FORM 10-K
(Mark One)
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Fiscal year ended December 31, 2001
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________________to_________________________
Commission File Number 333-83815
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Caithness Coso Funding Corp.
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(Exact name of registrant as specified in its charter)
Delaware 94-3328762
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Coso Finance Partners California 68-0133679
Coso Energy Developers California 94-3071296
Coso Power Developers California 94-3102796
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(Exact names of Registrants as (State or other jurisdiction (IRS Employer
specified in their characters) of incorporation) Identification No.)
565 Fifth Avenue, 29th Floor, New York, New York 10017-2478
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 921-9099
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Securities registered pursuant to Section 12(g) of the Act:
6.80% Series B Senior Secured Notes Due 2001
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(Title of class)
9.05% Series B Senior Secured Notes Due 2009
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(Title of class)
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. [ x ] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) 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. [ ___ ]
The Registrant's Common Stock is not traded in a public market.
Aggregate market value of the voting stock held by non-affiliates
of the registrant:
Not applicable.
Documents Incorporated by Reference
CAITHNESS COSO FUNDING CORP.
ANNUAL REPORT ON FORM 10-K
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
Part I Page
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Item 1. Business 1
Item 2. Properties 7
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Part II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters (Not applicable) 9
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 23
Item 8. Financial Statements and Supplementary Data 24
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 25
Part III
Item 10. Directors and Executive Officers of the Registrants 25
Item 11. Executive Compensation 27
Item 12. Security Ownership of Certain Beneficial Owners and
Management (Not applicable) 27
Item 13. Certain Relationships and Related Transactions 29
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 32
Part I
Item 1. Business.
The Coso Projects
The Coso projects consist of three 80 MW geothermal power plants, called
Navy I, BLM and Navy II, certain transmission lines, wells, gathering system and
other related facilities. The Coso projects are located near one another in the
Mojave Desert approximately 150 miles northeast of Los Angeles, California, and
have been generating electricity since the late 1980s. Unlike fossil fuel-fired
power plants, the Coso projects' power plants use geothermal energy derived from
the natural heat of the earth's interior to generate electricity.
Coso Finance Partners (The Navy I partnership) owns Navy I and its related
facilities, Coso Energy Developers (the BLM partnership) owns BLM and its
related facilities and Coso Power Developers (the Navy II partnership) owns Navy
II and its related facilities (collectively, the Coso partnerships). The Coso
partnerships and their affiliates own the exclusive right to explore, develop
and use, currently without any known interference from any other power
developers, a portion of the Coso Known Geothermal Resource Area.
The geothermal power plants, each of which has three separate turbine
generator units, have consistently operated above their nominal capacities, and
the combined average capacity factor for the plants has exceeded 100% for each
of the last seven years.
The Coso partnerships sell 100% of the electrical energy generated at the
plants to Southern California Edison (Edison) under three long-term Standard
Offer No. 4 power purchase agreements. Each power purchase agreement expires
after the last maturity date of the senior secured notes. (Edison is one of the
largest investor-owned electric utilities in the United States.) Under the power
purchase agreements, the Coso partnerships receive the following payments:
* Capacity payments for being able to produce electricity at certain
levels. Capacity payments are fixed throughout the lives of the power
purchase agreements;
* Capacity bonus payments if they are able to produce electricity
above a specified, higher level. The maximum capacity bonus payment
available is also fixed throughout the lives of the power purchase
agreements; and
* Energy payments based on the amount of electricity their respective
plants actually produce.
Energy payments were fixed for the first ten years of firm operation under
the power purchase agreements. Firm operation was achieved for each Coso
partnership when Edison and that Coso partnership under its power purchase
agreement agreed that each generating unit at a plant was a reliable source of
generation and could reasonably be expected to operate continuously at its
effective rating. After the first ten years of firm operation and until its
power purchase agreement expires, Edison is required to make energy payments to
the Coso partnership based on its avoided cost of energy. Edison's avoided cost
of energy is Edison's cost to generate electricity if Edison were to produce it
itself or buy it from another power producer rather than buy it from the
relevant Coso partnership. Future energy payments required to be paid by Edison
to the Coso partnerships will most likely be less than historical energy
payments because they will be paid based on Edison's avoided cost of energy,
instead of the fixed payments paid during the first ten years. The fixed energy
price period expired in August 1997 for the Navy I partnership, in March 1999
for the BLM partnership, and in January 2000 for the Navy II partnership. The
Edison power purchase agreements will expire in August 2011 for the Navy I
partnership; in March 2019 for the BLM partnership; and in January 2010 for the
Navy II partnership.
1
Edison entered into an agreement (the "Agreement") with the Coso
partnerships on June 19, 2001 that addressed renewable energy pricing and issues
concerning California's energy crisis. The Agreement which was amended on
November 30, 2001, established May 1, 2002 as the date when the Coso
partnerships will begin receiving a fixed avoided cost of energy rate of 5.37
cents per kWh for five (5) years. Subsequent to the five year period, Edison
will be required to make energy payments to the Coso partnerships based on its
avoided cost of energy until each partnership's power purchase agreement
expires.
AB1890 Energy Subsidy Payments
In addition to receiving payments under the power purchase agreements, the
Coso partnerships qualify for subsidy payments from a special purpose state fund
established under California Legislature AB1890 (AB1890). The California Energy
Commission administers the fund. AB1890, as amended, provides, in part, for
subsidy payments from 1998 through 2001 to power generators using renewable
sources of energy, including geothermal energy, and who are being paid based on
the avoided cost of energy. The funds were distributed in the form of a
production incentive payment that subsidizes renewable energy producers when
prices paid for their electricity are below certain pre-determined target
prices. Under AB1890, the Navy I partnership, the BLM partnership and the Navy
II partnership received subsidy payments for energy delivered to Edison by the
respective Coso partnership, if Edison's avoided cost of energy falls below 3.0
cents per kWh. This subsidy payment is capped at 1.0 cent per kWh.
Purchase of CalEnergy Interests
On February 25, 1999, Caithness Acquisition Company, LLC (CAC), a wholly
owned subsidiary of Caithness Energy, LLC, (Caithness Energy) purchased all of
the interests in the Coso projects that were owned by CalEnergy Company Inc.
(CalEnergy), which is now known as MidAmerican Energy Holdings Company. The
purchase price consisted of $205.0 million in cash, plus $5.0 million in
contingent payments, plus the assumption of CalEnergy's and its affiliates'
share of debt outstanding on the Coso projects which then totaled approximately
$67.0 million. In order to complete the purchase, CAC arranged for short-term
debt financing in the principal amount of approximately $211.5 million. CAC used
a portion of the proceeds from the Series A note offering that it received from
the Coso partnerships, together with funds from other sources, to repay all of
this short-term borrowing.
Operating Strategy
The Coso partnerships seek to maximize their cash flow at the Coso projects
through active management of their cost structure and the geothermal resource.
After CAC'S purchase of all of CalEnergy's interests in the Coso projects, the
Coso partnerships retained Coso Operating Company, (COC) which is an affiliate,
to maintain all three plants, the transmission lines and the geothermal
resource, including well drilling. As a result of the change in operators and
restructuring of operator fees, the aggregate annual fees paid by the Coso
partnerships to COC for such maintenance has been reduced significantly.
Payments of operator fees are subordinated to all payments made under the senior
secured notes. CAC, which purchased the managing partners interest in the Coso
partnerships, has caused any management fees payable by each Coso partnership to
its partners are subordinated to all payments made under the senior secured
notes.
The Coso projects qualify as Small Power Qualifying Facilities (QF) under
the Public Utility Regulatory Policies Act (PURPA) and the rules and regulations
promulgated under PURPA by the Federal Energy Regulatory Commission (FERC).
PURPA exempts the Coso projects from certain federal and state regulations. The
Coso projects must continue to satisfy certain ownership and fuel-use standards
to maintain their QF status. Since their inception, the Coso projects have
satisfied these standards and expect that they will continue to do so in the
future.
2
The Sponsor
Caithness Energy, the principal operating subsidiary of Caithness
Corporation, is a developer and owner of independent power projects and is the
sponsor of the Coso projects. Since 1966, the current owners of Caithness
Corporation have been involved in the development of long-term investment
opportunities involving natural resources. Caithness Corporation is one of the
two original sponsors of the Coso projects and formed Caithness Energy in 1995
to consolidate its ownership of independent power projects.
Caithness Energy believes that it is currently the second largest owner of
geothermal power projects in the United States, based on the total electrical
generating capacity of its power projects. Through its controlled affiliates,
Caithness Energy owns interests in seven geothermal plants, including the Coso
projects, totaling 414 MW of generating capacity. Caithness Energy is also
seeking to develop additional natural gas power projects, and has interests in
other operating power generating facilities, including solar, wind and natural
gas, totaling an additional 696 MW of generating capacity.
Caithness Energy is headquartered in New York City and has additional
offices in California, Nevada, Colorado and Florida.
The Issuer
Caithness Coso Funding Corp. (Funding Corp.) is a special purpose
corporation and a wholly owned subsidiary of the Coso partnerships. It was
formed for the purpose of issuing the senior secured notes on behalf of the Coso
partnerships who have jointly, severally, and unconditionally guaranteed
repayment of the senior secured notes.
Funding Corp. has no material assets, other than the loans made to the Coso
partnerships, and does not conduct any business, other than issuing the senior
secured notes and making the loans to the Coso partnerships.
The Coso Known Geothermal Resource Area
The Coso projects are located in an area that has been designated as a
Known Geothermal Resources Area by the Bureau of Land Management pursuant to the
Geothermal Steam Act of 1970. The Bureau of Land Management designates an area
as a Known Geothermal Resource Area when it determines that a commercially
viable geothermal resource is likely to exist there. There are over 100 Known
Geothermal Resource Areas in the United States, most of which are located in the
western United States in tectonically active regions.
The Coso Known Geothermal Resource Area is located in Inyo County,
California, approximately 150 miles northeast of Los Angeles. The Coso
geothermal resource is a "liquid-dominated" hot water source contained within
the heterogeneous fractured granite rocks of the Coso Mountains. It is believed
the heat source for the Coso geothermal resource is a hot molten rock or "magma"
body located at a depth of six-to-seven miles beneath the surface of the field.
Geochemical studies indicate that the water in the Coso geothermal resource is
ancient water that has been there since the ice age or longer.
3
Steam Sharing Program
In 1994, the Coso partnerships entered into a Geothermal Exchange Agreement
which implemented a steam-sharing program among the Coso projects. The purpose
of the steam-sharing program is to enhance the management and optimize the
overall use of the Coso geothermal resource. Pursuant to the steam sharing
program, the Coso partnerships constructed an inter-project steam supply and
water injection system that links the three Coso projects and BLM North together
via metered transfer lines through which the Coso partnerships exchange steam
and other geothermal resources with one another.
As part of the steam sharing program, the Coso partnerships plan to
conserve the geothermal resource whenever possible by, among other things,
transferring steam between and among the Coso projects and BLM North, rather
than drilling new wells at the Coso projects' sites prematurely, and expanding a
flexible field-wide water reinjection program. While the U.S. Navy and the
Bureau of Land Management have consented to the steam sharing program, each has
reserved the right, in its sole discretion, to withdraw its consent to such
transfers under certain circumstances.
In 2001, the Navy I partnership and the Navy II partnership incurred
aggregate royalties to the U.S Navy of approximately $2.5 million for steam
transferred by Navy I to Navy II and by Navy II to BLM under the steam sharing
program from geothermal resources located on the property on which Navy I or
Navy II, as the case may be, are situated. Of this amount, the Navy I and Navy
II partnerships each incurred approximately $1.3 million. The BLM partnership
reimbursed the Navy II partnership approximately $0.2 million of the royalties
incurred by the Navy II partnership. The BLM partnership incurs a royalty to the
U.S. Navy for electricity generated by BLM for steam transferred from U.S. Navy
property and sold to Edison.
Royalty and Revenue-Sharing Arrangements
The Coso partnerships are required to make royalty payments to, and are
subject to other revenue-sharing arrangements with, the U.S. Navy, the Bureau of
Land Management and certain other persons.
Navy I
Under the U.S. Navy contract, as a royalty for Unit 1 at Navy I, the Navy I
partnership is obligated to partially reimburse the U.S. Navy for electricity
supplied to it by Edison from electricity generated at the Navy I plant. The
reimbursement payment is based on a pricing formula included in the U.S. Navy
contract. The percentage rate of reimbursement changes semiannually, but cannot
exceed 95% of the price paid by the U.S. Navy to Edison, in accordance with a
weighted index based on the Consumer Price Index and price indices for the oil
industry, the electric power plant industry and the construction industry.
Discussions with the U.S. Navy are continuing to re-adjust the formula to
reflect recent activity in the local energy market. In November 2001, a
modification to the calculation of the reimbursement pricing formula was made to
the U.S. Navy Contract resulting in a reduction of accrued royalties of $6.5
million.
In addition, with respect to Unit 1 at Navy I, the Navy I partnership is
obligated to pay the U.S. Navy the sum of $25.0 million on or before December
31, 2009, the expiration date of the term of the U.S. Navy contract. Payment of
this obligation will be made from an established sinking fund to which the Navy
I partnership has been making payments since 1987.
For Units 2 and 3 at Navy I, the Navy I partnership's royalty expense is a
fixed percentage of its electricity sales to Edison. The royalty expense is
15.0% of revenues received by the Navy I partnership through 2003 and will
increase to 20.0% of revenues received from 2004 through 2009, the expiration
date of the U.S. Navy contract.
4
BLM
The BLM partnership pays royalties to the Bureau of Land Management under
the BLM lease. The royalty rate is 10% of the net value of the steam produced by
the BLM partnership. This royalty rate is fixed for the life of the BLM Lease.
In addition to this royalty, the BLM partnership is obligated, in connection
with the assignment of the BLM lease to the BLM partnership, to pay a royalty of
5% based on the value of the steam produced to Coso Land Company, a general
partnership of which CAC and another affiliate of Caithness Energy are the
general partners. The royalty is subordinated to the payment of all the BLM
partnership's other royalties, all debt service and all operating costs of the
BLM partnership. No portion of the royalty accrued to Coso Land Company has been
paid to date.
BLM North
In December of 2000, the Bureau of Land Management allowed Coso Land
Company to assign each of the Coso partnerships an undivided one-third interest
in leases they had previously bought from the Los Angeles Department of Water
and Power (LADWP). The assignment required each Coso partnership to pay $8.00
per acre in additional rent to the Bureau of Land Management. When the leased
property commences to produce geothermal steam, the Coso partnerships will pay
monthly royalties under the LADWP leases of 10% of the value of steam produced,
5% of the value of any by-products, and 5% of the value of commercially
demineralized water. The Bureau of Land Management may establish minimum
production levels and reduce the foregoing royalties if necessary to encourage
greater recovery of leased resources.
Navy II
The Navy II partnership pays royalties to the U.S Navy under the U.S Navy
contract. The Navy II partnership's royalty expense is a fixed percentage of its
electricity sales to Edison. The royalty rate was 10.0% of electricity sales to
Edison through 1999, increased to 18.0% for 2000 through 2004 and will increase
to 20.0% from 2005 through the end of the Navy contract.
Operations and Maintenance
The operations and maintenance services for the Coso projects, including
the Navy I, BLM, and Navy II transmission lines, wells, gathering system, and
other related facilities, are performed by COC on behalf of the Coso
partnerships pursuant to the Operation and Maintenance agreements. COC is a
wholly owned subsidiary of CAC that was initially formed by CalEnergy to
facilitate the transfer of operational control of the Coso projects to a
Caithness Energy affiliate.
On February 26, 1999 CalEnergy ceased to be the operator of the Coso
projects, and FPL Energy Operating Services, Inc. (FPLEOSI), an indirect wholly
owned subsidiary of FPL Energy, Inc., assumed that role. An amended and restated
operation and maintenance agreement between FPLEOSI and the managing general
partners was implemented. Under that agreement, FPLEOSI became the plant
operator and under a separate operations and maintenance agreement COC was
responsible for maintenance of the geothermal resource. On October 17, 1999 the
operating agreement between FPLEOSI and the managing general partners was
terminated and COC became the sole operator of the plant and continued to
maintain the geothermal field.
5
Insurance
The Coso partnerships currently have property, business interruption,
catastrophe and general liability insurance for the Coso projects. For the
period February 25, 2001 to February 24, 2002 the plants were insured up to
their replacement cost for general property damage and over $166.0 million in
the aggregate for business interruption, subject to a $50,000 deductible for
property damage (and a $250,000 deductible for the turbine generator sets), with
a 30-day deductible for business interruption (including machinery breakdown).
Catastrophic insurance (including earthquake and flood) was capped at $200.0
million for property damage, subject to a minimum deductible of $2.5 million or
5.0% of the loss. The deductible for flood is $50,000 for any one loss.
Liability insurance coverage was $51.0 million (occurrence based). Operators'
extra expense (control of well) insurance is $10.0 million per occurrence with a
$150,000 deductible.
During the latter half of 2001, conditions in the insurance markets
deteriorated due to increased claims and events surrounding the September 11th
terrorist attacks. As a result of the difficult market, the Coso partnerships
renewed their coverage for the period February 25, 2002 to February 25, 2003.
Liability and property coverage remains the same with the exception that
catastrophic occurrences are now capped at $160.0 million and the deductibles
under the property program have been increased as follows:
Business Interruption 60 Days
Property Damage $250,000
Turbine Generator Sets $500,000
Earthquake 5% of Property Value
Employees
Employees necessary for the operation of the Coso partnerships are provided
by COC, under their respective operation and maintenance agreements. COC
maintains a qualified technical staff covering a broad range of disciplines
including geology, geophysics, geochemistry, drilling technology, reservoir
engineering, plant engineering, construction management, maintenance services,
production management, electric power operation and certain accounting services.
As of December 31, 2001, COC employed 92 people to operate and maintain the Coso
projects.
Competition
The Coso partnerships sell all electrical energy generated at the plants to
Edison under three long-term Standard Offer No. 4 power purchase agreements. The
payments under these agreements have constituted 100% of the operating revenues
of each power plant since its inception.
Environmental and Regulatory Matters
The Coso partnerships are subject to environmental laws and regulations at
the federal, state and local levels in connection with the development,
ownership and operation of the Coso projects. These environmental laws and
regulations generally require that a wide variety of permits and governmental
approvals be obtained to construct and operate an energy-producing facility. The
facility must then operate in compliance with the terms of these permits and
approvals. If the Coso partnerships fail to operate their facilities in
compliance with applicable laws, permits and approvals, governmental agencies
could levy fines, curtail operations, or seek orders to cease operations.
The Coso partnerships believe they are in compliance in all material
respects with all environmental regulatory requirements applicable to the Coso
projects, and that maintaining compliance with current governmental requirements
will not require a material increase in capital expenditures or materially
adversely affect that Coso partnership's financial condition or results of
operations. It is possible, however, that future developments, such as more
stringent requirements of environmental laws and enforcement policies
thereunder, could affect capital and other costs at the Coso projects and the
manner in which the Coso partnerships conduct their business.
6
Financial Information
(in thousands)
Years Ended December 31,
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Navy I Partnership 1999(c) 2000(c) 2001(c)
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Total Operating Revenue(g)(h) $ 55,666 $ 52,419 $ 53,400
Operating Income 23,537 23,295 24,218
Total Assets 218,192 198,409 193,114
Years Ended December 31,
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BLM Partnership 1999(c) 2000(c) 2001(c)
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Total Operating Revenue(g)(h) $ 49,877 $ 42,174 $ 44,041
Operating Income 11,343 10,760 12,645
Total Assets 216,391 201,312 183,978
Years Ended December 31,
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Navy II Partnership 1999(c) 2000(c) 2001(c)
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Total Operating Revenue(g)(h) $ 113,746 $ 43,054 $36,389
Operating Income 70,169 8,471 1,981
Total Assets 273,269 195,693 170,058
(c) See Footnotes to Summary Selected Historical Financial and Operating Data
Item 2. Properties
Plants
Navy I
Navy I and its steam resource are located on the United States Naval
Weapons Center at China Lake. In December of 2000, Navy I acquired an undivided
one-third interest in leases previously purchased from LADWP located on Bureau
of Land Management property. It commenced operations in 1987. Geothermal steam
for Navy I is produced using over 45 production and injection wells located
within a radius of approximately 3,000 feet of Navy I. Navy I consists of three
separate turbine generators, known as Units 1, 2 and 3, each with approximately
30 MW of electrical generating capacity. Navy I's steam gathering and piping
systems are cross-connected to Navy II via metered transfers to allow steam to
be transferred from wells located on the real property covered by the LADWP
leases to Navy I and between Navy I and Navy II, pursuant to the steam sharing
program. Unit 1 commenced firm operation in 1987, and Units 2 and 3 commenced
firm operation during 1988. Navy I has an aggregate gross electrical generating
capacity of approximately 90 MW, and operated at an average operating capacity
factor of 108.3% in 2001, 111.8% in 2000 and 95.4% in 1999, based on a stated
capacity of 80 MW.
7
BLM
BLM and its steam resource are located on Bureau of Land Management
property, within the boundaries of the United States Naval Weapons Center at
China Lake. In December of 2000, BLM acquired an undivided one-third interest in
leases previously purchased from LADWP which are also located on Bureau of Land
Management property. It commenced operations in 1989. BLM is comprised of
turbine generators located at two different power blocks: the BLM East site and
the BLM West site. The BLM East site is located approximately 1.3 miles east of
the BLM West site. Geothermal steam for BLM is produced using over 41 production
and injection wells located within a radius of approximately 4,000 feet from
either the BLM East or the BLM West site. BLM consists of three separate turbine
generators, known as Units 7, 8 and 9. Units 7 and 8 are located at the BLM East
site, each with a generating capacity of approximately 30 MW, while Unit 9 is
located at the BLM West site, with a generating capacity of approximately 30 MW.
All three units commenced firm operation during 1989. BLM's steam gathering and
piping systems are cross connected to Navy II via metered transfers to allow
steam to be transferred between Navy II and BLM pursuant to the steam sharing
program. BLM has an aggregate gross electrical generating capacity of
approximately 90 MW, and operated at an average operating capacity factor of
102.8% in 2001, 109.4% in 2000 and 105.0% in 1999, based on a stated capacity of
80 MW.
Navy II
Navy II and its steam resource are located on the United States Naval
Weapons Center at China Lake. In December of 2000, Navy II acquired an undivided
one-third interest in leases previously purchased from LADWP which are located
on Bureau of Land Management property. It commenced operations in 1989.
Geothermal steam for Navy II is produced using over 36 production and injection
wells located within a radius of approximately 6,000 feet of Navy II. Navy II
consists of three separate turbine generators, known as Units 4, 5 and 6, each
with approximately 30 MW of electrical generating capacity. All three Navy II
units commenced firm operation in 1990. Navy II's steam supply systems are
cross-connected to Navy I and BLM steam supply systems via metered transfers to
allow steam to be transferred between or among the plants pursuant to the steam
sharing program. Navy II has an aggregate gross electrical capacity of
approximately 90 MW, and operated at an average operating capacity factor of
104.9% in 2001, 111.1% in 2000 and 112.0% in 1999, based on a stated capacity of
80 MW.
Transmission Lines
The electricity generated by Navy I is conveyed over an approximately
28.8-mile 115 kilovolt ("kV") transmission line on the U.S. Navy and Bureau of
Land Management land that is connected to the Edison substation at Inyokern,
California. The Navy I partnership owns and uses this transmission line and its
related facilities. The electricity generated by BLM and Navy II is conveyed
over an approximately 28.8-mile 230 kV transmission line on U.S. Navy and Bureau
of Land Management land that is also connected to the Edison substation at
Inyokern, California. Coso Transmission Line Partners owns the BLM/Navy II
transmission line and related facilities.
8
Item 3. Legal Proceedings.
Settlement of Litigation
The Coso partnerships are currently parties to various items of litigation
relating to day-to-day operations, none of which, if determined adversely, would
be material to the financial condition and results of operations of the Coso
partnerships, either individually or taken as a whole.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Not applicable.
Item 6. Selected Financial Data.
The selected fiscal year end historical financial data has been derived
from the audited financial statements of the Coso partnerships. The information
contained in the following tables should be read in conjunction with the audited
financial statements and notes thereto included elsewhere in this report.
Navy I Partnership
(Stand-alone)(a)
(In thousands, except ratio data)
Year Ended December 31,
-----------------------
1997 1998 1999(c) 2000 (c) 2001 (c)
---- ---- ---- ----- -----
Statement of Operations Data:
Operating revenues(b)(g)(h)................... $ 100,431 $ 53,153 $ 55,666 $ 52,419 $ 53,400
Operating expenses............................ (33,992) (31,894) (32,129) (29,124) (29,182)
---------- ---------- --------- ---------- ---------
Operating income.............................. 66,439 21,259 23,537 23,295 24,218
Non-Operating income and (expense):
Interest expense.............................. (6,260) (4,210) (11,573) (12,493) (11,732)
Other expenses................................ -- (1,046) (4,377) (520) (705)
Interest and other income, net................ 1,980 585 2,234 2,506 2,928
---------- ---------- --------- ---------- ---------
Net income................................... $ 62,159 $ 16,588 $ 9,821 $ 12,788 $ 14,709
========== ========== ========= ========== =========
Operating Data:
Operating capacity factor (d)(e).............. 103.2% 94.6% 95.4% 111.8% 108.3%
kWh produced.................................. 723,116 662,560 668,388 785,624 758,890
See Footnotes to Summary Selected Historical Financial and Operating Data
9
BLM Partnership
(Stand-alone)
(In thousands, except ratio data)
Year Ended December 31,
-----------------------
1997 1998 1999(c) 2000(c) 2001(c)
---- ---- ---- ----- -----
Operating revenues (b)(g)(h).................. $ 102,868 $ 107,199 $ 49,877 $ 42,174 $ 44,041
Operating expenses............................ (43,193) (44,687) (38,534) (31,414) (31,396)
--------- --------- -------- --------- --------
Operating income.............................. 59,675 62,512 11,343 10,760 12,645
Non-Operating income and (expense):
Interest expense ............................. (9,105) (6,107) (8,725) (9,174) (8,958)
Other expenses................................ -- (1,113) (3,332) (318) (440)
Interest and other income, net................ 1,712 1,181 1,066 8,125 3,766
--------- --------- -------- --------- --------
Net income.................................... $ 52,282 $ 56,473 $ 352 $ 9,393 $ 7,013
========= ========= ======== ========= ========
Operating Data:
Operating capacity factor (d)(e)................ 99.6% 104.4% 105.0% 109.4% 102.8%
kWh produced.................................... 697,794 731,767 735,840 769,098 720,130
See Footnotes to Summary Selected Historical Financial and Operating Data
Navy II Partnership
(Stand-alone)
(In thousands, except ratio data)
Year Ended December 31,
-----------------------
1997 1998 1999 (c) 2000 (c) 2001 (c)
---- ---- ------- ------- -------
Statement of Operations Data:
Operating revenues (b)(g)(h).................. $ 112,796 $ 119,564 $ 113,746 $ 43,054 $ 36,389
Operating expenses............................ (37,749) (41,120) (43,577) (34,583) (34,408)
--------- --------- -------- --------- --------
Operating income.............................. 75,047 78,444 70,169 8,471 1,981
Non-Operating income and (expense):
Interest expense.............................. (10,532) (7,918) (11,947) (9,130) (8,128)
Other expenses................................ -- (1,868) (4,191) (769) (1,119)
Interest and other income, net................ 2,187 1,799 2,174 2,868 2,883
--------- --------- -------- --------- --------
Net income (loss)............................. $ 66,702 $ 70,457 $ 56,205 $ 1,440 $ (4,383)
========= ========= ======== ========= ========
Operating Data:
Operating capacity factor (d)(e).............. 108.9% 108.6% 112.0% 111.1% 104.9%
kWh produced.................................. 762,821 760,659 785,772 780,709 735,210
See Footnotes to Summary Selected Historical Financial and Operating Data
10
As of December 31,
------------------
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
Balance Sheet Data (in thousands):
- ----------------------------------
Navy I Partnership (stand-alone)(a)
Cash........................................... $ 2,888 $ -- $ 7,821 $ 3,506 $ 264
Restricted cash and investments................ 6,479 7,524 25,001 22,996 21,325
Property, plant and equipment, net............. 186,399 180,189 153,879 149,076 140,437
Power purchase agreement, net.................. -- -- 13,388 12,240 11,093
Total assets................................... 209,390 202,266 218,192 198,409 193,114
Project loans:
Existing project debt, payable to
Coso Funding Corp......................... 45,666 40,566 -- -- --
Project notes (f).............................. -- -- 151,550 134,984 122,550
Partners' capital.............................. 155,568 149,933 49,362 46,871 52,425
BLM Partnership (stand-alone)
Cash........................................... $ 873 $ -- $ 6,423 $ 5,862 $ --
Restricted cash and investments................ 290 290 9,806 14,502 7,368
Property, plant and equipment, net............. 198,296 202,270 165,650 153,618 148,417
Power purchase agreement, net.................. -- -- 20,549 19,510 18,437
Total assets................................... 225,172 228,381 216,391 201,312 183,978
Project loans:
Existing project debt, payable to
Coso Funding Corp......................... 76,654 37,958 -- -- --
Project notes (f).............................. -- -- 107,900 100,907 96,250
Partners' capital.............................. 124,113 163,191 79,350 69,245 52,762
Navy II Partnership (stand-alone)
Cash........................................... $ 1,148 $ 818 $ 6,020 $ 7,741 $ --
Restricted cash and investments................ -- -- 54,338 10,214 5,517
Property, plant and equipment, net............. 199,134 188,840 147,522 136,947 124,665
Power purchase agreement, net.................. -- -- 28,409 25,614 22,820
Total assets................................... 228,653 220,867 273,269 195,693 170,058
Project loans:
Existing project debt, payable to
Coso Funding Corp......................... 97,267 61,323 -- -- --
Project notes (f).............................. -- -- 153,550 94,176 84,200
Partners' capital.............................. 125,413 153,661 104,331 87,423 62,220
See Footnotes to Summary Selected Historical Financial and Operating Data
11
Footnotes to Summary Selected Historical Financial and Operating Data
(a) Reflects the combined financial results of the Navy I partnership and Coso
Finance Partners II, a California general partnership ("CFP II"). The Navy
I partnership and CFP II were first formed as separate entities to
facilitate the initial bank financing for the construction and development
of Navy I. Initially, the Navy I partnership acquired all of the assets
relating to the first turbine generator unit at Navy I and CFP II acquired
all of the assets of Navy I relating to the second and third generator
units at Navy I. In 1988, CFP II assigned all of its rights and interests
in the second and third generator units at Navy I to the Navy I partnership
in return for a 5.0% royalty to be paid based on the Navy I partnership's
steam production. Since the Navy I partnership and CFP II operate under
common ownership and management control, the historical financial
statements of the entities have been combined after elimination of
intercompany amounts related to the royalty arrangement. CFP II merged with
and into the Navy I partnership and the accrued royalty was extinguished.
