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, 2005, 2004 AND 2003
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, 2005, 2004, and 2003 ........................ 2
Statement of Income
For years ending December 31, 2005, 2004, and 2003 ............. 3
Statement of Stockholders' Equity
For years ending December 31, 2005, 2004, and 2003 ............. 4
Statement of Cash Flows
For years ending December 31, 2005, 2004, and 2003 ............. 5
Notes to US GAAP Financial Statements .................................... 6-26
JORF LASFAR ENERGY COMPANY
BALANCE SHEET
Note December 31, 2005 December 31, 2004 December 31, 2003
---- ----------------- ----------------- -----------------
(000) U.S. Dollars (000) U.S. Dollars (000) U.S. Dollars
ASSETS
Current Assets
Cash ............................................. 3.1 62,763 69,800 65,611
Inventories ...................................... 2.c & 4 51,943 59,318 38,548
Account Receivable ............................... 5 114,217 123,867 85,486
Prepayments ...................................... 6 & 2.h 7,936 3,389 4,209
Recoverable VAT .................................. 8 0 1,540 0
Net investment from $ DFL model .................. 2.b & 17.3 11,645 9,644 38,461
Net investment from Euro DFL model ............... 2.b & 17.3 15,132 28,264 40,942
--------- --------- ---------
Total current assets ........................ 263,635 295,823 273,256
Long Term Assets, net
Restricted Cash .................................. 3.2 231 22,591 83,049
Fixed Assets ..................................... 7 14,881 12,159 9,603
Net investment from $ DFL model .................. 2.b & 17.3 645,078 656,723 638,004
Net investment from Euro DFL model ............... 2.b & 17.3 363,316 437,791 411,100
$ Capacity Charges less than $ DFL model ......... 13.1 76 0 713
Euro Capacity Charges less than Euro DFL model ... 13.2 425 0 0
Deferred Tax Asset ............................... 2.f 0 1,556 0
Other Long Term Assets ........................... 9 13,389 16,339 19,058
--------- --------- ---------
Total Long Term Assets ...................... 1,037,396 1,147,158 1,161,527
--------- --------- ---------
Total assets ................................ 1,301,031 1,442,980 1,434,783
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable to third parties ................ 10 & 2.h 54,319 73,332 47,721
Accounts payable to related parties .............. 11 & 2.h 104,428 96,410 176,823
VAT Liability ................................... 8 7,131 0 3,972
Taxes payable .................................... 12 & 2.h 499 565 3,598
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 41,531 48,043 44,491
Other current liabilities ........................ 14 7,327 9,363 7,739
--------- --------- ---------
Total current liabilities ................... 240,984 253,461 310,093
Non-Current Liabilities
Long-term loans in US Dollars .................... 15 160,928 186,677 212,426
Long-term loans in Euro .......................... 15 259,569 348,314 367,052
$ Capacity Charges greater than $ DFL model ...... 13.1 0 44 0
Euro Capacity Charges greater than Euro DFL model 13.2 0 73 422
Deferred Tax Liability ........................... 2.f 3,346 0 0
Derivative Instrument Liability .................. 20 15,107 23,446 22,050
Postemployment Benefits .......................... 19 2,020 13,782 9,878
--------- --------- ---------
Total non-current liabilities ............... 440,970 572,336 611,828
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 ................................ 16.4 246,771 253,216 147,499
Other Comprehensive Income or (Loss) ............. 20 (15,107) (23,446) (22,050)
--------- --------- ---------
Total stockholders' equity .................. 619,077 617,183 512,862
--------- --------- ---------
Total liabilities and stockholders' equity .. 1,301,031 1,442,980 1,434,783
The accompanying Notes 1 to 23 are an integral part of these financial
statements.
Page 2
JORF LASFAR ENERGY COMPANY
STATEMENT OF INCOME
January 1, 2005 January 1, 2004 January 1, 2003
to to to
Note December 31, 2005 December 31, 2004 December 31, 2003
---- ----------------- ----------------- -----------------
(000) U.S. Dollars (000) U.S. Dollars (000) U.S. Dollars
REVENUE
Lease Revenue from $ DFL model ...... 2.b & 17.2 89,258 80,476 81,793
Lease Revenue from Euro DFL model ... 2.b & 17.2 92,865 104,078 104,635
Energy Payments ..................... 2.h 267,215 216,992 125,985
O&M Revenue ......................... 2.h 53,212 52,406 48,062
Supplemental Capacity Charges ....... 3,597 4,173 3,949
License Tax Reimbursement ........... 3,038 2,864 4,102
Other ............................... 169 844 352
------- ------- -------
TOTAL REVENUE 509,354 461,833 368,878
OPERATING EXPENSES
Coal Cost ........................... 2.h 276,294 224,797 132,153
Fuel Oil Cost ....................... 1,476 1,085 1,280
O&M Costs ........................... 38,893 32,876 33,554
Operator's Incentive ................ 2,906 4,281 2,784
Generator Costs ..................... 2.h 9,298 11,457 9,776
License Tax Costs ................... 3,038 2,864 4,102
Amortization of Major Maintenance ... 9.1 2,529 2,564 1,935
Depreciation of Other Assets ........ 3,316 2,966 2,093
Non-Current Pension Expense ......... 2,864 2,989 2,902
------- ------- -------
TOTAL OPERATING EXPENSES 340,614 285,879 190,580
OPERATING INCOME 168,741 175,954 178,299
FINANCIAL ITEMS
Financial Income .................... 2,682 1,786 2,025
Exchange Gain (+) or Loss (-) ...... 2.d (4,615) 1,867 (8,605)
Financial Expenses .................. 18 (40,161) (46,893) (49,425)
------- ------- -------
TOTAL FINANCIAL ITEMS (42,094) (43,239) (56,005)
INCOME BEFORE TAXES 126,647 132,715 122,293
Income Taxes
Current ........................ 2.e 10,029 9,077 15,448
Deferred ....................... 2.f 5,057 (1,556) (13,005)
------- ------- -------
NET INCOME 16.4 & 21 111,561 125,194 119,850
The accompanying Notes 1 to 23 are an integral part of these financial
statements.
