SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the calendar year ended December 31, 2000
Commission File No. 333-00608
CE CASECNAN WATER AND ENERGY COMPANY, INC.
(Exact name of registrant as specified in its charter)
Philippines Not applicable
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(State or other (IRS Employer
jurisdiction of incorporation Identification No.)
or organization)
24th Floor 6750 Building, Ayala Avenue Not applicable
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Makati, Manila, Philippines (Zip Code)
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(Address of principal executive offices)
Registrant's telephone number, including area code: (632) 892-0276
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Securities registered pursuant to Section 12(b) of the Act: N/A
Securities registered pursuant to Section 12(g) of the Act: N/A
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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
All Common Stock of the Company is held by the original shareholders.
767,162 shares of Common Stock, $0.038 par value, were outstanding on March
29, 2001.
TABLE OF CONTENTS
PART I........................................................................4
ITEM 1. BUSINESS.............................................................4
General....................................................................4
Project....................................................................4
Terms of the Securities....................................................8
General...................................................................8
Payment of Principal and Interest.........................................8
Priority of Payments.....................................................10
Debt Service Reserve Fund................................................11
Optional Redemption......................................................11
Mandatory Redemption.....................................................11
Change in Control Put....................................................12
Distributions............................................................12
Ranking and Security for the Securities..................................12
Ratings..................................................................13
Nature of Recourse on the Securities.....................................13
Incurrence of Additional Debt............................................13
Principal Covenants......................................................15
Insurance.................................................................15
Regulatory Matters........................................................16
Employees.................................................................16
ITEM 2. PROPERTIES..........................................................17
ITEM 3. LEGAL PROCEEDINGS...................................................17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................17
PART II......................................................................18
ITEM 5. MARKET FOR COMPANY'S EQUITY AND RELATED STOCKHOLDER MATTERS.........18
ITEM 6. SELECTED FINANCIAL DATA.............................................18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION........................................18
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.........21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.........................22
Report of Independent Public Accountants..................................23
Report of Independent Public Accountants..................................24
Balance Sheets...........................................................25
Statements of Operations..................................................26
Statements of Changes in Stockholders' Equity.............................27
Statements of Cash Flows..................................................28
Notes to Financial Statements.............................................29
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.......................................37
PART III.....................................................................38
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY....................38
ITEM 11. EXECUTIVE COMPENSATION.............................................40
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....40
Description of Capital Stock..............................................40
Principal Holders.........................................................41
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION......................42
PART Iv......................................................................43
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES ON FORM 8-K...........43
SIGNATURES...................................................................44
INDEX TO EXHIBITS............................................................45
PART I
Item 1. Business
General
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CE Casecnan Water and Energy Company, Inc. ("Company" or "CE Casecnan") is a
privately held Philippine corporation formed in September of 1994 solely to
develop, construct, own and operate the Casecnan project, a multi-purpose
irrigation and hydroelectric power facility with a rated capacity of
approximately 150 Megawatts ("MW") located on the island of Luzon in the
Republic of the Philippines (the "Casecnan Project"). After the completion of
construction of the Casecnan Project, the Company is expected to be owned at
least 70% (subject to upward adjustment based upon the actual economics of the
Casecnan Project at commencement of commercial operations and the exercise of
certain options by a third party) by MidAmerican Energy Holdings Company
("MidAmerican") through its wholly owned indirect subsidiary CE Casecnan Ltd.
The ownership percentage held by the minority shareholders may be reduced in
certain circumstances and such reduction would result in a corresponding
increase in the ownership percentage of the Company held by affiliates of
MidAmerican.
The Securities (described herein) are recourse only to the Company. MidAmerican
has not guaranteed directly or indirectly the payment or performance of any
Company obligations.
The Company's principal executive office is located at 24th Floor 6750 Building,
Ayala Avenue, Makati City, Philippines, and its telephone number is 63 2 892
0276. The Company's principal office will be located in Pantabangan in the
Province of Nueva Ecija, Philippines upon commencement of commercial operations.
Project
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The Casecnan Project is located in the central part of the island of Luzon. It
consists generally of diversion structures in the Casecnan and Taan Rivers that
will capture and divert excess water in the Casecnan watershed by means of
concrete, in-stream diversion weirs and transfer that water through a transbasin
tunnel of approximately 23 kilometers (including the intake adit from the Taan
to the Casecnan River), with a diameter of approximately 6.5 meters to an
existing underutilized water storage reservoir at Pantabangan. During the water
transfer, the elevation differences between the two watersheds will allow
electrical energy to be generated at a new 150 net MW rated capacity power
plant, which is being constructed in an underground powerhouse cavern located at
the end of the water tunnel. A tailrace discharge tunnel of
approximately three kilometers will deliver water from the water tunnel and the
new powerhouse to the Pantabangan Reservoir, providing additional water for
irrigation and increasing the potential electrical generation at two downstream
existing hydroelectric facilities of the Philippine National Power Corporation
("NPC"), the government-owned and controlled corporation that is the primary
supplier of electricity in the Philippines. Since the water has been determined
to remain suitable for irrigation throughout the Casecnan Project operations of
capturing, diverting and transferring the water, other than removing sediments
at the diversion structures, no treatment will be required. Once in the
reservoir at Pantabangan, the water will be under the control of, and for the
use of the Philippine National Irrigation Administration ("NIA").
The Casecnan Project's diversion structures will be capable of storing flows
from the Casecnan and Taan Rivers over a number of hours, and then discharging
that stored water through the transbasin tunnel and new powerhouse during the 12
hours (8:00 a.m. through 8:00 p.m.) coinciding with peak electrical demand
hours. Tunnel flows and water depths behind the diversion structures will be
regulated by in-tunnel valves in front of the powerhouse turbines controlled by
the operators at the powerhouse control room.
In early 1994, President Fidel Ramos recognized the need for an irrigation and
hydroelectric project that would provide increased water flows for irrigation to
the rice growing area of Central Luzon, would be environmentally sound,
technically feasible and economically viable, and would involve no flooding or
relocation of local residents. At that time, he directed the Philippine
Department of Agriculture and NPC to work together with other interested
agencies to develop a combined irrigation and hydroelectric project. Shortly
thereafter, the Philippine government was approached by the Company with a
proposal for a project to be developed in the Casecnan area on a
build-own-operate-transfer ("BOOT") basis, that is, an arrangement under which
the Company as developer would agree to build during the construction period and
thereafter own and operate the Casecnan Project for a twenty-year cooperation
period, after which ownership and operation of the Project would be transferred
to NIA and NPC at no cost on an "as-is" basis. After conclusion of a public
solicitation for competing proposals, NIA selected the Company as the BOOT
developer and entered into a project agreement with the Company (the "Project
Agreement"). The Casecnan Project was subsequently designated a high priority
project under Republic Act No. 529 by the National Economic and Development
Authority of the Philippines.
CE Casecnan is constructing the Casecnan Project under the terms of the Project
Agreement between CE Casecnan and NIA. Under the Project Agreement, CE Casecnan
will develop, finance and construct the Casecnan Project over the construction
period, and thereafter own and operate the Casecnan Project for 20 years (the
"Cooperation Period"). During the Cooperation Period, NIA is obligated to accept
all deliveries of water and energy, and so long as the Casecnan
Project is physically capable of operating and delivering in accordance with
agreed levels set forth in the Project Agreement, NIA will pay CE Casecnan a
fixed fee for the delivery of a minimum volume of water and a fixed fee for the
delivery of a minimum amount of electricity. In addition, NIA will pay a fee for
all electricity delivered in excess of a threshold amount up to a specified
amount. NIA will sell the electricity it purchases to NPC, although NIA's
obligations to CE Casecnan under the Project Agreement are not dependent on
NPC's purchase of the electricity from NIA. All fees to be paid by NIA to CE
Casecnan are payable in U.S. dollars. The fixed fees paid for the delivery of
water and energy, regardless of the amount of electricity or water actually
delivered, are expected to provide approximately 70% of CE Casecnan's revenues.
At the end of the Cooperation Period, the Casecnan Project will be transferred
to NIA for no additional consideration on an "as is" basis.
The Project Agreement provides for additional compensation to CE Casecnan upon
the occurrence of certain events, including increases in Philippine taxes and
adverse changes in Philippine law. Upon the occurrence and during the
continuance of certain force majeure events, including those associated with
Philippine political action, NIA may be obligated to buy the Casecnan Project
from CE Casecnan at a buy out price expected to be in excess of the aggregate
principal amount of the outstanding CE Casecnan debt securities, together with
accrued but unpaid interest.
The Republic of the Philippines has provided a Performance Undertaking under
which NIA's obligations under the Project Agreement are guaranteed by the full
faith and credit of the Republic of the Philippines. The Project Agreement and
the Performance Undertaking provide for the resolution of disputes by binding
arbitration in Singapore under international arbitration rules.
NIA's payment obligations under the Project Agreement are expected to be the
Company's sole source of operating revenues. Because of the Company's dependence
on NIA, any material failure of NIA to fulfill its obligations under the Project
Agreement and any material failure of the Republic of the Philippines to fulfill
its obligations under the Performance Undertaking would significantly impair the
ability of the Company to meet its obligations under the Securities.
CE Casecnan financed a portion of the costs of the Casecnan Project through the
issuance of $125,000,000 of its 11.45% Senior Secured Series A Notes due 2005
(the "Series A Notes") and $171,500,000 of its 11.95% Senior Secured Series B
Bonds due 2010 (the "Series B Bonds") and $75,000,000 of its Senior Secured
Floating Rate Notes due 2002, pursuant to an indenture dated November 27, 1995,
as amended to date (the "Casecnan Indenture").
