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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission file number: 333-40478
AES RED OAK, L.L.C.
(Exact name of registrant as specified in its charter)
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DELAWARE 54-1889658
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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1001 NORTH 19th STREET, ARLINGTON, VIRGINIA 22209,
c/o THE AES CORPORATION
(703) 522-1315
(Registrant's address of principal executive offices,)
(zip code and telephone number, including area code)
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
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AES RED OAK, L.L.C.
TABLE OF CONTENTS
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<Caption>
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)
Condensed Consolidated Statements of Operations, three months ended
September 30, 2001 and September 30, 2000, nine months ended
September 30, 2001 and period from March 15, 2000 (inception) through
September 30, 2000 and the period from March 15, 2000 (inception)
through and September 30, 2001 ...............................................3
Condensed Consolidated Balance Sheets,
September 30, 2001 and December 31, 2000 .....................................4
Condensed Consolidated Statement of Changes in Member's Deficit,
period from March 15, 2000 (inception) through September 30, 2001.............5
Condensed Consolidated Statements of Cash Flows, for the nine months
ended September 30, 2001, period from March 15, 2000 (inception) through
September 30, 2000 and the period March 15, 2000 (inception)
through September 30, 2001....................................................6
Notes to the Condensed Consolidated Financial Statements..........................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............................................14
Item 3. Quantitative and Qualitative Disclosures
About Market Risk................................................................19
PART II. OTHER INFORMATION
Item 5. Other Information.....................................................................19
Item 6. Exhibits and Reports on Form 8-K......................................................19
SIGNATURES..................................................................................................20
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(Page 2 of 20)
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AES RED OAK, L.L.C.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS, THREE MONTHS ENDED SEPTEMBER 30, 2001 AND
SEPTEMBER 30, 2000, NINE MONTHS ENDED
SEPTEMBER 30, 2001 AND PERIOD FROM MARCH 15, 2000 (INCEPTION) THROUGH
SEPTEMBER 30, 2000 AND PERIOD FROM MARCH 15, 2000
(INCEPTION) THROUGH SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS)
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<Caption>
MARCH 15, 2000 MARCH 15, 2000
THREE MONTHS THREE MONTHS NINE MONTHS (INCEPTION) (INCEPTION)
ENDED ENDED ENDED THROUGH THROUGH
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2001 2000 2001 2000 2001
---- ---- ---- ---- ----
OPERATING EXPENSES
General administrative costs...... $ (35) $ (11) $ (57) $ (183) $ (258)
----------- ------- ----------- ----------- -----------
Operating Loss.................... $ (35) $ (11) $ (57) $ (183) $ (258)
----------- ------- ----------- ----------- -----------
OTHER INCOME/EXPENSE
Interest income................... 543 615 1,405 1,369 3,257
Interest expense.................. (1,326) (792) (2,904) (1,999) (5,503)
----------- ------- ----------- ----------- -----------
NET LOSS............................. $ (818) $ (188) $ (1,556) $ (813) $ (2,504)
============ ======== =========== =========== ===========
</Table>
See notes to condensed consolidated financial statements.
(Page 3 of 20)
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AES RED OAK, L.L.C.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED BALANCE SHEETS,
SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
(DOLLARS IN THOUSANDS)
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<Caption>
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
2001 2000
----------- -----------
ASSETS:
Current Assets:
Cash .............................................................................. $ 21 $ 15
Restricted investments-at cost, which approximates market value.................... 53,451 21,795
Receivables........................................................................ - 21
Receivable from affiliate.......................................................... 131 -
----------- -----------
Total current assets.......................................................... 53,603 21,831
Prepaid construction costs......................................................... - 227,609
Land 4,240 4,240
Construction in progress........................................................... 322,790 117,033
Deferred financing costs - net of accumulated amortization of
$1,258 and $646, respectively................................................. 17,447 18,059
----------- ------------
Total assets................................................................ $ 398,080 $ 388,772
=========== ============
LIABILITIES AND MEMBER'S DEFICIT:
Current Liabilities:
Accounts payable.................................................................... $ 11,025 $ 304
Accrued liabilities................................................................. 62 90
Accrued interest.................................................................... 2,821 2,821
Payable to affiliate................................................................ 1,690 2,505
Bonds payable-current portion....................................................... 1,210 -
----------- ------------
Total current liabilities...................................................... 16,808 5,720
Bonds payable....................................................................... 382,790 384,000
----------- ------------
Total liabilities.............................................................. $ 399,598 $ 389,720
----------- ------------
Commitments (Notes 5 and 6)
Member's deficit:
Common stock, $1 par value-10 shares authorized, none issued or outstanding........ - -
Contributed capital................................................................ 986 -
Deficit accumulated during the development stage................................... (2,504) (948)
----------- ------------
Total member's deficit........................................................ (1,518) (948)
----------- ------------
Total liabilities and member's deficit...................................... $ 398,080 $ 388,772
=========== ============
</Table>
See notes to condensed consolidated financial statements.
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AES RED OAK, L.L.C.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN MEMBER'S DEFICIT,
PERIOD FROM MARCH 15, 2000
(INCEPTION) THROUGH SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS)
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<Caption>
COMMON STOCK MEMBER'S
SHARES AMOUNT DEFICIT TOTAL
------ ------ -------- -----
BALANCE, MARCH 15, 2000 (inception)................ -- $ -- $ -- $ --
Net Loss......................................... -- -- (948) (948)
--------- ------------ -----------
BALANCE, DECEMBER 31, 2000 -- $ -- $ (948) $ (948)
Contributed Capital.............................. -- -- 986 986
Net Loss......................................... -- -- (1,556) (1,556)
--------- ------------ -----------
BALANCE, SEPTEMBER 30, 2001........................ -- $ -- $ (1 ,518) $ (1,518)
========= ============ ===========
</Table>
See notes to condensed consolidated financial statements.
