Oglethorpe Power Corporation
Notes to Condensed Financial Statements (Unaudited)
JuneSeptember 30, 2005 and 2004

(A)       General.   The condensed financial statements included in this report have been prepared by Oglethorpe Power Corporation (Oglethorpe), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). In the opinion of management, the information furnished in this report reflects all adjustments (which include only normal recurring adjustments) and estimates necessary to present fairly state, in all material respects, the results for the periods ended JuneSeptember 30, 2005 and 2004. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to SEC rules and regulations, although Oglethorpe believes that the disclosures are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in Oglethorpe’s latest Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the SEC. Certain amounts for 2004 have been reclassified to conform to the current period presentation. The results of operations for the three-month and six-monthnine-month periods ended JuneSeptember 30, 2005 are not necessarily indicative of results to be expected for the full year. As noted in Oglethorpe’s 2004 Annual Report on Form 10-K, substantially all of Oglethorpe’s sales are to its Members and, thus, the receivables on the accompanying balance sheets are principally from its Members. (See “Notes to Financial Statements” in Item 8 of Oglethorpe’s 2004 Annual Report on Form 10-K.)

(B)        New Accounting Pronouncements.   In March 2005, the Financial Accounting Standards Board (FASB) issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (Interpretation No. 47). This interpretationInterpretation clarifies that the term conditional“conditional asset retirement obligationobligation” as used in Statement of Financial Accounting Standards (SFAS) No. 143, “Accounting for Asset Retirement Obligations”, refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of Oglethorpe. The obligation to perform the asset retirement activity is unconditional even though uncertainty may exist about the timing and/or method of settlement. Thus, the timing and/or method of settlement may be conditional on a future event. Accordingly, Oglethorpe is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. This Interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. Interpretation No. 47 will be effective foradopted by Oglethorpe by no later than by the end of the current fiscal year ending December 31, 2005. Oglethorpe will implement this standard during the fourth quarter of 2005. Retroactive application for interim financial information is permitted but not required. Oglethorpe is assessing the impact of this Interpretation and currently believes that Interpretation No. 47 will not have a material impact on its financial statements.

In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” a replacement of APB Opinion No. 20 and SFAS No. 3. SFAS 154 requires retrospective application to prior periods’ financial statements of voluntary change in accounting principle, unless it is impractical.impractical to do so. Opinion No. 20 previously required that most voluntary changes in accounting principle be recognized by including, in net income, for the period of the change, the cumulative effect of changing to the newly adopted accounting principle. SFAS 154 also requires that a change in the method of depreciation, amortization, or depletion for long-lived, non-financial assets be accounted for as a change in accounting estimate that is effectedaffected by a change in accounting principle. Opinion No. 20 previously required that such a change be reported as a change in accounting principle. SFAS 154 also requires that any errors in the financial statements of a prior period shall be reported as a prior-period

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adjustment by restating the prior period financial statements. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Oglethorpe will implement this standard during the first quarter of 2006. Oglethorpe does not currently expect this statement to have an impact on its financial statements.

(C)        Proposed Accounting Interpretation.   In July 2005, the FASB issued an Exposure Draft of a proposed Interpretation, “Accounting for Uncertain Tax Positions—an Interpretation of FASB Statement No. 109.” The objective of the Proposed Interpretation is to clarify the accounting for uncertain tax positions. Generally, an entity would be required to recognize, in its financial statements, the best estimate of the impact of a tax position only if that position is probable of being sustained on audit based solely on the technical merits of the position. The term “probable” is used in this proposedProposed Interpretation consistent with its use in SFAS No. 5, “Accounting for Contingencies”, to mean “the future event or events are likely to occur.” Individual tax positions that fail to meet the probable threshold will generally result in either (a) a reduction in the deferred tax asset or an increase in a deferred tax liability or (b) an increase in a liability for income taxes payable or the reduction of an income tax refund receivable. Comments on the Exposure draft areDraft were due September 12, 2005. Oglethorpe is monitoring developments of the Proposed Interpretation and is assessing the impact that the Proposed Interpretation may have on its financial statements. Oglethorpe cannot predict what actions the FASB will take or how such actions might ultimately affect Oglethorpe’s financial position or results of operations.

