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EXHIBIT 99.1
DELOITTE & TOUCHE GmbH DELOITTE
Wirtschaftspruefungsgesellschaft &TOUCHE
Financial Statements
of "MIBRAG"
MITTELDEUTSCHE BRAUN-
KOHLENGESELLSCHAFT MBH,
THEISSEN
Report on the audit of the
financial statements for the years
ended December 31, 2000, 1999 and
1998 in accordance with German GAAP
and on the audit of the respective
U.S. GAAP reconciliations
Am Kirchtor 7 Postfach 11 01 43 Tel (03 45) 21 99-6
06108 Halle/Saale 06015 Halle/Saale Fax (03 45) 21 99-800
www.deloitte.de
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MITTELDEUTSCHE BRAUNKOHLENGESELLSCHAFT MBH
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Independent Auditors 1
Consolidated Financial Statements
Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998 2
Consolidated Balance Sheets at December 31, 2000 and 1999 3
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998 4
Consolidated Statements of Shareholders`Equity for the years
ended December 31, 2000, 1999 and 1998 5
Notes to the Consolidated Financial Statements 6
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REPORT OF INDEPENDENT AUDITORS
To the Shareholders of
MIBRAG mbH
Theissen, Germany
We have audited the accompanying consolidated balance sheets of
Mitteldeutsche Braunkohlengesellschaft mbH and its subsidiaries (MIBRAG or
Group) as of December 31, 2000 and 1999, and the related consolidated statements
of operations, shareholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 2000. These consolidated financial
statements are the responsibility of the Group's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in Germany and the United States of America. 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 consolidated financial position of MIBRAG
as of December 31, 2000 and 1999, and the consolidated results of its operations
and cash flows for each of the years in the three-year period ended December 31,
2000, in conformity with accounting principles generally accepted in Germany.
Generally accepted accounting principles in Germany vary in certain significant
respects from generally accepted accounting principles in the United States of
America. Application of generally accepted accounting principles in the United
States of America would have affected the results of operations for each of the
years in the three-year period ended December 31, 2000 and shareholders' equity
as of December 31, 2000 and 1999 to the extent summarized in Note C to the
consolidated financial statements.
Deloitte & Touche GmbH
Wirtschaftsprufungsgesellschaft
Halle, Germany
March 13, 2001
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MITTELDEUTSCHE BRAUNKOHLENGESELLSCHAFT MBH
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF EURO)
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
2000 1999 1998
-------------- --------------- --------------
Sales revenue 272,220 254,027 240,517
Changes in inventories 1,675 11,091 2,594
Own costs capitalized 502 3,276 8,182
Other operating income 14,372 18,496 34,147
-------------- --------------- --------------
Total performance 288,769 286,890 285,440
-------------- --------------- --------------
Cost of materials 65,033 59,388 55,662
Personnel expenses 93,351 100,185 107,370
Depreciation on intangible
and tangible fixed assets 49,059 51,654 75,882
Other operating expenses 62,879 66,698 75,227
-------------- --------------- --------------
Total operating expenses 270,322 277,925 314,141
-------------- --------------- --------------
Operating result 18,447 8,965 -28,701
Income from associated company
and from companies in which
participations are held 2,089 995 1,730
Income from financial assets 2,992 3,165 3,241
Depreciation on financial assets
and short term investments -- -- -100
Interest expense, net -7,620 -8,164 -5,507
-------------- --------------- --------------
Net income (loss) from ordinary activities 15,908 4,961 -29,337
Income taxes 42 -- --
Other taxes 1,288 978 1,066
-------------- --------------- --------------
Net income (loss) 14,578 3,983 -30,403
============== =============== ==============
See accompanying Notes to Consolidated Financial Statements.
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MITTELDEUTSCHE BRAUNKOHLENGESLLSCHAFT MBH
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF EURO)
AT DECEMBER 31,
------------------------------
NOTE 2000 1999
--------- ------------- -------------
ASSETS
NON-CURRENT ASSETS
Intangible assets
Concessions, trade marks, patents and licenses B, E 8,592 9,405
Property, plant and equipment
1. Land B, E 39,505 36,632
2. Buildings B, E 57,814 52,462
3. Strip mines B, E 40,263 41,194
4. Technical equipment and machinery B, E 225,704 187,611
5. Factory and office equipment B, E 24,072 18,790
6. Payments on account and assets under construction 6,672 76,555
------------- -------------
394,030 413,244
Financial assets
1. Participations (including associated company) B, F 13,052 12,497
2. Loans granted to participation B, G 7,124 7,499
3. Other loans B, H 31,649 35,484
------------- -------------
51,825 55,480
TOTAL NON-CURRENT ASSETS 454,447 478,129
Overburden B, I 164,424 161,548
CURRENT ASSETS
Inventories
1. Raw materials and supplies B 5,731 5,218
2. Unfinished services B 0 88
3. Finished and trade goods B 2,115 3,228
------------- -------------
7,846 8,534
Receivables and other assets
1. Trade receivables B, J 55,909 46,826
2. Receivables from enterprises in which participations are held B 899 1,389
3. Other assets B 13,086 13,135
------------- -------------
69,894 61,350
Investments
Other investments B, K 56,076 67,691
Cash B 19,903 13,010
TOTAL CURRENT ASSETS 153,719 150,585
Prepaid expenses 3,201 3,399
------------- -------------
TOTAL ASSETS 775,791 793,661
============= =============
AT DECEMBER 31,
-------------------------------
NOTE 2000 1999
-------- -------------- --------------
SHAREHOLDERS' EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY
Subscribed capital 30,678 30,678
Capital reserve 310,421 317,007
Balance Sheet Profit : TEUR 14.578; 1999: TEUR 3.988
