SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
----------------------
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended
JUNE 30, 2001
COMMISSION FILE NO. 333-608
CE CASECNAN WATER AND ENERGY COMPANY, INC.
------------------------------------------
(Exact name of registrant as specified in its charter)
PHILIPPINES Not Applicable
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
24th Floor, 6750 Building, Ayala Avenue
Makati, Metro Manila Philippines Not Applicable
----------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (632) 892-0276
---------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--------- ----------
Former name, former address and former fiscal year, if changed since last
report. Not Applicable
767,162 shares of Common Stock, $0.038 par value were outstanding as of June 30,
2001.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
Form 10-Q
June 30, 2001
-------------
C O N T E N T S
PART I: FINANCIAL INFORMATION Page
- ------------------------------
Item 1. Financial Statements
Report of Independent Public Accountants 3
Balance Sheets, June 30, 2001 and December 31, 2000 4
Statements of Operations for the Three and Six Months Ended June 30, 2001
and 2000 and for the period from the date of inception (September 21, 1994)
to June 30, 2001 5
Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2000
and for the period from the date of inception (September 21, 1994) to
June 30, 2001 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------- Results of Operations 11
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 15
- -------
Item 2. Changes in Securities 15
- -------
Item 3. Defaults on Senior Securities 15
- -------
Item 4. Submission of Matters to a Vote of Security Holders 15
- -------
Item 5. Other Information 15
- -------
Item 6. Exhibits and Reports on Form 8-K 15
- -------
Signatures 16
Report of Independent Accountants
To the Board of Directors and Stockholders of CE Casecnan Water and Energy
Company, Inc.
We have reviewed the accompanying balance sheet of CE Casecnan Water and Energy
Company, Inc. (a company in the development stage) as of June 30, 2001, and the
related statements of operations for the six and three months ended June 30,
2001 and of cash flows for the six months ended June 30, 2001. These financial
statements are the responsibility of the Company's management. The comparative
amounts for the quarter ended June 30, 2000 were reviewed by other independent
accountants.
A review of interim financial information consists principally of obtaining an
understanding of the system for the preparation of interim financial
information, applying analytical review procedures to the financial data and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit made in accordance with generally
accepted auditing standards in the United States of America, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States of
America.
JOAQUIN CUNANAN & CO.
A PricewaterhouseCoopers Member Firm
Makati City, Philippines
July 25, 2001
CE CASECNAN WATER AND ENERGY COMPANY, INC.
BALANCE SHEET
(Amounts in thousands U.S. Dollars,
except number of shares and per share amounts)
=========================================================== ==================
June 30, December 31,
2001 2000
- ----------------------------------------------------------- ------------------
A S S E T S
Cash $ 1,053 $ 703
Restricted cash and short-term investments - 1
Accrued interest receivable 573
41
Restricted investments 2,574 47,922
Bond issue costs, net 7,513 8,315
Development and construction costs 456,402 419,163
Deferred income tax asset 5,598 5,696
- ----------------------------------------------------------- ------------------
$ 473,181 $ 482,373
=========================================================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 5,966 $ 6,525
Payable to affiliates 24,652 19,000
Notes and bonds payable 338,125 352,750
- ----------------------------------------------------------- ------------------
368,743 378,275
- ----------------------------------------------------------- ------------------
Commitments and contingencies (Note 2)
Capital stock
Authorized - 2,148,000 shares at
$0.038 par value per share
Issued and outstanding - 767,162 shares 29 29
Additional paid-in capital 123,807 123,807
Accumulated deficit (19,398) (19,738)
- ----------------------------------------------------------- ------------------
104,438 104,098
- ----------------------------------------------------------- ------------------
$ 473,181 $ 482,373
=========================================================== ==================
(The accompanying notes are an integral part of these financial statements)
CE CASECNAN WATER AND ENERGY COMPANY, INC.
