SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-Q
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998
Commission File Number 33-82034
INDIANTOWN COGENERATION, L.P. (Exact name of co-registrant as
specified in its charter)
Delaware 52-1722490 (State or other
jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
INDIANTOWN COGENERATION FUNDING CORPORATION (Exact name of
co-registrant as specified in its charter)
Delaware 52-1889595 (State or other
jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
7500 Old Georgetown Road, 13th Floor Bethesda, Maryland 20814-6161
(Registrants' address of principal executive offices)
(301)-718-6800 (Registrants' 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 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. [ X ] Yes [ ] No
Indiantown Cogeneration, L.P. Indiantown Cogeneration Funding
Corporation
PART I FINANCIAL INFORMATION Page No.
Item 1 Financial Statements: Consolidated Balance Sheets as of
March 31, 1998 (Unaudited) and December 31,
1997.........................................................1
Consolidated Statements of Operations for the Three Months Ended
March 31, 1998 (Unaudited) and March 31, 1997
(Unaudited)..................................................3
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1998 (Unaudited) and March 31, 1997
(Unaudited)..................................................4
Notes to Consolidated Financial Statements (Unaudited)
...............................................5
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 5 Other
Information......................................................12
Item 6 Exhibits and Reports on Form
8-K..............................................................13
Signatures.......................................................17
PART I FINANCIAL INFORMATION
Indiantown Cogeneration, L.P.
Consolidated Balance Sheets
As of March 31, 1998 and December 31, 1997
ASSETS March 31, December 31,
1998 1997
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $3,067,453 $3,234,379
Accounts receivable-trade 12,791,463 14,483,090
Inventories 843,919 337,001
Prepaids 543,228 1,025,372
Deposits 83,804 193,357
Investments held by Trustee, including
restricted funds of $19,353,212
and $2,764,745, respectively 38,805,585 13,009,289
Total current assets 57,235,452 32,282,488
INVESTMENTS HELD BY TRUSTEE,
restricted funds 13,601,000 13,501,000
DEPOSITS 70,000 65,000
PROPERTY, PLANT & EQUIPMENT:
Land 8,582,363 8,582,363
Electric and steam
generating facilities 695,664,986 695,386,424
Less accumulated
depreciation (39,265,062) (35,504,414)
Net property, plant &
equipment 664,982,287 668,464,373
FUEL RESERVE 2,259,399 3,140,989
DEFERRED FINANCING COSTS,
net of accumulated amortization
of $42,385,949 and
$42,172,745, respectively 17,800,957 18,014,161
Total assets $ 754,849,095 $ 735,468,011
<FN>
The accompanying notes are an integral part of these consolidated
balance sheets.
Indiantown Cogeneration, L. P.
Consolidated Balance Sheets
As of March 31, 1998 and December 31, 1997
LIABILITIES AND PARTNERS' CAPITAL March 31, December 31,
1998 1997
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $ 617,186 $ 238,526
Accrued liabilities 9,603,782 9,785,093
Accrued interest 16,359,545 2,337,078
Current portion -
First Mortgage Bonds 10,265,000 10,265,000
Current portion lease
payable - railcars 271,921 267,058
Total current liabilities 37,117,434 22,892,755
LONG TERM DEBT:
First Mortgage Bonds 476,239,000 476,239,000
Tax Exempt Facility Revenue Bonds 125,010,000 125,010,000
Lease payable - railcars 4,800,916 4,870,747
Total long term debt 606,049,916 606,119,747
Reserve-Major Maintenance 375,397 329,945
Total liabilities 643,542,747 629,342,447
PARTNERS' CAPITAL:
Toyan Enterprises 55,653,175 53,062,783
Palm Power Corporation 11,130,634 10,612,556
TIFD III-Y, Inc. 44,522,539 42,450,225
Total partners' capital 111,306,348 106,125,564
Total liabilities and partners'
capital $754,849,095 $735,468,011
<FN>
The accompanying notes are an integral part of these consolidated
balance sheets.
Indiantown Cogeneration, L.P.
