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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 June 30, 2001
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
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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.
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OGLETHORPE POWER CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2001
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of June 30, 2001
(Unaudited) and December 31, 2000 3
Condensed Statements of Revenues and Expenses
(Unaudited) for the Three Months and Six Months ended
June 30, 2001 and 2000 5
Condensed Statements of Patronage Capital and Membership
Fees and Accumulated Other Comprehensive Margin
(Unaudited) for the Six Months ended
June 30, 2001 and 2000 6
Condensed Statements of Cash Flows (Unaudited)
for the Six Months ended June 30, 2001 and 2000 7
Notes to Condensed Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 15
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Oglethorpe Power Corporation
Condensed Balance Sheets
June 30, 2001 and December 31, 2000
- ---------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
2001 2000
Assets (Unaudited)
-------------------------------------------
Electric plant, at original cost:
In service $4,889,887 $4,883,680
Less: Accumulated provision for depreciation (1,815,390) (1,752,176)
------------------- -----------------
3,074,497 3,131,504
Nuclear fuel, at amortized cost 75,780 83,470
Construction work in progress 37,007 24,841
------------------- -----------------
3,187,284 3,239,815
------------------- -----------------
Investments and funds:
Decommissioning fund, at market 150,004 148,300
Deposit on Rocky Mountain transactions, at cost 65,812 63,665
Bond, reserve and construction funds, at market 29,076 29,167
Investment in associated organizations, at cost 20,474 19,997
Other, at cost 1,252 1,513
------------------- -----------------
266,618 262,642
------------------- -----------------
Current assets:
Cash and temporary cash investments, at cost 327,836 330,622
Other short-term investments, at market 84,929 81,715
Receivables 100,976 143,353
Notes and interim financing receivables 163,821 38,548
Inventories, at average cost 76,543 75,389
Prepayments and other current assets 39,215 59,824
------------------- -----------------
793,320 729,451
------------------- -----------------
Deferred charges:
Premium and loss on reacquired debt, being amortized 166,845 175,944
Deferred amortization of Scherer leasehold 103,007 102,753
Discontinued projects, being amortized 7,973 9,490
Deferred debt expense, being amortized 16,381 16,968
Other 27,512 31,107
------------------- -----------------
321,718 336,262
------------------- -----------------
$4,568,940 $4,568,170
=================== =================
The accompanying notes are an integral part of these condensed financial
statements.
3
Oglethorpe Power Corporation
Condensed Balance Sheets
June 30, 2001 and December 31, 2000
- --------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
2001 2000
Equity and Liabilities (Unaudited)
-------------------------------------------------
Capitalization:
Patronage capital and membership fees and accumulated
other comprehensive margin $371,255 $392,682
Long-term debt 2,953,571 3,019,019
Obligation under capital leases 263,177 267,449
Obligation under Rocky Mountain transactions 65,812 63,665
---------------------- --------------------
3,653,815 3,742,815
---------------------- --------------------
Current liabilities:
Long-term debt and capital leases due within one year 140,148 136,053
Accounts payable 80,909 114,964
Notes payable 182,621 78,482
Accrued interest 59,743 67,394
Accrued and withheld taxes 13,186 674
Other current liabilities 7,246 23,017
---------------------- --------------------
483,853 420,584
---------------------- --------------------
Deferred credits and other liabilities:
Gain on sale of plant, being amortized 52,095 53,332
Net benefit of sale of income tax benefits, being amortized 6,007 10,012
Net benefit of Rocky Mountain transactions, being amortized 81,226 82,819
Accumulated deferred income taxes 63,485 63,485
Decommissioning reserve 174,996 174,553
Interest rate swap arrangements 31,188 -
Other 22,275 20,570
---------------------- --------------------
431,272 404,771
---------------------- --------------------
$4,568,940 $4,568,170
====================== ====================
The accompanying notes are an integral part of these condensed financial
statements.