Less: Interim dividend paid: TEUR 9.504; 1999: TEUR 0 5,074 3,988
Minority interest -46,037 -44,643
thereof net income for the year:
TEUR 6.626 (1999: TEUR 5.816)
TOTAL SHAREHOLDERS' EQUITY 300,136 307,030
Special item for investment subsidies and incentives B 14,856 16,570
Provisions
1. Accruals for pensions and similar obligations L 8,861 6,651
2. Taxation accruals M 778 1,317
3. Environmental and mining provisions B, N 175,104 171,195
4. Other accruals O 18,833 18,297
-------------- --------------
203,576 197,460
Liabilities
1. Liabilities to banks B, P, Q 212,817 226,690
2. Downpayments received B, Q 0 53
3. Trade payables B, Q 16,748 24,069
4. Payables to participations B, Q 2,702 2,493
5. Other payables B, Q 24,954 19,296
-------------- --------------
257,221 272,601
Deferred income 2 --
-------------- --------------
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 775,791 793,661
============== ==============
See accompanying Notes to Consolidated Financial Statements
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MITTELDEUTSCHE BRAUNKOHLENGESELLSCHAFT MBH
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS OF EURO)
Balance
Subscribed Capital sheet profit/ Minority
capital reserve net profit interest Total
------------- ------------ ------------- ------------- -------------
BALANCE AS OF JANUARY 1, 1998 30,678 352,612 26 -32,320 350,996
Net loss 1998 -27,279 -3,124 -30,403
Transfer from capital reserve -29,810 29,810 0
Distributions -2,531 -2,531
Withdrawals by minority shareholders -7,256 -7,256
------------- ------------ ------------- ------------- -------------
BALANCE AS OF DECEMBER 31, 1998 30,678 322,802 26 -42,700 310,806
Net income/loss 1999 -1,833 5,816 3,983
Withdrawals by minority shareholders -7,759 -7,759
------------- ------------ ------------- ------------- -------------
30,678 322,802 -1,807 -44,643 307,030
Transfer from capital reserve based
upon a June 2000 shareholders' resolution -5,795 5,795 0
------------- ------------ ------------- ------------- -------------
BALANCE AS OF DECEMBER 31, 1999 30,678 317,007 3,988 -44,643 307,030
Net income 2000 7,952 6,626 14,578
Transfer from capital reserve -6,586 6,586 0
Distributions -13,452 -13,452
Withdrawals by minority shareholders -8,020 -8,020
------------- ------------ ------------- ------------- -------------
BALANCE AS OF DECEMBER 31, 2000 30,678 310,421 5,074 -46,037 300,136
============= ============ ============= ============= =============
See accompanying Notes to Consolidated Financial Statements
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NOTE A ORIGINATION AND NATURE OF BUSINESS
ORIGINATION: Mitteldeutsche Braunkohlengesellschaft mbH ("MIBRAG" or "MIBRAG
mbH") was created from split-up of MIBRAG AG, which had been previously owned by
the Treuhandanstalt (the German government privatization agency), into three
separate entities. Effective January 1, 1994 a consortium comprising of NRG
Energy, Inc., Morrison Knudsen Corporation, and PowerGen plc. jointly acquired
99 % of the active mining, power generation and related assets and liabilities
from the Treuhandanstalt through its Dutch holding company, MIBRAG B.V.. The
remaining 1 % was transferred on December 18, 1996 from the German government
privatization agency to Lambique Beheer B.V., Amsterdam, a subsidiary of NRG
Energy, Inc., Morrison Knudsen B.V., Amsterdam, and PowerGen Netherlands B.V.,
Amsterdam in equal portions (1/3 %) for each partner.
NATURE OF BUSINESS: The operations of MIBRAG mbH include two opencast brown coal
mines in Profen and Schleenhain and rights on future mining reserves. Operations
also include over 200 MW of power generation and one coal briquetting plant. A
significant portion of the sales of MIBRAG is made pursuant to long-term coal
and energy supply contracts.
NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The consolidated financial statements of MIBRAG mbH and
subsidiaries have been prepared in accordance with the German Commercial Code,
which represents accounting principles generally accepted in Germany ("German
GAAP"). German GAAP varies in certain significant respects from accounting
principles generally accepted in the United States of America ("US GAAP").
Application of U.S. GAAP would have affected the results of operations for each
of the years in the three-year period ended December 31, 2000 and shareholders'
equity as of December 31, 2000 and 1999 to the extent summarized in note C on
the consolidated financial statements.
On January 1, 1999, the Euro was introduced as the common legal currency of 11
member states of the European Economic and Monetary Union, including Germany.
MIBRAG has adopted the Euro as its reporting currency in its Consolidated
Financial Statements and translated all German marks (DM) amounts at the fixed
exchange rate for German marks to Euro. Although these statements depict the
same trends as would have been shown had they been presented in German marks,
they may not be directly comparable to the financial statements of other
companies that have also been restated in Euro. The Euro did not exist prior to
January 1999, and accordingly historical ex-change rates for the Euro are not
available. A comparison of the Consolidated Financial Statements and those of
another company that had historically used a reporting currency other than the
German mark that takes into account actual fluctuations in exchange rates could
give a much different impression than a comparison of the Consolidated Financial
Statements and those of another company as translated into Euro. All amounts
herein are shown in thousands of Euro ("TEUR") unless otherwise noted.
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PRINCIPLES OF CONSOLIDATION: All material companies in which MIBRAG has legal or
effective control are fully consolidated. In 2000, MIBRAG consolidated 6 (1999:
6, 1998: 5) domestic subsidiaries.
One significant investment, MUEG, in which MIBRAG has an ownership interest of
50%, is accounted for in accordance with the equity method. This investment is
referred to as an associated company in these financial statements.
