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, 2004, 2003 and 2002
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, 2004, 2003, and 2002............... 2
Statement of Income
For years ending December 31, 2004, 2003, and 2002.... 3
Statement of Stockholders' Equity
For years ending December 31, 2004, 2003, and 2002.... 4
Statement of Cash Flows
For years ending December 31, 2004, 2003, and 2002.... 5
Notes to US GAAP Financial Statements........................... 6-26
JORF LASFAR ENERGY COMPANY
BALANCE SHEET
Note December 31, 2004 December 31, 2003 December 31, 2002
---- ----------------- ----------------- -----------------
(000) U.S. Dollars (000) U.S. Dollars (000) U.S. Dollars
ASSETS
Current Assets
Cash................................................ 3.1 69,800 65,611 46,683
Inventories......................................... 2.c & 4 59,318 38,548 40,615
Account Receivable.................................. 5 123,867 85,486 76,175
Prepayments......................................... 6 23,655 11,582 23,757
Recoverable VAT..................................... 8 1,540 0 0
Net investment from $ DFL model..................... 2.b & 17.3 9,644 38,461 20,206
Net investment from Euro DFL model.................. 2.b & 17.3 28,264 40,942 31,298
--------- --------- ---------
Total current assets.......................... 316,088 280,629 238,734
Long Term Assets, net
Restricted Cash..................................... 3.2 22,591 83,049 53,778
Fixed Assets........................................ 7 12,159 9,603 6,554
Net investment from $ DFL model..................... 2.b & 17.3 656,723 638,004 678,549
Net investment from Euro DFL model.................. 2.b & 17.3 437,791 411,100 374,509
$ Capacity Charges less than $ DFL model............ 13.1 0 713 0
Euro Capacity Charges less than Euro DFL model...... 13.2 0 0 0
Deferred Tax Asset.................................. 2.f 1,556 0 0
Other Long Term Assets.............................. 9 16,339 19,058 10,968
--------- --------- ---------
Total Long Term Assets........................ 1,147,158 1,161,527 1,124,357
--------- --------- ---------
Total assets.................................. 1,463,246 1,442,157 1,363,091
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable to third parties................... 10 89,031 51,258 38,824
Accounts payable to related parties................. 11 96,408 176,730 145,065
VAT Liability...................................... 8 0 3,972 2,871
Taxes payable....................................... 12 5,134 7,527 4,866
Current part of Long-term loans in US Dollars....... 15 25,749 25,749 25,749
Current part of Long-term loans in Euro............. 15 48,043 44,491 36,855
Other current liabilities........................... 14 9,363 7,739 7,955
--------- --------- ---------
Total current liabilities..................... 273,727 317,466 262,186
Non-Current Liabilities
Long-term loans in US Dollars....................... 15 186,677 212,426 238,174
Long-term loans in Euro............................. 15 348,314 367,052 340,912
$ Capacity Charges greater than $ DFL model......... 13.1 44 0 2,441
Euro Capacity Charges greater than Euro DFL model... 13.2 73 422 236
Deferred Tax Liability.............................. 2.f 0 0 13,005
Derivative Instrument Liability..................... 20 23,446 22,050 21,410
Unfunded Pension Obligations........................ 19.1 13,782 9,878 5,693
--------- --------- ---------
Total non-current liabilities................. 572,336 611,828 621,872
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 .................................. 16.4 253,216 147,499 113,031
Other Comprehensive Income or (Loss ................ 20 (23,446) (22,050) (21,410)
--------- --------- ---------
Total stockholders' equity.................... 617,183 512,862 479,033
--------- --------- ---------
Total liabilities and stockholders' equity.... 1,463,246 1,442,157 1,363,091
The accompanying Notes 1 to 22 are an integral part of these financial
statements.
Page 2
JORF LASFAR ENERGY COMPANY
STATEMENT OF INCOME
January 1, 2004 January 1, 2003 January 1, 2002
to to to
Note December 31, 2004 December 31, 2003 December 31, 2002
---- ----------------- ----------------- -----------------
(000) U.S. Dollars (000) U.S. Dollars (000) U.S. Dollars
REVENUE
Lease Revenue from $ DFL model ..... 2.b.&.17.2 80,476 81,793 88,464
Lease Revenue from Euro DFL model... 2.b & 17.2 104,078 104,635 95,078
Energy Payments..................... 220,211 128,981 130,446
O&M Revenue......................... 49,187 45,066 42,930
Supplemental Capacity Charges....... 4,173 3,949 4,017
License Tax Reimbursement........... 2,864 4,102 0
Other............................... 844 352 3,337
------- ------- -------
TOTAL REVENUE 461,833 368,878 364,272
OPERATING EXPENSES
Coal Cost........................... 222,277 129,935 126,957
Fuel Oil Cost....................... 1,085 1,280 910
O&M Costs........................... 32,876 33,554 25,057
Operator's Incentive................ 4,281 2,784 3,721
Generator Costs..................... 13,977 11,994 11,397
License Tax Costs................... 2,864 4,102 0
Amortization of Major Maintenance... 9.1 2,564 1,935 1,128
Depreciation of Other Assets........ 2,966 2,093 1,624
Non-Current Pension Expense......... 2,989 2,902 5,427
------- ------- -------
TOTAL OPERATING EXPENSES 285,879 190,580 176,222
OPERATING INCOME 175,954 178,299 188,050
FINANCIAL ITEMS
Financial Income.................... 1,786 2,025 1,764
Exchange Gain (+) or Loss (-)....... 2.d 1,867 (8,605) (1,558)
Financial Expenses.................. 18 (46,893) (49,425) (44,834)
------- ------- -------
TOTAL FINANCIAL ITEMS (43,239) (56,005) (44,628)
INCOME BEFORE TAXES 132,715 122,293 143,422
Income Taxes
Current ....................... 2.e 9,077 15,448 4,226
Deferred. ..................... 2.f (1,556) (13,005) 6,908
------- ------- -------
NET INCOME 16.4 & 21 125,194 119,850 132,288
The accompanying Notes 1 to 22 are an integral part of these financial
statements.