In addition, the royalty will no longer be accrued from and after the
Series A note offering.
(b) The fixed energy price periods expired for the Navy I partnership in August
1997, for the BLM partnership in March 1999 and for the Navy II partnership
in January 2000.
(c) After CAC's purchase of all of CalEnergy's interests in the Coso projects
on February 25, 1999, the Coso partnerships adopted a new basis of
accounting and, accordingly, the financial information for the period after
the acquisition is presented on a different cost basis than that for the
period before the acquisition and therefore is not comparable. The purchase
price was allocated to the portion of the assets and liabilities purchased
from CalEnergy based on their fair values, with the amount of fair value of
net assets in excess of the purchase price being allocated to long-lived
assets on a pro-rata basis.
(d) Based on a stated capacity of 80 MW.
(e) The variance in the operating capacity factors for the Navy I partnership,
the BLM partnership, and the Navy II partnership are due to the transfer of
steam from the Navy I partnership to the BLM and Navy II partnership's
under the steam sharing program.
(f) Reflects indebtedness owed to Funding Corp., which loaned all the proceeds
from the offering to the Coso partnerships at interest rates and maturities
identical to the interest rates and maturities of the senior secured notes.
(g) Reflects non-recognition of operating revenues for the period November 1,
2000 through March 26, 2001, based on non-collection of amounts due for
power generated and sold to Edison.
(h) Certain reclassifications have been made to the 2000 statement of
operations to conform to the 2001 presentation.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Except for historical financial information contained herein, the matters
discussed in this annual report may be considered forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and subject to
the safe harbor created by the Securities Litigation Reform Act of 1995. Such
statements include declarations regarding the intent, belief or current
expectations of Caithness Coso Funding Corp. ("Funding Corp."), Coso Finance
Partners ("the Navy I partnership"), Coso Energy Developers ("the BLM
partnership"), and Coso Power Developers ("the Navy II partnerships"),
collectively, (the "Coso partnerships") and their respective management. Any
such forward-looking statements are not guarantees of future performance and
involve a number of risks and uncertainties; actual results could differ
materially from those indicated by such forward-looking statements. Among the
important factors that could cause actual results to differ materially from
those indicated by such forward-looking statements are: (i) risks relating to
the uncertainties in the California energy market, (ii) the financial viability
of Southern California Edison, ("Edison"), (iii) the information is of a
preliminary nature and may be subject to further adjustment, (iv) risks related
to the operation of power plants (v) the impact of avoided cost pricing, (vi)
general operating risks, (vii) the dependence on third parties, (viii) changes
in government regulation, (ix) the effects of competition, (x) the dependence on
senior management, (xi) fluctuations in quarterly results and (xii) seasonality.
12
General
The Coso projects consist of three 80MW geothermal power plants, which are
referred to as Navy I, BLM and Navy II, and their transmission lines, wells,
gathering systems and other related facilities. The Coso projects are located
near one another at the United States Naval Air Weapons Center at China Lake,
California. The Navy I partnership owns Navy I and its related facilities. The
BLM partnership owns BLM and its related facilities. The Navy II partnership
owns Navy II and its related facilities. Affiliates of Caithness Corporation and
CalEnergy Company, Inc. ("CalEnergy"), which is now known as MidAmerican Energy
Holdings Company, formed the Coso partnerships in the 1980s to develop,
construct, own and operate the Coso projects. On February 25, 1999 Caithness
Acquisition Company, LLC, (CAC) purchased all of CalEnergy's interests in the
Coso projects for $205.0 million in cash, plus $5.0 million in contingent
payments, plus the assumption of CalEnergy's and its affiliates' share of debt
outstanding at the Coso projects which then totaled approximately $67.0 million.
Each Coso partnership sells 100% of the electrical energy generated at its
plant to Edison under a long-term Standard Offer No.4 power purchase agreement.
Each power purchase agreement expires after the final maturity date of the 6.8%
Series B Senior Secured Notes and the 9.05% Series B Senior Secured Notes issued
by Funding Corp.
Each Coso partnership is entitled to the following payments under its power
purchase agreement:
* Capacity payments for being able to produce electricity at certain levels.
Capacity payments are fixed throughout the life of each power purchase
agreement;
* Capacity bonus payments if the Coso partnership is able to produce
electricity above a specified higher level. The maximum annual capacity
bonus payment available is also fixed throughout the life of each power
purchase agreement; and
* Energy payments which are based on the amount of electricity the Coso
partnership's plant actually produces.
Energy payments were fixed for the first ten years of firm operation under
each power purchase agreement. After the first ten years of firm operation and
until a Coso partnership's power purchase agreement expires, Edison makes energy
payments to the Coso partnership based on Edison's avoided cost of energy.
Edison's avoided cost of energy is Edison's cost to generate electricity if
Edison were to produce it itself or buy it from another power producer rather
than buy it from the Coso partnerships. The power purchase agreement for the
Navy I partnership will expire in August 2011, the power purchase agreement for
the BLM partnership will expire in March 2019, and the power purchase agreement
for the Navy II partnership will expire in January 2010. The fixed energy price
period expired in August 1997 for the Navy I partnership, in March 1999 for the
BLM partnership and in January 2000 for the Navy II partnership.
13
For the year ended December 31, 2001, Edison's annual average avoided cost
of energy paid to the Navy I, the BLM and the Navy II Partnerships was 7.5 cents
per kWh, which is significantly below the fixed energy prices earned by the
partnerships prior to the expiration of the fixed energy price periods of their
respective power purchase agreements.
Edison entered into an agreement ("Agreement") with the Coso partnerships
on June 19, 2001 that addressed renewable energy pricing and issues concerning
California's energy crisis. The Agreement which was amended on November 30,
2001, established May 1, 2002, as the date when the Coso partnerships will begin
receiving a fixed avoided cost of energy rate of 5.37 cents per kWh for five (5)
years. Subsequent to the five year period, Edison will be required to make
energy payments to the Coso partnerships based on it's avoided cost of energy
until each partnership's power purchase agreement expires.
In 1994, the Coso partnerships implemented a steam-sharing program, under
the Coso Geothermal Exchange Agreement. The purpose of the steam-sharing program
is to enhance the management of the Coso geothermal resource and to optimize the
resource's overall benefits to the Coso partnerships by transferring steam among
the Coso projects. Under the steam sharing program, the partnership receiving
the steam transfer splits revenue earned from electricity generated with the
partnership that transferred the steam.
The Coso partnerships are required to make royalty payments to the U.S.
Navy and the Bureau of Land Management. The Navy I partnership pays a royalty
for Unit I through reimbursement of electricity supplied to the U.S. Navy by
Edison from electricity generated at the Navy I plant. The reimbursement is
based on a pricing formula that is included in the U.S. Navy Contract. This
formula is largely based upon the tariff rates charged by Edison, which have
recently been increased by the California Public Utilities Commission (CPUC).
Discussions with the U.S. Navy are continuing to re-adjust the formula to
reflect recent activity in the local energy market. In November 2001, a
modification to the calculation of the reimbursement pricing formula was made to
the U.S. Navy Contract resulting in a reduction of accrued royalties of $6.5
million. For Units 2 and 3, the Navy I partnership's royalty expense paid to the
U.S. Navy is a fixed percentage of electricity sales at 15% of revenue received
by the Navy I partnership through 2003 and will increase to 20% from 2004
through 2009. In addition, the Navy I partnership is required to pay the U.S.
Navy $25.0 million in December 2009, the date their contract expires. The
payment is secured by funds placed on deposit monthly, which funds plus accrued
interest will aggregate $25.0 million. Currently, the monthly amount to deposit
is approximately $.6 million. The BLM partnership pays a 10% royalty to the
Bureau of Land Management based on the net value of steam produced. The Navy II
partnership pays a royalty to the U.S. Navy based on a fixed percentage of
electricity sales to Edison. The royalty rate was 10% of electricity sales
through 1999, and increased to 18% for 2000 through 2004 and will increase to
20% from 2005 through the end of the contract term. The Coso partnerships also
pay other royalties, at various rates which in the aggregate are not material.
Funding Corp is a special purpose corporation and a wholly owned subsidiary
of the Coso partnerships. It was formed for the purpose of issuing the senior
secured notes on behalf of the Coso partnerships who have jointly, severally,
and unconditionally guaranteed repayment of the senior secured notes.
On May 28, 1999, Funding Corp. issued $110.0 million of 6.80% senior
secured notes due in 2001 and $303.0 million of 9.05% senior secured notes due
in 2009. The proceeds from the notes were loaned to the Coso partnerships and
are payable to Funding Corp from payments of principal and interest on the
notes. Funding Corp. does not conduct any other operations apart from issuing
the notes.
14
Under the depository agreement with the trustee for the notes, the Coso
partnerships established accounts with a depository and pledged those accounts
as security for the benefit of the holders of the senior secured notes. All
amounts deposited with the depository are, at the direction of the Coso
partnerships, invested by the depository in permitted investments. All revenues
or other proceeds actually received by the Coso partnerships are deposited in a
revenue account and withdrawn upon receipt by the depository of a certificate
from the relevant Coso partnerships detailing the amounts to be paid from funds
in its respective revenue account.
Periodic increases in natural gas prices and imbalances between supply and
demand, among other factors, have at times led to significant increases in
wholesale electricity prices in California. During those periods, Edison had
fixed tariffs with their retail customers that were significantly below the
wholesale prices it paid in California. This resulted in significant
under-recoveries by Edison of its electricity purchase costs. On January 16,
2001 Edison announced that it was temporarily suspending payments for energy
provided, including the energy provided by the Coso partnerships, pending a
permanent solution to its liquidity crisis. This cash flow shortfall has
adversely affected Edison's liquidity and in turn it did not pay the Coso
partnerships for energy delivered from November 2000 through March 26, 2001. As
of December 31, 2001, the Coso partnerships were unable to determine the time
frame during which any future payments would be received. Due to the uncertainty
surrounding Edison's ability to make payment on past due amounts, collection was
not reasonably assured and the Navy I, BLM and Navy II partnerships had not
recognized revenue of $22.0 million, $21.8 million and $22.7 million,
respectively, from Edison for Energy delivered during the period January 1, 2001
through March 26, 2001. The provision for doubtful accounts previously recorded
as of December 31, 2000 by the Navy I, BLM and Navy II partnerships of $15.2
million, $15.3 million and $15.3 million, respectively, has been reclassified to
conform with the 2001 presentation. In addition, the Coso partnerships will not
recognize such revenue until payment from Edison is received.
Pursuant to a CPUC order, Edison resumed making payments to the Coso
partnerships beginning with power generated on March 27, 2001. Edison also made
a payment equal to 10% of the unpaid balance for power generated from November
1, 2000 to March 26, 2001, and continues to pay interest on the outstanding
amount at 7% per annum. That payment was made pursuant to the Agreement between
Edison and the Coso partnerships described above. On March 1, 2002, Edison
reached certain financing milestones and paid the Coso partnerships for revenue
generated but not recognized for the period November 2000 through March 26,
2001. As such, the Coso partnership will recognize this revenue in the first
quarter of 2002.
Capacity Utilization
For purposes of consistency in financial presentation, the plant capacity
factor for each of the Coso partnerships is based on a nominal capacity amount
of 80MW (240MW in the aggregate). The Coso partnerships have a gross operating
capacity that allows for the production of electricity in excess of their
nominal capacity amounts. Utilization of this operating margin is based upon a
number of factors and can be expected to vary throughout the year under normal
operating conditions.
The following data includes the operating capacity factor, capacity and
electricity production (in kWh) for each Coso partnership on a stand-alone
basis:
Year Ended December 31,
-----------------------
Navy I Partnership 2001 2000 1999
(stand alone) ---- ---- ----
Operating capacity factor 108.3% 111.8% 95.4%
Capacity (MW) (average) 86.63 89.44 76.34
kWh produced (000s) 758,890 785,624 668,388
BLM Partnership (stand alone)
Operating capacity factor 102.8% 109.4% 105.0%
Capacity (MW) (average) 82.21 87.56 84.00
kWh produced (000s) 720,130 769,098 735,840
Navy II Partnership (stand alone)
Operating capacity factor 104.9% 111.1% 112.1%
Capacity (MW) (average) 83.93 88.88 89.70
kWh produced (000s) 735,210 780,709 785,772
15
Total energy production for the Navy I partnership was 758.9 million kWh
for 2001, as compared to 785.6 million kWh for 2000, a decrease of 3.4%. Total
energy production for the BLM partnership was 720.1 million kWh for 2001, as
compared to 769.1 million kWh in 2000, a decrease of 6.4%. Total energy
production for the Navy II partnership was 735.2 million kWh for 2001, as
compared to 780.7 million kWh in 2000, a decrease of 5.8%. These decreases in
energy production were primarily due to the deferment of certain capital and
maintenance projects by the Coso partnerships, due to non-payment by Edison
during the period November 1, 2000 through March 26, 2001. These projects have
been resumed as Edison has resumed payment for production starting in late March
2001.
Total energy production for the Navy I partnership was 785.6 million kWh
for 2000, as compared to 668.4 million kWh for 1999, an increase of 17.5%. The
increase in Navy I partnership's energy production is attributable to increased
production resulting from decreased steam transfers and the outage of one
turbine generator unit during a portion of 1999. Total energy production for the
BLM partnership was 769.1 million kWh for 2000, as compared to 735.8 million kWh
in 1999, an increase of 4.5%. Total energy production for the Navy II
partnership was 780.7 million kWh for 2000, as compared to 785.8 million kWh in
1999, a decrease of 0.6%.
Results of Operations for the years ended December 31, 2001, 2000, and 1999.
- ----------------------------------------------------------------------------
The following discusses the results of operations of the Coso partnerships
for the years ended December 31, 2001, 2000 and 1999 (dollar amounts in tables
in thousands, except per kWh data):
Revenue
2001 2000 1999
---- ---- ----
$ cents/kWh $ cents/kWh $ cents/kWh
- --------- - --------- - ---------
Total Operating Revenues
Navy I partnership 53,400 7.0 52,419 6.7 55,666 8.3
BLM partnership 44,041 6.1 42,174 5.5 49,877 6.8
Navy II partnership 36,389 5.0 43,054 5.5 113,746 14.5
Capacity & Bonus Revenues
Navy I partnership 13,210 1.7 13,429 1.7 13,372 2.0
BLM partnership 12,908 1.8 13,122 1.7 13,938 1.9
Navy II partnership 12,978 1.8 13,195 1.7 14,018 1.8
Energy Revenues
Navy I partnership 40,190 5.3 38,990 5.0 42,294 6.3
BLM partnership 31,133 4.3 29,052 3.8 35,939 4.9
Navy II partnership 23,411 3.2 29,859 3.8 99,728 12.7
Total operating revenues for the Navy II partnership, which consist of
capacity payments, capacity bonus payments and energy payments, were $36.4
million for 2001, as compared to $43.1 million in 2000, an decrease of 15.5%.
Total energy revenues for the Navy II partnership were $23.4 million for 2001,
as compared to $29.9 million in 2000, an decrease of 21.7%. The decreases in
total operating revenues and energy revenues for 2001 were primarily due to
nonpayment by Edison for three months ended March 31, 2001, as compared to
November and December revenues in 2000, resulting from the Edison's liquidity
crisis discussed above, partially offset by decreases in steam transfer revenues
and the previously discussed decrease in generation.
16
Total operating revenues for the Navy I partnership, which consist of
capacity payments, capacity bonus payments and energy payments, were $52.4
million for 2000, as compared to $55.7 million in 1999, an decrease of 5.9%.
Total energy revenues for the Navy I partnership were $39.0 million for 2000, as
compared to $42.3 million in 1999, a decrease of 7.8%. The decreases in total
operating revenues and energy revenues for 2000 were primarily due to nonpayment
by Edison for November and December revenues in 2000, resulting from the
Edison's liquidity crisis, discussed above.
Total operating revenues for the BLM partnership, which consist of capacity
payments, capacity bonus payments and energy payments, were $42.2 million for
2000, as compared to $49.9 million in 1999, an increase of 15.4%. Total energy
revenues for the BLM partnership were $29.1 million for 2000, as compared to
$35.9 million in 1999, a decrease of 18.9%. The decreases in total operating
revenues and energy revenues for 2000 were primarily due to nonpayment by Edison
for November and December revenues in 2000, resulting from the Edison's
liquidity crisis, discussed above.
Total operating revenues for the Navy II partnership, which consist of
capacity payments, capacity bonus payments and energy payments, were $43.1
million for 2000, as compared to $113.7 million in 1999, a decrease of 62.1%.
Total energy revenues for the Navy II partnership were $29.9 million for 2000,
as compared to $99.7 million in 1999, a decrease of 70.0%. The Navy II
partnerships energy revenues decreased by $69.8 million due to the expiration of
the fixed energy price period under the Navy II partnership's power purchase
agreement in January 2000 and the receipt of energy payments based on Edison's
avoided cost of energy since that time and nonpayment by Edison for November and
December revenues in 2000, resulting from Edison's liquidity crisis, discussed
above. Until January 2000, and during 1999, the Navy II partnership received
approximately 14.5 cents per kWh for energy delivered. Under the avoided cost of
energy formula, the Navy II partnership received an average of approximately 6.0
cents per kWh for energy delivered for the period February 2000 to December
2000.
Interest and Other Income
2001 2000 1999
---- ----- ----
$ cents/kWh $ cents/kWh $ cents/kWh
- --------- - --------- - ---------
Navy I partnership 2,928 0.4 2,506 0.3 2,234 0.3
BLM partnership 3,766 0.5 8,125 1.1 1,066 0.1
Navy II partnership 2,883 0.4 2,868 0.4 2,174 0.3
The Navy I partnership's interest and other income was $2.9 million in
2001, as compared to $2.5 million in 2000, an increase of 16.0%. The increase
was primarily due to interest on amounts in arrears owed by Edison in 2001. The
BLM partnership's interest and other income was $3.8 million in 2001, as
compared to $8.1 million in 2000, a decrease of 53.1%. This decrease was
primarily due to legal settlements paid during 2000, of $6.1 million from Dow
Chemical Company and $600,000 for legal fees related to the Edison litigation,
partially offset by an increase in interest income on amounts in arrears owed by
Edison in 2001.
The Navy I partnership's interest and other income was $2.5 million in
2000, as compared to $2.2 million in 1999, an increase of 13.6%. The increase
was primarily due to a settlement of $600,000 for legal fees related to the
Edison litigation and increased interest income from higher cash reserves
balances required by the senior secured notes issued on May 28, 1999. The BLM
partnership's interest and other income was $8.1 million in 2000, as compared to
$1.1 million in 1999, an increase of $7.0 million. This increase was primarily
due to a legal settlement of $6.1 million with Dow Chemical Company, settlement
of $600,000 for legal fees related to the Edison litigation, and increased
interest income from higher cash reserves balances required by the senior
secured notes issued on May 28, 1999. The Navy II partnership's interest and
other income was $2.9 million in 2000, as compared to $2.2 million in 1999, an
increase of 31.8%. The increase was primarily due to a settlement of $600,000
for legal fees related to the Edison litigation and increased in interest income
from higher cash reserves balances required by the senior secured notes issued
on May 28, 1999.
17
Edison Legal Expenses and Settlement Costs
2001 2000 1999
---- ---- ----
$ cents/kWh $ cents/kWh $ cents/kWh
- --------- - --------- - ---------
Navy I partnership -- 0.0 -- 0.0 2,373 0.4
BLM partnership -- 0.0 -- 0.0 4,169 0.6
Navy II partnership -- 0.0 -- 0.0 5,819 0.7
Edison legal expenses and settlement costs decreased in 2000 for the Navy
I, BLM and Navy II partnerships by $2.4 million, $4.2 million and $5.8 million,
respectively. The changes for 2000 resulted from, among other expenses, an
accrued settlement obligation with Edison.
Plant Operations
2001 2000 1999
---- ---- ----
$ cents/kWh $ cents/kWh $ cents/kWh
- --------- - --------- - ---------
Navy I partnership 9,010 1.2 8,609 1.1 10,017 1.5
BLM partnership 10,221 1.4 12,008 1.6 15,568 2.1
Navy II partnership 9,679 1.3 9,409 1.2 10,873 1.4
The BLM partnership's operating expenses, including operating and general
and administrative expenses were $10.2 million in 2001, as compared to $12.0
million in 2000, a decrease of 15.0%. The decrease in operating expenses for
2001 as compared to 2000, was primarily due to a reduction in current property
taxes by an offset of a partial refund of an appealed amount and lower well
maintenance and workover costs during 2001.
The Navy I partnership's operating expenses, including operating and
general and administrative expenses were $8.6 million in 2000, as compared to
$10.0 million in 1999, a decrease of 14.0%. The BLM partnership's operating
expenses, including operating and general and administrative expenses were $12.0
million in 2000, as compared to $15.6 million in 1999, a decrease of 23.1%. The
Navy II partnership's operating expenses including operating and general and
administrative expenses were $9.4 million in 2000, as compared to $10.9 million
in 1999, a decrease of 13.8%. The decreases for each of the Coso partnerships
for 2000 as compared to 1999, was primarily due to the continued implementation
of management's plan to reduce the work force and other operating costs. The
replacement of the Coso project's prior operator and managing partner also
contributed to the overall reduction in plant operating costs.
Royalty Expenses
2001 2000 1999
---- ---- ----
$ cents/kWh $ cents/kWh $ cents/kWh
- --------- - --------- - ---------
Navy I partnership 9,950 1.3 10,921 1.4 10,157 1.5
BLM partnership 5,203 0.7 4,045 0.5 3,148 0.4
Navy II partnership 9,377 1.3 10,104 1.3 12,077 1.5
18
The Navy I partnership's royalty expenses were $10.0 million for 2001, as
compared to $10.9 million in 2000, a decrease of 8.3%. The decrease was
primarily due to a $6.5 million royalty reimbursement resulting from the
modification to the calculation of the Unit 1 royalty reimbursement pricing
formula. The decrease was partially offset by higher royalty charges due to
increased energy revenues caused by the increase in the average avoided cost of
energy from 5.8 cents per kWh in 2000, to 7.5 cents per kWh in 2001. The BLM
partnership's royalty expenses were $5.2 million for 2001, as compared to $4.0
million in 2000, an increase of 30.0%. The increase was due to an increase in
energy revenues caused by the increase in the average avoided cost of energy
from 5.8 cents per kWh in 2000, to 7.5 cents per kWh in 2001. The Navy II
partnership's royalty expenses were $9.4 million for 2001, as compared to $10.1
million in 2000, a decrease of 6.9%. The decrease was due to a decrease in
internally-produced steam over the same period in 2000.
The Navy I partnership's royalty expenses were $10.9 million for 2000, as
compared to $10.2 million in 1999, an increase of 6.9%. The increase was due to
an increase in energy revenues caused by the increase in the average avoided
cost of energy from 3.1 cents per kWh in 1999 to 5.8 cents per kWh in 2000. The
BLM partnership's royalty expenses were $4.0 million for 2000, as compared to
$3.1 million in 1999, an increase of 29.0%. This increase was due to an increase
in energy revenues caused by the increase in the average avoided cost of energy
from 3.1 cents per kWh in 1999 to 5.8 cents per kWh in 2000. The Navy II
partnership's royalty expenses were $10.1 million for 2000, as compared to $12.1
million in 1999, a decrease of 16.5%. The decrease was primarily due to a
reduction in the Navy II partnerships energy revenues, caused by the expiration
of the fixed energy price period under the Navy II partnership's power purchase
agreement in January 2000, and the receipt of energy payments based on Edison's
average avoided cost of energy since that time. Under the average avoided costs
of energy formula, the Navy II partnership received an average of approximately
6.0 cents per kWh for energy delivered for the period February 2000 to December
2000. The decrease in the Navy II partnerships royalty expenses were partially
offset by an increase in royalty rate from 10% to 18% as of January 2000.
Depreciation and Amortization
2001 2000 1999
---- ---- ----
$ cents/kWh $ cents/kWh $ cents/kWh
- --------- - --------- - ---------
Navy I partnership 10,222 1.3 9,594 1.2 9,582 1.4
BLM partnership 15,972 2.2 15,361 2.0 15,649 2.1
Navy II partnership 15,352 2.1 15,070 1.9 14,808 1.9
The Navy I partnership's depreciation and amortization expense was $10.2
million for 2001, as compared to $9.6 million in 2000, an increase of 6.3%. The
Navy I Partnership's increase in depreciation and amortization expense for 2001,
as compared to the same period in 2000, was primarily due to an increase in
capitalized assets in 2001.
Interest Expense
2001 2000 1999
---- ---- ----
$ cents/kWh $ cents/kWh $ cents/kWh
- --------- - --------- - ---------
Navy I partnership 11,732 1.5 12,493 1.6 9,611 1.4
BLM partnership 8,958 1.2 9,174 1.2 7,310 1.0
Navy II partnership 8,127 1.1 9,130 1.2 9,937 1.3
The Navy I partnership's interest expense was $11.7 million for 2001, as
compared to $12.5 million in 2000, a decrease of 6.4%. The Navy II partnership's
interest expense was $8.1 million for 2001, as compared to $9.1 million in 2000,
a decrease of 11.0%. These decreases in interest expense for 2001, as compared
to the same period in 2000, were due to reductions in the principal amount of
the project loan from Funding Corp.
19
The Navy I partnership's interest expense was $12.5 million in 2000, as
compared to $9.6 million in 1999, an increase of 30.2%. The BLM partnership's
interest expense was $9.2 million in 2000, as compared to $7.3 million in 1999,
an increase of 26.0%. The Navy II partnership's interest expense was $9.1
million in 2000, as compared to $9.9 million in 1999, a decrease of 8.1%. The
increases in interest expense for the Navy I partnership and the BLM partnership
and the decrease in interest expense for the Navy II partnership for the year
2000, as compared to 1999, were the result of higher outstanding debt balances
under the $413 million senior secured notes issued on May 28, 1999.
Interest Expense - Acquisition Debt
The Navy I, BLM and Navy II partnerships incurred interest expense -
acquisition debt of $2.0 million, $1.4 million, and $2.0 million, respectively
in 1999. This interest expense related to acquisition debt in the amount of
$211.5 million and was incurred on February 25, 1999 to acquire the interests of
CalEnergy in the Coso partnerships. This acquisition debt was repaid with the
proceeds of the $413.0 million senior secured notes issued on May 28, 1999.
Costs Related to Acquisition Debt
The Navy I, BLM and Navy II partnerships incurred other expenses of $1.6
million, $1.3 million and $1.5 million, respectively, for the twelve months
ended December 31, 1999. These other expenses, which consist primarily of
lending, legal and other fees, related to the acquisition debt in the amount of
$211.5 million incurred on February 25, 1999 to acquire Cal Energy's interest in
the Coso partnerships. This acquisition debt was repaid with the proceeds of the
$413.0 million senior secured notes issued on May 28, 1999.
Loss on early extinguishment of debt
The Navy I, BLM and Navy II partnerships recorded a loss on the early
extinguishment of their previous debt in the amounts of $2.4 million, $1.8
million and $2.1 million, respectively, for the twelve months ended December 31,
1999. This loss was due to premium and other costs incurred to repay the
existing project debt of the Coso partnerships before its scheduled maturity
date. These costs included tender premiums paid to the holders of the previous
debt and the write off of the remaining balance of deferred financing costs
related to the issuance of the previous debt. The previous debt was repaid with
the proceeds of the $413.0 million senior secured notes issued on May 28, 1999.
Liquidity and Capital Resources
Each of the Navy I partnership, the BLM partnership and the Navy II
partnership derive substantially all of their cash flow from Edison under their
power purchase agreements and from interest income earned on funds on deposit.
As of December 2001, the 6.8% notes were repaid, subsequently leaving the Coso
partnerships with more cash flow annually. The Coso partnerships have used their
cash primarily for capital expenditures for power plant improvements, resource
and operating costs, distributions to partners and payments with respect to the
project debt.
The Coso partnerships ability to meet their obligations as they come due
will depend upon the ability of Edison to meet its obligations under the terms
of the standard offer No. 4 power purchase agreements. Edison's shortfall in
collections, coupled with its near term capital requirements, materially and
adversely affected its liquidity. In resolution of that issue, Edison settled
with the CPUC on October 2, 2001, enabling it to recover in retail electric
rates its historical shortfall in electric purchase costs. Immediately after
this settlement, Edison and each of the Coso partnerships entered into an
amendment of their respective Agreement (referenced above) pertaining to partial
payment and interest payments relating to Edison's past due obligations for the
period from November 2000 through March 26, 2001. The Agreement, as amended, was
approved by CPUC in January of 2002, and established the fixed energy rates
discussed above and set payment terms for the past due amounts owed to the Coso
partnerships by Edison. It is anticipated that these recent arrangements will
eliminate some of the uncertainty of collection of amounts owed to the Navy I,
BLM and Navy II partnerships of $37.3 million, $37.1 million, and $38.0 million,
respectively, for electricity delivered from November 2000 through March 26,
2001 and forward. Edison's failure to pay its future obligations may have a
material adverse effect on the Coso partnership's ability to make debt service
payments to Funding Corp. as they come due under the Funding Corp. notes.
Current year cash flow from operations was sufficient to fully retire the $110
million senior secured note that came due on December 15, 2001.
20
On March 1, 2002, Edison reached certain financing milestones and paid the
Coso partnerships for revenue generated but not recognized for the period
November 2000 through March 26, 2001. As such, the Coso partnerships will
recognize this revenue in the first quarter of 2002.
The following table sets forth a summary of each Coso partnership's cash
flows for the years ended December 31, 2001, December 31, 2000, and December 31,
1999.
