-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ByzkciIcq0os08OMStWnDx1JCuW843+wb8TConsrBAwnk++MqZaCDRoiPC7oolwK 35HqUh0HKCBSvM75PGa81g== /in/edgar/work/0000912057-00-049968/0000912057-00-049968.txt : 20001115 0000912057-00-049968.hdr.sgml : 20001115 ACCESSION NUMBER: 0000912057-00-049968 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LSP ENERGY LTD PARTNERSHIP CENTRAL INDEX KEY: 0001092436 STANDARD INDUSTRIAL CLASSIFICATION: [4911 ] IRS NUMBER: 223422042 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-84609 FILM NUMBER: 767103 BUSINESS ADDRESS: STREET 1: TWO TOWER CENTER 20TH FLOOR CITY: EAST BRUNSWICK STATE: NJ ZIP: 08816 BUSINESS PHONE: 7322496750 MAIL ADDRESS: STREET 1: TWO TOWER CENTER 20TH FLOOR CITY: EAST BRUNSWICK STATE: NJ ZIP: 08816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LSP BATESVILLE FUNDING CORP CENTRAL INDEX KEY: 0001092435 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 223615403 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-84609-01 FILM NUMBER: 767104 BUSINESS ADDRESS: STREET 1: TWO TOWER CENTER 20TH FLOOR CITY: EAST BRUNSWICK STATE: NJ ZIP: 08816 BUSINESS PHONE: 7322496750 MAIL ADDRESS: STREET 1: TWO TOWER CENTER 20TH FLOOR CITY: EAST BRUNSWICK STATE: NJ ZIP: 08816 10-Q 1 a2030585z10-q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2000 Commission File Numbers 333-84609 and 333-84609-01 LSP ENERGY LIMITED PARTNERSHIP LSP BATESVILLE FUNDING CORPORATION (Exact name of registrant as specified in its charter) Delaware 22-3422042 Delaware 22-3615403 - --------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Two Tower Center, 20th Floor East Brunswick, N.J. 08816 (732) 249-6750 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ----------------------------- 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No LSP ENERGY LIMITED PARTNERSHIP LSP BATESVILLE FUNDING CORPORATION FORM 10-Q INDEX
PAGE --- PART I Item 1. Financial Statements 2 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 2 Item 3. Qualitative and Quantitative Disclosures about Market Risk 7 PART II Item 1. Legal Proceedings 7 Item 2. Changes in Securities and Use of Proceeds 7 Item 3. Defaults Upon Senior Securities 7 Item 4. Submission of Matters to a Vote of Security Holders 7 Item 5. Other Information 7 Item 6. Exhibits and Reports on Form 8-K 7 Signatures 8 Financial Statement Index F-1 Exhibits Index EI-1
PART I/ITEM 1. FINANCIAL STATEMENTS See financial statements commencing at F-1. These unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. While LSP Energy Limited Partnership, (the "Partnership") and LSP Batesville Funding Corporation ("Funding") believe that the disclosures made are adequate to make the information presented not misleading, these financial statements should be read in conjunction with the audited financial statements included in the Form S-4 as of December 31, 1999 and 1998 and for each of the three years in the three year period ended December 31, 1999, filed with the Commission by the Partnership and Funding. PART I/ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Partnership is a Delaware limited partnership formed in February 1996 to develop, construct, own and operate a gas-fired electric generating facility with a design capacity of approximately 837 megawatts located in Batesville, Mississippi (the "Facility"). The 1% general partner of the Partnership is LSP Energy, Inc. ("Energy"). The 99% limited partner of the Partnership is LSP Batesville Holding, LLC ("Holding"), a Delaware limited liability company established on July 29, 1998. Granite II Holding, LLC ("Granite"), an affiliate of LS Power, LLC ("LS Power") and a Delaware limited liability company, holds a 48.63% membership interest in Holding and Cogentrix/Batesville, LLC ("Cogentrix"), an affiliate of Cogentrix Energy, Inc. and a Delaware limited liability company, holds a 51.37% membership interest in Holding. LSP Batesville Funding Corporation ("Funding") was established on August 3, 1998. Funding's business purpose is limited to maintaining its organization and activities necessary to facilitate the acquisition of financing by the Partnership from the institutional debt market and to offer debt securities. Funding is wholly owned by Holding. On November 3, 2000, LS Power, LLC, CB Capital Investors, LLC (transferee of Chase Manhattan Capital, L.P.), and Cogen Grantor Trust, UA entered into a purchase agreement for the sale (the "Sale") of all of the partnership interests in Granite Power Partners II, L.P., the indirect owner of the Partnership and Funding and all of the membership interests in LS Power Management, LLC, the manager of the Facility, to NRG Energy, Inc and its affiliates. The Sale is expected to close in the first quarter of 2001. Under current circumstances, the Sale is not expected to result in a change of control under the Trust Indenture dated as of May 21, 1999 among Funding, the Partnership and The Bank of New York. The Partnership expects that the total cost of developing, constructing and financing the Facility and the Panola County gas and water infrastructure that the Facility will use will be approximately $394,278,000. The Partnership capitalized the costs pertaining to the construction of the Facility and the Panola County gas and water infrastructure, net of the Panola County gas and water infrastructure reimbursement funds of $14,278,000 received from the State of Mississippi as property, plant and equipment and the costs pertaining to the financing of the Facility and the Panola County gas and water infrastructure as debt issuance and financing costs, and the Partnership has included these items as assets on its balance sheets. RESULTS OF OPERATIONS The Facility commenced commercial operations under the Power Purchase Agreement ("Aquila PPA") with Aquila Energy Marketing Corporation ("Aquila") and Utilicorp United, Inc. ("Utilicorp") on August 8, 2000 and under the Power Purchase Agreement ("VEPCO PPA") with Virginia Electric and Power Company ("VEPCO") on August 9, 2000. 2 Revenues for the three and nine months ended consisted of approximately $7,200,000 of revenues earned under the VEPCO PPA and Aquila PPA during the period from the commercial operations date under the VEPCO PPA and the Aquila PPA through September 30, 2000. In addition, the Partnership is entitled to receive system upgrade credits in the amount of incremental revenue received by the Tennessee Valley Authority ("TVA") and Entergy Mississippi, Inc. ("Entergy") for transmission services procured for the delivery of energy from the Facility. For the three and nine months ended September 30, 2000, the Partnership earned system upgrade credits of approximately $1,605,000 and $1,507,000 from TVA and Entergy, respectively. Approximately $1,549,000 of these credits have been capitalized as a component of property, plant and equipment in the accompanying September 2000 financial statements. For the three and nine months ended September 30, 2000 project development expenses not directly related to the construction and financing of the Facility approximated $194,000 and $530,000, respectively, which amounts consisted primarily of approximately $100,000 and $300,000, respectively, of management fees and approximately $94,000 and $230,000, respectively, of labor charges, related benefits and taxes and other management expenses incurred under the management services agreement with LS Power Management, LLC ("LSP Management"). For the three and nine months ended September 30, 1999 project development expenses not directly related to the construction and financing of the Facility approximated $85,000 and $202,000, respectively, which amounts consisted primarily of labor charges, related benefits and taxes and other management expenses incurred under the management services agreement with LSP Management. For the three and nine months ended September 30, 2000 general and administrative expenses approximated $104,000 and $153,000, respectively, which amounts consisted primarily of legal and accounting fees and rating agency and Trustee fees. For the three and nine months ended September 30, 1999 general and administrative expenses approximated $59,000 and $209,000, respectively, which amounts consisted primarily of legal and accounting fees. Operations and maintenance expenses for the three and nine months ended September 30, 2000 approximated $1,412,000 and $2,437,000, respectively. These costs consisted primarily of approximately $491,000 and $918,000, respectively, of labor charges, related taxes and benefits and $73,000 and $307,000, respectively, of services fees incurred under the operations and maintenance agreement with Cogentrix Batesville Operations, LLC ("Cogentrix Batesville Operations") and approximately $31,000 and $183,000, respectively, of fuel pipeline management fees and water supply costs and approximately $425,000 and $467,000, respectively, of utilities and chemicals. For the three and nine months ended September 30, 1999 operations and maintenance expenses approximated $393,000 which amounts consisted primarily of costs incurred under the operations and maintenance agreement with Cogentrix Batesville Operations. The VEPCO PPA specifies an energy delivery milestone of June 1, 2000 for two of the three Combined Cycle Units ("Unit" or "Units") at the Facility, which date may be extended by a force majeure event or a delivery excuse. As a result of transportation delays in the delivery of one of the VEPCO Unit's steam turbine generator to the Facility, the Partnership issued a force majeure notice to VEPCO claiming delays of the energy delivery milestone date of June 1, 2000, under the VEPCO PPA. The Partnership has claimed a 21-day delay in the energy delivery milestone date for the first VEPCO Unit and a 9-day delay in the energy delivery milestone date for the second VEPCO Unit. VEPCO has initially rejected the Partnership's claim of a force majeure event. If it is determined that any portion of the delay in the delivery of the steam turbine generator constitutes a force majeure event under the VEPCO PPA, then the date that the Partnership was required to deliver energy from the respective VEPCO Units will be extended day for day for the number of days of the force majeure event. On August 9, 2000, the energy delivery milestone for the VEPCO Units was achieved. As a result of this delay in achieving the energy delivery milestone, the Partnership may be responsible for the incremental replacement power during the period of delay, subject to a maximum of $20 per kilowatt ($5,660,000) of committed capacity from each VEPCO Unit. The Partnership had issued two letters of credit each in the amount of $5,660,000 as security for this obligation. VEPCO has claimed that the Partnership is responsible for an aggregate of approximately $9,300,000 of incremental replacement power for the period June 1, 2000 through July 19, 2000 and has drawn approximately $4,650,000 on each of the two letters of credit. The draws on the letters of credit each converted into 5-year loans ("LOC Loans"). The Partnership has disputed the validity of the draws on the two letters of credit, the amount of the incremental replacement power costs and the methodology used by VEPCO to calculate the incremental replacement 3 power costs, including the failure by VEPCO to acknowledge the force majeure events described above. In connection with this dispute the Partnership issued a notice of default to VEPCO. In response to this notice of default, on August 17, 2000, VEPCO repaid the Partnership an amount equal to the draws on the two letters of credit plus accrued interest through August 31, 2000. Such amount less accrued interest through August 31, 2000 is being held in escrow pursuant to an escrow agreement dated August 17, 2000 among VEPCO, the Partnership and the Chase Manhattan Bank, as escrow agent, pending final resolution of this dispute. VEPCO has not waived its claim for incremental replacement power under the VEPCO PPA. As of September 30, 2000, the Partnership has estimated its potential liability for incremental replacement power to approximate $4,500,000 based on the information available to it. A final resolution of this dispute has not occurred. For the three and nine months ended September 30, 2000 replacement energy of $5,835,000 consisted of accrued incremental replacement energy costs of approximately $4,500,000 under the VEPCO PPA and delivery delay adjustments of approximately $1,335,000 under the Aquila PPA as a result of delays in achieving the energy delivery milestones under each PPA. The Aquila PPA specifies an energy delivery milestone deadline of June 1, 2000 for the Aquila Unit. On August 8, 2000, the energy delivery milestone of the Aquila Unit was achieved. The Partnership had the option of electing to incur an adjustment to the reservation payment to be received under the Aquila PPA or to be responsible for incremental replacement power during the period of delay. The Partnership elected to incur an adjustment to the reservation payments to be received under the Aquila PPA. The adjustment to the future reservation payments was determined by contract capacity, the duration of delay and a percentage factor for the month in which the delay occurred. The reduction in reservation payments received for the period from the commercial operations date through September 30, 2000 approximated $1,335,000. The delay which caused the aforementioned reduction in reservation payments will have no impact on reservation payments to be earned under the Aquila PPA after September 30, 2000. Net interest expense for the three and nine months ended September 30, 2000 aggregated approximately $3,303,000. LIQUIDITY AND CAPITAL RESOURCES The Partnership is using the net proceeds from the issuance of the two series of Senior Secured Bonds (the "Bonds"), $54,000,000 of capital contributions that the Partnership has received from Holding, test energy revenues generated during the start-up and commissioning of the Facility and the reimbursement payments that the Partnership has received from the State of Mississippi to pay the costs of developing, constructing and financing the Facility and the Panola County gas and water infrastructure. As of September 30, 2000, the Partnership had approximately $46,500,000 of remaining proceeds from the issuance of the Bonds, test energy revenues generated during start-up and commissioning of the Facility and Panola County gas and water infrastructure reimbursement funds received from the State of Mississippi, plus investment earnings on such funds, and $54,000,000 of capital contributions that the Partnership has received from Holding. During April 2000, July 2000 and August 2000, Holding made capital contributions of $5,000,000, $5,000,000 and $44,000,000, respectively, to the Partnership. As of September 30, 2000, costs incurred on the Facility and the Panola County infrastructure were approximately $370,565,000. Included in this amount is approximately $338,684,000 (net of the Panola County infrastructure reimbursement funds of approximately $14,278,000) of property, plant and equipment, approximately $10,039,000 of debt issuance and financing costs and approximately $3,728,000 of inventory and other current assets. In addition, $3,836,000 of costs incurred have been expensed as of September 30, 2000. As of September 30, 2000, the Partnership has expended approximately $347,778,000 of cash. The Partnership's original project budget included a line item, which the Partnership refers to as "contingency", of approximately $10,649,000 that is designed to cover things like change orders under the various construction contracts, the cost of fuel consumed by the Facility during testing in excess of the revenue received from the sale of test energy, other increased costs due to force majeure and other events that may increase the Partnership's expenses. As of October 31, 2000, the Partnership had reduced its available contingency budget amount by approximately $2,311,000 for change orders under 4 the Partnership's various construction contracts, by approximately $2,307,000 for the cost of the water pretreatment contract, by approximately $2,687,000 for fuel costs (net of test energy revenue received) consumed during testing and commissioning of the Facility, approximately $536,000 for debt service on LOC Loans, approximately $822,000 for initial working capital and by approximately $9,304,000 for budget overruns. Offsetting these reductions is an increase to the contingency budget amount of approximately $16,189,000 as a result of (1) the Panola County infrastructure reimbursement payments of approximately $14,278,000 that have been made to the Partnership by the State of Mississippi and (2) the Partnership's reallocation of approximately $1,911,000 that the Partnership had previously allocated to the cost of the Panola County infrastructure and have not yet spent, because Panola County was obligated to pay such amounts due under the Panola County infrastructure construction contracts. The Partnership will further decrease the contingency for additional costs to be incurred prior to completion of the Facility. Under the terms of the Turnkey Engineering, Procurement and Construction Contract ("Construction Agreement") with BVZ Power Partners-Batesville ("BVZ"), BVZ has committed to develop and construct the Facility subject to the terms, deadlines and conditions set forth in the Construction Agreement. BVZ completed the construction and start-up of the Aquila Unit and the VEPCO Units on August 8, 2000. BVZ and the suppliers of the combustion turbines, steam turbines and heat recovery steam generators are currently engaged in a dispute regarding payment of delay liquidated damages to BVZ. BVZ claims that such suppliers owe BVZ approximately $4,700,000 in delay liquidated damages. BVZ intends to set off or withhold such amount owed by these suppliers from payments to such suppliers. The equipment supplied to the Facility by each of these equipment suppliers constitute direct purchases by the Partnership. Although the Partnership has contracted directly with these suppliers for such equipment, BVZ is responsible for the obligations and liabilities of such suppliers pursuant to the terms of the Construction Agreement. Final resolution of this dispute has not occurred. As of September 30, 2000, engineering, procurement and construction was estimated to be approximately 99% complete and total costs incurred to date under the Construction Agreement were approximately $240,732,000, including retainage. As of September 30, 2000, the Partnership had retained construction contract payments under the Construction Agreement totaling approximately $12,063,000, which amounts are payable upon completion of the Facility. The Partnership received a technical advisory from the combustion turbine manufacturer on September 18, 2000, which warned of the potential for hot gas leakage from flanged connections within the turbine enclosure and limits all three combustion turbines to 80% load. In response to this technical advisory, the combustion turbine manufacturer has issued a product modification that will upgrade the flange connections and will install additional equipment monitors. Work on the product modifications is expected to begin before the end of November 2000 with all work complete and the 80% load restriction is expected to be removed by December 31, 2000. Based upon the projected dispatch of the VEPCO and Aquila units, the adjustment factors associated with unavailability during off peak months and the availability margins provided for within the power purchase agreements, the Partnership does not expect that the operational restrictions imposed by this technical advisory will result in a reduction in the reservation payment due to availability adjustments under the VEPCO PPA or Aquila PPA. However, because of the 80% load