================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------------------------------
FORM 10-Q
(Mark One)
[ X ][X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000March 31, 2001
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[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.
================================================================================
OGLETHORPE POWER CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2000MARCH 31, 2001
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of September 30, 2000March 31, 2001
(Unaudited) and December 31, 19992000 3
Condensed Statements of Revenues and Expenses
(Unaudited) for the Three Months Ended
March 31, 2001 and 2000 5
Condensed Statements of Patronage Capital and Membership
Fees and Accumulated Other Comprehensive Margin
(Unaudited) for the Three Months Ended
March 31, 2001 and Nine Months ended September 30, 2000 and 1999 56
Condensed Statements of Cash Flows (Unaudited)
for the NineThree Months Ended September 30,March 31, 2001 and 2000 and 1999 67
Notes to the Condensed Financial Statements 78
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 89
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 1314
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 1416
SIGNATURES 1517
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Oglethorpe Power Corporation
Condensed Balance Sheets
September 30, 2000March 31, 2001 and December 31, 19992000
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
2001 2000 1999
Assets (Unaudited)
------------------------------------------------------------------------------
Electric plant, at original cost:
In service $4,876,397 $4,854,037$ 4,885,727 $ 4,883,680
Less: Accumulated provision for depreciation (1,720,845) (1,625,933)
--------------- ---------------
3,155,552 3,228,104(1,784,270) (1,752,176)
----------- -----------
3,101,457 3,131,504
Nuclear fuel, at amortized cost 79,940 84,56579,546 83,470
Construction work in progress 50,214 18,299
--------------- ---------------
3,285,706 3,330,968
--------------- ---------------33,164 24,841
----------- -----------
3,214,167 3,239,815
----------- -----------
Investments and funds:
Decommissioning fund, at market 148,439 135,703143,858 148,300
Deposit on Rocky Mountain transactions, at cost 62,626 59,57964,738 63,665
Bond, reserve and construction funds, at market 28,713 31,15829,110 29,167
Investment in associated organizations, at cost 18,790 17,91919,794 19,997
Other, at cost 2,069 2,535
--------------- ---------------
260,637 246,894
--------------- ---------------1,513 1,513
----------- -----------
259,013 262,642
----------- -----------
Current assets:
Cash and temporary cash investments, at cost 280,582 222,814274,284 330,622
Other short-term investments, at market 79,409 75,48284,131 81,715
Receivables 106,437 109,705102,951 143,353
Notes receivable 161,248 94,070and interim financing receivables 121,107 38,548
Inventories, at average cost 80,795 89,76684,191 75,389
Prepayments and other current assets 38,451 19,293
--------------- ---------------
746,922 611,130
--------------- ---------------33,684 59,824
----------- -----------
700,348 729,451
----------- -----------
Deferred charges:
Premium and loss on reacquired debt, being amortized 181,033 196,289171,955 175,944
Deferred amortization of Scherer leasehold 102,309 101,404102,880 102,753
Discontinued projects, being amortized 21,882 28,0208,731 9,490
Deferred debt expense, being amortized 16,698 17,07016,662 16,968
Other 26,820 32,847
--------------- ---------------
348,742 375,630
--------------- ---------------
$4,642,007 $4,564,622
=============== ===============27,480 31,107
----------- -----------
327,708 336,262
----------- -----------
$ 4,501,236 $ 4,568,170
=========== ===========
The accompanying notes are an integral part of these condensed financial
statements.
