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 September 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 33-87902
33-87902-01
33-87902-02
IEC Funding Corp.
North Jersey Energy Associates, A Limited Partnership
Northeast Energy Associates, A Limited Partnership
--------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-3255377
New Jersey 04-2955646
Massachusetts 04-2955642
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
350 Lincoln Place, Hingham, Massachusetts 02043
----------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(617) 749-9800
--------------
(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________
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IEC FUNDING CORP.
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
INDEX
PAGE NUMBER
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
NORTHEAST ENERGY ASSOCIATES AND
NORTH JERSEY ENERGY ASSOCIATES
Combined Balance Sheet at December 31, 1995 and
September 30, 1996 (Unaudited)......................................... 3
Combined Statement of Operations for the Three
Months and Nine Months Ended
September 30, 1995 and 1996 (Unaudited)................................ 4
Combined Statement of Cash Flows for the Nine Months
Ended September 30, 1995 and 1996 (Unaudited).......................... 5
Notes to Combined Financial Statements................................. 7
IEC FUNDING CORP.
Balance Sheet at December 31, 1995 and
September 30, 1996 (Unaudited)......................................... 8
Statement of Operations for the Three Months and Nine
Months Ended September 30, 1995 and 1996 (Unaudited).................. 9
Statement of Cash Flows for the Nine Months
Ended September 30, 1995 and 1996 (Unaudited).......................... 10
Notes to Financial Statements.......................................... 11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................... 12
PART II OTHER INFORMATION...................................................... 13
SIGNATURES............................................................................ 14
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED BALANCE SHEET (UNAUDITED)
- --------------------------------------------------------------------------------
DECEMBER 31, SEPTEMBER 30,
1995 1996
(IN THOUSANDS)
ASSETS
Current assets
Cash and cash equivalents $ 58,277 $ 87,308
Accounts receivable 51,465 52,594
Fuel inventories 4,516 6,632
Prepaid expenses and other current assets 2,913 2,133
------------ -------------
Total current assets 117,171 148,667
------------ -------------
Cogeneration facilities and carbon dioxide facility (net of
accumulated depreciation of $104,157,000 and $122,808,000
at December 31, 1995 and September 30, 1996, respectively) 397,589 379,745
Unamortized financing costs 20,210 18,410
Other fixed assets (net of accumulated depreciation of $371,000
and $452,000 at December 31, 1995 and September 30, 1996, respectively) 485 458
Other assets 3,011 3,607
Restricted cash 78,568 69,156
------------ -------------
Total non-current assets 499,863 471,376
------------ -------------
Total assets $ 617,034 $ 620,043
------------ -------------
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities
Current portion of loans payable - IEC Funding Corp. $ 25,204 $ 24,640
Accounts payable 14,234 13,523
Accrued interest - IEC Funding Corp. 12,218
Other accrued expenses 2,104 2,845
Future obligations under interest rate swap agreements 3,654 2,369
------------ -------------
Total current liabilities 45,196 55,595
------------ -------------
Loans payable - IEC Funding Corp. 514,362 502,324
Amounts due utilities for energy bank balances 188,053 211,016
------------ -------------
Total non-current liabilities 702,415 713,340
------------ -------------
Total liabilities 747,611 768,935
------------ -------------
Partners' deficit
General partner (4,047) (4,230)
Limited partners (126,530) (144,662)
------------ -------------
Total partners' deficit (130,577) (148,892)
------------ -------------
Commitments and contingencies ------------ -------------
Total liabilities and partners' deficit $ 617,034 $ 620,043
------------ -------------
The accompanying notes are an integral part of these financial statements
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1995 1996
(IN THOUSANDS)
Revenue
Power sales to utilities $ 71,942 $ 73,170 $ 211,641 $ 204,710
Steam sales 1,147 1,128 3,501 3,393
----------- ---------- ------------ ------------
Total revenue 73,089 74,298 215,142 208,103
----------- ---------- ------------ ------------
Costs and expenses
