SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
or
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 33-46795
OLD DOMINION ELECTRIC COOPERATIVE
(Exact Name of Registrant as Specified in Its Charter)
VIRGINIA 23-7048405
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4201 Dominion Boulevard, Glen Allen, Virginia 23060
(Address of Principal Executive Offices) (Zip Code)
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(804) 747-0592
(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 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
The Registrant is a membership corporation and has no authorized or outstanding
equity securities.
OLD DOMINION ELECTRIC COOPERATIVE
INDEX
Page
Number
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1996 (Unaudited)
and December 31, 1995 3
Consolidated Statements of Revenues, Expenses and
Patronage Capital (Unaudited) - Three Months Ended
March 31, 1996 and 1995 5
Consolidated Statements of Cash Flows (Unaudited) - Three
Months Ended March 31, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. Other Information
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
Signature 13
Exhibit Index 14
OLD DOMINION ELECTRIC COOPERATIVE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1996 1995
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(IN THOUSANDS)
ASSETS: ......................................... (UNAUDITED) (*)
Electric Plant:
In service .................................... $ 853,782 $ 588,636
Less accumulated provision for depreciation ... (72,899) (68,738)
----------- -----------
780,883 519,898
Nuclear fuel, at amortized cost ............... 7,966 6,026
Plant acquisition adjustment, at amortized cost 26,343 26,860
Construction work in progress ................. 11,420 269,554
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Net Electric Plant ......................... 826,612 822,338
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Decommissioning Fund ............................ 36,025 36,118
Other Investments and Funds ..................... 151,258 58,809
Current Assets:
Cash and cash equivalents ..................... 82,468 63,670
Note Receivable ............................... 15,075 13,793
Receivables ................................... 35,478 35,255
Fuel Stock .................................... 2,755 3,189
Materials and supplies, at average cost ....... 4,893 4,971
Prepayments ................................... 1,848 1,069
Deferred energy ............................... 989 463
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Total Current Assets ....................... 143,506 122,410
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Deferred Charges ................................ 29,134 29,575
Other Assets .................................... 10,449 9,696
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Total Assets ............................... $ 1,196,984 $ 1,078,946
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
(*) The Consolidated Balance Sheet at December 31, 1995, has been taken
from the audited financial statements at that date, but does not
include all disclosures required by generally accepted accounting
principles.
OLD DOMINION ELECTRIC COOPERATIVE
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1996 1995
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(IN THOUSANDS)
CAPITALIZATION AND LIABILITIES: ......... (UNAUDITED) (*)
Capitalization:
Patronage capital ..................... $ 175,705 $ 172,513
Long-term debt ........................ 808,061 738,974
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Total Capitalization ............... 983,766 911,487
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Current Liabilities:
Long-term debt due within one year .... 18,032 18,385
Notes payable ......................... -- 8,700
Accounts payable ...................... 84,802 62,954
Construction contract payable ......... 23,063 22,541
Accrued interest ...................... 19,843 5,020
Accrued taxes ......................... 672 113
Other ................................. 3,220 3,856
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Total Current Liabilities .......... 149,632 121,569
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Decommissioning Reserve ................. 36,025 36,118
Other Liabilities and Deferred Credits .. 27,561 9,772
Committments and Contingencies...........
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Total Capitalization and Liabilities $1,196,984 $1,078,946
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
(*) The Consolidated Balance Sheet at December 31, 1995, has been taken
from the audited financial statements at that date, but does not
include all disclosures required by generally accepted accounting
principles.