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Oglethorpe Power Corporation
Condensed Balance Sheets
March 31, 2001 and December 31, 2000
- --------------------------------------------------------------------------------
Oglethorpe Power Corporation
Condensed Balance Sheets
September 30, 2000 and December 31, 1999
- --------------------------------------------------------------------------------------------------------
(dollars in thousands)
2001 2000 1999
Equity and Liabilities (Unaudited)
-----------------------------------
Capitalization:-----------------------------------------
Capitalization:
Patronage capital and membership fees (including
unrealized loss of ($411) at
September 30, 2000 and ($1,609) at
December 31, 1999 on available-for-sale securities) $389,710 $370,025accumulated
other comprehensive margin $371,668 $392,682
Long-term debt 3,019,151 3,103,5902,976,318 3,019,019
Obligation under capital leases 269,393 275,224265,313 267,449
Obligation under Rocky Mountain transactions 62,626 59,579
-------------- --------------
3,740,880 3,808,418
-------------- --------------64,738 63,665
----------------- ----------------
3,678,037 3,742,815
----------------- ----------------
Current liabilities:
Long-term debt and capital leases due within one year 133,130 129,419138,713 136,053
Accounts payable 72,593 69,55557,633 114,964
Notes payable 201,916 88,479130,317 78,482
Accrued interest 56,970 50,20149,312 67,394
Accrued and withheld taxes 20,108 266,649 674
Other current liabilities 4,294 9,318
-------------- --------------
489,011 346,998
-------------- --------------6,080 23,017
----------------- ----------------
388,704 420,584
----------------- ----------------
Deferred credits and other liabilities:
Gain on sale of plant, being amortized 53,951 55,80752,714 53,332
Net benefit of sale of income tax benefits, being amortized 12,014 18,0218,009 10,012
Net benefit of Rocky Mountain transactions, being amortized 83,615 86,00482,022 82,819
Accumulated deferred income taxes 63,485 63,20363,485
Decommissioning reserve 175,020 164,510169,331 174,553
Interest rate swap arrangements 37,443 -
Other 24,031 21,661
-------------- --------------
412,116 409,206
-------------- --------------
$4,642,007 $4,564,622
============== ==============21,491 20,570
----------------- ----------------
434,495 404,771
----------------- ----------------
$4,501,236 $4,568,170
================= ================
The accompanying notes are an integral part of these condensed financial
statements.
4
Oglethorpe Power Corporation
Condensed Statements of Revenues and Expenses (Unaudited)
For the Three Months Ended March 31, 2001 and 2000
- --------------------------------------------------------------------------------
Oglethorpe Power Corporation
Condensed Statements of Revenues and Expenses and Comprehensive Margin (Unaudited)
For the Three and Nine Months Ended September 30, 2000 and 1999
- ------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
Three Months Nine Months2001 2000
1999 2000 1999
-------------------------- ----------------------------
Operating revenues:----------- ------------
Operating revenues:
Sales to Members $297,777 $370,841 $833,867 $878,424$296,506 $264,705
Sales to non-Members 16,656 22,795 40,475 39,893
------------- ---------- ----------10,101 10,177
----------- ------------
Total operating revenues 314,433 393,636 874,342 918,317
------------- ---------- ----------306,607 274,882
----------- ------------
Operating expenses:
Fuel 59,734 57,158 164,444 145,29844,180 49,112
Production 48,111 50,376 159,207 153,21654,221 58,993
Purchased power 124,170 192,413 280,239 338,148111,838 72,514
Depreciation and amortization 33,022 33,728 98,653 101,028
------------- ---------- ----------32,113 32,736
----------- ------------
Total operating expenses 265,037 333,675 702,543 737,690
------------- ---------- ----------242,352 213,355
----------- ------------
Operating margin 49,396 59,961 171,799 180,627
------------- ---------- ----------64,255 61,527
----------- ------------
Other income (expense):
Investment income 10,458 6,897 31,021 24,96110,249 8,949
Amortization of net benefitdeferred gains 619 619
Amortization of proceeds from sale of income tax benefits 2,799 2,799
8,396 8,396
Allowance for equity funds used during construction 60 34 88 8024 12
Other 2,173 1,010 4,267 2,808
------------- ---------- ----------682 259
----------- ------------
Total other income 15,490 10,740 43,772 36,245
------------- ---------- ----------14,373 12,638
----------- ------------
Interest charges:
Interest on long-term debtlong-term-debt and other obligations 66,476 64,757 198,577 198,744capital leases 53,558 55,237
Other interest 4,743 4,539
Allowance for debt funds used during construction (1,267) (297) (1,494) (695)
------------- ---------- ----------(351) (99)
Amortization of debt discount and expense 5,395 5,300
----------- ------------
Net interest charges 65,209 64,460 197,083 198,049
------------- ---------- ----------63,345 64,977
----------- ------------
Net margin (323) 6,241 18,488 18,823$15,283 $9,188
=========== ============
The accompanying notes are an integral part of these financial statements.
