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UNITED STATES


SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One) 

FORM 10-Q
(Mark One)
x
ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OFTHE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004
OR


For the quarterly period ended March 31, 2005

OR

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OFTHE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                             to                              

For the transition period from __________ to __________


Commission File No. 33-7591

Oglethorpe Power Corporation

(An Electric Membership Corporation)
(Exact name of registrant as specified in its charter)

Georgia
(State or other jurisdiction ofincorporationof
incorporation or organization
organization)		 
58-1211925
(I.R.S. employeridentificationemployer identification no.)

Post Office Box 1349

2100 East Exchange Place

Tucker, Georgia
30085-1349
(Address of principal executive offices)
 
30085-1349
(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.Yesxý    Noo


Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).Yes o    No Noý

x


Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.The registrant is a membership corporation and has no authorized or outstanding equity securities.


OGLETHORPE POWER CORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2004MARCH 31, 2005



Page No.
PART I -— FINANCIAL INFORMATION
  
 
Item 1.

Financial Statements

 

 
 

Condensed Balance Sheets as of September 30, 2004 March 31, 2005
(Unaudited) and December 31, 20032004

3

 
 

Condensed Statements of Revenues and Expenses
(Unaudited) for the Three Months ended
March 31, 2005 and Nine Months ended September 30, 2004 and 2003

5

 
 

Condensed Statements of Patronage Capital and Membership
Fees and Accumulated Other Comprehensive Margin
(Unaudited) for the NineThree Months ended September 30,
March 31, 2005 and 2004 and 2003

6

 
 

Condensed Statements of Cash Flows (Unaudited)
For the NineThree Months ended September 30,March 31, 2005 and 2004 and 2003

7

 
 

Notes to Condensed Financial Statements
For the NineThree Months ended September 30,March 31, 2005 and 2004 and 2003

8
 

Item 2.

Management's Discussion and Analysis of
Financial Condition and Results of Operations

11
 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk		18

16
 
Item 4.
 
Controls and Procedures

16

PART II — OTHER INFORMATION

 
 
Item 4.1.		Controls and Procedures
18
Legal Proceedings

17
 
Item 6.
 
Exhibits

17

PART II - OTHER INFORMATIONSIGNATURES

 
Item 1.Legal Proceedings19
Item 5.Other Information19
Item 6.Exhibits20
SIGNATURES
21
18

2


PART I - I—FINANCIAL INFORMATION


Item 1. Financial Statements
Oglethorpe Power Corporation
Condensed Balance Sheets
September 30, 2004 and December 31, 2003
   (dollars in thousands) 
      
  
2004
 2003 
Assets
 (Unaudited)   
        
Electric plant:
       
In service 
$
5,782,633
 $5,755,553 
Less: Accumulated provision for depreciation  
(2,222,497
)
 (2,107,274)
   
3,560,136
  3,648,279 
        
Nuclear fuel, at amortized cost  
77,310
  90,283 
Construction work in progress  
22,019
  26,212 
   
3,659,465
  3,764,774 
        
Investments and funds:
       
Decommissioning fund, at market  
186,171
  180,448 
Deposit on Rocky Mountain transactions, at cost  
81,658
  77,684 
Bond, reserve and construction funds, at market  
8,011
  21,629 
Investment in associated organizations, at cost  
31,395
  29,374 
Other, at market  
14,859
  1,084 
   
322,094
  310,219 
        
Current assets:
       
Cash and cash equivalents, at cost  
152,026
  226,830 
Restricted short-term investments, at market  
80,113
  
-
 
Other short-term investments, at market  
2,845
  96,213 
Receivables  
120,354
  112,248 
Inventories, at average cost  
101,741
  105,338 
Prepayments and other current assets  
5,101
  4,959 
   
462,180
  545,588 
        
Deferred charges:
       
Premium and loss on reacquired debt, being amortized  
138,246
  139,741 
Deferred amortization of capital leases  
110,387
  110,626 
Deferred debt expense, being amortized  
22,318
  23,953 
Deferred nuclear outage costs, being amortized  
14,535
  14,764 
Deferred asset retirement obligations costs, being amortized  
20,544
  14,821 
Other  
3,717
  5,199 
   
309,747
  309,104 
  
$
4,753,486
 $4,929,685 

Oglethorpe Power Corporation
Condensed Balance Sheets
March 31, 2005 and December 31, 2004

   (dollars in thousands) 

 
 
2005

 
2004

 
   (Unaudited)    
Assets       

Electric plant:
 
 
 
 
 
 
 
 In service $5,782,434 $5,784,529 
 Less: Accumulated provision for depreciation  (2,270,206) (2,237,192)
  
 
 
   3,512,228  3,547,337 
 
Nuclear fuel, at amortized cost
 
 
88,241
 
 
87,941
 
 Construction work in progress  25,272  22,830 
  
 
 
   3,625,741  3,658,108 
  
 
 

Investments and funds:
 
 
 
 
 
 
 
 Decommissioning fund, at market  194,203  196,181 
 Deposit on Rocky Mountain transactions, at cost  84,404  83,012 
 Bond, reserve and construction funds, at market  7,086  8,051 
 Investment in associated organizations, at cost  33,867  33,959 
 Long-term investments, at market  46,512  68,507 
 Other, at cost  1,084  1,084 
  
 
 
   367,156  390,794 
  
 
 

Current assets:
 
 
 
 
 
 
 
 Cash and cash equivalents, at cost  99,047  133,669 
 Restricted cash and cash equivalents, at cost  —  11,781 
 Restricted short-term investments, at cost  239,854  81,104 
 Other short-term investments, at market  6,593  6,663 
 Receivables  125,033  129,221 
 Inventories, at average cost  96,450  100,927 
 Prepayments and other current assets  2,351  4,118 
  
 
 
   569,328  467,483 
  
 
 
Deferred charges:       
 Premium and loss on reacquired debt, being amortized  131,726  134,575 
 Deferred amortization of capital leases  110,002  110,422 
 Deferred debt expense, being amortized  24,049  23,026 
 Deferred nuclear outage costs, being amortized  18,744  10,880 
 Deferred asset retirement obligations costs, being amortized  20,536  14,664 
 Other  2,938  3,226 
  
 
 
   307,995  296,793 
  
 
 
  $4,870,220 $4,813,178 
  
 
 

The accompanying notes are an integral part of these condensed financial statements.


