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                          SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C.  20549

                                    ---------------------------------

                                      FORM 10-Q

(MARK ONE)

[ X ](Mark One)
[x]               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF
                          THE SECURITIES EXCHANGE ACT OF 1934
         
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996For the quarterly period ended March 31, 1997

                                        OR

[ ]             TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROMFor the transition period from ___________ TOto _____________

                           COMMISSION FILE NO.Commission File No. 33-7591

                                  ---------------------
                                        
                     OGLETHORPE POWER CORPORATION
       (AN ELECTRIC MEMBERSHIP GENERATION & TRANSMISSION CORPORATION)----------------

                        Oglethorpe Power Corporation
                   (An Electric Membership Corporation)
          (Exact name of registrant as specified in its charter)

               GEORGIAGeorgia                                 58-1211925
    (State or other jurisdiction of                 (I.R.S. employer
    incorporation or organization)                  identification no.)

         POST OFFICE BOXPost Office Box 1349
      2100 EAST EXCHANGE PLACE
          TUCKER, GEORGIAEast Exchange Place
            Tucker, Georgia                             30085-1349
(Address of principal executive offices)                (Zip Code)
    
Registrant's telephone number, including area code    (770) 270-7600

    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 of 
such filing requirements for the past 90 days.    YES _X_     NO ___Yes  X      No              
    
    Indicate the number of shares outstanding of each of the registrant's 
classes of common stock, as of the latest practicable date.  THE REGISTRANT 
IS A MEMBERSHIP CORPORATION AND HAS NO AUTHORIZED OR OUTSTANDING EQUITY 
SECURITIES.  

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------The Registrant 
is a membership corporation and has no authorized or outstanding equity 
securities.  

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                             OGLETHORPE POWER CORPORATION
                                           
                        INDEX TO QUARTERLY REPORT ON FORM 10-Q
                         FOR THE QUARTER ENDED SEPTEMBER 30, 1996


                                                                        PAGE NO.
                                                                        --------MARCH 31, 1997
                                           

                                                                     Page No.

PART I - FINANCIAL INFORMATION

 Item 1. Financial Statements                 

         Condensed Balance Sheets as of September 30, 1996March 31, 1997 (Unaudited)
         and December 31, 19951996                                            3

         Condensed Statements of Revenues and Expenses (Unaudited)
         for the Three Months Ended March 31, 1997 and Nine Months Ended September 30, 
        1996 and 1995               5
    
         Condensed Statements of Cash Flows (Unaudited)
         for the NineThree Months Ended September 30,March 31, 1997 and 1996 and 1995               6

         Notes to the Condensed Financial Statements                      7

 Item 2. Management's Discussion and Analysis of 
         Financial Condition and Results of Operations                    8


PART II - OTHER INFORMATION

 Item 6. Exhibits and Reports on Form 8-K                               1514

SIGNATURES                                                              1615

                                     2





PART I -  FINANCIALI--FINANCIAL INFORMATION 
ITEMItem 1. FINANCIAL STATEMENTS



OGLETHORPE POWER CORPORATION
CONDENSED BALANCE SHEETS
SEPTEMBER 30,Financial Statements
 


