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
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SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 - June 30, 1996 (Unaudited)
and December 31, 1995 3
Consolidated Statements of Revenues, Expenses and
Patronage Capital (Unaudited) - Three and Six Months Ended
June 30, 1996 and 1995 5
Consolidated Statements of Cash Flows (Unaudited) - Six
Months Ended June 30, 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
June 30, December 31,
1996 1995
-------------- -------------
(in thousands)
ASSETS: (unaudited) (*)
Electric Plant:
In service $ 857,618 $ 588,636
Less accumulated depreciation (78,457) (68,738)
-------------- -------------
779,161 519,898
Nuclear fuel, at amortized cost 6,772 6,026
Plant acquisition adjustment,
at amortized cost 25,825 26,860
Construction work in progress 11,839 269,554
-------------- -------------
Net Electric Plant 823,597 822,338
-------------- -------------
Decommissioning Fund 36,487 36,118
Other Investments and Funds 95,897 58,809
Current Assets:
Cash and cash equivalents 58,704 63,670
Note receivable 16,315 13,793
Receivables 32,580 35,255
Fuel stock 3,736 3,189
Materials and supplies, at average cost 5,227 4,971
Prepayments 821 1,069
Deferred energy - 463
-------------- -------------
Total Current Assets 117,383 122,410
-------------- -------------
Deferred Charges 28,717 29,575
Other Assets 11,140 9,696
-------------- -------------
Total Assets $ 1,113,221 $ 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
June 30, December 31,
1996 1995
-------------- -------------
(in thousands)
CAPITALIZATION AND LIABILITIES: (unaudited) (*)
Capitalization:
Patronage capital $ 178,808 $ 172,513
Long-term debt 764,846 738,974
-------------- -------------
Total Capitalization 943,654 911,487
-------------- -------------
Current Liabilities:
Long-term debt due within one year 17,670 18,385
Notes payable - 8,700
Accounts payable 60,934 62,954
Construction contract payable 16,060 22,541
Deferred energy 1,480 -
Accrued interest 4,648 5,020
Accrued taxes 1,327 113
Other 3,731 3,856
-------------- -------------
Total Current Liabilities 105,850 121,569
-------------- -------------
Decommissioning Reserve 36,487 36,118
Other Liabilities and Deferred Credits 27,230 9,772
Commitments and Contingencies
-------------- -------------
Total Capitalization and Liabilities $ 1,113,221 $ 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 Six Months Ended
June 30, June 30,
-------------------------------- --------------------------------
1996 1995 1996 1995
-------------- -------------- -------------- -------------
Operating Revenues:
Sales to members $ 81,828 $ 74,268 $ 180,957 $ 168,290
Sales to non-members 205 - 207 -
-------------- -------------- -------------- -------------
82,033 74,268 181,164 168,290
-------------- -------------- -------------- -------------
Operating Expenses:
Operation-
Fuel 9,950 1,236 18,600 2,877
Purchased power 35,638 51,990 103,605 122,511
Other 6,531 1,719 8,866 3,128
-------------- -------------- -------------- -------------
52,119 54,945 131,071 128,516
Maintenance 1,808 1,249 3,890 3,099
Administrative and general 3,360 2,781 7,142 5,690
Depreciation and amortization 6,066 2,231 10,729 4,454
Decommissioning cost 170 170 340 340
Taxes other than income taxes 1,282 1,057 2,992 2,152
-------------- -------------- -------------- -------------
Total Operating Expenses 64,805 62,433 156,164 144,251
-------------- -------------- -------------- -------------
Operating Margin 17,228 11,835 25,000 24,039
-------------- -------------- -------------- -------------
Other Income - - 5,755 -
-------------- -------------- -------------- -------------
Investment Income:
Interest 1,099 1,881 2,753 3,558
Other 297 85 545 155
-------------- -------------- -------------- -------------
Total Investment Income 1,396 1,966 3,298 3,713
-------------- -------------- -------------- -------------
Interest Charges:
Interest on long-term debt, net 15,427 16,172 31,291 31,876
Other 94 85 187 127
Allowance for borrowed funds
used during construction - (10,712) (3,720) (20,961)
-------------- -------------- -------------- -------------
Net Interest Charges 15,521 5,545 27,758 11,042
-------------- -------------- -------------- -------------
Net Margin 3,103 8,256 6,295 16,710
Patronage Capital-beginning of period 175,705 146,939 172,513 138,485
-------------- -------------- -------------- -------------
Patronage Capital-end of period $ 178,808 $ 155,195 $ 178,808 $ 155,195
============== ============== ============== =============
The accompanying notes are an integral part of the consolidated financial
statements.