Cost of power and steam sales 32,817 32,735 99,426 103,506
Operation and maintenance 6,726 6,238 18,675 17,019
Depreciation 6,211 6,249 18,637 18,732
General and administrative
expenses 3,141 3,481 8,831 10,357
----------- ----------- ------------ ------------
Total costs and expenses 48,895 48,703 145,569 149,614
----------- ----------- ------------ ------------
Operating income 24,194 25,595 69,573 58,489
----------- ----------- ------------ ------------
Other expense (income)
Amortization of financing costs 643 587 1,565 1,800
Interest expense 12,751 12,334 38,059 37,486
Interest expense on energy bank liabilities 4,273 4,783 12,143 14,375
Interest income (2,445) (2,232) (7,932) (7,673)
----------- ----------- ------------ ------------
Total other expense 15,222 15,472 43,835 45,988
----------- ----------- ------------ ------------
Net income $ 8,972 $ 10,123 $ 25,738 $ 12,501
=========== =========== ============ ============
The accompanying notes are an integral part of these financial statements
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED STATEMENT OF CASH FLOWS
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NINE MONTHS
ENDED
SEPTEMBER 30,
1995 1996
(IN THOUSANDS)
Cash flows from operating activities:
Cash received from utilities and other customers $ 215,141 $ 216,648
Cash paid to suppliers (122,716) (128,969)
Interest paid (27,876) (26,525)
Bank commitment fees paid (27) (27)
Interest received 7,660 9,282
Cash payments to general partner for operating activities (1,805) (3,746)
Cash payments to owners/management (2,671) (2,765)
------------ ------------
Net cash provided by operating
activities 67,706 63,898
------------ ------------
Cash flows from investing activities:
Net expenditures for facilities (1,863) (807)
Purchase of other fixed assets (40) (54)
Decrease in restricted cash 3,432 9,412
------------- -------------
Net cash provided by
investing activities 1,529 8,551
------------- -------------
Cash flows from financing activities:
Principal payments on debt (10,217) (12,602)
Payment of refinancing costs (5,739) -
Distributions to partners (43,700) (30,816)
------------ ------------
Net cash used for financing activities (59,656) (43,418)
------------ ------------
Net increase in cash and cash equivalents 9,579 29,031
Cash and cash equivalents at beginning of period 76,255 58,277
------------ ------------
Cash and cash equivalents at end of period $ 85,834 $ 87,308
============ ============
The accompanying notes are an integral
part of these financial statements
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED STATEMENT OF CASH FLOWS (CONTINUED)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Reconciliation of Net Income to Net Cash Provided by
Operating Activities
NINE MONTHS
ENDED
SEPTEMBER 30,
1995 1996
(IN THOUSANDS)
Net income $ 25,738 $ 12,501
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 18,637 18,732
Amortization of financing costs 1,565 1,800
Changes in assets and liabilities
Accounts receivable (11,436) (1,129)
Fuel inventories (935) (2,116)
Prepaid expenses and other current assets (891) 780
Accounts payable 4,119 (711)
Accrued interest - 12,218
Other accrued expenses 11,835 741
Future obligations under interest rate
swap agreements (2,356) (1,285)
Amounts due utilities for energy bank balances 21,915 22,963
Other assets (485) (596)
-------- -------
Net cash provided by operating activities $ 67,706 $ 63,898
======== =========
The accompanying notes are an integral
part of these financial statements
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. Basis of Presentation
The accompanying unaudited combined financial statements should be read in
conjunction with the audited combined financial statements included in the
Annual Report on Form 10-K for the year ended December 31, 1995 for
Northeast Energy Associates, A Limited Partnership, and North Jersey Energy
Associates, A Limited Partnership (together, the "Partnerships") and IEC
Funding Corp.
The results of operations for the periods ended September 30, 1996 are
unaudited and are not necessarily indicative of the results to be expected
for the full year. The unaudited financial information at September 30,
1996 and for the periods ended September 30, 1996 contains all adjustments,
consisting only of normal recurring adjustments, considered by management
necessary for a fair presentation of the operating results for such period.
2. Reclassification
Certain reclassifications were made to the prior year balances in order to
conform to current year presentation. These reclassifications had no
effect on prior year operating results.