STATEMENTS OF OPERATIONS
(Amounts in thousands U.S. Dollars,
except number of shares and per share amounts)
============================================= ================================= =============================== =================
From the date
of inception
(September
Three months ended Six months ended 21,1994) to
June 30, June 30, June 30,
-----------------------------------------------------------------
2001 2000 2001 2000 2001
- ---------------------------------------------- ----------------- --------------- --------------- --------------- -----------------
OTHER INCOME
Interest $ 131 $ 2,195 $ 869 $ 4,509 $ 87,553
- ---------------------------------------------- ----------------- --------------- --------------- --------------- -----------------
131 2,195 869 4,509 87,553
- ---------------------------------------------- ----------------- --------------- --------------- --------------- -----------------
COST AND EXPENSES:
Interest 10,823 11,337 21,850 23,097 253,969
Amortization of bond issue costs 401 366 802 733 7,652
Capitalized interest and bond issue costs (11,224) (11,574) (22,652) (22,937) (149,954)
Miscellaneous 215 - 431 - 882
- ---------------------------------------------- ----------------- --------------- --------------- --------------- -----------------
215 129 431 893 112,549
- ---------------------------------------------- ----------------- --------------- --------------- --------------- -----------------
INCOME (LOSS) BEFORE
INCOME TAX (84) 2,066 438 3,616 (24,996)
BENEFIT FROM (PROVISION FOR)
DEFERRED INCOME TAX 19 (463) (98) (810) 5,598
- ---------------------------------------------- ----------------- --------------- --------------- --------------- -----------------
NET INCOME (LOSS) $ (65) $ 1,603 $ 340 $ 2,806 $ (19,398)
============================================== ================= =============== =============== =============== =================
NET INCOME (LOSS) PER SHARE $ (0.09) $ 2.09 $ 0.44 $ 3.66 $ (26.57)
============================================== ================= =============== =============== =============== =================
AVERAGE NUMBER OF
SHARES OUTSTANDING 767,162 767,162 767,162 767,162 730,093
============================================== ================= =============== =============== =============== =================
(The accompanying notes are an integral part of these financial statements)
CE CASECNAN WATER AND ENERGY COMPANY, INC.
STATEMENTS OF CASH FLOWS
(Amounts in thousands U.S. Dollars)
=================================================================== ===================================== ====================
From the date
of inception
(September 21,
Six months ended 1994) to
June 30, June 30,
------------------ ------------------
2001 2000 2001
- ------------------------------------------------------------------- ------------------ ------------------ --------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 340 $ 2,806 $ (19,398)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Provision for (benefit from) deferred income tax 98 810 (5,598)
Amortization of bond issue costs 802 733 7,652
Decrease (increase) in accrued interest
and other receivables 532 946 (41)
Increase (decrease) in accounts payable
and accrued expenses (183) 328 127
- ------------------------------------------------------------------- ------------------ ------------------ --------------------
Net cash provided by (used in) operating activities 1,589 5,623 (17,258)
- ------------------------------------------------------------------- ------------------ ------------------ --------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to development and construction costs (37,239) (35,020) (456,402)
Decrease in restricted cash and short-term investments 1 42,064 -
Decrease (increase) in restricted investments 45,348 10,229 (2,574)
Increase (decrease) in accounts payable
and accrued expenses related to development
and construction activities (376) (26,552) 5,839
- ------------------------------------------------------------------- ------------------ ------------------ --------------------
Net cash provided by (used in) investing activities 7,734 (9,279) (453,137)
- ------------------------------------------------------------------- ------------------ ------------------ --------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in advances from affiliates 5,652 4,217 24,652
Issuance of bonds payable - - 371,500
Repayment of bonds payable (14,625) - (33,375)
Proceeds from issuance of capital stock - - 123,836
Bond issue costs - - (15,165)
- ------------------------------------------------------------------- ------------------ ------------------ --------------------
Net cash provided by (used in) financing activities (8,973) 4,217 471,448
- ------------------------------------------------------------------- ------------------ ------------------ --------------------
Net increase in cash and cash equivalents 350 561 1,053
Cash and cash equivalents at beginning of period 703 2,318 -
- ------------------------------------------------------------------- ------------------ ------------------ --------------------
Cash and cash equivalents at end of period $ 1,053 $ 2,879 $ 1,053
=================================================================== ================== ================== ====================
SUPPLEMENTAL DISCLOSURE OF CASH
FLOWS INFORMATION:
INTEREST PAID (NET OF AMOUNT
CAPITALIZED) $ (598) $ 34 $ 98,652
=================================================================== ================== ================== ====================
(The accompanying notes are an integral part of these financial statements)
CE CASECNAN WATER AND ENERGY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
(Amounts in thousands U.S. dollars)
Note 1 - General
In the opinion of management of CE Casecnan Water and Energy Company, Inc. ("CE
Casecnan" or the "Company"), the accompanying unaudited financial statements
contain all adjustments (consisting only of normal recurring accruals) necessary
to present fairly the financial position of the Company as of June 30, 2001 and
the results of its operations for the three and six months ended June 30, 2001
and 2000 and for the period from the date of inception (September 21, 1994) to
June 30, 2001, and its cash flows for the six months ended June 30, 2001 and
2000 and for the period from the date of inception (September 21, 1994) to June
30, 2001.
