated by the Windsystem is sold to
Southern California Edison Company. The general partner of the Partnership is
Zond Windsystems Management Corporation, a wholly-owned subsidiary of Zond
Systems, Inc. ("Zond").
Liquidity and Capital Resources
The Partnership continues to experience a lack of liquidity primarily due
to a continued short-fall in revenues from operations in comparison to the
costs and expenses of operations. Accordingly, interest payments on the
Purchase Notes were in arrears at June 30, 1996 in the aggregate amount of
$4,297,000. The Partnership expects that it will continue to experience poor
liquidity and to defer certain payments on the Purchase Notes. See "Results
of Operations."
Results of Operations
Three Months Ended June 30, 1996, Compared to Three
Months Ended June 30, 1995.
Revenues from power sales in the three months ended June 30, 1996 were
approximately the same as for the corresponding 1995 period. Wind energy
level at three representative anemometer locations on the Operating Site was
approximately the same as for the three months ended June 30, 1995 and was
approximately 5% higher than the historical average. Only three anemometers
are used to measure wind speed, therefore a direct correlation to production
of the entire group of turbines cannot always be expected. As reported by
Southern California Edison Company, the Windsystem produced 19,715 megawatt
hours in the three months ended June 30, 1996, in comparison to production of
19,656 megawatt hours in the corresponding 1995 period, representing an
increase in production of approximately .3%.
The Partnership received approximately $10,000 in "other income" from
interest earned on excess operating funds in the three months ended June 30,
1996, and approximately $5,000 in the corresponding 1995 period.
Total expenses for the three months ended June 30, 1996 were
approximately 1% higher than the corresponding 1995 period.
Interest expense decreased due to lower average principal balances
on the Purchase Notes outstanding. Management fees and land lease
expenses increased 22% due to their relationship to sales of
electricity. Maintenance and other operating costs increased 22%,
partially due to expenses incurred in replacing a catastrophically
damaged turbine. Although the Partnership has tendered a claim to
its insurance carrier for partial reimbursement of the turbine
replacement expense, which reimbursement is expected to be
received in the third quarter, there can be no assurance that the
insurance company will pay the claim. The Partnership does not
anticipate that a turbine will again suffer a catastrophic failure
necessitating replacement, although there can be no assurance that
turbines will not need to be replaced in the future. Without such
failure, maintenance and other operating cost would have increased
15% in comparison with the corresponding 1995 period. This
increase was partially due to labor and supply cost increases.
The rest of the increase is due to higher administrative expenses
which rose due to contributions to pro wind energy associations.
Insurance expense decreased 19% due to lower insurance premiums.
Overall, the Partnership reported income of $491,000 for the
three months ended June 30, 1996, in comparison to income of
$507,000 for the corresponding 1995 period.
The Partnership's financial condition improved during the
three months ended June 30, 1996. The change in overall financial
condition is due to the income earned during the quarter. During
the three months ended June 30, 1996, total partners' capital
increased $491,000 from $1,325,000 at March 31, 1996, to
$1,816,000 and Limited Partners' capital increased $485,000 from
$728,000 at March 31, 1996, to $1,213,000. This represents a
total increase of approximately $413 per unit of partnership.
Although the Partnership's financial condition improved during
this interim period, based on historical average wind energy and
current cost levels, the Partnership expects to continue to suffer
net annual operating losses and also expects that its overall
financial condition will worsen annually for the foreseeable
future.
Six Months Ended June 30, 1996, Compared to Six
Months Ended June 30, 1995.
Revenues from power sales in the six months ended June 30,
1996 were approximately 15% higher than the corresponding 1995
period - with all of this increase due to higher wind energy
levels in the first quarter. Wind energy levels at three
representative anemometer locations on the Operating Site was
approximately 6% higher than for the six months ended June 30,
1995 and was approximately 11% higher than the historical
averages. Only three anemometers are used to measure wind speed,
therefore a direct correlation to production of the entire group
of turbines cannot always be expected. As reported by Southern
California Edison Company, the Windsystem produced 32,122 megawatt
hours in the six months ended June 30, 1996, in comparison to
production of 27,895 megawatt hours in the corresponding 1995
period, representing an increase in production of approximately
15%.
The Partnership received approximately $17,000 in "other
income" from interest earned on excess operating funds in the six
months ended June 30, 1996, and approximately $6,000 in the
corresponding 1995 period.
Total expenses for the six months ended June 30, 1996, were
approximately 2% lower than the corresponding 1995 period.
Interest expense decreased due to lower average principal balances
on the Purchase Notes outstanding. Management fees and land lease
expenses increased 12% due to their relationship to sales of
electricity. Maintenance and other operating costs increased
approximately 8%, partially due to expenses incurred in replacing
a catastrophically damaged turbine. Although the Partnership has
tendered a claim to its insurance carrier for partial
reimbursement of the turbine replacement expense, which
reimbursement is expected to be received in the third quarter,
there can be no assurance that the insurance company will pay the
claim. The Partnership does not anticipate that a turbine will
again suffer a catastrophic failure necessitating replacement,
although there can be no assurance that turbines will not need to
be replaced in the future. Without such failure, maintenance and
other operating cost would have increased 5% in comparison with
the corresponding 1995 period. This increase was partially due to
higher administrative expenses which rose due to contributions to
pro wind energy associations. The rest of the increase is due to
labor and supply cost increases. Insurance expense decreased 21%
due to lower insurance premiums.
Overall, the Partnership reported income of $312,000 for the
six months ended June 30, 1996, in comparison to a loss of
$177,000 for the corresponding 1995 period. This was largely the
result of better production in the first quarter of the year.
The Partnership's financial condition improved slightly during
the six months ended June 30, 1996. The change in overall
financial condition is due to the net income from the second
quarter which more than offset the net loss during the first
quarter of this year. During the six months ended June 30, 1996,
total partners' capital increased $312,000 from $1,504,000 at
December 31, 1995, to $1,816,000 and Limited Partners' capital
increased $308,000 from $905,000 at December 31, 1995, to
$1,213,000. This represents a total increase of approximately
$262 per unit of partnership. Although the Partnership's
financial condition improved during this interim period, based on
historical average wind energy and current cost levels, the
Partnership expects to continue to suffer net annual operating
losses and also expects that its overall financial condition will
worsen annually for the foreseeable future.
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: Exhibit 27. Financial Data Schedule.
b. Reports on Form 8-K: No reports on Form 8-K
have been filed by the Registrant.
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.
ZOND-PANAERO WINDSYSTEM PARTNERS I
A CALIFORNIA LIMITED PARTNERSHIP
By: Zond Windsystems Management
Corporation, General Partner
Date: August 14, 1996 By:/S/ KENNETH C. KARAS
Kenneth C. Karas
President and
Chief Financial Officer
Date: August 14, 1996 By:/S/ D. MICHAEL WESTBELD
D. Michael Westbeld
Vice President-Controller