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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 March 31, 1998
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 May 15, 1998, 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 March 31, 1998 (Unaudited)
and December 31, 1997 3
Consolidated Statements of Income for the Three Months
Ended March 31, 1998 and 1997 (Unaudited) 4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1998 and 1997 (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 16
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 20
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COGENTRIX ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997
(dollars in thousands)
MARCH 31, DECEMBER
1998 31, 1997
----------- ---------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 51,707 $ 71,833
Restricted cash 56,684 27,742
Marketable securities -- 42,118
Accounts receivable 56,687 49,781
Inventories 16,940 15,210
Other current assets 3,464 2,465
---------- --------
Total current assets 185,482 209,149
NET INVESTMENT IN LEASES 496,713 --
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation: March 31, 1998, $197,507; December 31, 1997, $188,227 497,130 496,589
LAND AND IMPROVEMENTS 2,540 2,540
DEFERRED FINANCING, START-UP AND ORGANIZATION
COSTS, net of accumulated amortization: March 31, 1998, $12,814;
December 31, 1997, $16,592 32,213 21,085
NATURAL GAS RESERVES 2,164 2,384
INVESTMENTS IN UNCONSOLIDATED AFFILIATES 79,159 79,072
OTHER ASSETS 19,307 12,155
---------- --------
$1,314,708 $822,974
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 83,932 $ 74,680
Accounts payable 26,090 13,755
Accrued compensation 2,801 4,923
Accrued interest payable 7,903 2,935
Accrued dividends payable -- 2,140
Other accrued liabilities 14,379 8,182
---------- --------
Total current liabilities 135,105 106,615
LONG-TERM DEBT 1,003,468 595,112
DEFERRED INCOME TAXES 28,602 25,872
MINORITY INTERESTS 56,890 15,131
OTHER LONG-TERM LIABILITIES 21,731 21,946
---------- --------
1,245,796 764,676
---------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, no par value, 300,000 shares authorized;
282,000 shares issued and outstanding 130 130
Net unrealized gain on available for sale securities -- 26
Accumulated earnings 68,782 58,142
---------- --------
68,912 58,298
---------- --------
$1,314,708 $822,974
========== ========
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 INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
(dollars in thousands, except for earnings per common share)
THREE MONTHS ENDED
MARCH 31,
-------------------------
1998 1997
--------- ---------
OPERATING REVENUE:
Electric $ 73,935 $ 76,897
Steam 7,341 7,177
Lease revenue 1,314 --
Service revenue under sales-type capital leases 1,296 --
Income (loss) from unconsolidated investments in power projects 923 (325)
Other 2,410 2,897
--------- ---------
87,219 86,646
--------- ---------
OPERATING EXPENSES:
Fuel expense 19,419 28,111
Operations and maintenance 15,789 16,465
Cost of services under sales-type capital leases 1,398 --
General, administrative and development expenses 9,355 7,283
Depreciation and amortization 10,174 10,568
--------- ---------
56,135 62,427
--------- ---------
OPERATING INCOME 31,084 24,219
OTHER INCOME (EXPENSE):
Interest expense (13,243) (13,383)
Investment and other income, net 2,376 2,684
Equity in net income of affiliates, net 444 499
--------- ---------
INCOME BEFORE MINORITY INTERESTS IN INCOME,
INCOME TAXES AND EXTRAORDINARY LOSS 20,661 14,019
MINORITY INTERESTS IN INCOME BEFORE
EXTRAORDINARY LOSS (1,955) (1,143)
--------- ---------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY LOSS 18,706 12,876
PROVISION FOR INCOME TAXES (7,323) (4,491)
--------- ---------
INCOME BEFORE EXTRAORDINARY LOSS 11,383 8,385
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT
OF DEBT, net of minority interest and income tax benefit of $473 (743) --
--------- ---------
NET INCOME $ 10,640 $ 8,385
========= =========
EARNINGS PER COMMON SHARE:
Income before extraordinary loss $ 43.00 $ 29.73
Extraordinary loss (5.27) --
--------- ---------
$ 37.73 $ 29.73
========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 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
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
(dollars in thousands)
THREE MONTHS ENDED
MARCH 31,
------------------------
1998 1997
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,640 $ 8,385
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 10,174 10,568
Deferred income taxes 2,730 2,488
Extraordinary loss on early extinguishment of debt, non-cash portion 2,145 --
Gain on sale of investment in Bolivian Power -- 106
Minority interests in income, net of dividends (18,771) 525
Equity in net income of unconsolidated affiliates, net of dividends 19 6,677
Minimum lease payments received 1,242 --
Amortization of unearned lease income (1,314) --
Decrease (increase) in accounts receivable 2,621 (6,703)
Decrease in inventories 121 891
Increase (decrease) in accounts payable (3,633) 7,033
Increase (decrease) in accrued liabilities 1,024 (4,541)
Decrease (increase) in other (2,640) 788
--------- --------
Net cash flows provided by operating activities 4,358 26,217
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions (574) (1,644)
Decrease in marketable securities 42,118 43,695
Investments in affiliates (106) (50,822)
Acquisition of Facilities, net of cash acquired (155,324) --
Proceeds from sale of investment in Bolivian Power, net -- (106)
Decrease in restricted cash 6,872 2,768
--------- --------
Net cash flows used in investing activities (107,014) (6,109)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (2,140) --
Proceeds from issuance of debt 150,250 2,911
Repayments of debt (64,530) (19,612)
Increase in deferred financing costs (1,050) (128)
--------- --------
Net cash flows provided by (used in) financing activities 82,530 (16,829)
--------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (20,126) 3,279
CASH AND CASH EQUIVALENTS, beginning of period 71,833 89,188
--------- --------
CASH AND CASH EQUIVALENTS, end of period $ 51,707 $ 92,467
========= ========
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 unaudited consolidated condensed financial statements
include the accounts of Cogentrix Energy, Inc. and its subsidiary companies
(collectively, the "Company") 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 March 31, 1998 and for the three months
ended March 31, 1998 and 1997 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 March 31, 1998, and the results of operations and cash flows for
the three months ended March 31, 1998 and 1997. 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 United States
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 unaudited consolidated condensed financial statements
be read in conjunction with the audited consolidated financial statements and
the notes thereto included in the Company's most recent Report on Form 10-K for
the Six-Month Transition Period ended December 31, 1997, which was filed with
the United States Securities and Exchange Commission on March 31, 1998.