All other investments are included at cost and are referred to as participations
in these financial statements.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles necessarily 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 balance
sheet dates and the reported amounts of revenues and expenses during the
reported periods. Actual results could differ from those estimates.
TOTAL COST METHOD: The income statement has been presented according to the
total cost (or type of expenditure) format as commonly used in Germany.
According to this format, production and all other expenses incurred during the
period are classified by type of expenses.
REVENUE RECOGNITION: Revenue is recognized when title passes or services are
rendered, net of discounts, customer bonuses and rebates granted.
INTANGIBLE ASSETS: Intangible assets are valued at acquisition cost and are
amortized on a straight-line basis over their respective useful lives (3 to 25
years).
Property, Plant, and Equipment: Property, plant, and equipment acquired is
recorded on the basis of acquisition or manufacturing cost, including
capitalized mine development costs, and subsequently reduced by scheduled
depreciation charges over the assets' useful lives as follows: buildings - 3 to
40 years, technical facilities and machinery - 4 to 25 years; and facilities,
factory and office equipment - 5 to 10 years. Maintenance and repair costs are
expensed as incurred. Depreciation is computed principally by the straight-line
method over the expected useful lives of the assets. Low value items are
expensed in the year of acquisition. Opportunities for special tax deductible
depreciation were utilized for both book and tax purposes in 1998 and prior
years.
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Impairment tests of long-term assets are made when conditions indicate a
possible loss. If an impairment is indicated, the asset is written down to its
estimated fair value. If, at a later date, the conditions leading to impairment
no longer exist, the impairment loss is reversed up to the value of such assets,
if the asset had not been impaired.
Investments: The long-term loans and investments are recorded at cost.
OVERBURDEN: Overburden represents the costs of removing the surface above a coal
field subsequent to the initial opening of the field to the extent that the
removal exceeds what is needed for the current years coal extraction. These are
costs incurred in advance in respect of future coal production. The overburden
is valued on an average cost basis.
INVENTORY: Inventories are carried at the lower of average or market cost.
Obsolescence provisions are made to the extent that inventory risks are
determinable.
SECURITIES: Securities held as fixed assets as well as marketable securities are
valued individually at cost or at lower quoted or market values.
RECEIVABLES AND OTHER ASSETS: All receivables are valued at cost, reduced for
appropriate valuation allowances.
Cash: Cash includes cash-on-hand, checks, bank accounts and time deposits.
INVESTMENT GRANTS: To support the acquisition of certain tangible assets,
investment allowances and subsidies were granted by the German federal
government and the states of Saxony and Saxony-Anhalt. The application,
conditions and payments of investment grants are ruled by German law and
regulations. Investment allowances and subsidies received and formally claimed
are credited to the special item account. The special item is amortized into
income over the normal operating useful lives of the underlying assets to which
the allowances and subsidies relate.
ENVIRONMENTAL AND MINING PROVISIONS: Accruals for environmental and
mining-related matters are recorded when it is probable that a liability has
been incurred and the amount of the liability can be reasonably estimated, based
on current law and existing technologies. These accruals are adjusted
periodically as assessment and utilization progress or as additional technical
or legal information becomes available.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The fair value of cash, accounts payable
and receivable as well as short term borrowings approximates book value because
of the short maturity period and interest rates approximating market rates. The
Company has determined the estimated fair value of long-term debts by using
available market information and generally accepted valuation methodologies. The
use of different market assumptions or estimation methodologies could have a
material effect on the estimated fair value amounts.
LIABILITIES: Liabilities are shown at their repayment amounts.
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SUPPLEMENTAL CASH FLOW INFORMATION: The Group paid TEUR 42 income taxes in 2000
and TEUR 0 in 1999, 1998, respectively. Interest paid amounted to TEUR 14,563,
TEUR 15,137 and TEUR 13,561 in 2000, 1999 and 1998, respectively.
Per Share Amounts: Per share amounts are not disclosed in the financial
statements. MIBRAG is a nonpublic enterprise.
NOTE C SIGNIFICANT DIFFERENCES BETWEEN GERMAN AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
The MIBRAG consolidated financial statements comply with German GAAP, which
differs in certain respects from US GAAP. The significant differences that
affect the consolidated net income and shareholders' equity of MIBRAG are set
out below.
I. APPLICATION OF THE PURCHASE METHOD OF ACCOUNTING
The German GAAP financial statements include the historical cost book values of
assets transferred from a predecessor company.
The acquisition of 99% of the shares in MIBRAG mbH on January 1, 1994 by MIBRAG
B.V. was accounted for using the purchase method of accounting. The purchase
price adjustments to the historical cost basis have been pushed down to MIBRAG
mbH for purposes of the reconciliation to US GAAP. The excess (EUR 387 million)
of the fair value of the net assets acquired over the purchase price was
proportionally allocated to reduce the value assigned to non-current assets,
excluding long-term investments.
The US GAAP financial statements also recognize purchase price adjustments for
certain incremental transportation costs incurred by MIBRAG for lignite
transportation to one of its major customers.
II. NOTES TO SIGNIFICANT US GAAP ADJUSTMENTS
1. FIXED ASSETS
The differences relate primarily to the following:
o In the US GAAP balance sheet as of January 1, 1994, fixed asset balances,
other than financial assets, were adjusted to their fair market values, then
reduced by the allocation of the difference between the net acquisition costs
for the MIBRAG shares and the fair market value of MIBRAG's net assets.
o The depreciation period of long term assets are based upon periods acceptable
for German tax purposes, which differ from the useful lives for U.S.
accounting purposes.