The results of operations for the three and six months ended June 30, 2001 and
2000 are not necessarily indicative of the results to be expected for the full
year.
Note 2 - Commitments and Contingencies
In November 1995, the Company closed the financing and commenced construction of
the Casecnan Project, a combined irrigation and 150 megawatt 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 $90,000 as an out of
court settlement. The amount received was shown as accounts payable and accrued
expenses in the balance sheet and was released periodically to offset costs
which were incurred over the construction period. The amounts offset against
construction costs for 2000, 1999 and 1998 were $30,000, $44,000 and $16,000,
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 working schedule
from the Contractor that showed a completion date of August 31, 2001.
Furthermore, in July 2001, the Company received new schedule information from
the Contractor which extends the expected Substantial Completion Date for the
Casecnan Project from August 31, 2001 to September 30, 2001.
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 schedule, however,
the Company has sought and obtained from the 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 $11,600 of additional funds under certain conditions pursuant to
a Shareholder Support Letter dated February 8, 2001 (the "Shareholder Support
Letter"). As agreed in the Shareholder Support Letter and assuming payments are
received under the bank guaranty supporting the Contractor's obligation to pay
delay liquidated damages prior to September 30, 2001, CE Casecnan believes that
the funds available to it are reasonably expected to be sufficient to fund the
costs of reaching completion of the Casecnan Project. However, due to the delay
in completion of the project, CE Casecnan does not presently expect that it will
receive significant operating revenues from the Casecnan Project prior to
November 15, 2001. As a result, CE Casecnan presently expects that it will have
insufficient funds available to it for purposes of making the principal and
interest payments which will become due on November 15, 2001 on the debt
securities issued by CE Casecnan in November 1995 (the "Debt Securities"),
unless its ultimate parent agrees to fund the expected shortfall amount which is
currently estimated to be approximately $24,600.
CE Casecnan presently expects, but cannot assure, that its ultimate parent will
provide it with funds in an amount sufficient to permit CE Casecnan to make the
full principal and interest payments due on the Debt Securities on November 15,
2001. CE Casecnan has been advised that the willingness of its ultimate parent
to fund such November 15, 2001 shortfall will principally depend upon the
progress of the pending arbitration proceedings involving the Contractor,
including any orders issued in the future by the arbitration panel; completion
of the Casecnan Project in substantial compliance with the revised construction
schedule; and performance by the National Irrigation Administration (NIA) of its
obligations under the Project Agreement. Subject to these same assumptions, CE
Casecnan does not presently expect that any additional funding will be required
to be provided to it by its ultimate parent in order for CE Casecnan to make
future principal and interest payments on the Debt Securities following the
November 15, 2001 payments.
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, including the collapse of the surge
shaft. In a March 20, 2001 Supplement to Request for Arbitration, the Contractor
also seeks compensation for alleged additional costs of approximately $4,000 it
incurred from the claimed force majeure events to the extent it is unable to
recover from its insurer. On April 20, 2001, the Contractor filed a further
supplement seeking an additional approximately $62,000 in damages for the
alleged force majeure event (and geologic conditions) related to the collapse of
the surge shaft. CE Casecnan believes such allegations and claims are without
merit and is vigorously defending the Contractor's claims. The arbitration is
being conducted applying New York law and pursuant to the rules of the
International Chamber of Commerce with venue in London, England.
On June 25, 2001, the arbitration tribunal temporarily enjoined CE Casecnan from
making calls on the demand guaranty posted by Banca di Roma in support of the
Contractor's obligations to CE Casecnan for delay liquidated damages. Hearings
on the force majeure claims were held in London from July 2 to July 14, 2001,
and CE Casecnan expects the arbitration tribunal to issue a final order on the
demand guarantee injunction and the force majeure claims no later than August
31, 2001. Further hearings on the Contractor's claims for additional costs and
damages, separate from the force majeure claims, will be held in September and
October 2001.