2. COGENTRIX OF PENNSYLVANIA, INC.
In January 1998, the Company signed an agreement with Pennsylvania
Electric Company ("Penelec") to terminate the Ringgold Facility's power purchase
agreement. This termination agreement was the result of a request for proposals
to buy-back or restructure power sales agreements issued to all major operating
IPP projects in Penelec's territory in April 1997. The termination agreement
with Penelec provides for a payment to the Company of approximately $25 million
which will be sufficient to retire all of Cogentrix of Pennsylvania, Inc.'s
("CPA") outstanding project debt. The buy-back of the power purchase agreement
is subject to the issuance of an order by the Pennsylvania Public Utility
Commission granting Penelec the authority to fully recover from its customers
the consideration paid to CPA under the buyout agreement. Management does not
expect this event to have an adverse impact on the Company's consolidated
results of operations, cash flows or financial position.
3. JAMES RIVER COGENERATION COMPANY
Effective February 1998, James River Cogeneration Company ("JRCC"), a
joint venture owned 50% by the Company, which owns a cogeneration facility
located in Hopewell, Virginia (the "Hopewell Facility"), amended its power sales
agreement with Virginia Electric and Power Company ("Virginia Power") to provide
Virginia Power additional rights related to the dispatch of the Hopewell
Facility. In connection with the amendment of the power sales agreement, the
Company amended the terms of the existing project debt on the Hopewell Facility.
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The amended terms of the JRCC project debt resulted in an extension of
the final maturity of the note payable by six months to December 31, 2002 and an
increase in the amount of outstanding borrowings of $34.6 million, the proceeds
of which (net of transaction costs) were distributed to the JRCC partners. The
amended note payable accrues interest at an annual rate equal to the applicable
LIBOR rate, as chosen by the Company, plus an additional margin of .875% through
February 1999 and 1.00% thereafter. The amended credit facility also provides
for a $5 million letter of credit to secure the project's obligation to pay debt
service. Cogentrix Energy, Inc. has indemnified the lenders of the credit
facility for any cash deficits the Hopewell Facility could experience as a
result of incurring certain costs, subject to a cap of $10.6 million. An
extraordinary loss of $2.4 million was recorded in the first quarter of 1998
related to the write-off of unamortized deferred financing costs from the
original project debt and a swap termination fee on an interest rate swap
agreement hedging the original project debt.
4. WHITEWATER AND COTTAGE GROVE TRANSACTION
In March 1998, the Company acquired from LS Power Corporation (the "LS
Acquisition") an approximate 74% ownership interest in two partnerships which
own and operate electric generating facilities located in Whitewater, Wisconsin
(the "Whitewater Facility") and Cottage Grove, Minnesota (the "Cottage Grove
Facility"). Each of the Cottage Grove and Whitewater Facilities is a 245
megawatt gas-fired, combined-cycle cogeneration facility. Commercial operations
of both of these facilities commenced in the last half of calendar 1997. The
Cottage Grove Facility sells capacity and energy to Northern States Power
Company under a 30-year power sales contract terminating in 2027. The Whitewater
Facility sells capacity and energy to Wisconsin Electric Power Company under a
25-year power sales contract terminating in 2022. Each of the power sales
contracts has characteristics similar to a lease in that the agreement gives the
purchasing utility the right to use specific property, plant and equipment. As
such, each of the power sales contracts is accounted for as a "sales-type"
capital lease in accordance with Statement of Financial Accounting Standards
("SFAS") No. 13, "Accounting for Leases."
The aggregate acquisition price for the equity interests acquired in
the Cottage Grove and Whitewater Facilities acquired by the Company was $158.0
million. In addition, the Company pre-funded a $16.7 million distribution to the
previous owners, which represented unused construction contingency and cash
flows that were accumulated by the Cottage Grove and Whitewater Facilities prior
to January 1, 1998. Cogentrix Energy, Inc. received $15.7 million of this
distribution in April 1998 and expects to receive a distribution of the
remaining $1 million in calendar 1998. The purchase price was funded with
proceeds of the Company's corporate credit facility and corporate cash balances.
The Company accounted for the LS Acquisition using the purchase method
of accounting. The accompanying consolidated balance sheet as of March 31, 1998
reflects 100% of the assets and liabilities of the partnerships acquired
consisting primarily of net investment in leases of $496.7 million and long-term
debt of $332 million, respectively. The minority owner's share of the
partnerships' net assets is included in "minority interests" on the accompanying
consolidated balance sheet as of March 31, 1998. The accompanying consolidated
statement of income for the three months ended March 31, 1998 includes the
results of operations of the acquired facilities since the closing date of the
LS Acquisition (March 20, 1998).
The following unaudited pro forma consolidated results for the Company
for the three months ended March 31, 1998 give effect to the LS Acquisition as
if such transaction had occurred on January 1, 1998 (in thousands, except per
share amount).