Consolidated Statements of Operations
For the Three Months Ended March 31, 1998 and March 31, 1997
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
(Unaudited) (Unaudited)
Operating Revenues:
Electric capacity and
capacity bonus revenue $ 30,850,092 $ 29,871,287
Electric energy revenue 6,220,651 7,567,191
Steam revenue 72,810 33,333
Total operating revenues 37,143,553 37,471,811
Cost of Sales:
Fuel and ash 7,297,454 9,274,323
Operating and maintenance 4,399,708 4,136,367
Depreciation 3,774,640 3,887,664
Total cost of sales 15,471,802 17,298,354
Gross Profit 21,671,751 20,173,457
Other Operating Expenses:
General and administrative 677,962 756,425
Insurance and taxes 1,687,626 1,831,834
Total other operating
expenses 2,365,588 2,588,259
Operating Income 19,306,163 17,585,198
Non-Operating Income (Expenses):
Interest expense (14,726,001) (14,591,085)
Interest/Other income 600,622 956,008
Net non-operating expense (14,125,379) (13,635,077)
Net Income $ 5,180,784 $ 3,950,121
<FN>
The accompanying notes are an integral part of these consolidated
statements.
Indiantown Cogeneration, L.P.
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1998 and 1997
Three Months Three Months
Ended Ended
March 31, 1998 March 31, 1997
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 5,180,784 $ 3,950,121
Adjustments to reconcile
net income to net
Cash provided by operating
activities:
Depreciation and amortization 3,973,852 3,983,554
Decrease in accounts receivable 1,691,627 1,720,529
Decrease (Increase) in inventories
and fuel reserves 374,672 (372,593)
Decrease in deposits and prepaids 586,697 498,240
Increase in accounts payable,
accrued liabilities and
Accrued interest 14,219,816 12,957,816
Increase in major maintenance
reserve 45,452 --
(Decrease) in lease payable (64,968) (60,444)
Net cash provided by operating
activities 26,007,932 22,677,223
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property,
plant & equipment (278,562) (794,398)
Increase in investment held
by trustee (25,896,296) (21,505,339)
Net cash used in investing
activities (26,174,858) (22,299,737)
(DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (166,926) 377,486
CASH and CASH EQUIVALENTS,
beginning of year 3,234,379 344,323
CASH and CASH EQUIVALENTS,
end of period $ 3,067,453 $ 721,809
<FN>
The accompanying notes are an integral part of these consolidated
statements.
Indiantown Cogeneration, L.P.
Notes to Consolidated Financial Statements
As of March 31, 1998
(Unaudited)
1. ORGANIZATION AND BUSINESS: Indiantown Cogeneration, L.P. (the
"Partnership") is a special purpose Delaware limited partnership
formed on October 4, 1991. The general partners are Toyan
Enterprises ("Toyan"), a California corporation and a wholly-owned
special purpose indirect subsidiary of u.s. Generating Company,
LLC, and Palm Power Corporation ("Palm"), a Delaware corporation and
a special purpose indirect subsidiary of Bechtel Enterprises,
Inc.("Bechtel Enterprises"). The sole limited partner is TIFD
III-Y, Inc. ("TIFD"), a special purpose indirect subsidiary of
General Electric Capital Corporation ("GECC"). During 1994, the
Partnership formed its sole, wholly owned subsidiary, Indiantown
Cogeneration Funding Corporation ("ICL Funding"), to act as agent
for, and co-issuer with, the Partnership in accordance with the 1994
bond offering discussed in Note 4. ICL Funding has no separate
operations and has only $100 in assets and capitalization.
The Partnership was formed to develop, construct, and operate an
approximately 330 megawatt (net) pulverized coal-fired cogeneration
facility (the "Facility") located on an approximately 240 acre site
in southwestern Martin County, Florida. The Facility was designed
to produce electricity for sale to Florida Power & Light Company
("FPL") and will also supply steam to Caulkins Indiantown Citrus Co.
("Caulkins") for its plant located near the Facility.