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o In 1999, an impairment loss was recognized for US GAAP purposes to reduce the
assets of the briquette plant Mumsdorf to their fair values as of December
31, 1999.
o A write-up of previously impaired fixed assets of the briquette plant Deuben
(made in 1999 for German GAAP purposes) is not allowed under US GAAP.
o Special accelerated depreciation for tax purposes is recorded in the German
financial statements for 1998 and prior years.
Upon disposal, the above differences also resulted in differing gains or losses
on disposition.
FINANCIAL INVESTMENT IN MUEG
For German GAAP purposes, MIBRAG accounted for the investment in MUEG as of
January 1, 1994 using the cost method. Under US GAAP the book value was
increased to account for the equity earnings that were not distributed to MIBRAG
as of that date.
2. RELOCATION ACCRUALS
The US GAAP results recognized liabilities and deferred costs of TEUR 45,357 to
relocate three villages. The deferred costs are amortized in accordance with
quantities of coal extracted. In accordance with German accounting principles
accruals for the relocation of villages can not be accrued earlier than 2 years
prior to the relocation, and certain relocation costs are to be expensed as
incurred.
3. INVESTMENT IN POWER PLANTS
In 1995 and 1996, third party investors paid in EUR 110 million into a MIBRAG
subsidiary, MIBRAG Industriekraftwerke GmbH & Co. KG ("MI"), which operates
three lignite-fired power plants. The investment is structured such that the
third party investors obtain accelerated tax depreciation while retaining a put
option to sell their investments back to MIBRAG at predetermined prices. The
third party investments were considered additions to equity as minority
interests for German GAAP, while these arrangements are accounted for as a
financing in accordance with US GAAP.
4. TRANSPORTATION CREDITS
An acquisition related liability, for US GAAP purposes, is reduced by the amount
of excess incremental transportation costs incurred by MIBRAG for certain
lignite shipments. The acquisition related liability is not reflected in
MIBRAG's German financial statements. It was reduced to zero in 1998.
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5. INTEREST CAPITALIZATION
Interest is expensed in the German financial statements. Interest expense
related to qualified assets, however, is capitalized and depreciated for US GAAP
purposes.
6. RECEIVABLES/PAYABLES AT NON-MARKET INTEREST RATES
Certain accounts receivable or loans payable are recorded in the German GAAP
financial statements at their nominal values. As they carry non-market interest
rates, these receivables and payables were adjusted to their market values.
7. OVERBURDEN
Overburden in the German financial statements includes capitalized depreciation
based upon the historical costs. Because of the purchase accounting adjustments,
a different amount of depreciation is capitalized in overburden in the US GAAP
financial statements. Additionally, overburden as of January 1, 1994 was written
down to fair value.
8. ENVIRONMENTAL AND MINING PROVISIONS
The ratable accrued end-lake provision was reduced in 1998 based upon a new
estimate of total costs to be incurred. For US purposes, this adjustment would
be accounted for prospectively.
9. ACCRUED LIABILITIES
Certain mining and other accruals, which were provided for at January 1, 1994 in
accordance with US GAAP purchase accounting, were not recorded in the German
financial statements.
10. OTHER
Certain costs and income in the German financial statements are capitalized or
deferred for US GAAP purposes, respectively.
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11. UNREALIZED HOLDING GAINS
Unrealized holding gains on available-for-sale securities are not accounted for
under German GAAP, but are recorded as other comprehensive income for US GAAP
purposes.
12. DEFERRED TAXES
The differences noted above result in temporary differences which, when combined
with net operating loss carryforwards, would result in a net deferred tax asset
of EUR 111 million and EUR 147 million at December 31, 2000 and December 31,
1999, respectively. Because of available negative evidence, a 100 % valuation
allowance would have been recorded at each year-end. Because no net deferred
taxes were recorded for German or US GAAP purposes, no adjustment to net income
or shareholders equity is listed in the following reconciliation.
13. NEW ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging activities"
issued by the Financial Accounting Standards Board, (the "FASB") as amended by
SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133" and SFAS
138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities" is effective for the Company as of January 1, 2001. This statement
calls for that all derivative financial instruments to be reflected on the
balance sheet at fair value. Changes in fair value must be recognized
periodically in earnings or as a component of other comprehensive income,
depending on the nature of the underlying item. Changes in the fair value of the
derivative will be recognized currently in the statements of operations. As
MIBRAG has not engaged in any transactions that would be considered derivative
instruments or hedging activities, the adoption of this standard will not have
an effect on the MIBRAG consolidated financial statements.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities - a replacement
of FASB Statement No. 125." This statement revises the standards for accounting
for securitizations and other transfers of financial assets and collaterals and
requires certain financial statement disclosures. SFAS No. 140 is effective for
transactions occurring after March 31, 2001. The new disclosure requirements are
effective for business years ending after December 15, 2000. Adoption of this
standard is not anticipated to have a material effect on MIBRAG's consolidated
financial statements.
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RECONCILIATION TO US GAAP
The following is a summary of the significant adjustments to net income for
2000, 1999 and 1998 and to shareholders' equity at December 31, 2000 and
December 31, 1999, which would be required if US GAAP had been applied instead
of German GAAP.
