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                          SECURITIES AND EXCHANGE COMMISSION
                                           
                               WASHINGTON, D.C.  20549 
                                     ------------------------------
                                      FORM 10-Q

(MARK ONE)(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 SEPTEMBERFor the quarterly period ended June 30, 19961997

                                       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 ofto 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 SEPTEMBERJUNE 30, 1996


                                                                        PAGE NO.1997
                                           

                                                                     Page No.
                                                                     --------
PART I - FINANCIAL INFORMATION

    Item 1.   Financial Statements                 

         Condensed Balance Sheets as of SeptemberJune 30, 19961997 (Unaudited)
         and December 31, 19951996......................................       3


         Condensed Statements of Revenues and Expenses (Unaudited)
         for the Three Months and NineSix Months Ended
         SeptemberJune 30, 19961997 and 19951996.....................................       5
    

         Condensed Statements of Cash Flows (Unaudited)
         for the NineSix Months Ended SeptemberJune 30, 19961997 and 19951996............       6


         Notes to the Condensed Financial StatementsStatements................       7


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


PART II - OTHER INFORMATION

    Item 1.   Legal Proceedings.....................................      15

    Item 6.   Exhibits and Reports on Form 8-K8-K......................      15


SIGNATURESSIGNATURES..........................................................      16




                                           2

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

OGLETHORPE POWER CORPORATION
CONDENSED BALANCE SHEETS
SEPTEMBERJune 30, 1997 and December 31, 1996
AND DECEMBER 31, 1995
- -------------------------------------------------------------------------------
                                                       (dollars in thousands)------------------------------------------------------------------------------
                                                        (DOLLARS IN THOUSANDS)
1997 1996 1995 ASSETS (Unaudited) --------------------------(UNAUDITED) ------------ ----------- ELECTRIC PLANT, AT ORIGINAL COST:Electric plant, at original cost: In service $5,719,078 $5,699,213service............................................ $4,904,500 $5,742,597 Less: Accumulated provision for depreciation (1,458,271) (1,362,431) ---------- ---------- 4,260,807 4,336,782depreciation.......... (1,350,645) (1,488,272) ------------ ------------- 3,553,855 4,254,325 Nuclear fuel, at amortized cost 95,437 94,013cost....................... 86,793 86,722 Plant acquisition adjustments, at amortized cost 4,419 5,214cost...................................... -- 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 74,492progress......................... 13,928 31,181 ------------ ------------- 3,654,576 4,376,381 ------------ ------------- Investments and funds: Bond, reserve and construction funds, at market 53,024 56,511market.............................................. 32,331 53,955 Decommissioning fund, at market....................... 94,782 86,269 Investment in associated organizations, at cost 15,424 15,853 ---------- ---------- 146,334 146,856 ---------- ---------- CURRENT ASSETS:cost................................................ 15,395 15,379 Deposit on Rocky Mountain transactions, at cost................................................ 59,436 41,685 ------------ ------------- 201,944 197,288 ------------ ------------- Current assets: Cash and temporary cash investments, at cost 95,864 201,151cost................................................ 41,532 132,783 Other short-term investments, at market 90,375 79,165 Receivables 107,572 99,559market............... 93,682 91,499 Receivables........................................... 120,105 113,289 Inventories, at average cost 92,807 82,949cost.......................... 85,907 89,825 Prepayments and other current assets 14,288 14,325 ---------- ---------- 400,906 477,149 ---------- ---------- DEFERRED CHARGES:assets.................. 12,133 14,625 ------------ ------------- 353,359 442,021 ------------ ------------- Deferred charges: Premium and loss on reacquired debt, being amortized 202,737 200,794amortized........................................... 191,153 201,007 Deferred amortization of Scherer leasehold 89,715 87,134 Discontinued projects, being amortized 22,776 24,305leasehold........................................... 93,460 90,717 Deferred debt expense, being amortized 20,900 21,135 Other 22,632 9,361 ---------- ---------- 358,760 342,729 ---------- ---------- $5,307,321 $5,438,496 ---------- ---------- ---------- ----------amortized................ 12,748 21,703 Other................................................. 36,795 33,058 ------------ ------------- 334,156 346,485 ------------ ------------- $4,544,035 $5,362,175 ------------ ------------- ------------ -------------
