EXHIBIT 99(b)
Jorf Lasfar Energy Company S.C.A
JLEC
CENTRALE THERMIQUE DE JORF LASFAR
B P 99 SIDI BOUZID
EL JADIDA
MOROCCO
Tel : 212 23 34 53 71
Fax : 212 23 34 54 05
US GAAP
FINANCIAL STATEMENTS
AS OF
DECEMBER 31, 2003, 2002 AND 2001
AUDITED
- --------------------------------------------------------------------------------
R.C. n(degree)86655 - Patente n(degree)35511273 - Identification Fiscale
(I.S TVA) n(degree)1021595
JORF LASFAR ENERGY COMPANY
INDEX TO FINANCIAL STATEMENTS
Page(s)
-------------
Balance Sheet
As of December 31, 2003, 2002, and 2001 ........................................ 4
Statement of Income
For year ending December 31, 2003, 2002, and 2001 .............................. 5
Statement of Stockholders' Equity
For year ending December 31, 2003, 2002, and 2001 .............................. 6
Statement of Cash Flows
For year ending December 31, 2003, 2002, and 2001 .............................. 7
Notes to US GAAP Financial Statements ....................................................... 8-29
Report of Independent Auditors
We have audited the accompanying balance sheets of Jorf Lasfar Energy
Company S.C.A (the "Company") as of December 31, 2003, 2002 and 2001, and the
related statements of income, of stockholders' equity and of cash flows for the
years then ended. These financial statements are the responsibility of the
Company'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 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 statements presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Jorf Lasfar Energy Company
S.C.A at December 31, 2003, 2002 and 2001, and the results of its operations and
its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.
Price Waterhouse
Casablanca, Morocco,
February 10, 2004
JORF LASFAR ENERGY COMPANY
BALANCE SHEET
Note December 31, 2003 December 31, 2002 December 31, 2001
---- ----------------- ----------------- -----------------
(000) U.S. Dollars (000) U.S. Dollars (000) U.S. Dollars
ASSETS
Current Assets
Cash .............................................. 3.1 65,611 46,683 67,106
Inventories ....................................... 2.c & 4 38,548 40,615 31,759
Account Receivable ................................ 5 85,486 76,175 86,515
Prepayments ....................................... 6 8,138 10,431 4,477
Net investment from $ DFL model ................... 2.b & 17.3 38,461 20,206 56,061
Net investment from Euro DFL model ................ 2.b & 17.3 40,942 31,298 21,301
Other ............................................. 0 0 0
---------- ---------- ----------
Total current assets ....................... 277,186 225,408 267,219
Long Term Assets, net
Restricted Cash ................................... 3.2 83,049 53,778 17,140
Fixed Assets ...................................... 7 9,603 6,554 6,284
Net investment from $ DFL model ................... 2.b & 17.3 638,004 678,549 686,660
Net investment from Euro DFL model ................ 2.b & 17.3 411,100 374,509 339,492
$ Capacity Charges less than $ DFL model .......... 13.1 713 0 9,907
Euro Capacity Charges less than Euro DFL model .... 13.2 0 0 4,225
Other Long Term Assets ............................ 9 19,058 10,968 9,445
---------- ---------- ----------
Total Long Term Assets ..................... 1,161,527 1,124,357 1,073,153
---------- ---------- ----------
Total assets ............................... 1,438,713 1,349,765 1,340,372
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable to third parties ................. 10 47,851 25,498 34,764
Accounts payable to related parties ............... 11 176,693 145,065 74,704
VAT Liability .................................... 8 3,972 2,871 3,078
Taxes payable ..................................... 12 7,527 4,866 873
Current part of Long-term loans in US Dollars ..... 15 25,749 25,749 24,873
Current part of Long-term loans in Euro ........... 15 44,491 36,855 31,167
Other current liabilities ......................... 14 7,739 7,955 18,607
---------- ---------- ----------
Total current liabilities .................. 314,023 248,859 188,066
Non-Current Liabilities
Long-term loans in US Dollars ..................... 15 212,426 238,174 251,667
Long-term loans in Euro ........................... 15 367,052 340,912 319,457
$ Capacity Charges greater than $ DFL model ....... 13.1 0 2,441 0
Euro Capacity Charges greater than Euro DFL model.. 13.2 422 236 0
Deferred Tax Liability ............................ 2.f 0 13,005 6,097
Derivative Instrument Liability ................... 20 22,050 21,410 10,665
Unfunded Pension Obligations ...................... 19.1 9,878 5,693 0
---------- ---------- ----------
Total non-current liabilities .............. 611,828 621,872 587,886
Commitment and Contingencies .......................... 22
Stockholders' Equity
Common Stock ...................................... 16.1 58 58 58
Convertible Stockholders' Securities .............. 16.2 201,425 201,425 201,425
Preferred Stock ................................... 16.3 185,930 185,930 185,930
Retained Earnings ................................. 16.4 147,499 113,031 187,672
Other Comprehensive Income or (Loss) .............. 20 (22,050) (21,410) (10,665)
---------- ---------- ----------
Total stockholders' equity ................. 512,862 479,033 564,420
---------- ---------- ----------
Total liabilities and stockholders' equity.. 1,438,713 1,349,765 1,340,372
The accompanying Notes 1 to 23 are an integral part of these financial
statements.
Page 4
JORF LASFAR ENERGY COMPANY
STATEMENT OF INCOME
January 1, 2003 January 1, 2002 January 1, 2001
to to to
Note December 31, 2003 December 31, 2002 December 31, 2001
-------- ------------------ ------------------ ------------------
(000) U.S. Dollars (000) U.S. Dollars (000) U.S. Dollars
REVENUE
Lease Revenue from $ DFL model ......... 2.b 17.2 81,793 88,464 100,679
Lease Revenue from Euro DFL model ...... 2.b 17.2 104,635 95,078 94,545
Energy Payments ........................ 128,981 130,446 116,709
O&M Revenue ............................ 45,066 42,930 38,809
Supplemental Capacity Charges .......... 3,949 4,017 3,887
Sale of Fly Ash ........................ 214 247 303
License Tax Reimbursement .............. 4,102 0 0
Others ................................. 138 3,090 2,364
-------- -------- --------
TOTAL REVENUE 368,878 364,272 357,296
OPERATING EXPENSES
Coal Cost .............................. 129,935 126,957 115,066
Fuel Oil Cost .......................... 1,280 910 754
O&M Costs .............................. 33,554 25,057 20,329
Operator's Incentive ................... 2,784 3,721 2,099
Generator Costs ........................ 11,994 11,397 12,547
License Tax Costs ...................... 4,102 0 0
Amortization of Major Maintenance ...... 9.1 1,935 1,128 261
Depreciation of Other Assets ........... 2,093 1,624 470
Provision For Future Pension Obligations 2,902 5,427 0
-------- -------- --------
TOTAL OPERATING EXPENSES 190,580 176,222 151,525
OPERATING INCOME ............................. 178,299 188,050 205,771
FINANCIAL ITEMS
Financial Income ....................... 2,025 1,764 4,735
Exchange Gain (+) or Loss (-) .......... 2.d (8,605) (1,558) 8,197
Financial Expenses ..................... 18 (49,425) (44,834) (50,617)
-------- -------- --------
TOTAL FINANCIAL ITEMS (56,005) (44,628) (37,685)
INCOME BEFORE TAXES 122,293 143,422 168,086
Income Taxes
Current ......................... 2.e 15,448 4,226 603
Deferred ........................ 2.f (13,005) 6,908 6,097
-------- -------- --------
NET INCOME 16.4 & 21 119,850 132,288 161,386
The accompanying Notes 1 to 23 are an integral part of these financial
statements.
Page 5
JORF LASFAR ENERGY COMPANY
STATEMENT OF STOCKHOLDERS' EQUITY
January 1, 2003 January 1, 2002 January 1, 2001
to to to
Note December 31, 2003 December 31, 2002 December 31, 2001
------ ----------------- ------------------ -----------------
COMMON STOCK
At beginning and end of period in number of shares 16.1 5,500 5,500 5,500
At beginning and end of period in thousands of USD 16.1 58 58 58
(000) U.S. Dollars
CONVERTIBLE STOCKHOLDERS' SECURITIES ------------------
At beginning of period 201,425 201,425 387,355
Conversion of Convertible Stockholders' Securities
to Preferred Stock 0 0 (185,930)
Conversion of Convertible Stockholders' Securities
to Common Stock 0 0 0
----------------- ----------------- ----------------
At end of period 16.2 201,425 201,425 201,425
PREFERRED STOCK
At beginning of period 185,930 185,930 0
Conversion of Convertible Stockholders' Securities
to Preferred Stock 0 0 185,930
Conversion of Preferred Stock to Common Stock 0 0 0
----------------- ----------------- ----------------
At end of period 16.3 185,930 185,930 185,930
RETAINED EARNINGS (DEFICIT)
At beginning of period 113,031 187,672 296,409
Net income 119,850 132,288 161,386
Common stock dividend (64,973) (184,891) (270,123)
Preferred stock dividend (9,796) (9,942) 0
Convertible stockholders' securities (10,613) (12,096) 0
----------------- ----------------- ----------------
At end of period 16.4 147,499 113,031 187,672
OTHER COMPREHENSIVE INCOME (LOSS) (a)
Derivative Instruments
At beginning of period (21,410) (10,665) 0
Reclassification of gains (losses) included in net income 6,871 5,811 699
Unrealized gain (loss) on derivative instruments (7,511) (16,556) (11,364)
----------------- ----------------- ----------------
At end of period 20 (22,050) (21,410) (10,665)
----------------- ----------------- ----------------
512,862 479,034 564,420
================= ================= ================
(a) Disclosure of Comprehensive Income (Loss)
Net income 119,850 132,288 161,386
Derivative instruments
Reclassification of gains (losses) in net income 6,871 5,811 699
Unrealized gain (loss) on derivative instruments (7,511) (16,556) (11,364)
----------------- ----------------- ----------------
Total Comprehensive Income 119,211 121,543 150,721
================= ================= ================
The accompanying Notes 1 to 23 are an integral part of these financial
statements.