The Partnership is managed by U.S. Generating Company ("USGen")
pursuant to a Management Services Agreement (the "MSA"). The
Facility is operated by U.S. Operating Services Company ("USOSC")
pursuant to an Operation and Maintenance Agreement (the "O&M
Agreement"). USGen and USOSC are general partnerships originally
formed between affiliates of PG&E Enterprises and Bechtel
Enterprises. On September 19, 1997, USGen and USOSC each separately
redeemed Bechtel Enterprises' interests in USGen and USOSC so that
U.S. Generating Company, LLC now indirectly owns all of the
interests in USGen and USOSC. This will not affect USGen's
obligations under the MSA or USOSC's obligations under the O&M
Agreement. In addition, on September 19, 1997, Toyan purchased
16.67% of Palm's interest in the Partnership, which represents a 2%
ownership in the Partnership.
The net profits and losses of the Partnership are allocated to
Toyan, Palm and TIFD (collectively, the "Partners") based on the
following ownership percentages:
From Until
September September
20, 1997 20, 1997
Toyan 50% 48%
Palm 10% 12%
TIFD 40% 40%
All distributions other than liquidating distributions will be made
based on the Partners' percentage interest as shown above, in
accordance with the project documents and at such times and in
such amounts as the Board of Control of the Partnership
determines. The Partners contributed, pursuant to an equity
commitment agreement, approximately $140,000,000 of equity when
commercial operation of the Facility commenced in December 1995.
The Partnership was in the development stage through December
21, 1995 and commenced commercial operations on December 22, 1995
(the "Commercial Operation Date"). The Partnership's continued
existence is dependent on the ability of the Partnership to sustain
successful operations. Management of the Partnership is of the
opinion that the assets of the Partnership are realizable at their
current carrying value.
2. FINANCIAL STATEMENTS: The consolidated balance sheet as of
March 31, 1998, and the consolidated statements of operations
and cash flows for the three months ended on March 31, 1998 and
1997, have been prepared by the Partnership, without audit and
in accordance with the rules and regulations of the Securities
and Exchange Commission. In the opinion of management, these
financial statements include all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the
financial position of the Partnership as of March 31, 1998, and
the results of operations and cash flows for the three months
ended March 31, 1998 and 1997.
The financial statements and related notes contained herein
should be read in conjunction with the Partnership's Annual Report
on Form 10-K for the year ended December 31, 1997.
Investments Held by Trustee The investments held by trustee
represent bond and equity proceeds and revenue funds held by a
bond trustee/disbursement agent and are carried at cost which
approximates market. All funds are invested in either Nations
Treasury Fund-Class A or other permitted investments for longer
periods. The proceeds include $12,501,000 of restricted
tax-exempt debt service reserve required by the financing
documents. The Partnership also maintains restricted
investments covering a portion of the Partnership's debt as
required by the financing documents and is classified as a
noncurrent asset on the accompanying balance sheets. All other
investments are classified as current assets in the accompanying
consolidated balance sheets. In addition, a qualifying facility
("QF") reserve of $1 million is also held long term. Property,
Plant and Equipment Property, plant and equipment, which consist
primarily of the Facility, are recorded at actual cost. The
Facility is depreciated on a straight-line basis over 35 years.
As of January 1, 1997, the Partnership prospectively revised its
calculation of depreciation to include a residual value on the
Facility approximating 25 percent of the gross Facility costs.
Other property and equipment are depreciated on a straight-line
basis over the estimated economic or service lives of the respective
assets (ranging from five to seven years). Routine maintenance and
repairs are charged to expense as incurred.
Equity Contribution Agreement Pursuant to an Equity Contribution
Agreement, dated as of November 1, 1994, between TIFD and
NationsBank of Florida, N.A. (succeeded by The Bank of New York
Trust Company of Florida, N.A.) (the "Trustee"), the Partners
contributed approximately $140,000,000 of equity on December 26,
1995. Proceeds were used to repay the $139,000,000 balance
outstanding under the Equity Loan Agreement. The remaining
$1,000,000 was deposited with the Trustee according to a
disbursement agreement among the Partnership, the Trustee and
the other lenders to the Partnership and is included in
investments held by trustee in the accompanying consolidated
balance sheets as of March 31, 1998 and December 31, 1997.
3. DEPOSITS: In 1991, in accordance with a contract between the
Partnership and Martin County, the Partnership provided Martin
County with a security deposit in the amount of $149,357 to
secure installation and maintenance of required landscaping
materials. In January 1998, the Partnership received a refund
of funds in excess of the required deposit as security for the
first year maintenance as set forth in the contract between the
Partnership and Martin County. The deposit, net of any refund,
is included in current assets at March 31, 1998 and December 31,
1997.