Pro Forma
Three Months Ended
March 31, 1998
------------------
Revenues $106,628
Net Income 10,533
Earnings per share 37.35
5. BECHTEL ASSET ACQUISITION
In March 1998, the Company signed an agreement with Bechtel Generating
Company, Inc. to acquire ownership interests in 12 electric generating
facilities, comprising a net equity interest of approximately 360 megawatts, and
one interstate natural gas pipeline in the United States (the "Bechtel Asset
Acquisition"). The closing of the
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Bechtel Asset Acquisition, which is subject to customary conditions including
the obtaining of certain consents and regulatory approvals, is currently
expected to occur in calendar 1998. Management anticipates accounting for each
of these investments under the equity method.
In connection with the Bechtel Asset Acquisition, the Company plans to
issue up to $250 million of senior notes in a Rule 144A offering with a covenant
to register exchange notes with the U.S. Securities and Exchange Commission.
These senior notes will be unsecured and will rank pari passu with the Company's
$100 million of outstanding Senior Notes due 2004. The Company intends to use
the net proceeds to finance the Bechtel Asset Acquisition, to repay the
outstanding borrowings under the Company's corporate credit facility, which were
incurred to finance a portion of the purchase price of the LS Acquisition, and
for general corporate purposes. In connection with this anticipated debt
offering, the Company executed an interest rate agreement in March 1998 covering
a notional amount of $237 million for a period of four months to hedge against
fluctuations in interest rates prior to the completion of the debt offering.
6. PENDING CLAIMS AND LITIGATION
Effective September 1996, the Company amended the power sales
agreements on its Elizabethtown, Lumberton, Kenansville, Roxboro, and Southport
Facilities. Under the amended terms of these power sales agreements, the
purchasing utility has exercised its right of economic dispatch resulting in
significant reductions in fuel requirements at each of these facilities. In
response to this reduction in fuel requirements, one of the coal suppliers for
these facilities initiated an arbitration proceeding and another filed a civil
action against certain subsidiaries of the Company. The arbitration proceeding
was completed in October, 1997, with the arbitration panel denying any recovery
to the coal supplier. The coal supplier subsequently challenged the arbitration
panel's ruling on grounds of arbitration impartiality. On April 15, 1998, the
federal district court issued an order vacating the arbitration award and
directing a new arbitration be conducted. The Company is appealing this decision
to the Fourth Circuit United States Court of Appeals. The Company believes that
the claims of arbitration impartiality are without merit and that the
arbitration award is valid and will be upheld on appeal. With respect to the
civil action filed by the other coal supplier, management believes that there is
no basis for certain claims and there are meritorious defenses as to the
remainder. The Company intends to vigorously defend the pending civil action.
Effective December 1997, the Company amended the power sales agreement
on its Portsmouth Facility. Under the amended terms, the purchasing utility has
exercised its right of economic dispatch which has led to significant reductions
in that facility's fuel requirements. In response to the reduced fuel
requirements, the coal supplier for the Portsmouth Facility has filed a civil
action against a subsidiary of the Company. Management believes that there is no
basis for certain claims of the coal supplier and there are meritorious defenses
as to the remainder. The Company intends to vigorously defend the pending civil
action.
The Company has established reserves which management believes to be
adequate to cover any costs resulting from these matters. Management believes
that the resolution of these disputes will not have a material adverse effect on
the consolidated financial position, results of operations or cash flows 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
The Company is engaged in the acquisition, development, ownership, and
operation of power generation facilities and the sale of electricity and steam
in the United States and selected international markets. The Company owns
(entirely or in part) 13 power generation facilities having an aggregate
generating capacity of 1,610 megawatts. The Company has a pending acquisition,
subject to the fulfillment of all required conditions, of ownership interests in
12 domestic power generation facilities, comprising an aggregate generating
capacity of approximately 2,400 megawatts. Upon completion of the pending
acquisition, the Company's net interest in power generation facilities will be
1,675 megawatts, an increase from 840 megawatts in 1994.
Each of the Company's generating facilities relies on a power sales
agreement for the majority of its revenues. During the three months ended March
31, 1998, two regulated utilities, Carolina Power & Light Company ("CP&L") and
Virginia Power, accounted for approximately 82.3% of the Company's consolidated
revenues. As a result of the Company's recent growth, the Company's operations
will become more diverse with regard to both geography and fuel source and less
dependent on any single project or customer.
Each of the Company's power generation facilities produces electricity
for sale to a utility and thermal energy for sale to an industrial user. The
electricity and thermal energy generated by these facilities are typically sold
under long-term power or steam sales agreements, generally having original terms
of 20 to 30 years. Several of the Company's generating facilities originally
sold electricity under long-term "must-run" power sales agreements, which
obligated the utility to purchase all electricity generated by the power
generation facility. Over the last two years, the Company has amended the
majority of these "must-run" power sales agreements to provide the utility the
right to suspend or reduce purchases of energy from the facilities if the
utility determines it can operate its system for a designated period more
economically. These amended power sales agreements are structured such that the
Company continues 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
agreement. Energy payments, which are reduced (or possibly eliminated) as a
result of economic dispatch, primarily cover variable operating and maintenance
costs as well as fuel and fuel transportation costs. The restructuring of a
"must-run" power sales agreement to an economic dispatch power sales agreement
causes a significant reduction in electric revenues received under the contract,
which is offset by a corresponding reduction in fuel and fuel transportation
costs and operations and maintenance expense. In response to the reduction in
fuel requirements at certain of the facilities at which the Company has
restructured the power sales agreement, the facilities' coal suppliers have
instituted various legal proceedings against the Company seeking to recover
damages. See "Part II - Item 1. Legal Proceedings" herein.