Page 6
JORF LASFAR ENERGY COMPANY
STATEMENT OF CASH FLOWS
January 1, 2003 January 1, 2002 January 1, 2001
to to to
December 31, 2003 December 31, 2002 December 31, 2001
------------------ ------------------ ------------------
Note (000) U.S. Dollars (000) U.S. Dollars (000) U.S. Dollars
------
CASH FLOWS FROM OPERATING ACTIVITIES
Payments received from ONE ....................... $ 426,250 $ 471,044 $ 411,872
Interest received ................................ 1,870 1,748 4,543
Insurance Payments ............................... (5,699) (5,665) (7,104)
Payments of Operating Costs ...................... (233,068) (249,255) (228,771)
Cash Effect of Value Added Tax ................... 2,463 (321) 4,430
--------- --------- ---------
Net cash provided by operating activities.. 21 191,816 217,551 184,970
CASH FLOWS USED FOR INVESTING ACTIVITIES
Net (increase) in restricted cash ................ (25,942) (36,638) (17,140)
Acquisition of fixed assets ...................... (2,300) (3,957) (5,501)
Payment of Major Maintenance costs ............... (6,261) (93) (21,504)
--------- --------- ---------
Net cash used in investing activities ..... (34,503) (40,688) (44,145)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans .............................. 0 0 92,589
Proceeds of share capital payments ............... 0 0 0
Repayment of loans ............................... (65,639) (57,964) (41,961)
Payment of Convertible Securities interest ....... (11,417) (12,386) 0
Payment of Preferred Stock dividend .............. (10,539) (10,181) 0
Payment of Common Stock dividend ................. (54,877) (121,933) (189,600)
Repayment of Stockholders loans .................. 0 0 0
Purchase of Preferred Stock shares ............... 0 0 0
Purchase of Common Stock shares .................. 0 0 0
--------- --------- ---------
Net cash provided by financing activities.. (142,472) (202,464) (138,972)
Effect of exchange rate changes on cash .......... 4,087 5,178 (1,950)
CASH AT BEGINNING OF PERIOD ............................. 46,683 67,106 67,203
NET INCREASE (DECREASE) IN CASH DURING PERIOD ........... 18,928 (20,422) (97)
--------- --------- ---------
CASH AT END OF PERIOD ................................... 3.1 $ 65,611 $ 46,683 $ 67,106
========= ========= =========
SUPPLEMENTAL CASH FLOWS INFORMATION
Cash paid during the year-
Interest 49,136 56,054 45,486
Income taxes 12,826 5,150 6,173
The accompanying Notes 1 to 23 are an integral part of these financial
statements.
Page 7
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
1. GENERAL
A. BACKGROUND
The power station at Jorf Lasfar is located on the Atlantic coast of Morocco,
adjacent to the Port of Jorf Lasfar, in the Province of El Jadida. This location
is approximately 127 km south--west of Casablanca. Units 1 and 2 of the power
station were constructed by GEC Alstom for the Moroccan Electricity Company,
Office National de l'Electricite ("ONE"), and are now in commercial operation.
Each of these existing Units is 330 MW, fired by coal. In October of 1994, the
ONE issued a public tender for international companies to expand the power
station at Jorf Lasfar. In February of 1995, the ONE selected the "Consortium"
of ABB Energy Ventures and CMS Generation as the preferred bidder and exclusive
partner for negotiation. In April of 1996, the Consortium and the ONE reached
agreement in principle, and initialed the necessary Project Agreements.
B. ESTABLISHMENT
In order to officially conclude and implement these Project Agreements, the
Consortium established the Jorf Lasfar Energy Company (the "Company" or "JLEC")
on January 20, 1997. The Company was established as a limited partnership
("societe en commandite par actions") in accordance with the Laws of the Kingdom
of Morocco, with Commercial Registration Number 86655, Fiscal Identification
Number 1021595, and Patente Number 35511274. In accordance with its charter
documents, the Company's objective and purpose is to construct, operate, manage
and maintain the power station at Jorf Lasfar, including the development,
financing, engineering, design, construction, commissioning, testing, operation
and maintenance of two (2) new coal-fired Units, which are very similar in size
and technology to the existing Units. In order to secure its fuel supply the
Company also operates and maintains the coal-unloading pier in the Port of Jorf
Lasfar. For these activities, the Company received a "right of possession"
("droit de jouissance") for the Site, the existing Units, the new Units and coal
unloading pier. This "right of possession" will continue for the duration of the
Project Agreements, which is anticipated to be in the range from 15 to 30 years.
C. COMPANY LOAN, TRANSFER OF POSSESSION, PROJECT FINANCING AND INITIAL
DISBURSEMENT
On September 12, 1997, all Project Agreements were signed, the Company Loan
Agreement was executed and the first disbursement of the Company Loan was used
to pay the TPA fee to ONE. As a consequence, JLEC received possession of the
power station at Jorf Lasfar on September 13, 1997, and began to sell its
available capacity and net generation to ONE. All remaining requirements for
project financing were completed in November, and initial disbursement of the
Project Loans occurred on November 25, 1997.
D. CONSTRUCTION, COMMERCIAL OPERATION, PURCHASE OF COMPANY LOAN AND REPAYMENT OF
PROJECT LOANS
After a period of construction lasting 33 months and 41 months, Unit 3 and 4
began normal commercial operation on June 9, 2000, and February 2, 2001,
respectively. Consequently, the JLEC stockholders purchased 100% of the Company
Loan Notes on December 11, 2000, and JLEC began the repayment of all Project
Loans on May 15, 2001. After JLEC completes the repayment of all Project Loans
(which is scheduled for February 15, 2013), ONE has the option to pay JLEC the
Termination Amount, and then terminate all Project Agreements and retake
possession of the Site and power station at Jorf Lasfar.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The Company's financial statements are prepared using the historical cost
convention. The accounting and reporting policies of the Company are in
accordance with the generally accepted accounting principles of Morocco, which
are called "Code General de Normalisation Comptable" or "CGNC". Financial
statements are prepared in accordance with these CGNC standards, and expressed
in Dirhams. In addition to and separately from Moroccan (CGNC) financial
statements in Dirhams, the Company uses the U.S Dollar as functional currency,
and has prepared these financial statements in accordance with generally
accepted accounting principles of the United States.
Page 8
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
B. REVENUE RECOGNITION
On September 12, 1997, the Company and the Office National de L'Electricite
executed a set of contracts related to the power station at Jorf Lasfar. In
accordance with Statement of Financial Accounting Standard (SFAS) No. 13, these
contracts are accounted for as a direct financing lease. Accordingly, JLEC (the
"Lessor") will receive a stream of payments from ONE (the "Lessee") over the
term of the lease. The term of the lease is determined in accordance with SFAS
No. 13 Section (5)(f) which has been superseded by SFAS No. 98 Section 22(a).
The following policies are used to calculate the minimum lease payments and the
unearned income from the lease.
MINIMUM LEASE PAYMENTS are determined in accordance with SFAS
No. 13 Section 5(j), and are based on the capacity payments
that ONE will take to JLEC. These minimum lease payments do
not include reimbursable or executory costs such as the
reimbursement of coal costs. The sum of these capacity
payments equal the gross investment under the lease.
This gross investment minus the net investment in the plants
is defined to be the UNEARNED INTEREST INCOME. This unearned
interest income will be accreted and recognized into earnings
as LEASE REVENUE over the lease term using the effective
interest method so as to produce a constant periodic rate of
return on the net investment.
The NET INVESTMENT represents the cost of acquiring and
constructing the leased assets. These ACQUISITION AND
CONSTRUCTION COSTS include the following items which are
capitalized and allocated to Units 1 and 2 and Units 3 and 4
based upon appropriate allocation methodologies:
TRANSFER OF POSSESSION AGREEMENT (TPA): The TPA
payment is included in the cost basis of the leased
assets.
DIRECT CONSTRUCTION COSTS: All direct costs related
to construction are included in the cost basis of the
leased assets.
CAPITALIZED COSTS: Interest and financing costs
incurred during construction are capitalized and
included in the cost of the constructed units.
PROJECT DEVELOPMENT COSTS AND FEES: These costs and
fees are also capitalized and included in the cost
basis of the leased assets.
FINANCING COSTS: Interest expense is recognized on the
effective interest method over the life of the debt. Other
financing costs such as commitment fees, guarantee fees, etc.
are considered a component of the interest expense of the
related debt or financing. As such, they are amortized into
expense using the effective interest method over the life of
the related debt or financing.
C. INVENTORIES
The Company accounts for inventories by consistently applying the FIFO or
average cost method to each item, and uses the conservatism principle (lesser of
market value or cost) in its procedures for valuing inventories.
Page 9
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
D. FOREIGN CURRENCY TRANSACTIONS
The books and records of the Company for U.S. GAAP are maintained in U.S.
Dollars, which is both the reporting and functional currency. Transactions in
other currencies are translated to U.S. Dollars at the spot rate for current
period expenses and at the settlement rate for non-period transactions. Monetary
assets and monetary liabilities outstanding in other foreign currencies on
balance sheet dates are translated into U.S. Dollars at rates prevailing on such
balance sheet dates. Exchange gains and losses on those foreign currency
operations are included in determining net income for the period in which
exchange rates change.
E. CORPORATE TAX
Current Income tax is determined under Moroccan Income tax rules. In 1997, JLEC
signed a "tax incentive" convention with the Moroccan tax authorities. The main
principles of this convention are summarized below:
- - Income is subject to corporate tax and "Produit de Solidarite National" tax
(PSN)
- - PSN tax rate is 8.75% and is not subject of any tax holiday
- - Income tax holiday period is ten years
- - income tax holiday period starts on the "commercial operation date" for
each unit
- - income tax holiday is 100% during the first five-year period then at 50% of
the income tax rate during the second five-year period
- - income not related to the sale of electricity is subject to a tax rate of
35%
The "commercial operation date" for Units 1 and 2, Unit 3 and Unit 4 were
September 1997, June 2000 and February 2001, respectively. On September 13,
2002, income related to Units 1 and 2 became taxable at 17.5%. Unit 3 and Unit 4
are still in the 100% tax holiday period. The PSN tax was eliminated on January
1, 2001.
F. DEFERRED INCOME TAX
Starting September 13, 2002, JLEC tax rate on Units 1&2 is 17.5%. JLEC
determines and books the current income tax (US$ 15,448,426 for 2003 ) as
required by the tax laws and regulations of Morocco. Temporary differences
between the US GAAP and the CGNC balance sheets are creating the need to record
deferred income taxes. The main temporary differences result from the use of the
Direct Financing Lease method under US GAAP. In particular, the treatment of Net
Investment and revenue recognition (as disclosed in note 2.b above) under US
GAAP are quite different from the treatment of these items under Moroccan GAAP .
The total of all the deferred tax liabilities is $ 0 ($13,005,298 as of December
31, 2002 minus $13,005,298 for 2003).
G. OFF BALANCE SHEET COMMITMENTS
The Company discloses all off-balance sheet commitments, if any, on balance
sheet dates.
H. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reported period. Actual result could differ from these estimates and
assumptions.
Page 10
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
3. CASH
3.1 Cash
The Company's cash as of December 31, 2003, includes the initial capital
deposits of the Company's stockholders, as explained further in Note 16.1 . Such
cash is held in Moroccan Dirhams in accounts at CITIBANK MAGHREB, which is
located at Zenith Millenium Immeuble 1, Lotissement Attaoufik, Sidi Maarouf,
Casablanca Morocco. The remainder of the company's cash is held by the Offshore
Collateral Agent, Deutsche Bank Trust Company Americas in US$ and Euro, and by
the Onshore Collateral Agent, BMCI - Banque Marocaine pour le Commerce et
l'Industrie in Morocain Dirhams and US$.
