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
SEPTEMBER 30, 2000
COMMISSION FILE NO. 333-608
CE CASECNAN WATER AND ENERGY COMPANY, INC.
(Exact name of registrant as specified in its charter)
PHILIPPINES Not Applicable
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
24th Floor, 6750 Building, Ayala Avenue
Makati, Metro Manila Philippines Not Applicable
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (632) 892-0276
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 shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Former name, former address and former fiscal year, if changed since last
report. Not Applicable
767,162 shares of Common Stock, $0.038 par value were outstanding as of
September 30, 2000.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
Form 10-Q
September 30, 2000
_____________
C O N T E N T S
PART I: FINANCIAL INFORMATION Page
Item 1. Financial Statements
Report of Independent Public Accountants 3
Balance Sheets, September 30, 2000 and December 31, 1999 4
Statements of Operations for the Three and Nine Months Ended
September 30, 2000 and 1999 and for the period from the date
of inception (September 21, 1994) to September 30, 2000 5
Statements of Cash Flows for the Nine Months Ended
September 30, 2000 and 1999 and for the period from the
date of inception (September 21, 1994) to September 30, 2000 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 9
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults on Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
Exhibit 27 12
Report of Independent Accountants
To the Board of Directors and Stockholders of
CE Casecnan Water and Energy Company, Inc.
We have reviewed the accompanying balance sheet of CE Casecnan Water and Energy
Company, Inc. (a company in the development stage) as of September 30, 2000, and
the related statements of operations for the three and nine months ended
September 30, 2000 and of cash flows for the nine months ended September 30,
2000. These financial statements are the responsibility of the Company's
management. The quarters ended September 30, 1999, March 31, 2000 and June 30,
2000 were reviewed by another independent accounting firm.
A review of interim financial information consists principally of obtaining an
understanding of the system for the preparation of interim financial
information, applying analytical review procedures to the financial data and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit made in accordance with generally
accepted auditing standards in the United States of America, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States of
America.
Another independent accounting firm had previously audited in accordance with
generally accepted auditing standards in the United States of America, the
balance sheet as of December 31, 1999, statements of operations and of cash
flows for the year then ended, whose report dated January 25, 2000 expressed an
unqualified opinion on those financial statements.
JOAQUIN CUNANAN & CO.
A PricewaterhouseCoopers Member Firm
Makati City, Philippines
November 13, 2000
CE CASECNAN WATER AND ENERGY COMPANY, INC.
BALANCE SHEET
(In thousands, except number of shares and per share amounts)
September 30, December 31,
2000 1999
------------------- -----------------
A S S E T S
Cash and cash equivalents $ 2,835 $ 2,318
Restricted cash and investments 98,181 164,239
Accrued interest and other receivables 517 1,750
Bond issue costs - net 7,911 9,010
Development and construction costs 394,430 337,983
Deferred income tax 5,919 7,098
- ----------------------------------------- ------------------- -----------------
$ 509,793 $ 522,398
========================================= =================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 19,335 $ 41,633
Advances from affiliates 15,634 10,024
Notes and bonds payable 371,500 371,500
- ----------------------------------------- ------------------- -----------------
406,469 423,157
- ----------------------------------------- ------------------- -----------------
Common stock - par value $0.038 per share
Authorized - 2,148,000 shares
Issued and outstanding - 767,162 shares 29 29
Additional paid-in capital 123,807 123,807
Accumulated deficit (20,512) (24,595)
- ----------------------------------------- ------------------- -----------------
103,324 99,241
- ----------------------------------------- ------------------- -----------------
$ 509,793 $ 522,398
========================================= =================== =================
(See accompanying notes to financial statements)
CE CASECNAN WATER AND ENERGY COMPANY, INC.
