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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JuneSeptember 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission File No. 33-7591
Oglethorpe Power Corporation
(An Electric Membership Corporation)
(Exact name of registrant as specified in its charter)
Georgia 58-1211925
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Post Office Box 1349
2100 East 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 to such
filing requirements for the past 90 days. 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.
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OGLETHORPE POWER CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNESEPTEMBER 30, 2000
Page No.
-------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of JuneSeptember 30, 2000
(Unaudited) and December 31, 1999 3
Condensed Statements of Revenues and Expenses and
Comprehensive Margin (Unaudited) for the Three Months
and SixNine Months ended JuneSeptember 30, 2000 and 1999 5
Condensed Statements of Cash Flows (Unaudited)
for the SixNine Months Ended JuneSeptember 30, 2000 and 1999 6
Notes to the Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Oglethorpe Power Corporation
Condensed Balance Sheets
JuneSeptember 30, 2000 and December 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
2000 1999
Assets (Unaudited)
-----------------------------------------------------------------------
Electric plant, at original cost:
In service $4,862,550$4,876,397 $4,854,037
Less: Accumulated provision for depreciation (1,689,412)(1,720,845) (1,625,933)
-------------- --------------
3,173,138--------------- ---------------
3,155,552 3,228,104
Nuclear fuel, at amortized cost 81,09079,940 84,565
Construction work in progress 45,92350,214 18,299
-------------- --------------
3,300,151--------------- ---------------
3,285,706 3,330,968
-------------- ----------------------------- ---------------
Investments and funds:
Decommissioning fund, at market 141,732148,439 135,703
Deposit on Rocky Mountain transactions, at cost 61,58862,626 59,579
Bond, reserve and construction funds, at market 28,18728,713 31,158
Investment in associated organizations, at cost 17,78218,790 17,919
Other, at cost 2,0942,069 2,535
-------------- --------------
251,383--------------- ---------------
260,637 246,894
-------------- ----------------------------- ---------------
Current assets:
Cash and temporary cash investments, at cost 186,906280,582 222,814
Other short-term investments, at market 77,85079,409 75,482
Customer receivables 128,172Receivables 106,437 109,705
Notes receivable 150,873161,248 94,070
Inventories, at average cost 81,79380,795 89,766
Prepayments and other current assets 16,19238,451 19,293
-------------- --------------
641,786--------------- ---------------
746,922 611,130
-------------- ----------------------------- ---------------
Deferred charges:
Premium and loss on reacquired debt, being amortized 186,184181,033 196,289
Deferred amortization of Scherer leasehold 102,007102,309 101,404
Discontinued projects, being amortized 23,92821,882 28,020
Deferred debt expense, being amortized 16,99816,698 17,070
Other 27,66026,820 32,847
-------------- --------------
356,777--------------- ---------------
348,742 375,630
-------------- --------------
$4,550,097--------------- ---------------
$4,642,007 $4,564,622
============== ============================= ===============
The accompanying notes are an integral part of these condensed financial
statements.
3
Oglethorpe Power Corporation
Condensed Balance Sheets
JuneSeptember 30, 2000 and December 31, 1999
- --------------------------------------------------------------------------------------------------------
(dollars in thousands)
2000 1999
Equity and Liabilities (Unaudited)
-----------------------------------
Capitalization:
Capitalization:
Patronage capital and membership fees (including
unrealized loss of ($1,192)411) at
JuneSeptember 30, 2000 and ($1,609) at
December 31, 1999 on available-for-sale securities) $389,253$389,710 $370,025
Long-term debt 3,040,9343,019,151 3,103,590
Obligation under capital leases 271,336269,393 275,224
Obligation under Rocky Mountain transactions 61,58862,626 59,579
-------------- --------------
3,763,1113,740,880 3,808,418
-------------- --------------
Current liabilities:
Long-term debt and capital leases due within one year 111,411133,130 129,419
Accounts payable 53,38072,593 69,555
Notes payable 170,476201,916 88,479
Accrued interest 25,53756,970 50,201
Accrued and withheld taxes 13,40620,108 26
Other current liabilities 3,8914,294 9,318
-------------- --------------
378,101489,011 346,998
-------------- --------------
Deferred credits and other liabilities:
Gain on sale of plant, being amortized 54,57053,951 55,807
Net benefit of sale of income tax benefits, being amortized 14,01612,014 18,021
Net benefit of Rocky Mountain transactions, being amortized 84,41183,615 86,004
Accumulated deferred income taxes 63,485 63,203
Decommissioning reserve 169,008175,020 164,510
Other 23,39524,031 21,661
-------------- --------------
408,885412,116 409,206
-------------- --------------
$4,550,097$4,642,007 $4,564,622
============== ==============
The accompanying notes are an integral part of these condensed financial
statements.