The cash balances includes the following categories:
12/31/03 12/31/02 12/31/01
US$ US$ US$
--------------- ----------------- --------------------
Off-shore Revenue in US$ 24,426,875 22,666,875 36,223,422
Off-shore Revenue in Euro 6,590,224 5,331,124 5,000,414
-------------- ----------------- --------------------
Total Off-Shore Revenue 31,017,099 27,997,998 41,223,836
On-shore O&M Account - Generator 6,946,245 793,293 2,899,102
On-shore O&M Account - Operator 4,279,000 3,258,836 2,298,642
Off-shore O&M Accounts 4,546 10,607 8,464
-------------- ----------------- --------------------
Total O&M Accounts 11,229,792 4,062,735 5,206,208
Fuel & Spare Part Accounts 12,929,694 5,289,381 12,080,028
On-shore Construction Accounts 0 0 1,100,363
Off-shore Debt Service Accrual Accounts in US$ 3,734,278 3,843,187 3,540,479
Off-shore Debt Service Accrual Accounts in Euro 6,637,737 5,433,301 3,898,143
-------------- ----------------- --------------------
Total Debt Service Accrual Accounts 10,372,015 9,276,488 7,438,623
Stockholder capital deposits 62,863 56,624 56,624
-------------- ----------------- --------------------
Total 65,611,462 46,683,227 67,105,682
============== ================= ====================
3.2 Restricted Cash
The Reserve Accounts are as follow:
Major Maintenance Reserve Account in US$ 3.4 a 2,500,000 2,500,000 5,000,000
Fixed O&M Reserve Account in US$ 3.4 b 4,800,000 4,800,000 9,600,000
Debt Service Reserve Account in US$ 3.4 c 11,200,000 11,730,000 730,000
Super Reserve Account in US$ 3.4 d 45,600,000 18,100,000 0
Distribution Account in US$ 0 0 0
-------------- ----------------- --------------------
Off-shore Reserve Accounts in US$ 64,100,000 37,130,000 15,330,000
Fixed O&M Reserve Account in Euro 243,656 197,262 161,372
Debt Service Reserve Account in Euro 3.4 e 18,705,220 16,450,805 1,649,031
-------------- ----------------- --------------------
Off-shore Reserve Accounts in Euro 18,948,876 16,648,067 1,810,404
-------------- ----------------- --------------------
Total Reserve Accounts 83,048,876 53,778,067 17,140,404
============== ================= ====================
3.3 Total Cash
Cash 3.1 65,611,462 46,683,227 67,105,682
Restricted Cash in Reserve Accounts 3.2 83,048,876 53,778,067 17,140,404
-------------- ----------------- --------------------
148,660,339 100,461,294 84,246,086
============== ================= ====================
3.4 Letters of Credit
Additional liquidity is available, if needed for debt service, from
Sponsor (CMS and ABB) Letters of Credit in the following accounts:
12/31/03 12/31/02 12/31/01
-------------------- ------------------- --------------------
a. Major Maintenance Reserve Account US$ 2,500,000 2,500,000 0
b. Fixed O&M Reserve Account US$ 4,800,000 4,800,000 0
c. Debt Service Reserve Account US$ 11,300,000 11,300,000 22,600,000
d. Super Reserve Account US$ 39,086,700 47,900,000 36,800,000
e. Debt Service Reserve Account Euro 15,000,000 15,000,000 30,000,000
Page 11
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
4. INVENTORIES
The inventories are detailed as follows for the year ending:
12/31/03 12/31/02 12/31/01
US$ US$ US$
------------------ ------------------- -------------------
Stock of Coal 4.1 24,763,321 22,499,748 23,305,684
Stock of Fuel-oil 4.2 1,638,256 2,078,600 2,988,752
Stock of Spare Parts 4.3 10,940,862 15,081,606 4,952,377
Other Stocks (Chemicals, Oils,...) 1,205,566 954,692 512,445
------------------ ------------------- -------------------
38,548,005 40,614,646 31,759,259
================== =================== ===================
4.1 The stock of coal represents the value of 397,745 tones existing in the
coal storage area plus 184,318 tones in transit to Jorf Lasfar, for a total
inventory of 582,063 tones as of December 31, 2003 (606,115 tones total
as of December 31, 2002 and 643,042 tones total as of December 31, 2001).
4.2 The stock of fuel oil represents 9,471 m3 existing in the fuel tanks as of
December 31, 2003 (12,300 m3 as of December 31, 2002).
4.3 The stock of Spare Parts represents the value of spare parts as of December
31, 2003, that were purchased after the close-out of the Net Investment on
December 31, 2000. ($ 15,081,606 as of December 31, 2002).
5. RECEIVABLES
The "Accounts Receivables" as of December 31, 2003 are detailed as follows:
12/31/03 12/31/02 12/31/01
US$ US$ US$
------------------ ------------------- -------------------
Account Receivable - ONE 5.1 85,214,510 76,098,673 85,811,099
Account Receivable - Others 5.2 271,345 76,097 704,024
------------------ ------------------- -------------------
85,485,855 76,174,769 86,515,123
================== =================== ===================
5.1 The account receivable - ONE includes November 2003 and December 2003
invoices
The account receivable balance as of December 31, 2002 was US$ 76,098,673
(Nov. and Dec. Invoices).
5.2 The other receivables include a) invoices to Valcen Gie (association of
Moroccan cement companies) for purchases of fly ash during 4Q 2003 (US$
71,101), b) accrued interest earned by investment of JLEC's cash balances
($ 67,425), and c) other receivable (US$ 132,819).
6. PREPAYMENTS
The "Prepayments" as of December 31, 2003 are detailed as follows:
12/31/03 12/31/02 12/31/01
US$ US$ US$
----------------- ------------------- -------------------
Prepaid Insurance 3,599,349 3,582,404 3,822,746
Prepayments for Income Tax 3,929,580 5,194,869 0
Other Prepayments 609,277 1,653,537 653,896
----------------- ------------------- -------------------
8,138,206 10,430,810 4,476,641
================= =================== ===================
7. FIXED ASSETS
The "Fixed Assets" are detailed as follows for year ending:
12/31/03 12/31/02 12/31/01
US$ US$ US$
------------------ ------------------- -------------------
Fixed Asset - Gross 11,694,954 7,455,511 5,314,528
Depreciation -2,516,437 -1,884,137 -260,099
Construction in Progress 424,902 982,455 1,229,571
------------------ ------------------- -------------------
9,603,420 6,553,829 6,284,000
================== =================== ===================
8. V.A.T LIABILITY
The "V.A.T Liability" account represents the net amount of Value Added Tax as
shown below:
12/31/03 12/31/02 12/31/01
US$ US$ US$
------------------ ---------------- -------------------
Value Added Tax received from ONE to be declared 5,179,969 4,805,614 8,415,330
Value Added Tax to be paid & declared -1,207,918 -1,934,168 -5,337,662
------------------ ---------------- -------------------
3,972,052 2,871,446 3,077,668
================== ================ ===================
9. OTHER LONG TERM ASSETS
The Other Long Term Assets are as follows:
12/31/03 12/31/02 12/31/01
US$ US$ US$
-------------- ------------- -------------
Long Term Receivables Loan 3,372,930 2,754,540 2,016,161
Long Term Ash Disposal Site 1,389,307 1,913,308 0
Major Maintenance capitalized during 2001 Unit 1 turbine overhaul outage 7,898,850 7,898,850 7,898,850
Less: Amortization of Unit 1 Major Maintenance in 2001 and 2002 -1,598,577 -470,170 -470,170
9.1 Less: Amortization of Unit 1 Major Maintenance in 2003 -1,036,582 -1,128,407 0
Less: Adjustments due to changes in methodes -599,070 0 0
Major Maintenance capitalized during 2003 - Unit 2 turbine overhaul outage 10,529,148 0 0
9.1 Less: Amortization of Unit 2 Major Maintenance in 2003 -898,320 0 0
-------------- ------------- ------------
19,057,685 10,968,120 9,444,841
============== ============= ============
9.1 Capitalized major maintenance costs are amortized over the estimated
useful life of the investment, which for the turbine overhauls is 7 years
(84 months).
Page 12
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
10. ACCOUNTS PAYABLE TO THIRD PARTIES
The "Account Payable to Third Parties" includes the main suppliers of JLEC as of
December 31, 2003 and are detailed as follows:
12/31/03 12/31/02 12/31/01
US$ US$ US$
---------------------------------------------
Billiton (coal supplier) 2,800,790 4,119,817 16,060,510
Anglo (coal supplier) 6,320,391 2,245,218 5,281,412
RAG Trading (coal supplier) 0 4,499,958 0
Glencore (coal supplier) 20,030,571 2,187,744 0
BULK (coal supplier) 4,470,349 0 0
Total (coal supplier) 0 0 2,267,178
Alstom Power 1,507,931 2,845,357 2,607,834
ONE - Rebate 4,139,908 2,767,010 3,547,774
Other suppliers 8,581,419 6,832,615 4,999,250
---------------------------------------------
Total 47,851,359 25,497,718 34,763,957
=============================================
11. RELATED PARTY TRANSACTIONS
During the year 2003, JLEC has booked a number of related parties transactions
as follows:
-----------------------------------------------------------------------------------------------------
ABB ABB CMS CMS CMS Total
EV MAROC MOPCO MOPCO RD & GEN
Currencies US$ MAD MAD MAD US$ US$
Acc. Payable 12/31/02 105,764 125,880 -1,452,394 46,253,345 82,686
2003:
Management Fees 32,938,795
Incentive Accrual 29,320,319
Other 214,644 237,916 3,582,315
Total Payments 2003 230,400 363,796 30,311,126 46,253,688 82,686
Acc. Payable 90,007 0 4,757,590 29,319,976 0
Acc. Pay. in US$ 90,007 0 542,101 3,340,851 0 3,972,960
Jorf Lasfar Jorf Lasfar Tre Kronor
Common Stock Energiaktie- Power Energy Jorf Lasfar Investment AB Cythere 61 AB Cythere 63
bolag AB Handelsbolag AB Total
Currencies MAD MAD MAD MAD MAD MAD MAD
Acc. Payable 12/31/02 220,166,565 202,553,239 17,613,325 39,682,115 2,164,464 950,199,532 1,432,379,240
Dividend Payable Oct 30, 2003 151,250,000 139,150,000 12,100,000 12,100,000 660,000 289,740,000 605,000,000
Total Payments 2003 156,487,853 143,968,825 12,519,028 8,343,124 455,079 199,779,902 521,553,812
Acc. Payable 214,928,711 197,734,415 17,194,297 43,438,991 2,369,384 1,040,159,631 1,515,825,428
B/S FX Rate MAD/USD 8.776 8.776 8.776 8.776 8.776 8.776 8.776
Acc. Pay. in US$ 24,489,951 22,530,755 1,959,196 4,949,635 269,978 118,520,502 172,720,019
Preferred Stock & Convertible Jorf Lasfar Jorf Lasfar Tre Kronor AB AB
Securities Energiaktie- Power Energy Jorf Lasfar Investment Cythere 61 Cythere 63 Total
bolag AB Handelsbolag AB
Currencies MAD MAD MAD MAD MAD MAD MAD
Preferred Stock Dividend payable 0 0 0 0 226,840 99,666,957 99,893,797
Convertible Securities Interest payable 52,028,019 47,865,778 4,162,242 4,162,242 0 0 108,218,281
Total Payments 2003 52,028,019 47,865,778 4,162,242 4,162,242 226,840 99,666,957 208,112,078
Acc. Payable 0 0 0 0 0 0 0
B/S FX Rate MAD/USD 8.776 8.776 8.776 8.776 8.776 8.776 8.776
Acc. Pay. in US$ 0 0 0 0 0 0 0
-----------
Total Accounts Payable to Related Parties 176,692,979
Page 13
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
11. RELATED PARTY TRANSACTIONS (CONTINUED)
During 2002, related party transactions consisted of the following:
ABB ABB CMS CMS CMS Total
EV MAROC MOPCO MOPCO RD & GEN
Currencies US$ MAD MAD MAD US$ US$