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Certain of the Company's power sales agreements either terminate in
years 2000 through 2002 or provide for a significant reduction in capacity
payments received under such agreements after 2002. Accordingly, revenues
recognized by the Company under these power sales agreements after 2002 will be
eliminated or significantly reduced.
In March 1998, the Company acquired ownership interests in two
gas-fired power generation facilities located in the Midwest United States
having an aggregate generating capacity of 490 megawatts. The power sales
agreements for these facilities meet the criteria of a "sales-type" capital
lease as described in Statement of Financial Accounting Standards ("SFAS") No.
13, "Accounting for Leases." The Company has recorded a net investment in lease
which reflects the present value of future minimum lease payments. Future
minimum lease payments represent the amount of capacity payments due from the
utilities under the power sales 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 term of the power sales agreements using the effective interest rate method.
The Company 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 the Company will be directly
related to the level of dispatch of the facilities by the utilities and to a
lesser extent the level of thermal energy required by the steam hosts.
The activities of the Company's power generation facilities 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. 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.
The domestic power generation industry is currently going through a
period of significant change as many states are implementing or considering
regulatory initiatives designed to increase competition. In addition to
restructuring activities in various states, there have also been several
industry restructuring bills introduced in Congress. The Company cannot predict
the final form or timing of the proposed restructurings and the impact, if any,
that such restructurings would have on the Company's existing business or
consolidated results of operations. The Company believes that any such
restructuring would not have a material adverse effect on its power sales
agreements and, accordingly, believes that its existing business and results of
consolidated operations would not be materially adversely affected, although
there can be no assurance in this regard.
In 1996, the Company began making investments in partnerships formed to
develop, construct and operate greenhouses to produce tomatoes. These
partnerships are currently operating greenhouses with a combined total of 107
acres of production capacity. The Company has a 50% interest in each partnership
and accounts for these investments under the equity method.
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RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Three Months Ended March 31,
----------------------------------------
1998 1997
----------------- -----------------
(dollars in thousands, unaudited)
Total operating revenues $87,219 100% $86,646 100%
Operating costs 36,606 42 44,576 51
General, administrative and development 9,355 11 7,283 9
Depreciation and amortization 10,174 11 10,568 12
------- --- ------- ---
Operating income $31,084 36% $24,219 28%
======= === ======= ===
Total operating revenues increased 1.0% to $87.2 million for the first
quarter of 1998 as compared to the first quarter of 1997. This increase was
primarily attributable to the $2.6 million aggregate amount of lease revenue and
service revenue earned under the power sales agreements for the Cottage Grove
and Whitewater Facilities in which the Company acquired its interests on March
20, 1998. The increase in revenues also relates to a $1.2 million increase
during the quarter (as compared to the previous year fiscal quarter) in equity
earnings from the Birchwood Facility. These increases in operating revenues were
partially offset, however, by a $4.6 million decrease in electric revenues
resulting from the restructuring of the Company's power sales agreements on the
Portsmouth Facility in December 1997 and the Hopewell Facility in February 1998
to give the purchasing utility the right to suspend or reduce purchases of
energy from the facilities.
The Company's operating costs decreased 17.9% to $36.6 million for the
first quarter of 1998 as compared to the first quarter of 1997. This decrease
resulted primarily from the significant decrease in operating costs at the
Portsmouth and Hopewell Facilities associated with the recent restructuring of
their power sales agreements. The decrease also related to decreases in
operating costs incurred by ReUse Technology, Inc., a wholly-owned subsidiary of
the Company ("ReUse"), related to third party agreements. These decreases in
operating costs were partially offset during the first quarter of 1998 by an
increase in maintenance costs at the Richmond Facility associated with routine
maintenance performed during the first quarter of fiscal 1998 and operating
expenses incurred at the Cottage Grove and Whitewater Facilities, interests in
which the Company acquired on March 20, 1998.
General, administrative and development expenses increased 28.5% to
$9.4 million for the first quarter of 1998 as compared to the first quarter of
1997. These increases related primarily to an increase in expense under the
profit sharing plan, an increase in performance bonuses and a general increase
in consulting expenses related to development activity.
The Company's long term debt averaged $729 million with a weighted
average interest rate of 7.27% for the first quarter of 1998 as compared with
average long-term debt of $713 million with a weighted average interest rate of
7.51% for the first quarter of 1997. The increase in weighted average debt
outstanding related to the increase in project debt outstanding at the
Portsmouth Facility, which was refinanced in December 1997, and the Hopewell
Facility, which was refinanced in February 1998. The increase also related to
outstanding borrowings under the Company's corporate credit facility at the end
of the first quarter of 1998, which were incurred to fund a portion of the
acquisition price of the Company's interests in the Whitewater and Cottage Grove
Facilities. The decrease in weighted average interest rate relates primarily to
the expiration of an interest rate swap agreement on the Richmond Facility's
project debt in September 1997.
The increase in minority interests in income for the first quarter of
1998 as compared to the first quarter of 1997 related to a reduction in
operating costs incurred at the Hopewell Facility in the first quarter of 1998
as compared to the first quarter of 1997. Minority interests in income on the
accompanying consolidated statement of income for the three months ended March
31, 1998 is based on income before the recognition of an extraordinary loss on
early extinguishment of debt related to the refinancing of the Hopewell
Facility's project debt in February 1998.
