EX-99.1 5 c60217ex99-1.txt FINANCIAL STATEMENT OF "MIBRAG" 1 EXHIBIT 99.1 DELOITTE & TOUCHE GmbH DELOITTE Wirtschaftspruefungsgesellschaft &TOUCHE Financial Statements of "MIBRAG" MITTELDEUTSCHE BRAUN- KOHLENGESELLSCHAFT MBH, THEISSEN Report on the audit of the financial statements for the years ended December 31, 2000, 1999 and 1998 in accordance with German GAAP and on the audit of the respective U.S. GAAP reconciliations Am Kirchtor 7 Postfach 11 01 43 Tel (03 45) 21 99-6 06108 Halle/Saale 06015 Halle/Saale Fax (03 45) 21 99-800 www.deloitte.de 2 MITTELDEUTSCHE BRAUNKOHLENGESELLSCHAFT MBH INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page ---- Report of Independent Auditors 1 Consolidated Financial Statements Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998 2 Consolidated Balance Sheets at December 31, 2000 and 1999 3 Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998 4 Consolidated Statements of Shareholders`Equity for the years ended December 31, 2000, 1999 and 1998 5 Notes to the Consolidated Financial Statements 6
3 REPORT OF INDEPENDENT AUDITORS To the Shareholders of MIBRAG mbH Theissen, Germany We have audited the accompanying consolidated balance sheets of Mitteldeutsche Braunkohlengesellschaft mbH and its subsidiaries (MIBRAG or Group) as of December 31, 2000 and 1999, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2000. These consolidated financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in Germany and the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of MIBRAG as of December 31, 2000 and 1999, and the consolidated results of its operations and cash flows for each of the years in the three-year period ended December 31, 2000, in conformity with accounting principles generally accepted in Germany. Generally accepted accounting principles in Germany vary in certain significant respects from generally accepted accounting principles in the United States of America. Application of generally accepted accounting principles in the United States of America would have affected the results of operations for each of the years in the three-year period ended December 31, 2000 and shareholders' equity as of December 31, 2000 and 1999 to the extent summarized in Note C to the consolidated financial statements. Deloitte & Touche GmbH Wirtschaftsprufungsgesellschaft Halle, Germany March 13, 2001 4 MITTELDEUTSCHE BRAUNKOHLENGESELLSCHAFT MBH CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS OF EURO)
YEAR ENDED DECEMBER 31, ----------------------------------------------------- 2000 1999 1998 -------------- --------------- -------------- Sales revenue 272,220 254,027 240,517 Changes in inventories 1,675 11,091 2,594 Own costs capitalized 502 3,276 8,182 Other operating income 14,372 18,496 34,147 -------------- --------------- -------------- Total performance 288,769 286,890 285,440 -------------- --------------- -------------- Cost of materials 65,033 59,388 55,662 Personnel expenses 93,351 100,185 107,370 Depreciation on intangible and tangible fixed assets 49,059 51,654 75,882 Other operating expenses 62,879 66,698 75,227 -------------- --------------- -------------- Total operating expenses 270,322 277,925 314,141 -------------- --------------- -------------- Operating result 18,447 8,965 -28,701 Income from associated company and from companies in which participations are held 2,089 995 1,730 Income from financial assets 2,992 3,165 3,241 Depreciation on financial assets and short term investments -- -- -100 Interest expense, net -7,620 -8,164 -5,507 -------------- --------------- -------------- Net income (loss) from ordinary activities 15,908 4,961 -29,337 Income taxes 42 -- -- Other taxes 1,288 978 1,066 -------------- --------------- -------------- Net income (loss) 14,578 3,983 -30,403 ============== =============== ==============
See accompanying Notes to Consolidated Financial Statements. 2 5 MITTELDEUTSCHE BRAUNKOHLENGESLLSCHAFT MBH CONSOLIDATED BALANCE SHEETS (IN THOUSANDS OF EURO)
AT DECEMBER 31, ------------------------------ NOTE 2000 1999 --------- ------------- ------------- ASSETS NON-CURRENT ASSETS Intangible assets Concessions, trade marks, patents and licenses B, E 8,592 9,405 Property, plant and equipment 1. Land B, E 39,505 36,632 2. Buildings B, E 57,814 52,462 3. Strip mines B, E 40,263 41,194 4. Technical equipment and machinery B, E 225,704 187,611 5. Factory and office equipment B, E 24,072 18,790 6. Payments on account and assets under construction 6,672 76,555 ------------- ------------- 394,030 413,244 Financial assets 1. Participations (including associated company) B, F 13,052 12,497 2. Loans granted to participation B, G 7,124 7,499 3. Other loans B, H 31,649 35,484 ------------- ------------- 51,825 55,480 TOTAL NON-CURRENT ASSETS 454,447 478,129 Overburden B, I 164,424 161,548 CURRENT ASSETS Inventories 1. Raw materials and supplies B 5,731 5,218 2. Unfinished services B 0 88 3. Finished and trade goods B 2,115 3,228 ------------- ------------- 7,846 8,534 Receivables and other assets 1. Trade receivables B, J 55,909 46,826 2. Receivables from enterprises in which participations are held B 899 1,389 3. Other assets B 13,086 13,135 ------------- ------------- 69,894 61,350 Investments Other investments B, K 56,076 67,691 Cash B 19,903 13,010 TOTAL CURRENT ASSETS 153,719 150,585 Prepaid expenses 3,201 3,399 ------------- ------------- TOTAL ASSETS 775,791 793,661 ============= =============
AT DECEMBER 31, ------------------------------- NOTE 2000 1999 -------- -------------- -------------- SHAREHOLDERS' EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY Subscribed capital 30,678 30,678 Capital reserve 310,421 317,007 Balance Sheet Profit : TEUR 14.578; 1999: TEUR 3.988 Less: Interim dividend paid: TEUR 9.504; 1999: TEUR 0 5,074 3,988 Minority interest -46,037 -44,643 thereof net income for the year: TEUR 6.626 (1999: TEUR 5.816) TOTAL SHAREHOLDERS' EQUITY 300,136 307,030 Special item for investment subsidies and incentives B 14,856 16,570 Provisions 1. Accruals for pensions and similar obligations L 8,861 6,651 2. Taxation accruals M 778 1,317 3. Environmental and mining provisions B, N 175,104 171,195 4. Other accruals O 18,833 18,297 -------------- -------------- 203,576 197,460 Liabilities 1. Liabilities to banks B, P, Q 212,817 226,690 2. Downpayments received B, Q 0 53 3. Trade payables B, Q 16,748 24,069 4. Payables to participations B, Q 2,702 2,493 5. Other payables B, Q 24,954 19,296 -------------- -------------- 257,221 272,601 Deferred income 2 -- -------------- -------------- TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 775,791 793,661 ============== ==============
