UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One) | ||
ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended | ||
OR | ||
o | 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. 000-53908
(An Electric Membership Corporation)
(Exact name of registrant as specified in its charter)
Georgia (State or other jurisdiction of incorporation or organization) | 58-1211925 (I.R.S. employer identification no.) | |
2100 East Exchange Place Tucker, Georgia (Address of principal executive offices) | 30084-5336 (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 ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):Large Accelerated Filero o Accelerated Filer o Non-Accelerated Filer ý (Do not check if a smaller reporting company) Smaller Reporting Company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
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.
(This page has been left blank intentionally.)intentionally)
OGLETHORPE POWER CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2010MARCH 31, 2011
Oglethorpe Power Corporation
Condensed Balance Sheets (Unaudited)September 30, 2010March 31, 2011 and December 31, 20092010
(dollars in thousands) | (dollars in thousands) | |||||||||||||||
2010 | 2009 | 2011 | 2010 | |||||||||||||
Assets | Assets | Assets | ||||||||||||||
Electric plant: | Electric plant: | Electric plant: | ||||||||||||||
In service | $ | 6,662,637 | $ | 6,550,938 | In service | $ | 6,678,552 | $ | 6,672,253 | |||||||
Less: Accumulated provision for depreciation | (3,074,288 | ) | (2,993,215 | ) | Less: Accumulated provision for depreciation | (3,135,423 | ) | (3,101,731 | ) | |||||||
3,588,349 | 3,557,723 | 3,543,129 | 3,570,522 | |||||||||||||
Nuclear fuel, at amortized cost | 236,276 | 215,949 | Nuclear fuel, at amortized cost | 271,697 | 249,563 | |||||||||||
Construction work in progress | 1,049,600 | 626,824 | Construction work in progress | 1,391,592 | 1,195,475 | |||||||||||
4,874,225 | 4,400,496 | 5,206,418 | 5,015,560 | |||||||||||||
Investments and funds: | Investments and funds: | Investments and funds: | ||||||||||||||
Decommissioning fund | 251,939 | 239,746 | Decommissioning fund | 275,220 | 265,483 | |||||||||||
Deposit on Rocky Mountain transactions | 121,556 | 115,641 | Deposit on Rocky Mountain transactions | 125,656 | 123,573 | |||||||||||
Investment in associated companies | 54,794 | 53,199 | Investment in associated companies | 56,534 | 56,125 | |||||||||||
Long-term investments | 91,031 | 87,129 | Long-term investments | 80,607 | 79,212 | |||||||||||
Other, at cost | 3,493 | 4,597 | Other, at cost | 3,540 | 3,570 | |||||||||||
522,813 | 500,312 | 541,557 | 527,963 | |||||||||||||
Current assets: | Current assets: | Current assets: | ||||||||||||||
Cash and cash equivalents, at cost | 432,796 | 579,069 | Cash and cash equivalents, at cost | 540,864 | 672,212 | |||||||||||
Restricted cash, at cost | 6,299 | 22,405 | Restricted cash, at cost | 175,001 | 6,300 | |||||||||||
Restricted short-term investments | 80,771 | 80,590 | Restricted short-term investments | 15,125 | 97,286 | |||||||||||
Receivables | 127,703 | 110,258 | Receivables | 97,906 | 106,674 | |||||||||||
Inventories, at average cost | 185,701 | 209,837 | Inventories, at average cost | 187,385 | 171,815 | |||||||||||
Prepayments and other current assets | 13,778 | 9,393 | Prepayments and other current assets | 12,378 | 13,416 | |||||||||||
847,048 | 1,011,552 | 1,028,659 | 1,067,703 | |||||||||||||
Deferred charges: | Deferred charges: | Deferred charges: | ||||||||||||||
Premium and loss on reacquired debt, being amortized | 114,832 | 122,847 | Deferred debt expense, being amortized | 60,209 | 59,202 | |||||||||||
Deferred amortization of capital leases | 68,293 | 77,755 | Regulatory assets | 311,874 | 311,136 | |||||||||||
Deferred debt expense, being amortized | 53,865 | 57,262 | Other | 16,714 | 15,498 | |||||||||||
Deferred outage costs, being amortized | 31,644 | 31,319 | ||||||||||||||
Deferred tax assets | — | 24,000 | 388,797 | 385,836 | ||||||||||||
Deferred asset associated with retirement obligations | 27,952 | 31,413 | ||||||||||||||
Deferred interest rate swap termination fees, being amortized | 26,303 | 29,296 | $ | 7,165,431 | $ | 6,997,062 | ||||||||||
Deferred depreciation expense, being amortized | 52,988 | 54,056 | ||||||||||||||
Other | 29,421 | 29,926 | ||||||||||||||
405,298 | 457,874 | |||||||||||||||
$ | 6,649,384 | $ | 6,370,234 | |||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
Oglethorpe Power Corporation
Condensed Balance Sheets (Unaudited)September 30, 2010March 31, 2011 and December 31, 20092010
(dollars in thousands) | (dollars in thousands) | |||||||||||||||
2010 | 2009 | 2011 | 2010 | |||||||||||||
Equity and Liabilities | Equity and Liabilities | Equity and Liabilities | ||||||||||||||
Capitalization: | Capitalization: | Capitalization: | ||||||||||||||
Patronage capital and membership fees | $ | 598,071 | $ | 562,219 | Patronage capital and membership fees | $ | 612,062 | $ | 595,952 | |||||||
Accumulated other comprehensive deficit | (168 | ) | (1,253 | ) | Accumulated other comprehensive deficit | (490 | ) | (469 | ) | |||||||
597,903 | 560,966 | 611,572 | 595,483 | |||||||||||||
Long-term debt | 4,170,484 | 4,178,981 | Long-term debt | 4,708,066 | 4,657,127 | |||||||||||
Obligation under capital leases | 189,127 | 208,945 | Obligation under capital leases | 176,896 | 179,288 | |||||||||||
Obligation under Rocky Mountain transactions | 121,556 | 115,641 | Obligation under Rocky Mountain transactions | 125,656 | 123,573 | |||||||||||
5,079,070 | 5,064,533 | 5,622,190 | 5,555,471 | |||||||||||||
Current liabilities: | Current liabilities: | Current liabilities: | ||||||||||||||
Long-term debt and capital leases due within one year | 147,942 | 119,241 | Long-term debt and capital leases due within one year | 324,835 | 170,947 | |||||||||||
Short-term borrowings | 581,046 | 283,634 | Short-term borrowings | 293,240 | 305,959 | |||||||||||
Accounts payable | 97,093 | 24,184 | Accounts payable | 158,642 | 139,614 | |||||||||||
Accrued interest | 37,449 | 50,947 | Accrued interest | 46,210 | 76,435 | |||||||||||
Accrued and withheld taxes | 22,085 | 24,864 | Accrued and withheld taxes | 10,333 | 27,171 | |||||||||||
Member power bill prepayments, current | 64,963 | 182,514 | Member power bill prepayments, current | 55,822 | 71,496 | |||||||||||
Other current liabilities | 17,276 | 28,000 | Other current liabilities | 24,024 | 18,567 | |||||||||||
967,854 | 713,384 | 913,106 | 810,189 | |||||||||||||
Deferred credits and other liabilities: | Deferred credits and other liabilities: | Deferred credits and other liabilities: | ||||||||||||||
Gain on sale of plant, being amortized | 29,206 | 31,062 | Gain on sale of plant, being amortized | 27,969 | 28,587 | |||||||||||
Net benefit of Rocky Mountain transactions, being amortized | 51,762 | 54,151 | Asset retirement obligations | 284,748 | 280,496 | |||||||||||
Asset retirement obligations | 276,769 | 264,635 | Member power bill prepayments, non-current | 42,500 | 41,000 | |||||||||||
Accumulated retirement costs for other obligations | 38,737 | 43,955 | Power sale agreement, being amortized | 65,814 | 69,480 | |||||||||||
Long-term contingent liability | — | 24,000 | Regulatory liabilities | 163,654 | 170,235 | |||||||||||
Member power bill prepayments, non-current | 19,720 | 18,000 | Other | 45,450 | 41,604 | |||||||||||
Power sale agreement, being amortized | 73,663 | 86,211 | ||||||||||||||
Other | 112,603 | 70,303 | 630,135 | 631,402 | ||||||||||||
602,460 | 592,317 | $ | 7,165,431 | $ | 6,997,062 | |||||||||||
$ | 6,649,384 | $ | 6,370,234 | |||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
Oglethorpe Power Corporation
Condensed Statements of Revenues and Expenses (Unaudited)
For the Three and Nine Months Ended September 30,March 31, 2011 and 2010 and 2009
(dollars in thousands) | (dollars in thousands) | |||||||||||||||||||||||
Three Months | Nine Months | Three Months | ||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2011 | 2010 | |||||||||||||||||||
Operating revenues: | Operating revenues: | Operating revenues: | ||||||||||||||||||||||
Sales to Members | $ | 370,453 | $ | 308,414 | $ | 1,000,244 | $ | 890,646 | Sales to Members | $ | 269,448 | $ | 303,828 | |||||||||||
Sales to non-Members | 796 | 334 | 1,188 | 974 | Sales to non-Members | 326 | 244 | |||||||||||||||||
Total operating revenues | 371,249 | 308,748 | 1,001,432 | 891,620 | Total operating revenues | 269,774 | 304,072 | |||||||||||||||||
Operating expenses: | Operating expenses: | Operating expenses: | ||||||||||||||||||||||
Fuel | 160,174 | 94,508 | 383,725 | 281,627 | Fuel | 72,449 | 102,092 | |||||||||||||||||
Production | 82,717 | 69,144 | 245,978 | 209,177 | Production | 77,796 | 77,383 | |||||||||||||||||
Purchased power | 24,721 | 44,349 | 60,346 | 103,545 | Depreciation and amortization | 37,479 | 37,010 | |||||||||||||||||
Depreciation and amortization | 35,441 | 34,301 | 108,956 | 98,012 | Purchased power | 11,555 | 17,408 | |||||||||||||||||
Accretion | 4,282 | 4,565 | 12,848 | 13,696 | Accretion | 4,560 | 4,284 | |||||||||||||||||
Total operating expenses | 307,335 | 246,867 | 811,853 | 706,057 | Total operating expenses | 203,839 | 238,177 | |||||||||||||||||
Operating margin | Operating margin | 63,914 | 61,881 | 189,579 | 185,563 | Operating margin | 65,935 | 65,895 | ||||||||||||||||
Other income: | Other income: | Other income: | ||||||||||||||||||||||
Investment income | 7,950 | 8,147 | 23,103 | 24,210 | Investment income | 7,394 | 7,656 | |||||||||||||||||
Other | 3,231 | 2,152 | 9,413 | 7,418 | Other | 3,366 | 3,281 | |||||||||||||||||
Total other income | 11,181 | 10,299 | 32,516 | 31,628 | Total other income | 10,760 | 10,937 | |||||||||||||||||
Interest charges: | Interest charges: | Interest charges: | ||||||||||||||||||||||
Interest expense | 65,946 | 59,419 | 197,089 | 176,198 | Interest expense | 70,666 | 65,588 | |||||||||||||||||
Allowance for debt funds used during construction | (10,474 | ) | (3,979 | ) | (28,611 | ) | (12,523 | ) | Allowance for debt funds used during construction | (15,228 | ) | (9,462 | ) | |||||||||||
Amortization of debt discount and expense | 5,775 | 5,378 | 17,765 | 13,698 | Amortization of debt discount and expense | 5,147 | 6,102 | |||||||||||||||||
Net interest charges | 61,247 | 60,818 | 186,243 | 177,373 | Net interest charges | 60,585 | 62,228 | |||||||||||||||||
Net margin | Net margin | $ | 13,848 | $ | 11,362 | $ | 35,852 | $ | 39,818 | Net margin | $ | 16,110 | $ | 14,604 | ||||||||||
The accompanying notes are an integral part of these condensed financial statements.