The accompanying notes are an integral part of these condensed statements. 3 OGLETHORPE POWER CORPORATION CONDENSED BALANCE SHEETS SEPTEMBERJune 30, 1997 and December 31, 1996 AND DECEMBER 31, 1995 - -------------------------------------------------------------------------------- (dollars in thousands)------------------------------------------------------------------------------ (DOLLARS IN THOUSANDS)
1996 1995 EQUITIES1997 EQUITY AND LIABILITIES (Unaudited) -------------------------(UNAUDITED) 1996 ------------ ------------- CAPITALIZATION:Capitalization: Patronage capital and membership fees (including unrealized loss of ($276)1,302) at SeptemberJune 30, 19961997 and gain of $3,570($844) at December 31, 19951996 on available-for-sale securities) $361,273 $338,891securities.......................................... $ 321,855 $ 356,229 Long-term debt 4,122,458 4,207,320debt........................................ 3,279,702 4,052,470 Obligations under capital leases 294,381 296,478 ---------- ---------- 4,778,112 4,842,689 ---------- ---------- CURRENT LIABILITIES:leases...................... 291,111 293,682 Obligation under Rocky Mountain transactions.......... 59,436 41,685 ------------ ------------- 3,952,104 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 32,047year..................................... 97,724 159,622 Accounts payable 43,958 48,855payable...................................... 49,733 42,891 Accrued interest 20,806 91,096interest...................................... 7,995 15,931 Accrued and withheld taxes 22,486 1,785taxes............................ 14,160 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 65,510liabilities............................. 6,077 9,540 ------------ ------------- 175,689 232,924 ------------ ------------- Deferred credits and other liabilities: Gain on sale of plant, being amortized 59,113 60,868 Saleamortized................ 61,993 58,527 Net benefit of sale of income tax benefits, being amortized 44,170 50,194 Other 25,016 23,721 ---------- ---------- 312,779 314,342 ---------- ---------- $5,307,321 $5,438,496 ---------- ---------- ---------- ----------amortized..................................... 38,044 42,049 Net benefit of Rocky Mountain transactions, being amortized..................................... 93,967 70,701 Accumulated deferred income taxes..................... 60,325 61,985 Decommissioning reserve............................... 133,945 124,468 Other................................................. 27,968 27,455 ------------ ------------- 416,242 385,185 ------------ ------------- $4,544,035 $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 SEPTEMBERFor the Three and Six Months ended June 30, 1997 and 1996 AND 1995 - -------------------------------------------------------------------------------- (dollars in thousands)----------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
Three Months Ended Nine Months Ended September 30, September 30,THREE MONTHS SIX MONTHS ---------------------- ---------------------- 1997 1996 19951997 1996 1995 ----------------------- ---------------------------------- ---------- ---------- ---------- OPERATING REVENUES:Operating revenues: Sales to Members $268,939 $284,476 $771,378 $764,793Members...................................... $230,180 $255,981 $487,211 $502,439 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: Fuel 54,807 62,813 158,465 164,484 Production 31,296 30,578 93,293 92,443non-Members.................................. 12,696 19,247 27,150 43,478 ---------- ---------- ---------- ---------- Total operating revenues................................ 242,876 275,228 514,361 545,917 ---------- ---------- ---------- ---------- Operating expenses: Fuel.................................................. 46,704 55,418 91,593 103,658 Production............................................ 33,948 31,628 69,544 61,997 Purchased power 67,217 85,706 189,443 207,220power....................................... 62,321 58,162 120,311 122,226 Power delivery 4,110 3,817 11,974 11,885delivery........................................ 101 4,206 3,979 7,864 Depreciation and amortization 36,684 35,820 109,774 102,959amortization......................... 30,142 36,564 66,381 73,090 Taxes other than income taxes 7,035 7,181 21,761 19,601taxes......................... 5,595 7,342 13,215 14,726 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)expenses.............................. 2,642 9,394 10,098 16,274 ---------- ---------- ---------- ---------- Total operating expenses................................ 181,453 202,714 375,121 399,835 ---------- ---------- ---------- ---------- Operating margin........................................ 61,423 72,514 139,240 146,082 ---------- ---------- ---------- ---------- Other income (expense): Interest income....................................... 6,320 4,680 13,755 8,740 Amortization of net benefit of sale of income 8,698 4,806 17,438 12,717tax benefits........................................ 2,799 2,008 5,597 4,015 Amortization of deferred marginsmargins...................... -- 6,966 5,229 24,120 16,649-- 17,154 Allowance for equity funds used during construction 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:construction... (35) 43 49 90 Other................................................. 2,061 386 3,569 1,021 ---------- ---------- ---------- ---------- Total other income...................................... 11,145 14,083 22,970 31,020 ---------- ---------- ---------- ---------- Interest charges: Interest on long-term-debtlong-term debt and other obligations 81,488 86,429 245,848 254,961obligations...... 67,251 82,329 147,808 164,360 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 -------- -------- -------- -------- -------- -------- -------- --------construction..... (193) (464) (545) (978) ---------- ---------- ---------- ---------- Net interest charges.................................... 67,058 81,865 147,263 163,382 ---------- ---------- ---------- ---------- Net margin.............................................. $ 5,510 $ 4,732 $ 14,947 $ 13,720 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