4
Oglethorpe Power Corporation
Condensed Statements of Revenues and Expenses (Unaudited)
For the Three and Six Months Ended June 30, 2001 and 2000
- ------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
Three Months Six Months
------------------------- -------------------------
2001 2000 2001 2000
------------------------- -------------------------
Operating revenues:
Sales to Members $ 258,571 $ 271,384 $ 555,077 $ 536,090
Sales to non-Members 21,340 13,642 31,441 23,820
--------- --------- --------- ---------
Total operating revenues 279,911 285,026 586,518 559,910
--------- --------- --------- ---------
Operating expenses:
Fuel 56,949 55,597 101,129 104,709
Production 49,611 51,994 103,832 111,096
Purchased power 94,680 83,555 206,518 156,069
Depreciation and amortization 32,044 32,894 64,157 65,631
--------- --------- --------- ---------
Total operating expenses 233,284 224,040 475,636 437,505
--------- --------- --------- ---------
Operating margin 46,627 60,986 110,882 122,405
--------- --------- --------- ---------
Other income (expense):
Investment income 8,059 11,776 18,308 20,725
Amortization of deferred gains 618 619 1,237 1,237
Amortization of proceeds from sale of income tax benefits 2,798 2,799 5,597 5,597
Allowance for equity funds used during construction 44 16 68 28
Other 1,129 488 1,811 856
--------- --------- --------- ---------
Total other income 12,648 15,698 27,021 28,443
--------- --------- --------- ---------
Interest charges:
Interest on long-term-debt and capital leases 53,335 55,476 106,893 110,713
Other interest 2,302 6,176 7,045 10,715
Allowance for debt funds used during construction (556) 34 (907) (65)
Amortization of debt discount and expense 5,405 5,374 10,800 10,674
--------- --------- --------- ---------
Net interest charges 60,486 67,060 123,831 132,037
--------- --------- --------- ---------
Net margin (loss) ($ 1,211) $ 9,624 $ 14,072 $ 18,811
========= ========= ========= =========
The accompanying notes are an integral part of these condensed financial
statements.
5
Oglethorpe Power Corporation
Condensed Statements of Patronage Capital and Membership Fees and
Accumulated Other Comprehensive Margin (Unaudited)
For the Six Months Ended June 30, 2001 and 2000
- -----------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
Patronage Accumulated
Capital and Other
Membership Comprehensive
Fees Margin (Loss) Total
----------------------------------------------------
Balance at December 31, 1999 $371,634 ($1,609) $370,025
Components of comprehensive margin:
Net margin 18,811 18,811
Unrealized gain on available-for-sale securities 417 417
----------------
Total comprehensive margin 19,228
----------------
----------------------------------------------------
Balance at June 30, 2000 $390,445 ($1,192) $389,253
====================================================
Balance at December 31, 2000 $391,611 $1,071 $392,682
Components of comprehensive margin:
Net margin 14,072 14,072
Cumulative effect of accounting change to record unrealized
loss on interest rate swap arrangements as of January 1, 2001 (33,515) (33,515)
Unrealized gain on interest rate swap arrangements 2,327 2,327
Unrealized gain on available-for-sale securities 300 300
Unrealized loss on financial gas hedges (4,611) (4,611)
----------------
Total comprehensive margin (loss) (21,427)
----------------
----------------------------------------------------
Balance at June 30, 2001 $405,683 ($34,428) $371,255
====================================================
The accompanying notes are an integral part of these condensed financial
statements.
6
Oglethorpe Power Corporation
Condensed Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, 2001 and 2000
- ------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
2001 2000
---------------------------------------------
Cash flows from operating activities:
Net margin $14,072 $18,811
---------------- ---------------
Adjustments to reconcile net margin to net cash
provided by operating activities:
Depreciation and amortization 89,834 100,992
Allowance for equity funds used during construction (68) (28)
Amortization of deferred gains (1,237) (1,237)
Amortization of net benefit of sale of income tax benefits (5,597) (5,597)
Deferred income taxes - 283
Other 4,089 7,801
Change in net current assets, excluding long-term debt
and capital leases due within one year and notes payable:
Notes receivable (42) (13)
Receivables 42,377 (18,467)
Inventories (1,154) 7,973
Prepayments and other current assets (55) 3,101
Accounts payable (34,055) (16,175)
Accrued interest (7,651) (24,665)
Accrued and withheld taxes 12,512 13,380
Other current liabilities (20,382) (5,427)
---------------- ---------------
Total adjustments 78,571 61,921
---------------- ---------------
Net cash provided by operating activities 92,643 80,732
---------------- ---------------
Cash flows from investing activities:
Property additions (28,398) (53,607)
Net proceeds from bond, reserve and construction funds 397 2,964
(Increase) decrease in investment in associated organizations (477) 137
Increase in other short-term investments (3,221) (1,944)
Increase in decommissioning fund (3,299) (6,673)
Other-generation equipment deposits (13,064) -
---------------- ---------------
Net cash used in investing activities (48,062) (59,123)
---------------- ---------------
Cash flows from financing activities:
Long-term debt proceeds, net 1,735 (1,710)
Long-term debt payments (61,737) (81,014)
Increase in notes payable 104,139 81,997
Increase in notes receivable under interim financing agreement (91,504) (56,790)
---------------- ---------------
Net cash used in financing activities (47,367) (57,517)
---------------- ---------------
Net decrease in cash and temporary cash investments (2,786) (35,908)
Cash and temporary cash investments at beginning of period 330,622 222,814
---------------- ---------------
Cash and temporary cash investments at end of period $327,836 $186,906
================ ===============
Cash paid for:
Interest (net of amounts capitalized) $120,682 $140,325
Income taxes - -
The accompanying notes are an integral part of these condensed financial
statements.