2001 2000 1999
---- ---- ----
Navy I partnership (stand alone)
Net cash provided by operating activities $ 17,112 $ 29,168 $ 24,388
Net cash provided by (used in) investing activities 1,235 (1,638) (24,094)
Net cash provided by (used in) financing activities (21,589) ( 31,845) 7,527
-------- -------- --------
Net change in cash and cash equivalents $ (3,242) $ (4,315) $ 7,821
======== ======== ========
BLM partnership (stand alone)
Net cash provided by operating activities $ 24,855 $ 32,916 $ 29,806
Net cash (used in) investing activities (2,564) (6,986) (16,699)
Net cash (used in) financing activities (28,153) (26,491) ( 6,684)
-------- -------- --------
Net change in cash and cash equivalents $ (5,862) $ (561) $ 6,423
======== ======== ========
Navy II partnership (stand alone)
Net cash provided by operating activities $ 18,634 $ 37,019 $ 74,802
Net cash provided by (used in) investing activities 4,421 42,424 (58,752)
Net cash (used in) financing activities (30,796) (77,722) (10,848)
-------- -------- --------
Net change in cash and cash equivalents $ (7,741) $ 1,721 $ 5,202
======== ======== ========
The Navy I partnership's cash flows from operating activities decreased by
$12.1 million in 2001 as compared to 2000, primarily due to increases in
accounts receivable and related parties receivables.
Cash from investing activities at the Navy I partnership increased by $2.9
million in 2001 as compared to 2000, primarily due to a decreases in capital
expenditures in 2001.
The Navy I partnership's cash flows used in financing activities decreased
by $10.3 million in 2001 as compared to 2000, primarily due to a decrease in the
payment amount on the project loan from Funding Corp., and a reduction in the
distributions paid in 2001.
21
The BLM partnership's cash flows from operating activities decreased by
$8.1 million in 2001 as compared to 2000, primarily due to an increase in
accounts receivable, partially offset by increases in related parties payables.
Cash used in investing activities at the BLM partnership decreased by $4.4
million in 2001 as compared to 2000, primarily due to a decrease in restricted
cash requirements associated with the project loan from Funding Corp., partially
offset by an increase in capital expenditures in 2001.
The BLM partnership's cash used in financing activities increased by $1.7
million in 2001 as compared to 2000, primarily due to an increase in
distributions in 2001, partially offset by lower repayments of the project loan
from Funding Corp.
The Navy II partnership's cash flows from operating activities decreased by
$18.4 million in 2001 as compared to 2000, primarily due to the increase in
account receivable, partially offset by an increase in amounts due to related
parties.
Cash flows from investing activities at the Navy II partnership decreased
by $38.0 million in 2001 as compared to 2000, primarily due to lower repayments
of the project loan from Funding Corp., and decreases in 2001 capital
expenditures.
The Navy II partnership's cash used in financing activities decreased by
$46.9 million in 2001 as compared to 2000, primarily due to lower repayments of
the project loan from Funding Corp.
The Navy I partnership's cash flows from operating activities increased by
$4.8 million in 2000 as compared to 1999, primarily due to an increase in net
income, decreases in both accounts receivable and amounts due from related
parties, partially offset by decreases in trade payables.
Cash used in investing activities at the Navy I partnership decreased by
$22.5 million in 2000 as compared to 1999, primarily due to decreases in
restricted cash requirements associated with the project loan from Funding Corp.
The Navy I partnership's cash flows from financing activities decreased by
$39.4 million in 2000 as compared to 1999, primarily due to the project loan
from Funding Corp in 1999, partially offset by both lower repayments of project
financing loans and decreased distributions to partners in 2000.
The BLM partnership's cash flows from operating activities increased by
$3.1 million in 2000 as compared 1999, primarily due to increases in net income
and amounts due to related parties, and a decrease in accounts receivable.
Cash used in investing activities at the BLM partnership decreased by $9.7
million in 2000 as compared to 1999, due to a reduction in 2000 capital
expenditures.
The BLM partnership's cash used in financing activities increased by $19.8
million in 2000 as compared to 1999, primarily due to the project loan from
Funding Corp in 1999, partially offset by both lower repayments of project
financing loans and decreased distributions to partners in 2000.
The Navy II partnership's cash flows from operating activities decreased by
$37.8 million in 2000 as compared to 1999, primarily due to a decrease in net
income caused by the expiration of the fixed energy price period under the Navy
II Partnership's power purchase agreement in January 2000 and the receipt of
energy payments based on Edison's avoided cost of energy since that time. Under
the avoided costs of energy formula, the Navy II partnership received an average
of approximately 6.0 cents per kWh for energy delivered for the period February
2000 to December 2000. The decrease in net income was partially offset by
decreases in accounts receivable and amounts due from related parties.
22
Cash flows from investing activities at the Navy II partnership increased
by $100.9 million in 2000 as compared to 1999, primarily due to a decrease in
restricted cash requirements associated with the project loan from Funding Corp.
The Navy II partnership's cash used in financing activities increased by
$66.9 million in 2000 as compared to 1999, primarily due to the project loan
from Funding Corp in 1999, partially offset by both lower repayments of project
financing loans and decreased distributions to partners in 2000.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Risk Factors
Operating the Coso projects involves, among other things, general economic,
financial, competitive, legislative, regulatory and other factors that are
beyond our control. Changes in these factors could make it more expensive to
operate the Coso projects, or require additional capital expenditures, or reduce
certain benefits currently available to the Coso partnerships. There are a
variety of other risks that affect the Coso projects, some of which are beyond
our control, including:
* One or more of the Coso projects could perform below expected levels
of output or efficiency;
* In light of the uncertainty of the California energy market, Edison's
financial viability is uncertain. If Edison were to enter into
bankruptcy proceedings, the power purchase contracts could be amended
and any accounts receivable from Edison could be reduced or
eliminated;
* The Coso geothermal resource could be interrupted or unavailable;
* Operating costs could increase;
* Changes in the regulatory structure which govern the current
operations of the Coso partnerships.
* Competition may lead to an accelerated depletion of the resource;
* Energy prices paid by Edison could decrease or terminate;
* Delivery of electrical energy to Edison could be disrupted;
* Environmental problems could arise which could lead to fines or a
shutdown of one or more plants;
* Plant units and equipment have broken down or failed in the past and
could break down or fail in the future;
* The operators of the Coso projects could suffer labor disputes;
* The government could change permit or governmental approval
requirements;
* Third parties could fail to perform their contractual obligations to
the Coso partnerships; and
* Catastrophic events, such as fires, earthquakes, explosions, floods,
severe storms or other occurrences, could affect one or more of the
Coso projects or Edison.
In addition, the Coso partnerships must meet specified performance
requirements under their respective power purchase agreements during the months
of June through September to continue to qualify for the maximum capacity and
capacity bonus payments. If one or more of the events listed above occur and
substantially affect the performance of one or more of the plants during these
months, operating revenues would be significantly decreased.
23
Item 8. Financial Statements and Supplementary Data.
24
CAITHNESS COSO FUNDING CORP. AND
COSO OPERATING PARTNERSHIPS
Index
Caithness Coso Funding Corp:
- ----------------------------
KPMG LLP Independent Auditors' Report F-1
Balance Sheet as of December 31, 2001 and 2000 F-2
Statement of Income for the years ended
December 31, 2001, 2000 and 1999 F-3
Statement of Cash Flows for the years
ended December 31, 2001, 2000 and 1999 F-4
Notes to Financial Statements F-5
Coso Finance Partners:
- ----------------------
KPMG LLP Independent Auditors' Report F-6
Balance Sheets as of December 31, 2001 and 2000 F-7
Statements of Operations for the twelve-months
ended December 31, 2001 and 2000, two-months
ended February 28, 1999, ten-months ended
December 31, 1999 and twelve-months ended
December 31, 1999 F-8
Statements of Partners' Capital for the years
ended December 31, 2001, 2000 and 1999 F-9
Statements of Cash Flows for the twelve-months
ended December 31, 2001 and 2000, two-months
ended February 28, 1999, ten-months ended
December 31, 1999,and twelve-months ended
December 31, 1999 F-10
Notes to Financial Statements F-11
Coso Energy Developers:
- -----------------------
KPMG LLP Independent Auditors' Report F-12
Balance Sheets as of December 31, 2001 and 2000 F-13
Statements of Operations for the twelve-months ended
December 31, 2001 and 2000, two-months
ended February 28, 1999, ten-months ended
December 31, 1999, twelve-months ended
December 31, 1999 F-14
Statements of Partners' Capital for the years
ended December 31, 2001, 2000 and 1999 F-15
Statements of Cash Flows for the twelve-months
ended December 31, 2001 and 2000, two-months
ended February 28, 1999 ten-months ended
December 31, 1999, twelve-months ended
December 31, 1999 F-16
Notes to Financial Statements F-17
Coso Power Developers:
- ----------------------
KPMG LLP Independent Auditors' Report F-18
Balance Sheets as of December 31, 2001 and 2000 F-19
Statements of cash flows for the twelve-months
ended December 31, 2001 and 2000, two-months
ended February 28, 1999, ten-months ended
December 31, 1999, twelve-months ended
December 31, 1999 F-20
Statements of Partners' Capital for the years
ended December 31, 2001, 2000 and 1999 F-21
Statements of Cash Flows for the twelve-months
ended December 31, 2001 and 2000, two-months
ended February 28, 1999 ten-months ended
December 31, 1999, twelve-months ended
December 31, 1999 F-22
Notes to Financial Statements F-23
Supplemental Unaudited Condensed quarterly
Financial information for 2000 and 1999 F-24
Coso Partnerships:
- ------------------
Supplemental Condensed Combined Financial
Information for Coso Partnerships:
Unaudited Condensed Combined Balance Sheets as
of December 31, 2001 and 2000 F-25
Unaudited Condensed Combined Statements of
Operations for the twelve-months ended
December 31, 2001 and 2000, two-months ended
February 28, 1999, ten-months ended
December 31, 1999, twelve months ended
December 31, 1999 F-26
Unaudited Condensed Combined Statements of
Cash Flows for the twelve-months ended
December 31, 2001 and 2000, two months ended
February 28, 1999, ten-months ended
December 31, 1999, twelve-months ended
December 31, 1999 F-27
Notes to the Unaudited Condensed Combined
Financial Statements F-28
Independent Auditors' Report
The Partners
Caithness Coso Funding Corp.:
We have audited the accompanying balance sheets of Caithness Coso Funding Corp.
as of December 31, 2001 and 2000, and the related statements of income and cash
flows for each of the years in the three-year period ended December 31, 2001.
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 Caithness Coso Funding Corp. as
of December 31, 2001 and 2000, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America.
March 1, 2002
/s/KPMG LLP
- -----------
KPMG LLP
F-1
CAITHNESS COSO FUNDING CORP.
Balance Sheets
December 31, 2001 and 2000
(Dollars in thousands)
Assets 2001 2000
------------- -------------
Accrued interest receivable $ 1,225 1,286
Project loan to Coso Finance Partners 122,550 134,984
Project loan to Coso Energy Developers 96,250 100,907
Project loan to Coso Power Developers 84,200 94,176
------------- -------------
Total assets $ 304,225 331,353
============= =============
Liabilities and Stockholders Equity
Senior secured notes:
Accrued interest payable $ 1,225 1,286
6.8% notes due December 15, 2001 -- 27,067
9.05% notes due December 15, 2009 303,000 303,000
------------- -------------
Total liabilities 304,225 331,353
Stockholders equity (note 5) -- --
------------- -------------
Total liabilities and stockholders equity $ 304,225 331,353
============= =============
See accompanying notes to financial statements.
F-2
CAITHNESS COSO FUNDING CORP.
Statements of Income
Years ended December 31, 2001, 2000 and 1999
(Dollars in thousands)
2001 2000 1999
------------- ------------- -------------
Revenue:
Interest income $ 28,820 30,799 20,491
Expense:
Interest expense (28,820) (30,799) (20,491)
------------- ------------- -------------
Net income $ -- -- --
============= ============= =============
See accompanying notes to financial statements.
F-3
CAITHNESS COSO FUNDING CORP.
Statements of Cash Flows
Years ended December 31, 2001, 2000 and 1999
(Dollars in thousands)
2001 2000 1999
------------- ------------- -------------
Cash flows from investing activities $ 27,128 83,039 (414,392)
------------- ------------- -------------
Cash flows from financing activities (27,128) (83,039) 414,392
------------- ------------- -------------
Net changes in cash -- -- --
Cash at beginning of year -- -- --
------------- ------------- -------------
Cash at end of year $ -- -- --
============= ============= =============
Supplemental cash flow disclosures:
Interest paid $ 28,881 30,905 20,491
============= ============= =============
See accompanying notes to financial statements.
F-4
CAITHNESS COSO FUNDING CORP.
Notes to Financial Statements
December 31, 2001, 2000 and 1999
(Dollars in thousands)
(1) Organization of the Corporation
Caithness Coso Funding Corp. (Funding Corp.), which was incorporated on
April 22, 1999, is a single-purpose Delaware corporation formed to issue
senior secured notes (Notes) for its own account and as an agent acting on
behalf of Coso Finance Partners (CFP), Coso Energy Developers (CED), and
Coso Power Developers (CPD), collectively, the "Partnerships." The
Partnerships are California general partnerships.
On May 28, 1999, Funding Corp. sold $413,000 of Notes (see note 4).
Pursuant to separate credit agreements between Funding Corp. and each
partnership (Credit Agreements), the net proceeds from the offering of the
Notes were loaned to the Partnerships. Payment of the Notes is provided for
by payments made by the Partnerships under their respective project loans
(see note 3). Funding Corp. has no material assets, other than the project
loans, and does not conduct any operations apart from issuing the Notes and
making the project loans to the Partnerships.
(2) Summary of Significant Accounting Policies
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, liabilities,
stockholders equity, and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Fair Value of Financial Instruments
Based on quoted market rates of the Notes, the fair value of the project
loans and underlying Notes as of December 31, 2001 and 2000 is $-0- and
$26,796, respectively, for the Notes maturing in 2001, and $303,000 and
$322,979, respectively, for the Notes maturing in 2009.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities. In June 2000, FASB issued
SFAS No. 138, Accounting for Certain Derivative Instruments and Certain
Hedging Activities, which amended SFAS No. 133 and addressed certain
implementation issues. SFAS No. 133, as amended, requires that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. The Statement also requires that
changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Funding Corp. does not
have any derivative instruments and therefore the adoption in 2001 of SFAS
No. 133, as amended, will not have any effect on Funding Corp.'s financial
statements.
In June 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS
No.142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that
the purchase method of accounting be used for all business combinations.
SFAS No. 141 specifies criteria that intangible assets acquired in a
business combination must meet to be recognized and reported separately
from goodwill. SFAS No. 142 will require that goodwill and intangible
assets with indefinite useful lives no longer be amortized, but instead
tested for impairment at least annually in accordance with the provisions
of SFAS No. 142. SFAS No. 142 also requires that intangible assets with
estimable useful lives be amortized over their respective estimated useful
lives to their estimated residual values and reviewed for impairment in
accordance with SFAS No. 121 and, subsequently, SFAS No. 144 after its
adoption.
Funding Corp. adopted the provisions of SFAS No. 141 as of July 1, 2001,
and Funding Corp.'s management is in the process of evaluating the impact
of SFAS No.142 and believes there is no material impact to Funding Corp.'s
financial statements.
In October 2001, FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001, and replaces SFAS No. 121 and provisions
of APB Opinion No.30 for the disposal of segments of a business. SFAS No.
144 creates one accounting model, based on the framework established in
SFAS No. 121 to be applied to all long-lived assets including discontinued
operations. Funding Corp. is required to adopt SFAS No. 144 on January 1,
2002, and believes there will be no material effect on Funding Corp.'s
financial statements.
(3) Project Loans to the Partnerships
Pursuant to each Credit Agreement, each partnership shall make project loan
payments in scheduled installment amounts which, in the aggregate, are
sufficient to enable Funding Corp. to pay scheduled principal and interest
on the Notes (see note 4).
The Notes are general obligations of Funding Corp., and are secured and
perfected by: (1) first priority pledge of the promissory notes evidencing
each partnership's obligation to repay the loan; (2) first priority lien on
the funds in the debt service cash accounts of the Partnerships; and (3)
first priority pledge of all of the outstanding capital stock of Funding
Corp. These obligations are unconditionally guaranteed by the Partnerships
and are secured and perfected by substantially all assets of the
Partnerships and the equity interests in the Partnerships. Funding Corp.,
CPD, CED, and CFP are jointly and severally liable for the repayment of the
Notes.
(4) Senior Secured Notes
On May 28, 1999, Funding Corp. completed a $413,000 underwritten public
debt offering consisting of $110,000 6.8% Notes due 2001 and $303,000 9.05%
Notes due 2009. The Notes were issued under an indenture dated as of May
28, 1999 between Funding Corp. and the trustee, U.S. Bank Trust NA. Payment
of the Notes is provided for by payments to be made by the Partnerships on
their respective project loans (see note 3). Interest is payable each June
15 and December 15.
The annual maturity of the Notes for each year ending December 31 is as
follows:
Year ending December 31 Amount
----------------------- -------------------
2002 $ 21,771
2003 27,618
2004 31,332
2005 35,480
2006 38,286
Thereafter 148,513
--------------------
$ 303,000
====================
The Note indentures contain certain restrictive covenants that, among other
things, limit the ability to incur additional indebtedness, release funds
from reverse accounts, make distributions, create loans, and enter into any
transaction, merger, or consolidation.
(5) Stockholders' Equity
Funding Corp. is authorized to issue 1,000 shares of common stock, one cent
par value per share. Upon incorporating in 1999, Funding Corp. issued 100
common shares to CFP, CED, and CPD.
(6) Risks and Uncertainties
The Partnerships future results of operations involve a number of risks and
uncertainties. Periodic increases in natural gas prices and imbalances
between supply and demand, among other factors, have led to significant
increases in wholesale electricity prices in California. Southern
California Edison (Edison) is the only customer of the Partnerships. During
those periods, Edison had fixed tariffs with its retail customers that were
significantly below the wholesale prices it paid in California. That
resulted in significant under-recoveries by Edison of its electricity
purchase costs. On January 16, 2001, Edison announced that it was
temporarily suspending payment for energy provided, including the energy
provided by the Partnerships, pending a permanent solution to its liquidity
crisis. Subsequently, pursuant to a California Public Utilities Commission
(CPUC) order, Edison resumed making payments to the Partnerships beginning
with power generated on March 27, 2001. Edison also made payments equal to
10% of the unpaid balance for power generated from November 1, 2000 to
March 26, 2001, and continues to pay interest on the outstanding amount at
7% per annum. That payment was made pursuant to an agreement (the
Agreement) with Edison entered into on June 19, 2001 that addressed
renewable energy pricing and issues concerning California's energy crisis.
The Agreement, which was amended on November 30, 2001 and received CPUC
approval in January 2002, established May 1, 2002 as the date when the
Partnerships will begin receiving a fixed avoided cost of energy rate of
5.37 cents per kwh for five (5) years. Subsequent to the five-year period,
Edison will be required to make energy payments to the Partnerships based
on its avoided cost of energy until their respective power purchase
agreement expires. Beyond the five-year period, the Partnerships cannot
predict the likely level of avoided cost of energy prices under their
respective power purchase contract and, accordingly, the revenues generated
by the Partnerships could fluctuate significantly.
As of December 31, 2001, the Partnerships were unable to determine the time
frame during which any future payments would be recieved. Due to the
uncertainty surrounding Edison's ability to make payment on past due
amounts, collection was not reasonably assured and the Partnerships have
not recognized revenue from Edison for energy delivered during the period
January 1, 2001 through March 26, 2001. The partnerships will not recognize
this revenue until paymemt from Edison is recieved (see note 7)
(7) Subsequent Event
On March 1, 2002, Edison reached certain financing milestones and paid the
Partnerships for revenue generated but not recognized for the November 2000
through March 26, 2001. As such, the Partnerships will recognize this
revenue in the first quarter of 2002.
F-5
Independent Auditors' Report
The Partners and Management Committee
Coso Finance Partners:
We have audited the accompanying balance sheets of Coso Finance Partners as of
December 31, 2001 and 2000, and the related statements of operations, partners'
capital, and cash flows for each of the years in the three-year period ended
December 31, 2001. These financial statements are the responsibility of the
Partnership'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 2000 and 1999 financial statements referred to above present
fairly, in all material respects, the financial position of Coso Finance
Partners as of December 31, 2001 and 2000, and the results of their operations
and their cash flows for each of the years in the three-year period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States of America.
As discussed in note 3 to the financial statements, effective February 25, 1999,
Caithness Acquisition Company, LLC acquired all of the partnership interest not
already owned by its affiliates, ESCA LLC and ESCA II Limited Partnership, in a
business combination accounted for as a purchase. As a result of the
acquisition, the financial information for the period after the acquisition is
presented on a different cost basis than that for the period before the
acquisition and, therefore, is not comparable.
March 1, 2002
/s/ KPMG LLP
- -------------
KPMG LLP
F-6
COSO FINANCE PARTNERS
Balance Sheets
December 31, 2001 and 2000
(Dollars in thousands)
Assets 2001 2000
------------- -------------
Cash and cash equivalents $ 264 3,506
Restricted cash and investments (note 2) 21,325 22,996
Accounts receivable, net (note 2) 3,454 521
Prepaid expenses and other assets 650 809
Amounts due from related parties (note 8) 9,362 1,960
Property, plant, and equipment, net (notes 3 and 5) 140,437 149,076
Investment in New CLPSI Company, LLC (note 4) 4,005 4,072
Power purchase contract, net (note 3) 11,093 12,240
Deferred financing costs, net (note 2) 2,524 3,229
------------- -------------
Total assets $ 193,114 198,409
============= =============
Liabilities and Partners' Capital
Accounts payable and accrued liabilities (note 6) $ 17,578 15,857
Amounts due to related parties (note 8) 561 697
Project loans (note 7) 122,550 134,984
------------- -------------
Total liabilities 140,689 151,538
Commitments and contingencies (notes 6, 7, and 9)
Partners' capital 52,425 46,871
------------- -------------
Total liabilities and partners' capital $ 193,114 198,409
============= =============
See accompanying notes to financial statements.
F-7
COSO FINANCE PARTNERS
Statements of Operations
Years ended December 31, 2001, 2000, and 1999 (note 3)
(Dollars in thousands)
Twelve months Twelve months Two months Ten months Twelve months
ended ended ended ended ended
December 31, December 31, February 28, December 31, December 31,
2001 2000 1999 1999 1999
-------------- -------------- -------------- -------------- --------------
(old basis) (new basis)
Revenue:
Energy revenues (notes 2, 8, and 10) $ 40,190 38,990 8,098 34,196 42,294
Capacity payments 13,210 13,429 474 12,898 13,372
Interest and other income 2,928 2,506 824 1,410 2,234
-------------- -------------- -------------- -------------- --------------
Total revenue 56,328 54,925 9,396 48,504 57,900
-------------- -------------- -------------- -------------- --------------
Operating expenses:
Plant operating expenses 9,010 8,609 2,556 7,461 10,017
Royalty expense (note 6) 9,950 10,921 987 9,170 10,157
Depreciation and amortization 10,222 9,594 1,604 7,978 9,582
Edison legal expenses and
settlement costs (note 9) -- -- 569 1,804 2,373
-------------- -------------- -------------- -------------- --------------
Total operating expenses 29,182 29,124 5,716 26,413 32,129
-------------- -------------- -------------- -------------- --------------
Operating income 27,146 25,801 3,680 22,091 25,771
-------------- -------------- -------------- -------------- --------------
Other expenses:
Interest expense 11,732 12,493 645 8,966 9,611
Interest expense - acquisition debt -- -- -- 1,962 1,962
Costs related to acquisition debt -- -- -- 1,611 1,611
Amortization on deferred financing 705 520 18 373 391
-------------- -------------- -------------- -------------- --------------
Total other expenses 12,437 13,013 663 12,912 13,575
-------------- -------------- -------------- -------------- --------------
Income before
extraordinary item 14,709 12,788 3,017 9,179 12,196
Extraordinary item - loss on
extinguishment of debt (note 7) -- -- -- 2,375 2,375
-------------- -------------- -------------- -------------- --------------
Net income $ 14,709 12,788 3,017 6,804 9,821
============== ============== ============== ============== ==============
See accompanying notes to financial statements.
F-8
COSO FINANCE PARTNERS
Statements of Partners' Capital
Years ended December 31, 2001, 2000, and 1999 (note 3)
(Dollars in thousands)
Coso Finance Partners Coso Finance Partners II
-------------------------------- ----------------------------------
China Lake
China Lake New ESCA II Geothermal
ESCA Operating CLOC, Limited Management New
LLC Company, Inc. LLC Partnership Company, Inc. CLGMC Total
---------- ------------- ---------- -------------- ------------- -------- --------
Balance at December 31, 1998 $ 66,918 62,272 -- 11,214 9,529 -- 149,933
Transfer of capital -- (62,272) 62,272 -- (9,529) 9,529 --
Combination reclassifications 11,214 -- 9,529 (11,214) -- (9,529) --
Net income 5,264 -- 4,557 -- -- -- 9,821
Effect of purchase accounting -- -- (6,935) -- -- -- (6,935)
Distributions to partners (55,453) -- (48,004) -- -- -- (103,457)
---------- ------------- ---------- ------------ ------------- ---------- ---------
Balance at December 31, 1999 27,943 -- 21,419 -- -- -- 49,362
Net income 6,854 -- 5,934 -- -- -- 12,788
Distributions to partners (8,190) -- (7,089) -- -- -- (15,279)
---------- ------------- ---------- ------------ ------------- ---------- ---------
Balance at December 31, 2000 26,607 -- 20,264 -- -- -- 46,871
Net income 7,884 -- 6,825 -- -- -- 14,709
Distributions to partners (4,907) -- (4,248) -- -- -- (9,155)
---------- ------------- ---------- ------------ ------------- ---------- ---------
Balance at December 31, 2001 $ 29,584 -- 22,841 -- -- -- 52,425
========== ============= ========== ============ ============= ========== =========
See accompanying notes to financial statements.
F-9
COSO FINANCE PARTNERS
Statements of Cash Flows
Years ended December 31, 2001, 2000, and 1999 (note 3)
(Dollars in thousands)
Twelve months Twelve months Two months Ten months Twelve months
ended ended ended ended ended
December 31, December 31, February 28, December 31, December 31,
2001 2000 1999 1999 1999
------------- -------------- -------------- -------------- --------------
(old basis) (new basis)
Cash flows from operating activities:
Net income $ 14,709 12,788 3,017 6,804 9,821
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,222 9,594 1,604 7,978 9,582
Amortization of deferred financing costs 705 520 18 373 391
Write-off of deferred financing costs -- -- -- 177 177
Changes in operating assets and liabilities:
Accounts receivable, prepaid
expenses, and other assets (2,774) 4,304 1,015 (994) 21
Investment in New CLPSI Company, LLC 67 140 19 (92) (73)
Accounts payable and accrued liabilities 1,721 (859) 378 4,253 4,631
Amounts due from related parties (7,402) 2,548 (1,751) 1,025 (726)
Amounts due to related parties (136) 133 594 (30) 564
----------- -------------- -------------- -------------- --------------
Net cash provided by
operating activities 17,112 29,168 4,894 19,494 24,388
----------- -------------- -------------- -------------- --------------
Cash flows from investing activities:
Capital expenditures (436) (3,643) (571) (5,904) (6,475)
Decrease (increase) in restricted cash 1,671 2,005 (194) (17,425) (17,619)
----------- -------------- -------------- -------------- --------------
Net cash provided by (used in)
investing activities 1,235 (1,638) (765) (23,329) (24,094)
----------- -------------- -------------- -------------- --------------
Cash flows from financing activities:
Distributions to partners (9,155) (15,279) -- (103,457) (103,457)
Increase in project financing debt -- -- -- 151,550 151,550
Repayment of project financing loans (12,434) (16,566) -- (40,566) (40,566)
----------- ------------- -------------- -------------- --------------
Net cash (used in) provided by
financing activities (21,589) (31,845) -- 7,527 7,527
----------- -------------- -------------- -------------- --------------
Net change in cash and
cash equivalents (3,242) (4,315) 4,129 3,692 7,821
Cash and cash equivalents at beginning of year 3,506 7,821 -- 4,129 --
----------- -------------- -------------- -------------- --------------
Cash and cash equivalents at end of year $ 264 3,506 4,129 7,821 7,821
=========== ============== ============== ============== ==============
Supplemental cash flow disclosure:
Cash paid for interest $ 11,763 12,532 -- 10,694 10,694
=========== ============== ============== ============== ==============
Schedule of noncash investing activities
as a result of purchase:
Fair value of power purchase contract -- -- -- 14,344 14,344
Reduction in property, plant, and equipment -- -- -- (24,316) (24,316)
Net increase in other assets -- -- -- 3,733 3,733
Liabilities assumed -- -- -- (696) (696)
----------- -------------- -------------- -------------- --------------
Reduction in partners' capital $ -- -- -- (6,935) (6,935)
=========== ============== ============== ============== ==============
See accompanying notes to financial statements.
F-10
COSO FINANCE PARTNERS
Notes to Financial Statements
December 31, 2001, 2000, and 1999
(Dollars in thousands)
(1) Organization, Operation, and Business of the Partnerships
Coso Finance Partners (CFP or the Partnership) and Coso Finance Partners II
(CFP II) were formed on July 7, 1987 in connection with the refinancing of
the construction of a 30-net-megawatt (NMW) geothermal power plant and the
expansion of that power plant from 30 NMW to approximately 80 NMW,
constructed on behalf of China Lake Joint Venture (CLJV) on land at the
China Lake Naval Air Weapons Station, Coso Hot Springs, China Lake,
California.
CFP acquired the assets and assumed the liabilities of CLJV insofar as they
related to the first turbine generator set of the power plant and the
related geothermal resources. CFP II acquired the assets and assumed the
liabilities of CLJV insofar as they related to the second and third turbine
generator sets, together with the related geothermal resources. The three
turbine generators that comprise the power plant have the capacity to
produce an aggregate of approximately 80 NMWs. CFP and CFP II were formed
as separate entities in order to facilitate bank financing of the completed
power plant and power plants under construction, respectively. In 1988, CFP
II assigned its assets and liabilities to CFP in exchange for a royalty of
5% of the value of the steam produced.
In May of 1999, CFP merged with CFP II, with CFP surviving as a general
partnership owned by ESCA LLC (ESCA) and New CLOC Company, LLC (New CLOC),
both Delaware limited liability companies. CFP and CFP II were general
partnerships between China Lake Operating Company (CLOC), a Delaware
corporation wholly owned by CalEnergy Company, Inc. (CalEnergy), now known
as MidAmerican Energy Holding Company, and ESCA, and China Lake Geothermal
Management Company (CLGMC), a Delaware corporation wholly owned by
CalEnergy, and ESCA II Limited Partnership (ESCA II), respectively. ESCA
was a California limited liability company owned by Caithness Geothermal
1980, Ltd., Caithness Power, L.L.C., and ESI Geothermal, Inc. (ESI) (a
subsidiary of FPL Group, Inc.). ESCA II was a California limited
partnership among Caithness Geothermal 1980, Ltd., Mojave Power II, Inc.,
and ESI Geothermal II, Inc. (a subsidiary of FPL Group, Inc.).