STATEMENTS OF OPERATIONS
(In thousands, except number of shares and per share amounts)
From the date
of inception
(September
Three months ended Nine months ended 21,1994) to
September 30 September 30 September 30,
----------------- ----------------- -------------- ----------------- ------------------
2000 1999 2000 1999 2000
----------------- ----------------- -------------- ----------------- ------------------
REVENUES
Interest income $ 1,858 $ 2,665 $ 6,367 $ 8,958 $ 85,446
- ----------------------------------------- ----------------- ----------------- -------------- ----------------- ------------------
1,858 2,665 6,367 8,958 85,446
- ----------------------------------------- ----------------- ----------------- -------------- ----------------- ------------------
COST AND EXPENSES:
Pre-operating expenses 212 - 212 - 212
Financial expenses
Interest expense 11,978 11,581 35,808 34,648 226,428
Capitalized interest (11,978) (9,315) (34,915) (26,658) (114,763)
- ----------------------------------------- ----------------- ----------------- -------------- ----------------- ------------------
Total costs and expenses 212 2,266 1,105 7,990 111,877
- ----------------------------------------- ----------------- ----------------- -------------- ----------------- ------------------
INCOME (LOSS) BEFORE
INCOME TAX 1,646 399 5,262 968 (26,431)
BENEFIT FROM
(PROVISION FOR)
DEFERRED INCOME TAX (369) (90) (1,179) (217) 5,919
- ----------------------------------------- ----------------- ----------------- -------------- ----------------- ------------------
NET INCOME (LOSS) $ 1,277 $ 309 $ 4,083 $ 751 $ (20,512)
========================================= ================= ================= ============== ================= ==================
NET INCOME (LOSS) PER
SHARE $ 1.66 $ 0.40 $ 5.32 $ 0.98 $ (27.96)
========================================= ================= =============== ================= ============== ====================
AVERAGE NUMBER OF
SHARES OUTSTANDING 767,162 767,162 767,162 767,162 733,645
========================================= ================= =============== ================= ============== ====================
(See accompanying notes to financial statements)
CE CASECNAN WATER AND ENERGY COMPANY, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
From the date
of inception
(September 21,
Nine months ended 1994) to
September 30, September 30,
------------------ ------------------
2000 1999 2000
- ------------------------------------------------------------------- ------------------ ------------------ --------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 4,083 $ 751 $ (20,512)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Provision for (benefit from) deferred income tax 1,179 217 (5,919)
Amortization of bond issue costs 1,099 993 5,679
Decrease (increase) in accrued interest
and other receivables 1,233 (152) (517)
Increase (decrease) in accounts payable
and accrued expenses 63 9,584 (7)
- ------------------------------------------------------------------- ------------------ ------------------ --------------------
Net cash provided by (used in) operating
Activities 7,657 11,393 (21,276)
- ------------------------------------------------------------------- ------------------ ------------------ --------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to development and construction costs (56,447) (49,704) (394,430)
Decrease (increase) in restricted cash
and investments 66,058 69,497 (98,181)
Increase (decrease) in accounts payable
and accrued expenses related to development
and construction activities (22,361) (36,277) 19,342
- ------------------------------------------------------------------- ------------------ ------------------ --------------------
Net cash used in investing activities (12,750) (16,484) (473,269)
- ------------------------------------------------------------------- ------------------ ------------------ --------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in advances from affiliates 5,610 5,532 15,634
Issuance of bonds payable - - 371,500
Proceeds from issuance of capital stock - - 123,836
Bond issue costs - - (13,590)
- ------------------------------------------------------------------- ------------------ ------------------ --------------------
Net cash provided by financing activities 5,610 5,532 497,380
- ------------------------------------------------------------------- ------------------ ------------------ --------------------
Net increase in cash and cash equivalents 517 441 2,835
Cash and cash equivalents at beginning of period 2,318 1,996 -
- ------------------------------------------------------------------- ------------------ ------------------ --------------------
Cash and cash equivalents at end of period $ 2,835 $ 2,437 $ 2,835
=================================================================== ================== ================== ====================
SUPPLEMENTAL DISCLOSURE OF CASH
FLOWS INFORMATION:
INTEREST PAID (NET OF AMOUNT CAPITALIZED) $ (9,981) $ (2,587) $ 90,530
=================================================================== ================== ================== ====================
(See accompanying notes to financial statements)
CE CASECNAN WATER AND ENERGY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
Note 1 - General
In the opinion of management of CE Casecnan Water and Energy Company, Inc. ("CE
Casecnan" or the "Company"), the accompanying unaudited financial statements
contain all adjustments (consisting only of normal recurring accruals) necessary
to present fairly the financial position of the Company as of September 30, 2000
and the results of its operations for the three and nine months ended September
30, 2000 and 1999 and for the period from the date of inception (September 21,
1994) to September 30, 2000, and its cash flows for the nine months ended
September 30, 2000 and 1999 and for the period from the date of inception
(September 21, 1994) to September 30, 2000.
The results of operations for the three and nine months ended September 30, 2000
and 1999 are not necessarily indicative of the results to be expected for the
full year.
Note 2 - Other footnote information
Reference is made to the Company's December 31, 1999 financial statements, which
were audited by other independent accountants in Form 10-K that included
information necessary or useful to the understanding of the Company's business
and financial statement presentations. In particular, the Company's significant
accounting policies and practices were presented as Note 2 to the financial
statements included in that report.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands)
Results of Operations
The Company is in the construction stage and has not yet started commercial
operations. Revenue consists of interest income on cash received from bond
proceeds and equity contributions. Interest income decreased in the third
quarter of 2000 to $1,858 from $2,665 in the same period in 1999, a 30.3%
decrease. For the nine months ended September 30, 2000, interest income
decreased to $6,367 from $8,958 in the same period in 1999, a 28.9% decrease.
These decreases are primarily due to lower cash balances as a result of the use
of existing cash to support the ongoing development and construction activities.