See accompanying Notes to Consolidated Financial Statements 3 6 MITTELDEUTSCHE BRAUNKOHLENGESELLSCHAFT MBH CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (IN THOUSANDS OF EURO)
Balance Subscribed Capital sheet profit/ Minority capital reserve net profit interest Total ------------- ------------ ------------- ------------- ------------- BALANCE AS OF JANUARY 1, 1998 30,678 352,612 26 -32,320 350,996 Net loss 1998 -27,279 -3,124 -30,403 Transfer from capital reserve -29,810 29,810 0 Distributions -2,531 -2,531 Withdrawals by minority shareholders -7,256 -7,256 ------------- ------------ ------------- ------------- ------------- BALANCE AS OF DECEMBER 31, 1998 30,678 322,802 26 -42,700 310,806 Net income/loss 1999 -1,833 5,816 3,983 Withdrawals by minority shareholders -7,759 -7,759 ------------- ------------ ------------- ------------- ------------- 30,678 322,802 -1,807 -44,643 307,030 Transfer from capital reserve based upon a June 2000 shareholders' resolution -5,795 5,795 0 ------------- ------------ ------------- ------------- ------------- BALANCE AS OF DECEMBER 31, 1999 30,678 317,007 3,988 -44,643 307,030 Net income 2000 7,952 6,626 14,578 Transfer from capital reserve -6,586 6,586 0 Distributions -13,452 -13,452 Withdrawals by minority shareholders -8,020 -8,020 ------------- ------------ ------------- ------------- ------------- BALANCE AS OF DECEMBER 31, 2000 30,678 310,421 5,074 -46,037 300,136 ============= ============ ============= ============= =============
See accompanying Notes to Consolidated Financial Statements 5 7 NOTE A ORIGINATION AND NATURE OF BUSINESS ORIGINATION: Mitteldeutsche Braunkohlengesellschaft mbH ("MIBRAG" or "MIBRAG mbH") was created from split-up of MIBRAG AG, which had been previously owned by the Treuhandanstalt (the German government privatization agency), into three separate entities. Effective January 1, 1994 a consortium comprising of NRG Energy, Inc., Morrison Knudsen Corporation, and PowerGen plc. jointly acquired 99 % of the active mining, power generation and related assets and liabilities from the Treuhandanstalt through its Dutch holding company, MIBRAG B.V.. The remaining 1 % was transferred on December 18, 1996 from the German government privatization agency to Lambique Beheer B.V., Amsterdam, a subsidiary of NRG Energy, Inc., Morrison Knudsen B.V., Amsterdam, and PowerGen Netherlands B.V., Amsterdam in equal portions (1/3 %) for each partner. NATURE OF BUSINESS: The operations of MIBRAG mbH include two opencast brown coal mines in Profen and Schleenhain and rights on future mining reserves. Operations also include over 200 MW of power generation and one coal briquetting plant. A significant portion of the sales of MIBRAG is made pursuant to long-term coal and energy supply contracts. NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION: The consolidated financial statements of MIBRAG mbH and subsidiaries have been prepared in accordance with the German Commercial Code, which represents accounting principles generally accepted in Germany ("German GAAP"). German GAAP varies in certain significant respects from accounting principles generally accepted in the United States of America ("US GAAP"). Application of U.S. GAAP would have affected the results of operations for each of the years in the three-year period ended December 31, 2000 and shareholders' equity as of December 31, 2000 and 1999 to the extent summarized in note C on the consolidated financial statements. On January 1, 1999, the Euro was introduced as the common legal currency of 11 member states of the European Economic and Monetary Union, including Germany. MIBRAG has adopted the Euro as its reporting currency in its Consolidated Financial Statements and translated all German marks (DM) amounts at the fixed exchange rate for German marks to Euro. Although these statements depict the same trends as would have been shown had they been presented in German marks, they may not be directly comparable to the financial statements of other companies that have also been restated in Euro. The Euro did not exist prior to January 1999, and accordingly historical ex-change rates for the Euro are not available. A comparison of the Consolidated Financial Statements and those of another company that had historically used a reporting currency other than the German mark that takes into account actual fluctuations in exchange rates could give a much different impression than a comparison of the Consolidated Financial Statements and those of another company as translated into Euro. All amounts herein are shown in thousands of Euro ("TEUR") unless otherwise noted. 6 8 PRINCIPLES OF CONSOLIDATION: All material companies in which MIBRAG has legal or effective control are fully consolidated. In 2000, MIBRAG consolidated 6 (1999: 6, 1998: 5) domestic subsidiaries. One significant investment, MUEG, in which MIBRAG has an ownership interest of 50%, is accounted for in accordance with the equity method. This investment is referred to as an associated company in these financial statements. All other investments are included at cost and are referred to as participations in these financial statements. All significant intercompany accounts and transactions have been eliminated in consolidation. