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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2001
Commission File Number 33-95928
LS POWER FUNDING CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 81-0502366
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
9405 ARROWPOINT BOULEVARD,
CHARLOTTE, NC 28273, (704) 525-3800
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
LSP-COTTAGE GROVE, L.P.
LSP-WHITEWATER LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
DELAWARE 81-0493289
DELAWARE 81-0493287
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Numbers)
9405 ARROWPOINT BOULEVARD,
CHARLOTTE, NC 28273, (704) 525-3800
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No[ ]
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LS POWER FUNDING CORPORATION
LSP-COTTAGE GROVE, L.P.
LSP-WHITEWATER LIMITED PARTNERSHIP
INDEX
TO THE QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
Page
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PART I
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Item 1. Condensed Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 3
PART II
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Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
Financial Statement Index F-1
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PART I/ITEM 1. FINANCIAL STATEMENTS
The unaudited condensed financial statements contained herein have been
prepared pursuant to the rules and regulations of the United States Securities
and Exchange Commission (the "Commission"). Certain information and footnote
disclosures normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. While the management of LS Power Funding Corporation ("Funding"),
LSP-Cottage Grove, L.P. ("Cottage Grove") and LSP-Whitewater Limited Partnership
("Whitewater"), (Cottage Grove and Whitewater sometimes referred to herein
individually as a "Partnership" and collectively as the "Partnerships") believes
that the disclosures made are adequate to make the information presented not
misleading, these unaudited condensed financial statements should be read in
conjunction with the audited financial statements included in the Annual Report
on Form 10-K for the year ended December 31, 2000, filed by Funding, and the
Partnerships.
PART I/ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
In addition to discussing and analyzing Funding and the Partnerships'
recent historical financial results and condition, the following "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
includes statements concerning certain trends and other forward-looking
information affecting or relating to Funding and the Partnerships which are
intended to qualify for the protections afforded "Forward-Looking Statements"
under the Private Securities Litigation Reform Act of 1995, Public Law 104-67.
The forward-looking statements made herein are inherently subject to risks and
uncertainties which could cause Funding's and the Partnerships' actual results
to differ materially from the forward-looking statements.
GENERAL
Cottage Grove is a single purpose Delaware limited partnership
established in December 1993 to develop, finance, construct and own a gas-fired
cogeneration facility located in Cottage Grove, Minnesota (the "Cottage Grove
Facility"). The 1% general partner, LSP-Cottage Grove, Inc., and the 72% limited
partner, Cogentrix Cottage Grove, LLC, are indirect subsidiaries of Cogentrix
Energy, Inc. ("Cogentrix Energy"). The other limited partner is TPC Cottage
Grove, Inc. ("TPC Cottage Grove") and is not affiliated with Cogentrix Energy.
Whitewater is a single purpose Delaware limited partnership established in
December 1993 to develop, finance, construct and own a gas-fired cogeneration
facility located in Whitewater, Wisconsin (the "Whitewater Facility", and
collectively with the Cottage Grove Facility, the "Facilities"). The 1% general
partner, LSP-Whitewater I, Inc., and the 73% limited partner, Cogentrix
Whitewater, LLC, are indirect subsidiaries of Cogentrix Energy. The other
limited partner is TPC Whitewater ("TPC Whitewater"), an affiliate of TPC
Cottage Grove that is not affiliated with Cogentrix Energy. The Partnerships
sell electric capacity and energy generated by their Facilities to two utilities
under separate long-term power purchase agreements (individually, the "Power
Purchase Agreement" and collectively, the "Power Purchase Agreements").
Whitewater sells up to 236.5 megawatts of electric capacity and associated
energy generated by the Whitewater Facility to Wisconsin Electric Power Company
("WEPCO") pursuant to a 25-year Power Purchase Agreement expiring in September
2022. Whitewater may also sell to third parties up to 12 megawatts of electric
capacity and any energy not dispatched by WEPCO. All of the electric capacity
and energy generated by the Cottage Grove Facility is sold to Northern States
Power Company ("NSP") pursuant to a 30-year Power Purchase Agreement which runs
through October 2027. The Partnerships also have long-term steam supply
agreements with steam hosts to supply thermal energy produced by the Facilities.
The Whitewater Facility commenced commercial operations on September
18, 1997, and the Cottage Grove Facility commenced commercial operations on
October 1, 1997. The Whitewater and Cottage Grove Power Purchase Agreements meet
the criteria of a "sales-type" capital lease as described in Statement of
Financial Accounting Standards ("SFAS") No. 13, "Accounting for Leases." Cottage
Grove and Whitewater each recognized a gain on sales-type capital lease for the
difference between the estimated fair market value and the historical cost of
the Facilities as of the commencement of each respective Power Purchase
Agreement's terms (commencement of commercial operations). The Partnerships each
recorded a net investment in lease that reflects the present value of future
minimum lease payments. Future minimum lease payments represent the amount of
capacity payments due
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from the utilities under the Power Purchase Agreements in excess of fixed
operating costs (i.e., executory costs). The difference between the undiscounted
future minimum lease payments due from the utilities and the net investment in
lease represents unearned income. This unearned income will be recognized as
lease revenue over the respective terms of the Power Purchase Agreements using
the effective interest rate method. The Partnerships will also recognize service
revenue related to the reimbursement of costs incurred in operating the
Facilities and providing electricity and thermal energy. The amount of service
revenue recognized by each Partnership will be directly related to the level of
dispatch of the Facilities by the respective utilities and to a lesser extent
the level of thermal energy required by the steam hosts.