OLD DOMINION ELECTRIC COOPERATIVE
CONSOLIDATED STATEMENTS OF REVENUES,
EXPENSES AND PATRONAGE CAPITAL (UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
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1996 1995
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(IN THOUSANDS)
Operating Revenues:
Sales to members ............................... $ 99,129 $ 94,022
Sales to non-members ........................... 2 --
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99,131 94,022
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Operating Expenses:
Operation-
Fuel ......................................... 8,650 1,641
Purchased power .............................. 67,967 70,521
Other ........................................ 2,335 1,409
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78,952 73,571
Maintenance .................................... 2,082 1,850
Administrative and general ..................... 3,782 2,909
Depreciation and amortization .................. 4,663 2,223
Decommissioning cost ........................... 170 170
Taxes other than income taxes .................. 1,710 1,095
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Total Operating Expenses .................. 91,359 81,818
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Operating Margin ................................. 7,772 12,204
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Other Income ..................................... 5,764 --
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Investment Income:
Interest ....................................... 1,654 1,677
Other .......................................... 239 70
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Total Investment Income ................... 1,893 1,747
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Interest Charges:
Interest on long-term debt, net ................ 15,864 15,704
Other .......................................... 93 42
Allowance for borrowed funds used during
construction ................................. (3,720) (10,249)
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Net Interest Charges ...................... 12,237 5,497
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Net Margin ....................................... 3,192 8,454
Patronage Capital-beginning of period ............ 172,513 138,485
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Patronage Capital-end of period .................. $ 175,705 $ 146,939
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
OLD DOMINION ELECTRIC COOPERATIVE
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-----------------------------
1996 1995
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(IN THOUSANDS)
Cash Provided By Operating Activities:
Net margin .............................................. $ 3,192 $ 8,454
Adjustments to reconcile net margin to net cash
provided by operating activities:
Depreciation .......................................... 4,115 1,681
Amortization of plant acquisition adjustment .......... 517 516
Amortization of nuclear fuel .......................... 1,060 1,198
Decommissioning cost .................................. 170 170
Amortization of debt discount ......................... 243 106
Amortization of other debt costs ...................... 309 311
Amortization of deferred charges and other assets ..... 28 24
Gain from lease transactions .......................... (5,852) --
Changes in Current Assets and Current Liabilities:
Notes receivables ................................... (1,282) --
Receivables ......................................... (223) 191
Fuel stock .......................................... 434 --
Materials and supplies .............................. 78 (18)
Prepayments ......................................... (779) (212)
Notes payable ....................................... (8,700) --
Accounts payable .................................... 21,848 6,202
Deferred energy ..................................... (526) 570
Accrued expenses .................................... 15,382 16,953
Other ............................................... (636) (82)
(Increase) decrease in deferred charges ............... 160 (130)
Decrease (increase) in other assets ................... (809) 110
Increase (decrease) in other liabilities .............. 23,641 6
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Net Cash Provided By Operating Activities .......... 52,370 36,050
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Cash Provided By (Used For) Financing Activities:
Additions to long-term debt ............................. 23,884 --
Obligations under long-term lease ....................... 51,498 --
Reductions of long-term debt ............................ (6,891) (316)
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Net Cash Provided By (Used For) Financing Activities 68,491 (316)
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Cash Used For Investing Activities:
Additions to electric plant ............................. (9,438) (23,613)
Decommissioning fund deposits ........................... (170) (170)
Additions to other investments and funds, net ........... (92,449) (1,498)
Retirement work in progress ............................. (6) 42
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Net Cash Used For Investing Activities ............. (102,063) (25,239)
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Net Increase in Cash and Cash Equivalents ............... 18,798 10,495
Beginning of Period Cash and Cash Equivalents ........... 63,670 66,678
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End of Period Cash and Cash Equivalents ................. $ 82,468 $ 77,173
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
OLD DOMINION ELECTRIC COOPERATIVE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the management of Old Dominion Electric Cooperative
("Old Dominion"), the accompanying unaudited consolidated financial
statements contain all adjustments, which include only normal recurring
adjustments, necessary for a fair statement of Old Dominion's
consolidated financial position as of March 31, 1996, and its
consolidated results of operations and cash flows for the three months
ended March 31, 1996 and 1995. The consolidated results of operations
for the three months ended March 31, 1996 are not necessarily indicative
of the results to be expected for the entire year. These financial
statements should be read in conjunction with the financial statements
and notes thereto included in Old Dominion's 1995 Annual Report on Form
10-K filed with the Securities and Exchange Commission (the "SEC").