Oglethorpe Power Corporation 
Condensed Balance Sheets 
March 31, 1997 and December 31, 1996 
AND DECEMBER 31, 1995
- -------------------------------------------------------------------------------
(dollars in thousands)
1997 1996 1995 ASSETS (Unaudited) -------------------------------------------------------------------- ELECTRIC PLANT, AT ORIGINAL COST:Electric plant, at original cost: In service $5,719,078 $5,699,213$4,921,498 $5,742,597 Less: Accumulated provision for depreciation (1,458,271) (1,362,431) ---------- ---------- 4,260,807 4,336,782(1,333,820) (1,488,272) ------------- -------------- 3,587,678 4,254,325 Nuclear fuel, at amortized cost 95,437 94,01381,883 86,722 Plant acquisition adjustments, at amortized cost 4,419 5,214-- 4,153 Construction work in progress 40,658 35,753 ---------- ---------- 4,401,321 4,471,762 ---------- ---------- INVESTMENTS AND FUNDS: Decommissioning fund, at market 77,886 74,4929,494 31,181 ------------- -------------- 3,679,055 4,376,381 ------------- -------------- Investments and funds: Bond, reserve and construction funds, at market 53,024 56,51131,663 53,955 Decommissioning fund, at market 86,654 86,269 Investment in associated organizations, at cost 15,424 15,853 ---------- ---------- 146,334 146,856 ---------- ---------- CURRENT ASSETS:15,430 15,379 Deposit on Rocky Mountain transactions, at cost 58,466 41,685 Other 4,168 -- ------------- -------------- 196,381 197,288 ------------- -------------- Current assets: Cash and temporary cash investments, at cost 95,864 201,15152,401 132,783 Other short-term investments, at market 90,375 79,16592,816 91,499 Receivables 107,572 99,55999,198 113,289 Inventories, at average cost 92,807 82,94985,547 89,825 Prepayments and other current assets 14,288 14,325 ---------- ---------- 400,906 477,149 ---------- ---------- DEFERRED CHARGES:16,676 14,625 ------------- -------------- 346,638 442,021 ------------- -------------- Deferred charges: Premium and loss on reacquired debt, being amortized 202,737 200,794193,700 201,007 Deferred amortization of Scherer leasehold 89,715 87,134 Discontinued projects, being amortized 22,776 24,30592,089 90,717 Deferred debt expense, being amortized 20,900 21,1359,511 21,703 Other 22,632 9,361 ---------- ---------- 358,760 342,729 ---------- ---------- $5,307,321 $5,438,496 ---------- ---------- ---------- ----------33,142 33,058 ------------- -------------- 328,442 346,485 ------------- -------------- $4,550,516 $ 5,362,175 ------------- --------------
The accompanying notes are an integral part of these condensed statements. 3 OGLETHORPE POWER CORPORATION CONDENSED BALANCE SHEETS SEPTEMBER 30,Oglethorpe Power Corporation Condensed Balance Sheets March 31, 1997 and December 31, 1996 AND DECEMBER 31, 1995 - --------------------------------------------------------------------------------
(dollars in thousands)
1997 1996 1995 EQUITIES AND LIABILITIES (Unaudited) ---------------------------------------------------- CAPITALIZATION:Capitalization: Patronage capital and membership fees (including unrealized loss of ($276)1,791) at September 30, 1996March 31, 1997 and gain of $3,570$(844) at December 31, 19951996 on available-for-sale securities) $361,273 $338,891$315,855 $356,229 Long-term debt 4,122,458 4,207,3203,314,890 4,052,470 Obligations under capital leases 294,381 296,478 ---------- ---------- 4,778,112 4,842,689 ---------- ---------- CURRENT LIABILITIES:292,397 293,682 Obligation under Rocky Mountain transactions 58,466 41,685 ------------ ------------- 3,981,608 4,744,066 ------------ ------------- Current liabilities: Long-term debt and capital leases due within one year 109,545 89,675 Deferred margins to be refunded within one year 7,927 32,04788,875 159,622 Accounts payable 43,958 48,85540,308 42,891 Accrued interest 20,806 91,09614,243 15,931 Accrued and withheld taxes 22,486 1,7858,982 4,940 Other current liabilities 11,708 18,007 ---------- ---------- 216,430 281,465 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES: Decommissioning reserve 118,970 114,049 Accumulated deferred income taxes 65,510 65,5109,442 14,022 ------------ ------------- 161,850 237,406 ------------ ------------- Deferred credits and other liabilities: Gain on sale of plant, being amortized 59,113 60,868 Sale62,699 58,527 Net benefit of sale of income tax benefits, being amortized 44,170 50,19440,046 42,049 Net benefit of Rocky Mountain transactions, being amortized 94,764 70,701 Accumulated deferred income taxes 60,623 61,985 Decommissioning reserve 125,298 124,468 Other 25,016 23,721 ---------- ---------- 312,779 314,342 ---------- ---------- $5,307,321 $5,438,496 ---------- ---------- ---------- ----------23,628 22,973 ------------ ------------- 407,058 380,703 ------------ ------------- $ 4,550,516 $ 5,362,175 ------------ ------------- ------------ -------------
The accompanying notes are an integral part of these condensed statements. 4 OGLETHORPE POWER CORPORATION CONDENSED STATEMENTS OF REVENUES AND EXPENSES (UNAUDITED) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,Oglethorpe Power Corporation Condensed Statements of Revenues and Expenses (Unaudited) For the Three Month ended March 31, 1997 and 1996 AND 1995 - --------------------------------------------------------------------------------
(dollars in thousands)
Three Months Ended Nine Months Ended September 30, September 30,1997 1996 1995 1996 1995 ----------------------- ------------------------------------------------------ OPERATING REVENUES:Operating revenues: Sales to Members $268,939 $284,476 $771,378 $764,793$ 257,031 $ 243,952 Sales to non-Members 17,709 33,060 61,187 91,519 -------- -------- -------- -------- TOTAL OPERATING REVENUES 286,648 317,536 832,565 856,312 -------- -------- -------- -------- OPERATING EXPENSES:14,454 24,231 ----------- ------------- Total operating revenues 271,485 268,183 ----------- ------------- Operating expenses: Fuel 54,807 62,813 158,465 164,48444,889 48,240 Production 31,296 30,578 93,293 92,44335,595 30,369 Purchased power 67,217 85,706 189,443 207,22057,991 64,064 Power delivery 4,110 3,817 11,974 11,8853,878 3,658 Depreciation and amortization 36,684 35,820 109,774 102,95936,239 36,526 Taxes other than income taxes 7,035 7,181 21,761 19,6017,620 7,384 Other operating expenses 10,490 8,672 26,764 24,039 -------- -------- -------- -------- TOTAL OPERATING EXPENSES 211,639 234,587 611,474 622,631 -------- -------- -------- -------- OPERATING MARGIN 75,009 82,949 221,091 233,681 -------- -------- -------- -------- OTHER INCOME (EXPENSE)7,455 4,374 ----------- ------------- Total operating expenses 193,667 194,615 ----------- ------------- Operating margin 77,818 73,568 ----------- ------------- Other income (expense): Interest income 8,698 4,806 17,438 12,7177,434 4,060 Amortization of net benefit of sale of income tax benefits 2,798 2,008 Amortization of deferred margins 6,966 5,229 24,120 16,649-- 10,188 Allowance for equity funds used during construction 84 47 68 137 1,635 Other 2,769 3,242 7,805 9,505 -------- -------- -------- -------- TOTAL OTHER INCOME 18,480 13,345 49,500 40,506 -------- -------- -------- -------- INTEREST CHARGES:1,507 634 ----------- ------------- Total other income 11,823 16,937 ----------- ------------- Interest charges: Interest on long-term-debtlong-term debt and other obligations 81,488 86,429 245,848 254,96180,557 82,031 Allowance for debt funds used during construction (507) (791) (1,485) (20,186) -------- -------- -------- -------- NET INTEREST CHARGES 80,981 85,638 244,363 234,775 -------- -------- -------- -------- NET MARGIN $12,508 $10,656 $26,228 $39,412 -------- -------- -------- -------- -------- -------- -------- --------(352) (514) ----------- ------------- Net interest charges 80,205 81,517 ----------- ------------- Net margin $ 9,436 $ 8,988 ----------- ------------- ----------- -------------