Funding
Funding was organized in June 1995 as a special purpose Delaware
corporation to issue debt securities in connection with financing the
construction of the Facilities. Funding's sole business activities are limited
to maintaining its organization and activities necessary pursuant to the
offering of the Senior Secured Bonds (defined below) and its acquisition of the
First Mortgage Bonds (defined below) from the Partnerships.
The Senior Secured Bonds are the following:
7.19% Senior Secured Bonds Due 2010, Series A of LS Power
Funding Corporation
8.08% Senior Secured Bonds Due 2016, Series A of LS Power
Funding Corporation
The First Mortgage Bonds are the following:
7.19% First Mortgage Bonds of LSP-Cottage Grove, L.P. Due
2010
8.08% First Mortgage Bonds of LSP-Cottage Grove, L.P. Due
2016
7.19% First Mortgage Bonds of LSP-Whitewater Limited
Partnership Due 2010
8.08% First Mortgage Bonds of LSP-Whitewater Limited
Partnership Due 2016
Cottage Grove and Whitewater each own 50% of the outstanding stock of
Funding.
RESULTS OF OPERATIONS
Cottage Grove
Operating revenues increased approximately 12.2% for the first quarter
of 2001 as compared to the first quarter of 2000. This increase was primarily a
result of an increase in service revenue and commodity sales. The increase in
service revenue resulted from an increase in the variable energy rate charged to
the purchasing utility and steam purchaser as a result of an increase in natural
gas prices. The increase in service revenue was partially offset by a decrease
in megawatt hours provided to the purchasing utility. The increase in commodity
sales resulted primarily from an increase in remarketed fuel sales to third
party purchasers which was also due to increased natural gas prices.
Operating expenses increased approximately 25.6% for the first quarter
of 2001 as compared to the first quarter of 2000. This increase was the result
of increases in cost of services and commodity sales expense. The increase in
cost of services resulted from an increase in fuel expense, a component of cost
of services, as a result of an increase in natural gas prices. The increase in
fuel expense was partially offset by a decrease in other operating expenses as a
result of a decrease in megawatt hours provided to the purchasing utility.
Commodity sales expense increased due to an increase in remarketed fuel sales to
third party purchasers.
Interest expense consists primarily of interest expense on the First
Mortgage Bonds and amortization of the costs incurred to issue the bonds.
Whitewater
Operating revenues increased approximately 16.9% for the first quarter
of 2001 as compared to the first quarter of 2000. This increase was primarily
the result of an increase in service revenue and commodity sales. The
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increase in service revenue resulted from an increase in the variable energy
rate charged to the purchasing utility as a result of an increase in natural gas
prices, which was partially offset by a decrease in megawatt hours provided to
the purchasing utility. Commodity sales expense increased due to an increase in
remarketed fuel sales to third party purchasers.
Operating expenses increased approximately 34.5% for the first quarter
of 2001 as compared to the first quarter of 2000. This increase was primarily
the result of increases in cost of services and commodity sales expense. The
increase in cost of services resulted from an increase in fuel expense, a
component of cost of services, as a result of an increase in natural gas prices,
which was partially offset by decreased megawatt hours sold to the purchasing
utility. Commodity sales expense increased due to an increase in remarketed fuel
sales to third party purchasers.
Interest expense consists primarily of interest expense on the First
Mortgage Bonds and amortization of the costs incurred to issue the bonds.
OPERATIONS AND MAINTENANCE
Operations and Maintenance Agreements
Each of the Cottage Grove and Whitewater Facilities is operated by its
respective general partner pursuant to operations and maintenance agreements (an
"O&M Agreement", and collectively, the "O&M Agreements") expiring in 2004. Under
each O&M Agreement, the general partners are required to provide certain
services during the operation of the Facilities. As compensation for its
services, each general partner is reimbursed under each O&M Agreement on a
monthly basis for certain approved costs incurred in connection with operating
the related Facility. In addition, each general partner will receive an annual
management fee of $350,000 (subject to adjustment each year based on specified
indices). The Partnerships contract directly with certain subcontractors for
materials and services which are outside the scope of the general partners'
obligations under the O&M Agreements, including major maintenance of the
Facilities. The general partners are also subject to an annual performance bonus
or penalty depending upon each Facility's availability relative to certain
performance criteria reflecting aspects of similar criteria contained in each
Facility's Power Purchase Agreement. Furthermore, the general partners are
subject to a penalty payment depending upon each Facility's ability to produce
an uninterrupted supply of thermal energy.
LIQUIDITY AND CAPITAL RESOURCES
Cottage Grove
The principal components of operating cash flow for the three-month
period ending March 31, 2001 were net income of $1.3 million, $0.1 million for
amortization of debt issuance and financing costs and a net $3.9 million of cash
provided by changes in other working capital assets and liabilities, which were
partially offset by amortization of unearned lease income, net of minimum lease
payments received of $0.1 million. Cash flow provided by operating activities of
$5.2 million was primarily used to fund $4.5 million of restricted cash.
