SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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, 2000
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 No. 33-7591
Oglethorpe Power Corporation
(An Electric Membership Corporation)
(Exact name of registrant as specified in its charter)
Georgia 58-1211925
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Post Office Box 1349
2100 East Exchange Place
Tucker, Georgia 30085-1349
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 270-7600
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
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. The Registrant is a
membership corporation and has no authorized or outstanding equity securities.
OGLETHORPE POWER CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of March 31, 2000
(Unaudited) and December 31, 1999 3
Condensed Statements of Revenues and Expenses and
Comprehensive Margin (Unaudited) for the Three Months
ended March 31, 2000 and 1999 5
Condensed Statements of Cash Flows (Unaudited)
for the Three Months Ended March 31, 2000 and 1999 6
Notes to the Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Oglethorpe Power Corporation
Condensed Balance Sheets
March 31, 2000 and December 31, 1999
- ------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
2000 1999
Assets (Unaudited)
--------------------------------------
Electric plant, at original cost:
In service $4,856,774 $4,854,037
Less: Accumulated provision for depreciation (1,657,517) (1,625,933)
--------------- ---------------
3,199,257 3,228,104
Nuclear fuel, at amortized cost 79,751 84,565
Construction work in progress 24,720 18,299
--------------- ---------------
3,303,728 3,330,968
--------------- ---------------
Investments and funds:
Decommissioning fund, at market 141,423 135,703
Deposit on Rocky Mountain transactions, at cost 60,583 59,579
Bond, reserve and construction funds, at market 28,082 31,158
Investment in associated organizations, at cost 17,788 17,919
Other, at cost 2,510 2,535
--------------- ---------------
250,386 246,894
--------------- ---------------
Current assets:
Cash and temporary cash investments, at cost 165,022 222,814
Other short-term investments, at market 76,648 75,482
Customer receivables 107,688 109,705
Notes receivable 136,277 94,070
Inventories, at average cost 84,284 89,766
Prepayments and other current assets 21,466 19,293
--------------- ---------------
591,385 611,130
--------------- ---------------
Deferred charges:
Premium and loss on reacquired debt, being amortized 191,269 196,289
Deferred amortization of Scherer leasehold 101,705 101,404
Discontinued projects, being amortized 25,974 28,020
Deferred debt expense, being amortized 17,178 17,070
Other 31,040 32,847
--------------- ---------------
367,166 375,630
--------------- ---------------
$4,512,665 $4,564,622
=============== ===============
The accompanying notes are an integral part of these condensed financial
statements.
3
Oglethorpe Power Corporation
Condensed Balance Sheets
March 31, 2000 and December 31, 1999
- --------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
2000 1999
Equity and Liabilities (Unaudited)
-----------------------------------------
Capitalization:
Patronage capital and membership fees (including unrealized loss of ($1,435)
at March 31, 2000 and ($1,609) at
December 31, 1999 on available-for-sale securities) $379,387 $370,025
Long-term debt 3,062,376 3,103,590
Obligation under capital leases 273,280 275,224
Obligation under Rocky Mountain transactions 60,583 59,579
---------------- -----------------
3,775,626 3,808,418
---------------- -----------------
Current liabilities:
Long-term debt and capital leases due within one year 110,123 129,419
Accounts payable 55,411 69,555
Notes payable 130,253 88,479
Accrued interest 14,484 50,201
Accrued and withheld taxes 6,724 26
Other current liabilities 8,042 9,318
---------------- -----------------
325,037 346,998
---------------- -----------------
Deferred credits and other liabilities:
Gain on sale of plant, being amortized 55,188 55,807
Net benefit of sale of income tax benefits, being amortized 16,019 18,021
Net benefit of Rocky Mountain transactions, being amortized 85,208 86,004
Accumulated deferred income taxes 63,485 63,203
Decommissioning reserve 169,505 164,510
Other 22,597 21,661
---------------- -----------------
412,002 409,206
---------------- -----------------
$4,512,665 $4,564,622
================ =================
The accompanying notes are an integral part of these condensed financial
statements.
