SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report January 4, 2001
(Date of earliest event reported)
Commission File No. 33-95538
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SALTON SEA FUNDING CORPORATION
(Exact name of registrant as specified in its charter)
47-0790493
(IRS Employer Identification No.)
(Exact name of Registrants (State or other jurisdiction of (I.R.S. Employer
as specified in their incorporation or Identification No.)
charters) organization)
- -------------------------- ------------------------------ -------------------
Salton Sea Brine Processing L.P. California 33-0601721
Salton Sea Power Generation L.P. California 33-0567411
Fish Lake Power LLC Delaware 33-0453364
Vulcan Power Company Nevada 95-3992087
CalEnergy Operating Corporation Delaware 33-0268085
Salton Sea Royalty LLC Delaware 47-0790492
VPC Geothermal LLC Delaware 91-1244270
San Felipe Energy Company California 33-0315787
Conejo Energy Company California 33-0268500
Niguel Energy Company California 33-0268502
Vulcan/BN Geothermal Power Company Nevada 33-3992087
Leathers, L.P. California 33-0305342
Del Ranch, L.P. California 33-0278290
Elmore, L.P. California 33-0278294
Salton Sea Power LLC Delaware 47-0810713
CalEnergy Minerals LLC Delaware 47-0810718
CE Turbo LLC Delaware 47-0812159
CE Salton Sea Inc. Delaware 47-0810711
Salton Sea Minerals Corp. Delaware 47-0811261
302 S. 36th Street, Suite 400-A, Omaha, NE 68131
(Address of principal executive offices and Zip Code of Salton Sea Funding
Corporation)
Salton Sea Funding Corporation's Telephone Number,
including area code: (402) 341-4500
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N/A
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(Former name or former address, if changed since last report)
Item 5. Other Events.
On January 4, 2001 and January 8, 2001, respectively, Standard & Poor's
Ratings Group and Moody's Investors Service, Inc. announced that they had
reduced their respective ratings on the senior secured bonds of Salton Sea
Funding Corporation ("Salton Sea Funding"). Standard & Poor's reduced its rating
from BBB to BBB- (credit watch negative) and Moody's reduced its rating from
Baa2 to Baa3 (review for possible downgrade). The announced basis for each of
these downgrades was the downgrade by Standard & Poor's and Moody's of their
ratings for Southern California Edison Company ("Edison") as a result of
concerns about Edison's financial condition. The Salton Sea bonds are secured by
the cash flows and assets of ten operating geothermal power plants in the
Imperial Valley, California (the "Projects") with an approximate aggregate
capacity of 326 MW. Eight of the Projects with an approximate aggregate net
rated capacity of 267 MW sell their capacity and energy to Edison under
long-term power sales contracts.
Salton Sea Funding is aware that there have been public announcements
that Edison's financial condition has deteriorated as a result of reduced
liquidity because of Edison's inability to recover from its retail customers the
entire cost of wholesale power purchased by Edison for those customers. Salton
Sea Funding does not have information to be able to verify these announcements
as to Edison's financial condition. Salton Sea Funding is monitoring this
situation closely.
These eight Projects have not yet received payment from Edison for
capacity and energy delivered during November 2000. These contracts provide for
billing and payment on a schedule where payment would normally be received in
early January 2001. Edison has provided no assurance as to when it will make
these payments. A failure by Edison to make these payments as well as subsequent
monthly payments, for a substantial period of time after the payments are due,
could have a material adverse effect on the financial condition of Salton Sea
Funding and the Projects and on their ability to make payments on the Salton Sea
Funding bonds.
Certain information included in this report contains forward-looking
statements made pursuant to the Private Securities Litigation Reform Act of 1995
("Reform Act"). Such statements are based on current expectations and involve a
number of known and unknown risks and uncertainties that could cause the actual
results and performance of the Registrants to differ materially from any
expected future results or performance, expressed or implied, by the
forward-looking statements including expectations regarding the future results
of operations of Registrants. In connection with the safe harbor provisions of
the Reform Act, the Registrants have identified important factors that could
cause actual results to differ materially from such expectations, including
development and construction uncertainty, operating uncertainty, acquisition
uncertainty, uncertainties relating to geothermal resources, uncertainties
relating to economic and political conditions and uncertainties regarding the
impact of regulations, changes in government policy, industry deregulation and
competition. Reference is made to all of the Registrants' SEC Filings,
incorporated herein by reference, for a description of such factors. The
Registrants assume no responsibility to update forward-looking information
contained herein.
Item 7. Financial Statements and Exhibits
Exhibit 1 - Standard & Poor's Press Release dated January 4, 2001
Exhibit 2 - Moody's Press Release dated January 8, 2001
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.
SALTON SEA FUNDING CORPORATION
Date: January 15, 2001 /s/ Douglas L. Anderson
Douglas L. Anderson
Vice President and General Counsel
Salton Sea Funding Corp Rating Lowered to "BBB-"; Remains on CreditWatch
Negative Peter Rigby, New York (1) 212-438-2085
NEW YORK (Standard & Poor's CreditWire) Jan. 4, 2000 - Standard & Poor's today
lowered its rating on Salton Sea Funding Corp.'s $592 million senior-secured
bonds, series B, C, E, and F, to triple "B" minus from triple "B". The rating
remains on CreditWatch with negative implications where it was placed Dec. 21,
2000.