Whitewater
The principal components of operating cash flow for the three-month
period ended March 31, 2001 were net income of $1.3 million, $0.2 million for
depreciation and amortization of debt issuance and financing costs, a net $4.3
million of cash provided by changes in other working capital assets and
liabilities, and amortization of unearned lease income, net of minimum lease
payments received of $0.3 million. Cash flow provided by operating activities of
$6.1 million and a portion of the cash on hand at the beginning of the period of
$0.4 million was primarily used to fund $6.5 million of restricted cash.
A portion of the proceeds received by the Partnerships from the sale of
the First Mortgage Bonds was used by the Partnerships to maintain a debt service
reserve fund as required by certain financing documents. During 2001 and 2000,
the Partnerships transferred the cash held in their debt service reserve funds
to Cogentrix Energy. The funds, currently equal to $6.8 million and $7.7 million
for Cottage Grove and Whitewater, respectively, are included
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on the respective balance sheets as a note receivable from affiliate. The
receivables are backed by an irrevocable letter of credit issued on behalf of a
subsidiary of Cogentrix Energy.
In addition to funds received through the acquisition of the First
Mortgage Bonds by Funding and through the receipt of equity contributions from
each of TPC Cottage Grove and TPC Whitewater in 1997, in the respective amounts
of $18.2 million for Cottage Grove and $20.6 million for Whitewater, each
Partnership may each receive on its behalf certain letters of credit to be
issued pursuant to a letter of credit facility which expires in June 2002. Each
letter of credit facility provides for letters of credit in a face amount not to
exceed $5,000,000 for Whitewater and $5,500,000 for Cottage Grove, which may be
drawn on by the respective Partnership from time to time. Such letters of credit
will satisfy certain requirements of the Partnerships under various project
agreements. Cottage Grove has issued a $500,000 letter of credit under the
Cottage Grove letter of credit facility to secure certain obligations of Cottage
Grove under the Cottage Grove Power Purchase Agreement.
In order to provide for the Partnerships' working capital needs, the
Partnerships have each entered into a working capital facility. Each working
capital facility will provide for working capital loans in an aggregate
principal amount not to exceed $3,000,000 for each Partnership. At March 31,
2001, no amounts were outstanding under the working capital facilities.
The Partnerships expect that payments from the utilities under the
Power Purchase Agreements will provide the substantial majority of their
revenues. Under and subject to the terms of the Power Purchase Agreements, each
utility is obligated to purchase electric capacity made available to it and
energy that it requests from the related Partnership. For additional information
regarding NSP and WEPCO, reference is made to the respective Annual Reports
filed on Form 10-K, the Quarterly Reports filed on Form 10-Q, proxy, and any
other filings made by NSP and WEPCO with the Commission.
The Power Purchase Agreements are dispatchable contracts that provide
the utilities the right to suspend or reduce purchases of electricity from the
Facilities. The Power Purchase Agreements are structured such that the
Partnerships will continue to receive capacity payments during any period of
dispatch. Each Partnership is dependent on capacity payments under its Power
Purchase Agreement to meet its fixed obligations, including the payment of debt
service under each Partnership's First Mortgage Bonds (which will be Funding's
sole source of revenues for payment of debt service under the Senior Secured
Bonds). Capacity payments by each of NSP and WEPCO are based on the tested
capacity and availability of the Facilities and are unaffected by levels of
dispatch. Each Facility's capacity is subject to semi-annual verification
through testing. Capacity payments are subject to reduction if a Facility is
operating at reduced or degraded capacity at the time of such test, although
each Facility is permitted a retest subject to certain retest limitations. Also,
capacity payments for each Facility are subject to rebate or reduction if the
respective Facility does not maintain certain minimum levels of availability.
Under the Cottage Grove Power Purchase Agreement, capacity payments are further
adjusted by, among other things, the capacity loss factor which is determined in
accordance with procedures jointly agreed to by Cottage Grove and NSP. The
Partnerships expect to achieve the minimum capacity and availability levels;
however, any material shortfall in tested capacity or availability over a
significant period could result in a shortage of funds to the Partnerships.
Each Partnership presently believes that funds available from cash and
investments on hand, restricted funds, operations and letter of credit and
working capital facilities will be more than sufficient to meet the
Partnership's obligations as they come due, pay project debt service and make
required contributions to project reserve accounts.