Page 3
JORF LASFAR ENERGY COMPANY
STATEMENT OF STOCKHOLDERS' EQUITY
January 1, 2005 January 1, 2004 January 1, 2003
to to to
December 31, December 31, December 31,
Note 2005 2004 2003
---- ---- ---- ----
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 253,216 147,499 113,031
Net income 111,561 125,194 119,850
Common stock dividend (97,608) 0 (64,973)
Preferred stock dividend (9,585) (9,349) (9,796)
Convertible stockholders' securities (10,813) (10,128) (10,613)
------- ------- -------
At end of period 16.4 246,770 253,216 147,499
OTHER COMPREHENSIVE INCOME (LOSS) (A)
Derivative Instruments
At beginning of period (23,446) (22,050) (21,410)
Reclassification of gains (losses) included in net income 6,680 7,675 6,871
Unrealized gain (loss) on derivative instruments 1,659 (9,072) (7,511)
------- ------- -------
At end of period 20 (15,107) (23,446) (22,050)
------- ------- -------
619,077 617,183 512,862
======= ======= =======
(a) Disclosure of Comprehensive Income (Loss)
Net income 111,561 125,194 119,850
Derivative instruments
Reclassification of gains (losses) in net income 6,680 7,675 6,871
Unrealized gain (loss) on derivative instruments 1,659 (9,072) (7,511)
------- ------- -------
Total Comprehensive Income 119,900 123,797 119,211
======= ======= =======
The accompanying Notes 1 to 23 are an integral part of these financial
statements.
Page 4
JORF LASFAR ENERGY COMPANY
STATEMENT OF CASH FLOWS
January 1, 2005 January 1, 2004 January 1, 2003
to to to
December 31, 2005 December 31, 2004 December 31, 2003
(000) U.S. (000) U.S. (000) U.S.
Note Dollars Dollars Dollars
---- ------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Payments received from ONE ...................................... $ 593,249 $ 526,880 $ 426,250
Interest received ............................................... 2,412 1,538 1,870
Rebates paid to ONE ............................................. (40,023) (58,108) (5,376)
Corporate Income Tax Payments ................................... (14,258) (12,795) (12,826)
Insurance Payments .............................................. (5,339) (2,927) (5,699)
Interest Payments .............................................. (41,423) (46,626) (49,136)
Payments to Coal Suppliers ...................................... (280,730) (210,454) (111,262)
Payments of Operating Costs ..................................... (62,375) (58,302) (53,971)
Payments to Pension Plans ....................................... (13,826) (601) (496)
Cash Effect of Value Added Tax .................................. 8,693 (12,393) 2,463
--------- --------- ---------
Net cash provided (+) or used (-) by operating activities... 21 146,380 126,211 191,816
CASH FLOWS USED FOR INVESTING ACTIVITIES
Net decrease (increase) in restricted cash ...................... 22,324 60,795 (25,942)
Acquisition of fixed assets ..................................... (4,958) (6,379) (2,300)
Payment of Major Maintenance costs .............................. 0 0 (6,261)
--------- --------- ---------
Net cash provided (+) or used (-) by investing activities... 17,366 54,416 (34,503)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans ............................................. 0 0 0
Proceeds of share capital payments .............................. 0 0 0
Repayment of loans .............................................. (69,503) (69,900) (65,639)
Payment of Convertible Securities interest ...................... (10,308) (9,595) (11,417)
Payment of Preferred Stock dividends ............................ (9,515) (8,857) (10,539)
Payment of Common Stock dividends ............................... (76,093) (89,703) (54,877)
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... (165,419) (178,055) (142,472)
Effect of exchange rate changes on cash ........................... (5,364) 1,617 4,087
CASH AT BEGINNING OF PERIOD ......................................... 69,800 65,611 46,683
NET INCREASE (DECREASE) IN CASH DURING PERIOD ....................... (7,037) 4,188 18,928
--------- --------- ---------
CASH AT END OF PERIOD ............................................... 3.1 $ 62,763 $ 69,800 $ 65,611
========= ========= =========
The accompanying Notes 1 to 23 are an integral part of these financial
statements.
Page 5
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005
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, 2005
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 method
for spare part inventory valuation and average cost method for Coal and other
inventory valuation. Inventories are periodically revalued to the lessor of
market value or cost.
Page 7
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005
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%. On
June 10, 2005, income related to Unit 3 became taxable at 17.5%. Unit 4 was
still in the 100% tax holiday period during 2005.
F. DEFERRED INCOME TAX
As of December 31, 2005, the applicable tax rate on Units 1, 2 and 3 is 17.5%.
JLEC determines and books the current income tax (US$ 10,028,853 for 2005) 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. 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 main temporary differences result from the use of the Direct Financing Lease
method under US GAAP which generated a Deferred Tax Liability of $ 5,999,932 and
differences in the timing of the deductibility of pension liabilities which
generated a Deferred Tax Asset of $ 2,498,693. The total of deferred tax
liability is $ 3,501,239 ($0 as of December 31, 2004 and $0 as of December 31,
2003). The total of the deferred tax asset amounts to $ 0 ($1,555,763 as of
December 31, 2004 and $0 as of December 31, 2003).
G. OFF BALANCE SHEET COMMITMENTS
The Company discloses all off-balance sheet commitments, if any, on balance
sheet dates.
H. RECLASSIFICATIONS
Certain amounts for the prior period have been reclassified for comparative
purposes. These reclassifications, however, did not change the Total Revenue or
Total Operating Expenses of the prior period.
I. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reported period. Actual result could differ from these estimates and
assumptions. In management's opinion, the information contained in this report
reflects all adjustments of a normal recurring nature necessary to assure the
fair presentation of financial position, results of operations and cash flows
for the periods presented.
Page 8
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005
3. CASH
3.1 Cash
The Company's cash as of December 31, 2005, includes the initial capital
deposits of the Company's stockholders, as explained further in Note 16.1. Such
cash is held in Moroccan Dirhams in accounts at CITIBANK MAGHREB, which is
located at Zenith Millenium Immeuble 1, Lotissement Attaoufik, Sidi Maarouf,
Casablanca Morocco. The remainder of the company's' cash is held by the Offshore
Collateral Agent, Deutsche Bank Trust Company Americas in US$ and Euro, and by
the Onshore Collateral Agent, BMCI - Banque Marocaine pour le Commerce et
l'Industrie in Moroccan Dirhams and US$.
The cash balances includes the following categories :
12/31/05 12/31/04 12/31/03
US$ US$ US$
---------- ---------- ----------
Off-shore Revenue in US$ 23,487,215 19,658,389 24,426,875
Off-shore Revenue in Euro 5,263,923 6,471,506 6,590,224
---------- ---------- ----------
Total Off-Shore Revenue 28,751,138 26,129,895 31,017,099
On-shore O&M Account - Generator 5,151,140 12,565,202 6,946,245
On-shore O&M Account - Operator 1,042,679 2,468,763 4,279,000
Off-shore O&M Accounts 6,071 4,742 4,546
---------- ---------- ----------
Total O&M Accounts 6,199,890 15,038,706 11,229,792
Fuel & Spare Part Accounts 18,727,645 18,388,897 12,929,694
Off-shore Debt Service Accrual Accounts in US$ 3,526,813 3,641,836 3,734,278
Off-shore Debt Service Accrual Accounts in Euro 5,497,741 6,489,135 6,637,737
---------- ---------- ----------
Total Debt Service Accrual Accounts 9,024,554 10,130,971 10,372,015
Distribution Account in US$ 0 44,489 0
Stockholder capital deposits 59,469 66,934 62,863
---------- ---------- ----------
Total 62,762,696 69,799,893 65,611,462
========== ========== ==========
3.2 Restricted Cash
In accordance with the Common Agreement and the Offshore Collateral Agency
Agreement, the following Reserve Account cash and letters of credit ( as shown
in Note 3.4) are held by Deutsche Bank Trust Company Americas as security for
JLEC's lenders.