(D)       Accumulated Comprehensive Margin (Loss).   The table below provides a detail of the beginning and ending balance for each classification of other comprehensive margin (loss) along with the amount of any reclassification adjustments included in margin for each of the periods presented in the Statement of Patronage Capital and Membership Fees and Accumulated Other Comprehensive Margin (Loss). There were no material changes in the nature, timing or amounts of expected reclassification adjustments from the amounts disclosed in Oglethorpe’s Annual Report on Form 10-K for the year ended December 31, 2004. Oglethorpe’s effective tax rate is zero; therefore, all amounts below are presented net of tax.

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(E)        Environmental mattersmatters::

Set forth below are environmental matters that could have an effect on Oglethorpe.Oglethorpe’s financial condition or results of operations. At this time, the resolution of these matters is uncertain, and Oglethorpe has made no accruals for such contingencies and cannot reasonably estimate the possible loss or range of loss with respect to these matters.

1.General.As is typical for electric utilities, Oglethorpe is 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 and nitrogen oxides into the air and discharges of other

pollutants, including heat, into waters of the United States. Oglethorpe is 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 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. 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. Oglethorpe cannot provide assurance that it will always be in compliance with current and future regulations.

2.Clean Air Act.In December 2002, the Sierra Club, Physicians for Social Responsibility, Georgia Forest Watch and one individual filed suit in Federal Court in Georgia against Georgia Power Company (GPC) alleging violations of the Clean Air Act at Plant Wansley. The complaint alleges violations of opacity limits at both the coal-fired units, in which Oglethorpe is a co-owner, and other violations at several of the combined cycle units wherein which Oglethorpe has no ownership interest. This civil action requests injunctive and declaratory relief, civil penalties, a supplemental environmental project and attorneys’ fees. In December 2004, the U.S. District Court for the Northern District of Georgia issued an Order holding GPC liable for certain violations of opacity limits at the coal-fired units. However, in March 2005, the U.S. Court of Appeals for the Eleventh Circuit allowed an immediate appeal of the Court’s Order. Oral arguments in the case are scheduled for January 2006. While Oglethorpe believes that Plant Wansley has complied with applicable laws and regulations, resolution of this matter is uncertain at this time, as is anyOglethorpe’s responsibility, of Oglethorpeif any, for a share of any penalties or other costs that might be assessed against GPC.

In January 2003, the Sierra Club appealed an unsuccessful challenge to an air operating permit for the Chattahoochee combined cycle facility, to the United States Court of Appeals for the Eleventh Circuit. Oglethorpe acquired this facility by mergingwhen it merged with Chattahoochee EMC.EMC in May 2003. Oglethorpe intervened in the appeal on behalf of the Environmental Protection Agency (EPA). In May 2004, the Court ruled in favor of the Sierra Club, invalidating EPA’s denial of the petition and remanding the matter to EPA for further consideration. AlthoughIn October 2005, EPA issued an order denying Sierra Club’s petition to object to the Chattahoochee facility’s air operating permit. EPA has indicated that it intends to issue another order correcting an error in the October order, but still denying the petition. Whether the Sierra Club will appeal this latest round of orders denying its petition is unknown. While Oglethorpe believes that the order does not affect the ability of the facilitycontinues to continue to operate pending further consideration andbelieve that a favorable outcome in this matter is likely, an unfavorable ruling could temporarily affect the ability of the facility to continue operations.

(F)         LEM Arbitration.In October 2004, LG&E Energy Marketing Inc. (LEM), and its affiliates initiated a binding arbitration process to resolve certain issues relating to the LEM agreement. Oglethorpe recorded a $15.0 million reserve inat December 31, 2004 for estimated damages payable to LEM. In June 2005, the arbitration panel selected LEM’s remedy, which requiresrequired Oglethorpe to pay LEM approximately $16.0 million. Oglethorpe recorded an additional $1.0 million accrual to purchased power energy costs and a corresponding increase in current liabilities, during the second quarter of 2005. The $16.0 million accrual is reflected as an unbilled receivable from the Members2005 and accounts payable on the accompanying balance sheets at June 30, 2005. Paymentpayment was made to LEM in July 2005.