As with any power generation facility, operation of the Facilities will
involve certain risks, including the performance of a Facility below expected
levels of output or efficiency, interruptions in fuel supply, pipeline
disruptions, disruptions in the supply of thermal or electrical energy, power
shut-downs due to the breakdown or failure of equipment or processes, violation
of permit requirements (whether through operation, or change in law), operator
error, labor disputes or catastrophic events such as fires, earthquakes,
explosions, floods or other similar occurrences affecting a Facility or its
power purchasers, thermal energy purchasers, fuel suppliers or fuel
transporters. The occurrence of any of these events could significantly reduce
or eliminate revenues generated by a Facility or significantly increase the
expenses of that Facility, thereby impacting the ability of a Partnership to
make payments of the amounts necessary to fund principal of and interest on its
First Mortgage Bonds, and, consequently, Funding's ability to make payments of
principal of and interest on the Senior Secured Bonds. Not all risks are
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insured and the proceeds of such insurance applicable to covered risks may not
be adequate to cover a Facility's lost revenues or increased expenses. In
addition, extended unavailability under the Power Purchase Agreements, which may
result from one or more of such events, may entitle the respective power
purchaser to terminate its Power Purchase Agreement.
IMPACT OF ENERGY PRICE CHANGES, INTEREST RATES AND INFLATION
The Partnerships have attempted to mitigate the risk of increases in
fuel and transportation costs by providing contractually for matching increases
in the energy payments the Partnerships receive from the utilities purchasing
electricity generated by the Facilities. In addition, the Partnerships have
hedged against the risk of fluctuations in interest rates by arranging
fixed-rate financing.
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PART 2/ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Incorporation of LS Power Funding Corporation(1)
3.2 Bylaws of LS Power Funding Corporation(1)
3.3 Certificate of Limited Partnership of LSP-Cottage Grove, L.P.(1)
3.4 Amended and Restated Partnership Agreement dated as of June 30, 1995 among LSP-Cottage Grove, Inc., Granite Power
Partners, L.P. and TPC Cottage Grove, Inc.(1)
3.4.1 Amendment No. 1 to the Cottage Grove Partnership Agreement(2)
3.4.2 Consent, Waiver and Amendment No. 2 dated March 20, 1998 to the Amended and Restated
Limited Partnership Agreement of LSP-Cottage Grove, L.P.(3)
3.4.3 Third Amendment, dated December 11, 1998, to the Amended and Restated
Limited Partnership Agreement of LSP-Cottage Grove, L.P.(4)
3.5 Certificate of Limited Partnership of LSP-Whitewater Limited Partnership(1)
3.6 Amended and Restated Partnership Agreement dated as of June 30, 1995 among LSP-Whitewater I, Inc., Granite Power
Partners, L.P. and TPC Whitewater, Inc.(1)
3.6.1 Consent, Waiver and Amendment No. 1 dated March 20, 1998 to the Amended and Restated
Limited Partnership Agreement of LSP-Whitewater Limited Partnership (3)
3.6.2 Second Amendment, dated December 11, 1998, to the Amended and Restated
Limited Partnership Agreement of LSP-Whitewater Limited Partnership (3)
4.1 Trust Indenture dated as of May 1, 1995 by and among LS Power Funding
Corporation and IBJ Schroder Bank & Trust Company, as Trustee, with
respect to the Senior Secured Bonds (as Supplemented by the First
Supplemental Indenture dated as of May 1, 1995 by and among LS Power
Funding Corporation and IBJ Schroder Bank & Trust Company, as
Trustee(1)
4.2 Trust Indenture dated as of May 1, 1995 by and among LSP-Cottage Grove, L.P. and IBJ Schroder Bank & Trust Company, as
Trustee, with respect to the Cottage Grove First Mortgage Bonds (as supplemented by the First Supplemental Indenture
dated as of May 1, 1995 by and among LSP-Cottage Grove, L.P. and IBJ Schroder Bank & Trust Company, as Trustee)(1)
4.3 Trust and Indenture dated as of May 1, 1995 by and among LSP-Whitewater
Limited Partnership and IBJ Schroder Bank & Trust Company, as Trustee,
with respect to the Whitewater First Mortgage Bonds (as supplemented by
the First Supplemental Indenture dated as of May 1, 1995 by and among
LSP-Whitewater Limited Partnership and IBJ Schroder Bank & Trust
Company, as Trustee) (1)
4.4 Registration Rights Agreement dated as of June 30, 1995 by and among Chase Securities, Inc., Morgan Stanley & Co.
Incorporated, LS Power Funding Corporation, LSP-Cottage Grove, L.P., and LSP-Whitewater Limited Partnership 1)
4.5 Form of Senior Secured Bond (included in Exhibit 4.1)(1)
4.6 Form of Cottage Grove First Mortgage Bond (included in Exhibit 4.2)(1)
4.7 Form of Whitewater First Mortgage Bond (included in Exhibit 4.3)(1)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter covered by this
report.
(1) Incorporated herein by reference to the Registration Statement on Form
S-4 (File No. 33-95928) filed by LS Power Funding Corporation,
LSP-Cottage Grove, L.P. and LSP-Whitewater Limited Partnership on
August 16, 1995, as amended, or to the Form 10-K (File No. 33-95928)
filed for the fiscal year ended December 31, 1995 by LS Power Funding
Corporation, LSP-Cottage Grove, L.P. and LSP-Whitewater Limited
Partnership.
(2) Incorporated herein by reference to the Form 10-Q (File No. 33-95928)
filed August 14, 1996.
(3) Incorporated herein by reference to the Form 10-K (File No. 33-95928)
filed April 15, 1998.
(4) Incorporated herein by reference to the Form 10-K (File No. 33-95928)
filed March 31, 1999.