In 1991, in accordance with the Planned Unit Development Zoning
Agreement between the Partnership and Martin County, the Partnership
deposited $1,000,000 in trust with the Board of County Commissioners
of Martin County (the "PUD Trustee"). Income from this trust will
be used solely for projects benefiting the community of Indiantown.
On July 23, 2025, the PUD Trustee is required to return the deposit
to the Partnership. As of March 31, 1998 and 1997, the estimated
present value of this deposit was $70,000 and $65,000, respectively,
and has been included in deposits in the accompanying balance
sheets. The remaining balance has been included in property plant,
and equipment as part of total construction expenses. 4. FAIR
VALUE OF FINANCIAL INSTRUMENTS The following table presents the
carrying amounts and estimated fair values of the Partnership's
financial instruments at March 31, 1998. Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments", defines the fair market value of a financial
instrument as the amount at which the instrument could be exchanged
in a current transaction between willing parties.
Carrying Amount Fair Value
Financial Liabilities
Tax-Exempt Bonds $ 125,010,000 $ 144,661,413
Taxable Bonds $ 486,504,000 $ 597,130,276
For the Tax Exempt Bonds and First Mortgage Bonds, the fair values
of the Partnership's bonds payable are based on the stated rates
of the Tax Exempt Bonds and First Mortgage Bonds and current
market interest rates to estimate market values for the Tax
Exempt Bonds and the First Mortgage Bonds.
The carrying amounts of the Partnership's cash and cash
equivalents, accounts receivable, deposits, prepaid expenses,
investments held by trustee, accounts payable, accrued liabilities
and accrued interest approximate fair value because of the short
maturities of these instruments.
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements of the Partnership and the notes
thereto included elsewhere in this report.
General
The Partnership is primarily engaged in the ownership and
operation of a non-utility electric generating facility. Since its
inception, and until December 21, 1995, the Partnership was in the
development stage and had no operating revenues or expenses. On
December 22, 1995 the Facility commenced commercial operation. As
of March 31, 1998, the Partnership had approximately $665 million of
property, plant and equipment (net of accumulated depreciation)
consisting primarily of purchased equipment, construction-related
labor and materials, interest during construction, financing costs
and other costs directly associated with the construction of the
Facility. For the three months ended March 31, 1998, the
Partnership had total operating revenues of approximately $37.1
million, total operating costs of $17.8 million, and total net
interest expenses of approximately $14.1 million resulting in net
income of approximately $5.2 million.
The Partnership has obtained all material environmental permits
and approvals required as of March 31, 1998 for the operation of
the Facility. Certain of these permits and approvals are subject
to periodic renewal. Certain additional permits and approvals will
be required in the future for the continued operation of the
Facility. The Partnership is not presently aware of any technical
circumstances that would prevent the issuance of such permits and
approvals or the renewal of currently existing permits. The
Partnership timely filed its application for a Title V air permit
on May 24, 1996. The air construction permit will continue in
effect until the Title V permit is issued. A permit is expected
within the next year.
Results of Operations
For the three months ending March 31, 1998 and 1997, the
Facility achieved an average Capacity Billing Factor of 100.89% and
95.38%, respectively. This resulted in earning monthly capacity
payments aggregating $28.1 million and $28.0 million, and bonuses
aggregating $2.8 million and $1.9 million for the three months ended
March 31, 1998 and 1997, respectively. The Capacity Billing Factor
measures the overall availability of the Facility, but gives a
heavier weighting to on-peak availability. During the three months
ended March 31, 1998, the Facility was dispatched by FPL and
generated 261,635 megawatt-hours compared with 329,841
megawatt-hours during the same period in 1996. The 68,206
megawatt-hour decrease was due to lower dispatch levels by FPL. The
monthly dispatch rate for the first three months of 1998 ranged from
35% to 51%, as compared to a range of 44% to 72% for the
corresponding period in 1997.