OLD DOMINION ELECTRIC COOPERATIVE
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
June 30,
--------------------------
1996 1995
-------------- ---------
(in thousands)
Cash Provided By Operating Activities:
Net margin $ 6,295 $ 16,710
Adjustments to reconcile net margin to net cash
provided by operating activities:
Depreciation 9,990 3,366
Amortization of plant acquisition adjustment 1,035 1,033
Amortization of nuclear fuel 3,118 2,146
Decommissioning cost 340 340
Amortization of debt costs 1,380 838
Amortization of deferred charges and other assets 57 50
Amortization of lease obligation 1,204 -
Gain from lease transactions (6,123) -
Change in current asssets (402) (2,365)
Change in current liabilities (8,060) 11,639
Decrease (Increase) in deferred charges 297 (1,460)
(Increase) decrease in other assets (1,555) 1,616
Increase (decrease) in other liabilities and
deferred credits 23,581 (571)
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Net Cash Provided By Operating Activities 31,157 33,342
------- -------
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 (52,194) (7,079)
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Net Cash Provided By (Used For) Financing
Activities 23,188 (7,079)
------- --------
Cash (Used For) Provided By Investing Activities:
Additions to electric plant (21,878) (47,628)
Decommissioning fund deposits (340) (340)
(Additions to) reductions of other
investments and funds, net (37,088) 50,320
Retirement work in progress (5) (605)
--------- -------
Net Cash (Used For) Provided By Investing
Activities (59,311) 1,747
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Net Change in Cash and Cash Equivalents (4,966) 28,010
Beginning of Period Cash and Cash Equivalents 63,670 61,180
--------- -------
End of Period Cash and Cash Equivalents $ 58,704 $ 89,190
========= =======
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 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 June 30, 1996, and its
consolidated results of operations and cash flows for the three months
ended June 30, 1996 and 1995. The consolidated results of operations
for the six months ended June 30, 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"), executed a
six-month power sales contract with INECEL, the state-owned electric
utility in Ecuador. CSC together with the three other participants
in Seacoast Power LLC have also formed Power Ventures LLC (Power
Ventures LLC, together with its affiliates, is referred to as "Power
Ventures"). A subsidiary of Power Ventures owns the generating assets
necessary to fulfill the power sales contract with INECEL. Under the
terms of the contract, INECEL is obligated to make monthly payments for
energy delivered and energy made available, as well as fuel used, by
Seacoast. As of July 31, 1996, INECEL has paid approximately $3.0
million for fuel and $0.7 million for energy delivered. However,
due to contract disputes, INECEL has not yet remitted contract
payments of approximately $16.0 million. 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.
As of June 30, 1996, Old Dominion has recorded a note receivable of
approximately $16.3 million from Seacoast, which replaces a $15.1 million
note dated March 31, 1996, and which consists of cash advances of $15.9
million and accrued interest of $0.4 million. The note 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 or
Seacoast or both that ultimately accrue to Old Dominion and its members.
Based on continuing negotiations, a new power sales contract is expected
to be signed and the generating units are anticipated to be back in
operation in the third quarter of 1996. Until the contract is signed and
other uncertainties are resolved, management is unable to determine the
impact, if any, on the collectibility of the advances or the accrued
interest.
3. Certain reclassifications have been made to the accompanying prior year's
consolidated financial statements to conform with the current year's
presentation.