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SIGNATURES: Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
LS POWER FUNDING CORPORATION
By: /s/ Thomas F. Schwartz
----------------------------------------------------------
Name: Thomas F. Schwartz
Title: Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: May 15, 2001
LSP-COTTAGE GROVE, L.P.
By: LSP-Cottage Grove, Inc.
Its: General Partner
By: /s/ Thomas F. Schwartz
----------------------------------------------------------
Name: Thomas F. Schwartz
Title: Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: May 15, 2001
LSP-WHITEWATER LIMITED PARTNERSHIP
By: LSP-Whitewater I, Inc.
Its: General Partner
By: /s/ Thomas F. Schwartz
----------------------------------------------------------
Name: Thomas F. Schwartz
Title: Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: May 15, 2001
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LS POWER FUNDING CORPORATION
LSP-COTTAGE GROVE, L.P.
LSP-WHITEWATER LIMITED PARTNERSHIP
FINANCIAL STATEMENT INDEX
Page
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LS POWER FUNDING CORPORATION
Balance Sheets as of March 31, 2001 (unaudited) and December 31, 2000 F-2
Statements of Income for the Three Months Ended March 31, 2001 and 2000
(unaudited) F-3
Statements of Cash Flows for the Three Months Ended March 31,
2001 and 2000 (unaudited) F-4
Notes to Condensed Financial Statements (unaudited) F-5
LSP-COTTAGE GROVE, L.P.
Balance Sheets as of March 31, 2001 (unaudited) and December 31, 2000 F-6
Statements of Income for the Three Months Ended March 31, 2001 and 2000
(unaudited) F-7
Statements of Cash Flows for the Three Months Ended March 31,
2001 and 2000 (unaudited) F-8
Notes to Condensed Financial Statements (unaudited) F-9
LSP-WHITEWATER LIMITED PARTNERSHIP
Balance Sheets as of March 31, 2001 (unaudited) and December 31, 2000 F-10
Statements of Income for the Three Months Ended March 31, 2001 and 2000
(unaudited) F-11
Statements of Cash Flows for the Three Months Ended March
31, 2001 and 2000 (unaudited) F-12
Notes to Condensed Financial Statements (unaudited) F-13
F-1
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LS POWER FUNDING CORPORATION
BALANCE SHEETS
March 31, 2001 and December 31, 2000
(dollars in thousands)
MARCH 31, DECEMBER 31,
2001 2000
----------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 1 $ 1
Current portion of investment in First Mortgage Bonds 3,314 3,314
Interest receivable on First Mortgage Bonds 6,430 --
-------- --------
9,745 3,315
INVESTMENT IN FIRST MORTGAGE BONDS 326,364 326,364
-------- --------
Total assets $336,109 $329,679
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of Senior Secured Bonds Payable $ 3,314 $ 3,314
Interest payable on Senior Secured Bonds Payable 6,430 --
-------- --------
9,744 3,314
SENIOR SECURED BONDS PAYABLE 326,364 326,364
-------- --------
336,108 329,678
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 1,000 shares authorized,
100 shares issued and outstanding -- --
Additional paid-in capital 1 1
-------- --------
Total stockholders' equity 1 1
-------- --------
Total liabilities and stockholders' equity $336,109 $329,679
======== ========
The accompanying notes to the condensed financial statements are
an integral part of these balance sheets.
F-2
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LS POWER FUNDING CORPORATION
STATEMENTS OF INCOME (UNAUDITED)
For the Three Months Ended March 31, 2001 and 2000
(dollars in thousands)
THREE MONTHS ENDED MARCH 31,
------------------------------
2001 2000
---------- ----------
INTEREST INCOME $ 6,430 $ 6,472
INTEREST EXPENSE 6,430 6,472
---------- ----------
NET INCOME $ -- $ --
========== ==========
EARNINGS PER COMMON SHARE $ -- $ --
========== ==========
The accompanying notes to the condensed financial statements are
an integral part of these balance sheets.
F-3
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LS POWER FUNDING CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Months Ended March 31, 2001 and 2000
(dollars in thousands)
THREE MONTHS ENDED MARCH 31,
------------------------------------
2001 2000
-------- --------
CASH PROVIDED BY OPERATING ACTIVITIES:
Net cash flows provided by operating activities $ -- $--
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash flows provided by investing activities -- --
-------- --------
CASH PROVIDED BY FINANCING ACTIVITIES:
Net cash flows used in financing activities -- --
-------- --------
NET INCREASE (DECREASE) IN CASH -- --
CASH, beginning of period 1 1
-------- --------
CASH, end of period $ 1 $ 1
======== ========
The accompanying notes to the condensed financial statements are
an integral part of these balance sheets.
F-4
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LS POWER FUNDING CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
UNAUDITED
1. FINANCIAL STATEMENTS
The balance sheet as of March 31, 2001 and the statements of income and
cash flows for the three-month periods ended March 31, 2001 and 2000 have been
prepared by LS Power Funding Corporation ("Funding"), without audit. In the
opinion of management, these unaudited condensed financial statements include
all adjustments (consisting of normal recurring adjustments) necessary to
present fairly Funding's financial position as of March 31, 2001, and the
results of its operations and its cash flows for the three-month periods ended
March 31, 2001 and 2000.