The accompanying notes are an integral part of these condensed statements. 5 OGLETHORPE POWER CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30,Oglethorpe Power Corporation Condensed Statements of Cash Flows (Unaudited) For the Three Months ended March 31, 1997 and 1996 AND 1995 - --------------------------------------------------------------------------------
(dollars in thousands)
1997 1996 1995 ------------------------ CASH FLOWS FROM OPERATING ACTIVITIES:Cash flows from operating activities: Net margin $ 26,2289,436 $ 39,412 --------- --------- ADJUSTMENTS TO RECONCILE NET MARGIN TO NET CASH PROVIDED BY OPERATING ACTIVITIES:8,988 ----------- ----------- Adjustments to reconcile net margin to net cash provided by operating activities: Depreciation and amortization 132,565 149,588 Amortization56,911 39,425 Net benefit of deferred margins (24,120) (16,649)Rocky Mountain transactions 24,859 -- Deferred gain from Corporate Restructuring 4,757 -- Allowance for equity funds used during construction (137) (1,635)(84) (47) Amortization of deferred margins -- (10,188) Amortization of net benefit of sale of income tax benefits (2,798) (2,008) Other (2,998) (416) CHANGE IN NET CURRENT ASSETS, EXCLUDING LONG-TERM DEBT DUE WITHIN ONE YEAR AND DEFERRED MARGINS TO BE REFUNDED WITHIN ONE YEAR:280 1,149 Change in net current assets, excluding long-term debt due within one year and deferred margins to be refunded within one year: Receivables (8,013) 6,52414,092 (1,368) Inventories (9,858) 8,736(1,530) (3,137) Prepayments and other current assets 37 (1,915)(2,413) (3,000) Accounts payable (4,897) (19,757)(1,930) (9,096) Accrued interest (70,290) (19,735)(1,568) 6,380 Accrued and withheld taxes 20,701 21,1214,042 (18,663) Other current liabilities (6,299) (5,885) --------- --------- TOTAL ADJUSTMENTS 26,691 119,977 --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 52,919 159,389 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES:(3,356) (5,232) ----------- ----------- Total adjustments 91,262 (5,785) ----------- ----------- Net cash provided by operating activities 100,698 3,203 ----------- ----------- Cash flows from investing activities: Property additions (69,211) (107,989)(24,962) (24,824) Net proceeds from bond, reserve and construction funds 3,060 13,39721,793 2,397 Decrease (increase) in investment in associated organizations 429 1,210(51) 351 Increase in other short-term investments (14,629) (69,239) Increase(1,766) (10,000) Decrease (increase) in decommissioning fund (4,970) (5,254) --------- --------- NET CASH USED IN INVESTING ACTIVITIES (85,321) (167,875) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES:(2,423) 729 Net assets sold in Corporate Restructuring 716,365 -- Net liabilities extinguished in Corporate Restructuring (696,190) -- Other (4,168) -- ----------- ----------- Net cash provided by (used in) investing activities 8,598 (31,347) ----------- ----------- Cash flows from financing activities: Debt proceeds, net 3,092 142,341101,149 -- Debt payments, (75,809) (139,730)net (239,805) (25,366) Retirement of patronage capital (48,863) -- Other (168) (1,193) --------- --------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (72,885) 1,418 --------- --------- NET DECREASE IN CASH AND TEMPORARY CASH INVESTMENTS (105,287) (7,068) CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD(2,159) 505 ----------- ----------- Net cash used in financing activities (189,678) (24,861) ----------- ----------- Net decrease in cash and temporary cash investments (80,382) (53,005) Cash and temporary cash investments at beginning of period 132,783 201,151 190,642 --------- --------- CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD----------- ----------- Cash and temporary cash investments at end of period $ 95,86452,401 $ 183,574 --------- --------- --------- --------- CASH PAID FOR:148,146 ----------- ----------- ----------- ----------- Cash paid for: Interest (net of amounts capitalized) $ 301,67576,871 $ 239,48596,769 Income taxes - -3,525 --
The accompanying notes are an integral part of these condensed statements. 6 OGLETHORPE POWER CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30,Oglethorpe Power Corporation Notes to Condensed Financial Statements March 31, 1997 and 1996 AND 1995 (A) The condensed financial statements included herein have been prepared by Oglethorpe Power Corporation (Oglethorpe), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). In the opinion of management, the information furnished herein reflects all adjustments (which included only normal recurring adjustments) necessary to present fairly, in all material respects, the results for the periods ended September 30, 1996March 31, 1997 and 1995.1996. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations, although Oglethorpe believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in Oglethorpe's latest Annual Report on Form 10-K, as filed with the SEC. Certain amounts for 1996 have been reclassified to conform with the current period presentation. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL PROPOSEDCORPORATE RESTRUCTURING As reported in its Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and in its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996, Oglethorpe is planningand the Members completed a corporate restructuring (the Corporate Restructuring) on March 11, 1997. Pursuant to dividethe Corporate Restructuring, Oglethorpe divided itself into three specialized operating companies to respond to increasing competition and deregulationregulatory changes in the electric industry. In JuneAs part of the Corporate Restructuring, the transmission business is now owned and July of 1996, the Boards of Directors of Oglethorpe,operated by a newly formed Georgia electric membership corporation, Georgia Transmission Corporation (An Electric Membership Corporation) (GTC), and the system operations business is now owned and operated by a newly formed Georgia nonprofit corporation, Georgia System Operations Corporation (GSOC) unanimously approved a First Amended and Restated Restructuring Agreement (the Restructuring Agreement) which sets forth the terms and conditions on which the restructuring and related changes will