2. Old Dominion and 10 of its 12 member distribution systems have established
an affiliate, CSC Services, Inc. ("CSC"), to explore alternative business
opportunities on behalf of the cooperatives. CSC has invested, with
three other participants, in Seacoast Power LLC, whose wholly-owned
subsidiary, Seacoast, Inc. ("Seacoast"), has executed a six-month
power sales contract with INECEL, the state-owned electric utility in
Ecuador. CSC, through a wholly-owned affiliate, together with the three
other participants in Seacoast Power LLC, have formed Power Ventures
LLC (Power Ventures LLC, together with its affiliates, referred to as
"Power Ventures"). Power Ventures owns the generating assets necessary
to fulfill the power sales contract between Seacoast and INECEL. Under
the terms of the contract, INECEL is obligated to make monthly
payments for energy available, as well as fuel used, by Seacoast. Due to
contract disputes, INECEL has not yet remitted contract payments of
approximately $1.3 million and $3.2 million for February and March
1996, respectively. Accordingly, Seacoast has stopped generating
energy until the disputes are resolved and past due payments are
received. Seacoast is attempting to enforce the contract and is
actively working with INECEL to resolve the contract issues in dispute and
to renegotiate a new, longer term power sales contract.
3. On March 31, 1996, Old Dominion loaned approximately $15.1 million to
Seacoast. This amount, together with other amounts loaned to
Seacoast Power LLC by the other participants in Power Ventures
LLC, was used to fund capital investment in the generating assets
owned by Power Ventures and to fund operating expenses. The note from
Seacoast is payable in 90 days at an interest rate of 6.6% and is payable
from the share of the profits generated by the operations and
activities of Power Ventures that ultimately accrue to the benefit of
Old Dominion and its members. This note replaces the $13.8 million note
from Seacoast dated December 31, 1995. Management believes that the
disputes referred to in Note 2 will be resolved, and the note is
collectible.
4. On March 27, 1996, the Construction Management Committe approved a motion
declaring the Clover Power Station Unit 2 commercial as of 00:01, Thursday,
March 28, 1996.
OLD DOMINION ELECTRIC COOPERATIVE
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Operating Revenues. Old Dominion's operating revenues are derived from power
sales to its Members. Revenues from sales to Members are a function of the
requirement for power by the Members' consumers and Old Dominion's cost of
service in meeting that requirement. The major factors affecting Members'
consumers' demand for power are the growth in the number of consumers and
seasonal weather fluctuations.
The following table illustrates the increases (decreases) in operating
revenues by component:
Three Months
Ended
March 31,
1996 vs 1995
(in thousands)
Sales to Members:
Power sales volume $12,732
Blended rates (837)
Fuel adjustment revenue (3,538)
Margin stabilization plan adjustment (3,250)
$ 5,107
Operating revenues for the three month period ended March 31, 1996 increased
as compared to the same period in 1995 primarily due to an 11.4% increase in
demand sales and a 13.4% increase in energy sales. These increases were the
result of the severe weather experienced in February and below normal
temperatures in March. Old Dominion's demand and energy sales for the three
months ended March 31, 1996, were 4,297,723 MW and 2,117,939 MWh, respectively.
Old Dominion's demand and energy sales for the three months ended March 31, 1995
were 3,815,963 MW and 1,866,566 MWh, respectively. The increases in demand and
energy sales were partially off-set by a $3.5 million decrease in fuel
adjustment revenue and a $3.3 million change in the margin stabilization plan
adjustment.