(Page 5 of 20)
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AES RED OAK, L.L.C.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2001, THE PERIOD FROM MARCH 15, 2000 (INCEPTION) THROUGH
SEPTEMBER 30, 2000 AND THE PERIOD MARCH 15, 2000 (INCEPTION)
THROUGH SEPTEMBER 30, 2001.
(DOLLARS IN THOUSANDS)
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<Caption>
MARCH 15, 2000 MARCH 15, 2000
NINE MONTHS ENDED (INCEPTION) THROUGH (INCEPTION) THROUGH
SEPTEMBER 30, 2001 SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
------------------ ------------------ ------------------
OPERATING ACTIVITIES:
Net loss................................................. $ (1,556) $ (813) $ (2,504)
Amortization of deferred financing costs................. 612 443 1,258
Change in:
Accounts receivable................................... 21 -- --
Receivable from affiliate............................. (131) -- (131)
Accounts payable...................................... 10,721 418 11,025
Accrued liabilities .................................. (28) -- 62
Accrued interest ..................................... -- 2,821 2,821
Payable to affiliates................................. (815) 2,958 1,690
----------------- ---------------- ----------------
Net cash provided by operating activities................ 8,824 5,827 14,221
---------------- ---------------- ----------------
INVESTING ACTIVITIES:
Transfers from (to) prepaid construction costs........... 227,609 (227,609) --
Payments for construction in progress.................... (205,757) (106,445) (322,790)
Payments for land........................................ -- (4,240) (4,240)
Change in debt service reserve........................... (31,656) (32,831) (53,451)
----------------- ----------------- -----------------
Net cash used in investing activities.................... (9,804) (371,125) (380,481)
----------------- ----------------- -----------------
FINANCING ACTIVITIES:
Proceeds from project debt issuance...................... -- 384,000 384,000
Contributed capital...................................... 986 -- 986
Payments for deferred financing costs.................... -- (18,719) (18,705)
Other.................................................... -- 49 --
----------------- ----------------- -----------------
Net cash provided by financing activities................ 986 365,330 366,281
----------------- ----------------- -----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS................ 6 32 21
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........... 15 -- --
CASH AND CASH EQUIVALENTS, END OF PERIOD................. $ 21 $ 32 $ 21
----------------- ----------------- -----------------
----------------- ----------------- -----------------
SUPPLEMENTAL DISCLOSURE OF OTHER ACTIVITIES:
Interest paid (net of amount capitalized)................ 2,668 1,370 4,715
================ ================ ================
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Transfer of prepaid construction costs to construction
in progress........................................ 131,840 60,965 192,804
================ ================ ================
</Table>
See notes condensed consolidated financial statements.
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AES RED OAK, L.L.C.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, THREE MONTHS ENDED
SEPTEMBER 30, 2001 AND 2000, NINE MONTHS ENDED SEPTEMBER 30, 2001, THE PERIOD
FROM MARCH 15, 2000 (INCEPTION) THROUGH SEPTEMBER 30, 2000
AND THE PERIOD FROM MARCH 15, 2000 (INCEPTION)
THROUGH SEPTEMBER 30, 2001
1. ORGANIZATION
AES Red Oak, L.L.C. (the Company) was formed on September 13, 1998, in
the State of Delaware, to develop, construct, own and operate an
830-megawatt (MW) gas-fired, combined cycle electric generating facility
(the Facility) in Sayreville, New Jersey. The Company was considered
dormant until March 15, 2000, at which time it consummated a project
financing and certain related agreements. On March 15, 2000, the Company
issued $384 million in senior secured bonds for the purpose of providing
financing for the construction of the Facility and to fund, through the
construction period, interest payments to the bondholders. In late
September 2000, the Company consummated an exchange offer whereby the
holders of the senior secured bonds exchanged their privately placed
senior secured bonds for registered senior secured bonds.
The Facility, currently under construction, will consist of three
Westinghouse 501 FD combustion turbines, three unfired heat recovery
steam generators, and one multicylinder steam turbine. The Facility will
produce and sell electricity, as well as provide fuel conversion and
ancillary services, solely to Williams Energy Marketing and Trading
Company (Williams) under a 20-year fuel conversion services, capacity and
ancillary services purchase agreement expected to commence on in early
April, 2002, approximately two months after the Facility's guaranteed
completion date under the EPC Contract of February 14, 2002, as defined
below (see notes 5 and 8).
The Company is in the development stage and is not expected to generate
any operating revenues until the Facility achieves commercial operations.
As with any new business venture of this size and nature, operation of
the Facility could be affected by many factors. Management of the Company
believes that the assets of the Company are realizable.
The Company is a wholly owned subsidiary of AES Red Oak, Inc. (Red Oak),
which is a wholly-owned subsidiary of The AES Corporation (AES). Red Oak
has no assets other than its ownership interests in the Company and AES
Sayreville, L.L.C. Red Oak has no operations and is not expected to have
any operations. Red Oak's only income will be from distributions it
receives from the Company and AES Sayreville, L.L.C., once the Company
achieves commercial operations. Pursuant to an equity subscription
agreement (see note 4), Red Oak has agreed to contribute up to
approximately $55.7 million to the Company to fund construction after the
bond proceeds have been fully utilized. The equity that Red Oak is to
provide to the Company will be provided to Red Oak by AES, which owns all
of the equity interest in Red Oak. AES files quarterly and annual audited
reports with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, which are publicly available, but which do not
constitute a part of, and are not incorporated into, this Form 10-Q. Red
Oak's equity contribution obligations are required to be supported by
either an insurance bond or letter of credit. Currently those obligations
are supported by an insurance bond issued to the Collateral Agent.
The Company owns all of the equity interests in AES Red Oak Urban Renewal
Corporation (URC), which was organized as an urban renewal corporation
under New Jersey Law. As an urban renewal corporation under New Jersey
law, portions of the Facility can be designated as
(Page 7 of 20)
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redevelopment areas in order to provide real estate tax and development
benefits to the Facility. URC has no operations outside of its activities
in connection with the Facility.