4
Oglethorpe Power Corporation
Condensed Statements of Revenues and Expenses and Comprehensive Margin (Unaudited)
For the Three and SixNine Months Ended JuneSeptember 30, 2000 and 1999
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
Three Months Ended June 30, SixNine Months Ended June 30,
2000 1999 2000 1999
-------------------------- ----------------------------
----------------------------Operating revenues:
Operating revenues:
Sales to Members $271,384 $262,540 $536,090 $507,583$297,777 $370,841 $833,867 $878,424
Sales to non-Members 13,642 11,377 23,820 17,099
----------- ----------- -----------16,656 22,795 40,475 39,893
------------- ---------- ---------- -----------
Total operating revenues 285,026 273,917 559,910 524,682
----------- ----------- -----------314,433 393,636 874,342 918,317
------------- ---------- ---------- -----------
Operating expenses:
Fuel 55,597 46,606 104,709 88,14159,734 57,158 164,444 145,298
Production 51,994 52,559 111,096 102,84748,111 50,376 159,207 153,216
Purchased power 83,555 82,729 156,069 145,735124,170 192,413 280,239 338,148
Depreciation and amortization 32,894 33,681 65,631 67,300
----------- ----------- -----------33,022 33,728 98,653 101,028
------------- ---------- ---------- -----------
Total operating expenses 224,040 215,575 437,505 404,023
----------- ----------- -----------265,037 333,675 702,543 737,690
------------- ---------- ---------- -----------
Operating margin 60,986 58,342 122,405 120,659
----------- ----------- -----------49,396 59,961 171,799 180,627
------------- ---------- ---------- -----------
Other income (expense):
Investment income 11,614 10,610 20,563 18,06410,458 6,897 31,021 24,961
Amortization of net benefit of sale of income tax benefits 2,799 2,799 5,597 5,5978,396 8,396
Allowance for equity funds used during construction 16 19 28 4660 34 88 80
Other 1,107 1,017 2,093 1,804
----------- ----------- -----------2,173 1,010 4,267 2,808
------------- ---------- ---------- -----------
Total other income 15,536 14,445 28,281 25,511
----------- ----------- -----------15,490 10,740 43,772 36,245
------------- ---------- ---------- -----------
Interest charges:
Interest on long-term debt and other obligations 67,026 68,242 132,102 133,98766,476 64,757 198,577 198,744
Allowance for debt funds used during construction (128) 62 (227) (398)
----------- ----------- -----------(1,267) (297) (1,494) (695)
------------- ---------- ---------- -----------
Net interest charges 66,898 68,304 131,875 133,589
----------- ----------- -----------65,209 64,460 197,083 198,049
------------- ---------- ---------- -----------
Net margin 9,624 4,483 18,811 12,581(323) 6,241 18,488 18,823
Net change in unrealized gain (loss) on available-for sale securities 243 (894) 417 (1,668)
----------- ----------- -----------(649) (85) 1,198 (1,754)
------------- ---------- ---------- -----------
Comprehensive margin $9,867 $3,589 $19,228 $10,913
=========== =========== ===========($972) $6,156 $19,686 $17,069
============= ========== ========== ===========
The accompanying notes are an intregalintegral part of these condensed financial
statements.