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles necessarily requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. TOTAL COST METHOD: The income statement has been presented according to the total cost (or type of expenditure) format as commonly used in Germany. According to this format, production and all other expenses incurred during the period are classified by type of expenses. REVENUE RECOGNITION: Revenue is recognized when title passes or services are rendered, net of discounts, customer bonuses and rebates granted. INTANGIBLE ASSETS: Intangible assets are valued at acquisition cost and are amortized on a straight-line basis over their respective useful lives (3 to 25 years). Property, Plant, and Equipment: Property, plant, and equipment acquired is recorded on the basis of acquisition or manufacturing cost, including capitalized mine development costs, and subsequently reduced by scheduled depreciation charges over the assets' useful lives as follows: buildings - 3 to 40 years, technical facilities and machinery - 4 to 25 years; and facilities, factory and office equipment - 5 to 10 years. Maintenance and repair costs are expensed as incurred. Depreciation is computed principally by the straight-line method over the expected useful lives of the assets. Low value items are expensed in the year of acquisition. Opportunities for special tax deductible depreciation were utilized for both book and tax purposes in 1998 and prior years. 7 9 Impairment tests of long-term assets are made when conditions indicate a possible loss. If an impairment is indicated, the asset is written down to its estimated fair value. If, at a later date, the conditions leading to impairment no longer exist, the impairment loss is reversed up to the value of such assets, if the asset had not been impaired. Investments: The long-term loans and investments are recorded at cost. OVERBURDEN: Overburden represents the costs of removing the surface above a coal field subsequent to the initial opening of the field to the extent that the removal exceeds what is needed for the current years coal extraction. These are costs incurred in advance in respect of future coal production. The overburden is valued on an average cost basis. INVENTORY: Inventories are carried at the lower of average or market cost. Obsolescence provisions are made to the extent that inventory risks are determinable. SECURITIES: Securities held as fixed assets as well as marketable securities are valued individually at cost or at lower quoted or market values. RECEIVABLES AND OTHER ASSETS: All receivables are valued at cost, reduced for appropriate valuation allowances. Cash: Cash includes cash-on-hand, checks, bank accounts and time deposits. INVESTMENT GRANTS: To support the acquisition of certain tangible assets, investment allowances and subsidies were granted by the German federal government and the states of Saxony and Saxony-Anhalt. The application, conditions and payments of investment grants are ruled by German law and regulations. Investment allowances and subsidies received and formally claimed are credited to the special item account. The special item is amortized into income over the normal operating useful lives of the underlying assets to which the allowances and subsidies relate. ENVIRONMENTAL AND MINING PROVISIONS: Accruals for environmental and mining-related matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on current law and existing technologies. These accruals are adjusted periodically as assessment and utilization progress or as additional technical or legal information becomes available. FAIR VALUE OF FINANCIAL INSTRUMENTS: The fair value of cash, accounts payable and receivable as well as short term borrowings approximates book value because of the short maturity period and interest rates approximating market rates. The Company has determined the estimated fair value of long-term debts by using available market information and generally accepted valuation methodologies. The use of different market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts. LIABILITIES: Liabilities are shown at their repayment amounts. 8 10 SUPPLEMENTAL CASH FLOW INFORMATION: The Group paid TEUR 42 income taxes in 2000 and TEUR 0 in 1999, 1998, respectively. Interest paid amounted to TEUR 14,563, TEUR 15,137 and TEUR 13,561 in 2000, 1999 and 1998, respectively. Per Share Amounts: Per share amounts are not disclosed in the financial statements. MIBRAG is a nonpublic enterprise. NOTE C SIGNIFICANT DIFFERENCES BETWEEN GERMAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES The MIBRAG consolidated financial statements comply with German GAAP, which differs in certain respects from US GAAP. The significant differences that affect the consolidated net income and shareholders' equity of MIBRAG are set out below. I. APPLICATION OF THE PURCHASE METHOD OF ACCOUNTING The German GAAP financial statements include the historical cost book values of assets transferred from a predecessor company. The acquisition of 99% of the shares in MIBRAG mbH on January 1, 1994 by MIBRAG B.V. was accounted for using the purchase method of accounting. The purchase price adjustments to the historical cost basis have been pushed down to MIBRAG mbH for purposes of the reconciliation to US GAAP. The excess (EUR 387 million) of the fair value of the net assets acquired over the purchase price was proportionally allocated to reduce the value assigned to non-current assets, excluding long-term investments. The US GAAP financial statements also recognize purchase price adjustments for certain incremental transportation costs incurred by MIBRAG for lignite transportation to one of its major customers. II. NOTES TO SIGNIFICANT US GAAP ADJUSTMENTS 1. FIXED ASSETS The differences relate primarily to the following: o In the US GAAP balance sheet as of January 1, 1994, fixed asset balances, other than financial assets, were adjusted to their fair market values, then reduced by the allocation of the difference between the net acquisition costs for the MIBRAG shares and the fair market value of MIBRAG's net assets. o The depreciation period of long term assets are based upon periods acceptable for German tax purposes, which differ from the useful lives for U.S. accounting purposes. 