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The $16.0 million accrual previously reflected as an unbilled receivable on the balance sheets was billed to the Members in July 2005.

(G)      Subsequent event.   Sale ofThrough JulySO₂ Allowances.   During 2005 and principally the quarter ended September 30, 2005, Oglethorpe sold SO₂ allowances in excess of its needs to various parties and received approximately $47.2$57.0 million in net proceeds from these sales. These amounts will be recorded as other incomeThis gain on the Condensed Statementssale of Revenues and Expenses. Oglethorpe expects toSO₂ allowances was offset, however, by a $40.4 million of this incomereduction in Sales to Members and by reducing amounts collected from Members during 2005. The remaining $6.8$16.6 million of income is expected to be offset by amortizing in 2005 $6.8 millionamortization of deferred asset retirement obligations costs.costs in the form of accretion expense. As a result, there would bewas no net change to net margin. In October 2005, Oglethorpe sold an additional $4.5 million of SO₂ allowances. The net proceeds from the October sale is also expected to be fully offset by additional amortization of deferred asset retirement obligations costs.

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

Results of Operations

For the Three Months and SixNine Months Ended JuneSeptember 30, 2005 and 2004

Net Margin

Oglethorpe’s net margin for the three months and sixnine months ended JuneSeptember 30, 2005 was $1.0$5.5 million and $12.2$17.7 million, compared to $2.7$4.4 million and $15.4$19.8 million for the same periods of 2004. The higher net margin for the current quarter of 2005 primarily relates to budgeted fixed operation and maintenance costs being closer to actual costs in 2004 than in 2005. The year-to-date lower net margin for the current periodsperiod of 2005 was primarily due to budgeted fixed productionadministrative and general expenses, purchased power capacity costs and depreciation and amortization expenses in 2005 being closer to the actual amounts than in 2004, when the corresponding amounts were lower than budget.

Operating Revenues

Oglethorpe’s operating revenues fluctuate from period to period based on factors including weather and other seasonal factors, load growth in the service territories of Oglethorpe’s 38 electric distribution cooperative members (the Members), operating costs, availability of electric generation resources, Oglethorpe’s decisions of whether to dispatch its owned or purchased resources or Member-owned resources over which it has dispatch rights and by Members’ decisions of whether to purchase a portion of their hourly energy requirements from Oglethorpe resources or from other suppliers.

Total revenues from sales to the Members for the three-month and six-monthnine-month periods ended JuneSeptember 30, 2005 were 15.3%12.4% and 9.3%10.5% less than such revenues for the same periods of 2004. Megawatt-hour (MWh) sales to Members decreased 33.4%26.2% and 24.3%25.0% in the currentscurrent periods compared to the same periods of 2004. The average total revenue per MWh from sales to Members increased 27.3%18.7% and 19.8%19.4% for the current periods of 2005 compared to the same periods of 2004. The absence of the LEM and Morgan Stanley agreements from Oglethorpe’s power supply portfolio has resultedThis increase in an increase to the average cost of power being supplied by Oglethorpe to its Members.the Members is primarily due to the termination of Oglethorpe’s power marketer agreements with LEM on December 31, 2004 and Morgan Stanley Capital Group Inc. (Morgan Stanley), on March 31, 2005. There are two reasons for this. First, the energy that was provided pursuant to the LEM and Morgan Stanley agreements were at a very favorable cost to Oglethorpe. But, more importantly, because Oglethorpe is selling less energy to its Members, the spreading of Oglethorpe’s fixed cost (which remain relatively unchanged)unchanged except for reduction to capacity revenues to offset revenues generated from sale of SO₂ allowances as discussed above) over fewer MWhs sold has the effect of increasing Oglethorpe’s average cost of power. For further discussion regarding purchased power costs see “Operating Expenses” below. Plans by the Members to replace the portion of energy provided by the LEM and Morgan Stanley agreements have been implemented smoothly. (See “Executive Overview” in Item 7 of Oglethorpe’s 2004 Annual Report on Form 10-K.)

The components of Member revenues for the three months and sixnine months ended JuneSeptember 30, 2005 and 2004 were as follows: