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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 EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1996
Commission File Number: 33-74254
COGENTRIX ENERGY, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1853081
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9405 ARROWPOINT BOULEVARD, CHARLOTTE, NORTH CAROLINA 28273-8110
(Address of principal executive offices) (Zipcode)
(704) 525-3800
(Registrant's telephone number, including area code)
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 (or for such period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. [X] Yes [ ] No
On February 14, 1997, there were 282,000 shares of common stock, no par value,
issued and outstanding.
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COGENTRIX ENERGY, INC.
PAGE NO.
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PART I: FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements:
Consolidated Balance Sheets at December 31, 1996 (Unaudited)
and June 30, 1996 3
Consolidated Statements of Operations for the Three Months and Six
Months Ended December 31, 1996 and 1995 (Unaudited) 4
Consolidated Statements of Cash Flows for the Six Months
Ended December 31, 1996 and 1995 (Unaudited) 5
Notes to Consolidated Condensed Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II: OTHER INFORMATION
Item 1: Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 16
Signature 18
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COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and June 30, 1996
(dollars in thousands)
December June
31, 1996 30, 1996
-------- --------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 89,188 $ 33,351
Restricted cash 29,274 42,203
Accounts receivable 53,218 57,331
Inventories 18,764 19,086
Other current assets 1,257 2,883
-------- --------
Total current assets 191,701 154,854
PROPERTY, PLANT AND EQUIPMENT,
Net of accumulated depreciation: $172,455 and $156,215, respectively 531,781 604,491
LAND AND IMPROVEMENTS 2,424 2,424
DEFERRED FINANCING, START-UP AND
ORGANIZATION COSTS,
Net of accumulated amortization: $20,531 and $19,653, respectively 24,483 25,105
RESTRICTED MARKETABLE SECURITIES 63,695 63,695
NATURAL GAS RESERVES 3,215 3,611
INVESTMENTS IN AFFILIATES 33,489 56,028
OTHER ASSETS 15,153 11,433
-------- --------
$865,941 $921,641
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 59,115 $ 48,416
Accounts payable 23,245 21,453
Accrued interest payable 4,409 4,063
Accrued dividends payable 0 4,759
Other accrued liabilities 11,132 13,209
-------- --------
Total current liabilities 97,901 91,900
LONG-TERM DEBT 664,284 670,900
DEFERRED INCOME TAXES 22,779 46,971
MINORITY INTEREST IN JOINT VENTURE 13,196 22,044
OTHER LONG-TERM LIABILITIES 17,150 6,816
-------- --------
815,310 838,631
-------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, no par value, 300,000 shares authorized;
282,000 shares issued and outstanding 130 130
Accumulated earnings 50,501 82,880
-------- --------
50,631 83,010
-------- --------
$865,941 $921,641
======== ========
The accompanying notes to consolidated condensed financial statements
are an integral part of these balance sheets.
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COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months and Six Months Ended December 31, 1996 and 1995
(dollars in thousands, except for earnings per common share)
Three Months Ended Six Months Ended
December 31, December 31,
------------------------- -------------------------
1996 1995 1996 1995
--------- --------- --------- ---------
OPERATING REVENUE:
Electric $ 72,516 $ 84,717 $162,909 $178,687
Steam 6,652 6,497 13,284 12,000
Other 2,511 5,773 4,608 11,873
-------- -------- -------- --------
81,679 96,987 180,801 202,560
-------- -------- -------- --------
OPERATING EXPENSES:
Fuel expense 28,372 40,383 71,350 84,917
Operations and maintenance 17,573 18,210 36,998 37,326
General, administrative and development expenses 8,032 7,733 16,017 14,755
Depreciation and amortization 9,417 9,639 18,702 18,997
Loss on impairment and cost of removal of cogeneration facilities 65,628 0 65,628 0
-------- -------- -------- --------
129,022 75,965 208,695 155,995
-------- -------- -------- --------
OPERATING INCOME (LOSS) (47,343) 21,022 (27,894) 46,565
OTHER INCOME (EXPENSE):
Interest expense (14,066) (14,768) (28,144) (29,548)
Investment and other income 2,375 2,105 4,486 4,265
Gain on sale of investment in Bolivian Power 3,243 0 3,243 0
Equity in net income (loss) of affiliates (429) 107 (648) 91
-------- -------- -------- --------
INCOME (LOSS) BEFORE MINORITY INTEREST IN
INCOME OF JOINT VENTURE, INCOME TAXES AND
EXTRAORDINARY LOSS (56,220) 8,466 (48,957) 21,373
MINORITY INTEREST IN INCOME OF JOINT VENTURE (1,137) 58 (1,614) (742)
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY LOSS (57,357) 8,524 (50,571) 20,631
BENEFIT (PROVISION) FOR INCOME TAXES 21,707 (3,515) 18,895 (8,339)
-------- -------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY LOSS (35,650) 5,009 (31,676) 12,292
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT
OF DEBT, NET OF INCOME TAX BENEFIT OF $470 0 0 (703) 0
-------- -------- -------- --------
NET INCOME (LOSS) ($35,650) $ 5,009 ($32,379) $ 12,292
======== ======== ======== ========
EARNINGS (LOSS) PER COMMON SHARE ($126.42) $ 17.76 ($114.81) $ 43.59
======== ======== ======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 282,000 282,000 282,000 282,000
======== ======== ======== ========
The accompanying notes to consolidated condensed financial statements
are an integral part of these statements.