4
Oglethorpe Power Corporation
Condensed Statements of Revenues and Expenses and Comprehensive Margin (Unaudited)
For the Three Months Ended March 31, 2000 and 1999
- ---------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
2000 1999
--------------------------------------------
Operating revenues:
Sales to Members $264,705 $245,043
Sales to non-Members 10,177 5,721
------------- -------------
Total operating revenues 274,882 250,764
------------- -------------
Operating expenses:
Fuel 49,112 41,535
Production 58,993 50,311
Purchased power 72,514 63,006
Depreciation and amortization 32,736 33,619
------------- -------------
Total operating expenses 213,355 188,471
------------- -------------
Operating margin 61,527 62,293
------------- -------------
Other income (expense):
Investment income 8,949 7,455
Amortization of deferred gains 619 619
Amortization of net benefit of sale of income tax benefits 2,799 2,799
Allowance for equity funds used during construction 12 27
Other 259 191
------------- -------------
Total other income 12,638 11,091
------------- -------------
Interest charges:
Interest on long-term debt and other obligations 65,076 65,745
Allowance for debt funds used during construction (99) (460)
------------- -------------
Net interest charges 64,977 65,285
------------- -------------
Net margin 9,188 8,099
Net change in unrealized gain (loss) on available-for-sale securities 174 (775)
------------- -------------
Comprehensive margin $9,362 $7,324
============= =============
The accompanying notes are an integral part of these condensed financial
statements.
5
Oglethorpe Power Corporation
Condensed Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31, 2000 and 1999
- -----------------------------------------------------------------------------------------------------------
2000 1999
------------------------------------
Cash flows from operating activities:
Net margin $ 9,188 $ 8,099
------------ -------------
Adjustments to reconcile net margin to net cash provided
by operating activities:
Depreciation and amortization 51,244 38,108
Allowance for equity funds used during construction (12) (27)
Amortization of deferred gains (619) (619)
Amortization of net benefit of sale of income tax benefits (2,799) (2,799)
Deferred income taxes 283 -
Other 2,337 3,269
Change in net current assets, excluding long-term debt
and capital leases due within one year and notes payable:
Notes receivable 200 209
Receivables 2,017 6,889
Inventories 5,482 (6,676)
Prepayments and other current assets (2,174) (4,896)
Accounts payable (14,144) 11,060
Accrued interest (35,718) 4,331
Accrued and withheld taxes 6,698 6,270
Other current liabilities (1,277) (11,558)
------------ -------------
Total adjustments 11,518 43,561
------------ -------------
Net cash (used in) provided by operating activities 20,706 51,660
------------ -------------
Cash flows from investing activities:
Property additions (14,582) (18,632)
Net proceeds from bond, reserve and construction funds 3,013 330
Decrease in investment in associated organizations 131 138
Increase in other short-term investments (930) (1,296)
Increase in decommissioning fund (2,861) (4,467)
------------ -------------
Net cash used in investing activities (15,229) (23,927)
------------ -------------
Cash flows from financing activities:
Long-term debt proceeds, net (2,957) (2,597)
Long-term debt payments (60,685) (33,825)
Increase in notes payable 41,774 39,898
Increase in notes receivable under interim financing agreement (42,405) (48,908)
Other 1,004 230
------------ -------------
Net cash used in financing activities (63,269) (45,202)
------------ -------------
Net decrease in cash and temporary cash investments (57,792) (17,469)
Cash and temporary cash investments at beginning of period 222,814 106,235
------------ -------------
Cash and temporary cash investments at end of period $165,022 $ 88,766
============ =============
Cash paid for:
Interest (net of amounts capitalized) $ 93,058 $ 52,415
Income taxes - -
The accompanying notes are an integral part of these condensed financial
statements.
6
Oglethorpe Power Corporation
Notes to Condensed Financial Statements
March 31, 2000 and 1999
(A) The condensed financial statements included in this report have been
prepared by Oglethorpe Power Corporation (Oglethorpe), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). In the opinion of management, the information
furnished in this report reflects all adjustments (which include only
normal recurring adjustments) and estimates necessary to present fairly,
in all material respects, the results for the periods ended March 31,
2000 and 1999. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant
to SEC rules and regulations, although Oglethorpe believes that the
disclosures are adequate to make the information presented not
misleading. These condensed financial statements should be read in
conjunction with the financial statements and the notes thereto included
in Oglethorpe's latest Annual Report on Form 10-K, as filed with the
SEC. Certain amounts for 1999 have been reclassified to conform with the
current period presentation. The results of operations for the three
month period ended March 31, 2000 are not necessarily indicative of
results to be expected for the full year.
(B) In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." The standard requires
that all derivative instruments be recognized as assets or liabilities
and be measured at fair value. Oglethorpe is required to adopt SFAS No.
133 by January 1, 2001. Oglethorpe is currently assessing the impact
that adoption of SFAS No. 133 will have on results of operations and
financial condition.
7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
For the Three Months Ended March 31, 2000 and 1999
Operating Revenues
Revenues from sales to Oglethorpe's 39 retail electric distribution cooperative
members (the Members) for the three months ended March 31, 2000 were 8.0% higher
than for the same period of 1999. Megawatt-hour (MWh) sales to Members were 9.5%
higher in the current period compared to the same period of 1999. The increase
in MWh sales to Members in 2000 compared to 1999 was due primarily to continued
sales growth in the Members' service territories. The average revenue per MWh
from sales to Members was 1.3% lower for the current quarter compared to the
same period of 1999.