Page 3
JORF LASFAR ENERGY COMPANY
STATEMENT OF STOCKHOLDERS' EQUITY
January 1, 2004 January 1, 2003 January 1, 2002
to to to
December 31, December 31, December 31,
Note 2004 2003 2002
---- ---- ---- ----
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 201,425 201,425 201,425
Conversion of Convertible Stockholders' Securities to Preferred Stock 0 0 0
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 185,930 185,930 185,930
Conversion of Convertible Stockholders' Securities to Preferred Stock 0 0 0
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 147,499 113,031 187,672
Net income 125,194 119,850 132,288
Common stock dividend 0 (64,973) (184,891)
Preferred stock dividend (9,349) (9,796) (9,942)
Convertible stockholders' securities (10,128) (10,613) (12,096)
------- ------- -------
At end of period 16.4 253,216 147,499 113,031
OTHER COMPREHENSIVE INCOME (LOSS) (a)
Derivative Instruments
At beginning of period (22,050) (21,410) (10,665)
Reclassification of gains (losses) included in net income 7,675 6,871 5,811
Unrealized gain (loss) on derivative instruments (9,072) (7,511) (16,556)
------- ------- -------
At end of period 20 (23,446) (22,050) (21,410)
------- ------- -------
617,183 512,862 479,034
======= ======= =======
(a) Disclosure of Comprehensive Income (Loss)
Net income 125,194 119,850 132,288
Derivative instruments
Reclassification of gains (losses) in net income 7,675 6,871 5,811
Unrealized gain (loss) on derivative instruments (9,072) (7,511) (16,556)
------- ------- -------
Total Comprehensive Income 123,797 119,211 121,543
======= ======= =======
The accompanying Notes 1 to 22 are an integral part of these financial
statements.
Page 4
JORF LASFAR ENERGY COMPANY
STATEMENT OF CASH FLOWS
January 1, 2004 January 1, 2003 January 1, 2002
to to to
December 31, 2004 December 31, 2003 December 31, 2002
(000) U.S. (000) U.S. (000) U.S.
Note Dollars Dollars Dollars
---- ------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Payments received from ONE....................................... $ 526,880 $ 426,250 $ 471,044
Interest received................................................ 1,538 1,870 1,748
Rebates paid to ONE.............................................. (58,108) (5,376) (16,073)
Corporate Income Tax Payments.................................... (12,795) (12,826) (5,150)
Insurance Payments............................................... (2,927) (5,699) (5,665)
Payments of Operating Costs...................................... (315,983) (214,865) (228,031)
Cash Effect of Value Added Tax................................... (12,393) 2,463 (321)
--------- --------- ---------
Net cash provided (+) or used (-) by operating activities... 21 126,211 191,816 217,551
CASH FLOWS USED FOR INVESTING ACTIVITIES
Net decrease (increase) in restricted cash....................... 60,795 (25,942) (36,638)
Acquisition of fixed assets...................................... (6,379) (2,300) (3,957)
Payment of Major Maintenance costs............................... 0 (6,261) (93)
--------- --------- ---------
Net cash provided (+) or used (-) by investing activities... 54,416 (34,503) (40,688)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans.............................................. 0 0 0
Proceeds of share capital payments............................... 0 0 0
Repayment of loans............................................... (69,900) (65,639) (57,964)
Payment of Convertible Securities interest....................... (9,595) (11,417) (12,386)
Payment of Preferred Stock dividend.............................. (8,857) (10,539) (10,181)
Payment of Common Stock dividend................................. (89,703) (54,877) (121,933)
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 (+) or used (-) by financing activities... (178,055) (142,472) (202,464)
Effect of exchange rate changes on cash.......................... 1,617 4,087 5,178
CASH AT BEGINNING OF PERIOD.......................................... 65,611 46,683 67,106
NET INCREASE (DECREASE) IN CASH DURING PERIOD........................ 4,188 18,928 (20,422)
--------- --------- ---------
CASH AT END OF PERIOD................................................ 3.1 $ 69,800 $ 65,611 $ 46,683
========= ========= =========
SUPPLEMENTAL CASH FLOWS INFORMATION
Cash paid during the year
Interest 46,626 49,136 56,054
Income taxes 12,795 12,826 5,150
The accompanying Notes 1 to 22 are an integral part of these financial
statements.
Page 5
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
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 30 years, ending on September 13,
2027.
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. JLEC is scheduled to complete the repayment of all
Project Loans on February 15, 2013.
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 6
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
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 equals 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 7
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
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 rate of 35%
- - 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 13, 1997, June 10, 2000 and February 3, 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.
F. DEFERRED INCOME TAX
Starting September 13, 2002, the JLEC statutory tax rate on Units 1&2 is 17.5%.
JLEC determines and books the current income tax (US$ 9,077,235 for 2004) as
required by the tax laws and regulations of Morocco. Temporary differences
between US GAAP and the CGNC balance sheets may create the need to record
deferred income taxes. The main temporary differences result from the use of the
Direct Financing Lease method under US GAAP, and the differences in the timing
of the deductibility of pension liabilities. In particular, the treatment of Net
Investment and revenue recognition (as disclosed in note 2.b above) under US
GAAP are different from the treatment of these items under the tax laws and
regulations of Morocco. The total of the deferred tax liability is $ 0 ($0 as of
December 31, 2003 and $13,005,298 as of December 31, 2002). The total of the
deferred tax asset amounts to $ 1,555,763 ($0 as of December 31, 2003 and $0 as
of December 31, 2002) related to unfunded pension obligations.