5
Oglethorpe Power Corporation
Condensed Statements of Cash Flows (Unaudited)
For the SixNine Months Ended JuneSeptember 30, 2000 and 1999
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
2000 1999
--------------------------------------
Cash flows from operating activities:
Net margin $ 18,81118,488 $ 12,58118,823
------------- -------------
Adjustments to reconcile net margin to net cash
provided by operating activities:
Depreciation and amortization 100,992 84,167138,707 136,505
Allowance for equity funds used during construction (28) (46)(88) (80)
Amortization of deferred gains (1,237) (1,237)(1,856) (1,856)
Amortization of net benefit of sale of income tax benefits (5,597) (5,597)(8,396) (8,396)
Deferred income taxes 283 -
Other 5,541 8,6247,217 10,596
Change in net current assets, excluding long-term debt and capital
leases due within one year and notes payable:
Notes receivable (13) 415141 220
Receivables (18,467) (14,914)3,268 (21,419)
Inventories 7,973 (15,636)8,971 (14,852)
Prepayments and other current assets 3,101 2,413(19,159) 3,835
Accounts payable (16,175) 14,7003,038 17,677
Accrued interest (24,665) 5,5356,769 10,259
Accrued and withheld taxes 13,380 12,74020,082 19,219
Other current liabilities (5,427) (9,630)(5,025) (8,532)
------------- -------------
Total adjustments 59,661 81,534153,952 143,176
------------- -------------------------
Net cash provided by operating activities 78,472 94,115172,440 161,999
------------- -------------
Cash flows from investing activities:
Property additions (53,607) (32,454)(75,967) (44,995)
Net proceeds from bond, reserve and construction funds 2,964 92
Decrease2,680 1,327
Increase in investment in associated organizations 137 138(871) (8)
Increase in other short-term investments (1,944) (1,832)(2,964) (2,972)
Increase in decommissioning fund (6,673) (10,868)(8,896) (13,905)
------------- -------------
Net cash used in investing activities (59,123) (44,924)(86,018) (60,553)
------------- -------------
Cash flows from financing activities:
Long-term debt proceeds, net (1,710) (4,667)3,518 (3,497)
Long-term debt payments (81,014) (52,938)(81,253) (71,945)
Increase in notes payable 81,997 58,356113,437 19,265
Increase in notes receivable under interim financing agreement (56,790) (70,435)(67,319) (28,460)
Other 2,260 9642,963 2,137
------------- -------------
Net cash used in financing activities (55,257) (68,720)(28,654) (82,500)
------------- -------------
Net decreaseincrease in cash and temporary cash investments (35,908) (19,529)57,768 18,946
Cash and temporary cash investments at beginning of period 222,814 106,235
------------- -------------
Cash and temporary cash investments at end of period $186,906$280,582 $ 86,706125,181
============= =============
Cash paid for:
Interest (net of amounts capitalized) $140,325$166,987 $ 108,936161,459
Income taxes - -
The accompanying notes are an integral part of these condensed financial
statements.
6
Oglethorpe Power Corporation
Notes to Condensed Financial Statements
JuneSeptember 30, 2000 and 1999
(A) The condensed financial statements included in this report 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
in this report reflects all adjustments (which include only normal
recurring adjustments) and estimates necessary to present fairly, in all
material respects, the results for the periods ended JuneSeptember 30, 2000 and
1999. 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 SEC rules
and regulations, although Oglethorpe believes that the disclosures are
adequate to make the information presented not misleading. These condensed
financial statements should 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 1999 have
been reclassified to conform with the current period presentation. The
results of operations for the three and sixnine month periods ended JuneSeptember
30, 2000 are not necessarily indicative of results to be expected for the
full year.
(B) In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." In June 2000, the Financial Accounting
Standards Board issued SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities," an amendment of SFAS No. 133.
These standards require that derivative instruments, with certain
exceptions, be recognizedThe new standard, as amended, requires an entity to recognize derivatives
as either assets or liabilities and be measuredin the financial statements, to measure
those instruments at fair value. Oglethorpe is requiredvalue and to adopt SFAS No. 133 and SFAS No. 138 byreflect the changes in fair value of
those instruments as either components of comprehensive margin or in net
margin, depending on the types of those instruments.