Net income for the three months ended March 31, 1998, was
approximately $5.2 million compared to the net income of
approximately $4.0 million for the corresponding period in the prior
year. The $1.2 million increase is primarily attributable to a
higher Capacity Billing Factor and the corresponding increases in
capacity payments and bonuses.
Electric Revenues (dollars and KWh's in millions)
For the three months ended
March 31, 1998 March 31, 1997
Dollars 37.1 million 37.5 million
KWhs 261.6 329.8
Average Capacity Billing Factor 100.89% 95.38%
Average Dispatch Rate 40.7% 58.7%
For the three months ended March 31, 1998, the Partnership had total
operating revenues of approximately $37.1 million as compared to
$37.5 million for the corresponding period in the prior year.
The $400,000 decrease in operating revenue is primarily due to a
$1.35 million decrease in electric revenue resulting from lower
dispatch by FPL and is offset by a $979,000 increase in electric
capacity and bonus revenue resulting from higher availability
levels during the three months ended March 31, 1998.
Costs of revenues for the three months ended March 31, 1998,
were approximately $15.5 million on sales of 261,635 MWhs as
compared to $17.3 million on sales of 329,841 MWhs for the
corresponding period in the prior year. This decrease is largely
attributable to a $1.68 million decrease in fuel and ash disposal
costs resulting from lower dispatch by FPL offset by $.3 million
higher operating and maintenance costs.
Total other operating expenses for the three months ended March
31, 1998, were approximately $2.37 million, which is comparable to
the $2.6 million of total other operating expenses for the
corresponding period in the prior year. The $230,000 decrease is
due to lower insurance premiums and lower general and administrative
costs.
Net interest expense for the three months ended March 31, 1998,
of approximately $14.1 million was comparable to the $14.0 million
of net interest expense for the same period in the prior year.
Liquidity and Capital Resources
On November 22, 1994 the Partnership and ICL Funding issued
first mortgage bonds in an aggregate principal amount of $505
million (the "First Mortgage Bonds"), $236.6 million of which bear
an average interest rate of 9.26% and $268.4 million of which bear
an interest rate of 9.77%. Concurrently with the Partnership's
issuance of its First Mortgage Bonds, the Martin County Industrial
Development Authority issued $113 million of Industrial Development
Refunding Revenue Bonds (Series 1994A) which bear an interest rate
of 7.875% (the "1994A Tax Exempt Bonds"). A second series of tax
exempt bonds (Series 1994B) in the approximate amount of $12
million, which bear an interest rate of 8.05%, were issued by the
Martin County Industrial Development Authority on December 20, 1994
(the "1994B Tax Exempt Bonds" and, together with the 1994A Tax
Exempt Bonds, the "1994 Tax Exempt Bonds"). The First Mortgage
Bonds and the 1994 Tax Exempt Bonds are hereinafter collectively
referred to as the "Bonds."
Certain proceeds from the issuance of the First Mortgage Bonds
were used to repay $421 million of the Partnership's indebtedness
and financing fees and expenses incurred in connection with the
development and construction of the Facility and the balance of the
proceeds were deposited in various restricted funds that are being
administered by an independent disbursement agent pursuant to trust
indentures and a disbursement agreement. Funds administered by such
disbursement agent are invested in specified investments. These
funds together with other funds available to the Partnership were
being used: (i) to finance completion of construction, testing, and
initial operation of the Facility; (ii) to finance construction
interest and contingency; and (iii) to provide for initial working
capital.
The proceeds of the 1994 Tax Exempt Bonds were used to refund
$113 million principal amount of Industrial Development Revenue
Bonds (Series 1992A and Series 1992B) previously issued by the
Martin County Industrial Development Authority for the benefit of
the Partnership, and to fund, in part, a debt service reserve
account for the benefit of the holders of its tax-exempt bonds and
to complete construction of certain portions of the Facility.