Acc. Payable 12/31/01 137,581 78,576 7,726,314 44,598,493 76,753
Management Fees 35,654,033
Incentive Accrual 46,253,517
Other 207,059 778,086 6,139,521 114,510
Total Payments 2002 238,876 730,782 38,693,220 44,598,665 108,577
Acc. Payable 12/31/02 105,764 125,880 1,452,394 46,253,345 82,686
Acc. Pay. in US$ 12/31/02 105,764 12,345 142,433 4,535,976 82,686 4,594,337
Jorf Lasfar Jorf Lasfar Tre Kronor
Common Stock Energiaktie- Power Energy Jorf Lasfar Investment AB Cythere 61 AB Cythere 63 Total
bolag AB Handelsbolag AB
Currencies MAD MAD MAD MAD MAD MAD MAD
Acc. Payable 12/31/01 202,826,993 186,600,834 16,226,160 16,226,160 885,063 388,542,764 811,307,973
Dividend Payable Oct 29, 2002 495,000,000 455,400,000 39,600,000 39,600,000 2,160,000 948,240,000 1,980,000,000
Total Payments 2002 477,660,429 439,447,594 38,212,834 16,144,045 880,600 386,583,232 1,358,928,734
Acc. Payable 12/31/02 220,166,565 202,553,239 17,613,325 39,682,115 2,164,464 950,199,532 1,432,379,240
B/S FX Rate MAD/USD 10.197 10.197 10.197 10.197 10.197 10.197 10.197
Acc. Pay. in US$ 12/31/02 21,591,308 19,864,003 1,727,305 3,891,548 212,265 93,184,224 140,470,652
Preferred Stock & Jorf Lasfar Jorf Lasfar Tre Kronor
Convertible Securities Energiaktie- Power Energy Jorf Lasfar Investment AB Cythere 61 AB Cythere 63 Total
bolag AB Handelsbolag AB
Currencies MAD MAD MAD MAD MAD MAD MAD
Preferred Stock
Dividend payable 0 0 0 0 261,774 115,016,078 115,277,852
Convertible Securities
Interest payable 63,882,171 58,771,597 5,110,574 5,110,574 16,749 7,359,167 140,250,832
Total Payments 2002 63,882,171 58,771,597 5,110,574 5,110,574 278,523 122,375,245 255,528,684
Acc. Payable 12/31/02 0 0 0 0 0 0 0
B/S FX Rate MAD/USD 10.197 10.197 10.197 10.197 10.197 10.197 10.197
Acc. Pay. in US$ 12/31/02 0 0 0 0 0 0 0
Total Accounts Payable to Related Parties 145,064,990
During 2001, related party transactions consisted of the following:
ABB ABB ABB ABB CMS CMS CMS Total
EV Secheron Secheron MAROC MOPCO MOPCO RD & GEN
Currencies US$ DEM CHF MAD MAD MAD US$ US$
Acc. Payable 12/31/00 43,545 - - - 16,747,904 96,757,074 200,667
Management Fees 35,287,098
Incentive Accrual 44,314,093
Other 331,716 375,000 25,200 469,461 5,873,718 471,870
Total Payments 2001 237,679 375,000 25,200 390,885 38,434,970 96,472,673 595,784
Acc. Payable 12/31/01 137,581 - - 78,576 7,726,314 44,598,493 76,753
Acc. Pay. in US$ 12/31/01 137,581 - - 6,777 666,349 3,846,356 76,753 4,733,816
Jorf Lasfar Jorf Lasfar Tre Kronor Jorf Lasfar AB
AB Cythere 63 Energiaktie- Power Energy Investment Handels- Cythere Total
bolag AB AB bolag 61
Currencies MAD MAD MAD MAD MAD MAD MAD
Dividend Payable Apr 24, 2001 790,200,000 412,500,000 379,500,000 33,000,000 33,000,000 1,800,000 1,650,000,000
Dividend Payable Oct 29, 2001 650,598,000 339,625,000 312,455,000 27,170,000 27,170,000 1,482,000 1,358,500,000
Total Payments 2001 1,052,255,236 549,298,007 505,354,166 43,943,841 43,943,841 2,396,937 2,197,192,027
Acc. Payable 12/31/01 388,542,764 202,826,993 186,600,834 16,226,160 16,226,160 885,063 811,307,973
B/S FX Rate MAD/USD 11.60 11.60 11.60 11.60 11.60 11.60 11.60
Acc. Pay. in US$ 12/31/01 33,509,510 17,492,626 16,093,216 1,399,410 1,399,410 76,331 69,970,502
Total Accounts Payable to Related Parties 74,704,318
Page 14
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
12. TAXES PAYABLE:
The "taxes payable" includes the following items as of December 31, 2003:
12/31/03 12/31/02 12/31/01
US$ US$ US$
--------------- ---------------- --------------
Value Added Tax on behalf of foreign suppliers 309,190 299,199 312,044
Income Tax 2001 0 0 186,202
Income Tax 2002 0 4,226,098 0
Income Tax 2003 5,393,931 0 0
Withholding Tax 260,841 155,281 192,380
Payroll Tax 237,358 185,575 182,715
Licence Tax 1,325,971 0 0
--------------- ---------------- --------------
Total 7,527,291 4,866,153 873,340
=============== ================ ==============
13. CAPACITY CHARGES
13.1 $ Capacity Charges greater than $ DFL Model Actual DFL model
--------------- ----------------
$ Capacity Min Lease
--------------- ----------------
Charges Payments Difference
--------------- ---------------- --------------
CGNC US GAAP US GAAP
--------------- ---------------- --------------
USD USD USD
--------------- ---------------- --------------
$ Capacity Charges 103,690,956 104,516,335 -825,379
$ O.N.E Rebate -2,761,910 -2,874,199 112,289
--------------- ---------------- --------------
2003 in USD 100,929,046 101,642,136 -713,090
$ Capacity Charges greater than $ DFL Model -713,090
--------
Actual DFL model
--------------- ----------------
13.2 Euro Capacity Charges greater than Euro DFL Model Euro Capacity Min Lease
--------------- ----------------
Charges Payments Difference
--------------- ---------------- --------------
CGNC US GAAP US GAAP
--------------- ---------------- --------------
Euro Euro Euro/USD
--------------- ---------------- --------------
Euro Capacity Charges 125,149,979 124,917,610 232,369
Euro O.N.E Rebate -3,333,492 -3,435,234 101,742
--------------- ---------------- --------------
2003 in Euro 121,816,487 121,482,376 334,111
B/S FX Rate X 1.263417
--------------
Euro Capacity Charges greater than Euro DFL Model in USD 422,122
13.1 $ Capacity Charges greater than $ DFL Model Actual DFL model
--------------- ----------------
$ Capacity Min Lease
--------------- ----------------
Charges Payments Difference
--------------- ---------------- --------------
CGNC US GAAP US GAAP
--------------- ---------------- --------------
USD USD USD
--------------- ---------------- --------------
$ Capacity Charges 152,243,461 148,653,918 3,589,543
$ O.N.E Rebate -7,466,514 -6,317,791 -1,148,723
--------------- ---------------- --------------
2002 in USD 144,776,947 142,336,127 2,440,820
$ Capacity Charges greater than $ DFL Model 2,440,820
---------
Actual DFL model
--------------- ----------------
13.2 Euro Capacity Charges greater than Euro DFL Model Euro Capacity Min Lease
--------------- ----------------
Charges Payments Difference
--------------- ---------------- --------------
CGNC US GAAP US GAAP
--------------- ---------------- --------------
Euro Euro Euro/USD
--------------- ---------------- --------------
Euro Capacity Charges 131,283,947 130,150,792 1,133,155
Euro O.N.E Rebate -6,438,591 -5,531,409 -907,183
--------------- ---------------- --------------
2002 in Euro 124,845,355 124,619,384 225,971
- ------------
B/S FX Rate X 1.046582
--------------
Euro Capacity Charges greater than Euro DFL Model in USD 236,497
Page 15
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
13. CAPACITY CHARGES (CONTINUED)
13.1 $ Capacity Charges greater than $ DFL Model Actual DFL model
--------------- ----------------
$ Capacity Min Lease
--------------- ----------------
Charges Payments Difference
--------------- ---------------- ---------------
CGNC US GAAP US GAAP
--------------- ---------------- ---------------
USD USD USD
--------------- ---------------- ---------------
$ Capacity Charges 167,725,226 174,863,943 -7,138,718
$ O.N.E Rebate -4,643,978 -1,876,144 -2,767,834
--------------- ---------------- ---------------
2001 in USD 163,081,248 172,987,799 -9,906,551
$ Capacity Charges greater than $ DFL Model -9,906,551
----------
Actual DFL model
--------------- ----------------
13.2 Euro Capacity Charges greater than Euro DFL Model Euro Capacity Min Lease
--------------- ----------------
Charges Payments Difference
--------------- ---------------- ---------------
CGNC US GAAP US GAAP
--------------- ---------------- ---------------
Euro Euro Euro/USD
--------------- ---------------- ---------------
Euro Capacity Charges 114,874,856 117,731,467 -2,856,611
Euro O.N.E Rebate -3,180,600 -1,263,161 -1,917,440
--------------- ---------------- ---------------
2001 in Euro 111,694,256 116,468,307 -4,774,051
- ------------
B/S FX Rate X 0.88504
---------------
Euro Capacity Charges greater than Euro DFL Model in USD -4,225,210
14. OTHER CURRENT LIABILITIES
The "Other Current Liabilities" as of December 31, 2003 are detailed as follows:
12/31/03 12/31/02 12/31/01
US$ US$ US$
--------------- ---------------- ---------------
Accrued Expenses: interest, swaps and fees 14.1 5,904,937 6,072,924 17,293,488
Accrued salaries expense 1,198,164 1,390,179 986,669
Liability for Compensated Absences 298,523 307,449 108,027
Other Liabilities 337,780 184,470 218,670
--------------- ---------------- ---------------
7,739,404 7,955,022 18,606,854
=============== ================ ===============
14.1 The accrued interests and fee expenses are detailed by loans as follows:
12/31/03 12/31/02 12/31/01
US$ US$ US$
--------------- ---------------- ---------------
OPIC 728,141 807,914 907,733
SACE 1,586,760 1,522,740 1,413,325
WB 1,712,739 1,629,541 1,146,864
US EXIM - Exposure Fees 0 0 12,255,922
US EXIM 1,574,138 1,823,435 1,370,400
ERG 303,158 289,295 199,245
--------------- ---------------- ---------------
5,904,937 6,072,924 17,293,488
=============== ================ ===============
Page 16
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
15. LONG TERM LOANS
Long term loans are detailed as follows as of December 31, 2003:
Interest Reimbursement
Borrowing Principal --------------- Interest --------------------------
Loan Date Currency Amount Type Rate Payment Maturity Periodicity
- ---- --------- -------- --------- ---- ---- ------- -------- -----------
US EXIM 9/12/02 US$ 181,363,762 Fixed 7.2000% Quarterly Feb. 15, 2013 Quarterly
OPIC Note A 11/25/97 US$ 46,635,417 Fixed 10.2300% Quarterly Feb. 15, 2013 Quarterly
OPIC Note B 02/11/98 US$ 10,175,000 Fixed 9.9200% Quarterly Feb. 15, 2013 Quarterly
-----------
56,810,417
-----------
Total L.T loan in US$ 238,174,179
-----------
Current part in USD 25,748,560
-----------
Non-Current part in USD 212,425,619
-----------
Interest Reimbursement
Borrowing Principal --------------- Interest --------------------------
Loan Date Currency Amount Type Rate Payment Maturity Periodicity
- ---- --------- -------- --------- ---- ---- ------- -------- -----------
SACE 11/17/03 Euro 179,332,929 Fixed 5.7300% Quarterly Feb. 15, 2013 Quarterly
ERG 11/17/03 Euro 23,045,939 Variable 4.16888% Quarterly Feb. 15, 2013 Quarterly
World Bank 11/17/03 Euro 123,359,818 Variable 3.9189% Quarterly Feb. 15, 2013 Quarterly
-----------
Total L.T loan in Euro 325,738,687
-----------
B/S FX Rate Euro/USD 1.26342
-----------
Total L.T loan in USD 411,543,784
-----------
Current part in USD 44,491,219
-----------
Non-Current part in USD 367,052,565
-----------
Total principal repayments for the next five years are detailed below. Forecasts
of interest payments, interest-rate swap payments and guarantee fees are also
shown below. For further information regarding swaps, see Note 20.
