1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
------------------------
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NUMBER 1-13264
------------------------
TRIGEN ENERGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3378939
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
ONE WATER STREET
WHITE PLAINS, NEW YORK 10601
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(914) 286-6600
(REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- --------------------------------------------- ---------------------------------------------
Common Stock, Par Value $.01 Per Share New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant was $97,558,955.63 based upon the closing sale price quoted by the
New York Stock Exchange on March 24, 1997. There were 12,038,057 shares of the
Registrant's Common Stock outstanding on March 24, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Information called for in Part III of this Form 10-K is incorporated by
reference from the Registrant's definitive proxy statement to be filed in
connection with its 1997 annual meeting of shareholders.
================================================================================
2
PART I
ITEM 1. BUSINESS
GENERAL
Trigen Energy Corporation (together with its subsidiaries, the "Company" or
"Trigen"), a thermal sciences company, develops, owns and operates commercial
district energy and cogeneration systems. Trigen uses its expertise in
thermodynamic engineering and proprietary cogeneration processes to convert fuel
to various forms of thermal energy and electricity at more efficient conversion
rates than conventional processes. Trigen combines heat and power generation,
producing electricity as a by-product, for use in its facilities and for sale to
customers. The Company serves more than 1,500 customers with energy produced at
23 plants in 13 locations, including industrial plants, electric utilities,
commercial and office buildings, government buildings, colleges and
universities, hospitals, residential complexes and hotels.
A district energy system consists of a central production plant that
distributes steam, hot water or chilled water, or steam and chilled water, to
customer facilities through underground distribution pipes. Cogeneration is the
conversion of a single fuel source into two useful energy products, such as
steam and electricity, with a greater efficiency than is possible by producing
the two products separately. At six of its cogeneration facilities, the Company
has expanded cogeneration to "trigeneration", which is the generation of steam
or hot water, electricity and chilled water. Chilled water production by
Trigen's patented trigeneration machines has saved up to 71% of the fuel used in
conventional stand-alone chilled water production. In addition, Trigen
incorporates in its systems innovative applications for standardized, modular
equipment to improve productivity.
The Company's revenues have increased from approximately $1 million in 1987
(its first full year of operation) to $243.6 million in 1996 through acquisition
and internal growth. In December 1993 the Company acquired United Thermal
Corporation ("UTC"), which operated steam-only district energy systems in four
communities. This acquisition (the "UTC Acquisition") more than doubled the
Company's 1993 revenues on a pro forma basis. During 1995, the Company acquired
a waste-to-energy district energy system serving the Province of Prince Edward
Island in Canada and (through a limited partnership in which it has a 51%
managing partner interest) the energy systems of Coors' Brewing Company ("CBC")
and Coors Energy Company in Golden, Colorado. Gas transportation services are
also provided to CBC and certain related companies pursuant to the acquisition
agreements. In January 1996, the Company acquired the privately-held Ewing Power
Systems, a leading systems integrator of steam turbine cogenerator systems. In
March 1996, the Company's subsidiary, Trigen-Schuylkill Energy Corporation,
acquired a one-third interest in Grays Ferry Cogeneration Partnership, a
Pennsylvania single purpose partnership that will construct and operate a 150
megawatt ("MW") gas- or oil-fired combined cycle cogeneration facility, which
Trigen-Schuylkill will operate as managing partner. Also in March 1996, the
Company entered into a joint venture with the privately held Gentor Industrias,
S.A. de C.V. of Monterrey, Mexico to complete the installation and utilization
of 36 MW of new cogeneration capacity and develop additional cogeneration
opportunities in Mexico. At the same time, the Company entered into a strategic
alliance agreement with a U.S. subsidiary of Gentor to deploy factory built and
tested standard cogeneration units in the United States and worldwide. In July
1996 the Company introduced its first factory built and tested standard
cogeneration unit at its London, Ontario facility. In November, 1996, the
Company entered into a joint venture with Hydro-Quebec to provide a complete
package of energy commodity and energy production services throughout New
England and upstate New York. In December 1996, the Company entered into a joint
venture with Cinergy Corp. to build, own and operate cogeneration and
trigeneration facilities throughout the United States, Canada, the United
Kingdom and Ireland, subject to certain exclusions resulting from pre-existing
agreements.
BUSINESS STRATEGY
Significant opportunities for the Company's continued growth include:
expanding existing systems to serve additional customers or the expanded needs
of existing customers, acquiring systems or assuming management of additional
systems, adding new services to its systems and developing new systems to
provide district energy or independent power wherever its expertise provides a
competitive advantage.
1
3
Key elements of the Company's growth and profitability have included the
following:
- Economies of Scale. The Company's growth is attributable in large part
to the inherent economies of scale of district energy systems (when
compared to individual customer production of heating and cooling). These
advantages include the utilization of large efficient machinery, labor
savings, the ability to serve diverse peak requirements of various
customers, and specialization in energy production and distribution. In
many locations, these advantages outweigh the limitations of district
energy systems, which often involve significant capital expenditures in
the initial stages of construction or expansion and generally require a
high density of customer buildings.
- Stable Customer Base. The Company's long-term contracts (i.e., contracts
with terms of five years or more) would provide pro forma consolidated
revenues of over $142 million per year for the five-year period 1996
through 2000 and approximately $2.4 billion cumulatively for the period
1996 through 2024 (assuming, among other things, no inflation and no
changes in consumption or prices from 1995 levels). Since customers with
short-term contracts do not operate boiler rooms and chillers, and in
most cases do not even have such equipment, customer attrition has been
low.
- Technical Innovation and Plant Optimization. The Company has developed
computerized, automated control systems, typically installed in
large-scale generating facilities, which place real-time production cost
information in the hands of its plant operators. In addition, patents
have been granted for certain of its trigeneration and chilling
technologies and the Company has developed innovative applications of
standard modular equipment.
- Natural Barriers to Entry. Once a system is in place, the Company
benefits from natural barriers to entry by anyone trying to create a
competing system and is able to add customers within reach of its
installed systems at a relatively low additional cost (although not all
potential customers can be added on a cost-effective basis).
- Expansion to Industrial Plants. While the Company continues to grow its
business of district heating and cooling, there appear to be growing
opportunities to provide combined heat and power at industrial sites.
Monopoly regulation currently impedes progress in this area, but ongoing
deregulation of the electric industry is reducing this barrier.
- Rate Structures. Because the Company's rate structures typically enable
it to pass through to its customers fuel and most other commodity prices,
changes in such prices (which constitute more than 50% of the Company's
costs) have little impact on operating income. However, the Company is
not a monopoly provider and its rates must remain cost competitive.
- Reduced Environmental Impact. The Company produces substantially less
pollutants than would result from conventional generation of the same
heat, electricity, and cooling. This is due to the fuel efficiency of
cogeneration and trigeneration, employment of refrigerants other than
CFCs wherever possible, thermal, chemical, and catalytic destruction of
exhaust contaminants, and extensive automation with continuous emission
monitoring, among other means.
- Entrepreneurial Management. The Company's senior management has
extensive experience in the development and operation of district energy
systems and cogeneration technologies, and has a track record of
technical and financial innovation. Senior management as a group hold
approximately 14% percent of the Company's common stock.
OVERVIEW OF THE COMPANY'S PRODUCTS AND SERVICES
The Company's plants have the capacity to produce 4,204 MW of energy, of
which approximately 85.1% is steam or hot water, 8.4% is electricity and 6.5% is
chilled water. These products are distributed to customers through 137.1 miles
(220.7 kilometers) of pipeline, a substantial portion of which was in place in
the systems when such systems were acquired by the Company. Separate pipelines
are used for steam, hot water and chilled water.
2
4
The following table summarizes the Company's systems by location:
1996 REVENUES
(DOLLARS IN
MILLIONS)
------------------ CAPACITY
% OF ------------------------------------------------------------
TOTAL STEAM AND HOT ELECTRICITY CHILLED WATER MILES OF
LOCATION AMOUNT REVENUES WATER ----------- -------------- PIPELINE
- ------------------------- ------ -------- ------------------ --------
(MWT) (MLBS/HR) (MWE) (MWT) (TONS)
Baltimore................ $ 27.6 11.3% 437 1,358 -- -- -- 16.6
Boston................... 38.4 15.8% 511 1,585 1 -- -- 22.0
Chicago(1)(2)............ .6 .3% 114 355 3 58 16,500 2.0
Golden, Colorado......... 30.2 12.4% 380 1,180 40 -- -- --
Kansas City.............. 9.0 3.7% 403 1,250 6 -- -- 9.5
London, Ontario.......... 1.9 .8% 55 170 4 5 1,500 5.5
Nassau County............ 36.3 14.9% 267 830 57 53 15,200 4.1
Oklahoma City............ 4.7 1.9% 102 316 1 51 14,600 4.0
Philadelphia(5).......... 57.1 23.4% 889 2,760 225 -- -- 33.0
Prince Edward Island..... 5.4 2.2% 33 101 2 -- -- 4.3
St. Louis................ 8.3 3.4% 184 570 -- -- -- 22.0
Trenton(3)............... 15.7 6.5% 108 335 12 37 10,390 9.5
Tulsa(4)................. 7.4 3.0% 94 291 1 71 20,150 4.6
Ewing Power Systems...... 1.0 .4% -- -- -- -- -- --
------ ---- ----- ------ --- --- ------ -----
Total.................... $243.6 100% 3,577 11,101 352 275 78,340 137.1
====== ==== ===== ====== === === ====== =====
- ---------------
(1) Includes 8.5 million gallon chilled water storage tank.
(2) The Company accounts for its investment in the Chicago joint venture with
Peoples Energy Corporation under the equity method of accounting.
(3) Includes 2.6 million gallon chilled water storage tank.
(4) Includes cold storage warehouse.
(5) 170 MWe under construction in the Grays Ferry Cogeneration Project.
Where electricity is produced with diesel or gas turbines, exhaust heat is
recovered for production of additional electricity, steam or hot water and/or
chilled water. In trigeneration plants, chilled water is produced using a
compressor which is powered by the diesel or gas turbine used to produce
electricity, steam or hot water. Because demand for steam and hot water has
daily and yearly cycles, the Company cannot always use all the waste heat
generated by its plants to produce steam and hot water for immediate use.
Trigeneration plants and innovative use of standard modular equipment enable the
Company to recover and use waste heat to produce electricity or chilled water
for a longer period of time each day, during both summer and winter.
By generating two or three energy products from a single fuel source,
cogeneration and trigeneration yield more useful energy output. For example, the
average electricity plant in the United States delivered an estimated 33% of its
fuel as useful energy in 1996, releasing the remaining 67% into the environment.
The Company estimates that in the same year its systems converted approximately
50% to 92% of their fuel to useful energy.
In each system, the Company's policy is to have sufficient heating capacity
so that it can generate peak loads even without its largest production unit in
service, and to have the ability to use two or more different types of fuel in
its systems. This policy, which requires the Company to increase steam
generating capacity from time to time, has enabled it to achieve high levels of
reliability of service. During the extreme cold weather of January 1994 and
during the heat wave of the summer of 1995, when numerous electric utilities on
the east coast of the United States suffered or instituted rolling blackouts,
the Company's customers received uninterrupted service.
Steam and Hot Water. The Company produces steam and/or hot water at all of
its systems. Some of this is used internally to drive chillers; most is sold to
customers for space heating and hot water, for cooling
3
5
(by powering on-site steam-driven chillers or absorption chillers), and for
humidification, sterilization and various industrial process uses.
Electricity. The Company produces electricity at ten of its plants. All of
the electricity produced is either sold to the local utility company or used by
the Company internally in the production of steam and hot water or to drive
mechanical chillers. Five of these electricity generating plants, located in
Colorado, Nassau County, Philadelphia, Trenton and Kansas City are qualified for
exemption from regulation ("Qualifying Facilities") under the Public Utility
Regulatory Policies Act of 1978 ("PURPA").
Chilled Water. At six of its facilities, the Company produces chilled
water, which is provided to customers to cool commercial building space and for
process chilling. Chilled water is produced by converting the energy in hot
water, steam, mechanical energy or electricity into chilled water through the
use of absorption chillers and mechanical chillers. An absorption chiller uses
heat (steam or hot water) to concentrate lithium bromide, which when mixed with
water absorbs heat and thus chills the water. A mechanical chiller, driven by a
steam turbine, electric motor, diesel engine or gas turbine, uses a compressor
to compress refrigerant gases. When such gases are expanded chilled water is
produced.
The Company adds chilling capacity to its systems in two ways: it acquires
chillers for operation in its central production facilities and it operates
chillers leased from customers (sometimes powering them with steam produced at
the Company's central plant). The use of leased equipment permits the Company to
establish cooling systems and to add new customers with reduced capital
investments. In most cases, the chilled water is distributed through the
Company's energy system. At present, the Company owns all of the chillers used
in London, Ont., Tulsa and Oklahoma City and leases all of the chillers used in
Nassau County. In Trenton and Chicago, the Company uses a combination of leased
and owned equipment. Some customers also maintain on-site chillers to serve
solely as backup for their own buildings. In these cases, the Company may
contract to operate such equipment for the customer and contract for the right
to use such capacity to back up the Company's chilled water production. The
Company has signed a contract with the City of Kansas City, Missouri, and a
letter of intent with Jackson County, Missouri, and the U.S. General Services
Administration to provide chilled water to eleven buildings in downtown Kansas
City beginning in 1998.
Energy Services. The Company also provides energy services to its
customers, consisting of operating supervision, management and maintenance of
facilities as well as advice and assistance regarding initial design,
construction and start-up, with respect to energy use as well as energy audits.