restriction the units are not able to operate as efficiently as they otherwise would, the Partnership is responsible for this mismatch in efficiency as guaranteed heat rate payments to VEPCO and Aquila. Based upon the projected dispatch of the VEPCO and Aquila units, the Partnership estimates its additional obligation with respect to the guaranteed heat rate payments will be between $15,000 to $20,000 per month for the months of October, November and December. The completion of the cooling tower performance test and declaration of substantial completion of the Facility have been delayed pending completion of modifications by the cooling tower manufacturer that will improve cooling tower performance. Final acceptance tests cannot be completed and final completion of the Facility cannot be declared until after implementation of the combustion turbine product modifications and removal of the 80% load restriction imposed by the combustion turbine manufacturer. During an inspection of the second VEPCO Unit's combustion turbine on May 9, 2000, damage to the compressor blades was discovered. The combustion turbine manufacturer was notified and additional technical support was dispatched 5 to the Facility to determine the cause and extent of the damage and assist in repairs. During the subsequent investigation and inspection to determine the cause of the damage, impact and/or rubbing damage were identified in each of the 16 stages of the second VEPCO Unit's compressor. All compressor and combustion turbine repairs have been completed. The estimated cost of the repairs is approximately $1,550,000. The Partnership expects this cost to be substantially covered through insurance. The Partnership's property insurance has a deductible of $250,000. The Partnership contends that the deductible is the responsibility of the combustion turbine manufacturer. The Partnership was required to maintain casualty risk insurance during the construction period, including delayed opening insurance covering a period of approximately 18 months with a 30-day deductible per occurrence. The cost of this insurance was approximately $1,608,000. The Partnership currently maintains casualty risk insurance, including business interruption insurance covering a period of approximately 12 months with a 30 day deductible per occurrence. Subsequent to the completion of the Facility, the Partnership's primary sources of liquidity will be the VEPCO PPA and Aquila PPA for the sale of the capacity of and electric energy from the Facility. The VEPCO PPA covers the sale of the capacity of and electrical energy from two of the Partnership's generating Units for an initial term of 13 years, which VEPCO can extend at its option for an additional 12 years. The Aquila PPA covers the sale of the capacity of and electric energy from the Partnership's other generating Unit for an initial term of 15 years and seven months, which Aquila can extend at its option for an additional five years. Both of these power purchase agreements allow the power purchasers to dispatch the generating Units the Partnership has dedicated to them, meaning that the power purchasers have the right to control how much electrical energy they want their dedicated Units to produce. However, even if the Facility is not dispatched at all by VEPCO and Aquila, they will still have to pay the Partnership the reservation payment as provided under the power purchase agreements. As a result of the VEPCO draws on the letters of credit each draw converted into a 5-year loan ("LOC Loans"). Principal amounts under each LOC Loan are repayable in 20 equal quarterly installments of $232,487 commencing on the commercial operations date of the VEPCO Units. On September 30, 2000, the Partnership made principal payments under the LOC Loans aggregating approximately $465,000. As of September 30, 2000, interest on each outstanding LOC Loan was 8.22%. As noted above, on August 17, 2000, VEPCO repaid the Partnership an amount equal to the draws on the two letters of credit plus accrued interest through August 31, 2000. Such amount less accrued interest through August 31, 2000 is being held in escrow pending final resolution of the Partnership's dispute with VEPCO. Upon the commercial operation date for the VEPCO dedicated Units, the Partnership issued an additional letter of credit in the amount of $5,660,000 as security for the Partnership's obligations under the VEPCO PPA. This letter of credit will be subject to replenishment if drawn and the Partnership will be required to reimburse the issuing bank if this letter of credit is drawn. The Partnership also may be required to provide security to support the Partnership's obligations under the Aquila PPA. This security would be in the form of cash, a surety bond, or a letter of credit or guarantee from an investment grade entity. If the Partnership's debt service coverage ratio for each of the previous four consecutive calendar quarters is less than 1.25 to 1.00 then the Partnership must provide Aquila, upon their request, reasonable security for the Partnership's obligations. The security must be in an amount equal to $5.00 per kilowatt of the contract capacity or approximately $1,300,000. The Partnership must maintain this security until the earlier of the date on which (1) the Partnership provides Aquila documentation that the Partnership's debt service coverage ratio was 1.25 to 1.00 or greater for a period of four consecutive calendar quarters and (2) the Aquila power purchase agreement terminates, and the Partnership has paid in full to Aquila the amounts that the Partnership owes Aquila. The Partnership is dependent on the fixed reservation payments and other fixed payments under the VEPCO and Aquila power purchase agreements to meet the Partnership's fixed obligations, including debt service under the exchange bonds and LOC Loans The Partnership's power purchasers' obligations to pay the Partnership these fixed payments are dependent upon the Facility operating at minimum capacity and availability levels. The Partnership expects to achieve the minimum capacity and availability levels; however, any material shortfall in tested capacity or availability over a significant period could impact the Partnership's ability to make payments of principal and interest on the exchange bonds, LOC Loans and the Partnership's other debt when due. 6 As with any power generation facility, operation of the Facility will involve risk, including performance of the Facility below expected levels of output and efficiency, shut-downs due to the breakdown or failure of equipment or processes, violations of permit requirements, operator error, labor disputes, or catastrophic events such as fires, earthquakes, explosions, floods or other similar occurrences affecting a power generation facility or its power purchasers. The occurrence of any of these events could significantly reduce or eliminate revenues generated by the Facility or significantly increase the expenses of the Facility, adversely impacting the Partnership's ability to make payments of principal and interest on the exchange bonds, LOC Loans and the Partnership's other debt when due. 7 PART I/ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK The Partnership uses fixed rate debt as a source of capital. At September 30, 2000 and December 31, 1999 the Partnership had $326,000,000 of outstanding bonds at an average fixed interest rate of 7.70%. PART II/ITEM 1. LEGAL PROCEEDINGS During the first nine months of 2000, Funding and the Partnership have not been parties to any material legal proceedings. PART II/ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. PART II/ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. PART II/ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II/ITEM 5. OTHER INFORMATION None. PART II/ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS See the Exhibits Index at EI-1. (B) REPORTS ON FORM 8-K No reports on Form 8-K have been filed during the last quarter of the period covered by this report. 8 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 of the undersigned thereunto duly authorized. LSP ENERGY LIMITED PARTNERSHIP By: LSP-Energy, Inc. Its: General Partner By: /s/ MIKHAIL SEGAL ------------------------------- Name: Mikhail Segal Title: President Date: November 14, 2000 By: /s/ MARK BRENNAN ------------------------------- Name: Mark Brennan Title: Treasurer Date: November 14, 2000 LSP BATESVILLE FUNDING CORPORATION By: /s/ MIKHAIL SEGAL ------------------------------- Name: Mikhail Segal Title: President Date: November 14, 2000 By: /s/ MARK BRENNAN ------------------------------- Name: Mark Brennan Title: Treasurer Date: November 14, 2000 9 LSP ENERGY LIMITED PARTNERSHIP LSP BATESVILLE FUNDING CORPORATION FINANCIAL STATEMENT INDEX
PAGE LSP ENERGY LIMITED PARTNERSHIP Balance Sheets as of September 30, 2000 and December 31, 1999.........................................F-2 Statements of Operations for the three and nine months ended September 30, 2000 and 1999...........................................................................................F-3 Statements of Changes in Partner's Capital (Deficit) for the three and nine months ended September 30, 2000 and 1999.................................................................F-4 Statements of Cash Flows for the three and nine months ended September 30, 2000 and 1999...........................................................................................F-5 Notes to financial statements.........................................................................F-6 LSP BATESVILLE FUNDING CORPORATION Balance Sheets as of September 30, 2000 and December 31, 1999........................................F-14 Statements of Operations for the three and nine months ended September 30, 2000 and 1999.............F-15 Statements of Changes in Stockholder's Equity (Deficit) for the three and nine months ended September 30, 2000 and 1999.................................................................F-16 Statements of Cash Flows for the three and nine months ended September 30, 2000 and 1999.............F-17 Notes to financial statements........................................................................F-18