The Casecnan Project was initially being constructed pursuant to a fixed-price,
date-certain, turnkey construction contract (the "Hanbo Contract") on a joint
and several basis by Hanbo Corporation ("Hanbo") and Hanbo Engineering and
Construction Co., Ltd. ("HECC"), both of which are South Korean corporations. As
of May 7, 1997, the Company terminated the Hanbo Contract due to defaults by
Hanbo and HECC including the insolvency of each such company. On the same date,
the Company entered into a new fixed-price, date certain, turnkey engineering,
procurement and construction contract to complete the construction of the
Casecnan Project (the "Replacement Contract"). The work under the Replacement
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, the Replacement Contract was amended to extend the
Guaranteed Substantial Completion Date for the Casecnan Project to March 31,
2001. This amendment was approved by the lender's independent engineer under the
Casecnan Indenture. In January 2001, the Company received a new working schedule
from the Contractor that showed a completion date of August 31, 2001.
Accordingly, the Casecnan Project is now expected to become operational by the
third quarter of 2001. The delay in completion is attributable in part to the
collapse in December 2000 of the Project's partially completed vertical surge
shaft and the need to drill a replacement surge shaft.
The receipt of the working schedule does not change the Guaranteed Substantial
Completion Date under the Replacement Contract, and the Contractor is still
contractually obligated either to complete the Project by March 31, 2001 or to
pay delay liquidated damages. As a result of receipt of the working schedule,
however, the Company has sought and obtained from the lender's independent
engineer approval for a revised construction schedule under the Casecnan
Indenture. In connection with the revised schedule, the ultimate parent company
of CE Casecnan agreed to make available up to $11.6 million of additional funds
under certain conditions pursuant to a Shareholder Support Letter dated February
8, 2001 (the "Shareholder Support Letter") to cover additional costs resulting
from the Contractor's schedule delay.
On February 12, 2001, the Contractor filed a Request for Arbitration with the
International Chamber of Commerce seeking an extension of the Guaranteed
Substantial Completion Date by up to 153 days through August 31, 2001 -
resulting from various alleged force majeure events. In a March 20, 2001
Supplement to Request for Arbitration, the Contractor also seeks compensation
for alleged additional costs it incurred from the claimed force majeure events
to the extent it is unable to recover from its insurer. CE Casecnan believes
such allegations are without merit and intends to vigorously defend the
Contractor's claims.
Under the Project Agreement, if NIA is able to accept delivery of water into the
Pantabangan Reservoir and NPC has completed the Project's related transmission
line, the Company is liable to pay NIA $5,500 per day for each day of delay in
completion of the Casecnan Project beyond July 27, 2000, increasing to $13,500
per day for each day of delay in completion beyond November 27, 2000. Although
the transmission line is complete, NIA has not yet installed the Project's
metering equipment. Accordingly, no liquidated damages payments to NIA have been
made.
The Company's ability to make payments on any of its existing and future
obligations is dependent on NIA's and the Republic of the Philippines'
performance of their obligations under the Project Agreement and the Performance
Undertaking, respectively. Except to the extent expressly provided for in the
Shareholder Support Letters, no shareholders, partners or affiliates of the
Company, including MidAmerican, and no directors, officers or employees of the
Company will guarantee or be in any way liable for payment of the Company's
obligations. As a result, payment of the Company's obligations depends upon the
availability of sufficient revenues from the Company's business after the
payment of operating expenses.
There are pending bills before the Philippine Congress and the Philippine Senate
aimed at restructuring the electric industry, privatization of the NPC and
introduction of a competitive electricity market, among others. The passage of
the bills may have an impact on the Company's future operations and the industry
as a whole, the effect of which is not yet determinable and estimable.
Terms of the Securities
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General
In November 1995, the Company issued and sold (i) $125,000,000 aggregate
principal amount of the 11.45% Senior Secured Series A Notes due November 15,
2005 ("Series A Notes"), (ii) $171,500,000 aggregate principal amount of 11.95%
Senior Secured Series B Bonds due November 15, 2010 ("Series B Bonds"), and
(iii) $75,000,000 aggregate principal amount of LIBOR Plus 3.00% Senior Secured
Floating Rate Notes due November 15, 2002 ("FRNs"), collectively referred to
herein as the "Securities". The FRNs rank pari passu with and will share the
collateral on a pro rata basis with the Series A Notes and the Series B Bonds
and are entitled to the benefits of the Indenture and the Depositary Agreement.
The Securities are direct obligations of the Company, secured solely by the
Company collateral.
Payment of Principal and Interest
Interest on the Securities is payable semiannually on each May 15 and November
15 (the "Securities Interest Payment Date"), commencing May 15, 1996, to the
registered Holders thereof at the close of business on the May 1 and November 1,
as the case may be, preceding each Securities Interest Payment Date. The initial
average life of the Series A Notes was 8.84 years, and the initial average life
of the Series B Bonds was 11.57 years.
The $125,000,000 principal of the Series A Notes due November 15, 2005 is
payable in semiannual installments, commencing May 15, 2003, as follows:
Percentage of Principal
Payment Date Amount Payable
May 15, 2003 13.50%
November 15, 2003 13.50%
May 15, 2004 17.00%
November 15, 2004 17.00%
May 15, 2005 19.50%
November 15, 2005 19.50%
The $171,500,000 principal of the Series B Bonds due November 15, 2010 is
payable in semiannual installments, commencing May 15, 2002, as follows:
Percentage of Principal
Payment Date Amount Payable
May 15, 2002 2.50%
November 15, 2002 2.50%
May 15, 2003 2.25%
November 15, 2003 2.25%
May 15, 2004 2.00%
November 15, 2004 2.00%
May 15, 2005 1.75%
November 15, 2005 1.75%
May 15, 2006 10.50%
November 15, 2006 10.50%
May 15, 2007 11.00%
November 15, 2007 11.00%
May 15, 2008 11.00%
November 15, 2008 11.00%
May 15, 2009 4.00%
November 15, 2009 4.00%
May 15, 2010 5.00%
November 15, 2010 5.00%
The $75,000,000 principal of the FRNs due November 15, 2002 is payable in
semiannual installments, commencing November 15, 2000, as follows:
Percentage of Principal
Payment Date Amount Payable
November 15, 2000 25.00%
May 15, 2001 19.50%
November 15, 2001 20.00%
May 15, 2002 18.00%
November 15, 2002 17.50%
The FRNs bear interest at LIBOR plus 3.00% per annum and will be payable
quarterly on each February 15, May 15, August 15, and November 15, commencing on
February 15, 1996, to the registered Holders thereof at the close of business on
the preceding February 1, May 1, August 1, and November 1, as the case may be.
Priority of Payments
Prior to completion of the Casecnan Project pursuant to the Replacement
Contract, all net proceeds of the Securities and any liquidated damages proceeds
will be deposited in the Construction Fund and disbursed to pay for budgeted
construction or restoration costs, including interest and, if applicable,
principal on the Securities.
After completion, except as otherwise provided for with respect to mandatory
redemptions and loss proceeds, all revenues received by the Company from the
Casecnan Project will be paid into the Revenue Fund maintained by the Depositary
(other than certain peso payments required to be used for VAT payments to the
Republic of the Philippines). Amounts paid into the Revenue Fund shall be
distributed in the following order of priority: (a) to pay operating and
maintenance costs; (b) to pay certain administrative costs of the agents for the
Secured Parties under the Financing Documents; (c) to pay principal of, premium
(if any) and interest on the Securities (including any increased costs necessary
to gross up such payments for certain withholding taxes and other assessments
and charges), and principal and interest on other senior debt, if any; (d) to
cause the Debt Service Reserve Fund to equal the Debt Service Reserve Fund
Required Balance, as defined below; (e) to pay indemnification expenses and
other expenses to the Secured Parties and certain other costs, and (f) to the
Distribution Fund or Distribution Suspense Fund, as applicable.
Debt Service Reserve Fund
At completion, the Company will establish a Debt Service Reserve Fund for the
benefit of the Holders of the Securities, which will be funded in cash from any
remaining shareholder capital contributions in the Capital Contribution Fund or,
to the extent required, from operating revenues as described under "Priority of
Payments" above. Such amounts will be deposited into the Debt Service Reserve
Fund from time to time to the extent required to cause it to equal the Debt
Service Reserve Fund Required Balance which is intended to approximate the
highest amount of the payments of principal and interest to be made on the
Securities during any semiannual period over the subsequent three years.
Optional Redemption
On and after the seventh anniversary of the closing (as defined in the Trust
Indenture) of the Casecnan Project financing, the Series A Notes are subject to
optional redemption by the Company, in whole and not in part, at par plus
accrued interest to the Redemption Date.
The Series B Bonds are subject to optional redemption by the Company, at any
time, in whole or in part, pro rata, at par plus accrued interest to the
redemption date plus a premium, calculated to "make whole" to comparable U.S.
treasury securities plus 150 basis points.
After completion, the FRN's are subject to optional redemption by the Company,
in whole or in part, pro rata at par plus accrued interest, on any FRN interest
payment date.
The Company also has the option to redeem the Securities, in whole or in part,
at par plus accrued interest at any time if, as a result of any change in
Philippine tax law or in the application or interpretation of Philippine tax law
occurring after the date of issuance of the Securities, the Company is required
to pay certain additional amounts described in the Indenture.
Mandatory Redemption
The Securities are subject to mandatory redemption, pro rata, at par plus
accrued interest to the redemption date, (a) upon the receipt by the Company of
loss proceeds that exceed $15 million in respect of certain events of property
or casualty loss or similar events, unless the funds are to be utilized by the
Company for an Approved Restoration Plan; or (b) upon the receipt by the Company
of proceeds realized in connection with a Project Agreement Buyout.
Change in Control Put
Upon the occurrence of a Change of Control, each Holder will have the right to
require the Company to repurchase all or any part of such Holder's Securities at
a purchase price in cash equal to 101% of the principal amount thereof, plus
accrued interest to the date of repurchase in accordance with the procedures set
forth in the Indenture. There is no assurance that upon a Change in Control the
Company will have sufficient funds to repurchase the Securities.