The Partnership's total borrowings from inception through March
1998 were $769 million. The equity loan of $139 million was repaid
on December 26, 1995. As of March 31, 1998, the borrowings included
$125 million from the 1994 Tax Exempt Bonds and all of the available
First Mortgage Bond proceeds. Series A-1 of the First Mortgage
Bonds, in the aggregate principal amount of $4,397,000, matured and
were repaid on June 15, 1996. Series A-2 of the First Mortgage
Bonds, in the aggregate principal amount of $4,398,000, matured and
were repaid on December 15, 1996. Series A-3 of the First Mortgage
Bonds, in the aggregate principal amount of $4,850,000, matured and
were repaid on June 15, 1997 and Series A-4 of the First Mortgage
Bonds, in the aggregate principal amount of $4,851,000, matured and
were repaid on December 15, 1997. The weighted average interest
rate paid by the Partnership on its debt for the six months ended
March 31, 1998 and 1997, was 9.171% and 9.176%, respectively.
The Partnership, pursuant to certain of the Project Contracts,
is required to post letters of credit which, in the aggregate, will
have a face amount of no more than $65 million. Certain of these
letters of credit have been issued pursuant to a Letter of Credit
and Reimbursement Agreement with Credit Suisse and the remaining
letters of credit will be issued when required under the Project
Contracts, subject to conditions contained in such Letter of Credit
and Reimbursement Agreement. As of March 31, 1998, no drawings have
been made on any of these letters of credit. The Letter of Credit
and Reimbursement Agreement has a term of seven years subject to
extension at the discretion of the banks party thereto.
The Partnership entered into a debt service reserve letter of
credit and reimbursement agreement, dated as of November 1, 1994,
with Banque Nationale de Paris pursuant to which a debt service
reserve letter of credit in the amount of approximately $60 million
was issued. Such agreement has a rolling term of five years,
subject to extension at the discretion of the banks party thereto.
Drawings on the debt service reserve letter of credit became
available on the Commercial Operation Date of the Facility to pay
principal and interest on the First Mortgage Bonds, the 1994 Tax
Exempt Bonds and interest on any loans created by drawings on such
debt service reserve letter of credit. Cash and other investments
held in the debt service reserve account will be drawn on for the
Tax Exempt Bonds prior to any drawings on the debt service reserve
letter of credit. As of March 31, 1998, no drawings have been made
on the debt service reserve letter of credit.
In order to provide for the Partnership's working capital needs,
the Partnership entered into a Revolving Credit Agreement with
Credit Suisse dated as of November 1, 1994. Such Agreement has a
term of seven years subject to extension at the discretion of the
banks party thereto. The revolving credit agreement has a maximum
available amount of $15 million and may be drawn on by the
Partnership from time to time. The interest rate is based upon
various short term indices at the Partnership's option and is
determined separately for each draw. As of March 31, 1998, no
working capital loans have been made to the Partnership under the
working capital loan facility.
Year 2000
The Partnership is, with the assistance of USOSC and USGen,
conducting a review of its computer systems to identify the systems
that could be affected by the new millennium. USOSC and USGen are
being aided in this effort by PG&E Corporation. The year 2000 may
pose problems in software applications because many computer systems
and applications currently use two-digit date fields to designate a
year. As the century date occurs, date sensitive systems may
recognize the year 2000 as 1900 or not at all. This potential
inability to recognize or properly treat the year 2000 may cause
systems to process financial or operational information incorrectly.
Management has not yet determined which, if any, systems may be
affected and, if affected, the extent of any potential disruption in
operations and the resulting potential impact on the Partnership's
ability to generate and deliver electricity or steam. USOSC has
been asked to develop and, if required, implement a plan to remedy
any potential problems prior to the year 2000. Management expects
to finalize this plan, if required, and estimate any potential
expenses to implement such plan, in 1998. Management has not yet
assessed expenses related to year 2000 compliance or the potential
impacts of this matter.
PART II OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS
The Partnership is not currently aware of any pending or
threatened litigation that it anticipates would have a material
adverse effect on the Partnership.
Item 5 OTHER INFORMATION
Governmental Approvals
The Partnership has obtained all material environmental permits
and approvals required, as of March 31, 1998, in order to continue
commercial operation of the Facility. Certain of these permits and
approvals are subject to periodic renewal. Certain additional
permits and approvals will be required in the future for the
continued operation of the Facility. The Partnership is not aware
of any technical circumstances that would prevent the issuance of
such permits and approvals or the renewal of currently issued
permits. The Partnership timely filed its application for a Title V
air permit on May 24, 1996. A permit is expected within the next
year.