On February 25, 1999, Caithness Acquisition Company, LLC (CAC), a wholly
owned subsidiary of Caithness Energy, LLC and an affiliate of ESCA and ESCA
II, purchased all of CalEnergy's interest in CLOC and CLGMC (see note 3)
and formed two wholly owned subsidiaries, New CLOC, a Delaware limited
liability company, and New CLGMC Company (New CLGMC), a Delaware limited
liability company. In May of 1999, ESCA II merged into ESCA, and New CLGMC
merged into New CLOC. In October 1999, CAC purchased all of ESI's interest
in ESCA and ESCA II. The new managing partner of CFP became New CLOC.
The Partnership sells all electricity produced to Southern California
Edison (Edison) under a 24-year power purchase contract (PPC) expiring in
2011. Under the terms of the PPC, Edison makes payments to CFP as follows:
* Contractual payments for energy delivered, which payments escalated at an
average rate of approximately 7.6% for the first ten years after the date
of firm operation (scheduled energy price period). After the scheduled
energy price period, the energy payment adjusted to the actual avoided
energy cost experienced by Edison. In August 1997, the Partnership
completed the first ten-year period. At that time, Edison ceased paying the
scheduled energy rates. For the years ended December 31, 2001, 2000, and
1999, Edison's average avoided cost of energy was 7.46, 5.80, and 3.13
cents per kilowatt (kWh), respectively. Edison entered into an agreement
(the Agreement) with the Partnership on June 19, 2001 that addressed
renewable energy pricing and issues concerning California's energy crisis.
The Agreement, which was amended on November 30, 2001, established May 1,
2002 as the date when the Partnership will begin receiving a fixed
avoided-cost-of-energy rate of 5.37 cents per kWh for five (5) years.
Subsequent to the five-year period, Edison will be required to make energy
payments to the Partnership based on its avoided cost of energy until its
PPC expires. Beyond the five-year period, the Partnership cannot predict
the likely level of avoided cost of energy prices under the PPC and,
accordingly, the revenues generated by the Partnership could fluctuate
significantly:
* Capacity payments which remain fixed over the life of the PPC to the extent
that actual energy delivered exceeds minimum levels of the plant capacity
defined in the PPC; and
* Bonus payments to the extent that actual energy delivered exceeds 85% of
the plant capacity stated in the PPC. In 2001, 2000, and 1999, the bonus
payments aggregated $2,237, $2,250, and $1,345, respectively.
CalEnergy served as the operator for CFP, maintaining the accounting
records and operating the plant day to day, until February 1, 1999, at
which time Coso Operating Company LLC (COC), a Delaware limited liability
company, became operator pursuant to certain operations and maintenance
agreements with CLOC, the managing general partner. COC was a wholly owned
subsidiary of CalEnergy until February 25, 1999, when CalEnergy assigned
all of its interest and rights in COC to CAC, which became manager and sole
member.
On February 25, 1999, CFP entered into two operating and maintenance
agreements, one with FPL Operating Services, Inc. (FPL) and a second with
COC. The initial term of the FPL operating and maintenance agreement was
for three years, to provide for the operation and maintenance of the
geothermal power facilities and the interconnection to the transmission
line. The term of the COC agreement is through December 31, 2009 to provide
field services and administrative services for the Partnership. On October
17, 1999, the operating agreement with FPL was terminated and COC became
the sole operator of all Partnership operations.
At formation, and as subsequently amended, the terms of the partnership
agreements provided that distributable cash flow before "payout" was
allocated 10% to CLOC as managing partner and 90% in proportion to the
remaining sums necessary to be distributed to each partner to achieve
payout. "Payout" occurred in June 1996 and is defined as the point at which
each partner had received aggregate cash distributions from the 90%
allocation in amounts equal to their accumulated cash contributions plus
amounts equal to 10% simple interest on the cash contributions. For
purposes of allocating net income to partners' capital accounts, profits
and losses are allocated based on the aforementioned percentages. For
income tax purposes, certain deductions and credits are subject to special
allocations as defined in the partnership agreements. Cash flow after
"payout" is allocated 53.6% and 46.4% to ESCA and New CLOC (formerly
CLOC/CLGMC), respectively.
(2) Summary of Significant Accounting Policies
Accounts Receivable and Revenue Recognition
Accounts receivable primarily consist of receivables from Edison for
electricity delivered and sold under the PPC. In addition, the U.S. Navy
(Navy) reimburses CFP for electricity paid on their behalf (see note 6). As
of December 31, 2001 and 2000, the balance due from the Navy was $1,218 and
$477, respectively.
Operating revenues are recognized as income during the period in which
electricity is delivered to Edison. Revenue was recognized based on the
payment rates scheduled in CFP's PPC with Edison through August 1997. From
August 1997 through May 1, 2002, and subsequent to the five-year period
stated in the Agreement, revenue is recognized based on Edison's avoided
energy cost until the Partnership's PPC expires.
Periodic increases in natural gas prices and imbalances between supply and
demand, among other factors, have at times led to significant increases in
wholesale electricity prices in California. During those periods, Edison
had fixed tariffs with their retail customers that were significantly below
the wholesale prices it paid in California. That resulted in significant
under-recoveries by Edison of its electricity purchase costs. On
January 16, 2001, Edison announced that it was temporarily suspending
payments for energy provided, including the energy provided by the
Partnership, pending a permanent solution to its liquidity crisis.
Subsequently, pursuant to a California Public Utilities Commission (CPUC)
order, Edison resumed making payments to the Partnership beginning with
power generated on March 27, 2001. Edison also made a payment equal to 10%
of the unpaid balance for power generated from November 1, 2000 to March
26, 2001, and continues to pay interest on the outstanding amount at 7% per
annum. That payment was made pursuant to the Agreement between Edison and
the Partnership described in note 1. The Agreement as amended, which
received CPUC approval in January of 2002, established the fixed energy
rates discussed above and set payment terms for past due amounts owed to
the Partnership by Edison. As of December 31, 2001, the Partnership was
unable to determine the time frame during which any future payments would
be received. Due to the uncertainty surrounding Edison's ability to make
payment on past due amounts, collection was not reasonably assured and the
Partnership had not recognized revenue of $22,019 from Edison for energy
delivered during the period January 1, 2001 through March 26, 2001. The
provision for doubtful accounts previously recorded as of December 31, 2000
of $15,234 has been reclassified to conform with the 2001 presentation. In
addition, the Partnership will not recognize this revenue until payments
from Edison are received (see note 10).
Fixed Assets and Depreciation
The costs of major additions and betterments are capitalized, while
replacements, maintenance, and repairs which do not improve or extend the
lives of the respective assets are expensed currently.
Depreciation of the operating power plant and transmission line is computed
on a straight-line basis over their estimated useful lives of 30 years and,
for significant additions, the remainder of the 30-year life from the
plant's commencement of operations.
Recoverability of Long-Lived Assets
An impairment loss is recognized whenever events or changes in
circumstances indicate that the carrying amounts of long-lived tangible and
intangible assets is not recoverable. The Partnership considers historical
performance and future estimated results in its evaluation of potential
impairment and then compares the carrying amount of the asset to the
estimated future cash flows expected to result from the use of the asset.
If the carrying amount of the asset exceeds estimated expected undiscounted
future cash flows before interest charges, the Partnership measures the
amount of the impairment by comparing the carrying amount of the asset to
its fair value. The estimation of fair value is generally measured by
discounting expected future cash flows at the rate the Partnership utilizes
to evaluate potential investments. The Partnership estimates fair value
based on the best information available using estimates, judgments, and
projections as considered necessary.
Wells and Resource Development Costs
The Partnership follows the full-cost method of accounting for costs
incurred in connection with the exploration and development of geothermal
resources. All such costs, which include dry hole costs, the cost of
drilling and equipping production wells, and administrative and interest
costs directly attributable to the project, are capitalized and amortized
over their estimated useful lives when production commences. The estimated
useful lives of production wells are ten years each; exploration costs and
development costs, other than production wells, are amortized over 30 years
and, for significant additions, the remainder of the 30-year life from the
plant's commencement of operations.
Deferred Plant Overhaul Costs and Well Rework Costs
Plant overhaul costs are deferred and amortized over the estimated period
between overhauls, as these costs extend the useful life of the respective
assets. These deferred costs of $490 and $497 at December 31, 2001 and
2000, respectively, are included in property, plant, and equipment.
Currently, plant overhauls are amortized over three to four years from the
point of completion.
Production and injection rework costs are expensed as incurred. For the
years ended December 31, 2001, 2000, and 1999, such costs were $561, $42,
and $47, respectively.
Reclassifications
Certain reclassifications have been made to the 2000 balance sheet and the
2000 and 1999 statements of operations and cash flows to conform to the
2001 presentation.
Deferred Financing Costs
Deferred financing costs as of December 31, 2001 and 2000 consist of loan
fees and other costs of financing that are amortized over the term of the
related financing. In 1999, fees of $1,984 associated with certain
short-term financing were fully expensed and included in costs related to
acquisition debt, and a refinancing of this debt resulted in new deferred
financing costs of $4,122. The $215 balance of the deferred financing costs
at the date of acquisition related to the refinanced project debt was
included in the extraordinary loss recorded at the time of the refinancing
(see note 7). Accumulated amortization at December 31, 2001 and 2000 was
$1,598 and $893, respectively.
Income Taxes
There is no provision for income taxes since such taxes are the
responsibility of the partners.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Partnership considers all
money market instruments purchased with initial maturities of three months
or less to be cash equivalents.
Restricted Cash and Investments
As of December 31, 2001 and 2000, all of the Partnership's investments were
classified as held to maturity and reported at amortized cost. Restricted
cash and investments include a capital expenditure reserve and a sinking
fund related to a lump-sum royalty payment of $25,000 to be paid to the
Navy in 2009 (see note 6) totaling $10,894 and $9,838 at December 31, 2001
and 2000, respectively. This account comprised various mortgage-backed
securities with maturities ranging from 2000 through 2005. Restricted cash
and investments also include a sinking fund for the project debt service
required by the project loans (see note 7). The carrying amount of
restricted cash and investments at December 31, 2001 and 2000 approximated
fair value, which is based on quoted market prices as provided by the
financial institution which holds the investments.
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, liabilities, and
partners' capital and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues,
expenses, and allocation of profits and losses during the period. Actual
results could differ significantly from those estimates.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable,
prepaid expenses and other assets, amounts due from related parties,
accounts payable and accrued liabilities, and amounts due to related
parties approximated fair value as of December 31, 2001 and 2000, because
of the relatively short maturities of these instruments. The project loans
as of December 31, 2001 and 2000 have an estimated fair value of $122,550
and $132,103, respectively, based on the quoted market price of the senior
secured notes and the Caithness Coso Funding Corp. notes, respectively (see
note 7).
The investment in New CLPSI Company, LLC (see note 4) approximates the fair
value.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities. In June 2000, FASB issued
SFA No. 138, Accounting for Certain Derivative Instruments and Certain
Hedging Activities, which amended SFAS No. 133 and addressed certain
implementation issues. SFAS No. 133, as amended, requires that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. The Statement also requires that
changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. The Partnership does not
have any derivative instruments and, therefore, the adoption in 2001 of
SFAS No. 133, as amended, did not have any effect on the Partnership's
financial statements.
In June 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS
No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that
the purchase method of accounting be used for all business combinations.
SFAS No. 141 also specifies criteria that intangible assets acquired in a
business combination must meet to be recognized and reported separately
from goodwill. SFAS No. 142 will require that goodwill and intangible
assets with indefinite useful lives no longer be amortized, but instead be
tested for impairment at least annually in accordance with the provisions
of SFAS No. 142. SFAS No. 142 also requires that intangible assets with
estimable useful lives be amortized over their respective estimated useful
lives to their estimated residual values, and be reviewed for impairment in
accordance with SFAS No. 121 and, subsequently, SFAS No. 144 after its
adoption.
The Partnership adopted the provisions of SFAS No. 141 as of July 1, 2001.
The Partnership's management is in the process of evaluating the impact of
implementing SFAS No. 142 and is unable to estimate the effect, if any, on
the Partnership's financial statements.
In October 2001, FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001, and replaces SFAS No. 121 and provisions
of APB Opinion No. 30 for the disposal of segments of a business. SFAS No.
144 creates one accounting model, based on the framework established in
SFAS No. 121, to be applied to all long-lived assets including discontinued
operations. The Partnership is required to adopt SFAS No. 144 on January 1,
2002 and believes there will be no material effect on the Partnership's
financial statements.
(3) Acquisition Accounting
On February 25, 1999, CAC purchased all of CalEnergy's interest in CFP and
CFP II, Coso Energy Developers (CED), and Coso Power Developers (CPD),
collectively known as the Coso Partnerships, for approximately $205,500 in
cash plus the assumption of debt of approximately $139,800. The purchase
price allocated to CFP was approximately $62,000 plus the assumption of
debt of approximately $40,600. The acquisition was accounted for under the
purchase method, and no goodwill was recorded. After CAC's purchase of
CalEnergy's interest in CFP, a new basis of accounting was adopted and,
therefore, the financial information for the period after the acquisition
is presented on a different cost basis than that for the period before the
acquisition and, therefore, is not comparable.
The purchase price was allocated to the portion of the assets and
liabilities purchased from CalEnergy based upon their fair value, with the
amount of fair value of net assets in excess of the purchase price being
allocated to long-lived assets on a pro rata basis. These adjustments
resulted in a net decrease of $24,316 in the amounts allocated to property,
plant, and equipment, and an increase of $14,344 in the amount allocated to
PPC. The PPC is being amortized on a straight-line basis over the remaining
term of the PPC of 12.5 years as of the date of acquisition. Accumulated
amortization on the PPC at December 31, 2001 and 2000 was $3,251 and
$2,104, respectively.
(4) Investment in New CLPSI Company, LLC
New CLPSI Company, LLC (CLPSI) is a wholly owned subsidiary of CAC. CLPSI
purchases, stores, and distributes spare parts to the Coso Partnerships.
Also, certain other facilities utilized by the Coso Partnerships are held
by CLPSI. CFP's investment in CLPSI represents funds advanced for the
purchase of spare parts inventory and other assets. Spare parts inventory
held by CLPSI on behalf of CFP is valued at the lower of cost or market.
(5) Property, Plant, and Equipment
Property, plant, and equipment at December 31, 2001 and 2000 consist of the
following:
2001 2000
---- ----
Power plant and gathering system $ 154,506 154,506
Transmission line 5,746 5,746
Wells and resource development costs 68,832 68,466
------- -------
229,084 228,718
Less accumulated depreciation and
amortization (88,647) (79,642)
------- -------
$ 140,437 149,076
======= =======
The transmission line costs represent the Partnership's share of the costs
of construction of transmission lines from Inyokern, California to the
Edison substation at Kramer, California and from Kramer to the Edison
substation at Victorville, California.
(6) Royalty Expense
Royalty expense is summarized as follows:
2001 2000 1999
---- ---- ----
Unit 1 $ 4,889 3,824 3,852
Units 2 and 3 5,061 7,097 6,305
----- ----- -----
Total $ 9,950 10,921 10,157
===== ====== ======
The Navy I partnership pays a royalty for Unit I through reimbursement of
electricity supplied to the Navy by Edison from electricity generated at
the Navy I plant. The reimbursement is based on a pricing formula that is
included in the Navy contract. This formula is largely based upon the
tariff rates charged by Edison, which have recently been increased by the
CPUC. Discussions with the Navy are continuing to readjust the formula to
reflect recent activity in the local energy market. In November 2001, a
modification to the calculation of the reimbursement pricing formula was
made to the Navy contract resulting in a reduction of accrued royalties of
$6.5 million. For Units 2 and 3, the Navy I partnership's royalty expense
paid to the Navy is a fixed percentage of electricity sales at 15% of
revenue received by the Navy I partnership through 2003, and will increase
to 20% from 2004 through 2009.
In addition, CFP is required to pay the Navy $25,000 in December 2009, the
date the contract expires. The payment is secured by funds placed on
deposit monthly, which funds plus accrued interest will aggregate $25,000.
Currently, the monthly amount to be deposited is approximately $60. The
balance included in accounts payable and accrued liabilities at December
31, 2001 and 2000 was $11,098 and $9,862, respectively.
(7) Project Loans
In order to complete the purchase of CalEnergy's interest in CFP and CFP
II, CAC arranged for short-term debt financing of $211,500, of which
approximately $77,610 was allocated to CFP. As a result of "push-down"
accounting, the short-term debt was reflected in the financial statement of
CFP and was repaid on May 28, 1999 from a portion of the proceeds from the
offering of senior secured notes. Financing costs associated with the
short-term financing are included in interest expense - acquisition debt.
On May 28, 1999, Caithness Coso Funding Corp. (Funding Corp.), a wholly
owned subsidiary of the Coso Partnerships, raised $413,000 from an offering
of senior secured notes. Funding Corp. loaned approximately $151,550 to CFP
from the $413,000 debt raised from the offering of senior secured notes on
terms consistent with those of the senior secured notes. The loan consisted
of one note of $29,000 at 6.80% which was paid off on December 15, 2001,
and another of $122,550 at 9.05% which has payments due at various dates
through December 15, 2009. Through this financing, the existing project
loan and short-term financing of $118,176 were repaid and an extraordinary
loss of $2,375 from the early extinguishment of this debt was incurred. The
extraordinary loss was due to a premium and other costs incurred to pay the
existing project loan before its maturity date.
The annual maturity of the project loans for each year ending December 31
is as follows:
Year ending December 31: Amount
------------------------ --------
2002 $ 11,597
2003 13,408
2004 10,694
2005 15,100
2006 16,160
Thereafter 55,591
-------
$ 122,550
=======
The loans contain certain restrictive covenants that, among other things,
limit the Partnership's ability to incur additional indebtedness, release
funds from reserve accounts, make distributions, create liens, and enter
into any transaction of merger or consolidation.
The Partnership, Funding Corp., CPD, and CED are jointly and severally
liable for the repayment of the senior secured notes.
The annual maturity of the senior secured notes for each year ending
December 31 is as follows:
Year ending December 31: Amount
------------------------ -------
2002 $ 21,771
2003 27,618
2004 31,332
2005 35,480
2006 38,286
Thereafter 148,513
-------
$ 303,000
=======
(8) Related Party Transactions
The amounts due from and to related parties at December 31, 2001 and 2000
consist of the following:
2001 2000
----- -----
Amounts due from related parties:
Coso Operating Company $ 231 --
CPD for steam sharing 7,376 1,357
CED for steam sharing 1,755 603
----- -----
$ 9,362 1,960
===== =====
Amounts due to related parties:
Caithness Coso Funding Corp. $ 494 525
Coso Operating Company -- 60
Caithness Operating Company 67 112
----- -----
$ 561 697
===== =====
COC is reimbursed monthly for non-third-party costs incurred on behalf of
CFP. These costs are comprised principally of direct operating costs of the
CFP geothermal facility, allocable general and administrative costs, and an
operator fee. The amount due from COC relates to advances for payments of
operating expenses. The amount due to COC relates to reimbursements for
payment of operating expenses.
Both CalEnergy and ESCA were reimbursed at amounts approved for their
respective costs incurred in relation to the CFP Management Committee.
Prior to May 28, 1999, CalEnergy received $25, while ESCA received $129.
As of May 28, 1999, the management committee fee was eliminated and
replaced by a non-managing fee payable to ESCA. For the years ended
December 31, 2001 and 2000, ESCA received $237 and $234, respectively.
The amount due to Funding Corp. is accrued interest for 15 days in December
related to the project loans (see note 7).
CFP is charged by CLPSI for both its inventory usage and its portion of the
expenses of operating CLPSI. The charges to CFP from CLPSI in 2001, 2000,
and 1999, which are included in plant operating expenses, were
approximately $147, $43, and $65, respectively.
During 1994, the Coso Partnerships entered into steam sharing agreements
under which the partnerships may transfer steam, with the resulting
incremental revenue and royalty expense shared equally by the partnerships.
In the second half of 1995, interconnection facilities between the plants
were completed and the transfer of steam commenced. CFP steam sharing
revenue, net of royalties and other related costs, amounted to $7,938,
$5,962, and $17,579 in 2001, 2000, and 1999, respectively.
(9) Settlement of Litigation
In February 2000, the Coso Partnerships reached a settlement with Edison,
subject to the approval of the CPUC, which approval was received in
December 2000. The case has not been dismissed pending completion of
certain obligations under the settlement agreements. The cost of the
settlement will be allocated among the Coso Partnerships. A portion of that
cost was reflected in the purchase accounting applied to the acquisition of
CalEnergy's interest in the Partnership (see note 3). The balance of the
settlement was charged to settlement of litigation and related expenses.
(10) Subsequent Event
On March 1, 2002, Edison reached certain financing milestones and paid the
Partnership for revenue generated but not recognized for the period
November 2000 through March 26, 2001. As such, the Partnership will
recognize this revenue in the first quarter of 2002.
F-11
Independent Auditors' Report
The Partners and Management Committee
Coso Energy Developers:
We have audited the accompanying balance sheets of Coso Energy Developers as of
December 31, 2001 and 2000, and the related statements of operations, partners'
capital, and cash flows for each of the years in the three-year period ended
December 31, 2001. These financial statements are the responsibility of the
Partnership'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 2001 and 2000 financial statements referred to above present
fairly, in all material respects, the financial position of Coso Energy
Developers as of December 31, 2001 and 2000, and the results of its operations
and its cash flows for each of the years in the three-year period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States of America.
As discussed in note 3 to the financial statements, effective February 25, 1999,
Caithness Acquisition Company, LLC acquired all of the partnership interest not
already owned by its affiliate, Caithness Coso Holdings LLC, in a business
combination accounted for as a purchase. As a result of the acquisition, the
financial information for the period after the acquisition is presented on a
different cost basis than that for the period before the acquisition and,
therefore, is not comparable.
March 1, 2002
/S/ KPMG LLP
- --------------
KPMG LLP
F-12
COSO ENERGY DEVELOPERS
Balance Sheets
December 31, 2001 and 2000
(Dollars in thousands)
Assets 2001 2000
------------- ------------
Cash and cash equivalents $ -- 5,862
Restricted cash and investments (note 2) 7,368 14,502
Accounts receivable, net (note 2) 2,939 40
Prepaid expenses and other assets 849 1,013
Amounts due from related parties (note 8) 401 365
Property, plant, and equipment (notes 3 and 6) 148,417 153,618
Investment in New CLPSI Company, LLC (note 5) 789 1,051
Investments in Coso Transmission Line Partners (note 4) 2,738 2,871
Power purchase contract, net (note 3) 18,437 19,510
Deferred financing costs, net (note 2) 2,040 2,480
------------- ------------
Total assets $ 183,978 201,312
============= ============
Liabilities and Partners' Capital
Accounts payable and accrued liabilities $ 7,699 6,839
Amounts due to related parties (note 8) 27,267 24,321
Project loan (note 7) 96,250 100,907
------------- ------------
Total liabilities 131,216 132,067
Commitments and contingencies (notes 7 and 9)
Partners' capital 52,762 69,245
------------- ------------
Total liabilities and partners' capital $ 183,978 201,312
============= ============
See accompanying notes to financial statements.
F-13
COSO ENERGY DEVELOPERS
Statements of Operations
Years ended December 31, 2001, 2000, and 1999 (note 3)
(Dollars in thousands)
Twelve months Twelve months Two months Ten months Twelve months
ended ended ended ended ended
December 31, December 31, February 28, December 31, December 31,
2001 2000 1999 1999 1999
------------- -------------- ------------- ------------- -------------
(old basis) (new basis)
Revenues:
Energy revenues (notes 2, 8, and 10) $ 31,133 29,052 16,716 19,223 35,939
Capacity payments 12,908 13,122 817 13,121 13,938
Interest and other income 3,766 8,125 78 988 1,066
----------- -------------- ------------- ------------- -------------
Total revenues 47,807 50,299 17,611 33,332 50,943
----------- -------------- ------------- ------------- --------------
Operating expenses:
Plant operating expense 10,221 12,008 3,470 12,098 15,568
Royalty expense 5,203 4,045 1,592 1,556 3,148
Depreciation and amortization 15,972 15,361 2,550 13,099 15,649
Edison legal expenses and
settlement costs (note 9) -- -- 569 3,600 4,169
----------- -------------- ------------- ------------- --------------
Total operating expenses 31,396 31,414 8,181 30,353 38,534
----------- -------------- ------------- ------------- --------------
Operating income 16,411 18,885 9,430 2,979 12,409
----------- -------------- ------------- ------------- --------------
Other expenses:
Interest expense 8,958 9,174 602 6,708 7,310
Interest expense - acquisition debt (note 3) -- -- -- 1,415 1,415
Costs related to acquisition debt (note 3) -- -- -- 1,262 1,262
Amortization of deferred financing 440 318 14 234 248
----------- -------------- ------------- ------------- --------------
Total other expenses 9,398 9,492 616 9,619 10,235
----------- -------------- ------------- ------------- --------------
Income (loss) before
extraordinary item 7,013 9,393 8,814 (6,640) 2,174
Extraordinary item - loss on
extinguishment of debt (note 7) -- -- -- 1,822 1,822
----------- -------------- ------------- ------------- --------------
Net income (loss) $ 7,013 9,393 8,814 (8,462) 352
=========== ============== ============= ============= ==============
See accompanying notes to financial statements.
F-14
COSO ENERGY DEVELOPERS
Statements of Partners' Capital
Years ended December 31, 2001, 2000, and 1999 (note 3)
(Dollars in thousands)
Caithness Coso
Coso Hotsprings New
Holdings Intermountain Chip
LLC Powers, Inc. Company, LLC Total
--------- ------------- ------------ --------
Balance at December 31, 1998 $ 87,896 75,295 -- 163,191
Transfer of capital -- (75,295) 75,295 --
Distributions to partners (39,846) -- (36,780) (76,626)
Net income 183 -- 169 352
Effect of purchase accounting -- -- (7,567) (7,567)
--------- ------------- ------------ --------
Balance at December 31, 1999 48,233 -- 31,117 79,350
Distributions to partners (10,139) -- (9,359) (19,498)
Net income 4,884 -- 4,509 9,393
--------- ------------- ------------ --------
Balance at December 31, 2000 42,978 -- 26,267 69,245
Distributions to partners (12,218) -- (11,278) (23,496)
Net income 3,647 -- 3,366 7,013
--------- ------------- ------------ --------
Balance at December 31, 2001 $ 34,407 -- 18,355 52,762
========= ============= ============ ========
See accompanying notes to financial statements.
F-15
COSO ENERGY DEVELOPERS
Statements of Cash Flows
Years ended December 31, 2001, 2000, and 1999 (note 3)
(Dollars in thousands)
Twelve months Twelve months Two months Ten months Twelve months
ended ended ended ended ended
December 31, December 31, February 28, December 31, December 31,
2001 2000 1999 1999 1999
------------- ------------- ------------ ------------ -------------
(old basis) (new basis)
Cash flows from operating activities:
Net income (loss) $ 7,013 9,393 8,814 (8,462) 352
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 15,972 15,361 2,550 13,099 15,649
Amortization of deferred financing costs 440 318 14 234 248
Write-off of deferred financing costs -- -- -- 161 161
Changes in operating assets and liabilities:
Accounts receivable, prepaid expenses,
and other assets (2,735) 5,142 (944) 14,833 13,889
Investment in Coso Transmission
Line Partners 133 110 (823) 949 126
Investment in New CLPSI Company, LLC 262 177 141 198 339
Accounts payable and accrued liabilities 860 158 (1,248) 2,215 967
Amounts due from related parties (36) 396 (6) (461) (467)
Amounts due to related parties 2,946 1,861 2,055 (3,513) (1,458)
---------- ------------- ------------ ------------ -------------
Net cash provided by
operating activities 24,855 32,916 10,553 19,253 29,806
---------- ------------- ------------ ------------ -------------
Cash flows from investing activities:
Capital reimbursements (expenditures) (9,698) (2,290) 316 (7,252) (6,936)
Decrease (increase) in restricted cash 7,134 (4,696) 43 (9,806) (9,763)
---------- ------------- ------------ ------------ -------------
Net cash provided by (used in)
investing activities (2,564) (6,986) 359 (17,058) (16,699)
---------- ------------- ------------ ------------ -------------
Cash flows from financing activities:
Distributions to partners (23,496) (19,498) -- (76,626) (76,626)
Increase in project financing debt -- -- -- 107,900 107,900
Repayment of project financing loans (4,657) (6,993) -- (37,958) (37,958)
---------- ------------- ------------ ------------ -------------
Net cash used in
financing activities (28,153) (26,491) -- (6,684) (6,684)
---------- ------------- ------------ ------------ -------------
Net change in cash and
cash equivalents (5,862) (561) 10,912 (4,489) 6,423
Cash and cash equivalents at beginning of year 5,862 6,423 -- 10,912 --
---------- ------------- ------------ ------------ -------------
Cash and cash equivalents at end of year $ -- 5,862 10,912 6,423 6,423
========== ============= ============ ============ =============
Supplemental cash flow disclosure:
Cash paid for interest $ 8,964 9,187 -- 8,117 8,117
========== ============= ============ ============ =============
Schedule of noncash investing activities
as a result of purchase:
Fair value of power purchase contract $ -- -- -- 21,443 21,443
Reduction in property, plant, and equipment -- -- -- (29,304) (29,304)
Net increase in other assets -- -- -- 2,694 2,694
Liabilities assumed -- -- -- (2,400) (2,400)
---------- ------------- ------------ ------------ -------------
Reduction in partners' capital $ -- -- -- (7,567) (7,567)
========== ============= ============ ============ =============
See accompanying notes to financial statements.
F-16
COSO ENERGY DEVELOPERS
Notes to Financial Statements
December 31, 2001, 2000, and 1999
(Dollars in thousands)
(1) Organization, Operation, and Business of the Partnership
Coso Energy Developers (CED or the Partnership) was founded on March 31,
1988, in connection with financing the construction of a geothermal power
plant on land leased from the U.S. Bureau of Land Management (BLM) at Coso
Hot Springs, China Lake, California. CED is a general partnership owned by
Caithness Coso Holdings, LLC (CCH), a California limited liability company
and, until February 25, 1999, Coso Hotsprings Intermountain Powers, Inc.
(CHIP), a Delaware corporation wholly owned by CalEnergy Company, Inc.