9 11 o In 1999, an impairment loss was recognized for US GAAP purposes to reduce the assets of the briquette plant Mumsdorf to their fair values as of December 31, 1999. o A write-up of previously impaired fixed assets of the briquette plant Deuben (made in 1999 for German GAAP purposes) is not allowed under US GAAP. o Special accelerated depreciation for tax purposes is recorded in the German financial statements for 1998 and prior years. Upon disposal, the above differences also resulted in differing gains or losses on disposition. FINANCIAL INVESTMENT IN MUEG For German GAAP purposes, MIBRAG accounted for the investment in MUEG as of January 1, 1994 using the cost method. Under US GAAP the book value was increased to account for the equity earnings that were not distributed to MIBRAG as of that date. 2. RELOCATION ACCRUALS The US GAAP results recognized liabilities and deferred costs of TEUR 45,357 to relocate three villages. The deferred costs are amortized in accordance with quantities of coal extracted. In accordance with German accounting principles accruals for the relocation of villages can not be accrued earlier than 2 years prior to the relocation, and certain relocation costs are to be expensed as incurred. 3. INVESTMENT IN POWER PLANTS In 1995 and 1996, third party investors paid in EUR 110 million into a MIBRAG subsidiary, MIBRAG Industriekraftwerke GmbH & Co. KG ("MI"), which operates three lignite-fired power plants. The investment is structured such that the third party investors obtain accelerated tax depreciation while retaining a put option to sell their investments back to MIBRAG at predetermined prices. The third party investments were considered additions to equity as minority interests for German GAAP, while these arrangements are accounted for as a financing in accordance with US GAAP. 4. TRANSPORTATION CREDITS An acquisition related liability, for US GAAP purposes, is reduced by the amount of excess incremental transportation costs incurred by MIBRAG for certain lignite shipments. The acquisition related liability is not reflected in MIBRAG's German financial statements. It was reduced to zero in 1998. 10 12 5. INTEREST CAPITALIZATION Interest is expensed in the German financial statements. Interest expense related to qualified assets, however, is capitalized and depreciated for US GAAP purposes. 6. RECEIVABLES/PAYABLES AT NON-MARKET INTEREST RATES Certain accounts receivable or loans payable are recorded in the German GAAP financial statements at their nominal values. As they carry non-market interest rates, these receivables and payables were adjusted to their market values. 7. OVERBURDEN Overburden in the German financial statements includes capitalized depreciation based upon the historical costs. Because of the purchase accounting adjustments, a different amount of depreciation is capitalized in overburden in the US GAAP financial statements. Additionally, overburden as of January 1, 1994 was written down to fair value. 8. ENVIRONMENTAL AND MINING PROVISIONS The ratable accrued end-lake provision was reduced in 1998 based upon a new estimate of total costs to be incurred. For US purposes, this adjustment would be accounted for prospectively. 9. ACCRUED LIABILITIES Certain mining and other accruals, which were provided for at January 1, 1994 in accordance with US GAAP purchase accounting, were not recorded in the German financial statements. 10. OTHER Certain costs and income in the German financial statements are capitalized or deferred for US GAAP purposes, respectively. 11 13 11. UNREALIZED HOLDING GAINS Unrealized holding gains on available-for-sale securities are not accounted for under German GAAP, but are recorded as other comprehensive income for US GAAP purposes. 12. DEFERRED TAXES The differences noted above result in temporary differences which, when combined with net operating loss carryforwards, would result in a net deferred tax asset of EUR 111 million and EUR 147 million at December 31, 2000 and December 31, 1999, respectively. Because of available negative evidence, a 100 % valuation allowance would have been recorded at each year-end. Because no net deferred taxes were recorded for German or US GAAP purposes, no adjustment to net income or shareholders equity is listed in the following reconciliation. 13. NEW ACCOUNTING PRONOUNCEMENTS SFAS No. 133, "Accounting for Derivative Instruments and Hedging activities" issued by the Financial Accounting Standards Board, (the "FASB") as amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133" and SFAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities" is effective for the Company as of January 1, 2001. This statement calls for that all derivative financial instruments to be reflected on the balance sheet at fair value. Changes in fair value must be recognized periodically in earnings or as a component of other comprehensive income, depending on the nature of the underlying item. Changes in the fair value of the derivative will be recognized currently in the statements of operations. As MIBRAG has not engaged in any transactions that would be considered derivative instruments or hedging activities, the adoption of this standard will not have an effect on the MIBRAG consolidated financial statements. In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a replacement of FASB Statement No. 125." This statement revises the standards for accounting for securitizations and other transfers of financial assets and collaterals and requires certain financial statement disclosures. SFAS No. 140 is effective for transactions occurring after March 31, 2001. The new disclosure requirements are effective for business years ending after December 15, 2000. Adoption of this standard is not anticipated to have a material effect on MIBRAG's consolidated financial statements. 12 14 RECONCILIATION TO US GAAP The following is a summary of the significant adjustments to net income for 2000, 1999 and 1998 and to shareholders' equity at December 31, 2000 and December 31, 1999, which would be required if US GAAP had been applied instead of German GAAP.
