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 Quarter Ended March 31, 1996 Commission File Number 33-59960
SITHE/INDEPENDENCE FUNDING CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-3677475
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
450 LEXINGTON AVENUE, NEW YORK, NY 10017
(Address of principal executive offices) (Zip code)
(212)-450-9000
(Registrant's telephone number, including area code)
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0468704
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
450 LEXINGTON AVENUE, NEW YORK, NY 10017
(Address of principal executive offices) (Zip code)
(212)-450-9000
(Registrant's 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 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.
[ X ] Yes [ ] No
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
SITHE/INDEPENDENCE FUNDING CORPORATION
PAGE NO.
PART I FINANCIAL INFORMATION --------
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(a Delaware Limited Partnership)
Financial Statements:
Consolidated Balance Sheets at March 31, 1996 and
December 31, 1995 (Unaudited) 3
Consolidated Statements of Operations for the Three Months
Ended March 31, 1996 and 1995 (Unaudited) 4
Consolidated Statement of Partners' Capital for the Three
Months Ended March 31, 1996 (Unaudited) 5
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1996 and 1995 (Unaudited) 6
Notes to Consolidated Financial Statements (Unaudited) 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
-2-
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
CONSOLIDATED BALANCE SHEETS (Unaudited)
(IN THOUSANDS)
March 31, December 31,
1996 1995
--------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 186 $ 942
Restricted funds 47,245 56,036
Accounts receivable - trade 49,178 35,321
Fuel inventory and other current assets 5,997 2,862
--------- ------------
TOTAL CURRENT ASSETS 102,606 95,161
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land 5,875 5,875
Electric and steam generating facilities 752,655 750,769
--------- ------------
758,530 756,644
Accumulated depreciation (23,623) (18,928)
--------- ------------
734,907 737,716
DEBT ISSUANCE COSTS 11,077 11,350
OTHER ASSETS 1,314 1,661
--------- ------------
TOTAL ASSETS $849,904 $845,888
--------- ------------
--------- ------------
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Trade payables $ 29,905 $ 20,190
Accrued interest 15,395 30,910
Current portion of long-term debt 3,929 11,382
Accrued construction costs and retentions 2,381 16,587
--------- ------------
TOTAL CURRENT LIABILITIES 51,610 79,069
LONG-TERM DEBT:
7.90% secured notes due 2002 138,955 138,957
8.50% secured bonds due 2007 150,839 150,839
9.00% secured bonds due 2013 408,609 408,609
--------- ------------
698,403 698,405
OTHER LIABILITIES 7,332 5,680
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL 92,559 62,734
--------- ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $849,904 $845,888
--------- ------------
--------- ------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS)
THREE MONTHS
ENDED MARCH 31,
-------------------------
1996 1995
-------- --------
REVENUE $113,410 $ 86,986
-------- --------
COST OF SALES
Fuel 53,227 47,900
Operations and maintenance 10,333 9,210
Depreciation 4,695 4,705
-------- --------
68,255 61,815
-------- --------
OPERATING INCOME 45,155 25,171
NON-OPERATING INCOME (EXPENSES):
Interest expense (15,802) (16,080)
Other income, net 464 186
-------- --------
NET INCOME $ 29,817 $ 9,277
-------- --------
-------- --------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (UNAUDITED)
(IN THOUSANDS)
UNREALIZED
LOSS ON TOTAL
GENERAL LIMITED MARKETABLE PARTNERS'
PARTNER PARTNERS SECURITIES CAPITAL
------- ------- ---------- -------
BALANCE, JANUARY 1, 1996 $ 3,141 $59,601 $ (8) $62,734
Net income 2,982 26,835 - 29,817
Change in unrealized loss
on marketable securities - - 8 8
------- ------- ------- -------
BALANCE, MARCH 31, 1996 $ 6,123 $86,436 $ - $92,559
------- ------- ------- -------
------- ------- ------- -------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-5-
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
THREE MONTHS
ENDED MARCH 31,
--------------------
1996 1995
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 29,817 $ 9,277
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 4,695 4,705
Amortization of deferred financing costs 273 288
Changes in operating assets and liabilities:
Accounts receivable - trade (13,857) (22,972)
Fuel inventory and other current assets (3,135) (2,386)
Other assets 347 -
Trade payables and other current liabi1ities 9,715 17,186
Accrued interest payable (15,515) 15,516
Other liabilities 1,652 1,465
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 13,992 23,079
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction costs (16,092) (23,380)
Restricted funds 8,799 393
Investment of funds designated for construction - (40,090)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (7,293) (63,077)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt (7,455) -
Capital contribution - 40,000
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (7,455) 40,000
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (756) 2
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 942 4
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 186 $ 6
-------- --------
-------- --------
SUPPLEMENT CASH FLOW INFORMATION
Cash payments:
Interest (net of amounts capitalized) $ 30,736 $ -
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. THE PARTNERSHIP
Sithe/Independence Power Partners, L.P. (the "Partnership"),
in which Sithe Energies, Inc. and certain of its direct and indirect
wholly owned subsidiaries (the "Partners") hold all the partnership
interests, is a Delaware limited partnership that was formed in
November 1990 for a term of 50 years to develop, construct and own a
gas-fired cogeneration facility with a design capacity of approximately
1,000 megawatts (the "Project") located in the Town of Scriba, County of
Oswego, New York. The Partnership commenced commercial operation for
financial reporting purposes on December 29, 1994. The majority of the
capacity and electric energy generated by the Project is sold to
Consolidated Edison Company of New York, Inc. ("Con Edison") and Alcan
Aluminum Corporation with the remainder of the electric energy being
sold to Niagara Mohawk Power Corporation ("Niagara Mohawk").
