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: September 30, 1998
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 September 30, 1998 and December 31, 1997.
Statement of Operations for the
Three Months Ended September 30, 1998, and
September 30, 1997.
Statement of Operations for the
Nine Months Ended September 30, 1998, and
September 30, 1997.
Statement of Changes in Partners' Capital
Accounts at September 30, 1998, and December 31, 1997.
Statement of Cash Flows for the Nine Months
Ended September 30, 1998, and September 30, 1997.
Notes to Interim Financial Statements.
ZOND-PANAERO WINDSYSTEM PARTNERS I
(A California Limited Partnership)
BALANCE SHEET
(Amounts in thousands)
December 31, September 30,
1997 1998
(Audited) (Unaudited)
ASSETS
Current assets:
Cash $ 183 $ 1,699
Accounts receivable 368 683
Other current assets 36 104
----------- -----------
Total current assets 587 2,486
----------- -----------
Noncurrent assets:
Building 98 98
Wind turbines 49,561 49,561
Less - Accumulated depreciation (32,240) (34,113)
----------- -----------
Total noncurrent assets 17,419 15,546
----------- -----------
Total assets $ 18,006 $ 18,032
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current portion of
notes payable to related party $ 2,114 $ 2,251
Accounts payable 29 21
Interest payable to related party 4,103 4,781
Amounts payable to related parties 160 298
----------- -----------
Total current liabilities 6,406 7,351
----------- -----------
Notes payable to related party, less
current portion 11,700 10,539
----------- -----------
Partners' capital:
Limited partners (683) (443)
General partner 1 2
Substituted limited partner 1 2
Special limited partner -- --
Contributed capital 581 581
----------- -----------
Total partners' capital (100) 142
----------- -----------
Total liabilities and partners' capital $ 18,006 $ 18,032
=========== ===========
<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
September 30,
1997 1998
Revenues:
Sales of electricity $ 1,043 $ 1,102
Other income 11 7
----------- -----------
1,054 1,109
----------- -----------
Costs and Expenses:
Depreciation 625 625
Interest expense 406 352
Property taxes 4 32
Management fees and land lease
to related parties 114 146
Maintenance and other operating
costs to related parties 242 318
Other operating costs 4 4
Insurance expense 32 5
----------- -----------
1,427 1,482
----------- -----------
Net income $ (373) $ (373)
=========== ===========
Net income per limited
partnership unit $ (0.313) $ (0.313)
=========== ===========
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 Nine Months Ended
September 30,
1997 1998
Revenues:
Sales of electricity $ 3,782 $ 4,321
Other income 26 21
----------- -----------
3,808 4,342
----------- -----------
Costs and Expenses:
Depreciation 1,873 1,873
Interest expense 1,265 1,108
Property taxes 16 41
Management fees and land lease
to related parties 267 280
Maintenance and other operating
costs to related parties 695 724
Other operating costs 10 12
Insurance expense 97 62
----------- -----------
4,223 4,100
----------- -----------
Net (loss) income $ (415) $ 242
=========== ===========
Net (loss) income per limited
partnership unit $ (0.349) $ 0.203
=========== ===========
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 CHANGES IN PARTNERS' CAPITAL
(Amounts in thousands)
Substit.
General Limited Limited Contrib.
Total Partner Partners Partner Capital
Profit and loss allocation
percentage 100% .5% 99% .5%
Capital contributions, net
of private placement costs
and cash distributions $27,000 $ 273 $26,146 $ - $ 581
Conversion to
Substituted Limited
Partner - (83) - 83 -
Loss for the period from
June 29, 1984(inception)
through December 31, 1995 (25,496) (181) (25,241) (74) -
Balance at December 31, 1995 1,504 9 905 9 581
Net loss (543) (3) (537) (3) -
Balance at December 31, 1996 961 6 368 6 581
Net loss (1,061) (5) (1,051) (5) -
Balance at December 31, 1997 (100) 1 (683) 1 581
Net income 242 1 240 1 -
Balance at September 30, 1998 $ 142 $ 2 $ (443) $ 2 $ 581
<FN>
See accompanying notes to financial statements.
</FN>
ZOND-PANAERO WINDSYSTEM PARTNERS I
(A California Limited Partnership)
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(Amounts in thousands)
For the Nine Months Ended
September 30,
1997 1998
Cash flows from operating activities:
Net (loss) income $ (415) $ 242
Adjustments to reconcile net loss to cash
provided by (used in) operating activities -
Depreciation 1,873 1,873
Changes in assets and liabilities -
Accounts receivable 153 (315)
Prepaid insurance and other 89 (68)
Accounts payable and accrued expenses (69) (8)
Amounts payable to related party (84) 138
Accrued interest payable
to related party 660 678
----------- ---------
Net cash provided (used) 2,207 2,540
Cash flows from financing activities:
Principal payments on notes payable
to related party (903) (1,024)
----------- ---------
Net increase in cash and cash equivalents 1,304 1,516
Cash & cash equivalents beginning of period 142 183
----------- ---------
Cash and cash equivalents end of period $ 1,446 $ 1,699
=========== =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 606 $ 430
=========== =========
<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 $ 2,106,000
Less: Depreciation less for tax than GAAP (1,870,000)
Other, net 6,000
---------------
GAAP basis income $ 242,000
===============
Tax basis partners' capital
at September 30, 1998 $ (9,147,000)
Plus:
GAAP basis loss less than taxable loss net,
June 24, 1984 (inception)
through December 31, 1997 11,153,000
GAAP basis loss versus taxable income
January 1, 1998 through September 30, 1998 (1,864,000)
---------------
GAAP basis partners' capital $ 142,000
===============
3. Reconciliation of GAAP Basis and Tax Basis Financial
Statements:
Tax basis total assets $ 8,720,000
Cumulative tax depreciation in excess of
GAAP depreciation 9,312,000
---------------
GAAP basis total assets
at September 30, 1998 $ 18,032,000
===============
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. 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
Partnership's payment for the purchase, construction, and
installation of the Windsystem was comprised of $22,430,000 in
cash and $26,500,000 in the form of eighteen-year notes payable
(the "Purchase Notes"). 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").