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 SEPTEMBERFor the Six Months Ended June 30, 1997 and 1996 AND 1995 - -------------------------------------------------------------------------------- (dollars in thousands)----------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
1997 1996 1995 ---------------------------------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES:Cash flows from operating activities: Net margin.................................................................................. $ 14,947 $ 13,720 ---------- ---------- Adjustments to reconcile net margin $ 26,228 $ 39,412 --------- --------- ADJUSTMENTS TO RECONCILE NET MARGIN TO NET CASH PROVIDED BY OPERATING ACTIVITIES:to net cash provided by operating activities: Depreciation and amortization 132,565 149,588 Amortizationamortization............................................................. 99,558 88,441 Net benefit of deferred margins (24,120) (16,649)Rocky Mountain transactions................................................ 23,266 -- Deferred gain from Corporate Restructuring................................................ 4,670 -- Allowance for equity funds used during construction (137) (1,635) 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: Receivables (8,013) 6,524 Inventories (9,858) 8,736construction....................................... (49) (90) Amortization of deferred margins.......................................................... -- (17,154) Amortization of net benefit of sale of income tax benefits................................ (5,597) (4,015) Other..................................................................................... (1,556) 2,783 Change in net current assets, excluding long-term debt due within one year and deferred margins to be refunded within one year: Receivables............................................................................... (6,815) (10,157) Inventories............................................................................... (5,063) (5,113) Prepayments and other current assets 37 (1,915)assets...................................................... 2,062 (189) Accounts payable (4,897) (19,757)payable.......................................................................... 7,495 (14,616) Accrued interest (70,290) (19,735)interest.......................................................................... (7,816) (3,907) Accrued and withheld taxes 20,701 21,121taxes................................................................ 9,220 13,686 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:liabilities................................................................. 2,869 (5,142) ---------- ---------- Total adjustments....................................................................... 122,244 44,527 ---------- ---------- Net cash provided by operating activities................................................. 137,191 58,247 ---------- ---------- Cash flows from investing activities: Property additions (69,211) (107,989)additions.......................................................................... (39,386) (51,727) Net proceeds from bond, reserve and construction funds 3,060 13,397funds...................................... 21,378 2,664 Decrease in investment in associated organizations 429 1,210organizations.......................................... (16) 389 Increase in other short-term investments (14,629) (69,239)investments.................................................... (2,395) (9,984) Increase in decommissioning fund (4,970) (5,254) --------- --------- NET CASH USED IN INVESTING ACTIVITIES (85,321) (167,875) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES:fund............................................................ (4,521) (3,245) Net assets sold in Corporate Restructuring.................................................. 717,907 -- Net liabilities extinguished in Corporate Restructuring..................................... (694,412) -- ---------- ---------- Net cash used in investing activities..................................................... (1,445) (61,903) ---------- ---------- Cash flows from financing activities: Debt proceeds, net 3,092 142,341net.......................................................................... 111,306 397 Debt payments (75,809) (139,730) 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 PERIODpayments............................................................................... (286,397) (42,430) Retirement of patronage capital............................................................. (48,863) -- Other....................................................................................... (3,043) (3,091) ---------- ---------- Net cash used in financing activities..................................................... (226,997) (45,124) ---------- ---------- Net decrease in cash and temporary cash investments........................................... (91,251) (48,780) 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.......................................... $ 95,86441,532 $ 183,574 --------- --------- --------- --------- CASH PAID FOR:152,371 ---------- ---------- ---------- ---------- Cash paid for: Interest (net of amounts capitalized)....................................................... $ 301,675145,392 $ 239,485157,883 Income taxes - -taxes................................................................................ $ 830 $ --