3. Distributions
Distributions to the partners may be made only after all required funds and
sub-funds have been fully funded as described in the Trust Indenture. After
funding all amounts required under the indenture, the excess cash generated
during periods ended June 30 and March 31, 1996 were in excess of
approximately $30.5 million and $0.3 million, respectively. All conditions
under the trust indenture for distributions of such excess cash were
satisfied after March 31, 1996 resulting in a distribution of approximately
$8.8 million in April and $22.0 million in June to the partners in
proportion to their designated interests in the Partnerships. No
distributions were made during the third quarter of 1996. As of November 2,
1996 excess cash of $19.1 million was available for distribution. These
funds have been released for payment to the partners.
IEC FUNDING CORP.
BALANCE SHEET (UNAUDITED)
- --------------------------------------------------------------------------------
DECEMBER 31, SEPTEMBER 30,
1995 1996
(IN THOUSANDS)
ASSETS
Current assets
Cash $ 1 $ 1
Current portion of notes receivable from
Northeast Energy Associates and North Jersey
Energy Associates (together, the "Partnerships") 25,204 24,640
Interest receivable from the Partnerships - 12,218
---------- ----------
Total current assets 25,205 36,859
Notes receivable from the Partnerships 514,362 502,324
---------- ----------
Total assets $ 539,567 $ 539,183
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of securities payable $ 25,204 $ 24,640
Accrued interest - 12,218
---------- ----------
Total current liabilities 25,204 36,858
Securities payable 514,362 502,324
---------- ----------
Total liabilities 539,566 539,182
Stockholders' equity
Common stock, no par value, 10,000 shares
authorized, issued and outstanding 1 1
---------- ----------
Total liabilities and stockholders' equity $539,567 $ 539,183
========== ==========
The accompanying notes are an integral
part of these financial statements
IEC FUNDING CORP.
STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1995 1996
(IN THOUSANDS) (IN THOUSANDS)
Interest income $ 12,699 $ 12,218 $ 38,386 $ 37,186
Interest expense (12,699) (12,218) (38,386) (37,186)
-------- -------- -------- --------
$ - $ - $ - $ -
======== ======== ======== ========
The accompanying notes are an integral
part of these financial statements
IEC FUNDING CORP.
STATEMENT OF CASH FLOWS (UNAUDITED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
- --------------------------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30
1995 1996
(IN THOUSANDS)
Cash Flows from operating activities:
Interest received from Partnerships $ 25,829 $ 24,968
Interest paid (25,829) (24,968)
-------- -------
Net cash provided by operating activities - -
-------- -------
Cash flows from investing activities:
Principal payment received from partnerships 10,217 12,602
Principal payment on debt (10,217) (12,602)
-------- --------
Net cash provided by investing activities - -
-------- --------
Cash flows from financing activities - -
-------- --------
Net increase in cash - -
-------- --------
Cash at beginning of period 1 1
-------- --------
Cash at end of period $ 1 $ 1
-------- --------
The accompanying notes are an integral
part of these financial statements
IEC FUNDING CORP.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
BASIS OF PRESENTATION
The accompanying unaudited financial statements should be read in
conjunction with the audited financial statements included in the Annual
Report on Form 10-K for the year ended December 31, 1995 for IEC Funding
Corp. (the "Company") and the Partnerships.
The unaudited financial information at September 30, 1996 and for the
periods ended September 30, 1996 contains all adjustments, consisting only
of normal recurring adjustments, considered by management necessary for a
fair presentation of the operating results for such period.
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Total revenue of $74.3 million for the third quarter of 1996 increased $1.2
million (1.7%) as compared to the third quarter of 1995. This increase is a
result of the timing of curtailment rights exercised by certain power
purchasers. Fewer curtailment hours were requested during the third quarter of
1996 as compared to the third quarter of 1995. It is expected that the remaining
curtailment hours available to these utilities under the respective power
purchase agreements will be requested during the fourth quarter of 1996. Power
purchase rates for the third quarter of 1996 increased slightly on Bellingham
contracts and remained flat, on average, for Sayreville. On a year to date
basis, total revenue of $208.1 million in 1996 decreased $7.0 million (3.2%) as
compared to 1995. This decrease is primarily due to scheduled maintenance
outages that occurred during the second quarter of 1996 and included a major
inspection and maintenance program (scheduled at five year intervals) at the
Bellingham facility. Lower rates, on average, under the Sayreville power
purchase contract during the first nine months of 1996 also contributed to the
revenue decrease. Rates for the Bellingham project increased slightly over the
prior year.