Distributions
Prior to completion, there will be no distributions to the Company or its
shareholders. After completion, distributions may be made only from and to the
extent of monies on deposit in the Distribution Fund or Distribution Suspense
Fund. Distributions are subject to the prior satisfaction of the following
conditions:
(a) The amounts contained in the Principal Fund and the Interest Fund will be
equal to or greater than the aggregate scheduled principal and interest
payments next due on the Securities;
(b) No Default or Event of Default under the Indenture shall have occurred and
be continuing;
(c) The Debt Service Coverage Ratio for the preceding 12-month period is equal
to or greater than 1.35 to 1 as certified by an officer of the Company;
(d) The projected Debt Service Coverage Ratio of the Securities for the
succeeding 12-month period is equal to or greater than 1.35 to 1, as
certified by an officer of the Company; and,
(e) The Debt Service Reserve Fund has a balance equal to or greater than the
Debt Service Reserve Fund Required Balance.
Ranking and Security for the Securities
The Securities are senior debt of the Company and are secured by (a) an
assignment of all revenues received by the Company from the Casecnan Project;
(b) a collateral assignment of all material contracts; (c) a lien on any
accounts and funds on deposit under the Depositary Agreement; (d) a pledge of
approximately 100% of the capital stock of the Company, subject to release in
certain circumstances relating to accessing political risk insurance for the
benefit of the shareholders; and (e) a lien on all other material assets and
property interests of the Company. The Securities will rank pari passu with and
will share the Collateral on a pro rata basis with certain other senior secured
debt, if any (provided that the Debt Service Reserve Fund shall be collateral
solely for the obligations under the Securities). The proceeds of any political
risk insurance covering the capital investment will not be part of the
collateral for the Securities. While under the Indenture the Company may incur
certain permitted debt senior to the Securities, it has no present intention to
do so.
Ratings
Moody's and Standard & Poor's have assigned the Securities ratings of "Ba2" and
"BB+", respectively. There is no assurance that any such credit rating will
remain in effect for any given period of time or that such rating will not be
lowered, suspended or withdrawn entirely by the applicable rating agency, if, in
such rating agency's judgment, circumstances so warrant.
Nature of Recourse on the Securities
The Company's obligations to make payments of principal, premium, if any, and
interest on the Securities are obligations solely of the Company secured solely
by the collateral. Neither the shareholders of the Company nor any Affiliate,
including MidAmerican, incorporator, officer, director or employee thereof or of
the Company guaranteed the payment of, nor have any obligation with respect to
payment of the Securities, except to the extent that affiliates of MidAmerican
who are stockholders of the Company have pledged their capital stock in the
Company as security for the notes and bonds issued by the Company. As a result,
payment of the Company's obligations depends upon the availability of sufficient
revenues from the Company's business after the payment of operating expenses.
Incurrence of Additional Debt
The Company shall not incur any debt other than "Permitted Debt." "Permitted
Debt" means:
(a) The Securities;
(b) After completion, debt incurred to finance the making of capital
improvements to the Casecnan Project required to maintain compliance with
applicable law or anticipated changes therein; provided that no such debt
may be incurred unless at the time of incurrence the independent engineer
confirms as reasonable (i) a certification by the Company (containing
customary assumptions and qualifications) that the proposed capital
improvements are reasonably expected to enable the Casecnan Project to
comply with applicable or anticipated legal requirements and (ii) the
calculations of the Company that demonstrate, after giving effect to the
incurrence of such debt, the minimum project Debt Service Coverage Ratio
(x) for the next four consecutive fiscal quarters, commencing with the
quarter in which such debt is incurred, taken as one annual period, and (y)
for each subsequent fiscal year through the final maturity date, will not
be less than 1.3 to 1;
(c) After completion, debt incurred to finance the making of capital
improvements to the Casecnan Project not required by applicable law, so
long as after giving effect to the incurrence of such debt (i) no default
or event of default has occurred and is continuing, and (ii)(A) the
independent engineer confirms as reasonable (I) a certification by the
Company (containing customary assumptions and qualifications) that the
proposed capital improvements are technically feasible and prudent and (II)
the calculations of the Company that demonstrate, after giving effect to
the incurrence of such debt, (x) the minimum project Debt Service Coverage
Ratio for the next four consecutive fiscal quarters, commencing with the
quarter in which such debt is incurred, taken as one annual period, and in
every fiscal year thereafter, will not be less than 1.4 to 1 and (y) the
average projected Debt Service Coverage Ratio for all succeeding fiscal
years until the final maturity date will not be less than 1.7 to 1, or (B)
the rating agencies confirm that the incurrence of such debt will not
result in a rating downgrade;
(d) After completion, working capital debt in an aggregate amount outstanding
at any time not to exceed $5 million;
(e) Debt incurred in connection with certain permitted interest rate and
currency hedging arrangements;
(f) Subordinated debt from affiliates in an aggregate amount not to exceed $150
million prior to completion and $100 million after completion, which shall
be used to finance capital, operating or other costs with respect to the
Project;
(g) Debt incurred for purposes for which permitted liens may be incurred;
(h) Debt contemplated to be incurred pursuant to the Casecnan Project
documents, including obligations in connection with any letter of credit in
an aggregate amount outstanding at any time not to exceed $15 million;
(i) Purchase money debt and other ordinary course trade debt to support
operation and maintenance of the Casecnan Project, in an aggregate amount
at any time not to exceed $35 million;
(j) Permitted refinancing debt, if, as certified by an authorized officer of
the Company at the time of incurrence, (A)(i) after giving effect to the
incurrence of such debt, (x) the minimum projected Debt Service Coverage
Ratio for the next four consecutive fiscal quarters in which such debt is
incurred, taken as one annual period, and in every fiscal year thereafter,
will not be less than 1.5 to 1, and (y) for each subsequent fiscal year
through the final maturity date, the average project Debt Service Coverage
Ratio will not be less than 2.0 to 1, and (ii) the final maturity and
average life of the debt incurred each exceed those of the debt remaining,
(B) each principal payment equals that of each corresponding principal
payment of the debt being replaced or (C) the rating agencies confirm that
the incurrence of such debt will not result in a rating downgrade; and,
(k) Debt incurred by the Company prior to completion as necessary for
financing, engineering, construction, completion, testing and start-up of
the Casecnan Project in accordance with an Approved Completion Plan in
order to achieve completion ("Pre-Completion Additional Debt"), provided
that (i) the rating agencies confirm that the incurrence of such debt will
not result in a rating downgrade; or (ii)(A) the independent engineer has
confirmed (subject to customary assumptions and qualifications) as
reasonable the technical feasibility of the Approved Completion Plan
including a certification that (subject to customary assumptions and
qualifications) the net proceeds of such Debt and other funds available to
the Company (from Liquidated Damages Proceeds or otherwise) are reasonably
expected to be sufficient to fund the costs of reaching completion; and (B)
the Company certifies at the time of incurrence (with customary assumptions
and qualifications) that (x) the Approved Completion Plan is technically
feasible and prudent, (y) after giving effect to the incurrence of such
debt, the minimum projected Debt Service Coverage Ratio for the four fiscal
quarters commencing with the quarter that commences immediately after the
projected date of commercial operation of the Casecnan Project, taken as
one annual period, and in every fiscal year thereafter, will not be less
than 1.3 to 1, and (z) after giving effect to incurrence of such debt, the
average projected Debt Service Coverage Ratio for all succeeding Calendar
Years until the final maturity date will not be less than 1.5 to 1.
Principal Covenants
Principal covenants under the Indenture require the Company, subject to certain
exceptions and qualifications, (a) not to incur (i) any debt except Permitted
Debt or (ii) any lien upon any of its assets except permitted liens; (b) not to
enter into any transaction of merger or consolidation, change its form of
organization, liquidate, wind-up or dissolve itself; (c) not to enter into
non-arm's length transactions or agreements with affiliates; (d) not to engage
in any business other than as contemplated by the Indenture; (e) not to enter
into certain change orders under the Turnkey Construction Contract or amend the
Approved Construction Budget and Schedule (or an Approved Completion Plan), or
amend, terminate or otherwise modify any material Project Document to which it
is a party, except as permitted under the Indenture; (f) not to sell, lease or
transfer any property or assets material to the Casecnan Project except in the
ordinary course of business; (g) to construct the Casecnan Project in accordance
with the Approved Construction Budget and Schedule; (h) to operate and maintain
the Casecnan Project in accordance with the Approved Operation and Maintenance
Budget; (i) to maintain insurance as required under the Indenture; and (j) to
enter into an interest rate agreement for the FRNs, within 30 days of Closing,
at a LIBOR cap of up to 7.5%.
Insurance
- ---------
The Company maintains insurance with respect to the Casecnan Project of a type
and in such amounts as are generally carried by companies engaged in similar
businesses and owning similar projects that are financed in a similar manner.
These coverages will include casualty insurance, including flood and earthquake
coverage, business interruption insurance, primary and excess liability
insurance, automobile insurance and workers compensation insurance. However, the
proceeds of such insurance may not be adequate to cover reduced revenues,
increased expenses or other liabilities arising from the occurrence of
catastrophic events. Moreover, there can be no assurance that such insurance
coverage will be available in the future at commercially reasonable rates or
that the amounts for which the Company will be insured will cover all losses.
Nevertheless, the Company will not reduce or cancel coverages if the Insurance
Consultant determines it is not reasonable to do so and insurance is available
on commercially reasonable terms.
Regulatory Matters
- ------------------
The Company is subject to a number of Philippine statutory and regulatory
standards and required and desirable approvals, including those relating to
energy and environmental laws. Many permits and regulatory approvals are
required and desirable for the construction and operation of the Casecnan
Project. A number of these permits and regulatory approvals have not yet been
obtained. Some of the permits and regulatory approvals that have been obtained
contain conditions, and a number of the permits and approvals not yet obtained
may contain conditions when they are issued. Delay in receipt of or failure to
obtain these permits or approvals or to satisfy any of these conditions could
delay completion of the construction of the Casecnan Project, restrict the
operation of the Casecnan Project, or result in additional costs or taxes. The
adoption of new laws, policies or regulations, or changes in the interpretation
or application of existing laws, policies and regulations, that modify the
present regulatory environment could have a material adverse effect on the
Company's ability to construct or operate the Casecnan Project and could trigger
the Company's right to sell the Casecnan Project to NIA. Upon such sale, the
Securities will be subject to mandatory redemption.