Major Maintenance Reserve Account in US$ 3.4 a 0 1,410,601 2,500,000
Fixed O&M Reserve Account in US$ 3.4 b 0 0 4,800,000
Debt Service Reserve Account in US$ 3.4 c 0 0 11,200,000
Super Reserve Account in US$ 3.4 d 0 20,913,300 45,600,000
---------- ---------- ----------
Off-shore Reserve Accounts in US$ 0 22,323,901 64,100,000
Fixed O&M Reserve Account in Euro 230,810 267,002 243,656
Debt Service Reserve Account in Euro 3.4 e 0 0 18,705,220
---------- ---------- ----------
Off-shore Reserve Accounts in Euro 230,810 267,002 18,948,876
---------- ---------- ----------
Total Reserve Accounts 230,810 22,590,902 83,048,876
========== ========== ==========
3.3 Total Cash
Cash 3.1 62,762,696 69,799,893 65,611,462
Restricted Cash in Reserve Accounts 3.2 230,810 22,590,902 83,048,876
---------- ---------- ----------
62,993,506 92,390,795 148,660,339
========== ========== ==========
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 :
12/31/05 12/31/04 12/31/02
---------- ---------- ----------
a. Major Maintenance Reserve Account US$ 10,000,000 6,100,000 2,500,000
b. Fixed O&M Reserve Account US$ 9,600,000 9,600,000 4,800,000
c. Debt Service Reserve Account US$ 20,400,000 21,400,000 11,300,000
d. Super Reserve Account US$ 80,000,000 79,086,700 39,086,700
e. Debt Service Reserve Account Euro 26,800,000 28,200,000 15,000,000
Page 9
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005
4. INVENTORIES
The inventories are detailed as follows for the year ending:
12/31/05 12/31/04 12/31/03
US$ US$ US$
---------- ---------- ----------
Stock of Coal 4.1 33,363,034 41,419,482 24,763,321
Stock of Fuel-oil 4.2 1,331,092 1,355,124 1,638,256
Stock of Spare Parts 4.3 16,655,779 15,386,680 10,940,862
Other Stocks (Chemicals, Oils,...) 593,338 1,156,676 1,205,566
---------- ---------- ----------
51,943,242 59,317,963 38,548,005
========== ========== ==========
4.1 The stock of coal represents the value of 347,441 tones existing in the
coal storage area plus 125,609 tones in transit to Jorf Lasfar, for a
total inventory of 473,050 tones as of December 31, 2005 (614,328 tones
total as of December 31, 2004, and 582,063 tones total as of December 31,
2003).
4.2 The stock of fuel oil represents 6,496 m3 existing in the fuel tanks as of
December 31, 2005 (7,654 m3 as of December 31, 2004, and 9,471 m3 as of
December 31, 2003).
4.3 The stock of Spare Parts represents the value of spare parts as of
December 31, 2005, that were purchased after the close-out of the Net
Investment on December 31, 2000, and remain in JLEC's inventory as of
December 31, 2005.
5. RECEIVABLES
The "Accounts Receivables" as of December 31, 2005 are detailed as follows :
12/31/05 12/31/04 12/31/03
US$ US$ US$
----------- ----------- ----------
Account Receivable - ONE 5.1 113,978,487 123,770,898 85,214,510
Account Receivable - Others 5.2 238,706 96,570 271,345
----------- ----------- ----------
114,217,192 123,867,468 85,485,855
=========== =========== ==========
5.1 The account receivable from ONE consists of November 2005 and December
2005 invoices.
5.2 The other receivables include a) accrued interest earned by investment of
JLEC's cash balances (US$ 60,167), and b) other receivable (US$ 178,538).
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 $7,099,483
from AMCI through litigation with uncertain outcome.
6. PREPAYMENTS
The "Prepayments" as of December 31, 2005 are detailed as follows :
12/31/05 12/31/04 12/31/03
US$ US$ US$
---------- ---------- ----------
Prepayments For Income Tax - Gross 16,067,338 6,754,801 0
Income Tax Payable -10,028,853 -4,568,726 0
---------- ---------- ----------
Prepayments for Income Tax - Net 6,038,486 2,186,076 0
Prepaid Insurance 513,781 524,479 3,599,349
Prepaid Expenses 797,072 324,949 321,637
Other Prepayments 586,278 353,506 287,640
---------- ---------- ----------
7,935,616 3,389,010 4,208,626
========== ========== ==========
7. FIXED ASSETS
The "Fixed Assets" are detailed as follows for year ending :
12/31/05 12/31/04 12/31/03
US$ US$ US$
---------- ---------- ----------
Fixed Asset - Gross 18,494,760 16,493,623 11,694,954
Depreciation -7,381,753 -4,753,714 -2,516,437
Construction in Progress 3,767,900 418,708 424,902
---------- ---------- ----------
14,880,908 12,158,617 9,603,420
========== ========== ==========
8. V.A.T LIABILITY
The "V.A.T Liability" account represents the net amount of Value Added Tax as
shown below :
12/31/05 12/31/04 12/31/03
US$ US$ US$
---------- ---------- ----------
Value Added Tax received from ONE to be declared 12,336,557 13,463,427 5,179,969
Value Added Tax to be paid & declared -5,205,116 -15,003,302 -1,207,918
---------- ---------- ----------
7,131,441 -1,539,875 3,972,052
========== ========== ==========
In 2005 and 2003 the Value Added Tax (VAT) were liablities while in 2004 the VAT
was recoverable and was recorded as an asset.