Energy Prices
On October 1, 1996, FPL filed with the Florida Public Service
Commission its most recent projections for its 1996-1999 "as
available" energy costs (in this context, "as available" energy
costs reflect actual energy production costs avoided by FPL
resulting from the purchase of energy from the Facility and other
Qualifying Facilities). The projections filed by FPL are lower for
certain periods than the energy prices specified in the Power
Purchase Agreement for energy actually delivered by the Facility.
At other times, the projections exceed the energy prices specified
in the Power Purchase Agreement. Should FPL's "as available"
energy cost projections prove to reflect actual rates, FPL may
elect, pursuant to its dispatch and control rights over the
Facility set forth in the Power Purchase Agreement, to run the
Facility less frequently or at lower loads than if the Facility's
energy prices were lower than the cost of other energy sources
available to FPL. Because capacity payments under the Power
Purchase Agreement are not affected by FPL's dispatch of the
Facility and because capacity payments are expected by the
Partnership to cover all of the Partnership's fixed costs,
including debt service, the Partnership currently expects that, if
the filed projections prove to reflect actual rates, such rates and
the resulting dispatch of the Facility will not have a material
adverse effect on the Partnership's ability to service its debt.
To the extent the Facility is not operated by FPL during Caulkins'
processing season (November to June), the Partnership may elect to
run the Facility at a minimum load or shut down the Facility and
run auxiliary boilers to produce steam for Caulkins in amounts
required under the Partnership's steam agreement with Caulkins.
Such operations may result in decreased net operating income for
such periods. The Partnership expects that the decrease, if any,
will not be material. For the three months ended March 31, 1998,
FPL requested the Partnership to decommit the Facility numerous
times and the Partnership has typically exercised its rights to
operate at minimum load (100MW) during such decommit requests. The
Partnership's election to operate at minimum load has not had a
material impact on the Partnership or its financial condition
although energy delivered during such operations is sold at reduced
prices. Based upon FPL's projections, the Partnership does not
expect that, if the filed projections prove to reflect actual
rates, its dispatch rate will change materially during the period
covered by such projections.
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
a) Reports on Form 8-K: None.
b) Exhibits:
Exhibit No. Description
3.1 Certificate of Incorporation of Indiantown Cogeneration
Funding Corporation.*
3.2 By-laws of Indiantown Cogeneration Funding Corporation.*
3.3 Certificate of Limited Partnership of Indiantown Cogeneration,
L.P.*
3.4 Amended and Restated Limited Partnership Agreement of Indiantown
Cogeneration, L.P., among Palm Power Corporation, Toyan Enterprises
and TIFD III-Y Inc.*
3.5 Form of First Amendment to Amended and Restated Limited
Partnership Agreement of Indiantown Cogeneration, L.P.*
4.1 Trust Indenture, dated as of November 1, 1994, among Indiantown
Cogeneration Funding Corporation, Indiantown Cogeneration, L.P., and
NationsBank of Florida, N.A., as Trustee, and First Supplemental
Indenture thereto.**
4.2 Amended and Restated Mortgage, Assignment of Leases, Rents,
Issues and Profits and Security Agreement and Fixture Filing among
Indiantown Cogeneration, L.P., as Mortgagor, and Bankers Trust
Company as Mortgagee, and NationsBank of Florida, N.A., as
Disbursement Agent and, as when and to the extent set forth therein,
as Mortgagee with respect to the Accounts, dated as of November 1,
1994.**
4.3 Assignment and Security Agreement between Indiantown
Cogeneration, L.P., as Debtor, and Bankers Trust Company as Secured
Party, and NationsBank of Florida, N.A., as Disbursement Agent and,
as when, and to the extent set forth therein, a Secured Party with
respect to the Accounts, dated as of November 1, 1994.**
10.1.1 Amended and Restated Indenture of Trust between Martin