G. OFF BALANCE SHEET COMMITMENTS
The Company discloses all off-balance sheet commitments, if any, on balance
sheet dates.
H. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reported period. Actual result could differ from these estimates and
assumptions.
Page 8
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
3. CASH
3.1 Cash
The Company's cash as of December 31, 2004, includes the initial capital
deposits of the Company's stockholders, as explained further in Note 16.1. Such
cash is held in Moroccan Dirhams in accounts at CITIBANK MAGHREB, which is
located at Zenith Millenium Immeuble 1, Lotissement Attaoufik, Sidi Maarouf,
Casablanca Morocco. The remainder of the company's' cash is held by the Offshore
Collateral Agent, Deutsche Bank Trust Company Americas in US$ and Euro, and by
the Onshore Collateral Agent, BMCI - Banque Marocaine pour le Commerce et
l'Industrie in Moroccan Dirhams and US$.
The cash balances includes the following categories :
12/31/04 12/31/03 12/31/02
US$ US$ US$
----------- ---------- ----------
Off-shore Revenue in US$ 19,658,389 24,426,875 22,666,875
Off-shore Revenue in Euro 6,471,506 6,590,224 5,331,124
---------- ---------- ----------
Total Off-Shore Revenue 26,129,895 31,017,099 27,997,998
On-shore O&M Account - Generator 12,565,202 6,946,245 793,293
On-shore O&M Account - Operator 2,468,763 4,279,000 3,258,836
Off-shore O&M Accounts 4,742 4,546 10,607
---------- ---------- ---------
Total O&M Accounts 15,038,706 11,229,792 4,062,735
Fuel & Spare Part Accounts 18,388,897 12,929,694 5,289,381
Off-shore Debt Service Accrual Accounts in US$ 3,641,836 3,734,278 3,843,187
Off-shore Debt Service Accrual Accounts in Euro 6,489,135 6,637,737 5,433,301
---------- ---------- ---------
Total Debt Service Accrual Accounts 10,130,971 10,372,015 9,276,488
Distribution Account in US$ 44,489 0 0
Stockholder capital deposits 66,934 62,863 56,624
---------- ---------- ----------
Total 69,799,893 65,611,462 46,683,227
========== ========== ==========
3.2 Restricted Cash
The Reserve Accounts are as follow :
Major Maintenance Reserve Account in US$ 3.4 a 1,410,601 2,500,000 2,500,000
Fixed O&M Reserve Account in US$ 3.4 b 0 4,800,000 4,800,000
Debt Service Reserve Account in US$ 3.4 c 0 11,200,000 11,730,000
Super Reserve Account in US$ 3.4 d 20,913,300 45,600,000 18,100,000
----------- ---------- ----------
Off-shore Reserve Accounts in US$ 22,323,901 64,100,000 37,130,000
Fixed O&M Reserve Account in Euro 267,002 243,656 197,262
Debt Service Reserve Account in Euro 3.4 e 0 18,705,220 16,450,805
----------- ---------- ----------
Off-shore Reserve Accounts in Euro 267,002 18,948,876 16,648,067
----------- ---------- ----------
Total Reserve Accounts 22,590,902 83,048,876 53,778,067
=========== ========== ==========
3.3 Total Cash
Cash 3.1 69,799,893 65,611,462 46,683,227
Restricted Cash in Reserve Accounts 3.2 22,590,902 83,048,876 53,778,067
----------- ----------- -----------
92,390,795 148,660,339 100,461,294
=========== =========== ===========
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 :
12/31/04 12/31/03 12/31/02
----------- ---------- ----------
a. Major Maintenance Reserve Account US$ 6,100,000 2,500,000 2,500,000
b. Fixed O&M Reserve Account US$ 9,600,000 4,800,000 4,800,000
c. Debt Service Reserve Account US$ 21,400,000 11,300,000 11,300,000
d. Super Reserve Account US$ 79,086,700 39,086,700 47,900,000
e. Debt Service Reserve Account Euro 28,200,000 15,000,000 15,000,000
Page 9
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
4. INVENTORIES
The inventories are detailed as follows for the year ending:
12/31/04 12/31/03 12/31/02
US$ US$ US$
---------- ---------- ----------
Stock of Coal 4.1 41,419,482 24,763,321 22,499,748
Stock of Fuel-oil 4.2 1,355,124 1,638,256 2,078,600
Stock of Spare Parts 4.3 15,386,680 10,940,862 15,081,606
Other Stocks (Chemicals, Oils,...) 1,156,676 1,205,566 954,692
---------- ---------- ----------
59,317,963 38,548,005 40,614,646
========== ========== ==========
4.1 The stock of coal represents the value of 338,128 tones existing in the
coal storage area plus 276,200 tones in transit to Jorf Lasfar, for a
total inventory of 614,328 tones as of 4.1 December 31, 2004 (582,063
tones total as of December 31, 2003 and 606,115 tones total as of December
31, 2002).
4.2 The stock of fuel oil represents 7,654 m3 existing in the fuel tanks as of
December 31, 2004 (9,471 m3 as of December 31, 2003 and 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, 2004, that were purchased after the close-out of the Net
Investment on December 31, 2000.
5. RECEIVABLES
The "Accounts Receivables" as of December 31, 2004 are detailed as follows :
12/31/04 12/31/03 12/31/02
US$ US$ US$
----------- ---------- ----------
Account Receivable - ONE 5.1 123,770,898 85,214,510 76,098,673
Account Receivable - Others 5.2 96,570 271,345 76,097
----------- ---------- ----------
123,867,468 85,485,855 76,174,769
=========== ========== ==========
5.1 The account receivable - ONE includes November 2004 and December 2004
invoices
5.2 The other receivables include a) accrued interest earned by investment of
JLEC's cash balances ($ 96,570).