Remaining Remaining Remaining
Principal Principal Principal Principal Principal Interest Swap Guarantee
Repayment in Repayment in Repayment in Repayment in Repayment in Payments Payments Fees
2004 2005 2006 2007 2008 2004-2013 2004-2013 2004-2013
In USD
US EXIM 19,606,893 19,606,893 19,606,893 19,606,893 19,606,893 62,017,946 0 0
OPIC A 5,041,667 5,041,666 5,041,666 5,041,666 5,041,666 22,657,888 0 0
OPIC B 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 4,793,735 0 0
Total in USD 25,748,560 25,748,559 25,748,559 25,748,559 25,748,559 89,469,569 0 0
In Euro
SACE 19,387,344 19,387,344 19,387,344 19,387,344 19,387,344 49,481,105 0 0
ERG 2,491,452 2,491,452 2,491,452 2,491,452 2,491,452 4,730,553 4,774,063 0
WB 13,336,197 13,336,197 13,336,197 13,336,197 13,336,197 22,600,374 25,202,063 5,472,842
Total in Euro 35,214,993 35,214,993 35,214,993 35,214,993 35,214,993 76,812,032 29,976,126 5,472,842
B/S FX Rate
Euro/USD 1.26342 1.26342 1.26342 1.26342 1.26342 1.26342 1.26342 1.26342
Total in USD 44,491,219 44,491,219 44,491,219 44,491,219 44,491,219 97,045,624 37,872,347 6,914,481
Page 17
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
15. LONG TERM LOANS (CONTINUED)
Long term loans are detailed as follows as of December 31, 2002:
Interest Reimbursement
Borrowing Principal ---------------- Interest ---------------------------
Loan Date Currency Amount Type Rate Payment Maturity Periodicity
US EXIM 9/12/02 US$ 200,971,655 Fixed 7.2% Quarterly Feb. 15, 2013 Quarterly
OPIC Note A 11/25/97 US$ 51,677,083 Fixed 10.23% Quarterly Feb. 15, 2013 Quarterly
OPIC Note B 02/11/98 US$ 11,275,000 Fixed 9.92% Quarterly Feb. 15, 2013 Quarterly
-----------
62,952,083
-----------
Total L.T loan in US$ 263,923,738
-----------
Current part in USD 25,748,560
-----------
Non-Current part in USD 238,175,178
-----------
Interest Reimbursement
Borrowing Principal ---------------- Interest ---------------------------
Loan Date Currency Amount Type Rate Payment Maturity Periodicity
SACE 11/15/02 Euro 198,720,273 Fixed 5.73% Quarterly Feb. 15, 2013 Quarterly
ERG 11/15/02 Euro 25,537,392 Variable 5.14% Quarterly Feb. 15, 2013 Quarterly
World Bank 11/15/02 Euro 136,696,015 Variable 4.89% Quarterly Feb. 15, 2013 Quarterly
-----------
Total L.T loan in Euro 360,953,680
-----------
B/S FX Rate Euro/USD 1.04658
-----------
Total L.T loan in USD 377,767,743
-----------
Current part in USD 36,855,389
-----------
Non-Current part in USD 340,912,354
-----------
Total principal repayments for the next five years are detailed below. Forecasts
of interest payments, interest-rate swap payments and guarantee fees are also
shown below. For further information regarding swaps, see Note 20.
Remaining Remaining Remaining
Principal Principal Principal Principal Principal Interest Swap Guarantee
Repayment in Repayment in Repayment in Repayment in Repayment in Payments Payments Fees
2003 2004 2005 2006 2007 2003-2013 2003-2013 2003-2013
In USD
US EXIM 19,606,893 19,606,893 19,606,893 19,606,893 19,606,893 76,033,383 0 0
OPIC A 5,041,667 5,041,666 5,041,666 5,041,666 5,041,666 27,754,052 0 0
OPIC B 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 5,871,955 0 0
Total in USD 25,748,560 25,748,559 25,748,559 25,748,559 25,748,559 109,659,390 0 0
In Euro
SACE 19,387,344 19,387,344 19,387,344 19,387,344 19,387,344 60,663,342 0 0
ERG 2,491,452 2,491,452 2,491,452 2,491,452 2,491,452 7,093,552 4,535,473 0
WB 13,336,197 13,336,197 13,336,197 13,336,197 13,336,197 36,148,188 23,844,995 6,757,469
Total in Euro 35,214,993 35,214,993 35,214,993 35,214,993 35,214,993 103,905,082 28,380,468 6,757,469
B/S FX Rate
Euro/USD 1.04658 1.04658 1.04658 1.04658 1.04658 1.04658 1.04658 1.04658
Total in USD 36,855,389 36,855,389 36,855,389 36,855,389 36,855,389 108,745,223 29,702,496 7,072,248
Page 18
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
15. LONG TERM LOANS (CONTINUED)
Long term loans are detailed as follows as of December 31, 2001:
Drawdown Drawdown Interest Interest Reimbursement
Loan Date Currency Amount Type Rate Payment Maturity Periodicity
US EXIM 11/15/2001 US$ 207,446,204 Variable 4.14% Quarterly Feb. 15, 2013 Quarterly
OPIC Note A 11/25/97 US$ 56,718,750 Fixed 10.48% Quarterly Feb. 15, 2013 Quarterly
OPIC Note B 02/11/98 US$ 12,375,000 Fixed 10.17% Quarterly Feb. 15, 2013 Quarterly
69,093,750
Total L.T loan in US$ 276,539,954
Current part in USD 24,873,137
Non-Current part in USD 251,666,817
Drawdown Drawdown Interest Interest Reimbursement
Loan Date Currency Amount Type Rate Payment Maturity Periodicity
SACE 11/15/2001 Euro 218,107,617 Fixed 5.73% Quarterly Feb. 15, 2013 Quarterly
ERG 11/15/2001 Euro 28,028,845 Variable 5.34% Quarterly Feb. 15, 2013 Quarterly
World Bank 11/15/2001 Euro 150,032,211 Variable 5.09% Quarterly Feb. 15, 2013 Quarterly
Total L.T loan in Euro 396,168,673
B/S FX Rate Euro/USD 0.885
Total L.T loan in USD 350,623,797
Current part in USD 31,166,559
Non-Current part in USD 319,457,237
Total principal repayments for the next five years are detailed below. Forecast
interest payments, interest-rate swap payments and guarantee fees are also
shown below. For further information regarding swaps, see Note 20.
Principal Principal Principal Principal Principal Remaining Remaining Remaining
Repayment in Repayment in Repayment in Repayment in Repayment in Interest Swap Guarantee
2002 2003 2004 2005 2006 Payments Payments Fees
2002-2013 2002-2013 2002-2013
In USD
US EXIM 18,731,470 19,606,893 19,606,893 19,606,893 19,606,893 87,235,810 0 1,176,315
OPIC A 5,041,667 5,041,666 5,041,666 5,041,666 5,041,666 33,499,497 0 0
OPIC B 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 7,088,426 0 0
Total in USD 24,873,137 25,748,559 25,748,559 25,748,559 25,748,559 127,823,733 0 1,176,315
In Euro
SACE 19,387,344 19,387,344 19,387,344 19,387,344 19,387,344 72,907,871 0 0
ERG 2,491,452 2,491,452 2,491,452 2,491,452 2,491,452 8,830,924 4,982,063 0
WB 13,336,197 13,336,197 13,336,197 13,336,197 13,336,197 45,081,853 25,824,728 8,173,329
Total in Euro 35,214,993 35,214,993 35,214,993 35,214,993 35,214,993 126,820,648 30,806,791 8,173,329
B/S FX Rate
USD/Euro 0.88504 0.88504 0.88504 0.88504 0.88504 0.88504 0.88504 0.88504
Total in USD 31,166,559 31,166,559 31,166,559 31,166,559 31,166,559 112,240,922 27,265,139 7,233,696
Page 19
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
15. LONG TERM LOANS (CONTINUED)
PLEADGE OF STOCK AND OTHER ASSETS
As security for the repayment of the loans, and the payment of all related
interest, fees and swap obligations, JLEC and its stockholders have entered into
various pledge agreements with Deutsche Bank Trust Company Americas, as Offshore
Collateral Agent, and with Banque Marocaine pour le Commerce et l'Industrie, as
Onshore Collateral Agent, for the benefit of such lenders and other secured
parties. Such security shall continue in effect until the repayment in full of
all outstanding principal amounts and the payment in full of all related
interest, fee and swap obligations, which is scheduled to occur in February of
2013. The principle pledge agreements are:
1. The Stockholder Pledge and Security Agreements, in which each of JLEC's
stockholders pledges all of its shares, claims, rights and interests in JLEC to
the Offshore Collateral Agent.
2. The Security and Assignment Agreement, in which JLEC assigns to the Offshore
Collateral Agent a security interest in all of JLEC's rights, title and interest
in the following collateral, among others:
a. all of JLEC's contractual rights,
b. all rents, profits, income and revenues derived by JLEC from its ownership
of the Project,
c. all cash deposits and other assets in any of JLEC's accounts with financial
institutions,
d. all permits, licenses and other governmental authorizations obtained by
JLEC in connection with its ownership of the Project,
e. all of JLEC's insurance policies and related claims and proceeds, and
f. all personal property and inventories of JLEC.