Employees
- ---------
At December 31, 2000, the Company had 27 employees who are currently overseeing
the construction and startup activities. After completion of construction, the
Casecnan Project is expected to employ approximately 25 people, consisting of
operations, maintenance, logistics, compliance, and engineering personnel. At
the powerhouse control room, personnel will monitor, direct and control the
operations and maintenance of the whole Casecnan Project. The control room will
be staffed 24 hours per day and will be the contact point for the Casecnan
Project's customers and others. At the diversion structures, personnel will be
responsible to ensure that the trash racks at the tunnel intakes are kept clean
and maintained and that excessive sediment build-up behind the structure is
prevented.
Item 2. Properties
CE Casecnan does not separately own or lease office space but has arranged for a
separate suite at the offices of MidAmerican's affiliate in Manila.
Item 3. Legal Proceedings
On February 12, 2001, the Contractor filed a Request for Arbitration pursuant to
the Replacement Contract, seeking up to 153 days of schedule relief related to
various alleged force majeure events, including the vertical surge shaft
collapse. On March 20, 2001, the Contractor supplemented its Request for
Arbitration, seeking up to US $3,853,328 as compensation in connection with the
vertical surge shaft replacement work. CE Casecnan believes that the arbitration
claims are without merit and intends to defend them vigorously. In accordance
with the Replacement Contract, the arbitration will be conducted pursuant to the
rules of the International Chamber of Commerce. The parties have agreed that the
venue of the arbitration will be London, England.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable.
PART II
Item 5. Market for Company's Equity and Related Stockholder Matters.
Not Applicable.
Item 6. Selected Financial Data
Amounts in Thousands Except Per Share Amounts
====================================== ============================================================================
Year ended December 31,
- -------------------------------------- ------------- ------------- ---------------- --------------- ---------------
2000 1999 1998 1997 1996
- -------------------------------------- ------------- ------------- ---------------- --------------- ---------------
Total revenue $ 7,605 $ 11,656 $ 19,533 $ 19,786 $ 25,611
Net income (loss) to common
stockholders 4,857 699 381 (11,264) (13,211)
Net income (loss) per share 6.33 0.91 0.50 (14.68) (17.22)
Total assets 482,373 522,398 553,433 491,912 490,162
Total liabilities 378,275 423,157 454,891 393,751 380,737
Notes and bonds payable 352,750 371,500 371,500 371,500 371,500
Stockholders' equity 104,098 99,241 98,542 98,161 109,425
====================================== ============= ============= ================ =============== ===============
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations:
- ---------------------
The Company is in the construction stage and has not yet started commercial
operations as of December 31, 2000. The quarter and year ended December 31, 2000
revenue of $1.2 million and $7.6 million respectively, consists of interest
income on cash and investment balances. The quarter and year ended December 31,
2000 interest expense of $11.4 million and $46.1 million, respectively, less
amounts capitalized of $12.5 million and $47.5 million, respectively, and
amortization of bond issue costs of $1.2 million and $2.3 million, respectively,
are related to the notes and bonds payable issued by the Company in the fourth
quarter of 1995.
Liquidity and Capital Resources:
- -------------------------------
In November 1995, the Company closed the financing and commenced construction of
the Casecnan Project, a combined irrigation and 150 net MW hydroelectric power
generation project located in the central part of the island of Luzon in the
Republic of the Philippines.
CE Casecnan, which is expected to be indirectly owned at least 70% by
MidAmerican, is constructing the Casecnan Project under the terms of the Project
Agreement between CE Casecnan and the NIA. Under the Project Agreement, CE
Casecnan will develop, finance and construct the Casecnan Project over the
construction period, and thereafter own and operate the Casecnan Project for 20
years (the "Cooperation Period"). During the Cooperation Period, NIA is
obligated to accept all deliveries of water and energy, and so long as the
Casecnan Project is physically capable of operating and delivering in accordance
with agreed levels set forth in the Project Agreement, NIA will pay CE Casecnan
a fixed fee for the delivery of a minimum volume of water and a fixed fee for
the delivery of a minimum amount of electricity. In addition, NIA will pay a
fixed fee for all electricity delivered in excess of a threshold amount up to a
specified amount. NIA will sell the electricity it purchases to the NPC,
although NIA's obligations to CE Casecnan under the Project Agreement are not
dependent on the purchase of the electricity from NIA by NPC. All fees to be
paid by NIA to CE Casecnan are payable in U.S. dollars. The fixed fees paid for
the delivery of water and energy, regardless of the amount of electricity or
water actually delivered, are expected to provide approximately 70% of CE
Casecnan's revenues. At the end of the Cooperation Period, the Casecnan Project
will be transferred to NIA for no additional consideration on an "as is" basis.
The Casecnan Project was initially being constructed pursuant to a fixed-price,
date-certain, turnkey construction contract (the "Hanbo Contract") on a joint
and several basis by Hanbo Corporation ("Hanbo") and Hanbo Engineering and
Construction Co., Ltd. ("HECC"), both of which are South Korean corporations. As
of May 7, 1997, the Company terminated the Hanbo Contract due to defaults by
Hanbo and HECC including the insolvency of each such company. On the same date,
the Company entered into a new fixed-price, date certain, turnkey engineering,
procurement and construction contract to complete the construction of the
Casecnan Project (the "Replacement Contract"). The work under the Replacement
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, the Replacement Contract was amended to extend the
Guaranteed Substantial Completion Date for the Casecnan Project to March 31,
2001. This amendment was approved by the lender's independent engineer under the
Casecnan Indenture. In January 2001, the Company received a new working schedule
from the Contractor that showed a completion date of August 31, 2001.
Accordingly, the Casecnan Project is now expected to become operational by the
third quarter of 2001. The delay in completion is attributable in part to the
collapse in December 2000 of the Project's partially completed vertical surge
shaft and the need to drill a replacement surge shaft.
The receipt of the working schedule does not change the Guaranteed Substantial
Completion Date under the Replacement Contract, and the Contractor is still
contractually obligated either to complete the Project by March 31, 2001 or to
pay delay liquidated damages. As a result of receipt of the working schedule,
however, the Company has sought and obtained from the lender's independent
engineer approval for a revised construction schedule under the Casecnan
Indenture. In connection with the revised schedule, the ultimate parent company
of CE Casecnan agreed to make available up to $11.6 million of additional funds
under certain conditions pursuant to a Shareholder Support Letter dated February
8, 2001 (the "Shareholder Support Letter") to cover additional costs resulting
from the Contractor's schedule delay. CE Casecnan intends to exercise all
contractual rights and remedies, including collection of liquidated damages, in
connection with such delay.
CE Casecnan financed a portion of the cost of the Casecnan Project through the
issuance of $125 million of its 11.45% Senior Secured Series A Notes due 2005
and $171.5 million of its 11.95% Senior Secured Series B Bonds due 2010 and $75
million of its Secured Floating Rate Notes due 2002, pursuant to an indenture
dated November 27, 1995, as amended to date (the "Casecnan Indenture").
The securities are senior debt of the Company and are secured by a collateral
assignment of all revenues received from the 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 schemes
as provided for in the Casecnan Indenture. The debt covenants contain certain
restrictions as to incurrence of additional indebtedness; merger, consolidation,
dissolution, or any significant change in corporate structure; non-arm's length
transactions or agreements with affiliates; material change in the Turnkey
Construction Contract; and sale, lease, or transfer of properties material to
the Project, among others.
Forward-looking Statements
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 and construction
uncertainty, operating uncertainty, uncertainties relating to doing business
outside of the United States, uncertainties relating to international economic
and political conditions and uncertainties regarding the impact of regulations,
changes in government policy, industry deregulation and competition. The Company
assumes no responsibility to update forward-looking information contained
herein.
Item 7A. Qualitative and Quantitative Disclosures About Market Risk
The following discussion of the Company's exposure to various market risks
contains "forward-looking statements" that involve risks and uncertainties.
These projected results have been prepared utilizing certain assumptions
considered reasonable in the circumstances and in light of information currently
available to the Company. Actual results could differ materially from those
projected in the forward-looking information.
Interest Rate Risk
At December 31, 2000, the Company had fixed-rate long-term debt of $296.5
million in principal amount and having a fair value of $271.0 million. These
instruments are fixed-rate and therefore do not expose the Company to the risk
of earnings loss due to changes in market interest rates. However, the fair
value of these instruments would decrease by approximately $5.3 million if
interest rates were to increase by 10% from their levels at December 31, 2000.
In general, such a decrease in fair value would impact earnings and cash flows
only if the Company were to reacquire all or a portion of these instruments
prior to their maturity.
At December 31, 2000, the Company had floating-rate obligations of $56.3 million
that expose the Company to the risk of increased interest expense in the event
of increases in short-term interest rates. If the floating rates were to
increase by 10% from December 31, 2000 levels, the Company's consolidated
interest expense would increase by approximately $49,000 each month in which
such increase continued based upon December 31, 2000 principal balances.
Item 8. Financial Statements and Supplementary Data
Report of Independent Public Accountants....................................23
Report of Independent Public Accountants....................................24
Balance Sheets as of December 31, 2000 and 1999.............................25
Statements of Operations for the Years Ended December 31, 2000, 1999 and 1998
and for the Period from the Date of Inception (September 21, 1994) to
December 31, 2000........................................................26
Statements of Changes in Stockholders' Equity for the Period from Inception
(September 21, 1994) to December 31, 2000................................27
Statements of Cash Flows for the Years Ended December 31, 2000, 1999, and 1998
and for the Period from the Date of Inception (September 21, 1994) to
December 31, 2000........................................................28
Notes to Financial Statements...............................................29
Report of Independent Public Accountants
To the Board of Directors and Stockholders of CE Casecnan Water and Energy
Company, Inc.