F-1 LSP ENERGY LIMITED PARTNERSHIP BALANCE SHEETS (UNAUDITED) SEPTEMBER 30, 2000 AND DECEMBER 31, 1999 ASSETS
2000 1999 ---- ---- Current assets: Cash $ 205,349 $ 202,924 Investments held by Trustee, at amortized cost which approximates fair value 49,976,458 53,547,410 Cash held in escrow 9,321,261 --- Accounts receivable 4,488,878 --- Spare parts inventory 3,117,493 733,462 Other current assets 630,009 174,174 ------------ ------------- Total Current Assets 67,739,448 54,657,970 PROPERTY, PLANT AND EQUIPMENT Construction in progress --- 295,835,581 Land and easements 678,088 676,558 Electric generating facility 338,006,101 --- ------------- ------------- 338,684,189 296,509,139 Accumulated depreciation (1,990,303) --- ------------- ------------- 336,693,886 296,509,139 Debt issuance and financing costs, net of accumulated amortization of $4,406,436 and $4,046,139 at September 30, 2000 and December 31, 1999, respectively 10,039,462 10,099,017 ------------- ------------- Total Assets $414,472,796 $361,266,126 ============ ============ LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) Current liabilities: Accounts payable $ 11,321,477 $ 9,923,894 Contract retainage payable 12,085,805 11,944,208 Current portion of loans payable 1,859,897 --- Current portion of bonds payable 4,125,000 --- Accrued replacement power expense 4,500,000 --- Accrued interest payable 5,230,750 15,345,443 ------------- ------------ Total Current Liabilities 39,122,929 37,213,545 Loans payable 6,974,615 --- Bonds payable 321,875,000 326,000,000 ------------ ------------ Total Liabilities 367,972,544 363,213,545 Commitments and contingencies PARTNERS' CAPITAL (DEFICIT) 46,500,252 (1,947,419) ------------- ------------- Total Liabilities and Partners' Capital (Deficit) $414,472,796 $361,266,126 ============ ============
See accompanying notes to financial statements. F-2 LSP ENERGY LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2000 1999 2000 1999 ---- ---- ---- ---- Revenues: Electric capacity revenues $6,930,576 $ --- $ 6,930,576 $ --- Electric energy revenues 269,400 --- 269,400 --- System upgrade credits 1,563,121 --- 1,563,121 --- ----------- --------- ----------- --------- Total revenues 8,763,097 --- 8,763,097 --- ----------- --------- ----------- --------- Expenses: Operations and maintenance expenses 1,412,101 392,842 2,437,085 392,842 Replacement energy 5,835,000 --- 5,835,000 --- Depreciation and amortization 2,057,455 --- 2,057,455 --- Project management expenses 193,924 84,559 530,184 201,545 General and administrative expenses 103,789 58,580 153,197 209,338 ----------- --------- ----------- --------- Total operating expenses 9,602,269 535,981 11,012,921 803,725 ----------- --------- ----------- --------- Operating loss (839,172) (535,981) (2,249,824) (803,725) Non-operating income (expenses): Interest expense (3,662,063) --- (3,662,063) --- Interest income 359,558 --- 359,558 --- ----------- --------- ----------- --------- Net loss $(4,141,677) $(535,981) $(5,552,329) $(803,725) =========== ========= =========== =========
See accompanying notes to financial statements. F-3 LSP ENERGY LIMITED PARTNERSHIP STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
LIMITED PARTNER GENERAL PARTNER --------------- ---------------- LSP BATESVILLE HOLDING, LLC LSP ENERGY, INC. TOTAL ------------ ---------------- ----- Balance at December 31, 1999 $ (1,927,945) $ (19,474) $(1,947,419) Net loss (1,396,545) (14,107) (1,410,652) Capital contributions 5,000,000 --- 5,000,000 ------------ --------- ----------- Balance at June 30, 2000 $1,675,510 $ (33,581) $ 1,641,929 Net loss $ (4,100,260) $ (41,417) $(4,141,677) Capital contributions 49,000,000 --- 49,000,000 ------------ --------- ----------- Balance at September 30, 2000 $ 46,575,250 $ (74,998) $46,500,252 ============ ========= =========== Balance at December 31, 1998 $ (438,298) $ (4,427) $ (442,725) Net loss (265,066) (2,678) (267,744) ------------ --------- ----------- Balance at June 30, 1999 $ (703,364) $ (7,105) $ (710,469) Net loss $ (530,621) $ (5,360) $ (535,981) ------------ --------- ----------- Balance at September 30, 1999 $ (1,233,985) $ (12,465) $(1,246,450) ============ ========= ===========
See accompanying notes to financial statements. F-4 LSP ENERGY LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, 2000 1999 2000 1999 ---- ---- ---- ---- Cash Flows from Operating Activities: Net loss $ (4,141,677) $ (535,981) $ (5,552,329) $ (803,725) Adjustments to reconcile net loss to cash provided by (used in) operating activities: Depreciation and amortization 2,057,455 --- 2,057,455 --- Interest earned on escrow funds (21,774) --- (21,774) --- Increase in accounts receivable (4,488,878) --- (4,488,878) --- Increase in spare parts inventory (93,265) --- (2,384,031) --- Decrease (increase) in other current assets 236,133 20,238 (455,835) (10,495) Increase (decrease) in accounts payable 2,756,796 12,599,544 1,432,293 14,983,449 Increase in accrued expenses 4,222,181 --- 4,500,000 --- Decrease in accrued interest on loans payable --- --- --- (154,898) -------------- ------------- -------------- -------------- Cash provided by (used in) operating activities 526,971 12,083,801 (4,913,099) 14,014,331 -------------- ------------- -------------- -------------- Cash Flows from Investing Activities: Investments held in escrow (9,299,487) --- (9,299,487) --- Investments held by Trustee (49,000,000) --- (54,000,000) (183,598,081) Investments drawn for project costs 20,005,023 53,352,345 68,340,766 106,764,462 Payments on property and construction in progress (20,162,984) (65,230,412) (62,624,815) (182,112,201) -------------- ------------- -------------- -------------- Cash used in investing activities (58,457,448) (11,878,067) (57,583,536) (258,945,820) -------------- ------------- -------------- -------------- Cash Flows from Financing Activities: Debt issuance and financing costs --- (301,518) (335,452) (3,043,421) Proceeds from issuance of loans --- --- --- 58,600,000 Repayments of loans (464,975) --- (464,975) (136,600,000) Proceeds from issuance of loans 9,299,487 --- 9,299,487 --- Proceeds from issuance of bonds --- --- --- 326,000,000 Capital contributions 49,000,000 --- 54,000,000 --- -------------- ------------- -------------- -------------- Cash provided by (used in) financing activities 57,834,512 (301,518) 62,499,060 244,956,579 -------------- ------------- -------------- -------------- Increase (decrease) in cash (95,965) (95,784) 2,425 25,090 Cash, beginning of period 301,314 204,740 202,924 83,866 -------------- ------------- -------------- -------------- Cash, end of period $ 205,349 $ 108,956 $ 205,349 $ 108,956 ============== ============= ============== ============== RECONCILIATION OF CHANGES IN PROPERTY AND CONSTRUCTION IN PROGRESS: Increase in property and construction in progress $ (5,810,564) $ (74,211,182) $ (42,175,050) $(202,471,359) Increase (decrease) in contract retainage 557,178 4,028,706 141,597 10,275,516 Investment income on investments held by Trustee (455,143) (1,587,108) (1,259,447) (2,319,640) Reimbursement received from the State of Mississippi --- --- --- --- Test energy revenues and system upgrade credits (8,063,766) --- (9,510,367) --- Amortization of debt issuance and financing costs 52,947 153,360 293,145 3,334,740 Increase (decrease) in accrued interest payable on bonds (6,443,636) 6,385,812 (10,114,693) 9,068,542 -------------- ------------- -------------- -------------- Payments on property and construction in progress $ (20,162,984) $ (65,230,412) $ (62,624,815) $(182,112,201) ============== ============= ============== ==============
See accompanying notes to financial statements. F-5 LSP ENERGY LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION AND BUSINESS LSP Energy Limited Partnership (the "Partnership") is a Delaware limited partnership formed in February 1996 to develop, construct, own and operate a gas-fired electric generating facility with a design capacity of approximately 837 megawatts located in Batesville, Mississippi (the "Facility"). The 1% general partner of the Partnership is LSP Energy, Inc. ("Energy"). The 99% limited partner of the Partnership is LSP Batesville Holding, LLC ("Holding"), a Delaware limited liability company established on July 29, 1998. Granite II Holding, LLC ("Granite"), an affiliate of LS Power, LLC and a Delaware limited liability company, holds a 48.63% membership interest in Holding and Cogentrix/Batesville, LLC ("Cogentrix"), an affiliate of Cogentrix Energy, Inc. and a Delaware limited liability company holds a 51.37% membership interest in Holding. During April 2000, July 2000 and August 2000 Cogentrix made capital contributions to Holding of $5,000,000, $5,000,000 and $44,000,000 respectively, which contributions were contributed to the Partnership by Holding. On November 3, 2000, LS Power, LLC, CB Capital Investors, LLC (transferee of Chase Manhattan Capital, L.P.), and Cogen Grantor Trust, UA entered into a purchase agreement for the sale (the "Sale") of all of the partnership interests in Granite Power Partners II, L.P., the indirect owner of the Partnership and LSP Batesville Funding Corporation ("Funding"), and all of the membership interests in LS Power Management, LLC, the manager of the Facility, to NRG Energy, Inc and its affiliates. The Sale is expected to close in the first quarter of 2001. Under current circumstances, the Sale is not expected to result in a change of control under the Trust Indenture dated as of May 21, 1999 among Funding, the Partnership and The Bank of New York. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL The financial statements, included herein, have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the information contained herein reflects all adjustments, including normal recurring accruals, necessary to present fairly the financial condition, results of operations and cash flows for the periods disclosed. Operating results for the three and nine months ended September 30, 2000 are not necessarily indicative of the results anticipated for the year ending December 31, 2000. These financial statements should be read in conjunction with the audited financial statements, and footnotes thereto, included in the Form S-4 for the year ending December 31, 1999. BASIS OF PRESENTATION The Facility commenced commercial operations under the Power Purchase Agreement ("Aquila PPA") with Aquila Energy Marketing Corporation ("Aquila") and Utilicorp United, Inc. ("Utilicorp") on August 8, 2000 and under the Power Purchase Agreement ("VEPCO PPA") with Virginia Electric and Power Company ("VEPCO") on August 9, 2000. Prior to the achieving commercial operations under the Aquila PPA and VEPCO PPA, the Partnership had been in the development stage since its inception and had not generated any operating revenues. REVENUE RECOGNITION Revenues from the sale of electricity are recorded based on capacity provided and output delivered at rates as specified under contract terms. (continued) F-6 LSP ENERGY LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) PROPERTY, PLANT AND EQUIPMENT All costs directly related to the acquisition and construction of long-lived assets are capitalized. Interest costs (including amortization of debt issuance and financing costs), net of interest income on excess proceeds from loans and bonds, is capitalized during construction. As of September 30, 2000 and December 31, 1999, capitalized interest since inception including amortization of debt issuance and financing costs was approximately $35,570,000 and $20,823,000, respectively, ($31,230,000 and $16,777,000, respectively, before amortization). Cash paid for interest was approximately $29,157,000 and $3,172,000 and $12,805,000 and $29,000 for the nine months ended September 30, 2000 and 1999, and for the three months ended September 30, 2000 and 1999, respectively. All costs not directly related to the acquisition or construction of long-lived tangible assets are expensed as incurred. Depreciation of the electric generating facility is computed primarily using the straight-line method over 30-years. Certain components within the plant will require replacement or overhaul at various times within the estimated life of the plant. These components are being depreciated using the straight-line method over their estimated service lives ranging from two to twelve years. The cost of future replacements and overhaul of these components will be capitalized and depreciated over their estimated service lives. Routine maintenance and repairs are charged to expense as incurred. 3. FACILITY CONTRACTS The VEPCO PPA specifies an energy delivery milestone of June 1, 2000 for two of the three Combined Cycle Units ("Unit" or "Units") at the Facility, which date may be extended by a force majeure event or a delivery excuse. As a result of transportation delays in the delivery of one of the VEPCO Unit's steam turbine generator to the Facility, the Partnership issued a force majeure notice to VEPCO claiming delays of the energy delivery milestone date of June 1, 2000, under the VEPCO PPA. The Partnership has claimed a 21-day delay in the energy delivery milestone date for the first VEPCO Unit and a 9-day delay in the energy delivery milestone date for the second VEPCO Unit. VEPCO has initially rejected the Partnership's claim of a force majeure event. If it is determined that any portion of the delay in the delivery of the steam turbine generator constitutes a force majeure event under the VEPCO PPA, then the date that the Partnership was required to deliver energy from the respective VEPCO Units will be extended day for day for the number of days of the force majeure event. On August 9, 2000, the energy delivery milestone for the VEPCO Units was achieved. As a result of this delay in achieving the energy delivery milestone, the Partnership may be responsible for the incremental replacement power during the period of delay, subject to a maximum of $20 per kilowatt ($5,660,000) of committed capacity from each VEPCO Unit. The Partnership had issued two letters of credit each in the amount of $5,660,000 as security for this obligation (see Note 4). VEPCO has claimed that the Partnership is responsible for an aggregate of approximately $9,300,000 of incremental replacement power for the period June 1, 2000 through July 19, 2000 and has drawn approximately $4,650,000 on each of the two letters of credit. The draws on the letters of credit each converted into 5-year loans. The Partnership has disputed the validity of the draws on the two letters of credit, the amount of the incremental power costs and the methodology used by VEPCO to calculate the incremental replacement power costs, including the failure by VEPCO to acknowledge the force majeure events described above. In connection with this dispute the Partnership issued a notice of default to VEPCO. In response to this notice of default, on August 17, 2000, VEPCO repaid the Partnership an amount equal to the draws on the two letters of credit plus accrued interest through August 31, 2000. Such amount less accrued interest through August 31, 2000 is being held in escrow pursuant to an escrow agreement dated August 17, 2000 among VEPCO, the Partnership and the Chase Manhattan Bank, as escrow agent, pending final resolution of this dispute. VEPCO has not waived its claim for incremental replacement power under the VEPCO PPA. As of September 30, 2000, the Partnership has estimated its potential liability for incremental replacement power to approximate $4,500,000 based on the information available to it. A final resolution of this dispute has not occurred. (continued) F-7 LSP ENERGY LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) Under the terms of the VEPCO PPA, VEPCO provided natural gas for the startup and commissioning of each of its Units. The Partnership was obligated to reimburse VEPCO for the delivered cost of such natural gas. The Partnership purchased approximately $7,375,000 of natural gas from VEPCO for the start-up and commissioning of each of its Units. This amount has been recorded as a component of property, plant and equipment in the accompanying September 30, 2000 balance sheet. Under the terms of the VEPCO PPA, VEPCO acted as the Partnership's agent for the purpose of marketing and selling test energy generated during the start-up and commissioning of the VEPCO Units. In return for VEPCO's services, the Partnership was obligated to pay VEPCO a marketing fee equal to $1.00 per MW hour of test energy sold plus a reimbursement for any reasonable costs related to the sale of such test energy. For the period May 23, 2000 through the commercial operations date under the VEPCO PPA, the Partnership recorded approximately $2,978,000, net of related marketing fees, from the sale of test energy under this arrangement with VEPCO. This amount has been recorded as a component of property, plant and equipment in the accompanying September 30, 2000 balance sheet. The terms of the VEPCO PPA require VEPCO to make payments to the Partnership including a reservation payment, an energy payment, a start-up payment, system upgrade payments and a guaranteed heat rate payment. The reservation payment is a monthly payment based on the tested capacity of each VEPCO Unit adjusted to specific ambient conditions and the applicable reservation charge. The standard capacity reservation charge is $5.00 per megawatt per month, $6.00 per megawatt per month, and $4.50 per megawatt per month for contract years 1-5, 6-13, and 14-25, respectively. The supplemental (or augmented) capacity reservation charge is $3.25 per megawatt per month, $3.50 per megawatt per month, and $3.00 per megawatt per month for contract years 1-5, 6-13, and 14-25, respectively. The reservation payment may be adjusted downward due to low Unit reliability or availability. However, in the event of an extended forced outage, the Partnership may elect to pay for or provide VEPCO with replacement power and, thereby, avoid a reduction in the reservation payment due to reduced availability. There were no reductions in the reservation payments under the VEPCO PPA in August or September due to low availability. The Partnership has invoiced VEPCO approximately $4,598,000 for reservation payments for the period from the commercial operations date through September 30, 2000. The energy payment is a monthly payment based on the amount of energy delivered to VEPCO and an energy rate. The energy rate is $1.00 per megawatt-hour escalated by 3% per year. The Partnership has invoiced VEPCO approximately $230,000 for energy payments for the period from the commercial operations date through September 30, 2000. The start-up payment is a monthly payment based on the number of starts for a VEPCO Unit in excess of 250 per year and a start-up charge. The start-up charge is equal to $5,000 per Unit per start in excess of 250 per year. As of the end of September there has been a total of 37 and 28 starts for the year for VEPCO's Units 1 and 2, respectively. There were no start-up payments earned during the period from the commercial operations date through September 30, 2000. The system upgrade payment is a monthly payment based on VEPCO's receipt of a credit or discount for transmission service from the Tennessee Valley Authority ("TVA") and Entergy Mississippi, Inc. ("Entergy") due to the Partnership's payment for system upgrades on TVA's or Entergy's transmission systems. The system upgrade payment is due only to the extent that VEPCO receives such transmission service credit or discount. As of the end of September, VEPCO has received no credit or discount from TVA or Entergy