Energy services is a significant line of business for the Company's parent
company, ELYO ("ELYO" and collectively with its other subsidiaries the "ELYO
Group"), which makes its expertise available to the Company as required.
FUEL AND RAW MATERIALS
The Company is a significant purchaser of gas and oil and of chillers,
boilers, generators and other equipment used for heating, cooling and electric
generation. The Company formed a fuel management subsidiary in 1994 to
coordinate purchases of fuel to achieve savings and favorable contract terms.
Most of the Company's gas and oil requirements, as well as most of its other
supplies, are purchased from local suppliers. The Company believes that it has
adequate sources of fuel, supplies and equipment.
COMPETITION
Provision of Heating, Electricity and Cooling at Existing Systems
The provision of heating, electricity and cooling services is highly
competitive, although there are currently very few competing operators of
multiple-user district energy systems. The Company's principal competition is
from potential customers that own and operate their own boiler and chilled water
plants, who are often encouraged to install and retain their own plants by the
suppliers of raw energy (such as local oil, natural gas and electricity
companies) and by equipment suppliers that sell products and services to users
that self-generate thermal energy. In some cases utilities offer cash incentives
to install equipment that will use
4
6
their electricity or gas. In two of its locations, local utilities are competing
directly with the Company through unregulated subsidiaries offering steam and/or
cooling.
The Company believes that competition in each of these areas is primarily
based on customers' perceptions of cost savings and reliability of service. The
Company competes to attract and retain customers, and also competes for
contracts and other awards to develop new facilities and systems. A significant
additional factor is the high capital cost involved in constructing a district
energy system. While this factor provides a competitive advantage once the
Company is operating a completed system, high capital costs typically require
the Company to have a significant number of customers, preferably under
long-term contract, prior to undertaking construction of a new cooling or
heating system.
New Projects
The Company competes directly with a large number of well-capitalized
independent power developers for new electric generation projects. Competition
is based on technical skills, financing ability and market reputation, among
other factors.
In the past, the Company has not generally competed for single user
cogeneration power development projects, but focused on multi-customer district
energy systems. Most of the Company's cogeneration facilities are in the center
of cities and relatively smaller and more expensive to build (per unit of
electric generation) than plants built to produce the minimum heat recovery
required to be certified as a Qualifying Facility. The Company selectively
pursues generation opportunities where electricity is a by-product of efficient
heat and cooling production, providing electricity directly to industrial or
commercial customers or selling it to electric utilities.
Internationally, the Company intends to seek selected opportunities in
nations where electricity demand is high and special conditions make fuel
expensive, or where a customer's location or business favor a power project with
high efficiency, reliability and waste heat recovery.
In 1996, the Company entered into joint ventures with certain electric
utilities to be able to offer a complete package of energy commodity and energy
production services, to reach more customers, and to be in a position to
participate in the anticipated deregulated electricity market .
TECHNOLOGY
The Company's research and development efforts have focused on efficient
conversion of fuel to energy and on improved generating, monitoring, automation
and storage technologies. These efforts have resulted in the trigeneration
machine, innovations in chilled water storage and control systems, innovative
applications of standard modular equipment, and various incremental operational
improvements. Expenditures for customer-sponsored or Company-sponsored research
and development are not separately reflected in the Company's financial
statements and the Company believes that if such expenditures were so allocated,
the amounts would not be material. The Company has been granted patents for the
trigeneration machine, its freeze suppression chemical for stratified cold water
storage and a fuel blending system for emissions control. None of these patents
are believed to be material.
ENVIRONMENTAL
The Company's operations are subject to extensive federal, state,
provincial and local environmental laws and regulations that govern, among other
matters, emissions into the air, the discharge of effluents, the use of water,
fuel tank management and the storage, handling and disposal of toxic waste
material. A continuing objective of the Company is to achieve compliance with
these laws and regulations. The Company has invested substantial funds to modify
facilities to comply with applicable environmental laws and plans additional
capital expenditures for these purposes in the future. Approximately $3.1
million was spent in 1996 in connection with environmental compliance, most of
which is included in capital expenditures. The Company expects to spend
approximately $4.0 million in the aggregate for similar capital programs in 1997
5
7
through 1999. Additional amounts to be spent for environmental control
facilities in future years will depend on new laws and regulations and other
changes in environmental concerns and legal requirements.
EMPLOYEES
As of December 31, 1996 the Company had approximately 651 employees, 581 of
whom were in the operating subsidiaries and 70 at the corporate headquarters.
The Company has collective bargaining agreements with the International Union of
Operating Engineers (Local 877 in Boston, Local 30 in Nassau County, and Local
68, 68A and 68B in Trenton) and Local 100 of the Canadian Union of Operating
Engineers in London, Ontario. These agreements cover 46, 25, 22 and 7 employees,
respectively, and expire in May 1997, April 1999, February 1997 and August 1998,
respectively. The Company believes that its relations with its employees are
good.
ITEM 2. PROPERTIES
The following table shows the material properties owned or leased by
Trigen's operating subsidiaries:
LOCATION FACILITY DESCRIPTION OWNED/LEASED
- --------------------------------------- ------------------------------ ---------------------
Baltimore (Spring Gardens) Steam Owned
Baltimore (Saratoga) Steam Owned
Baltimore (Central Avenue) Steam Owned
Boston (Kneeland) Steam Owned
Boston (Scotia) Steam Owned
Chicago (McCormick Place)(1) Trigeneration 25-year leasehold
Colorado (Golden)(2) Cogeneration Owned
Kansas City Cogeneration Owned
London, Ontario Trigeneration Owned
Nassau County (Uniondale) Trigeneration Owned
Nassau County (Central Utility Plant) Steam and Chilled Water 25-year leasehold
Nassau County (Medical Center Plant) Steam and Chilled Water 25-year leasehold
Oklahoma City Trigeneration Owned
Philadelphia (Schuylkill) Cogeneration 50-year leasehold
Philadelphia (Edison) Steam Owned
Philadelphia (Willow Street)(3) Steam Owned
Philadelphia (Petro Site) Oil Terminal and Storage Site Owned
Prince Edward Island (Charlottetown) Cogeneration Owned
South Deerfield, Massachusetts (Ewing) Turbine Cogeneration Systems Lease month to month
St. Louis (Ashley Street)(4) Steam Owned
St. Louis (Cass Street)(4) Possible Future Facility Owned
Trenton Trigeneration 99-year leasehold
Tulsa Trigeneration Owned
Turners Falls, Massachusetts (Ewing) Under Construction Owned
- ---------------
(1) This facility is leased by a joint venture with Peoples Energy Corporation.
(2) This facility is owned by a joint venture with Nations Energy Corporation, a
wholly-owned subsidiary of Tucson Electric Power Company.
(3) This facility is inactive.
(4) The steam distribution system associated with this facility is leased from
the Solid Waste Management and Development Corporation, a Missouri
not-for-profit corporation organized in the City of St. Louis.
6
8
See Footnote 11 to the consolidated financial statements of the Company
regarding assets pledged as security under the Company's financing agreements.
The Company leases approximately 16,986 square feet in White Plains, New
York which houses its executive offices, financial, engineering, marketing,
legal and data processing staffs. The term of the lease extends through March
31, 2000 and the annual rent due thereunder is approximately $333,481. The
Company believes that these facilities are adequate to meet its needs for the
foreseeable future, and that suitable replacement space is readily available.
ITEM 3. LEGAL PROCEEDINGS
Oklahoma Litigation
In August 1996, the Company's subsidiary, Trigen-Oklahoma City Energy
Corporation, commenced an antitrust action in Federal District Court in Oklahoma
City seeking injunctions and $21 million in damages from the local utility,
Oklahoma Gas and Electric Company ("OG&E"). The action was commenced following
many years of questionable anti-competitive actions against Trigen-Oklahoma City
Energy Corporation by OG&E, culminating in criminal indictments being brought
against two OG&E officials for allegedly bribing Oklahoma elected officials to
breach Trigen-Oklahoma City Energy Corporation contracts. OG&E has
counterclaimed for $5 million in damages, claiming that OG&E has been slandered
by the commencement of the action. Pretrial discovery is currently being
conducted. This case is not expected to come to trial before the end of 1997.
Legal expenses through December 31, 1996 were approximately $200,000.
Other Litigation
The Company is subject from time to time to various other claims that arise
in the normal course of business, and the Company believes that the outcome of
these matters (either individually or in the aggregate) will not have a material
adverse effect on the business results of operation or financial condition of
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol TGN. The Company's initial public offering of Common Stock occurred
on August 12, 1994 at $15.75 per share. As of March 24, 1997 there were
approximately 1,858 shareholders of record.
The following table sets forth the high and low sales prices for the
Company's Common Stock for the periods indicated:
HIGH LOW
---- ---
1996
First Quarter.......................................................... 21 3/4 18 1/2
Second Quarter......................................................... 22 1/4 18 1/8
Third Quarter.......................................................... 22 1/2 18
Fourth Quarter......................................................... 32 1/4 21 5/8
1995
First Quarter.......................................................... 22 1/2 19 1/2
Second Quarter......................................................... 20 16 1/4
Third Quarter.......................................................... 22 3/8 17 3/8
Fourth Quarter......................................................... 21 5/8 16 3/4
During 1996 and 1995, the Company declared dividends of $0.14 per share of
Common Stock.
7
9
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data for the
Company and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements of the Company, including the notes thereto, appearing
elsewhere in this Annual Report:
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
1996 1995 1994 1993(1) 1992
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Total revenues..................... $243,634 $198,710 $185,627 $ 90,578 $ 70,552
Operating income................... 43,138 37,038 29,718 17,100 12,767
Interest expense................... 18,840 19,890 16,657 9,448 8,135
Income before extraordinary loss... 14,051 10,564 8,561 4,325 3,248
Extraordinary loss on
extinguishment of long-term debt,
net of tax....................... 1,943 -- -- 4,500 --
Net income (loss).................. 12,108 10,564 8,561 (175) 3,248
Per common share:
Cash dividends................... .14 .14 .07 -- --
Income before extraordinary
loss.......................... 1.21 .93 .89(2) .51(2) .38(2)
Net income (loss)................ $ 1.04 $ .93 $ .89(2) $ (.02)(2) $ .38(2)
- ---------------
(1) Includes operations of UTC for the period from December 1, 1993 through
December 31, 1993.
(2) Restated to reflect an approximate 26 for 1 stock split effective August 10,
1994.
AS OF DECEMBER 31,
-------------------------------------------------------------
1996 1995 1994 1993(1) 1992
-------- -------- -------- -------- --------
(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital (deficit).......... $ (5,536) $ 282 $ 9,801 $(14,600) $ 848
Property, plant and equipment,
net.............................. 374,549 341,188 311,418 300,591 156,941
Total assets....................... 494,436 454,906 424,330 402,669 191,167
Long-term debt..................... 226,487 223,371 220,725 228,320 126,202
Other long-term liabilities........ 7,755 9,229 11,546 20,983 2,696
Stockholders' equity............... 140,534 118,830 109,354 61,846 42,521
- ---------------
(1) Includes UTC balances effective December 1, 1993.
Certain statements in this Annual Report that do not reflect historical
information are forward-looking statements. These include statements about
energy markets in 1997; cost reduction targets; return on capital goals;
development, production and acceptance of new products and process technologies;
ongoing and planned capacity additions and expansions and joint ventures.
Important factors that could cause actual results to differ materially from
those discussed in such forward-looking statements include: supply/demand
balance for the corporation's products, competitive pricing pressures, weather
patterns, changes in industry laws and regulations, competitive technology
positions and failure to achieve the corporation's cost reduction targets or
complete construction projects on schedule.
ITEM 7. 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 Company, including the notes thereto,
appearing elsewhere in this Annual Report.
8
10
GENERAL
The highlights of operations in 1996 and 1995 included the following:
- Formation of two separate independent joint ventures with Cinergy Corp.
and Hydro-Quebec.
- Acquisition of Ewing Power Systems, Inc. in 1996, for $1.0 million of
common stock.
- A wholly-owned subsidiary of the Company became a one-third partner in
the Grays Ferry Cogeneration Facility in 1996.
- Prepayment of $7.0 million of subordinated debt in 1996.
- Acquisition of two energy facilities in 1995, the energy production
assets of Coors Brewing Company and Coors Energy Company ("Coors") and
the energy production facilities and distribution assets in
Charlottetown, Prince Edward Island ("PEI").
- Completion of a $62.5 million revolving credit facility in 1995.
The following tables set forth certain historical operating data (expressed
as a percentage of total revenues) for the periods shown:
1996 1995 1994
--------------------- --------------------- --------------------
REVENUE REVENUE REVENUE
------------ ------------ ------------
AMOUNT % UNITS AMOUNT % UNITS AMOUNT % UNITS
------ --- ------ ------ --- ------ ------ --- -----
(DOLLARS IN MILLIONS, UNITS IN THOUSAND MW HOURS)
Thermal energy(1).............. $187.7 77 5,400 $156.2 79 4,327 149.0 80 3,836
Electricity.................... 44.7 18 860 34.3 17 693 33.2 18 574
Fees and other revenues(2)..... 11.2 5 -- 8.2 4 -- 3.4 2 --
------ --- ----- ------ --- ----- ------ --- -----
Total.......................... $243.6 100 6,260 $198.7 100 5,020 $185.6 100 4,410
====== === ===== ====== === ===== ====== === =====
- ---------------
(1)Some steam is used by customers in almost all systems for production of
chilled water; such use for cooling is especially significant in Nassau,
Boston and London, Ontario.
(2) Includes development fees, energy services, cold storage warehouse revenues
and other revenues.