9. OTHER LONG TERM ASSETS
The Other Long Term Assets are as follows :
12/31/05 12/31/04 12/31/03
US$ US$ US$
---------- ---------- ----------
Long Term Receivables from employee home mortgage loans 4,187,029 3,946,932 3,372,930
Long Term Ash Disposal Site 0 660,624 1,389,307
Major Maintenance capitalized during prior years 17,828,927 17,828,927 7,299,779
Major Maintenance capitalized during current year 0 0 10,529,148
Less : Amortization of Major Maintenance during prior years -6,097,963 -3,533,479 -1,598,577
9.1 Less : Amortization of Major Maintenance in current year -2,529,355 -2,564,485 -1,934,902
---------- ---------- ----------
13,388,638 16,338,520 19,057,686
========== ========== ==========
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, 2005
10. ACCOUNTS PAYABLE TO THIRD PARTIES
The "Account Payable to Third Parties" includes the main suppliers of JLEC as of
December 31, 2005 and are detailed as follows :
12/31/05 12/31/04 12/31/03
US$ US$ US$
---------- ----------- ----------
ONE - Availability Rebate - Gross 12,260,084 15,950,384 7,583,477
less provisional payments to ONE -7,661,363 -15,696,844 -3,443,569
---------- ----------- ----------
ONE - Availability Rebate - Net 4,598,721 253,540 4,139,908
ONE - Fixed Reduction Rebate 8,376,603 8,687,506 0
---------- ----------- ----------
ONE - Total Rebates 12,975,324 8,941,045 4,139,908
Glencore 12,453,129 22,932,140 20,030,571
Anglo Coal 8,738,244 0 6,320,391
BULK Trading 7,829,367 20,302,750 4,470,349
Weglokoks 4,595,313 0 0
CARGILL 0 10,197,420 0
BHP Billiton 0 2,550,241 2,800,790
---------- ----------- ----------
Total Coal Suppliers 33,616,052 55,982,551 33,622,101
Alstom Power 999,252 859,588 1,507,931
Other suppliers 6,728,796 7,548,586 8,451,151
---------- ----------- ----------
Total 54,319,424 73,331,771 47,721,091
========== =========== ==========
11. RELATED PARTY TRANSACTIONS
During the year 2005, JLEC has booked a number of related parties transactions
as follows :
ABB Equity
Ventures ABB Maroc ABB Others CMS MOPCO CMS MOPCO CMS Others Total
Currencies US$ MAD US$ MAD MAD US$ US$
---------- ---------- ---------- ---------- ---------- ---------- ----------
Acc. Payable 12/31/04 90,591 861,216 43,146 9,769,277 42,344,781 2,298
2005 :
Management Fees 33,415,077
Incentive Accrual 32,424,389
Services 293,620 4,573,578 102,366
Insurance Brokerage 410,000
Spare Part Purchases 1,050,033 69,585 0
Total Payments 2005 276,985 1,493,952 518,586 33,122,084 42,344,890 102,366
Acc. Payable 107,226 417,297 4,145 14,635,848 32,424,279 2,297
Acc. Pay. in US$ 107,226 44,981 4,145 1,577,632 3,495,088 2,297 5,231,369
ABB Equity Ventures, ABB Maroc and other ABB companies (such as ABB Switzerland
Ltd, ABB Power Technology, S.A., ABB Secheron S.A. and ABB Komposit) are
subsidiaries of ABB Ltd, which is the ultimate parent company of 3 JLEC
shareholders: Tre Kronor Investment AB, AB Cythere 61 and AB Cythere 63. CMS
Morocco Operating Company, Consumers Energy and CMS Generation are subsidiaries
of CMS Energy, which is the ultimate parent company of 3 JLEC shareholders:
Jorf Lasfar Energiaktiebolag, Jorf Lasfar Power Energy AB and Jorf Lasfar
Handelsbolag.
Common Stock Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor
(see Note 16.1) Energiaktie- Power Energy Handelsbolag Investment AB Cythere AB Cythere
bolag AB AB 61 63 Total
Currencies MAD MAD MAD MAD MAD MAD MAD
----------- ----------- ------------ ----------- ----------- ----------- -----------
Acc. Payable 12/31/04 167,509,911 154,109,119 13,400,793 16,221,663 884,802 388,428,350 740,554,638
Dividends Declared
Payable in 2005 220,000,000 202,400,000 17,600,000 17,600,000 960,000 421,440,000 880,000,000
Total Payments 2005 179,404,457 165,052,101 14,352,356 13,659,646 745,072 327,086,444 700,300,076
Acc. Payable 208,105,454 191,457,018 16,648,437 20,162,016 1,099,730 482,781,906 920,254,562
B/S FX Rate MAD/USD 9.277 9.277 9.277 9.277 9.277 9.277 9.277
Acc. Pay. in US$ 22,432,167 20,637,593 1,794,573 2,173,310 118,542 52,040,175 99,196,361
Preferred Stock & Convertible Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor
Securities Energiaktie- Power Energy Handelsbolag Investment AB Cythere AB Cythere
(see Notes 16.2 & 16.3) bolag AB AB 61 63 Total
----------- ----------- ------------ ----------- ----------- ----------- -----------
Currencies MAD MAD MAD MAD MAD MAD MAD
----------- ----------- ------------ ----------- ----------- ----------- -----------
Preferred Stock Dividend payable 0 0 0 0 186,827 82,086,257 82,273,084
Convertible Securities Interest payable 42,850,564 39,422,519 3,428,045 3,428,045 0 0 89,129,174
Total Payments 2005 42,850,564 39,422,519 3,428,045 3,428,045 186,827 82,086,257 171,402,258
Acc. Payable 0 0 0 0 0 0 0
B/S FX Rate MAD/USD 9.277 9.277 9.277 9.277 9.277 9.277 9.277
Acc. Pay. in US$ 0 0 0 0 0 0 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Accounts Payable to Related Parties 104,427,730
-----------
Page 11
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005
11. RELATED PARTY TRANSACTIONS (CONTINUED)
During the year 2004, JLEC has booked a number of related parties transactions
as follows :
ABB Equity
Ventures ABB Maroc ABB Others CMS MOPCO CMS MOPCO CMS Others Total
Currencies US$ MAD US$ MAD MAD US$ US$
----------- ----------- ----------- ----------- ----------- ----------- -----------
Acc. Payable 12/31/03 90,007 0 36,608 4,757,590 29,319,976 93,661
2004 :
Management Fees 32,195,453
Incentive Accrual 42,344,890
Services 256,323 5,066,894 3,817
Insurance Brokerage 330,000
Spare Part Purchases 1,460,976 1,077,929
Total Payments 2004 255,739 599,760 1,401,390 32,250,660 29,320,086 95,180
Acc. Payable 90,591 861,216 43,146 9,769,277 42,344,781 2,298
Acc. Pay. in US$ 90,591 104,486 43,146 1,185,247 5,137,433 2,298 6,563,201
Common Stock Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor
(see Note 16.1) Energiaktie- Power Energy Handelsbolag Investment AB Cythere AB Cythere
bolag AB 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
Dividends Declared Payable in 2004 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
Preferred Stock & Convertible Securities Energiaktie- Power Energy Handelsbolag Investment AB Cythere AB Cythere
(see Notes 16.2 & 16.3) bolag AB 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 Parties 96,410,168
-------------
During 2003, related party transactions consisted of the following:
ABB Equity
Ventures ABB Maroc ABB Others CMS MOPCO CMS MOPCO CMS Others Total