(CalEnergy), now known as MidAmerican Energy Holding Company. On February
25, 1999, Caithness Acquisition Company, LLC (CAC), a wholly owned
subsidiary of Caithness Energy, LLC and an affiliate of CCH, purchased all
of CalEnergy's interest in CHIP (see note 3) and formed a wholly owned
subsidiary, New CHIP Company, LLC (New CHIP), a Delaware limited liability
company, to become the new managing general partner of CED.
The CED power plants are located on land owned by the BLM. There are
turbine generators located at both the East and West power locks. CED pays
royalties to BLM of 10% of the net value of the steam produced.
The primary BLM geothermal lease had an initial term of ten years (1998)
and thereafter is subject to automatic extension until October 31, 2035, so
long as geothermal steam is commercially produced. In addition, the lease
may be extended to 2075 at the option of the BLM. Coso Land Company (CLC),
the original leaseholder, retained a 5% overriding royalty interest based
on the value of the steam produced. CLC was a joint venture between
CalEnergy and an affiliate of CCH. On February 25, 1999, CalEnergy
transferred all its interest and rights in CLC to CAC.
The Partnership sells all electricity produced to Southern California
Edison (Edison) under a 30-year power purchase contract (the PPC) expiring
in 2019. Under the terms of the PPC, Edison makes payments to CED as
follows:
* Contractual payments for energy delivered, which payments escalated at an
average rate of approximately 7.6% for the first ten years after the date
of firm operation (scheduled energy price period). After the scheduled
energy price period, the energy payment adjusted to the actual avoided
energy cost experienced by Edison. In March of 1999, the Partnership
completed the ten-year fixed price payment period and Edison ceased paying
the scheduled energy rates. For the years ended December 31, 2001, 2000,
and 1999, Edison's average avoided cost of energy was 7.46, 5.80, and 3.13
cents per kwh, respectively. Edison entered into an agreement (the
Agreement) with the Partnership on June 19, 2001 that addressed renewable
energy pricing and issues concerning California's energy crisis. The
Agreement, which was amended on November 30, 2001, established May 1, 2002
as the date when the Partnership will begin receiving a fixed avoided cost
of energy rate of 5.37 cents per kwh for five (5) years. Subsequent to the
five-year period, Edison will be required to make energy payments to the
Partnership based on its avoided cost of energy until its PPC expires.
Beyond the five-year period, the Partnership cannot predict the likely
level of avoided cost of energy prices under the PPC and, accordingly, the
revenues generated by the Partnership could fluctuate significantly;
* Capacity payments which remain fixed over the life of the PPC to the extent
that actual energy delivered exceeds minimum levels of the plant capacity
defined in the PPC; and
* Bonus payments to the extent that actual energy delivery exceeds 85% of the
plant capacity stated in the PPC. In 2001, 2000, and 1999, the bonus
aggregated $2,194, $2,230, and $2,200, respectively.
CalEnergy served as the operator for CED, maintaining the accounting
records and operating the plant day-to-day, until February 1, 1999 at which
time when Coso Operating Company LLC (COC), a Delaware limited liability
company, became operator pursuant to certain operations and maintenance
agreements with CHIP, the managing general partner. COC was a wholly owned
subsidiary of CalEnergy until February 25, 1999 when CalEnergy assigned all
of its interest and right in COC to CAC, which became its manager and sole
member.
On February 25, 1999, CED entered into two operating and maintenance
agreements, one with FPL Operating Services, Inc. (FPL) and a second with
COC. The initial term of the FPL operating and maintenance agreement was
for three years, to provide for the operation and maintenance of the
geothermal power facilities and the interconnection to the transmission
line. The term of the COC agreement is through December 31, 2009 to provide
field services and administrative services for the Partnership. On October
17, 1999, the operating agreement with FPL was terminated and COC became
the sole operator of all Partnership operations.
At formation, and as subsequently amended, the partnership agreement
provided that distributable cash flow before "payout" was allocated 3.81%
to CHIP as managing partner and 96.19% allocated in proportion to the
remaining sums necessary to be distributed to each partner to achieve
payout. "Payout" was defined as the point at which each partner had
received aggregate cash distributions from the 96.19% allocation in amounts
equal to their accumulated capital contributions. Cash flow after "payout,"
which occurred in June 1994, is allocated 48% to New CHIP (formerly CHIP)
and 52% to CCH. For purposes of allocating net income to partners' capital
accounts, profits and losses are allocated based on the aforementioned
capital percentages. For income tax purposes, certain deductions and
credits are subject to special allocations as defined in the partnership
agreement.
(2) Summary of Significant Accounting Policies
Accounts Receivable and Revenue Recognition
Accounts receivable primarily consist of receivables from Edison for
electricity delivered and sold under the PPC. Operating revenues are
recognized as income during the period in which electricity is delivered to
Edison. Revenue was recognized based on the payment rates scheduled in
CED's PPC with Edison through March 1999. From March 1999 through May 1,
2002, and subsequent to the five-year period stated in the Agreement,
revenue is recognized based on Edison's avoided energy cost, until the
Partnership's PPC expires.
Periodic increases in natural gas prices and imbalances between supply and
demand, among other factors, have at times led to significant increases in
wholesale electricity prices in California. During those periods, Edison
had fixed tariffs with their retail customers that were significantly below
the wholesale prices it paid in California. That resulted in significant
under-recoveries by Edison of its electricity purchase costs. On
January 16, 2001, Edison announced that it was temporarily suspending
payments for energy provided, including the energy provided by the
Partnership, pending a permanent solution to its liquidity crisis.
Subsequently, pursuant to a California Public Utilities Commission (CPUC)
order, Edison resumed making payments to the Partnership beginning with
power generated on March 27, 2001. Edison also made a payment equal to 10%
of the unpaid balance from power generated from November 1, 2000 to March
26, 2001 and continues to pay interest on the outstanding amount at 7% per
annum. That payment was made pursuant to the Agreement between Edison and
the Partnership described in note 1. The Agreement as amended, which
received CPUC approval in January 2002, established the fixed energy rates
discussed above and set payment terms for past due amounts owed to the
Partnership by Edison. As of December 31, 2001, the Partnership was unable
to determine the time frame during which any future payments would be
received. Due to the uncertainty surrounding Edison' ability to make
payment on past due amounts, collection was not reasonably assured and the
Partnership had not recognized revenue of $21,789 from Edison for energy
delivered during the period January 1, 2001 through March 26, 2001. The
provision for doubtful accounts previously recorded as of December 31, 2000
of $15,279 has been reclassified to conform with the 2001 presentation. In
addition, the Partnership will not recognize this revenue until payments
from Edison are received (see note 10).
Fixed Assets and Depreciation
The costs of major additions and betterments are capitalized, while
replacements, maintenance and repairs, which do not improve or extend the
life of the respective assets, are expensed currently.
Depreciation of the power plant and transmission line is computed on a
straight-line basis over their estimated useful life of 30 years and, for
significant additions, the remainder of the 30-year life from the plant's
commencement of operations.
Recoverability of Long-Lived Assets
An impairment loss is recognized whenever events or changes in
circumstances indicate that the carrying amounts of long-lived tangible and
intangible assets are not recoverable. The Partnership considers historical
performance and future estimated results in its evaluation of potential
impairment and then compares the carrying amount of the asset to the
estimated future cash flows expected to result from the use of the asset.
If the carrying amount of the asset exceeds estimated expected undiscounted
future cash flows before interest charges, the Partnership measures the
amount of the impairment by comparing the carrying amount of the asset to
its fair value. The estimation of fair value is generally measured by
discounting expected future cash flows at the rate the Partnership utilizes
to evaluate potential investments. The Partnership estimates fair value
based on the best information available using estimates, judgments, and
projections as considered necessary.
Wells and Resource Development Costs
CED follows the full-cost method of accounting for costs incurred in
connection with the exploration and development of geothermal resources.
All such costs, which include dry hole costs, the cost of drilling and
equipping production wells, and administrative and interest costs directly
attributable to the project are capitalized and amortized over their
estimated useful lives when production commences. The estimated useful
lives of production wells are 10 years each; exploration costs and
development costs, other than production wells, are amortized over 30 years
and, for significant additions, the remainder of the 30-year life from the
plant's commencement of operations.
Deferred Plant Overhaul Costs and Well Rework Costs
Plant overhaul costs are deferred and amortized over the estimated period
between overhauls as these costs extend the life of the respective assets.
These deferred costs of $519 and $100 at December 31, 2001 and 2000,
respectively, are included in property, plant, and equipment. Currently,
plant overhauls are amortized over three years from the point of
completion.
Production and injection rework costs are expensed as incurred during the
year. For the years ended December 31, 2001, 2000, and 1999, such costs
were $160, $653, and $676, respectively.
Reclassifications
Certain reclassifications have been made to the 2000 balance sheet and the
2000 and 1999 statements of operations and cash flows to conform to the
2001 presentation.
Deferred Financing Costs
Deferred financing costs as of December 31, 2001 and 2000 consist of loan
fees and other costs of financing that are amortized over the term of the
related financing. On February 25, 1999, the fees of $1,408 associated with
certain short-term financing were fully expensed and included in costs
related to acquisition debt, and a refinancing of this debt resulted in new
deferred financing costs of $3,032. The $148 balance of the deferred
financing costs at the date of acquisition related to the refinanced
project debt was included in the extraordinary loss recorded at the time of
the refinancing (see note 7). Accumulated amortization at December 31, 2001
and 2000 was $992 and $552, respectively.
Income Taxes
There is no provision for income taxes since such taxes are the
responsibility of the partners.
Cash and Cash Equivalents
For purposes of the statements of cash flows, CED considers all money
market instruments purchased with an initial maturity of three months or
less to be cash equivalents.
Restricted Cash and Investments
As of December 31, 2001 and 2000, all of the Partnership's investments were
classified as held to maturity and reported at amortized cost. Included in
restricted cash and investments are capital expenditure reserves and
sinking fund requirements for the project debt service required by the
project loans (see note 7). The carrying amount of restricted cash and
investments at December 31, 2001 and 2000 approximated fair value, which is
based on quoted market prices as provided by the financial institution,
which holds the investments.
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, liabilities, and
partners' capital and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues,
expenses, and the allocation of profits and losses during the period.
Actual results could differ significantly from those estimates.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable,
prepaid expenses and other assets, amounts due from related parties,
accounts payable and accrued liabilities, and amounts due to related
parties approximated fair value as of December 31, 2001 and 2000, because
of the relatively short maturity of these instruments. The project loans as
of December 31, 2001 and 2000 have an estimated fair value of $96,250 and
$98,694, respectively, based on the quoted market price of the senior
secured notes and the COSO Funding Corp. notes, respectively (see note 7).
The investments in Coso Transmission Line Partners (see note 4) and New
CLPSI Company, LLC (see note 5) approximate the fair value.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities. In June 2000, FASB issued
SFAS No. 138, Accounting for Certain Derivative Instruments and Certain
Hedging Activities, which amended SFAS No. 133 and addressed certain
implementation issues. SFAS No. 133, as amended, requires that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. The Statement also requires that
changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. The Partnership does not
have any derivative instruments and, therefore, the adoption in 2001 of
SFAS No. 133, as amended, did not have any effect on the Partnership's
financial statements.
In June 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS
No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that
the purchase method of accounting be used for all business combinations.
SFAS No. 141 specifies criteria that intangible assets acquired in a
business combination must meet to be recognized and reported separately
from goodwill. SFAS No. 142 will require that goodwill and intangible
assets with indefinite useful lives no longer be amortized, but instead
tested for impairment at least annually in accordance with the provisions
of SFAS No. 142. SFAS No. 142 also requires that intangible assets with
estimable useful lives be amortized over their respective estimated useful
lives to their estimated residual values, and reviewed for impairment in
accordance with SFAS No. 121 and subsequently, SFAS No. 144 after its
adoption.
The Partnership adopted the provisions of SFAS No. 141 as of July 1, 2001
and the Partnership's management is in the process of evaluating the impact
of implementing SFAS No. 142 and is unable to estimate the effect, if any,
on the Partnership's financial statements.
In October 2001, FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001, and replaces SFAS No. 121 and provisions
of APB Opinion No. 30 for the disposal of segments of a business. SFAS No.
144 creates one accounting model, based on the framework established in
SFAS No. 121, to be applied to all long-lived assets including discontinued
operations. The Partnership is required to adopt SFAS No. 144 on January 1,
2002 and believes there will be no effect on the Partnership's financial
statements.
(3) Acquisition Accounting
On February 25, 1999, CAC purchased all of CalEnergy's interest in CED,
Coso Power Developers (CPD), Coso Finance Partners (CFP), and Coso Finance
Partners II (CFP II), collectively known as the Coso Partnerships, for
approximately $205,500 in cash plus the assumption of debt of approximately
$139,800. Allocated to CED from the purchase price was approximately
$69,000 plus the assumption of debt of approximately $37,900. The
acquisition was accounted for under the purchase method, and no goodwill
was recorded. After CAC's purchase of CalEnergy's interest in CED, a new
basis of accounting was adopted and, therefore, the financial information
for the period after the acquisition is presented on a different cost basis
than that for the period before the acquisition and, therefore, is not
comparable.
The purchase price was allocated to the portion of the assets and
liabilities purchased from CalEnergy based upon their fair values, with the
amount of fair value of net assets in excess of the purchase price being
allocated to long-lived assets on a pro rata basis. These adjustments
resulted in a net decrease of $29,304 in the recorded amounts allocated to
property, plant, and equipment and an increase of $21,443 in the recorded
amounts allocated to the PPC. The PPC is being amortized on a straight-line
basis over the remaining term of the PPC of 20 years as of the date of
acquisition. Accumulated amortization on the PPC at December 31, 2001 and
2000 was $3,006 and $1,933, respectively.
(4) Investment in Coso Transmission Line Partners
Coso Transmission Line Partners (CTLP) is a partnership, between CED and
CPD, which owns the transmission line and facilities connecting the power
plants owned by CED and CPD to the transmission line, owned by Edison, at
Inyokern, California, located 28 miles south of the plants. CTLP charges
CED and CPD for the use of the transmission line at amounts sufficient for
CTLP to recover its operating costs. These charges are recorded by CED as
operating expenses and reflected as a reduction in CED's investment in
CTLP.
(5) Investment in New CLPSI Company, LLC
New CLPSI Company, LLC (CLPSI) is a wholly owned subsidiary of CAC. CLPSI
purchases, stores, and distributes spare parts to the Coso Partnerships.
Also, certain other facilities utilized by the Coso Partnerships are held
by CLPSI. CED's investments in CLPSI represent funds advanced for the
purchase of spare parts inventory and other assets. Spare parts inventory
held by CLPSI on behalf of CED is valued at the lower of cost or market.
(6) Property, Plant, and Equipment
Property, plant, and equipment at December 31, 2001 and 2000 consist of the
following:
2001 2000
------ ------
Power plant and gathering system $ 146,631 146,500
Transmission line 9,120 9,120
Wells and resources development costs 91,452 82,624
------- -------
247,203 238,244
Less accumulated depreciation and amortization (98,786) (84,626)
------- -------
$ 148,417 153,618
======= =======
The transmission line costs represent the Partnership's share of the costs
of construction of transmission lines from Inyokern, California to the
Edison substation at Kramer, California and from Kramer to the Edison
substation at Victorville, California.
(7) Project Loan
In order to complete the purchase of CalEnergy's interest in CED, CAC
arranged for short-term debt financing of $211,500, of which $55,256 was
allocated to CED. As a result of "push-down" accounting, the short-term
debt was reflected in the financial statements of CED and was repaid on
May 28, 1999 from a portion of the proceeds from the offering of senior
secured notes. Financing costs associated with the short-term financing are
included in interest expense - acquisition debt.
On May 28, 1999, Caithness Coso Funding Corp. (Funding Corp.), a wholly
owned subsidiary of the Coso Partnerships raised $413,000 from an offering
of senior secured notes. Funding Corp. loaned approximately $107,900 to CED
from the $413,000 debt raised from the offering of senior secured notes on
terms consistent with those of the senior secured notes. The loan consisted
of one note of $11,650 at 6.80% which was paid off on December 15, 2001 and
another of $96,250 at 9.05%, which has payments due at various dates
through December 15, 2009. Through this financing, the existing project
loan and short-term financing loans of $93,214 were repaid and an
extraordinary loss of approximately $1,822 from the early extinguishment of
this debt was incurred. The extraordinary loss was due to a premium and
other costs incurred to pay the existing project loan before its maturity
date.
The annual maturity of the project loans for each year ending December 31
is as follows:
Year ending December 31: Amount
------------------------ ------
2002 $ 6,375
2003 5,055
2004 9,920
2005 8,683
2006 10,388
Thereafter 55,829
------
$ 96,250
======
The loans contain certain restrictive covenants that among other things,
limit the Partnership's ability to incur additional indebtedness, release
funds from reserve accounts, make distributions, create liens, and enter
into any transaction of merger or consolidation.
The Partnership, Funding Corp., CPD, and CFP are jointly and severally
liable for the repayment of the senior secured notes.
The annual maturity of the senior secured notes for each year ending
December 31 is as follows:
Year ending December 31: Amount
----------------------- -------
2002 $ 21,771
2003 27,618
2004 31,332
2005 35,480
2006 38,286
Thereafter 148,513
-------
$ 303,000
=======
(8) Related Party Transactions
The amounts due from and to related parties at December 31, 2001 and 2000
consist of the following:
2001 2000
---- ----
Amounts due from related parties:
Coso Land Company:
Principal $ 141 141
Accrued interest 260 224
------- ------
$ 401 365
======= ======
Amounts due to related parties:
CPD for steam sharing $ 283 127
CFP for steam sharing 1,755 603
Coso Land Company 24,214 22,532
Caithness Coso Funding Corp. 392 397
Coso Operating Company LLC 555 564
Caithness Operating Company, Inc. 68 98
------- ------
$ 27,267 24,321
======= ======
COC is reimbursed monthly for non-third-party costs incurred on behalf of
CED. These costs are comprised principally of direct operating costs of CED
geothermal facility, allocable general and administrative costs, and an
operator fee. The amount due to COC relates to reimbursements for payments
of operating expenses.
Both CCH and CalEnergy were reimbursed at amounts approved for their
respective costs incurred in relation to the CED Management Committee.
Prior to May 28, 1999 CalEnergy received $25, while CCH received $130.
As of May 28, 1999, the management committee fees were eliminated, and
replaced by a non-managing fee payable to CCH. For the years ended December
31, 2001 and 2000, CCH received $237 and $234, respectively.
As indicated in note 1, CLC is entitled to a royalty of 5% of the value of
steam used by CED to produce the electricity sold to Edison. The royalty
due CLC for the years ended December 31, 2001, 2000, and 1999 was $1,684,
$1,195, and $771, respectively. Payment of royalties due to CLC is
subordinated to payment of the project loans (see note 7).
CED is charged for its use of the transmission line owned by CTLP. The
amount of such net charges, which are included in plant operating expenses
were $114, $157, and $126 for the years ended December 31, 2001, 2000, and
1999, respectively.
CED is charged by CLPSI for both its inventory usage and its portion of the
expenses of operating CLPSI. The 2001, 2000, and 1999 costs charged to CED
from CLPSI, which are included in plant operating expenses, were
approximately $324, $359, and $143, respectively.
The amount due to Caithness Coso Funding Corp. represents accrued interest
for fifteen days in December related to the project loans (see note 7).
On December 16, 1992, CED retired CLC's promissory note due CalEnergy,
resulting in the loan from CED to CLC of $141. Interest was accrued on this
loan for the years ended December 31, 2001, 2000, and 1999 at 10.0%, 10.0%,
and 12.5%, respectively. Interest on the note was $36, $34, and $34 in
2001, 2000, and 1999, respectively.
During 1994, the Coso Partnerships entered into steam sharing agreements
under which the partnerships may transfer steam, with the resulting
incremental revenue and royalty expense shared equally by the partnerships.
In the second half of 1995, interconnection facilities between the plants
were completed and the transfer of steam commenced. CED steam sharing
resulted in an expense, net of royalties and other related costs for the
years ended December 31, 2001, 2000, and 1999 of $1,085, $2,712, and
$6,103, respectively.
(9) Settlement of Litigation
In February 2000, the Coso Partnerships reached a settlement with Edison,
subject to the approval of the CPUC, which approval was received in
December 2000. The case has not yet been dismissed pending completion of
certain obligations under the settlement agreements. The cost of the
settlement was allocated among the Coso Partnerships. A portion of that
cost was reflected in the purchase accounting applied to the acquisition of
CalEnergy's interest in the Partnership (see note 3). The balance of the
settlement was charged to settlement of litigation and related expenses.
In December 1999, the Partnership and Dow Chemical Company (Dow) entered
into a confidential settlement agreement which was effective January 1,
2000 to resolve CED's claim to recover damages incurred related to an
installation in 1992 by Dow of a hydrogen sulfide abatement system.
(10) Subsequent Event
On March 1, 2002, Edison reached certain financing milestones and paid the
Partnership for revenue generated but not recognized for the period
November 2000 through March 26, 2001. As such, the Partnership will
recognize this revenue in the first quarter of 2002.
F-17
Independent Auditors' Report
The Partners and Management Committee
Coso Power Developers:
We have audited the accompanying balance sheets of Coso Power Developers as of
December 31, 2001 and 2000, and the related statements of operations, partners'
capital, and cash flows for each of the years in the three-year period ended
December 31, 2001. These financial statements are the responsibility of the
Partnership'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 2001 and 2000 financial statements referred to above present
fairly, in all material respects, the financial position of Coso Power
Developers as of December 31, 2001 and 2000, and the results of its operations
and its cash flows for each of the years in the three-year period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States of America.
As discussed in note 3 to the financial statements, effective February 25, 1999,
Caithness Acquisition Company, LLC acquired all of the partnership interest not
already owned by its affiliates, Navy II Group LLC, in a business combination
accounted for as a purchase. As a result of the acquisition, the financial
information for the period after the acquisition is presented on a different
cost basis than that for the period before the acquisition and, therefore, is
not comparable.
March 1, 2002
/s/ KPMG LLP
- --------------
KPMG LLP
F-18
COSO POWER DEVELOPERS
Balance Sheets
December 31, 2001 and 2000
(Dollars in thousands)
Assets 2001 2000
------------------- -------------------
Cash and cash equivalents $ -- 7,741
Restricted cash and investments (note 2) 5,517 10,214
Accounts receivable, net (note 2) 3,210 29
Prepaid expenses and other assets 660 849
Amounts due from related parties (note 8) 6,139 5,953
Property, plant, and equipment, net (notes 3 and 6) 124,665 136,947
Investment in New CLPSI Company, LLC (note 5) 1,913 1,963
Investment in Coso Transmission Line Partners (note 4) 3,398 3,528
Power purchase contract, net (note 3) 22,820 25,614
Deferred financing costs, net (note 2) 1,736 2,855
------------------- -------------------
Total assets $ 170,058 195,693
=================== ===================
Liabilities and Partners' Capital
Accounts payable and accrued liabilities (notes 1 and 9) $ 15,860 12,278
Amounts due to related parties (note 8) 7,778 1,816
Project loans (note 7) 84,200 94,176
------------------- -------------------
Total liabilities 107,838 108,270
Commitments and contingencies (notes 7 and 9)
Partners' capital 62,220 87,423
------------------- -------------------
Total liabilities and partners' capital $ 170,058 195,693
=================== ===================
See accompanying notes to financial statements.
F-19
COSO POWER DEVELOPERS
Statements of Operations
Years ended December 31, 2001, 2000, and 1999 (note 3)
(Dollars in thousands)
Twelve months Twelve months Two months Ten months Twelve months
ended ended ended ended ended
December 31, December 31, February 28, December 31, December 31,
2001 2000 1999 1999 1999
-------------- -------------- ------------- ------------- --------------
(old basis) (new basis)
Revenues:
Energy revenues (notes 2, 8, and 10) $ 23,411 29,859 16,687 83,041 99,728
Capacity payments 12,978 13,195 822 13,196 14,018
Interest and other income 2,883 2,868 150 2,024 2,174
-------------- -------------- ------------- ------------- --------------
Total revenues 39,272 45,922 17,659 98,261 115,920
-------------- -------------- ------------- ------------- --------------
Operating expenses:
Plant operating expense 9,679 9,409 2,626 8,247 10,873
Royalty expense 9,377 10,104 1,806 10,271 12,077
Depreciation and amortization 15,352 15,070 2,339 12,469 14,808
Edison legal expenses and
settlement costs (note 9) -- -- 569 5,250 5,819
-------------- -------------- ------------- ------------- --------------
Total operating expenses 34,408 34,583 7,340 36,237 43,577
-------------- -------------- ------------- ------------- --------------
Operating income 4,864 11,339 10,319 62,024 72,343
-------------- -------------- ------------- ------------- --------------
Other expenses:
Interest expense 8,128 9,130 933 9,004 9,937
Interest expense - acquisition debt -- -- -- 2,010 2,010
Costs related to acquisition debt -- -- -- 1,473 1,473
Amortization on deferred financing 1,119 769 20 551 571
-------------- -------------- ------------- ------------- --------------
Total other expenses 9,247 9,899 953 13,038 13,991
-------------- -------------- ------------- ------------- --------------
Income (loss) before
extraordinary item (4,383) 1,440 9,366 48,986 58,352
Extraordinary item - loss on
extinguishment of debt (note 7) -- -- -- 2,147 2,147
-------------- -------------- ------------- ------------- --------------
Net (loss) income $ (4,383) 1,440 9,366 46,839 56,205
============== ============== ============= ============= ==============
See accompanying notes to financial statements.
F-20
COSO POWER DEVELOPERS
Statements of Partners' Capital
Years ended December 31, 2001, 2000, and 1999 (note 3)
(Dollars in thousands)
Caithness
Navy II Coso New
Group, Technology CTC
LLC Corporation Company, LLC Total
----------------- ----------------- ------------------- ---------------.
Balance at December 31, 1998 $ 76,830.5 76,830.5 -- 153,661.0
Transfer of capital -- (76,830.5) 76,830.5 --
Distributions to partners (51,537.5) -- (51,537.5) (103,075.0)
Net income 28,102.5 -- 28,102.5 56,205.0
Effect of purchase accounting -- -- (2,460.0) (2,460.0)
----------------- ----------------- ----------------- -----------------
Balance at December 31, 1999 53,395.5 -- 50,935.5 104,331.0
Distributions to partners (9,174.0) -- (9,174.0) (18,348.0)
Net income 720.0 -- 720.0 1,440.0
----------------- ----------------- ----------------- -----------------
Balance at December 31, 2000 44,941.5 -- 42,481.5 87,423.0
Distributions to partners (10,410.0) -- (10,410.0) (20,820.0)
Net loss (2,191.5) -- (2,191.5) (4,383.0)
----------------- ----------------- ----------------- -----------------
Balance at December 31, 2001 $ 32,340.0 -- 29,880.0 62,220.0
================= ================= ================= =================
See accompanying notes to financial statements.
F-21
COSO POWER DEVELOPERS
Statements of Cash Flows
Years ended December 31, 2001, 2000, and 1999 (note 3)
(Dollars in thousands)
Twelve months Twelve months Two months Ten months Twelve months
ended ended ended ended ended
December 31, December 31, February 28, December 31, December 31,
2001 2000 1999 1999 1999
-------------- -------------- ------------ -------------- --------------
(old basis) (new basis)
Cash flows from operating activities:
Net (loss) income $ (4,383) 1,440 9,366 46,839 56,205
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation and amortization 15,352 15,070 2,339 12,469 14,808
Amortization of deferred financing costs 1,119 769 20 551 571
Write-off of deferred financing costs -- -- -- 217 217
Changes in operating assets and liabilities:
Accounts receivable, prepaid
expenses, and other assets (2,992) 19,662 (909) 329 (580)
Investment in Coso Transmission Line
Partners 130 132 (989) 1,131 142
Investment in New CLPSI Company, LLC 50 135 52 (64) (12)
Accounts payable and accrued liabilities 3,582 115 439 3,997 4,436
Amounts due from related parties (186) 1,105 1,432 (3,740) (2,308)
Amounts due to related parties 5,962 (1,409) 2,088 (765) 1,323
-------------- -------------- ------------ -------------- --------------
Net cash provided by operating
activities 18,634 37,019 13,838 60,964 74,802
-------------- -------------- ------------ -------------- --------------
Cash flows from investing activities:
Capital expenditures (276) (1,700) (1,182) (3,232) (4,414)
Decrease (increase) in restricted cash 4,697 44,124 -- (54,338) (54,338)
-------------- -------------- ------------ -------------- --------------
Net cash provided by (used in)
investing activities 4,421 42,424 (1,182) (57,570) (58,752)
-------------- -------------- ------------ -------------- --------------
Cash flows from financing activities:
Distributions to partners (20,820) (18,348) -- (103,075) (103,075)
Increase in project financing debt -- -- -- 153,550 153,550
Repayment of project financing loan (9,976) (59,374) -- (61,323) (61,323)
-------------- -------------- ------------ -------------- --------------
Net cash used in financing activities (30,796) (77,722) -- (10,848) (10,848)
-------------- -------------- ------------ -------------- --------------
Net change in cash and cash
equivalents (7,741) 1,721 12,656 (7,454) 5,202
Cash and cash equivalents at beginning of year 7,741 6,020 818 13,474 818
-------------- -------------- ------------ -------------- --------------
Cash and cash equivalents at end of year $ -- 7,741 13,474 6,020 6,020
============== ============== ============ ============== ==============
Supplemental cash flow disclosure:
Cash paid for interest $ 8,154 9,183 -- 11,060 11,060
============== ============== ============ ============== ==============
Schedule of noncash investing activities as
a result of purchase:
Fair value of power purchase contract -- -- -- 30,738 30,738
Reduction in property, plant, and
equipment -- -- -- (33,536) (33,536)
Net increase in other assets -- -- -- 4,084 4,084
Liabilities assumed -- -- -- (3,746) (3,746)
-------------- -------------- ------------ -------------- --------------
Reduction in partners' capital $ -- -- -- (2,460) (2,460)
============== ============== ============ ============== ==============
See accompanying notes to financial statements.