Oglethorpe Power Corporation
Condensed Statements of Patronage Capital and Membership Fees
and Accumulated Other Comprehensive Deficit (Unaudited)
For the NineThree Months Ended September 30,March 31, 2011 and 2010 and 2009
(dollars in thousands) | (dollars in thousands) | |||||||||||||||||||||
Patronage Capital and Membership Fees | Accumulated Other Comprehensive (Deficit) | Total | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance at December 31, 2008 | $ | 535,829 | $ | (1,348 | ) | $ | 534,481 | |||||||||||||||
Components of comprehensive margin: | ||||||||||||||||||||||
Net margin | 39,818 | — | 39,818 | |||||||||||||||||||
Unrealized gain on available-for-sale securities | — | 263 | 263 | |||||||||||||||||||
Total comprehensive margin | 40,081 | |||||||||||||||||||||
Balance at September 30, 2009 | $ | 575,647 | $ | (1,085 | ) | $ | 574,562 | |||||||||||||||
Patronage Capital and Membership Fees | Accumulated Other Comprehensive (Deficit) | Total | ||||||||||||||||||||
Balance at December 31, 2009 | Balance at December 31, 2009 | $ | 562,219 | $ | (1,253 | ) | $ | 560,966 | Balance at December 31, 2009 | $ | 562,219 | $ | (1,253 | ) | $ | 560,966 | ||||||
Components of comprehensive margin: | Components of comprehensive margin: | Components of comprehensive margin: | ||||||||||||||||||||
Net margin | 35,852 | — | 35,852 | Net margin | 14,604 | — | 14,604 | |||||||||||||||
Unrealized gain on available-for-sale securities | — | 1,085 | 1,085 | Unrealized gain on available-for-sale securities | — | 249 | 249 | |||||||||||||||
Total comprehensive margin | Total comprehensive margin | 36,937 | Total comprehensive margin | 14,853 | ||||||||||||||||||
Balance at September 30, 2010 | $ | 598,071 | $ | (168 | ) | $ | 597,903 | |||||||||||||||
Balance at March 31, 2010 | Balance at March 31, 2010 | $ | 576,823 | $ | (1,004 | ) | $ | 575,819 | ||||||||||||||
Balance at December 31, 2010 | Balance at December 31, 2010 | $ | 595,952 | $ | (469 | ) | $ | 595,483 | ||||||||||||||
Components of comprehensive margin: | Components of comprehensive margin: | |||||||||||||||||||||
Net margin | 16,110 | — | 16,110 | |||||||||||||||||||
Unrealized loss on available-for-sale securities | — | (21 | ) | (21 | ) | |||||||||||||||||
Total comprehensive margin | Total comprehensive margin | 16,089 | ||||||||||||||||||||
Balance at March 31, 2011 | Balance at March 31, 2011 | $ | 612,062 | $ | (490 | ) | $ | 611,572 | ||||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
Oglethorpe Power Corporation
Condensed Statements of Cash Flows (Unaudited)
For the NineThree Months Ended September 30,March 31, 2011 and 2010 and 2009
(dollars in thousands) | (dollars in thousands) | |||||||||||||||||||||
2010 | 2009 | 2011 | 2010 | |||||||||||||||||||
Cash flows from operating activities: | Cash flows from operating activities: | Cash flows from operating activities: | ||||||||||||||||||||
Net margin | $ | 35,852 | $ | 39,818 | Net margin | $ | 16,110 | $ | 14,604 | |||||||||||||
Adjustments to reconcile net margin to net cash provided (used) by operating activities: | Adjustments to reconcile net margin to net cash provided (used) by operating activities: | |||||||||||||||||||||
Depreciation and amortization, including nuclear fuel | 196,509 | 171,124 | Depreciation and amortization, including nuclear fuel | 66,378 | 63,172 | |||||||||||||||||
Accretion cost | 12,848 | 13,696 | Accretion cost | 4,560 | 4,284 | |||||||||||||||||
Amortization of deferred gains | (4,245 | ) | (4,245 | ) | Amortization of deferred gains | (1,415 | ) | (1,415 | ) | |||||||||||||
Allowance for equity funds used during construction | (1,707 | ) | (1,904 | ) | Allowance for equity funds used during construction | (547 | ) | (531 | ) | |||||||||||||
Deferred outage costs | (25,229 | ) | (25,362 | ) | Deferred outage costs | (34,962 | ) | (22,134 | ) | |||||||||||||
(Gain) loss on sale of investments | (12,013 | ) | 12,018 | Gain on sale of investments | (5,053 | ) | (4,140 | ) | ||||||||||||||
Regulatory deferral of costs associated with nuclear decommissioning | 4,987 | (20,810 | ) | Regulatory deferral of costs associated with nuclear decommissioning | 2,348 | 1,610 | ||||||||||||||||
Other | (4,216 | ) | (483 | ) | Other | (1,848 | ) | (1,135 | ) | |||||||||||||
Change in operating assets and liabilities: | Change in operating assets and liabilities: | |||||||||||||||||||||
Receivables | (25,622 | ) | (5,501 | ) | Receivables | 8,653 | (17,848 | ) | ||||||||||||||
Inventories | 24,137 | (24,056 | ) | Inventories | (15,570 | ) | 6,200 | |||||||||||||||
Prepayments and other current assets | (4,384 | ) | 131 | Prepayments and other current assets | 1,038 | 274 | ||||||||||||||||
Accounts payable | (2,487 | ) | (12,512 | ) | Accounts payable | (7,541 | ) | (16,218 | ) | |||||||||||||
Accrued interest | (13,498 | ) | (3,319 | ) | Accrued interest | (30,225 | ) | (10,473 | ) | |||||||||||||
Accrued and withheld taxes | (2,779 | ) | 2,072 | Accrued and withheld taxes | (16,838 | ) | (17,293 | ) | ||||||||||||||
Other current liabilities | (2,782 | ) | (92 | ) | Other current liabilities | 6,017 | (4,556 | ) | ||||||||||||||
(Decrease) increase in Member power bill prepayments | (115,831 | ) | 189,047 | Member power bill prepayments | (14,174 | ) | (48,745 | ) | ||||||||||||||
Total adjustments | 23,688 | 289,804 | Total adjustments | (39,179 | ) | (68,948 | ) | |||||||||||||||
Net cash provided by operating activities | 59,540 | 329,622 | ||||||||||||||||||||
Net cash used in operating activities | Net cash used in operating activities | (23,069 | ) | (54,344 | ) | |||||||||||||||||
Cash flows from investing activities: | Cash flows from investing activities: | Cash flows from investing activities: | ||||||||||||||||||||
Property additions | (524,334 | ) | (454,313 | ) | ||||||||||||||||||
Plant acquisition | — | (105,008 | ) | |||||||||||||||||||
Activity in decommissioning fund—Purchases | (480,447 | ) | (495,689 | ) | Property additions | (208,479 | ) | (161,815 | ) | |||||||||||||
—Proceeds | 476,630 | 491,715 | Activity in decommissioning fund—Purchases | (284,469 | ) | (133,043 | ) | |||||||||||||||
Decrease in restricted cash and cash equivalents | 16,106 | 10,255 | —Proceeds | 283,188 | 131,908 | |||||||||||||||||
Increase in restricted short-term investments | (181 | ) | (39,738 | ) | Increase in restricted cash and cash equivalents | (168,701 | ) | (122,612 | ) | |||||||||||||
Activity in investment in associated organizations—Purchases | (4,142 | ) | (11,395 | ) | Decrease (increase) in restricted short-term investments | 82,162 | (40,802 | ) | ||||||||||||||
—Proceeds | 3,196 | 1,666 | Activity in investment in associated organizations | (256 | ) | (580 | ) | |||||||||||||||
Activity in other long-term investments—Purchases | (4,313 | ) | (1,037 | ) | Activity in other long-term investments—Purchases | (402 | ) | (455 | ) | |||||||||||||
—Proceeds | 3,100 | 900 | —Proceeds | 300 | 700 | |||||||||||||||||
Other | 5,420 | (2,158 | ) | Other | (1,185 | ) | 1,067 | |||||||||||||||
Net cash used in investing activities | Net cash used in investing activities | (508,965 | ) | (604,802 | ) | Net cash used in investing activities | (297,842 | ) | (325,632 | ) | ||||||||||||
Cash flows from financing activities: | Cash flows from financing activities: | Cash flows from financing activities: | ||||||||||||||||||||
Long-term debt proceeds | 222,631 | 464,026 | Long-term debt proceeds | 257,351 | 133,550 | |||||||||||||||||
Long-term debt payments | (222,265 | ) | (86,419 | ) | Long-term debt payments | (54,931 | ) | (32,827 | ) | |||||||||||||
Increase in short-term borrowings, net | 297,413 | 206,672 | (Decrease) increase in short-term borrowings, net | (12,719 | ) | 206 | ||||||||||||||||
Other | 5,373 | (6,147 | ) | Other | (138 | ) | 2,436 | |||||||||||||||
Net cash provided by financing activities | Net cash provided by financing activities | 303,152 | 578,132 | Net cash provided by financing activities | 189,563 | 103,365 | ||||||||||||||||
Net (decrease) increase in cash and cash equivalents | (146,273 | ) | 302,952 | |||||||||||||||||||
Net decrease in cash and cash equivalents | Net decrease in cash and cash equivalents | (131,348 | ) | (276,611 | ) | |||||||||||||||||
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | 579,069 | 167,659 | Cash and cash equivalents at beginning of period | 672,212 | 579,069 | ||||||||||||||||
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $ | 432,796 | $ | 470,611 | Cash and cash equivalents at end of period | $ | 540,864 | $ | 302,458 | ||||||||||||
Supplemental cash flow information: | Supplemental cash flow information: | Supplemental cash flow information: | ||||||||||||||||||||
Cash paid for— | Cash paid for— | Cash paid for— | ||||||||||||||||||||
Interest (net of amounts capitalized) | $ | 173,307 | $ | 161,457 | Interest (net of amounts capitalized) | $ | 82,661 | $ | 63,651 | |||||||||||||
Supplemental disclosure of non-cash investing and financing activities: | Supplemental disclosure of non-cash investing and financing activities: | Supplemental disclosure of non-cash investing and financing activities: | ||||||||||||||||||||
Plant expenditures included in ending accounts payable and other long-term liabilities | $ | 95,797 | $ | (977 | ) | Change in plant expenditures included in accounts payable | $ | 29,663 | $ | (388 | ) | |||||||||||
Acquired power purchase and sale liability | $ | — | $ | 98,100 |
The accompanying notes are an integral part of these condensed financial statements.
Oglethorpe Power Corporation
Notes to Unaudited Condensed Financial StatementsSeptember 30,March 31, 2011 and 2010 and 2009
The guidance establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
As required by the guidance, assets and liabilities measured at fair value are based on one or more of the following three valuation techniques:
1. Market approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business) and deriving fair value based on these inputs.
2. Income approach. The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts.
3. Cost approach. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (often referred to as current replacement cost). This approach assumes that the fair value would not exceed what it would cost a market participant to acquire or construct a substitute asset or comparable utility, adjusted for obsolescence.
The tables below detail assets and liabilities measured at fair value on a recurring basis for the periods ended September 30, 2010March 31, 2011 and December 31, 2009.2010.