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The extraordinary loss on early extinguishment of debt for the first
quarter of 1998 related to the refinancing of the Hopewell Facility's project
debt in January 1998. The loss consisted of a write-off of the deferred
financing costs on the Hopewell Facility's original project debt and a swap
termination fee on an interest rate swap agreement hedging the original project
debt.
LIQUIDITY AND CAPITAL RESOURCES
The principal components of operating cash flow for the first quarter
of 1998 were generated by net income of $10.6 million, increases due to
adjustments for depreciation and amortization of $10.2 million, deferred income
taxes of $2.7 million and write-off of deferred financing costs of $2.1 million,
which were partially offset by minority interests in income, net of dividends,
of $18.8 million and a net $2.5 million use of cash reflecting changes in other
working capital assets and liabilities. Cash flow provided by operating
activities of $4.4 million, proceeds from borrowings of $150.3 million, proceeds
from the sale of marketable securities of $42.1 million, and $6.9 million of
cash escrows and restricted marketable securities released were primarily used
to acquire interests in facilities of $155.3 million, purchase property plant
and equipment of $0.6 million, make investments in affiliates of $0.1 million,
repay project finance borrowings of $64.5 million, pay deferred financing costs
of $1.0 million, and pay common stock dividends of $2.1 million.
Historically, the Company has financed each facility primarily under
financing arrangements and related documents which generally require the
extensions of credit to be repaid solely from the project's revenues and provide
that the repayment of the extensions of credit (and interest thereon) is secured
solely by the physical assets, agreements, cash flow and, in certain cases, the
capital stock of or partnership interest in that project subsidiary. This type
of financing is generally referred to as "project financing." The project
financing debt of the Company's subsidiaries (aggregating $935.4 million as of
March 31, 1998) is substantially non-recourse to the Company and its other
project subsidiaries, except in connection with certain transactions where
Cogentrix Energy, Inc. or Cogentrix, Inc. has agreed to certain limited
guarantees and other obligations with respect to such projects. These limited
guarantees and other obligations include agreements for the benefit of the
project lenders to three project subsidiaries to fund cash deficits the projects
may experience as a result of incurring certain costs, subject to an aggregate
cap of $51.9 million. In addition, Cogentrix has guaranteed certain project
subsidiaries' obligations to the utility under power sales agreements and
obligations of up to $1.5 million of ReUse under an ash disposal agreement with
an unrelated third party. Because certain of these limited guarantees and other
obligations do not by their terms stipulate a maximum dollar amount of
liability, the aggregate amount of the Company's potential exposure under these
guarantees cannot be quantified. The aggregate contractual liability of the
Company to its subsidiaries' project lenders is, in each case, a small portion
of the aggregate project debt. If, however, the Company were required to satisfy
all these guarantees and other obligations, or even one or more of the
significant ones, such event could have a material adverse impact on the
Company's financial condition.
As of March 31, 1998, the Company had long-term debt (including the
current portion thereof) of approximately $1,085.4 million. With the exception
of the Company's $100 million of Senior Notes issued in March 1994 and the $50
million outstanding under the Company's corporate credit facility, substantially
all of such indebtedness is project financing debt that is substantially
non-recourse to the Company. Future annual maturities of long-term debt
range from $78.3 million to $87.7 million in the five-year period ending
December 31, 2002. The Company believes that its project subsidiaries will
generate sufficient cash flow to pay all required debt service on the project
financing debt and allow them to pay management fees and dividends to Cogentrix
Energy, Inc. periodically in sufficient amounts to allow Cogentrix Energy, Inc.
to pay all required debt service on the Senior Notes, 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 May 1997, the Company entered into a credit agreement with Australia
and New Zealand Banking Group Limited, as Agent, which provides for a $50
million revolving credit facility (the "Corporate Credit Facility") with a term
of three years (the "Revolving Term"). The Corporate Credit Facility provides
for one-year extensions of the Revolving Term, subject to lender consent. The
Company can utilize the Corporate Credit Facility in the form of direct advances
or the issuance of unsecured letters of credit. The outstanding balance of the
Corporate
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Credit Facility at the end of the Revolving Term is payable over two years in
four equal semiannual repayments of direct advances or collateralization of
letters of credit. As of March 31, 1998, the Company had $50 million of advances
outstanding and no available balance under the Corporate Credit Facility. The
$50 million borrowed under the Corporate Credit Facility was utilized to fund a
portion of the purchase price related to the LS Acquisition.
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 acquisition financing 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, the project entity.
The ability of the Company's project subsidiaries and the project
entities in which it has an investment to 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 December 1997, the Company substantially completed construction of a
248 megawatt combined-cycle, gas-fired electric generation facility (the "Clark
Facility") for Public Utility District Number 1 of Clark County, Washington
("Clark") and earned a construction management fee of $4.5 million. Upon final
completion of the facility and acceptance by Clark, the Company will earn an
additional construction management fee of $500,000 and will also share in 50% of
the amount, if any, of the excess of the contract amount ($117 million) over the
actual costs and expenses incurred in constructing the Clark Facility. The
Company's share of the excess is currently expected to be approximately $4
million.
In December 1997, the Company renegotiated the project financing
arrangements for its Portsmouth Facility. The amended agreements resulted in an
extension of the final maturity date of the loan by three months and an increase
in the amount of commitment provided by the project lenders in the form of a
$40.5 million revolving credit facility. This revolving credit facility is
available to be drawn by Cogentrix Virginia Leasing Corporation, the project
subsidiary owning the Portsmouth Facility ("CVLC"), at any time for general
corporate purposes, including paying dividends to Cogentrix Energy, Inc. In
March 1998, CVLC borrowed $20 million under the revolving credit facility and
distributed the entire proceeds to Cogentrix Energy, Inc. for purposes of
funding a portion of the purchase price related to the LS Acquisition.