In preparation for adoption of this Statement effective January 1, 2001.2001,
Oglethorpe has completed an analysis of the information required by SFAS
133. Oglethorpe is currently assessing the impact that adoption of SFAS No. 133 and SFAS No. 138
will have on results of operations and financial condition. Oglethorpe will
continue to evaluate all current and possible future use of derivatives,
including their effectiveness for hedging, and to apply appropriate
procedures and methods for valuing them.
7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
For the Three Months and SixNine Months Ended JuneSeptember 30, 2000 and 1999
- --------------------------------------------------------------------------------------------------------------------------------------
Net Margin and Comprehensive Margin
Oglethorpe's net margins (loss) for the three-month and nine-month periods ended
September 30, 2000 were ($323,000) and $18.5 million, respectively, compared to
$6.2 million and $18.8 million for the same periods of 1999. As a result of
lower than budgeted fixed O&M expenses for the nine-month period of 2000,
Oglethorpe's Board of Directors approved a $10.5 million reduction to revenue
requirements. This was recorded as a $10.5 million reduction in Sales to Members
for the third quarter of 2000 which resulted in a lower net margin for the third
quarter of 2000. Year-to-date net margin, after this adjustment, is on target to
meet the margin requirement under Oglethorpe's Indenture. Comprehensive margin
for Oglethorpe is net margin adjusted for the net change in unrealized gains and
losses on investments in available-for-sale securities.
Operating Revenues
Revenues from sales to Oglethorpe's 39 retail electric distribution cooperative
members (the Members) for the three months and sixnine months ended JuneSeptember 30,
2000 were 3.4%19.7% and 5.6% higher5.1% lower than the same periods of 1999. Megawatt-hour
(MWh) sales to Members were 11.5%1.8% and 10.5%7.0% higher in the current three-month and
six-monthnine-month periods compared to the same periods of 1999. The increase in MWh
sales to Members in 2000 compared to 1999 was primarily due to continued sales
growth in the Members' service territories. The average revenue per MWh from
sales to Members was 7.3%21.2% and 4.4%11.3% less for the current periods compared to
the same periods of 1999.
The components of Member revenues for the three months and sixnine months ended
JuneSeptember 30, 2000 and 1999 were as follows:
Three Months SixNine Months
Ended JuneSeptember 30, Ended JuneSeptember 30,
------------------------ ---------------------
2000 1999 2000 1999
---- ---- ---- ----
(dollars in thousands)
Capacity revenues $157,612 $155,210 $312,928 $310,424$151,433 $155,287 $464,361 $465,710
Energy revenues 113,772 107,330 223,162 197,159146,344 215,554 369,506 412,714
-------- -------- --------------- --------
Total $271,384 $262,540 $536,090 $507,583$297,777 $370,841 $833,867 $878,424
======== ======== ======== ========
While capacity revenues from Members for the three months and sixnine months ended
JuneSeptember 30, 2000 compared to 1999 increaseddecreased slightly, energy revenues were
6.0%8
32.1% and 13.2% higher10.5% lower for the current periods compared to the same periods of
1999. The increasedecrease in energy revenues in 2000 was primarily due to higher MWh sales.the
pass-through of lower purchased power energy costs (see "Operating Expenses"
below). Oglethorpe's average energy revenue per MWh from sales to Members was
4.9%33.3% and 16.3% less in the current three-month periodand nine-month periods of 2000
compared to 1999 and 2.4% higher for
the six-month periodsame periods of 2000 compared to 1999. The lower average energy revenue
per MWh during the current quarter resulted primarily from lower average
purchased power energy costs (see "Operating Expenses" below).
8
Sales to non-Members were primarily from energy sales to other utilities and
power marketers. The following table summarizes the amounts of non-Member
revenues from these sources for the three months and sixnine months ended JuneSeptember
30, 2000 and 1999:
Three Months SixNine Months
Ended JuneSeptember 30, Ended JuneSeptember 30,
----------------------- -------------------
2000 1999 2000 1999
---- ---- ---- ----
(dollars in thousands)
Sales to other utilities $11,768 $8,878 $20,345 $12,705$16,333 $21,884 $36,677 $34,588
Sales to power marketers 1,874 2,499 3,475 4,394323 911 3,798 5,305
------- ------- ------- -------------
Total $13,642 $11,377 $23,820 $17,099$16,656 $22,795 $40,475 $39,893
======= ======= ======= =======
Sales to other utilities 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 Capital Group Inc. (Morgan Stanley) that is not
scheduled by Morgan Stanley pursuant to its power marketer arrangement.