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COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended December 31, 1996 and 1995
(dollars in thousands)
Six Months Ended
December 31,
-----------------------
1996 1995
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($32,379) $ 12,292
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization 18,702 18,997
Loss on impairment and cost of removal of cogeneration facilities 65,628 0
Deferred income taxes (24,192) 5,533
Extraordinary loss on early extinguishment of debt 1,173 0
Gain on sale of investment in Bolivian Power (3,243) 0
Minority interest in income of joint venture, net of dividends (8,848) (323)
Equity in net income (loss) of affiliates, net of dividends 936 181
Decrease in accounts receivable 4,113 5,490
Decrease in inventories 718 665
Increase (decrease) in accounts payable 1,792 (4,993)
Decrease in accrued liabilities (1,731) (2,071)
Decrease (increase) in other (550) 1,461
-------- --------
Net cash flows provided by operating activities 22,119 37,232
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions (837) (848)
Increase in marketable securities 0 (12,836)
Investments in affiliates (750) (1,125)
Proceeds from sale of investment in Bolivian Power, net 25,504 0
Decrease (increase) in restricted cash 12,929 (752)
-------- --------
Net cash flows provided by (used in) investing activities 36,846 (15,561)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 67,750 63
Repayments of debt (63,535) (22,344)
Increase in deferred financing costs (2,584) 0
Common stock dividends paid (4,759) (4,235)
-------- --------
Net cash flows used in financing activities (3,128) (26,516)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 55,837 (4,845)
CASH AND CASH EQUIVALENTS, beginning of period 33,351 34,073
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 89,188 $ 29,228
======== ========
The accompanying notes to consolidated condensed financial statements
are an integral part of these statements.
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COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
UNAUDITED
1. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements include
the accounts of Cogentrix Energy, Inc., its subsidiary companies and a 50% owned
joint venture in which the Company has effective control through majority
representation on the board of directors of the managing general partner.
Investments in other affiliates in which the Company has a 20% to 50% interest
and/or the ability to exercise significant influence over operating and
financial policies are accounted for on the equity method. All material
intercompany transactions and balances among Cogentrix Energy, Inc., its
subsidiary companies and its consolidated joint venture have been eliminated in
the accompanying consolidated condensed financial statements.
Information presented as of December 31, 1996 and for the three months
and six months ended December 31, 1996 and 1995 is unaudited. In the opinion of
management, however, such information reflects all adjustments, which consist of
normal recurring adjustments necessary to present fairly the financial position
of the Company as of December 31, 1996, the results of operations for the three
months and six months ended December 31, 1996 and 1995, and cash flows for the
six months ended December 31, 1996 and 1995. The results of operations for these
interim periods are not necessarily indicative of results which may be expected
for any other interim period or for the fiscal year as a whole.
The accompanying unaudited consolidated condensed financial statements
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures normally included
in annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to those rules and
regulations, although management believes that the disclosures made are adequate
to make the information presented not misleading. It is suggested that these
consolidated condensed financial statements be read in conjunction with the
audited consolidated financial statements and the notes thereto included in the
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
October 11, 1996.
2. JAMES RIVER REFINANCING
In July 1996, James River Cogeneration Company ("James River"), a joint
venture owned 50% by the Company, which owns a cogeneration facility in
Hopewell, Virginia (the "Hopewell facility"), renegotiated the Hopewell
facility's project financing arrangements. The amended agreements resulted in a
$13 million increase in the amount of James River's outstanding debt and
extended the final maturity date of the loan by 21 months. The amended project
debt accrues interest at an annual rate equal to the applicable LIBOR as chosen
by the Company, plus .875% per annum through July 1999 and 1.125% thereafter.
Principal is payable quarterly with interest payable the earlier of the maturity
of the applicable LIBOR term or quarterly through June 2002. James River
transferred substantially all of the additional funds borrowed (net of
transaction costs) to its partners. The distribution received by Cogentrix
Energy, Inc. related to the refinancing was approximately $6.1 million.
3. AMENDMENTS TO POWER SALES AGREEMENTS AND PROJECT DEBT AGREEMENTS
Effective in September 1996, the Company amended the power sales
agreements on its Lumberton, Elizabethtown, Kenansville, Roxboro and Southport
facilities. These amendments provide the purchasing utility additional rights
related to the dispatch of the facilities and eliminate the purchase options
which the utility held related to the Roxboro and Southport facilities. In
connection with the amendment of these power sales agreements, the Company
refinanced the existing project debt on the Lumberton, Elizabethtown and
Kenansville facilities, as well as the project debt on the Roxboro and Southport
facilities.
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The project debt on the Elizabethtown, Lumberton and Kenansville
facilities, which consisted of a senior loan with a syndicate of banks and a
subordinated credit facility with a financial institution, was refinanced with
the proceeds of a $39 million senior credit facility and a $5.5 million capital
contribution by Cogentrix Energy, Inc. The senior credit facility accrues
interest at an annual rate equal to the applicable LIBOR rate, as chosen by the
Company, plus .875% through September 1997 and 1% thereafter. Principal is
payable quarterly with interest payable at the earlier of the maturity of the
applicable LIBOR term or quarterly through September 2000. The senior credit
facility also provides for a $3.3 million letter of credit to secure the
project's obligations to pay debt service. An extraordinary loss of $1.2 million
related to the write-off of unamortized deferred financing costs from the
original senior loan and subordinated credit facility is shown net of an income
tax benefit of $470,000 in the accompanying consolidated statements of
operations for the six months ended December 31, 1996.
The project debt for the Roxboro and Southport facilities consisted of
a note payable to banks, which was refinanced with the proceeds of a senior
credit facility. This senior credit facility accrues interest at an annual rate
equal to the applicable LIBOR rate, as chosen by the Company, plus .875% through
September 1997, 1% through September 2001 and 1.125% thereafter. Principal is
payable quarterly with interest payable at the earlier of the maturity of the
applicable LIBOR term or quarterly through June 2002. The senior credit facility
also provides for a $6.5 million letter of credit to secure the project's
obligations to pay debt service. The revised credit facility for the Roxboro and
Southport facilities increased outstanding borrowings $18.4 million, the
proceeds of which (net of transaction costs of $1.3 million and accrued interest
payments of $400,000) were paid as a distribution to Cogentrix Energy, Inc. In
connection with the refinancing, Cogentrix Energy, Inc. has entered into an
agreement for the benefit of the project lenders to fund cash deficits the
subsidiary that operates the Roxboro and Southport facilities could experience
as a result of incurring certain costs, subject to a cap of $11.3 million.