5
Condensed Statements of Patronage Capital and Membership Fees and
Accumulated Other Comprehensive Margin (Unaudited)
For the Three Months Ended March 31, 2001 and 2000
- --------------------------------------------------------------------------------
(dollars in thousands)
Patronage Accumulated
Capital and Other
Membership Comprehensive
Fees Margin (Loss) Total
---------------------------------------------------
Balance at December 31, 1999 $ 371,634 ($ 1,609) $ 370,025
Components of comprehensive margin:
Net margin 9,188 9,188
Unrealized gain on available-for-sale securities 174 174
---------
Total comprehensive margin 9,362
---------
--------- --------- ---------
Balance at March 31, 2000 $ 380,822 ($ 1,435) $ 379,387
========= ========= =========
Balance at December 31, 2000 $ 391,611 $ 1,071 $ 392,682
Components of comprehensive margin:
Net margin 15,283 15,283
Cumulative effect of accounting change into record unrealized
loss on interest rate swap arrangements as of January 1, 2001 (33,515) (33,515)
Unrealized loss on interest rate swap arrangements (3,928) (3,928)
Unrealized gain on available-for-sale securities 1,146 1,146
---------
Total comprehensive margin (loss) on available-for sale securities (649) (85) 1,198 (1,754)
------------- ---------- ---------- -----------
Comprehensive margin(21,014)
---------
--------- -------- ---------
Balance at March 31, 2001 $ 406,894 ($972) $6,156 $19,686 $17,069
============= ========== ========== =========== 35,226) $ 371,668
========= ========= =========
The accompanying notes are an integral part of these condensed financial
statements.
56
Oglethorpe Power Corporation
Condensed Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31, 2001 and 2000
- --------------------------------------------------------------------------------
Oglethorpe Power Corporation
Condensed Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 30, 2000 and 1999
- ----------------------------------------------------------------------------------------------------------------
(dollars in thousands)
2001 2000
1999
--------------------------------------
---------------------------------------------
Cash flows from operating activities:
Net margin $ 18,488 $ 18,823
------------- -------------$15,283 $9,188
---------------- ---------------
Adjustments to reconcile net margin to net cash
provided by operating activities:
Depreciation and amortization 138,707 136,50547,130 51,244
Allowance for equity funds used during construction (88) (80)(24) (12)
Amortization of deferred gains (1,856) (1,856)(619) (619)
Amortization of net benefit of sale of income tax benefits (8,396) (8,396)(2,799) (2,799)
Deferred income taxes - 283
-
Other 7,217 10,596(857) 3,341
Change in net current assets, excluding long-term debt
and capital leases due within one year and notes payable:
Notes receivable 141 220121 200
Receivables 3,268 (21,419)40,402 2,017
Inventories 8,971 (14,852)(8,802) 5,482
Prepayments and other current assets (19,159) 3,835(2,804) (2,174)
Accounts payable 3,038 17,677(57,331) (14,144)
Accrued interest 6,769 10,259(18,082) (35,718)
Accrued and withheld taxes 20,082 19,2195,975 6,698
Other current liabilities (5,025) (8,532)
------------- -------------(16,937) (1,277)
---------------- ---------------
Total adjustments 153,952 143,176
------------- -------------(14,627) 12,522
---------------- ---------------
Net cash provided by operating activities 172,440 161,999
------------- -------------656 21,710
---------------- ---------------
Cash flows from investing activities:
Property additions (75,967) (44,995)(11,075) (14,582)
Net proceeds from bond, reserve and construction funds 2,680 1,327
Increase399 3,013
Decrease in investment in associated organizations (871) (8)203 131
Increase in other short-term investments (2,964) (2,972)(1,613) (930)
Increase in decommissioning fund (8,896) (13,905)
------------- -------------(3,100) (2,861)
Other-generation equipment deposits (4,784) -
---------------- ---------------
Net cash used in investing activities (86,018) (60,553)
------------- -------------(19,970) (15,229)
---------------- ---------------
Cash flows from financing activities:
Long-term debt proceeds, net 3,518 (3,497)325 (2,957)
Long-term debt payments (81,253) (71,945)(40,233) (60,685)
Increase in notes payable 113,437 19,26551,835 41,774
Increase in notes receivable under interim financing agreement (67,319) (28,460)
Other 2,963 2,137
------------- -------------(48,951) (42,405)
---------------- ---------------
Net cash used in financing activities (28,654) (82,500)
------------- -------------(37,024) (64,273)