Fair Value Measurements at Reporting Date Using | Fair Value Measurements at Reporting Date Using | |||||||||||||||||||||||||||||
September 30, | Quoted Prices in | Significant Other | Significant | March 31, 2011 | Quoted Prices in | Significant Other | Significant | |||||||||||||||||||||||
(dollars in thousands) | (dollars in thousands) | |||||||||||||||||||||||||||||
Decommissioning funds | ||||||||||||||||||||||||||||||
Domestic equity | $ | 84,984 | $ | 84,984 | $ | — | $ | — | ||||||||||||||||||||||
Decommissioning funds: | Decommissioning funds: | |||||||||||||||||||||||||||||
Corporate bonds | 50,894 | 50,894 | — | — | Domestic equity | $ | 113,873 | $ | 113,873 | $ | — | $ | — | |||||||||||||||||
International equity | 40,308 | 40,308 | — | — | International equity | 43,638 | 43,638 | — | — | |||||||||||||||||||||
U.S. Treasury and government agency securities | 43,896 | 43,896 | — | — | Corporate bonds | 50,805 | 50,805 | — | — | |||||||||||||||||||||
Agency mortgage and asset backed securities | 29,220 | 29,220 | — | — | US Treasury and government agency securities | 32,579 | 32,579 | — | — | |||||||||||||||||||||
Municipal bonds | 1,525 | 1,525 | — | — | Agency mortgage and asset backed securities | 17,179 | 17,179 | — | — | |||||||||||||||||||||
Derivative instruments | (523 | ) | — | — | (523 | ) | Derivative instruments | (548 | ) | — | — | (548 | ) | |||||||||||||||||
Other | 1,635 | 1,635 | — | — | Other | 17,694 | 17,694 | — | — | |||||||||||||||||||||
Bond, reserve and construction funds | Bond, reserve and construction funds | 2,877 | 2,877 | — | — | Bond, reserve and construction funds | 2,785 | 2,785 | — | — | ||||||||||||||||||||
Long-term investments | Long-term investments | 91,031 | 66,937 | — | 24,094 | (1) | Long-term investments | 80,607 | 72,199 | — | 8,408 | (1) | ||||||||||||||||||
Natural gas swaps | Natural gas swaps | (4,724 | ) | — | (4,724 | ) | — | Natural gas swaps | (2,069 | ) | — | (2,069 | ) | — | ||||||||||||||||
Deposit on Rocky Mountain transactions | 121,556 | — | — | 121,556 | ||||||||||||||||||||||||||
Investments in associated companies | 54,794 | — | — | 54,794 | ||||||||||||||||||||||||||
Total | $ | 517,473 | $ | 322,276 | $ | (4,724 | ) | $ | 199,921 | Total | $ | 356,543 | $ | 350,752 | $ | (2,069 | ) | $ | 7,860 | |||||||||||
Fair Value Measurements at Reporting Date Using | Fair Value Measurements at Reporting Date Using | |||||||||||||||||||||||||||||
December 31, 2009 | Quoted Prices in | Significant Other | Significant | December 31, | Quoted Prices in | Significant Other | Significant | |||||||||||||||||||||||
(dollars in thousands) | (dollars in thousands) | |||||||||||||||||||||||||||||
Decommissioning funds: | Decommissioning funds: | Decommissioning funds: | ||||||||||||||||||||||||||||
Domestic equity | $ | 89,723 | $ | 89,723 | $ | — | $ | — | Domestic equity | $ | 105,523 | $ | 105,523 | $ | — | $ | — | |||||||||||||
Corporate bonds | 48,317 | 48,317 | — | — | International equity | 43,619 | 43,619 | — | — | |||||||||||||||||||||
International equity | 40,951 | 40,951 | — | — | Corporate bonds | 53,847 | 53,847 | — | — | |||||||||||||||||||||
U.S. Treasury and government agency securities | 35,137 | 35,137 | — | — | US Treasury and government agency securities | 47,649 | 47,649 | — | — | |||||||||||||||||||||
Agency mortgage and asset backed securities | 21,383 | 21,383 | — | — | Agency mortgage and asset backed securities | 7,926 | 7,926 | — | — | |||||||||||||||||||||
Preferred stock | 1,463 | — | 1,463 | — | Derivative instruments | (452 | ) | — | — | (452 | ) | |||||||||||||||||||
Municipal bonds | 1,267 | 1,267 | — | — | Other | 7,371 | 7,371 | — | — | |||||||||||||||||||||
Derivative instruments | (260 | ) | — | — | (260 | ) | ||||||||||||||||||||||||
Other | 1,765 | 1,765 | — | — | ||||||||||||||||||||||||||
Bond, reserve and construction funds | Bond, reserve and construction funds | 3,982 | 3,982 | — | — | Bond, reserve and construction funds | 2,815 | 2,815 | — | — | ||||||||||||||||||||
Long-term investments | Long-term investments | 87,129 | 60,119 | — | 27,010 | (1) | Long-term investments | 79,212 | 70,541 | — | 8,671 | (1) | ||||||||||||||||||
Natural gas swaps | Natural gas swaps | (12,516 | ) | — | (12,516 | ) | — | Natural gas swaps | (2,054 | ) | — | (2,054 | ) | — | ||||||||||||||||
Deposit on Rocky Mountain transactions | 115,641 | — | — | 115,641 | ||||||||||||||||||||||||||
Investments in associated companies | 53,199 | — | — | 53,199 | ||||||||||||||||||||||||||
Total | $ | 487,181 | $ | 302,644 | $ | (11,053 | ) | $ | 195,590 | Total | $ | 345,456 | $ | 339,291 | $ | (2,054 | ) | $ | 8,219 | |||||||||||
The following tables present the changes in our Level 3 assets and liabilities measured at fair value on a recurring basis during the three and nine months ended September 30, 2010March 31, 2011 and 2009, respectively.2010.
Three Months Ended September 30, 2010 | Three Months Ended March 31, 2011 | |||||||||||||||||||||
Decommissioning funds | Long-term investments | Deposit on Rocky Mountain transactions | Investments in associated companies | Decommissioning funds | Long-term investments | |||||||||||||||||
(dollars in thousands) | (dollars in thousands) | |||||||||||||||||||||
Assets: | Assets: | Assets: | ||||||||||||||||||||
Balance at June 30, 2010 | $ | (311 | ) | $ | 24,485 | $ | 119,542 | $ | 55,329 | |||||||||||||
Balance at January 1, 2011 | Balance at January 1, 2011 | $ | (452 | ) | $ | 8,671 | ||||||||||||||||
Total gains or losses (realized/unrealized): | Total gains or losses (realized/unrealized): | Total gains or losses (realized/unrealized): | ||||||||||||||||||||
Included in earnings (or changes in net assets) | (212 | ) | — | 2,014 | (535 | ) | Included in earnings (or changes in net assets) | (96 | ) | — | ||||||||||||
Impairment included in other comprehensive deficit | — | 9 | — | — | Impairment included in other comprehensive deficit | — | 37 | |||||||||||||||
Purchases, issuances, liquidations | Purchases, issuances, liquidations | — | (400 | ) | — | — | Purchases, issuances, liquidations | — | (300 | ) | ||||||||||||
Balance at September 30, 2010 | $ | (523 | ) | $ | 24,094 | $ | 121,556 | $ | 54,794 | |||||||||||||
Balance at March 31, 2011 | Balance at March 31, 2011 | $ | (548 | ) | $ | 8,408 | ||||||||||||||||
Nine Months Ended September 30, 2010 | ||||||||||||||
Decommissioning funds | Long-term investments | Deposit on Rocky Mountain transactions | Investments in associated companies | |||||||||||
(dollars in thousands) | ||||||||||||||
Assets: | ||||||||||||||
Balance at January 1, 2010 | $ | (260 | ) | $ | 27,010 | $ | 115,641 | $ | 53,199 | |||||
Total gains or losses (realized/unrealized): | ||||||||||||||
Included in earnings (or changes in net assets) | (263 | ) | — | 5,915 | 1,595 | |||||||||
Impairment included in other comprehensive deficit | — | 184 | — | — | ||||||||||
Purchases, issuances, liquidations | — | (3,100 | ) | — | — | |||||||||
Balance at September 30, 2010 | $ | (523 | ) | $ | 24,094 | $ | 121,556 | $ | 54,794 | |||||
Three Months Ended September 30, 2009 | Three Months Ended March 31, 2010 | |||||||||||||||||||||
Decommissioning funds | Long-term investments | Deposit on Rocky Mountain transactions | Investments in associated companies | Decommissioning funds | Long-term investments | |||||||||||||||||
(dollars in thousands) | (dollars in thousands) | |||||||||||||||||||||
Assets: | Assets: | Assets: | ||||||||||||||||||||
Balance at June 30, 2009 | $ | 8,661 | $ | 29,299 | $ | 111,868 | $ | 53,491 | ||||||||||||||
Balance at January 1, 2010 | Balance at January 1, 2010 | $ | (260 | ) | $ | 27,010 | ||||||||||||||||
Total gains or losses (realized/unrealized): | Total gains or losses (realized/unrealized): | Total gains or losses (realized/unrealized): | ||||||||||||||||||||
Included in earnings (or changes in net assets) | 31 | — | 1,886 | (1,140 | ) | Included in earnings (or changes in net assets) | (175 | ) | — | |||||||||||||
Impairment included in other comprehensive deficit | — | 27 | — | — | Impairment included in other comprehensive deficit | — | 66 | |||||||||||||||
Purchases, issuances, liquidations | Purchases, issuances, liquidations | (3,153 | ) | (700 | ) | — | — | Purchases, issuances, liquidations | — | (700 | ) | |||||||||||
Balance at September 30, 2009 | $ | 5,539 | $ | 28,626 | $ | 113,754 | $ | 52,351 | ||||||||||||||
Balance at March 31, 2010 | Balance at March 31, 2010 | $ | (435 | ) | $ | 26,376 | ||||||||||||||||
Nine Months Ended September 30, 2009 | ||||||||||||||
Decommissioning funds | Long-term investments | Deposit on Rocky Mountain transactions | Investments in associated companies | |||||||||||
(dollars in thousands) | ||||||||||||||
Assets: | ||||||||||||||
Balance at January 1, 2009 | $ | 6,085 | $ | 29,643 | $ | 108,219 | $ | 43,441 | ||||||
Total gains or losses (realized/unrealized): | ||||||||||||||
Included in earnings (or changes in net assets) | 31 | — | 5,535 | 8,910 | ||||||||||
Impairment included in other comprehensive deficit | — | (117 | ) | — | — | |||||||||
Purchases, issuances, liquidations | (577 | ) | (900 | ) | — | — | ||||||||
Balance at September 30, 2009 | $ | 5,539 | $ | 28,626 | $ | 113,754 | $ | 52,351 | ||||||
Realized gains and losses included in earnings for the period are reported in investment income.
The assets included in the "Long-term investments" column in each of the Level 3 tables above are auction rate securities. As a result of market conditions, including the failure of auctions for the auction rate securities in which we invested, the fair value of these auction rate securities was determined using an income approach based on a discounted cash flow model. The discounted cash flow model utilized projected cash flows at current rates, which was adjusted for illiquidity premiums based on discussions with market participants. At September 30, 2010,March 31, 2011, we held auction rate securities with maturity dates ranging from March 15, 2028November 1, 2044 to December 1, 2045.
At December 31, 2009,2010, we had a total temporary impairment of $1,690,000 on our investments in auction rate securities.securities of $1,029,000. Based on the fair value of thesethe auction rate securities as of September 30, 2010,held at March 31, 2011, we recorded a reduction($37,000) incremental adjustment to the temporary impairment of approximately $184,000.impairment. The temporary impairment is reflected in "Accumulated other comprehensive deficit" on the condensed unaudited balance sheets.Condensed Balance Sheets. The various assumptions we utilizeutilized to determine the fair value of our auction rate securities investments will vary from period to period based on the prevailing economic conditions. If the market for our auction rate securities investments should deteriorate, we may need to increase the illiquidity premium used in preparing a discounted cash flow model for these securities. A 25 basis point increase in the illiquidity premium used to determine the fair value of these investments at September 30, 2010,March 31, 2011, would have resulted in aan additional decrease in the fair value of our auction rate securities investments by approximately $1,310,000. $562,000.
These investments were rated either A3 or Aaa by Moody's Investors Service and AAA by Standard and Poor'sFitch as of September 30, 2010.March 31, 2011. Therefore, it is expected that the investments will not be settled at a price less than par value. Because we have the ability and intentdo not intend to hold these investments untilsell unless we can recover our original investment value,cost basis in a relatively short period of time, and it is not more likely than not that we will be required to sell the securities, we considered the investments to be only temporarily impaired at September 30, 2010.March 31, 2011.
treatment, unrealized gains or losses from the decommissioning trust fund are recorded as an increase or decrease to the regulatory asset or liability.
Under the natural gas swap arrangements, we pay the counterparty a fixed price for specified natural gas quantities and receive a payment for such quantities based on a market price index. These payment obligations are netted, such that if the market price index is lower than the fixed price, we will make a net payment, and if the market price index is higher than the fixed price, we will receive a net payment.
At September 30, 2010,March 31, 2011, the estimated fair value of our natural gas contracts was an unrealized loss of approximately $4,724,000.$2,069,000. See Note B for further discussion on fair value measurements of financial instruments.