F-22
COSO POWER DEVELOPERS
Notes to Financial Statements
December 31, 2001, 2000, and 1999
(Dollars in thousands)
(1) Organization, Operation, and Business of the Partnership
Coso Power Developers (CPD or the Partnership) was formed on July 31, 1989
in connection with financing the construction of a geothermal power plant
on land at the China Lake Naval Air Weapons Station at Coso Hot Springs,
China Lake, California. CPD is a general partnership between Caithness Navy
II Group LLC (Navy II), a Delaware limited liability company, and, until
February 25, 1999, Coso Technology Corporation (CTC), a Delaware
corporation wholly owned by CalEnergy, Inc. (CalEnergy), now known as
MidAmerica Energy Holdings Company. On February 25, 1999, Caithness
Acquisition Company, LLC (CAC), a wholly owned subsidiary of Caithness
Energy, LLC and an affiliate of Navy II, purchased all of CalEnergy's
interest in CTC (see note 3) and formed a wholly owned subsidiary, New CTC
Company, LLC (New CTC), a Delaware limited liability company, to become the
new managing general partner of CPD.
The power plant is located on land owned by the U.S. Navy. Under the terms
of a 30-year contract with the U.S. Navy to develop geothermal energy on
its land, CPD pays a royalty to the U.S. Navy which was initially 4% of
revenues, increased to 10% of revenues at December 31, 1998, and is
currently 18% of revenues (as of December 24, 1999). The royalty will
increase to 20% of revenues after December 15, 2004. The U.S. Navy contract
will expire in 2010. At December 31, 2001, royalties payable totaled
$6,431.
The Partnership sells all electricity produced to Southern California
Edison (Edison) under a 20-year power purchase contract (the PPC) expiring
in 2010. Under the terms of the PPC, Edison makes payments to CPD as
follows:
* Contractual payments for energy delivered, which escalated at an average
rate of approximately 7.6% for the first ten years after the date of firm
operation (scheduled energy price period). The scheduled energy price
period extended until January 2000. After the scheduled energy price
period, the energy payment adjusted to the actual avoided energy cost
experienced by Edison. For the years ended December 31, 2001, 2000, and
1999, Edison's average avoided cost of energy was 7.46, 5.80, and 3.13
cents per kwh, respectively. Edison entered into an agreement (the
Agreement) with the Partnership on June 19, 2001 that addressed renewable
energy pricing and issues concerning California's energy crisis. The
Agreement, which was amended on November 30, 2001, established May 1, 2002
as the date when the Partnership will begin receiving a fixed avoided cost
of energy rate of 5.37 cents per kWh for five (5) years. Subsequent to the
five-year period, Edison will be required to make energy payments to the
Partnership based on its avoided cost of energy until its PPC expires.
Beyond the five-year period, the Partnership cannot predict the likely
level of avoided cost of energy prices under the PPC and, accordingly, the
revenues generated by the Partnership could fluctuate significantly;
* Capacity payments which remain fixed over the life of the PPC to the extent
that actual energy delivered exceeds minimum levels of the plant capacity
defined in the PPC; and
* Bonus payments to the extent that actual energy delivered exceeds 85% of
the plant capacity stated in the PPC. In 2001, 2000, and 1999, the bonus
payments aggregated $2,248, $2,248, and $2,248, respectively.
CalEnergy served as the operator for CPD, maintaining the accounting
records and operating the plant day to day, until February 1, 1999, at
which time Coso Operating Company LLC (COC), a Delaware limited liability
company, became operator pursuant to certain operations and maintenance
agreements with CTC, the managing general partner. COC was a wholly owned
subsidiary of CalEnergy until February 25, 1999, when CalEnergy assigned
all of its interest and rights in COC to CAC, which became manager and sole
member.
On February 25, 1999, CPD entered into two operating and maintenance
agreements, one with FPL Operating Services, Inc. (FPL) and a second with
COC. The initial terms of the FPL operating and maintenance agreement were
for three years, to provide for the operation and maintenance of the
geothermal power facilities and the interconnection to the transmission
line. The term of the COC agreement is through December 31, 2009 to provide
field services and administrative services for the Partnership. On October
17, 1999, the operating agreement with FPL was terminated and COC became
the sole operator of all Partnership operations.
At formation, and as subsequently amended, the partnership agreement
provides that cash flows before and after "payout" are allocated 50% each
to New CTC (formerly CTC) and Navy II. "Payout," which has occurred, is
defined as the point at which each partner received aggregate cash
distributions in an amount equal to its accumulated capital contributions.
For purposes of allocating net income to partners' capital accounts and for
income tax purposes, profits and losses are allocated based on the
aforementioned capital percentages.
(2) Summary of Significant Accounting Policies
Accounts Receivable and Revenue Recognition
Accounts receivable primarily consists of receivables from Edison for
electricity delivered and sold under the PPC.
Operating revenues are recognized as income during the period in which
electricity is delivered to Edison. Revenue was recognized based on the
payment rates scheduled in CPD's PPC with Edison, through January 2000.
From January 2000 through May 1, 2002, and subsequent to the five-year
period stated in the Agreement, revenue is recognized based on Edison's
avoided energy cost, until the Partnership's PPC expires.
Periodic increases in natural gas prices and imbalances between supply and
demand, among other factors, have at times led to significant increases in
wholesale electricity prices in California. During those periods, Edison
had fixed tariffs with its retail customers that were significantly below
the wholesale prices it paid in California. That resulted in significant
under-recoveries by Edison of its electricity purchase costs. On January
16, 2001, Edison announced that it was temporarily suspending payments for
energy provided, including the energy provided by the Partnership, pending
a permanent solution to its liquidity crisis. Subsequently, pursuant to a
California Public Utilities Commission (CPUC) order, Edison resumed making
payments to the Partnership beginning with power generated on March 27,
2001. Edison also made a payment equal to 10% of the unpaid balance for
power generated from November 1, 2000 to March 26, 2001 and continues to
pay interest on the outstanding amount at 7% per annum. That payment was
made pursuant to the Agreement between Edison and the Partnership described
in note 1. The Agreement as amended, which received CPUC approval in
January of 2002, established the fixed energy rates discussed above and set
payment terms for past due amounts owed to the Partnership by Edison. As of
December 31, 2001, the Partnership was unable to determine the time frame
during which any future payments would be received. Due to the uncertainty
surrounding Edison's ability to make payment on past due amounts,
collection was not reasonably assured and the Partnership had not
recognized revenue of $22,733 from Edison for energy delivered during the
period January 1, 2001 through March 26, 2001. The provision for doubtful
accounts previously recorded as of December 31, 2000 of $15,312 has been
reclassified to conform with the 2001 presentation. In addition, the
Partnership will not recognize this revenue until payments from Edison are
received (see note 10).
Fixed Assets and Depreciation
The costs of major additions and betterments are capitalized, while
replacements, maintenance, and repairs which do not improve or extend the
life of the respective assets are expensed currently.
Depreciation of the power plant and transmission line is computed on a
straight-line basis over their estimated useful life of 30 years and, for
significant additions, the remainder of the 30-year life from the plant's
commencement of operations.
Recoverability of Long-Lived Assets
An impairment loss is recognized whenever events or changes in
circumstances indicate that the carrying amounts of long-lived tangible and
intangible assets is not recoverable. The Partnership considers historical
performance and future estimated results in its evaluation of potential
impairment, and then compares the carrying amount of the asset to the
estimated future cash flows expected to result from the use of the asset.
If the carrying amount of the asset exceeds estimated expected undiscounted
future cash flows before interest charges, the Partnership measures the
amount of the impairment by comparing the carrying amount of the asset to
its fair value. The estimation of fair value is generally measured by
discounting expected future cash flows at the rate the Partnership utilizes
to evaluate potential investments. The Partnership estimates fair value
based on the best information available using estimates, judgments, and
projections as considered necessary.
Wells and Resource Development Costs
CPD follows the full-cost method of accounting for costs incurred in
connection with the exploration and development of geothermal resources.
All such costs, which include dry hole costs, the costs of drilling and
equipping production wells, and administrative and interest costs directly
attributable to the project, are capitalized and amortized over their
estimated useful lives when production commences. The estimated useful
lives of production wells are ten years each; exploration costs and
development costs, other than production wells, are amortized over 30 years
and, for significant additions, the remainder of the 30-year life from the
plant's commencement of operations.
Deferred Plant Overhaul Costs and Well Rework Costs
Plant overhaul costs are deferred and amortized over the estimated period
between overhauls, as these costs extend the useful lives of the respective
assets. These deferred costs of $281 and $333 at December 31, 2001 and
2000, respectively, are included in property, plant, and equipment.
Currently, plant overhauls are amortized over three years from the point of
completion.
Production and injection rework costs are expensed as incurred. For the
years ended December 31, 2001, 2000, and 1999, such costs were $533, $32,
and $101, respectively.
Reclassifications
Certain reclassifications have been made to the 2000 and 1999 statements of
operations and cash flows to conform to the 2001 presentation.
Deferred Financing Costs
Deferred financing costs as of December 31, 2001 and 2000 consist of loan
fees and other costs of financing that are amortized over the term of the
related financing. In 1999, fees of $1,473 associated with certain
short-term financing were fully expensed and included in costs related to
acquisition debt, and a refinancing of this debt resulted in new deferred
financing costs of $4,175. The $179 balance of the deferred financing costs
at the date of acquisition related to the refinanced project debt was
included in the extraordinary loss recorded at the time of the refinancing
(see note 7). Accumulated amortization at December 31, 2001 and 2000 was
$2,439 and $1,320, respectively.
Income Taxes
There is no provision for income taxes since such taxes are the
responsibility of the partners.
Cash and Cash Equivalents
For purposes of the statements of cash flows, CPD considers all money
market instruments purchased with initial maturities of three months or
less to be cash equivalents.
Restricted Cash and Investments
As of December 31, 2001 and 2000, all of the Partnership's investments were
classified as held to maturity and reported at amortized cost. Included in
restricted cash and investments are capital expenditure reserves and
sinking fund requirements for the project debt service required by the
project loans (see note 7). The carrying amount of restricted cash and
investments at December 31, 2001 and 2000 approximated fair value, which is
based on quoted market prices as provided by the financial institution
which holds the investments.
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, liabilities,
partners' capital, and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues,
expenses, and the allocation of profits and losses during the reportable
period. Actual results could differ significantly from those estimates.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable,
prepaid expenses and other assets, amounts due from related parties,
accounts payable and accrued liabilities, and amounts due to related
parties approximated fair value as of December 31, 2001 and 2000, because
of the relatively short maturity of these instruments. The project loans as
of December 31, 2001 and 2000 have an estimated fair value of $84,200 and
$93,866, respectively, based on the quoted market price of the senior
secured notes and the Coso Funding Corp. notes, respectively (see note 7).
The investments in Coso Transmission Line Partners (see note 4) and New
CLPSI Company, LLC (see note 5) approximate fair value.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities. In June 2000, FASB issued
SFAS No. 138, Accounting for Certain Derivative Instruments and Certain
Hedging Activities, which amended SFAS No. 133 and addressed certain
implementation issues. SFAS No. 133, as amended, requires that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. The Statement also requires that
changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. The Partnership does not
have any derivative instruments and, therefore, the adoption in 2001, of
SFAS No. 133, as amended, did not have any effect on the Partnership's
financial statements.
In June 2001, FASB issued SFAS No. 141, Business Combinations (SFAS No.
141) and SFAS No. 142, Goodwill and Other Intangible Assets (SFAS No. 142).
SFAS No. 141 requires that the purchase method of accounting be used for
all business combinations. SFAS No. 141 specifies criteria that intangible
assets acquired in a business combination must meet to be recognized and
reported separately from goodwill. SFAS No. 142 will require that goodwill
and intangible assets with indefinite useful lives no longer be amortized,
but instead tested for impairment at least annually in accordance with the
provisions of SFAS No. 142. SFAS No. 142 also requires that intangible
assets with estimable useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for
impairment in accordance with SFAS No. 121 and subsequently, SFAS No. 144
after its adoption.
The Partnership adopted the provisions of SFAS No. 141 as of July 1, 2001,
and the Partnership's management is in the process of evaluating the impact
of implementing SFAS No. 142 and is unable to estimate the effects, if any,
on the Partnership's financial statements.
In October 2001, FASB issued Statement of Financial Accounting Standards
No. 144 (SFAS No. 144), Accounting for the Impairment or Disposal of
Long-Lived Assets. This Statement is effective for fiscal years beginning
after December 15, 2001, and replaces SFAS No. 121 and provisions of APB
Opinion No. 30 for the disposal of segments of a business. The statement
creates one accounting model, based on the framework established in SFAS
No. 121 to be applied to all long-lived assets including discontinued
operations. The Partnership is required to adopt SFAS No. 144 on January 1,
2002 and believes there will be no effect on the Partnership's financial
statements.
(3) Acquisition Accounting
On February 25, 1999, CAC purchased all of CalEnergy's interest in CPD,
Coso Energy Developers (CED), Coso Finance Partners (CFP), and Coso Finance
Partners II (CFP II), collectively known as the Coso Partnerships, for
approximately $205,500 in cash plus the assumption of debt of approximately
$139,800. The purchase price allocated to CPD was approximately $74,500
plus the assumption of debt of approximately $61,300. The acquisition was
accounted for under the purchase method, and no goodwill was recorded.
After CAC's purchase of CalEnergy's interest in CPD, a new basis of
accounting was adopted and, therefore, the financial information for the
period after the acquisition is presented on a different cost basis than
that for the period before the acquisition and, therefore, is not
comparable.
The purchase price was allocated to the portion of the assets and
liabilities purchased from CalEnergy based upon their fair values, with the
amount of fair value of net assets in excess of the purchase price being
allocated to long-lived assets on a pro rata basis. These adjustments
resulted in a net decrease of $33,536 in the recorded amounts allocated to
the value of property, plant, and equipment and an increase of $30,738 in
the recorded amounts allocated to the PPC. The PPC is being amortized on a
straight-line basis over the remaining term of the PPC of 11 years as of
the date of acquisition. Accumulated amortization on the PPC at December
31, 2001 and 2000 was $7,918 and $5,124, respectively.
(4) Investment in Coso Transmission Line Partners
Coso Transmission Line Partners (CTLP) is a partnership between CPD and
CED, which owns the transmission line and facilities connecting the power
plants owned by CPD and CED to the transmission line, owned by Edison, at
Inyokern, California, located 28 miles south of the plants. CTLP charges
CPD and CED for the use of the transmission line at amounts sufficient for
CTLP to recover its operating costs. These charges are recorded by CPD as
operating expenses and reflected as a reduction in CPD's investment in
CTLP.
(5) Investment in New CLPSI Company, LLC
New CLPSI Company, LLC (CLPSI) is a wholly owned subsidiary of CAC. CLPSI
purchases, stores, and distributes spare parts to the Coso Partnerships.
Also, certain other facilities utilized by the Coso Partnerships are held
by CLPSI. CPD's investments in CLPSI represent funds advanced for the
purchase of spare parts inventory and other assets. Spare parts inventory
held by CLPSI on behalf of CPD is valued at the lower of cost or market.
(6) Property, Plant, and Equipment
Property, plant, and equipment at December 31, 2001 and 2000 consist of the
following:
2001 2000
--------------- ------------
Power, plant, and gathering system $ 142,712 142,350
Transmission line 7,245 7,245
Wells and resources development costs 59,695 60,010
--------------- -------------
209,652 209,605
Less accumulated depreciation
and amortization (84,987) (72,658)
--------------- -----------
$ 124,665 136,947
=============== ===========
The transmission line costs represent the Partnership's share of the costs
of construction of transmission lines from Inyokern, California to the
Edison substation at Kramer, California, and from Kramer to the Edison
substation at Victorville, California.
(7) Project Loans
In order to complete the purchase of CalEnergy's interest in CPD, CAC
arranged for short-term debt financing of $211,500, of which approximately
$78,634 was allocated to CPD. As a result of "push-down" accounting, the
short-term debt was reflected in the financial statements of CPD and was
repaid on May 28, 1999 from a portion of the proceeds from the offering of
senior secured notes. Financing costs associated with the short-term
financing are included in interest expense - acquisition debt.
On May 28, 1999, Caithness Coso Funding Corp. (Funding Corp.) raised
$413,000 from an offering of senior secured notes. Funding Corp. loaned
approximately $153,550 to CPD from the $413,000 debt raised from the
offering of senior secured notes on terms consistent with those of the
senior secured notes. The loan consisted of one note of $69,350 at 6.80%
which was paid off on December 15, 2001 and another note of $84,200 at
9.05% which has payments due at various dates through December 15, 2009.
Through this financing, the existing project loan and short-term financing
of approximately $139,957 was repaid and an extraordinary loss of
approximately $2,147 from the early extinguishment of this debt was
incurred. The extraordinary loss was due to a premium and other costs
incurred to pay the existing project loan before its maturity date.
The annual maturity of the project loans for each year ending December 31
is as follows:
Year ending December 31: Amount
------------------------ ------
2002 $ 3,799
2003 9,155
2004 10,718
2005 11,697
2006 11,738
Thereafter 37,093
------
$ 84,200
======
The loans contain certain restrictive covenants that, among other things,
limit the Partnership's ability to incur additional indebtedness, release
funds from reserve amounts, make distributions, create loans, and enter
into any transaction of merger or consolidation.
The Partnership, Funding Corp., CED, and CFP are jointly and severally
liable for the repayment of the senior secured notes.
The annual maturity of the senior secured notes for each year ending
December 31 is as follows:
Year ending December 31: Amount
------------------------ ------
2002 $ 21,771
2003 27,618
2004 31,332
2005 35,480
2006 38,286
Thereafter 148,513
-------
$ 303,000
=======
(8) Related Party Transactions
The amounts due from and to related parties at December 31, 2001 and 2000
consist of the following:
2001 2000
---- ----
Amounts due from related parties:
CED for steam sharing $ 283 127
Coso Operating Company 1,409 1,784
China Lake Joint Venture:
Principal 1,562 1,562
Accrued interest 2,885 2,480
----- -----
$ 6,139 5,953
===== =====
Amounts due to related parties:
CFP for steam sharing $ 7,376 1,357
Caithness Coso Funding Corp. 339 365
Caithness Operating Company 63 94
----- -----
$ 7,778 1,816
===== =====
COC is reimbursed monthly for non-third-party costs incurred on behalf of
CPD. These costs are comprised principally of direct operating costs of the
CPD geothermal facility, allocable general and administrative costs, and an
operator fee. The amount due from COC relates to advances for payments of
operating expenses.
Both CalEnergy and Navy II were reimbursed at amounts approved for their
respective costs incurred in relation to the CPD Management Committee.
Prior to May 28, 1999, CalEnergy received $25, while Navy II received $130.
As of May 28, 1999, the management committee fees were eliminated and
replaced by a nonmanaging fee payable to Navy II. For the years ended
December 31, 2001 and 2000, Navy II received $237 and $234, respectively.
CPD is charged for its use of the transmission line owned by CTLP. For the
years ended December 31, 2001, 2000, and 1999, the amount of such net
charges was $129, $179, and $141, respectively.
CPD is charged by CLPSI for both its inventory usage and its portion of the
expenses of operating CLPSI. The charges to CPD from CLPSI in 2001, 2000,
and 1999, which are included in plant operating expenses, were
approximately $148, $318, and $78, respectively.
On December 16, 1992, CPD retired China Lake Joint Venture's (CLJV)
promissory note due CalEnergy, resulting in the loan from CPD to CLJV of
$1,562 at December 31, 1992. CLJV is an affiliated venture. Interest has
been accrued on this loan for the years ended December 31, 2001, 2000, and
1999 at 10.0%, 10.0%, and 12.5%, respectively. Interest on the loan was
$405, $371, and $421 in 2001, 2000, and 1999, respectively. The amount due
to Funding Corp. represents accrued interest for 15 days in December,
related to the project loans (see note 7).
During 1994, the Coso Partnerships entered into steam sharing agreements
under which the partnerships may transfer steam, with the resulting
incremental revenue and royalty expense shared equally by the partnerships.
In the second half of 1995, interconnection facilities between the plants
were completed and the transfer of steam commenced. CPD steam sharing
resulted in an expense, net of royalties and other related costs, of
$9,634, $5,751, and $18,618 for the years ended December 31, 2001, 2000,
and 1999, respectively.
(9) Settlement of Litigation
In February 2000, the Coso Partnerships reached a settlement with Edison,
subject to the approval of the CPUC, which approval was received in
December 2000. The case has not yet been dismissed pending completion of
certain obligations under the settlement agreements. The cost of the
settlement will be allocated among the Coso Partnerships. A portion of that
cost was reflected in the purchase accounting applied to the acquisition of
CalEnergy's interest in the Partnership (see note 3). The balance of the
settlement was charged to settlement of litigation and related expenses.
(10) Subsequent Event
On March 1, 2002, Edison reached certain financing milestones and paid the
Partnership for revenue generated but not recognized for the period
November 2000 through March 26, 2001. As such, the Partnership will
recognize this revenue in the first quarter of 2002.
F-23
Quarterly Data (Unaudited)
March 31(a)(b) June 30(a)(c) September 30(a) December 31(a)
-------------- ------------- --------------- --------------
Caithness Coso Funding Corp:
2001
Total revenues $ 8,601 5,997 7,105 7,117
Operating income -- -- -- --
Net income $ -- -- -- --
2000
Total revenues $ 9,221 7,708 7,671 6,199
Operating income -- -- -- --
Net income $ -- -- -- --
1999
Total revenues $ -- 4,986 11,459 4,046
Operating income -- -- -- --
Net income $ -- -- -- --
Coso Finance Partners:
2001
Total revenues $ 6,188 24,835 16,833 8,472
Operating income (loss) (1,843) 16,498 5,126 7,365
Income (loss) before extraordinary Item (4,957) 13,397 2,100 4,169
Net income (loss) $ (4,957) 13,397 2,100 4,169
2000
Total revenues $ 9,303 13,483 22,929 9,210
Operating income 3,689 6,958 13,781 1,373
Income (loss) before extraordinary Item 386 3,709 10,556 (1,863)
Net income (loss) $ 386 3,709 10,556 (1,863)
1999
Total revenues $ 14,859 12,648 18,648 11,745
Operating income 6,451 5,667 9,333 4,320
Income (loss) before extraordinary item 4,158 1,346 6,123 569
Net income (loss) $ 4,158 (1,029) 6,123 569
Coso Energy Developers:
2001
Total revenues $ 1,445 23,529 15,095 7,738
Operating income (loss) (7,730) 15,595 7,735 811
Income (loss) before extraordinary item (10,066) 13,264 5,431 (1,616)
Net income (loss) $ (10,066) 13,264 5,431 (1,616)
2000
Total revenues $ 12,495 11,628 20,311 5,865
Operating income 6,015 4,699 11,880 (3,709)
Income (loss) before extraordinary item 3,627 2,345 9,514 (6,093)
Net income (loss) $ 3,627 2,345 9,514 (6,093)
1999
Total revenues $ 21,573 7,097 14,674 7,599
Operating income 10,266 (1,059) 6,130 (2,928)
Income (loss) before extraordinary item 8,417 (4,690) 3,817 (5,370)
Net income (loss) $ 8,417 (6,512) 3,817 (5,370)
Coso Power Developers:
2001
Total revenues $ (2,196) 20,133 13,934 7,401
Operating income (loss) (11,636) 11,246 5,388 (134)
Income (loss) before extraordinary item (13,903) 8,991 3,193 (2,664)
Net income (loss) $ (13,903) 8,991 3,193 (2,664)
2000
Total revenues $ 10,317 11,812 20,207 3,586
Operating income 2,739 3,577 10,827 (5,804)
Income (loss) before extraordinary item 193 1,077 8,349 (8,179)
Net income (loss) $ 193 1,077 8,349 (8,179)
1999
Total revenues $ 24,943 28,637 34,763 27,577
Operating income 14,058 19,082 25,366 13,837
Income before extraordinary item 11,313 14,428 22,171 10,440
Net income $ 11,313 12,281 22,171 10,440
(a) In the opinion of the Caithness Coso Funding Corp. and the Partnerships,
all adjustments, which consist of normal recurring accruals to present a
fair statement of the amounts shown for such periods, have been made.
(b) The provision for doubtful accounts previously recorded for the quarter
ended March 31, 2001 for Coso Finance Partners, Coso Energy Developers, and
Coso Power Developers of $25,817, $25,950 and $26,998, respectively, has
been reclassified as a reduction of revenue to conform with the 2001
financial statements presentation.
(c) The income from the reduction in the provision for doubtful accounts
previously recorded for the quarter ended June 30, 2001 for Coso Finance
Partners, Coso Energy Developers, and Coso Power Developers of $4,204
$4,120 and $4,265, respectively, has been reclassified to revenue to
conform with the 2001 financial statements presentation.
F-24
Supplemental Condensed Combined Financial Information for Coso Partnerships
The following information presents unaudited condensed combined financial
statements of the Coso Partnerships. These financial statements represent a
compilation of the financial statements of Caithness Coso Funding Corp., Coso
Finance Partners, Coso Energy Developers and Coso Power Developers for the
periods indicated. This supplemental financial information is not required by
GAAP and has been provided to facilitate a more comprehensive understanding of
the financial position, operating results and cash flows of the Coso
partnerships as a whole, which jointly and severally guarantee the repayment of
Caithness Coso Funding Corp's senior notes. The unaudited condensed combined
financial statements should be read in conjunction with each individual
partnerships financial statements and their accompanying notes.
COSO PARTNERSHIPS
UNAUDITED CONDENSED COMBINED BALANCE SHEETS
December 31, 2001 and 2000
(Dollars in thousands)
Assets 2001 2000
---- ----
Cash $ 264 $ 17,109
Restricted cash and investments 34,210 47,712
Accounts receivable, net 9,603 590
Prepaid expenses and other assets 2,159 2,671
Amounts due from related parties 6,488 6,191
Property, plant and equipment, net 413,519 439,641
Power purchase agreement, net 52,350 57,364
Investments 12,843 13,485
Deferred financing costs, net 6,300 8,564
--------- ----------
Total assets $ 537,736 $ 593,327
========= ==========
Liabilities and Partners' Capital
Accounts payable and accrued liabilities $ 42,362 $ 36,261
Amounts due to related parties 24,967 23,460
Project loan 303,000 330,067
--------- ----------
Total liabilities 370,329 389,787
Partners' capital 167,407 203,540
--------- ----------
Total liabilities and partners' capital $ 537,736 $ 592,327
========= ==========
F-25
COSO PARTNERSHIPS
UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS
Year ended December 31, 2001, 2000 and 1999
(Dollars in thousands)
Twelve-Months Twelve-Months Two-Months Ten-Months Twelve-Months
Ended Ended Ended Ended Ended
December 31, December February 28, December December 31,
2001 2000 1999 1999 1999
------------- ------------- ----------- ----------- -------------
(old basis) (new basis)
Revenue:
Energy revenues $ 94,734 97,901 41,501 136,460 177,961
Capacity payments 39,096 39,746 2,113 39,215 41,328
Interest and other income 9,577 13,499 1,052 4,422 5,474
------- ------- ------ ------- -------
Total revenue 143,407 151,146 44,666 180,097 224,763
------- ------- ------ ------- -------
Operating expenses:
Plant operating expenses 28,910 30,026 8,652 27,806 36,458
Royalty expense 24,530 25,070 4,385 20,997 25,382
Depreciation and amortization 41,546 40,025 6,493 33,546 40,039
Edison legal expense and
settlement costs -- -- 1,707 10,654 12,361
------- ------ ----- ------ ------
Total operating expenses 94,986 95,121 21,237 93,003 114,240
------- ------- ------ ------- -------
Operating income 48,421 56,025 23,429 87,094 110,523
------- ------- ------ ------- -------
Other expenses:
Interest expense 28,818 30,797 2,180 24,678 26,858
Interest expense-acquisition debt -- -- -- 5,387 5,387
Costs related to acquisition debt -- -- -- 4,346 4,346
Amortization on deferred financing 2,264 1,607 52 1,158 1,210
------- ------- ------ ------- -------
Total other expenses 31,082 32,404 2,232 35,569 37,801
------- ------- ------ ------- -------
Income before extraordinary item 17,339 23,621 21,197 51,525 72,722
Extraordinary item-loss on
extinguishment of debt -- -- -- 6,344 6,344
------- ------- ------ ------- -------
Net income $ 17,339 23,621 21,197 45,181 66,378
======= ======= ====== ======= =======
F-26
COSO PARTNERSHIPS
UNAUDITED CONDENSED COMBINED STATEMENTS OF CASH FLOWS
Years ended December 31, 2001, 2000 and 1999
(Dollars in thousands)
Twelve-Months Twelve-Months Two-Months Ten-Months Twelve-Months
Ended Ended Ended Ended Ended
December 31, December 31, February 28, December 31, December 31,
2000 2000 1999 1999 2000
------------- ------------- ----------- ------------ -------------
(old basis) (new basis)
Net cash provided by operating activities............ $ 60,601 99,103 29,285 99,711 128,996
Net cash provided by (used in) investing activities.. 3,092 33,800 (1,588) (97,957) (99,545)
Net cash provided by (used in) financing activities.. (80,538) (136,058) -- (10,005) (10,005)
------------- ------------- ----------- ------------ -------------
Net change in cash and cash equivalents.............. $ (16,845) (3,155) 27,697 (8,251) 19,446
============= ============= =========== ============ =============
Supplemental cash flow disclosure:
Cash paid for interest....................... $ 28,881 30,902 -- 29,871 29,871
============= ============= =========== ============ =============
F-27
COSO PARTNERSHIPS
NOTES TO THE UNAUDITED CONDENSED
COMBINED FINANCIAL STATEMENTS
December 31, 2001, 2000 and 1999
(1) Basis of Presentation
The accompanying unaudited condensed combined financial statements were
derived from the stand alone financial statements of Caithness Coso Funding
Corp., Coso Finance Partners, Coso Energy Developers and Coso Power
Developers. All intercompany accounts and transactions were eliminated.
This financial information has been provided to facilitate a more
comprehensive understanding of the financial position, operating results
and cash flows of the Coso Partnerships as a whole. The unaudited condensed
combined financial statements should read in conjunction with each
individual partnership's financial statements.
(2) Acquisition
On February 25, 1999, Caithness Acquisition Company, LLC (CAC), a wholly
owned subsidiary of Caithness Energy, LLC, purchased all of the interests
in the Coso projects that were owned by CalEnergy Company Inc. (CalEnergy),
which is now known as MidAmerican Energy Holdings Company. The purchase
price consisted of $205.0 million in cash, plus $5.0 million in contingent
payments, plus the assumption of CalEnergy's and its affiliates' share of
debt outstanding. The acquisition was accounted for under the purchase
method, and no goodwill was recorded. After Caithness Acquisition's
purchase of CalEnergy's interest in Coso Partnerships, a new basis of
accounting was adopted and is referred to as "New Basis" as compared to the
former cost basis which is referred to as "Old Basis" in the financial
statements. The purchase price was allocated to the portion of the assets
and liabilities purchased from CalEnergy based upon their fair values, with
the amount of fair value of net assets in excess of the purchase price
being allocated to long-lived assets on a pro-rata basis.
