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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
AUGUST 8, 2002
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Date of Report (Date of Earliest Event Reported)
SITHE/INDEPENDENCE FUNDING CORPORATION
(Exact Name of Registrant as Specified in Charter)
DELAWARE 33-59960 13-3677475
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(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer
Incorporation or Organization) Identification Number)
335 MADISON AVENUE, NEW YORK, NY 10017
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(Address of Principal Executive Offices) (Zip Code)
(212) 351-0000
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 33-59960 33-0468704
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(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer
Incorporation or Organization) Identification Number)
335 MADISON AVENUE, NEW YORK NY, 10017
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(Address of Principal Executive Offices) (Zip Code)
(212) 351-0000
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
Dynegy Holdings Inc. ("DHI") failed to provide certain substitute
guaranties that it was obligated to provide to Sithe/Independence Power
Partners, L.P. (the "Partnership") under four separate guaranty agreements (the
"Guaranty Agreements"), pursuant to which DHI guaranteed to the Partnership
certain obligations of certain of its subsidiaries under the Tolling Agreement,
the Financial Swap Agreement, the Gas Supply Agreement and the Energy Management
Agreement, which are described below. The obligation to provide these
substitute guaranties was caused by a downgrading in the investment ratings of
the unsecured, senior long-term debt of DHI. The failure to provide these
substitute guaranties constitutes a breach of the terms of the Guaranty
Agreements and an event of default under each of the Tolling Agreement, the
Financial Swap Agreement, the Gas Supply Agreement and the Energy Management
Agreement. To our knowledge, DHI's subsidiaries party to the Tolling Agreement,
the Financial Swap Agreement, the Gas Supply Agreement and the Energy Management
Agreement are otherwise in substantial compliance with such Agreements.
For a more complete description of the Tolling Agreement, the Financial
Swap Agreement, the Gas Supply Agreement and the Energy Management Agreement
please refer to the Partnership's annual report on Form 10-K for the fiscal year
ended December 31, 2001, filed with the Securities and Exchange Commission on
March 29, 2002.
The Partnership entered into a tolling arrangement (the "Tolling
Agreement") with Dynegy Power Marketing, Inc. ("DPM") on July 1, 2001.
Pursuant to the Tolling Agreement, DPM is obligated to pay to the Partnership
tolling fees for the right to supply natural gas to the electric generating
facility located in the Town of Scriba, County of Oswego, New York, having a
design capacity of approximately 1,000 megawatts ("MW"), owned by the
Partnership (the "Project"). The Tolling Agreement commenced on July 1, 2001
and runs through 2014. Approximately sixty percent of the output of the
Project is covered by the Tolling Agreement.
In addition, the Partnership entered into a multi-agreement financial
swap with DPM (collectively, the "Financial Swap Agreement") with respect to
approximately 375 MW of the Project's energy, which runs through 2014. To hedge
its exposure under the Financial Swap Agreement, using natural gas supplied by
Dynegy Canada Marketing and Trade ("DCMT"), the Partnership will generate
electricity from forty percent of the Project and sell such electricity to the
New York Independent System Operator, Inc. ("NYISO"). DPM will pay the
Partnership: (i) a monthly fixed payment under the financial swap and (ii) a
payment designed to cover the Partnership's costs of generating electric energy
(including amounts paid under the gas supply agreement with DCMT described
below) from the Project's reserved capability. The Partnership will pay to DPM
amounts equivalent to those received from the NYISO for the sales of energy
associated with the reserved forty percent of the Project.
Pursuant to a gas supply agreement between the Partnership and DCMT
(the "Gas Supply Agreement"), the Partnership will purchase from DCMT at a
defined index price, all natural gas required to operate forty percent of the
Project. The pricing under the Gas Supply Agreement is structured so that
payments for natural gas associated with operation of the reserved capability
are covered by the payments from DPM under the Financial Swap Agreement. In
addition, if DCMT fails to deliver natural gas to the Project at any time that
the Partnership is intending to operate the Project to sell electric energy to
the NYISO to cover its exposure under the Financial Swap Agreement, DCMT is
obligated to reimburse the Partnership at the NYISO market price for the amount
of such electric energy.
The Partnership, DPM, and Dynegy Marketing and Trade ("DMT") have
entered into an energy management agreement (the "Energy Management Agreement"),
whereby DMT is responsible for all bidding and scheduling of gas under the Gas
Supply Agreement and the Tolling Agreement, and DPM is responsible for all
bidding and scheduling of electric purchases and sales under the Tolling
Agreement and resulting from the Financial Swap Agreement.
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 hereunto duly authorized.
SITHE/INDEPENDENCE FUNDING CORPORATION
(REGISTRANT)
Date: August 8, 2002 By: /s/ THOMAS M. BOEHLERT
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Name: Thomas M. Boehlert
Title: Chief Financial Officer and
Senior Vice President
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
the co-registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(REGISTRANT)
By: SITHE/INDEPENDENCE, INC.
GENERAL PARTNER
Date: August 8, 2002 By: /s/ THOMAS M. BOEHLERT
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Name: Thomas M. Boehlert
Title: Chief Financial Officer and
Senior Vice President
(Principal Financial and
Accounting Officer)