Interest expense inclusive of bond issue costs in the third quarter of 2000 was
$11,978 compared to $11,581 for the same period in 1999. For the nine months
ended September 30, 2000 and 1999, interest expense was $35,808 and $34,648,
respectively. Amortization of bond issue costs for the three and nine-month
periods ended September 30, 2000 were $366 and $1,099, respectively, compared to
$331 and $993 for the same period in 1999. Capitalized interest in the third
quarter of 2000 increased to $11,978 from $9,315 for the same period in 1999, a
28.6% increase. For the nine months ended September 30, 2000, capitalized
interest increased to $34,915 from $26,658 for the same period in 1999, a 31%
increase. The increases in capitalized interest resulted from higher cumulative
development and construction costs. Interest expense, capitalized interest and
amortization of bond issue costs relate to the notes and bonds payable issued by
the Company in the fourth quarter of 1996.
Liquidity and Capital Resources:
CE Casecnan financed a portion of the costs of the Casecnan Project through the
issuance of $125,000 of its 11.45% Senior Secured Series A Notes due 2005,
$171,500 of its 11.95% Senior Secured Series B Bonds due 2010 and $75,000 of its
Senior Secured Floating Rate Notes due 2002 (the "Securities"), pursuant to an
indenture (the "Indenture") dated as of November 27, 1995, as amended to date.
The Securities are senior debt of the Company and are secured by a collateral
assignment of all revenues that will be received from the Casecnan Project, a
collateral assignment of all material contracts, a lien on any accounts and
funds on deposit under a Deposit and Disbursement Agreement, a pledge of 100% of
the capital stock of the Company and a lien on all other material assets and
property. The Securities rank pari passu with and will share the collateral on a
pro rata basis with other senior secured debt, if any.
The Securities are subject to certain optional and mandatory redemption
provisions as defined in the Indenture. The Securities contain customary events
of default and restrictive covenants.
The Casecnan Project is being constructed pursuant to a fixed-price,
date-certain, turnkey engineering, procurement and construction contract to
complete the construction of the Casecnan Project (the "EPC Contract"). The work
under the EPC Contract is being conducted by a consortium consisting of
Cooperativa Muratori Cementisti CMC di Ravenna and Impresa Pizzarotti & C. Spa
working together with Siemens A.G., Sulzer Hydro Ltd., Black & Veatch and
Colenco Power Engineering Ltd. (collectively, the "Contractor").
On November 20, 1999, following a request by the Contractor, the EPC Contract
was amended, inter alia, to extend the Guaranteed Substantial Completion Date
for the Casecnan Project to March 31, 2001. In connection with such extension,
Stone & Webster, the Casecnan Project's independent engineer, confirmed that the
revised construction budget and schedule was reasonable and that funds remaining
available to the Company should be sufficient to complete the Casecnan Project.
Accordingly, the Casecnan Project is currently scheduled to become operational
by the second quarter of 2001, subject to any further completion date extensions
resulting from contractor delays.
The Republic of the Philippines ("RP") has recently been experiencing a period
of political unrest and governmental uncertainty relating to the impeachment of
President Estrada which could result in a change in the Presidency and related
changes to the RP cabinet and overall government administration.
Although the obligations of the National Irrigation Administration ("NIA") to
make payments to the Company for water and electricity fees under the Project
Agreement with NIA and the obligations of the RP under the related sovereign
performance undertaking are in no way dependent on maintaining any particular RP
administration in place or on any particular government's annual budgetary
appropriations, it is possible that the current Philippine governmental
uncertainty could have an adverse impact on the Casecnan Project, which, as
noted above, is scheduled to commence commercial operation and commence
receiving payments in 2001.
Certain information included in this report contains forward-looking statements
made pursuant to the Private Securities Litigation Reform Act of 1995 ("Reform
Act"). Such statements are based on current expectations and involve a number of
known and unknown risks and uncertainties that could cause the actual results
and performance of the Company to differ materially from any expected future
results or performance, expressed or implied, by the forward-looking statements.
In connection with the safe harbor provisions of the Reform Act, the Company has
identified important factors that could cause actual results to differ
materially from such expectations, including development uncertainty, operating
uncertainty, acquisition uncertainty, uncertainties relating to doing business
outside of the United States, uncertainties relating to domestic and
international economic and political conditions and uncertainties regarding the
impact of regulations, changes in government policy, industry deregulation and
competition. Reference is made to all of the Company's SEC filings, incorporated
herein by reference, for a description of such factors. The Company assumes no
responsibility to update forward-looking information contained herein.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
PART II - OTHER INFORMATION
Item 1 - Legal proceedings.
Not applicable.
Item 2 - Changes in Securities.
Not applicable.
Item 3 - Defaults on Senior Securities.
Not applicable.
Item 4 - Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5 - Other Information.
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
Not applicable.
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.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
Date: November 14, 2000 /s/ Patrick J. Goodman
Patrick J. Goodman
Senior Vice President & Chief Financial Officer