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 $13.5 per day for each day of delay in
completion of the Casecnan Project beyond November 27, 2000. Although the
transmission line is complete, NIA has not yet completed installation and
testing of 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 Letter, no shareholders, partners or affiliates of the
Company, including MidAmerican Energy Holdings Company, 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.
The Philippine Congress recently passed the Electric Power Industry Reform Act
which is aimed at restructuring the electric industry, privatizing of the
National Power Corporation and introducing a competitive electricity market,
among others. The passage of the bill 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 3 - Other footnote information
Reference is made to the Company's December 31, 2000 audited financial
statements included in Form 10-K that provides information necessary or useful
to the understanding of the Company's business and financial statement
presentations. In particular, the Company's significant accounting policies and
practices were presented as Note 2 to the financial statements included in the
report.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Amounts in thousands U.S. Dollars)
Results of Operations
- ---------------------
The Company is in the construction stage and has not yet started commercial
operations. Revenue consists of interest income on cash received from bond
proceeds and equity contributions. Interest income decreased in the second
quarter of 2001 to $131 from $2,195 in the same period in 2000, a 94.0%
decrease. For the six months ended June 30, 2001, interest income decreased to
$869 from $4,509 for the same period in 2000, an 80.7% decrease. These decreases
are primarily due to lower cash balances as a result of the use of existing cash
to support the ongoing development and construction activities.
Interest expense inclusive of bond issue costs in the second quarter of 2001 was
$11,224 compared to $11,703 for the same period in 2000. The decrease in
interest expense resulted from reduced indebtedness. For the three and six
months ended June 30, 2001, amortization of bond issue costs was $401 and $802
respectively, compared to $366 and $733 for the same period in 2000. In the
second quarter of 2001, capitalized interest decreased to $11,224 from $11,574
for the same period in 2000. For the six months ended June 30, 2001, capitalized
interest decreased to $22,652 from $22,937. The decrease in capitalized interest
resulted from lower interest expense. Interest expense, capitalized interest and
amortization of bond issue costs relate to the notes and bonds payable issued by
the Company in the fourth quarter of 1995.
Liquidity and Capital Resources:
- -------------------------------
CE Casecnan financed a portion of the costs of the Casecnan Project through the
issuance of $125,000 of its 11.45% Senior Secured Series A Notes due 2005,
$171,500 of its 11.95% Senior Secured Series B Bonds due 2010 and $75,000 of its
Senior Secured Floating Rate Notes due 2002 (the "Securities"), pursuant to an
indenture (the "Indenture") dated as of November 27, 1995, as amended to date.
The Securities are senior debt of the Company and are secured by a collateral
assignment of all revenues that will be received from the Casecnan Project, a
collateral assignment of all material contracts, a lien on any accounts and
funds on deposit under a Deposit and Disbursement Agreement, a pledge of 100% of
the capital stock of the Company and a lien on all other material assets and
property. The Securities rank pari passu with and will share the collateral on a
pro rata basis with other senior secured debt, if any.
The Securities are subject to certain optional and mandatory redemption
provisions as defined in the Indenture. The Securities contain customary events
of default and restrictive covenants.
The Casecnan Project 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 $90,000 as an out of
court settlement. The amount received was shown as accounts payable and accrued
expenses in the balance sheet and was released periodically to offset costs
which were incurred over the construction period. The amounts offset against
construction costs for 2000, 1999 and 1998 were $30,000, $44,000 and $16,000,
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.
Furthermore, in July 2001, the Company received new schedule information from
the Contractor which extends the expected Substantial Completion Date for the
Casecnan Project from August 31, 2001 to September 30, 2001.
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 $11,600 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. As agreed in the Shareholder Support Letter and
assuming payments are received under the bank guaranty supporting the
Contractor's obligation to pay delay liquidated damages prior to September 30,
2001, CE Casecnan believes that the funds available to it are reasonably
expected to be sufficient to fund the costs of reaching completion of the
Casecnan Project. However, due to the delay in completion of the project, CE
Casecnan does not presently expect that it will receive significant operating
revenues from the Casecnan Project prior to November 15, 2001. As a result, CE
Casecnan presently expects that it will have insufficient funds available to it
for purposes of making the principal and interest payments which will become due
on November 15, 2001 on the debt securities issued by CE Casecnan in November
1995 (the "Debt Securities"), unless its ultimate parent agrees to fund the
expected shortfall amount which is currently estimated to be approximately
$24,600.
