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: March 31, 1999
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)
(661) 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 March 31, 1999 and December 31, 1998.
Statement of Operations for the
Three Months Ended March 31, 1999, and
March 31, 1998.
Statement of Changes in Partners' Capital
Accounts at March 31, 1999, and December 31, 1998.
Statement of Cash Flows for the Three Months
Ended March 31, 1999, and March 31, 1998.
Notes to Interim Financial Statements.
PAGE
ZOND-PANAERO WINDSYSTEM PARTNERS I
(A California Limited Partnership)
BALANCE SHEET
(Amounts in thousands)
December 31, March 31,
1998 1999
(Audited) (Unaudited)
ASSETS
Current assets:
Cash $ 10 $ 458
Accounts receivable 543 956
Other current assets 87 55
----------- -----------
Total current assets 640 1,469
----------- -----------
Noncurrent assets:
Building 98 98
Wind turbines 49,561 49,561
Less - Accumulated depreciation (34,737) (35,361)
----------- -----------
Total noncurrent assets 14,922 14,298
----------- -----------
Total assets $ 15,562 $ 15,767
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current portion of
notes payable to related party $ 2,398 $ 2,398
Accounts payable 22 21
Interest payable to related party 3,864 4,186
Amounts payable to related parties 260 228
----------- -----------
Total current liabilities 6,544 6,833
----------- -----------
Notes payable to related party, less
current portion 9,302 9,302
----------- -----------
Partners' capital:
Limited partners (865) (949)
General partner 0 0
Substituted limited partner 0 0
Special limited partner -- --
Contributed capital 581 581
----------- -----------
Total partners' capital (284) (368)
----------- -----------
Total liabilities and partners' capital $ 15,562 $ 15,767
=========== ===========
<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
March 31,
1998 1999
Revenues:
Sales of electricity $ 1,069 $ 1,261
Other income 9 8
----------- -----------
1,078 1,269
----------- -----------
Costs and Expenses:
Depreciation 624 624
Interest expense 380 322
Property taxes 5 32
Management fees and land lease
to related parties 44 59
Maintenance and other operating
costs to related parties 188 276
Other operating costs 3 23
Insurance expense 29 17
----------- -----------
1,273 1,353
----------- -----------
Net income $ (195) $ (84)
=========== ===========
Net income per limited
partnership unit $ (0.164) $ (0.071)
=========== ===========
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, 1996 (26,039) (184) (25,778) (77) -
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 loss (184) (1) (182) (1) -
Balance at December 31, 1998 (284) 0 (865) 0
581
Net loss (84) 0 (84) 0 -
Balance at March 31, 1999 $ (368) $ 0 $ (949) $ 0 $ 581
<FN>
See accompanying notes to financial statements.
</FN>
PAGE
ZOND-PANAERO WINDSYSTEM PARTNERS I
(A California Limited Partnership)
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(Amounts in thousands)
For the Three Months Ended
March 31,
1998 1999
Cash flows from operating activities:
Net (loss) income $ (195) $ (84)
Adjustments to reconcile net loss to cash
provided by (used in) operating activities -
Depreciation 624 624
Changes in assets and liabilities -
Accounts receivable (436) (413)
Prepaid insurance and other (6) 32
Accounts payable and accrued expenses 8 (1)
Amounts payable to related party (126) (32)
Accrued interest payable
to related party 379 322
----------- ---------
Net cash provided (used) 248 448
Cash flows from financing activities:
Principal payments on notes payable
to related party -- --
----------- ---------
Net increase in cash and cash equivalents 248 448
Cash & cash equivalents beginning of period 183 10
----------- ---------
Cash and cash equivalents end of period $ 431 $ 458
=========== =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ -- $ --
=========== =========
<FN>
See accompanying notes to interim financial statements
PAGE
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 $ 538,000
Less: Depreciation less for tax than GAAP (623,000)
Other, net 1,000
---------------
GAAP basis income $ (84,000)
===============
Tax basis partners' capital
at March 31, 1999 $ (8,412,000)
Plus:
GAAP basis loss less than taxable loss net,
June 24, 1984 (inception)
through December 31, 1998 8,666,000
GAAP basis loss versus taxable income
January 1, 1999 through March 31, 1999 (622,000)
---------------
GAAP basis partners' capital $ (368,000)
===============
3. Reconciliation of GAAP Basis and Tax Basis Financial
Statements:
Tax basis total assets $ 7,702,000
Cumulative tax depreciation in excess of
GAAP depreciation 8,065,000
---------------
GAAP basis total assets
at March 31, 1999 $ 15,767,000
===============
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 Enron Wind
Systems, Inc. ("Enron Wind Systems"), formerly known as Zond Systems, Inc.
("Zond Systems").
On January 3, 1997 Zond System'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 $30 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 March 31, 1999 in the aggregate amount of
$3,819,000. 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 March 31, 1999, Compared to Three
Months Ended March 31, 1998.
Revenues from power sales in the three months ended March 31, 1999 were
18.0% higher than for the corresponding 1998 period. As reported by Southern
California Edison Company, the Windsystem produced 12,368 megawatt hours in
the three months ended March 31, 1999, in comparison to production of 10,382
megawatt hours in the corresponding 1998 period, representing an increase in
production of approximately 19.1%.
The Partnership received approximately $8,000 in "other income" from
interest earned on cash balances in the three months ended March 31, 1999, and
approximately $9,000 in the corresponding 1998 period.
Total expenses for the three months ended March 31, 1999 were
approximately 6.3% higher than the corresponding 1998 period. Interest
expense decreased due to lower average principal balances on the Purchase
Notes outstanding. Property Taxes increased by $27,000 due to a higher
valuation by the property tax assessor in Riverside County, California. This
revaluation which is based on projected cash flows by the Partnership has been
appealed. Management fees and land lease expenses increased 34.1%.
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 56.5%, substantially
due to increased generator and nacelle parts replacements. Insurance expense
decreased 41.4%, 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 $84,000 for the three months
ended March 31, 1999, in comparison to loss of $195,000 for the corresponding
1998 period.
The Partnership's financial condition worsened during the three months
ended March 31, 1999. The change in overall financial condition is primarily
due to the loss during the quarter. During the three months ended March 31,
1999, total partners' capital decreased $84,000 from ($284,000) at December
31, 1998, to ($368,000). Limited Partners' capital decreased $84,000 from
($865,000) at December 31, 1998, to ($949,000). This represents a total
decrease of approximately $71 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.
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.
PAGE
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: May 14, 1999 By:/S/ KENNETH C. KARAS
Kenneth C. Karas
President and
Chief Financial Officer
Date: May 14, 1999 By:/S/ D. MICHAEL WESTBELD
D. Michael Westbeld
Vice President-Controller