In February 1998, the Company renegotiated the project financing
arrangements for its Hopewell Facility, in which it owns a 50% interest. The
amended agreements resulted in a $34.6 million increase in outstanding
indebtedness of JRCC and extended the final maturity date of the loan by six
months. JRCC 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 $16.6 million, which
was used by the Company to fund a portion of the acquisition price related to
the LS Acquisition.
In March 1998, the Company acquired from LS Power Corporation an
approximate 74% ownership interest in the Whitewater Facility and the Cottage
Grove Facility. Each of the Cottage Grove and Whitewater Facilities is a 245
megawatt gas-fired, combined-cycle cogeneration facility. Commercial operations
of both facilities commenced in the last half of calendar 1997. The aggregate
acquisition price for the equity interests in the Cottage Grove and Whitewater
Facilities acquired by the Company was $158.0 million. In addition, the Company
pre-funded a $16.7 million distribution to the previous owners, which
represented unused construction contingency and cash flows that were accumulated
by the Cottage Grove and Whitewater Facilities prior to January 1, 1998.
Cogentrix Energy, Inc. received a distribution of $15.7 million in April 1998
and expects to receive a distribution of the remaining $1.0 million in 1998. The
purchase price was funded with proceeds of the Corporate Credit Facility and
corporate cash balances.
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In March 1998, the Company signed an agreement with Bechtel Generating
Company, Inc. to acquire ownership interests in 12 electric generating
facilities, comprising a net equity interest of 360 megawatts, and one
interstate natural gas pipeline in the United States (the "Bechtel Asset
Acquisition"). The closing of the Bechtel Asset Acquisition, which is subject to
customary conditions including the obtaining of certain consents and regulatory
approvals, is currently expected to occur in calendar 1998.
In connection with the Bechtel Asset Acquisition, the Company plans to
issue up to $250 million of additional senior notes in a Rule 144A offering with
a covenant to register exchange notes under the Securities Act of 1933, as
amended. The additional senior notes will be unsecured and will rank pari passu
with the Company's $100 million of outstanding Senior Notes due 2004. The net
proceeds will be used by the Company to finance the Bechtel Asset Acquisition
and to repay the outstanding borrowings under the Corporate Credit Facility. In
connection with this anticipated debt offering, the Company executed an interest
rate agreement in March 1998 covering a notional amount of $237 million for a
period of four months to hedge against fluctuations in interest rates prior to
the completion of the debt offering.
For the fiscal year ended June 30, 1997, the Company's board of
directors declared a dividend on its outstanding common stock of $5.0 million,
which was paid in September 1997. The Company's board of directors declared a
dividend on its outstanding common stock of $2.1 million for the six-month
period ended December 31, 1997, which was paid in March 1998. The board of
directors' policy, which is subject to change at any time, provides for a
dividend payout ratio of no more than 20% of the Company's net income for the
immediately preceding fiscal year. In addition, under the terms of the
indentures for the Senior Notes and the Corporate Credit Facility, 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 general economic conditions, and tend to fluctuate significantly. Through
various hedging mechanisms, the Company has attempted to mitigate the impact of
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 certain of the Company's
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 attempts to hedge 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 on a portion
of its indebtedness.
Although hedged to a significant extent, the Company's financial
results will likely be affected to some degree by fluctuations in energy prices,
interest rates and inflation. The effectiveness of the hedging techniques
implemented by the Company is dependent, in part, on each counterparty's ability
to perform in accordance with the provisions of the relevant contracts. The
Company has sought to reduce the risk by entering into contracts with
creditworthy organizations.
YEAR 2000 COMPLIANCE
The Company is currently evaluating its information technology
infrastructure for Year 2000 compliance. The majority of the Company's internal
financial information systems are being replaced with a fully compliant new
system. This new system is expected to be implemented by January 1, 1999. The
Company is also evaluating its plants' operating systems. Based on present
information, the Company believes that only minor modifications and upgrades
will be required for the operating systems to be Year 2000 compliant. As such,
the Company does not anticipate that the costs incurred to complete the
necessary transition to
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ensure Year 2000 compliance will have a material impact on the Company's
consolidated results of operations, cash flows or financial position. Any costs
necessary to modify existing systems to ensure Year 2000 compliance will be
expensed as incurred. The Company is also communicating with customers,
suppliers, financial institutions and others to coordinate Year 2000 conversion.
In the event that any of the Company's significant customers or suppliers do not
successfully and timely achieve Year 2000 compliance, the Company's business or
operations could be adversely affected.
CHANGE OF CORPORATE FISCAL YEAR
Effective January 1, 1998, the Company changed its fiscal year to
commence on January 1 and conclude on December 31 of each year. The Company's
fiscal year previously commenced each July 1, concluding on June 30 of the
following calendar year.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Under the terms of the amended power sales agreements for the
Elizabethtown, Lumberton, Kenansville (the "ELK Facilities"), 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 ELK Facilities by James River Coal
Sales, Inc. ("James River") and its affiliate, Bell County Coal Corporation.
Coal was supplied to the Southport Facility until November 1997 by Coastal Coal
Sales, Inc. ("Coastal"). The coal sales agreements for both the ELK Facilities
and the Southport Facility provide for the sale and purchase of the coal
requirements of those facilities through the respective contract term.
Under the amended power sales agreement for the Company's Portsmouth
Facility, Virginia Power has from time to time since December 1997 exercised its
right of economic dispatch resulting in significantly reduced fuel requirements
at the facility. Coal is supplied to the Portsmouth Facility by Arch Coal Sales
Company, Inc. ("Arch"). The coal sales agreement with Arch provides for the sale
and purchase of the coal requirements of the Portsmouth Facility during the
period extending 15 years from late 1987, the year of commencement of commercial
operations at the facility.