In addition, JLEC has invoiced AMCI a total of $8,599,483 under Coal Supply
Agreement 720, representing JLEC's excess cost of purchasing 186,244 tons of
coal from a third party after AMCI failed to fulfill its obligation to deliver
187,682 tons of coal to JLEC. AMCI has failed to pay JLEC's invoices when due;
and therefore, JLEC has called on AMCI's performance bond of $1,500,000 and is
seeking the remainder of $7,099,483 from AMCI through an UNCITRAL arbitration
with uncertain outcome.
6. PREPAYMENTS
The "Prepayments" as of December 31, 2004 are detailed as follows :
12/31/04 12/31/03 12/31/02
US$ US$ US$
----------- ---------- ----------
Prepaid Insurance 524,479 3,599,349 3,582,404
Prepayments for Availability Rebate 15,696,844 3,443,569 13,326,626
Prepayments for Income Tax 6,754,801 3,929,580 5,194,869
Other Prepayments 678,455 609,277 1,653,537
----------- ---------- ----------
23,654,579 11,581,775 23,757,436
=========== ========== ==========
7. FIXED ASSETS
The "Fixed Assets" are detailed as follows for year ending :
12/31/04 12/31/03 12/31/02
US$ US$ US$
----------- ---------- ----------
Fixed Asset - Gross 16,493,623 11,694,954 7,455,511
Depreciation (4,753,714) (2,516,437) (1,884,137)
Construction in Progress 418,708 424,902 982,455
----------- ---------- ----------
12,158,617 9,603,420 6,553,829
=========== ========== ==========
8. RECOVERABLE V.A.T
The "Recoverable V.A.T" account represents the net amount of Value Added Tax as
shown below :
12/31/04 12/31/03 12/31/02
US$ US$ US$
----------- ---------- ----------
Value Added Tax received from ONE to be declared (13,463,427) (5,179,969) (4,805,614)
Value Added Tax to be paid & declared 15,003,302 1,207,918 1,934,168
----------- ---------- ----------
1,539,875 -3,972,052 -2,871,446
=========== ========== ==========
In 2004 the Value Added Tax (VAT) became recoverable and was recorded as an
asset while in 2003 and 2002 the VAT was a liability.
9. OTHER LONG TERM ASSETS
The Other Long Term Assets are as follows :
12/31/04 12/31/03 12/31/02
US$ US$ US$
---------- ---------- -----------
Long Term Receivables Loan 3,946,932 3,372,930 2,754,540
Long Term Ash Disposal Site 660,624 1,389,307 1,913,308
Major Maintenance capitalized during prior years 17,828,927 7,299,779 7,898,850
Major Maintenance capitalized during current year 0 10,529,148 0
Less :Amortization of Major Maintenance during prior years (3,533,479) (1,598,577) (470,170)
9.1 Less :Amortization of Major Maintenance in current year (2,564,485) (1,934,902) (1,128,407)
---------- ---------- -----------
16,338,520 19,057,686 10,968,120
========== ========== ===========
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 10
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
10. ACCOUNTS PAYABLE TO THIRD PARTIES
The "Account Payable to Third Parties" includes the main suppliers of JLEC as of
December 31, 2004 and are detailed as follows :
12/31/04 12/31/03 12/31/02
US$ US$ US$
---------- ---------- -----------
Glencore (coal supplier) 22,932,140 20,030,571 2,187,744
BULK (coal supplier) 20,302,750 4,470,349 0
CARGILL (coal supplier) 10,197,420 0 0
BHP Billiton (coal supplier) 2,550,241 2,800,790 4,119,817
Anglo American (coal supplier) 0 6,320,391 2,245,218
RAG Trading (coal supplier) 0 0 4,499,958
Alstom Power 859,588 1,507,931 2,845,357
ONE - Availability Rebate 15,950,384 7,583,477 16,093,636
ONE - Fixed Rebate 8,687,506 0 0
Other suppliers 7,550,884 8,544,812 6,832,615
---------- ---------- -----------
Total 89,030,912 51,258,320 38,824,345
========== ========== ===========
11. RELATED PARTY TRANSACTIONS
During the year 2004, JLEC has booked a number of related parties transactions
as follows :
ABB ABB ABB CMS CMS CMS
EV OTHERS MAROC MOPCO MOPCO RD & GEN Total
Currencies US$ US$ MAD MAD MAD US$ US$
------- --------- --------- ---------- ---------- -------- ---------
Acc. Payable 12/31/03 90,007 36,608 0 4,757,590 29,319,976 0
2004 :
Management Fees 32,195,453
Incentive Accrual 42,344,890
Other 256,323 1,077,929 1,460,976 5,066,894
Total Payments 2004 255,739 1,071,390 599,760 32,250,660 29,320,086 0
Acc. Payable 90,591 43,146 861,216 9,769,277 42,344,781 0
Acc. Pay. in US$ 90,591 43,146 104,486 1,185,247 5,137,433 0 6,560,903
Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor
Energiaktie- Power Energy Handels- Investment AB Cythere AB Cythere
Common Stock bolag AB bolag AB 61 63 Total
------------ ------------ ----------- ---------- ---------- ------------- -------------
Currencies MAD MAD MAD MAD MAD MAD MAD
----------- ------------ ----------- ---------- ---------- ------------- -------------
Acc. Payable 12/31/03 214,928,711 197,734,415 17,194,297 43,438,991 2,369,384 1,040,159,631 1,515,825,428
Dividend Payable 0 0 0 0 0 0 0
Total Payments 2004 47,418,800 43,625,296 3,793,504 27,217,328 1,484,582 651,731,281 775,270,790
Acc. Payable 167,509,911 154,109,119 13,400,793 16,221,663 884,802 388,428,350 740,554,638
B/S FX Rate MAD/USD 8.2424 8.2424 8.2424 8.2424 8.2424 8.2424 8.2424
Acc. Pay. in US$ 20,322,953 18,697,117 1,625,836 1,968,075 107,348 47,125,637 89,846,967
Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor
Energiaktie- Power Energy Handels- Investment AB Cythere AB Cythere
Preferred Stock & Convertible Securities bolag AB bolag AB 61 63 Total