4. LOSS ON IMPAIRMENT AND COST OF REMOVAL OF COGENERATION FACILITIES
During the second quarter of fiscal year 1997, the Company undertook an
analysis of the post-contract operating environment for all of its operating
facilities in light of the dramatic market changes that are taking place in the
power generation industry. The analysis included assumptions regarding future
levels of operations, operating costs and market prices for equivalent
generation available from other sources. As a part of this analysis, in
accordance with the Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," the Company assessed whether any impairment of the Company's
facilities had occurred. This assessment included comparing the projected future
cash flows to be provided by these assets to the net book value of such assets.
Based on this assessment, the Company determined that an impairment loss had
occurred on the Elizabethtown, Lumberton, Kenansville and Ringgold facilities.
This loss on impairment of cogeneration facilities of $57.3 million, which was
recorded in the second quarter of fiscal 1997, represents the excess of the net
book value of these cogeneration facilities over their current fair value,
determined by discounting to present value, projected future cash flows to be
provided by such assets. The Company believes that its projections of future
cash flows are based upon reasonable assumptions about the future performance of
these assets. Because of the risks and uncertainties associated with any
projections, there can be no assurances, however, that actual events will be
consistent with the assumptions made, and future cash flows may be greater or
less than those projected. The analysis also resulted in the recognition of an
$8.3 million liability related to the Company's estimated cost of removal
obligations under the land leases for the Elizabethtown, Lumberton and
Kenansville facilities. The total impairment loss and cost of removal amounting
to $65.6 million has been reflected in the accompanying statements of operations
for the three and six months ended December 31, 1996. Also in connection with
the overall assessment of the post-contract operating environment for its
cogeneration facilities, the Company concluded that, effective January 1, 1997,
the Lumberton, Elizabethtown, Kenansville, Roxboro and Southport facilities will
be depreciated over the remaining term of these facilities' power purchase
agreements.
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5. SALE OF INVESTMENT IN BOLIVIAN POWER
In December 1996, the Company sold its investment in Bolivian Power
Company Limited ("Bolivian Power") pursuant to a cash tender offer made for all
of the outstanding common stock of Bolivian Power at a price of $43 per share.
The Company received proceeds from the sale of $25.5 million, net of transaction
costs, which included payments made to certain unaffiliated individuals who
performed development activities for Bolivian Power. The resulting book gain of
$3.2 million is reflected in the accompanying statements of operations for the
quarter ended December 31, 1996.
6. PENDING CLAIMS AND LITIGATION
The Company is a party to certain matters which have resulted in
litigation and arbitration proceedings. Management believes that the resolution
of these matters will not have a material adverse effect on the consolidated
financial position or results of operations of the Company.
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PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
The information called for by this item is hereby incorporated herein
by reference to pages 3 through 8 of this report.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
In addition to discussing and analyzing the Company's 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 the Company 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 the
Company's actual results to differ materially from the forward-looking
statements.
GENERAL
Cogentrix Energy, Inc. and subsidiary companies (collectively, the
"Company") are primarily engaged in the development, ownership and operation of
independent power generating facilities (individually, a "facility" or
collectively, the "facilities"). The Company's consolidated revenues are derived
and costs are incurred primarily from the generation and sale of electricity
and, to a lesser extent, from the production and sale of thermal energy
(primarily steam) and other commodities related to its cogeneration operations.
Other revenues and costs arise from fees earned and costs incurred in connection
with the development of power generating facilities, ash transport, ash
by-products, and environmental consulting services.
As of December 31, 1996, Cogentrix Energy, Inc. owned, through its
subsidiaries, eleven operating facilities in the United States with an aggregate
installed capacity of approximately 1,120 megawatts ("MW"). Two of the eleven
facilities are owned 50% by the Company and 50% by other independent power
producers.
Effective in September 1996, the Company amended the power sales
agreements with Carolina Power & Light Company ("CP&L") on the Elizabethtown,
Lumberton, Kenansville, Roxboro and Southport facilities. Under the amended
terms, the power sales agreements are dispatchable contracts which provide the
utility the ability to suspend or reduce purchases of energy from the facilities
if CP&L determines it can operate its system for a designated period more
economically. The amended power sales agreements are structured so that the
Company will continue to receive capacity payments during any period of economic
dispatch. Capacity payments cover project debt service, fixed operating costs
and constitute a substantial portion of the profit component of the power sales
agreements. Energy payments, which will be reduced or eliminated as a result of
economic dispatch, primarily cover variable operating and maintenance costs as
well as coal and rail transportation costs. The impact of the amendments to
these power sales agreements will be a significant reduction in the Company's
electric revenues, which will be offset by reduced fuel costs and operations and
maintenance expense at these facilities in future years. In addition to
providing CP&L additional dispatch rights, the amendments eliminated the
purchase options for the Roxboro and Southport facilities which CP&L had given
notice they were going to exercise.
Unusual weather conditions, reduced demand for steam by a facility's
steam host and the needs of each facility to perform routine or unanticipated
facility maintenance involving planned or forced turbine outages may have an
effect on interim financial results. In addition, power sales agreements at
seven of the Company's facilities permit the utility customer to significantly
dispatch the related plant (i.e., direct the plant to deliver a reduced amount
of electrical output). However, even when dispatched, such facilities' capacity
payments, which are structured to cover fixed operating costs and debt service
and constitute a substantial portion of the profits of these facilities, are not
reduced.
The activities of the Company are subject to stringent environmental
regulations by federal, state, local and (for future non-U.S. projects) foreign
governmental authorities. The Clean Air Act Amendments of 1990 require states to
impose permit fees on certain emissions, and Congress may consider proposals to
restrict or tax certain emissions, which proposals, if adopted, could impose
additional costs on the operation of the Company's facilities.
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There can be no assurance that the Company's business and financial condition
would not be materially and adversely affected by the cost of compliance with
future changes in domestic or foreign environmental laws and regulations or
additional requirements for reduction or control of emissions imposed by
regulatory authorities in connection with renewals of required permits. The
Company maintains a comprehensive program to monitor its project subsidiaries'
compliance with all applicable environmental laws, regulations, permits and
licenses.