---------------- ---------------
Net increasedecrease in cash and temporary cash investments 57,768 18,946(56,338) (57,792)
Cash and temporary cash investments at beginning of period 330,622 222,814
106,235
------------- ----------------------------- ---------------
Cash and temporary cash investments at end of period $280,582 $ 125,181
============= =============$274,284 $165,022
================ ===============
Cash paid for:
Interest (net of amounts capitalized) $166,987 $ 161,459$73,497 $93,058
Income taxes - -
The accompanying notes are an integral part of these condensed financial
statements.
67
Oglethorpe Power Corporation
Notes to Condensed Financial Statements
September 30,March 31, 2001 and 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 September 30, 2000March 31, 2001 and
1999.2000. 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 19992000 have
been reclassified to conform with the current period presentation. The
results of operations for the three and nine month periodsperiod ended September
30, 2000March 31, 2001 are
not necessarily indicative of results to be expected for the full year.
(B) In June 1998, the Financial Accounting Standards Board issuedEffective January 1, 2001, Oglethorpe adopted Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments
and Hedging Activities." In June 2000,The standard establishes accounting and reporting
requirements for derivative instruments, including certain derivative
instruments embedded in other contracts, and hedging activities. It
requires the recognition of certain derivatives as assets or liabilities on
Oglethorpe's balance sheet and measurement of those instruments at fair
value. The accounting treatment of changes in fair value is dependent upon
whether or not a derivative instrument is classified as a hedge and if so,
the type of hedge. Oglethorpe has classified, pursuant to SFAS No. 133, the
interest rate swap arrangements as cash flow hedges. Accordingly, as of
January 1, 2001 Oglethorpe recorded as a cumulative effect adjustment an
unrealized loss in comprehensive margin of $33.5 million and a
corresponding increase in other liabilities.
The application of the new rules for SFAS No. 133 is still evolving and
further guidance from the Financial Accounting Standards Board issued SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities," an amendment of SFAS No. 133.
The new standard, as amended, requires an entity to recognize derivatives
as either assets or liabilities in theis expected
which could further impact Oglethorpe's financial statements, to measure
those instruments at fair value and to reflect 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.statements. In preparation for adoption of this Statement effective January 1, 2001,
Oglethorpe has completed an analysis of the information required by SFAS
133. Oglethorpe is currently assessing the impact that adoption of SFAS 133
will have on results of operations and financial condition.addition,
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.
78
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
For the Three Months Ended March 31, 2001 and Nine Months Ended September 30, 2000
and 1999
- ------------------------------------------------------------------------------------------------------------------------
Net Margin and Comprehensive Margin
Oglethorpe's net margins (loss)margin for the three-month and nine-month periodsthree months ended September 30, 2000 were ($323,000) and $18.5March 31, 2001 was $15.3
million respectively, compared to $6.2 million and $18.8$9.2 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 lower2000. The higher 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.current period resulted primarily from lower than budgeted
production expenses.
Operating Revenues
Revenues from sales to Oglethorpe's 39 retail electric distribution cooperative
members (the Members) for the three months and nineended March 31, 2001 were 12.0%
higher than such revenues for the first three months ended September 30,
2000 were 19.7% and 5.1% lower than the same periods of 1999.2000. Megawatt-hour
(MWh) sales to Members were 1.8% and 7.0%8.1% higher in the current three-month and
nine-month periodsperiod
compared to the same periodsperiod of 1999.2000. The increase in MWh sales to Members in
20002001 compared to 19992000 was primarily due to continued sales growth in the
Members' service territories. The average revenue per MWh from sales to Members
was 21.2% and 11.3% less3.6% higher for the current periods compared toperiod than in the same periodsperiod of 1999.2000.