As a result of the economic dispatch of these facilities and their
consequently reduced fuel requirements, the Company's project subsidiaries
operating these facilities are purchasing significantly less coal. James River,
Coastal and Arch have each initiated either a civil action or an arbitration
proceeding seeking to recover damages and, in some cases, seeking injunctive
relief. A summary of each of these pending disputes is set forth below.
JAMES RIVER DISPUTE (ELK FACILITIES)
In November 1996, James River and its affiliate instituted an action in
the United States District Court for the Eastern District of Kentucky against
Cogentrix Eastern Carolina Corporation ("CECC") claiming breach of contract and
fraud in the inducement based on the reduction in fuel requirements at the ELK
Facilities. In this complaint, James River and its affiliate sought specific
performance and, in the alternative, an unspecified amount of damages.
CECC filed a motion to dismiss the complaint for (i) lack of
jurisdiction and (ii) failure to state a claim upon which relief can be granted.
Prior to the court ruling on the motion, the case was transferred in September
1997 to the United States District Court, Western District of North Carolina.
The CECC motion to dismiss was taken up by the North Carolina court, which by
order dated January 8, 1998 denied the motion to dismiss count I (breach of
contract) and granted the motion to dismiss count II (fraud in the inducement).
James River filed an amended complaint on January 29, 1998, and CECC refiled its
motion to dismiss count II of the amended complaint on February 24, 1998. On
April 20, 1998, the court issued an order dismissing with prejudice count II of
the amended complaint.
The coal sales agreement for the ELK Facilities contains an arbitration
provision requiring contract disputes to be submitted to arbitration in
Charlotte, North Carolina. CECC has filed with the court seeking to compel
enforcement of that arbitration provision.
COASTAL DISPUTE (SOUTHPORT FACILITY)
In October 1996, Coastal initiated an arbitration proceeding against
Cogentrix of North Carolina, Inc. ("CNC") through the American Arbitration
Association in Charlotte, North Carolina. The notice of arbitration alleged
breach of contract based on the reduction in fuel requirements at the Southport
Facility. The arbitration was conducted by a three-member panel during the
period September 30 through October 3, 1997, and an arbitration award was
rendered on October 22, 1997 in favor of CNC denying any recovery to Coastal
("Arbitration Award").
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On January 20, 1998, ANR Coal Company, L.L.C. ("ANR"), as successor to
Coastal, filed a complaint in United States District Court for the Western
District of North Carolina (the "Court") seeking an order vacating the
Arbitration Award. The principal basis of the complaint is an allegation that
the impartial third arbitrator of the panel of arbitrators was improperly biased
and failed to make complete disclosure of pertinent information during the
selection process. CNC filed its motion to dismiss, motion to confirm and answer
on February 17, 1998. CNC does not believe the allegations of ANR in the
complaint are meritorious or provide a basis upon which the Court could properly
vacate the Arbitration Award. On April 15, 1998, the district court issued an
order vacating the Arbitration Award and directing a new arbitration be
conducted. CNC is appealing this decision to the United States Court of Appeals,
Fourth Circuit, where the issue will be reviewed de novo. The Company continues
to be optimistic that the Arbitration Award is valid and will be upheld on
appeal.
ARCH DISPUTE (PORTSMOUTH FACILITY)
In March 1998, Arch filed a complaint in the United States District
Court, Southern District of West Virginia against CVLC, the Company's project
subsidiary that owns and operates the Portsmouth Facility, alleging a breach of
contract. In the complaint, Arch claims that CVLC (i) is obligated to purchase
approximately 360,000 tons of coal per year, (ii) breached the Coal Agreement by
wrongfully reducing its requirements of coal, and (iii) violated a duty of good
faith and fair dealing owed to Arch. Arch also seeks damages for CVLC's failure
to purchase such quantities of coal.
The claims made by Arch directly contradict the clear, overriding
provisions of the coal sales agreement, which specifically provide that
notwithstanding any provision in the agreement to the contrary, CVLC shall not
be obligated to purchase more than the Portsmouth Facility's requirements of
coal. Furthermore, the coal agreement contains an arbitration clause, which the
Company believes is enforceable, that requires any disputes between the parties
to be resolved by arbitration in Charlotte, North Carolina. CVLC has filed
preliminary motions contesting the action proceeding in West Virginia and
seeking transfer to Federal District Court in Charlotte, North Carolina and to
compel arbitration in Charlotte.
The Company is confident that the claims made by Arch against CVLC will
ultimately be resolved in favor of CVLC. CVLC will vigorously defend the matter,
seek to enforce the terms of the agreement against Arch, including the
arbitration clause, and otherwise continue to perform under the agreement as
required.
SUMMARY OF COAL PURCHASE AGREEMENT DISPUTES
Management believes that, as to the James River and Arch suits, there
is no basis for certain claims and there are meritorious defenses as to the
remainder. Management believes the Coastal Arbitration Award was the product of
an arbitration process that was entirely proper and in accordance with American
Arbitration Association guidelines and procedures. The Company intends to
vigorously contest the actions of James River, Arch and ANR (Coastal) and is
confident that they will be resolved in favor of the Company. The Company has
established reserves which management believes to be adequate to cover any costs
which may result from these matters. The ultimate disposition of the James
River, Arch and ANR (Coastal) actions, in the judgement of management, will not
have a material adverse impact on the Company's consolidated results of
operations, cash flows or financial position.