The unaudited condensed financial statements have been prepared
pursuant to the rules and regulations of the United States Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. While management believes
that the disclosures made are adequate to make the information presented not
misleading, these unaudited condensed financial statements should be read in
conjunction with Funding's audited financial statements included in Funding's
Annual Report on Form 10-K for the fiscal year ended December 31, 2000.
2. ORGANIZATION
Funding was established on June 23, 1995 as a special purpose Delaware
corporation to issue debt securities in connection with financing construction
of two gas-fired cogeneration facilities, one located in Cottage Grove,
Minnesota and the other located in Whitewater, Wisconsin. LSP-Cottage Grove,
L.P. ("Cottage Grove") and LSP-Whitewater Limited Partnership ("Whitewater") are
single purpose Delaware limited partnerships established to develop, finance,
construct and own the facilities at Cottage Grove and Whitewater, respectively.
Cottage Grove and Whitewater each owns 50% of the outstanding stock of Funding.
Funding's sole business activities are limited to maintaining its organization,
the offering of the Senior Secured Bonds and its acquisition of the First
Mortgage Bonds issued by Cottage Grove and Whitewater.
F-5
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LSP-COTTAGE GROVE, L.P.
BALANCE SHEETS
MARCH 31, 2001 AND DECEMBER 31, 2000
(dollars in thousands)
MARCH 31, DECEMBER 31,
ASSETS 2001 2000
-------- ------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 1,957 $ 1,212
Restricted cash 4,814 363
Accounts receivable - trade 4,540 9,200
Fuel inventories 675 438
Fuel held for resale -- 610
Spare parts inventories 536 536
Other current assets 521 224
-------- --------
Total current assets 13,043 12,583
NET INVESTMENT IN LEASE 236,903 236,834
DEBT ISSUANCE AND FINANCING COSTS, net of accumulated
amortization of $1,594 and $1,509, respectively 5,528 5,613
NOTE RECEIVABLE FROM AFFILIATE 6,777 6,777
INVESTMENT IN UNCONSOLIDATED AFFILIATE 1 1
-------- --------
Total assets $262,252 $261,808
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Current portion of first mortgage bonds payable $ 1,547 $ 1,547
Accounts payable 3,180 5,440
Accrued interest payable 3,002 --
Other accrued expenses 114 1,725
-------- --------
Total current liabilities 7,843 8,712
FIRST MORTGAGE BONDS PAYABLE 152,369 152,369
-------- --------
Total liabilities 160,212 161,081
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL 102,040 100,727
-------- --------
Total liabilities and partners' capital $262,252 $261,808
======== ========
The accompanying notes to the condensed financial statements are
an integral part of these balance sheets.
F-6
16
LSP-COTTAGE GROVE, L.P.
STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(dollars in thousands)
THREE MONTHS ENDED MARCH 31,
-----------------------------
2001 2000
-------- -----------
OPERATING REVENUES:
Lease revenue $ 5,334 $ 5,329
Service revenue 7,797 6,342
Commodity sales 1,578 1,416
Other 235 233
-------- --------
14,944 13,320
OPERATING EXPENSES:
Cost of services 8,832 7,259
Commodity cost of sales 1,886 1,272
-------- --------
10,718 8,531
OPERATING INCOME 4,226 4,789
NON-OPERATING INCOME (EXPENSE):
Interest expense (3,099) (3,090)
Interest income 186 163
-------- --------
NET INCOME $ 1,313 $ 1,862
======== ========
The accompanying notes to the condensed financial statements are
an integral part of these balance sheets.
F-7
17
LSP-COTTAGE GROVE, L.P.
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(dollars in thousands)
THREE MONTHS ENDED MARCH 31,
-------------------------------
2001 2000
--------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,313 $ 1,862
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of debt issuance and financing costs 85 60
Amortization of unearned lease income (5,334) (5,329)
Minimum lease payments received 5,265 5,286
Decrease in accounts receivable - trade 4,660 184
Increase in accounts receivable - other -- (126)
Decrease in fuel inventories 373 1,725
Increase in spare parts inventories -- (16)
Increase in other current assets (297) (92)
Increase (decrease) in accounts payable (2,260) 599
Increase in accrued interest payable 3,002 3,021
Decrease in accrued expenses (1,611) (372)
--------- ---------
Net cash flows provided by operating activities 5,196 6,802
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in restricted cash (4,451) (6,387)
--------- ---------
Net cash flows used in investing activities (4,451) (6,387)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash flows used in financing activities -- --
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 745 415
CASH AND CASH EQUIVALENTS, beginning of period 1,212 957
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 1,957 $ 1,372
========= =========
The accompanying notes to the condensed financial statements are
an integral part of these balance sheets.
