SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report: September 8, 2006
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(Date of earliest event reported)
Zond Windsystem Partners, Ltd., Series 85-B,
a California Limited Partnership
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(Exact Name of Registrant as Specified in its Charter)
California 000-51875 77-0081345
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(State or Other (Commission (IRS Employer
Jurisdiction of Incorporation) File Number) Identification No.)
1221 Lamar Street, Suite 1600, Houston, Texas 77010
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(Address of Principal Executive Offices)
(713) 853-0530
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(Registrant's telephone number, including area code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 1.01. Entry into a Material Definitive Agreement.
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As previously reported in the Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 2006 of Zond Windsystem Partners, Ltd., Series
85-B, a California Limited Partnership (the "Partnership"), Enron Wind Systems,
LLC ("EWS") and Southern California Edison Company ("SCE") entered into a
Settlement Agreement and Release of Claims dated as of August 11, 2006 (the "SCE
Settlement Agreement"), pursuant to which, in consideration for the payment by
EWS of amounts overpaid by SCE under the Power Purchase Agreement dated as of
June 22, 1984, as amended, between SCE and the Partnership (the "85-B Power
Agreement"), plus applicable interest, as agreed between the parties, SCE agreed
to release EWS, the Partnership and Zond Windsystem Partners, Ltd., Series 85-A,
a California Limited Partnership ("Series 85-A"), among others, from liability
associated with such overpayments. The SCE Settlement Agreement was approved by
the United States Bankruptcy Court for the Southern District of New York on
August 24, 2006. The releases provided by SCE under the Settlement Agreement
became effective on September 8, 2006, the date on which EWS made a payment
to SCE of $7 million pursuant to the terms of the Settlement Agreement.
In 1996, the Partnership had informed the Partnership's limited
partners that it was reviewing the payments received from SCE in 1996 for energy
delivered under the 85-B Power Agreement in the context of the Partnership's
contractual rights, and due to the apparent uncertainty concerning this issue,
the Partnership recognized the difference between the cash received by the
Partnership applicable to the windsystem under the fixed rate of the 85-B Power
Agreement and the avoided cost variable rates during the year ended December 31,
1996 (approximately $3.9 million) as deferred revenue (the "Deferred Energy
Revenue"). The Deferred Energy Revenue was segregated from the Partnership's
operating cash account and was not recognized as income. In connection with
discussions with SCE, it was further discovered that from January 1996 through
June 2006, SCE made capacity payments under the 85-B Power Agreement in the
amount of approximately $628,000 in excess of the amounts required to be paid
under the 85-B Power Agreement. Of this amount, approximately $589,000 related
to and was retained by the Partnership (the "Excess Capacity Revenue"). Prior to
September 8, 2006, the Deferred Energy Revenue, related accrued interest and the
Excess Capacity Revenue were classified as deferred revenue in the Partnership's
financial statements. Effective September 8, 2006, in conjunction with the
releases provided by SCE, as discussed above, this deferred revenue of
approximately $4.7 million will be recognized as other income in the
Partnership's financial statements.
There is no assurance that regulators or other governmental authorities
will not make certain assertions related to this matter, including that a
violation of law has occurred, or take some type of action against the
Partnership or others associated with these events. At this time, the
Partnership is unable to determine whether, and to what extent, the Partnership
has financial exposure related to any such potential claims, assertions or
actions, and the Partnership reserves all of its rights and defenses associated
therewith. Therefore, the Partnership is unable to predict the ultimate outcome
this matter may have on the Partnership's financial position, results of
operations or cash flows.
Item 1.02. Termination of a Material Definitive Agreement.
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On September 8, 2006, the Partnership sold substantially all of its
assets to AES Tehachapi Wind, LLC ("AES Tehachapi") effective as of August 31,
2006, pursuant to the Purchase and Sale Agreement dated as of April 12, 2006, by
and among EWS, ZWHC LLC ("ZWHC"), Series 85-A, the Partnership, AES Tehachapi
and SeaWest Holdings, Inc., as amended by the First Amendment to Purchase and
Sale Agreement dated as of July 31, 2006, the Second Amendment to Purchase and
Sale Agreement dated as of August 31, 2006 (the "Second Amendment to Purchase
and Sale Agreement") and the Third Amendment to Purchase and Sale Agreement
dated as of September 7, 2006 (the "Third Amendment to Purchase and Sale
Agreement") (collectively, the "Purchase Agreement").