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
----- ----- -----
Total revenues.............................................. 100.0% 100.0% 100.0%
Fuel and consumables........................................ 48.6 42.6 44.7
Production and operating costs.............................. 18.0 20.2 21.4
Depreciation................................................ 3.1 5.7 5.9
----- ----- -----
Cost of sales............................................... 69.7 68.5 72.0
General and administrative.................................. 12.6 12.9 12.0
----- ----- -----
Operating income............................................ 17.7 18.6 16.0
Interest expense............................................ 7.7 10.0 9.0
Income before income tax expense and extraordinary loss..... 9.6 9.0 7.8
The Company's rate structures for thermal energy generally include fixed
and variable components. The rate structures are intended to cause revenues to
match the Company's costs of providing capacity, including projected debt
service and return on equity, thermal losses in the distribution network, taxes,
labor and scheduled maintenance and repair. The capacity component, which is
independent of usage in the period, generally includes cost escalation
provisions. The rate structures also contain a charge, which varies with usage
during the period, and which is intended to cover directly variable costs, so as
to pass through to customers the Company's cost of fuel. The Company accounts
for its operating expenses based on the average cost to produce and deliver
thermal energy or electricity, on a system by system basis, over the course of
the year.
9
11
The Company has been able to reduce its cost of sales as a percentage of
revenues since 1994 by achieving production and distribution efficiencies,
principally as a result of process optimization and automation of plant control
equipment.
RESULTS OF OPERATIONS -- 1996 COMPARED TO 1995
The Company's revenues and operating profit are subject to seasonal
fluctuation due to peak heating demand in the winter and peak cooling demand in
the summer. The acquisition of UTC, which sold only steam, causes greater
concentration of the Company's revenues in cold months. The Company's strategy
of adding cooling, electricity and energy services will, if successful, reduce
the concentration of revenues in cold months in the future.
Revenues
Revenues were $243.6 million in 1996, an increase of $44.9 million, from
$198.7 million in 1995, due principally to two acquisitions consummated in
September 1995, which contributed $24.7 million of the increase, a colder winter
in 1996 compared to 1995 and the increased price of fuel.
Operating Expenses
The Company's cost of sales includes fuel and consumables, production and
operating costs and depreciation expense and is affected primarily by its costs
for fuel, chemicals, water and other commodities. Because the Company's rates
typically enable it to pass changes in its fuel and most commodity costs to the
customer, such changes have little impact on operating income. The Company's
cost of sales and its operating income are affected by its efficiency in
converting fuel to steam, hot water, electricity and chilled water and its
ability to minimize costs through automation and enhanced process control. Cost
of sales as a percentage of revenues increased from 68.5% of revenues in 1995 to
69.7% of revenues in 1996 due to the increased cost of fuel, partially offset by
the reduction in depreciation expense related to a net gain of $6.4 million from
a condemnation award granted to the Company for one of its Boston, Massachusetts
facilities and labor productivity improvements.
Fuel and consumables' costs were $118.3 million, or 48.6% of revenues, in
1996, compared to $84.6 million, or 42.6% of revenues, in 1995, an increase of
$33.7 million. This increase is due to the impact of the two acquisitions ($13.5
million), and the increased price of fuel.
Production and operating costs are those costs of operating the Company's
facilities other than fuel and consumables, and include labor and supervisory
personnel, repair and maintenance costs and plant operating costs. Production
and operating costs increased to $44.0 million in 1996 from $40.1 million in
1995, and as a percentage of revenues decreased to 18.0% in 1996 compared to
20.2% in 1995. The increase of $5.1 million resulting from the two acquisitions
was offset by cost savings, labor productivity improvements and an arbitration
award of $1.0 million, net of expenses.
Depreciation expense was $7.6 million in 1996 compared to $11.4 million in
1995, a decrease of $3.8 million, due to a net gain of $6.4 million from a
condemnation award granted to the Company for one of its Boston, Massachusetts
facilities, offset by the two acquisitions ($0.8 million), increased capital
expenditures and the write-off of certain assets of $3.7 million in 1995.
General and administrative expenses represent on-site management and other
overhead costs incurred for existing operations, as well as the Company's
marketing, development and corporate management costs. General and
administrative costs increased to $30.6 million, or 12.6% of revenues, in 1996,
from $25.6 million, or 12.9% of revenues, in 1995. This is primarily due to
additional staff and development costs, legal costs and the impact of the two
acquisitions ($1.6 million).
Operating Income
Operating income was $43.1 million, or 17.7% of revenues, in 1996 compared
to $37.0 million, or 18.6% of revenues, in 1995. Increased general and
administrative expenses offset by cost savings, primarily from
10
12
efficiency and labor productivity, increased revenues, lower depreciation
expense due to the condemnation award, and the impact of the two acquisitions
($3.7 million), resulted in improved operating income of $6.1 million.
Interest Expense; Other Income
Interest expense decreased to $18.8 million in 1996 from $19.9 million in
1995, primarily due to lower average interest rates.
Income Tax Expense
The Company's effective tax rate is determined primarily by the federal
statutory rate of 35%, and state and local income taxes. The effective income
tax rate of 40.4% (after the income tax benefit from the extraordinary loss) is
consistent with the rate in 1995.
Extraordinary Loss
The Company prepaid $7.0 million of subordinated debt in the third quarter
of 1996, which resulted in an extraordinary loss of $1.9 million, net of income
taxes of $1.1 million.
RESULTS OF OPERATIONS -- 1995 COMPARED TO 1994
Revenues
During 1995, a wholly owned subsidiary of the Company, in partnership with
Nations Energy Corporation, purchased the energy production assets of Coors
Brewing Company in Golden, Colorado to provide steam and electricity to Coors
under a 25 year contract. Trigen has a 51% interest in the partnership.
In 1995, the Company also acquired, through a subsidiary, the energy
production facilities and distribution assets in Charlottetown, Prince Edward
Island ("PEI"). Under a thirty-year contract, the Company will provide the
thermal energy needs of the Province of PEI, Queen Elizabeth Hospital and the
University of PEI.
Revenues were $198.7 million in 1995, an increase of $13.1 million from
$185.6 million in 1994, principally due to the impact in 1995 of the two
acquisitions, which contributed revenues of $11.0 million.
Operating Expenses
Cost of sales as a percentage of revenues decreased from 72.0% in 1994 to
68.5% in 1995, primarily due to the Company's efforts in improving fuel
efficiency and reduction of costs from enhanced automation.
Fuel and consumable costs were $84.6 million, or 42.6% of revenues in 1995,
compared to $83.0 million, or 44.7% of revenues in 1994, an increase of $1.6
million. The impact of the two acquisitions increased these costs by $5.3
million, which was offset by higher efficiency and lower average fuel costs.
Production and operating costs increased to $40.1 million in 1995 from
$39.7 million in 1994. The increase resulting from the two acquisitions of $2.4
million was offset by cost savings and labor productivity improvements.
Production and operating costs as a percentage of revenues were 20.2% in 1995
and 21.4% in 1994.
Depreciation expense was $11.4 million in 1995 compared to $10.9 million in
1994, an increase of $0.5 million due to additional capital expenditures, a full
year's depreciation of assets put in service during 1994 and the write-off of
certain assets. Included in depreciation expense is the write-off of certain
assets of $3.7 million, and a gain of $4.8 million related to a condemnation
award received for one of its Boston, MA facilities.
General and administrative costs increased to $25.6 million, or 12.9% of
revenues, in 1995, from $22.2 million in 1994, or 12.0% of revenues. This is
primarily due to additional staff and development costs and the impact of the
two acquisitions of $0.7 million.
11
13
Operating Income
Operating income was $37.0 million, or 18.6% of revenues, in 1995 compared
to $29.7 million, or 16.0% of revenues in 1994. Cost savings, primarily from
efficiency and labor productivity, and the impact of the two acquisitions in
1995 of $2.3 million, resulted in improved operating income of $7.3 million.
Interest Expense; Other Income
Interest expense increased to $19.9 million in 1995 from $16.7 million in
1994, primarily due to higher average interest rates on indebtedness.
Income Tax Expense
The Company's effective tax rate is determined primarily by the federal
statutory rate of 35%, and state and local income taxes. The effective income
tax rate of 40.9% in 1995 is consistent with the rate in 1994.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow
The Company had cash and cash equivalents of $25.3 million at December 31,
1996 and $20.2 million at December 31, 1995, an increase of $5.1 million. The
Company had short-term indebtedness outstanding of $18.5 million at December 31,
1996 compared to $14.2 million at December 31, 1995, an increase of $4.3
million. These changes, in addition to the results of investing and financing
activities, were due to the use of cash on hand at December 31, 1995, and cash
generated from operations during the year.
Cash provided by operating activities was $28.0 million in 1996, compared
to $14.1 million in 1995. Net cash used in investing activities was $42.7
million in 1996, primarily due to capital expenditures of $47.6 million. Net
cash provided by financing activities was $19.8 million in 1996 principally
reflecting debt proceeds of $46.7 million to fund capital expenditures and the
issuance of common stock of $6.8 million, offset by debt repayments of $28.9
million.
The Company had cash and cash equivalents and marketable securities of
$20.2 million at December 31, 1995 and $36.2 million at December 31, 1994, a
decrease of $16.0 million. The Company had no marketable securities at December
31, 1995. The Company had short-term indebtedness outstanding of $14.2 million
at December 31, 1995 compared to $15.6 million at December 31, 1994, a reduction
of $1.4 million. These changes were primarily due to the sale of $16.4 million
of marketable securities and the two acquisitions during 1995, capital
expenditures, the use of cash on hand at December 31, 1994 and cash generated
from operations during the year.
Cash provided by operating activities was $14.1 million in 1995, compared
to $12.3 million in 1994. Net cash used in investing activities was $16.8
million in 1995 primarily due to the two acquisitions aggregating $18.5 million
and capital expenditures of $18.5 million, offset by the sale of marketable
securities of $16.4 million and proceeds from the $5.3 million condemnation
award. Net cash provided by financing activities was $3.0 million in 1995,
principally reflecting debt proceeds.
During 1996 and 1995, the Company declared dividends of $0.14 per share of
common stock at the rate of $.035 per share per quarter.
The Company believes that cash provided by operations net of debt service,
cash balances at December 31, 1996 and available credit facilities, will be
sufficient to finance its capital program, several new development projects and
continuing quarterly dividends.
12
14
At December 31, 1996, the Company's long-term debt (including the current
portion) was $240.0 million or 57.7% of total capital, at a weighted average
annual interest rate of approximately 6.55% (based on three-month LIBOR of 5.66%
per year) and an average remaining maturity of 6.3 years.
On September 30, 1996, the Company prepaid $7.0 million of subordinated
debt. The prepayment was accomplished through the payment of cash and the
issuance of 200,000 shares of the Company's stock to the lender. In repaying
this debt, costs of $3.0 million ($1.9 million net of income tax benefit), were
incurred by the Company and were accounted for as an extraordinary loss. The
Company also issued 240,000 shares of stock to its parent, Cofreth American
Corporation.
At December 31, 1995, the Company's long-term debt (including the current
portion) was $230.8 million or 60.6% of total capital, at a weighted average
annual interest rate of approximately 7.24% (based on three-month LIBOR of 5.65%
per year) and an average remaining maturity of 7.0 years.
The Company has incurred most of this indebtedness at the subsidiary level
in order to finance the acquisition or construction of its energy systems.
Certain of the Company's debt is variable rate or rate capped. Based upon
the debt balances at December 31, 1996, a change in the LIBOR rate of .25% would
have a corresponding change in interest expense of approximately $400,000 per
year when three-month LIBOR is under 6.25% ranging to approximately $350,000 per
year when three-month LIBOR is over 7.50%. Three-month LIBOR at December 31,
1996 was 5.66%.
Payments to Parent Company
Certain of the Company's debt agreements restrict payments by its
subsidiaries, which are the primary obligors, to the Company, unless the
payments are for specified purposes or the subsidiary meets certain financial
covenants. Trigen's cash is derived from management fees and costs recovered
from its subsidiaries, distributions by its subsidiaries, and, at times,
repayment to Trigen from proceeds of long-term financing obtained by the
subsidiaries for funds previously advanced to subsidiaries.
Restricted cash and cash equivalents of $17.9 million at December 31, 1996
included $6.6 million for debt service and reserve funds, $2.1 million for
operations and maintenance reserves, $5.9 million available for subsidiary
operating purposes and $3.3 million for certain construction projects.
Restricted funds may be invested only in certain securities. At December 31,
1996, the Company had unused lines of credit available consisting of $0.7
million under a UTC revolving credit facility and $28.5 million under a
corporate revolving credit facility.
Environmental Expenditures
The Company's facilities are subject to governmental requirements with
respect to the discharge of materials and otherwise relating to protection of
the environment. The Company spent approximately $3.1 million and $2.5 million
in 1996 and 1995, respectively, to comply with these requirements, most of which
is included in capital expenditures, and estimates that its expenditures for
environmental compliance in 1997 through 1999 will be approximately $4.0 million
in the aggregate, most of which will be capital expenditures. These expenditures
include improvements at certain facilities for air emission control equipment as
required by the United States Clean Air Act (the "Clean Air Act"), wastewater
discharge control equipment, asbestos control and replacement of CFC
refrigerants.
Management expects that the cost of compliance with existing environmental
requirements will not have a material adverse effect on the Company's liquidity
or financial condition.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and financial statement schedules that are filed
as part of this Annual Report begin on page F-1 hereof.
13
15
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Information concerning directors and executive officers of Trigen is hereby
incorporated by reference from Trigen's definitive proxy statement which will be
filed with the Commission within 120 days after the close of the fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation is hereby incorporated by
reference from Trigen's definitive proxy statement which will be filed with the
Commission within 120 days after the close of the fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners and
management is hereby incorporated by reference from Trigen's definitive proxy
statement which will be filed with the Commission within 120 days after the
close of the fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is
hereby incorporated by reference from Trigen's definitive proxy statement which
will be filed with the Commission within 120 days after the close of the fiscal
year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) The Financial Statements and Financial Statement Schedules
listed under "Index to Financial Statements and Financial Statement Schedules"
on page F-1 hereof are filed as part of this Annual Report.