3 

Oglethorpe Power Corporation
Oglethorpe Power Corporation
Condensed Balance Sheets
September 30, 2004 and December 31, 2003

   (dollars in thousands) 
      
  
2004
 2003 
Equity and Liabilities
 (Unaudited)   
       
Capitalization:
       
Patronage capital and membership fees 
$
464,206
 $444,418 
Accumulated other comprehensive loss  
(47,765
)
 (49,814)
   
416,441
  394,604 
        
Long-term debt  
3,202,884
  3,315,128 
Obligation under capital leases  
328,839
  342,232 
Obligation under Rocky Mountain transactions  
81,658
  77,684 
   
4,029,822
  4,129,648 
        
Current liabilities:
       
Long-term debt and capital leases due within one year  
156,972
  237,522 
Accounts payable  
44,373
  63,559 
Accrued interest  
15,873
  7,158 
Accrued and withheld taxes  
24,253
  19,957 
Other current liabilities  
10,221
  9,109 
   
251,692
  337,305 
        
Deferred credits and other liabilities:
       
Gain on sale of plant, being amortized  
44,053
  45,909 
Net benefit of Rocky Mountain transactions, being amortized  
70,874
  73,263 
Asset retirement obligations  
244,510
  233,155 
Accumulated retirement costs for other obligations  
35,095
  35,349 
Interest rate swap arrangements  
47,734
  49,916 
Other  
29,706
  25,140 
   
471,972
  462,732 
  
$
4,753,486
 $4,929,685 
Condensed Balance Sheets
March 31, 2005 and December 31, 2004

   (dollars in thousands) 

 
 
2005

 
2004

 
   (Unaudited)    
Equity and Liabilities       

Capitalization:
 
 
 
 
 
 
 
 Patronage capital and membership fees $472,881 $461,655 
 Accumulated other comprehensive loss  (49,326) (46,896)
  
 
 
   423,555  414,759 
 
Long-term debt
 
 
3,131,397
 
 
3,180,915
 
 Obligation under capital leases  319,507  324,326 
 Obligation under Rocky Mountain transactions  84,404  83,012 
  
 
 
   3,958,863  4,003,012 
  
 
 

Current liabilities:
 
 
 
 
 
 
 
 Long-term debt and capital leases due within one year  171,383  190,835 
 Accounts payable  43,155  67,149 
 Accrued interest  11,197  40,176 
 Accrued and withheld taxes  16,245  9,945 
 Members' advances  158,672  — 
 Other current liabilities  12,853  11,583 
  
 
 
   413,505  319,688 
  
 
 

Deferred credits and other liabilities:
 
 
 
 
 
 
 
 Gain on sale of plant, being amortized  42,816  43,434 
 Net benefit of Rocky Mountain transactions, being amortized  69,281  70,078 
 Asset retirement obligations  252,326  248,295 
 Accumulated retirement costs for other obligations  55,309  54,272 
 Interest rate swap arrangements  47,498  45,254 
 Other  30,622  29,145 
  
 
 
   497,852  490,478 
  
 
 
  $4,870,220 $4,813,178 
  
 
 

The accompanying notes are an integral part of these condensed financial statements.


 4

Oglethorpe Power Corporation
Oglethorpe Power Corporation
Condensed Statements of Revenues and Expenses (Unaudited)
For the Three and Nine Months Ended September 30, 2004 and 2003

  (dollars in thousands) 
      
  Three Months Nine Months 
  
2004
 2003 
2004
 2003 
Operating revenues:
             
Sales to Members 
$
359,291
 $343,797 
$
975,740
 $890,392 
Sales to non-Members  
8,198
  8,488  
25,009
  27,995 
Total operating revenues
  
367,489
  352,285  
1,000,749
  918,387 
              
Operating expenses:
             
Fuel  
85,379
  81,151  
227,656
  184,684 
Production  
64,638
  60,633  
183,445
  180,539 
Purchased power  
122,530
  113,764  
302,027
  276,739 
Depreciation and amortization  
38,316
  37,756  
114,767
  106,195 
Income taxes  -  -  
(3
)
 - 
Accretion  
2,704
  1,703  
12,390
  3,269 
Total operating expenses
  
313,567
  295,007  
840,282
  751,426 
Operating margin
  
53,922
  57,278  
160,467
  166,961 
              
Other income (expense):
             
Investment income  
5,408
  4,733  
21,309
  15,417 
Amortization of deferred gains  
619
  619  
1,856
  1,856 
Amortization of net benefit of sale of income tax benefits  
796
  796  
2,389
  2,389 
Allowance for equity funds used during construction  
37
  82  
156
  313 
Other  
403
  564  
1,496
  1,728 
Total other income
  
7,263
  6,794  
27,206
  21,703 
              
Interest charges:
             
Interest on long-term debt and capital leases  
51,328
  53,677  
153,594
  152,619 
Other interest  
1,580
  1,075  
2,934
  4,646 
Allowance for debt funds used during construction  
(285
)
 (534) 
(1,149
)
 (2,090)
Amortization of debt discount and expense  
4,168
  3,642  
12,506
  10,867 
Net interest charges
  
56,791
  57,860  
167,885
  166,042 
Net margin
 
$
4,394
 $6,212 
$
19,788
 $22,622 
Condensed Statements of Revenues and Expenses (Unaudited)
For the Three Months Ended March 31, 2005 and 2004

   (dollars in thousands) 

 
 
Three months

 
  2005
 2004
 
Operating revenues:       
 Sales to Members $287,893 $296,687 
 Sales to non-Members  9,391  8,157 
  
 
 
  Total operating revenues  297,284  304,844 
  
 
 

Operating expenses:
 
 
 
 
 
 
 
 Fuel  66,348  57,861 
 Production  62,717  58,322 
 Purchased power  71,361  87,697 
 Depreciation and amortization  38,354  38,133 
 Accretion  3,108  6,787 
  
 
 
  Total operating expenses  241,888  248,800 
  
 
 
Operating margin  55,396  56,044 
  
 
 

Other income (expense):
 
 
 
 
 
 
 
 Investment income  8,122  9,958 
 Amortization of deferred gains  619  619 
 Amortization of net benefit of sale of income tax benefits  796  796 
 Allowance for equity funds used during construction  65  84 
 Other  825  735 
  
 
 
  Total other income  10,427  12,192 
  
 
 

Interest charges:
 
 
 
 
 
 
 
 Interest on long-term debt and capital leases  50,126  51,276 
 Other interest  1,015  682 
 Allowance for debt funds used during construction  (482) (612)
 Amortization of debt discount and expense  3,938  4,172 
  
 
 
  Net interest charges  54,597  55,518 
  
 
 
Net margin $11,226 $12,718 
  
 
 

The accompanying notes are an integral part of these condensed financial statements.

 5


Oglethorpe Power Corporation
Condensed Statements of Patronage Capital and Membership Fees
and Accumulated Other Comprehensive Margin (Unaudited)
For the Nine Months Ended September 30, 2004 and 2003
  

 (dollars in thousands)

 
        
        
        
  
Patronage
 
Accumulated
   
  
Capital and
 
Other
   
  
Membership
 
Comprehensive
   
  
Fees
 
Margin (Loss)
 
Total
 
            
           
Balance at December 31, 2002
 
$
427,569
 $
(55,751
)
$
371,818
 
Components of comprehensive margin:
          
Net margin  22,622     22,622 
Unrealized gain on interest rate swap arrangements     4,246  4,246 
Unrealized loss on available-for-sale securities     (1,889) (1,889)
Unrealized loss on financial gas hedges     (136) (136)
           
Total comprehensive margin
        24,843 
           
Balance at September 30, 2003
 
$
450,191
 $
(53,530
)
$
396,661
 
           
           
           
           
           
           
Balance at December 31, 2003
 
$
444,418
 $
(49,814
)
$
394,604
 
Components of comprehensive margin:
          