We have audited the accompanying balance sheet of CE Casecnan Water and Energy
Company, Inc. (a company in the development stage) as of December 31, 2000, and
the related statements of income, of changes in stockholders' equity and of cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit. The financial statements for the
years ended December 31, 1999 and 1998 were audited by other independent
accountants, whose report dated January 25, 2000 expressed an unqualified
opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CE Casecnan Water and Energy
Company, Inc. as of December 31, 2000, and the results of its operations, and
changes in stockholders' equity and its cash flows for the year then ended in
conformity with generally accepted accounting principles in the United States of
America.
JOAQUIN CUNANAN & CO.
A Pricewaterhousecoopers member firm
Makati City, Philippines
January 29, 2001, except Note 9 which is as of
February 12, 2001 and March 20, 2001
Report of Independent Public Accountants
The Stockholders and the Board of Directors
CE Casecnan Water and Energy Company, Inc.
We have audited the accompanying balance sheets of CE Casecnan Water and Energy
Company, Inc. (a company in the development stage) as of December 31, 1999, and
the related statements of operations, changes in stockholders' equity and cash
flows for each of the two years in the period ended December 31, 1999 and for
the period from the date inception (September 21, 1994) to December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CE Casecnan Water and Energy
Company, Inc. as of December 31, 1999 and the results of its operations, changes
in stockholders' equity, and its cash flows for each of the two years in the
period ended December 31, 1999 and for the period from the date of inception
(September 21, 1994) to December 31, 1999 in conformity with accounting
principles generally accepted in the United States of America.
SyCip Gorres Velayo & Co
An Arthur Andersen Member Firm
January 25, 2000
CE CASECNAN WATER AND ENERGY COMPANY, INC.
(A company in the development stage)
BALANCE SHEET
DECEMBER 31, 2000
(With comparative figures as of December 31, 1999)
(Amounts in thousands U.S. Dollars, except number of shares and par value)
================================================================================= ==================== =====================
2000 1999
- ----------------------------------------------------------------------------------------------------------------------------
A S S E T S
Cash $ 703 $ 2,318
Restricted Cash and Short-term Investments (Note 3) 1 42,064
Accrued Interest Receivable 573 1,750
Restricted Investments (Note 3) 47,922 122,175
Bond Issue Costs, net 8,315 9,010
Development and Construction Costs (Notes 1, 3 and 7) 419,163 337,983
Deferred Income Tax Asset 5,696 7,098
- --------------------------------------------------------------------------------- -------------------- ---------------------
Total Assets $ 482,373 $ 522,398
================================================================================= ==================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Expenses $ 6,525 $ 41,633
Payable to Affiliates 19,000 10,024
Notes and Bonds Payable 352,750 371,500
- --------------------------------------------------------------------------------- -------------------- ---------------------
Total liabilities 378,275 423,157
Commitments and contingencies (Notes 7 and 9)
Stockholders' Equity
Capital stock (Notes 3 and 6)
Authorized - 2,148,000 shares at one Philippine peso ($0.038) par
value per share 29 29
Issued - 767,162 shares 123,807 123,807
Additional paid-in capital (Note 3) (19,738) (24,595)
Accumulated deficit
- --------------------------------------------------------------------------------- --------------------- --------------------
Total stockholders' equity 104,098 99,241
- --------------------------------------------------------------------------------- --------------------- --------------------
Total liabilities and stockholders' equity $ 482,373 $ 522,398
================================================================================= ===================== ====================
(The accompanying notes are an integral part of these financial statements.)
CE CASECNAN WATER AND ENERGY COMPANY, INC.
(A company in the development stage)
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31,
2000 (With comparative figures for the years
ended December 31, 1999 and 1998
and for the period from the date of inception (September 21, 1994)
to December 31, 2000)
(Amounts in thousands U.S. Dollars, except net income (loss) per share
and average number of common shares outstanding)
==========================================================================================================================
From the date
of inception
(September 21, 1994)
2000 1999 1998 to December 31, 2000
- --------------------------------------------------------------------------------------------------------------------------
OTHER INCOME
Interest income $ 7,605 $ 11,656 $ 19,533 $ 86,684
COST AND EXPENSES
Interest 46,079 45,005 45,028 232,119
Amortization of bond issue costs 2,270 1,324 1,179 6,850
Capitalized interest and bond issue costs (47,454) (36,501) (27,161) (127,302)
Miscellaneous 451 - - 451
- --------------------------------------------------------------------------------------------------------------------------
1,346 9,828 19,046 112,118
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE
INCOME TAX 6,259 1,828 487 (25,434)
BENEFIT FROM (PROVISION FOR)
DEFERRED INCOME TAX (Note 4) (1,402) (1,129) (106) 5,696
- --------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 4,857 $ 699 $ 381 $ (19,738)
==========================================================================================================================
Net income (loss) per share $ 6.33 $ 0.91 $ .50 $ (27.15)
==========================================================================================================================
Average number of common shares Outstanding 767,162 767,162 767,162 727,098
==========================================================================================================================
(The accompanying notes are an integral part of these financial statements.)
CE CASECNAN WATER AND ENERGY COMPANY, INC.
(A company in the development stage)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31,
2000 (With comparative figures for the years
ended December 31, 1999 and 1998
and for the period from the date of inception (September 21, 1994)
to December 31, 2000)
(Amounts in thousands U.S. Dollars, except number of shares)
=========================================================================================================================
Outstanding
Common Common Additional Accumulated
Shares Stock paid-in capital Deficit Total
- -------------------------------------------------------------------------------------------------------------------------
Balance, September 21, 1994 - $ - $ - $ - $ -
Issuance of common shares 537,014 20 530 - 550
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 537,014 20 530 - 550
Additional issuance of common shares
(Note 6) 230,148 9 - - 9
Additional paid-in capital (Note 3) - - 123,277 - 123,277
Net loss - - - (1,200) (1,200)
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 767,162 29 123,807 (1,200) 122,636
Net loss - - - (13,211) (13,211)
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 767,162 29 123,807 (14,411) 109,425
Net loss - - - (11,264) (11,264)
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 767,162 29 123,807 (25,675) 98,161
Net income - - - 381 381
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 767,162 29 123,807 (25,294) 98,542
Net income - - - 699 699
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 767,162 29 123,807 (24,595) 99,241
Net income - - - 4,857 4,857
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000 767,162 $ 29 $ 123,807 $ (19,738) $ 104,098
=========================================================================================================================
(The accompanying notes are an integral part of these financial statements.)
CE CASECNAN WATER AND ENERGY COMPANY, INC.
(A company in the development stage)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000
(With comparative figures for the years ended
December 31, 1999 and 1998 and for the period from the
date of inception (September 21, 1994) to December 31, 2000)
(Amounts in thousands U.S. Dollars)
=============================================================================================================================
From the date
of inception
(September 21, 1994)
2000 1999 1998 to December 31, 2000
- -----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $ 4,857 $ 699 $ 381 $ (19,738)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Amortization of bond issue costs 2,270 1,324 1,179 6,850
Provision for (benefit from) deferred income tax 1,402 1,129 106 (5,696)
Changes in assets and liabilities
Decrease (increase) in accrued interest receivable 1,177 1,264 (52) (573)
Increase in accounts payable and accrued expenses - - 2,195 8,650
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided (used in) operating activities 9,706 4,416 3,809 (10,507)
- -----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to development and construction costs (82,755) (76,420) (103,297) (420,738)
Decrease (increase) in restricted:
Cash and short-term investments 42,063 103,894 37,520 (1)
Investments 74,253 166 4,343 (47,922)
Increase (decrease) in accounts payable and accrued
expenses related to development and construction costs (35,108) (41,002) 61,248 (2,125)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (1,547) (13,362) (186) (470,786)
- -----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in advances from affiliates 8,976 9,268 (2,303) 19,000
Payment of bond issue costs - - - (13,590)
Proceeds from(repayment of):
Capital stock - - - 123,836
Notes and bonds payable (18,750) - - 352,750
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (9,774) 9,268 (2,303) 481,996
- -----------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (1,615) 322 1,320 703
CASH AT BEGINNING OF PERIOD 2,318 1,996 676 -
- -----------------------------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 703 $ 2,318 $ 1,996 $ 703
=============================================================================================================================
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Interest paid during the period (net of
Amount capitalized) $ (1,259) $ 8,670 $ 18,477 $ 99,250
=============================================================================================================================
(The accompanying notes are an integral part of these financial statements.)
CE CASECNAN WATER AND ENERGY COMPANY, INC.
(A company in the development stage)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
(With comparative figures for the years ended December 31, 1999 and 1998 and
for the period from the date of inception (September 21, 1994) to
December 31, 2000)
(amounts in U.S. Dollars)
Note 1 - Organization
- ---------------------
CE Casecnan Water and Energy Company, Inc. (the Company) was registered with the
Philippine Securities and Exchange Commission on September 21, 1994 primarily to
design, develop, construct, erect, assemble, commission, operate and own a
hydroelectric power plant and the related facilities for conversion into
electricity of water provided by and under contract with the Philippine
Government or any government-owned or controlled corporation.
The Company has a contract with the Philippine Government, through the
Philippine National Irrigation Administration (NIA) (a government-owned
controlled corporation), for the development and construction of a hydroelectric
power plant and related facilities under a build-own-operate-transfer agreement
(Project Agreement), covering a 20-year cooperation period with "take-or-pay"
obligations for water and electricity. At the end of the 20-year cooperation
period, the combined irrigation and 150 net megawatt hydroelectric power
generation project (the Casecnan Project) will be transferred to the Philippine
Government at no cost. The Philippine Government also signed a Performance
Undertaking which, among others, affirms and guarantees the obligations of NIA
under the contract. Construction of the Casecnan Project commenced in 1995 and
the related costs are included under "Development and construction costs"
account in the balance sheet.
The Company is in the development stage and has not yet started commercial
operations as of December 31, 2000.
After the completion of the aforementioned project, the Company is expected to
be at least 70% owned by MidAmerican Energy Holdings Company (MidAmerican),
subject to upward adjustment based upon the actual economics of the Casecnan
Project at commencement of commercial operations.
