SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1996 Commission File Number 33-59960
SITHE/INDEPENDENCE FUNDING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3677475
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
450 Lexington Avenue, New York, NY 10017
(Address of principal executive offices) (Zip code)
(212)-450-9000
(Registrant's telephone number, including area code)
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 33-0468704
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
450 Lexington Avenue, New York, NY 10017
(Address of principal executive offices) (Zip code)
(212)-450-9000
(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 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
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
SITHE/INDEPENDENCE FUNDING CORPORATION
Page No.
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Part I Financial Information
SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(a Delaware Limited Partnership)
Financial Statements:
Consolidated Balance Sheets at June 30, 1996 and
December 31, 1995 (Unaudited)....................................... 3
Consolidated Statements of Operations for the
Three Months and Six Months Ended June 30, 1996
and 1995 (Unaudited)............................................... 4
Consolidated Statement of Partners' Capital for the Six
Months Ended June 30, 1996 (Unaudited)............................ 5
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1996 and 1995 (Unaudited).......................... 6
Notes to Consolidated Financial Statements (Unaudited)............... 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................ 8
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K......................... 10
Signatures ......................................................... 11
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SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(a Delaware Limited Partnership)
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)
June 30, December 31,
1996 1995
-------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,616 $ 942
Restricted funds 94,237 56,036
Accounts receivable - trade 32,374 35,321
Fuel inventory and other current assets 2,131 2,862
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Total current assets 130,358 95,161
Property, plant and equipment, at cost:
Land 5,875 5,875
Electric and steam generating facilities 752,677 750,769
-------------- ------------
758,552 756,644
Accumulated depreciation (28,317) (18,928)
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730,235 737,716
Debt issuance costs 10,807 11,350
Other assets 967 1,661
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Total assets $ 872,367 $ 845,888
============== ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Trade payables $ 21,228 $ 20,190
Accrued interest 30,460 30,910
Current portion of long-term debt 9,030 11,382
Accrued construction costs and retentions 9,185 16,587
-------------- ------------
Total current liabilities 69,903 79,069
Long-term debt:
7.90% secured notes due 2002 133,854 138,957
8.50% secured bonds due 2007 150,839 150,839
9.00% secured bonds due 2013 408,609 408,609
-------------- ------------
693,302 698,405
Other liabilities 8,984 5,680
Commitments and contingencies
Partners' capital 100,178 62,734
-------------- ------------
Total liabilities and partners' capital $ 872,367 $ 845,888
============== ============
See notes to consolidated financial statements.
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SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(a Delaware Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands)
Three Months Six Months
Ended June 30, Ended June 30,
------------------------------- -------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
Revenue $ 82,172 $ 82,569 $ 195,582 $ 169,555
------------ ------------ ------------ ------------
Cost of sales:
Fuel 44,953 46,876 98,180 94,776
Operations and maintenance 9,985 10,315 20,318 19,525
Depreciation 4,694 4,705 9,389 9,410
------------ ------------ ------------ ------------
59,632 61,896 127,887 123,711
------------ ------------ ------------ ------------
Operating income 22,540 20,673 67,695 45,844
Non-operating income (expenses):
Interest expense (15,887) (16,180) (31,689) (32,260)
Other income, net 966 3,225 1,430 3,411
------------ ------------ ------------ ------------
Net income $ 7,619 $ 7,718 $ 37,436 $ 16,995
============ ============ ============ ============
See notes to consolidated financial statements.
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SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(a Delaware Limited Partnership)
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (Unaudited)
(In thousands)
Unrealized
Loss on Total
General Limited Marketable Partners'
Partner Partners Securities Capital
------------ ----------- ----------- ----------
Balance, January 1, 1996 $ 3,141 $ 59,601 $ (8) $ 62,734
Net income 3,744 33,692 -- 37,436
Change in unrealized loss
on marketable securities -- -- 8 8
--------- ------------ ----------- ---------
Balance, June 30, 1996 $ 6,885 $ 93,293 $ -- $ 100,178
========= ============ =========== =========
See notes to consolidated financial statements.
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SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(a Delaware Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Six Months
Ended June 30,
--------------------
1996 1995
-------- --------
Cash flows from operating activities:
Net income $ 37,436 $ 16,995
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 9,389 9,410
Amortization of deferred financing costs 543 536
Changes in operating assets and liabilities:
Accounts receivable - trade 2,947 (19,202)
Fuel inventory and other current assets 731 (2,291)
Other assets 694 --
Trade payables 1,038 16,468
Accrued interest payable (450) --
Other liabilities 3,304 2,870
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Net cash provided by operating activities 55,632 24,786
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Cash flows from investing activities:
Construction costs (9,310) (26,297)
Restricted funds (38,193) 393
Investment of funds designated for construction -- (31,283)
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Net cash used in investing activities (47,503) (57,187)
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Cash flows from financing activities:
Principal payments of long-term debt (7,455) (7,454)
Capital contribution -- 40,000
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Net cash provided by (used in) financing activities (7,455) 32,546
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Net increase in cash and cash equivalents 674 145
Cash and cash equivalents at beginning of period 942 4
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Cash and cash equivalents at end of period $ 1,616 $ 149
======== ========
Supplement cash flow information
Cash payments:
Interest (net of amounts capitalized) $ 30,736 $ 31,031
See notes to consolidated financial statements.