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 and to non-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 increases (decreases) in operating revenues
by component:
Three Months Six Months
Ended Ended
June 30, June 30,
1996 vs 1995 1996 vs 1995
(in thousands)
Sales to Members:
Power sales volume $12,832 $25,581
Blended rates (383) (1,238)
Fuel adjustment revenues (4,050) (7,587)
Margin stabilization plan
adjustment (839) (4,089)
Sales to Non-members 205 207
------- --------
$ 7,765 $12,874
======= =======
Operating revenues for the three months ended June 30, 1996, increased as
compared to the same period in 1995 primarily due to a 20.7% increase in demand
sales. The increase was the result of below normal temperatures in April and a
prolonged period of extreme heat in May. Energy sales were 8.9% greater than the
second quarter of 1995. Old Dominion's demand sales for the three month periods
ended June 30, 1996 and 1995, were 3,455,972 KW and 2,844,703 KW, respectively.
Energy sales for the three month periods ended June 30, 1996 and 1995, were
1,672,478 MWh and 1,536,275 MWh, respectively. The increase in operating
revenues was partially off-set by a $4.1 million decrease in fuel adjustment
revenue.
Operating revenues for the six month period ended June 30, 1996, increased
as compared to the same period in 1995 primarily due to a 15.4% increase in
demand sales and an 11.3% increase in energy sales. The increase in demand and
energy sales was caused by extreme temperatures in February and May combined
with below normal temperatures in March and April. Demand sales for the six
month periods ended June 30, 1996 and 1995, were 7,753,695 KW and 6,660,666 KW,
respectively. Energy sales for the six month periods ended June 30, 1996 and
1995, were 3,790,417 MWh and 3,402,841 MWh, respectively. The increase in
operating revenues was partially off-set by a $7.6 million decrease in fuel
adjustment revenues and a $4.1 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.
Old Dominion also holds a 50% undivided interest in the Clover Power
Station ("Clover"). Unit 1 went into commercial operation on October 7, 1995 and
Unit 2 went into commercial operation on March 28, 1996.
When either North Anna or Clover 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 or Clover 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 operations
of North Anna and Clover.
North Anna and Clover capacity factors for the three and six month periods
ended June 30, 1996 and 1995, were as follows:
North Anna Clover
Three Six Three Six
Months Ended Months Ended Months Ended Months Ended
June 30, June 30, June 30, June 30,
---------------------- --------------------- --------------------- -------------
1996 1995 1996 1995 1996 1995 1996 1995
------ ------ ------ ------ -------- ------ ------ -----
Unit 1 101.4% 100.5% 78.0% 99.5% 73.0% - 64.1% -
Unit 2 100.8 28.9 101.0 52.5 74.4 - 73.7 -
Combined 101.1 64.5 89.5 75.9 73.7 - 68.9 -
During the six month period ended June 30, 1996, North Anna Unit 1 was
off-line 30 days due to scheduled maintenance and refueling. Unit 2 has not been
off-line in 1996. During the six month period ended June 30, 1995, North Anna
Unit 1 was off-line 1 day due to unscheduled maintenance, and Unit 2 was
off-line 68 days for refueling and the steam generator replacement project.
During the six month period ended June 30, 1996, Clover Unit 1 was off-line
30 days for replacement of the burners and repairs to the chimney liner. Unit 2
was off-line 5 days for scheduled maintenance.
Old Dominion's energy supply for the three and six month periods
ended June 30, 1996 and 1995, was as follows:
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------- -----------------------------------
1996 1995 1996 1995
------------- ----------------- ------------- --------------
(mWh) (mWh) (mWh) (mWh)
North Anna 458,241 26.8% 295,686 18.7% 811,840 20.8% 691,583 19.7%
Clover 544,428 31.9 - - 1,015,228 26.0 - -
Purchased Power:
Virginia Power 318,499 18.7 934,212 59.1 1,162,894 29.8 2,036,338 58.1
Delmarva Power 75,602 4.4 79,387 5.0 274,494 7.0 263,850 7.5
PSE&G Contract 271,350 15.9 245,810 15.6 551,982 14.2 459,340 13.1
Other 39,165 2.3 25,013 1.6 85,636 2.2 55,639 1.6
----------- ------- ----------- ------- ----------- ------- ------------------
Total Available Energy 1,707,285 100.0% 1,580,108 100.0% 3,902,074 100.0% 3,506,750 100.0%
========= ===== ========= ===== ========= ===== ========= =====
Fuel costs increased during the second quarter and the first half of 1996
as compared to the same periods in 1995 primarily because of Clover operations.