We are exposed to credit risk as a result of entering into these hedging arrangements. Credit risk is the potential loss resulting from a counterparty's nonperformance under an agreement. We manage credit risk with policies and procedures for, among other things, counterparty analysis, exposure measurement, and exposure monitoring and mitigation.mitigation in our natural gas hedging portfolio.
It is possible that volatility in commodity prices could cause us to have credit risk exposures with one or more counterparties. If such counterparties fail to perform their obligations, we could suffer
a financial loss. However, as of September 30, 2010,March 31, 2011, all of the counterparties with transaction amounts outstanding in our hedging portfolio are rated above investment grade by the major rating agencies or have provided a guaranty from one of their affiliates that is rated above investment grade.
We have entered into International Swaps and Derivatives Association Agreements with our natural gas hedge counterparties that mitigate credit exposure by creating contractual rights relating to creditworthiness, collateral, termination and netting (which allows us to use the net value of affected transactions with the same counterparty in the event of default by the counterparty or early termination of the agreement).
Additionally, we have implemented procedures to monitor the creditworthiness of our counterparties and to evaluate nonperformance in valuing counterparty positions. We have contracted with a third party to assist in monitoring counterparties' credit standing, including those experiencing financial problems, significant swings in credit default swap rates, credit rating changes by external rating agencies, or changes in ownership. Net liability positions are generally not adjusted as we use derivative transactions as hedges and have the ability and intent to perform under each of our contracts. In the instance of net asset positions, we consider general market conditions and the observable financial health and outlook of specific counterparties, forward looking data such as credit default swaps, when available, and historical default probabilities from credit rating agencies in evaluating the potential impact of nonperformance risk to derivative positions.
The contractual agreements contain provisions that could require us or the counterparty to post collateral or credit support. The amount of collateral or credit support that could be required is calculated as the difference between the aggregate fair value of the hedges and pre-established credit thresholds. The credit thresholds are contingent upon each party's credit standing and credit ratings from the major credit rating agencies. The collateral and credit support requirements vary by contract and by counterparty. We may only post credit support in the form of a letter of credit due to provisions within our Rural Utilities Service Loan Contract; however, we may receive collateral in the form of cash or credit support. As of September 30, 2010,March 31, 2011, neither we nor any counterparties were required to post credit support or collateral under any of these agreements. If the credit-risk-related contingent features underlying these agreements were triggered on September 30, 2010March 31, 2011 due to our credit rating being downgraded below investment grade, we could have been required to post letters of credit totaling up to $4,724,000$2,069,000 with our counterparties.
The following table reflects the volume activity of our natural gas derivatives and derivatives within our nuclear decommissioning trust fund as of September 30, 2010March 31, 2011 that areis expected to settle or mature each year:
Year | Natural Gas Swaps | Decommissioning Fund | Natural Gas Swaps | ||||||||
2010 | 0.64 | $ | (1.40 | ) | |||||||
2011 | 2.55 | (0.60 | ) | 4.23 | |||||||
2012 | 0.38 | 0.20 | 1.48 | ||||||||
2013 | — | (3.80 | ) | 0.02 | |||||||
2014 | — | (1.92 | ) | ||||||||
2015 | — | (0.20 | ) | ||||||||
2016 | — | (0.08 | ) | ||||||||
Total | 3.57 | $ | (7.80 | ) | 5.73 | ||||||
The table below reflects the fair value of derivative instruments and their effect on our condensed unaudited balance sheet for the period ended September 30, 2010.March 31, 2011.
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |||||||||||
(dollars in thousands) | (dollars in thousands) | |||||||||||||
Designated as hedges under authoritative guidance related to derivatives and hedging activities: | Designated as hedges under authoritative guidance related to derivatives and hedging activities: | Designated as hedges under authoritative guidance related to derivatives and hedging activities: | ||||||||||||
Assets | Assets | Assets | ||||||||||||
Natural Gas Swaps | Receivables | $ | 4,750 | Natural Gas Swaps | Receivables | $ | 2,522 | |||||||
Natural Gas Swaps | Receivables | (26 | ) | Natural Gas Swaps | Receivables | (453 | ) | |||||||
Total assets designated as hedges under authoritative guidance related to derivatives and hedging activities | Total assets designated as hedges under authoritative guidance related to derivatives and hedging activities | $ | 4,724 | Total assets designated as hedges under authoritative guidance related to derivatives and hedging activities | $ | 2,069 | ||||||||
Liabilities | Liabilities | Liabilities | ||||||||||||
Natural Gas Swaps | Other current liabilities | $ | 4,750 | Natural Gas Swaps | Other current liabilities | $ | 2,522 | |||||||
Natural Gas Swaps | Other current liabilities | (26 | ) | Natural Gas Swaps | Other current liabilities | (453 | ) | |||||||
Total liabilities designated as hedges under authoritative guidance related to derivatives and hedging activities | Total liabilities designated as hedges under authoritative guidance related to derivatives and hedging activities | $ | 4,724 | Total liabilities designated as hedges under authoritative guidance related to derivatives and hedging activities | $ | 2,069 | ||||||||
Not designated as hedges under authoritative guidance related to derivatives and hedging activities: | Not designated as hedges under authoritative guidance related to derivatives and hedging activities: | Not designated as hedges under authoritative guidance related to derivatives and hedging activities: | ||||||||||||
Assets | Assets | Assets | ||||||||||||
Nuclear decommissioning trust | Decommissioning fund | $ | 20,995 | Nuclear decommissioning trust | Decommissioning fund | $ | 445 | |||||||
Nuclear decommissioning trust | Decommissioning fund | (21,518 | ) | Nuclear decommissioning trust | Decommissioning fund | (993 | ) | |||||||
Nuclear decommissioning trust | Deferred asset associated with retirement obligations | 21,003 | Nuclear decommissioning trust | Deferred asset associated with retirement obligations | 242 | |||||||||
Nuclear decommissioning trust | Deferred asset associated with retirement obligations | (21,071 | ) | Nuclear decommissioning trust | Deferred asset associated with retirement obligations | (273 | ) | |||||||
Total not designated as hedges under authoritative guidance related to derivatives and hedging activities | Total not designated as hedges under authoritative guidance related to derivatives and hedging activities | $ | (591 | ) | Total not designated as hedges under authoritative guidance related to derivatives and hedging activities | $ | (579 | ) | ||||||
The following table presents the gains and (losses) on derivative instruments recognized in income for the three and nine months ended September 30, 2010.March 31, 2011.
Effect of Derivative Instruments on the Condensed Statement of Revenues and Expenses | Effect of Derivative Instruments on the Condensed Statement of Revenues and Expenses | Effect of Derivative Instruments on the Condensed Statement of Revenues and Expenses | |||||||||||||||
Income Statement Location | Three months ended | Nine months ended | Income Statement Location | Three months ended | |||||||||||||
(dollars in thousands) | (dollars in thousands) | ||||||||||||||||
Designated as hedges under authoritative guidance related to derivatives and hedging activities | Designated as hedges under authoritative guidance related to derivatives and hedging activities | Designated as hedges under authoritative guidance related to derivatives and hedging activities | |||||||||||||||
|
| $ | 22 | ||||||||||||||
|
| $ | (12,383 | ) | $ | (17,824 | ) |
|
| (283 | ) | ||||||
Not designated as hedges under authoritative guidance related to derivatives and hedging activities | Not designated as hedges under authoritative guidance related to derivatives and hedging activities | Not designated as hedges under authoritative guidance related to derivatives and hedging activities | |||||||||||||||
|
| 1,042 | 2,107 |
|
| 240 | |||||||||||
|
| (999 | ) | (2,048 | ) |
|
| (250 | ) | ||||||||
Total losses on derivatives | Total losses on derivatives | $ | (12,340 | ) | $ | (17,765 | ) | Total losses on derivatives | $ | (271 | ) | ||||||
For those securities considered to be available-for-sale, the following table summarizes the activities for those securities as of September 30, 2010March 31, 2011 and December 31, 2009:2010:
(dollars in thousands) | (dollars in thousands) | |||||||||||||||||||||||||
Gross Unrealized | Gross Unrealized | |||||||||||||||||||||||||
September 30, 2010 | Cost | Gains | Losses | Fair Value | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
March 31, 2011 | Cost | Gains | Losses | Fair Value | ||||||||||||||||||||||
Equity | $ | 136,650 | $ | 31,305 | $ | (6,197 | ) | $ | 161,758 | $ | 142,477 | $ | 46,938 | $ | (2,035 | ) | $ | 187,380 | ||||||||
Debt | 174,709 | 32,557 | (24,683 | ) | 182,583 | 149,988 | 8,524 | (4,426 | ) | 154,086 | ||||||||||||||||
Other | 1,502 | 4 | — | 1,506 | 17,175 | 244 | (273 | ) | 17,146 | |||||||||||||||||
Total | $ | 312,861 | $ | 63,866 | $ | (30,880 | ) | $ | 345,847 | $ | 309,640 | $ | 55,706 | $ | (6,734 | ) | $ | 358,612 | ||||||||
Gross Unrealized | Gross Unrealized | |||||||||||||||||||||||||
December 31, 2009 | Cost | Gains | Losses | Fair Value | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
December 31, 2010 | Cost | Gains | Losses | Fair Value | ||||||||||||||||||||||
Equity | $ | 127,704 | $ | 35,003 | $ | (3,671 | ) | $ | 159,036 | $ | 137,492 | $ | 42,622 | $ | (2,482 | ) | $ | 177,632 | ||||||||
Debt | 170,033 | 15,685 | (13,089 | ) | 172,629 | 158,706 | 9,130 | (4,879 | ) | 162,957 | ||||||||||||||||
Other | (815 | ) | 7 | — | (808 | ) | 7,035 | 3 | (118 | ) | 6,920 | |||||||||||||||
Total | $ | 296,922 | $ | 50,695 | $ | (16,760 | ) | $ | 330,857 | $ | 303,233 | $ | 51,755 | $ | (7,479 | ) | $ | 347,509 | ||||||||
Our effective tax rate is zero; therefore, all amounts below are presented net of tax.
| Accumulated Other Comprehensive Deficit Three Months Ended | ||||||
---|---|---|---|---|---|---|---|
Available-for-sale | Total | ||||||
Balance at June 30, 2009 | $ | (1,427 | ) | $ | (1,427 | ) | |
Unrealized gain | 342 | 342 | |||||
Balance at September 30, 2009 | $ | (1,085 | ) | $ | (1,085 | ) | |
Balance at June 30, 2010 | $ | (220 | ) | $ | (220 | ) | |
Unrealized gain | 52 | 52 | |||||
Balance at September 30, 2010 | $ | (168 | ) | $ | (168 | ) | |
| Accumulated Other Comprehensive Deficit Nine Months Ended | Accumulated Other Comprehensive Deficit Three Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Available-for-sale | Total | (dollars in thousands) | ||||||||||||
Available-for-sale | Total | |||||||||||||
Balance at December 31, 2008 | $ | (1,348 | ) | $ | (1,348 | ) | ||||||||
Unrealized gain | 263 | 263 | ||||||||||||
Balance at September 30, 2009 | $ | (1,085 | ) | $ | (1,085 | ) | ||||||||
Balance at December 31, 2009 | $ | (1,253 | ) | $ | (1,253 | ) | $ | (1,253 | ) | $ | (1,253 | ) | ||
Unrealized gain | 1,085 | 1,085 | 249 | 249 | ||||||||||
Balance at March 31, 2010 | $ | (1,004 | ) | $ | (1,004 | ) | ||||||||
Balance at September 30, 2010 | $ | (168 | ) | $ | (168 | ) | ||||||||
Balance at December 31, 2010 | $ | (469 | ) | $ | (469 | ) | ||||||||
Unrealized loss | (21 | ) | (21 | ) | ||||||||||
Balance at March 31, 2011 | $ | (490 | ) | $ | (490 | ) | ||||||||
As is typical for electric utilities, we are subject to various federal, state and local air and water quality requirements which, among other things, regulate emissions of pollutants, such as particulate matter, sulfur dioxide, nitrogen oxides and mercury into the air and discharges of other pollutants, including heat, into waters of the United States. Beginning in 2011, we have become subject to climate change regulations that impose restrictions on emissions of greenhouse gases (including carbon dioxide), through the Prevention of Significant Deterioration preconstruction permitting program. As a result, we will have to evaluate any major modifications that we plan to undertake at our plants to determine whether they will need to undergo new source review permitting for greenhouse gases, and, if they do, whether any control technology will need to be added. We are also subject to federal, state and local waste disposal requirements that regulate the manner of transportation, storage and disposal of various types of waste. In the future, we may become subject to greenhouse gas emission restrictions as a result of regulation aimed at responding to climate change.