The accompanying notes are an integral part of these condensed statements. 6 OGLETHORPE POWER CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS SEPTEMBEROglethorpe Power Corporation Notes to Condensed Financial Statements June 30, 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 includedinclude only normal recurring adjustments) necessary to present fairly, in all material respects, the results for the periods ended SeptemberJune 30, 19961997 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 ITEMItem 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSManagement'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 its 39 retail electric distribution cooperative members (the Members) completed a corporate restructuring (the Corporate Restructuring) on March 11, 1997. Pursuant to divide itselfthe Corporate Restructuring, Oglethorpe was divided into three specialized operating companies to respond to increasing competition and deregulationregulatory changes in the electric industry. In JuneOglethorpe's transmission business was transferred to, and Julyis now owned and operated by, Georgia Transmission Corporation (An Electric Membership Corporation) (GTC), a recently formed Georgia electric membership corporation. Oglethorpe's system operations business was transferred to, and is now owned and operated by, Georgia System Operations Corporation (GSOC), a recently formed Georgia nonprofit corporation. Oglethorpe continues to operate its power supply business. Oglethorpe retained all of its owned and leased generation assets. Oglethorpe also continues to administer its power purchase contracts and provide marketing support functions to the Members. Immediately after the Corporate Restructuring, Oglethorpe's corporate name was changed from "Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation)" to "Oglethorpe Power Corporation (An Electric Membership Corporation)". POWER MARKETER ARRANGEMENTS Oglethorpe is utilizing long-term power marketer arrangements to reduce the cost of power to the Members. Oglethorpe has entered into power marketer agreements with LG&E Power Marketing Inc. (LPM) effective January 1, 1997, for approximately 50% of the load requirements of the Members and with Morgan Stanley Capital Group Inc. (Morgan Stanley) effective May 1, 1997, with respect to 50% of the forecasted load requirements of the Members. Under these power marketer agreements, Oglethorpe purchases energy at fixed prices covering a portion of the costs of energy to its Members. LPM and Morgan Stanley, in turn, have certain rights to market excess energy from the Oglethorpe system. All of Oglethorpe's existing generating facilities and power purchase arrangements are available for use by LPM and Morgan Stanley for the term of the respective agreements. Oglethorpe continues to be responsible for all the costs of its system resources but receives revenue from LPM and Morgan Stanley for the use of the resources. 8 Separate Dispatch of Plant Wansley As discussed in its Annual Report on Form 10-K for the fiscal year ended December 31, 1996, the Plant Wansley ownership and operating agreements were amended to allow each co-owner to dispatch separately its respective ownership interest in conjunction with contracting separately for long-term coal purchases procured by Georgia Power Company (GPC) and to procure separately long-term coal purchases. Pursuant to the amendments, Oglethorpe began separately dispatching Wansley Units No. 1 and No. 2 on May 1, 1997. Oglethorpe continues to use GPC as its agent for fuel procurement. Results of Operations 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 GTC and reflected the transfer of its system operations assets to GSOC. However, the Boards of Directors of Oglethorpe, GeorgiaGTC 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 six months ended June 30, 1997 reflect operations as a combined power supply, transmission and system operations company through March 31, 1997, and operations solely as a power supply company thereafter. Therefore, decreases in operating revenues, power delivery expenses, depreciation and amortization, taxes other than income taxes, operating margin, other operating income and net interest charges from 1996 to 1997 are primarily attributable to the Corporate Restructuring. See Oglethorpe's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 for a pro forma presentation of the Statement of Revenues and Expenses reflecting the exclusion of the transmission and system operations businesses, as though the Corporate Restructuring had occurred at the beginning of 1996, for the year ended December 31, 1996 (Note 11 of Notes to Financial Statements). For the Three Months and Six Months Ended March 31, 1997 and 1996 Oglethorpe's net margin for the three months and six months ended June 30, 1997 was $5.5 million and $14.9 million, respectively, compared to $4.7 million and $13.7 million