YEAR ENDED DECEMBER 31,
-----------------------------------
2000 1999 1998
NOTE TEUR TEUR TEUR
-------- ----------- ----------- -----------
Net income as reported in the consolidated
income statement under German GAAP 14,578 3,982 -30,404
Adjustments required to conform with
U.S. GAAP:
Fixed assets (1) 4,598 15,937 48,462
Relocation accruals (2) 802 871 3,916
Investment in power plants (3) -3,546 -3,775 -3,969
Transportation credits (4) 0 0 6,944
Interest capitalization (5) -221 2,585 973
Receivable/payables at
non-market interest rates (6) -516 -511 -506
Overburden (7) 7,813 11,744 4,945
Environmental and mining provisions (8) 5,569 81 -18,154
Other (10) 404 403 245
----------- ----------- -----------
NET INCOME IN ACCORDANCE WITH U.S. GAAP 29,481 31,317 12,453
=========== =========== ===========
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YEAR ENDED DECEMBER 31,
----------------------------
2000 1999
NOTE TEUR TEUR
-------- ------------- -------------
Shareholders' equity as reported
in the consolidated balance
sheet under German GAAP 300,136 307,030
Adjustments required to conform with
U.S. GAAP:
Fixed assets (1) 110,764 108,893
Relocation accruals (2) 16,528 12,999
Investments in power plants (3) -77,962 -82,436
Interest capitalization (5) 6,241 6,462
Receivables/payables
at non-market interest rates (6) 1,023 1,539
Overburden (7) -67,280 -75,093
Environmental and mining
provisions (8) -12,504 -18,073
Accrued liabilities (9) -15,417 -15,417
Other (10) -8,062 -8,466
Unrealized holding gains (11) 450 1,981
------------- -------------
SHAREHOLDERS' EQUITY IN ACCORDANCE
WITH U.S. GAAP 253,918 239,420
============= =============
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REPORTING OF COMPREHENSIVE INCOME
Comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive
Income", includes the impact of other comprehensive income. These are revenues,
gains, expenses and losses that under U.S. GAAP are not included in net income.
Year ended December 31
---------------------------------------------
2000 1999 1998
TEUR TEUR TEUR
-------------- -------------- --------------
Net income in accordance with US GAAP 29,481 31,318 12,453
Other comprehensive income
Unrealized holding gains on securities -1,531 -2,086 1,836
-------------- -------------- --------------
Comprehensive income 27,950 29,232 14,289
============== ============== ==============
Statement of shareholders` equity:
Year ended December 31
-------------------------------------------
2000 1999 1998
TEUR TEUR TEUR
-------------- -------------- -------------
Stockholders' equity according to US GAAP
before accumulated other comprehensive
income 253,468 237,439 206,119
Accumulated other comprehensive income:
Unrealized holding gains on securities 450 1,981 4,067
-------------- -------------- -------------
Total stockholders' equity according to US
GAAP including comprehensive income 253,918 239,420 210,186
============== ============== =============
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NOTE D CONCENTRATION OF CREDIT RISK AND LONG-TERM COAL SALES AGREEMENTS
MIBRAG mbH markets its coal principally to electric utilities in Germany. As of
Decem-ber 31, 2000 and 1999 accounts receivable from electric utilities totaled
TEUR 55,909 and TEUR 46,827, respectively. Credit is extended based on an
evaluation of the customer's financial condition. Credit losses are provided for
in the financial statements and consistently have been minimal.
MIBRAG mbH is committed under several long-term contracts to supply raw brown
coal and whirl fine coal to the Schkopau power station and the Lippendorf power
station. Under the terms of the Schkopau Agreement, MIBRAG mbH may deliver
annually up to 5.8 million tons of coal. The agreement is in effect until 2010,
with an option for the purchaser to extend the agreement for another 10 years.
The price to be paid by the Schkopau power station is a fixed price adjusted by
an annual escalation rate.
The Lippendorf Agreements provide for deliveries of up to 10 million tons of raw
brown coal per year from 1999 through 2040 with an option for the customers to
extend for an additional 3-year period. These Agreements were closed with
Vereinigte Energiewerke AG (VEAG), Berlin, E.ON Kraftwerke GmbH, Hanover and
EnBW Lippendorf Beteiligungsgesellschaft mbH, Stuttgart. The price to be paid by
the Lippendorf power station is a base-price with escalation and adjustment
based on quality of the coal delivered. The first bloc of the new Lippendorf
power station went into full operation in October 1999 and the second bloc in
May 2000.
A substantial portion of the Company's coal reserves is dedicated to the
production of coal for such agreements.
NOTE E INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT
The group depreciation charges are as follows: TEUR 49,059 (2000), TEUR 51,654
(1999) and TEUR 75,882 (1998), including normal depreciation, unplanned
depreciation and special tax depreciation (1998) in terms of section 4 of the
German tax law, "Foerdergebietsgesetz". According to that law, certain tangible
assets can for example be depreciated up to 50 % of the historical costs in the
first five years of acquisition in addition to the normal depreciation. Special
tax depreciation was EUR 23.067 in 1998.
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The major categories of fixed assets are the following (in TEUR):
2000 1999
--------------- ---------------
Concessions, trade marks, patents and licenses cost 13,967 14,177
less: accumulated amortization -5,375 -4,772
--------------- ---------------
net book value 8,592 9,405
=============== ===============
Property, plant and equipment
cost - land and land rights 39,504 36,632
- buildings 139,389 133,908
- strip mines 45,772 45,772
- technical equipment and machinery 747,008 677,601
- factory and office equipment 106,601 101,236
- payments on account and assets under
Construction 6,672 76,555
--------------- ---------------
total cost 1,084,946 1,071,704
--------------- ---------------
less: accumulated depreciation -690,916 -658,460
--------------- ---------------
net book value 394,030 413,244
=============== ===============
MIBRAG reopened the briquette plant in Deuben and closed the briquette plant in
Mumsdorf in the year 2000. The fixed assets of the briquette plant in Deuben
were written up at December 31, 1999 for German GAAP purposes to their continued
carrying values as if the assets had not been impaired in 1996. The fixed assets
of the briquette plant in Mumsdorf were fully written down for German and US
GAAP purposes in 2000.