This rating action reflects today's rating downgrade of the project's
primary contractual offtaker, Southern California Edison co. (SoCalEd: triple
"B" minus/Watch Neg/"A-3"), to triple "B" minus as a result of the extraordinary
events in California's power markets, which have brought the state's two largest
investor-owned utilities to the brink of bankruptcy (see related stories).
Salton Sea Funding Corp. is an indirect wholly owned subsidiary of CE
Generation LLC (triple "B" minus/stable), which is owned 50% by MidAmerican
Energy Holdings Co. (MEC, triple "B" minus/Watch Pos/ --) and 50% by El Paso
Energy Corp. (triple "B" plus/stable/"A-2"). Salton Sea Funding is the financing
vehicle for MEC's Southern California-based geothermal power projects, which
total about 304 gross MW.
SoCalEd is facing imminent default unless California regulators and
politicians can immediately craft a viable financial solution that restores
liquidity to the utility. Because SoCalEd is counterparty to long-term contracts
with Salton Sea, a bankruptcy filing by the utility would likely trigger a
default under the offtake contracts or a stay of payments, which in turn would
trigger a default under the project debt indenture. Should SoCalEd file for
bankruptcy, Salton Sea would be at serious risk of falling into the lowest
speculative grades or even to "D".
Standard & Poor's notes that Salton Sea does not face immediate
liquidity problems as it has a six-month debt service reserve in place, which
may be sufficient to weather the current crisis in California. In addition, the
projects are current in their principal and interest payments, and SoCalEd is
current in its payments to the projects.
Over the next few weeks, Standard & Poor's will be assessing each of
Salton Sea's project contracts and long-term equilibrium economic positions, as
well as the potential for selling into alternative offtake arrangements that may
potentially protect the projects' credit positions.
Salton Sea Funding is a wholly owned subsidiary of Magma Power Co.,
which in turn is wholly owned by CE Generation LLC. Three groups of wholly owned
CE Generation (the guarantors) with assets in geothermal production guarantee
Salton Sea Funding's obligations: Salton Sea Guarantors, Royalty Guarantor, and
the Partnership Guarantors. Through the guarantors, CE Generation owns and
operates the Salton Sea Units 1, 2, 3, and 4; the Imperial Valley projects
(including the Vulcan, Del Ranch, Elmore, and Leathers projects); and the
Royalty projects. The total capacity of these geothermal projects is about 304MW
gross and 267 MW net, Standard & Poor's said. -CreditWire
Credit Profile:
DOWNGRADED, REMAINS ON CREDITWATCH NEGATIVE
TO FROM
Salton Sea Funding Corp. BBB- BBB
Susan D. Abbott A.J. Sabatelle
Managing Director Vice President - Senior Analyst
Moody's Investors Service Moody's Investors Service
MOODY'S LOWERS DEBT RATINGS FOR PROJECTS EXPOSED TO COUNTERPARTY RISK OF
CALIFORNIA UTILITIES
New York, January 08, 2001 -- Moody's Investor Service has lowered its
project debt ratings for Edison Mission Energy Funding Corp. to Baa3 from Baa1,
FPL Energy Caithness Funding Corp. to Baa3 from Baa2 and Salton Sea Funding
Corp. to Baa3 from Baa2 and placed them under review for further downgrade.
Separately, Moody's placed the project debt ratings for Caithness Coso Funding
Corp. (short term senior secured tranche rated Ba1 and long-term senior secured
tranche rated Ba2), CE Generation LLC (senior secured Baa3), and Juniper
Generation LLC (senior secured Baa3) on review for possible downgrade. Moody's
downgrade of Southern California Edison Company (SCE) and Pacific Gas and
Electric Company (PGE) announced late last week has prompted these rating
actions.
It is Moody's practice for the credit rating of a project whose cash flow is
largely derived from a single source to be capped by the unsecured rating of the
respective source of funds. All projects noted above have substantial cash flow
exposure to either SCE or PGE. Therefore, Moody's has lowered those projects
whose credit ratings were above the current senior unsecured rating of the two
California utilities to reflect the deterioration of the credit quality of those
cash flows. The deterioration in credit quality at SCE and PGE has resulted from
the atypically high cost of wholesale power in California which was further
exacerbated by a weak CPUC rate order issued on January 4. This rate order
provides only a modest interim rate increase and fails to adequately address
other issues critical to effecting a working power market. (Please refer to
Moody's press releases of Jan. 5, 2001 for further discussion of these rating
actions.)
The ratings for each of these projects have been placed on review for downgrade
to reflect the possibility that the ratings of SCE and PGE could decline further
if the near term liquidity crisis facing the utilities is not averted, and other
corrective measures are not implemented. Moody's believes that the best chance
for such a crisis to be averted is for legislative, state, or federal actions to
establish a near-term liquidity plan that will strengthen and extend the
utilities' financial viability. Absent such an event, all parties' credit
ratings are likely to be negatively affected.
New York
Susan D. Abbott
Managing Director
Corporate Finance
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653
New York
A.J. Sabatelle
Vice President - Senior Analyst
Corporate Finance
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653
Moody's Investors Service
Moody's Investors Service
(C)Copyright 2001 by Moody's Investors Service, 99 Church Street, New York, NY
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