(a) (3) The Exhibits listed under "Index of Exhibits" on pages E-1 and E-2
hereof are filed as part of this Annual Report.
(b) Reports on Form 8-K. None
14
16
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
PAGE
----
REGISTRANT'S FINANCIAL STATEMENTS
Independent Auditors' Report........................................................ F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995........................ F-3
Consolidated Statements of Operations for the Years Ended December 31, 1996, 1995
and 1994......................................................................... F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995
and 1994......................................................................... F-5
Consolidated Statements of Stockholders' Equity for the Years Ended December 31,
1996, 1995 and 1994.............................................................. F-6
Notes to Consolidated Financial Statements.......................................... F-7
REGISTRANT'S FINANCIAL STATEMENT SCHEDULES
I Condensed Financial Information of the Registrant as of December 31, 1996 and
1995 and for the Years Ended December 31, 1996, 1995 and 1994.................... S-1
II Valuation and Qualifying Accounts for the Years Ended December 31, 1996, 1995 and
1994............................................................................. S-6
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or notes
thereto.
F-1
17
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Trigen Energy Corporation:
We have audited the accompanying consolidated balance sheets of Trigen
Energy Corporation and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1996. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedules as listed in the accompanying
index. These consolidated financial statements and financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Trigen
Energy Corporation and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
As discussed in note 2 to the consolidated financial statements, in 1995
the Company adopted the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of".
KPMG PEAT MARWICK LLP
March 24, 1997
Stamford, Connecticut
F-2
18
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
1996 1995
-------- --------
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 14,598 $ 9,984
Accounts receivable:
Trade (less allowance for doubtful accounts of $1,128 in 1996 and
$697 in 1995).................................................... 35,436 36,275
Other............................................................. 3,479 1,922
Inventories.......................................................... 6,900 6,239
Prepaid costs and other current assets............................... 7,346 6,890
-------- --------
Total current assets......................................... 67,759 61,310
Non-current cash and cash equivalents.................................. 10,678 10,191
Property, plant and equipment, net..................................... 374,549 341,188
Investment in non-consolidated partnerships............................ 8,781 6,548
Intangible assets, net................................................. 14,390 15,088
Deferred costs and other assets, net................................... 18,279 20,581
-------- --------
Total assets................................................. $494,436 $454,906
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................... $ 7,800 $ 5,924
Accrued fuel......................................................... 14,394 16,806
Accrued expenses and other current liabilities....................... 19,102 16,718
Short-term debt...................................................... 18,500 14,165
Current portion of long-term debt.................................... 13,499 7,415
-------- --------
Total current liabilities.................................... 73,295 61,028
Long-term debt......................................................... 226,487 223,371
Other long-term liabilities............................................ 7,755 9,229
Deferred income tax liabilities........................................ 29,597 25,222
-------- --------
Total liabilities............................................ 337,134 318,850
Minority interests in consolidated entities............................ 16,768 17,226
Stockholders' equity:
Preferred stock -- $.01 par value (authorized and unissued 15,000,000
shares)........................................................... -- --
Common stock -- $.01 par value (authorized 60,000,000 shares; issued
12,010,597 shares in 1996, 11,416,418 shares in 1995)............. 120 114
Additional paid-in capital........................................... 112,836 100,788
Retained earnings.................................................... 28,538 18,070
Treasury stock, at cost (46,140 shares in 1996, 7,268 shares in
1995)............................................................. (960) (142)
-------- --------
Total stockholders' equity................................... 140,534 118,830
-------- --------
Total liabilities and stockholders' equity................... $494,436 $454,906
======== ========
See accompanying notes to consolidated financial statements.
F-3
19
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
1996 1995 1994
-------- -------- --------
REVENUES
Energy revenues.......................................... $232,403 $190,536 $182,266
Fees earned and other.................................... 11,231 8,174 3,361
-------- -------- --------
Total revenues................................... 243,634 198,710 185,627
OPERATING EXPENSES
Fuel and consumables..................................... 118,304 84,565 83,049
Production and operating costs........................... 43,959 40,089 39,668
Depreciation............................................. 7,595 11,429 10,948
General and administrative............................... 30,638 25,589 22,244
-------- -------- --------
Total operating expenses......................... 200,496 161,672 155,909
OPERATING INCOME........................................... 43,138 37,038 29,718
Other income (expense):
Interest expense......................................... (18,840) (19,890) (16,657)
Other income, net........................................ 1,603 1,816 1,612
-------- -------- --------
Income before minority interests, income tax expense and
extraordinary loss....................................... 25,901 18,964 14,673
Minority interests in earnings of consolidated entities.... (2,598) (1,076) (163)
-------- -------- --------
Income before income tax expense and extraordinary loss.... 23,303 17,888 14,510
Income tax expense......................................... 9,252 7,324 5,949
-------- -------- --------
INCOME BEFORE EXTRAORDINARY LOSS........................... 14,051 10,564 8,561
Extraordinary loss on extinguishment of long-term debt, net
of income tax benefits................................... 1,943 -- --
-------- -------- --------
NET INCOME................................................. $ 12,108 $ 10,564 $ 8,561
======== ======== ========
Net income per share:
Income before extraordinary loss......................... $ 1.21 $ .93 $ .89
Extraordinary loss....................................... (0.17) -- --
-------- -------- --------
Net income............................................... $ 1.04 $ .93 $ .89
======== ======== ========
Average shares outstanding................................. 11,612 11,390 9,619
======== ======== ========
Dividends per share........................................ $ .14 $ .14 $ .07
======== ======== ========
See accompanying notes to consolidated financial statements.
F-4
20
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(ALL AMOUNTS IN THOUSANDS)
1996 1995 1994
------- ------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $12,108 $10,564 $ 8,561
Reconciliation of net income to cash provided by operating
activities:
Depreciation expense..................................... 7,595 11,429 10,948
Amortization expense..................................... 2,738 2,641 2,060
Deferred income tax provision............................ 4,871 4,437 4,933
Provision for doubtful accounts.......................... 664 208 448
Minority interests.......................................... 2,598 1,076 163
Changes in assets and liabilities, net of effects of
acquisitions:
Accounts receivable...................................... (984) (12,532) 3,705
Inventories and other current assets..................... (1,613) (1,286) (1,271)
Accounts payable and other current liabilities........... 1,848 3,138 (6,198)
Non-current operating assets and liabilities............. (1,786) (5,550) (11,039)
------- ------- -------
Net cash provided by operating activities........... 28,039 14,125 12,310
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale (purchase) of marketable securities.................... -- 16,361 (16,301)
Proceeds of condemnation award.............................. 6,821 5,265 --
Acquisition of energy facilities............................ -- (18,549) --
Capital expenditures........................................ (47,641) (18,454) (22,920)
Investment in non-consolidated partnerships, net............ (1,911) (1,460) 350
------- ------- -------
Net cash used in investing activities............... (42,731) (16,837) (38,871)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of Initial Public Offering......................... -- -- 39,892
Short-term debt, net........................................ 4,335 (1,435) (16,546)
Proceeds of long-term borrowings............................ 42,384 16,000 --
Payments of long-term borrowings............................ (28,934) (10,197) (7,548)
Sale of interest rate caps.................................. 1,003 -- --
Dividends................................................... (1,640) (1,594) (797)
Issuance of common stock.................................... 6,767 506 --
Repurchase of common stock.................................. (818) -- (148)
Distribution to minority interests.......................... (2,884) -- --
Deferred financing costs.................................... (420) (230) --
------- ------- -------
Net cash provided by financing activities........... 19,793 3,050 14,853
------- ------- -------
Net increase (decrease) in cash and cash equivalents.......... 5,101 338 (11,708)
Cash and cash equivalents at beginning of period.............. 20,175 19,837 31,545
------- ------- -------
Cash and cash equivalents at end of period.................... $25,276 $20,175 $19,837
======= ======= =======
Cash and cash equivalents at end of period:
Current cash and cash equivalents............................. $14,598 $ 9,984 $11,455
Non-current cash and cash equivalents......................... 10,678 10,191 8,382
------- ------- -------
Cash and cash equivalents at end of period.................... $25,276 $20,175 $19,837
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
NON-CASH INVESTING ACTIVITY:
Acquisition of subsidiary................................ $ 1,037 -- --
======= ======= =======
NON-CASH FINANCING ACTIVITY:
Issuance of common stock for acquisition of subsidiary... $ 1,037 -- --
======= ======= =======
Issuance of common stock for extinguishment of long-term
debt.................................................. $ 4,250 -- --
======= ======= =======
See accompanying notes to consolidated financial statements.
F-5
21
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
PREFERRED COMMON COMMON ADDITIONAL TREASURY
STOCK STOCK STOCK PAID-IN STOCK TREASURY RETAINED
SHARES SHARES PAR VALUE CAPITAL SHARES STOCK EARNINGS TOTAL
--------- ---------- --------- ---------- -------- -------- --------- --------
Balances at December 31,
1993..................... -- 8,500,000 $ 85 $ 60,425 -- $ -- $ 1,336 $ 61,846
Initial public
offering............... -- 2,880,000 29 39,863 -- -- -- 39,892
Dividends................ -- -- -- -- -- -- (797) (797)
Repurchase of common
stock.................. -- -- -- -- 7,570 (148) -- (148)
Net income............... -- -- -- -- -- -- 8,561 8,561
--
---------- ---- -------- ------ ----- ------- --------
Balances at December 31,
1994..................... -- 11,380,000 114 100,288 7,570 (148) 9,100 109,354
Issuance of common
stock.................. -- 36,418 -- 500 (302) 6 -- 506
Dividends................ -- -- -- -- -- -- (1,594) (1,594)
Net income............... -- -- -- -- -- -- 10,564 10,564
--
---------- ---- -------- ------ ----- ------- --------
Balances at December 31,
1995..................... -- 11,416,418 114 100,788 7,268 (142) 18,070 118,830
Issuance of common
stock.................. -- 594,179 6 12,048 -- -- -- 12,054
Repurchase of common
stock.................. -- -- -- -- 38,872 (818) -- (818)
Dividends................ -- -- -- -- -- -- (1,640) (1,640)
Net income............... -- -- -- -- -- -- 12,108 12,108
--
---------- ---- -------- ------ ----- ------- --------
Balances at December 31,
1996..................... -- 12,010,597 $ 120 $ 112,836 46,140 $ (960) $ 28,538 $140,534
== ========== ==== ======== ====== ===== ======= ========
See accompanying notes to consolidated financial statements.
F-6
22
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Trigen Energy Corporation (together with its subsidiaries, the "Company")
develops, owns and operates district energy systems in the United States and
Canada. A district energy system ("DES") consists of one or more central
production facilities that generate energy in the form of steam and hot water,
chilled water and/ or by-product electricity for distribution to customers. The
Company currently has ownership interests in and operates 13 district energy
systems.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Changes
In October, 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation". As allowable by SFAS No. 123, the Company elected to
continue following the recognition provisions of Accounting Principles Board
(APB) Opinion No. 25, "Accounting for Stock Issued to Employees" (note 13).
In 1995, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" (note 7).
Principles of Consolidation
The consolidated financial statements include the accounts of Trigen Energy
Corporation ("Trigen" or the "parent company") and all subsidiaries. Significant
intercompany transactions and balances are eliminated. Minority interests are
separately identified in the consolidated financial statements.
Basis of Presentation
Certain reclassifications have been made to the prior years' financial
statements to conform to the 1996 presentation.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue and Cost Recognition
Revenue for energy sold includes both fixed charges and amounts based on
energy delivered. Contract rates are either directly negotiated with the
customer or approved by the applicable regulatory authority. Sales not billed by
month-end are accrued based upon estimated usage. Fees earned are recognized as
services are performed.
Cost of energy sold for each energy system is based on average costs to
produce and deliver either heating, electricity or cooling during the year.
The Company has one customer (Long Island Lighting Company) in Nassau
County, New York which accounted for 12.0%, 13.0% and 14.4% of energy revenues
in 1996, 1995 and 1994, respectively.
F-7
23
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Cash and Cash Equivalents
Cash and cash equivalents include demand deposits and temporary investments
in high-grade instruments readily convertible to cash.
Fuel Expense and Deferred Fuel
The Company's subsidiaries, either as a result of regulation or contractual
agreements with their customers, are allowed to recover all or substantially all
of their fuel costs, which is the Company's largest expense. Certain of these
subsidiaries estimate the future cost of fuel in current contract rates.
Differences between the estimated fuel costs and actual fuel costs are deferred
and subsequently charged to or rebated to the customer through future rate
adjustments.
Inventories
Inventories are comprised principally of fuel, operating supplies and spare
parts. Fuel inventories are stated at cost determined on a first-in, first-out
basis and materials and supplies are stated at average cost.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost. Depreciation is computed
by the straight-line method over the estimated useful lives commencing when
assets, or major components thereof, are placed in service. Significant renewals
or betterments are capitalized. Maintenance and repair costs are expensed as
incurred.
Construction in Process
Expenditures during the construction period of major assets are
capitalized. Interest costs incurred to fund construction are capitalized
commencing with the first expenditure of funds for an asset and until the asset
is placed in service, or until construction is completed if sooner. For
tax-exempt debt designated for construction costs, interest cost is capitalized
net of interest earned. Capitalized interest was $328,000, $129,000 and $657,000
during the years ended December 31, 1996, 1995 and 1994, respectively.