occur. The current target date for full implementation of the restructuring is January 1, 1997; however, such effective date may, by the terms of the Restructuring Agreement, be extended by the three companies. On October 1, 1996,. Oglethorpe transferred its system operations assets, consisting of its control center and related energy control and revenue metering systems equipment to GSOC, a newly formed wholly owned subsidiary of Oglethorpe. The purchase price of these assets totaled approximately $9.4 million and was funded by GSOC's assumption of Oglethorpe's obligations under an existing Rural Utilities Service (RUS) note and by delivery of a purchase money note payable to Oglethorpe. GSOC will not become fully operational until the effective date of the restructuring. At that time, it is expected that the Members will also become members of GSOC. GSOC will then operate the control center as a separate entity and provide system operations services to the Members, Oglethorpe, GTC and third parties. Under the Restructuring Agreement, Oglethorpe will transfer its transmission business and assets to GTC, a newly formed electric membership corporation, which will thereafter own and operate the transmission system and provide transmission services to the Members, Oglethorpe and third parties. In preparation for the restructuring, Oglethorpe's Members have become members of GTC. Oglethorpe's investment in transmission and distribution plant less accumulated depreciation as of December 31, 1995 was approximately $650 million. The purchase price for the transmission business will be based on an appraisal of the fair market value of such business as of the closing date as determined by an independent appraiser. The purchase price will be paid by GTC's assumption of a portion of Oglethorpe's long-term secured debt and by cash obtained through third-party borrowing. Oglethorpe also will make a special patronage capital distribution to the Members which can be used by the Members to establish equity in and to provide initial working capital to GTC. In June and July of 1996, the Boards of Directors of Oglethorpe, GTC and GSOC unanimously approved an agreement (the Member Agreement) which sets forth those matters contemplated in the Restructuring Agreement that directly involve the Member corporations. The Member Agreement specifies the form of the new wholesale power contracts, transmission contracts and 8 system operations contracts to be signed by the Members. The Member Agreement and related contracts and documents were distributed to the Members for consideration and approval by their own Boards of Directors. All of the Member Boards have approved these documents; however, some Members have conditioned their approvals on implementation of a long-term power supply swap transaction. See POWER SUPPLY ARRANGEMENTS below for the status of implementation of a long-term power supply swap transaction. In addition to delivery of the Member Agreement by the Members and delivery of new wholesale power contracts, transmission contracts and system operations contracts, the restructuring remains subject to a number of additional conditions specified in the Restructuring Agreement, including (1) receiving a favorable ruling from the Internal Revenue Service that implementation of the new governance structure would not affect Oglethorpe's status as a cooperative for federal income tax purposes, (2) RUS approval of the restructuring, (3) governmental, lender and other third party consents, authorizations, waivers, orders and approvals, (4) receipt by GTC of certain capital contributions by the Members and (5) assurances from rating agencies that the ratings on Oglethorpe's outstanding fixed rate pollution control revenue bonds (PCBs) would not be lowered as a result of the restructuring and that such rating agencies would assign to any comparable bonds issued by GTC the same or better credit rating as assigned to Oglethorpe's fixed rate PCBs. Most of these conditions can be waived by Oglethorpe's Board, subject to RUS approval in certain instances. Three rating agencies have recently issued new indicative ratings for secured debt issued by or on behalf of Oglethorpe and have issued indicative credit ratings for GTC (both to be effective subsequent to the restructuring). Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., rated Oglethorpe's debt A and rated GTC AA; Fitch Investors Service, Inc. rated Oglethorpe's debt A and rated GTC A+; and Moody's Investors Service rated Oglethorpe's debt A3 and rated GTC A3. From the rating agency reports, it is not clear if these ratings meet the ratings condition of the Restructuring Agreement; however, if necessary, it is expected that Oglethorpe's Board will waive this condition. As part of the restructuring, Oglethorpe also expects to replace the RUS Mortgage under which its existing secured debt is secured with a new Indenture providing for a lien on substantially all of the real and tangible personal property of Oglethorpe. A draft of the Indenture was made available to the rating agencies before they issued the ratings stated above. It is expected that GTC will enter into a similar Indenture. Under Oglethorpe's existing RUS Mortgage, an indenture may be substituted for the RUS Mortgage with the consent of RUS and certain other secured parties, but without the consent of the trustees for certain outstanding PCB indebtedness of Oglethorpe, so long as two rating agencies advise Oglethorpe that the ratings on such PCB indebtedness will not be withdrawn or reduced as a result of the substitution of the Indenture for the RUS Mortgage. Oglethorpe expects to be able to satisfy this condition. The Oglethorpe Board of Directors recently approved a contingent rate mechanism that would be implemented in lieu of the rate schedules included in the new wholesale power contract, transmission contract and system operations contract in the event that Oglethorpe, GTC and GSOC decide to extend the effective date of the restructuring beyond January 1, 1997. This rate would remain in effect until such time as the restructuring becomes effective and essentially utilizes the 9 same rate structure that is in place for 1996 applied to the approved and somewhat lower budgeted costs for 1997. In light of the significant conditions that remain to be satisfied, including RUS and other governmental and third-party approvals and implementation of a long-term power supply swap transaction, Oglethorpe cannot now predict the actual timing of or the ultimate likelihood of full implementation of the restructuring or the governance changes previously described in Oglethorpe's 1995 Annual Report on Form 10-K. Until the restructuring is implemented, Oglethorpe currently anticipates that it will continue its current operations, and until the conditions applicable to the new governance structure have been satisfied, Oglethorpe will continue under its existing governance structure. POWER SUPPLY SWAP ARRANGEMENTS As a means of reducing the cost of power provided