------------ ------------ ----------- ---------- ---------- ---------- -----------
Currencies MAD MAD MAD MAD MAD MAD MAD
------------ ------------ ----------- ---------- ---------- ---------- -----------
Preferred Stock Dividend payable 0 0 0 0 186,316 81,861,977 82,048,293
Convertible Securities Interest payable 42,733,486 39,314,807 3,418,679 3,418,679 0 0 88,885,651
Total Payments 2004 42,733,486 39,314,807 3,418,679 3,418,679 186,316 81,861,977 170,933,944
Acc. Payable 0 0 0 0 0 0 0
B/S FX Rate MAD/USD 8.2424 8.2424 8.2424 8.2424 8.2424 8.2424 8.2424
Acc. Pay. in US$ 0 0 0 0 0 0 0
----------- ------------ ----------- ---------- ---------- ---------- -----------
Total Accounts Payable to Related Partie 96,407,870
-----------
Page 11
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
11. RELATED PARTY TRANSACTIONS (CONTINUED)
During the year 2003, JLEC has booked a number of related parties transactions
as follows :
ABB ABB ABB CMS CMS CMS
EV OTHERS MAROC MOPCO MOPCO RD & GEN Total
Currencies US$ US$ MAD MAD MAD US$ US$
------- ------ ------- ---------- ---------- -------- ---------
Acc. Payable 12/31/02 105,764 0 125,880 -1,452,394 46,253,345 82,686
2003 :
Management Fees 32,938,795
Incentive Accrual 29,320,319
Other 214,644 90,575 237,916 3,582,315
Total Payments 2003 230,400 53,967 363,796 30,311,126 46,253,688 82,686
Acc. Payable 90,007 36,608 0 4,757,590 29,319,976 0
Acc. Pay. in US$ 90,007 36,608 0 542,101 3,340,851 0 4,009,568
Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor
Energiaktie- Power Energy Handels- Investment AB Cythere AB Cythere
Common Stock bolag AB bolag AB 61 63 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
Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor
Energiaktie- Power Energy Handels- Investment AB Cythere AB Cythere
Preferred Stock & Convertible Securities bolag AB bolag AB 61 63 Total
------------ ------------ ----------- ---------- ---------- ---------- -----------
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 176,729,587
-----------
During 2002, related party transactions consisted of the following:
ABB ABB ABB CMS CMS CMS Total
EV OTHERS MAROC MOPCO MOPCO RD & GEN
------- ------ ------- ---------- ---------- -------- ---------
Currencies US$ US$ MAD MAD MAD US$ US$
------- ------ ------- ---------- ---------- -------- ---------
Acc. Payable 12/31/01 137,581 36,275 78,576 7,726,314 44,598,493 76,753
Management Fees 35,654,033
Incentive Accrual 46,253,517
Other 207,059 26,381 778,086 -6,139,521 114,510
Total Payments 2002 238,876 62,657 730,782 38,693,220 44,598,665 108,577
Acc. Payable 12/31/02 105,764 0 125,880 -1,452,394 46,253,345 82,686
Acc. Pay. in US$ 12/31/02 105,764 0 12,345 -142,433 4,535,976 82,686 4,594,337
Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor
Energiaktie- Power Energy Handels- Investment AB Cythere AB Cythere
Common Stock bolag AB bolag AB 61 63 Total
------------ ------------ ----------- ---------- ---------- ------------- -------------
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
Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor
Energiaktie- Power Energy Handels- Investment AB Cythere AB Cythere
Preferred Stock & Convertible Securities bolag AB bolag AB 61 63 Total
------------ ------------ ----------- ---------- ---------- ---------- -----------
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
-----------
Page 12
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
12. TAXES PAYABLE :
The "taxes payable" includes the following items as of December 31, 2004 :
12/31/04 12/31/03 12/31/02
US$ US$ US$
----------- ----------- ----------
Value Added Tax on behalf of foreign suppliers 204,712 309,190 299,199
Income Tax 2002 0 0 4,226,098
Income Tax 2003 0 5,393,931 0
Income Tax 2004 4,568,726 0 0
Withholding Tax 100,984 260,841 155,281
Payroll Tax 259,164 237,358 185,575
Licence Tax 0 1,325,971 0
----------- ----------- ----------
Total 5,133,586 7,527,291 4,866,153
=========== =========== ==========
13. CAPACITY CHARGES
2004
13.1 $ Capacity Charges greater than $ DFL Model Actual DFL model
------------- ------------
in November and December 2004 $ Capacity Min Lease
------------- ------------
Charges Payments Difference
------------- ------------ -----------
CGNC US GAAP US GAAP
------------- ------------ -----------
USD USD USD
------------- ------------ -----------
$ Capacity Charges 20,705,351 20,383,548 321,803
$ O.N.E Rebate (4,302,807) (4,025,187) (277,620)
------------- ------------ -----------
2004 in USD 16,402,544 16,358,361 44,183
$ Capacity Charges greater than $ DFL Model 44,183
-----------
Actual DFL model
------------- ------------
13.2 Euro Capacity Charges greater than Euro DFL Model Euro Capacity Min Lease
------------- ------------
in November and December 2004 Charges Payments Difference
------------- ------------ -----------
CGNC US GAAP US GAAP
------------- ------------ -----------
Euro Euro Euro/USD
------------- ------------ -----------
Euro Capacity Charges 20,032,963 19,721,611 311,353
Euro O.N.E Rebate (3,123,333) (2,865,480) (257,853)
------------- ------------ -----------
2004 in Euro 16,909,630 16,856,131 53,499
B/S FX Rate X 1.36428
-----------
Euro Capacity Charges greater than Euro DFL Model in USD 72,988
-----------
2003
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 less 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