The components of Member revenues for the three months ended March 31, 2001 and
nine months ended
September 30, 2000 and 1999 were as follows:
Three Months
Nine Months
Ended September 30, Ended September 30,March 31,
--------------
2001 2000 1999 2000 1999
---- ----
---- ----
(dollars in thousands)
Capacity revenues $151,433 $155,287 $464,361 $465,710$158,478 $155,316
Energy revenues 146,344 215,554 369,506 412,714
-------- --------138,028 109,389
-------- --------
Total $297,777 $370,841 $833,867 $878,424
======== ========$296,506 $264,705
======== ========
While capacity revenues from Members for the three months and nine months ended September 30, 2000March 31, 2001
compared to 1999 decreased2000 increased slightly, energy revenues were 8
32.1% and 10.5% lower26.2% higher for the
current periodsperiod compared to the same periodsperiod of 1999.2000. The decreaseincrease in energy
revenues in 20002001 was primarilypartly due to the pass-through of lowerhigher purchased power
energy costs and partly due to the increase in the volume of purchased MWhs (see
"Operating Expenses" below). Oglethorpe's average energy revenue per MWh from
sales to Members was 33.3% and 16.3% less16.7% higher in the current three-month and nine-month periods of 2000period compared to
the same periodsperiod of 1999.2000.
Sales to non-Members were primarily from energy sales to other utilities and
9
power marketers. The following table summarizes the amounts of non-Member
revenues from these sources for the three months ended March 31, 2001 and nine months ended September
30, 2000 and 1999:2000:
Three Months
Nine Months
Ended September 30, Ended September 30,March 31,
--------------
2001 2000 1999 2000 1999
---- ----
---- ----
(dollars in thousands)
Sales to other utilities $16,333 $21,884 $36,677 $34,588$ 8,156 $ 8,576
Sales to power marketers 323 911 3,798 5,305
------- ------- ------- -------1,945 1,601
----- -----
Total $16,656 $22,795 $40,475 $39,893
======= =======$10,101 $10,177
======= =======
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, salesSales to the power marketers represent the net energy transmitted on behalf of
LEMLG&E Energy Marketing Inc. (LEM) and Morgan Stanley off-system on a daily basis
from Oglethorpe's total resources.resources under the LEM and Morgan Stanley power
marketer arrangements. 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 nine months ended September 30, 2000first quarter of 2001 were 20.6% and 4.8% lower compared to the same periods of 1999. The decreases
were primarily due to lower purchased power costs for the current three-month
period13.6% higher compared to
the same period of 1999 and offset somewhat2000. The increase was due to higher fuelpurchased power costs
for the current nine-monththree-month period ended March 31, 2001 compared to the same period of
1999.
Purchased power2000, offset somewhat by decreases in fuel costs decreased 35.5% and 17.1%production costs for the
three months and nine
months ended September 30, 2000first quarter of 2001 compared to the same periodsperiod of 1999.2000.
Purchased power costs increased 54.2% in the current quarter compared to the
same period of 2000. This was primarily due a 36.5% increase in purchased MWhs
in 2001 compared to a decreasethe same period of 49.0% and 35.3% in2000. In addition, the average cost per
MWh of total purchased power increased 13.0% in 20002001 compared to the comparable
9
periodsperiod of 1999. Purchased MWhs increased 26.6% and 28.0% in 2000 compared to
the same periods of 1999.2000. Purchased power costs were as follows:
Three Months
Nine Months
Ended September 30, Ended September 30,March 31,
--------------
2001 2000 1999 2000 1999
---- ----
---- ----
(dollars in thousands)
Capacity costs $32,451 $22,858 $78,508 $75,207$ 24,918 $ 21,611
Energy costs 91,719 169,555 201,731 262,941
-------- -------- -------- --------86,920 50,903
------ ------
Total $124,170 $192,413 $280,239 $338,148$111,838 $ 72,514
======== ========
======== ========10
Purchased power capacity costs for the three months and nine months ended September 30, 2000March 31, 2001 were
42.0% and 4.4%15.3% higher than the same periodsperiod of 1999.2000. The higher capacity costs were
primarily a result of capacity charges incurred for new power purchase
agreements, including an agreement with Doyle I, LLC.LLC commencing in May 2000.