OTHER ROUTINE LITIGATION
In addition to the litigation described above, the Company experiences
routine litigation in the normal course of business. Management is of the
opinion that none of this routine litigation will have a material adverse impact
on the consolidated financial position or results of operations of the Company.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description of Exhibit
----------- ----------------------
10.1 Operating Agreement, dated as of November
14, 1997, between Greenhost, Inc., as Owner,
and Village Farms of Virginia, Inc., as
Operator (Birchwood Facility). (*)
10.2 Purchase Agreement, dated as of March 6,
1998, between Cogentrix Energy, Inc. and
Bechtel Generating Company, Inc. (*)
10.3 Amendment to Agreement of Limited
Partnership, dated as of April 17, 1998, by
and among Cogentrix of Buffalo, Inc.,
Cogentrix Greenhouse Investments, Inc.,
Village Farms of Delaware, L.L.C., and
Village Farms, L.L.C.
10.4 Amended and Restated Limited Partnership
Agreement, dated as of June 30, 1995, among
LSP-Cottage Grove, Inc., Granite Power
Partners, L.P., and TPC Cottage Grove, Inc.
(1)
10.4(a) Amendment #1 to the Cottage Grove
Partnership Agreement. (2)
10.4(b) Consent, Waiver and Amendment No. 2, dated
March 20, 1998, to the Amended and Restated
Limited Partnership Agreement of LSP-Cottage
Grove, L.P. (4)
10.5 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)
10.5(a) Consent, Waiver and Amendment No. 1, dated
March 20, 1998, to the Amended and Restated
Limited Partnership Agreement of
LSP-Whitewater Limited Partnership. (4)
10.6 Power Purchase Agreement, dated as of May 9,
1994, between Northern States Power Company
and LSP-Cottage Grove, L.P. (1)
10.7 Power Purchase Agreement, dated as of
December 21, 1993, between Wisconsin
Electric Power Company and LSP-Whitewater
Limited Partnership. (1)
10.7(a) Amendment to Power Purchase Agreement, dated
as of February 10, 1994, between Wisconsin
Electric Power Company and LSP-Whitewater
Limited Partnership. (1)
10.7(b) Second Amendment to Power Purchase
Agreement, dated as of October 5, 1994,
between Wisconsin Electric Power Company and
LSP-Whitewater Limited Partnership. (1)
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10.7(c) Third Amendment to Power Purchase Agreement,
dated as of May 5, 1995, between Wisconsin
Electric Power Company and LSP-Whitewater
Limited Partnership. (1)
10.7(d) Fourth Amendment to Power Purchase
Agreement, dated March 18, 1997, between
Wisconsin Electric Power Company and
LSP-Whitewater Limited Partnership. (3)
10.7(e) Fifth Amendment to Power Purchase Agreement,
dated February 26, 1998, between Wisconsin
Electric Power Company and LSP-Whitewater
Limited Partnership. (4)
27 Financial Data Schedule, which is submitted
electronically to the U.S. Securities and
Exchange Commission for information only and
is not filed.
-----------------------------
(*) Portions of these agreements have been deleted pursuant to a request
for confidential treatment pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.
(1) Incorporated herein by reference from the Registration Statement on
Form S-4, File No. 33-95928 filed with the Securities and Exchange
Commission by LS Power Funding Corporation, LSP-Cottage Grove, L.P. and
LSP-Whitewater Limited Partnership on August 16, 1995, as amended, or
from the Annual Report on Form 10-K for the fiscal year ended December
31, 1995 filed with the Securities and Exchange Commission by LS Power
Funding Corporation, LSP-Cottage Grove, L.P. and LSP-Whitewater Limited
Partnership.
(2) Incorporated herein by reference from the Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 1996, File No. 33-95928 filed
with the Securities and Exchange Commission by LS Power Funding
Corporation, LSP-Cottage Grove, L.P. and LSP-Whitewater Limited
Partnership.
(3) Incorporated herein by reference from the Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1997, File No. 33-95928 filed
with the Securities and Exchange Commission by LS Power Funding
Corporation, LSP-Cottage Grove, L.P. and LSP-Whitewater Limited
Partnership.
(4) Incorporated herein by reference from the Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 filed with the Securities
and Exchange Commission by LS Power Funding Corporation, LSP-Cottage
Grove, L.P. and LSP-Whitewater Limited Partnership.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K, dated January 12, 1998,
with respect to the determination of the Company's board of directors to change
the Company's fiscal year to commence on January 1 and conclude on December 31
of each year.
The Company filed a Current Report on Form 8-K, dated March 10, 1998,
with respect to the March 6, 1998 signing of a Securities Purchase Agreement
between the Company and certain of its subsidiaries (the "Purchasers") and LS
Power Corporation and Granite Power Partners, L.P. (the "Sellers") pursuant to
which the Purchasers agreed to acquire the Sellers' ownership interests in
certain of its assets.
The Company filed a Current Report on Form 8-K, dated March 23, 1998,
with respect to the signing of an agreement with Bechtel Generating Company,
Inc. ("Bechtel") to acquire Bechtel's ownership interests in certain of its
assets and to announce the Company's plans to issue up to $250 million in senior
notes pursuant to the Securities and Exchange Commission's Rule 144A in
connection with the acquisition.
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SIGNATURES
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)
May 15, 1998 /s/ JAMES R. PAGANO
-------------------------
James R. Pagano
Group Senior Vice President,
Chief Financial Officer
(Principal Financial Officer)
May 15, 1998 /s/ THOMAS F. SCHWARTZ
--------------------------
Thomas F. Schwartz
Senior Vice President - Finance
Treasurer
(Principal Accounting Officer)
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