to the Members, Oglethorpe is continuing to utilize short-term power supply swap agreements. The initial agreement was with Enron Power Marketing, Inc. (EPMI) and was in place from January 4, 1996 through August 31, 1996. Effective September 1, Oglethorpe selected Duke/Louis Dreyfus L.L.C. (DLD) for a short-term power supply swap transaction that will supply Oglethorpe's requirements for the remainder of 1996. Under both of the swap agreements, the power marketer was required to sell to Oglethorpe at a favorable fixed rate all the energy necessary to meet the Members' requirements and Oglethorpe was required to sell to the power marketer at cost, subject to certain limitations, upon request all energy available from Oglethorpe's total power resources. Under both agreements, Oglethorpe continuedcontinues to operate the power supply systembusiness. Oglethorpe retained all of its owned and continuedleased generation assets. Oglethorpe also continues to dispatchadminister its power purchase contracts and provide marketing support functions to the generating resourcesMembers. POWER SUPPLY SWAP ARRANGEMENTS Oglethorpe has entered into a power marketer agreement with Morgan Stanley Capital Group Inc. (Morgan Stanley) to ensure system reliability. See "OPERATING REVENUES" and "OPERATING EXPENSES" below for a discussioncover 50% of the impactMembers' load requirements. The agreement was effective May 1, 1997. The agreement obligates Oglethorpe to purchase fixed quantities of energy at fixed prices, initially averaging 50% of the power supply swap agreementsMembers' forecasted requirements. Each Member selected a term for its obligation, as well as the portion of its forecasted requirements to be purchased as a fixed quantity. Oglethorpe is obligated to sell and Morgan Stanley is obligated to buy 50% of the output of each Member's percentage capacity responsibility (PCR) share (for the term and portion selected) of the "must run" units (primarily nuclear units). Oglethorpe is also obligated to make available the same share of all other resources, which Morgan Stanley may schedule for each 24-hour day. This schedule is set the day prior based on availability limitations in the resultscontract. After the schedule is set, Oglethorpe must make available the scheduled energy without regard to the actual availability of operationsthe units. Morgan Stanley does not have the right to the output of upgrades to these resources. Morgan Stanley must pay a contractually fixed amount each month and an amount for the first nine months of 1996. Oglethorpescheduled energy based on contractually fixed prices. The agreement has negotiated and obtained Board approvalan initial term extending to sign a long-term power supply swap agreement for approximately 50% of its Members' load requirements with LG&E Power Marketing Inc. (LPM). This agreement is structured to commence on January 1, 1997, initially on a short-term basis if RUSMarch 31, 2000. Upon the approval of the agreement has not been received. ThisRural Utilities Service (RUS), which is pending, the agreement will convert into a long-term agreement at the time of RUS approval, if received on or before June 1, 1997. Oglethorpe now expectsbe extended to focus its negotiations on completing a long-term contract with either EPMI or DLD for the remaining approximately 50% of its load. Oglethorpe may enter into an additional short-term power supply swap arrangement for the remaining approximately 50% of its load while it finalizes and obtains RUS approval of the long-term arrangements. STRATEGIC ALLIANCE WITH INTELLISOURCE In conjunctionMarch 31, 2005, with the restructuring and as a part of its continuing effortspurchase for certain Members declining to reduce costs,zero prior to that date. Initially, Oglethorpe has signed a letter of intentwill manage the system through purchases and/or sales to form a business alliance between its support services division and Intellisource, Inc., a nationally known service corporation. Underbalance the agreement, approximately 130 employees of Oglethorpe's support services division, which provides accounting, auditing, communications, human resources, facility management, purchasing, telecommunications and information technology services, will be transferred to Intellisource, 10 effective in early 1997. Oglethorpe, GTC and GSOC will be key customers and will be served on-site byfixed purchase obligation against the same managers and employees.actual requirements. SEPARATE DISPATCH OF PLANT WANSLEY AMENDMENTS As discussed in its Annual Report on Form 10-K for the fiscal year ended December 31, 1995, RUS has now approved the amendments to1996, the Plant Wansley Operating Agreement which give Oglethorpe the rightownership and operating agreements were amended in 1996 to allow each co-owner to dispatch separately its respective ownership share of Wansley Units No. 1 and No. 2.interest. Pursuant to the amendments, Oglethorpe expects to begin8 began separately dispatching Wansley Units No. 1 and No. 2 within the next six months. ROCKY MOUNTAIN LEASE TRANSACTIONon May 1, 1997. Oglethorpe is in the process of negotiating a lease transaction, which will be characterizedcontinues to use Georgia Power Company (GPC) as a saleits agent for income tax purposes and as a lease for state law purposes, for Oglethorpe's 74.61% ownership interest in the Rocky Mountain pumped storage hydroelectric facility (Rocky Mountain). This transaction will provide a substantial up-front cash payment to Oglethorpe which will be amortized over the term of the lease to reduce revenue requirements from the Members. Substantially all of the net cash benefit is expected to be used by Oglethorpe to reduce long-term debt. Oglethorpe expects to close at least a portion of this transaction in late 1996 and to close any remaining portion in early 1997.fuel procurement. RESULTS OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30,CORPORATE RESTRUCTURING Oglethorpe and the Members completed the Corporate Restructuring on March 11, 1997. As of that date, Oglethorpe transferred its transmission business and assets to a separate entity, GTC, and reflected the transfer of its system operations assets to a separate entity, GSOC. However, the Boards of Directors of Oglethorpe, GTC and GSOC determined that for ratemaking purposes all revenues and expenses related to operations of GTC and GSOC would remain with Oglethorpe until April 1, 1997. Pursuant to this approach, all transmission-related and systems operations-related revenues were assigned to Oglethorpe, and all transmission-related and systems operations-related costs were paid or reimbursed by Oglethorpe during the period March 11, 1997 through March 31, 1997. As a result, the Condensed Statements of Revenues and Expenses for the three months ended March 31, 1997 includes fully the revenues and expenses of the undivided, pre-restructuring Oglethorpe. See Oglethorpe's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 AND 1995for a pro-forma presentation of the Statement