All of the Company's operating facilities are wholly-owned by the
Company except for the Hopewell and Birchwood cogeneration facilities, in which
the Company has a 50% ownership interest. The Company's consolidated condensed
financial statements include the accounts of the Hopewell facility as the
Company has effective control of the facility through majority representation on
the board of directors of the managing general partner. The "minority interest
in income of joint venture" on the Company's consolidated statements of
operations for the three months and six months ended December 31, 1996 and 1995
reflects the Company's joint venture partner's interest in the net income of the
Hopewell facility. The Company accounts for its investment in the Birchwood
facility using the equity method.
RESULTS OF OPERATIONS - THREE MONTHS AND SIX MONTHS ENDED
DECEMBER 31, 1996 AND 1995
THREE MONTHS ENDED DECEMBER 31, SIX MONTHS ENDED DECEMBER 31,
------------------------------------------- -----------------------------------------------
1996 1995 1996 1995
-------------------- -------------------- --------------------- ---------------------
(dollars in thousands, unaudited)
Total operating revenues $ 81,679 100% $96,987 100% $ 180,801 100% $202,560 100%
Operating costs 45,945 56 58,593 60 108,348 60 122,243 60
General, administrative and
development 8,032 10 7,733 8 16,017 9 14,755 7
Depreciation and amortization 9,417 12 9,639 10 18,702 10 18,997 10
Loss on impairment and cost
of removal of cogeneration
facilities 65,628 80 0 0 65,628 36 0 0
-------- ---- ------- --- --------- ---- -------- ---
Operating income (loss) $(47,343) (58)% $21,022 22% $ (27,894) (15)% $ 46,565 23%
======== ==== ======= === ========= ==== ======== ===
Total operating revenues decreased 15.8% to $81.7 million for the
second quarter of fiscal 1997 as compared to the second quarter of fiscal 1996.
This decrease was primarily attributable to the significant decreases in
electric revenues associated with the amendment of the Company's power sales
agreements with CP&L on the Elizabethtown, Lumberton, Kenansville, Roxboro and
Southport facilities. The decrease in operating revenues is also attributable to
the $5 million fee earned by the Company in the second quarter of fiscal 1996
related to the pre-construction development phase of an electric generation
facility for the Public Utility District No. 1 of Clark County, Washington
("Clark"). The decrease in operating revenues was partially offset by increases
in electric revenues at the Hopewell, Portsmouth and Richmond facilities, due to
an increase in megawatt hours delivered to the purchasing utility during the
second quarter of fiscal 1997 as compared to the same period of fiscal 1996, as
well as escalation/inflation adjustment provisions in certain power sales
agreements.
The Company's operating revenues for the first six months of fiscal
1997, which decreased 10.7% to $180.8 million as compared to $202.6 million for
the first six months of fiscal 1996, were largely influenced by the same factors
as discussed above: the significant decrease in megawatt hours sold to CP&L and
the development fee related to the Clark facility. The decrease in operating
revenues for the six months of fiscal 1997 also related to a payment received by
the Company upon the execution in July 1995 of the joint development agreement
with China Light & Power Company Limited ("CLP") related to the development of
the Company's India project. These decreases in revenues for the first six
months of fiscal 1997 were partially offset by an increase in electric revenues
associated with an increase in megawatt hours sold at the Portsmouth and
Richmond Facilities, as well as escalation/inflation adjustment provisions in
certain power sales agreements.
Operating costs decreased 21.6% to $45.9 million for the second quarter
of fiscal 1997 as compared to the same period of fiscal 1996. This decrease
related primarily to the significant decrease in fuel expense at the
Elizabethtown, Lumberton, Kenansville, Roxboro and Southport facilities
associated with the amendment of their power sales agreements with CP&L. The
decrease in operating costs in the second quarter of fiscal 1997 also related to
decreases in maintenance costs at the Portsmouth and Hopewell facilities, at
which facilities the Company performed
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routine maintenance during the second quarter of fiscal 1996. These decreases in
operating costs were partially offset by costs incurred by the Richmond and
Rocky Mount Facilities related to routine maintenance performed during the
second quarter of fiscal 1997, increases in fuel expense at the Portsmouth and
Richmond Facilities associated with an increase in megawatt hours sold, as well
as an increase in operating costs incurred by ReUse Technology, Inc. ("ReUse")
related to third party agreements. The Company's operating costs for the first
six months of fiscal 1997, which decreased 11.4% to $108.4 million as compared
to $122.2 million for the first six months of fiscal 1996, were largely
influenced by the same factors: a reduction of fuel expense associated with the
amendments to the CP&L contracts, reductions in routine maintenance costs
incurred at the Hopewell and Portsmouth Facilities, an increase in routine
maintenance costs incurred at the Rocky Mount and Richmond Facilities, increases
in fuel expense at the Portsmouth and Richmond Facilities associated with an
increase in megawatt hours sold and an increase in operating costs incurred by
ReUse related to third party agreements.
General, administrative and development expenses increased 3.9% to $8.0
million for the second quarter of fiscal 1997 and 8.6% to $16.0 million for the
six months ended December 31, 1996 as compared to the corresponding periods of
fiscal 1996. These increases relate primarily to a general increase in payroll,
due to an increase in performance bonuses paid during the first quarter of
fiscal 1997. The increase in general, administrative and development expenses
also relates to an increase in expenses incurred related to the Company's
international development efforts. These increases were partially offset by a
reduction in development expenses incurred on a project the Company is
developing in Idaho.
During the second quarter of fiscal year 1997, the Company undertook an
analysis of the post-contract operating environment for all of its operating
facilities in light of the dramatic market changes that are taking place in the
power generation industry. The analysis included assumptions regarding future
levels of operations, operating costs and market prices for equivalent
generation available from other sources. As a part of this analysis, in
accordance with the Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," the Company assessed whether any impairment of the Company's
facilities had occurred. This assessment included comparing the projected future
cash flows to be provided by these assets to the net book value of such assets.