Deferred Costs and Other Assets
Included in deferred costs and other assets are capitalized costs
associated with debt issuances, development projects and other non-current
assets. Costs incurred to issue debt are capitalized and amortized over the debt
term using methods that approximate the interest method. Costs incurred in
developing energy generation facilities prior to the execution of binding
contracts are accumulated by project and included in the acquisition cost or as
construction in process for that project.
Intangible Assets
Included in intangible assets are the excess of the cost of the Company's
investment in Trigen-Trenton Energy Company, L.P. ("TEC") over the fair value of
acquired assets, a non-compete agreement with the former majority owner of
United Thermal Corporation ("UTC") and certain affiliated companies, and certain
organization costs. The excess of cost of the investment in TEC over the fair
value of acquired assets is being amortized over the partnership term. The
non-compete agreement is being amortized on a straight line basis over the
fifteen year term of the agreement. The Company continuously assesses the
recoverability of these intangible assets by evaluating whether the amortization
of the intangible asset balances over the remaining lives can be recovered
through expected future results. Expected future results are based on projected
undiscounted operating results before the effects of intangible amortization.
The amount of impairment, if any, is measured based on projected discounted
future results, using a discount rate reflecting the Company's average cost of
funds. Organization costs are capitalized and amortized over 5 years.
F-8
24
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Foreign Currency Translation
Income and expenses of Canadian subsidiaries are translated to U. S.
dollars at rates in effect during the year, and assets and liabilities at year
end exchange rates. The impact of the difference between rates at year end and
during the year was not significant.
Financial Instruments
Financial instruments are used by the Company to hedge financial risk
caused by fluctuating interest rates and foreign currency exchange rates. The
net amounts due or receivable under interest rate swap and cap agreements that
hedge interest rates are charged to interest expense over the terms of the
agreements. Gains and losses on foreign currency forward exchange contracts used
to hedge firm commitments are deferred and recognized as part of the related
foreign currency transactions.
Income Taxes
The Company uses the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities, and their
respective tax bases. Deferred income tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Other Income, Net
Other income, net consists of interest income and other non-operating
income.
Net Income Per Share
Net income per share is calculated using the weighted average number of
shares of Common Stock outstanding each year. The calculations did not include
shares from the assumed conversion of Subordinated Debt because the effect was
antidilutive, or shares from the assumed exercise of outstanding stock options
because the effect is not significant.
3. ACQUISITIONS
Trigen-Colorado
Trigen-Colorado, a wholly owned subsidiary of the Company, and a subsidiary
of Nations Energy Corporation ("Nations") of Orlando, Florida formed a
partnership to purchase the energy production assets of Coors Brewing Company
and Coors Energy Company ("Coors") and to provide steam and electricity to Coors
over a 25 year contract period. On September 14, 1995, the partnership purchased
the assets for $22 million. The acquisition was accounted for under the purchase
method. Trigen-Colorado has a 51% interest in and has consolidated the results
of operations of this partnership since the date of acquisition.
Prince Edward Island
On August 31, 1995, the Company purchased for $7.3 million the energy
production facilities and distribution assets in Charlottetown, Prince Edward
Island ("PEI") from the PEI Energy Corporation and the government of PEI. In
addition, the Company has committed to invest approximately $23 million to
integrate and upgrade the facilities. In exchange, the Province of PEI, Queen
Elizabeth Hospital and the University of PEI will purchase their thermal energy
needs under thirty year contracts. The acquisition was accounted for under the
purchase method and the results of operations of PEI have been included in the
accompanying consolidated statement of operations since the date of acquisition.
F-9
25
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. PARTNERSHIPS
Trigen-Trenton Energy Company, L.P. ("TEC")
TEC is a limited partnership which built and operates a district energy
system in Trenton, New Jersey. A wholly-owned subsidiary of the Company is the
managing general partner. The partnership term expires January 2017.
Partnership income or loss, as well as cash distributions, are allocated
pursuant to the partnership agreement. One limited partner is entitled to
distributions prior to any other partner. At December 31, 1996, this partner's
cumulative priority claim on cash was $847,000. Remaining annual preferential
payments are between $202,000 and $292,000 through 2002, then $233,000 per year
through 2017.
TEC has long-term contracts, generally expiring in 2007 and beyond, to sell
the electric, heat and chilled water output of the facility. The land on which
the facility is located is leased through December 2081 with an option to extend
through 2180. Minimum annual rent is $180,000.
Trigen-Peoples District Energy Company ("T-P")
T-P is a general partnership formed in December 1992 to construct, own and
operate a district energy system (the "Chicago System") serving McCormick Place
Exposition Center in Chicago. The partners are wholly owned subsidiaries of
Peoples Energy Corporation ("Peoples") and Trigen. Each partner has a 50%
interest in profits and losses and an equal vote on partnership matters, and is
required to make capital contributions in cash to meet T-P's needs. The
partnership term expires December 2042. The partnership commenced operations
November 1993, generating results of operations and cash flow of which the
Company is entitled to a 50% share. The Company's investment in T-P is accounted
for using the equity method and its share of the earnings of the partnership and
its management fee for services provided to the partnership were $569,000,
$575,000 and $473,000 in 1996, 1995, and 1994, respectively, and are included in
fees earned and other revenues.
T-P is constructing the Chicago System, and will own and operate it,
pursuant to an agreement with the Metropolitan Pier and Exposition Authority,
Chicago ("MPEA"). Certain components of the Chicago System have been purchased
by the MPEA and leased back to T-P. Each partner provided an $18 million letter
of credit in favor of T-P, which drew equally on the letters of credit to
provide construction funds, such that the balance of each letter of credit at
December 31, 1996 was $5.0 million. T-P obtained long-term financing for the
Chicago System in August 1995. Each partner is also maintaining a $2 million
letter of credit in favor of the MPEA to cover the costs, if any, to cure
defaults by the partnership under its heating and cooling service contract with
the MPEA.
Trigen-Nations District Energy Company ("T-N")
T-N is a general partnership formed in September 1995 to operate, own and
upgrade the Coors' plant in Golden, Colorado. The partners are wholly-owned
subsidiaries of Nations and Trigen. The Trigen subsidiary has a 51% interest in
the partnership. The partnership owns all of the existing electric and steam
generating facilities and support facilities, including a 25 mile gas pipeline
to Coors Brewing Company in Jefferson County, Colorado. The partnership term
expires September 14, 2020.
Trigen-Schuylkill Energy Corporation ("Trigen-Schuylkill")
On March 11, 1996, a wholly-owned subsidiary of the Company,
Trigen-Schuylkill, became a one-third partner in the Grays Ferry Cogeneration
Facility. Under the terms of the Partnership Agreement, in addition
F-10
26
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to its initial equity investment, the Company is required to contribute $10
million when construction is completed, which is expected in the fourth quarter
of 1997.
5. RESTRICTED FUNDS
Restricted funds at December 31 were (all amounts in thousands):
1996 1995
--------------------- ---------------------
CURRENT NON-CURRENT CURRENT NON-CURRENT
------- ----------- ------- -----------
Restricted.................................... $ 7,180 $10,678 $ 4,399 $10,191
Unrestricted.................................. 7,418 -- 5,585 --
------- ------- ------ -------
Cash and cash equivalents..................... $14,598 $10,678 $ 9,984 $10,191
======= ======= ====== =======
Under the terms of the Company's debt agreements, a substantial portion of
the cash of operating subsidiaries is restricted in use, first to paying the
operating costs of the respective subsidiary, then its debt service obligations,
in the priority stipulated in the respective debt agreements.
Under the terms of the debt agreements, payments from the subsidiaries to
affiliated companies, including the parent company, are permitted, provided no
default exists or would be created by the payment and either (a) the payment is
to reimburse the parent company for management costs as permitted by the
respective debt agreement or (b) the subsidiary meets financial tests, which may
include debt coverage, working capital or equity tests, as specified in the
respective agreement. Cash available to the parent company without restriction
as to use was $7.4 million at December 31, 1996 and $5.6 million at December 31,
1995.
The remaining restricted cash and cash equivalents at December 31, 1996
included $6.6 million for debt service and reserve funds, $2.1 million for
operations and maintenance reserves, $5.9 million available for subsidiary
operating purposes, and $3.3 million for certain construction projects.
Restricted funds may be invested only in certain securities.
6. INVENTORIES
Inventories at December 31 were (all amounts in thousands):
1996 1995
------- -----------
Fuel................................................................. $ 2,370 $ 2,590
Operating supplies and spare parts................................... 4,530 3,649
------ ------
Total........................................................... $ 6,900 $ 6,239
====== ======
At December 31, 1996, the Company had purchase commitments for fuel at
prices discounted from the spot market and at fixed prices. The aggregate value
of these contracts is estimated to be $14.8 million based on current spot
prices. These contracts expire at varying dates from May 1997 through July 1999.
The Company has fuel cost pass-through clauses in its rates with customers
for all of these commitments.
F-11
27
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31 was (all amounts in
thousands):
ESTIMATED USEFUL
LIVES (YEARS) 1996 1995
---------------- -------- --------
Land........................................... -- $ 10,448 $ 10,448
Plant, machinery and equipment................. 15-35 365,887 330,893
Buildings...................................... 40 31,216 32,490
Furniture, fixtures and leasehold
improvements................................. 3-5 7,488 5,993
Construction in process........................ -- 21,506 9,080
-------- --------
436,545 388,904
Less: Accumulated depreciation................. (61,996) (47,716)
-------- --------
$374,549 $341,188
======== ========
Substantially all of the Company's assets are pledged as collateral under
the Company's debt agreements (note 11).
In 1996 and 1995, the Company received condemnation awards related to one
of its facilities in Boston, Massachusetts and recognized gains of $6.4 million
and $4.8 million, respectively, based on the excess of condemnation proceeds
received, net of expenses, over the net book value of the condemned assets. In
1995, the Company also recognized an asset impairment loss of $2.7 million ($1.6
million net of tax). This loss is the difference between the carrying value of
one of its Canadian subsidiaries long-lived assets and the fair value of these
assets based on discounted estimated future cash flows. In 1995, the Company
also wrote-off certain other assets at a loss of $1.0 million. The respective
gains and losses are included in depreciation expense.
8. INTANGIBLE ASSETS
Intangible assets at December 31 were (all amounts in thousands):
1996 1995
-------- --------
Excess of cost of investment in TEC over fair value of acquired
assets....................................................... $ 4,790 $ 4,790
Excess of cost of investment in Ewing Power Systems over fair
value of acquired assets..................................... 583 --
Non-compete agreement.......................................... 10,000 10,000
Organization costs............................................. 3,507 3,373
-------- --------
18,880 18,163
Less: Accumulated amortization................................. (4,490) (3,075)
-------- --------
$ 14,390 $ 15,088
======== ========
Amortization expense for the years ended December 31, 1996, 1995 and 1994
was $1,415,000, $1,053,000 and $848,000, respectively.
F-12
28
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. DEFERRED COSTS AND OTHER ASSETS
Deferred costs and other assets at December 31 were (all amounts in
thousands):
1996 1995
------- -------
Deferred debt costs.............................................. $17,088 $18,431
Less: Accumulated amortization................................... (6,098) (4,722)
------- -------
10,990 13,709
Project development costs........................................ 1,516 1,315
Other............................................................ 5,773 5,557
------- -------
$18,279 $20,581
======= =======
Amortization expense for the years ended December 31, 1996, 1995 and 1994
was $1,323,000, $1,588,000 and $1,212,000, respectively.
10. SHORT-TERM DEBT
Corporate Facilities
The Company has bank credit facilities of $22.5 million (note 11a) for
general corporate purposes. These committed facilities bear interest at rates
based on the London Interbank Offered Rate (LIBOR). The balance outstanding
under this facility at December 31, 1996 was $5.0 million. The effective rate at
December 31, 1996 was 5.9%. The credit facilities were unused at December 31,
1995. The average rate on borrowings under these facilities was 5.8% in 1996 and
6.5% in 1995.
UTC Revolver
The UTC companies have a $14.2 million revolving credit facility available
(the "UTC Revolver") through December 16, 1997, and, upon approval of the
lender, for additional one year periods thereafter. The UTC Revolver is secured
pro rata with the UTC Term Loan (note 11b). UTC is required to have 60
consecutive days each year with no outstanding borrowings under the UTC
Revolver. UTC has several interest rate options under the UTC Revolver including
LIBOR. The balances outstanding under this facility at December 31, 1996 and
1995 were $13.5 million and $14.2 million, respectively, and the average rates
on these borrowings were 6.4% in 1996, 7.1% in 1995 and 6.6% in 1994. The
effective rate at December 31, 1996 was 6.5%.
F-13
29
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. LONG-TERM DEBT
Long-term debt outstanding at December 31 was (all amounts in thousands):
1996 1995
-------- --------
Corporate facility (a)......................................... $ 29,000 $ 16,000
UTC term loan (b).............................................. 66,440 75,154
Nassau term loan (c)........................................... 47,789 50,482
Nassau bonds (d)............................................... 14,350 14,350
Trenton bonds (e).............................................. 37,280 38,470
Oklahoma term loan (f)......................................... 18,743 19,809
Oklahoma bonds (g)............................................. 9,000 9,000
Subordinated debt (h).......................................... -- 7,521
PEI Construction loan (i)...................................... 17,384 --
-------- --------
239,986 230,786
Less: Current portion included above........................... (13,499) (7,415)
-------- --------
$226,487 $223,371
======== ========
- ---------------
(a) On May 24, 1995, a $62.5 million corporate revolving credit facility was
completed with a group of banks with Societe Generale as agent. The facility
extends through March 1997 with interest at rates based on LIBOR. The
agreement requires the Company to meet financial tests and contains certain
restrictions as to the payment of dividends.