Currencies US$ MAD US$ MAD MAD US$ US$
----------- ----------- ----------- ----------- ----------- ----------- -----------
Acc. Payable 12/31/02 105,764 125,880 0 -1,452,394 46,253,345 82,686
2003 :
Management Fees 32,938,795
Incentive Accrual 29,320,319
Services 214,644 3,582,315 136,496
Insurance Brokerage 345,000
Spare Part Purchases 237,916 90,575
Total Payments 2003 230,400 363,796 398,967 30,311,126 46,253,688 125,522
Acc. Payable 90,007 0 36,608 4,757,590 29,319,976 93,661
Acc. Pay. in US$ 90,007 0 36,608 542,101 3,340,851 93,661 4,103,228
Common Stock Jorf Lasfar Jorf Lasfar Jorf Lasfar Tre Kronor
(see Note 16.1) Energiaktie- Power Energy Handelsbolag Investment AB Cythere AB Cythere
bolag AB 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
Dividends Declared Payable in 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
Preferred Stock & Convertible Securities Energiaktie- Power Energy Handelsbolag Investment AB Cythere AB Cythere
(see Notes 16.2 & 16.3) bolag AB 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 176,823,247
-------------
Page 12
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005
12. TAXES PAYABLE :
The "taxes payable" includes the following items as of December 31, 2005 :
12/31/05 12/31/04 12/31/03
US$ US$ US$
---------- ---------- ----------
Income Tax - Gross 0 0 5,393,931
Prepayments for Income Tax 0 0 -3,929,580
---------- ---------- ----------
Income Tax Payable ( see Note 6) 0 0 1,464,351
Value Added Tax on behalf of foreign suppliers 153,030 204,712 309,190
Withholding Tax 84,894 100,984 260,841
Payroll Tax 261,044 259,164 237,358
Licence Tax 0 0 1,325,971
---------- ---------- ----------
Total 498,968 564,860 3,597,710
========== ========== ==========
13. CAPACITY CHARGES
2005
13.1 $ Capacity Charges less than $ DFL Model Actual DFL model
----------- -----------
$ Capacity Min Lease
----------- -----------
Charges Payments Difference
----------- ----------- -----------
CGNC US GAAP US GAAP
----------- ----------- -----------
USD USD USD
----------- ----------- -----------
$ Capacity Charges 120,964,406 121,579,240 -614,835
$ O.N.E Rebate -22,182,641 -22,676,909 494,269
----------- ----------- -----------
2005 in USD 98,781,765 98,902,331 -120,566
2004 in USD 44,183
-----------
$ Capacity Charges less than $ DFL Model -76,383
-----------
Actual DFL model
------------- -----------
13.2 Euro Capacity Charges less than Euro DFL Model Euro Capacity Min Lease
------------- -----------
Charges Payments Difference
------------- ----------- -----------
CGNC US GAAP US GAAP
------------- ----------- -----------
Euro Euro Euro/USD
------------- ----------- -----------
Euro Capacity Charges 111,715,690 112,521,159 -805,469
Euro O.N.E Rebate -16,424,630 -16,816,070 391,441
----------- ----------- -----------
2005 in Euro 95,291,060 95,705,089 -414,029
2004 in Euro 53,499
-----------
-360,530
B/S FX Rate X1.17936
-----------
Euro Capacity Charges less than Euro DFL Model in USD -425,193
-----------
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
-----------
Page 13
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005
13. CAPACITY CHARGES (CONTINUED)
2003
13.1 $ Capacity Charges less 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
14. OTHER CURRENT LIABILITIES
The "Other Current Liabilities" as of December 31, 2005 are detailed as follows:
12/31/05 12/31/04 12/31/03
US$ US$ US$
----------- ----------- -----------
Accrued Expenses: interest, swaps and fees 14.1 4,516,665 5,726,546 5,904,937
Accrued salaries expense 1,538,372 2,075,391 1,198,164
Liability for Compensated Absences 319,280 310,222 298,523
Coal Custom Duty Advances from ONE 554,771 671,924 0
Current Deferred Tax 155,503 0 0
Other Liabilities 242,786 578,504 337,780
----------- ----------- -----------
7,327,377 9,362,588 7,739,404
=========== =========== ===========
14.1 The accrued interests and fee expenses are detailed by loans as follows :
12/31/05 12/31/04 12/31/03
US$ US$ US$
----------- ----------- -----------
OPIC 570,954 648,818 728,141
SACE 1,213,676 1,597,674 1,586,760
WB 1,208,062 1,708,747 1,712,739
US EXIM 1,289,865 1,467,777 1,574,138
ERG 234,107 303,531 303,158
----------- ----------- -----------
4,516,665 5,726,547 5,904,937
=========== =========== ===========
Page 14
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005
15. LONG TERM LOANS
Long term loans are detailed as follows as of December 31, 2005 :
Interest Reimbursement
Borrowing Principal ----------------- Interest --------------------------------
Loan Date Currency Amount Type Rate Payment Maturity Periodicity
- ----------- -------- -------- ----------- ----- ------- --------- ------------- -----------
US EXIM 9/12/02 US$ 142,149,976 Fixed 7.2000% Quarterly Feb. 15, 2013 Quarterly
OPIC Note A 11/25/97 US$ 36,552,083 Fixed 10.2300% Quarterly Feb. 15, 2013 Quarterly
OPIC Note B 02/11/98 US$ 7,975,000 Fixed 9.9200% Quarterly Feb. 15, 2013 Quarterly
-----------
44,527,083
-----------
Total L.T loan in US$ 186,677,059
-----------
Current part in USD 25,748,559
-----------
Non-Current part in USD 160,928,500
-----------
Interest Reimbursement
Rollover Principal ---------------------- Interest -----------------------------
Loan Date Currency Amount Type Rate Payment Maturity Periodicity
- ---------- -------- -------- ----------- -------- ------- --------- ------------- -----------
SACE 11/15/05 Euro 140,558,242 Fixed 5.73000% Quarterly Feb. 15, 2013 Quarterly
ERG 11/15/05 Euro 18,063,034 Variable 4.44763% Quarterly Feb. 15, 2013 Quarterly
World Bank 11/15/05 Euro 96,687,425 Variable 4.19763% Quarterly Feb. 15, 2013 Quarterly
-----------
Total L.T loan in Euro 255,308,700
-----------
B/S FX Rate Euro/USD 1.17936
-----------
Total L.T loan in USD 301,099,750
-----------
Current part in USD 41,531,000
-----------
Non-Current part in USD 259,568,750
-----------
</Table>
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
2006 2007 2008 2009 2010 2006-2013 2006-2013 2006-2013
------------ ------------ ------------ ------------ ------------ --------- ---------- ---------
In USD
US EXIM 19,606,893 19,606,893 19,606,893 19,606,893 19,606,893 38,405,875 0 0
OPIC A 5,041,666 5,041,666 5,041,666 5,041,666 5,041,666 14,019,567 0 0
OPIC B 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 2,966,123 0 0
------------ ------------ ------------ ------------ ------------ ---------- ----------- ----------
Total in USD 25,748,559 25,748,559 25,748,559 25,748,559 25,748,559 55,391,565 0 0