Under the LG&E Energy Marketing Inc. (LEM) and Morgan Stanley power marketer
arrangements, sales to the power marketers represent the net energy transmitted
on behalf of LEM and Morgan Stanley off-system on a daily basis from
Oglethorpe's total resources. Oglethorpe sold this energy to LEM at Oglethorpe's
cost, subject to certain limitations, and to Morgan Stanley at a contractually
fixed price. The volume of sales to power marketers depends primarily on the
power marketers' decisions for servicing their load requirements.
Operating Expenses
Operating expenses for the three months and sixnine months ended JuneSeptember 30, 2000
were 3.9%20.6% and 8.3% higher4.8% lower compared to the same periods of 1999. These increasesThe decreases
were primarily due to lower purchased power costs for the current three-month
period compared to the same period of 1999 and offset somewhat due to higher
fuel costs for the current three-month and six-month
periods compared to the same periods of 1999 and due to an increase in
production and purchased power costs for the current six-monthnine-month period compared
to the same period of 1999.
Fuel costs increased 19.3% and 18.8% for the current three-month and six-month
periods compared to the same periods of 1999 primarily as a result of increases
of 17.1% and 16.1%, respectively, in MWhs of generation. For the current
three-month and six-month periods, nuclear generation was 13.8% and 14.7% higher
and fossil generation was 19.5% and 15.8% higher as compared to the same periods
of 1999. The higher fossil generation resulted in a 1.9% and 2.3% increase in
average fuel costs.
The 8.0% increase in production costs for the six-month period ended June 30,
2000 was due to higher operations and maintenance (O&M) expenses for Plant
Scherer and Plant Hatch and higher expenses incurred for special strategic
projects. The higher O&M expenses for Plant Scherer resulted from a $1.6 million
true up for sharing of O&M expenses between the owners of Units No. 1 and 2
(which include Oglethorpe) and the owners of Units No. 3 and 4 related to the
burning of western coal. The higher O&M expenses for Plant Hatch resulted from
increased amortization of nuclear
9
refueling outage costs in 2000 compared to the same period of
1999.
Purchased power costs increased 1.0%decreased 35.5% and 7.1%17.1% for the three months and sixnine
months ended JuneSeptember 30, 2000 compared to the same periods of 1999. This was
due to a 33.9%decrease of 49.0% and 29.2% increase35.3% in purchased MWhs, offset by 24.6% and 17.1% lowerthe average cost per MWh of total
purchased power in 2000 compared to the comparable
9
periods of 1999. Purchased MWhs increased 26.6% and 28.0% in 2000 compared to
the same periods of 1999. Purchased power costs were as follows:
Three Months SixNine Months
Ended JuneSeptember 30, Ended JuneSeptember 30,
---------------------- ------------------------
2000 1999 2000 1999
---- ---- ---- ----
(dollars in thousands)
Capacity costs $24,446 $26,941 $46,057 $52,349$32,451 $22,858 $78,508 $75,207
Energy costs 59,109 55,788 110,012 93,386
------- ------- ------- ------91,719 169,555 201,731 262,941
-------- -------- -------- --------
Total $83,555 $82,729 $156,069 $145,735
======= =======$124,170 $192,413 $280,239 $338,148
======== ======== ======== ========
Purchased power capacity costs for the three months and sixnine months ended
JuneSeptember 30, 2000 were approximately 9.3%42.0% and 12.0% lower4.4% higher than the same periods of 1999. These savingsThe
higher capacity costs were primarily a result of acapacity charges incurred for
new power purchase agreements, including an agreement Oglethorpe entered into with Georgia Power Company (GPC) effective April 1, 1999
which replaced the Block Power Sale Agreement.Doyle I, LLC.
