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, 1996
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.)
6750 Ayala Avenue, 24th Floor
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, 1996.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
Form 10-Q
June 30, 1996
_____________
C O N T E N T S
PART I: FINANCIAL INFORMATION Page
Item 1. Financial Statements
Report of Independent Accountants 3
Unaudited Balance Sheet, June 30, 1996
with comparative audited figures for 1995 4
Unaudited Statements of Operations for the Three Months
and Six Months Ended June 30, 1996 and for the period
from inception (September 21, 1994) to June 30,1996 5
Unaudited Statements of Cash Flows for the
Six Months Ended June 30, 1996 and 1995 and for the period
from inception (September 21, 1994) to June 30, 1996 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults on Senior Securities 10
Item 4. Submission of Matters to a Vote of
Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Stockholders and the Board of Directors
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, 1996, and the related statements of
operations for the three months and six months ended June 30,
1996 and the period from inception (September 21, 1994) to June
30, 1996, and cash flows for the six months ended June 30, 1996
and 1995 and the period from inception (September 21, 1994) to
June 30, 1996. The financial statements are the responsibility of
the Company's management.
A review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with auditing standards generally
accepted 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.
We have audited in accordance with auditing standards generally
accepted in the United States of America, the balance sheet of CE
Casecnan Water and Energy Company, Inc. (a company in the
development stage) as of December 31, 1995, and the related
statements of operations for the year ended December 31, 1995,
changes in stockholders' equity for the period from date of
inception (September 21, 1994) to December 31, 1995 and cash
flows for the year ended December 31, 1995, three months ended
December 31, 1994 and for the period from inception (September
21, 1994) to December 31, 1995 (not presented separately herein)
and, in our report dated March 4, 1996, we expressed an
unqualified opinion on those financial statements.
SYCIP, GORRES, VELAYO & CO.
An Arthur Andersen Member Firm
6760 Ayala Avenue
Makati City, Philippines
July 16, 1996
CE CASECNAN WATER AND ENERGY COMPANY, INC.
UNAUDITED BALANCE SHEET
June 30, 1996
(with comparative audited figures for 1995)
(in thousands, except share and per share amounts)
________________________________
June 30, December 31,
1996 1995
ASSETS
Cash $ 1,691 $ 1,696
Restricted cash and short-term
investments 163,494 235,851
Accrued interest and other receivables 4,787 2,820
Restricted investments 284,464 238,465
Bond issue costs, net 13,042 13,342
Development costs 24,807 8,340
Deferred income tax 3,752 646
Total assets $496,037 $501,160
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 6,173 $ 5,951
Advances from an affiliate 1,496 1,073
Notes and bonds payable 371,500 371,500
Total liabilities 379,169 378,524
Commitments and contingencies
Stockholders' equity:
Common stock - par value $0.038 per share,
authorized 2,148,000 shares, issued and
outstanding 767,162 shares at June 30,
1996 and December 31, 1995, respectively 29 29
Additional paid in capital 123,807 123,807
Accumulated deficit (6,968) (1,200)
Total stockholders' equity 116,868 122,636
Total liabilities and stockholders'
equity $496,037 $501,160
The accompanying notes are an integral part of these financial statements.
CE CASECNAN WATER AND ENERGY COMPANY, INC
UNAUDITED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
________________________________
Three Months Six Months From Inception
Ended June 30, Ended June 30, (September 21, 1994
1996 1995 to June 30, 1996
Revenues:
Interest and other income $ 6,321 $ 13,268 $ 15,762
Total revenues 6,321 13,268 15,762
Costs and expenses:
Interest expense 11,415 22,868 27,218
Less interest capitalized (691) (1,198) (1,284)
Amortization of bond issue
costs 238 472 548
Total cost and expenses 10,962 22,142 26,482
Loss before income taxes (4,641) (8,874) (10,720)
Deferred income tax benefit 1,625 3,106 3,752
Net loss available to common
stockholders $ (3,016) $ (5,768) $ (6,968)
Net loss per share - primary $ (3.93) $ (7.52) $ (11.16)
Average number of common and
common equivalent shares
outstanding 767,162 767,162 624,689
The accompanying notes are an integral part of these financial statements.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
UNAUDITED STATEMENTS OF CASH FLOWS
(in thousands)
________________________________
Three Months Six Months From Inception
Ended June 30, Ended June 30,
(September 21, 1994
1996 1995 to June 30, 1996
Cash flows from operating activities:
Net loss $ (5,768) $ - $ (6,968)
Adjustments to reconcile net cash
flow from operating activities:
Provision for deferred income
tax benefit (3,106) - (3,752)
Amortization of bond issue costs 472 - 548
Increase in accrued interest and
other receivables (1,967) - (4,787)
Increase in accounts payable and
accrued expenses 1,734 - 5,999
Net cash flows from operating
activities (8,635) - (8,960)
Cash flows from investing activities:
Additions to development costs (16,467) (1,691) (24,807)
Decrease (increase) in restricted
cash and short-term investments 72,357 - (163,493)
Increase in restricted investments (45,998) - (284,464)
Increase (decrease) in accounts
payable and accrued expenses
related to development activities (1,233) - 173
Net cash flows from investing activities 8,659 (1,691) (472,591)
Cash flows from financing activities:
Issuance of bonds payable - - 371,500
Proceeds from issuance of capital stock - - 29
Additional paid-in capital - - 123,807
Bond issue costs (173) - (13,590)
Accrued expense related to financing
activities (279) - -
Advances from an affiliate 423 1,141 1,496
Net cash flows from financing
activities (29) 1,141 483,242
Net increase (decrease) in cash
and cash equivalents (5) (550) 1,691
Cash and cash equivalents at
beginning of period 1,696 550 -
Cash and cash equivalents at
end of period $ 1,691 $ - $ 1,691
The accompanying notes are an integral part of these financial statements.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except per share amounts)
________________________________
1. General:
In the opinion of management of CE Casecnan Water and Energy
Company, Inc. (the "Company"), the accompanying unaudited
financial statements contain all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the
financial position as of June 30, 1996 and the results of
operations for the three months and six months ended June 30,
1996, and the period from inception (September 21, 1994) to June
30, 1996, and cash flows for the six months ended June 30, 1996
and 1995 and the period from inception (September 21, 1994) to
June 30, 1996.