The facility is composed of a $22.5 million revolver committed for two years
which is available for general corporate purposes and a $40.0 million
revolver committed through March 1997 which is available for acquisitions,
construction and development projects. Amounts outstanding at March 31,
1997, under the $40 million revolver portion of this facility can be
converted to a three-year loan. The balance outstanding under this portion
of the facility was $29.0 million at December 31, 1996 and $16.0 million at
December 31, 1995. The effective rate at December 31, 1996 was 6.1%. The
weighted average rate on borrowings under these facilities was 6.0% in 1996
and 7.0% in 1995. The expected sources of repayment are cash flow from
existing operations and permanent project financing. The loan agreement
permits additional debt on a pari passu basis and permits subordinated debt.
A new, increased revolving credit agreement is in the final stages of
negotiation with the four banks in the current revolver and four additional
banks. In the event that the new agreement is not executed on or prior to
March 31, 1997, the expiration date on the current revolver will be amended
by the four current banks and extended as necessary until consummation of
the new agreement.
(b) The UTC Term Loan is secured by all the assets and revenues of the acquired
UTC companies, on a pro rata basis with the UTC Revolver (see note 10)
(together with the UTC Term Loan, the "UTC Debt"). The parent company has
guaranteed the UTC Debt in an amount which is limited, except for
liabilities of UTC arising from environmental matters, to the lesser of
$31.7 million and one-third of the UTC Debt outstanding. The debt agreements
require UTC to meet certain financial tests, and contain restrictions on
payments to Trigen and other affiliated companies and on incurrence of new
debt.
Interest on the term loan is at variable rates based on LIBOR. The average
effective rate was 7.6% in 1996, 7.7% in 1995, and 6.0% in 1994. The rate at
December 31, 1996 was 7.3%. UTC has purchased from the Term Loan lenders
interest rate protection agreements. Quarterly term loan principal
repayments commenced in June 1994, with final maturity in September 2004.
F-14
30
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(c) The cost to construct the Nassau plant was financed with the Nassau Term
Loan, the Nassau Bonds (note 11d) and capital contributions. The Nassau Term
Loan and the Nassau Bonds are without recourse to the parent company.
Interest on the term loan is at variable rates based on LIBOR. The average
effective rate was 6.8% in 1996, 7.2% in 1995 and 5.2% in 1994. At December
31, 1996, the effective rate was 6.5%. Quarterly term loan principal
repayments commenced in June 1992, with final maturity in December 2003.
Upon certain events, Trigen-Nassau will be required to fix the rate on up to
fifty percent of the aggregate outstanding principal amount of the term loan
and the bonds for a minimum five year period.
All Trigen-Nassau assets and revenues are pledged to secure, pro rata, the
term loan and bonds. The agreements require Trigen-Nassau to meet financial
and operating tests, and contain certain restrictions on payments to the
parent company and other affiliated companies (note 11h) and on incurrence
of new debt.
(d) In September 1990 the Town of Hempstead Industrial Development Authority
issued Revenue Bonds on behalf of Trigen-Nassau. Interest at 7.75% per year
is due semi-annually. Annual principal payments are due from 2012 through
2015. A bank has issued a letter of credit in favor of the bondholders in
the event of default by Trigen-Nassau, which must reimburse the bank for
amounts drawn thereunder. Trigen-Nassau pays the bank an annual fee for the
letter of credit.
(e) The Trenton Bonds were issued by, and are limited obligations of, the New
Jersey Economic Development Authority, and are payable solely from revenues
and other funds pledged by Trigen-Trenton Energy Company.
The bonds require annual sinking fund payments beginning December 1993 with
final maturity in December 2010.
The interest rates on the bonds were fixed to maturity at 6.1% - 6.2% on
$35.2 million of the bonds (the tax-exempt portion), and 7.3% on the balance
(the taxable portion). Interest on the bonds is paid semi-annually.
(f) In September 1992, the Company's Oklahoma subsidiary ("Trigen-Oklahoma")
obtained long-term financing consisting of a $21.0 million term loan and
$9.0 million of tax-exempt bonds (note 11g). The parent company has
guaranteed the obligations of Trigen-Oklahoma pursuant to the debt
agreements until the date certain conditions were fulfilled. The guarantee
was released on March 21, 1997.
Interest on the term loan is at variable rates based on LIBOR. The average
effective rate was 6.9% in 1996, 7.5% in 1995 and 6.3% in 1994. At December
31, 1996, the rate was 6.8%. Quarterly term loan principal repayments
commenced in December 1994. Final maturity is September 2007. Upon certain
events, Trigen-Oklahoma will be required to fix the rate on a portion of the
outstanding term loan so that the interest rates applicable to seventy five
percent of the sum of the outstanding term loan and the outstanding bonds
are fixed for an average life of seven years.
All Trigen-Oklahoma assets are pledged under the Trigen-Oklahoma debt
agreements. The debt agreements require Trigen-Oklahoma to meet certain
financial tests, and contain restrictions on payments to the parent and
other affiliated companies and on incurrence of new debt.
(g) In September 1992, the Oklahoma City Industrial and Cultural Facilities
Trust issued Revenue Bonds on behalf of Trigen-Oklahoma. Interest at 6.75%
per year is payable semi-annually. Annual principal payments are due from
2008 through 2017. A bank has issued a letter of credit in favor of the
bondholders in the event of default by Trigen-Oklahoma, which must reimburse
the bank for amounts drawn thereunder. Trigen-Oklahoma pays the bank an
annual fee for the letter of credit.
(h) In November 1993, Trigen-Lindbergh, a wholly-owned subsidiary of the Company
and the 100% owner of Trigen-Nassau, issued $12 million Subordinated Debt
bearing base interest at 10% and deferrable interest at 5%. On September 30,
1996, Trigen-Lindbergh prepaid the remaining $7.0 million of
F-15
31
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
subordinated debt. The prepayment was accomplished through the payment of
cash and the issuance of 200,000 shares of the Company's stock to the
lender. In repaying this debt, costs of $3.0 million ($1.9 million net of
income tax benefit) were incurred by the Company and were accounted for as
an extraordinary loss.
(i) The cost to purchase, refurbish, expand and integrate an approximately
350,000 mmBtu per annum waste processing facility with two district energy
systems in Charlottetown, Prince Edward Island was financed with a $23
million construction loan. The debt is secured by the assets of the project,
with limited recourse to Trigen Energy Corporation in the event of any
shortfalls in debt service payments of Trigen Energy Canada Inc. on a
quarter-by-quarter basis.
Interest on the construction loan is at variable rates based on Canadian
bankers' acceptances. The average effective rate was 4.7% in 1996. At
December 31, 1996, the rate was 4.1%.
Maturities of long-term debt at December 31, 1996 were (all amounts in
thousands):
1997...................................................................... $ 13,499
1998...................................................................... 14,745
1999...................................................................... 16,509
2000...................................................................... 46,427
2001...................................................................... 18,573
Thereafter................................................................ 130,233
--------
Total long-term debt...................................................... $239,986
========
Based upon the debt balances at December 31, 1996, a change in the LIBOR
rate of .25% would have a corresponding change in interest expense of
approximately $400,000 per year when three-month LIBOR is under 6.25% ranging to
approximately $350,000 per year when three-month LIBOR is over 7.50%. Three-
month LIBOR at December 31, 1996 was 5.66%.
Cash paid for interest (net of amounts capitalized) was $17.5 million,
$18.1 million and $16.1 million in 1996, 1995 and 1994, respectively.
12. LEASES
The Company has entered into various leasing arrangements for office space,
land and equipment. These arrangements are accounted for as operating leases.
Future minimum rental payments under leases with remaining noncancelable
terms in excess of one year at December 31, 1996 are (all amounts in thousands):
1997....................................................................... $ 2,693
1998....................................................................... 2,702
1999....................................................................... 2,565
2000....................................................................... 2,585
2001....................................................................... 2,485
Thereafter................................................................. 13,259
-------
Total minimum payments..................................................... $26,289
=======
Excluded from the above are TEC's commitment of $180,000 per year under its
99 year operating lease for the land on which the Trenton facility is located
(note 4) and Trigen-Nassau's commitment of $680,000 per year under its 25 year
operating lease for the land on which the Nassau facility is located. The total
remaining commitments under these leases at December 31, 1996 are estimated to
be $15.3 million and $13.3 million, respectively.
F-16
32
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Rental expense was $2.9 million in 1996, $2.1 million in 1995 and $2.6
million in 1994.
13. STOCK OPTIONS
The Company adopted the 1994 Stock Incentive Plan for officers, directors
and key employees (the "1994 Stock Plan"). The purpose of the 1994 Stock Plan is
to help further the growth, development and financial success of the Company by
providing additional incentives to non-employee Directors and selected key
management personnel. A total of 1,050,000 shares of Common Stock has been
authorized for issuance pursuant to options, stock appreciation rights,
performance shares, restricted stock and other stock awards under the 1994 Stock
Plan, subject to adjustment in the event of stock dividends, stock splits or
other subdivisions, combinations or reclassifications of shares. The 1994 Stock
Plan is administered by the Compensation Committee and will expire ten years
from the date of adoption, unless sooner terminated by the Board of Directors.
Stock options granted to the Board of Directors of the Company are exercisable
six months from the date of grant, and are exercisable until the earlier of the
tenth anniversary of the date of grant, or the first anniversary of leaving the
Board of Directors. All other employees' stock options vest at the rate of 20%
per year, starting on the first anniversary of the grant date and are
exercisable over a period of ten years from the date of grant.
Options granted under the 1994 Stock Plan have a maximum term of ten years
from the date of grant. The exercise price of options granted under the 1994
Stock Plan is at least equal to 100% of the fair market value of the Common
Stock on the date of the grant. Options granted become exercisable at such time
or times as the committee deems appropriate, and options granted at different
times or at different prices may have different vesting periods. The committee
may award restricted stock at a purchase price which is less than fair market
value.
In addition, options to purchase 43,584 shares of common stock, which
satisfied a contingent condition of an individual's employment with the Company
in 1992, were outstanding as of December 31, 1995. The exercise price of these
options ranged from $1 to $1.22 per share. Options were exercisable over a
period of ten years from the date of grant. Thirty percent of the options vested
on the date of grant and were exercised in 1996. An additional twenty percent of
the options vested on the next anniversary date of the grant and were exercised
in 1996, and the remaining options were forfeited in 1996.
F-17
33
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information relating to stock options granted under the 1994 Stock Plan
during 1996, 1995 and 1994 is summarized as follows:
WEIGHTED-AVERAGE
RANGE OF EXERCISE PRICE
EXERCISE PRICES NUMBER OF SHARES PER SHARE
----------------- ---------------- ----------------
Shares under option at December 31, 1993....... -- -- --
Granted........................................ $15.75 to $19.00 491,000 $15.92
Exercised...................................... -- -- --
Expired........................................ -- -- --
Forfeited...................................... -- -- --
Shares under option at December 31, 1994....... $15.75 to $19.00 491,000 15.92
Granted........................................ $17.25 to $22.13 90,500 19.82
Exercised...................................... -- -- --
Expired........................................ -- -- --
Forfeited...................................... $15.75 to $15.75 14,200 15.75
Shares under option at December 31, 1995....... $15.75 to $22.13 567,300 16.54
Granted........................................ $18.88 to $21.75 67,200 20.05
Exercised...................................... $15.75 to $19.75 38,500 16.05
Expired........................................ -- -- --
Forfeited...................................... $15.75 to $22.00 31,940 16.95
Shares under option at December 31, 1996....... $15.75 to $22.13 564,060 17.05
Shares exercisable at December 31, 1996........ $15.75 to $22.13 237,984 16.62
As of December 31, 1996, stock options granted under the 1994 Stock Plan
have a weighted average contractual life of 7.9 years.
Had compensation cost for this plan been recorded at fair value on the date
of grant in accordance with SFAS No. 123, the effect on the Company's net income
and net income per share amounts would have been immaterial at December 31, 1996
and December 31, 1995.
In 1994, the Company adopted an employee stock purchase plan and has
allocated 200,000 shares of Common Stock for purchases pursuant to such plan.
Stock purchased in 1996 and 1995 pursuant to the employee stock purchase plan
was 28,325 and 25,768 shares, respectively. The acquisition price of the stock
is 85% of the lower of the closing market price on the first and last day of the
six month purchase period. On March 31, 1996, 14,404 shares were purchased at
$18.27 per share. On September 30, 1996, 13,921 shares were purchased at $18.49
per share.
14. RETIREMENT PLANS
Effective January 1, 1995, the Company consolidated its retirement plans by
offering a 401(k) retirement savings plan ("401(k) Plan") to certain employees
as stated below. Previously, a cash balance defined benefit pension plan
("defined benefit plan") covered certain full-time employees while a 401(k) plan
covered employees who were previously employees of UTC.
401(k) Plan
The 401(k) Plan allows participants to make contributions pursuant to
Section 401(k) of the Internal Revenue Code. The Company matches employee
contributions in varying percentages according to a schedule
F-18
34
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
up to an annual maximum Company contribution of approximately $1,260 per
employee. Employees vest immediately in both employee and Company contributions
to the 401(k) Plan. The Company's contributions to the 401(k) Plan were
approximately $1,375,000 (including the cost of 27,460 shares of Company stock),
$1,064,000 (including the cost of 26,253 shares of Company stock) and $320,000,
for the years ended December 31, 1996, 1995 and 1994, respectively. Effective
January 1, 1995, the 401(k) Plan was open to all Company employees excluding
certain employees covered by other retirement plans.