The components of Member revenues for the three months ended March 31, 2000 and
1999 were as follows:
Three Months
Ended March 31,
------------------------
2000 1999
---- ----
(dollars in thousands)
Capacity revenues $155,316 $155,213
Energy revenues 109,389 89,830
-------- --------
Total $264,705 $245,043
======== ========
While capacity revenues from Members for the three months ended March 31, 2000
compared to 1999 were virtually unchanged, energy revenues were 21.8% higher for
the current quarter compared to the same period of 1999. The increase in energy
revenues in the current quarter of 2000 was partly due to higher MWh sales and
partly due to the pass-through of higher prices for purchased power energy and
higher average fuel costs (see "Operating Expenses" below). Oglethorpe's average
energy revenue per MWh from sales to Members for the three-month period was
11.2% higher in 2000 compared to 1999.
8
Sales to non-Members were primarily from energy sales to other utilities and
power marketers. The following table summarizes the amounts of non-Member
revenues from these sources for the three months ended March 31, 2000 and 1999:
Three Months
Ended March 31,
------------------------
2000 1999
---- ----
(dollars in thousands)
Sales to other utilities $ 8,576 $3,826
Sales to power marketers 1,601 1,895
------- ------
Total $10,177 $5,721
======= ======
Sales to other utilities represent sales made directly by Oglethorpe. Oglethorpe
sells for its own account any energy available from the portion of its resources
dedicated to Morgan Stanley Capital Group Inc. (Morgan Stanley) that is not
scheduled by Morgan Stanley pursuant to its power marketer arrangement.
Under the LG&E Energy Marketing Inc. (LEM) and Morgan Stanley power marketer
arrangements, sales to the power marketers represent the net energy transmitted
on behalf of LEM and Morgan Stanley off-system on a daily basis from
Oglethorpe's total resources. Oglethorpe sold this energy to LEM at Oglethorpe's
cost, subject to certain limitations, and to Morgan Stanley at a contractually
fixed price. The volume of sales to power marketers depends primarily on the
power marketers' decisions for servicing their load requirements.
Operating Expenses
Operating expenses for the three months ended March 31, 2000 were 13.2% higher
compared to the same period of 1999. This increase was primarily due to
increases in fuel, production and purchased power costs for the current quarter
compared to the same quarter of 1999.
Fuel costs increased 18.2% primarily as a result of a 15.0% increase in MWhs of
generation. For the current quarter, nuclear generation was 15.4% higher and
fossil generation was 11.6% higher as compared to the same period of 1999. The
higher fossil generation resulted in a 2.9% increase in average fuel costs.
The 17.3% increase in production costs was partly due to higher operations and
maintenance (O&M) expenses for Plant Scherer and partly due to nuclear insurance
costs. The higher O&M expenses for Plant Scherer resulted partly from a $1.6
million true up for sharing of O&M expenses between the owners of Units No. 1
and 2 (which include Oglethorpe) and the owners of Units No. 3 and 4 related to
the burning of western coal. In addition, Plant Scherer Unit No. 2 incurred
higher maintenance outage costs in the first quarter of 2000 compared to the
same quarter of 1999. Also, O&M expenses in 1999 were lowered by a $2.1 million
refund for nuclear insurance.
Purchased power costs increased 15.1% in the current quarter compared to the
same period of 1999 primarily as a result of a 23.7% increase in purchased MWhs.
The average cost per MWh of total
9
purchased power was 7.0% lower in 2000 compared to the comparable period of
1999. Purchased power costs were as follows:
Three Months
Ended March 31,
-----------------------
2000 1999
---- ----
(dollars in thousands)
Capacity costs $21,611 $25,408
Energy costs 50,903 37,598
------- -------
Total $72,514 $63,006
======= =======
Purchased power capacity costs for the three months ended March 31, 2000 were
approximately 14.9% lower than for the same period of 1999. These savings were
primarily a result of a new power purchase agreement Oglethorpe entered into
with Georgia Power Company (GPC) effective April 1, 1999 which replaced the
Block Power Sale Agreement. Purchased power energy costs for the three-month
period of 2000 were 35.4% higher compared to the same period of 1999 primarily
as a result of higher volume of purchased MWhs during the first quarter of 2000
compared to the first quarter of 1999. In addition, higher prices in the
wholesale electricity markets resulted in a 9.4% increase in the average cost of
purchased power energy per MWh for the three-month period of 2000 compared to
1999.