------------ ------------ ------------ ------------ ------------ ---------- ----------- ----------
In Euro
SACE 19,387,344 19,387,344 19,387,344 19,387,344 19,387,344 30,642,181 0 0
ERG 2,491,452 2,491,452 2,491,452 2,491,452 2,491,452 3,056,526 2,853,816 0
WB 13,336,197 13,336,197 13,336,197 13,336,197 13,336,197 15,440,488 15,057,593 3,308,859
Total in Euro 35,214,993 35,214,993 35,214,993 35,214,993 35,214,993 49,139,195 17,911,408 3,308,859
B/S FX Rate Euro/USD 1.17936 1.17936 1.17936 1.17936 1.17936 1.17936 1.17936 1.17936
------------ ------------ ------------ ------------ ------------ ---------- ----------- ----------
Total in USD 41,531,000 41,531,000 41,531,000 41,531,000 41,531,000 57,952,586 21,123,920 3,902,321
------------ ------------ ------------ ------------ ------------ ---------- ----------- ----------
Page 15
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005
15. LONG TERM LOANS (CONTINUED)
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 25,748,559
-----------
Non-Current part in USD 186,677,060
-----------
Interest Reimbursement
Rollover 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
-----------
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
Rollover 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
-----------
Page 16
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005
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 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 total of cash and letters of credit in all JLEC reserve 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, 2005
16. STOCKHOLDERS' EQUITY
16.1 COMMON STOCK AS OF DECEMBER 31, 2005, 2004, AND 2003
Common Stock
-------------------------------------------------
Type of Number Par value Par value
Stockholders Partner of Shares Dirham US Dollar
----------------------- ----------- --------- --------- ---------
Jorf Lasfar Handelsbolag, Sweden............................. CMS General 110 11,000 1,155
Jorf Lasfar Energiaktiebolag, Sweden......................... CMS Limited 1,375 137,500 14,443
Jorf Lasfar Power Energy AB, Sweden.......................... CMS Limited 1,265 126,500 13,288
Tre Kronor Investment AB, Sweden............................ ABB General 110 11,000 1,155
AB Cythere 63, Sweden........................................ ABB Limited 2,634 263,400 27,668
AB Cythere 61, Sweden........................................ ABB Limited 6 600 63
----------- --------- --------- ---------
Total 5,500 550,000 57,773
16.2 CONVERTIBLE STOCKHOLDERS' SECURITIES AS OF DECEMBER 31, 2005, 2004,
AND 2003
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 :
Type of Number Par value Par value
Stockholders Partner of Shares Dirham US Dollar
---------------- ----------- ---------- ------------- -----------
Jorf Lasfar Handelsbolag, Sweden............................. CMS General 842,962 84,296,200 7,747,100
Jorf Lasfar Energiaktiebolag, Sweden......................... CMS Limited 10,537,024 1,053,702,400 96,838,750
Jorf Lasfar Power Energy AB, Sweden.......................... CMS Limited 9,694,062 969,406,200 89,091,650
Tre Kronor Investment AB, Sweden............................ ABB General 842,962 84,296,200 7,747,100
AB Cythere 63, Sweden........................................ ABB Limited 0 0 0
AB Cythere 61, Sweden........................................ ABB Limited 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 degrees.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 2005 was 4.00% (4.00% in 2004 and 4.00% in 2003).
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, 2005
16.3 PREFERRED STOCK AS OF DECEMBER 31, 2005, 2004, AND 2003
In accordance with Section 3.01 par.(b) of the amended Company Loan Agreement
(see note 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 Preferred Stock for each one hundred
(100) MAD of such Company Loan principal converted into Preferred Stock, as
follows:
Preferred Stock
----------------------------------------------------
Type of Number Par value Par value
Stockholders Partner of Shares Dirham US Dollar
-------------- ----------- ---------- ------------- -----------
Jorf Lasfar Handelsbolag, Sweden ................. CMS General 0 0 0
Jorf Lasfar Energiaktiebolag, Sweden ............. CMS Limited 0 0 0
Jorf Lasfar Power Energy AB, Sweden .............. CMS Limited 0 0 0
Tre Kronor Investment AB, Sweden ................ ABB General 0 0 0
AB Cythere 63, Sweden ............................ ABB Limited 20,185,145 2,018,514,500 185,508,183
AB Cythere 61, Sweden ............................ ABB Limited 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
2005 US$
------ -----------
Retained Earnings as of December 31, 2004 253,215,661
Retained Earnings increase during 2005 111,561,388
Retained Earnings decrease during 2005
Convertible Securities interest payable as of January 1, 2005 -10,813,498
89,129,174 Dirhams ( at 8.2424 Dirhams per US Dollar)
Preferred Stock Dividend payable as of March 31, 2005 -9,585,139
82,273,084 Dirhams ( at 8.5834 Dirhams per US Dollar)
Common Stock Dividends payable as of August 31, 2005 -97,607,507
5,500 Common Stock Shares
160,000 Dirhams per share
880,000,000 Dirhams
9.0157 Dirhams per US Dollar on August 31, 2005
-----------
Total Retained Earnings 246,770,905
The Retained Earnings are allocated among the stockholders as follows:
Common
Convertible Securities Preferred Stock Stock Total
--------------- ---------------------- ----------------------- -----------------------
Stockholders Type of Partner Dirhams US Dollars Dirhams US Dollars US Dollars US Dollars
-------------- --------------- ---------- ---------- ---------- ---------- ---------- -----------
Jorf Lasfar Handelsbolag, Sweden ...... CMS General 3,418,679 368,507 0 0 4,566,911 4,935,418
Jorf Lasfar Energiaktiebolag, Sweden .. CMS Limited 42,733,486 4,606,341 0 0 57,086,385 61,692,726
Jorf Lasfar Power Energy AB, Sweden ... CMS Limited 39,314,807 4,237,834 0 0 52,519,474 56,757,308
Tre Kronor Investment AB, Sweden ..... ABB General 3,418,679 368,507 0 0 4,566,911 4,935,418
AB Cythere 63, Sweden ................. ABB Limited 0 0 81,861,977 8,824,091 109,356,755 118,180,847
AB Cythere 61, Sweden ................. ABB Limited 0 0 186,316 20,083 249,104 269,188
---------- ---------- ---------- ---------- ----------- -----------
Total 88,885,652 9,581,189 82,048,293 8,844,175 228,345,541 246,770,905
The allocations for Convertible Securities (88,885,652 Dirhams) and Preferred
Stock (82,084,293 Dirhams) are scheduled for payment on May 15, 2006.