In February 2001, the Company reclassified $986,000, a payable to
affiliate (AES Corporation) to contributed capital. This amount
represented expenditures paid by the AES Corporation prior to March 15,
2000.
2. NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets." The provisions of this statement are required to be
applied starting with fiscal years beginning after December 15, 2001.
This statement is required to be applied at the beginning of an entity's
fiscal year and to be applied to all goodwill and other intangible assets
recognized in its financial statements at that date. SFAS No. 142
addresses how intangible assets (but not those acquired in a business
combination) should be accounted for in financial statements upon their
acquisition. This statement also addresses how goodwill and other
intangible assets should be accounted for after they have been initially
recognized in the financial statements. The statement requires that
goodwill and certain other intangibles with an indefinite life, as
defined in the standard, no longer be amortized. However, goodwill and
intangibles would have to be assessed each year to determine whether an
impairment loss has occurred. Any impairments recognized upon adoption
would be recorded as a change in accounting principle. Future impairments
would be recorded in income from continuing operations. The statement
provides specific guidance for testing goodwill for impairment. The
Company had no goodwill at September 30, 2001. The Company believes that
SFAS No. 142 will not have any material impact on its financial position
or results of operations.
In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Operations." The standard is effective for fiscal years
beginning after June 15, 2002, and provides accounting requirements for
asset retirement obligations associated with long-lived assets. The
Company believes that SFAS No. 143 will not have any material impact on
its financial reporting.
In August 2001, the FASB issued SFAS No. 144, "Accounting for Impairment
or Disposal of Long-Lived Assets." The provisions of this statement are
effective for financial statements issued for fiscal years beginning
after December 15, 2001, and generally are to be applied prospectively.
This statement addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. SFAS No. 144 provides
guidance for developing estimates of future cash flows used to test
assets for recoverability, requires that assets to be disposed off be
classified as held for sale when certain criteria are met. The statement
also extends the reporting of discontinued operations to all components
of an entity and provides guidance for recognition of a liability for
obligations associated with a disposal activity. The Company believes
that the initial adoption of SFAS No. 144 will not have a material
impact on its financial position or result of operations.
3. BASIS OF PRESENTATION
In the Company's opinion, all adjustments necessary for a fair
presentation of the unaudited results of operations for the three months
ended September 30, 2001 and September 30, 2000, the nine months ended
September 30, 2001, the period from March 15, 2000 (inception) through
September 30, 2000, and the period from March 15, 2000 (inception)
through September 30, 2001 are included. All such adjustments are
accruals of a normal and recurring nature. The results of operations for
the three months ended September 30, 2001 and September 30, 2000, the
nine months ended September 30, 2001, the period from March 15, 2000
(inception) through September 30, 2000, and the period from March 15,
2000 (inception) through September 30, 2001, are not necessarily
indicative of the results of operations to be expected for the full year
or future periods.
(Page 8 of 20)
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These condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States of America for interim financial information, with the
instructions to the Form 10-Q, and with Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by
accounting principles generally accepted in the Unites States of America
for complete financial statements and should be read in conjunction with
the audited financial statements for the fiscal year ended December 31,
2000 and notes thereto included in the Company's Form 10-K for the fiscal
year ended December 31, 2000.
4. EQUITY SUBSCRIPTION AGREEMENT
The Company, along with Red Oak, has entered into an equity subscription
agreement, pursuant to which Red Oak has agreed to contribute up to
approximately $55.7 million to the Company to fund project costs. This
amount is secured by an insurance bond issued to the Collateral Agent.
Red Oak will fund these amounts as they come due upon the earlier of (a)
expenditure of all funds that have been established for construction or
(b) the occurrence of, and during the continuation of, an event of
default, as defined under the indenture governing its senior secured
bonds. A portion of this equity requirement may be made in the form of
affiliate debt, between Red Oak and the Company, which would be
subordinate to the senior secured bonds.
5. POWER PURCHASE AGREEMENT
The Company and Williams have entered into a Fuel Conversion Services,
Capacity and Ancillary Services Purchase Agreement (PPA) for the sale of
all capacity produced by the Facility, as well as ancillary services and
fuel conversion services. The term of the PPA is 20 years, commencing on
the commercial operation date, which is defined in the PPA as the day the
initial start up testing procedures have been successfully completed and
notified to Williams by the Company. The payment obligations of Williams
to the Company under the PPA are guaranteed by The Williams Companies,
Inc. The payment obligations of The Williams Companies, Inc. under that
guarantee are capped at an amount equal to 125% of the sum of the
principal amount of the senior secured bonds plus the maximum debt
service reserve account required balance. The Company has provided
Williams a letter of credit (PPA Letter of Credit) in the amount of $30
million to support specific payment obligations should the Facility not
achieve commercial operation by the date required under the PPA. Upon
achievement of commercial operation, the stated amount of that letter of
credit will be reduced to $10 million. The repayment obligations with
respect to any drawings under the PPA Letter of Credit are a senior debt
obligation of the Company. The original anticipated commercial operation
date under the PPA was December 31, 2001, but such date can be extended
under the PPA at the request of the Company until June 30, 2002 at no
cost, as described in the succeeding paragraph. The Company currently
anticipates that commercial operation of the Facility will commence in
early April 2002, approximately two months after the guaranteed
completion date of February 14, 2002 under the EPC Contract (see note 6.)
If the commercial operation date has not occurred by December 31, 2001
for any reason, including the continued existence of or delay caused by a
force majeure event affecting the Company, other than any delay caused by
any act or failure to act by Williams or any of its affiliates where the
action is required under the PPA, Williams will have the right to
terminate the PPA. The Company, however, can extend the commercial
operation date to June 30, 2002 (1) by providing an opinion from a
third-party engineer that the commercial operation date will occur no
later than June 30, 2002 (the "Free Extension Option"), or (2) by giving
Williams written notice of such extension no later than November 30,
2001, and paying to Williams $2.5 million by no later than January 31,
2002 (the "First Paid Extension Option"). In accordance with the PPA,
during the week ending November 16, 2001, the Company expects to provide
Williams an opinion from a third-party engineer stating that the
commercial operation date will occur no later than June 30, 2002. As a
(Page 9 of 20)
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result, the Company believes that the commercial operation date under the
power purchase agreement will be extended to June 30, 2002 without the
need for the Company to purchase such an extension. In the event that
Williams, for any reason, does not accept the opinion of the third-party
engineer, the Company will be required to exercise its First Paid
Extension Option.