Purchased power energy costs for the three-month and nine-month periodsperiod of 20002001 were 45.9% and 23.3% lower70.8%
higher compared to the same periodsperiod of 1999. These decreases2000. This increase primarily resulted
from a combinationthe higher volume of lowerpurchased MWhs. In addition, higher prices in the
wholesale electricity markets and from purchases made under new power purchase agreements during the current
quarter. Thisfirst quarter of 2001 resulted in a
57.3% and 40.1% decrease25.1% increase in the average cost of purchased power energy per MWh for the
three-month and nine-month periodsperiod of 20002001 compared to 1999.
Fuel2000.
Production costs increased 13.2% fordecreased 8.1% in the current nine-monthquarter compared to the same
period of 2000. The lower production costs in 2001 resulted from lower operation
and maintenance (O&M) expenses at Plants Scherer and Wansley. O&M expenses for
Plant Scherer were higher in 2000 due to a $1.6 million true up for sharing of
O&M expenses between the owners of Units No. 3 and 4 related to the burning of
western coal. The lower O&M expenses in 2001 at Plant Wansley were due to lower
maintenance outage costs at Unit No. 2 in the first quarter of 2001 compared to
the same quarter of 2000.
For the current three-month period compared to the same period of 1999 primarily as a result of an increase of 9.8% in MWhs of
generation.2000 total
fuel costs decreased 10.0% while total generation decreased only 1.1%. For the
current nine-monththree-month period, nuclear generation was 6.8%8.1% higher and fossil
generation was 11.9% higher11.6% lower as compared to the same period of 1999.2000. The larger
portion of fossilnuclear generation, with its higherlower average fuel cost compared to
nuclear fuelfossil generation, yielded a 3.0% increase9.1% decrease in average fuel cost.
Other Income
Investment income was higherincreased 14.5% in the current three-month and nine-month periods of 2000period compared to
the same periodsperiod of 1999 partly2000 primarily 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. See "Financial Condition" for a further discussion of the
Sewell Creek Energy Facility.
10balances.
11
Financial Condition
Capital Requirements and Liquidity and Sources of Capital
- -------------------------------------------
As previously reported,---------------------------------------------------------
Under the Members' power requirements have exceeded existing
resources and are expected to continue to exceed existing resources over the
next several years. Under their Wholesale Power Contracts, withMembers can elect on an annual basis
whether to have 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 37provide joint planning and resource management
services. See "OGLETHORPE'S POWER SUPPLY RESOURCES--Future Power Resources" in
Item 1 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 and the fourth unit was declared
in commercial operation in September 2000.
Oglethorpe provided the interim financing for Sewell Creek, and as of September
30, 2000, $154.9 million of commercial paper was outstanding for this purpose.
In late September, Smarr EMC closed on a permanent financing for Sewell Creek on
a non-recourse basis to Oglethorpe, and in early October Smarr EMC reimbursed
Oglethorpe $154.5 million representing project costs incurred for Sewell Creek
construction through July 31, 2000. Oglethorpe in turn used the funds to retire
$154.5 million of 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-K10-K. Oglethorpe is in the
process of arranging the necessary power supply for a further discussion
of Smarr EMC.