In general, environmental requirements are becoming increasingly stringent. New requirements may substantially increase the cost of electric service by requiring changes in the design or operation of existing facilities or changes or delays in the location, design, construction or operation of new facilities. See "BUSINESS—"Item 1—BUSINESS—ENVIRONMENTAL AND OTHER REGULATION" in our 20092010 Form 10-K for a more detailed discussion of current and potential future regulations.regulation. Failure to comply with these requirements could result in the imposition of civil and criminal penalties as well as the complete shutdown of individual generating units not in compliance. Certain of our debt instruments and credit agreements require us to comply in all material respects with laws, rules, regulations and orders imposed by applicable governmental authorities, which include current or future environmental laws and regulations. Should we fail to be in compliance with these requirements, it would constitute a default under such debt instruments. Although it is our intent to comply with applicable current and future regulations, we cannot provide assurance that we will always be in compliance with such requirements.
The following regulatory assets and liabilities are reflected on the accompanying condensed balance sheets as of March 31, 2011 and December 31, 2010.
| 2011 | 2010 | |||||
---|---|---|---|---|---|---|---|
(dollars in thousands) | |||||||
Premium and loss on reacquired debt | $ | 108,310 | $ | 111,570 | |||
Deferred amortization on capital leases | 60,075 | 64,561 | |||||
Deferred outage costs | 38,736 | 23,796 | |||||
Deferred interest rate swap termination fees | 24,308 | 25,306 | |||||
Asset retirement obligations | 8,881 | 15,699 | |||||
Deferred depreciation expense | 52,277 | 52,632 | |||||
Deferred investment impairment losses | 4,953 | 5,214 | |||||
Deferred charges related to Plant Vogtle Units 3 and 4 training costs | 11,703 | 9,707 | |||||
Other regulatory assets | 2,631 | 2,651 | |||||
Accumulated retirement costs for other obligations | (39,082 | ) | (39,205 | ) | |||
Net benefit of Rocky Mountain transactions | (50,169 | ) | (50,965 | ) | |||
Hawk Road net margin deferral | (13,636 | ) | (21,956 | ) | |||
Major maintenance sinking fund | (28,751 | ) | (28,500 | ) | |||
Deferred debt service adder | (30,165 | ) | (27,678 | ) | |||
Other regulatory liabilities | (1,851 | ) | (1,931 | ) | |||
Net regulatory assets | $ | 148,220 | $ | 140,901 | |||
On November 9, 2010, we issued $450,000,000 of taxable first mortgage bonds primarilyThe acquisition also includes an existing power purchase and sale agreement with Georgia Power Company for the purposeentire output of fundingMurray I through May 31, 2012. Initially, both units are planned to be operated independently of the other generating facilities we own and operate but will be integrated into our system as needed.
In connection with this acquisition, we closed a $260,000,000 three-year term loan with three banks to provide a portion of the costinterim financing for this acquisition. We financed the remaining $269,485,000 through the issuance of constructing Plant Vogtle Units No. 3commercial paper and No. 4. A substantial portiondraws under existing credit facilities. We have submitted a loan application to the Rural Utilities Service for long-term financing for this acquisition. For any amounts not funded through the Rural Utilities Service, we intend to issue taxable bonds.
With the completion of this acquisition, we have cancelled the development of the proceeds were usedpreviously announced 605 megawatt combined cycle plant and have withdrawn the corresponding loan application submitted to repay outstanding short-term borrowings in connection with payments previously made for construction of this facility. The first mortgage bonds are secured under our first mortgage indenture.the Rural Utilities Service.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
General
We are a Georgia electric membership corporation (an EMC) incorporated in 1974 and headquartered in metropolitan Atlanta. We are owned by our 39 retail electric distribution cooperative members. Our members are consumer-owned distribution cooperatives providing retail electric service in Georgia on a not-for-profit basis. Our principal business is providing wholesale electric power to our members through a combination of our generation assets and to, a lesser extent, power purchased from power marketers and other suppliers. As with cooperatives generally, we operate on a not-for-profit basis.
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 financing transactions by us, (ii) our future capital expenditure requirements and funding sources and (iii) achievement of a margins for interest ratio at the minimum requirement contained in our first mortgage indenture and, in the case that our board of directors approves a budget for a particular fiscal year that seeks to achieve a higher margins for interest ratio, such higher board-approved margins for interest ratio. These forward-looking statements are based largely on our current expectations and are subject to a number of risks and uncertainties, some of which are beyond our control. For a discussion of some factors that could cause actual results to differ materially from those anticipated by these forward-looking statements, see "Item 1A—"Item1A—RISK FACTORS" contained in our Annual Report on2010 Form 10-K for the fiscal year ended December 31, 2009.10-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 on Form 10-Q will in fact transpire.
Results of Operations
For the Three and Nine Months Ended September 30,March 31, 2011 and 2010 and 2009
Net Margin
Throughout the year, we monitor our operating results and, with board approval, make budget adjustments when and as necessary to ensure our targeted margins for interest ratio is achieved. Under the first mortgage indenture, we are required to establish and collect rates that are reasonably expected, together with our other revenues, to yield at least a 1.10 margins for interest ratio in each fiscal year. However, to enhance margin coverage during this period of generation facility construction and acquisition,expansion, our board of directors approved budgets for 2010 and 2011 to achieve a 1.14 margins for interest ratio. As our constructiongeneration expansion program evolves, our board of directors will continue to evaluate the level of margin coverage and may choose to change the targeted margins for interest ratio in the future, although not below the 1.10 margins for interest ratio required under our first mortgage indenture.
Our net margin for the three- and nine-month periodsthree-month period ended September 30, 2010March 31, 2011 was $13.8 million and $35.9$16.1 million compared to $11.4 million and $39.8$14.6 million for the same periodsperiod of 2009. Through September 30, 2010, we have collected 106% of our targeted2010. We expect a net margin of $33.8$38.3 million for the year ending December 31, 2010. This is typical as our management generally budgets conservatively and makes adjustments to the budget throughout the year so that net margins2011, which will achieve, but not exceed, the targeted margins for interest ratio of 1.14.
Operating Revenues
Our operating revenues fluctuate from period to period based on several factors, including weather and other seasonal factors, load requirements in our members' service territories, operating costs, availability of electric generation resources, our decisions of whether to dispatch our owned or
purchased resources or member-owned resources over which we have dispatch rights and members' decisions of whether to purchase a portion of their hourly energy requirements from our resources or from other suppliers.
Total revenues from sales to members were 20.1% and 12.3% higherdecreased 11.3% in the three- and nine-month periodsthree-month period ended September 30, 2010 than forMarch 31, 2011 compared to the same periodsperiod of 2009.2010. Megawatt-hour sales to members increased 19.2% and 11.9%decreased 21.4% for the three- and nine-month periodsthree-month period ended September 30, 2010March 31, 2011 versus the same periodsperiod of 2009.2010. The average total revenue per megawatt-hour from sales to members increased 0.7% and 0.3%12.8% for the three- and nine-month periodsthree-month period ended September 30, 2010March 31, 2011 compared to the same periodsperiod of 2009.2010.
The components of member revenues for the three-three-month period ended March 31, 2011 and nine-month periods ended September 30, 2010 and 2009 were as follows (amounts in thousands except for cents per kilowatt-hour):
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2011 | 2010 | |||||||||||||||
Capacity revenues | $ | 172,217 | $ | 166,527 | $ | 514,435 | $ | 495,687 | $ | 171,261 | $ | 170,775 | ||||||||
Energy revenues | 198,236 | 141,887 | 485,809 | 394,959 | 98,187 | 133,053 | ||||||||||||||
Total | $ | 370,453 | $ | 308,414 | $ | 1,000,244 | $ | 890,646 | $ | 269,448 | $ | 303,828 | ||||||||
Kilowatt-hours sold to members | 6,649,453 | 5,576,812 | 17,451,164 | 15,590,051 | 3,982,856 | 5,066,221 | ||||||||||||||
Cents per kilowatt-hour | 5.57¢ | 5.53¢ | 5.73¢ | 5.71¢ | 6.77¢ | 6.00¢ | ||||||||||||||
CapacityEnergy revenues were 26.2% lower for the three- and nine-month periodsthree-month period ended September 30, 2010 increased 3.4% and 3.8%March 31, 2011 compared to the same periodsperiod of 2009. This increase in capacity revenues primarily resulted from higher budgeted fixed operations and maintenance expenses and depreciation expenses. Energy revenues were 39.7% and 23.0% higher for the three- and nine-month periods ended September 30, 2010 compared to the same periods of 2009.2010. Our average energy revenue per megawatt-hour from sales to members was 17.2% and 9.9% higher6.1% lower for the three- and nine-month periodsthree-month period ended September 30, 2010March 31, 2011 as compared to the same periods of 2009.2010. The increasedecrease in total energy revenues was primarily due to the pass-through to our members of higherlower fuel costs (primarily due to higher coal-fired generation)lower coal- and gas-fired generation due to outages at Plant Scherer and the Chattahoochee Energy Facility). For a discussion of fuel costs, see "—Operating Expenses" below.
Operating Expenses
Operating expenses for the three- and nine-monththree-month periods ended September 30, 2010 increased 24.5% and 15.0%March 31, 2011 decreased 14.4% compared to the same periodsperiod of 2009.2010. This increasedecrease in operating expenses was primarily due to higherlower fuel costs, higher production expenses and higher depreciation expenses, offset somewhat bycosts. In addition, a decrease in purchased power costs contributed to lower operating expenses.
The following table summarizes our megawatt-hour generation and fuel costs by generating source and purchased power costs.
Three Months Ended March 31, | |||||||||||||
2011 | 2010 | ||||||||||||
Fuel Source | Cost | Generation | Cost | Generation | |||||||||
(thousands) | (Mwh) | (thousands) | (Mwh) | ||||||||||
Coal | $ | 50,564 | 1,682,119 | $ | 68,595 | 2,561,647 | |||||||
Nuclear | 16,143 | 2,396,999 | 12,949 | 2,183,448 | |||||||||
Gas | 5,091 | 22,911 | 19,967 | 361,358 | |||||||||
Pumped Storage (net of pumping energy) | 651 | (74,042 | ) | 580 | (62,657 | ) | |||||||
$ | 72,449 | 4,027,987 | $ | 102,091 | 5,043,796 | ||||||||
Cost | Purchased | Cost | Purchased | ||||||||||
(thousands) | (Mwh) | (thousands) | (Mwh) | ||||||||||
Purchased Power | $ | 11,555 | 21,027 | $ | 17,408 | 123,123 | |||||||
For the three- and nine-month periodsthree-month period ended September 30, 2010,March 31, 2011, total fuel costs increased 69.5% and 36.2%decreased 29.0% and total megawatt-hour generation increased 21.7% and 13.8%decreased 20.1% compared to the same periodsperiod of 2009.2010. Average fuel costs per megawatt-hour increased 39.3% and 19.8%decreased 11.1% in the three- and nine-month periods of 2010three-month period ended March 31, 2011 compared to the same periodsperiod of 2009.2010. This increasedecrease in total fuel costs resulted primarilypartly from higherlower coal-fired generation at Plant Scherer and Plant Wansley.partly from lower gas-fired generation at the Chattahoochee Energy Facility. The increasedecrease in average fuel costs during the nine-monththree-month period ended September 30, 2010March 31, 2011 compared to the same period of 20092010 resulted primarily from a 23.8%34.3% or 1,559,000880,000 megawatt-hour increasedecrease in coal-fired generation primarily at Plant Scherer and Plant Wansley due to significantly lessa scheduled outage timefor the installation of environmental compliance equipment in 2010 as compared to 2009. In addition, total2011. Total natural gas-fired generation increased 18.0%decreased 93.7% or 333,000338,000 megawatt-hours for the nine-monthsthree-months ended September 30, 2010March 31, 2011 as compared to the same period of 2009.2010 primarily due to an unplanned outage at Chattahoochee. Chattahoochee was put back into operation on April 2, 2011. The average fuel cost per megawatt-hour of coal- and gas-fired generation is substantially higher than nuclear generation;
thus, the increasedecrease in coal- and gas-fired generation was the primary contributor to the increasedecrease in average fuel costs per megawatt-hour of generation.