Page 13
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
13. CAPACITY CHARGES (CONTINUED)
2002
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
14. OTHER CURRENT LIABILITIES
The "Other Current Liabilities" as of December 31, 2004 are detailed as follows:
12/31/04 12/31/03 12/31/02
US$ US$ US$
--------- --------- ---------
Accrued Expenses: interest, swaps and fees 14.1 5,726,546 5,904,937 6,072,924
Accrued salaries expense 2,075,391 1,198,164 1,390,179
Liability for Compensated Absences 310,222 298,523 307,449
Coal Custom Duty Advances from ONE 671,924 0 0
Other Liabilities 578,504 337,780 184,470
--------- --------- ---------
9,362,588 7,739,404 7,955,022
========= ========= =========
14.1 The accrued interests and fee expenses are detailed by loans as follows :
12/31/04 12/31/03 12/31/02
US$ US$ US$
--------- --------- ---------
OPIC 648,818 728,141 807,914
SACE 1,597,674 1,586,760 1,522,740
WB 1,708,747 1,712,739 1,629,541
US EXIM 1,467,777 1,574,138 1,823,435
ERG 303,531 303,158 289,295
--------- --------- ---------
5,726,547 5,904,937 6,072,924
========= ========= =========
Page 14
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
15. LONG TERM LOANS
Long term loans are detailed as follows as of December 31, 2004 :
Interest Reimbursement
Borrowing Principal ---------------- Interest ---------------------------
Loan Date Currency Amount Type Rate Payment Maturity Periodicity
- ----------- --------- -------- ----------- ----- ------- --------- ------------- -----------
US EXIM 9/12/02 US$ 161,756,869 Fixed 7.2000% Quarterly Feb. 15, 2013 Quarterly
OPIC Note A 11/25/97 US$ 41,593,750 Fixed 10.2300% Quarterly Feb. 15, 2013 Quarterly
OPIC Note B 02/11/98 US$ 9,075,000 Fixed 9.9200% Quarterly Feb. 15, 2013 Quarterly
-----------
50,668,750
-----------
Total L.T loan in US$ 212,425,619
-----------
Current part in USD 25,748,560
-----------
Non-Current part in USD 186,677,059
-----------
Interest Reimbursement
Borrowing Principal ------------------ Interest ---------------------------
Loan Date Currency Amount Type Rate Payment Maturity Periodicity
- ---------- --------- -------- ----------- -------- -------- --------- ------------- -----------
SACE 11/15/04 Euro 159,945,585 Fixed 5.73000% Quarterly Feb. 15, 2013 Quarterly
ERG 11/15/04 Euro 20,554,486 Variable 4.17013% Quarterly Feb. 15, 2013 Quarterly
World Bank 11/15/04 Euro 110,023,622 Variable 3.92013% Quarterly Feb. 15, 2013 Quarterly
-----------
Total L.T loan in Euro 290,523,693
-----------
B/S FX Rate Euro/USD 1.36429
-----------
Total L.T loan in USD 396,357,727
-----------
Current part in USD 48,043,360
-----------
Non-Current part in USD 348,314,367
-----------
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
2005 2006 2007 2008 2009 2005-2013 2005-2013 2005-2013
------------ ------------ ------------ ------------ ------------ ----------- ----------- ----------
In USD
US EXIM 19,606,893 19,606,893 19,606,893 19,606,893 19,606,893 49,522,500 0 0
OPIC A 5,041,667 5,041,666 5,041,666 5,041,666 5,041,666 18,079,169 0 0
OPIC B 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 3,825,014 0 0
------------ ------------ ------------ ------------ ------------ ----------- ----------- ----------
Total in USD 25,748,560 25,748,559 25,748,559 25,748,559 25,748,559 71,426,684 0 0
------------ ------------ ------------ ------------ ------------ ----------- ----------- ----------
In Euro
SACE 19,387,344 19,387,344 19,387,344 19,387,344 19,387,344 39,511,596 0 0
ERG 2,491,452 2,491,452 2,491,452 2,491,452 2,491,452 3,799,644 3,811,035 0
WB 13,336,197 13,336,197 13,336,197 13,336,197 13,336,197 19,152,073 20,118,202 4,323,243
Total in Euro 35,214,993 35,214,993 35,214,993 35,214,993 35,214,993 62,463,313 23,929,237 4,323,243
B/S FX Rate Euro/USD 1.36429 1.36429 1.36429 1.36429 1.36429 1.36429 1.36429 1.36429
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
Total in USD 48,043,360 48,043,360 48,043,360 48,043,360 48,043,360 85,217,892 32,646,350 5,898,145
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
Page 15
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
15. LONG TERM LOANS (CONTINUED)
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
-----------
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
-----------
Page 16
JORF LASFAR ENERGY COMPANY
NOTES to US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
15. LONG TERM LOANS (CONTINUED)
PLEDGE 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 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 17
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
16. STOCKHOLDERS' EQUITY
The composition of Stockholders' Equity as of December 31, 2004 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 61and 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 2004 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 18
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
16.3 PREFERRED STOCK
In accordance with Section 3.01 par.(b) of the amended Company Loan Agreement
(see npte 16.2 above). the Company has 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 Preffered Stock for each one hundred
(100) MAD of such Company Loan principal converted in to Preffered 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 #REF! as shown in
Note 16.4.