Based on this assessment, the Company determined that an impairment loss had
occurred on the Elizabethtown, Lumberton, Kenansville and Ringgold facilities.
This loss on impairment of cogeneration facilities of $57.3 million, which was
recorded in the second quarter of fiscal 1997, represents the excess of the net
book value of these cogeneration facilities over their current fair value,
determined by discounting to present value, projected future cash flows to be
provided by such assets. The Company believes that its projections of future
cash flows are based upon reasonable assumptions about the future performance of
these assets. Because of the risks and uncertainties associated with any
projections, there can be no assurances, however, that actual events will be
consistent with the assumptions made, and future cash flows may be greater
or less than those projected. The analysis also resulted in the recognition of
an $8.3 million liability related to the Company's estimated cost of removal
obligations under the land leases for the Elizabethtown, Lumberton and
Kenansville facilities. The total impairment loss and cost of removal
amounting to $65.6 million has been reflected in the accompanying statements of
operations for the three and six months ended December 31, 1996. Also in
connection with the overall assessment of the post-contract operating
environment for its cogeneration facilities, the Company concluded that,
effective January 1, 1997, the Lumberton, Elizabethtown, Kenansville, Roxboro
and Southport facilities will be depreciated over the remaining term of these
facilities' power purchase agreements.
In December 1996, the Company sold its investment in Bolivian Power
Company Limited ("Bolivian Power") to NRG Generating Holdings (No. 9) B.V., a
wholly owned subsidiary of NRG Energy, Inc. ("Holdings"), pursuant to a cash
tender offer which Holdings made for all of the outstanding common stock of
Bolivian Power at a price of $43 per share. The Company recognized a $3.2
million gain on the sale of its investment in Bolivian Power, net of transaction
costs, which included payments made to certain unaffiliated individuals who
performed development activities for Bolivian Power.
The Company's long-term debt averaged $719 million with a weighted
average interest rate of 7.8% for the six months ended December 31, 1996 as
compared with an average of $751 million with a weighted average interest rate
of 7.9% in the corresponding period of fiscal 1996. The decrease in weighted
average debt outstanding, which relates to the scheduled maturities of the
Company's project finance debt, was partially offset by an increase in project
debt outstanding at the Hopewell facility and Roxboro and Southport facilities
related to refinancings completed during the first six months of fiscal 1997.
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The decrease in equity in net income (loss) of affiliates during the
second quarter and the first six months of fiscal 1997 as compared to the
corresponding periods of fiscal 1996 relates primarily to a reduction in the
equity in net income of the Company's investment in Bolivian Power and the
Company's equity in the net loss of the Texas greenhouse project, which
commenced commercial operations during the first six months of fiscal 1997. See
"Liquidity and Capital Resources" for further discussion of the Texas greenhouse
project.
The increase in minority interest in income of joint venture for the
first half of fiscal 1997 as compared to fiscal 1996 relates to the increased
net income of the Hopewell facility during the first half of fiscal 1997 as a
result of a reduction in maintenance costs incurred in fiscal 1997 as compared
to fiscal 1996.
The benefit for income taxes for the first six months of fiscal 1997
represents an effective rate of 37.4% of income before benefit for income taxes
as compared to an effective rate of 40.4% of income before income taxes for the
first six months of fiscal 1996. This decrease in the effective tax rate in
fiscal 1997 relates to the reduced recognition of current year losses for state
income tax purposes.
The extraordinary loss on early extinguishment of debt in the first six
months of fiscal 1997 relates to the write-off of the deferred financing costs
on the Elizabethtown, Lumberton and Kenansville facilities' original project
debt, which was refinanced in September 1996.
LIQUIDITY AND CAPITAL RESOURCES
The principal components of operating cash flow for the six months
ended December 31, 1996 were generated by a net loss of $32.4 million, increases
due to adjustments for depreciation and amortization of $18.7 million, loss on
impairment and cost of removal of cogeneration facilities of $65.6 million,
extraordinary loss on early extinguishment of debt of $1.2 million,
distributions from and equity in net loss of unconsolidated affiliates of $0.9
million and a net $4.3 million source of cash reflecting changes in other
working capital assets and liabilities, which were partially offset by deferred
taxes of $24.2 million, gain on sale of investment in Bolivian Power of $3.2
million and minority interest in income of joint venture, net of dividends of
$8.8 million. Cash flow provided by operating activities of $22.1 million, net
proceeds from the sale of investment in Bolivian Power of $25.5 million,
proceeds from project finance borrowings of $67.8 million and $13.0 million of
cash escrows released were primarily used to purchase equipment of $0.8 million,
to make investments in affiliates of $0.8 million, to repay project finance
borrowings of $63.5 million, to pay deferred financing costs of $2.6 million and
to pay common stock dividends of $4.8 million.
Historically, the Company has financed the capital costs of each of its
facilities under financing arrangements that, with certain exceptions, are
substantially non-recourse to Cogentrix Energy, Inc. and its other project
subsidiaries. Based upon the Company's current level of operations, the Company
believes that its project subsidiaries will generate sufficient revenue to pay
all required debt service on the project financing debt and to allow them to pay
management fees and dividends to Cogentrix Energy, Inc. periodically in
sufficient amounts to allow the Company to pay all existing debt service, fund a
significant portion of its development activities and meet its other
obligations. If, as a result of unanticipated events, the Company's ability to
generate cash from operating activities is significantly impaired, the Company
could be required to curtail its development activities to meet its debt service
obligations.
In December 1994, the Company acquired a 50% interest in Birchwood
Power Partners, L.P. ("Birchwood Power"), a partnership formed to own a 220
megawatt coal-fired cogeneration facility (the "Birchwood facility") in King
George County, Virginia, from two indirect wholly-owned subsidiaries of The
Southern Company. The Birchwood facility, which commenced commercial operations
in November 1996, sells electricity to Virginia Electric and Power Company and
provides thermal energy to a 36-acre greenhouse under long-term contracts. The
purchase price of the 50% interest in Birchwood Power was approximately $29.5
million and was funded with a portion of the net proceeds of the sale of $100
million of the Company's Senior Notes due 2004 (the "Senior Notes"). The Company
has also committed to provide an equity contribution to Birchwood Power of
approximately $43.7 million, which is anticipated to be funded in March 1997.