County Industrial Development Authority, as Issuer, and NationsBank
of Florida, N.A., as Trustee, dated as of November 1, 1994.**
10.1.2 Amended and Restated Authority Loan Agreement by and between
Martin County Industrial Development Authority and Indiantown
Cogeneration, L.P., dated as of November 1, 1994.**
10.1.3 Letter of Credit and Reimbursement Agreement among
Indiantown Cogeneration, L.P., as Borrower, and the Banks Named
Therein, and Credit Suisse, as Agent, dated as of November 1,
1994.**
10.1.4 Disbursement Agreement, dated as of November 1, 1994, among
Indiantown Cogeneration, L.P., Indiantown Cogeneration Funding
Corporation, NationsBank of Florida, N.A., as Tax-Exempt Trustee,
NationsBank of Florida, N.A., as Trustee, Credit Suisse, as Letter
of Credit Provider, Credit Suisse, as Working Capital Provider,
Banque Nationale de Paris, as Debt Service Reserve Letter of Credit
Provider, Bankers Trust Company, as Collateral Agent, Martin County
Industrial Development Authority, and NationsBank of Florida, N.A.,
as Disbursement Agent.**
10.1.5 Revolving Credit Agreement among Indiantown Cogeneration,
L.P., as Borrower, and the Banks Named Therein, and Credit Suisse,
as Agent, dated as of November 1, 1994.**
10.1.6 Collateral Agency and Intercreditor Agreement, dated as of
November 1, 1994, among NationsBank of Florida, N.A., as Trustee
under the Trust Indenture, dated as of November 1, 1994, NationsBank
of Florida, N.A., as Tax-Exempt Trustee under the Tax Exempt
Indenture, dated as of November 1, 1994, Credit Suisse, as letter of
Credit Provider, Credit Suisse, as Working Capital Provider, Banque
Nationale de Paris, as Debt Service Reserve Letter of Credit
Provider, Indiantown Cogeneration, L.P., Indiantown Cogeneration
Funding Corporation, Martin County Industrial Development Authority,
NationsBank of Florida, N.A., as Disbursement Agent under the
Disbursement Agreement dated as of November 1, 1994, and Bankers
Trust Company, as Collateral Agent.**
10.1.7 Amended and Restated Equity Loan Agreement dated as of
November 1, 1994, between Indiantown Cogeneration, L.P., as the
Borrower, and TIFD III-Y Inc., as the Equity Lender.**
10.1.8 Equity Contribution Agreement, dated as of November 1, 1994,
between TIFD III-Y Inc. and NationsBank of Florida, N.A., as
Disbursement Agent.**
10.1.9 GE Capital Guaranty Agreement, dated as of November 1, 1994,
between General Electric Capital Corporation, as Guarantor, and
NationsBank of Florida, N.A., as Disbursement Agent.**
10.1.11 Debt Service Reserve Letter of Credit and Reimbursement
Agreement among Indiantown Cogeneration, L.P., as Borrower, and the
Banks Named Therein, and Banque Nationale de Paris, as Agent, dated
as of November 1, 1994.**
10.2.18 Amendment No. 2 to Coal Purchase Agreement, dated as of
April 19, 1995.***
10.2.19 Fourth Amendment to Energy Services Agreement, dated as of
January 30, 1996.*****
21 Subsidiaries of Registrant*
27 Financial Data Schedule. (For electronic filing purposes
only.)*****
99 Copy of Registrants' press release dated January 3, 1996.****
* Incorporated by reference from the Registrant Statement on Form
S-1, as amended, file no. 33-82034 filed by the Registrants with
the SEC in July 1994.
** Incorporated by reference from the
quarterly report on Form 10-Q, file no. 33-82034 filed by the
Registrants with the SEC in December 1994.
*** Incorporated by
reference from the quarterly report on Form 10-Q, file no. 33-82034
filed by the Registrants with the SEC in May 1995.
**** Incorporated by reference from the current report on Form 8-K, file
no. 33-82034 filed by the Registrants with the SEC in January 1996.
***** Incorporated by reference from the quarterly report on Form
10-Q, file no. 33-82034 filed by the Registrants with the SEC in
May 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
INDIANTOWN COGENERATION, L.P.
(Co-Registrant)
Date: May 14, 1998
____/s/John R. Cooper__________________ John
John R. Cooper Vice President and Chief
Financial Officer
INDIANTOWN COGENERATION FUNDING
CORPORATION (Co-Registrant)
Date: May 14, 1998 ____/s/John R. Cooper__________________
John R. Cooper Vice President and
Chief Financial Officer