YEAR ENDED DECEMBER 31, ----------------------------------- 2000 1999 1998 NOTE TEUR TEUR TEUR -------- ----------- ----------- ----------- Net income as reported in the consolidated income statement under German GAAP 14,578 3,982 -30,404 Adjustments required to conform with U.S. GAAP: Fixed assets (1) 4,598 15,937 48,462 Relocation accruals (2) 802 871 3,916 Investment in power plants (3) -3,546 -3,775 -3,969 Transportation credits (4) 0 0 6,944 Interest capitalization (5) -221 2,585 973 Receivable/payables at non-market interest rates (6) -516 -511 -506 Overburden (7) 7,813 11,744 4,945 Environmental and mining provisions (8) 5,569 81 -18,154 Other (10) 404 403 245 ----------- ----------- ----------- NET INCOME IN ACCORDANCE WITH U.S. GAAP 29,481 31,317 12,453 =========== =========== ===========
13 15
YEAR ENDED DECEMBER 31, ---------------------------- 2000 1999 NOTE TEUR TEUR -------- ------------- ------------- Shareholders' equity as reported in the consolidated balance sheet under German GAAP 300,136 307,030 Adjustments required to conform with U.S. GAAP: Fixed assets (1) 110,764 108,893 Relocation accruals (2) 16,528 12,999 Investments in power plants (3) -77,962 -82,436 Interest capitalization (5) 6,241 6,462 Receivables/payables at non-market interest rates (6) 1,023 1,539 Overburden (7) -67,280 -75,093 Environmental and mining provisions (8) -12,504 -18,073 Accrued liabilities (9) -15,417 -15,417 Other (10) -8,062 -8,466 Unrealized holding gains (11) 450 1,981 ------------- ------------- SHAREHOLDERS' EQUITY IN ACCORDANCE WITH U.S. GAAP 253,918 239,420 ============= =============
14 16 REPORTING OF COMPREHENSIVE INCOME Comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive Income", includes the impact of other comprehensive income. These are revenues, gains, expenses and losses that under U.S. GAAP are not included in net income.
Year ended December 31 --------------------------------------------- 2000 1999 1998 TEUR TEUR TEUR -------------- -------------- -------------- Net income in accordance with US GAAP 29,481 31,318 12,453 Other comprehensive income Unrealized holding gains on securities -1,531 -2,086 1,836 -------------- -------------- -------------- Comprehensive income 27,950 29,232 14,289 ============== ============== ==============
Statement of shareholders` equity:
Year ended December 31 ------------------------------------------- 2000 1999 1998 TEUR TEUR TEUR -------------- -------------- ------------- Stockholders' equity according to US GAAP before accumulated other comprehensive income 253,468 237,439 206,119 Accumulated other comprehensive income: Unrealized holding gains on securities 450 1,981 4,067 -------------- -------------- ------------- Total stockholders' equity according to US GAAP including comprehensive income 253,918 239,420 210,186 ============== ============== =============
15 17 NOTE D CONCENTRATION OF CREDIT RISK AND LONG-TERM COAL SALES AGREEMENTS MIBRAG mbH markets its coal principally to electric utilities in Germany. As of Decem-ber 31, 2000 and 1999 accounts receivable from electric utilities totaled TEUR 55,909 and TEUR 46,827, respectively. Credit is extended based on an evaluation of the customer's financial condition. Credit losses are provided for in the financial statements and consistently have been minimal. MIBRAG mbH is committed under several long-term contracts to supply raw brown coal and whirl fine coal to the Schkopau power station and the Lippendorf power station. Under the terms of the Schkopau Agreement, MIBRAG mbH may deliver annually up to 5.8 million tons of coal. The agreement is in effect until 2010, with an option for the purchaser to extend the agreement for another 10 years. The price to be paid by the Schkopau power station is a fixed price adjusted by an annual escalation rate. The Lippendorf Agreements provide for deliveries of up to 10 million tons of raw brown coal per year from 1999 through 2040 with an option for the customers to extend for an additional 3-year period. These Agreements were closed with Vereinigte Energiewerke AG (VEAG), Berlin, E.ON Kraftwerke GmbH, Hanover and EnBW Lippendorf Beteiligungsgesellschaft mbH, Stuttgart. The price to be paid by the Lippendorf power station is a base-price with escalation and adjustment based on quality of the coal delivered. The first bloc of the new Lippendorf power station went into full operation in October 1999 and the second bloc in May 2000. A substantial portion of the Company's coal reserves is dedicated to the production of coal for such agreements. NOTE E INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT The group depreciation charges are as follows: TEUR 49,059 (2000), TEUR 51,654 (1999) and TEUR 75,882 (1998), including normal depreciation, unplanned depreciation and special tax depreciation (1998) in terms of section 4 of the German tax law, "Foerdergebietsgesetz". According to that law, certain tangible assets can for example be depreciated up to 50 % of the historical costs in the first five years of acquisition in addition to the normal depreciation. Special tax depreciation was EUR 23.067 in 1998. 16 18 The major categories of fixed assets are the following (in TEUR):
2000 1999 --------------- --------------- Concessions, trade marks, patents and licenses cost 13,967 14,177 less: accumulated amortization -5,375 -4,772 --------------- --------------- net book value 8,592 9,405 =============== =============== Property, plant and equipment cost - land and land rights 39,504 36,632 - buildings 139,389 133,908 - strip mines 45,772 45,772 - technical equipment and machinery 747,008 677,601 - factory and office equipment 106,601 101,236 - payments on account and assets under Construction 6,672 76,555 --------------- --------------- total cost 1,084,946 1,071,704 --------------- --------------- less: accumulated depreciation -690,916 -658,460 --------------- --------------- net book value 394,030 413,244 =============== ===============