This equity commitment is supported by a letter of credit of equal amount,
provided by a bank, which is collateralized by a pledge of marketable
securities.
In December 1994, the Company executed an engineering, procurement and
construction agreement (the "Construction Agreement") with Clark. Under this
Construction Agreement, the Company is currently engineering,
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procuring equipment for and constructing a 248 megawatt combined-cycle,
gas-fired electric generation facility (the "Clark facility"). In October 1995,
the Company delivered to Clark a $20 million letter of credit, provided by a
bank, which is collateralized by a pledge of marketable securities. This letter
of credit will support the Company's contingent obligations under certain
performance guarantees and late construction completion payments under the
Construction Agreement. The Company is also obligated to pay 50% of costs and
expenses, if any, incurred in constructing the facility in excess of the
contract amount. Pursuant to the Construction Agreement, the contract amount of
$117 million may be adjusted as a result of a force majeure event, scope change,
certain delays in schedule or change in law. The Company will earn a
construction fee of $5 million upon completion of the Clark facility. The
Company will also share in 50% of the amount, if any, equal to the excess of the
contract amount over the costs and expenses in constructing the Clark facility.
Cogentrix of Vancouver, Inc. ("CVC"), an indirect wholly-owned subsidiary of
Cogentrix Energy, Inc., performed the development and preliminary engineering on
the Clark facility and received a development fee of $5 million in October 1995.
The Company anticipates that construction on the Clark facility will be
completed in late calendar 1997. Upon commencing commercial operations, CVC will
operate and maintain the Clark facility pursuant to a two-year operations and
maintenance agreement.
In July 1995, the Company executed a joint development agreement with a
subsidiary of CLP (the "Joint Venture") which provides for the Company and CLP
to co-develop a 1,000 megawatt coal-fired facility in India and to share equally
in the direct development expenses related to the project. Additionally, the
Company is currently seeking other international partners for the purpose of
making equity investments in the project. The Company currently anticipates
requiring funds, in addition to amounts payable by CLP to the Company at
financial closing of the project, in an amount ranging from $50 to $80 million
for the purpose of making its equity investment in the India project. The
Company expects to fund this equity commitment from corporate cash balances.
In February 1996, the Company formed the Village Farms of Texas,
Limited Partnership (the "Texas Partnership") with wholly-owned subsidiaries of
Agro Power Development, Inc., for the purpose of developing, constructing and
operating a 41-acre venlo-style greenhouse (the "Greenhouse facility") located
in Fort Davis, Texas, which produces tomatoes. In February 1996, the Texas
Partnership obtained construction financing and a working capital facility
aggregating $21.1 million from a group of banks (the "Banks"). In addition, the
Company, which holds a 50% interest in the Texas Partnership, made a
contribution to the Texas Partnership of $4.6 million which, together with the
funds provided by the Banks (the "Construction Funds"), were used to construct
the Greenhouse facility. In connection with the construction of the Greenhouse
facility, which commenced in February 1996, the Company has entered into a
guaranty agreement with the Banks which obligates the Company to make an
additional capital contribution to the Texas Partnership in the event the
construction costs related to the Greenhouse facility exceed the amount of the
Construction Funds. The maximum capital contribution the Company is obligated to
make under this guaranty agreement is $5 million. The Greenhouse facility, which
was constructed in two phases, commenced sales of tomatoes in November 1996. The
Company anticipates that the Texas Partnership will declare construction
completion in March 1997.
In July 1996, the Company renegotiated the project financing
arrangements for its Hopewell facility, in which it owns a 50% interest. The
amended agreements resulted in a $13 million increase in the amount of
indebtedness of James River outstanding and extended the final maturity date of
the loan by 21 months. James River transferred substantially all of the
additional funds borrowed (net of transaction costs) to its partners. The
distribution received by Cogentrix Energy, Inc. related to the refinancing was
approximately $6.1 million.
In September 1996, the Company renegotiated the project financing
arrangements for its Roxboro and Southport facilities. The amended agreements
resulted in an approximate $18.4 million increase in the amount of indebtedness
outstanding and extended the final maturity date of the loan by 7 months. The
Company's project subsidiary operating the Roxboro and Southport facilities
transferred substantially all of the additional funds borrowed (net of
transaction costs) to Cogentrix Energy, Inc., which utilized $5.5 million to
make a capital contribution to the project subsidiary operating the
Elizabethtown, Lumberton and Kenansville facilities in connection with the
refinancing of its project debt in September 1996. The remainder of the proceeds
were distributed to Cogentrix Energy, Inc.
In December 1996, the Company sold its investment in Bolivian Power
pursuant to a cash tender offer received for all of the outstanding common stock
of Bolivian Power at a price of $43 per share. The Company received proceeds of
$25.4 million from the sale of its investment in Bolivian Power, net of
transaction costs which included
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payments made to certain unaffiliated individuals who performed development
activities for Bolivian Power. See "Results of Operations" for the financial
reporting impact of the sale of the investment in Bolivian Power.
Any projects the Company develops in the future, and those independent
power projects it may seek to acquire, are likely to require substantial capital
investment. The Company's ability to arrange financing on a substantially
non-recourse basis and the cost of such capital are dependent on numerous
factors. In order to access capital on a substantially non-recourse basis in the
future, the Company may have to make larger equity investments in, or provide
more financial support for, its project subsidiaries.
The ability of the Company's project subsidiaries to declare and pay
dividends and management fees periodically to Cogentrix Energy, Inc. is subject
to certain limitations in their respective project credit documents. Such
limitations generally require that: (i) project debt service payments be
current, (ii) project debt service coverage ratios be met, (iii) all project
debt service and other reserve accounts be funded at required levels, and (iv)
there be no default or event of default under the relevant project credit
documents. There are also additional limitations that are adapted to the
particular characteristics of each project subsidiary.