Unit 1 began operating October 7, 1995 and Unit 2 began operating on March 28,
1996.
Purchased power costs decreased for the three and six month periods ended
June 30, 1996, as compared to the corresponding periods in 1995 primarily
because Clover Unit 1 was in operation all year and Unit 2 became operational on
March 28, 1996.
Other operating costs increased in the second quarter and first half of
1996 as compared to the same periods in 1995 primarily due to an increase in
production caused by Clover operations in 1996.
Maintenance, administrative and general, and depreciation expense increased
during the second quarter and the first half of 1996 as compared to the same
periods in 1995 due to Clover operations in 1996.
Interest income decreased during the second quarter and the first half of
1996 as compared to the same periods in 1995 primarily due to lower interest
rates.
Other income increased during the three and six month periods ended June
30, 1996, as compared to the same period in 1995 due the recognition of the gain
from the cross border lease transaction.
Allowance for borrowed funds used during construction decreased in the
second quarter and first six months of 1996 as compared to 1995 because interest
capitalization on the Clover construction ceased as the units went into
commercial operation. Clover Unit 1 began operating October 7, 1995 and Unit 2
began operating March 28, 1996.
Liquidity and Capital Resources
Operating Activities. Net cash provided by operating activities decreased
in the six month period ended June 30, 1996, as compared to the same period in
1995 primarily due to a decrease in net margins, the recognition of the non-cash
cross border lease gain that was reflected in estimated rates charged to the
members and to changes between periods in non-cash working capital accounts,
mainly notes payable and accounts payable. These increases were off-set by the
deferred gain from the long-term lease transaction.
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.
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"), executed a six-month power sales contract with
INECEL, the state-owned electric utility in Ecuador. CSC and the three other
participants in Seacoast Power LLC have also formed Power Ventures LLC (Power
Ventures LLC, together with its affiliates, is referred to as "Power Ventures").
A subsidiary of Power Ventures owns the generating assets necessary to fulfill
the power sales contract with INECEL. Under the terms of the contract, INECEL is
obligated to make monthly payments for energy delivered and energy made
available, as well as fuel used, by Seacoast. As of July 31, 1996, INECEL has
paid approximately $3.0 million for fuel and $0.7 million for energy delivered.
However, due to contract disputes, INECEL has not yet remitted contract payments
of approximately $16.0 million. 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.
As of June 30, 1996, Old Dominion has recorded a note receivable of
approximately $16.3 million from Seacoast, which replaces a $15.1 million note
dated March 31, 1996, and which consists of cash advances of $15.9 million and
accrued interest of $0.4 million. The note 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 or Seacoast or both that ultimately
accrue to Old Dominion and its members
Based on continuing negotiations, a new power sales contract is
expected to be signed and the units are anticipated to be back in operation in
the third quarter of 1996. Until the contract is signed and other uncertainties
are resolved, management is unable to determine the impact, if any, on the
collectibility of the advances or the accrued interest.
Subsequent Event
On July 31, 1996, Old Dominion finalized a long-term lease transaction with an
owner trust for the benefit of EPC Corporation ("EPC"), an affiliate of Chrysler
Capital Corporation. Under the terms of the transaction, Old Dominion entered
into a 53.4-year capital lease of its interest in Clover Unit 2 (valued at
$320.0 million) to EPC, and simultaneously entered into a 23.4-year lease of the
interest back from EPC. As a result of the transaction, Old Dominion received a
net cash benefit of $39.3 million, which is being recognized in income over the
financing lease term.
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 June 30, 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: August 14, 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