If the Company qualifies for the Free Extension Option or exercises the
First Paid Extension Option, in the event that the Facility does not
achieve commercial operation by June 30, 2002, the Company has the right
under the PPA, upon written notification to Williams not later than April
30, 2001, to extend the commercial operation date until June 30, 2003 by
paying Williams an amount equal to the lessor of any actual damages
Williams suffers or incurs after June 30, 2002 as a result of Williams
reliance upon the delivery by such date or three million dollars
($3,000,000) (the "Second Paid Extension Option"). The Company shall also
pay specified amounts ranging from $11,000 per day to $50,000 per day of
the extension. If the Company exercises the Second Paid Extension Option,
and has previously exercised the First Paid Extension Option, it need
only pay the per day amounts discussed in this preceding sentence. During
the period of the Second Paid Extension Option, the Company will continue
to collect liquidated damages from the contractor under the EPC Contract
in the amount of $108,000 per day.
If the Facility has not achieved commercial operation by the commercial
operation date as finally extended under the PPA, Williams has the right
to terminate the PPA. If Williams terminates the PPA and the Company
cannot find a long-term replacement power purchaser on favorable or
reasonable terms, the Company will be required to sell its capacity and
energy under shorter-term contracts or into the PJM market at spot
prices. In such circumstances, no assurances can be given that the
Company would have financial resources sufficient to meet its financial
and contractual obligations, including the timely payment of principal
and interest on the senior secured bonds (see note 6, regarding possible
construction delays).
6. COMMITMENTS AND CONTINGENCIES
CONSTRUCTION - The Company entered into an Agreement for Engineering,
Procurement and Construction services, dated as of October 15, 1999,
between the Company and Raytheon Engineers & Constructors, Inc. (REC), as
amended (EPC Contract) for the design, engineering, procurement and
construction of the Facility. Under a guaranty in the Company's favor,
effective as of October 15, 1999, all of REC's obligations under the EPC
Contract were irrevocably and unconditionally guaranteed by Raytheon
Company (Raytheon).
At the time of issuance of the senior secured bonds, the Company prepaid
the discounted fixed price of the EPC Contract in accordance with the EPC
Prepayment Coordination Agreement, dated as of March 14, 2000 between REC
and the Company (the "Prepayment Agreement"). In consideration of such
prepayment, the performance of Washington Group International's (WGI),
as successor to REC under the EPC Contract, obligations under the EPC
Contract were secured by a letter of credit (the "Prepayment Letter of
Credit") provided in favor of the Collateral Agent with an initial
stated amount of $237.7 million, such amount to be reduced over the
construction period as construction milestones were met by WGI.
On July 7, 2000, WGI, Inc. acquired certain assets of REC, including
REC's rights and obligations under the EPC Contract. However, the terms
and conditions under the EPC Contract and the Prepayment Letter of Credit
were unchanged by such acquisition, and Raytheon's guaranty remained in
full force and effect.
On May 14, 2001, WGI announced that it had filed a plan of reorganization
along with voluntary petitions to restructure under Chapter 11 of the
U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of
Nevada in Reno (Bankruptcy Court). Under the EPC Contract, a bankruptcy
filing by WGI constituted an event of default. Based on correspondence
received from WGI preceding
(Page 10 of 20)
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the bankruptcy filing and in accordance with the terms of the EPC
Contract and the Collateral Agency Agreement, the Company on May 3, 2001
requested the Collateral Agent to draw the full available amount of such
letter of credit and deposit the proceeds of such drawing in the
Construction Account held by the Collateral Agent. The Collateral Agent
made such drawing on May 4, 2001 in the amount of $95.8 million, which
was the then outstanding amount of the Prepayment Letter of Credit as it
had been reduced by WGI's achievement of construction milestones under
the EPC Contract. Subsequent to the termination of the prepayment
arrangements with WGI, payments to WGI for achievement of construction
milestones as specified in the EPC Contract were made in accordance with
the terms of the EPC Contract.
On June 20, 2001, as a result of WGI's bankruptcy filing the Company made
a demand on Raytheon to perform its obligations under the Raytheon
guarantee.
Since the date of its bankruptcy filing, WGI has continued with
construction of the Facility. To provide for continued performance, the
Company, WGI and Raytheon entered into an Interim Agreement for Advance
Payments (Interim Agreement), dated June 20, 2001. The term of the
Interim Agreement, as amended, currently expires on November 16, 2001.
However, once executed, the Interim Agreement will be superceded by the
Project Completion Agreement by and between WGI and Raytheon, as
discussed below (see note 8). The Project Completion Agreement is
expected to be executed during the week of November 16, 2001. In the
event that the Project Completion Agreement is not executed by November
16, 2001, it is expected that, consistent with past practice, the Interim
Funding Agreement will be extended as necessary until the Project
Completion Agreement is executed. There can be no assurance however, that
the Interim Funding Agreement will be extended as expected. Under the
Interim Agreement, the Company and Raytheon have agreed to fund payments
to WGI's subcontractors working on construction of the Facility in
accordance with the terms of their subcontracts as required by the EPC
Contract, and to pay WGI's employees who are performing services with
respect to the project.