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SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(a Delaware Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. The Partnership
Sithe/Independence Power Partners, L.P. (the "Partnership"), in which Sithe
Energies, Inc. and certain of its direct and indirect wholly owned subsidiaries
(the "Partners") hold all the partnership interests, is a Delaware limited
partnership that was formed in November 1990 for a term of 50 years to develop,
construct and own a gas-fired cogeneration facility with a design capacity of
approximately 1,000 megawatts (the "Project") located in the Town of Scriba,
County of Oswego, New York. The Partnership commenced commercial operation for
financial reporting purposes on December 29, 1994. The majority of the capacity
and electric energy generated by the Project is sold to Consolidated Edison
Company of New York, Inc. ("Con Edison") and Alcan Aluminum Corporation with the
remainder of the electric energy being sold to Niagara Mohawk Power Corporation
("Niagara Mohawk").
2. Basis of Presentation
The accompanying consolidated balance sheets at June 30, 1996 and December
31, 1995 and the consolidated statements of operations for the three and six
months ended June 30, 1996 and 1995 and cash flows for the six months ended June
30, 1996 and 1995 should be read in conjunction with the audited consolidated
financial statements included in the Annual Report on Form 10-K for the year
ended December 31, 1995 for the Partnership and its wholly-owned subsidiary,
Sithe/Independence Funding Corporation.
The results of operations for the three and six months ended June 30, 1996
are not necessarily indicative of the results to be expected for the full year.
The unaudited financial information at June 30, 1996 and for the three and six
months ended June 30, 1996 and 1995 contains all adjustments, consisting only of
normal recurring adjustments, which management considers necessary for a fair
presentation of the operating results for such periods.
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SITHE/INDEPENDENCE POWER PARTNERS, L.P.
(a Delaware Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Revenue and cost of sales for the second quarter of 1996 decreased by $.4
million (.5%) and $2.3 million (4%), respectively, over the corresponding
quarter of last year. Revenue decreased slightly as the impacts of a longer
Spring maintenance outage than in 1995 and a first quarter 1996 tariff
adjustment payment to Niagara Mohawk were largely offset by higher avoided cost
based tariff prices on energy deliveries to Con Edison and a 1995 tariff
adjustment payment from Con Edison. The decrease in cost of sales primarily
reflected lower fuel costs as a result of the extended maintenance outage and
a rebate of first quarter fuel costs resulting from the downward adjustment
to Niagara Mohawk's first quarter 1996 tariffs. As a result of these factors,
operating income for the second quarter increased by $1.9 million (9%) over
the corresponding quarter of last year.
Revenue, cost of sales and operating income for the first six months of
1996 increased by $26.0 million (15%), $4.2 million (3%), and $21.9 million
(48%), respectively, over the corresponding period of last year, with the
increases reflecting higher avoided cost based tariff prices on energy
deliveries to Con Edison, a 1995 tariff adjustment payment from Con Edison,
overall higher plant availability and incremental revenue from selling gas
instead of generating electricity at certain times during the first quarter of
1996.
Interest expense for the second quarter of 1996 decreased by $.3 million
(2%) from the corresponding quarter of last year as a result of lower
outstanding amounts of long-term debt. Other income, net, for the second quarter
of 1996 consisted of interest income. Other income, net, for the second quarter
of 1995 consisted of $1.1 million of interest income and $2.1 million of income
from a natural gas arbitrage transaction.
Interest expense for the first six months of 1996 decreased by $.6 million
(2%) from the corresponding period of last year as a result of lower outstanding
amounts of long-term debt. Other income, net, for the first six months of 1996
consisted of interest income. Other income, net, for the first six months of
1995 consisted of $1.5 million of interest income, $2.1 million of income from
a natural gas arbitrage transaction and $.2 million of realized losses on
short-term investments designated for construction.
Liquidity and Capital Resources
The Partners have obtained a credit facility under which one or more
letters of credit may be issued in connection with their obligations pursuant to
certain Project contracts, and, as of June 30, 1996, letters of credit
aggregating $17.0 million were outstanding in connection with such obligations.
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The Partnership secured the Project's debt service obligations with a
letter of credit in the amount of $50 million and entered into a secured working
capital facility for a maximum available amount of $20 million through January
1997, which may be extended by the parties thereto for additional one-year
periods. Amounts outstanding under the working capital facility will accrue
interest at the prime commercial lending rate of the reference bank in effect
from time to time. To secure the Partnership's obligation to pay interest,
principal and other amounts payable in respect of the working capital facility,
the working capital provider has been assigned a security interest and lien on
all of the collateral in which the holders of the Partnership's long-term debt
issued to finance the development and construction of the Project have been
assigned a security interest and lien.
The Partnership presently believes that funds available from cash on
hand, operations, the working capital facility and the debt service letter of
credit will be more than sufficient to liquidate Partnership obligations as they
come due and to pay 1996 Project debt service. The Partnership is required to
fund reserves for debt service and major overhauls from available cash flow
after debt service as follows: $32.3 million in 1996, $16.4 million in 1997 and
approximately $6 million annually thereafter.
Changes in the avoided-cost-based energy component of billings by the
Partnership to Con Edison will impact the Partnership's profitability,
particularly during the first five years of operation when the price for gas
associated with energy deliveries to Con Edison is fixed.
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PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. Description of Exhibit
----------- ----------------------
27 ---- Article 5 Financial Data Schedule of
Sithe/Independence Power Partners, L.P. for the
quarter ended June 30, 1996.
(b) Reports on Form 8-K:
No report on Form 8-K was filed during the quarter covered by
this report.
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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.
Sithe/Independence Funding Corporation
--------------------------------------
(Registrant)
August 14, 1996 /s/ Richard J. Cronin III
-------------------------
Richard J. Cronin III
Chief Financial Officer and
Vice President
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, the
co-registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Sithe/Independence Power Partners, L.P.
---------------------------------------
(Registrant)
By: Sithe/Independence, Inc.
-------------------------
General Partner
August 14, 1996 /s/ Richard J. Cronin III
-------------------------
Richard J. Cronin III
Chief Financial Officer and
Vice President
(Principal Financial and
Accounting Officer)
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