3. The Agreement for Pledge of Shares, in which each of JLEC's stockholders
pledges all of its shares, claims, rights and interests in JLEC to the Onshore
Collateral Agent, and assigns to the Onshore Collateral Agent the direct payment
by JLEC of all dividends and other stockholder distributions if and whenever a
Default has occurred and is continuing.
4. The General Delegation of Contract Claims, in which JLEC assigns to the
Onshore Collateral Agent the direct payment of any and all contract claims due
to JLEC if and whenever a Default has occurred and is continuing.
5. The Pledge over General Operating Accounts, in which JLEC pledges to the
Onshore Collateral Agent any and all monies in JLEC's accounts with the Onshore
Collateral Agent.
6. The Master Agreement for Assignment of Accounts Receivable as Security, in
which JLEC assigns to the Onshore Collateral Agent a security interest in all of
the accounts receivable payable by ONE to JLEC under the Power Purchase
Agreement.
COVENANTS
The covenants on the loans also place restrictions on JLEC's payment of
dividends and other distributions to JLEC's stockholders.
Specifically, JLEC may not:
1. Pay any dividends to its stockholders, or
2. Make any distribution, payment or delivery of property or cash to
its stockholders, or
3. Redeem, retire, purchase or otherwise acquire any shares of its
capital stock, or
4. Purchase or redeem any subordinated debt except, on quarterly
repayment dates and only then after first satisfying all debt
service obligations and satisfying all of the following conditions,
among others:
a. No default shall have occurred,
b. The cash balance in all JLEC reserve and accrual accounts shall equal or
exceed required levels,
c. JLEC's actual debt service coverage ratios for the current quarter and
preceding four quarters have all been greater than 1.3, and
d. JLEC's forecasted debt service coverage ratios for the next succeeding two
quarters are greater than 1.3 JLEC has complied with these covenants since May
2001, when the loans began to be repaid.
Page 20
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
16. STOCKHOLDERS' EQUITY
The composition of Stockholders' Equity as of December 31, 2003 was:
16.1 COMMON STOCK
Common Stock
---------------------------------------------
Number Par value Par value
Stockholders of Shares Dirham US Dollar
- ----------------------- ---------------------------------------------
AB Cythere 63, Sweden.................. 2,634 263,400 27,668
Jorf Lasfar Energiaktiebolag, Sweden... 1,375 137,500 14,443
Jorf Lasfar Power Energy AB, Sweden.... 1,265 126,500 13,288
Tre Kronor Investment AB, Sweden....... 110 11,000 1,155
Jorf Lasfar Handelsbolag, Sweden....... 110 11,000 1,155
AB Cythere 61, Sweden 6 600 63
---------------------------------------------
Total 5,500 550,000 57,773
16.2 CONVERTIBLE STOCKHOLDERS' SECURITIES
On December 11, 2000, the JLEC stockholders purchased 100% of all Company Loan
Notes for $387,355,000, and amended the Company Loan Agreement to make such
stockholder securities convertible into Preferred Stock or Common Stock. On
January 1, 2001, the convertible securities (Company Loan Principal) held by AB
Cythere 61 and AB Cythere 63 were converted into Preferred Stock as shown below
on Note 16.3. Such conversions shall be made into a fixed number of JLEC shares
as listed below:
----------------------------------------------
Number Par value Par value
Stockholders of Shares Dirham US Dollar
- ---------------------- ----------------------------------------------
AB Cythere 63, Sweden................... 0 0 0
Jorf Lasfar Energiaktiebolag, Sweden.... 10,537,024 1,053,702,400 96,838,750
Jorf Lasfar Power Energy AB, Sweden..... 9,694,062 969,406,200 89,091,650
Tre Kronor Investment AB, Sweden........ 842,962 84,296,200 7,747,100
Jorf Lasfar Handelsbolag, Sweden........ 842,962 84,296,200 7,747,100
AB Cythere 61, Sweden................... 0 0 0
----------------------------------------------
Total 21,917,010 2,191,701,000 201,424,600
Under the terms of the amended Company Loan Agreement summarized below, these
convertible securities constitute an hybrid instrument which are delt with in
accordance with the substance of the transaction, i.e. as a Preferred Stock
equivalent:
(a) Expression of the Loan in MAD
The outstanding USD 201,424,600 principal amount is expressed as MAD
2,191,701,000 for the purpose of computing interest and principal payments due
under this Agreement. However, interest and principal payments will be paid to
the stockholders in USD, provided that the Company is not responsible for any
losses realized by the stockholders resulting from the depreciation of the value
of the MAD relative to the USD.
(b) Repayment or conversion into Stock
Under the terms of the amended Agreement:
- - the Security may only be repaid, in whole or in part, at the Company's option;
- - the part of the Security principal held by other Company Lenders listed above
may be converted into Common Stock at any time, using the same conversion ratio
used for the conversion of the parts of AB Cythere 61 and AB Cythere 63;
- - the shares of Preferred Stock issued to AB Cythere 61 and AB Cythere 63 may be
converted into Common Stock. In this case, all outstanding Security principal
held by other Company Lenders will be mandatorily converted into Common Stock at
the same conversion ratio.
(c) Interest payment and accruals as Retained Earning
In accordance with Amendment N(degree).2, the Company will pay interest on the
unpaid principal amount once per year, at the interest rate per annum equal to
the greater of (1) the Moroccan maximum deductible rate, and (2) 4.00%. The
applicable interest rate for 2003 is 4.00%. Accruals for such interest payments
are reported as part of the Retained Earning allocation in Note 16.4, and are
not expensed.
Page 21
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
16.3 PREFERRED STOCK
In accordance with Section 3.01 par.(b) of the amended Company Loan Agreement
(see note 16.2 above), the Company as converted on January 1, 2001, all
outstanding Company Loan principal held by AB Cythere 61 and AB Cythere 63, at
the conversion ratio of one (1) share of Preferred Stock for each one hundred
(100) MAD of such Company Loan principal converted into Preferred Stock, as
follows:
Preferred Stock
-------------------------------------------------
Number Par value Par value
Stockholders of Shares Dirham US Dollar
-------------------------------------------- -------------------------------------------------
AB Cythere 63, Sweden....................... 20,185,145 2,018,514,500 185,508,183
Jorf Lasfar Energiaktiebolag, Sweden ....... 0 0 0
Jorf Lasfar Power Energy AB, Sweden......... 0 0 0
Tre Kronor Investment AB, Sweden............ 0 0 0
Jorf Lasfar Handelsbolag, Sweden............ 0 0 0
AB Cythere 61, Sweden....................... 45,941 4,594,100 422,217
-------------------------------------------------
Total 20,231,086 2,023,108,600 185,930,400
Such shares are non-participating voting shares of convertible Preferred Stock
of the Company, and:
- - are convertible at any moment into shares of Common Stock;
- - give right to the collection of a minimum priority dividend, at least equal to
4% of the aggregate par value of the preferred shares,
- - do not participate in the distribution of the remaining balance of Retained
Earning, which is divided among the shares of Common Stock as shown in Note
16.4.
16.4 RECONCILIATION AND ALLOCATION OF RETAINED EARNINGS
US$
----------------
2003
----
Retained Earnings as of December 31, 2002 113,030,506
Retained Earnings increase during 2003 119,850,319
Retained Earnings decrease during 2003
Convertible Securities interest payable as of January 1, 2003 -10,612,757
108,218,281 Dirhams
10.1970 Dirhams per US Dollar
Preferred Stock Dividend payable as of January 1, 2003 -9,796,391
99,893,797 Dirhams
10.1970 Dirhams per US Dollar
Common Stock Dividend payable as of October 30, 2003 -64,972,722
5,500 Common Stock Shares
110,000 Dirhams per share
605,000,000 Dirhams
9.3116 Dirhams per US Dollar on October 30, 2003
----------------
Total Retained Earnings 147,498,955
The Retained Earnings are allocated among the stockholders as follows:
Common
Convertible Securities Preferred Stock Stock Total
---------------------------------------------------------------------------------------
Stockholders Dirhams US Dollars Dirhams US Dollars US Dollars US Dollars
- ----------------------------------------- ---------------------------------------------------------------------------------------
AB Cythere 63, Sweden.................... 0 0 81,861,977 9,327,725 61,310,884 70,638,608
Jorf Lasfar Energiaktiebolag, Sweden..... 42,733,486 4,869,247 0 0 32,005,492 36,874,739
Jorf Lasfar Power Energy AB, Sweden...... 39,314,807 4,479,707 0 0 29,445,052 33,924,760
Tre Kronor Investment AB, Sweden......... 3,418,679 389,540 0 0 2,560,439 2,949,979
Jorf Lasfar Handelsbolag, Sweden......... 3,418,679 389,540 0 0 2,560,439 2,949,979
AB Cythere 61, Sweden.................... 0 0 186,316 21,230 139,660 160,890
---------------------------------------------------------------------------------------
Total 88,885,652 10,128,034 82,048,293 9,348,954 128,021,967 147,498,955
The allocations for Convertible Securities (88,885,652 Dirhams) and Preferred
Stock (82,048,293 Dirhams) are payable as of January 1, 2004, and are scheduled
for payment on May 17, 2004.
Page 22
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
16.4 RECONCILIATION AND ALLOCATION OF RETAINED EARNINGS (CONTINUED)
2002 US$
---- --------------
Retained Earnings as of December 31, 2001 187,671,644
Retained Earnings increase during 2002 132,287,908
Retained Earnings decrease during 2002:
Convertible Securities interest payable as of January 1, 2002 -12,095,803
140,250,832 Dirhams
11.5950 Dirhams per US Dollar
Preferred Stock Dividend payable as of January 1, 2002 -9,942,031
115,277,852 Dirhams
11.5950 Dirhams per US Dollar
Common Stock Dividend payable as of October 29, 2002 -184,891,213
5,500 Common Stock Shares
360,000 Dirhams per share
1,980,000,000 Dirhams
10.7090 Dirhams per US Dollar on October 29, 2002
--------------
Total Retained Earnings 113,030,506
The Retained Earnings are allocated among the shareholders as follows:
Common
Convertible Securities Preferred Stock Stock Total
------------------------------------------------------------------------------------------
Shareholders Dirhams US Dollars Dirhams US Dollars US Dollars US Dollars
- ------------------------------------------------------------------------------------------------------------------------------------
AB Cythere 63, Sweden.................... 0 0 99,666,957 9,774,145 44,357,210 54,131,355
Jorf Lasfar Energiaktiebolag, Sweden..... 52,028,019 5,102,287 0 0 23,155,340 28,257,626
Jorf Lasfar Power Energy AB, Sweden...... 47,865,778 4,694,104 0 0 21,302,912 25,997,016
Tre Kronor Investment AB, Sweden......... 4,162,242 408,183 0 0 1,852,427 2,260,610
Jorf Lasfar Handelsbolag, Sweden......... 4,162,242 408,183 0 0 1,852,427 2,260,610
AB Cythere 61, Sweden 0 0 226,840 22,246 101,041 123,287
------------------------------------------------------------------------------------------
Total 108,218,281 10,612,757 99,893,797 9,796,391 92,621,358 113,030,506
2001 USD
---- --------------
Retained Earnings as of December 31, 2000 296,408,600
Retained Earnings increase during 2001 161,385,686
Retained Earnings decrease during 2001
Common Stock dividend declared payable on April 24, 2001 -151,362,260
5,500 Common Stock Shares
300,000 Dirhams per share
1,650,000,000 Dirhams
10.9010 Dirhams per US Dollar on April 24, 2001
Common Stock dividend declared payable on October 29, 2001 -118,760,381
5,500 Common Stock Shares
247,000 Dirhams per share
1,358,500,000 Dirhams
11.4390 Dirhams per US Dollar on October 29, 2001
--------------
Total Retained Earnings 187,671,644
The Retained Earnings are allocated among the shareholders as follows:
Common
Convertible Securities Preferred Stock Stock Total
-------------------------------------------------------------------------------------------
Shareholders Dirhams US Dollars Dirhams US Dollars US Dollars US Dollars
- ------------------------------------------------------------------------------------------------------------------------------------
AB Cythere 63, Sweden.................. 7,359,167 634,685 115,016,078 9,919,455 79,323,538 89,877,677
Jorf Lasfar Energiaktiebolag, Sweden... 63,882,171 5,509,458 0 0 41,408,453 46,917,911
Jorf Lasfar Power Energy AB, Sweden.... 58,771,597 5,068,702 0 0 38,095,776 43,164,478
Tre Kronor Investment AB, Sweden....... 5,110,574 440,757 0 0 3,312,676 3,753,433
Jorf Lasfar Handelsbolag, Sweden....... 5,110,574 440,757 0 0 3,312,676 3,753,433
AB Cythere 61, Sweden.................. 16,749 1,445 261,774 22,576 180,691 204,712
-------------------------------------------------------------------------------------------
Total 140,250,833 12,095,803 115,277,852 9,942,031 165,633,810 187,671,644
Page 23
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
17. DIRECT FINANCING LEASE - (D.F.L)
As explained in Note 2b, JLEC is using the Direct Financing Lease methodology.