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NOTE F PARTICIPATIONS (INCLUDING ASSOCIATED COMPANY)
MIBRAG's investment in MUEG Mitteldeutsche Umwelt- und Entsorgungs GmbH,
Braunsbedra, ("MUEG") is accounted for using the equity method. MUEG was founded
in 1990 and coordinates the waste disposal activities in the Central German
brown coal area. The equity value as of December 31, 2000 is TEUR 5,684, and the
cost basis is TEUR 6,333.
Investments in five (1999: six) other companies are accounted for at cost.
NOTE G LOANS GRANTED TO PARTICIPATIONS
In 1995, MIBRAG sold its district heating network assets to a company in which
it holds a participation. The sales price is being repaid in equal installments
of TEUR 375 over a period of 25 years. The interest rate is fixed at 5,4 percent
beginning in 2000 (1999: 5,0%).
The fair market value of the loan approximates the book value, which amounted to
TEUR 7,124 and TEUR 7,499 at December 31, 2000 and 1999, respectively.
NOTE H OTHER LOANS
The other loans were granted to the third party investors in a subsidiary of
MIBRAG mbH. These loans were financed by a borrowing from KfW (Kreditanstalt
fuer Wieder-aufbau). KfW granted MIBRAG mbH a loan of TEUR 52,663 due on
December 30, 2005 at fixed interest rates between 6.26 % and 6.82 %. The balance
of the loan as of December 31, 2000 amounted to TEUR 31,649. The loans to the
third party investors of the subsidiary of MIBRAG mbH were granted at the same
conditions as those applicable to the loan between MIBRAG mbH and KfW.
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NOTE I OVERBURDEN
The reconciliation of the overburden costs is as follows:
December 31, 2000 December 31, 1999
------------------------------ ------------------------------
Tonnage Value Tonnage Value
metric tons million EUR metric tons million EUR
-------------- --------------- -------------- ---------------
Profen 20.8 80,5 20.0 78,4
Schleenhain 21.9 83,9 20.0 83,2
-------------- --------------- -------------- ---------------
42.7 164,4 40.0 161,6
============== =============== ============== ===============
The basis for the determination of the overburden is the total quantity of
partially exposed raw brown coal.
NOTE J TRADE RECEIVABLES
Trade receivables were disclosed in the balance sheet,
net of allowances, as follows (in TEUR):
December 31, 2000 December 31, 1999
----------------------- -----------------------
Trade receivables 56,518 47,236
Less allowances (608) (410)
----------------------- -----------------------
55,910 46,826
======================= =======================
NOTE K OTHER INVESTMENTS
At December 31, 2000 other investments were disclosed at an amount of TEUR
56,076. The balance consists of investment funds of MI (TEUR 44,549), which were
specially set up to reinvest the additional liquidity resulting from the entry
of new investors into a subsidiary of MIBRAG and to short-term investments (TEUR
11,527).
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Net dividends distributed by the investment funds were partially reinvested in
1998 to 2000 and paid out in 2000. Realized gains of EUR 6.6 million, EUR 5.8
million and EUR 5.4 million were disclosed in interest income in, 2000, 1999 and
1998, respectively.
NOTE L ACCRUALS FOR PENSIONS AND SIMILAR OBLIGATIONS
The provision relates primarily to briquette benefit claims of active and
retired employees on the basis of the collective bargaining agreement of
November 9, 1993 in respect to allowances in kind. Individuals entitled must be
employees of the company at the date of retirement. The entitlement does not
vest and lapses with early termination of the working relationship or upon
receipt of social plan benefits.
The calculation is based on an actuarial valuation, which takes into account the
entitlement to the redemption value of DM 185.00 per metric ton of briquettes as
specified in the collective bargaining agreement, the employees entitled to
benefits as of December 31, 2000, and official demographic tables.
In addition, pension obligations for early retirement benefits were accrued.
These amounts have also been calculated on the basis of actuarial valuations.
NOTE M TAXATION ACCRUALS
MIBRAG accrued TEUR 778 (1999: TEUR 1.317) for property taxes.
MIBRAG did not provide for income taxes under German GAAP in spite of a positive
result for the year 2000 because of tax losses brought forward from prior years.
Deferred tax assets and liabilities have not been recorded because there are no
significant differences between the German GAAP financial statement and the tax
bases of the assets and liabilities.
The German income tax rate applicable to MIBRAG (corporate income tax,
solidarity surcharge, trade tax) is 50,17 % in 2000 (1999: 50,17%, 1998: 54,72
%) on undistributed income. Beginning in 2001 this tax rate will be 35,98 %
according to changed tax laws. The company has an effective tax rate of 0 %
because the company has no taxable income and the recording of a deferred tax
benefit for net loss carryforwards is prohibited under German GAAP.
The income taxes paid in 2000 (TEUR 42; 1999: TEUR 0; 1998: TEUR 0) relate to a
subsidiary of MIBRAG.
At December 31, 2000 the Company had approximately EUR 266 million net operating
loss carry-forwards, which do not expire and may be applied against future
taxable
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income. The tax audit is currently taking place for the fiscal years 1994
through 1997.
NOTE N ENVIRONMENTAL AND MINING PROVISIONS
The following is a summary of environmental and mining provisions (in TEUR):
Balance as of Balance as of
December 31, 2000 December 31, 1999
----------------------- ----------------------
1) End-lake provision 139,286 135,163
2) Provision for environmental pollution 5,100 5,100
3) Landscaping 5,876 6,560
4) Planting 4,331 5,040
5) Relocation of villages 20,511 19,332
----------------------- ----------------------
175,104 171,195
======================= ======================
1) End-lake provision
MIBRAG is responsible for reclaiming the mines Profen and Schleenhain. The
mining field reclaimation of the Profen and Schleenhain mines after the ceasing
of production is planned for 2029 to 2046 and 2041 to 2073, respectively. A
legally binding closure plan laying down the principles for action plans in
accordance with the Federal Mining Law (Bundesberggesetz) is normally approved
two years in advance to the commencement of production by the relevant mining
authorities. The liability to reclaim the area exists from the start of mining
activities. In each year of coal extraction the reclaimation costs are accrued
ratably using the relation of the coal mined to the total coal mine volume.