Page 19
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005
16.4 RECONCILIATION AND ALLOCATION OF RETAINED EARNINGS (CONTINUED)
US$
-----------
2004
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 ( at 8.7762 Dirhams per US Dollar)
Preferred Stock Dividend payable as of January 1, 2004 -9,348,954
82,048,293 Dirhams ( at 8.7762 Dirhams per US Dollar)
-----------
Total Retained Earnings 253,215,661
The Retained Earnings are allocated among the shareholders as follows :
Common
Convertible Securities Preferred Stock Stock Total
--------------- ---------------------- ---------------------- ----------- -----------
Shareholders Type of Partner Dirhams US Dollars Dirhams US Dollars US Dollars US Dollars
-------------- --------------- ---------- ---------- ---------- ---------- ----------- -----------
Jorf Lasfar Handelsbolag, Sweden ...... CMS General 3,428,045 415,904 0 0 4,648,409 5,064,313
Jorf Lasfar Energiaktiebolag, Sweden .. CMS Limited 42,850,564 5,198,797 0 0 58,105,118 63,303,915
Jorf Lasfar Power Energy AB, Sweden ... CMS Limited 39,422,519 4,782,893 0 0 53,456,709 58,239,602
Tre Kronor Investment AB, Sweden ..... ABB General 3,428,045 415,904 0 0 4,648,409 5,064,313
AB Cythere 63, Sweden ................. ABB Limited 0 0 82,086,256 9,959,024 111,308,278 121,267,301
AB Cythere 61, Sweden ................. ABB Limited 0 0 186,827 22,667 253,550 276,216
---------- ---------- ---------- ---------- ----------- -----------
Total 89,129,174 10,813,498 82,273,083 9,981,690 232,420,473 253,215,661
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 ( at 10.1970 Dirhams per US Dollar)
Preferred Stock Dividend payable as of January 1, 2003 -9,796,391
99,893,797 Dirhams ( at 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 shareholders as follows :
Common
Convertible Securities Preferred Stock Stock Total
--------------- ---------------------- ---------------------- ----------- -----------
Shareholders Type of Partner Dirhams US Dollars Dirhams US Dollars US Dollars US Dollars
------------- --------------- ---------- ---------- ---------- ---------- ----------- -----------
Jorf Lasfar Handelsbolag, Sweden ....... CMS General 3,418,679 389,540 0 0 2,560,439 2,949,979
Jorf Lasfar Energiaktiebolag, Sweden ... CMS Limited 42,733,486 4,869,247 0 0 32,005,492 36,874,739
Jorf Lasfar Power Energy AB, Sweden .... CMS Limited 39,314,807 4,479,707 0 0 29,445,052 33,924,760
Tre Kronor Investment AB, Sweden ...... ABB General 3,418,679 389,540 0 0 2,560,439 2,949,979
AB Cythere 63, Sweden .................. ABB Limited 0 0 81,861,977 9,327,725 61,310,884 70,638,608
AB Cythere 61, Sweden .................. ABB Limited 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
Page 20
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005
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, 2005
17.1 LONG TERM RECEIVABLES AS OF DECEMBER 31, 2005
US$ Euro
------------- -------------
Units 1 to 4 Units 1 to 4
------------- -------------
Total Minimum Lease Payments 2,084,457,657 1,038,253,560
Minimum Lease Payments for 2005 -98,902,328 -95,705,084
------------- -------------
Total of Future Minimum Lease Payments 1,985,555,329 942,548,476
X 1.17936
------------- -------------
Total of Future Minimum Lease Payments in US$ 17.3 1,985,555,329 1,111,599,840
============= =============
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
- ------ -------------- --------------
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
2010 91,054,494 80,225,551
17.2 UNEARNED INCOME AS OF DECEMBER 31, 2005
US$ Euro
------------- ------------
Units 1 to 4 Units 1 to 4
------------- ------------
Total Unearned Income 1,418,090,734 696,642,515
----------
Lease Revenue 2005 -89,258,071 -74,987,909 X 1.23840 92,865,318
------------- ------------ ----------
1,328,832,663 621,654,606
X 1.17936
------------- ------------
Total Remaining Unearned Income in US$ 17.3 1,328,832,663 733,151,852
============= ============
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
- ------ ------------ ------------
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
2010 81,563,514 57,390,062
17.3 NET INVESTMENT IN DIRECT FINANCING LEASES AS OF DECEMBER 31, 2005
US$ Euro
-------------- -------------
Units 1 to 4 Units 1 to 4
-------------- -------------
Total of Future Minimum Lease Payments in US$ 17.1 1,985,555,329 1,111,599,840
Total Remaining Unearned Income in US$ 17.2 -1,328,832,663 -733,151,852
-------------- -------------
Net investment in direct financing leases in US$ 656,722,666 378,447,988
============== =============
Current part in US$ 11,644,985 15,131,695
Non-Current part in US$ 645,077,681 363,316,293
Page 21
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005
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
$1,498,566,597 and from Euro 477,010,214 to Euro 780,404,581.
Page 22
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005
Direct Financing Lease - (D.F.L) as of December 31, 2003
17.1 LONG TERM RECEIVABLES AS OF DECEMBER 31, 2003
US$ 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 0.95144 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 23
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005
18. FINANCIAL EXPENSES
12/31/05 12/31/04 12/31/03
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 358,167,574 324,780,552 287,290,576
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) 10,393,398 10,240,839 9,754,617
Guarantee Fees 23,141,044 22,035,847 20,598,822
Swaps 51,622,612 44,896,300 37,238,114
------------ ------------ ------------
514,451,127 473,080,038 426,008,628
Accrued Interest, Fees, Swaps (see Note 14.1) 4,516,665 5,726,546 5,904,937
------------ ------------ ------------
Total Interest, Fees and Swaps 518,967,792 478,806,584 431,913,565
------------ ------------ ------------
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 308,018,429 267,857,221 220,964,202
Interest, fees and swaps expensed during prior years -267,857,221 -220,964,202 -171,539,035
------------ ------------ ------------
Interest, fees and swaps expensed during current year 40,161,208 46,893,019 49,425,167
============ ============ ============
19. POSTEMPLOYMENT BENEFITS
JLEC contributes to two pension plans as described in Notes 19.1 and 19.2.