The maximum amount that the Company has agreed to fund under the Interim
Agreement is $17.5 million with the balance of funding under the Interim
Agreement being provided by Raytheon pursuant to its obligations under
the Raytheon Guaranty. In June 2001 and July 2001, the Company paid
approximately $14.5 million and $3.0 million, respectively, under the
Interim Agreement and accordingly, has no further funding obligations
under that agreement. Any amounts advanced by the Company under the
Interim Agreement will be deducted from milestone payments otherwise
payable by the Company to WGI under the EPC Contract. The Interim
Agreement provides for weekly budgeting and weekly status updates. The
Interim Agreement does not change the EPC Contract price, the
construction progress milestone dates, the guaranteed completion dates,
or the project schedule. In addition, the Interim Agreement does not
relieve WGI from any obligations it has under the EPC Contract, nor does
it relieve Raytheon from any obligations it has under its performance
guarantee. The Company is carefully monitoring the progress of
construction at the Facility for any work slowdowns or stoppages, neither
of which has been material to date.
Although there can be no assurances, based upon the Company's current
assessment of progress at the construction site, and the performance
guaranty from Raytheon, and assuming that Raytheon continues to fulfill
its obligations under its performance guarantee, the Company currently
believes that it has sufficient funds available to complete construction
of the Facility, and expects the Facility to become commercially
operational in early April 2002, which is approximately two months after
the guaranteed completion date under the EPC Contract of February 14,
2002 (see note 8).
Notwithstanding the Company's current belief, if it becomes necessary to
replace WGI as the primary contractor working on the Project or if
Raytheon does not fulfill its obligations under its performance
guarantee, the Company may not have sufficient funds to complete
construction of the
(Page 11 of 20)
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Facility and/or may experience significant construction delays. In the
event the commercial operation date of the Facility is significantly
delayed, the PPA may be terminated by Williams and the Company may not
have financial resources sufficient to meet its financial and contractual
obligations, including the timely payment of principal and interest on
the senior secured bonds.
Other than with respect to developments that may have a material impact
on the Company or its business operations, the Company is under no
obligation nor does it intend to continuously provide updates of WGI's
bankruptcy proceedings. However, copies of all pleadings filed with the
Bankruptcy Court are available from the office of the clerk of the
Bankruptcy Court.
MAINTENANCE SERVICES - The Company has entered into a maintenance
services agreement with Siemens Westinghouse Power Corporation (Siemens).
Siemens will provide the Company with specific combustion turbine
maintenance services and spare parts for an initial term of between six
and sixteen years. For the first six years of operation, the Company is
committed to pay $306 per equivalent operating hour of service. The value
of this commitment is difficult to ascertain at this time due to the
unknown operational mode Williams will require from the Company.
WATER SUPPLY - The Company has entered into a contract with the Borough
of Sayreville (the Borough) by which the Borough will provide untreated
water to the Company. The contract has a term of 30 years with an option
to extend for up to four additional five-year terms. The Company is
contractually committed to a minimum annual payment of $300,000. Based on
estimated maximum usage, the Company believes that its annual payment
will not exceed approximately $400,000.
INTERCONNECTION AGREEMENT - The Company has entered into an
interconnection agreement with Jersey Central Power & Light Company d/b/a
GPU Energy (GPU) to transmit the electricity generated by the Facility to
the transmission grid so that it may be sold as prescribed under the PPA.
The agreement is in effect for the life of the Facility, yet may be
terminated by mutual consent of both GPU and the Company under certain
circumstances as detailed in the agreement. Costs associated with the
agreement are based on electricity transmitted via GPU at a variable
price and the PJM (Pennsylvania/New Jersey/Maryland) Tariff as charged by
GPU, which is comprised of both service cost and asset recovery cost, as
determined by GPU and approved by the Federal Energy Regulatory
Committee. On June 22, 2001, FERC approved the Company's Market-Based
Tariff petition.
INTERCONNECTION INSTALLATION AGREEMENT - The Company entered into an
interconnection agreement with GPU on April 27, 1999 to design, furnish
install and own certain facilities required to interconnect the Company
with the transmission system. Under the terms of this agreement GPU will
provide all labor, supervision, materials and equipment necessary to
perform the interconnection installation. The cost of these
interconnection facilities is estimated to be $5.3 million. The Company
has paid $3.8 million to GPU for these facilities as of September 30,
2001.
WATER SUPPLY PIPELINE - The Borough will design the Lagoon Water
Pipeline, Lagoon Pumping Station and Sayreville Interconnection Number 2
in conformance with standard water system practice. The Company is
responsible for selection of a contractor and for payment of all costs.
The pipeline construction has been completed. The construction contract
for the Pumping Station has been awarded. The values of the pipeline and
pumping station are estimated to be approximately $2.0 million and
$678,000, respectively.
GAS INTERCONNECTION - Williams is responsible for the construction of all
natural gas interconnection facilities necessary for the delivery of
natural gas up to the Company's natural gas delivery point. This includes
metering equipment, valves and piping. Upon the expiration of the PPA or
termination of the PPA, the Company has the right to purchase the natural
gas interconnection facilities from Williams.
(Page 12 of 20)
<Page>
The Company has also made road modifications at a cost of approximately
$537,000, is in the process of constructing an administration building
for an estimated $1.7 million, and is installing a fuel gas heater for
an estimated $1.3 million. The Company has paid $670,000 towards the
fuel gas heater project and $235,000 towards the administration
building. The majority of the remaining capital expenditures are
expected to be paid by the end of February 2002.
7. DERIVATIVE INSTRUMENTS
Effective January 1, 2001, the Company adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," which, as amended,
establishes accounting and reporting standards for derivative instruments
and hedging activities.
The Company will produce and sell electricity, as well as provide fuel
conversion and ancillary services, solely to Williams under a long term
Power Purchase Agreement (PPA). The Company does not believe that the PPA
meets the definition of a derivative under SFAS No. 133, and as such,
should not be accounted for as a derivative.
The Company has no other contracts that meet the definition of a
derivative or an embedded derivative under SFAS No. 133.
8. SUBSEQUENT EVENT
As noted above, Raytheon guaranteed all of WGI's obligations under the
EPC Contract. Since the execution of the Interim Agreement described
above (see note 6), Raytheon, in furtherance of its obligations under its
performance guarantee, and WGI have been negotiating a series of
arrangements under which the Project will be completed in accordance with
the terms of the EPC Contract. During the week ending November 16, 2001,
Raytheon and WGI expect to execute a Project Completion Agreement (PCA).