Net margin  19,788     19,788 
Unrealized gain on interest rate swap arrangements     2,182  2,182 
Unrealized loss on available-for-sale securities     (658) (658)
Unrealized gain on financial gas hedges     525  525 
           
Total comprehensive margin
        21,837 
           
Balance at September 30, 2004
 
$
464,206
 $
(47,765
)
$
416,441
 

Oglethorpe Power Corporation
Condensed Statements of Patronage Capital and Membership Fees
and Accumulated Other Comprehensive Margin (Unaudited)
For the Three Months Ended March 31, 2005 and 2004

   (dollars in thousands) 

 

 
Patronage
Capital and
Membership
Fees

 
Accumulated
Other
Comprehensive
Margin (Loss)

 
Total

 
Balance at December 31, 2003 $444,418 $(49,814)$394,604 
 
Components of comprehensive margin:          
 Net margin  12,718     12,718 
 Unrealized loss on interest rate swap arrangements     (5,142) (5,142)
 Unrealized gain on available-for-sale securities     237  237 
 Unrealized gain on financial gas hedges     1,523  1,523 
        
 
Total comprehensive margin        9,336 
        
 


 
Balance at March 31, 2004 $457,136 $(53,196)$403,940 
 



Balance at December 31, 2004
 
$
461,655
 
$
(46,896
)
$
414,759
 
 
Components of comprehensive margin:          
 Net margin  11,226     11,226 
 Unrealized loss on interest rate swap arrangements     (2,244) (2,244)
 Unrealized loss on available-for-sale securities     (322) (322)
 Unrealized gain on financial gas hedges     136  136 
        
 
Total comprehensive margin        8,796 
        
 


 
Balance at March 31, 2005 $472,881 $(49,326)$423,555 
 

The accompanying notes are an integral part of these condensed financial statements.

 6


Oglethorpe Power Corporation
Condensed Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 30, 2004 and 2003
   (dollars in thousands) 
      
  
2004
 2003 
        
Cash flows from operating activities:
       
Net margin 
$
19,788
 $22,622 
        
Adjustments to reconcile net margin to net cashprovided by operating activities:
       
Depreciation and amortization, including nuclear fuel  
171,041
  166,062 
Net accretion cost  
12,390
  3,269 
Allowance for equity funds used during construction  
(156
)
 (313)
Amortization of deferred gains  
(1,856
)
 (1,856)
Amortization of net benefit of sale of income tax benefits  
(2,389
)
 (2,389)
Deferred nuclear outage costs  
(13,029
)
 (10,371)
Other  
67
  (298)
        
Change in operating assets and liabilities:
       
Receivables  
(8,106
)
 (36,626)
Notes receivable  
-
  597 
Inventories  
3,597
  1,872 
Prepayments and other current assets  
381
  (1,082)
Accounts payable  
(19,186
)
 (9,680)
Accrued interest  
8,715
  12,005 
Accrued and withheld taxes  
4,296
  19,045 
Other current liabilities  
1,112
  (4,949)
Deferred start-up costs  
-
  1,897 
Total adjustments
  
156,877
  137,183 
Net cash provided by operating activities
  
176,665
  159,805 
        
Cash flows from investing activities:
       
Property additions  
(37,915
)
 (120,474)
Net proceeds from bond, reserve and construction funds  
13,563
  4,695 
Net cash received from merger of Talbot EMCand Chattahoochee EMC into Oglethorpe
  
-
  18,273 
Increase in investment in associated organizations  
(2,020
)
 (255)
Decrease (increase) in restricted and other short-term investments  
13,575
  (1,773)
Increase in other long-term investments  
(14,699
)
 
-
 
Increase in decommissioning fund  
(12,910
)
 (4,332)
Proceeds from sale of railcars  
-
  21,799 
Net cash used in investing activities
  
(40,406
)
 (82,067)
        
Cash flows from financing activities:
       
Long-term debt proceeds, net  
-
  550,928 
Long-term debt payments  
(206,187
)
 (362,148)
Issuance costs and loss on reacquired debt  
(9,375
)
 (5,120)
Decrease in notes payable  
-
  (260,638)
Increase in notes receivable under interim financing agreement  
-
  (11,141)
Increase in deferred credit for major overhaul  
4,499
  1,751 
Net cash used in financing activities
  
(211,063
)
 (86,368)
Net decrease in cash and cash equivalents
  
(74,804
)
 (8,630)
Cash and cash equivalents at beginning of period
  
226,830
  151,311 
Cash and cash equivalents at end of period
 
$
152,026
 $142,681 
        
Cash paid for:
       
Interest (net of amounts capitalized) 
$
146,664
 $143,170 
Income taxes  
-
  
-
 

Oglethorpe Power Corporation
Condensed Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31, 2005 and 2004

   (dollars in thousands) 

 
 
2005

 
2004

 
Cash flows from operating activities:       
 Net margin $11,226 $12,718 
  
 
 
 Adjustments to reconcile net margin to net cash provided by operating activities:       
  Depreciation and amortization, including nuclear fuel  55,688  57,042 
  Net accretion cost  3,108  6,787 
  Allowance for equity funds used during construction  (65) (84)
  Amortization of deferred gains  (619) (619)
  Amortization of net benefit of sale of income tax benefits  (796) (796)
  Deferred nuclear outage costs  (12,619) (7,296)
  Other  198  (1,072)
 
Change in operating assets and liabilities:
 
 
 
 
 
 
 
  Receivables  4,188  9,777 
  Inventories  4,477  (1,290)
  Prepayments and other current assets  1,767  1,995 
  Accounts payable  (23,994) (28,776)
  Accrued interest  (28,979) 3,773 
  Accrued and withheld taxes  6,300  (6,211)
  Members' advances  158,672  — 
  Other current liabilities  1,405  (2,319)
  
 
 
   Total adjustments  168,731  30,911 
  
 
 
Net cash provided by operating activities  179,957  43,629 
  
 
 
Cash flows from investing activities:       
 Property additions  (12,675) (13,077)
 Net proceeds from bond, reserve and construction funds  878  13,618 
 Decrease (increase) in investment in associated organizations  503�� (1,187)
 Decrease in restricted cash and cash equivalents  11,781  133,343 
 Increase in restricted and other short-term investments  (158,750) (926)
 Decrease (increase) in other long-term investments  21,830  (28,005)
 Increase in decommissioning fund  (3,115) (6,960)
  
 
 
Net cash (used in) provided by investing activities  (139,548) 96,806 
  
 
 
Cash flows from financing activities:       
 Long-term debt proceeds  —  — 
 Long-term debt payments  (73,789) (146,520)
 Issuance costs and loss on reacquired debt  (2,111) (9,092)
 Increase in deferred credit for major overhaul  870  1,577 
  
 
 
Net cash used in financing activities  (75,030) (154,035)
  
 
 
Net decrease in cash and cash equivalents  (34,621) (13,600)
Cash and cash equivalents at beginning of period  133,668  66,485 
  
 
 
Cash and cash equivalents at end of period $99,047 $52,885 
  
 
 
Cash paid for:       
 Interest (net of amounts capitalized) $79,638 $47,573 
 Income taxes  —  — 

The accompanying notes are an integral part of these condensed financial statements.