Defined Benefit Plan
Benefits payable under the plan were frozen as of December 31, 1994 pending
vesting and distribution to participants. Benefits under the plan are based
primarily on salary during the term of employment and length of service. Pension
expense was $122,000, $75,000 and $485,000 in 1996, 1995 and 1994, respectively.
The Company's net obligation under the plan at December 31, 1996 was not
significant.
15. RELATED PARTY TRANSACTIONS
Cofreth American Corporation ("CAC") is owned by ELYO (formerly
Ufiner-Cofreth), a leading energy services company. ELYO operates approximately
70 district energy systems, as well as chilled water systems, around the world.
ELYO is controlled by Lyonnaise des Eaux Dumez, a French Company with 1995
revenues of approximately $20 billion. Compagnie Parisienne de Chauffage Urbain
("CPCU"), a direct subsidiary of ELYO, owns and operates the Paris district
heating system.
ELYO, CAC and CPCU, collectively the "ELYO Group," provide to the Company
licenses and technical support. The parties have agreed to provide licenses to
each other for any patents relating to electric and/or thermal energy generation
any of them own or acquire. The Company was charged a management fee of $250,000
by ELYO in 1996 and 1995, and $90,000 in 1994. The Company was charged by CAC
for the services of an executive officer and other professionals, and for
out-of-pocket costs, $578,000 in 1996, $598,000 in 1995 and $221,000 in 1994.
The Company owed the ELYO Group $72,000, $142,000 and $171,000 at December 31,
1996, 1995 and 1994, respectively.
16. FINANCIAL INSTRUMENTS
Long-Term Debt
The fair value of the Company's long-term debt, including the current
portions and interest rate cap and collar agreements, was estimated based on the
future cash flows associated with each instrument discounted using the Company's
current borrowing rate for similar instruments of comparable maturity. The
estimated fair value of the Company's long term debt and related financial
instruments approximates carrying value at December 31, 1996.
Short-Term Debt and Other Financial Instruments
The carrying amount approximates fair value because of the short maturity
of these instruments.
17. INCOME TAXES
Income tax provisions for the years ended December 31 were (all amounts in
thousands):
1996 1995 1994
--------------------------- --------------------------- ---------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
------- -------- ------ ------- -------- ------ ------- -------- ------
State/Local............ $ 1,081 $ 492 $1,573 $ 1,395 $ 703 $2,098 $ 453 $1,083 $1,536
U.S. Federal........... 3,300 4,379 7,679 1,492 3,734 5,226 563 3,850 4,413
------ ------ ------ ------ ------ ------ ------ ------ ------
Total............. $ 4,381 $4,871 $9,252 $ 2,887 $4,437 $7,324 $ 1,016 $4,933 $5,949
====== ====== ====== ====== ====== ====== ====== ====== ======
F-19
35
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to deferred tax
liabilities and assets at December 31 are (all amounts in thousands):
1996 1995
------- -------
Deferred income tax liabilities:
Property, plant and equipment.................................. $34,790 $31,931
------- -------
Deferred income tax assets:
AMT credit carryforwards....................................... 3,060 2,053
Tax loss carryforwards......................................... 1,209 1,959
Environmental costs............................................ 1,663 1,811
Revenue and receivable allowances.............................. 358 520
Other, net..................................................... 2,816 5,605
------- -------
Gross deferred income tax assets............................... 9,106 11,948
Valuation allowances........................................... (273) (1,103)
------- -------
Net deferred income tax assets................................. 8,833 10,845
------- -------
Net deferred income tax liability.............................. $25,957 $21,086
======= =======
Net current deferred income tax assets of $3.6 million and $4.1 million at
December 31, 1996 and 1995, respectively are included in prepaid costs and other
current assets.
At December 31, 1996 a loss carryforward of $1.8 million was available to
offset Canadian taxable income expiring $.2 million in 1999, $.4 million in
2000, $.1 million in 2001 and $1.1 million in 2003. At December 31, 1996 an
alternative minimum tax credit carryforward of $3.0 million was available to
offset future U.S. regular income taxes, if any, over an indefinite period.
Valuation allowances were primarily for tax loss carryforwards in state, local
and Canadian jurisdictions that may expire before being used.
A reconciliation from the U.S. Federal statutory rate to income tax expense
follows:
1996 1995 1994
---- ---- ----
Income tax expense at statutory rates........................ 35.0% 35.0% 35.0%
State/local income taxes, net of Federal benefit............. 5.7 7.6 6.9
Taxes related to foreign operations.......................... (.1) (1.2) (.2)
(Decrease)/increase in valuation allowances.................. (3.6) (1.4) 1.6
Other items, net............................................. 2.7 .9 (2.3)
---- ---- ----
- - -
Income tax expense........................................... 39.7% 40.9% 41.0%
===== ===== =====
The Company made income tax payments of $2.3 million, $3.1 million and $.7
million in 1996, 1995 and 1994 respectively.
Taxes on receipts (as defined) or capital, imposed by some jurisdictions in
lieu of taxes on income are included in general and administrative expenses.
These were $.8 million, $.7 million and $2.0 million in 1996, 1995 and 1994
respectively.
In 1996, the Company received IRS approval to change its tax year-end from
September 30 to December 31, effective December 31, 1995.
F-20
36
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
FOR THE QUARTER
---------------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- ------- -------- -------
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE
DATA)
1996:
Revenues......................................... $86,219 $48,685 $ 41,646 $67,084
Operating income................................. 12,143 9,322 12,762 8,911
Income before extraordinary loss................. 4,181 2,498 4,757 2,615
Extraordinary loss, net of income tax benefit.... -- -- 1,943 --
Net income....................................... 4,181 2,498 2,814 2,615
Income before extraordinary loss per share....... $ .36 $ .22 $ .41 $ .22
Extraordinary loss per share..................... -- -- (.17) --
------- ------- ------- -------
Net income per share............................. $ .36 $ .22 $ .24 $ .22
======= ======= ======= =======
Weighted average shares outstanding.............. 11,470 11,507 11,510 11,959
======= ======= ======= =======
1995:
Revenues......................................... $65,176 $35,775 $ 30,998 $66,761
Operating income................................. 10,002 7,975 7,507 11,554
Net income....................................... 3,258 2,140 1,594 3,572
Net income per share............................. $ .29 $ .19 $ .14 $ .31
======= ======= ======= =======
Weighted average shares outstanding.............. 11,373 11,386 11,393 11,408
======= ======= ======= =======
F-21
37
SCHEDULE I
TRIGEN ENERGY CORPORATION (PARENT COMPANY)
CONDENSED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(ALL AMOUNTS IN THOUSANDS)
1996 1995
-------- --------
ASSETS
Cash and cash equivalents............................................ $ 5,853 $ 4,010
Other current assets................................................. 588 639
Property, plant and equipment, net................................... 12,287 689
Other assets......................................................... 4,116 2,017
Investments in and amounts due from subsidiaries, net................ 156,298 130,502
-------- --------
Total assets................................................. $179,142 $137,857
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt...................................................... $ 5,000 $ --
Long-term debt....................................................... 29,000 16,000
Other liabilities.................................................... 4,608 3,027
-------- --------
Total liabilities............................................ 38,608 19,027
Stockholders' equity:
Preferred stock...................................................... -- --
Common stock......................................................... 120 114
Additional paid-in capital........................................... 112,836 100,788
Retained earnings.................................................... 28,538 18,070
Treasury stock, at cost.............................................. (960) (142)
-------- --------
Total stockholders' equity................................... 140,534 118,830
-------- --------
Total liabilities and stockholders' equity................... $179,142 $137,857
======== ========
See accompanying notes to condensed financial statements.
S-1
38
SCHEDULE I -- (CONTINUED)
TRIGEN ENERGY CORPORATION (PARENT COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(ALL AMOUNTS IN THOUSANDS)
1996 1995 1994
------- ------- -------
REVENUES
Management fees and costs recovered from subsidiaries....... $11,156 $ 4,918 $ 4,341
Interest income from subsidiaries........................... 2,015 706 805
------- ------- -------
Total revenues...................................... 13,171 5,624 5,146
COSTS AND EXPENSES
General and administrative.................................. 14,262 9,544 7,321
Interest expense............................................ 1,689 426 464
Other (income) expense, net................................. (436) 75 106
------- ------- -------
Total costs and expenses............................ 15,515 10,045 7,891
Loss before income tax expense, equity in earnings of
subsidiaries and extraordinary loss......................... (2,344) (4,421) (2,745)
Income tax benefit............................................ 820 1,547 961
Equity in earnings of subsidiaries, net....................... 15,575 13,438 10,345
------- ------- -------
Income before extraordinary loss.............................. 14,051 10,564 8,561
Extraordinary loss on extinguishment of subsidiaries'
long-term debt, net of subsidiaries income tax benefits..... (1,943) -- --
------- ------- -------
NET INCOME.......................................... $12,108 $10,564 $ 8,561
======= ======= =======
See accompanying notes to condensed financial statements.
S-2
39
SCHEDULE I -- (CONTINUED)
TRIGEN ENERGY CORPORATION (PARENT COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(ALL AMOUNTS IN THOUSANDS)
1996 1995 1994
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................... $ 12,108 $ 10,564 $ 8,561
Reconciliation of net income to cash provided by
operating activities:
Equity in earnings of subsidiaries.................... (15,575) (13,438) (10,345)
Dividends received from subsidiaries.................. -- 7,000 1,693
Other, net............................................ (1,266) 2,110 156
--------- --------- ---------
Net cash (used in) provided by operating
activities..................................... (4,733) 6,236 65
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures..................................... (10,800) -- --
Acquisition of energy facilities, net of cash acquired... -- (18,549) --
Investments in and amounts due from subsidiaries, net.... (9,183) 4,167 (29,575)
--------- --------- ---------
Net cash used in investing activities............ (19,983) (14,382) (29,575)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term debt, net..................................... 5,000 (7,500) (5,031)
Proceeds of Initial Public Offering...................... -- -- 39,892
Proceeds of long-term borrowings......................... 17,250 16,000 --
Dividends................................................ (1,640) (1,594) (797)
Issuance (Repurchase) of common stock.................... 5,949 506 (148)
--------- --------- ---------
Net cash provided by financing activities........ 26,559 7,412 33,916
--------- --------- ---------
Net increase/(decrease) in cash and cash equivalents....... 1,843 (734) 4,406
Cash and cash equivalents at beginning of year............. 4,010 4,744 338
--------- --------- ---------
Cash and cash equivalents at end of year................... $ 5,853 $ 4,010 $ 4,744
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
NON-CASH INVESTING ACTIVITY:
Acquisition of subsidiary............................. $ 1,037 -- --
========= ========= =========
NON-CASH FINANCING ACTIVITY:
Issuance of common stock for acquisition of
subsidiary.......................................... $ 1,037 -- --
========= ========= =========
Issuance of common stock for extinguishment of
long-term debt...................................... $ 4,250 -- --
========= ========= =========
See accompanying notes to condensed financial statements.
S-3
40
SCHEDULE I -- (CONTINUED)
TRIGEN ENERGY CORPORATION (PARENT COMPANY)
NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(1) TRIGEN ENERGY CORPORATION (PARENT COMPANY) FINANCIAL STATEMENTS
The accompanying condensed financial information has been prepared in
accordance with Regulation S-X of the Securities Act of 1933 and does not
include all information and notes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles since the user of these statements is assumed to
read them in conjunction with Trigen Energy Corporation's consolidated financial
statements and the notes thereto for the year ended December 31, 1996 included
elsewhere in this document.
Certain reclassifications have been made to the prior years' financial
statements to conform to the 1996 presentation.
(2) TRANSACTIONS WITH SUBSIDIARIES
The Parent Company derives cash from management fees and costs recovered
from its subsidiaries, distributions by its subsidiaries and, at times,
repayment to the Parent Company from proceeds of long-term financing obtained by
the subsidiaries for funds previously advanced to subsidiaries for construction
in advance of obtaining permanent financing. Certain subsidiaries have
restrictive debt agreements which generally permit distributions to the Parent
Company only when certain ratios and other financial covenants are satisfied.
Cash available to the Parent Company without restrictions as to use, including
amounts distributable by subsidiaries was $7.4 million at December 31, 1996 and
$5.6 million at December 31, 1995.
(3) ACQUISITIONS
Trigen-Colorado
Trigen-Colorado, a wholly owned subsidiary of the Parent Company, and
Nations Energy Corporation ("Nations") of Orlando, Florida formed a partnership
to purchase the energy production assets of Coors Brewing Company and Coors
Energy Company ("Coors") and to provide steam and electricity to Coors over a 25
year period. On September 14, 1995, the partnership purchased the assets for $22
million, $12 million of which was funded by Trigen-Colorado. The acquisition was
accounted for under the purchase method. Trigen-Colorado has a 51% interest in
and has consolidated the results of operations of this partnership since the
date of acquisition.
Prince Edward Island
On August 31, 1995, the Parent Company purchased for $7.3 million the
energy production facilities and distribution assets in Charlottetown, Prince
Edward Island ("PEI") from the PEI Energy Corporation and the government of PEI.
In addition, the Parent Company has committed to invest approximately $23
million to integrate and upgrade the facilities. In exchange, the Province of
PEI, Queen Elizabeth Hospital and the University of PEI will purchase their
thermal energy needs under thirty year contracts. The acquisition was accounted
for under the purchase method and the results of operations of PEI have been
included in the accompanying consolidated statement of operations since the date
of acquisition.
(4) DEBT
The Parent Company has bank credit facilities of $22.5 million for general
corporate purposes. These committed facilities bear interest at rates based on
LIBOR. The balance outstanding under this facility at December 31, 1996 was $5.0
million. The effective rate at December 31, 1996 was 5.9%. The credit facilities
were unused at December 31, 1995. The average rate on borrowing under these
facilities were 5.8% and 6.5% in 1996 and 1995, respectively.