The calculation of the total cost for reclaiming mining fields has been made on
the basis of a third party opinion and estimations on the basis of current
prices. The end-lake costs consist mainly of costs for reconstruction, bank
reinforcement, dewatering and watering.
2) Provision for Environmental Measures
The provision for the environmental measures is determined in respect to
disposal sites and old locations of MIBRAG mbH in refinement and mining areas on
which waste deposits can be found. The obligation at the accrued amount is
derived from article 19.3 of the purchase and sales agreement. Qualifying costs
that exceed the provision are to be reimbursed by the Bundesanstalt fuer
vereinigungsbedingte Sonderaufgaben (BvS).
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3) Landscaping
This provision includes costs for reclaiming disposal areas and leveling the
area outside the embankments. These costs relate solely to continuous
landscaping, while costs for closing down landscaping are included in the
end-lake provision.
4) Planting
Provision is made for costs in connection with temporary planting as of December
31, 2000 and December 31, 1999.
5) Relocation of villages
The provision for the relocation of villages is in respect to the relocation of
municipalities, which is necessary for the expansion of the Profen and
Schleenhain mines. The calculation of the provision is based on a method that
takes into account the cost for project planning, infrastructural development,
cemetery relocation, demolition and landmark preservation. The provision is
built up in equal annual amounts, commencing two years before the relocation
starts and ending in the middle of the relocation year.
NOTE O OTHER ACCRUALS
Accrued liabilities are as follows (in TEUR):
December 31, 2000 December 31, 1999
--------------------- --------------------
1) Severance payments 10,373 10,549
--------------------- --------------------
2) Personnel expenses
- Employment anniversaries 1,209 1,355
- Vacation and other compensated
absences 311 276
- Other 61 124
--------------------- --------------------
1,581 1,755
--------------------- --------------------
3) Remaining accruals 6,879 5,993
--------------------- --------------------
18,833 18,297
===================== ====================
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1) Severance payments
Basis for the provisions is signed social plan framework agreements in which the
measures for the personnel adjustments are defined. The employees are entitled
to a one-time severance payment if the company initiates termination or in case
of retrenchments. The severance payments are limited to TEUR 26 per person.
Employees participating in early retirement programs are entitled to additional
compensation, mainly for the reduction in statutory pension payments due to
early retirement.
2) Personnel expenses
MIBRAG mbH grants awards in recognition of long service in the company, based on
the collective bargaining agreement dated January 1, 1992 and the company
agreement dated October 1, 1995. The employees are entitled to financial awards,
which increase in proportion to their employment periods. The valuations of the
benefits were based on actuarial valuations.
The liability for vacation and other compensated absences arises from the days
and shifts outstanding at balance sheet dates, which have been determined for
each employee.
3) Remaining provisions
Composition (in TEUR):
December 31, 2000 December 31, 1999
--------------------- ---------------------
Outstanding invoices 2,913 1,834
Mine damages 1,790 1,790
Water usage fees 760 1,008
Professional service and litigation 1,052 747
Others 364 614
--------------------- ---------------------
6,879 5,993
===================== =====================
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NOTE P LONG-TERM DEBT
Long-term debt consists of the following (in TEUR):
December 31, 2000 December 31, 1999
--------------------- ---------------------
a) Loan to finance the power stations
- build up the power station of Waehlitz 60,509 64,068
- modernization of the power stations in
Deuben and Mumsdorf 47,196 51,916
- finance the additional paid-in capital by
the investors of MI 31,649 35,484
b) Loan to finance the Schleenhain mine
investments 70,069 71,581
c) Loan for home construction 2,818 3,055
d) Deferred interest 576 586
--------------------- ---------------------
212,817 226,690
===================== =====================
To a)
These liabilities refer to three loans from the Kreditanstalt fuer Wiederaufbau,
Frankfurt/Main:
The first loan was granted December 9, 1992 for the construction of a raw brown
coal powered industrial power station in Waehlitz of TEUR 71,187. The interest
rate has been fixed at 7 % p.a. until December 9, 2002. The loan period is 25
years. The repayments are due in 40 equal amounts commencing from June 30, 1998.
On April 3, 1995 two additional loan agreements were closed with Kreditanstalt
fuer Wiederaufbau (KfW). One of these contracts was closed for partially
financing the modernization and reshaping of both industrial power plants in
Deuben and Mumsdorf (TEUR 61,355). The redemption period is 13 years starting on
December 31, 1998. Interest has to be paid between 6.04 % and 6.80 %. These
rates are fixed until January 2006 for loans of EUR 27.5 million, and 2007 for
the remaining portion of the loans. The second loan in the amount of EUR 52,663
was granted to partially finance the limited partner capital contribution of
investors. The redemption period is 13 years. In 1996, the loan was fully called
up (TEUR 52,663). In 2000, TEUR 3,835 were redeemed.
The interest rates are fixed at between 6.26 % and 6.82 % until 2005 at which
time the rates will be adjusted to market rates.
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Interest expense for the three loans amounted to EUR 10.2 million, EUR 11.3
million and EUR 12.2 million in 2000, 1999, and 1998, respectively.