2. BASIS OF PRESENTATION
The accompanying consolidated balance sheets at March 31, 1996 and
December 31, 1995 and the consolidated statements of operations and cash
flows for the three months ended March 31, 1996 and 1995 should be read in
conjunction with the audited consolidated financial statements included in
the Annual Report on Form 10-K for the year ended December 31, 1995
for the Partnership and its wholly-owned subsidiary, Sithe/Independence
Funding Corporation.
The results of operations for the three months ended March 31, 1996
are not necessarily indicative of the results to be expected for the full
year. The unaudited financial information at March 31, 1996 and for the
three months ended March 31, 1996 and 1995 contains all adjustments,
consisting only of normal recurring adjustments, which management
considers necessary for a fair presentation of the operating results for such
periods.
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SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenue, cost of sales and operating income for the first quarter of
1996 increased by $26.4 million (30%), $6.4 million (10%), and $20.0 million
(79%), respectively, over the corresponding quarter of last year, with the
increases reflecting higher avoided cost based tariff prices on energy
deliveries to Con Edison and Niagara Mohawk, higher plant availability
and incremental revenue from selling gas instead of generating
electricity at certain times during the first quarter of 1996.
Interest expense for the first quarter of 1996 decreased by $.3
million (2%) from the corresponding quarter of last year as a result of
lower outstanding amounts of long term debt. Other income, net for the
first quarter of 1996 consisted of interest income. Other income, net
for the first quarter of 1995 consisted of $.4 million of interest
income and $.2 million of realized losses on short-term investments
designated for construction.
LIQUIDITY AND CAPITAL RESOURCES
The Partners have obtained a credit facility under which one or
more letters of credit may be issued in connection with their
obligations pursuant to certain Project contracts, and, as of March 31,
1996, letters of credit aggregating $17.0 million were outstanding
in connection with such obligations.
The Partnership secured the Project's debt service obligations
with a letter of credit in the amount of $50 million and entered into a
secured working capital facility for a maximum available amount of $20
million through January 1997, which may be extended by the parties thereto
for additional one-year periods. Amounts outstanding under the working
capital facility will accrue interest at the prime commercial lending
rate of the reference bank in effect from time to time. To secure
the Partnership's obligation to pay interest, principal and other
amounts payable in respect of the working capital facility, the working
capital provider has been assigned a security interest and lien on
all of the collateral in which the holders of the Partnership's
long-term debt issued to finance the development and construction of the
Project have been assigned a security interest and lien.
The Partnership presently believes that funds available from cash on
hand, operations, the working capital facility and the debt service letter
of credit will be more than sufficient to liquidate Partnership obligations
as they come due and to pay 1996 Project debt service. The Partnership is
required to fund reserves for debt service and major overhauls from
available cash flow after debt service as follows: $32.3 million in 1996,
$16.4 million in 1997 and approximately $6 million annually thereafter.
-8-
Changes in the avoided-cost-based energy component of billings by the
Partnership to Con Edison will impact the Partnership's profitability,
particularly during the first five years of operation when the price for
gas associated with energy deliveries to Con Edison is fixed.
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PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit No. Description of Exhibit
---------- ----------------------
27 ---- Article 5 Financial Data Schedule of
Sithe/Independence Power Partners, L.P.
for the quarter ended March 31, 1996.
(b) Reports on Form 8-K:
No report on Form 8-K was filed during the quarter
covered by this report.
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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.
Sithe/Independence Funding Corporation
(REGISTRANT)
May 14, 1996 /s/ Richard J. Cronin III
---------------------------------------
RICHARD J. CRONIN III
CHIEF FINANCIAL OFFICER AND
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 thereunto duly
authorized.
Sithe/Independence Power Partners, L.P.
(REGISTRANT)
By: Sithe/Independence, Inc.
GENERAL PARTNER
May 14, 1996 /s/ Richard J. Cronin III
--------------------------------------
RICHARD J. CRONIN III
CHIEF FINANCIAL OFFICER AND
VICE PRESIDENT
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
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