for use of the TVA and Entergy transmission system upgrades. TVA and Entergy have been collecting the transmission service fees and have been providing the system upgrade payments directly to the Partnership. The guaranteed heat rate payment is a monthly payment based on the difference between the actual operating efficiency of the VEPCO Units and the operating efficiency that the Partnership has guaranteed. If the actual operating efficiency of the VEPCO Units is higher than the operating efficiency that the Partnership has guaranteed, VEPCO is required to pay the Partnership the fuel cost savings that resulted from such higher efficiency. If the actual operating efficiency of the VEPCO Units is lower than the operating efficiency that the Partnership has guaranteed, the Partnership is required to pay VEPCO the fuel cost expense that resulted from such lower efficiency. As of September 30, 2000, the Partnership has paid approximately $17,700 in guaranteed heat rate payments to VEPCO. (continued) F-8 LSP ENERGY LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) Due to the unavailability of testing data at the time of commercial operation of the VEPCO units, VEPCO and the Partnership agreed to fix the standard and supplemental capacities of the VEPCO Units under the power purchase agreement at 243 megawatts and 40 megawatts respectively. The Partnership committed to retest for the standard capacity and supplemental capacity of the VEPCO units by September 30, 2000 and November 30, 2000,respectively. However due to the combustion turbine manufacturer's 80% load limitation, as described below, the retests will not be conducted until after the removal of such advisory. The results of the standard capacity test will be applied retroactively back to September 30, 2000. In the event that the supplemental capacity test is completed after November 30, 2000, the results of the test will be applied retroactively back to November 30, 2000. The Aquila PPA specifies an energy delivery milestone deadline of June 1, 2000 for the Aquila Unit. On August 8, 2000, the energy delivery milestone of the Aquila Unit was achieved. The Partnership had the option of electing to incur an adjustment to the reservation payment to be received under the Aquila PPA or to be responsible for incremental replacement power during the period of delay. The Partnership elected to incur an adjustment to the reservation payments to be received under the Aquila PPA. The adjustment to the future reservation payments was determined by contract capacity, the duration of delay and a percentage factor for the month in which the delay occurred. The reduction in reservation payments received for the period from the commercial operations date through September 30, 2000 approximated $1,335,000. The delay which caused the aforementioned reduction in reservation payments will have no impact on reservation payments to be earned under the Aquila PPA after September 30, 2000. Under the terms of the Aquila PPA, Aquila provided natural gas for the startup and commissioning of its Unit. The Partnership was obligated to reimburse Aquila for the delivered cost of such natural gas. The Partnership purchased approximately $4,602,000 of natural gas from Aquila for the start-up and commissioning of its Unit. This amount has been recorded as a component of property, plant and equipment in the accompanying September 30, 2000 balance sheet. Under the terms of the Aquila PPA, Aquila acted as the Partnership's agent for the purpose of marketing and selling test energy generated during the start-up and commissioning of the Aquila Unit. In return for Aquila's services, the Partnership was obligated to pay Aquila a marketing fee equal to $0.25 per MW hour of test energy sold plus a reimbursement for any reasonable costs related to the sale of such test energy. For the period May 23, 2000 through the commercial operations date under the Aquila PPA, the Partnership recorded approximately $2,940,000, net of related marketing fees, from the sale of test energy under this arrangement with Aquila. This amount has been recorded as a component of property, plant and equipment in the accompanying September 30, 2000 balance sheet. The terms of the Aquila PPA require Aquila to make payments to the Partnership including a reservation payment, an energy payment, a start-up payment, system upgrade payments and a guaranteed heat rate payment The reservation payment is a monthly payment based on the tested capacity of each Aquila Unit adjusted to specific ambient conditions and the applicable reservation charge. The capacity reservation charge for all capacity up to 267-megawatts is $4.90 per megawatt per month for the first 60 months and $5.00 per megawatt per month thereafter. The capacity reservation charge for all capacity in excess of 267-megawatts is $2.50 per megawatt per month through the term of the Aquila PPA. The reservation payment may be adjusted downward due to low Unit reliability or availability. However, in the event of an extended forced outage the Partnership may elect to pay for or provide Aquila with replacement power and, thereby, avoid a reduction in the reservation payment due to reduced availability. There were no reductions in the reservation payments under the Aquila PPA in August or September due to low availability. The Partnership has invoiced Aquila approximately $997,000 for reservation payments, net of the delay adjustment of approximately $1,335,000, for the period from the commercial operations date through September 30, 2000. The energy payment is a monthly payment based on the amount of energy delivered to Aquila and an energy rate. The energy rate is $1.00 per megawatt-hour times the ratio of the current gross domestic product implicit price deflator to the gross domestic product implicit price deflator from January 1, 1997. The Partnership has invoiced Aquila approximately $136,000 for energy payments for the period from the commercial operations date through September 30, 2000. The start-up payment is a monthly payment based on the number of starts for the Aquila Unit in excess of 200 per year and a start charge. The start charge is equal to $5,000 per Unit per start. As of the end of September there has been a total of 41 starts for the year for Aquila's unit. There were no start-up payments earned during the period from the commercial operations date through September 30, 2000. (continued) F-9 LSP ENERGY LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) The system upgrade payment is a monthly payment based on Aquila's receipt of a credit or discount for transmission service from TVA or Entergy due to the Partnership's payment for system upgrades on TVA's or Entergy's transmission systems. The system upgrade payment is due only to the extent that Aquila receives such transmission service credit or discount. As of the end of September, Aquila has received no credit or discount from TVA or Entergy for use of the TVA and Entergy transmission system upgrades. TVA and Entergy have been collecting the transmission service fees and have been providing the system upgrade payment directly to the Partnership. The guaranteed heat rate payment is a monthly payment based on the difference between the actual operating efficiency of the Aquila Unit and the operating efficiency that the Partnership has guaranteed. If the actual operating efficiency of the Aquila Unit is higher than the operating efficiency that the Partnership has guaranteed, Aquila is required to pay the Partnership the fuel cost savings that resulted from such higher efficiency. If the actual operating efficiency of the Aquila Unit is lower than the operating efficiency that the Partnership has guaranteed, the Partnership is required to pay Aquila the fuel cost expense that resulted from such lower efficiency. As of September 30, 2000, the Partnership has paid approximately $55,000 in guaranteed heat rate payments to Aquila. Due to the unavailability of testing data at the time of commercial operation of the Aquila Unit, Aquila and the Partnership agreed to fix the standard and supplemental capacities of the Aquila Unit under the power purchase agreement at 243 megawatts and 38 megawatts, respectively. The Partnership committed to retest for the standard and supplemental capacity of the Aquila Unit by November 30, 2000. However, due to the combustion turbine manufacturer's 80% load limitation, as described below, the Partnership may not be able to perform the retests on or before November 30, 2000. In the event these tests are completed after November 30, 2000, the results of such tests will be applied retroactively back to November 30, 2000. For the period between February 25, 2000 and May 23, 2000, the Partnership was a party to a power purchase agreement with Tennessee Valley Authority ("TVA") for the sale of test energy generated during startup and commissioning of the Facility ("Test Energy Agreement"). As of September 30, 2000, the Partnership has recorded approximately $2,007,000 from the sale of test energy to TVA. This amount has been recorded as a component of property, plant and equipment in the accompanying September 30, 2000 balance sheet. On July 22, 1998, the Partnership entered into a $240 million fixed price Turnkey Engineering, Procurement and Construction Contract ("Construction Agreement") with BVZ Power Partners-Batesville ("BVZ"), a joint venture formed by H.B. Zachary Company and a subsidiary of Black & Veatch, LLP. The obligations of BVZ are guaranteed by Black & Veatch, LLP and the entire Construction Agreement is backed by a performance bond. Under the terms of the Construction Agreement, BVZ has committed to develop and construct the Facility subject to the terms, deadlines and conditions set forth in the Construction Agreement. BVZ completed the construction and start-up of the Aquila Unit and the VEPCO Units on August 8, 2000. BVZ and the suppliers of the combustion turbines, steam