7
Oglethorpe Power Corporation
Notes to Condensed Financial Statements
June 30, 2001 and 2000
(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 June 30, 2001 and
2000. 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 2000 have
been reclassified to conform with the current period presentation. The
results of operations for the three and six months periods ended June 30,
2001 are not necessarily indicative of results to be expected for the full
year.
(B) Effective January 1, 2001, Oglethorpe adopted Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments
and Hedging Activities." The standard establishes accounting and reporting
requirements for derivative instruments, including certain derivative
instruments embedded in other contracts, and hedging activities. It
requires the recognition of certain derivatives as assets or liabilities on
Oglethorpe's balance sheet and measurement of those instruments at fair
value. The accounting treatment of changes in fair value is dependent upon
whether or not a derivative instrument is classified as a hedge and if so,
the type of hedge. Oglethorpe has classified, pursuant to SFAS No. 133, two
interest rate swap arrangements as cash flow hedges. Accordingly, as of
January 1, 2001 Oglethorpe recorded as a cumulative effect adjustment an
unrealized loss in comprehensive margin of $33.5 million and a
corresponding increase in other liabilities. (For a discussion of the
interest rate swap arrangements, see Note 2 of Notes to Financial
Statements in Item 8 of Oglethorpe's Annual Report on Form 10-K.)
The application of the new rules for SFAS No. 133 is still evolving and
further guidance from the Financial Accounting Standards Board is expected
which could further impact Oglethorpe's financial statements. In addition,
Oglethorpe will continue to evaluate use of derivatives, including their
effectiveness for hedging, and to apply appropriate procedures and methods
for valuing them.
(C) In July 2001, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards No. 141, "Business
Combinations", and No. 142, "Goodwill and Other Intangible Assets". Under
these new standards the FASB eliminated accounting for certain mergers and
acquisitions as poolings of interests, eliminated amortization of goodwill
and indefinite life intangible assets, and established new impairment
measurement procedures for goodwill. For calendar-year reporting companies,
8
the standards become effective for all acquisitions completed on or after
June 30, 2001. Changes in financial statement treatment for goodwill and
intangible assets arising from mergers and acquisitions completed prior to
June 30, 2001 become effective January 1, 2002. Oglethorpe's management
does not believe the impact will be material.
9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
For the Three Months and Six Months Ended June 30, 2001 and 2000
- ----------------------------------------------------------------
Net Margin
Oglethorpe's net margin (loss) for the three months and six months ended June
30, 2001 were ($1.2) million and $14.1 million compared to $9.6 million and
$18.8 million for the same periods of 2000. As a result of lower than budgeted
fixed production expenses and lower interest costs for the six month period
ended June 30, 2001, Oglethorpe's Board of Directors approved a $17.3 million
reduction to revenue requirements. This was recorded as a $17.3 million
reduction in Sales to Members in the second quarter of 2001. Year-to-date net
margin, after this adjustment, is on target to meet the margin requirement under
Oglethorpe's Indenture.
Operating Revenues
Revenues from sales to Oglethorpe's 39 retail electric distribution cooperative
members (the Members) for the three months and six months ended June 30, 2001
were 4.7% lower and 3.5% higher than such revenues for the same periods of 2000.
Megawatt-hour (MWh) sales to Members decreased 1.4% in the current quarter and
increased 3.1% year-to-date compared to the same periods of 2000. The decrease
in MWh sales to Members in the second quarter of 2001 compared to the same
period of 2000 was primarily due to cooler weather in the current quarter. The
year-to-date increase in MWh sales to Members was primarily due to continued
sales growth in the Members' service territories. The average revenue per MWh
from sales to Members decreased 3.4% during the second quarter and increased
0.4% year-to-date compared to the same periods of 2000.