Purchased power energy costs for the three-month and six-monthnine-month periods of 2000
were 6.0%45.9% and 17.8% higher23.3% lower compared to the same periods of 1999 primarily as1999. These decreases
resulted from a resultcombination of higher volume of
purchased MWhs during the first quarter of 2000 compared to the first quarter of
1999. Lowerlower prices in the wholesale electricity markets
and from purchases made under new power purchase agreements during the current
quarter, however,quarter. This resulted in a 20.9%57.3% and 8.8%40.1% decrease in the average cost of
purchased power energy per MWh for the three-month and six-monthnine-month periods of
2000 compared to 1999.
Fuel costs increased 13.2% for the current nine-month period compared to the
same period of 1999 primarily as a result of an increase of 9.8% in MWhs of
generation. For the current nine-month period, nuclear generation was 6.8%
higher and fossil generation was 11.9% higher as compared to the same period of
1999. The larger portion of fossil generation with its higher average fuel cost
compared to nuclear fuel yielded a 3.0% increase in average fuel cost.
Other Income
Investment income was higher in the three-monthsthree-month and six-monthnine-month periods of 2000
compared to the same periods of 1999 partly due to higher cash and temporary
cash investment balances and higher interest earnings on those investments,
partly due to higher earnings from the decommissioning fund and partly due to
interest earnings on the notes receivable from Smarr EMC relating to the Sewell
Creek Energy Facility and
partly due to higher cash and temporary cash investment balances and higher
interest earnings on those investments.Facility. See "Financial Condition" for a further discussion of the
Sewell Creek Energy Facility.
Net Margin and Comprehensive Margin
Oglethorpe's net margin for the three-month and six-month ended June 30, 2000
was $9.6 million and $18.8 million, respectively, compared to $4.5 million and
$12.6 million for the same periods of 1999. The higher net margin resulted
primarily from lower than budgeted fixed operations and maintenance (O&M)
expenses. Comprehensive margin for Oglethorpe is net margin adjusted for the net
change in unrealized gains and losses on investments in available-for-sale
securities.
10
Financial Condition
Capital Requirements and Sources of Capital
- -------------------------------------------
As previously reported, Oglethorpe continues to plan for the Members' power requirements above owned and leased generating units and long-term power
purchase contracts. The requirements for the Members have exceeded existing
resources and Oglethorpe expects the Members' requirements willare expected to continue to exceed existing resources over the
next several years. Under their Wholesale Power Contracts with Oglethorpe, the
Members may choose to satisfy all or a portion of their future requirements from
sources other than Oglethorpe, including Member-owned generation. Some of these
requirements are now being met by combustion turbine facilities owned by Smarr
EMC, a cooperative owned by 37 of Oglethorpe's 39 Members. Smarr EMC's 217 MW
Smarr Energy Facility began operating in June 1999. Three of the four units of
Smarr EMC's 492 MW Sewell Creek Energy Facility (Sewell Creek) were declared
in commercial operation in June and July 2000. The2000, and the fourth unit is scheduled forwas declared
in commercial operation in the fall ofSeptember 2000.
Oglethorpe is providingprovided the interim financing for the Sewell Creek, Energy Facility, and as of JuneSeptember
30, 2000, $145.5$154.9 million of commercial paper was outstanding for this purpose.
In late September, Smarr EMC has arrangedclosed on a permanent financing for the Sewell Creek Energy Facility on
a non-recourse basis to Oglethorpe. Oglethorpe, expects thatand in early October Smarr EMC will repayreimbursed
Oglethorpe $154.5 million representing project costs incurred for Sewell Creek
construction through July 31, 2000. Oglethorpe in turn used the interim financing in the fallfunds to retire
$154.5 million of 2000.outstanding commercial paper. See "THE MEMBERS--Smarr EMC" and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Financial Condition--Liquidity and Sources of Capital" in Items 1
and 7 of Oglethorpe's 1999 Annual Report on Form 10-K for a further discussion
of Smarr EMC.