MIBRAG reopened the briquette plant in Deuben and closed the briquette plant in Mumsdorf in the year 2000. The fixed assets of the briquette plant in Deuben were written up at December 31, 1999 for German GAAP purposes to their continued carrying values as if the assets had not been impaired in 1996. The fixed assets of the briquette plant in Mumsdorf were fully written down for German and US GAAP purposes in 2000. 17 19 NOTE F PARTICIPATIONS (INCLUDING ASSOCIATED COMPANY) MIBRAG's investment in MUEG Mitteldeutsche Umwelt- und Entsorgungs GmbH, Braunsbedra, ("MUEG") is accounted for using the equity method. MUEG was founded in 1990 and coordinates the waste disposal activities in the Central German brown coal area. The equity value as of December 31, 2000 is TEUR 5,684, and the cost basis is TEUR 6,333. Investments in five (1999: six) other companies are accounted for at cost. NOTE G LOANS GRANTED TO PARTICIPATIONS In 1995, MIBRAG sold its district heating network assets to a company in which it holds a participation. The sales price is being repaid in equal installments of TEUR 375 over a period of 25 years. The interest rate is fixed at 5,4 percent beginning in 2000 (1999: 5,0%). The fair market value of the loan approximates the book value, which amounted to TEUR 7,124 and TEUR 7,499 at December 31, 2000 and 1999, respectively. NOTE H OTHER LOANS The other loans were granted to the third party investors in a subsidiary of MIBRAG mbH. These loans were financed by a borrowing from KfW (Kreditanstalt fuer Wieder-aufbau). KfW granted MIBRAG mbH a loan of TEUR 52,663 due on December 30, 2005 at fixed interest rates between 6.26 % and 6.82 %. The balance of the loan as of December 31, 2000 amounted to TEUR 31,649. The loans to the third party investors of the subsidiary of MIBRAG mbH were granted at the same conditions as those applicable to the loan between MIBRAG mbH and KfW. 18 20 NOTE I OVERBURDEN The reconciliation of the overburden costs is as follows:
December 31, 2000 December 31, 1999 ------------------------------ ------------------------------ Tonnage Value Tonnage Value metric tons million EUR metric tons million EUR -------------- --------------- -------------- --------------- Profen 20.8 80,5 20.0 78,4 Schleenhain 21.9 83,9 20.0 83,2 -------------- --------------- -------------- --------------- 42.7 164,4 40.0 161,6 ============== =============== ============== ===============
The basis for the determination of the overburden is the total quantity of partially exposed raw brown coal. NOTE J TRADE RECEIVABLES Trade receivables were disclosed in the balance sheet, net of allowances, as follows (in TEUR):
December 31, 2000 December 31, 1999 ----------------------- ----------------------- Trade receivables 56,518 47,236 Less allowances (608) (410) ----------------------- ----------------------- 55,910 46,826 ======================= =======================
NOTE K OTHER INVESTMENTS At December 31, 2000 other investments were disclosed at an amount of TEUR 56,076. The balance consists of investment funds of MI (TEUR 44,549), which were specially set up to reinvest the additional liquidity resulting from the entry of new investors into a subsidiary of MIBRAG and to short-term investments (TEUR 11,527). 19 21 Net dividends distributed by the investment funds were partially reinvested in 1998 to 2000 and paid out in 2000. Realized gains of EUR 6.6 million, EUR 5.8 million and EUR 5.4 million were disclosed in interest income in, 2000, 1999 and 1998, respectively. NOTE L ACCRUALS FOR PENSIONS AND SIMILAR OBLIGATIONS The provision relates primarily to briquette benefit claims of active and retired employees on the basis of the collective bargaining agreement of November 9, 1993 in respect to allowances in kind. Individuals entitled must be employees of the company at the date of retirement. The entitlement does not vest and lapses with early termination of the working relationship or upon receipt of social plan benefits. The calculation is based on an actuarial valuation, which takes into account the entitlement to the redemption value of DM 185.00 per metric ton of briquettes as specified in the collective bargaining agreement, the employees entitled to benefits as of December 31, 2000, and official demographic tables. In addition, pension obligations for early retirement benefits were accrued. These amounts have also been calculated on the basis of actuarial valuations. NOTE M TAXATION ACCRUALS MIBRAG accrued TEUR 778 (1999: TEUR 1.317) for property taxes. MIBRAG did not provide for income taxes under German GAAP in spite of a positive result for the year 2000 because of tax losses brought forward from prior years. Deferred tax assets and liabilities have not been recorded because there are no significant differences between the German GAAP financial statement and the tax bases of the assets and liabilities. The German income tax rate applicable to MIBRAG (corporate income tax, solidarity surcharge, trade tax) is 50,17 % in 2000 (1999: 50,17%, 1998: 54,72 %) on undistributed income. Beginning in 2001 this tax rate will be 35,98 % according to changed tax laws. The company has an effective tax rate of 0 % because the company has no taxable income and the recording of a deferred tax benefit for net loss carryforwards is prohibited under German GAAP. The income taxes paid in 2000 (TEUR 42; 1999: TEUR 0; 1998: TEUR 0) relate to a subsidiary of MIBRAG. At December 31, 2000 the Company had approximately EUR 266 million net operating loss carry-forwards, which do not expire and may be applied against future taxable 20 22 income. The tax audit is currently taking place for the fiscal years 1994 through 1997. NOTE N ENVIRONMENTAL AND MINING PROVISIONS The following is a summary of environmental and mining provisions (in TEUR):
Balance as of Balance as of December 31, 2000 December 31, 1999 ----------------------- ---------------------- 1) End-lake provision 139,286 135,163 2) Provision for environmental pollution 5,100 5,100 3) Landscaping 5,876 6,560 4) Planting 4,331 5,040 5) Relocation of villages 20,511 19,332 ----------------------- ---------------------- 175,104 171,195 ======================= ======================