16.4 RECONCILIATION AND ALLOCATION OF RETAINED EARNINGS 16.4
2004 US$
------ -----------
Retained Earnings as of December 31, 2003 147,498,955
Retained Earnings increase during 2004 125,193,694
Retained Earnings decrease during 2004
Convertible Securities interest payable as of January 1, 2004 (10,128,034)
88,885,651 Dirhams
8.7762 Dirhams per US Dollar
Preferred Stock Dividend payable as of January 1, 2004 (9,348,954)
82,048,293 Dirhams
8.7762 Dirhams per US Dollar
-----------
Total Retained Earnings 253,215,661
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 82,086,256 9,959,024 111,308,278 121,267,301
Jorf Lasfar Energiaktiebolag, Sweden........ 42,850,564 5,198,797 0 0 58,105,118 63,303,915
Jorf Lasfar Power Energy AB, Sweden......... 39,422,519 4,782,893 0 0 53,456,709 58,239,602
Tre Kronor Investment AB, Sweden........... 3,428,045 415,904 0 0 4,648,409 5,064,313
Jorf Lasfar Handelsbolag, Sweden............ 3,428,045 415,904 0 0 4,648,409 5,064,313
AB Cythere 61, Sweden....................... 0 0 186,827 22,667 253,550 276,216
---------- ---------- ---------- ---------- ----------- -------------
Total 89,129,174 10,813,498 82,273,084 9,981,690 232,420,473 253,215,661
The allocations for Convertible Securities (89,129,174 Dirhams) and Preferred
Stock (82,273,084 Dirhams) are scheduled for payment on May 16, 2005.
Page 19
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
16.4 RECONCILIATION AND ALLOCATION OF RETAINED EARNINGS (CONTINUED)
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 a 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 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
US$
------------
2002
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 a 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
Page 20
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
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, 2004
17.1 LONG TERM RECEIVABLES AS OF DECEMBER 31, 2004
US$ Euro
------------- -------------
Units 1 to 4 Units 1 to 4
------------- -------------
Total Minimum Lease Payments 17.4 2,197,963,436 1,152,862,047
Minimum Lease Payments for 2004 (113,505,779) (114,608,487)
------------- -------------
Total of Future Minimum Lease Payments 2,084,457,657 1,038,253,560
X 1.36428
------------- -------------
Total of Future Minimum Lease Payments in US$ 17.3 2,084,457,657 1,416,475,939
============= =============
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
- ------ -------------- ---------------
2005 98,902,331 95,705,089
2006 99,348,712 84,343,267
2007 94,266,264 83,270,646
2008 97,990,818 79,557,495
2009 97,756,285 76,945,799
17.2 UNEARNED INCOME AS OF DECEMBER 31, 2004
US$ Euro
------------- --------------
Units 1 to 4 Units 1 to 4
------------- --------------
Total Unearned Income 17.4 1,498,566,597 780,404,581
------------
Lease Revenue 2004 (80,475,863) (83,762,066) X 1.24254 104,077,762
------------- -------------- ------------
1,418,090,734 696,642,515
X 1.36428
------------- --------------
Total Remaining Unearned Income in US$ 17.3 1,418,090,734 950,420,397
============= ==============
The Lease Revenues under the US GAAP model for the next five years are as
follows:
US$ Euro
------------- --------------
Year Units 1 to 4 Units 1 to 4
- ------ ------------- --------------
2005 89,258,072 74,987,906
2006 87,703,727 71,512,790
2007 86,501,207 68,270,588
2008 85,143,123 64,820,922
2009 83,150,426 61,693,606
17.3 NET INVESTMENT IN DIRECT FINANCING LEASES AS OF DECEMBER 31, 2004
US$ Euro
-------------- ---------------
Units 1 to 4 Units 1 to 4
-------------- ---------------
Total of Future Minimum Lease Payments in US$ 17.1 2,084,457,657 1,416,475,939
Total Remaining Unearned Income in US$ 17.2 (1,418,090,734) (950,420,397)
-------------- ---------------
Net investment in direct financing leases in US$ 666,366,923 466,055,542
============== ===============
Current part in US$ 9,644,259 28,264,185
Non-Current part in US$ 656,722,664 437,791,357
17.4 On November 8, 2004, Amendment No. 2 to the Power Purchase Agreement
became effective, and JLEC updated our Direct Finance Lease models
including an extension of such DFL models by 15 years until September 13,
2027. As a result, starting from January 1, 2004, the total minimum lease
payments have increased from $1,181,954,019 to $2,197,963,436 and from
Euro 834,803,410 to Euro 1,152,862,047. Likewise, JLEC's total unearned
income under the updated and extended DFL models increased from
$505,489,540 to $1,498,566,597 and from Euro 477,010,214 to Euro
780,404,581.