In order to complete the purchase of CalEnergy's interest in Coso
Partnerships, Caithness Acquisition arranged for short-term debt financing
of approximately $211.5 million. This short-term debt was repaid on May 28,
1999 from a portion of the proceeds from the offering of senior secured
notes (see note 3).
(3) Debt Financing
On May 28, 1999 Caithness Coso Funding Corp. loaned approximately $413.0
million to Coso Partnerships from a portion of the proceeds from the
offering of senior secured notes. The loan consists of one note of $110.0
million with an interest rate of 6.80% and another of $303.0 million with
an interest rate of 9.05% with maturity dates of December 15, 2001 and
December 15, 2009, respectively. All prior project loans of approximately
$351.4 million were repaid from the proceeds of the financing and an
extraordinary loss from the early extinguishment of this debt was incurred
for approximately $6.3 million. The extraordinary loss was due to a premium
and other costs incurred to pay the prior project loans before maturity.
(4) Reclassifications
Certain reclassifications have been made to the 2000, statement of
operations to conform to the 2001 presentation.
F-28
Item 9. Changes in and disagreements with Accountants on Accounting and
Financial Disclosure.
Since 1991, Caithness Energy and CalEnergy, the then present co-sponsors of
the Coso projects, had engaged PricewaterhouseCoopers LLP to audit the financial
statements of the Coso partnerships. On February 25, 1999, CAC purchased all of
CalEnergy's interests in the Coso projects, and Caithness Energy engaged KPMG
LLP, its own independent certified public accountants, to audit future financial
statements of the Coso partnerships. In connection with the audits of the
financial statements of Coso Finance Partners and Coso Finance Partners II, Coso
Energy Developers and Coso Power Developers for the period ended February 25,
1999, (i) Caithness Energy had no disagreements with PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to make
reference thereto in their reports on the financial statements for such years,
and (ii) the reports of PricewaterhouseCoopers LLP on the Coso partnerships did
not contain any adverse opinion or disclaimer of opinion, and were not modified
as to uncertainty, audit scope or accounting principles except for the reference
to the Coso partnerships' adoption in 1998 of Statement of Position No. 98-5,
"Reporting on the Costs of Start-up Activities."
Part III
Item 10. Directors and Executive Officers of the Registrant.
The following table sets forth the persons who served as our directors and
executive officers as of December 31, 2001:
Name Age Position(s)
- ---- --- -----------
James D. Bishop, Sr. 68 Director, Chairman and Chief Executive Officer
Leslie J. Gelber 45 Director, President and Chief Operating Officer
James D. Bishop, Jr. 41 Director, Vice Chairman
Christopher T. McCallion 40 Director, Executive Vice President and Chief
Financial Officer
Kenneth Hoffman 49 Senior Vice President
Larry K. Carpenter 52 Director, Executive Vice President
Mark A. Ferrucci 49 Director
David V. Casale 38 Vice President and Controller
John A. McNamara 42 Vice President Finance
Barbara Bishop Gollan 43 Vice President
James D. Bishop, Sr., Chairman, Chief Executive Officer and a Director of
Funding Corp. and of Caithness Energy, has served as a Director of Caithness
Corporation since its inception in 1975. Mr. Bishop served as Caithness
Corporation's President from its inception until December 1986 and has served as
Chairman of Caithness Corporation since January 1987. Mr. Bishop also serves as
a director for various other entities which engage in independent power
production and natural resource exploration and development. Mr. Bishop holds a
Master of Business Administration degree from Harvard Business School and a
Bachelor of Arts degree from Yale University. Mr. Bishop is the father of James
D. Bishop, Jr. and Barbara Bishop Gollan.
25
Leslie J. Gelber, President, Chief Operating Officer and a Director of
Funding Corp. and of Caithness Energy, has served as President and Chief
Operating Officer of Caithness Corporation since January 1999. Prior to joining
Caithness Corporation, Mr. Gelber served as President of Cogen Technologies,
Inc., which is also engaged in the field of independent power production, from
August 1998 until December 1998. From July 1993 to July 1998, Mr. Gelber served
as President of ESI Energy, Inc., the non-regulated independent power company
owned by FPL Group, Inc. Mr. Gelber holds a Master of Business Administration
degree from the University of Miami and holds a Bachelor of Arts degree in
Economics from Alfred University.
James D. Bishop, Jr., Vice Chairman and a Director of Funding Corp. and of
Caithness Energy, joined Caithness Corporation in 1988 and served as President
and Chief Operating Officer of Caithness Corporation from November 1995 until
December 1998. Mr. Bishop also serves on all the boards of directors and
management committees of the entities and joint ventures affiliated with
Caithness Corporation. Mr. Bishop holds a Master of Business Administration
degree from the Kellogg Graduate School of Management at Northwestern University
and holds a Bachelor of Science degree from Trinity College. Mr. Bishop is the
son of James D. Bishop, Sr. and the brother of Barbara Bishop Gollan.
Christopher T. McCallion, Executive Vice President, Chief Financial Officer
and a Director of Funding Corp. and of Caithness Energy, served as Vice
President and Controller of Caithness Corporation from July 1991 to November
1995, and has served as Executive Vice President and Chief Financial Officer of
Caithness Corporation since November 1995. Mr. McCallion holds a Bachelor of
Science degree from Seton Hall University.
Kenneth P. Hoffman a Senior Vice President of Funding Corp and of Caithness
Energy, joined Caithness Corporation in March of 2000. Prior to joining
Caithness, Mr. Hoffman was a Vice President of FPL Energy, Inc. From 1989 until
1993 he was the Vice President of Business Management of ESI Energy, Inc. Before
1989, Mr. Hoffman was employed by Florida Power & Light Company. Mr. Hoffman
holds a Master of Business Administration degree from Florida International
University and a Bachelor of Science degree from Rochester Institute of
Technology.
Larry K. Carpenter, Executive Vice President and a Director of Funding
Corp. and of Caithness Energy, has served as an Executive Vice President of
Caithness Corporation since January 1999. Prior to joining Caithness
Corporation, Mr. Carpenter served as Vice President of Development at ESI
Energy, Inc., the non-regulated independent power company owned by FPL Group
Inc., from 1985 to December 1998. Mr. Carpenter holds a Bachelor of Science
degree in Electrical Engineering from the University of Florida.
Mark A. Ferrucci, a Director of Funding Corp., has served as the
independent director of Funding Corp. since May 1999. Since 1997, Mr. Ferrucci
has been an employee of CT Corporation System, an independent company that
provides corporate and UCC services to businesses and law firms. From 1977 until
1992, Mr. Ferrucci served as CT Corporation System's Assistant Secretary and as
Assistant Vice President of CT Corporation System from 1992 until the present.
David V. Casale, a Vice President and the Controller of Funding Corp. and
of Caithness Energy joined Caithness Corporation in December 1991 and has served
as a Vice President and as its Controller since November 1995. Mr. Casale also
serves on the boards of directors of joint ventures affiliated with Caithness
Corporation. Mr. Casale holds a Bachelor of Arts degree from Adelphi University.
26
John A. McNamara, Vice President Finance of Funding Corp. and of Caithness
Energy, joined Caithness Corporation in September of 1990 and has served as Vice
President since 1999. Prior to joining Caithness, Mr. McNamara was a broker with
Bradley & Company, an account executive with First Georgetown Securities, Inc.
and a staff member of the United States Senate Committee on Small Business. He
received a Masters of Business Administration degree from Georgetown University
and a Bachelor of Arts degree from Denison University.
Barbara Bishop Gollan, a Vice President of Funding Corp. and of Caithness
Energy, joined Caithness Corporation as Vice President in October 1990. Ms.
Gollan has authored and co-authored a number of technical papers on geothermal
systems, which were presented to the Geothermal Resources Council, the Geologic
Society of America and the Stanford Geothermal Workshop. Ms. Gollan holds a
Master of Science degree in Geology and Geochemistry from Stanford University
and holds a Bachelor of Arts degree from Amherst College. Ms. Gollan is the
daughter of Mr. James D. Bishop, Sr. and the sister of James D. Bishop, Jr.
The Board of Directors appointed Mr. Ferrucci as an independent director.
The unanimous affirmative vote of our Board of Directors (including Mr.
Ferrucci) is required before certain actions can be taken, including, but not
limited to, (1) engaging in any business or activity other than issuing the
senior secured notes and making the related loans to the Coso partnerships, (2)
incurring any debt, or assuming or guaranteeing any debt of any other entity,
(3) dissolving or liquidating, (4) consolidating, merging or selling all or
substantially all of our assets or (5) instituting any bankruptcy or insolvency
proceedings.
Item 11. Executive Compensation.
None of the directors or executive officers of Funding Corp. receives any
compensation for his or her services, except Mr. Ferruci, who receives $8,400 in
compensation annually for services provided.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of December 31, 2001 certain information
regarding the beneficial ownership of Coso Funding Corp.'s voting securities and
the beneficial ownership of the voting securities of each of the Coso
partnerships by:
(1) Each person who is known by us and the Coso partnerships to beneficially
own 5% or more of Coso Funding Corp.'s voting securities or 5% or more of
the voting securities of any Coso partnership,
(2) Each of Coso Funding Corp.'s directors and executive officers who also act
in similar capacities on behalf of the managing partner of each Coso
partnership and each of the delegates to the management committee of each
Coso partnership, and
(3) All of Coso Funding Corp.'s directors and executive officers who also act
in similar capacities for the managing partnership of each Coso partnership
and all of the delegates to the management committee of each Coso
partnership as a group.
Beneficial ownership has been determined in accordance with Rule 13d-3
under the Securities Exchange Act of 1934, as amended. Except as otherwise
noted, each person named below has an address in care of our principal executive
offices.
27
Beneficial Ownership of Coso Funding Corp. and the Coso Partnerships
Percent Indirect Percent Indirect Percent Indirect Percent Indirect
Beneficial Beneficial Beneficial Beneficial
Name and Address of Ownership in Ownership in Ownership in Ownership in
Beneficial Owner Coso Funding the Navy I the BLM The Navy II
---------------- Corp. Partnership Partnership Partnership
---------------- ---------------- ---------------- ----------------
James D. Bishop, Sr. (1)(2)............... 0.6% 1.0% -- 0.7%
Leslie J. Gelber (1)(3)................... -- -- -- --
James D. Bishop, Jr. (1)(4)............... 25.0% 24.5% 28.0% 22.6%
Christopher T. McCallion (1)(3)........... -- -- -- --
Larry K. Carpenter (1)(3)................. -- -- -- --
Mark A. Ferrucci.......................... -- -- -- --
David V. Casale (1)(3).................... -- -- -- --
John A. McNamara (1)(3)................. -- -- -- --
Barbara Bishop Gollan (1)(3)(5)......... -- -- -- --
Dominion Energy, Inc. (6)................ * -- 7.8% 2.8%
901 East Byrd Street
Richmond, VA 23219
Mojave Energy Company (7)................. 6.1% 5.5% 7.7% 5.2%
c/o Davenport Resources, Inc.
200 Railroad Avenue, 3rd floor
Greenwich, CT 06830
All directors, executive officers and
management committee delegates as a group.
35.3% 30.9% 43.6% 31.3%
* Less than 5.0%.
(1) The address of such person is c/o Caithness
Corporation, 565 Fifth Avenue, 29th Floor, New York, New York 10017-2478.
(2) The beneficial ownership of James D. Bishop, Sr.'s interests is based upon
his ownership of shares of common stock of Mojave Power, Inc. and Mojave
Power II, Inc. which own, indirectly through various entities, general
partnership interests in the Navy I partnership and the Navy II
partnership. In addition to these interests, James D. Bishop, Sr. is the
beneficiary of The James D. Bishop Trust--2001 ( "Bishop, Sr. Trust "),
which owns shares of common stock of Caithness Corporation and membership
units in Caithness 1997, LLC. Caithness Corporation and Caithness 1997, LLC
own, indirectly through various entities, general partnership interests in
the Navy I partnership, the BLM partnership and the Navy II partnership,
which collectively own all of the shares of common stock of Funding Corp.
The voting rights to the shares of common stock of Caithness Corporation
held by the Bishop, Sr. Trust have been transferred to The Caithness
Entities Voting Trust, the trustee of which is James D. Bishop, Jr. The
Bishop, Sr. Trust is irrevocable. James D. Bishop, Sr., therefore, does not
have voting or investment power over these shares of common stock of
Caithness Corporation.
28
(3) Owner of economic interests in the Coso partnerships through Caithness
Corporation's employee incentive plans, which economic interests are not
listed on this table.
(4) James D. Bishop, Jr. is: (i) the beneficiary of The James D. Bishop, Jr.
Irrevocable Trust--1996 (the "Bishop, Jr. Trust "), which owns shares of
common stock of Caithness Corporation, and membership units in Caithness
1997, LLC, the voting rights of which have been transferred to the
Caithness Entities Voting Trust, the trustee of which is James D. Bishop,
Jr.; (ii) the owner of common stock of Caithness Corporation and Mojave
Power, Inc, and membership units in Caithness 1997, LLC; and (iii) the
trustee of The Caithness Entities Voting Trust which possesses sole voting
control over the shares of common stock of Caithness Corporation held by
the Bishop, Sr. Trust, The Barbara Bishop Gollan Irrevocable Trust--1996
(the "Gollan Trust "), The Elizabeth Bishop DeLuca Irrevocable Trust--1996
and The Linda Bishop Fotiu Irrevocable Trust--1996. The interests listed in
(i) and (ii) above entitle James D. Bishop, Jr. to the following indirect
beneficial ownership interests: Funding Corp. (1.6%); Navy I partnership
(1.6%); BLM partnership (1.5%); and Navy II partnership (1.6%). James D.
Bishop, Jr. disclaims beneficial ownership of the interests listed in (iii)
above.
(5) Barbara Bishop Gollan is the beneficiary of the Gollan Trust, which owns
shares of common stock of Caithness Corporation, and membership units in
Caithness 1997, LLC. The voting rights to the shares of common stock of
Caithness Corporation held by the Gollan Trust have been transferred to The
Caithness Entities Voting Trust, the trustee of which is James D. Bishop,
Jr. The Gollan Trust is irrevocable. Barbara Bishop Gollan, therefore, does
not have voting or investment power over these shares of common stock of
Caithness Corporation.
(6) Dominion Energy, Inc. owns: (i) a limited liability company membership
interest in Caithness BLM Group, LP, a Delaware limited partnership, which
owns a limited liability company membership interest in Caithness Coso
Holdings, LLC, which owns a general partnership interest in the BLM
partnership; and (ii) a limited liability company membership interest in
Navy II Group which owns a general partnership interest in the Navy II
partnership.
(7) Mojave Energy Company owns limited liability company membership interests
in Caithness Power, LLC, which owns, indirectly through various entities,
general partnership interests in each of the Coso partnerships.
Item 13. Certain Relationships and Related Transactions.
The Coso Partnerships
Each of the Coso partnerships has two general partners, a managing partner
and a non-managing partner. Under the amended and restated partnership
agreement, the managing partner of each Coso partnership is generally
responsible for the management and control of the day-to-day business and
affairs. The managing partner of the Navy I partnership is New CLOC Company,
LLC, a Delaware limited liability company, the managing partner of the BLM
partnership is New CHIP Company, LLC, a Delaware limited liability company and
the managing partner of the Navy II partnership is New CTC Company, LLC, a
Delaware limited liability company. The non-managing partner of the Navy I
partnership is ESCA, LLC, a Delaware limited liability company, the non-managing
partner of the BLM partnership is Caithness Coso Holdings, LLC, a Delaware
limited liability company, and the non-managing partner of the Navy II
partnership is Caithness Navy II Group, LLC, a Delaware limited liability
company.
Each managing partner is a limited liability company managed by a manager
who is appointed by Caithness Acquisition Company, LLC (CAC), the sole member of
each managing partner. The manager is responsible for the ordinary course
management and operations by its Coso partnership. CAC has appointed itself as
the manager of each managing partner. CAC has also appointed Mr. Ferrucci as the
independent manager of each managing partner. (In addition, each of the managing
members of the non-managing partners has appointed Mr. Ferrucci as the
independent manager of that non-managing partner.) The approval of the
independent manager is required before the managing partner (or the non-managing
partner, as the case may be) may take certain actions that do not involve the
ordinary course management and operations by the Coso partnerships of the Coso
projects, including, among others, (1) commencing any bankruptcy or insolvency
proceeding involving the managing partner, (2) incurring any debt in the name of
the managing partner for which it would be liable, (3) dissolving, liquidating,
consolidating or merging, or selling all or substantially all of the assets of,
its respective Coso partnership, or (4) engaging in any business or activity
other than acting as the managing partner of its respective Coso partnership.
Each managing partner also has its officers, who are also officers of Funding
Corp. , who act on behalf of the managing partners of the Coso partnerships.
29
CAC, a limited liability company, is the manager and sole member of each of
the managing partners. Caithness Energy, LLC (Caithness Energy) as the manager
and sole owner of CAC, has delegated its role as manager of CAC to the CAC board
of directors, including the power to manage the managing partners of the Coso
partnerships. Each managing partner's officers are also the officers of CAC.
None of the persons acting on behalf of the Coso partnerships receives any
compensation from the Coso partnerships for his or her services, except that
nominal compensation is paid in consideration for Mr. Ferrucci's services.
Caithness Energy is governed by a board of directors and not by its
members. The directors of Funding Corp., other than Mr. Ferrucci, also currently
serve as members of the board of directors of Caithness Energy. Under the
limited liability company agreement of Caithness Energy, Caithness Corporation
is entitled to appoint a number of members to the Board of Directors of
Caithness Energy who hold, in the aggregate, a majority of the votes of all
members of such board of directors. Caithness Corporation's present appointees
are Messrs. Bishop, Sr., and Bishop, Jr. In addition, Messrs. Gelber, Carpenter
and McCallion serve as voting members of the board of directors of Caithness
Energy pursuant to their individual executive compensation agreements with
Caithness Energy. These five individuals, together with Mr. Ferrucci, serve as
the CAC board of directors.
Management Committees
Under the amended and restated partnership agreement of each Coso
partnership, the managing partner is subject to the directives of a management
committee which oversees the business operations of the Coso partnership. The
managing partner of a Coso partnership may not take certain specific actions
without the consent of the management committee of that Coso partnership.
However, the management committee may not direct the managing partner of the
Coso partnership to take any action over which the independent manager has
exclusive authority without the requisite approval of the independent manager.
The management committee of each Coso partnership consists of four delegates,
two of which are appointed by the managing partner and two of which are
appointed by the non-managing partner. Each partner may substitute or change its
delegates.
Under the amended and restated partnership agreements of the Coso
partnerships, each partner may appoint one delegate with multiple votes. The
names of the delegates appointed by affiliates of Caithness Energy to the
management committees of the Coso partnerships are set forth below.
As of December 31, 2001, the following persons were the members of the
management committee of each Coso partnership, as applicable. Each person has
two votes on each management committee on which he serves:
Name Age Partnership(s)
---- --- --------------
James D. Bishop, Jr. 41 Navy I partnership, BLM partnership,
Navy II partnership
Christopher T. McCallion 40 Navy I partnership, BLM partnership,
Navy II partnership
30
Certain information regarding Messrs. Bishop and McCallion is provided above.
Management Committee Fees
The members of the management committees are not entitled to any direct
compensation from Funding Corp. or the Coso partnerships. However, each Coso
partnership previously paid its two general partner's annual management
committee fees for their participation on the management committee of that Coso
partnership. The following table sets forth, for the years ended December 31,
1998, 1999, 2000 and 2001, the total amount of management committee fees paid or
payable by each of the Coso partnerships to its partners:
Year Ended December 31
----------------------
1998 1999 2000 2001
---- ---- ---- ----
Navy I Partnership
New CLOC.................... $ -- $ -- $ -- $ --
Predecessor of New CLOC 147,000 25,000 -- --
ESCA........................ 221,000 258,000 234,000 237,000
------- ------- ------- -------
$ 368,000 $ 283,000 $ 234,000 $ 237,000
======= ======= ======= =======
BLM Partnership
New CHIP.................... $ -- $ -- $ -- $ --
Predecessor of New CHIP 148,000 25,000 -- --
CCH......................... 223,000 259,000 234,000 237,000
------- ------- ------- -------
$ 371,000 $ 284,000 $ 234,000 $ 237,000
======= ======= ======= =======
Navy II Partnership..............
New CTC..................... $ -- $ -- $ -- $ --
Predecessor of New CTC...... 148,000 25,000 -- --
Navy II Group............... 223,000 259,000 234,000 237,000
------- ------- ------- -------
$ 371,000 $ 284,000 $ 234,000 $ 237,000
======= ======= ======= =======
The Coso partnerships no longer pay management committee fees to their
managing partners.
Funding Corp.
As of June 30, 1999, the authorized capital stock of Funding Corp.
consisted of 1,000 shares of common stock, par value 1 cent per share, of which
300 shares were outstanding. The outstanding common stock is owned equally by
the Coso partnerships.
Coso Partnerships
The directors and executive officers also act in similar capacities on
behalf of the managing partner of each Coso partnership and, except for Mr.
Ferrucci, on behalf of CAC and Caithness Energy. Several of these directors and
executive officers beneficially own the securities of Caithness Corporation, who
beneficially owns the majority of membership interests of Caithness Energy.
31
Part IV
Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K.
(a) Documents filed as part of this report:
Financial Statements and Schedules
(b) Current reports on Form 8-K:
The Coso Partnerships filed current reports on Form 8-K dated December
1, 2001 reporting an amendment to the agreement entered into on June
19, 2001 between Edison and the Coso partnerships that addresses
renewable energy pricing and payment issues.
(c) Exhibits:
The exhibits listed on the accompanying Index to Exhibits are filed as
part of this Annual Report.
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
------ ----------------------
3.1 Certificate of Incorporation of Caithness Coso Funding Corp.*
3.2 Bylaws of Caithness Coso Funding Corp.*
3.3 Third Amended and Restated Partnership Agreement of Coso Finance
Partners, dated as of May 28, 1999.*
3.4 Third Amended and Restated Partnership Agreement of Coso Energy
Developers, dated as of May 28, 1999.*
3.5 Third Amended and Restated Partnership Agreement of Coso Power
Developers, dated as of May 28, 1999.*
3.6 Amendment Agreement, dated as of May 28, 1999, by and among Coso
Finance Partners, Caithness Acquisition Company, LLC, New CLOC
Company, LLC, ESCA, LLC and Coso Operating Company LLC.*
3.7 Amendment Agreement, dated as of May 28, 1999, by and among Coso
Energy Developers, Caithness Acquisition Company, LLC, New CHIP
Company, LLC, Caithness Coso Holdings, LLC and Coso Operating Company
LLC.*
3.8 Amendment Agreement, dated as of May 28, 1999, by and among Coso Power
Developers, Caithness Acquisition Company, LLC, New CTC Company, LLC,
Caithness Navy II Group, LLC and Coso Operating Company LLC.*
4.1 Indenture, dated as of May 28, 1999, among Caithness Coso Funding
Corp., Coso Finance Partners, Coso Energy Developers, Coso Power
Developers, and U.S. Bank Trust National Association as trustee and as
collateral agent.*
4.3 Notation of Guarantee, dated as of May 28, 1999, of Coso Finance
Partners.*
32
4.4 Notation of Guarantee, dated as of May 28, 1999, of Coso Energy
Developers.*
4.5 Notation of Guarantee, dated as of May 28, 1999, of Coso Power
Developers.*
4.6 Registration Rights Agreement, dated as of May 28, 1999, by and among
Caithness Coso Funding Corp., Coso Finance Partners, Coso Energy
Developers, Coso Power Developers, and Donaldson, Lufkin & Jenrette
Securities Corporation.*
10.1 Deposit and Disbursement Agreement, dated as of May 28, 1999, among
Caithness Coso Funding Corp., Coso Finance Partners, Coso Energy
Developers, Coso Power Developers, and U.S. Bank Trust National
Association, as collateral agent, as trustee, and as depositary.*
10.2 Credit Agreement, dated as of May 28, 1999, between Caithness Coso
Funding Corp. and Coso Finance Partners.*
10.3 Promissory Note due 2001 of Coso Finance Partners in favor of
Caithness Coso Funding Corp.*
10.4 Promissory Note due 2009 of Coso Finance Partners in favor of
Caithness Coso Funding Corp.*
10.5 Credit Agreement, dated as of May 28, 1999, between Caithness Coso
Funding Corp. and Coso Energy Developers.*
10.6 Promissory Note due 2001 of Coso Energy Developers in favor of
Caithness Coso Funding Corp.*
10.7 Promissory Note due 2009 of Coso Energy Developers in favor of
Caithness Coso Funding Corp.*
10.8 Credit Agreement, dated as of May 28, 1999, between Caithness Coso
Funding Corp. and Coso Power Developers.*
10.9 Promissory Note due 2001 of Coso Power Developers in favor of
Caithness Coso Funding Corp.*
33
10.10 Promissory Note due 2009 of Coso Power Developers in favor of
Caithness Coso Funding Corp.*
10.11 Purchase Agreement, dated as of May 21, 1999, by and among Caithness
Coso Funding Corp., as Issuer, Coso Finance Partners, Coso Energy
Developers and Coso Power Developers, as guarantors, and Donaldson,
Lufkin & Jenrette Securities Corporation, as initial purchaser.*
10.12 Security Agreement, dated as of May 28, 1999, executed by and among
Caithness Coso Funding Corp. in favor of U.S. Bank Trust National
Association, as collateral agent.*
10.13 Security Agreement, dated as of May 28, 1999, executed by and among
Coso Finance Partners in Favor of U.S. Bank Trust National
Association, as collateral agent.*
10.14 Security Agreement, dated as of May 28, 1999, executed by Coso Energy
Developers in favor of U.S. Bank Trust National Association, as
collateral agent.*
10.15 Security Agreement, dated as of May 28, 1999, executed by Coso Power
Developers in favor of U.S. Bank Trust National Association, as
collateral agent.*
10.18 Security Agreement (Navy I project permits), dated as of May 28,
1999, executed by Coso Operating Company LLC in favor of U.S. Bank
Trust National Association, as collateral agent.*
10.19 Security Agreement (BLM project permits), dated as of May 28, 1999,
executed by Coso Operating Company LLC in favor of U.S. Bank Trust
National Association, as collateral agent.*
10.20 Security Agreement (Navy II project permits), dated as of May 28,
1999, executed by Coso Operating Company LLC in favor of U.S. Bank
Trust National Association, as collateral agent.*
10.24 Deed of Trust, Assignment of Rents, Fixture Filing and Security
Agreement, dated as of May 28, 1999, executed by Coso Finance Partners
in favor of U.S. Bank Trust National Association, as trustee, and as
beneficiary.*
10.25 Deed of Trust, Assignment of Rents, Fixture Filing and Security
Agreement, dated as of May 28, 1999, executed by Coso Energy
Developers in favor of U.S. Bank Trust National Association, as
trustee, and as beneficiary.*
10.26 Deed of Trust, Assignment of Rents, Fixture Filing and Security
Agreement, dated as of May 28, 1999, executed by Coso Power Developers
in favor of U.S. Bank Trust National Association, as trustee, and as
beneficiary.*
10.27 Deed of Trust, Assignment of Rents, Fixture Filing and Security
Agreement, dated as of May 28, 1999, executed by Coso Transmission
Line Partners in favor of U.S. Bank Trust National Association, as
trustee, and as beneficiary.*
10.28 Deed of Trust, Assignment of Rents, Fixture Filing and Security
Agreement, dated as of May 28, 1999, executed by China Lake Joint
Venture in favor of U.S. Bank Trust National Association, as trustee,
and as beneficiary.*
10.29 Deed of Trust, Assignment of Rents, Fixture Filing and Security
Agreement, dated as of May 28, 1999, executed by Coso Land Company in
favor of U.S. Bank Trust National Association, as trustee, and as
beneficiary.*
10.30 Stock Pledge Agreement, dated as of May 28, 1999, by Coso Finance
Partners, Coso Energy Developers and Coso Power Developers in favor of
U.S. Bank Trust National Association, as Collateral agent.*
10.31 Partnership Interest Pledge Agreement (Navy I), dated as of May 28,
1999, by ESCA, LLC and New CLOC Company, LLC, in favor of U.S. Bank
Trust National Association, as collateral agent.*
10.32 Partnership Interest Pledge Agreement (BLM), dated as of May 28,
1999, by Caithness Coso Holdings, LLC and New CHIP Company, LLC, in
favor of U.S. Bank Trust National Association, as Collateral agent.*
10.33 Partnership Interest Pledge Agreement (Navy II), dated as of May 28,
1999, by Caithness Navy II Group, LLC and New CTC Company, LLC, in
favor of U.S. Bank Trust National Association, as collateral agent.*
10.34 Partnership Interest Pledge Agreement (CTLP), dated as of May 28,
1999, by Coso Energy Developers and Coso Power Developers, in favor of
U.S. Bank Trust National Association, as Collateral agent.*
10.35 Partnership Interest Pledge Agreement (CLJV), dated as of May 28,
1999, by Caithness Acquisition Company, LLC and Caithness Geothermal
1980 Ltd., LP, in favor of U.S. Bank Trust National Association, as
collateral agent.*
10.36 Partnership Interest Pledge Agreement (CLC), dated as of May 28,
1999, by Caithness Acquisition Company, LLC and Caithness Geothermal
1980 Ltd., LP, in favor of U.S. Bank Trust National Association, as
collateral agent.*
10.37 Promissory Notes Security Agreement, dated as of May 28, 1999, by
Caithness Coso Funding Corp., in favor of U.S. Bank Trust National
Association, as collateral agent.*
34
10.38 Original Service Contract N62474-79-C-5382, dated December 6, 1979,
between U.S. Naval Weapons Center and California Energy Company, Inc.,
Contractor (the "Navy Contract "), including all Amendments thereto.*
10.39 Escrow Agreement, dated December 16, 1992, as amended, by and among
Coso Finance Partners, Bank of America and the Navy.*
10.40 Offer to Lease and Lease for Geothermal Resources, Serial No. 11402,
dated April 29, 1985 but Effective May 1, 1985, from the United States
of America, acting through the Bureau of Land Management, to
California Energy Company, Inc.; as assigned by Assignment Affecting
Record Title to Geothermal Resources Lease, dated June 24, 1985, but
effective July 1, 1985 from California Energy Company, Inc. to Coso
Land Company; as assigned by Assignment of Record Title Interest in a
Lease for Oil and Gas or Geothermal Resources, dated April 20, 1988,
but effective May 1, 1988 from Coso Land Company to Coso Geothermal
Company; as assigned by Assignment of Record Title Interest in a Lease
for Oil and Gas or Geothermal Resources dated April 20, 1988 but
effective May 1, 1988 from Coso Geothermal Company to Coso Energy
Developers.*
10.41 Geothermal Resources Lease, Serial No. CA-11383, by and between the
United States of America, acting through the Bureau of Land
Management, and the LADWP, effective as of January 1, 1988; as
assigned by Lease Assignment Agreement by and between LADWP and Coso
Land Company, dated September 10, 1997; as assigned by Assignment of
Record Title Interest in Lease for Oil and Gas or Geothermal
Resources, by and between the United States of America, acting through
the Bureau of Land Management, and Coso Land Company, effective
January 1, 1998; and as extended by Extension of primary term of
CACA-11383 to September 23, 2004.*
10.42 Geothermal Resources Lease, Serial No. CA-11384, by and between the
United States of America, acting through the Bureau of Land
Management, and the LADWP, effective as of February 1, 1982; as
assigned by Lease Assignment Agreement by and between LADWP and Coso
Land Company, dated September 10, 1997; as assigned by Assignment of
Record Title Interest in a Lease for Oil and Gas or Geothermal
Resources (CACA-11384), by and between the United States of America,
acting through the Bureau of Land Management, and Coso Land Company,
effective as of January 1, 1998; and as extended by extension of
primary term of CACA-11385 to December 24, 2002.*
10.43 Geothermal Resources Lease, Serial No. CA-11385, by and between the
United States of America, acting through the Bureau of Land
Management, and the LADWP, effective as of February 1, 1982; as
assigned by Lease Assignment Agreement by and between LADWP and Coso
Land Company, dated September 10, 1997; as assigned by Assignment of
Record Title Interest in a Lease for Oil and Gas or Geothermal
Resources (CACA-11385) by and between the United States of America,
acting Through the Bureau of Land Management, and Coso Land Company,
effective as of January 1, 1998; and as extended by extension of
primary term of CACA-11385 to December 24, 2002.*
10.44 License for Electric Power Plant Site Utilizing Geothermal Resources
between the United States of America, Licensor, through the Bureau of
Land Management, and Coso Energy Developers, Licensee, Serial No. CACA
22512, dated March 8, 1989 (expires 3/8/19).*
10.45 License for Electric Power Plant Site Utilizing Geothermal Resources
between the United States of America, acting through the Bureau of
Land Management, and Coso Energy Developers, Licensee, Serial No.