Specific accounts were created to reflect this method. These accounts are
detailed below.
Direct Financing Lease - (D.F.L) as of December 31, 2003
17.1 LONG TERM RECEIVABLES AS OF DECEMBER 31, 2003
US$ Euro
---------------- ------------------
Units 1 to 4 Units 1 to 4
---------------- ------------------
Total Minimum Lease Payments 1,283,596,155 956,285,785
Minimum Lease Payments for 2003 -101,642,136 -121,482,375
--------------- -----------------
Total of Future Minimum Lease Payments 1,181,954,019 834,803,410
X 1.263417
--------------- -----------------
Total of Future Minimum Lease Payments in US$ 17.3 1,181,954,019 1,054,704,794
============= =============
The minimum lease payments under the US GAAP model for the next five years are
as follows:
US$ Euro
---------------- ----------------
Year Units 1 to 4 Units 1 to 4
--------------- ---------------- ----------------
2004 116,664,592 116,635,941
2005 116,371,118 107,167,144
2006 108,749,430 92,362,540
2007 96,617,923 85,060,254
2008 104,467,842 84,500,888
17.2 UNEARNED INCOME AS OF DECEMBER 31, 2003
US$ Euro
---------------- ----------------
Units 1 to 4 Units 1 to 4
---------------- ----------------
Total Unearned Income 587,282,368 568,767,180
----------------
Lease Revenue 2003 -81,792,828 -91,756,966 X 1.14035 104,635,053
--------------- --------------- ----------------
505,489,540 477,010,214
X 1.263417
--------------- ---------------
Total Remaining Unearned Income in US$ 17.3 505,489,540 602,662,799
=========== ===========
The minimum lease payments under the US GAAP model for the next five years are
as follows:
US$ Euro
---------------- ----------------
Year Units 1 to 4 Units 1 to 4
--------------- ---------------- ----------------
2004 78,203,985 84,230,456
2005 73,392,008 76,117,547
2006 68,172,214 69,587,224
2007 64,172,868 64,534,124
2008 59,591,568 58,711,491
17.3 NET INVESTMENT IN DIRECT FINANCING LEASES AS OF DECEMBER 31, 2003
US$ Euro
---------------- ----------------
Units 1 to 4 Units 1 to 4
---------------- ----------------
Total of Future Minimum Lease Payments in US$ 17.1 1,181,954,019 1,054,704,794
Total Remaining Unearned Income in US$ 17.2 -505,489,540 -602,662,799
-------------- ---------------
Net investment in direct financing leases in US$ 676,464,479 452,041,995
=========== ===========
Current part in US$ 38,460,607 40,941,639
Non-Current part in US$ 638,003,872 411,100,356
Page 24
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
Direct Financing Lease - (D.F.L) as of December 31, 2002
17.1 LONG TERM RECEIVABLES AS OF DECEMBER 31, 2002
US$ Euro
---------------- -----------------
Units 1 to 4 Units 1 to 4
---------------- -----------------
Total Minimum Lease Payments 1,426,008,468 1,081,037,348
Minimum Lease Payments for 2002 -142,336,127 -124,619,384
--------------- ----------------
Total of Future Minimum Lease Payments 1,283,672,341 956,417,964
------------- -----------
X 1.046582
--------------- ----------------
Total of Future Minimum Lease Payments in US$ 17.3 1,283,672,341 1,000,970,139
============= =============
The minimum lease payments under the US GAAP model for the next five years are
as follows:
US$ Euro
---------------- ----------------
Year Units 1 to 4 Units 1 to 4
--------------- ---------------- ----------------
2003 101,642,136 121,482,376
2004 116,664,592 116,635,941
2005 116,371,118 107,167,144
2006 106,872,046 90,768,049
2007 96,617,923 85,060,254
17.2 UNEARNED INCOME AS OF DECEMBER 31, 2002
US$ Euro
---------------- -----------------
Units 1 to 4 Units 1 to 4
---------------- -----------------
Total Unearned Income 673,381,447 668,603,895
----------------
Lease Revenue 2002 -88,463,713 -99,930,507 X 0.95144 95,077,872
--------------- ---------------- ----------------
584,917,734 568,673,388
----------- -----------
X 1.046582
--------------- ----------------
Total Remaining Unearned Income in US$ 17.3 584,917,734 595,163,517
=========== ===========
The Lease Revenue under the US GAAP model for the next five years are as
follows:
US$ Euro
---------------- ----------------
Year Units 1 to 4 Units 1 to 4
--------------- ---------------- ----------------
2003 81,436,213 91,576,926
2004 77,831,811 84,020,822
2005 73,012,360 75,871,769
2006 67,896,425 69,487,000
2007 64,019,517 64,661,480
17.3 NET INVESTMENT IN DIRECT FINANCING LEASES AS OF DECEMBER 31, 2002
US$ Euro
---------------- -----------------
Units 1 to 4 Units 1 to 4
---------------- -----------------
Total of Future Minimum Lease Payments in US$ 17.1 1,283,672,341 1,000,970,139
Total Remaining Unearned Income in US$ 17.2 -584,917,734 -595,163,517
--------------- ----------------
Net investment in direct financing leases in US$ 698,754,607 405,806,622
=========== ===========
Current part in US$ 20,205,960 31,298,090
Non-Current part in US$ 678,548,647 374,508,532
Page 25
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
Direct Financing Lease - (D.F.L) as of December 31, 2001
17.1 LONG TERM RECEIVABLES AS OF DECEMBER 31, 2001
US$ Euro
---------------- ----------------
Units 1 to 4 Units 1 to 4
---------------- ----------------
Total Minimum Lease Payments 1,638,683,000 1,210,483,496
Minimum Lease Payments for 2001 -172,987,799 -116,468,307
--------------- ----------------
Total of Future Minimum Lease Payments 1,465,695,201 1,094,015,189
------------- -------------
X 0.88504
--------------- ----------------
Total of Future Minimum Lease Payments in US$ 17.3 1,465,695,201 968,243,542
============= ===========
The minimum lease payments under the US GAAP model for the next five years are
as follows:
US$ Euro
---------------- ----------------
Year Units 1 to 4 Units 1 to 4
--------------- ---------------- ----------------
2002 147,453,739 125,654,878
2003 108,352,169 125,448,188
2004 121,415,209 118,233,920
2005 120,444,202 108,413,086
2006 109,842,978 91,398,693
17.2 UNEARNED INCOME AS OF DECEMBER 31, 2001
US$ Euro
---------------- ----------------
Units 1 to 4 Units 1 to 4
---------------- ----------------
Total Unearned Income 823,653,897 792,223,192
------------
Lease Revenue 2001 -100,679,205 -105,867,406 X 0.89305 94,544,727
---------------- ---------------- ------------
722,974,692 686,355,786
----------- -----------
91,398,693
---------------- ----------------
Total Remaining Unearned Income in US$ 17.3 722,974,692 607,450,028
=========== ===========
The Lease Revenue under the US GAAP model for the next five years are as
follows:
US$ Euro
---------------- ----------------
Year Units 1 to 4 Units 1 to 4
--------------- ---------------- ----------------
2002 91,392,805 101,298,144
2003 87,462,185 94,047,617
2004 83,519,951 86,014,881
2005 78,375,499 77,627,453
2006 73,017,083 71,189,178
17.3 NET INVESTMENT IN DIRECT FINANCING LEASES AS OF DECEMBER 31, 2001
US$ Euro
---------------- ----------------
Units 1 to 4 Units 1 to 4
---------------- ----------------
Total of Future Minimum Lease Payments in US$ 17.1 1,465,695,201 968,243,542
Total Remaining Unearned Income in US$ 17.2 -722,974,692 -607,450,028
---------------- ----------------
Net investment in direct financing leases in US$ 742,720,509 360,793,514
=========== ===========
Current part in US$ 56,060,930 21,301,261
Non-Current part in US$ 686,659,570 339,492,340
Page 26
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
18. FINANCIAL EXPENSES
The Financial Expenses are detailed as follows, for the year ending:
12/31/03 12/31/02 12/31/01
US$ US$ US$
----------- ----------- -----------
Interest, Fees and Swaps incurred from inception to December 31, 2003
Up-Front Fees 25,609,073 25,609,073 25,609,073
Interest Costs 287,290,576 246,526,514 210,187,205
Premiums 23,808,481 23,808,481 23,808,481
Commitment Fees 19,312,672 19,312,672 18,136,357
Arrangement Fees 2,396,273 2,396,273 2,396,273
Other Fees (acceptance fees, Agent fees...etc) 9,754,617 9,297,751 8,875,953
Guarantee Fees 20,598,822 19,101,732 5,496,128
Swaps 37,238,114 30,362,978 25,851,201
----------- ----------- -----------
426,008,628 376,415,474 320,360,671
Accrued Interest, Fees, Swaps (see Note 14.1) 5,904,937 6,072,924 17,293,488
----------- ----------- -----------
Total Interest, Fees and Swaps 431,913,565 382,488,398 337,654,159
Interest, fees and swaps capitalized as part of
the project construction for Units 3&4 -210,949,363 -210,949,363 -210,949,363
----------- ----------- -----------
Interest and swaps expensed - Total 220,964,202 171,539,035 126,704,796
Interest and swaps expensed from 1997 through 2002 -171,539,035 -126,704,796 -76,088,286
----------- ----------- -----------
Interest and swaps expensed 49,425,167 44,834,239 50,616,510
=========== =========== ===========
19. PENSION PLANS
JLEC contributes to the following pension plans:
19.1 COMMON FUND FOR RETIREMENT (CAISSE COMMUNE DES RETRAITES OR CCR)
As required by PPA Section 23.2.4, most of JLEC's employees (259 employees of
313, or 84%) plus 1 recent retiree are participants in the CCR defined benefit
pension plan. This plan is funded by employee payroll deductions equal to 9% of
the employee's gross pay, plus JLEC contributions equal to 18% of the
participating employee's gross pay. In 2003, 2002 and 2001, JLEC contributed to
the CCR US$ 350,071, US$ 291,036 and US$ 266,972, respectively.