The components of Member revenues for the three months and six months ended June
30, 2001 and 2000 were as follows:
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
2001 2000 2001 2000
---- ---- ---- ----
(dollars in thousands)
Capacity revenues $142,898 $157,612 $301,376 $312,928
Energy revenues 115,673 113,772 253,701 223,162
------- ------- ------- -------
Total $258,571 $271,384 $555,077 $536,090
======== ======== ======== ========
Capacity revenues from Members for the three months and six months ended June
30, 2001 were 9.3% and 3.7% lower compared to the same periods of 2000. The
decrease in capacity revenues was primarily due to lower fixed production
expenses and lower interest costs. Energy revenues were 1.7% and 13.7% higher
10
for the current periods of 2001 compared to the same periods of 2000. The
increase in energy revenues in 2001 was partly due to the pass-through of higher
purchased power energy costs and partly due to an increase in the volume of
purchased MWhs (see "Operating Expenses" below). Oglethorpe's average energy
revenue per MWh from sales to Members was 3.1% and 10.2% higher in the current
three-month and six-month periods compared to the same periods of 2000.
Sales to non-Members were from energy sales to other utilities and power
marketers. The following table summarizes the sources of non-Member revenues for
the three months and six months ended June 30, 2001 and 2000:
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
2001 2000 2001 2000
---- ---- ---- ----
(dollars in thousands)
Sales to other utilities $19,798 $11,768 $27,954 $20,345
Sales to power marketers 1,542 1,874 3,487 3,475
----- ----- ----- -----
Total $21,340 $13,642 $31,441 $23,820
======= ======= ======= =======
Sales to other utilities represent sales made directly by Oglethorpe. Oglethorpe
sells energy to non-Members from its available resources that is neither
utilized to serve its Members nor contractually dedicated to the power
marketers. The cooler weather and corresponding decrease in MWh sales to Members
in the second quarter of 2001 resulted in an increase in energy available for
sale to other utilities. In addition, Oglethorpe increased purchased MWhs for
resale to other utilities.
Sales to the power marketers represent the net energy transmitted on behalf of
LG&E Energy Marketing Inc. (LEM) and Morgan Stanley Capital Group Inc. (Morgan
Stanley) off-system on a daily basis from Oglethorpe's total resources under the
LEM and Morgan Stanley power marketer arrangements. 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-month and six-month periods of 2001 were 4.1%
and 8.7% higher compared to the same periods of 2000. The increase was due to
higher purchased power costs for the three-month and six-month periods ended
June 30, 2001 compared to the same periods of 2000, offset somewhat by decreases
in production costs for the current periods of 2001 compared to the same periods
of 2000.
Purchased power costs increased 13.3% and 32.3% in the current periods of 2001
compared to the same periods of 2000. This increase in purchased power costs
resulted from a combination of increased purchased MWhs and higher average cost
per MWh in 2001 compared to 2000. Purchased MWhs increased 2.4% and 17.6% in the
three-month and six-month periods of 2001 compared to the same periods of 2000.
The average cost per MWh of total purchased power increased 10.7% and 12.5% in
11
current quarter and year-to-date periods of 2001 compared to the comparable
periods of 2000. Purchased power costs were as follows:
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
2001 2000 2001 2000
---- ---- ---- ----
(dollars in thousands)
Purchase power capacity costs $ 27,096 $ 24,446 $ 52,014 $ 46,057
Purchase power energy costs 67,584 59,109 154,504 110,012
------ ------ ------- -------
Total $ 94,680 $ 83,555 $206,518 $156,069
======== ======== ======== ========
Purchased power capacity costs for the three months and six months ended June
30, 2001 were 10.8% and 12.9% higher than the same periods of 2000. The higher
capacity costs were primarily a result of capacity charges incurred for new
power purchase agreements, including an agreement with Doyle I, LLC that
commenced in May 2000. Purchased power energy costs for the three-month and
six-month periods of 2001 were 14.3% and 40.4% higher compared to the same
periods of 2000. This increase resulted partly from higher volume of purchased
MWhs and partly from higher prices in the wholesale electricity markets. During
the current periods of 2001 the average cost of purchased power energy increased
11.7% and 19.5% compared to the same periods of 2000.