 7

Oglethorpe Power Corporation


Notes to Condensed Financial Statements
March 31, 2005 and 2004

(A)
September 30,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, in all material respects, the results for the periods ended March 31, 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, 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 period ended March 31, 2005 are not necessarily indicative of results to be expected for the full year.

(B)
New Accounting Pronouncements.    In March 2005, the Financial Accounting Standards Board (FASB) issued Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations". This interpretation clarifies that the term conditional asset retirement obligation as used in FASB 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 for Oglethorpe by no later than by the end of the current fiscal year ending December 31, 2005. Retroactive application for interim financial information is permitted but not required. Oglethorpe is assessing the impact of this Interpretation and 2003currently believes that Interpretation No. 47 will not have a material impact on its financial statements.

(C)
Proposed Accounting Interpretation.    A current FASB project, "Uncertain Tax Positions (Recognition of Tax Benefits)", objective is to clarify the criteria for recognition of tax benefits in accordance with Statement No. 109, "Accounting for Income Taxes". The project seeks to clarify that an entity's tax benefits recognized in tax returns must be probable of being sustained prior to recording the related tax benefit in the financial statements. Oglethorpe is monitoring developments of the proposed Interpretation and is assessing the impact this 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.

(A)General. The condensed financial statements
(D)
Accumulated Comprehensive Margin or (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 this report have been prepared by Oglethorpe Power Corporation (Oglethorpe), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). In the opinion of management, the information furnished in this report reflects all adjustments (which include only normal recurring adjustments) and estimates necessary to present fairly, in all material respects, the results for the periods ended September 30, 2004 and 2003. 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 no t misleading. These condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in Oglethorpe's latest Annual Report on Form 10-K, as filed with the SEC. Certain amounts for 2003 have been reclassified to conform to the current period presentation. The results of operations for the three-month and nine-month periods ended September 30, 2004 are not necessarily indicative of results to be expected for the full year.

(B)NewAccounting Pronouncements.In December 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46R, “Consolidation of Variable Interest Entities - an Interpretation of Accounting Research Bulletin (ARB) No. 51.” This interpretation clarifies the application of ARB No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Interpretation No. 46R is not cu rrently effective for Oglethorpe until the end of fiscal year 2004. However, based on its current analysis, Oglethorpe believes that Interpretation No. 46R will not have a material impact on its financial statements.

(C)Merger of Chattahoochee EMC and Talbot EMC.Effective May 1, 2003, via a merger, Oglethorpe acquired all of the assets and assumed all of the liabilities of Chattahoochee EMC and Talbot EMC at book value. The merger was accounted for under the purchase method of accounting. The assets primarily consist of the Chattahoochee combined cycle generating facility and the Talbot combustion turbine generating facility. The book value of Chattahoochee EMC and Talbot EMC as of the effective merger date was approximately $609 million, which approximated fair value. The assets and liabilities and results of operations have been included in Oglethorpe’s financial statements since the effective date of the merger.
(D)
Accumulated Comprehensive Margin or (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 inthe Statement of Patronage Capital and Membership Fees and Accumulated Other Comprehensive Margin. 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.

Accumulated Other Comprehensive Margin. 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, 2003. Oglethorpe's effective tax rate is zero; therefore, all amounts below are presented net of tax.Margin (Loss)

 

8

(dollars in thousands)



Interest Rate
Swap Arrangements

Available-for-sale
Securities

Financial
Gas Hedges

Total
 
Accumulated Other Comprehensive Margin (Loss)
 
(dollars in thousands)
   
Interest RateAvailable-for-saleFinancial 
Swap ArrangementsSecuritiesGas HedgesTotal
Balance at December 31, 2002
($58,443)$1,722$970($55,751)
   
Unrealized gain/(loss)4,246(1,292)6,8399,793
   
Reclassification adjustments-(597)(6,975)(7,572)
   
Balance at September 30, 2003
($54,197)($167)$834($53,530)
   
   
Balance at December 31, 2003
Balance at December 31, 2003
($49,916)($618)$720($49,814) ($49,916)($618)$720 ($49,814)
    
 
Unrealized gain/(loss)Unrealized gain/(loss)2,182216(2,007)391
 
(5,142
)
245
 
1,393
 
(3,504
)
   
Reclassification adjustmentsReclassification adjustments-(874)2,5321,658
 
—
 
(8
)
130
 
122
 
   
 

 
Balance at September 30, 2004
($47,734)($1,276)$1,245($47,765)
Balance at March 31, 2004 ($55,058)($381)$2,243 ($53,196)
 
 


 

 
Balance at December 31, 2004 ($45,254)($1,506)($136)($46,896)
 
 

Unrealized gain/(loss)
 
(2,244
)
(322
)
—
 
(2,566
)

Reclassification adjustments
 
—
 
—
 
136
 
136
 


 

 
Balance at March 31, 2005 ($47,498)($1,828)$— ($49,326)
 
 
(E)
Environmental matters:

(E)Environmental matters:

Set forth below are environmental matters that could have an effect on Oglethorpe. 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.


9

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.    OnIn December 30, 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 where 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. While Oglethorpe believes that Plant Wansley has complied with applicable laws and regulations, resolution of this matter is uncertain at this time, as is any responsibility of Oglethorpe for a share of any penalties or other costs that might be assessed against GPC.

On

In January 16, 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 the Environmental Protection Agency’s (EPA) denial of an administrative petition to invalidate an air operating permit for the combined cycleCircuit. Oglethorpe acquired this facility Oglethorpe recently acquired by merging with Chattahoochee EMC. Oglethorpe intervened in the appeal. Onappeal on behalf of the Environmental Protection Agency (EPA). In May 5, 2004, the Court ruled in favor of the Sierra Club, invalidating EPA’sEPA's denial of the petition and remanding the matter to EPA for further consideration. Although Oglethorpe believes that the order does not affect the ability of the facility to continue to operate pending further consideration and that a favorable outcome in this matter is likely.
likely, an unfavorable ruling could temporarily affect the ability of the facility to continue operations.

10


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


Results of Operations


For the Three Months Ended March 31, 2005 and Nine Months Ended September 30, 2004 and 2003


Net Margin


Oglethorpe's net margin for the three months and nine months ended September 30, 2004March 31, 2005 was $4.4 million and $19.8$11.2 million compared to $6.2 million and $22.6$12.7 million for the same periods of 2003. Net margin for the nine-month period of 2004 reflects a $6.3 million Board of Directors approved reduction to revenue requirements as a result of lower than budgeted fixed production expenses, general and administrative expenses, depreciation expenses and interest costs.2004. The revenue reduction was recorded as a $6.3 million reduction in sales to Members resulting in lower net margin for the nine-monththree-month period ended September 30, 2004.