Operating Expenses. Old Dominion has an 11.6% ownership interest in the
North Anna Nuclear Power Station ("North Anna"). While nuclear power plants,
such as North Anna, generally have relatively high fixed costs, such facilities
operate with relatively low variable costs due to lower fuel costs and
technological efficiencies. Owners of nuclear power plants, including Old
Dominion, incur the embedded fixed costs of these facilities whether or not the
units operate. When North Anna is off-line, Old Dominion must purchase
replacement power that is more costly. Any change in the amount of Old
Dominion's energy output from North Anna displaces or is replaced by higher cost
supplemental energy purchases from Virginia Electric and Power Company
("Virginia Power"). As a result, Old Dominion's operating expenses, and
therefore its rates to the Members, are significantly impacted by the operation
of North Anna.
North Anna capacity factors for 1996 and 1995 were as follows:
Three Months Ended
March 31,
1996 1995
Unit 1 54.7% 98.4%
Unit 2 101.1 76.4
Combined 78.0 87.3
During the first quarter of 1996 North Anna Unit 1 was off-line 30 days for
scheduled maintenance and refueling. Unit 2 was not off-line during the first
quarter of 1996. During the three month period ended March 31, 1995, North Anna
Unit 1 was off-line one day for unscheduled maintenance and Unit 2 was off-line
seven days due to the scheduled shutdown for the refueling and steam generator
replacement project, which began on March 25, 1995.
On March 27, 1996, the Construction Management Committee approved a motion
declaring the Clover Power Station Unit 2 commercial as of 00:01, Thursday,
March 28, 1996, four days ahead of schedule. Clover Power Station Unit 1 was
declared commercial as of 00:01, Saturday, October 7, 1995.
Old Dominion's energy supply for 1996 and 1995 was as follows:
Three Months Ended
March 31,
1996 1995
(MWh) (MWh)
North Anna 353,599 16.1% 395,897 20.5%
Clover 470,800 21.5 - -
Purchased Power:
Virginia Power 844,395 38.4 1,102,126 57.2
Delmarva Power 198,892 9.1 184,463 9.6
PSE&G & Others 280,632 12.8 213,530 11.1
Other 46,471 2.1 30,626 1.6
----------- ------- ----------- -------
Total Available Energy 2,194,789 100.0% 1,926,642 100.0%
========= ===== ========= =====
Fuel costs increased during the first quarter of 1996 as compared to the
first quarter of 1995 primarily because Clover Unit 1 was in operation for the
entire quarter and Unit 2 came on-line March 28, 1996.
Purchased power costs decreased during the first quarter of 1996 as compared
to the same period in 1995 primarily because Clover Unit 1 was operating during
the quarter and Unit 2 began operating on March 28, 1996. This decrease was
off-set by increased purchases due to the severe weather in February and below
normal temperatures in March.
Other operating costs increased in the first three months of 1996 as
compared to the same period in 1995 primarily due to an increase in production
caused by Clover operations in 1996.
Maintenance expense increased in the first three months of 1996 as compared
to the first three months of 1995 primarily due to Clover Unit 1 operations
during the first quarter of 1996 and Unit 2 operations during the last four days
of March 1996.
Administrative and general expenses increased during the first three months
of 1996 as compared to 1995 primarily due to Clover Unit 1 being in operation
during the quarter. Additionally, Clover Unit 2 came on-line on March 28, 1996.
Depreciation expense increased in the first quarter of 1996 as compared to
the first quarter of 1995 due to Clover Unit 1 being in operation during the
quarter and Unit 2 coming on-line on March 28, 1996.
Other income is the result of recognizing the income from the cross border
tax benefit lease, which was entered into in December 1994. The gain from the
lease had been deferred with recognition based on Unit 2 going into commercial
operation.
Allowance for borrowed funds used during construction decreased in the first
three months of 1996 as compared to the same period of 1995 primarily as a
result of Clover Unit 1 being in operation during the first quarter of 1996 and
Unit 2 coming on-line on March 28, 1996, four days ahead of schedule.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities. Net cash provided by operating activities increased in
the first quarter of 1996 as compared to 1995 primarily due to changes between
the periods in non-cash working capital, mainly notes receivable, accounts
payable, and accrued expenses. Additionally, a substantial increase in other
liabilities contributed to the increase in net cash provided by operating
activities.