Other Income
Investment income was higher for the three-month period of 2000 compared to the
same period of 1999 partly due to interest earnings on the notes receivable from
Smarr EMC relating to the Sewell Creek Energy Facility and partly due to higher
cash and temporary cash investment balances and higher interest earnings on
those investments. See "Financial Condition" for a further discussion of the
Sewell Creek Energy Facility.
Financial Condition
Total assets and total equity plus liabilities as of March 31, 2000 were $4.5
billion, which was $52 million less than the total at December 31, 1999 due
primarily to depreciation of plant and the decrease in cash and temporary cash
investments, offset somewhat by an increase in the notes receivable for
construction of Sewell Creek Energy Facility. The Sewell Creek Energy Facility
is being financed on an interim basis by Oglethorpe through the issuance of
commercial paper. Smarr EMC has negotiated permanent financing for the Sewell
Creek Energy Facility, which Oglethorpe expects will close shortly after it is
placed into commercial operation (expected to occur in the summer of 2000).
Oglethorpe expects Smarr EMC to use the proceeds of this financing to repay the
notes to Oglethorpe, and Oglethorpe will in turn repay the commercial paper
issued in connection with the interim financing of the facility. See "THE
MEMBERS--Smarr EMC" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Financial Condition--Liquidity and Sources
of Capital" in Items 1 and 7 of Oglethorpe's 1999 Annual Report on Form 10-K for
a further discussion of Smarr EMC.
10
Assets
Property additions for the three months ended March 31, 2000 totaled $14.6
million primarily for purchases of nuclear fuel and for additions, replacements
and improvements to existing generation facilities.
The decrease in cash and temporary cash investments is a result of cash used in
financing and investing activities, including property additions noted above and
debt principal repayments, exceeding cash provided from operations.
The increase in notes receivable resulted primarily from use of funds for
interim financing activities related to the construction of the Sewell Creek
Energy Facility.
Prepayments and other current assets increased primarily due to the estimated
prepayments to GPC for Plant Hatch O&M costs for April 2000 being $3.3 million
higher compared to the estimate for January 2000.
Equity and Liabilities
Accounts payable decreased due to normal variations in the timing of payables
activity.
Notes payable represents commercial paper issued by Oglethorpe as interim
financing for costs incurred in the construction of Sewell Creek Energy
Facility. Oglethorpe expects to be reimbursed for costs relating to the
construction of Sewell Creek Energy Facility shortly after it is placed into
commercial operation, which Oglethorpe anticipates will be in the summer of
2000.
The decrease in accrued interest resulted from the fourth quarter Federal
Financing Bank interest payment being paid on January 3, 2000, whereas, the
first quarter Federal Financing Bank interest payment was paid on March 31.
Accrued and withheld taxes increased as a result of the normal monthly accruals
for property taxes, which are generally paid in the fourth quarter of the year.
Forward-Looking Statements and Associated Risks
This Quarterly Report on Form 10-Q contains forward-looking statements,
including statements regarding, among other items, (i) anticipated trends in
Oglethorpe's business and (ii) Oglethorpe's future power supply resources and
arrangements. These forward-looking statements are based largely on Oglethorpe's
current expectations and are subject to a number of risks and uncertainties,
certain of which are beyond Oglethorpe's control. For certain factors that could
cause actual results to differ materially from those anticipated by these
forward-looking statements, see "CERTAIN FACTORS AFFECTING THE ELECTRIC UTILITY
INDUSTRY" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--Miscellaneous--Competition" in Items 1 and 7 of
Oglethorpe's 1999 Annual Report
11
on Form 10-K. In light of these risks and uncertainties, there can be no
assurance that events anticipated by the forward-looking statements contained in
this Quarterly Report will in fact transpire.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Oglethorpe's market risks have not changed materially from the market risks
reported in Oglethorpe's 1999 Annual Report on Form 10-K.
12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
27.1 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
No reports on Form 8-K were filed by Oglethorpe for the quarter ended March
31, 2000.
13
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.
Oglethorpe Power Corporation
(An Electric Membership Corporation)
Date: May 15, 2000 By: /s/ Thomas A. Smith
-------------------
Thomas A. Smith
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 15, 2000 /s/ Mac F. Oglesby
------------------
Mac F. Oglesby
Treasurer
(Principal Financial Officer)
Date: May 15, 2000 /s/ W. Clayton Robbins
----------------------
W. Clayton Robbins
Senior Vice President, Finance
and Administration
(Principal Financial Officer)
Date: May 15, 2000 /s/ Willie B. Collins
---------------------
Willie B. Collins
Controller and Chief Risk Officer
(Chief Accounting Officer)
14