The Interim Agreement will be superceded by the PCA upon its execution.
Under the PCA, WGI will (i) assign to the Company, as the project owner,
certain of the major equipment, subcontracts and vendor contracts
relating to the project, (ii) assign to Raytheon the remaining
subcontracts and vendor contracts relating to the project, (iii) agree to
complete construction of the Facility on a cost reimbursable basis but
otherwise in accordance with the terms of the EPC Contract, with all
funding to come from Raytheon, and (iv) perform obligations under the
subcontracts and vendor contracts as the subagent of Raytheon. Raytheon,
as guarantor under the EPC Contract, will, as necessary, fund all of
WGI's costs and expenses related to WGI's completion of the project. Both
parties will have limited termination rights under the PCA.
Issuance of an order by the Bankruptcy Court approving (1) the rejection
of the EPC Contract by WGI and (2) the execution by WGI of the PCA is
expected to occur during the week ending November 16, 2001.
On or about the time the PCA is executed, the Company and Raytheon expect
to enter an agreement pursuant to which (i) Raytheon and the Company will
acknowledge that, notwithstanding the rejection of the EPC Contract by
WGI, Raytheon will cause the project to be completed in accordance with
the terms of the EPC Contract pursuant to Raytheon's performance guaranty
obligations, and the EPC Contract will have continuing applicability
insofar as it defines (x) the obligations owed to the Company by Raytheon
under its guaranty and (y) the obligations of the Company to Raytheon
arising from the performance of those obligations, (ii) Raytheon (or
their designees) will be designated as the Company's agent for purposes
of administering the subcontracts and vendor contracts assigned by WGI to
the Company, (iii) all future payments from the Company will be paid in
accordance with the terms of the EPC Contract directly to Raytheon, and
(iv) Raytheon will indemnify the Company with respect to any claims
arising out of the subcontracts and vendor contracts assumed by the
Company.
(Page 13 of 20)
<Page>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this Form 10-Q, as well as statements made by the
Company in periodic press releases and other public communications, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Certain, but not necessarily all, of such
forward-looking statements can be identified by the use of forward-looking
terminology, such as "believes," "estimates," "plans," "projects," "expects,"
"may," "will," "should," "approximately," or "anticipates" or the negative
thereof or other variations thereof or comparable terminology, or by discussion
of strategies, each of which involves risks and uncertainties. The Company has
based these forward-looking statements on its current expectations and
projections about future events based upon its knowledge of facts as of the date
of this Form 10-Q and its assumptions about future events.
All statements, other than of historical facts included herein, including those
regarding market trends, the Company's financial position, business strategy,
projected plans and objectives of management for future operations and the
anticipated commercial operation date of the Facility, are forward-looking
statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors outside of the Company's control that may cause
the actual results or performance of the Company to be materially different from
any future results, performance or achievements expressed or implied by the
forward-looking statements. These risks, uncertainties and other factors
include, among others, the following:
o unexpected construction delays,
o unexpected problems relating to the start-up, commissioning and
performance of the Facility,
o the financial condition of third parties on which we depend,
including in particular, Washington Group International, Inc.,
("WGI")
o continued performance by WGI under the EPC Contract and the
Project Completion Agreement,
o the Company's ability to find a replacement contractor on
favorable or reasonable terms, if necessary,
o performance by Raytheon Company under its performance guarantee
and any related agreements,
o the termination of the PPA by Williams Energy in the event of a
significant delay in achieving commercial operations,
o the Company's ability to find a replacement power purchaser on
favorable or reasonable terms, if necessary,
o an adequate merchant market after the expiration of the power
purchase agreement,
o capital shortfalls and access to additional capital on reasonable
terms,
o inadequate insurance coverage,
o unexpected expenses or lower than expected revenues once
commercial operations have begun,
o environmental and regulatory compliance,
o terrorists acts and adverse reactions to United States
anti-terrorism activities, and
o the additional factors that are unknown to the Company or beyond
its control.
(Page 14 of 20)
<Page>
The Company has no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.
GENERAL
The Company was formed on September 13, 1998 to develop, construct, own, operate
and maintain its Facility. The Company is in the development stage and has no
operating revenues. The Company was dormant until March 15, 2000, the date of
the sale of the senior secured bonds. The Company obtained $384.0 million of
project financing from the sale of its senior secured bonds. The total cost of
the construction of the Company's Facility is estimated to be approximately
$439.8 million, which will be financed by the proceeds from the sale its senior
secured bonds and the equity contribution described below. In late September
2000, the Company consummated an exchange offer whereby the holders of the
senior secured bonds exchanged their privately placed senior secured bonds for
registered senior secured bonds.
The Company's Facility is still under construction and is expected to be
completed and operational in early April 2002 which is approximately two months
after February 14, 2002, the guaranteed completion date under the EPC Contract.
The Company cannot assure that these expectations will be met. See "Note 6.
Commitments And Contingencies--Construction" and "Note 8. Subsequent Event" of
the Notes to Condensed Consolidated Financial Statements, "--Liquidity and
Capital Resources" and "--Cautionary Note Regarding Forward-Looking Statements."
EQUITY CONTRIBUTIONS
In February 2001, the Company reclassified $986,000, a payable to affiliate
("AES Corporation") to contributed capital. This amount represented expenditures
paid by the AES Corporation prior to March 15, 2000.
Under the equity subscription agreement, Red Oak is obligated to contribute up
to approximately $55.7 million to the Company to fund project costs. Through
September 30, 2001, Red Oak has not yet contributed under the equity
subscription agreement. Red Oak's obligation to make the contributions is, and
will be, supported by an acceptable letter of credit or an acceptable bond.