Net margin forof 2005 was due to budgeted fixed production expenses in 2005 being closer to the first nine months ofactual amount than in 2004, (as waswhen the case in 2003) is greatercorresponding amounts were lower than the estimated annual margin requirement under Oglethorpe’s Indenture, dated as of March 1, 1997, from Oglethorpe to Sun Trust Bank, as trustee (the “Mortgage Indenture”). The rate schedule to Oglethorpe’s Wholesale Power Contracts provides for budget adjustments from time to time throughout the year. Oglethorpe’s management is monitoring the expected year-end net margin and if needed may consider additional budget adjustments that would reduce budgeted expenses and associated capacity revenues from Members, with a view to achieving a Margins for Interest Ratio of at least 1.10 for 2004 (the minimum margin requirement under the Mortgage Indenture).

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 3938 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’Members' decisions of whether to purchase a portion of their hourly energy growth requirements from Oglethorpe resources or from other suppliers.


Total revenues from sales to the Members for the three-month and nine-month periodsperiod ended September 30, 2004March 31, 2005 were 4.5% and 9.6% higher3.0% less than such revenues for the same periodsperiod of 2003.2004. Megawatt-hour (MWh) sales to Members increased 2.0% and 8.9%decreased 14.0% in the current periodsperiod compared to the same periodsperiod of 2003.2004. The average total revenue per MWh from sales to Members increased 2.4% and 0.6%12.9% for the current periodsfirst quarter of 2005 compared to the same periodsperiod of 2003.


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2004.

The components of Member revenues for the three months ended March 31, 2005 and nine months ended September 30, 2004 and 2003 were as follows:


  Three Months Nine Months 
  Ended September 30, Ended September 30, 
  2004 2003 2004 2003 
  (dollars in thousands) 
    
Capacity revenues $161,530 $160,211 $478,504 $459,498 
Energy revenues  197,761  183,586  497,236  430,894 
Total $359,291 $343,797 $975,740 $890,392 

  Three Months
Ended March 31,
  2005
 2004
   (dollars in thousands)
Capacity revenues $159,779 $161,525
Energy revenues  128,114  135,162
  
 
Total $287,893 $296,687
  
 

Capacity revenues for the ninethree months ended September 30, 2004 increased 4.1%March 31, 2005 varied only slightly compared to the same period of 2003.The increase in capacity revenues for the nine-month period was primarily due to an increase in revenue requirements beginning in May 2003 associated with the fixed cost recovery for the Chattahoochee and Talbot generating facilities acquired by Oglethorpe in May 2003. See Note (C) and “Financial Condition” for further discussion regarding the merger of Chattahoochee and Talbot EMCs with and into Oglethorpe.


2004. Energy revenues were 7.7% and 15.4% higher5.2% lower for the three-month and nine-month periodsperiod ended September 30, 2004 compared to the same periods of 2003. The increase in energy revenues for the third quarter of 2004 was partly due to recovery of increases in fuel costs and partly due to increased generation at the Talbot facilityMarch 31, 2005 compared to the same period of 2003. The increase in energy revenues for the nine-months ended September 30, 2004 was primarily due to recovery of increases in fuel costs related to operating the recently acquired Chattahoochee generating facilities and partly due to increased generation from coal-fired facilities. In addition, an increase in purchased power energy costs contributed to the increase in Member energy revenues for both the three-month and nine-month periods of 2004 as compared to 2003 . (See “Operating Expenses” below.)2004. Oglethorpe's average energy revenue per MWh from sales to Members was 5.6% and 5.9%10.3% higher in the current periodsperiod compared to the same periodsperiod of 2003.2004. The decrease in energy revenues for the first quarter of 2005 was primarily due to a decrease in the pass through of purchased power energy costs due to the termination, effective December 31, 2004, of the power marketer agreement with LG&E Marketing, Inc. (LEM). The absence of the LEM agreement from Oglethorpe's power supply portfolio has resulted in an increase to the average cost of power being supplied by Oglethorpe to its Members. There are two reasons for this. First, the energy that was provided pursuant to the LEM agreement was 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) 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.



Sales to non-Members were primarily from capacity and energy sales to power companies and from energy salesAlabama Electric Cooperative under an agreement to LG&E Energy Marketing Inc. (LEM) and Morgan Stanley Capital Group Inc. (Morgan Stanley) under their power marketer arrangements with Oglethorpe. Sales to power companies represent sales made directly by Oglethorpe. Total non-Member revenuesell 100 MW of capacity for the three-month and nine-month periods of 2004 was $8.2 million and $25.0 million, compared to $8.5 million and $28.0 million for the same periods of 2003.period June 1998 through December 2005. In addition, Oglethorpe sells short-term energy to non-Members for the benefit of Members participating in its capacity and energy pool. SalesThe capacity and energy pool was discontinued effective March 31, 2005. Total non-Members revenues for the three-month period of 2005 were $9.4 million compared to LEM and Morgan Stanley represent$8.2 million for the net energy transmitted on behalfsame period of LEM and Morgan Stanley off-system on an hourly basis from Oglethorpe's total resources under the LEM and Morgan Stanley power market er arrangements. Oglethorpe sold this energy to LEM at Oglethorpe's cost, subject to certain limitations, and to Morgan Stanley at a contractually fixed price. The volume of sales to LEM and Morgan Stanley depends primarily on the power marketers’ decisions for servicing their load requirements.


12

2004.

Operating Expenses


Operating expenses for the three-month and nine-month periods ended September 30, 2004 were 6.3% and 11.8% higher compared to the same periods of 2003. The increase in operating expenses for the nine-month period ended September 30, 2004March 31, 2005 were 2.8% lower compared to the same period of 2003 was primarily due to higher fuel, purchased power, depreciation and accretion expenses.2004. The increasedecrease in operating expenses for the current quarter was primarily due to higher purchased power and accretion expenses.


For the nine-month period of 2004 compared to the same period of 2003, total fuel costs increased 23.3%. The increase in total fuel costs was partly as a result of an increase in MWhs of generation (primarily due to increased MWhs sold to Members) of 6.9% for the current period of 2004 as compared to the same period of 2003 and partly due to higher average fuel costs associated with increased fossil generation and generation from the Chattahoochee facility, a gas-fired combined cycle plant. For the nine-month period of 2004 compared to 2003, output from Oglethorpe’s coal-fired facilities was 13.2% higher. The generation output from the Chattahoochee facility was 262,000 MWhs higher for the current period compared to the comparablesame period of 2003. The Chattahoochee facility2004 was acquired in May 2003; therefore, no c orrespondingprimarily due to lower purchased power and accretion expenses offset somewhat by higher fuel costs were incurred and no generation output was experienced for this facility prior to May 2003.

Purchased power costs increased 7.7% and 9.1% forcosts.

For the three-month and nine-month periods ended September 30, 2004period of 2005 compared to the same periodsperiod of 2003. 2004, total fuel costs increased 14.7% while total generation varied slightly. The increase in total fuel costs for 2005 resulted from the difference in the mix of generation, with a higher percentage of generation from fossil and less from nuclear than in 2004. The larger portion of fossil generation, with its higher average fuel cost compared to nuclear, yielded a 14.7% increase in average fuel cost.