S-4
41
On May 24, 1995, a $62.5 million corporate revolving credit facility was
completed with a group of banks with Societe Generale as agent. The facility
extends through March 1997 with interest at rates based upon the London
Interbank Offered Rate (LIBOR). The agreement requires the Parent Company to
meet financial tests and contains certain restrictions as to the payment of
dividends. The effective interest rate on the borrowings at December 31, 1996
was 6.1%.
The facility is composed of a $22.5 million revolver committed for two
years which is available for general corporate purposes and a $40.0 million
revolver committed through March 1997 which is available for acquisitions,
construction and development projects. Amounts outstanding at March 31, 1997,
under the $40 million revolver portion of this facility can be converted to a
three-year loan. The expected sources of repayment are cash flow from existing
operations and permanent project financing. The loan agreement permits
additional debt on a pari passu basis and permits subordinated debt.
A new, increased revolving credit agreement is in the final stages of
negotiation with the four banks in the current revolver and four additional
banks. In the event that the new agreement is not executed on or prior to March
31, 1997, the expiration date on the current revolver will be amended by the
four current banks and extended as necessary until consummation of the new
agreement.
The Parent Company has issued certain guarantees relating to the debt of
UTC and Trigen-Oklahoma. The Parent Company's guarantee of the UTC debt is
limited, except for liabilities of UTC arising from indemnities for
environmental matters, to the lesser of $31.7 million or one-third of the amount
outstanding ($79.9 million outstanding at December 31, 1996). The Parent
Company's guarantee of the Oklahoma term loan ($18.7 million at December 31,
1996) and bonds ($9.0 million at December 31, 1996) remains in place until the
later of September, 2017 and the date certain conditions were fulfilled. The
guarantee was released on March 21, 1997.
(5) INCOME TAXES
The Parent Company and its domestic subsidiaries file a consolidated U.S.
Federal income tax return. The Parent Company's state income taxes are filed on
a separate return basis. A valuation allowance for state tax loss carryforwards
has been provided because there are carryforwards which may expire before being
used.
S-5
42
SCHEDULE II
TRIGEN ENERGY CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(ALL AMOUNTS IN THOUSANDS)
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND BALANCE AT
DESCRIPTIONS YEAR EXPENSES DEDUCTIONS END OF YEAR
- --------------------------------------------- ------------ ---------- ---------- -----------
Year ended December 31, 1994:
Allowance for doubtful accounts:........... $249 448 (129) $ 568
Year ended December 31, 1995:
Allowance for doubtful accounts:........... $568 208 (79) $ 697
Year ended December 31, 1996:
Allowance for doubtful accounts:........... $697 664 (233) $ 1,128
S-6
43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 in the City of New
York, State of New York on March 27, 1997.
TRIGEN ENERGY CORPORATION
By /s/ THOMAS R. CASTEN
------------------------------------
Thomas R. Casten
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 27, 1997.
SIGNATURE TITLE
- --------------------------------------------- --------------------------------------------
/s/ THOMAS R. CASTEN Director, President and Chief Executive
- --------------------------------------------- Officer
Thomas R. Casten (Principal Executive Officer)
/s/ DAVID H. KELLY Vice President -- Finance, Chief Financial
- --------------------------------------------- Officer
David H. Kelly
/s/ DANIEL J. SAMELA Controller (Principal Accounting Officer)
- ---------------------------------------------
Daniel J. Samela
/s/ RICHARD E. KESSEL Director, Executive Vice President, Chief
- --------------------------------------------- Operating Officer
Richard E. Kessel
/s/ GEORGE F. KEANE Director and Chairman of the Board
- ---------------------------------------------
George F. Keane
Director
- ---------------------------------------------
Philippe Brongniart
/s/ DOMINIQUE MANGIN D'OUINCE Director
- ---------------------------------------------
Dominique Mangin d'Ouince
/s/ PATRICK DESNOS Director
- ---------------------------------------------
Patrick Desnos
/s/ MICHEL BLEITRACH Director
- ---------------------------------------------
Michel Bleitrach
/s/ FRANCOIS FAESSEL Director
- ---------------------------------------------
Francois Faessel
/s/ MICHEL CASSOU Director
- ---------------------------------------------
Michel Cassou
/s/ CHARLES E. BAYLESS Director
- ---------------------------------------------
Charles E. Bayless
/s/ JONATHAN O'HERRON Director
- ---------------------------------------------
Jonathan O'Herron
44
TRIGEN ENERGY CORPORATION
INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
- ------- ---------------------------------------------------------------------------------
2.1** -- Stock Purchase Agreement, dated December 3, 1993, among Catalyst Energy
Corporation, Trigen, and Trigen Acquisition, Inc.
2.2** -- Agreement and Plan of Merger, dated as of October 18, 1993, among Trigen, Trigen
Acquisition, Inc. and United Thermal Corporation.
3.1** -- Restated Certificate of Incorporation of Trigen (Registration Statement No.
33-80410)
3.2** -- Restated and Amended By-Laws of Trigen (Registration Statement No. 33-80410)
4.1** -- Credit Agreement, dated as of December 2, 1993, among Trigen Acquisition Inc.,
Trigen, the Lenders named therein, and Toronto Dominion (Texas), Inc., as Agent
(Registration Statement No. 33-80410).
4.2** -- Loan Agreement, dated as of June 1, 1993, between Trigen-Trenton District Energy
Company, L.P. and the New Jersey Economic Development Authority (District Heating
and Cooling Revenue Bonds) (Registration Statement No. 33-80410).
4.3** -- Construction, Term Loan and Reimbursement Agreement, dated as of August 21, 1990,
among Nassau District Energy Corporation, Toronto Dominion Bank, Chicago Branch,
as Letter of Credit Issuing Bank, the Banks named therein and Toronto Dominion
Bank Trust Company, as Agent and Security Representative (Registration Statement
No. 33-80410).
4.4** -- See Exhibits 3.1 and 3.2 (Registration Statement No. 33-80410).
4.5** -- Credit Agreement dated as of May 24, 1995 between Trigen Energy Corporation and
Societe Generale, New York Branch, as Administrative Agent.
4.6** -- Construction and Term Loan Agreement dated as of August 11, 1995 between
Trigen-Peoples District Energy Company and The Prudential Insurance Company of
America.
4.7* -- Amended and Restated Credit and Acceptance Agreement dated as of December 20,
1996 among Trigen Energy Canada Inc., Certain Commercial Lending Institutions as
the Lenders, Societe Generale, New York Branch, as the Administrative Agent for
the Lenders and Societe Generale (Canada) as the Collateral Agent for the
Lenders.
9.1** -- Stockholders' Agreement, dated August 10, 1994 by and among Trigen, Thomas R.
Casten, Michael Weiser, Eugene E. Murphy, Richard E. Kessel, John J. Ludwig,
Cofreth American Corporation and Compagnie Parisienne de Chauffage Urbain, S.A.
(Registration Statement No. 33-80410).
9.2** -- Stockholder's Agreement dated as of January 17, 1996 by and between Thomas Ewing
and Trigen Energy Corporation.
10.1** -- Securities Purchase Agreement, dated as of November 18, 1993 between Trigen
Lindbergh Corporation and Trust Company of the West, as Agent (Registration
Statement No. 33-80410).
10.2** -- Reimbursement and Credit Agreement, dated as of September 1, 1992, among Trigen-
Oklahoma District Energy Corporation, the Banks named therein, and Societe
Generale, Southwest Agency, as Agent and Collateral Agent (Registration Statement
No. 33-80410).
10.3** -- Loan Agreement, dated as of September 1, 1992, between Oklahoma City Industrial
and Cultural Facilities Trust, as Lender and Trigen-Oklahoma District Energy
Corporation, as Borrower (District Heating and Cooling Revenue Bonds, Series
1992) (Registration Statement No. 33-80410).
10.4** -- Lease Agreement, dated as of August 1, 1990, between Town of Hempstead Industrial
Development Agency and Nassau District Energy Corporation (Industrial Development
Revenue Bonds) (Registration Statement No. 33-80410).
10.7** -- Letter Agreement, dated February 24, 1994, between Trigen and Credit Commerciale
de France, New York Branch, (Registration Statement No. 33-80410).
10.8** -- Standby Letter of Credit Agreement, dated November 16, 1993, between Trigen and
Societe Generale, New York Branch (Registration Statement No. 33-80410).
10.9** -- Application and Agreement for Irrevocable Standby Letter of Credit, dated
December 14, 1992, between Societe Generale, New York Branch, and Trigen-Chicago
District Energy Corporation (Registration Statement No. 33-80410).
E-1
45
EXHIBIT DESCRIPTION
- ------- ---------------------------------------------------------------------------------
10.11** -- Noncompetition Agreement, dated December 3, 1993, among Catalyst Energy
Corporation, Great Lakes Power Limited, Century Power Corporation, Trigen
Acquisition, Inc. and Trigen (Registration Statement No. 33-80410).
10.12** -- Site Lease Agreement, dated as of December 16, 1992, between Metropolitan Pier
and Exposition Authority and Trigen-Peoples District Energy Company (Registration
Statement No. 33-80410).
10.13** -- Lease Agreement, dated as of November 30, 1993, between Housing Authority of
Baltimore City and Baltimore Thermal Energy Corporation (Registration Statement
No. 33-80410).
10.14** -- Spring Gardens Land Lease, dated February 28, 1985, between Baltimore Gas and
Electric Company and Baltimore Steam Company (Registration Statement No.
33-80410).
10.15** -- Lease Agreement, dated as of June 26, 1991, between King Real Estate Corporation,
Trustee of King Terminal Trust and Boston Thermal Energy Corporation, as amended
by the First Amendment to Lease, dated July 5, 1991, and by the Second Amendment
to Lease, dated June 23, 1992. (Registration Statement No. 33-80410).
10.16** -- Lease Agreement, dated as of April 1, 1991, between Aetna Life Insurance Company
and Boston Thermal Energy Corporation (Registration Statement No. 33-80410).
10.17** -- Lease Agreement, dated March 29, 1990, between Kansas City Power & Light Company
and Trigen-Kansas City District Energy Corporation (Registration Statement No.
33-80410).
10.18** -- Indenture, dated September 14, 1993, between George Chioros Holdings Ltd., as
Lessor, and Trigen-London District Energy Corporation, as Lessee (Registration
Statement No. 33-80410).
10.19** -- Standard Lease, dated as of August 7, 1990, between the United States Postal
Service and Trigen-Oklahoma District Energy Corporation (Registration Statement
No. 33-80410).
10.20** -- Schuylkill Station Lease Agreement, dated January 30, 1987, between Philadelphia
Electric Company and Philadelphia Thermal Corporation (Registration Statement No.
33-80410).
10.21** -- Amended and Restated Site Lease, dated September 17, 1993, between Philadelphia
Thermal Energy Corporation and Grays Ferry Cogeneration Partnership (Registration
Statement No. 33-80410).
10.22** -- Lease Agreement, dated as of March 5, 1975, between the City of St. Louis and
Union Electric Company (Registration Statement No. 33-80410).
10.23** -- Ground Lease, dated as of December 1, 1982, between the City of Trenton and
Trenton District Energy Company (Registration Statement No. 33-80410).
10.24** -- Thermal Energy Agreement, dated July 22, 1981, between Mercer Medical Center and
Trenton District Energy Company, as amended September 1981, as amended August 22,
1984, and as further amended May 27, 1986 (Registration Statement No. 33-80410).
10.27** -- See Exhibits 4.1, 4.2 and 4.3 (Registration Statement No. 33-80410).
10.28** -- Trigen Energy Corporation 1994 Director Stock Plan (Registration Statement No.
33-80410).
10.29** -- Trigen Energy Corporation 1994 Stock Incentive Plan (Registration Statement No.
33-80410).
10.30** -- Intercompany Services and License Agreement, dated August 10, 1994, between
Ufiner-Cofreth, S.A. and Trigen (Registration Statement No. 33-80410).
10.31** -- Form of Employment Agreement, dated as of August 12, 1994 between Trigen and
Thomas R. Casten (Form 10-K Annual Report for 1994).
10.32** -- Form of Employment Agreement, dated as of August 12, 1994, between Trigen and
Richard E. Kessel (Form 10-K Annual Report for 1994).
10.33** -- Form of Employment Agreement, dated as of August 12, 1994, between Trigen and
John J. Ludwig (Form 10-K Annual Report for 1994).
10.34** -- Form of Employment Agreement, dated as of August 12, 1994, between Trigen and
Eugene E. Murphy (Form 10-K Annual Report for 1994).
10.35** -- Form of Employment Agreement, dated as of August 12, 1994, between Trigen and
Michael Weiser (Form 10-K Annual Report for 1994).
10.36** -- Acquisition Agreement dated March 1, 1996 among Adwin (Schuylkill) Cogeneration,
Inc., O'Brien (Schuylkill) Cogeneration, Inc. and Trigen -- Schuylkill
Cogeneration, Inc.
10.37** -- Amended and Restated Partnership Agreement dated March 1, 1996 among Adwin
(Schuylkill) Cogeneration, Inc., O'Brien (Schuylkill) Cogeneration, Inc. and
Trigen -- Schuylkill Cogeneration, Inc.
E-2
46
EXHIBIT DESCRIPTION
- ------- ---------------------------------------------------------------------------------
11* -- Computation of Earnings Per Share.
21* -- Subsidiaries of Trigen.
23.1* -- Consent of KPMG Peat Marwick LLP.
27 -- Financial Data Schedule (for electronic filing only)
- ---------------
* Filed herewith.
** Incorporated by reference to the corresponding exhibit to the indicated prior
filing.
E-3