CE Casecnan presently expects, but cannot assure, that its ultimate parent will
provide it with funds in an amount sufficient to permit CE Casecnan to make the
full principal and interest payments due on the Debt Securities on November 15,
2001. CE Casecnan has been advised that the willingness of its ultimate parent
to fund such November 15, 2001 shortfall will principally depend upon the
progress of the pending arbitration proceedings involving the Contractor,
including any orders issued in the future by the arbitration panel; completion
of the Casecnan Project in substantial compliance with the revised construction
schedule; and performance by the National Irrigation Administration (NIA) of its
obligations under the Project Agreement. Subject to these same assumptions, CE
Casecnan does not presently expect that any additional funding will be required
to be provided to it by its ultimate parent in order for CE Casecnan to make
future principal and interest payments on the Debt Securities following the
November 15, 2001 payments.
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, including the collapse of the surge
shaft. In a March 20, 2001 Supplement to Request for Arbitration, the Contractor
also seeks compensation of approximately $4,000 for alleged additional costs it
incurred from the claimed force majeure events to the extent it is unable to
recover from its insurer. On April 20, 2001, the Contractor filed a further
supplement seeking an additional approximately $62,000 in damages for the
alleged force majeure event (and geologic conditions) related to the collapse of
the surge shaft. CE Casecnan believes such allegations and claims are without
merit and is vigorously defending the Contractor's claims. The arbitration is
being conducted applying New York law and pursuant to the rules of the
International Chamber of Commerce with venue in London, England.
On June 25, 2001, the arbitration temporarily enjoined CE Casecnan from making
calls on the demand guaranty posted by Banca di Roma in support of the
Contractor's obligations to CE Casecnan for delay liquidated damages. Hearings
on the force majeure claims were held in London from July 2 to July 14, 2001,
and CE Casecnan expects the arbitration tribunal to issue a final order on the
demand guarantee injunction and the force majeure claims no later than August
31, 2001. Furthermore, hearings on the Contractor's claims for additional costs
and damages, separate from the force majeure claims, will be held in September
and October 2001.
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 $13.5 per day for each day of delay in
completion beyond November 27, 2000. Although the transmission line is complete,
NIA has not yet completed installation and testing of 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 Letter, no shareholders, partners or affiliates of the
Company, including MidAmerican Energy Holdings Company, 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.
Certain information included in this report contains forward-looking statements
made pursuant to the Private Securities Litigation Reform Act of 1995 ("Reform
Act"). Such statements are based on current expectations and involve a number of
known and unknown risks and uncertainties that could cause the actual results
and performance of the Company to differ materially from any expected future
results or performance, expressed or implied, by the forward-looking statements.
In connection with the safe harbor provisions of the Reform Act, the Company has
identified important factors that could cause actual results to differ
materially from such expectations, including development uncertainty, operating
uncertainty, acquisition uncertainty, uncertainties relating to doing business
outside of the United States, uncertainties relating to domestic and
international economic and political conditions and uncertainties regarding the
impact of regulations, changes in government policy, industry deregulation and
competition. Reference is made to all of the Company's SEC filings, incorporated
herein by reference, for a description of such factors. The Company assumes no
responsibility to update forward-looking information contained herein.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
PART II - OTHER INFORMATION
Item 1 - Legal proceedings.
- ------
Not applicable.
Item 2 - Changes in Securities.
- ------
Not applicable.
Item 3 - Defaults on Senior Securities.
- ------
Not applicable.
Item 4 - Submission of Matters to a Vote of Security Holders.
- ------
Not applicable.
Item 5 - Other Information.
- ------
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K.
- ------
(a) Exhibits:
None.
(b) Reports on Form 8-K:
The Company issued a Current report on Form 8-K dated July 10, 2001 announcing
that it had received new schedule information from the turnkey Construction
Contractor for the Casecnan Project which extends the expected Substantial
Completion Date for the Casecnan Project from August 31, 2001 to September 30,
2001 and that the arbitration tribunal temporarily enjoined CE Casecnan from
making calls on the demand guaranty posted by Banca di Roma.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
Date: July 31, 2001 /s/ Patrick J. Goodman
-------------------------------------------
Patrick J. Goodman
Senior Vice President & Chief Financial Officer