of Revenues and Expenses of the post-restructuring Oglethorpe for the year ended December 31, 1996 (Note 11 of Notes to Financial Statements). For the Three Months Ended March 31, 1997 and 1996 Oglethorpe's net margin for the three months and nine months ended September 30, 1996March 31, 1997 was $12.5 million and $26.2$9.4 million compared to $10.7 million and $39.4$9.0 million for the same periods of 1995. Net margin was higher for the nine month period of 1995 compared to 1996 primarily due to unbudgeted savings in 1995 from the continued capitalization of costs of Rocky Mountain due to the delay in commercial operation of the initial unit from April 1995 to June 1995.1996. OPERATING REVENUES Member revenues for the three months ended September 30, 1996March 31, 1997 were lower5.4% higher compared to the same period of 1995 due to1996. While capacity revenues were slightly lower energy revenues (discussed below). The increase in Member revenues for the ninethree months ended September 30, 1996March 31, 1997 compared to the same period of 1995 was due to the recovery of additional fixed costs of Rocky Mountain and the increased fixed cost responsibility resulting from the scheduled end of Sell-back revenues from Georgia Power Company (GPC) under the plant operating agreements (discussed below). Energy1996, energy revenues from sales to Members for the three months and nine months ended September 30, 1996of 1997 were 16.3% and 6.5% lower then20.0% higher than same periodsperiod of the prior year despiteyear. Megawatt-hour (MWh) sales to the fact that megawatt-hour (MWh) salesMembers were virtually unchanged for the current quarter and increased 7.7% year-to-date. Underversus the DLD and EPMI power supply swap agreements,same period of 1996. However, Oglethorpe's average energy revenue per MWh from sales to Members was 20.8% higher in 1997 compared to 1996 primarily due to the power marketers sold to Oglethorpe at a favorable fixed rate allpassthrough of significant savings derived from the energy necessary to meet the Members' requirements, which resulted in savings in energy costs of approximately $28.6 milliontransaction with Enron Power Marketing Inc. (EPMI) in the first ninequarter of 1996. During the first eight months of 1996. These savings were immediately passed through1996, Oglethorpe had a power supply arrangement with EPMI to supply 100% of the load requirements of the Members. Oglethorpe's average Member energy 11 revenue per MWhAs reported in its Annual Report on Form 10-K for the three months and nine monthsfiscal year ended September 30,December 31, 1996, was 16.3% and 13.1% less thaneffective January 1, 1997, Oglethorpe entered into a power supply arrangement with LG&E Power Marketing Inc. (LPM) for 50% of the same periodsload requirements of 1995, respectively.the Members. Sales to non-Members were primarily made pursuant to threetwo different types of contractual arrangements with GPC and from energy sales to other non-Member utilities. The following table summarizes the amounts of non-Member revenues from these sources for the three months ended March 31, 1997 and nine months ended September 30,1996: 9 THREE MONTHS ENDED MARCH 31, ------------------- 1997 1996 and 1995:
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 1996 1995 1996 1995 ---- ---- ---- ---- (dollars in thousands) GPC- Plant operating agreements $ - $ 89 $ - $10,096 GPC- Power supply arrangements 2,959 12,139 11,054 30,712 ITS transmission agreements 1,817 3,770 6,874 9,377 Sales to power marketers 1,150 - 8,846 - Sales to other utilities 11,783 17,062 34,413 41,334 ------- ------- ------- ------- Total $17,709 $33,060 $61,187 $91,519 ------- ---------------- --------- (DOLLARS IN THOUSANDS) GPC- Power supply arrangements...................... $ 7,802 $ 4,717 Sales to other utilities............................ 4,040 12,282 ITS transmission agreements......................... 2,180 3,372 Sales to power marketers............................ 432 3,860 ------- ------- Total............................................... $14,454 $24,231 ------- ------- ------- -------
The first two types of non-Member revenues were derived from contractual agreements with GPC. UnderFor the plant operating agreements, GPC purchased capacity and energy from Oglethorpe on a declining scale inthree months ended March 31, 1997, the early years of operation of certain co-owned generating units. As scheduled, effective June 1, 1995, revenues from GPC pursuant to all of the plant operating agreements ended. The secondlargest source of non-Member revenues iswas derived pursuant to power supply arrangements with GPC. These revenues are derived from energy sales arising from dispatch situations whereby GPC causes Plant Wansley to be operated when Oglethorpe's system does not require all of its contractual entitlement to the generation. These revenues compensate Oglethorpe for its costs since, under the operating agreements, Oglethorpe is responsible for its share of fuel costs any time a unit operates. Such sales to GPC were significantly lowerhigher in 19961997 compared to the same period of 1995. The third1996. As noted above under "General", with the commencement of the separate dispatch of Plant Wansley as of May 1, 1997, this type of sales to GPC will cease. Another source of non-Member revenues was primarily payments received from GPC for use of the Integrated Transmission System (ITS) and related transmission interfaces. GPC compensates Oglethorpe to the extent that Oglethorpe's percentage of investment in the ITS exceeds its percentage use of the system. In such case, Oglethorpe is entitled to income as compensation for the use of its investment by the other ITS participants. The decline in these revenues for the three month and nine month periodsperiod of 19961997 compared to 19951996 was the result of relatively greater usage by Oglethorpe compared to its relative investment. As a result of the Corporate Restructuring, all of the revenues in this category will accrue to GTC effective April 1, 1997. Under the DLD,current LPM power supply arrangement, and previously, under the EPMI power supply swap agreement,arrangement, sales to the power marketers represented the net energy transmitted on behalf of DLDLPM and EPMI off-system on a daily basis from Oglethorpe's total resources. Such energy was sold to DLDLPM and EPMI at Oglethorpe's cost, subject to certain limitations. The volume of sales to power marketers depends primarily on the power marketers' decisions for servicing their load requirements. Sales to other non-Member utilities in 1997 represent sales made directly by Oglethorpe only from the 50% of the power supply resources not sold to LPM. LPM now administers all third-party transactions directly with such parties for its 50% portion of the resources. Such sales in the first three months of 1996 were initiated by DLD and EPMI in 1996 while in 1995 these sales were made by Oglethorpe directly with the non-Member 12 utilities. While Oglethorpe maintainsmaintained the contractual relationship with these other utilities and administersreflected the sales transactions all profits on these sales to other utilities from Oglethorpe's total resources accrued to DLD and EPMI.in its revenues. 