Financing Activities. On March 1, 1996, Old Dominion finalized a long-term
lease transaction with an owner trust for the benefit of First Union National
Bank of Florida ("First Union"). Under the terms of the transaction, Old
Dominion entered into a 49-year capital lease of its interest in Clover Unit 1
(valued at $315.0 million) to First Union, and simultaneously entered into a
22-year lease of the interest back from First Union. As a result of the
transaction, Old Dominion received $47.5 million, of which $23.6 was a net cash
benefit, which is being recognized in income over the financing lease term, and
$23.9 million which was used to retire a portion of Old Dominion's 8.76% First
Mortgage Bonds, Series 1992 A. Concurrent with the retirement of its Series 1992
A Bonds, Old Dominion issued a like amount of zero coupon First Mortgage Bonds,
Series 1996 A with an effective interest rate of 7.06%. The lease transaction
increased long-term debt and other investments and funds by $51.5 million and
$99.0 million, respectively.
Investing Activities. Net cash used for investing activities increased
primarily as a result of an increase in investments and funds which resulted
from the long-term lease transaction with an owner trust for the benefit of
First Union.
OTHER MATTERS
Old Dominion and 10 of its 12 member distribution systems have established an
affiliate, CSC Services, Inc. ("CSC"), to explore alternative business
opportunities on behalf of the cooperatives. CSC has invested, with three other
participants, in Seacoast Power LLC, whose wholly-owned subsidiary, Seacoast,
Inc. ("Seacoast"), has executed a six-month power sales contract with INECEL,
the state-owned electric utility in Ecuador. CSC, through a wholly-owned
affiliate, together with the three other participants in Seacoast Power LLC,
have formed Power Ventures LLC (Power Ventures LLC, together with its
affiliates, referred to as "Power Ventures"). Power Ventures owns the generating
assets necessary to fulfill the power sales contract between Seacoast and
INECEL. Under the terms of the contract, INECEL is obligated to make monthly
payments for energy available, as well as fuel used, by Seacoast. Due to
contract disputes, INECEL has not yet remitted contract payments of
approximately $1.3 million and $3.2 million for February and March 1996,
respectively. Accordingly, Seacoast has stopped generating energy until the
disputes are resolved and past due payments are received. Seacoast is attempting
to enforce the contract and is actively working with INECEL to resolve the
contract issues in dispute and to renegotiate a new, longer term power sales
contract with INECEL.
On March 31, 1996, Old Dominion loaned approximately $15.1 million to Seacoast.
This amount, together with other amounts loaned to Seacoast Power LLC by the
other participants in Power Ventures LLC, was used to fund capital investment in
the generating assets owned by Power Ventures and to fund operating expenses.
The note from Seacoast is payable in 90 days at an interest rate of 6.6% and is
payable from the share of the profits generated by the operations and activities
of Power Ventures that accrue to the benefit of Old Dominion and its members.
The note replaces the $13.8 million note from Seacoast dated December 31, 1995.
Management believes that the dispute referred to in Note 2 will be resolved and
the note is collectible.
7
OLD DOMINION ELECTRIC COOPERATIVE
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Other than certain legal proceedings arising out of the ordinary
course of business, which the management of Old Dominion believes will
not have a material adverse impact on the results of operations or
financial condition of Old Dominion, there is no other litigation
pending or threatened against Old Dominion.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Registrant during the quarter
ended March 31, 1996.
SIGNATURE
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.
OLD DOMINION ELECTRIC COOPERATIVE
Registrant
Date: May 15, 1996 /s/ Daniel M. Walker
--------------------------------------
Daniel M. Walker
Vice President of Accounting and Finance
(Chief Financial Officer)
EXHIBIT INDEX
Exhibit Page
Number Description of Exhibit Number
27 Financial Data Schedule.