Production expenses increased 19.6% and 17.6% for the three- and nine-month periods ended September 30, 2010 compared to the same periods of 2009. This increase is partly attributable to increased general operations and maintenance expenses at the jointly owned plants (Plants Hatch, Vogtle, Wansley and Scherer) during the three- and nine-month periods ended September 30, 2010 and partly due to operations and maintenance expenses for the Hawk Road and Hartwell Energy Facilities incurred in 2010. We acquired these facilities in May and October of 2009, respectively.
Total purchased power costs decreased 44.3% and 41.7%33.6% for the three- and nine-month periodsthree-month period ended September 30, 2010March 31, 2011 compared to the same periodsperiod of 2009.2010. Purchased megawatt-hours decreased 70.6% and 54.1%82.9% for the three- and nine-month periods of 2010three-month period ended March 31, 2011 compared to the same periodsperiod of 2009. The average cost per megawatt-hour of total purchased power increased 89.8% and 27.1% for the three- and nine-month periods ended September 30, 2010 compared to the same periods of 2009.
Purchased power costs were as follows (amounts in thousands except for cents per kilowatt-hour):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
2010 | 2009 | 2010 | 2009 | ||||||||||
Capacity costs | $ | 3,848 | $ | 11,407 | $ | 11,905 | $ | 33,114 | |||||
Energy costs | 20,873 | 32,942 | 48,441 | 70,431 | |||||||||
Total | $ | 24,721 | $ | 44,349 | $ | 60,346 | $ | 103,545 | |||||
Kilowatt-hours of purchased power | 64,711 | 220,306 | 291,339 | 635,251 | |||||||||
Cents per kilowatt-hour | 38.20¢ | 20.13¢ | 20.71¢ | 16.30¢ | |||||||||
Purchased power capacity costs decreased 66.3% and 64.1% in the three- and nine-month periods ended September 30, 2010 compared to the same periods of 2009. Purchased power energy costs for the three- and nine-month periods ended September 30, 2010 decreased 36.7% and 31.2% compared to the same periods of 2009. The average cost per kilowatt-hour of purchased power energy increased 115.7% and 50.0% for the three- and nine-month periods ended September 30, 2010 compared to the same periods of 2009.2010. The decrease in purchased power capacity costs is primarily attributable to the Hartwell acquisition. As part of the acquisition, we acquired an existing power purchase agreement we had in place with the former owners of Hartwell. The decrease in purchased power energy costs resulted from (i) a decrease in megawatt-hours acquired under our energy replacement program, which replaces power from our owned generation facilities with lower price spot market purchased power energy (ii)and from lower realized losses incurred for natural gas financial contracts utilized for managing exposure to fluctuations in the market prices of natural gas and (iii) no power purchases under the Hartwell power purchase agreement in 2010 as a result of our acquisition of Hartwell in October 2009.
Depreciation and amortization expense increased 3.3% and 11.2% in the three- and nine-month periods ended September 30, 2010 as compared to the same periods of 2009. The increase was primarily due to increased depreciation expense for Plants Scherer and Wansley related to capital expenditures for environmental compliance projects, and to a lesser extent, depreciation expense related to Hawk Road and Hartwell, which were acquired in May and October of 2009, respectively.gas.
Interest charges
Interest expense increased by 11.0% and 11.9%7.7% in the three- and nine-month periodsthree-month period ended September 30, 2010March 31, 2011 compared to the same periodsperiod of 2009.2010. This increase wasis primarily due to the issuance in November 2009 of $400 million of taxable fixed rate bondsincreased debt issued for the purpose of financing construction of Plant Vogtle Units No. 3 and No. 4.
Allowance for debt funds used during construction increased by 163.2% and 128.5%60.9% in the three- and nine-month periodsthree-month period ended September 30, 2010March 31, 2011 compared to the same periodsperiod of 20092010 primarily due to construction expenditures for Plant Vogtle Units No. 3 and No. 4.
Amortization of debt discount and expense increased 7.4% and 29.7%decreased 15.7% in the three- and nine-month periodsthree-month period ended September 30, 2010March 31, 2011 compared to the same periodsperiod of 2009 partly2010 primarily due to the completion of amortization of issuance costs associated with transactions that closed in May and August 2009 to provide supplemental credit enhancement for the Rocky Mountain lease arrangements and partly due to the amortization of losses on debt refinancing associated with the Hartwell acquisition.arrangements.
Financial Condition
Balance Sheet Analysis as of September 30, 2010March 31, 2011
Assets
Cash used for property additions for the nine-monththree-month period ended September 30, 2010March 31, 2011 totaled $524.3$208.5 million. Of this amount, approximately $308$96 million was associated with the construction expenditures for Plant Vogtle Units No. 3 and No. 4. The remaining expenditures were primarily for environmental control systems being installed at Plant Scherer, normal additions and replacements to existing generation facilities and purchases of nuclear fuel.
Cash and cash equivalents decreased by $146.3$131.3 million in the nine-monththree-month period ended September 30, 2010 and can be largelyMarch 31, 2011. The decrease was primarily attributed to capital expenditures of approximately $524.3$208.5 million for property additions, which were partially offset by $77 million in advances received from the Rural Utilities Service for environmental and a net applicationgeneral improvements.
The $6.3 million restricted cash balance at September 30, 2010March 31, 2011 consisted of the remaining$168.7 million of pollution control revenue bond proceeds obtained from the issuance of clean renewable energy bonds in December 2009.a March 2011 bond refinancing. The proceeds from the clean renewable energy bonds are restricted in use for certain qualifying expenditures. The $16.1 million decrease in restricted cashwere on deposit with a trustee and subsequently utilized on April 1, 2011 for the nine-month period ended September 30, 2010 was due in part to the expenditurerefunding of $5.2 million for such qualifying costs. In addition, $10.9 million of restricted cash, the proceeds from a December 2009 bond refinancing, was utilized to payoff the principal amount of the refinancedcertain pollution control revenue bondsbonds.
Restricted short-term investments at March 31, 2011 represented funds deposited into a Rural Utilities Service Cushion of Credit Account with the U.S. Treasury that matured in January 2010.
Receivables increased by $17.4 million in the nine-month period ended September 30, 2010.earns interest at a guaranteed rate of 5% per annum. The December 31, 2009 receivables balance included approximately $20.7 million of credits availablefunds, including interest earned thereon, can only be applied to the members for a board approved reduction to 2009 revenue requirements as a result of margins collected in excess of our 2009 target 1.12 margins for interest ratio. The increase in receivables was largely due to these credits being utilized by the members during 2010. The receivable for amounts billed or billable to the members for their monthly power bills also increased by approximately $1.7 million in September 2010 compared to December 2009. Receivables from Smarr EMC for costs incurred for operation of its facilities also increased by $2.5 million. These increases were partially offset by a $7.8 million decrease in the receivable from the members associated with natural gas derivatives. This decrease was largely due to the settlement of certain natural gas contracts.debt service on Rural Utilities Service and Rural Utilities Service-guaranteed Federal Financing Bank notes. For information regarding the natural gas contracts,Rural Utilities Service Cushion of Credit Account, see Note CI of Notes to Unaudited Condensed Financial Statements.
Inventories, including fossil fuelStatements and spare parts inventories, decreased by $24.1 million in the nine-month period ended September 30, 2010. The decrease was primarily due to a $27.6 million decrease in coal fuel inventories, largely a result"—Capital Requirements and Liquidity and Sources of a planned reduction in coal fuel inventory balances.
Capital—Table of ContentsLiquidity
Prepayments and other current assets increased by $4.4 million in the nine-month period ended September 30, 2010 primarily as a result of an increase in prepaid insurance balances.
The $9.5 million decrease in deferred amortization of capital leases for the nine-month period ended September 30, 2010 was primarily due to regular monthly amortization.
The deferred tax asset represents an offset to the liability recorded for unrecognized tax benefits due to an uncertain tax position. We are carrying forward significant regular tax and alternative minimum tax net operating losses. As a result, any regular tax liability in open tax years related to an uncertain tax position would be offset by regular net operating losses. At December 31, 2009, we had recognized a $24.0 million liability for an uncertain tax position and consequently an offsetting $24.0 million deferred asset. The uncertain tax position relates to the 2006 tax year for which the U.S. federal statute of limitations expired during the third quarter of 2010. Accordingly, this liability and the related deferred tax asset were each reduced by $24.0 million during the third quarter of 2010 to zero.
The $3.5 million decrease in the deferred asset associated with retirement obligations in the nine-month period ended September 30, 2010 was primarily due to decommissioning fund earnings. The deferred asset increases or decreases to the extent of timing differences between recognized accretion expense associated with nuclear decommissioning and the amounts recovered through decommissioning fund earnings. Nuclear decommissioning accretion and related expenses of approximately $11.3 million and decommissioning fund net earnings of approximately $16.3 million resulted in the deferred charge decreasing by $5.0 million in the nine-month period ended September 30, 2010. Partially offsetting this decrease was a $2.0 million decrease in the unrealized gains associated with the nuclear decommissioning fund. Consistent with our ratemaking policy, unrealized gains or losses from the nuclear decommissioning fund are deducted from or added to the deferred asset associated with retirement obligations. The decrease in the nuclear decommissioning fund unrealized gains therefore increased the deferred asset by $2.0 million." herein.
Equity and Liabilities
Long-term debt and capital leases due within one year increased $28.7$153.9 million primarily as a result of scheduled debt maturitiesthe $180.4 million refinancing transaction that occurred in March 2011. The principal payments for the refinanced pollution control revenue bonds were made April 1, 2011 and the consequent reclassificationbalances were classified as current as of certain long-term debt.
The $297.4 million increase in short-term borrowings was primarilyMarch 31, 2011. For information regarding the March 2011 bond refinancing, see Note L of Notes to fund constructionUnaudited Condensed Financial Statements and "—Capital Requirements and Liquidity and Sources of Plant Vogtle Units No. 3 and No. 4.Capital—Bond Financings" herein.
Accounts payable increased $72.9$19.0 million in the nine-monththree-month period ended September 30, 2010March 31, 2011 primarily due to a $69.8$22.2 million increase in the payable to Georgia Power for operation, maintenance and capital costs, primarily associated with construction costs for Plant Vogtle Units No. 3 and No. 4. In addition, there was a $3.8$3.4 million increasedecrease in the payable for natural gas, primarily due to increased generationan unplanned outage at the natural gas fired plants in September 2010 compared with December 2009.Chattahoochee.
The $13.5$30.2 million decrease in accrued interest duringfor the nine-monththree-month period ended September 30, 2010March 31, 2011 was due to the normal timing differences between interest payments and interest expense accruals.
Accrued and withheld taxes decreased $16.8 million for the three-month period ended March 31, 2011 as a result of payments made (when due) for 2010 property taxes, which exceeded normal 2011 property tax accruals.
Member power bill prepayments represent funds received from the members for prepayment of their monthly power bills. At September 30, 2010, $65.0March 31, 2011, $55.8 million of member power bill prepayments was classified as a current liability and $19.7$42.5 million of member power bill prepayments was classified as a long-term deferred liability. During the nine-monththree-month period ended September 30, 2010,March 31, 2011, approximately $66.4$10.6 million of prepayments waswere received from the members and approximately $182.2$24.8 million was applied to the members' monthly power bills. The application of member prepayments received in the prior year to the current year's power bills significantly reduced net cash provided by operations. For information regarding the power bill prepayment program, see Note JK of Notes to Unaudited Condensed Financial Statements and see "Financial Condition—"—Capital Requirements and Liquidity and Sources of Capital—Liquidity" herein.
Other current liabilities increased by $5.5 million during the three-month period ended March 31, 2011 primarily due to $9.5 million accrued for major maintenance at the Hawk Road Energy Facility. Partially offsetting the increase was a $3.7 million decrease in accrued payroll as a result of the payout of 2010 performance pay.