The Company is registered with the BOI of the Philippines as a new operator of
hydroelectric power plant with pioneer status under the Omnibus Investments Code
of 1987 (Executive
Order No. 226). Under the terms of its registration, the Company is entitled to
certain incentives which include an income tax holiday for a minimum of six
years from the start of commercial operations; tax and duty-free importation of
capital equipment; tax credits on domestic capital equipment; and, exemption
from customs duties and national internal revenue taxes for the importation and
unrestricted use of the consigned equipment for the development, construction,
start-up, testing and operation of the power plant. The registration also
requires, among others, the maintenance of a debt-to-equity ratio not exceeding
75:25 upon commencement of commercial operations.
Note 2 - Summary of Significant Accounting Policies
- ---------------------------------------------------
The more significant accounting policies and practices of the Company are set
forth to facilitate the understanding of data presented in the financial
instruments:
Restricted short-term investments other than restricted cash are primarily
commercial papers and money market securities. Restricted cash include similar
securities and mortgage-backed securities.
Since the Company has the positive intent and ability to hold all of its
investments to maturity, these are classified as held to maturity and recorded
at amortized cost. The carrying amount of investments as of December 31, 2000
approximates their fair value, which is based on quoted market prices as
provided by the financial institution holding the investments.
Bond issue costs consist of costs incurred in the issuance of senior secured
notes and bonds and are being amortized over the term of the notes and bonds
using the effective interest rate method.
Development and construction costs of the hydroelectric power plant and related
facilities are capitalized and will be amortized over a period of 20 years from
the start of its commercial operations.
Borrowing costs (interest and other financial charges) are being capitalized as
part of the cost of capital projects. Interest is capitalized up to the extent
of construction and development costs incurred.
Transactions in foreign currencies (Philippine pesos) are recorded based on the
prevailing rates of exchange at transaction dates. Monetary assets and
liabilities denominated in foreign currencies are restated in the financial
statements at the exchange rates prevailing at the balance sheet date. Gain or
losses arising from the restatement are credited or charged to current
operations.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial reporting bases
of assets and liabilities and their related tax bases. Deferred tax assets and
liabilities are measured using the tax rate expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered
or settled. A valuation allowance is provided for deferred tax assets if it is
more likely than not that a tax benefit will not be realized.
Net income (loss) per share is based on the weighted average number of common
shares outstanding during the period.
Impairment of long-lived assets are reviewed whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment loss would be recognized whenever evidence exists
that the carrying value is not recoverable.
Use of estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Note 3 - Notes and Bonds Payable
- --------------------------------
On November 27, 1995, the Company issued $371.5 million worth of notes and bonds
to finance the construction of the Casecnan Project. These consist of $75.0
million Senior Secured Floating Rate Notes (FRNs) due in 2002; $125.0 million
Senior Secured Series A Notes (Series A Notes) with interest at 11.45% due in
2005; and $171.5 million Senior Secured Series B Bonds (Series B Bonds) with
interest at 11.95% due 2010. For the year ended December 31, 2000, the notes and
bonds have effective interest rates of 12.98% and 13.83% for the Series A Notes
and Series B Bonds, respectively, inclusive of bond issue cost amortization. The
effective interest rate for the FRNs fluctuated between 10.52% and 11.35% in
2000 and was 11.35% at December 31, 2000. Quarterly interest payments for the
FRNs commenced on February 15, 1996, and semi-annual interest payments for
Series A Notes and Series B Bonds commenced on May 15, 1996.
Semi-annual installments for principal payments for the FRNs have commenced on
November 15, 2000 amounting to $18.75 million and will commence on May 15, 2003
and May 15, 2002 for the Series A Notes and Series B Bonds, respectively. The
repayment schedule is as follows (in thousands):
======================== ====================== ====================== ====================== =====================
FRNs Series A notes Series B bonds Total
- ------------------------ ---------------------- ---------------------- ---------------------- ---------------------
2001 $29,625 $ - $ - $ 29,625
2002 26,625 - 8,575 35,200
2003 - 33,750 7,718 41,468
2004 - 42,500 6,860 49,360
2005 - 48,750 6,002 54,752
2006 - - 36,015 36,015
2007 - - 37,730 37,730
2008 - - 37,730 37,730
2009 - - 13,720 13,720
2010 - - 17,150 17,150
- ------------------------ ---------------------- ---------------------- ---------------------- ---------------------
$56,250 $125,000 $171,500 $352,750
======================== ====================== ====================== ====================== =====================
The securities are senior debt of the Company and are secured by an 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 interests of the Company. 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 schemes
as provided for in the Trust Indenture.
The debt covenants contain certain restrictions as to incurrence of additional
indebtedness; merger, consolidation, dissolution, or any significant change in
corporate structure; non-arm's length transactions or agreements with
affiliates; material change in the Turnkey Construction Contract (see Note 7);
sale, lease, or transfer of properties material to the Casecnan Project, among
others.
In connection with the foregoing secured indebtedness, the Company, on November
27, 1995, entered into a Deposit and Disbursement Agreement with Chemical Trust
Company of California (Chemical Trust) and Kiewit (a predecessor shareholder)
whereby Chemical Trust acts as a depositary and a collateral agent. As a
depositary agent, it will hold monies, instruments and securities pledged by the
Company to the collateral agent. The terms of this agreement require the
establishment of several funds which include a Capital Contribution Fund. The
Company's stockholders deposited an aggregate capital contribution of
approximately US$123.3 million to the fund which will be strictly used to fund
the construction of the Casecnan Project when the proceeds from the Series A
Notes and Series B Bonds have been fully utilized. The contributions are
included in the "Additional paid-in capital" account in the balance sheet.
As of December 31, 2000, MidAmerican held $6.3 million of the outstanding
Casecnan FRNs. The purchase of the FRNs by MidAmerican does not release the
Company of its obligations.
Interest capitalized as part of development and construction costs amounted to
$47.5 million and $36.5 million in 2000 and 1999, respectively.
Note 4 - Deferred income tax asset
- ----------------------------------
The Company's deferred tax asset amounting to $5.7 million and $7.1 million (net
of valuation allowance of $2.4 million and $3.0 million) as of December 31, 2000
and 1999, respectively, consists mainly of the difference between the financial
reporting basis and the tax reporting basis for development and construction
costs.
Effective January 1998, the Philippine statutory income tax rate has been
changed from 35% to 34% in 1998, further reduced to 33% in 1999, and to 32% in
2000 and onwards.
Note 5 - Related party transactions
- -----------------------------------
The Company has transactions with its affiliates which consist primarily of cash
advances for capital requirements related to the construction of the Casecnan
Project.
Note 6 - Capital stock
- ----------------------
On October 26, 1995, the Company issued 230,148 shares to the current minority
stockholders out of the unsubscribed portion of the Company's authorized capital
stock.
The minority stockholders initially formed a venture to pursue the opportunity
of developing a water and energy project in the Casecnan Basin. After securing
preliminary indications of interest from the Philippine Government, the minority
stockholders sought out the other shareholders to form a new entity capable of
financing and building the Casecnan Project. In consideration of their role in
initiating the Casecnan Project, delivering the opportunity to the Company and
performing development assistance, the minority stockholders retained an
ownership interest in the Company.
Note 7 - Commitments and Contingencies
- --------------------------------------
In November 1995, the Company closed the financing and commenced construction of
the Casecnan Project, a combined irrigation and 150 MW hydroelectric power
generation project located in the central part of the island of Luzon in the
Republic of the Philippines.
The Casecnan Project was initially being constructed pursuant to a fixed-price,
date-certain, turnkey construction contract (the "Hanbo Contract") on a joint
and several basis by Hanbo Corporation ("Hanbo") and Hanbo Engineering and
Construction Co., Ltd. ("HECC"), both of which are South Korean corporations. As
of May 7, 1997, the Company terminated the Hanbo Contract due to defaults by
Hanbo and HECC including the insolvency of each such company. On the same date,
the Company entered into a new fixed-price, date certain, turnkey engineering,
procurement and construction contract to complete the construction of the
Casecnan Project (the "Replacement Contract"). The work under the Replacement
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").
After a series of litigations between the contracting parties in connection with
the termination of the Hanbo Contract, the Company received $90 million as an
out of court settlement. The amount received was shown as accounts payable and
accrued expenses in the balance sheet and was being released periodically to
offset costs which were incurred over the remainder of the construction period.
The amount of settlement that was offset against construction costs for 2000,
1999 and 1998 were $30 million, $44 million and $16 million, respectively.
On November 20, 1999, the Replacement Contract was amended to extend the
Guaranteed Substantial Completion Date for the Casecnan Project to March 31,
2001. This amendment was approved by the lender's independent engineer under the
Casecnan Indenture. In January 2001, the Company received a new working schedule
from the Contractor that showed a completion date of August 31, 2001.
Accordingly, the Casecnan Project is now expected to become operational by the
third quarter of 2001. The delay in completion is attributable in part to the
collapse in December 2000 of the Project's partially completed vertical surge
shaft and the need to drill a replacement surge shaft.
The receipt of the working schedule does not change the Guaranteed Substantial
Completion Date under the Replacement Contract, and the Contractor is still
contractually obligated either to complete the Project by March 31, 2001 or to
pay delay liquidated damages. As a result of receipt of the working schedule,
however, the Company has sought and obtained from the lender's independent
engineer approval for a revised construction schedule under the Casecnan
Indenture. In connection with the revised schedule, the ultimate parent company
of CE Casecnan agreed to make available up to $11.6 million of additional funds
under certain conditions pursuant to a Shareholder Support Letter dated February
8, 2001 (the "Shareholder Support Letter").
Under the Project Agreement, if NIA is able to accept delivery of water into the
Pantabangan Reservoir and NPC has completed the Project's related transmission
line, the Company is liable to pay NIA $5,500 per day for each day of delay in
completion of the Casecnan Project beyond July 27, 2000, increasing to $13,500
per day for each day of delay in completion beyond November 27, 2000. Although
the transmission line is complete, NIA has not yet installed the Project's
metering equipment. Accordingly, no liquidated damages payments to NIA have been
made.