for the same periods of 1996. Operating Revenues Revenues from sales to Members for the three months and six months ended June 30, 1997 were 10.1% and 3.0% lower compared to the same period of 1996. The decrease in revenues from Members was attributable to reduced capacity revenues relating to the transmission business, however, this decrease was offset somewhat by an increase in energy revenues from sales to Members for the three months and six months ended June 30, 1997 of 9.7% and 14.6% compared to the same periods of 1996, respectively. Megawatt-hour (MWh) sales to the Members were 6.1% and 9 3.5% lower in the current three-month and six-month periods compared to the same periods of 1996. As a result, Oglethorpe's average energy revenue per MWh from sales to Members for the three-month and six-month periods were 16.8% and 19.0% higher in 1997 compared to 1996, respectively, primarily due to the expiration of the short-term power marketer arrangement with Enron Power Marketing Inc. (EPMI) that had allowed Oglethorpe to passthrough significant savings in the first six months of 1996. During the first eight months of 1996, Oglethorpe had a power marketer arrangement with EPMI to supply 100% of the load requirements of the Members. As noted under "General--Power Marketer Arrangements" above, Oglethorpe has entered into power marketer arrangements with LPM effective January 1, 1997 for approximately 50% of the load requirements of the Members and with Morgan Stanley effective May 1, 1997 with respect to 50% of the forecasted load requirement of the Members. Sales to non-Members were primarily made pursuant to contractual arrangements with GPC and from energy sales to other non-Member utilities and power marketers. The following table summarizes the amounts of non-Member revenues from these sources for the three months and six months ended June 30, 1997 and 1996: Three Months Six Months Ended June 30, Ended June 30, ----------------- ------------------- 1997 1996 1997 1996 ------ ------ ------- ------- (dollars in thousands) GPC-Power supply arrangements $4,763 $3,208 $12,565 $ 7,925 Sales to other utilities 5,629 10,517 9,663 22,799 Sales to power marketers 2,304 3,837 2,736 7,697 ITS transmission agreements -- 1,685 2,186 5,057 ------ ------ ------- ------- Total $12,696 $19,247 $27,150 $43,478 ------ ------ ------- ------- ------ ------ ------- ------- The revenues from power supply arrangements with GPC were derived from energy sales arising from dispatch situations whereby GPC caused Plant Wansley to be operated when Oglethorpe's system did not require all of its contractual entitlement to the generation. These revenues compensated Oglethorpe for its costs because, under the operating agreement (before it was recently amended), Oglethorpe was responsible for its share of fuel costs any time a unit operated. Such sales to GPC were higher in 1997 compared to the same periods of 1996. As noted under "General--Separate Dispatch of Plant Wansley" above, with the commencement of the separate dispatch of Plant Wansley as of May 1, 1997, this type of sale to GPC has ended. Sales to other non-Member utilities in 1997 represent sales made directly by Oglethorpe. Oglethorpe sells for its own account any energy available from the portion of its resources dedicated to Morgan Stanley that is not scheduled by Morgan Stanley pursuant to its power marketer arrangement. Such sales during the first six months of 1996 were initiated by EPMI. Where EPMI did not have a 10 contractual relationship with the purchaser and Oglethorpe did, Oglethorpe recorded the sale and credited the revenues to EPMI in its monthly billing. Under the current LPM and Morgan Stanley power marketer arrangements, and previously, under the EPMI power marketer arrangement, sales to the power marketers represented the net energy transmitted on behalf of LPM, Morgan Stanley and EPMI off-system on a daily basis from Oglethorpe's total resources. Such energy was sold to LPM, Morgan Stanley 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. Another source of non-Member revenues was payments received from GPC for use of the Integrated Transmission Corporation (GTC) and 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(ITS) and related changes will occur. The current target date for full implementationtransmission interfaces. GPC compensated Oglethorpe to the extent that Oglethorpe's percentage of investment in the ITS exceeded its percentage use of the restructuring issystem. In such case, Oglethorpe was entitled to income as compensation for the use of its investment by the other ITS participants. As a result of the Corporate Restructuring, all of the revenues in this category have accrued to GTC since April 1, 1997. Operating Expenses The overall decrease in operating expenses for the three months and six months ended June 30, 1997 compared to the same periods of 1996 was primarily attributable to the elimination of expenses relating to the transmission business assumed by GTC in connection with the Corporate Restructuring. However, the decrease in fuel expense and the increase in production operations and maintenance costs were unaffected by the Corporate Restructuring. Fuel costs decreased 15.7% and 11.6% from the same periods of the prior year, respectively, even though total generation decreased only 9.1% and 5.7%, respectively. Such savings in average fuel costs resulted from the difference in the mix of generation, with more nuclear