turbines and heat recovery steam generators are currently engaged in a dispute regarding payment of delay liquidated damages to BVZ. BVZ claims that such suppliers owe BVZ approximately $4,700,000 in delay liquidated damages. BVZ intends to set off or withhold such amount owed by these suppliers from payments to such suppliers. The equipment supplied to the Facility by each of these equipment suppliers constitute direct purchases by the Partnership. Although the Partnership has contracted directly with these suppliers for such equipment, BVZ is responsible for the obligations and liabilities of such suppliers pursuant to the terms of the Construction Agreement. Final resolution of this dispute has not occurred. As of September 30, 2000, engineering, procurement and construction was estimated to be approximately 99% complete and total costs incurred to date under the Construction Agreement were approximately $240,732,000, including retainage. As of September 30, 2000, the Partnership had retained construction contract payments under the Construction Agreement totaling approximately $12,062,000, which amounts are payable upon completion of the facility. (continued) F-10 LSP ENERGY LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) The Partnership received a technical advisory from the combustion turbine manufacturer on September 18, 2000, which warned of the potential for hot gas leakage from flanged connections within the turbine enclosure and limits all three combustion turbines to 80% load. In response to this technical advisory, the combustion turbine manufacturer has issued a product modification that will upgrade the flange connections and will install additional equipment monitors. Work on the product modifications is expected to begin before the end of November 2000 with all work complete and the 80% load restriction is expected to be removed by December 31, 2000. Based upon the projected dispatch of the VEPCO and Aquila units, the adjustment factors associated with unavailability during off peak months and the availability margins provided for within the power purchase agreements, the Partnership does not expect that the operational restrictions imposed by this technical advisory will result in a reduction in the reservation payment due to availability adjustments under the VEPCO PPA or Aquila PPA. However, because of the 80% load restriction the units are not able to operate as efficiently as they otherwise would, the Partnership is responsible for this mismatch in efficiency as guaranteed heat rate payments to VEPCO and Aquila. Based upon the projected dispatch of the VEPCO and Aquila units, the Partnership estimates its additional obligation with respect to the guaranteed heat rate payments will be between $15,000 to $20,000 per month for the months of October, November and December. The completion of the cooling tower performance test and declaration of substantial completion of the Facility have been delayed pending completion of modifications by the cooling tower manufacturer that will improve cooling tower performance. Final acceptance tests cannot be completed and final completion of the Facility cannot be declared until after implementation of the combustion turbine product modifications and removal of the 80% load restriction imposed by the combustion turbine manufacturer. During an inspection of the second VEPCO Unit's combustion turbine on May 9, 2000, damage to the compressor blades was discovered. The combustion turbine manufacturer was notified and additional technical support was dispatched to the Facility to determine the cause and extent of the damage and assist in repairs. During the subsequent investigation and inspection to determine the cause of the damage, impact and/or rubbing damage were identified in each of the 16 stages of the second VEPCO Unit's compressor. All compressor and combustion turbine repairs were completed and the Unit resumed testing on June 12, 2000. The estimated cost of the repairs is approximately $1,550,000. The Partnership expects this cost to be substantially covered through insurance. The Partnership's property insurance has a deductible of $250,000. The Partnership contends that the deductible is the responsibility of the combustion turbine manufacturer. The Partnership is entitled to receive system upgrade credits in the amount of incremental revenue received by the TVA and Entergy for transmission services procured for the delivery of energy from the Facility. As of September 30, 2000, the Partnership earned system upgrade credits of approximately $1,605,000 and $1,508,000 from TVA and Entergy, respectively. Approximately $1,549,000 of these credits have been capitalized as a component of property, plant and equipment in the accompanying September 2000 financial statements. 4. FINANCING On May 21, 1999, the Partnership and Funding issued two series of Senior Secured Bonds (the "Bonds") in the following total principal amounts: $150,000,000 7.164% Series A Senior Secured Bonds due 2014 and $176,000,000 8.160% Series B Senior Secured Bonds due 2025. Effective March 7, 2000, the Partnership and Funding filed a registration statement with the Securities and Exchange Commission (the "SEC") for a registered offer to exchange the Bonds for two series of debt securities (the "Exchange Bonds") which are in all material respects substantially identical to the Bonds. Interest is payable semiannually on each January 15 and July 15, commencing January 15, 2000, to the holders of record on the immediately preceding January 1 and July 1. On July 15, 2000, the Partnership made interest payments aggregating approximately $12,649,000. Principal payments are payable on each January 15 and July 15, commencing on July 15, 2001. The Exchange Bonds are secured by substantially all of the personal property and contract rights of the Partnership and Funding. In addition, Holding and Energy have pledged all of their interests in the Partnership, and Holding has pledged all of the common stock of Energy and all of the common stock of Funding. (continued) F-11 LSP ENERGY LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) The Exchange Bonds are senior secured obligations of the Partnership and Funding, rank equivalent in right of payment to all other senior secured obligations of the Partnership and Funding and rank senior in right of payment to all existing and future subordinated debt of the Partnership and Funding. The Letter of Credit and Reimbursement Agreement (the "LOC Agreement"), entered into by the Partnership with a bank provides for letter of credit commitments aggregating $16,980,000. The LOC Agreement provides for the bank to issue three separate letters of credit ("Letter of Credit A", "Letter of Credit B" and "Letter of Credit C"). The Bank had issued Letter of Credit A and Letter of Credit B each in the amount of $5,660,000 as security for the Partnership's incremental replacement power obligation under the VEPCO PPA until the commercial operations date. On July 21, 2000, VEPCO issued a draw of approximately $4,650,000 on each of Letter of Credit A and Letter of Credit B (see Note 3). The draws on Letter of Credit A and Letter of Credit B each converted into 5-year loans ("LOC Loans"). Principal amounts under each LOC Loan are repayable in 20 equal quarterly installments of approximately $232,487 on each March 31, June 30, September 30, and December 31 commencing on the first such date subsequent to the commercial operations date of the VEPCO Units. On September 30, 2000, the Partnership made principal payments under the LOC Loans aggregating approximately $464,974. As of September 30, 2000, interest on each outstanding LOC Loan was 8.26%. Letter of Credit C was issued in the amount of $5,660,000 on the commercial operations date of the VEPCO Units as security for the Partnership's obligations under the VEPCO PPA. 5. RELATED PARTY TRANSACTIONS LS Power Management, LLC ("LSP Management"), a wholly owned subsidiary of LS Power, LLC provides certain management services to the Partnership pursuant to a management services agreement. Under this management services agreement, LSP Management manages the business affairs of the Partnership during construction and operation of the Facility. LSP Management is reimbursed for its reasonable and necessary expenses incurred in performing its services, including salaries of its personnel, other than executive officers, to the extent related to services provided under the management services agreement. LSP Management also receives a monthly management fee of approximately $33,300 during the construction and operation of the Facility. This management fee will be adjusted annually based on published indices. Management fee payments began during the third quarter of 1999. For the three and nine months ended September 30, 2000, LSP Management billed the Partnership approximately $290,000 and $838,000, respectively, under the management services agreement. For the three and nine months ended September 30, 1999 LSP Management billed the Partnership approximately $237,000 and $809,000, respectively, under the management services agreement. The Facility is operated and maintained under a long-term operations and maintenance agreement with Cogentrix Batesville Operations, LLC (the "Operator"). The initial term of the operations and maintenance agreement is twenty-seven years. The Partnership has the option of extending the term of the agreement for successive two-year terms with one hundred and eighty days notice. Under the terms of the agreement the Partnership paid the Operator a fixed fee of $390,000, in ten monthly installments, for services provided during construction of the Facility. During operation of the Facility the Partnership will pay the Operator a fixed monthly fee of approximately $42,000. The Partnership is also required to reimburse the Operator for all labor costs, including payroll and taxes, subcontractor costs and