F-8
18
LSP-COTTAGE GROVE, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
UNAUDITED
1. FINANCIAL STATEMENTS
The balance sheet as of March 31, 2001 and the statements of income and
cash flows for the three-month periods ended March 31, 2001 and 2000 have been
prepared by LSP-Cottage Grove, L.P. (the "Partnership"), without audit. In the
opinion of management, these unaudited condensed financial statements include
all adjustments (consisting of normal recurring adjustments) necessary to
present fairly the Partnership's financial position as of March 31, 2001, and
the results of its operations and its cash flows for the three-month periods
ended March 31, 2001 and 2000.
The unaudited condensed financial statements have been prepared
pursuant to the rules and regulations of the United States Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. While management believes
that the disclosures made are adequate to make the information presented not
misleading, these unaudited condensed financial statements should be read in
conjunction with the Partnership's audited financial statements included in the
Partnership's Annual Report on Form 10-K for the fiscal year ended December 31,
2000.
2. ORGANIZATION
The Partnership is a Delaware limited partnership that was formed on
December 14, 1993 to develop, finance, construct and own a gas-fired
cogeneration facility with a design capacity of approximately 245 megawatts
located in Cottage Grove, Minnesota (the "Facility"). Construction and start-up
of the Facility was substantially completed and commercial operation commenced
October 1, 1997 (the "Commercial Operations Date"). The 1% general partner of
the Partnership is LSP-Cottage Grove, Inc., ("Cottage Grove"), a wholly-owned
subsidiary of Cogentrix Cottage Grove, LLC, ("Cogentrix Cottage Grove").
Cogentrix Cottage Grove and TPC Cottage Grove, Inc., are the sole limited
partners of the Partnership, owning approximately 72% and 27% limited
partnership interests, respectively. The ultimate parent of Cogentrix Cottage
Grove is Cogentrix Energy, Inc. ("Cogentrix Energy"), a North Carolina
corporation.
The Partnership holds a 50% equity ownership interest in LS Power
Funding Corporation ("Funding"), which was established on June 23, 1995 as a
special purpose funding corporation to issue debt securities (the "Senior
Secured Bonds") in connection with financing construction of the Facility and a
similar gas-fired cogeneration facility located in Whitewater, Wisconsin. On
June 30, 1995, a portion of the proceeds from the offering and sale of the
Senior Secured Bonds issued by Funding was used to purchase $155 million of
First Mortgage Bonds issued simultaneously by the Partnership.
All of the electric capacity and energy generated by the Facility is
sold to Northern States Power Company, (the "Utility") under a 30-year power
purchase agreement (the "Power Purchase Agreement"). The thermal energy
generated by the Facility is sold in the form of steam to Minnesota Mining and
Manufacturing Company (the "Steam Purchaser") under a 30-year thermal energy
sales agreement.
3. SALES-TYPE CAPITAL LEASE
The components of the net investment in lease at March 31, 2001, are as
follows (dollars in thousands):
Gross Investment in Lease $501,225
Unearned Income on Lease (264,322)
--------
Net Investment in Lease $236,903
========
Gross investment in lease represents total capacity payments receivable
over the term of the Power Purchase Agreement, net of executory costs, which are
considered minimum lease payments in accordance with Statement of Financial
Accounting Standards No. 13, "Accounting for Leases".
F-9
19
LSP-WHITEWATER LIMITED PARTNERSHIP
BALANCE SHEETS
MARCH 31, 2001 AND DECEMBER 31, 2000
(dollars in thousands)
MARCH 31, DECEMBER 31,
ASSETS 2001 2000
----------- ------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 1,435 $ 1,794
Restricted cash 6,861 372
Accounts receivable - trade 5,912 7,483
Accounts receivable - other 305 1,066
Fuel inventories 847 949
Fuel held for resale -- 607
Spare parts inventories 744 740
Other current assets 644 187
-------- --------
Total current assets 16,748 13,198
NET INVESTMENT IN LEASE 262,661 262,940
GREENHOUSE FACILITY, net of accumulated
depreciation of $1,478 and $1,369, respectively 7,318 7,427
DEBT ISSUANCE AND FINANCING COSTS, net of
accumulated amortization of $1,622 and $1,535, respectively 5,601 5,688
NOTE RECEIVABLE FROM AFFILIATE 7,739 7,739
INVESTMENT IN UNCONSOLIDATED AFFILIATE 1 1
-------- --------
Total assets $300,068 $296,993
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Current portion of first mortgage bonds payable $ 1,767 $ 1,767
Accounts payable 691 878
Accrued interest payable 3,428 --
Other accrued expenses 4,520 5,996
-------- --------
Total current liabilities 10,406 8,641
FIRST MORTGAGE BONDS PAYABLE 173,995 173,995
-------- --------
Total liabilities 184,401 182,636
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL: 115,667 114,357
-------- --------
Total liabilities and partners' capital $300,068 $296,993
======== ========
The accompanying notes to the condensed financial statements are
an integral part of these balance sheets.