and less fossil generation in 1997. The decrease in fossil generation resulted primarily from a maintenance outage during February and March 1997 at Plant Scherer Unit No. 1. The higher nuclear generation during 1997 compared to 1996 was achieved as a result of having two refueling outages in the first six months of 1996 compared to one in 1997. Conversely, the increase in production operations and maintenance costs was primarily attributable to the maintenance outage at Plant Scherer Unit No. 1. Effective January 1, 1997; however,1996, the costs of nuclear refueling outages are deferred and amortized over the 18-month period following the outage. Purchased power cost for the six months ended June 30, 1997 compared to the same period of 1996 was virtually unchanged. A total of 16.8% fewer MWhs were purchased in 1997 compared to 1996, but average purchased power expense increased by 18.4%. As noted under "Operating Revenues" above, significant energy cost savings were derived in the first six months of 1996 from the EPMI power supply arrangement. The decrease in other operating expenses for 1997 compared to the same periods of the prior year was due primarily to transfer of administrative and general expenses relating to the transmission and system operations businesses in connection with the Corporate Restructuring. 11 Other Income Other income for the three months and six months ended June 30, 1997 decreased compared to the same periods of 1996 primarily as a result of Oglethorpe utilizing, as planned, all remaining amounts available under its deferred margin rate mechanism during 1996. (For a discussion of deferred margins, see Note 1 of Notes to Financial Statements in Oglethorpe's Annual Report on Form 10-K for the fiscal year ended December 31, 1996.) Interest income was higher in the three-month and six-month periods of 1997 compared to the same periods of 1996 partly due to higher earnings from the decommissioning fund and partly due to income from the deposits from the Rocky Mountain transactions. The deposits were made in December 1996 and January 1997. Financial 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 were no longer a part of Oglethorpe. The purchase price for the transmission business was based on an appraisal of the fair market value of such effective date may,business, as determined by an independent appraiser, and was approximately $708 million. 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 Members which was used by the terms of the Restructuring Agreement, be extended by the three companies.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 its system control center and related energy control and revenue metering systems equipment to GSOC, a newly formed wholly owned subsidiary of Oglethorpe.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) note and, 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 will not become fully operational untilremained in the effective dateconsolidated balance sheet of the restructuring. At that time, it is expected that theOglethorpe. The Members will also becomeand GTC became members of GSOC. GSOC will then operateon March 11, 1997; and thereafter the control center as a separate entityassets, liabilities 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 membersequity 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 continued to operate the power supply system and continued to dispatch the generating resources to ensure system reliability. See "OPERATING REVENUES" and "OPERATING EXPENSES" below for a discussion of the impact of the power supply swap agreements on the results of operations for the first nine months of 1996. Oglethorpe has negotiated and obtained Board approval 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 RUS approval of the agreement has not been received. This agreement will convert into a long-term agreement at the time of RUS approval, if received on or before June 1, 1997. Oglethorpe now expects 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 conjunction with the restructuring and asno longer a part of its continuing effortsOglethorpe. Most of the remaining comparisons of the balance sheets as of June 30, 1997 and December 31, 1996 are in addition to reduce costs, Oglethorpe has signed a letterthe effects of intent to form a business alliance between its support services division and Intellisource, Inc., a nationally known service corporation. Under the agreement, approximately 130 employees ofCorporate Restructuring described above. See 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 by the same managers and employees. 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 to the Plant Wansley Operating Agreement which give Oglethorpe the right to dispatch separately its ownership share of Wansley Units No. 1 and No. 2. Oglethorpe expects to begin separately dispatching Wansley Units No. 1 and No. 2 within the next six months. ROCKY MOUNTAIN LEASE TRANSACTION Oglethorpe is in the process of negotiating1996 for a lease transaction, which will be characterized as a sale 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 termpro forma 12 presentation of the lease to reduce revenue requirements from the Members. Substantially allBalance Sheet of the net cash benefit is expectedpost-restructuring Oglethorpe as of December 31, 1996 (Note 11 of Notes 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. RESULTS OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 