Production costs decreased 4.6% and 6.5% for the current quarter and
year-to-date compared to the same periods of 2000. The lower production costs in
2001 resulted partly from lower operation and maintenance (O&M) expenses at
Plants Scherer, Wansley and Hatch and partly from lower administrative and
general costs. O&M expenses for Plant Scherer were higher in 2000 due to a $1.6
million true up for sharing of O&M expenses between the owners of Units No. 1
and 2 and the owners of Units No. 3 and 4 related to the burning of western
coal. The lower O&M expenses in 2001 at Plant Wansley were due to lower
maintenance outage costs at Unit No. 2 in the first quarter of 2001 compared to
the same quarter of 2000. Variable O&M expenses at Plant Hatch were lower in
2001 compared to 2000. Administrative and general costs were lower in 2001
partly due to lower expenses incurred for support services provided by Georgia
System Operations Corporation and partly due to expenses incurred in 2000 for
special strategic projects.
Other Income
Investment income decreased 31.6% and 11.7% in the three months and six months
ended June 30, 2001 compared to 2000 primarily due to lower earnings from the
decommissioning fund.
Interest Charges
Other interest expense decreased 62.7% and 34.3% for the current periods
compared to the same periods of 2000 primarily as a result of a decrease in
interest earnings on decommissioning funds, which create an offsetting interest
expense.
12
Financial Condition
Capital Requirements and Liquidity and Sources of Capital
- ---------------------------------------------------------
Under the Wholesale Power Contracts, Members can elect on an annual basis
whether to have Oglethorpe provide joint planning and resource management
services. These services consist of bulk power supply planning, future resource
procurement and bulk power sales for the Members. (See "OGLETHORPE'S POWER
SUPPLY RESOURCES--Future Power Resources" in Item 1 of Oglethorpe's 2000 Annual
Report on Form 10-K.) Oglethorpe is in the process of arranging the necessary
power supply for Members that currently participate in joint planning and
resource management services. In this regard, Oglethorpe has entered into
agreements to acquire and construct six gas-fired combustion turbines designed
to provide 618 MW of capacity and a gas-fired combined cycle facility designed
to provide 468 MW of capacity. Four of the combustion turbines are scheduled for
completion in 2002, with the other two to be completed in 2003. The combined
cycle facility is scheduled for completion in 2003. Oglethorpe expects that
these new generation facilities will ultimately be owned by two separate
cooperatives to be incorporated in the near future. The new cooperatives will be
owned by those Members participating in the respective facilities.
Oglethorpe is currently providing interim financing for the construction of
these facilities. As of June 30, $159.8 million of commercial paper was
outstanding for this purpose. Oglethorpe expects to issue the maximum amount of
its commercial paper ($260 million) by the fall of 2001 in conjunction with the
interim financing of these new generation facilities. Oglethorpe has submitted
loan applications to the Rural Utilities Service (RUS) to provide financing for
these projects and expects a response from RUS later in 2001. The loan
applications were made on behalf of any entity that may ultimately own these
facilities. However, due to the anticipated timing of the loan approval and
funding from the RUS, Oglethorpe will need and is seeking additional
construction financing until permanent financing is obtained.
Oglethorpe also continues to make payments under an agreement to purchase
equipment for an additional gas-fired combined cycle facility. As of June 30,
2001, Oglethorpe had $22.8 million of commercial paper outstanding relating to
payments under this agreement. Oglethorpe is pursuing a sale of this equipment,
but will continue to make payments under the agreement until the equipment is
sold.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Financial Condition--Capital Requirements" and "--Liquidity and
Sources of Capital" in Item 7 of Oglethorpe's 2000 Annual Report on Form 10-K.
General
- -------
Total assets and total equity plus liabilities as of June 30, 2001 were $4.6
billion, which was $770,000 more than the total at December 31, 2000. The
increase was due primarily to additions to construction work in progress and an
increase in the interim financing receivable offset by depreciation of plant and
a decrease in accounts receivable.
13
Assets
Property additions for the six months ended June 30, 2001 totaled $28.4 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 was a result of cash used in
financing and investing activities, including debt principal repayments,
exceeding cash provided from operations.
The decrease in receivables was primarily due to a cold December, which resulted
in higher energy charges billed to Members at December 31, 2000 than at June 30,
2001.
The increase in notes and interim financing receivables was primarily due to the
construction of new generating facilities as discussed above. These facilities
will ultimately be owned by two separate cooperatives, as discussed above, which
will be owned by those Members who participate in these facilities. These
cooperatives will reimburse Oglethorpe for construction costs after permanent
financing is obtained.