25690, dated 12/29/1989 (expires 12/28/19).*
10.46 Right of Way CA-18885 by and between the United States of America,
acting through the Bureau of Land Management, and California Energy
Company, Inc., dated May 7, 1986 (telephone cable)(expires 5/7/16).*
35
10.47 Right of Way CA-13510 by and between the United States of America,
acting through the Bureau of Land Management, and California Energy
Company, Inc., dated April 12, 1984 (Coso office site)(expires
4/12/14).*
10.48 Agreement of Transfer and Assignment (Navy I Transmission Line),
dated July 14, 1987, among China Lake Joint Venture and Coso Finance
Partners.*
10.49 Agreement of Transfer and Assignment (Navy II Transmission Line),
dated July 31, 1989, among Coso Power Developers and Coso Transmission
Line Partners.*
10.50 Agreement of Transfer and Assignment (BLM Transmission Line), dated
July 31, 1989, among Coso Energy Developers and Coso Transmission Line
Partners.*
10.51 Agreement Regarding Overriding Royalty (CLC Royalty), dated May 5,
1988, between Coso Energy Developers and Coso Land Company.*
10.52 Coso Geothermal Exchange Agreement, dated January 11, 1994, by and
among Coso Finance Partners, Coso Energy Developers, Coso Power
Developers, and California Energy Company, Inc.*
10.53 Amendment to Coso Geothermal Exchange Agreement, dated April 12,
1995, by and among Coso Finance Partners, Coso Energy Developers, Coso
Power Developers, and California Energy Company, Inc.*
10.55 Operation and Maintenance Agreement (Navy I Project), dated May 28,
1999, by and among FPL Energy Operating Services, Inc. and Coso
Operating Company, LLC and New CLOC Company, LLC.*
10.56 Operation and Maintenance Agreement (BLM Project), dated May 28,
1999, by and among FPL Energy Operating Services, Inc. and Coso
Operating Company, LLC and New CHIP Company, LLC.*
10.57 Operation and Maintenance Agreement (Navy II Project), dated May 28,
1999, by and among FPL Energy Operating Services, Inc. and Coso
Operating Company, LLC and New CTC Company, LLC.*
10.58 Field Operation and Maintenance Agreement (Navy I), dated February
25, 1999, between Coso Operating Company, LLC and New CLOC Company,
LLC.*
10.59 Field Operations and Maintenance Agreement (Navy II), dated February
25, 1999, between Coso Operating Company, LLC and New CTC Company,
LLC.*
10.60 Field Operations and Maintenance Agreement (BLM), dated February 25,
1999, between Coso Operating Company, LLC and New CHIP Company, LLC.*
10.61 Purchase Agreement, dated as of January 16, 1999, by and among
Caithness Energy, L.L.C., Caithness Acquisition Company, LLC, and
California Energy Company, Inc.*
10.62 Agreement Concerning Consideration, dated as of February 25, 1999, by
and among Caithness Energy, L.L.C., Caithness Acquisition Company,
L.L.C., New CLOC Company, LLC, New CHIP Company, LLC, New CTC Company,
LLC, and CalEnergy Company, Inc.*
10.63 Future Revenue Agreement, dated February 25, 1999, by and between
Caithness Energy, L.L.C., Caithness Acquisition Company, LLC, New CTC
Company, LLC, New CLOC Company, LLC, NewCHIP Company, LLC, Coso
Finance Partners, Coso Energy Developers, Coso Power Developers, and
California Energy Company, Inc.*
36
10.64 Acknowledgment and Agreement--Release, dated January 16, 1999,
executed by Caithness Resources, Inc., Caithness Corporation,
Caithness Power, L.L.C., James Bishop Sr., and Caithness CEA
Geothermal, LP (appended to Exhibit 10.61).*
10.65 Acknowledgment and Agreement--Indemnity, dated May 28, 1999, executed
by Coso Finance Partners, New CLOC Company, LLC, ESCA, LLC, Coso
Energy Developers, New CHIP Company, LLC, Caithness Coso Holdings,
LLC, Coso Power Developers, New CTC Company, LLC, and Caithness Navy
II Group, LLC.*
10.66 Acknowledgment and Agreement--Release, dated May 28, 1999, executed
by Coso Finance Partners, New CLOC Company, LLC, ESCA, LLC, Coso
Energy Developers, New CHIP Company, LLC, Caithness Coso Holdings,
LLC, Coso Power Developers, New CTC Company, LLC, and Caithness Navy
II Group, LLC.*
10.67 Acknowledgment and Agreement--Indemnity, dated January 16, 1999,
executed by Caithness Resources, Inc., Caithness Corporation,
Caithness Power, L.L.C., China Lake Operating Company, Coso Technology
Corporation and Coso Hotsprings Intermountain Power (appended to
Exhibit 10.61).*
10.68 Power Purchase Agreement (modified Standard Offer No.4) (Navy I),
dated as of June 4, 1984, as Amended, by and between Southern
California Edison Company and Coso Finance Partners (as assignee of
China Lake Joint Venture).*
10.69 Power Purchase Agreement (modified Standard Offer No.4) (BLM), dated
as of February 1, 1985, by and between Southern California Edison
Company and Coso Energy Developers (as assignee of China Lake Joint
Venture).*
10.70 Power Purchase Agreement (modified Standard Offer No.4) (Navy II),
dated as of February 1, 1985, by and between Southern California
Edison Company and Coso Power Developers (as assignee of China Lake
Joint Venture).*
10.72 Interconnection and Integration Facilities Agreement (BLM project),
dated December 15, 1988, Between Southern California Edison Company
and Coso Energy Developers (as assignee of China Lake Joint Venture).*
10.73 Interconnection and Integration Facilities Agreement (Navy II
project), dated December 15, 1988, Between Southern California Edison
Company and Coso Power Developers (as assignee of China Lake Joint
Venture).*
10.77 Operating Fee Subordination Agreement (Navy I), dated as of May 28,
1999, by and among Coso Operating Company, LLC, and U.S. Bank Trust
National Association, as collateral agent.*
10.78 Operating Fee Subordination Agreement (BLM), dated as of May 28,
1999, by and among Coso Operating Company, LLC, and U.S. Bank Trust
National Association, as collateral agent.*
10.79 Operating Fee Subordination Agreement (Navy II), dated as of May 28,
1999, by and among Coso Operating Company, LLC, and U.S. Bank Trust
National Association, as collateral agent.*
10.80 Management Fee Subordination Agreement (Navy I), dated as of May 28,
1999, by and among ESCA, LLC, New CLOC Company, LLC, Coso Finance
Partners, and U.S. Bank Trust National Association, as collateral
agent.*
10.81 Management Fee Subordination Agreement (BLM), dated as of May 28,
1999, by and among Caithness Coso Holdings, LLC, New CHIP Company,
LLC, Coso Energy Developers, and U.S. Bank Trust National Association,
as collateral agent.*
37
10.82 Management Fee Subordination Agreement (Navy II), dated as of May 28,
1999, by and among Caithness Navy II Group, LLC, New CTC Company, LLC,
Coso Power Developers, and U.S. Bank Trust National Association, as
collateral agent.*
10.83 Cotenancy Agreement, dated as of May 28, 1999, by and among Coso
Finance Partners, Coso Energy Developers, and Coso Power Developers.*
10.84 Acquisition Agreement, dated as of May 28, 1999, among Coso Land
Company, Coso Finance Partners, Coso Energy Developers, Coso Power
Developers, and Coso Operating Company, LLC.*
10.85 Assignment and Assumption Agreement, dated as of May 28, 1999, by and
among MidAmerican Energy Holdings Company as successor-in-interest to
Cal Energy Company, Inc., Coso Energy Developers, Coso Power
Developers and Coso Finance Partners.*
21.1 Subsidiaries of Caithness Coso Funding Corp., Coso Finance Partners,
Coso Energy Developers, and Coso Power Developers.*
23.3 Consent of Sandwell Engineering Inc.*
23.4 Consent of Henwood Energy Services, Inc.*
23.5 Consent of GeothermEx, Inc.*
23.6 Consent of Riordan & McKinzie, A Professional Law Corporation
(included in Exhibit 5.1).*
23.7 Consent of Reed Smith Shaw & McClay LLP (included in Exhibit 5.2).*
24.1 Powers of Attorney (included on pages II-9, II-11, II-13 and II-15).*
25.1 Form T-1 Statement of Eligibility and Qualification of U.S. Bank Trust
National Association as Trustee.*
27.1 Financial Data Schedule--Form SX--Caithness Coso Funding Corp.
27.2 Financial Data Schedule--Form SX--Coso Finance Partners.
27.3 Financial Data Schedule--Form SX--Coso Energy Developers.
27.4 Financial Data Schedule--Form SX--Coso Power Developers.
99.1 Sale Agreement by and between Caithness Acquisition Company, LLC, and
ESI Geothermal, Inc. dated as of October 6, 1999.**
99.2 Assignment, Assumption and Novation Agreement (Coso Finance Partners)
by and between FPL Energy Operating Services, Inc. and Coso Operating
Company, LLC dated October 18, 1999.**
99.3 Assignment, Assumption and Novation Agreement (Coso Energy Developers)
by and between FPL Energy Operating Services, Inc. and Coso Operating
Company, LLC dated October 18, 1999.**
99.4 Assignment, Assumption and Novation Agreement (Coso Power Developers)
by and between FPL Energy Operating Services, Inc. and Coso Operating
Company, LLC dated October 18, 1999.**
38
* Incorporated herein by reference from the Registration Statement on
Form S-4, Registration No. 333-83815 filed with the Securities and
Exchange Commission (the SEC) by Coso Funding Corp. on October 7,
1999, as amended.
** Incorporated herein by reference from the Form 8-K on report dated
October 18, 1999 for Coso Funding Corp., filed with the SEC.
EXHIBIT 27.1
Form S-X
Commercial and Industrial Companies
Financial Data Schedule Worksheet for: CAITHNESS COSO FUNDING CORP.
----------------------------
Review the following list of tags for Article 5 and fill in the correct data in
the column(s) provided. Generally, only one column of information will be
required, however, two columns are provided if required in the Financial Data
Schedule.
Unless otherwise noted, all tags are required. A response is required for each
item within the schedule. Use the value "0" (zero) if information is immaterial,
inapplicable or unknown. Decimals may not be used to state financial data except
as indicated. Values not provided will be entered as "0" (zero). Missing dates
will be entered as "TO COME". Please be sure to verify all information in the
EDGARized exhibit.
To include a footnote, place a number in parentheses next to the value and
provide the text of each corresponding footnote at the end of the worksheet
form.
Do you wish to include a LEGEND? This schedule contains summary financial
Yes X No information extracted from *_____________
--- --- and_is equalified in its entirety by
reference to such financial statements.
*Identify the financial statement(s) to
be referenced in the legend:
RESTATED
Are your financials being "restated" (NO VALUE REQUIRED)
from a previously file period?
Yes X No
--- ---
CIK Use this section only for coregistrant
Does this data apply to a coregistrant filings.
Yes X No
--- --- COREGISTRANT CIK:
NAME Use this section only for coregistrant
Does this data apply to a coregistrant filings.
Yes X No
--- --- COREGISTRANT NAME:
MULTIPLIER
Do the financials require a multiplier X 1,000 1,000,000,000
--- ----
other than 1 (one)?
X Yes No 1,000,000 1,000,000,000,000
--- --- --- ----
CURRENCY CURRENCY OF FINANCIAL DATA:
Is the currency used other than US
Dollars? Use in conjunction with
EXCHANGE RATE tag.
Yes X No
--- ---
PERIOD TYPE - MOS - MOS
-- ---- -- ----
X YEAR X YEAR
--- ---
(for annual report filings)
OTHER OTHER
---- ----
FISCAL YEAR END
(example: DEC-31-1997) Dec - 31 - 2000 DEC - 31 - 2001
--------------- ---------------
mmm - dd - yyyy mmm - dd - yyyy
PERIOD START
(example: JAN-01-1997) Jan - 01 - 2000 JAN - 01 - 2001
--------------- ---------------
mmm - dd - yyyy mmm - dd - yyyy
PERIOD END
(example: SEP-30-1997) Dec - 31 - 2000 DEC - 31 - 2001
--------------- ---------------
mmm - dd - yyyy mmm - dd - yyyy
EXCHANGE RATE EXCHANGE RATE: EXCHANGE RATE:
Is the exchange rate other than 1
(one)? Value may contain up to 5
decimal places) Use in conjunction
with CURRENCY tag.
Yes X No
--- ---
PERIOD TYPE Year PERIOD TYPE Year
---- ----
CASH 0 0
SECURITIES 0 0
RECEIVABLES 331,353 304,225
ALLOWANCES 0 0
INVENTORY 0 0
CURRENT ASSETDS 1,286 1,225
PP&E 0 0
DEPRECIATION 0 0
TOTAL ASSETS 331,353 304,225
CURRENT LIABILITIES 1,286 1,225
BONDS 330,067 303,000
PREFERRED MANDATORY 0 0
PREFERRED 0 0
COMMON 0 0
OTHER SE 0 0
TOTAL LIABILITY AND EQUITY 331,353 304,225
SALES 0 0
TOTAL REVENUES 30,799 28,820
CGS 0 0
TOTAL COSTS 0 0
OTHER EXPENSES 0 0
LOSS PROVISION 0 0
INTEREST EXPENSES 30,799 28,820
INCOME PRETAX 0 0
INCOME TAX 0 0
INCOME CONTINUING 0 0
DISCONTINUED 0 0
EXTRAORDINARY 0 0
CHANGES 0 0
NET INCOME 0 0
EPS BASIC 0 0
(Value may contain up to 3 decimal places)
EPS DILUTED 0 0
(Value may contain up to 3 decimal places)
Footnote Text: (Note: Each footnote cannot exceed 256 characters, including spaces)
EXHIBIT 27.2
Form S-X
Commercial and Industrial Companies
Financial Data Schedule Worksheet for: COSO FINANCE PARTNERS
---------------------
Review the following list of tags for Article 5 and fill in the correct data in
the column(s) provided. Generally, only one column of information will be
required, however, two columns are provided if required in the Financial Data
Schedule.
Unless otherwise noted, all tags are required. A response is required for each
item within the schedule. Use the value "0" (zero) if information is immaterial,
inapplicable or unknown. Decimals may not be used to state financial data except
as indicated. Values not provided will be entered as "0" (zero). Missing dates
will be entered as "TO COME". Please be sure to verify all information in the
EDGARized exhibit.
To include a footnote, place a number in parentheses next to the value and
provide the text of each corresponding footnote at the end of the worksheet
form.
Do you wish to include a LEGEND? This schedule contains summary financial
Yes X No information extracted from *_____________
--- --- and_is equalified in its entirety by
reference to such financial statements.
*Identify the financial statement(s) to
be referenced in the legend:
RESTATED
Are your financials being "restated" (NO VALUE REQUIRED)
from a previously file period?
Yes X No
--- ---
CIK Use this section only for coregistrant
Does this data apply to a coregistrant filings.
Yes X No
--- --- COREGISTRANT CIK:
NAME Use this section only for coregistrant
Does this data apply to a coregistrant filings.
Yes X No
--- --- COREGISTRANT NAME:
MULTIPLIER
Do the financials require a multiplier X 1,000 1,000,000,000
--- ----
other than 1 (one)?
X Yes No 1,000,000 1,000,000,000,000
--- --- --- ----
CURRENCY CURRENCY OF FINANCIAL DATA:
Is the currency used other than US
Dollars? Use in conjunction with
EXCHANGE RATE tag.
Yes X No
--- ---
PERIOD TYPE - MOS - MOS
-- ---- -- ----
X YEAR X YEAR
--- ---
(for annual report filings)
OTHER OTHER
---- ----
FISCAL YEAR END
(example: DEC-31-1997) Dec - 31 - 2000 DEC - 31 - 2001
--------------- ---------------
mmm - dd - yyyy mmm - dd - yyyy
PERIOD START
(example: JAN-01-1997) Jan - 01 - 2000 JAN - 01 - 2001
--------------- ---------------
mmm - dd - yyyy mmm - dd - yyyy
PERIOD END
(example: SEP-30-1997) Dec - 31 - 2000 DEC - 31 - 2001
--------------- ---------------
mmm - dd - yyyy mmm - dd - yyyy
EXCHANGE RATE EXCHANGE RATE: EXCHANGE RATE:
Is the exchange rate other than 1
(one)? Value may contain up to 5
decimal places) Use in conjunction
with CURRENCY tag.
Yes X No
--- ---
PERIOD TYPE Year PERIOD TYPE Year
---- ----
CASH 3,506 264
SECURITIES 22,996 21,325
RECEIVABLES 2,481 12,816
ALLOWANCES 0 0
INVENTORY 0 0
CURRENT ASSETS 6,796 13,730
PP&E 228,718 229,084
DEPRECIATION 79,642 88,647
TOTAL ASSETS 198,409 193,114
CURRENT LIABILITIES 16,554 18,139
BONDS 134,984 122,550
PREFERRED MANDATORY 0 0
PREFERRED 0 0
COMMON 0 0
OTHER SE 0 0
TOTAL LIABILITY AND EQUITY 198,409 193,114
SALES 67,653 75,419
TOTAL REVENUES 70,159 78,347
CGS 0 0
TOTAL COSTS 0 0
OTHER EXPENSES 44,358 51,201
LOSS PROVISION 0 0
INTEREST EXPENSES 13,013 12,437
INCOME PRETAX 0 0
INCOME TAX 0 0
INCOME CONTINUING 0 0
DISCONTINUED 0 0
EXTRAORDINARY 0 0
CHANGES 0 0
NET INCOME 12,788 14,709
EPS BASIC 0 0
(Value may contain up to 3 decimal places)
EPS DILUTED 0 0
(Value may contain up to 3 decimal places)
Footnote Text: (Note: Each footnote cannot exceed 256 characters, including spaces)
EXHIBIT 27.3
Form S-X
Commercial and Industrial Companies
Financial Data Schedule Worksheet for: COSO ENERGY DEVELOPERS
----------------------
Review the following list of tags for Article 5 and fill in the correct data in
the column(s) provided. Generally, only one column of information will be
required, however, two columns are provided if required in the Financial Data
Schedule.
Unless otherwise noted, all tags are required. A response is required for each
item within the schedule. Use the value "0" (zero) if information is immaterial,
inapplicable or unknown. Decimals may not be used to state financial data except
as indicated. Values not provided will be entered as "0" (zero). Missing dates
will be entered as "TO COME". Please be sure to verify all information in the
EDGARized exhibit.
To include a footnote, place a number in parentheses next to the value and
provide the text of each corresponding footnote at the end of the worksheet
form.
Do you wish to include a LEGEND? This schedule contains summary financial
Yes X No information extracted from *_____________
--- --- and_is equalified in its entirety by
reference to such financial statements.
*Identify the financial statement(s) to
be referenced in the legend:
RESTATED
Are your financials being "restated" (NO VALUE REQUIRED)
from a previously file period?
Yes X No
--- ---
CIK Use this section only for coregistrant
Does this data apply to a coregistrant filings.
Yes X No
--- --- COREGISTRANT CIK:
NAME Use this section only for coregistrant
Does this data apply to a coregistrant filings.
Yes X No
--- --- COREGISTRANT NAME:
MULTIPLIER
Do the financials require a multiplier X 1,000 1,000,000,000
--- ----
other than 1 (one)?
X Yes No 1,000,000 1,000,000,000,000
--- --- --- ----
CURRENCY CURRENCY OF FINANCIAL DATA:
Is the currency used other than US
Dollars? Use in conjunction with
EXCHANGE RATE tag.
Yes X No
--- ---
PERIOD TYPE - MOS - MOS
-- ---- -- ----
X YEAR X YEAR
--- ---
(for annual report filings)
OTHER OTHER
---- ----
FISCAL YEAR END
(example: DEC-31-1997) Dec - 31 - 2000 DEC - 31 - 2001
--------------- ---------------
mmm - dd - yyyy mmm - dd - yyyy
PERIOD START
(example: JAN-01-1997) Jan - 01 - 2000 JAN - 01 - 2001
--------------- ---------------
mmm - dd - yyyy mmm - dd - yyyy
PERIOD END
(example: SEP-30-1997) Dec - 31 - 2000 DEC - 31 - 2001
--------------- ---------------
mmm - dd - yyyy mmm - dd - yyyy
EXCHANGE RATE EXCHANGE RATE: EXCHANGE RATE:
Is the exchange rate other than 1
(one)? Value may contain up to 5
decimal places) Use in conjunction
with CURRENCY tag.
Yes X No
--- ---
PERIOD TYPE Year PERIOD TYPE Year
---- ----
CASH 5,862 0
SECURITIES 14,502 7,368
RECEIVABLES 405 3,340
ALLOWANCES 0 0
INVENTORY 0 0
CURRENT ASSETS 7,280 4,189
PP&E 238,244 247,203
DEPRECIATION 84,626 98,786
TOTAL ASSETS 201,312 183,978
CURRENT LIABILITIES 31,160 34,966
BONDS 100,907 96,250
PREFERRED MANDATORY 0 0
PREFERRED 0 0
COMMON 0 0
OTHER SE 0 0
TOTAL LIABILITY AND EQUITY 201,312 183,978
SALES 57,453 65,830
TOTAL REVENUES 65,578 69,596
CGS 0 0
TOTAL COSTS 0 0
OTHER EXPENSES 46,693 53,185
LOSS PROVISION 0 0
INTEREST EXPENSES 9,492 9,398
INCOME PRETAX 0 0
INCOME TAX 0 0
INCOME CONTINUING 0 0
DISCONTINUED 0 0
EXTRAORDINARY 0 0
CHANGES 0 0
NET INCOME 9,393 7,013
EPS BASIC 0 0
(Value may contain up to 3 decimal places)
EPS DILUTED 0 0
(Value may contain up to 3 decimal places)
Footnote Text: (Note: Each footnote cannot exceed 256 characters, including spaces)
EXHIBIT 27.4
Form S-X
Commercial and Industrial Companies
Financial Data Schedule Worksheet for: COSO POWER DEVELOPERS
---------------------
Review the following list of tags for Article 5 and fill in the correct data in
the column(s) provided. Generally, only one column of information will be
required, however, two columns are provided if required in the Financial Data
Schedule.
Unless otherwise noted, all tags are required. A response is required for each
item within the schedule. Use the value "0" (zero) if information is immaterial,
inapplicable or unknown. Decimals may not be used to state financial data except
as indicated. Values not provided will be entered as "0" (zero). Missing dates
will be entered as "TO COME". Please be sure to verify all information in the
EDGARized exhibit.
To include a footnote, place a number in parentheses next to the value and
provide the text of each corresponding footnote at the end of the worksheet
form.
Do you wish to include a LEGEND? This schedule contains summary financial
Yes X No information extracted from *_____________
--- --- and_is equalified in its entirety by
reference to such financial statements.
*Identify the financial statement(s) to
be referenced in the legend:
RESTATED
Are your financials being "restated" (NO VALUE REQUIRED)
from a previously file period?
Yes X No
--- ---
CIK Use this section only for coregistrant
Does this data apply to a coregistrant filings.
Yes X No
--- --- COREGISTRANT CIK:
NAME Use this section only for coregistrant
Does this data apply to a coregistrant filings.
Yes X No
--- --- COREGISTRANT NAME:
MULTIPLIER
Do the financials require a multiplier X 1,000 1,000,000,000
--- ----
other than 1 (one)?
X Yes No 1,000,000 1,000,000,000,000
--- --- --- ----
CURRENCY CURRENCY OF FINANCIAL DATA:
Is the currency used other than US
Dollars? Use in conjunction with
EXCHANGE RATE tag.
Yes X No
--- ---
PERIOD TYPE - MOS - MOS
-- ---- -- ----
X YEAR X YEAR
--- ---
(for annual report filings)
OTHER OTHER
---- ----
FISCAL YEAR END
(example: DEC-31-1997) Dec - 31 - 2000 DEC - 31 - 2001
--------------- ---------------
mmm - dd - yyyy mmm - dd - yyyy
PERIOD START
(example: JAN-01-1997) Jan - 01 - 2000 JAN - 01 - 2001
--------------- ---------------
mmm - dd - yyyy mmm - dd - yyyy
PERIOD END
(example: SEP-30-1997) Dec - 31 - 2000 DEC - 31 - 2001
--------------- ---------------
mmm - dd - yyyy mmm - dd - yyyy
EXCHANGE RATE EXCHANGE RATE: EXCHANGE RATE:
Is the exchange rate other than 1
(one)? Value may contain up to 5
decimal places) Use in conjunction
with CURRENCY tag.
Yes X No
--- ---
PERIOD TYPE Year PERIOD TYPE Year
---- ----
CASH 7,741 0
SECURITIES 10,214 5,517
RECEIVABLES 5,982 9,349
ALLOWANCES 0 0
INVENTORY 0 0
CURRENT ASSETS 14,572 10,009
PP&E 209,605 209,652
DEPRECIATION 72,658 84,987
TOTAL ASSETS 195,693 170,058
CURRENT LIABILITIES 14,094 23,638
BONDS 94,176 84,200
PREFERRED MANDATORY 0 0
PREFERRED 0 0
COMMON 0 0
OTHER SE 0 0
TOTAL LIABILITY AND EQUITY 195,639 170,058
SALES 58,366 59,122
TOTAL REVENUES 61,234 62,005
CGS 0 0
TOTAL COSTS 0 0
OTHER EXPENSES 49,895 57,141
LOSS PROVISION 0 0
INTEREST EXPENSES 9,899 9,247
INCOME PRETAX 0 0
INCOME TAX 0 0
INCOME CONTINUING 0 0
DISCONTINUED 0 0
EXTRAORDINARY 0 0
CHANGES 0 0
NET INCOME 1,440 (4,383)
EPS BASIC 0 0
(Value may contain up to 3 decimal places)
EPS DILUTED 0 0
(Value may contain up to 3 decimal places)
Footnote Text: (Note: Each footnote cannot exceed 256 characters, including spaces)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 14, 2002 CAITHNESS COSO FUNDING CORP.,
a Delaware corporation
By: /S/ CHRISTOPHER T. MCCALLION
----------------------------
Christopher T. McCallion
Executive Vice President &
Chief Financial Officer
(Principal Financial and
Accounting Officer)
COSO FINANCE PARTNERS
a California general partnership
By: New CLOC Company, LLC,
its Managing General Partner
By: /S/ CHRISTOPHER T. MCCALLION
----------------------------
Christopher T. McCallion
Executive Vice President &
Chief Financial Officer
(Principal Financial and
Accounting Officer)
COSO ENERGY DEVELOPERS
a California general partnership
By: New CHIP Company, LLC,
its Managing General Partner
By: /S/ CHRISTOPHER T. MCCALLION
----------------------------
Christopher T. McCallion
Executive Vice President &
Chief Financial Officer
(Principal Financial and
Accounting Officer)
COSO POWER DEVELOPERS
a California general partnership
By: New CTC Company, LLC,
its Managing General Partner
By: /S/ CHRISTOPHER T. MCCALLION
----------------------------
Christopher T. McCallion
Executive Vice President &
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
/S/ JAMES D. BISHOP, SR. Director, Chairman and Chief March 14, 2002
- ----------------------------------------------- Executive Officer (Principal
James D. Bishop, Sr. Executive Officer)
/S/ CHRISTOPHER T. MCCALLION Director, Executive Vice President March 14, 2002
- ----------------------------------------------- and Chief Financial Officer
Christopher T. McCallion (Principal Accounting Officer)
/S/ LESLIE J. GELBER Director, President and Chief March 14, 2002
- ----------------------------------------------- Operating Officer
Leslie J. Gelber
/S/ JAMES D. BISHOP, JR. Director March 14, 2002
- -----------------------------------------------
James D. Bishop, Jr.
/S/ LARRY K. CARPENTER Director March 14, 2002
- -----------------------------------------------
Larry K. Carpenter
/S/ MARK A. FERRUCCI Director March 14, 2002
- -----------------------------------------------
Mark A. Ferrucci