In addition,As previously reported, Oglethorpe has entered into agreements to construct six
new combustion turbine units totaling 660 MW of capacity and has an option to
construct a 520 MW combined cycle facility. Four of the combustion turbines are
targeted for completion in 2002, with the other two to be completed in 2003. The
combined cycle facility is targeted for completion in 2003. Oglethorpe estimates
capital expenditures for these facilities, excluding interest during
construction, will be approximately $88 million in 2000, $277 million in 2001,
$129 million in 2002 and $22 million in 2003. The Members are considering
participation in these facilities, through a subsidiary of Oglethorpe or Smarr
EMC or a similar entity. Oglethorpe is currently providing some of the interim financing
for these facilities and expects to arrange for construction and permanent
financing either from the Rural Utilities Service or another lender. Oglethorpe is also
evaluating options for constructing or contracting for additional capacity
anticipated to be needed in 2004 and beyond. See
"OGLETHORPE POWER CORPORATION--Relationship with RUS" in Item 1 of Oglethorpe's
1999 Annual Report on Form 10-K. Oglethorpe has also made an option payment on
equipment for a possible combined cycle project to be completed in 2004. As of
September 30, 2000, Oglethorpe had $47.6 million of commercial paper outstanding
relating to the interim financing of these future facilities.
General
- -------
Total assets and total equity plus liabilities as of JuneSeptember 30, 2000 were
$4.6 billion, which was $14.5$77.3 million lessgreater than the total at December 31,
1999. The decreaseincrease was due primarily to depreciation ofadditions to plant, and the decreasean increase in cash
and temporary cash investments, offset somewhat byand an increase in the notes receivable for
construction of the Sewell Creek Energy Facility.Facility, offset somewhat by
depreciation of plant.
11
Assets
Property additions for the sixnine months ended JuneSeptember 30, 2000 totaled $53.6$76.0
million. These additions
11
primarily consisted of costs related to the six
combustion turbine units discussed above, purchases of nuclear fuel and
additions, replacements and improvements to existing generation facilities. The
$27.6$31.9 million increase in construction work in progress was due primarily to the
construction of the six combustion turbine units.
The decreaseincrease in cash and temporary cash investments is awas the result of cash
provided by operations exceeding cash used in financing and investing
activities, including property additions noted above and debt principal
repayments, exceeding cash provided from operations.
The increase in receivables resulted from significantly higher energy costs
billed to Members at June 30, 2000 compared to the energy costs billed to
Members at December 31, 1999.repayments.
The increase in notes receivable resulted primarily from use of funds for
interim financing activities related to the construction of the Sewell Creek
Energy Facility.
Prepayments and other current assets decreasedincreased primarily due to $17.9 million in
option payments related to the two proposed combined cycle facilities, and
estimated prepayments for construction and nuclear fuelHatch Unit 1 O&M costs for JulyOctober 2000 being $3.9$5.5
million lowerhigher compared to the estimate for January 2000.
The decrease in other deferred charges is primarily due to the 1999 refueling
outage costs for Hatch Unit No. 1 being significantly higher than the refueling
outage costs incurred for Hatch Unit No. 2to date in spring 2000. Such costs are amortized to expense over
the 18-month operating cycle of the unit.
Equity and Liabilities
Accounts payable decreased due to normal variations in the timing of payables
activity.
Notes payable represents commercial paper issued by Oglethorpe as interim
financing primarily for costs incurred in the construction of Sewell Creek Energy Facility. Oglethorpe expects to be reimbursedand the future
facilities discussed above. (See "Capital Requirements and Sources of Capital"
for a discussion of the reimbursement by Smarr EMC of the costs relating to
the
construction of Sewell Creek Energy Facility shortly after the last of the four
units is placed into commercial operation, which Oglethorpe anticipates will
occur in the fall of 2000.construction.)
The balance of the outstanding commercial paper was
issued as interim financing for the future generation facilities discussed
above.
The decreaseincrease in accrued interest primarily resulted from the fourth quarter Federal
Financing Bankaccrual of interest
payment being paid on January 3, 2000, whereas,expense associated with the second quarter Federal Financing BankScherer lease. There was no comparable interest
accrual at December 31, 1999 as the Scherer interest payment was paid on June 30.made in
December 1999.
Accrued and withheld taxes increased as a result of the normal monthly accruals
for property taxes, which are generally paid in the fourth quarter of the year.