To b)
In 1997 and 1998, loan contracts were closed with four banks to finance the
capital expenditures at the Schleenhain mine, especially the construction of the
blending yard and environmental measures for the conveyor belts. In 1998 EUR
61,355 million and in 1999 further EUR 10,226 million were called up at interest
rates between 3.5 % and 5.4 %, which are fixed until 2008 and 2009,
respectively.
To c)
The loans for home construction were granted by the Deutsche Bank AG and the
Nord LB for relocation-related home construction purposes in Hohenmoelsen.
For the loan granted by Deutsche Bank AG amounting to TEUR 1,333 an interest
rate of 5.6 % was set for a period ending 2007. For the two loans granted by
Nord LB at the amounts of TEUR 624 and TEUR 861 there are no interest payments
due until 2007 and 2010, respectively. Thereafter the rate is fixed at 8 % p.a.
The OTHER LIABILITIES (in TEUR) refer to:
December 31, 2000 December 31, 1999
--------------------- ---------------------
Usage reimbursement for the mining rights 11,015 7,705
Wages and Salaries 4,440 3,077
Tax lease 2,475 2,774
Social security contributions 2,159 2,311
Tax authorities 3,366 1,914
Others 1,498 1,515
--------------------- ---------------------
24,953 19,296
===================== =====================
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The payables due to the tax lease model relate to the equity commission and
management fees.
NOTE Q MATURITY PERIODS OF LIABILITIES
The maturity periods of liabilities (in TEUR) are as follows:
Down-
Liabilities Trade Payables to Other payment
to banks*) payables participations payables received Total
----------- -------- -------------- -------- -------- ---------
Balance as of December 31, 1999 226,690 24,069 2,493 19,296 53 272,601
thereof: maturity period
- up to 1 year 14,449 21,953 2,493 15,964 53 54,912
- 1-5 years 72,602 2,116 -- 2,405 -- 77,123
- more than 5 years 139,639 -- -- 927 -- 140,566
Balance as of December 31, 2000 212,817 16,749 2,702 24,953 -- 257,221
thereof: maturity period
- up to 1 year 16,379 15,067 2,702 22,660 -- 56,808
- 1-5 years 78,770 1,682 -- 1,547 -- 81,999
- more than 5 years 117,668 -- -- 746 -- 118,414
*) Liabilities to banks are fully collateralized by mortgages
Annual maturities of liabilities to banks are as follows:
Year of maturity Amount in TEUR
- - ------------------------- ----------------------------------
2001 16,379
2002 17,352
2003 17,490
2004 21,956
2005 21,972
--------------------
78,770
Thereafter 117,668
--------------
Total 212,817
==============
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The estimated fair value of the Company's liabilities to banks at December 31,
2000 (1999), approximates TEUR 213.030 (TEUR 232.968) compared with the carrying
value of TEUR 212,817 (TEUR 226.690).
NOTE R COMMITMENTS AND CONTINGENCIES
(in TEUR) At December 31,
--------------------------------------------
2000 1999
---------------------- ---------------------
Guarantees for indebtedness of others 19,672 19,705
Other contractual obligations 14,200 23,980
The other contractual obligations refer to long term investment projects in the
mines Profen and Schleenhain.
MIBRAG leases office equipment and railway-carriages, expiring at various dates.
Rental and lease expenses amounted to TEUR 780, TEUR 849 and TEUR 852 in the
years ended December 31, 2000, 1999 and 1998, respectively. The future minimum
lease payments under operating leases amount to TEUR 637 (2001: TEUR 279, 2002:
TEUR 254, 2003: TEUR 90, 2004: TEUR 11, 2005: TEUR 3 and no obligations
thereafter).
NOTE S SEGMENT INFORMATION
MIBRAG operates as one segment. Sales were exclusively achieved in Germany, and
all long-lived assets are located in Germany. Sales were almost completely
limited to the new German Federal States, mainly to Saxony Anhalt, Thuringia,
and Saxony.
Net sales by product and service:
2000 1999 1998
TEUR TEUR TEUR
------------ ------------- ------------
Raw brown coal and coal products 192,296 168,767 152,308
Electrical power, heating and steam 33,140 42,305 43,177
Other products and services 2,678 2,138 2,481
Further charging of transport services, ash
disposal and others 44,106 40,817 42,551
------------ ------------- ------------
272,220 254,027 240,517
============ ============= ============
Several major customers account for 10 % or more of MIBRAG's revenues. As a
percen-tage of total sales such customers accounted for 24 %, 21 % and 13 % in
2000, 31 %, 15 % and 10 % in 1999, and 35 % and 14 % in 1998.
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NOTE T RELATED PARTY TRANSACTIONS
Agreements for consulting and management services were closed in respect to the
mining operations and the refinement facilities between MIBRAG and two
subsidiaries of the common parent companies NRG Energy Inc., Morrison-Knudsen
Corp. and PowerGen plc.
These contracts determine certain consulting services to be provided by the two
subsidiaries Morrison-Knudsen Deutschland GmbH (MKD) and Saale Energie Service
GmbH (SES) to MIBRAG or its subsidiaries.
MIBRAG is obliged to determine and pay the cost-related remuneration for these
services. Expenditures for MIBRAG amount to TEUR 7,669, TEUR 7,669 and TEUR
10,013 for 2000, 1999 and 1998, respectively.
Part of the lignite deliveries from 1998 to 2000 to the Schkopau power plant
were sales to Saale Energie GmbH (SEG), which is a subsidiary of the common
parent companies of MIBRAG - NRG Energy Inc. and PowerGen plc. SEG is operating
two blocs of the Schkopau power station with 400 MW.
Sales to SEG amount to EUR 17.3 million, EUR 14.7 million, EUR 14.2 million in
2000, 1999 and 1998, respectively. The conditions of delivery are the same as to
the other (third party) operator of the Schkopau power plant.
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