Other current liabilities decreased by $10.7 million during nine-month period ended September 30, 2010, primarily due to a $6.2 million decrease in accruals for other miscellaneous payables. This decrease was largely due to the payment and true-up of estimated operation and maintenance costs. The liability associated with natural gas derivatives also decreased by $7.8 million primarily due to the settlement of certain natural gas contracts. Partially offsetting these increases was a $3.6 million liability established as a result of the receipt of certain grant monies relating to energy efficiency programs.
Primarily as a result of incurring approximately $6.4 million of removal costs for the retirement of certain assets, accumulated retirement costs for other obligations decreased by $5.2 million during the nine-month period ended September 30, 2010.
The long-term contingent liability represents a liability recorded for unrecognized tax benefits. The $24 million decrease was the result of the expiration of the statute of limitations for the 2006 tax year. See the deferred tax asset discussion above for more information.
The $12.5 million decrease in the power sale agreement, which we assumed as part of the acquisition of Heard County Power L.L.C. in May 2009, in the nine-month period ended September 30, 2010 was due to regular monthly amortization.
Other deferred credits and liabilities increased $42.3 million in the nine-month period ended September 30, 2010 partially due to a $19.7 million liability established in 2010 for long-term contract retention payables associated with the Plant Vogtle Units No. 3 and No. 4 construction. The increase was also partially due to a $10.5 million increase in the regulatory liability established to defer the effects on net margin that result from Hawk Road Energy Facility operations. Also contributing to the increase was a $7.5 million increase in funding received from the members for future debt payments related to the Talbot and Chattahoochee Energy Facilities, as well as a $4.2 million increase in funding for the future overhaul of the combustion turbine plants.
Capital Requirements and Liquidity and Sources of Capital
Future Power Resources
To meet the energy needs of our members, we have embarked onare in a period of generation expansion program. On October 26, 2010, we entered into a non-binding term sheet with a third party to acquire natural gas-fired generation facilities.expansion. In addition to significantly greater generationacquiring 2,020 megawatts of capacity through the purchase price for the facilities is expected to be less than the cost projected for us to construct a previously disclosed 605-megawatt combined cycle plant. The proposed acquisition remains subject to the completion of our due diligence and approval process, including subscription by our members and approval by our members and our Board of Directors, as well as negotiation of definitive agreements with the third party and, as a result, may not result in a completed transaction. If we complete this acquisition, we anticipate that it will close in early 2011.
If we acquire these facilities, we would revise our plans to construct future generation resources to reflect this additional generation capacity and our members' projected power supply needs. Completing this acquisition would affect two generation projects currently under development, a 605-megawatt combined cycle plant and the 100-megawatt Warren County biomass plant, which are projected to cost us approximately $750 million and $477 million, including allowance for funds used during construction, respectively. Upon closing, we would cancel the combined cycle plant and indefinitely defer the Warren County biomass plant while we continue to monitor regulatory and legislative uncertainties related to biomass electricity generation. These actions would reduce our previously disclosed projected capital expenditures by approximately $250 million through 2012 and by a total of approximately $1.2 billion through 2015, exclusive of expenditures at closing related to the purchase price of the target facilities. To date, the expenditures on the combined cycleHawk Road, Hartwell and biomass plantMurray Energy Facilities, members have not been material. This acquisition would have no effect on our participationsubscribed to a 30% interest in the construction of Plant Vogtle Units No. 3
and No. 4.4 (660 megawatts), which are currently under construction. We will continue to evaluate otheradditional generation resource development opportunities to help meet our members' projected power supply needs over the next ten years.
See"Financing Activities" herein for a discussion of how we plan to finance the acquisition of the gas-fired facilities, should the acquisition be completed. For further discussion of our planned future generation resources and projected capital expenditures, see "BUSINESS—OUR POWER SUPPLY RESOURCES—Future"Item 1—BUSINESS—Our Power Resources" in our 2009 Form 10-K and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition—Capital Requirements and Liquidity and Sources of Capital—Supply Resources—Future Power Resources" and "—"Item 7—MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Financial Condition—Capital Requirements—Capital Expenditures" in our Quarterly Report on2010 Form 10-Q10-K.
Recent Events in Japan. On March 11, 2011, a major earthquake and tsunami struck Japan and caused substantial damage to the nuclear generating units at the Fukushima Daiichi generating plant. According to published reports, the owner of these units is working to stabilize these units following a loss of operation of the cooling systems for the quarterly period ended June 30, 2010.units, which led to the release of radiation. Both Georgia Power, on behalf of the co-owners, and we continue to monitor this situation as it develops.
In response to the events in Japan, the Nuclear Regulatory Commission has formed a task force to review operational and safety requirements for nuclear facilities in the U.S. which could potentially impact future operations and capital requirements. Additionally, the Nuclear Regulatory Commission has also received two petitions to suspend its decision-making processes related to both the AP1000 design certification and new nuclear construction generally in order to evaluate further any lessons learned from these events. The Nuclear Regulatory Commission has not acted on these petitions. To date, Georgia Power has not identified any immediate impacts to the licensing and construction of Vogtle Units No. 3 and No. 4 or the operation of our existing nuclear generating units.
The events in Japan have also created broader economic uncertainties that may affect the availability of equipment from Japanese manufacturers and future operating costs, including fuel, for our nuclear and other generating facilities. The ultimate outcome of these events on both our existing generation resources and the development of Vogtle Units No. 3 and No. 4 cannot be determined at this time. See "Item 1A—RISK FACTORS" in our 2010 Form 10-K for a discussion of certain risks associated with the licensing, construction and operation of nuclear generating units, including potential impacts that could result from a major incident at a nuclear facility anywhere in the world.
Environmental Regulations
Several environmental regulation-related developments have occurred sinceSince our Quarterly Report on2010 Form 10-Q was filed for the second quarter of 201010-K was filed with the SEC. TheSEC, the Environmental Protection Agency has published final maximum achievable control technology emission limits for industrial, commercial and institutional boilers. At the same time, EPA announced its intention to reconsider certain aspects of these standards, and is now in the process of developing a notice of reconsideration that will request additional comment on certain issues embedded in the rule. Thus, while the final rule issued on June 22, 2010 revisingis more favorable than the sulfur dioxide standardproposed rule as it would apply to the boiler that was planned for the Warren County Biomass Project, there is still uncertainty as to whether there will be further changes in the rule that would apply to the emissions from that boiler. In addition, EPA has now been challenged. After EPA's proposal of the Transport Rule on August 2, 2010, EPA issued a Notice of Data Availability on September 1, 2010, updatingpublished proposed maximum achievable control technology emission limits for certain analyses used to derive the emissions limitations in the Transport Rule and issued a second Notice of Data Availability on October 27, 2010. Also, EPA received approval from the U.S. Court of Appeals for the D.C. Circuit to delay the finalization of the proposed national emission standards for hazardous air pollutants (including mercury) for industrial boilers proposed on June 4, 2010 for one month until January 16, 2011. This rulecoal and oil-fired electric generating units. EPA has stated its intention to finalize this proposal later in 2011, after it has considered and responded to comments that are now being prepared in response to the proposed Transport Rule could undergo substantial revision prior to finalization, at which time they too might be challenged.proposal. We cannot predict at this time whether any of these developments will ultimately result in the further regulation of emissions from our existing or future power plants, or the effects of any such regulation, including any resulting capital requirements. For further discussion regarding environmental capital
requirements, see "Item 7—MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS���Financial Condition—Capital Requirements—Capital Expenditures" in our 2010 Form 10-K.
Liquidity
At September 30, 2010,March 31, 2011, we had $862.8 million$1.3 billion of unrestricted available liquidity to meet our short-term cash needs and liquidity requirements. This amount included $432.8$541 million in cash and cash equivalents and $430$718 million of unused and available committed short-term credit arrangements. As discussed above, cash and cash equivalents decreased by approximately $146.3$131 million duringin the nine-monththree-month period ended September 30, 2010 compared to the same period in 2009 mainlyMarch 31, 2011 primarily due to capital expenditures made for property additions and the application of member power bill prepayments to power bills. Short-term borrowings and long-term debt proceeds of $297.4 million and $222.6 million, respectively, were significant sources of cash during the nine-month period ended September 30, 2010.additions.
Our short-term credit facilities are shown in the table below. WeAs discussed below, we expect to renew or restructure these short-term credit facilities, as needed, prior to their respective expiration dates.
| | Authorized Amount | Available 9/30/2010 | Expiration Date | | Authorized Amount | Available 3/31/2011 | Expiration Date | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Unsecured Facilities: | Unsecured Facilities: | Unsecured Facilities: | ||||||||||||||||
Commercial Paper Backup Line of Credit | $ | 475 | $ | 1 | (1) | July 2012 | Commercial Paper Line of Credit | $ | 475 | $ | 182 | (1) | July 2012 | |||||
CoBank Line of Credit | 50 | 0 | December 2010 | CoBank Line of Credit | 50 | 50 | June 2011 | |||||||||||
CFC Line of Credit | 50 | 0 | October 2011 | CFC Line of Credit | 50 | 50 | October 2011 | |||||||||||
JPMorgan Chase Line of Credit | 150 | 29 | (2) | December 2012 | JPMorgan Chase Line of Credit | 150 | 36 | (2) | December 2012 | |||||||||
Secured facilities: | Secured facilities: | Secured facilities: | ||||||||||||||||
CoBank Line of Credit | 150 | 150 | November 2012 | CoBank Line of Credit | 150 | 150 | November 2012 | |||||||||||
CFC Line of Credit | 250 | 250 | December 2013 | CFC Line of Credit | 250 | 250 | December 2013 | |||||||||||
Total | Total | $ | 1,125 | $ | 430 | Total | $ | 1,125 | $ | 718 |
Due to the significant amount of expenditures we are incurring relating to environmental compliance projects and acquisition and construction or acquisition of new generation facilities, we are currently funding our capital requirements through a combination of funds generated from operations and short-term and long-term borrowings. In particular, we are using commercial paper, and short-termrevolving credit facilities and term loans to provide interim financing for the environmental compliance expenditures, for the acquisition of generation facilities and for new generation construction until permanent financing for these projects is put in place. In November 2010late 2011 we issued $450plan to issue approximately $400 million of long-term first mortgage bonds to fund a portion of the cost of constructing Plant Vogtle Units No. 3 and No. 4 and used a substantial portion ofwill use the bond proceeds to repay short-term borrowings that wereare providing interim funding for this same purpose. A similar repayment of short-term borrowings related to the Vogtle construction occurred in connection with the issuanceissuances of $450 million and $400 million of long-term first mortgage bonds issued in November 2009.2010 and November 2009, respectively. For a more detailed discussion of our plans regarding financing of these facilities, see "—Financing Activities."
In order to further enhance our liquidity position during the peak years of newour generation construction,expansion program, we are currently anticipate ain the process of restructuring and related upsizing of certain of our short-term credit facilities, including the $475 million commercial paper backup line of credit, the $50 million CoBank line of credit and a $136 million letter of credit facility sometime in 2011. The exact timing, size and term of the restructuredcurrently providing credit facilities will be influenced by many factors, including the ultimate sizeenhancement on certain of our construction program, the timingvariable rate pollution control bonds. We expect to replace these facilities with a new
Table of permanent financingContents
four year revolving credit facility of up to $1.3 billion that can be used to support commercial paper issuance, to advance funds for working capital purposes and to issue letters of credit thereunder. Bank of America will continue to serve as administrative agent under this restructured facility. A closing on this new generation facilitiesfacility is expected by June 2011. We also plan to renew and overall market conditions.upsize our $50 million National Rural Utilities Cooperative Finance Corporation (CFC) line of credit later this year.
Under the commercial paper program, we areour board of directors has authorized us to issue commercial paper in amounts that do not exceed the amount of any committed backup lines of credit in place, thereby providing 100% dedicated backup support for any paper outstanding. We periodically assess our needs in order to determine the appropriate amount of commercial paper backup to maintain and currentlymaintain. In connection with the increase in the size of our main revolving credit facility to approximately $1.3 billion, we will be upsizing the size of our commercial paper program accordingly. Once all the restructured credit facilities have closed, we expect to have in place credit facilities in the aggregate totaling approximately $1.9 billion. We believe this amount of liquidity will be more than sufficient to cover our interim funding needs through the period of generation expansion and to provide a $475 million committed backup credit facility provided by eight participant banks, with Bank of America serving as administrative agent for this facility.reasonable cushion to operate our business.