Purchased MWhs increased 3.8% and 7.7%power costs decreased 18.6% for the current periods of 2004three-month period ended March 31, 2005 compared to the same periodsperiod of 2003.2004. Purchased MWhs decreased 48.8% for the first quarter of 2005 compared to the same period of 2004. The average cost per MWh of total purchased power increased 3.8% and 1.3%59.0% in the current periodsperiod of 20042005 compared to the same periodsperiod of 2003.2004. Purchased power costs were as follows:


  Three Months Nine Months 
  Ended September 30, Ended September 30, 
  2004 2003 2004 2003 
  (dollars in thousands) 
    
Capacity costs $15,930 $15,580 $46,848 $46,086 
Energy costs  106,600  98,184  255,179  230,653 
Total $122,530 $113,764 $302,027 $276,739 

  Three Months
Ended March 31,
  2005
 2004
   (dollars in thousands)
Capacity costs $15,082 $15,255
Energy costs  56,279  72,442
  
 
Total $71,361 $87,697
  
 

Purchased power energy costs for the three-month and nine-month periodsperiod ended September 30, 2004March 31, 2005 were 8.6% and 10.6% higher22.3% lower compared to the same periodsperiod of 2003.2004. The decrease in purchased power energy costs resulted primarily from the termination of the LEM power marketer agreement offset somewhat by an increase in energy purchases from other power companies. The average cost of purchased power energy for the three months and nine months ended September 30, 2004March 31, 2005 was 4.6% and 2.7%51.8% higher compared to the same periods of 2003. The increase in average purchased power costs was partly attributable to slightly higher prices in the wholesale electricity markets and partly due to slightly higher prices for energy purchases made from purchased power agreements.


Depreciation and amortization increased 8.1% in the nine-months ended September 30, 2004 compared to the same period of 2003. The increase is primarily attributable2004. As discussed above, the energy provided pursuant to depreciation expense associated with the Chattahoochee and Talbot generating facilities acquired by Oglethorpe in May 2003. ThereLEM agreement was no corresponding depreciation expense for these facilities prior to May 2003.

13

at a very favorable cost thus the termination of the LEM agreement has had the effect of increasing the average purchased power energy costs.

Accretion expense which Oglethorpe began recording in January 2003, represents the change in the asset retirement obligations due to the passage of time. For nuclear decommissioning, Oglethorpe records a regulatory asset for the timing difference in accretion expense recognized under SFAS No. 143 compared to the expense recovered for ratemaking purposes. The accretion expense recognized is equal to the earnings from the decommissioning trust fund. In 20042005 decommissioning trust fund earnings were greaterless than in 2003,2004, thus accretion expense recognized was higherlower in 2004.


2005.

Other Income


Investment income increased 14.3%decreased 18.4% (or $0.7 million) and 38.2% (or $5.9$1.8 million) in the current three-month and nine-month periods compared to the same periods of 2003 primarily due to higher earnings from the decommissioning fund.


Interest Charges

Interest on long-term debt and capital leases decreased 4.4% for the nine-month period of 2004 compared to the same period of 2003. Amortization of debt discount and expense increased $0.5 million and $1.6 million in the current periods of 2004 compared to the same periods of 2003 primarily due to amortization of debt issuance costs associated with a $133.3 million pollution control revenue bond (PCB) refunding transaction completed in December 2003.lower earnings from the decommissioning fund.


Financial Condition


Capital Requirements and Liquidity and Sources of Capital


Environmental Matters


Oglethorpe’sOglethorpe's future capital expenditures depend in part on future environmental regulations, including future implementation of existing laws and regulations and how Oglethorpe and the other co-owners of coal-fired Plants Scherer and Wansley choose to comply with these regulations, once finalized. See Management’sManagement's Discussion and Analysis offor Financial Condition and Results of Operations—Financial Condition—Capital Requirements”" in Oglethorpe’s Annual Report on Form 10-K for the year ended December 31, 2003 and the Quarterly Report on Form 10-Q for the quarters ended March 31, 2004 and June 30, 2004.


Financing for Talbot EMC and Chattahoochee EMC

In May 2003, Talbot EMC and Chattahoochee EMC were merged with and into Oglethorpe. Pursuant to the merger, Oglethorpe succeeded to all of the assets and liabilities of Talbot EMC and Chattahoochee EMC. The assets consist of a 618 MW combustion turbine facility referred to as the Talbot Energy Facility and a 468 MW combined cycle facility referred to as the Chattahoochee Energy Facility. Oglethorpe is financing these generating facilities through two loans from the FFB, guaranteed by the RUS. At September 30, 2004, $565 million had been drawn under these loans, and Oglethorpe expects to receive another loan advance of approximately $13 million in early 2005. Oglethorpe provided interim financing for these generating facilities through its commercial paper program. However, by December 31, 2003, sufficient funds had bee n drawn under the FFB loans to retire all outstanding commercial paper issued for this purpose. (See “MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Financial Condition -Capital Requirements -Financing for Acquisition of Talbot EMC and Chattahoochee EMC” in Item 7 of Oglethorpe's Annual Report on Form 10-K for the year ended December 31, 2003.)2004.

Liquidity


14
Liquidity

As of September 30, 2004,March 31, 2005, Oglethorpe had $670$526 million of unrestricted available liquidity to meet short-term cash needs and liquidity requirements. This liquidity consisted of, (i) approximately $152$99 million in cash and cash equivalents, (ii) $80 million in restricted short-term investments (see discussion below), (iii) $18$7 million in other short-term investments, (maturities greater than 90 days but less than 2 years), (iv)(iii) $20 million available under a letter of credit facility, and (v)(iv) $400 million available under three committed working capital line of credit facilities (see discussion below).


In late July

Oglethorpe also had $37 million invested in auction rate securities at March 31, 2005. These securities have maturities in excess of one year and early August 2004,as such are classified as long-term investments. However, most of these securities re-price in auctions that occur every 28 days or less, and Oglethorpe made voluntary deposits totaling $80 million intohas the option of liquidating these securities at the end of any auction period.

Oglethorpe has in place a RUS Cushion of Credit Account with the U.S. Treasury, earning interest at a guaranteed rate of 5% per annum. The funds, including interest earned thereon, can only be applied to future debt service on RUS and RUS guaranteed FFB notes. As of September 30, 2004, the amount on deposit equals approximately four months of RUS/FFB debt service. These deposits provide a source of short-term liquidity.


In September 2004, Oglethorpe renewed, at $300 million the committed working capital line of credit that supports its commercial paper program. In conjunction with the renewal, Oglethorpe converted this line of credit from a 364-day to a three-year facility.

This facility matures in September 2007. Oglethorpe also has in place two $50 million committed lines of credit, one with National Rural Utilities Cooperative Finance Corporation that matures onin September, 30, 2005, and one with CoBank, ACB that matures in November, 2005.