The decrease in prepayments and other current assets was primarily due to the
reclassification of $33.8 million in equipment to notes and interim financing
receivables.
The decrease in other deferred charges was due to the amortization of nuclear
outage costs exceeding additional deferrals of nuclear outage costs.
Equity and Liabilities
Accounts payable decreased principally due to the accrual of lower off-system
energy charges at June 30, 2001 as compared to December 31, 2000. Due to the
cold weather in December, off-system energy purchases were significantly higher.
In addition, accruals for Georgia Power Company charges were lower at June 30,
2001.
The increase in notes payable was attributable to commercial paper issued by
Oglethorpe as interim financing for costs incurred in the construction of the
future generation facilities discussed above. (See "Capital Requirements and
Liquidity and Sources of Capital" above for a discussion regarding financing of
these projects.)
The decrease in accrued interest primarily resulted from an interest payment
associated with the lease of Plant Scherer Unit No. 2, and to a lesser extent,
interest payments associated with certain Pollution Control Bonds. These
payments were made January 2, 2001 for interest accrued during the previous six
months.
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.
14
The decrease in other current liabilities resulted primarily from lower negative
cash balances, resulting from zero balance sweep accounts, at June 30, 2001 as
compared to December 31, 2000, and for payment of year-end accruals.
The interest rate swap arrangements represent an unrealized loss from adoption
of SFAS No. 133. (For further discussion see Note B of Notes to Condensed
Financial Statements.)
New Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board (FASB) issued Statements
of Financial Accounting Standards No. 141, "Business Combinations", and No. 142,
"Goodwill and Other Intangible Assets". Under these new standards the FASB
eliminated accounting for certain mergers and acquisitions as poolings of
interests, eliminated amortization of goodwill and indefinite life assets, and
established new impairment measurement procedures for goodwill. For
calendar-year reporting companies, the standards become effective for all
acquisitions completed on or after June 30, 2001. Changes in financial statement
treatment for goodwill and intangible assets arising from mergers and
acquisitions completed prior to June 30, 2001 become effective January 1, 2002.
Oglethorpe's management does not believe the impact will be material.
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 capital requirements and
sources of capital. 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 factors
that could cause actual results to differ materially from those anticipated by
these forward-looking statements, see "OGLETHORPE'S POWER SUPPLY
RESOURCES--Future Power Resources," 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 2000 Annual Report 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
Changes in Risk Exposure
Oglethorpe has entered into several natural gas swap agreements to hedge a
portion of its exposure to variable energy charges under long-term power
purchase contracts. Under these swap agreements, Oglethorpe pays the
counterparty a fixed price for specified natural gas quantities and receives a
payment for such quantities based on a market price index. These payment
obligations are netted, such that if the market price index is lower than the
fixed price, Oglethorpe will make a net payment, and if the market price index
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is higher than the fixed price, Oglethorpe will receive a net payment. (See
"Financial Condition--Capital Requirements and Liquidity and Sources of Capital"
in Item 2 above and "QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK--Commodity Price Risk" in Item 7A of Oglethorpe's 2000 Annual Report on
Form 10-K.) Oglethorpe's market price risk exposure on these agreements is not
material.
Oglethorpe's market risks have not changed materially from the market risks
reported in Oglethorpe's 2000 Annual Report on Form 10-K. (For information
regarding Oglethorpe's risk management policies, see Item 7A of Oglethorpe's
Annual Report on Form 10-K.)
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
------ -----------
10.29 Amendment to Employment Agreement, dated May 8, 2001, between
Oglethorpe and Thomas A. Smith.
10.30 Amendment to Employment Agreement, dated May 8, 2001, between
Oglethorpe and Elizabeth Higgins.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by Oglethorpe for the quarter ended
June 30, 2001.
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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.
Oglethorpe Power Corporation
(An Electric Membership Corporation)
Date: August 13, 2001 By: /s/ Thomas A. Smith
-------------------
Thomas A. Smith
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 13, 2001 /s/ Mac F. Oglesby
------------------
Mac F. Oglesby
Treasurer
(Principal Financial Officer)
Date: August 13, 2001 /s/ W. Clayton Robbins
----------------------
W. Clayton Robbins
Senior Vice President, Finance and
Administration (Principal Financial
Officer)
Date: August 13, 2001 /s/ Willie B. Collins
---------------------
Willie B. Collins
Controller
(Chief Accounting Officer)
18