The Company's ability to make payments on any of its existing and future
obligations is dependent on NIA's and the Republic of the Philippines'
performance of their obligations under the Project Agreement and the Performance
Undertaking, respectively. Except to the extent expressly provided for in the
Shareholder Support Letters, no shareholders, partners or affiliates of the
Company, including MidAmerican, and no directors, officers or employees of the
Company will guarantee or be in any way liable for payment of the Company's
obligations. As a result, payment of the Company's obligations depends upon the
availability of sufficient revenues from the Company's business after the
payment of operating expenses.
NIA's payments of obligations under the Project Agreement will be substantially
denominated in United States dollars and are expected to be the Company's sole
source of operating revenues. Because of the Company's dependence on NIA, any
material failure of NIA to fulfill its obligations under the Project Agreement
and any material failure of the Republic of the Philippines to fulfill its
obligations under the Performance Undertaking would significantly impair the
ability of the Company to meet its existing and future obligations.
There are pending bills before the Philippine Congress and the Philippine Senate
aimed at restructuring the electric industry, privatization of the NPC and
introduction of a competitive electricity market, among others. The passage of
the bills may have an impact on the Company's future operations and the industry
as a whole, the effect of which is not yet determinable and estimable.
Note 8 - Fair Value of Financial Instruments
- --------------------------------------------
Financial Accounting Standards Board (FASB) Statement No. 107, "Disclosures
About Fair Value of Financial Instruments", defines the fair value of financial
instruments as the amount at which the instruments could be exchanged in a
current transaction between willing parties. Although management uses its best
judgment in estimating the fair value of these financial instruments, there are
inherent limitations in any estimation technique. Therefore, the fair value
estimates presented herein are not necessarily indicative of the amounts which
the Company could realize in a current transaction.
The methods and assumptions used to estimate fair value are as follows:
Notes and Bonds Payable
- -----------------------
The fair value of the Company's notes and bonds payable are estimated based on
quoted market prices. The carrying amounts in the table below are included under
the indicated captions in Note 3 (in thousands):
========================================================================
2000 1999
- ------------------------------------------------------------------------
Carrying Estimated Carrying Estimated
Value fair value value fair value
- ------------------------------------------------------------------------
Series B Bonds $171,500 $156,134 $171,500 $166,527
Series A Notes 125,000 114,875 125,000 121,962
FRNs 56,250 53,859 75,000 73,500
- ------------------------------------------------------------------------
$352,750 $324,868 $371,500 $361,989
========================================================================
Other financial instruments
Financial instruments other than notes and bonds payable of a material nature
fall into the definition of short-term and fair value are estimated as the
carrying amount.
Note 9 - Subsequent events
- --------------------------
On February 12, 2001, the Contractor filed a Request for Arbitration with the
International Chamber of Commerce seeking an extension of the Guaranteed
Substantial Completion Date by up to 153 days through August 31, 2001 -
resulting from various alleged force majeure events. In a March 20, 2001
Supplement to Request for Arbitration, the Contractor also seeks compensation
for alleged additional costs it incurred from the claimed force majeure events
to the extent it is unable to recover from its insurer. CE Casecnan believes
such allegations are without merit and intends to vigorously defend the
Contractor's claims.
In connection with the expected extension of the Substantial Completion Date,
the ultimate parent of the Company agreed to make up to $11.6 million available
under certain condition to fund the costs of reaching completion.
Note 10 - Reclassification
- --------------------------
Certain accounts in the 1999 financial statements were reclassified to conform
with the 2000 financial statements presentation. Such reclassification did not
impact previously reported net income or retained earnings.
Item 9: Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The Company filed a Current Report on Form 8-K dated September 7, 2000 as
amended by Form 8-K dated December 18, 2000 reporting the replacement of Sycip
Gorres Velayo and Co., an Arthur Andersen member firm, and the subsequent
appointment of Joaquin Cunanan and Co., a PricewaterhouseCoopers member firm, as
the independent accountants for the Company for 2000.
In connection with that report, the Company stated that Sycip Gorres Velayo &
Co.'s reports on the Company's financial statements for the two most recent
fiscal years ended December 31, 1999 and 1998 contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty, and
there were no disagreements with Sycip Gorres Velayo & Co. on any matter of
accounting principles or practices, financial statement disclosures, or auditing
scope or procedures, which disagreements, if not resolved to the satisfaction of
Sycip Gorees Velayo & Co., would have caused it to make a reference to the
subject matter of the disagreements in connection with its audit reports.
PART III
Item 10. Directors and Executive Officers of the Company
The following table sets forth the names, ages, and positions of the directors
and executive officers of the Company:
NAME AGE POSITION
David L. Sokol 44 Director and Chairman
Gregory E. Abel 38 Vice Chairman
Patrick J. Goodman 34 Director, Senior Vice President and Chief
Financial Officer
Steven A. McArthur 43 Senior Vice President
Douglas L. Anderson 43 Vice President, General Counsel and Assistant
Secretary
David A. Baldwin 36 Director, Vice President and General Manager
Jose Sandejas 63 Director and Corporate Secretary
Marivic Punzalan-Espiritu 33 Director and Assistant Corporate Secretary
Jose Jaime Cruz 30 Director
Scott LaPrairie 43 Director
Rachel Hernandez 34 Director
James D. Stallmeyer 43 Vice President
Brian K. Hankel 38 Vice President and Treasurer
Paul J.Leighton 47 Assistant Corporate Secretary
Directors of the Company are elected annually and hold office until a successor
is elected. Executive officers are chosen from time to time by vote of the Board
of Directors. Pursuant to the terms of the Stockholders Agreement, CE Casecnan
Ltd. is entitled to elect seven of the directors, and each of the minority
investors is entitled to elect one director.
David L. Sokol. In addition to serving as a Director and Chairman of the
Company, Mr. Sokol has been Chief Executive Officer of MidAmerican since April
19, 1993 and served as President of MidAmerican from April 19, 1993 until
January 21, 1995. Mr. Sokol has been Chairman of the Board of Directors since
May 1994 and a director of MidAmerican since March 1991. Formerly, among other
positions held in the independent power industry, Mr. Sokol served as the
President and Chief Executive Officer of Kiewit Energy Company, which at that
time was a wholly owned subsidiary of PKS, and Ogden Projects, Inc.
Gregory E. Abel. In addition to serving as Vice Chairman of the Company, Mr.
Abel is President and Chief Operating Officer of MidAmerican. Mr. Abel joined
MidAmerican in 1992. Mr. Abel is a Chartered Accountant and from 1984 to 1992 he
was employed by Price Waterhouse. As a Manager in the San Francisco office of
Price Waterhouse, he was responsible for clients in the energy industry.
Patrick J. Goodman. In addition to serving as Director, Senior Vice President
and Chief Financial Officer for the Company, he is Senior Vice President and
Chief Financial Officer for MidAmerican. Mr. Goodman joined MidAmerican in June
1995, and served as Manager of Consolidation Accounting until September 1996
when he was promoted to Controller. Prior to joining MidAmerican, Mr. Goodman
was a financial manager for National Indemnity Company and a senior associate at
Coopers & Lybrand.
Steven A. McArthur. In addition to serving as Senior Vice President for the
Company, Mr. McArthur is a Senior Vice President and Secretary of MidAmerican.
Mr. McArthur joined MidAmerican in February 1991. From 1988 to 1991 he was an
attorney in the Corporate Finance Group at Shearman & Sterling in San Francisco.
From 1984 to 1988, he was an attorney in the Corporate Finance Group at
Winthrop, Stimson, Putnam & Roberts in New York.
Douglas L. Anderson. In addition to serving as Vice President, General Counsel
and Assistant Secretary for the Company, Mr. Anderson is Vice President and
Assistant General Counsel of MidAmerican and General Counsel of CalEnergy
Generation. Mr. Anderson joined MidAmerican in February 1993. From 1990 to 1993
Mr. Anderson was a business attorney with Fraser, Stryker, Vaughn, Meusey,
Olson, Boyer & Bloch, P.C. in Omaha and prior to that Mr. Anderson was a
principal in the firm Anderson & Anderson.
David A. Baldwin. In addition to serving as Director, Vice President and General
Manager for the Company, he is President and General Manager, Philippines for
MidAmerican. From December 1996 to June 1997, Mr. Baldwin served as Vice
President, Project Development for Asia Power Ltd. In Hong Kong. From October
1994 to December 1996, Mr. Baldwin was Project Director at SouthPac Corporation
Ltd. in New Zealand and, prior to that, he held a series of project management
and engineering positions at Shell International in the Netherlands and New
Zealand.
Jose Sandejas. In addition to serving as a Director and Corporate Secretary of
the Company, Mr. Sandejas is a partner with the law firm of Quisumbing Torres &
Evangelista.
Marivic Punzalan-Espiritu. In addition to serving as a Director and Assistant
Corporate Secretary of the Company, Ms. Punzalan-Espiritu is a partner with the
law firm of Quisumbing Torres & Evangelista.
Jose Jaime Cruz. In addition to serving as a Director of the Company, Mr. Cruz
is an attorney with the law firm of Quesumbing Torres & Evangelista.
Scott LaPrairie. In addition to serving as a Director of the Company, Mr.
LaPrairie is President and Chief Executive Officer of the LaPrairie Group of
Companies.
Rachel Hernandez. In addition to serving as a Director of the Company, Ms.
Hernandez is Corporate Counsel for the Company and certain of its affiliates.
James D. Stallmeyer. In addition to serving as Vice President of the Company,
Mr. Stallmeyer is Commercial Director and General Counsel of Northern Electric.
Mr. Stallmeyer joined the Company in 1993. Mr. Stallmeyer practiced in the
public finance and banking areas at Chapman and Cutler in Chicago from 1984 to
1987 and in the corporate finance department from 1989 to 1993. Prior to that,
Mr. Stallmeyer was an attorney in the public finance department of the Chicago
office of Skadden, Arps, Slate, Meagher & Flom in 1987 and 1988 and was a legal
writing instructor at the University of Illinois College of Law in 1988 and
1989.