In addition to unrestricted available liquidity, Oglethorpe had $240 million in restricted short-term investments at March 31, 2005. This amount relates to a Rural Utilities Service (RUS) Cushion of Credit Account established with the U.S. Treasury in mid-2004 that earns interest at a guaranteed rate of 5% per annum, which is more than Oglethorpe is currently earning on November 11,its general funds investments. The funds, including interest earned thereon, can only be applied to future debt service on RUS and RUS-guaranteed Federal Financing Bank (FFB) notes. At December 31, 2004, the balance in this account was $81 million. As a result of a program that was implemented in the first quarter of 2005 under which the Members can prepay at a discount their monthly power bill from Oglethorpe, an additional $171 million was deposited into the Cushion of Credit Account. On March 30, 2005, $13 million of the funds on deposit were applied against RUS/FFB debt service due from Oglethorpe. This left a balance of $240 million in the account at March 31, 2005.

Oglethorpe anticipates that some Members will continue to prepay their power bills during the remainder of 2005 and that those funds will be deposited in the Cushion of Credit Account. Based on Oglethorpe's view of interest rates and its scheduled RUS/FFB debt service, it is currently estimated that at the end of 2005 the amount on deposit will equal $81 million, which is approximately four months of RUS/FFB debt service. Although restricted, these deposits provide a source of short-term liquidity.

OtherPlanned Financings


Oglethorpe submitted a loan application totaling approximately $72 million to the RUS in September 2004.2004, and expects soon to amend this loan application to increase the requested amount to $112 million. If approved, the loan will fund normal additions and replacements to generation facilities incurred in


2004, and a portion of the normal additions and replacements to generation facilities expected to be incurred in 2005 through 2012. Oglethorpe anticipates that RUS will take action on this loan application by mid-year 2005.

In the second half of 2005, Oglethorpe anticipates submitting another loan application to RUS totaling approximately $160 million to fund capital expenditures made in 2004 and forecasted to be made in 2005 through 2007. This2009 to comply with certain environmental regulations. Oglethorpe does not expect RUS to act on this loan application until 2006 at the earliest.

If approved, both of these loans would be funded through the FFB and guaranteed by the RUS and the debt would be secured under Oglethorpe’sOglethorpe's Mortgage Indenture.


General


Total assets and total equity plus liabilities as of September 30, 2004March 31, 2005 were $4.8$4.9 billion, which was $176$57 million lowerhigher than the total at December 31, 2003.2004. The decreaseincrease was due primarily to an increase in restricted short-term investments, somewhat offset by the depreciation of plant and decreases in cash and cash equivalents.


equivalents, and long-term investments.

Assets


Property additions for the ninethree months ended September 30, 2004March 31, 2005 totaled $37.9$12.7 million, primarily for purchases of nuclear fuel and for additions, replacements, and improvements to existing generation facilities.


15

Nuclear fuel decreased 14.4% primarily as a result of timing issues. Purchases of nuclear fuel are somewhat below budgeted amounts for 2004.

The purchases are projected to be on budget by year-end.


The 16.0% decrease$2.4 million increase in construction work in progress was primarily due to various replacement and improvement projects for existing generation facilities.

Long-term investments primarily represent auction rate securities. As a result of their favorable interest rates, Oglethorpe invests in auction rate securities on a short-term basis by utilizing the completionre-pricing option inherent to the securities. The decrease in long-term investments was due to Oglethorpe satisfying a portion of a cooling tower at Plant Hatch, which was placed in serviceits cash needs during the secondfirst quarter of 2004.


The bond, reserve and construction funds balance decreased 63.0% as the result2005 by liquidating a number of lower debt service reserve requirements at September 30, 2004 as compared to December 31, 2003. In conjunction with the December 2003 PCB refinancing, approximately $13.6 million was released from the debt service reserve funds and applied mainly to the payment of principal and interest due on the bonds being refunded. The newly issued PCBs do not require a debt service reserve fund.

Other investments and funds increased by $13.8 million as the result of investments in U.S. Treasury Notes with maturities greater than one year.

these investments.

As of September 30, 2004,March 31, 2005, Oglethorpe had cash and cash equivalents of $152.0$99.0 million, which was a decrease of $74.8$34.6 million from December 31, 2003.2004. The decrease was primarily due to $206.2$73.8 million repayment of long-term debt (primarily PCBFFB debt) and $37.9$12.7 million invested in property additions (primarily improvements and replacements to generation facilities)nuclear fuel); offset somewhat by $176.7a $21.8 million liquidation of certain long-term investments, an $11.8 million use of restricted cash, and cash generated from operations.


Restricted cash and cash equivalents at December 31, 2004 represent the proceeds from the December 2004 PCB refinancing, which were on deposit with a trustee. The proceeds were subsequently used in the first quarter of 2005 for payment of the refinanced PCB principal that matured in January 2005.

Restricted short-term investments represent funds deposited into a RUS Cushion of Credit Account with the U.S. Treasury. The account was funded during the third quarter primarily with the proceeds obtainedFunds received from the liquidation of certain other short-term investments.


Other short-term investments decreased by 97.0% primarilyMembers as thea result of the liquidationpower bill prepayment program were deposited into the Cushion of certain investments. The proceeds were primarily used to fundCredit Account. For information regarding the RUS Cushion of Credit Account.
credit and the power bill prepayment program, see "Liquidity" above.

The 42.9% decrease in prepayments and other current assets was predominately due to the amortization of prepaid insurance balances.

Deferred nuclear outage costs increased $7.9 million, or 72.3%, as a result of the deferral of refueling outage costs incurred for Plant Hatch Unit No. 2 and Plant Vogtle Unit No. 1 during the first quarter of 2005. Nuclear outage costs incurred during a refueling outage are deferred and amortized over an 18-month or 24-month operating cycle, depending upon the plant.



Deferred asset retirement obligation costs increased 38.6%40.0%, or $5.7$5.9 million. Consistent with Oglethorpe’sOglethorpe's rate making policy, unrealized gains or losses from the nuclear decommissioning fund are added to or deducted from the deferred asset. A decrease in the unrealized gain resulted in a $7.2$5.1 million increase in the deferred asset, whichasset. An additional $0.9 million was offset somewhat bydeferred due to the timing difference between the accretion expense recognized earnings produced byunder SFAS No. 143 and the nuclear decommissioning funds.expense recovered for rate making purposes. As a result of these earnings, $1.0 million of additionalthis difference, amortization was recognized as accretion expense.expense was reduced and the deferral was increased by $0.9 million. For information regarding accretion expense, see “Operating Expenses”"Operating Expenses" above.


Other deferred charges decreased by 28.5% due to the regular monthly amortization of these charges.

Equity and Liabilities


Long-term debt and capital leases due within one year decreased by 33.9%10.2% primarily as a result of the timing of FFB principal payments made during 2004.and interest payments. The balancecurrent portion at December 31, 20032004 included five quarterly principal payments, whereas the PCBs that were callable January 1,March 31, 2005 balance included four quarterly principal payments. The fourth quarter 2004 and which were redeemedpayment was paid, when due, on January 2, 2004.


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3, 2005.

Accounts payable decreased 30.2%35.7% primarily as a result of a decrease in payables to power marketers and Georgia Power CompanyCompany. The payables to power marketers decreased due to the expiration of one contract on December 31, 2004, and payment being made in January 2005 for amounts accrued at December 31, 2004. In addition, Oglethorpe was in a net receivable position with the remaining power marketers.marketer at March 31, 2005. The payable to Georgia Power Company at December 31, 20032004 included higher accruals for fuel purchases and certain construction projects.