Benefits provided under this plan include pension and retiree health insurance.
As of December 31, 2003, the benefit obligation totalled US$ 14,584,092 (MAD
127,992,907/8.7762). The fair value of assets contributed to the CCR was US$
4,705,965 (MAD 41,300,493/8.7762) as of December 31, 2003. The net unfunded
benefit obligation as of December 31, 2003 reflected in the accompanying balance
sheet was US$ 9,878,126 (MAD 86,692,413/8.7762).
The following assumptions were used to perform the actuarial valuations:
2003 2002 2001
---- ---- ----
Discount rate 6.00% 7.58% 7.58%
Rate of compensation increase 6.50% 6.50% 6.50%
19.2 MOROCCAN RETIREMENT FUND FOR PROFESSIONALS (CAISSE INTERPROFESSIONNELLE
MAROCAINE DE RETRAITES OR CIMR)
Employees of JLEC not covered by CCR participate in a fund to which the employer
contributes an amount equal to 12 percent of the employee's gross pay. This fund
is carried in the employee's name, and the pension benefits an employee will
receive depend only on the amount contributed to this account and the returns
earned on investments of those contributions. In 2003, JLEC's contribution to
that fund amounted to USD 145,677 (USD 109,147 in 2002, and USD 105,912 in 2001)
Page 27
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
20. DERIVATIVE INSTRUMENT LIABILITY / OTHER COMPREHENSIVE INCOME
JLEC adopted SFAS N(degree). 133 on January 1, 2001. This standard requires
JLEC to recognize at fair value on the balance sheet, as assets or
liabilities, all contracts that meet the definition of a derivative
instrument. Details of all JLEC derivative instruments (interest rate
swaps) are provided in the following table as of December 31, 2003, and all
such swaps qualify with 100% effectiveness as cash flow hedge for JLEC's
variable interest rate loans. Therefore, in accordance with SFAS N(degree).
133, the changes in fair value of these interest rate swaps are reflected
directly in Stockholders' Equity under "Other Comprehensive Income or
(Loss)". JLEC determines fair value based upon market price estimations
provided by the swap providers.
2003
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed Rate Current Current Settlement Forecast of Valuation
Credit Swap Paid by Libor Paid Notional and Termination Remaining in
Facility Providers Currency JLEC to JLEC Amount Amortization Date Payments Euro
- ------------------------------------------------------------------------------------------------------------------------------------
World Bank BNP Euro 6.4115% 2.16888% 41,119,939 Quarterly 2/15/2013 8,400,358 4,942,789
ABN Euro 6.4175% 2.16888% 41,119,939 Quarterly 2/15/2013 8,412,238 4,940,969
CSFB Euro 6.4060% 2.16888% 41,119,939 Quarterly 2/15/2013 8,389,468 4,733,058
----------- ---------- ----------
123,359,818 25,202,063 14,616,816
- ------------------------------------------------------------------------------------------------------------------------------------
ERG BNP Euro 6.4700% 2.16888% 7,681,980 Quarterly 2/15/2013 1,590,984 942,887
ABN Euro 6.4750% 2.16888% 7,681,980 Quarterly 2/15/2013 1,592,834 942,179
CSFB Euro 6.4680% 2.16888% 7,681,980 Quarterly 2/15/2013 1,590,245 950,471
----------- ---------- ----------
23,045,940 4,774,063 2,835,537
- -----------------------------------------------------------------------------------------------------------------------------------
Total in Euro 17,452,353
----------
B/S FX rate X 1.26342
Total in USD 22,049,599
==========
2002
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed Rate Current Current Settlement Forecast of Valuation
Credit Swap Paid by Libor Paid Notional and Termination Remaining in
Facility Providers Currency JLEC to JLEC Amount Amortization Date Payments Euro
- ------------------------------------------------------------------------------------------------------------------------------------
World Bank BNP Euro 6.4115% 3.13725% 45,565,338 Quarterly 2/15/2013 7,947,927 5,729,083
ABN Euro 6.4175% 3.13725% 45,565,338 Quarterly 2/15/2013 7,962,491 5,739,581
CSFB Euro 6.4060% 3.13725% 45,565,338 Quarterly 2/15/2013 7,934,576 5,719,459
----------- ---------- ----------
136,696,014 23,844,995 17,188,122
- -----------------------------------------------------------------------------------------------------------------------------------
ERG BNP Euro 6.4700% 3.13725% 8,512,464 Quarterly 2/15/2013 1,511,371 1,089,437
ABN Euro 6.4750% 3.13725% 8,512,464 Quarterly 2/15/2013 1,513,638 1,091,072
CSFB Euro 6.4680% 3.13725% 8,512,464 Quarterly 2/15/2013 1,510,464 1,088,783
----------- ---------- ----------
25,537,392 4,535,473 3,269,292
- ------------------------------------------------------------------------------------------------------------------------------------
Total in Euro 20,457,415
----------
B/S FX rate X 1.04658
Total in USD 21,410,369
==========
2001
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed Rate Current Current Settlement Forecast of Valuation
Credit Swap Paid by Libor Paid Notional and Termination Remaining in
Facility Providers Currency JLEC to JLEC Amount Amortization Date Payments Euro
- ------------------------------------------------------------------------------------------------------------------------------------
World Bank BNP Euro 6.4300% 3.34000% 48,899,387 Quarterly 12/17/2012 8,614,748 3,369,696
ABN Euro 6.4300% 3.34000% 48,899,387 Quarterly 12/17/2012 8,614,748 3,369,696
CSFB Euro 6.4230% 3.34000% 48,899,387 Quarterly 12/17/2012 8,595,232 3,362,062
----------- ---------- ----------
146,698,162 25,824,728 10,101,454
- -----------------------------------------------------------------------------------------------------------------------------------
ERG BNP Euro 6.3600% 3.34000% 9,654,551 Quarterly 12/17/2012 1,662,339 650,231
ABN Euro 6.3600% 3.34000% 9,654,551 Quarterly 12/17/2012 1,662,339 650,231
CSFB Euro 6.3510% 3.34000% 9,654,551 Quarterly 12/17/2012 1,657,385 648,293
----------- ---------- ----------
28,963,653 4,982,063 1,948,755
- ------------------------------------------------------------------------------------------------------------------------------------
Total in Euro 12,050,209
----------
B/S FX rate X 0.88504
Total is USD 10,664,877
==========
Page 28
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003
21. CASH FLOWS FOR 2003
Reconciliation of net income to net cash from operating activities under the
Direct Method is as follows :
2003 2002 2001
US$ US$ US$
--------------------------------------------
Net Income ..................................................................... 119,850,319 132,287,908 161,385,686
Adjustment to reconcile Net Income to cash provided from operating activities :
Depreciation and amortization ......................................... 4,028,115 2,752,641 731,003
Deferred taxes ........................................................ (13,005,297) 6,908,298 6,097,093
Lease Revenue ......................................................... (186,427,881) (183,541,585) (195,223,932)
Finance tariff cash revenue ........................................... 246,405,730 263,559,812 262,829,803
Changes in operating assets and liabilities:
Inventories ........................................................... 2,066,641 (8,855,387) (9,242,424)
Accounts receivable ................................................... (9,311,086) 10,340,353 (22,975,149)
Prepayments ........................................................... 2,292,604 (5,954,169) 979,429
Accounts payable ...................................................... 22,353,640 (9,266,000) (20,701,000)
Unfunded pension obligation ........................................... 4,185,183 5,692,943 --
Other liabilities ..................................................... (2,445,519) (608,934) 3,093,490
Effect of exchange rate changes ....................................... 1,824,028 4,235,487 (2,003,877)
--------------------------------------------
Net cash provided by operating activities ...................................... 191,816,478 217,551,367 184,970,122
22. UNCERTAINTIES AS OF DECEMBER 31, 2003
22.1 JLEC's corporate tax return, payroll tax and VAT returns for the years 2000
to 2003 are open to audit by the Moroccan Tax Authorities. JLEC is periodically
involved in other legal, tax and other proceedings regarding matters arising in
the ordinary course of business. JLEC believes that the outcome of these matters
will not materially affect its results of operations or liquidity.
22.2 Discussions are currently underway between JLEC and ONE, which may result
in amendments of the Power Purchase Agreement (PPA) and the Transfer of
Possession Agreement (TPA). As currently drafted, such amendments would
eliminate ONE's right of termination for convenience (which right ONE could
otherwise exercise starting on September 13, 2012) and reduce ONE's right of
termination due to adverse economic circumstances (which right ONE might
otherwise be entitled to exercise after all of the principal amount of JLEC's
indebtedness to the project lenders has been repaid); and thereby, the proposed
amendments would increase the likelihood that the PPA and TPA continue in effect
until their scheduled expiration on September 13, 2027. In exchange, it is
proposed that the PPA's gross capacity charges be reduced by means of a new
rebate (to be paid by JLEC to ONE on a quarterly basis, and calculated starting
from September 13, 2003) and future tariff reductions (starting from September
13, 2014). These possible PPA and TPA amendments are still under negotiation,
and such negotiations may or may not converge on agreements acceptable to both
JLEC and ONE. Furthermore, any potential PPA and TPA amendments agreed between
JLEC and ONE would still be subject to change by and the approval of ONE's Board
of Directors, JLEC's shareholders and JLEC's lenders before coming into effect.
This process of negotiation, review and approval will require several months at
least, and may possibly never result in any amendments. This uncertainty exists
as of the date of these financial statements.
23. NEW ACCOUNTING STANDARDS
In June 2002, FASB issued SFAS No 146, "Accounting for Costs Associated with
Exit or Disposal Activities.". This statement addresses the recognition,
measurement and reporting of costs that are associated with exit and disposal
activities and nullifies EITF 94-3 "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to exit an Activity (Including Certain
costs incurred in a Restructuring)". Under SFAS 146, the cost associated with an
exit or disposal activity is recognized in the periods in which it is incurred
rather than at the date the company committed to the exit plan. This statement
became effective for exit or disposal activities initiated after December 31,
2002. The adoption of SFAS No 146 did not have a material impact on JLEC's
results of operations or its financial position.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." The Standard
specifies that instruments within its scope embody obligations of the issuer and
that, therefore, the issuer must classify them as liabilities. The Standard is
effective for interim or fiscal periods ending after June 15, 2003. JLEC is
currently assessing the new standard and has not yet determined the impact on
its financial statements.
Page 29