10 OPERATING EXPENSES The decrease in operatingOperating expenses decreased slightly for the three months and nine months ended September 30, 1996March 31, 1997 compared to the same periodsperiod of 19951996. The decrease was primarily attributable to decreases in fuel and purchased power costs, offset by higher production operations and maintenance (O&M) costs. Fuel costs decreased 6.9% in 1997 compared to 1996 even though total generation decreased only 2.1%. Such savings resulted from the difference in the mix of generation, with more nuclear and less fossil generation. The decrease in fuel costsfossil generation resulted partlyprimarily from an unplanneda maintenance outage during the month of July 1996February and March 1997 at Plant Scherer Unit No. 1 which resulted in a 10% decrease in1. The higher nuclear generation during the thirdfirst quarter of 1997 compared to 1996 was achieved as a result of having two refueling outages in the first quarter 1996 compared to none in 1997. Conversely, the increase in production O&M costs was primarily attributable to the maintenance outage at Plant Scherer Unit No. 1. Effective January 1, 1996, the costs of nuclear refueling outages are deferred and amortized over the 18-month period following the outage. The 9.5% decrease in purchased power costs in the first three months of 1997 compared to the same period of 1995 and partly due to1996 resulted from the utilization of lower price spot market coal at Plant Wansley. The decreasesavings in purchasedcapacity costs under the Block Power Sale Agreement (BPSA) with GPC. Effective September 1, 1996, Oglethorpe reduced its purchase commitment by a 250 MW Component Block. Purchased power energy costs from 1995were virtually unchanged. A total of 22.2% fewer MWhs were purchased power in the first three months of 1997 compared to 1996 reflected offsettingthe same period of 1996; however, the average purchased power cost savings and additional amounts of power purchased.per MWh was significantly higher. As noteddiscussed under "OPERATING REVENUES""Operating Revenues" above, significant energy cost savings of $28.6 million were realized in the first ninethree months of 1996 from the DLD and EPMI power supply swap agreements. In addition, thearrangement; such average purchased power marketers utilized 11.7% greater MWhs of purchased powercost per MWh was 16.4% higher in the first ninethree months of 19961997 compared to 1995the same period of 1996. The increase in other operating expenses for the three months ended March 31, 1997 was due to provide for Oglethorpe's Member load and for sales to other utilities.costs of the Corporate Restructuring. OTHER INCOME Other income for the three months and nine months ended September 30, 1996 increasedMarch 31, 1997 decreased compared to the same period of 19951996 primarily as a result of higher income from amortizationOglethorpe utilizing, as planned, all remaining amounts available under its deferred margin rate mechanism during 1996. (For a discussion of deferred margins, and higher interest income.see Note 1 of Notes to Financial Statements in Oglethorpe's Board of Directors authorizesAnnual Report on Form 10-K for the amount of deferred margins to be returned to the Members each year. For 1996, the remaining annual amount of $32 million was authorized as compared to $16 million for 1995.fiscal year ended December 31, 1996.) Interest income was higher in 1996the first three months of 1997 compared to 1995the same period of 1996 partly due to higher average cashinvestment balances and partly due to higher interest rates. INTEREST CHARGESFINANCIAL CONDITION CORPORATE RESTRUCTURING As of March 11, 1997, Oglethorpe transferred its transmission business and assets to GTC. Thereafter, the assets, liabilities and equity of GTC are no longer a part of Oglethorpe. The decrease in net interest chargespurchase price for the three months ended September 30, 1996 comparedtransmission business was based on an appraisal of the fair market value of such business, as determined by an independent appraiser, and was approximately $708 million. 11 The purchase price was paid primarily by GTC's assumption of a portion (approximately 16.86%) of Oglethorpe's long-term secured debt in an amount equal to approximately $686 million. Approximately $541 million of this debt (payable to RUS, Federal Financing Bank (FFB) and CoBank, ABC (CoBank)) became the sole obligation of GTC, and Oglethorpe was released from all liability with regard to this indebtedness. The remaining debt assumed by GTC in connection with the Corporate Restructuring, approximately $145 million, relates to Oglethorpe's pollution control revenue bonds (PCBs). While GTC assumed and agreed to pay this $145 million of debt, Oglethorpe is not legally released from its liability for this debt. The remainder of the purchase price was paid by GTC from cash obtained through a borrowing from National Rural Utilities Cooperative Finance Corporation (CFC) and the assumption of approximately $1 million of other Oglethorpe liabilities. Oglethorpe also made a special patronage capital distribution of approximately $49 million to the same periodMembers which was used by the Members to establish equity in and to provide initial working capital to GTC. On October 1, 1996, Oglethorpe transferred to GSOC its system operations assets, consisting of 1995its system control center and related energy control and revenue metering systems equipment. The purchase price of these assets totaled approximately $9.4 million and was funded by GSOC's assumption of Oglethorpe's obligations under an existing note held by the Rural Utilities Service (RUS), by delivery of a purchase money note payable to Oglethorpe and by the assumption of certain other liabilities of Oglethorpe. From October 1, 1996 to March 11, 1997, Oglethorpe was the sole member of GSOC; therefore, the assets transferred to GSOC remained in the consolidated balance sheet of Oglethorpe. The Members and GTC became members of GSOC on March 11, 1997; and thereafter the assets, liabilities and equity of GSOC are no longer a resultpart of savings fromOglethorpe. Most of the most recent refinancings. The increase in net interest chargesremaining comparisons of the balance sheets as of March 31, 1997 and December 31, 1996 exclude the effects of the Corporate Restructuring described above. See Oglethorpe's Annual Report on Form 10-K for the nine monthsfiscal year ended September 30,December 31, 1996 comparedfor a pro-forma presentation of the Balance Sheet of the post-restructuring Oglethorpe as of December 31, 1996 (Note 11 of Notes to 1995 resulted from Rocky Mountain becoming commercially operable in June 1995 (interest was capitalized for the first six months)Financial Statements). FINANCIAL CONDITION Total assets and total equity plus liabilities as of September 30, 1996March 31, 1997 were $5.3$4.6 billion which was $131$127 million less than the comparable total at December 31, 19951996 due to depreciation of plant and due to the decrease in cash and temporary cash investments. 