The increasedecrease in accrued interest was largely due to the timing of FFB principal and interest payments. The December 31, 2004 balance included an amount payable on January 3, 2005, whereas there was no amount accrued for FFB debt at March 31, 2005, as a result of the payment made (as due) on that date. The decrease was somewhat offset by the interest expense accrual associated with the lease of Plant Scherer Unit No. 2.2, which is paid semi-annually. There was no accrual at December 31, 20032004 for the Scherer debt as a result of the payment made (as due) on that date.


Accrued and withheld taxes increased 21.5%63.4% as a result of the monthly accruals for 20042005 property tax.


Other deferred charges increased 18.2% primarily as a resulttax, which are generally paid in the fourth quarter of deferred credits representing payments made to Oglethorpe by itsthe year.

Members' advances represent amounts received from the Members for fundingprepayment of their monthly power bill. The prepayment program began in 2005. For information regarding the future overhaul of the combustion turbine plants. The cost associated with the major overhaul will be expensed as incurred. Revenues will be recognized as the expenses are recorded.


power bill prepayment program, see "Liquidity" above.

New and Proposed Accounting Pronouncements


For a discussion of New and Proposed Accounting Pronouncements see Note B and C of Notes to Condensed Financial Statements.


Forward-Looking Statements and Associated Risks


This Quarterly Report on Form 10-Q contains forward-looking statements, including statements regarding, among other items, (i) anticipated transactions by Oglethorpe and (ii) Oglethorpe's future capital requirements and sources of capital. These forward-looking statements are based largely on Oglethorpe's current expectations and are subject to a number of risks and uncertainties, some of which are beyond Oglethorpe's control. For factors that could cause actual results to differ materially from those anticipated by these forward-looking statements, see "BUSINESS-Competition" in Item 1 of Oglethorpe's 20032004 Annual Report on Form 10-K. In light of these risks and uncertainties, there can be no assurance that events anticipated by the forward-looking statements contained in this Quarterly Report will in fact transpire.


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Item 3. Quantitative and Qualitative Disclosures About Market Risk


Oglethorpe's market risks have not changed materially from the market risks reported in Oglethorpe's 20032004 Annual Report on Form 10-K.


Item 4. Controls and Procedures

As of September 30, 2004,March 31, 2005, Oglethorpe had carried out an evaluation, under the supervision and with the participation of its management, of the effectiveness of the design and operation of its 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, the President and Chief Executive Officer and the Chief Financial Officer concluded that Oglethorpe's disclosure controls and procedures are effective to ensure that information required to be disclosed by Oglethorpe in the reports that Oglethorpe files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods required by the Securities Exchange Act and the rules there under.


No change in Oglethorpe's internal control over financial reporting occurred during the most recent fiscal quarter that has materially affected, or are reasonably likely to materially affect, Oglethorpe’sOglethorpe's internal control over financial reporting.


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PART II -— OTHER INFORMATION


Item 1. Legal Proceedings


Environmental Matters


For information about environmental matters that could have an effect on Oglethorpe, see Note (E) to Notes to Condensed Financial Statements.


Item 5. Other Information

Control Area Services

As described in Item 5 of Oglethorpe’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, Oglethorpe and Georgia System Operations Corporation (“GSOC”) have a contract with Georgia Power Company (“GPC”) to provide certain coordination services for the benefit of Oglethorpe and its Members (the Revised and Restated Coordination Services Agreement (“RCSA”). GSOC sent a notice of termination of the RCSA to GPC in January 2004. Although GPC requested FERC to amend the RCSA’s termination provisions by extending the minimum term through December 31, 2005, FERC rejected GPC’s request to amend the RCSA unilaterally and allowed it to terminate on September 30, 2004. However, the parties executed a replacement agreement for the RCSA, resulting in rates that are lower than those in the existing RCSA. GPC, with the concurrence of Oglethorpe and GSOC, petitioned FERC to allow the RCSA to remain in effect until the commencement of service under the replacement agreement, now anticipated to be February 1, 2005.

Member Withdrawal

As reported on Form 8-K dated October 7, 2004, pursuant to the provisions of Oglethorpe’s bylaws, Flint Electric Membership Corporation (“Flint”) delivered to Oglethorpe a Notice of Intent to Withdraw and an executed Withdrawal Agreement, dated as of October 1, 2004. After the passage of 90 days and the fulfillment of certain conditions, including the approval by the Rural Utilities Service (“RUS”) of certain power supply contracts between Flint and other power suppliers, Flint would no longer be a member of Oglethorpe.

As provided in the Withdrawal Agreement, Flint also notified Oglethorpe of its intent to assign its Wholesale Power Contract (the “Flint WPC”) to Cobb Electric Membership Corporation (“Cobb”). Upon the assignment, Cobb would be responsible for performance of all obligations to Oglethorpe under the Flint WPC and Flint would be released from those obligations.

Further, Cobb and six other Members of Oglethorpe participating in a resource scheduling group with Cobb requested Oglethorpe to approve the reallocation of the power supply resources covered by the Flint WPC among members of the scheduling group. Such a reallocation is subject to the approval of RUS. Upon the effectiveness of the reallocation, Cobb would remain responsible for only a portion of the Flint WPC, and the other Members would each become responsible for reallocated portions, with all portions totaling 100% of the Flint WPC.

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The Oglethorpe Board of Directors consented to the proposed assignment of the Flint WPC to Cobb and approved the reallocation at its November 11 meeting, each subject to the effectiveness of Flint’s withdrawal, currently anticipated to be January 1, 2005, provided all conditions are met.

Member System Lease

Oglethorpe previously reported under “Oglethorpe PowerCorporation” in Item 1 of its Annual Report on Form 10-K for the year ended December 31, 2003, that one of its Members, Pataula Electric Membership Corporation (“Pataula”) had approached Cobb about acquiring its system. On October 15, 2004 , Pataula requested, in accordance with its Wholesale Power Contract, that Oglethorpe consent to the lease of its system to Cobb. Cobb offered to guarantee the obligations of Pataula under Pataula’s Wholesale Power Contract with Oglethorpe. Further, Pataula and Cobb have petitioned the Georgia Public Service Commission to transfer Pataula’s customers and reassign its service territory to Cobb. At its November 11, 2004 meeting, the Oglethorpe Board of Directors consented to the lease, subject to the guarantee by Cobb.

Item 6. Exhibits

Number
 
Description
3.2Bylaws of Oglethorpe, as amended and restated, as of November 8, 2004
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)

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SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Oglethorpe Power Corporation
(An Electric Membership Corporation)
   
 Oglethorpe Power Corporation
(An Electric Membership Corporation)

Date: November 12, 2004May 13, 2005

By:


/s/ Thomas A. Smith
Thomas A. Smith

President and Chief Executive Officer

Date: May 13, 2005
 
 

 
Date: November 12, 2004

/s/ Mark Chesla
Mark Chesla

Vice President, Controller

(Chief Accounting Officer)

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