The results of operations for the three months and six months
ended June 30, 1996 are not necessarily indicative of the results
to be expected for the full year. The Company did not have any
revenues or expenses until the fourth quarter of 1995.
2. Other Footnote Information:
Reference is made to the Company's December 31, 1995 audited
financial statements included in Amendment No. 3 to the Form S-4
dated April 30, 1996 that included information necessary or
useful to the understanding of the Company's business and
financial statement presentations. In particular, the Company's
significant accounting policies and practices were presented as
Note 3 to the financial statements included in that report.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share amounts)
________________________________
Results of Operations:
The Company is in the construction stage and has not yet started
commercial operations as of June 30, 1996. The quarter and year
to date revenue ended June 30, 1996 of $6,321 and $13,268
consists of interest income from bond proceeds and equity
investments. The quarter and year to date interest expense ended
June 30, 1996 of $11,415 and $22,868 less amounts capitalized of
$691 and $1,198 and amortization of bond issue costs of $238 and
$472 are related to the notes and bonds payable issued by the
Company in the fourth quarter of 1995.
Liquidity and Capital Resources:
The Company has a contract with the Philippine Government,
through the National Irrigation Administration ("NIA") (a
government-owned and controlled corporation), for the development
and construction of a hydroelectric power plant and related
facilities under a build-own-operate-transfer agreement
("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 Casecnan Multipurpose Irrigation
and Power Project (the "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 Agreement.
Construction of the Project commenced in 1995 and such costs are
included in the development costs account. The total project cost
for the facility is approximately $495,000. The draws on the
notes and bonds payable excluding interest expense payments were
$10,700 and $16,300 for the three months and six months ended
June 30, 1996, respectively.
CASECNAN WATER AND ENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share amounts)
________________________________
The Project is being constructed by Hanbo Corporation and Hanbo
Engineering & Construction Co., Ltd. (formerly You One
Engineering & Construction Co., Ltd.) (collectively, the
"Contractor"), both of which are South Korean corporations, on a
joint and several basis, pursuant to a fixed price (approximately
$236,000), date-certain, turnkey construction contract (the
"Turnkey Construction Contract"). The Contractor's obligations
under the Turnkey Construction Contract are guaranteed by Hanbo
Steel Company, Ltd. In addition, the Contractor's obligations
under the Turnkey Construction Contract are collateralized by the
unconditional, irrevocable standby letter of credit issued by
Korea First Bank in the amount of approximately $118,000. The
Company entered into an agreement for engineering services with
Knight Piesold. Ltd. for a fee based on the provisions of that
agreement.
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 Agreement
and the performance undertaking, respectively. No shareholders,
partners or affiliates of the Company, including CECI and Kiewit,
and no directors, officers or employees of the Company will
guarantee or be in any way liable for payment of the Company's
obligations except to the extent that the Company's stockholders
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.
NIA's payments of obligations under the Agreement are expected to
be the Company's sole source of operating revenues. Because of
CE CASECNAN WATER AND ENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share amounts)
________________________________
Liquidity and Capital Resources (continued):
the Company's dependence on NIA, any material failure of NIA to
fulfill its obligations under the 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. Payments under the Agreement
will be denominated in U.S. Dollars except for any VAT or other
gross-up taxes, which are paid in Philippine Pesos.
On November 27, 1995, the Company issued $371,500 worth of notes
and bonds to finance the construction of the Project. These
consist of $75,000 Senior Secured Floating Rate Notes (FRNs) due
2002, $125,000 Senior Secured Series A Notes (Series A Notes)
with interest at 11.45% due 2005 and $171,500 Senior Secured
Series B Bonds (Series B Bonds) with interest at 11.95% due 2010.
For the six months ended June 30, 1996, these debt securities had
effective interest rates of 10.70%, 12.13% and 12.56% for FRNs,
Series A Notes and Series B Bonds, respectively, inclusive of the
effect of bond issue cost amortization. Quarterly interest
payments for the FRNs commenced on February 15, 1996, and
semiannual interest payments for Series A Notes and Series B
Bonds commenced on May 15, 1996. Semiannual installments for
principal payments will commence on November 15, 2000, May 15,
2003 and May 15, 2002 for the FRNs, Series A Notes and Series B
Bonds, respectively.
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
CASECNAN WATER AND ENERGY COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share amounts)
________________________________
Liquidity and Capital Resources (continued):
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 offering circular.
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 Turnkey Construction Contract; and sale, lease, or
transfer of properties material to the Project, among others.
The financial statements of the Company were prepared in United
States Dollar amounts. Gains or losses from translation of
monetary assets and liabilities in foreign currencies are not
material.
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.
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CE CASECNAN WATER AND ENERGY COMPANY, INC.
Date: August 12, 1996 /s/ John G. Sylvia
John G. Sylvia
Senior Vice President and
Chief Financial Officer
/s/ Gregory E. Abel
Gregory E. Abel
Senior Vice President, Chief Accounting
Officer and Controller