1) End-lake provision MIBRAG is responsible for reclaiming the mines Profen and Schleenhain. The mining field reclaimation of the Profen and Schleenhain mines after the ceasing of production is planned for 2029 to 2046 and 2041 to 2073, respectively. A legally binding closure plan laying down the principles for action plans in accordance with the Federal Mining Law (Bundesberggesetz) is normally approved two years in advance to the commencement of production by the relevant mining authorities. The liability to reclaim the area exists from the start of mining activities. In each year of coal extraction the reclaimation costs are accrued ratably using the relation of the coal mined to the total coal mine volume. The calculation of the total cost for reclaiming mining fields has been made on the basis of a third party opinion and estimations on the basis of current prices. The end-lake costs consist mainly of costs for reconstruction, bank reinforcement, dewatering and watering. 2) Provision for Environmental Measures The provision for the environmental measures is determined in respect to disposal sites and old locations of MIBRAG mbH in refinement and mining areas on which waste deposits can be found. The obligation at the accrued amount is derived from article 19.3 of the purchase and sales agreement. Qualifying costs that exceed the provision are to be reimbursed by the Bundesanstalt fuer vereinigungsbedingte Sonderaufgaben (BvS). 21 23 3) Landscaping This provision includes costs for reclaiming disposal areas and leveling the area outside the embankments. These costs relate solely to continuous landscaping, while costs for closing down landscaping are included in the end-lake provision. 4) Planting Provision is made for costs in connection with temporary planting as of December 31, 2000 and December 31, 1999. 5) Relocation of villages The provision for the relocation of villages is in respect to the relocation of municipalities, which is necessary for the expansion of the Profen and Schleenhain mines. The calculation of the provision is based on a method that takes into account the cost for project planning, infrastructural development, cemetery relocation, demolition and landmark preservation. The provision is built up in equal annual amounts, commencing two years before the relocation starts and ending in the middle of the relocation year. NOTE O OTHER ACCRUALS Accrued liabilities are as follows (in TEUR):
December 31, 2000 December 31, 1999 --------------------- -------------------- 1) Severance payments 10,373 10,549 --------------------- -------------------- 2) Personnel expenses - Employment anniversaries 1,209 1,355 - Vacation and other compensated absences 311 276 - Other 61 124 --------------------- -------------------- 1,581 1,755 --------------------- -------------------- 3) Remaining accruals 6,879 5,993 --------------------- -------------------- 18,833 18,297 ===================== ====================
22 24 1) Severance payments Basis for the provisions is signed social plan framework agreements in which the measures for the personnel adjustments are defined. The employees are entitled to a one-time severance payment if the company initiates termination or in case of retrenchments. The severance payments are limited to TEUR 26 per person. Employees participating in early retirement programs are entitled to additional compensation, mainly for the reduction in statutory pension payments due to early retirement. 2) Personnel expenses MIBRAG mbH grants awards in recognition of long service in the company, based on the collective bargaining agreement dated January 1, 1992 and the company agreement dated October 1, 1995. The employees are entitled to financial awards, which increase in proportion to their employment periods. The valuations of the benefits were based on actuarial valuations. The liability for vacation and other compensated absences arises from the days and shifts outstanding at balance sheet dates, which have been determined for each employee. 3) Remaining provisions Composition (in TEUR):
December 31, 2000 December 31, 1999 --------------------- --------------------- Outstanding invoices 2,913 1,834 Mine damages 1,790 1,790 Water usage fees 760 1,008 Professional service and litigation 1,052 747 Others 364 614 --------------------- --------------------- 6,879 5,993 ===================== =====================
23 25 NOTE P LONG-TERM DEBT Long-term debt consists of the following (in TEUR):
December 31, 2000 December 31, 1999 --------------------- --------------------- a) Loan to finance the power stations - build up the power station of Waehlitz 60,509 64,068 - modernization of the power stations in Deuben and Mumsdorf 47,196 51,916 - finance the additional paid-in capital by the investors of MI 31,649 35,484 b) Loan to finance the Schleenhain mine investments 70,069 71,581 c) Loan for home construction 2,818 3,055 d) Deferred interest 576 586 --------------------- --------------------- 212,817 226,690 ===================== =====================
To a) These liabilities refer to three loans from the Kreditanstalt fuer Wiederaufbau, Frankfurt/Main: The first loan was granted December 9, 1992 for the construction of a raw brown coal powered industrial power station in Waehlitz of TEUR 71,187. The interest rate has been fixed at 7 % p.a. until December 9, 2002. The loan period is 25 years. The repayments are due in 40 equal amounts commencing from June 30, 1998. On April 3, 1995 two additional loan agreements were closed with Kreditanstalt fuer Wiederaufbau (KfW). One of these contracts was closed for partially financing the modernization and reshaping of both industrial power plants in Deuben and Mumsdorf (TEUR 61,355). The redemption period is 13 years starting on December 31, 1998. Interest has to be paid between 6.04 % and 6.80 %. These rates are fixed until January 2006 for loans of EUR 27.5 million, and 2007 for the remaining portion of the loans. The second loan in the amount of EUR 52,663 was granted to partially finance the limited partner capital contribution of investors. The redemption period is 13 years. In 1996, the loan was fully called up (TEUR 52,663). In 2000, TEUR 3,835 were redeemed. The interest rates are fixed at between 6.26 % and 6.82 % until 2005 at which time the rates will be adjusted to market rates. 