JLEC's obligations for retiree health care insurance and other postemployment
costs are described in Note 19.3
19.1 CAISSE DE DEPOT ET DE GESTION (CDG)
On December 23, 2005, JLEC entered into a Pension Plan Transfer Agreement with
the CDG and its affiliates called RCAR and CNRA. In accordance with the terms of
this Transfer Agreement, JLEC made a total, one-time payment of MAD 175,149,622
(USD 18,957,844) to the RCAR and CNRA to fully fund the pension plan covering
most (252 of 322) of JLEC's employees, and transferred the administration,
actuarial risk and investment return risk of this pension plan to the
CDG/RCAR/CNRA. Further, this Pension Plan Transfer Agreement defines JLEC's
future contributions to the RCAR for such pension plan to be equal to 18.00% of
the compensation of each participating employee. Such future contributions will
be expensed by JLEC in the period for which they are due. As a result of the
Transfer Agreement and payment described above, JLEC's unfunded pension
liability is zero as of December 31, 2005, compared with USD 11,524,374 as of
December 31, 2004, and USD 7,965,451 as of December 31, 2003. JLEC estimates our
2006 contributions will be USD 443,184.
19.2 CAISSE INTERPROFESSIONNELLE MAROCAINE DE RETRAITES (CIMR)
Employees of JLEC not covered by the pension plan described in Note 19.1
participate in a pension fund called CIMR, to which JLEC contributes an amount
equal to 7.32 percent of the employee's gross pay ( 7.08% in 2004, and 6.84% in
2003 ). This fund is carried in the employee's name, and the future pension
benefits an employee will receive depend only on the amount contributed to his
account and the returns earned on the investment of those contributions. JLEC's
contributions to the CIMR pension fund are expensed by JLEC in the period for
which they are due. In 2005, JLEC's contributions to the CIMR pension fund
amounted to USD 206,088, compared with USD 173,073 in 2004, and USD 145,677 in
2003. JLEC estimates our 2006 contributions will be USD 219,247.
19.3 POSTEMPLOYMENT OBLIGATIONS
For those 252 employees described in Note 19.1, JLEC retains an obligation for
certain postemployment benefits consisting of a 2/3 share of retiree health
insurance premiums and reimbursement of retiree electrical charges. Such
insurance premiums are forecast to trend higher in the future at a rate of 6.50%
per year; provided, however, that JLEC's contribution for each retiree's health
insurance is capped at 7,039 Dirhams ($ 782) per year for a typical family of
four. Using data as of September 30, 2005, Deloitte & Touche prepared an
actuarial forecast of JLEC's postemployment obligations and determined that the
present value at a 6.00% discount rate of such JLEC obligations amounted to USD
2,020,119 as of December 31, 2005. This compares with USD 2,257,713 as of
December 31, 2004, and USD 1,912,675 as of December 31, 2003. JLEC recognizes
such actuarial gains and losses directly in current period Income Before Tax.
JLEC estimates our future payments for such postemployment benefits will be as
follows :
Page 24
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005
20. DERIVATIVE INSTRUMENT LIABILITY / OTHER COMPREHENSIVE INCOME
JLEC adopted SFAS N degrees. 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
tables as of December 31, 2005, 2004 and 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 degrees. 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. JLEC estimates that our
swap expenses in 2006 will be USD 5,337,622.
2005
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% 2.31813% 32,229,142 Quarterly 2/15/2013 5,018,993 3,633,143
ABN Euro 6.4175% 2.31813% 32,229,142 Quarterly 2/15/2013 5,026,350 3,651,524
CSFB Euro 6.4060% 2.31813% 32,229,142 Quarterly 2/15/2013 5,012,250 3,476,765
---------- ---------- ----------
96,687,425 15,057,593 10,761,432
---------- ---------- ----------
ERG BNP Euro 6.4700% 2.31813% 6,021,011 Quarterly 2/15/2013 951,043 690,620
ABN Euro 6.4750% 2.31813% 6,021,011 Quarterly 2/15/2013 952,188 693,891
CSFB Euro 6.4680% 2.31813% 6,021,011 Quarterly 2/15/2013 950,585 663,435
---------- --------- ---------
18,063,034 2,853,816 2,047,947
Total in Euro 12,809,379
----------
B/S FX rate X 1.17936
Total in USD 15,106,813
==========
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
==========
Page 25
JORF LASFAR ENERGY COMPANY
NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2005
21. CASH FLOWS FOR 2005
Reconciliation of net income to net cash from operating activities under the
Direct Method is as follows :
2005 2004 2003
US$ US$ US$
----------- ----------- -----------
Net Income .......................................................... 111,561,388 125,193,694 119,850,319
Adjustment to reconcile Net Income to cash
provided from operating activities :
Depreciation and amortization .............................. 5,844,911 5,530,445 4,028,115
Deferred taxes ............................................. 5,057,003 (1,555,763) (13,005,297)
Lease Revenue .............................................. (182,123,389) (184,553,625) (186,427,881)
Finance tariff cash revenue ................................ 216,790,731 213,372,941 246,405,730
Changes in operating assets and liabilities:
Inventories ........................................... 7,374,721 (20,769,958) 2,066,641
Accounts receivable ................................... 9,650,275 (38,381,613) (9,311,086)
Prepayments ........................................... (4,546,607) 819,616 1,996,086
Accounts payable ...................................... (20,344,178) 28,070,653 21,732,263
Unfunded pension obligation ........................... (11,761,968) 3,903,961 4,185,183
Other liabilities ..................................... 3,509,238 (7,036,106) (1,527,625)
Effect of exchange rate changes ....................... 5,367,876 1,616,716 1,824,028
----------- ----------- -----------
Net cash provided by operating activities. 146,380,000 126,210,962 191,816,478
22. UNCERTAINTIES AS OF DECEMBER 31, 2005
JLEC's corporate tax return, payroll tax and VAT returns for the years 2002 to
2005 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.
23. NEW ACCOUNTING STANDARDS
In December 2004, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payments"
(FAS 123R). FAS 123R requires that JLEC recognizes the cost of share-based
payments granted to employees measured at the grant-date fair value of the
award. JLEC is required to adopt FAS 123R effective January 1, 2006 for all
share-based grants made or modified after June 15, 2005, and for the unvested
portion of outstanding share-based grants made prior to June 15, 2005. This new
standard will not have any impact on the JLEC's accounts.
In December 2004, the FASB issued SFAS No. 153 "Exchanges of Non-Monetary
Assets" as an amendment to APB Opinion No. 29 "Accounting for Non-Monetary
Transactions." APB 29 prescribes that exchanges of non-monetary transactions
should be measured based on the fair value of the assets exchanged, while
providing an exception for non-monetary exchange of similar productive assets.
SFAS 153 eliminates the exception provided in APB 29 and replaces it with a
general exception for exchanges of non-monetary assets that do not have
commercial substance. SFAS 153 is to be applied prospectively and is effective
for all non-monetary asset exchanges occurring in fiscal periods beginning after
June 15, 2005. JLEC does not expect any material effect upon the adoption of
this new standard.
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