Concurrent with the closing of such transaction, (i) the Partnership
and EWS entered into the Termination of Sublease (the "Sublease Termination")
effective as of August 31, 2006, terminating the Sublease dated as of August 30,
1990, between EWS and the Partnership, (ii) the Partnership and ZWHC entered
into the Termination of Amended and Restated Series B Wind Park Easement
Agreement (the "Easement Agreement Termination") effective as of August 31,
2006, terminating the Amended and Restated Series B Wind Park Easement Agreement
dated as of March 24, 1986 between the Partnership and ZWHC, (iii) the
Partnership and EWS entered into the Termination of Series B Power Transfer
Facilities Agreement (the "Transfer Facilities Termination") effective as of
August 31, 2006, terminating the Series A Power Transfer Facilities Agreement
dated as of September 9, 1985, as amended, between the Partnership and EWS, (iv)
the Partnership and EWS entered into the Termination of Windsystem Management
Agreement (the "Management Agreement Termination") effective as of August 31,
2006, terminating the Windsystem Management Agreement dated as of September 9,
1985, as amended, between EWS and the Partnership, (v) the Partnership and EWS
entered into the Termination of Reservation of Rights Agreement (the
"Reservation of Rights Agreement Termination") effective as of August 31, 2006,
terminating the Reservation of Rights Agreement dated as of February 15, 2006
between EWS and the Partnership, and (vi) EWS assigned to AES Tehachapi,
effective as of August 31, 2006, certain of the rights and obligations
of EWS under that certain Windsystem Operation and Maintenance Agreement dated
as of April 23, 2003 between EWS and enXco Service Corp. ("enXco")(the "O&M
Agreement"), pursuant to which enXco operated and maintained the Partnership's
wind turbines and other wind project assets. The Partnership did not incur any
early termination penalties in connection with the termination of the foregoing
agreements, and neither EWS nor the Partnership incurred any demobilization fees
in connection with the assignment of the O&M Agreement.
Copies of the Sublease Termination, the Easement Agreement Termination,
the Transfer Facilities Termination, the Management Agreement Termination
and the Reservation of Rights Agreement Termination are attached hereto as
Exhibits 10.1 through 10.5, respectively.
Item 2.01. Completion of Acquisition or Disposition of Assets.
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On September 8, 2006, pursuant to the Purchase Agreement, AES
Tehachapi purchased, effective as of August 31, 2006, the wind turbines and
transmission assets owned by the Partnership and Series 85-A, the real estate
interests relating to such projects owned by ZWHC and EWS and the power purchase
agreements used in connection with the projects held by EWS. The assets sold by
the Partnership pursuant to the Purchase Agreement constituted substantially all
of the assets of the Partnership. Pursuant to the terms of the Purchase
Agreement, the Partnership, Series 85-A, ZWHC and EWS received an aggregate
consideration of $15,312,500. The portion of the purchase price to be allocated
to the Partnership has not yet been determined.
Copies of the Second Amendment to Purchase and Sale Agreement and the
Third Amendment to Purchase and Sale Agreement are attached hereto as Exhibit
10.6 and Exhibit 10.7, respectively.
Item 9.01 Financial Statements and Exhibits.
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(c) Exhibits.
10.1 Termination of Sublease effective as of August 31, 2006, between Enron
Wind Systems, LLC and Zond Windsystem Partners, Ltd. Series 85-B.
10.2 Termination of Amended and Restated Series B Wind Park Easement
Agreement effective as of August 31, 2006, between ZWHC, LLC and Zond
Windsystem Partners, Ltd. Series 85-B.
10.3 Termination of Series B Power Transfer Facilities Agreement effective
as of August 31, 2006, between Enron Wind Systems, LLC and Zond
Windsystem Partners, Ltd. Series 85-B.
10.4 Termination of Windsystem Management Agreement effective as of August
31, 2006, between Enron Wind Systems, LLC and Zond Windsystem Partners,
Ltd. Series 85-B.
10.5 Termination of Reservation of Rights Agreement effective as of August
31, 2006, between Enron Wind Systems, LLC and Zond Windsystem Partners,
Ltd. Series 85-B.
10.6 Second Amendment to Purchase and Sale Agreement (Tehachapi Pass Wind
Project) dated as of August 31, 2006 by and among Enron Wind Systems
LLC, ZWHC LLC, Zond Windsystem Partners Ltd. Series 85-A, Zond
Windsystem Partners Ltd. Series 85-B, AES Tehachapi Wind, LLC and
SeaWest Holdings, Inc.
10.7 Third Amendment to Purchase and Sale Agreement (Tehachapi Pass Wind
Project) dated as of September 7, 2006 by and among Enron Wind Systems
LLC, ZWHC LLC, Zond Windsystem Partners Ltd. Series 85-A, Zond
Windsystem Partners Ltd. Series 85-B, AES Tehachapi Wind, LLC and
SeaWest Holdings, Inc.
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 hereunto duly authorized.
Zond Windsystem Partners, Ltd. Series 85-B,
a California Limited Partnership
By: Zond Windsystems Management IV LLC,
General Partner
Date: September 14, 2006 By: /s/ Jesse E. Neyman
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Name: Jesse E. Neyman
Title: President and Chief Executive
Officer