24 26 Interest expense for the three loans amounted to EUR 10.2 million, EUR 11.3 million and EUR 12.2 million in 2000, 1999, and 1998, respectively. To b) In 1997 and 1998, loan contracts were closed with four banks to finance the capital expenditures at the Schleenhain mine, especially the construction of the blending yard and environmental measures for the conveyor belts. In 1998 EUR 61,355 million and in 1999 further EUR 10,226 million were called up at interest rates between 3.5 % and 5.4 %, which are fixed until 2008 and 2009, respectively. To c) The loans for home construction were granted by the Deutsche Bank AG and the Nord LB for relocation-related home construction purposes in Hohenmoelsen. For the loan granted by Deutsche Bank AG amounting to TEUR 1,333 an interest rate of 5.6 % was set for a period ending 2007. For the two loans granted by Nord LB at the amounts of TEUR 624 and TEUR 861 there are no interest payments due until 2007 and 2010, respectively. Thereafter the rate is fixed at 8 % p.a. The OTHER LIABILITIES (in TEUR) refer to:
December 31, 2000 December 31, 1999 --------------------- --------------------- Usage reimbursement for the mining rights 11,015 7,705 Wages and Salaries 4,440 3,077 Tax lease 2,475 2,774 Social security contributions 2,159 2,311 Tax authorities 3,366 1,914 Others 1,498 1,515 --------------------- --------------------- 24,953 19,296 ===================== =====================
25 27 The payables due to the tax lease model relate to the equity commission and management fees. NOTE Q MATURITY PERIODS OF LIABILITIES The maturity periods of liabilities (in TEUR) are as follows:
Down- Liabilities Trade Payables to Other payment to banks*) payables participations payables received Total ----------- -------- -------------- -------- -------- --------- Balance as of December 31, 1999 226,690 24,069 2,493 19,296 53 272,601 thereof: maturity period - up to 1 year 14,449 21,953 2,493 15,964 53 54,912 - 1-5 years 72,602 2,116 -- 2,405 -- 77,123 - more than 5 years 139,639 -- -- 927 -- 140,566 Balance as of December 31, 2000 212,817 16,749 2,702 24,953 -- 257,221 thereof: maturity period - up to 1 year 16,379 15,067 2,702 22,660 -- 56,808 - 1-5 years 78,770 1,682 -- 1,547 -- 81,999 - more than 5 years 117,668 -- -- 746 -- 118,414
*) Liabilities to banks are fully collateralized by mortgages Annual maturities of liabilities to banks are as follows:
Year of maturity Amount in TEUR ------------------------- ---------------------------------- 2001 16,379 2002 17,352 2003 17,490 2004 21,956 2005 21,972 -------------------- 78,770 Thereafter 117,668 -------------- Total 212,817 ==============
26 28 The estimated fair value of the Company's liabilities to banks at December 31, 2000 (1999), approximates TEUR 213.030 (TEUR 232.968) compared with the carrying value of TEUR 212,817 (TEUR 226.690). NOTE R COMMITMENTS AND CONTINGENCIES
(in TEUR) At December 31, -------------------------------------------- 2000 1999 ---------------------- --------------------- Guarantees for indebtedness of others 19,672 19,705 Other contractual obligations 14,200 23,980
The other contractual obligations refer to long term investment projects in the mines Profen and Schleenhain. MIBRAG leases office equipment and railway-carriages, expiring at various dates. Rental and lease expenses amounted to TEUR 780, TEUR 849 and TEUR 852 in the years ended December 31, 2000, 1999 and 1998, respectively. The future minimum lease payments under operating leases amount to TEUR 637 (2001: TEUR 279, 2002: TEUR 254, 2003: TEUR 90, 2004: TEUR 11, 2005: TEUR 3 and no obligations thereafter). NOTE S SEGMENT INFORMATION MIBRAG operates as one segment. Sales were exclusively achieved in Germany, and all long-lived assets are located in Germany. Sales were almost completely limited to the new German Federal States, mainly to Saxony Anhalt, Thuringia, and Saxony. Net sales by product and service:
2000 1999 1998 TEUR TEUR TEUR ------------ ------------- ------------ Raw brown coal and coal products 192,296 168,767 152,308 Electrical power, heating and steam 33,140 42,305 43,177 Other products and services 2,678 2,138 2,481 Further charging of transport services, ash disposal and others 44,106 40,817 42,551 ------------ ------------- ------------ 272,220 254,027 240,517 ============ ============= ============
Several major customers account for 10 % or more of MIBRAG's revenues. As a percen-tage of total sales such customers accounted for 24 %, 21 % and 13 % in 2000, 31 %, 15 % and 10 % in 1999, and 35 % and 14 % in 1998. 27 29 NOTE T RELATED PARTY TRANSACTIONS Agreements for consulting and management services were closed in respect to the mining operations and the refinement facilities between MIBRAG and two subsidiaries of the common parent companies NRG Energy Inc., Morrison-Knudsen Corp. and PowerGen plc. These contracts determine certain consulting services to be provided by the two subsidiaries Morrison-Knudsen Deutschland GmbH (MKD) and Saale Energie Service GmbH (SES) to MIBRAG or its subsidiaries. MIBRAG is obliged to determine and pay the cost-related remuneration for these services. Expenditures for MIBRAG amount to TEUR 7,669, TEUR 7,669 and TEUR 10,013 for 2000, 1999 and 1998, respectively. Part of the lignite deliveries from 1998 to 2000 to the Schkopau power plant were sales to Saale Energie GmbH (SEG), which is a subsidiary of the common parent companies of MIBRAG - NRG Energy Inc. and PowerGen plc. SEG is operating two blocs of the Schkopau power station with 400 MW. Sales to SEG amount to EUR 17.3 million, EUR 14.7 million, EUR 14.2 million in 2000, 1999 and 1998, respectively. The conditions of delivery are the same as to the other (third party) operator of the Schkopau power plant. 28