RESULTS OF OPERATIONS
As of September 30, 2001 and December 31, 2000, Construction in Progress, which
includes capitalized facility construction costs, was $322.8 million and $117.0
million, respectively. For the nine months ended September 30, 2001 and the
period from March 15, 2000 (inception) through December 31, 2000, capitalized
facility construction costs were $205.8 million and $117.0 million,
respectively. For the three months ended September 30, 2001, the three months
ended September 30, 2000, the period from March 15, 2000 (inception) through
September 30, 2000, and the period from March 15, 2000 (inception) through
September 30, 2001, capitalized facility construction costs were $23.8 million,
$45.6 million, $106.4 million and $322.8 million, respectively. As discussed in
greater detail below, Construction in Progress also includes the capitalization
of construction related interest cost incurred on the portion of the bond
proceeds expended during the construction period. These capitalized costs are
included as assets on the Balance Sheets.
As discussed above, on May 3, 2001, the Company requested the Collateral Agent
to draw the full
(Page 15 of 20)
<Page>
available amount of the Prepayment Letter of Credit and deposit the proceeds of
such drawing in the Construction Account held by the Collateral Agent. The
Collateral Agent made such drawing on May 4, 2001 in the amount of $95.8
million, the balance of the letter of credit on that date. Subsequent to the
termination of the Interim Agreement with WGI, payments to WGI or to Raytheon
for achievement of construction milestones as specified in the EPC Contract were
made in accordance with the terms of the EPC Contract from funds available in
the Construction Account. As of September 30, 2001, the balance of the
Construction Account was $53.5 million.
For the three months ended September 30, 2001 and September 30, 2000, for the
nine months ended September 30, 2001, for the period from March 15, 2000
(inception) through September 30, 2000, and the period March 15, 2000
(inception) through September 30, 2001, general and administrative costs of
$35,000, $11,000, $57,000, $183,000 and $258,000, respectively, were incurred.
These costs did not directly relate to construction and are included as expenses
in the Statement of Operations.
A portion of the proceeds from the sale of the senior secured bonds has not yet
been expended on construction and was invested by the trustee. For the three
months ended September 30, 2001 and September 30, 2000, the nine months ended
September 30, 2001, the period from March 15, 2000 (inception) through September
30, 2000, and the period from March 15, 2000 (inception) through September 30,
2001, the interest income earned on these invested funds was approximately
$543,000, $615,000, $1.4 million, $1.4 million and $ 3.3 million, respectively,
and is included in the Statement of Operations.
For the three months ended September 30, 2001 and September 30, 2000, the nine
months ended September 30, 2001, the period from March 15, 2000 (inception)
through September 30, 2000, and the period from March 15, 2000 (inception)
through September 30, 2001, as noted above, construction related interest costs
incurred on the portion of the bond proceeds expended during the construction
period is capitalized to Construction in Progress, was approximately $7.1
million, $7.5 million, $22.5 million, $16.3 million and $46.7 million,
respectively, and is included on the Balance Sheets. For the three months
September 30, 2001 and September 30, 2000, the nine months ended September 30,
2001, the period from March 15, 2000 (inception) through September 30, 2000, and
the period from March 15, 2000 (inception) through September 30, 2001, interest
cost incurred on the bond proceeds not spent on construction of the Company's
Facility was approximately $1.3 million, $792,000, $2.9 million, $2.0 million
and $5.5 million, respectively, and is included as interest expense in the
Statements of Operations.
For the three months ended September 30, 2001 and September 30, 2000, the nine
months ended September 30, 2001, the period from March 15, 2000 (inception)
through September 30, 2000, and the period from March 15, 2000 (inception)
through September 30, 2001, non-capitalizable costs plus interest cost and less
interest income resulted in a net loss of approximately $818,000, $188,000, $1.6
million, $813,000 and $2.5 million, respectively. The results of operations may
not be comparable with the results of operations during future periods,
especially when the Company's Facility commences commercial operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that the net proceeds from the sale of the senior secured
bonds, together with the equity contribution, will be sufficient to (1) fund the
engineering, procurement, construction, testing and commissioning of the
Company's Facility until it is placed in commercial operation, (2) pay certain
fees and expenses in connection with the financing and development of the
Company's project and (3) pay project costs, including interest on the senior
secured bonds. After the Company's Facility is placed in commercial operation,
it will depend on revenues under the PPA, and after the power purchase
(Page 16 of 20)
<Page>
agreement expires, it will depend on revenues generated from market sales of
electricity.
In order to provide liquidity in the event of cash flow shortfalls, the Company
has provided the Collateral Agent with a debt service reserve letter of credit
in an initial stated amount of $22 million. The Collateral Agent may draw on the
debt service reserve letter of credit commencing on the earlier of the
guaranteed provisional acceptance date under the EPC Contract or the commercial
operation date of the Facility.
As of September 30, 2001, apart from commitments for unpaid scope changes
totaling $541,000 arising from the construction of our Facility, the Company has
committed to six major additional capital expenditures totaling $11.5 million.
These expenditures are for a water pipeline for approximately $678,000, road
modifications for approximately $537,000, a water pumping station for an
estimated $2.0 million, an administration office building for $1.7 million, a
fuel gas heater for $1.3 million and the construction of the Electrical
Interconnection Facilities under the Interconnection Installation Agreement for
$5.3 million. As of September 30, 2001, the road modifications and their related
expenditures have been completed and paid. The construction of the electrical
interconnection facilities are essentially complete except for equipment
testing. The Company has paid $3.8 million to GPU for these facilities thus far.
The remaining balance of the pipeline is approximately $36,000 and it is
expected that this balance will be paid in January 2002. The Company has also
installed a fuel gas heater and has paid $670,000 towards this project. The
majority of the remaining capital expenditures are expected to be paid by the
end of February 2002.
On May 14, 2001, WGI announced that it had filed a plan of reorganization along
with voluntary petitions to restructure under Chapter 11 of the U.S. Bankruptcy
Code in the U.S. Bankruptcy Court for the District of Nevada in Reno. WGI is
currently continuing construction of the Facility and the Company and the
independent engineer are carefully monitoring the progress of construction at
the Facility for any work slowdowns or stoppages, neither of which has been
material to date.