As previously reported,Members that currently
participate in joint planning and resource management services. In this regard,
Oglethorpe has entered into agreements to acquire and construct six newgas-fired
combustion turbine units totaling 660turbines designed to provide 618 MW of capacity and has an option to
construct a 520 MWgas-fired
combined cycle facility.facility designed to provide 468 MW of capacity. Four of the
combustion turbines are targetedscheduled for completion in 2002, with the other two to
be completed in 2003. The combined cycle facility is targetedscheduled for completion in
2003. Oglethorpe estimates
capital expenditures forexpects that these facilities excluding interest during
construction,will ultimately be owned by two
separate entities, which will be approximately $88 million in 2000, $277 million in 2001,
$129 million in 2002 and $22 million in 2003. Theowned by those Members are considering
participationwho participate in these
facilities, through a subsidiary of Oglethorpe or Smarr
EMC or a similar entity.facilities.
Oglethorpe is currently providing interim financing for the construction of
these facilities. As of March 31, $116.8 million of commercial paper was
outstanding for this purpose. Oglethorpe expects to issue the maximum amount of
its commercial paper ($260 million) by the fall of 2001 in conjunction with the
interim financing forof these facilities and expectsnew generation facilities. Oglethorpe has submitted
loan applications to arrange for construction and permanent
financing either from the Rural Utilities Service (RUS) to provide financing for
these projects and expects a response from RUS later in 2001. The loan
applications were made on behalf of any entity that may ultimately own these
facilities. If RUS funding is delayed or another lender. See
"OGLETHORPE POWER CORPORATION--Relationshipdenied, Oglethorpe will continue to
finance these projects with RUS" in Item 1 of Oglethorpe's
1999 Annual Report on Form 10-K.funds from operations and will seek additional
construction financing until permanent financing is obtained.
Oglethorpe has also madecontinues to make payments under an option payment onagreement to purchase
equipment for a possiblegas-fired combined cycle project to be completed in 2004.facility. As of September 30, 2000,March 31, 2001,
Oglethorpe had $47.6$14.3 million of commercial paper outstanding relating to
payments under this agreement. Oglethorpe is pursuing a sale of this equipment,
but will continue to make payments under the interim financingagreement until the equipment is
sold.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Financial Condition--Capital Requirements" and "--Liquidity and
Sources of these future facilities.Capital" in Item 7 of Oglethorpe's 2000 Annual Report on Form 10-K.
General
- -------
Total assets and total equity plus liabilities as of September 30, 2000March 31, 2001 were $4.6$4.5
billion, which was $77.3$66.9 million greaterless than the total at December 31, 1999.2000. The
increasedecrease was due primarily to additionsdepreciation of plant, and to plant, an increasedecreases in
receivables and cash and temporary cash investments, and an increase in the notes receivable for
construction of the Sewell Creek Energy Facility, offset somewhat by
depreciation of plant.
11additions to construction work in progress.
12
Assets
Property additions for the ninethree months ended September 30, 2000March 31, 2001 totaled $76.0
million. These additions$11.1
million primarily consisted of costs related to the six
combustion turbine units discussed above,for purchases of nuclear fuel and for additions, replacements,
and improvements to existing generation facilities.
The $31.9 million increase in construction work in progress was due primarily to the
construction of the six combustion turbine units.
The increasedecrease in cash and temporary cash investments was thea result of cash
provided by operations exceeding cash used in
financing and investing activities, including property additions noted above and debt principal repayments.repayments,
exceeding cash provided from operations.
The decrease in receivables is primarily due to a cold December, which resulted
in higher energy charges billed to Members at December 31, 2000 than at March
31, 2001.
The increase in notes receivable resulted primarily from use of funds forand interim financing activities relatedreceivable is primarily due to the
construction of new generating facilities as discussed above. Oglethorpe expects
that these facilities will ultimately be owned by two separate entities, which
will be owned by those Members who participate in these facilities.
Inventories increased primarily as a result of the Sewell Creek
Energy Facility.
Prepaymentsseasonal buildup of the coal
stockpiles at plants Scherer and Wansley in preparation for the summer peak
period.
The decrease in prepayments and other current assets increasedwas primarily due to $17.9the
reclassification of $33.8 million in option payments relatedequipment to the two proposed combined cycle facilities,notes and estimated prepaymentsinterim financing
receivables. See above for Hatch Unit 1 O&M costs for October 2000 being $5.5
million higher compared to the estimate for January 2000.discussion of notes and interim financing
receivables.