Page 21
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
Direct Financing Lease - (D.F.L) AS OF DECEMBER 31, 2003
17.1 LONG TERM RECEIVABLES AS OF DECEMBER 31, 2003
US$ 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 Lease Revenues 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 22
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
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 Revenues 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 23
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
18. FINANCIAL EXPENSES
12/31/04 12/31/03 12/31/02
US$ US$ US$
------------ ------------ ------------
The Financial Expenses are detailed as follows, for the year ending:
Interest, Fees and Swaps incurred from inception to the year ending:
Up-Front Fees 25,609,073 25,609,073 25,609,073
Interest Costs 324,780,552 287,290,576 246,526,514
Premiums 23,808,481 23,808,481 23,808,481
Commitment Fees 19,312,672 19,312,672 19,312,672
Arrangement Fees 2,396,273 2,396,273 2,396,273
Other Fees (acceptance fees, Agent fees...etc) 10,240,839 9,754,617 9,297,751
Guarantee Fees 22,035,847 20,598,822 19,101,732
Swaps 44,896,300 37,238,114 30,362,978
------------ ------------ ------------
473,080,038 426,008,628 376,415,474
Accrued Interest, Fees, Swaps (see Note 14.1) 5,726,546 5,904,937 6,072,924
------------ ------------ ------------
Total Interest, Fees and Swaps 478,806,584 431,913,565 382,488,398
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, fees and swaps expensed - Total 267,857,221 220,964,202 171,539,035
Interest, fees and swaps expensed during prior years (220,964,202) (171,539,035) (126,704,796)
------------ ------------ ------------
Interest, fees and swaps expensed during current year 46,893,019 49,425,167 44,834,239
============ ============ ============
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 (256 employees of
318, or 81%) plus 1 recent retiree and 2 surviving spouses 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 2004, 2003 and
2002, JLEC contributed to the CCR US$ 427,712, US$ 350,071 and US$ 291,036,
respectively. As of December 31, 2004, JLEC is also paying benefits to 1
retiree plus 2 surviving spouses; and during 2004, such payments amount to $
60,017 (USD 33,286 in 2003, and USD 23,783 in 2002).
Benefits provided under this plan include pension and retiree health
insurance. As of December 31, 2004, the benefit obligation totalled US$
19,913,861 (MAD 164,138,005 / 8.2424). The fair value of assets contributed to
the CCR was US$ 6,131,773 (MAD 50,540,529 / 8.2424) as of December 31, 2004.
The net unfunded benefit obligation as of December 31, 2004 reflected in the
accompanying balance sheet was US$ 13,782,087 (MAD 113,597,476 / 8.2424).
The following assumptions were used to perform the actuarial valuations:
2004 2003 2002
----- ----- -----
Discount rate 6.00% 6.00% 7.58%
Rate of return on Plan assets 6.00% 6.00% 7.58%
Rate of compensation increase 6.50% 6.50% 6.50%
Rate of health care cost 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 7.08 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 2004, JLEC's
contribution to that fund amounted to USD 173,073 (USD 145,677 in 2003, and
USD 109,147 in 2002).
Page 24
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
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, 2004, 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.
2004
Fixed Rate Current Current Settlement Forecast of
Credit Swap Paid by Libor Paid Notional and Termination Remaining Valuation
Facility Providers Currency JLEC to JLEC Amount Amortization Date Payments in Euro
- ---------- --------- -------- ---------- ---------- ----------- ------------ ----------- ------------- ----------
World Bank BNP Euro 6.4115% 2.17025% 36,674,540 Quarterly 2/15/2013 6,705,625 4,867,269
ABN Euro 6.4175% 2.17025% 36,674,540 Quarterly 2/15/2013 6,715,112 4,857,758
CSFB Euro 6.4060% 2.17025% 36,674,540 Quarterly 2/15/2013 6,696,930 4,681,464
----------- ---------- ----------
110,023,620 20,117,667 14,406,491
----------- ---------- ----------
ERG BNP Euro 6.4700% 2.17025% 6,851,496 Quarterly 2/15/2013 1,270,016 925,233
ABN Euro 6.4750% 2.17025% 6,851,496 Quarterly 2/15/2013 1,271,493 923,161
CSFB Euro 6.4680% 2.17025% 6,851,496 Quarterly 2/15/2013 1,269,426 930,588
----------- ---------- ----------
20,554,488 3,810,935 2,778,982
----------- ---------- ----------
Total in Euro 17,185,473
----------
B/S FX rate X 1.36429
Total in USD 23,445,919
==========
2003
Fixed Rate Current Current Settlement Forecast of
Credit Swap Paid by Libor Paid Notional and Termination Remaining Valuation
Facility Providers Currency JLEC to JLEC Amount Amortization Date Payments in 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
Credit Swap Paid by Libor Paid Notional and Termination Remaining Valuation
Facility Providers Currency JLEC to JLEC Amount Amortization Date Payments in 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
==========
Page 25
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2004
21. CASH FLOWS FOR 2004
Reconciliation of net income to net cash from operating activities under the
Direct Method is as follows :
2004 2003 2002
US$ US$ US$
------------ ------------ ------------
Net Income............................................................. 125,193,694 119,850,319 132,287,908
Adjustment to reconcile Net Income to cash
provided from operating activities :
Depreciation and amortization ..................................... 5,530,445 4,028,115 2,752,641
Deferred taxes .................................................... (1,555,763) (13,005,297) 6,908,298
Lease Revenue ..................................................... (184,553,625) (186,427,881) (183,541,585)
Finance tariff cash revenue ....................................... 213,372,941 246,405,730 263,559,812
Changes in operating assets and liabilities:
Inventories ....................................................... (20,769,958) 2,066,641 (8,855,387)
Accounts receivable ............................................... (38,381,613) (9,311,086) 10,340,353
Prepayments ....................................................... (12,072,804) 12,175,661 (19,280,513)
Accounts payable .................................................. 40,323,927 12,470,583 4,060,345
Unfunded pension obligation ....................................... 3,903,961 4,185,183 5,692,943
Other liabilities ................................................. (6,396,961) (2,445,519) (608,934)
Effect of exchange rate changes ................................... 1,616,716 1,824,028 4,235,487
----------- ----------- -----------
Net cash provided by operating activities ............................. 126,210,962 191,816,477 217,551,367
22. UNCERTAINTIES AS OF DECEMBER 31, 2004
JLEC's corporate tax return, payroll tax and VAT returns for the years 2001 to
2004 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.
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