In September 1996, the Company paid a $4.8 million dividend to the
common shareholders of the Company for the fiscal year ended June 30, 1996. The
Board of Directors has adopted a policy, which is subject to change at any time,
of maintaining a dividend payout ratio of no more than 20% of the Company's net
income for the immediately preceding fiscal year. Under the terms of the
Indenture for the Senior Notes, the Company's ability to pay dividends and make
other distributions to its shareholders is restricted.
IMPACT OF ENERGY PRICE CHANGES, INTEREST RATES AND INFLATION
Energy prices are influenced by changes in supply and demand, as well
as economic conditions, and generally tend to fluctuate significantly. Through
various hedging mechanisms, the Company has attempted to mitigate the impact of
such changes on the results of operations of most of its projects. The basic
hedging mechanism against increased fuel and transportation costs is to provide
contractually for matching increases in the energy payments the Company's
project subsidiaries receive from the utility purchasing the electricity
generated by the facility.
Under the power sales agreements for two of the Company's recently
developed facilities, energy payments are indexed, subject to certain caps, to
reflect the purchasing utility's solid fuel cost of producing electricity. The
Company's other power sales agreements provide periodic, scheduled increases in
energy prices that are designed to match periodic, scheduled increases in fuel
and transportation costs that are included in the fuel supply and transportation
contracts for the facilities.
Changes in interest rates could have a significant impact on the
Company. Interest rate changes affect the cost of capital needed to construct
projects, as well as interest expense of existing project financing debt. As
with fuel price escalation risk, the Company has substantially hedged against
the risk of fluctuations in interest rates by arranging either fixed-rate
financing or variable-rate financing with interest rate swaps, collars or caps.
As of December 31, 1996, approximately 84.8% of the Company's project financing
debt was hedged, of which 20.1% was hedged with interest rate caps which were
above the prevailing market rate at December 31, 1996 and therefore subject to
interest rate volatility.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Under the recently amended terms of the power sales agreements for the
Elizabethtown, Lumberton, Kenansville, Roxboro and Southport Facilities, the
purchasing utility, CP&L, has exercised its right of economic dispatch resulting
in significantly reduced fuel requirements at each of these facilities. Coal is
supplied to the Elizabethtown, Lumberton and Kenansville Facilities
(collectively, the "ELK Facilities") by James River Coal Sales, Inc. ("James
River Coal") and its affiliate, Bell County Coal Corporation. The coal sales
agreement for the ELK Facilities provides that the Company's subsidiary
operating the ELK Facilities will purchase, and James River Coal will provide,
all of such subsidiary's coal requirements through the end of the contract term.
In November 1996, James River Coal and its affiliate instituted an action
against Cogentrix Eastern Carolina Corporation ("CECC"), an indirect
wholly-owned subsidiary of Cogentrix Energy, Inc., claiming breach of contract
and fraud in the inducement based on the reduction in fuel requirements at the
ELK Facilities as a consequence of the recent amendments to the power sales
agreements. James River Coal and its affiliate seek specific performance and, in
the alternative, an unspecified amount of damages. The lawsuit is pending in the
United States District Court for the Eastern District of Kentucky. The coal
sales agreement for the ELK Facilities contains an arbitration provision
requiring disputes to be submitted to arbitration in North Carolina, which CECC
intends to seek to enforce with respect to these claims. Motions to dismiss the
Kentucky suit have been filed, briefed and are pending oral argument before the
court.
In October 1996, Coastal Sales, Inc. ("Coastal"), the coal supplier to
the Southport facility under a similar requirements contract, initiated an
arbitration proceeding against Cogentrix of North Carolina, Inc., an indirect
wholly-owned subsidiary of Cogentrix Energy, Inc., through the American
Arbitration Association in Charlotte, North Carolina. The notice of arbitration
alleges breach of contract based on the reduction in fuel requirements at the
Southport facility as a consequence of the recent amendment to the power sales
agreement. Coastal is seeking an unspecified amount of damages. The arbitration
panel has been selected, and the proceedings are expected to commence in the
near future.
Management believes that in some instances there is no basis for these
claims, and, as to the others, there are meritorious defenses. The Company
intends to defend the lawsuit and arbitration proceeding vigorously. In the
opinion of management, the ultimate outcome of the litigation, or any
arbitration proceeding relating to these claims, will not have a material
adverse effect on the Company's consolidated results of operations or financial
position.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description of Exhibit
----------- ----------------------
10.1 Loan and Reimbursement Agreement, dated as of May 18,
1994, among Birchwood Power Partners, L.P., the Banks
party thereto, John Hancock Mutual Life Insurance
Company, Allstate Insurance Company, New York Life
Insurance Company and the other Institutions party
thereto, Banque Paribas, New York Branch, Barclays
Bank PLC, Credit Suisse, Union Bank of California, as
Co-Agents for the Banks and Credit Suisse, as Issuing
Bank and as Administrative Agent for the Banks
(Birchwood facility).
10.2 Security Deposit and Intercreditor Agreement, dated
as of May 18, 1994, among Birchwood Power Partners,
L.P., the Secured Parties named therein and Credit
Suisse, as Security Agent (Birchwood facility).
10.3 First Amendment to Composite Amendment and Consent to
Project Loan Agreement and Security Deposit
Agreement, among Birchwood Power Partners, L.P. and
the persons party to the Loan and Reimbursement
Agreement, dated as of May 18, 1994, as amended, and
the Security Deposit and Intercreditor Agreement,
dated as of May 18, 1994, as amended (Birchwood
facility).
10.4 Amended and Restated Stock Pledge Agreement, dated as
of November 19, 1996, by and between
Cogentrix/Birchwood Two, L.P., as Pledgor, and
Birchwood Power Partners, L.P., as Lender (Birchwood
facility).
10.5 Amended and Restated Facility Operations and
Maintenance Agreement, dated as of May 18, 1994,
between Southern Electric International, Inc. and
Birchwood Power Partners, L.P. (Birchwood facility).
(*)
10.6 Power Purchase and Operating Agreement, dated as of
July 13, 1990, between SEI Birchwood, Inc. (assigned
to and assumed by Birchwood Power Partners, L.P.) and
Virginia Electric and Power Company, as amended
(Birchwood facility).