The decrease in other deferred charges is primarilywas due to the 1999 refuelingamortization of nuclear
outage costs for Hatch Unit No. 1 being significantly higher than the refuelingexceeding additional nuclear outage costs incurred to date in 2000. Such costs are amortized to expense over
the 18-month operating cycle of the unit.costs.
Equity and Liabilities
NotesAccounts payable representsdecreased principally due to the accrual of lower off-system
energy charges at March 31, 2001 as compared to December 31, 2000. Due to the
cold weather in December, off-system energy purchases were significantly higher
in December. In addition, accruals for Georgia Power Company charges were lower
at March 31, 2001.
The increase in notes payable was attributable to commercial paper issued by
Oglethorpe as interim financing for costs incurred in the construction of Sewell Creek and the
future generation facilities discussed above. (See "Capital Requirements and
Liquidity and Sources of Capital" above for a discussion regarding permanent
financing of the reimbursement by Smarr EMC of the costs relating to
Sewell Creek construction.these projects.)
The increasedecrease in accrued interest primarily resulted from the accrual ofan interest expensepayment
associated with the lease of Plant Scherer lease. There was no comparableUnit No. 2, and to a lesser extent,
interest accrual at December 31, 1999 aspayments associated with certain Pollution Control Bonds. These
payments were made January 2, 2001 for interest accrued during the Scherer interest payment was made in
December 1999.previous six
months.
13
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 resulted primarily resulted from lower negative
cash balances at March 31, 2001 as compared to December 31, 2000, and for
payment of year-end accruals for professional and legal services.
Other deferred credits and liabilities increased principally dueaccruals.
The interest rate swap arrangements represent an unrealized loss from adoption
of SFAS No. 133. For further discussion see Note B of Notes to the accrual
of other post employment benefits, which are pass-through expenses from Georgia
Power Company.
12
Condensed
Financial Statements.
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"OGLETHORPE'S POWER SUPPLY
RESOURCES--Future Power Resources," "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 19992000 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
Changes in Risk Exposure
In April 2001, Oglethorpe entered into two swap agreements with respect to
specified quantities of natural gas in 2002 and 2003. Under the agreements,
Oglethorpe pays the counterparty at a fixed price and receives a payment based
on a market price index for natural gas. These payment obligations are netted,
such that if the market price index is lower than the fixed price, Oglethorpe
will make a net payment, and if the market price index is higher than the fixed
price, Oglethorpe will receive a net payment. Oglethorpe will pass through an
applicable portion of the costs and benefits of this agreement to Smarr EMC and
to a new entity that will own the combustion turbines scheduled for completion
in 2002 and 2003. See "Financial Condition--Capital Requirements and Sources of
Capital" in Item 2 above and "QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK--Commodity Price Risk" in Item 7A of Oglethorpe's 2000 Annual Report
on Form 10-K. Oglethorpe's market price risk exposure on these agreements is not
material. Oglethorpe may enter into similar agreements regarding natural gas in
the future.
14
Oglethorpe's market risks have not changed materially from the market risks
reported in Oglethorpe's 19992000 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.
1310-K.
15
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
27.1 Financial Data Schedule (for SEC use only).None.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by Oglethorpe for the quarter ended September 30, 2000.
14March
31, 2001.
16
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: November 14, 2000May 15, 2001 By: /s/ Thomas A. Smith
--------------------------------------------------------
Thomas A. Smith
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 14, 2000May 15, 2001 /s/ Mac F. Oglesby
------------------------------------------------------
Mac F. Oglesby
Treasurer
(Principal Financial Officer)
Date: November 14, 2000May 15, 2001 /s/ W. Clayton Robbins
----------------------------------------------------------
W. Clayton Robbins
Senior Vice President, Finance and Administration
(Principal Financial Officer)
Date: November 14, 2000May 15, 2001 /s/ Willie B. Collins
---------------------------------------------------------
Willie B. Collins
Controller
and Chief Risk
Officer
(Chief Accounting Officer)
15
17