On January 3, 1997 Zond's parent, Zond Corporation, became a
wholly-owned subsidiary of Enron Renewable Energy Corporation,
which is majority owned by Enron Corp. In May 1997, the name of
Zond Corporation was changed to Enron Wind Corp. Enron Corp.,
headquartered in Houston, Texas, is one of the world's leading
integrated energy company. Enron Corp., which owns approximately
$23 billion in energy related assets, delivers physical
commodities and risk management and financial services to provide
energy solutions to customers around the world.
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 September 30, 1998 in the aggregate amount of
$4,380,000. 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 September 30, 1998, Compared to Three
Months Ended September 30, 1997.
Revenues from power sales in the three months ended September
30, 1998 were 5.7% higher than for the corresponding 1997 period.
As reported by Southern California Edison Company, the Windsystem
produced 10,805 megawatt hours in the three months ended
September 30, 1998, in comparison to production of 10,206
megawatt hours in the corresponding 1997 period, representing an
increase in production of approximately 5.9%.
The Partnership received approximately $7,000 in "other
income" from interest earned on cash balances in the three months
ended September 30, 1998, and approximately $11,000 in the
corresponding 1997 period.
Total expenses for the three months ended September 30, 1998
were approximately 3.8% lower than the corresponding 1997 period.
Interest expense decreased due to lower average principal
balances on the Purchase Notes outstanding. Property Taxes
increased by $28,000 due to a higher valuation of wind turbines
by the property tax assessor. Management fees and land lease
expenses increased 28%. Management fees are 2% of sales receipts
and land lease is 5% of sales receipts. Sales receipts lag
behind the accrued sales revenue by about two months.
Maintenance and other operating costs increased 30.9%,
substantially due to increased yaw parts replacement and crane
rental expense. Insurance expense decreased 84%, which is
attributable to historical low loss experience, asset
devaluation, and the packaging of all turbine projects Zond
operates under one policy with Enron Corp.
Overall, the Partnership reported loss of $373,000 for the
three months ended September 30, 1998, in comparison to loss of
$373,000 for the corresponding 1997 period.
The Partnership's financial condition worsened during the
three months ended September 30, 1998. The change in overall
financial condition is primarily due to the loss during the
quarter. During the three months ended September 30, 1998, total
partners' capital decreased $373,000 from $515,000 at June 30,
1998, to $142,000. Limited Partners' capital decreased $369,000
from ($74,000) at June 30, 1998, to ($443,000). This represents
a total decrease of approximately $313 per unit of partnership.
Based on historical average wind energy and current cost levels,
the Partnership expects to continue to suffer net annual
operating losses and expects that its overall financial condition
will worsen annually for the foreseeable future.
Nine Months Ended September 30, 1998, Compared to Nine
Months Ended September 30, 1997.
Revenues from power sales in the nine months ended September
30, 1998 were 14.2% higher than for the corresponding 1997
period. As reported by Southern California Edison Company, the
Windsystem produced 42,265 megawatt hours in the nine months
ended September 30, 1998, in comparison to production of 37,062
megawatt hours in the corresponding 1997 period, representing an
increase in production of approximately 14%.
The Partnership received approximately $21,000 in "other
income" from interest earned on cash balances in the nine months
ended September 30, 1998, and approximately $26,000 in the
corresponding 1997 period.
Total expenses for the nine months ended September 30, 1998
were approximately 2.9% lower than the corresponding 1997 period.
Interest expense decreased due to lower average principal
balances on the Purchase Notes outstanding. Property taxes
increased by $25,000 due to a higher valuation of wind turbines
by the tax assessor. Management fees and land lease expenses,
which are based on gross proceeds from power sales, increased
4.9%. Management fees are 2% of sales receipts and land lease is
5% of sales receipts. Sales receipts lag behind the accrued
sales revenue by about two months. Maintenance and other
operating costs increased 4.4%, substantially due to increased
yaw parts replacement and crane rental expense. Insurance
expense decreased 36%, which is attributable to historical low
loss experience, asset devaluation, and the packaging of all
turbine projects Zond operates under one policy with Enron Corp.
Overall, the Partnership reported income of $242,000 for the
nine months ended September 30, 1998, in comparison to a loss of
$415,000 for the corresponding 1997 period.
The Partnership's financial condition improved during the
nine months ended September 30, 1998. The change in overall
financial condition is primarily due to the income earned during
the nine month period. During the nine months ended September
30, 1998, total partners' capital increased $242,000 from
($100,000) at December 31, 1997, to $142,000. Limited Partners'
capital increased $240,000 from ($683,000) at December 31, 1997,
to ($443,000). This represents a total increase of approximately
$203 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 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: November 13, 1998 By:/S/ KENNETH C. KARAS
Kenneth C. Karas
President and
Chief Financial Officer
Date: November 13, 1998 By:/S/ D. MICHAEL WESTBELD
D. Michael Westbeld
Vice President-Controller