Oglethorpe's net margin for the three months and nine months ended September 30, 1996 was $12.5 million and $26.2 million compared to $10.7 million and $39.4 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. OPERATING REVENUES Member revenues for the three months ended September 30, 1996 were lower compared to the same period of 1995 due to lower energy revenues (discussed below)Financial Statements). The increase in Member revenues for the nine months ended September 30, 1996 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). Energy revenues from sales to Members for the three months and nine months ended September 30, 1996 were 16.3% and 6.5% lower then same periods of the prior year despite the fact that megawatt-hour (MWh) sales were virtually unchanged for the current quarter and increased 7.7% year-to-date. Under the DLD and EPMI power supply swap agreements, the power marketers sold to Oglethorpe at a favorable fixed rate all of the energy necessary to meet the Members' requirements, which resulted in savings in energy costs of approximately $28.6 million in the first nine months of 1996. These savings were immediately passed through to the Members. Oglethorpe's average Member energy 11 revenue per MWh for the three months and nine months ended September 30, 1996 was 16.3% and 13.1% less than the same periods of 1995, respectively. Sales to non-Members were primarily made pursuant to three 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 and nine months ended September 30, 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 ------- ------- ------- ------- ------- ------- ------- -------
The first two types of non-Member revenues were derived from contractual agreements with GPC. Under the plant operating agreements, GPC purchased capacity and energy from Oglethorpe on a declining scale in 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 second source of non-Member revenues is 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 were significantly lower in 1996 compared to the same period of 1995. The third source of non-Member revenues was primarily payments 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 periods of 1996 compared to 1995 was the result of relatively greater usage by Oglethorpe compared to its relative investment. Under the DLD, and previously, the EPMI power supply swap agreement, sales to the power marketers represented the net energy transmitted on behalf of DLD and EPMI off-system on a daily basis from Oglethorpe's total resources. Such energy was sold to DLD and EPMI at Oglethorpe's cost, subject to certain limitations. Sales to other non-Member utilities 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 maintains the contractual relationship with these other utilities and administers the transactions, all profits on these sales to other utilities from Oglethorpe's total resources accrued to DLD and EPMI. OPERATING EXPENSES The decrease in operating expenses for the three months and nine months ended September 30, 1996 compared to the same periods of 1995 was primarily attributable to decreases in fuel and purchased power costs. The decrease in fuel costs resulted partly from an unplanned outage during the month of July 1996 at Scherer Unit No. 1 which resulted in a 10% decrease in generation during the third quarter of 1996 compared to the same period of 1995 and partly due to the utilization of lower price spot market coal at Plant Wansley. The decrease in purchased power energy costs from 1995 to 1996 reflected offsetting cost savings and additional amounts of power purchased. As noted under "OPERATING REVENUES" above, energy cost savings of $28.6 million were realized in the first nine months of 1996 from the DLD and EPMI power supply swap agreements. In addition, the power marketers utilized 11.7% greater MWhs of purchased power in the first nine months of 1996 compared to 1995 to provide for Oglethorpe's Member load and for sales to other utilities. OTHER INCOME Other income for the three months and nine months ended September 30, 1996 increased compared to the same period of 1995 primarily as a result of higher income from amortization of deferred margins and higher interest income. Oglethorpe's Board of Directors authorizes 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. Interest income was higher in 1996 compared to 1995 partly due to higher average cash balances and partly due to higher interest rates. INTEREST CHARGES The decrease in net interest charges for the three months ended September 30, 1996 compared to the same period of 1995 are a result of savings from the most recent refinancings. The increase in net interest charges for the nine months ended September 30, 1996 compared to 1995 resulted from Rocky Mountain becoming commercially operable in June 1995 (interest was capitalized for the first six months). FINANCIAL CONDITION Total assets and total equity plus liabilities as of SeptemberJune 30, 19961997 were $5.3$4.5 billion which, after adjustment for the Corporate Restructuring, was $131$85 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 ASSETSAssets Property additions for the ninesix months ended SeptemberJune 30, 19961997 totaled $69.2$39.4 million and included additions, replacements and improvements to transmission and distribution facilities (subsequently sold to GTC) for the first three months of 1997 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. The decrease in the bond, reserve and construction