Brian K. Hankel. In addition to serving as Vice President and Treasurer for the
Company, he is Vice President and Treasurer for MidAmerican. Mr. Hankel joined
MidAmerican in February 1992 as a Treasury Analyst and served in that position
to December 1995. Mr. Hankel was appointed Assistant Treasurer in January 1996
and was appointed Treasurer in January 1997. Prior to joining the Company, Mr.
Hankel was a Money Position Analyst at FirsTier Bank of Lincoln from 1988 to
1992.
Paul J. Leighton. In addition to serving as Assistant Corporate Secretary, Mr.
Leighton is also Vice President, Corporate Law, Assistant General Counsel and
Assistant Secretary of MidAmerican. Mr. Leighton has served as Corporate
Secretary for MidAmerican and its predecessor companies since 1988 and as an
attorney since 1978.
Item 11. Executive Compensation
None of the executive officers or directors of the Company receives compensation
from the Company for services as officers or directors of the Company. All
directors are reimbursed for their expenses in attending board and committee
meetings.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Description of Capital Stock
As of December 31, 2000, the authorized capital stock of the Company consisted
of 2,148,000 shares of common stock, par value 1.00 peso per share (the "Common
Stock"), of which 767,162 shares were outstanding. There is no public trading
market for the Common Stock. As of December 31, 2000 there were 11 holders of
record of the Common Stock. Holders of Common Stock are entitled to one vote per
share on any matter coming before the stockholders for a vote.
The Indenture contains certain restrictions on the payment of dividends with
respect to the Common Stock.
Principal Holders
The following table sets forth information with respect to the shares of common
stock owned of record and beneficially by all persons who own of record or are
known by the Company to own beneficially more than 5% of the common stock and by
all directors and officers of the Company as a group.
Number Of % Of Common
Name and Address of Owner Shares Owned* Stock Owned
1. CE Casecnan, Ltd. (1) 537,005 70% (2)
a Bermuda corporation
c/o Conyers Dill & Pearman
Clarendon House
P.O. Box 666
Hamilton, Bermuda HM CX
2. LaPrairie Group Contractors
(International), Ltd. 115,074 15% (3)
a Barbados corporation
c/o P.O. . Box 690C
Bridgetown, Barbados
3. San Lorenzo Ruiz Builders and
Developers Group, Inc. 115,074 15% (3)(4)
a Philippine corporation
Violago Compound
222 East Rodriguez Avenue
Quezon City, Philippines
*In addition, each director of the Company owns one share in the Company as
required by Philippine law.
(1) MidAmerican indirectly owns CE Casecnan, Ltd., a Bermuda corporation which
is the registered owner of the shares.
(2) Number of shares owned subject to upward adjustment based on projected
level of financial return to MidAmerican from the Project calculated at the
time of Completion and the absence of the timely exercise of the option
specified in note (4) below.
(3) Number of shares owned and percentages owned subject to downward adjustment
based on projected level of financial return to MidAmerican from the
Project calculated at the time of Completion. Neither of the minority
shareholders will have a major role in the development, construction or
operation of the Casecnan project.
(4) During 1998, MidAmerican purchased substantially all of the shares held by
San Lorenzo Ruiz Builders and Developers Group Inc.; however, San Lorenzo
has an option to repurchase those shares at project completion.
Item 13. Certain Relationships and Related Transactions
Not Applicable.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated September 7, 2000 as
amended by Form 8-K dated December 18, 2000 reporting the replacement of Sycip
Gorres velayo and Co., an Arthur Andersen member firm, and the subsequent
appointment of Joaquin Cunanan and Co., a PricewaterhouseCoopers member firm, as
the independent accountants for the Company for 2000.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Omaha, State of
Nebraska, on March 29, 2001.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
By: /s/ * Douglas L. Anderson
Douglas L. Anderson
Vice President & General Counsel
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has caused this report to be signed by the following persons in the capacities
and on the dates indicated:
Signature Title Date
/s/ David L. Sokol* Director and Chairman of the Board March 29, 2001
- -------------------
David L. Sokol
/s/ David A. Baldwin* Vice President & General Manager March 29, 2001
- ---------------------
David A. Baldwin (Principal Executive Officer)
/s/ Patrick J. Goodman* Director, Senior Vice President and
- ----------------------- Chief Financial Officer
Patrick J. Goodman (Principal Financial Officer) March 29, 2001
/s/ Rachel Hernandez* Director March 29, 2001
- ---------------------
Rachel Hernandez
/s/ Marivic Espiritu * Director March 29, 2001
- ----------------------
Marivic Espiritu
/s/ Jose Jaime Cruz* Director March 29, 2001
- --------------------
Jose Jaime Cruz
/s/ Jose R. Sandejas* Director March 29, 2001
Jose R. Sandejas
*By: /s/ Douglas L. Anderson
------------------------
Douglas L. Anderson
Attorney-in-Fact
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
3.1 Articles of Incorporation of the Company (incorporated by reference to
Exhibit 3.1 the Company's Registration Statement on Form S-4, as amended,
dated January 25, 1996 ("Form S-4")).
3.2 By-laws of the Company (incorporated by reference to Exhibit 3.2 the
Company's Form S-4).
4.1(a) Trust Indenture, dated as of November 27, 1995, between Chemical Trust
Company of California and the Company (incorporated by reference to Exhibit
4.1(a) the Company's Form S-4).
4.1(b) First Supplemental Indenture, dated as of April 10, 1996, between
Chemical Trust Company of California and the Company (incorporated by
reference to Exhibit 4.1(b) to the Company's Form S-4).
4.2 Exchange and Registration Rights Agreement, dated as of November 27, 1995,
by and among CS First Boston Corporation, Bear Stearns & Co. Inc., Lehman
Brothers Inc. and the Company (incorporated by reference to Exhibit 4.2 the
Company's Form S-4).
4.3 Collateral Agency and Intercreditor Agreement, dated as of November 27,
1995, by and among Chemical Trust Company of California, Far East Bank &
Trust Company and the Company (incorporated by reference to Exhibit 4.3 the
Company's Form S-4).
4.4 Mortgage and Security Agreement, dated as of November 10, 1995, by and
among CE Casecnan Ltd., Kiewit Energy International (Bermuda) Ltd., La
Prairie Group Contractors (International) Ltd., San Lorenzo Ruiz Builders
and Developers Group, Inc., Chemical Trust Company of California, Far East
Bank & Trust Company and the Company (incorporated by reference to Exhibit
4.4 the Company's Form S-4).
4.6 Deposit and Disbursement Agreement, dated as of November 27, 1995, by and
among the Company, Chemical Trust Company of California, Kiewit Energy
Company and the Company (incorporated by reference to the Company's Form
S-4).
4.7 Consent of NIA, dated as of November 10, 1995, to the assignment of the
Amended and Restated Casecnan Project Agreement (incorporated by reference
to Exhibit 4.7 to the Company's Form S-4).
4.8 Consent of the Republic of Philippines, dated November 10, 1995, to the
assignment of the Performance Undertaking and the Amended and Restated
Casecnan Project Agreement (incorporated by reference to Exhibit 4.8 to the
Company's Form S-4).
4.9 Consent of Hanbo Corporation and You One Engineering and Construction
Company, Ltd., dated as of November 17, 1995, to the assignment of the
Engineering, Procurement and Construction Contract (incorporated by
reference to Exhibit 4.9 to the Company's Form S-4).
4.10 Consent of Hanbo Steel, dated as of November 17, 1995, to the assignment of
the Guaranty of Engineering, Procurement and Construction Contract
(incorporated by reference to Exhibit 4.10 to the Company's Form S-4).
4.11 Notification, dated as of November 27, 1995, from the Company to Korea
First Bank, of the assignment of the Irrevocable Letter of Credit
(incorporated by reference to Exhibit 4.11 to the Company's Form S-4).
10.1 Amended and Restated Casecnan Project Agreement, dated as of June 26, 1995,
between the National Irrigation Administration and the Company
(incorporated by reference to Exhibit 10.1 the Company's Form S-4).
10.2 Performance Undertaking, dated as of July 20, 1995, executed by the
Secretary of Finance on behalf of the Republic of the Philippines
(incorporated by reference to Exhibit 10.2 to the Company's Form S-4).
10.3 Engineering, Procurement and Construction Contract, dated as of October 10,
1995, by and among Hanbo Corporation, You One Engineering and Construction
Company, Ltd. and the Company (incorporated by reference to Exhibit 10.3
the Company's Form S-4)
10.4 Master Equipment Lease Agreement, dated as of November 1, 1995, between You
One Engineering and Construction Company, Ltd. and the Company
(incorporated by reference to Exhibit 10.4 the Company's Form S-4).
10.5 Sublease Agreement No. 1, dated as of November 1, 1995, between You One
Engineering and Construction Company, Ltd. and the Company (incorporated by
reference to Exhibit 10.5 the Company's Form S-4).
10.6 Guaranty of Engineering, Procurement and Construction Contract, dated as of
November 13, 1995, by Hanbo Steel guaranteeing the performance of the
obligations of Hanbo Corporation and You One Engineering and Construction
Company, Ltd. under the Engineering Procurement and Construction Contract
(incorporated by reference to Exhibit 10.6 to the Company's Form S-4).
10.7 Korea First Bank Irrevocable Letter of Credit issued to the Company in the
aggregate principal amount of U.S.$117,850,000.00 to support the
obligations of Hanbo Corporation and You One Engineering and Construction
Company, Ltd. under the Engineering, Procurement and Construction Contract
(incorporated by reference to Exhibit 10.7 to the Company's Form S-4).
10.8 Engineering, Procurement and Construction Contract dated May 7, 1997
between the Company and CP Casecnan - Consortium (incorporated by reference
to Exhibit 10.8 to the Company's Form 10-K dated December 31, 1998).
10.9 Amendment Agreement dated November 20, 1999 between the Company and CP
Casecnan - Consortium (incorporated by reference to Exhibit 10.9 to the
Company's Form 10-K dated December 31, 1999).
24 Power of Attorney