Along with the lines of credit from CoBank, the National Rural Utilities Cooperative Finance Corporation (CFC)CFC and JPMorgan Chase Bank, funds may also be advanced under the commercial paper backup line of credit supporting commercial paper for general working capital purposes. In addition, under certain of our committed credit facilities we have the ability to issue letters of credit totaling $450 million in the aggregate, of which approximately $180$336 million remained available at September 30, 2010.March 31, 2011. However, any amounts related to issued letters of credit will reduce the amount available to draw as working capital under those facilities. Also, due to the requirement to have 100% dedicated backup for any commercial paper outstanding, any amounts drawn under the commercial paper backup line for working capital or related to issued letters of credit will reduce the amount of commercial paper that we can issue.
Under the $250 million line of credit with CFC, we have the option of converting any amounts outstanding under the line of credit to a term loan with a maturity no later than December 31, 2043. Any amounts drawn under the $250 million CFC line of credit, as well as any amounts converted to a term loan, will be secured under our first mortgage indenture.
Several of our line of credit facilities contain a similar financial covenant that requires us to maintain minimum levels of patronage capital. At September 30, 2010,March 31, 2011, the required minimum level was $544.8$570 million and our actual patronage capital was $598.1$612 million. An additional covenant contained in several of our credit facilities limits our secured indebtedness and our unsecured indebtedness, both as defined by these credit facilities, to $8.5 billion and $4.0 billion, respectively. At September 30, 2010,March 31, 2011, we had approximately $4.5$5.2 billion of secured indebtedness and $666$392 million of unsecured indebtedness outstanding, which was well within the covenant thresholds.
We also have a power bill prepayment program that provides us with an additional source of liquidity. Under the program, members can prepay their power bills from us at a discount for an agreed upon number of months in advance, after which the prepayments are credited against the participating members' monthly power bills. The discount is comparable to our avoided cost of borrowing. As of September 30, 2010,March 31, 2011, the balance of member prepayments received but not yet credited to their power bills was $84.7 million, which represented prepayments from sixteen members participating in the program.$98 million. We began applying the prepayments against participating members' power bills in 2009 and will continue doing so through May 2015, with the majority of the remaining balance scheduled to be applied in 2011.2011 and 2012. For more information regarding the power bill prepayment program, see Note JK of Notes to Unaudited Condensed Financial Statements.
At September 30, 2010,March 31, 2011, current assets included $81$15 million of restricted short-term investments pursuant to deposits made to a Rural Utilities Service Cushion of Credit Account. The deposits with the U.S. Treasury were made voluntarily and earn interest at a guaranteed rate of 5% per annum. The funds in the account, including interest thereon, can only be applied to debt service payments on Rural Utilities
Service notes and Rural Utilities Service-guaranteed Federal Financing Bank notes. The amount on deposit in this account is less than one year's debt service payments owed to the Rural Utilities Service and Federal Financing Bank. Our decisions regarding how to apply the funds are guided by the interest rate environment and our anticipated liquidity needs.
Financing Activities
OurFirst Mortgage Indenture. At September 30, 2010March 31, 2011, we had $4.3$5.0 billion of long-term debt outstanding under our first mortgage indenture secured equally and ratably by a lien on substantially all of our tangible and some of our intangible assets, including those we acquire in the future. See "MANAGEMENT'S"Item 7—MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Financial Condition—Financing Activities—OurFirst Mortgage Indenture" in our 20092010 Form 10-K for a further discussion of our first mortgage indenture.
We intend to put in place by year-end 2010 an indenture for unsecured debt securities to provide an additional financing alternative, most notably in connection with interim financing related to generation facility acquisitions and new generation construction.
Bond Financings. InOn March 2010,31, 2011, the Development Authority of Appling County (Georgia), the Development Authority of Burke County (Georgia) and the Development Authority of Monroe County (Georgia) issued, on our behalf, $133.6$180.4 million in aggregate principal amount of tax-exempt pollution control revenue bonds for the purpose of refunding certain pollution control revenue bonds previously issued by the development authorities on our behalf to finance or refinance the costs of our undivided interests in certain air or water pollution control and sewage or solid waste disposal facilities. The bonds were issued as variabletwo-year term rate demand bonds backed by an irrevocable direct-pay letter of credit for each series of bonds issued by Bank of America.with a 2.5% interest rate fixed through February 28, 2013. The bonds are secured under our first mortgage indenture.
On November 9, 2010,In late 2011, we issued $450plan to issue approximately $400 million of taxable first mortgage bonds primarily for the purpose of funding a portion of the cost of constructing Plant Vogtle Units No. 3 and No. 4. A substantial portion of theThe proceeds werewill be used to repay outstanding short-term borrowings in connection with payments previously madedue during 2011 for construction of this facility.these units. The first mortgage bonds were secured under our first mortgage indenture.
We are evaluating the potential for an issuance of a modest amount of new tax-exempt debt in connection with costs related to pollution control equipment being installed at coal-fired Plant Scherer, but the timing and exact amount of this new debt, if any, is uncertain at this time. If issued, this tax-exempt debt will be secured under our first mortgage indenture.
TableInterim Financing for the Murray Acquisition. In early April 2011, we closed a $260 million three-year term loan to provide funds for a portion of Contentsthe cost of acquiring the Murray Energy Facility. The balance of the acquisition cost was funded with commercial paper and drawings under our existing short-term credit facilities.
Rural Utilities Service-Guaranteed Loans. We currently have five approved Rural Utilities Service-guaranteed loans, being funded through the Federal Financing Bank, totaling $1.2 billion that are in the process of being drawn down, with $940$830 million remaining to be advanced. Two of these loans were approved in the third quarter of 2010, including a loan relating to the acquisition of the Hawk Road Energy Facility ($203.1 million) and a loan relating to the acquisition of the Hartwell Energy Facility ($170 million).
We also have three Rural Utilities Service-guaranteed loan applications pending, totaling approximately $1.3$1.1 billion, including a loan applicationapplications related to the Warren County biomass plant, athe Murray Energy Facility and to general improvements at existing generation facilities. Actions on the Murray and general improvements loans are anticipated in 2011. The previously submitted loan application related to the 605 MWmegawatt gas-fired combined cycle plant, and a loan application related to general improvements at existing generation facilities (action on this general improvements loan is anticipatedwhich was cancelled in 2011). connection with the Murray acquisition, has been withdrawn.
The President'sFederal budget proposal for fiscal year 2011 (which began on October 1, 2010) has not yet beenwas adopted but if adopted would prohibitin April 2011. Rural Utilities Service funding for fiscal year 2011 remains unchanged from that in fiscal year 2010. Additionally, the previously proposed restrictions to eligibility for funding in fiscal year 2011 were not included. However, the President's proposed budget for fiscal year 2012 does include a modest reduction to the overall funding level as well as prohibitions against funding for (i) improvements to existing fossil-fueled generation facilities unless the improvements are related to carbon-capture projects, except up to $2 billion may be used for environmental improvements that would reduce emissions, and (ii) construction of new fossil-fueled generation facilities. Nonetheless we have submitted a loan application for Murray, and should members subscribe to any additional fossil-fueled facilities, including the gas-fired facilities that we may acquire, we anticipate filing loan applications for those facilities as well to the extent Rural Utilities Service regulationslending
authority in place at that time allow us to do so. As such, should we complete the acquisition of the natural gas-fired facilities discussed above under "Future Power Resources," we intend to submit a loan application to the Rural Utilities Service for long-term financing of the acquired facility, and at the same time would withdraw our loan application previously submitted to the Rural Utilities Service for the 605 MW gas-fired combined cycle plant. For any amounts not funded through the Rural Utilities Service, we would most likely issue taxable bonds secured under our first mortgage indenture. We are considering a variety of alternatives available to us for interim financing in connection with the potential acquisition of the gas-fired facilities including, but not limited to, using cash on hand, drawing down on our existing credit facilities or new unsecured credit facilities and issuing unsecured notes in transactions registered or exempt under the Securities Act of 1933, as amended (see "Our Indenture").
For a more detailed discussion regarding the Rural Utilities Service's current position on funding of generation facilities and a general discussion of the federal programs administered by it, see "BUSINESS—OGLETHORPE POWER CORPORATION—Relationship with Rural Utilities Service" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009.bonds.
All of the approved Rural Utilities Service loans are expected to be funded through the Federal Financing Bank and guaranteed by the Rural Utilities Service, and the debt will be secured under our first mortgage indenture.
Department of Energy-Guaranteed Loans. We have signed a conditional term sheet with the Department of Energy that sets forth the general terms of a loan and related loan guarantee that would fund approximately 70% of the estimated $4.2 billion cost to construct our 30% undivided share of Plant Vogtle Units No. 3 and No. 4, not to exceed $3.057 billion. The loan structure would entail a loan that is expected to be funded by the Federal Financing Bank carrying a federal loan guarantee provided by the Department of Energy, with the debt secured under our first mortgage indenture.
We are working with the Department of Energy to finalize the loan guarantee. However, final approval and issuance of a loan guarantee by the Department of Energy is subject to receipt of the combined construction permits and operating licenses for Plant Vogtle Units No. 3 and No. 4 from the Nuclear Regulatory Commission, negotiation of definitive agreements, completion of due diligence by the Department of Energy and satisfaction of other conditions. Therefore, there can be no assurance that the Department of Energy will ultimately issue the loan guarantee to us. We anticipate that any Plant Vogtle costs not funded under the Department of Energy loan guarantee program would be financed through the issuance of taxable bonds.
Of the approximately $1.2 billion of currently estimated project costs not expected to be funded under the Department of Energy loan guarantee program, we have already financed $850 million through the issuance of first mortgage bonds. WeAs discussed above, we expect to issue another approximately $400 million of first mortgage bonds for this purpose sometime in late 2011.
For more detailed information regarding our financing plans, see "MANAGEMENT'S"Item 7—MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Financial Condition—Financing Activities" in our 20092010 Form 10-K.
Newly Adopted or Issued Accounting Standards
For a discussion of recently issued or adopted accounting prouncements,pronouncements, see Note E of Notes to Unaudited Condensed Financial Statements herein.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our market risks have not changed materially from the risks reported in our 20092010 Form 10-K.
Item 4. Controls and Procedures
As of September 30, 2010,March 31, 2011, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective.
There have been no changes in our internal control over financial reporting or other factors that occurred during the quarter ended September 30, 2010March 31, 2011 that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.
We are a party to various actions and proceedings incidental to our normal business. Liability in the event of final adverse determination in any of these matters is either covered by insurance or, in the opinion of our management, after consultation with counsel, should not in the aggregate have a material adverse effect on our financial position or results of operations.
There have not been any material changes in our risk factors from those reported in "Item 1A—RISK FACTORS" of our Annual Report on2010 Form 10-K for the fiscal year ended December 31, 2009.10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not Applicable.
Item 3. Defaults upon Senior Securities
Not Applicable.
Not Applicable.
Number | Description | ||||||
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4.1 | |||||||
4.2 | |||||||
4.3 | Sixtieth Supplemental Indenture, dated as of April 1, 2011, made by Oglethorpe to U.S. Bank National Association, as trustee, relating to Series 2011 (FFB W-8) Note, Series 2011 (RUS | ||||||
31.1 | Rule 13a-14(a)/15d-14(a) Certification, by Thomas A. Smith (Principal Executive Officer). | ||||||
31.2 | Rule 13a-14(a)/15d-14(a) Certification, by Elizabeth B. Higgins (Principal Financial Officer). | ||||||
32.1 | Certification Pursuant to 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Thomas A. Smith (Principal Executive Officer). | ||||||
32.2 | Certification Pursuant to 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Elizabeth B. Higgins (Principal Financial Officer). | ||||||
99.1 | Member Financial and Statistical Information (for calendar years 2008-2010). |
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: | By: | /s/ Thomas A. Smith Thomas A. Smith President and Chief Executive Officer (Principal Executive Officer) | ||
Date: | /s/ Elizabeth B. Higgins Elizabeth B. Higgins Executive Vice President and Chief Financial Officer (Principal Financial Officer) |