Cost of power and steam sales as a percentage of gross revenues (gross of
increase to energy bank) was 41.8% for the third quarter of 1996 versus 42.7%
for the third quarter of 1995. Year to date costs as a percentage of gross
revenues was 47.8% in 1996 as compared to 44.2% in 1995. The decreased cost on a
quarterly basis is primarily a result of gains on natural gas swap agreements.
On a year to date basis, extended gas service charges by one of the Sayreville
facility's suppliers (due to lower temperatures), fixed demand charges under
certain fuel contracts (which remain constant regardless of availability) and
higher market prices of spot gas (which affect both spot purchases and certain
firm contracts) resulted in increased costs.
Operation and maintenance costs decreased $.5 million as compared to the
third quarter of 1995, and decreased $1.6 million on a year to date basis.
These decreases are a result of a one-time 1995 water franchise fee, and a lower
performance bonus payable to the O&M contractor in 1996 as a result of scheduled
maintenance outages. Offsetting these cost decreases were normal and expected
escalations on O&M contracts and increases in property taxes.
General and administrative expenses were $3.5 million for the third quarter
of 1996 as compared to $3.1 million for the same period in the prior year. On a
year to date basis 1996 costs were $10.3 million as compared to $8.8 million in
1995. Quarterly and year to date increases include increased insurance and other
overhead costs.
Interest expense decreased $.4 million as compared to the third quarter of
1995 and decreased $.6 million on a year to date basis. Interest on debt is
decreasing in 1996 as a result of principal payments made through June 30, 1996.
Principal payments are made semi-annually on June 30 and December 30. Interest
on energy bank liabilities has increased, reflecting increases in the underlying
amounts accrued for energy bank balances. Interest income has decreased as a
result of reduced cash collateral being held in support of letters of credit.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow generated during the nine months ended September 30, 1996 was more
than sufficient to fund all operating expenses for the period as well as fund
debt service requirements for both June and December of 1996. Debt service
reserve requirements specified in the trust indenture remain fulfilled. Through
the six months ended June 30, 1996 excess cash of $30.8 million was distributed
to the partners. While no distributions were made during the third quarter of
1996, as of November 2, 1996 excess cash of $19.1 million was available for
distribution and these funds have been released for payment to the partners.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The following Exhibits are filed herewith:
3.7 Agreement of Limited Partnership dated as of October
15, 1996, of Northeast Energy Associates, A Limited
Partnership.
3.8 Agreement of Limited Partnership dated as of October
15, 1996, of North Jersey Energy Associates, A Limited
Partnership.
10.10.5 Operation and Maintenance Agreement dated as of May 1,
1995, between NECO-Bellingham, Inc. and Westinghouse
Operating Services Company, Inc. (Supersedes Exhibit
10.10.5 previously filed)
10.14 Declaration of Easements, Covenants and Restrictions
dated as of June 28, 1989, among Northeast Energy
Associates, A Limited Partnership, Commonwealth
Electric Company, Boston Edison Company and Montaup
Electric Company.
(b) There were no reports on Form 8-K filed during the three months
ended September 30, 1996.
Pursuant to the requirements of the Securities Exchange Act of 1934, IEC
Funding Corp. has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IEC FUNDING CORP.
DATE SIGNATURE AND TITLE
November 14, 1996 /s/ Maureen P. Herbert
--------------------------- ----------------------------------------
Maureen P. Herbert
Vice President of Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, North
Jersey Energy Associates, A Limited Partnership has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
NORTH JERSEY ENERGY ASSOCIATES,
A LIMITED PARTNERSHIP
By: INTERCONTINENTAL ENERGY CORPORATION
As General Partner
DATE SIGNATURE AND TITLE
November 14, 1996 /s/ Maureen P. Herbert
------------------------ ----------------------------------------
Maureen P. Herbert
Vice President of Finance
Pursuant to the requirements of the Securities Exchange Act of 1934,
Northeast Energy Associates, A Limited Partnership has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
NORTHEAST ENERGY ASSOCIATES,
A LIMITED PARTNERSHIP
By: INTERCONTINENTAL ENERGY CORPORATION
As General Partner
DATE SIGNATURE AND TITLE
November 14, 1996 /s/ Maureen P. Herbert
------------------------ ---------------------------------------
Maureen P. Herbert
Vice President of Finance