Since the date of its bankruptcy filing, WGI has continued with construction of
the Facility. To provide for continued performance, the Company, WGI and
Raytheon entered into an Interim Agreement for Advance Payments (Interim
Agreement), dated June 20, 2001. The term of the Interim Agreement, as amended,
currently expires on November 16, 2001. However, once executed, the Interim
Agreement will be superceded by the Project Completion Agreement (PCA) by and
between WGI and Raytheon. The Project Completion Agreement is expected to be
executed during the week of November 16, 2001. In the event that the Project
Completion Agreement is not executed by November 16, 2001, it is expected that,
consistent with past practice, the Interim Funding Agreement will be extended as
necessary until the Project Completion Agreement is executed. There can be no
assurance however, that the Interim Funding Agreement will be extended as
expected. Under the Interim Agreement, the Company and Raytheon have agreed to
fund payments to WGI's subcontractors working on construction of the Facility in
accordance with the terms of their subcontracts as required by the EPC Contract,
and to pay WGI's employees who are performing services with respect to the
project.
Under the PCA, WGI will (i) assign to the Company, as the project owner, certain
of the major equipment, subcontracts and vendor contracts relating to the
project, (ii) assign to Raytheon the remaining subcontracts and vendor contracts
relating to the project, (iii) agree to complete construction of the Facility on
a cost reimbursable basis but otherwise in accordance with the terms of the EPC
Contract, with all funding to come from Raytheon, and (iv) perform obligations
under the subcontracts and vendor contracts as the subagent of Raytheon.
Raytheon, as guarantor under the EPC Contract, will, as necessary, fund all of
WGI's costs and expenses related to WGI's completion of the project. Both
parties will have limited termination rights under the PCA.
(Page 17 of 20)
<Page>
Issuance of an order by the Bankruptcy Court approving (1) the rejection of the
EPC Contract by WGI and (2) the execution by WGI of the PCA is expected to occur
during the week ending November 16, 2001.
On or about the time the PCA is executed, the Company and Raytheon expect to
enter an agreement pursuant to which (i) Raytheon and the Company will
acknowledge that, notwithstanding the rejection of the EPC Contract by WGI,
Raytheon will cause the project to be completed in accordance with the terms of
the EPC Contract pursuant to Raytheon's performance guaranty obligations, and
the EPC Contract will have continuing applicability insofar as it defines (x)
the obligations owed to the Company by Raytheon under its guaranty and (y) the
obligations of the Company to Raytheon arising from the performance of those
obligations, (ii) Raytheon (or their designees) will be designated as the
Company's agent for purposes of administering the subcontracts and vendor
contracts assigned by WGI to the Company, (iii) all future payments from the
Company will be paid in accordance with the terms of the EPC Contract directly
to Raytheon, and (iv) Raytheon will indemnify the Company with respect to any
claims arising out of the subcontracts and vendor contracts assumed by the
Company.
Although there can be no assurances, based upon the Company's current assessment
of progress at the construction site, and the performance guaranty from
Raytheon, and assuming that Raytheon continues to fulfill its obligations under
its performance guarantee and related agreements, the Company currently believes
that it has sufficient funds available to complete construction of the Facility,
and expects the Facility to become commercially operational in early April 2002,
which is approximately two months after the guaranteed completion date under the
EPC Contract of February 14, 2002.
Notwithstanding the Company's current belief, if the PCA is not executed, or if
the parties thereto fail to perform their obligations, or if Raytheon does not
fulfill its obligations under its performance guarantee or other related
agreements, the Company may experience significant construction delays and/or
may not have sufficient funds to complete the Facility. Furthermore, in the
event that the project is not commercially operational by June 30, 2002, and the
Company does not have sufficient funds to purchase extensions of the required
commercial operation date under the PPA, or the Facility does not achieve
commercial operation by the commercial operation date as extended, Williams has
the right to terminate the PPA. If Williams terminates the PPA and the Company
cannot find a long-term replacement power purchaser on favorable or reasonable
terms, the Company will be required to sell its capacity and energy under
shorter-term contracts or into the PJM spot market. In such event, the Company
may not have financial resources sufficient to meet its financial and
contractual obligations, including the timely payment of principal and interest
on the senior secured bonds. See "Note 6. Commitments And
Contingencies--Construction" and "Note 8. Subsequent Event" of the Notes to
Condensed Consolidated Financial Statements and "--Cautionary Note Regarding
Forward-Looking Statements."
BUSINESS STRATEGY AND OUTLOOK
The Company's overall business strategy is to market and sell all of its net
capacity, fuel conversion and ancillary services to Williams during the 20-year
term of the power purchase agreement. After expiration of the power purchase
agreement, the Company anticipates selling its Facility's capacity, ancillary
services and energy under a power purchase agreement or into the PJM power pool
market. The Company intends to cause its Facility to be managed, operated and
maintained in compliance with the project contracts and all applicable legal
requirements.
(Page 18 of 20)
<Page>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risks are not materially different from those market risks
described in its annual report on Form 10-K for the fiscal year ended December
31, 2000.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
References in Notes 6 and 8 to the Notes to the Consolidated Financial
Statements to events occurring after September 30, 2001 relating to WGI
and Raytheon are incorporated by reference into this Item 5.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
b) REPORTS ON FORM 8-K.
The Company did not file any reports on Form 8-K during the quarter ended
September 30, 2001.
(Page 19 of 20)
<Page>
SIGNATURES
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.
<Table>
AES RED OAK, L.L.C.
Date: November 14, 2001 By: /s/ PAM STRUNK
-----------------------------------------
PAM STRUNK
Regional Chief Financial Officer of AES
Enterprise, Inc. (and principal
accounting officer of AES Red Oak, L.L.C.)
Date: November 14, 2001 By: /s/ A.W. BERGERON
-----------------------------------------
A.W. BERGERON
Vice President
</Table>
(Page 20 of 20)