F-10
20
LSP-WHITEWATER LIMITED PARTNERSHIP
STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(dollars in thousands)
THREE MONTHS ENDED MARCH 31,
-----------------------------
2001 2000
-------- --------
OPERATING REVENUES:
Lease revenue $ 5,754 $ 5,864
Service revenue 9,837 7,749
Commodity sales 1,183 776
Other 304 225
-------- --------
17,078 14,614
OPERATING EXPENSES:
Cost of services 10,579 8,361
Commodity cost of sales 1,169 693
Greenhouse 689 194
-------- --------
12,437 9,248
OPERATING INCOME 4,641 5,366
NON-OPERATING INCOME (EXPENSE):
Interest expense (3,527) (3,531)
Interest income 196 261
-------- --------
NET INCOME $ 1,310 $ 2,096
======== ========
The accompanying notes to the condensed financial statements are
an integral part of these balance sheets.
F-11
21
LSP-WHITEWATER LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(dollars in thousands)
THREE MONTHS ENDED MARCH 31,
-----------------------------
2001 2000
------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,310 $ 2,096
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of debt issuance and financing costs 87 72
Depreciation 109 100
Amortization of unearned lease income (5,754) (5,864)
Minimum lease payments received 6,033 6,009
Increase (decrease) in accounts receivable - trade 1,571 (535)
Decrease in accounts receivable - other 761 555
Decrease in fuel inventories 709 530
Increase in spare parts inventories (4) (4)
Increase in other current assets (457) (466)
Decrease in accounts payable (187) (339)
Increase in accrued interest payable 3,428 3,451
Increase (decrease) in accrued expenses (1,476) 1,090
------- -------
Net cash flows provided by operating activities 6,130 6,695
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in restricted cash (6,489) (6,759)
------- -------
Net cash flows used in investing activities (6,489) (6,759)
------- -------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES -- --
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (359) (64)
CASH AND CASH EQUIVALENTS, beginning of period 1,794 1,446
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 1,435 $ 1,382
======= =======
The accompanying notes to the condensed financial statements are
an integral part of these balance sheets.
F-12
22
LSP-WHITEWATER LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS
UNAUDITED
1. FINANCIAL STATEMENTS
The balance sheet as of March 31, 2001 and the statements of income and
cash flows for the three-month periods ended March 31, 2001 and 2000 have been
prepared by LSP-Whitewater Limited Partnership (the "Partnership"), without
audit. In the opinion of management, these unaudited condensed financial
statements include all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the Partnership's financial position as of March 31,
2001 and the results of its operations and its cash flows for the three-month
periods ended March 31, 2001 and 2000.
The unaudited condensed financial statements have been prepared
pursuant to the rules and regulations of the United States Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. While management believes
that the disclosures made are adequate to make the information presented not
misleading, these unaudited condensed financial statements should be read in
conjunction with the Partnership's audited financial statements included in the
Partnership's Annual Report on Form 10-K for the fiscal year ended December 31,
2000.
2. ORGANIZATION
LSP-Whitewater Limited Partnership is a Delaware limited partnership
that was formed on December 14, 1993 to develop, finance, construct and own a
gas-fired cogeneration facility with a design capacity of approximately 245
megawatts located in Whitewater, Wisconsin (the "Facility"). Construction and
start-up of the Facility was substantially completed and commercial operation
commenced September 18, 1997 (the "Commercial Operations Date"). The 1% general
partner of the Partnership is LSP-Whitewater I, Inc., a wholly-owned subsidiary
of Cogentrix Whitewater, LLC ("Cogentrix Whitewater"). Cogentrix Whitewater and
TPC Whitewater, Inc. are the sole limited partners of the Partnership, owning
approximately 73% and 26% limited partnership interests, respectively. The
ultimate parent of Cogentrix Whitewater is Cogentrix Energy, Inc. ("Cogentrix
Energy"), a North Carolina Corporation.
The Partnership holds a 50% equity ownership interest in LS Power
Funding Corporation ("Funding"), which was established on June 23, 1995 as a
special purpose Delaware corporation to issue debt securities (the "Senior
Secured Bonds") in connection with financing construction of the Facility and a
similar gas-fired cogeneration facility located in Cottage Grove, Minnesota. On
June 30, 1995, a portion of the proceeds from the offering and sale of the
Senior Secured Bonds issued by Funding was used to purchase $177 million of
First Mortgage Bonds issued simultaneously by the Partnership.
The Partnership sells up to 236.5 megawatts of electric capacity and
associated energy generated by the Facility to Wisconsin Electric Power Company
("WEPCO" or, as the context requires, the "Utility") pursuant to a 25-year power
purchase agreement (the "Power Purchase Agreement"). The Partnership may also
sell to third parties up to 12 megawatts of electric capacity and any energy
that is not dispatched by WEPCO. The thermal energy generated by the Facility is
provided in the form of steam to the University of Wisconsin - Whitewater under
a steam supply agreement expiring on June 30, 2005 and in the form of hot water
to a greenhouse owned by the Partnership (collectively, the "Steam Purchasers").
3. SALES-TYPE CAPITAL LEASE
The components of the net investment in lease at March 31, 2001 are as
follows (dollars in thousands):
Gross Investment in Lease $540,085
Unearned Income on Lease (277,424)
--------
Net Investment in Lease $262,661
========
F-13
23
Gross investment in lease represents total capacity payments receivable
over the term of the Power Purchase Agreement, net of executory costs, which are
considered minimum lease payments in accordance with Statement of Financial
Accounting Standards No. 13, "Accounting for Leases".
F-14