The decrease in other current liabilities primarily resulted from year-end
accruals for professional and legal services.
Other deferred credits and liabilities increased principally due to the accrual
of other post employment benefits, which are pass-through expenses from Georgia
Power Company.
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Forward-Looking Statements and Associated Risks
This Quarterly Report on Form 10-Q contains forward-looking statements,
including statements regarding, among other items, (i) anticipated trends in
Oglethorpe's business and (ii) Oglethorpe's future capital requirements and
sources of capital. These forward-looking statements are based largely on
Oglethorpe's current expectations and are subject to a number of risks and
uncertainties, certain of which are beyond Oglethorpe's control. For certain
factors that could cause actual results to differ materially from those
anticipated by these forward-looking statements, see "CERTAIN FACTORS AFFECTING
THE ELECTRIC UTILITY INDUSTRY" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Miscellaneous--Competition" in
Items 1 and 7 of Oglethorpe's 1999 Annual Report on Form 10-K. In light of these
risks and uncertainties, there can be no assurance that events anticipated by
the forward-looking statements contained in this Quarterly Report will in fact
transpire.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Commodity Price Risk
Oglethorpe is exposed to electricity price risk relating to managing the supply
of energy to the Members. Oglethorpe supplies substantially all of the Members'
requirements from a combination of owned and leased generating plants and power
purchased under long-term contracts with other power suppliers and power
marketers. Therefore, only a small percentage of Oglethorpe's requirements is
purchased in the short-term market, and further only a small portion of these
requirements is covered by derivative commodity instruments. Oglethorpe's market
price risk exposure on these instruments is not material.
Oglethorpe utilizes a Risk Management Committee (RMC) to manage its risks
including those related to energy trading. The RMC consists of senior executive
officers including the Chief Executive Officer. The RMC has implemented risk
management policies, which include trading authority limits and counterparty
credit requirements for energy trading. The RMC plans to implement a
comprehensive risk management policy in the third quarter of 2000. The RMC
regularly reviews risk management reports and reports results to the Audit
Committee of the Board of Directors.
Oglethorpe has also entered into a service agreement with ACES Power Marketing
(APM) under which APM acts as Oglethorpe's agent in the purchase and sale of
short-term wholesale power. APM also provides related risk management services.
APM is subject to Oglethorpe's risk management policies, including trading
authority limits. APM is an organization owned by several generation and
transmission cooperatives that provides energy trading services to rural
electric cooperatives.
Changes in Risk Exposure
Oglethorpe's market risks have not changed materially from the market risks
reported in Oglethorpe's 1999 Annual Report on Form 10-K. For information
regarding Oglethorpe's risk management policies, see Item 7A of Oglethorpe's
Annual Report on Form 10-K and Item 3 of Oglethorpe's Quarterly Report on Form
10-Q for the quarter ended June 30, 2000.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
10.27 Employment Agreement, effective August 1, 2000, between Oglethorpe
and Michael Price.
10.28 Employment Agreement, effective August 1, 2000, between Oglethorpe
and William Clayton Robbins.
10.29 Employment Agreement, effective August 1, 2000, between Oglethorpe
and Elizabeth Bush Higgins.
27.1 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
No reports on Form 8-K were filed by Oglethorpe for the quarter ended
JuneSeptember 30, 2000.
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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 Corporation)
Date: August 11,November 14, 2000 By: /s/ Thomas A. Smith
--------------------------------------------------------
Thomas A. Smith
President and Chief Executive
Officer
(Principal Executive Officer)
Date: August 11,November 14, 2000 /s/ Mac F. Oglesby
------------------------------------------------------
Mac F. Oglesby
Treasurer
(Principal Financial Officer)
Date: August 11,November 14, 2000 /s/ W. Clayton Robbins
----------------------------------------------------------
W. Clayton Robbins
Senior Vice President,
Finance and Administration
(Principal Financial Officer)
Date: August 11,November 14, 2000 /s/ Willie B. Collins
---------------------------------------------------------
Willie B. Collins
Controller and Chief Risk
Officer
(Chief Accounting Officer)
15