10.7 Coal Supply Agreement, dated as of July 22, 1993, by
and among Birchwood Power Partners, L.P., AgipCoal
Holding USA, Inc. and AgipCoal Sales USA, Inc.
(assigned to and assumed by Neweagle Coal Sales Corp.
and Neweagle Industries, Inc.), Laurel Creek Co.,
Inc. and Rockspring Development, Inc. (Birchwood
facility). (*)
10.7(a) First Amendment to Coal Supply Agreement, dated as of
May 18, 1994, by and among Birchwood Power Partners,
L.P., Laurel Creek Co., Inc., Rockspring Development,
Inc., Neweagle Coal Sales Corp. and Neweagle
Industries, Inc. (Birchwood facility).
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Exhibit No. Description of Exhibit
----------- ----------------------
10.8 Coal Transportation Agreement, dated as of July 22,
1993, between Birchwood Power Partners, L.P. and
ER&L-Birchwood, Inc. (Birchwood facility). (*)
10.8(a) First Amendment to Coal Transportation Agreement,
dated as of April 28, 1994, between Birchwood Power
Partners, L.P. and ER&L Birchwood, Inc. (Birchwood
facility). (*)
10.9 Amendment No. 6 to Contract CSXT-C-03951, dated as of
January 1, 1997, between Cogentrix of Rocky Mount,
Inc. and CSX Transportation, Inc. (Rocky Mount
facility).
27 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only and is not filed.
(*) Portions of these exhibits have been omitted pursuant to a
request for confidential treatment pursuant to Rule 24b-2
under the Securities Exchange Act of 1934, as amended.
(b) Reports on Form 8-K
The Company filed a current Report on Form 8-K, dated November
14, 1996, with respect to the sale of its investment in Bolivian Power
Company Limited to NRG Generating Holdings (No. 9) B.V., a wholly owned
subsidiary of NRG Energy, Inc. ("Holdings"), pursuant to a cash tender
offer by Holdings for all of the outstanding common stock of Bolivian
Power Company Limited at a price of $43 per share.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COGENTRIX ENERGY, INC.
(Registrant)
February 14, 1997 /s/ Bruce C. McMillen
---------------------------------
Bruce C. McMillen
Group Senior Vice President,
Chief Financial Officer
(Principal Financial Officer)
February 14, 1997 /s/ Thomas F. Schwartz
---------------------------------
Thomas F. Schwartz
Vice President - Finance
Treasurer
(Principal Accounting Officer)
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EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
10.1 Loan and Reimbursement Agreement, dated as of May 18, 1994,
among Birchwood Power Partners, L.P., the Banks party thereto,
John Hancock Mutual Life Insurance Company, Allstate Insurance
Company, New York Life Insurance Company and the other
Institutions party thereto, Banque Paribas, New York Branch,
Barclays Bank PLC, Credit Suisse, Union Bank of California, as
Co-Agents for the Banks and Credit Suisse, as Issuing Bank and
as Administrative Agent for the Banks (Birchwood facility).
10.2 Security Deposit and Intercreditor Agreement, dated as of May
18, 1994, among Birchwood Power Partners, L.P., the Secured
Parties named therein and Credit Suisse, as Security Agent
(Birchwood facility).
10.3 First Amendment to Composite Amendment and Consent to Project
Loan Agreement and Security Deposit Agreement, among Birchwood
Power Partners, L.P. and the persons party to the Loan and
Reimbursement Agreement, dated as of May 18, 1994, as amended,
and the Security Deposit and Intercreditor Agreement, dated as
of May 18, 1994, as amended (Birchwood facility).
10.4 Amended and Restated Stock Pledge Agreement, dated as of
November 19, 1996, by and between Cogentrix/Birchwood Two,
L.P., as Pledgor, and Birchwood Power Partners, L.P., as
Lender (Birchwood facility).
10.5 Amended and Restated Facility Operations and Maintenance
Agreement, dated as of May 18, 1994, between Southern Electric
International, Inc. and Birchwood Power Partners, L.P.
(Birchwood facility). (*)
10.6 Power Purchase and Operating Agreement, dated as of July 13,
1990, between SEI Birchwood, Inc. (assigned to and assumed by
Birchwood Power Partners, L.P.) and Virginia Electric and
Power Company, as amended (Birchwood facility).
10.7 Coal Supply Agreement, dated as of July 22, 1993, by and among
Birchwood Power Partners, L.P., AgipCoal Holding USA, Inc. and
AgipCoal Sales USA, Inc. (assigned to and assumed by Neweagle
Coal Sales Corp. and Neweagle Industries, Inc.), Laurel Creek
Co., Inc. and Rockspring Development, Inc. (Birchwood
facility). (*)
10.7(a) First Amendment to Coal Supply Agreement, dated as of May 18,
1994, by and among Birchwood Power Partners, L.P., Laurel
Creek Co., Inc., Rockspring Development, Inc., Neweagle Coal
Sales Corp. and Neweagle Industries, Inc. (Birchwood
facility).
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Exhibit No. Description of Exhibit
----------- ----------------------
10.8 Coal Transportation Agreement, dated as of July 22, 1993,
between Birchwood Power Partners, L.P. and ER&L-Birchwood,
Inc. (Birchwood facility). (*)
10.8(a) First Amendment to Coal Transportation Agreement, dated as of
April 28, 1994, between Birchwood Power Partners, L.P. and
ER&L Birchwood, Inc. (Birchwood facility). (*)
10.9 Amendment No. 6 to Contract CSXT-C-03951, dated as of January
1, 1997, between Cogentrix of Rocky Mount, Inc. and CSX
Transportation, Inc. (Rocky Mount facility).
27 Financial Data Schedule, which is submitted electronically to
the Securities and Exchange Commission for information only
and is not filed.
(*) Portions of these exhibits have been omitted pursuant to a
request for confidential treatment pursuant to Rule 24b-2
under the Securities Exchange Act of 1934, as amended.
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