funds was attributable to the utilization of available excess debt service reserve funds for debt service payments. The increase in the deposit on, the obligation under and net benefit of the 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 cash and temporary cash investments was partly due to property additions funded from cashthe payment of the $49 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 increasea prepayment in other deferred charges primarily resulted1997 of Federal Financing Bank (FFB) debt made from the deferralproceeds of $14.7the December 1996 and January 1997 Rocky Mountain transactions. Prepayments and other current assets decreased due to a $1.1 million decrease in the estimated payment made to GPC for Plant Hatch and Plant Wansley operations and maintenance costs for July 1997 compared to the estimate paid for January 1997. The change in premium and loss on reacquired debt resulted partly from premiums paid in connection with FFB debt prepayment and the Pollution Control Bond (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 Maythe Corporate Restructuring. 13 Equity and November 1996. EQUITY AND LIABILITIES Deferred margins to be refundedLiabilities The decrease in patronage capital and membership fees is the result of the $49 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.the Corporate Restructuring. Accounts payable declined as of June 30, 1996 as a result ofincreased due to normal variations in the timing of payables activity. AccruedThe decrease in accrued interest decreased primarily due to normal paymentsresulted partly from the portion of debt assumed by GTC in the Corporate Restructuring and accruals of interest.partly from other factors. 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.Corporate Restructuring. 14 PART II - OTHER INFORMATION ITEMItem 1. Legal Proceedings On June 17, 1997, PECO Energy Company--Power Team ("PECO") filed an application with the Federal Energy Regulatory Commission ("FERC") pursuant to Section 211 of the Federal Power Act requesting FERC to compel Oglethorpe and/or GTC to provide PECO with 250 MW of firm point-to-point transmission service from the Tennessee Valley Authority ("TVA")-Integrated Transmission System ("ITS") interface to the Florida-ITS interface for an initial three-year period, with an automatic roll-over provision. PECO also seeks $10,000 per day in penalties from Oglethorpe and/or GTC, alleging bad faith and delays in negotiations. In their FERC response, GTC and Oglethorpe contend that they negotiated with PECO in good faith, and thus there is no reasonable basis for imposing the penalties sought by PECO. GTC also responded that it does not have firm "available transfer capability" at the TVA-ITS interface to fulfill PECO's request, after taking into account the need to protect system reliability, existing firm commitments, and use of the TVA-ITS interface to serve "native load," in accordance with North American Electric Reliability Council guidelines. In the event GTC is ordered by FERC to provide the requested service, PECO would be required to compensate GTC at rates set by FERC in the order. As a consequence of any such order, power purchased by Oglethorpe for delivery through the TVA-ITS interface would probably be curtailed, and could result in higher purchased power cost than would otherwise be the case. Although FERC transmission pricing policy is designed to ensure that a transmission provider is fully compensated for the cost of providing transmission service, potentially including opportunity cost, there can be no assurance that rates ordered by FERC for service to PECO would fully compensate GTC, Oglethorpe and the Members for the use of the transmission system and for any resulting increase in the cost of power. Item 6. EXHIBITS AND REPORTS ON FORMExhibits and Reports on Form 8-K (a) EXHIBITSExhibits Number Description - ---------- ----------- 2.1(1) First----------- 10.8.6 Supplemental Agreement to the 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,Wholesale Power Contract, dated as of January 15, 1995, to the Plant Hal Wansley Operating AgreementsMay 1, 1997 by and among Georgia Power Company,between Oglethorpe Municipaland Altamaha Electric Authority of Georgia and City of Dalton, Georgia. 10.29(2) Master Power Purchase and Sale Agreement between Duke/Louis Dreyfus L.L.C. and Oglethorpe, dated as of August 31, 1996.Membership Corporation, together with a Schedule identifying 38 other substantially identical Supplemental Agreements. 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---------------------------- (b) Reports 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 FORMForm 8-K No reports on Form 8-K were filed by Oglethorpe for the quarter ended SeptemberJune 30, 1996.1997. 15 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: August 14, 199611, 1997 By: /s/ T. D. Kilgore ------------------------------------------------------------ T. D. Kilgore President and Chief Executive Officer (Principal Executive Officer) Date: August 14, 199611, 1997 /s/ Gary M. Bullock -------------------------- Gary M. Bullock Secretary-TreasurerMac F. Oglesby ---------------------------------- Mac F. Oglesby Treasurer and Director (Principal Financial Officer) Date: August 14, 199611, 1997 /s/ Larry N. Brownlee -------------------------- Larry N. BrownleeRobert D. Steele ---------------------------------- Robert D. Steele Controller (Principal(Chief Accounting Officer) 16