13 ASSETS Property additions for the ninethree months ended September 30, 1996March 31, 1997 totaled $69.2$25.0 million and included additions, replacements and improvements to transmission and distribution facilities (subsequently sold to GTC) and existing generation facilities. All plant acquisition adjustments were related to transmission plant. As a result of the Corporate Restructuring discussed above, Oglethorpe no longer has any plant acquisition adjustments. The decrease in construction work in progress resulted from the projects sold to GTC and GSOC in the Corporate Restructuring. 12 The increase in the deposit on, the obligation under and net benefit of Rocky Mountain transactions resulted from the completion of the lease transactions for the remainder of Oglethorpe's interest in Rocky Mountain in January 1997. For a discussion of the Rocky Mountain transactions, see Notes 1 and 2 of Notes to Financial Statements in Oglethorpe's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. The decrease in the bond, reserve and construction funds was attributable to the utilization of a portion of the debt service reserve funds for debt service payments. The available funds resulted from Pollution Control Revenue Bond (PCB) refinancing projects in March 1997 for which the refunded PCBs did not require debt service reserve funds. The decrease in cash and temporary cash investments was partly due to property additions funded from cashthe payment of the $48.9 million special patronage capital distribution made in connection with the Corporate Restructuring discussed above and scheduled debt service payments. Other short-term investments is composed of those investments whose maturity periods exceed three months. During the first quarter of 1996, an additional $10 million was transferred into investments with maturities of more than three months. The increase in inventories primarily resulted from higher coal inventories at Plant Schererpartly due to an unplanned outage at Scherer Unit No. 1. In addition, coal inventories at Plant Scherer were lower than normal at year-end. The increase in other deferred charges primarily resulteda prepayment of Federal Financing Bank (FFB) debt made from the deferralproceeds of $14.7 millionthe Rocky Mountain transactions. The change in premium and loss on reacquired debt resulted partly from premiums paid in connection with FFB debt prepayment and the PCB refunding, excluding the effect of nuclear refueling outagethe portion of these costs assumed by GTC in the Corporate Restructuring. The decrease in deferred debt expense resulted partly from unamortized issuance cost related to Vogtle Units No. 1the PCB refunding being converted to premium and No. 2loss on reacquired debt and Hatch Unit No. 1 which are being recovered through rates over a periodpartly from the portion of eighteen months startingthese costs assumed by GTC in May and November 1996.the Corporate Restructuring transaction. EQUITY AND LIABILITIES Deferred margins to be refundedThe decrease in patronage capital and membership fees is the result of the $48.9 million special patronage capital distribution made in connection with the Corporate Restructuring, discussed above. The decrease in long-term debt due within one year decreased by $24.1 million which isresulted primarily from the amount that was refunded toprepayment of FFB debt, discussed above. In addition, the Members forbalance reflects the first nine monthsimpact of 1996. Accounts payable declined as of June 30, 1996 as a result of normal variations in the timing of payables activity. Accrued interest decreased primarily due to normal payments and accruals of interest.Corporate Restructuring transaction. Accrued and withheld taxes increased as a result of the normal monthly accruals of property taxes, which are generally paid in the fourth quarter of the year. Other current liabilities decreased partly due to the year-end accrual for employee incentive pay (subsequently paid in March 1996)1997) and partly due to normal activity. LIQUIDITY AND REFINANCING TRANSACTIONS In anticipation of the proposed restructuring and Oglethorpe's ongoing liquidity needs, Oglethorpe is evaluating its unsecured credit facilities. Oglethorpe does not anticipate renewing its $70 million uncommitted line of credit with CoBank, ACB, which expires on December 1, 1996. Prior to year-end, Oglethorpe may defease up to $309 million of PCBs and may issue commercial paper, on an interim basis, or refunding PCBs to finance the defeasance. 14Corporate Restructuring transaction. 13 PART II - OTHERII--OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS Number DescriptionExhibits NUMBER DESCRIPTION - ------------------------ ----------- 2.1(1) First Amended and Restated Restructuring Agreement, dated August 1, 1996, by and among Oglethorpe, Georgia Transmission Corporation (An Electric Membership Corporation) and Georgia System Operations Corporation. 3(ii) Bylaws of Oglethorpe as amended September 9, 1996. 10.5.2(a) Amendment, dated as of January 15, 1995, to the Plant Hal Wansley Operating Agreements by and among Georgia Power Company, Oglethorpe, Municipal Electric Authority of Georgia and City of Dalton, Georgia. 10.29(2) Master*10.34 Power Purchase and Sale Agreement between Duke/Louis Dreyfus L.L.C.Morgan Stanley Capital Group Inc. and Oglethorpe, dated as of August 31, 1996.April 7, 1997. 27.1 Financial Data Schedule (for SEC use only). - ---------------- (1) Pursuant to 17 C.F.R. 229.601(b)(2), the schedules and exhibits to this document are identified on a list of schedules and exhibits included within this document and are not filed herewith; however, the registrant hereby agrees that such schedules and exhibits will be provided to the Commission upon request. (2)------------------------ * Certain portions of this document have been omitted as confidential and filed separately with the Commission. (b) REPORTS ON FORMReports on Form 8-K No reports on Form 8-K were filed by Oglethorpe for the quarter ended September 30, 1996. 15March 31, 1997. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation) Date: AugustMay 14, 19961997 By: /s/ T. D. Kilgore ---------------------------------------------------------------------- T. D. Kilgore President and Chief Executive Officer (Principal Executive Officer) Date: AugustMay 14, 19961997 /s/ Gary M. Bullock -------------------------- Gary M. Bullock Secretary-TreasurerMac F. Oglesby --------------------------------------------- Mac F. Oglesby Treasurer and Director (Principal Financial Officer) Date: AugustMay 14, 19961997 /s/ Larry N. Brownlee -------------------------- Larry N. BrownleeRobert D. Steele --------------------------------------------- Robert D. Steele Controller (Principal Accounting Officer) 16 15