other costs deemed reimbursable by the Partnership. The management fee will be adjusted annually based on published indices. For the three and nine months ended September 30, 2000, Cogentrix billed the Partnership approximately $680,000 and $2,080,000, respectively, under the operations and maintenance agreement. For the three and nine months ended September 30, 1999 Cogentrix billed the Partnership approximately $386,000, under the operations and maintenance agreement. (continued) F-12 LSP ENERGY LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 6. DEPENDENCE ON THIRD PARTIES The Partnership is highly dependent on BVZ for the construction of the Facility and the Operator for the operation and maintenance of the Facility. During the terms of the VEPCO PPA and Aquila PPA, the Partnership will be highly dependent on two utilities for the purchase of electric generating capacity and dispatchable energy from their respective Units at the Facility. Any material breach by any one of these parties of their respective obligations to the Partnership could affect the ability of the Partnership to make payments under the various financing agreements. In addition, bankruptcy or insolvency of other parties or default by such parties relative to their contractual or regulatory obligations could adversely affect the ability of the Partnership to make payments under the various financing agreements. If an agreement were to be terminated due to a breach of such agreement, the Partnership's ability to enter into a substitute agreement having substantially equivalent terms and conditions, or with an equally creditworthy third party, is uncertain and there can be no assurance that the Partnership will be able to make payments under the various financing agreements. F-13 LSP BATESVILLE FUNDING CORPORATION BALANCE SHEETS (UNAUDITED) SEPTEMBER 30, 2000 AND DECEMBER 31, 1999 ASSETS
2000 1999 ---- ---- Current asset-Cash $1,000 $1,000 ====== ====== LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT) Due to LS Power Management, LLC $1,321 $ --- Due to LSP Energy Limited Partnership 8,510 5,960 ------ ------- Total Current Liabilities 9,831 5,960 ------ ------- Commitments and contingencies Common stock, $.01 par value, 1,000 shares authorized, 100 shares Issued and outstanding 1 1 Additional paid-in-capital 999 999 Accumulated deficit (9,831) (5,960) ------ ------- Total Stockholder's Equity (Deficit) (8,831) (4,960) ------ ------- Total Liability and Stockholder's Equity (Deficit) $1,000 $1,000 ====== ======
See accompanying notes to financial statements. F-14 LSP BATESVILLE FUNDING CORPORATION STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2000 1999 2000 1999 ---- ---- ---- ---- Revenues $ --- $ --- $ --- $ --- General and administrative expenses 421 --- 3,871 --- ------ ------ ------- ---------- Total expenses 421 --- 3,871 --- ------ ------ ------- ---------- Net income (loss) $ (421) $ --- $(3,871) $ --- ====== ====== ======= ==========
See accompanying notes to financial statements. F-15 LSP BATESVILLE FUNDING CORPORATION STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
COMMON ADDITIONAL ACCUMULATED STOCK PAID-IN-CAPITAL DEFICIT TOTAL ----- --------------- ------- ----- Balance at December 31, 1999 $ 1 $999 $(5,960) $(4,960) Net loss --- --- (3,450) (3,450) ----- ---- ------- ------- Balance at June 30, 2000 $ 1 $999 $(9,410) $(8,410) Net loss --- --- (421) (421) ----- ---- ------- ------- Balance at September 30, 2000 $ 1 $999 $(9,831) $(8,831) ===== ==== ======= ======= Balance at December 31, 1998 $ 1 $999 $ --- $ 1,000 Net loss --- --- --- --- ----- ---- ------- ------- Balance at June 30, 1999 $ 1 $999 $ --- $ 1,000 Net loss --- --- --- --- ----- ---- ------- ------- Balance at September 30, 1999 $ 1 $999 $ --- $ 1,000 ===== ==== ======= =======
See accompanying notes to financial statements. F-16 LSP BATESVILLE FUNDING CORPORATION STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, 2000 1999 2000 1999 ---- ---- ---- ---- Cash Flows from Operating Activities Net loss $(421) $ --- $(3,871) $ --- Adjustments to reconcile net loss to cash provided by operating activities: Increase in due to LS Power Management, LLC 421 --- 1,321 --- Increase in due to LSP Energy Limited Partnership --- --- 2,550 --- ------ ------ ------- ------ Cash provided by (used in) operating activities --- --- --- --- ------ ------ ------- ------ Cash Flows from Investing Activities --- --- --- --- ------ ------ ------- ------ Cash Flows from Financing Activities --- --- --- --- ------ ------ ------- ------ Increase in cash --- --- --- --- Cash, beginning of period 1,000 1,000 1,000 1,000 ------ ------ ------- ------ Cash, end of period $1,000 $1,000 $ 1,000 $1,000 ====== ====== ======= ======
See accompanying notes to financial statements. F-17 LSP BATESVILLE FUNDING CORPORATION NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION LSP Batesville Funding Corporation ("Funding") was established on August 3, 1998. Funding's business purpose is limited to maintaining its organization and activities necessary to facilitate the acquisition of financing by LSP Energy Limited Partnership ("the Partnership") from the institutional debt market and to offering debt securities. Funding is wholly owned by LSP Batesville Holding, LLC ("Holding"), a Delaware limited liability company. Holding was established on July 29, 1998 for the purpose of owning and managing the limited partnership interests of the Partnership, the common stock of LSP Energy, Inc., the general partner of the Partnership, and the common stock of Funding. The Partnership is a Delaware limited partnership formed in February 1996 to develop, finance, construct, own and operate a gas-fired electric generating facility with a design capacity of approximately 837 megawatts located in Batesville, Mississippi (the "Facility"). The Facility commenced commercial operations under the Power Purchase Agreement ("Aquila PPA") with Aquila Energy Marketing Corporation ("Aquila") and Utilicorp United, Inc. ("Utilicorp") on August 8, 2000 and under the Power Purchase Agreement ("VEPCO PPA") with Virginia Electric and Power Company ("VEPCO") on August 9, 2000. Prior to the achieving commercial operations under the Aquila PPA and the VEPCO PPA, the Partnership had been in the development stage since its inception and had not generated any operating revenues. Due to the insignificance of income tax effects applicable to Funding, the accompanying financial statements do not reflect any income tax effects. The financial statements, included herein, have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the information contained herein reflects all adjustments, including normal recurring accruals, necessary to present fairly the financial condition, results of operations and cash flows for the periods disclosed. Operating results for the three and nine months ended September 30, 2000 are not necessarily indicative of the results anticipated for the year ending December 31, 2000. These financial statements should be read in conjunction with the audited financial statements, and footnotes thereto, included in the Form S-4 for the year ending December 31, 1999. 2. FINANCING On May 21, 1999, the Partnership and Funding issued two series of Senior Secured Bonds (the "Bonds") in the following total principal amounts: $150,000,000 7.164% Series A Senior Secured Bonds due 2014 and $176,000,000 8.160% Series B Senior Secured Bonds due 2025. Effective March 7, 2000, the Partnership and Funding filed a registration statement with the Securities and Exchange Commission (the "SEC") for a registered offer to exchange the Bonds for two series of debt securities (the "Exchange Bonds") which are in all material respects substantially identical to the Bonds. Interest is payable semiannually on each January 15 and July 15, commencing January 15, 2000, to the holders of record on the immediately preceding January 1 and July 1. On July15, 2000, the Partnership made interest payments aggregating approximately $12,649,000. Principal payments are payable on each January 15 and July 15, commencing on July 15, 2001. The Exchange Bonds are secured by substantially all of the personal property and contract rights of the Partnership and Funding. In addition, Holding and Energy have pledged all of their interests in the Partnership, and Holding has pledged all of the common stock of Energy and all of the common stock of Funding. The Exchange Bonds are senior secured obligations of the Partnership and Funding, rank equivalent in right of payment to all other senior secured obligations of the Partnership and Funding and rank senior in right of payment to all existing and future subordinated debt of the Partnership and Funding. F-18 LSP ENERGY LIMITED PARTNERSHIP LSP BATESVILLE FUNDING CORPORATION EXHIBIT INDEX EXHIBIT NO. DESCRIPTION OF EXHIBIT - ----------- ---------------------------------------------------------------- **3.1 Amended and Restated Certificate of Incorporation of LSP Batesville Funding Corporation. **3.2 Amended and Restated Limited Partnership Agreement of LSP Energy Limited Partnership. **3.3 By-Laws of LSP Batesville Funding Corporation. **4.1 Indenture, dated as of May 21, 1999, among LSP Batesville Funding Corporation, LSP Energy Limited Partnership and The Bank of New York, as Trustee. **4.2 First Supplemental Indenture, dated May 21, 1999 among LSP Batesville Funding Corporation, LSP Energy Limited Partnership and The Bank of New York, as Trustee, relating to $150,000,000 aggregate principal amount of 7.164% Series A Senior Secured Bonds due 2014. **4.3 Second Supplemental Indenture, dated May 21, 1999 among LSP Batesville Funding Corporation, LSP Energy Limited Partnership and The Bank of New York, as Trustee, relating to $176,000,000 aggregate principal amount of 8.160% Series B Senior Secured Bonds due 2025. **4.4 Form of Third Supplemental Indenture among LSP Batesville Funding Corporation, LSP Energy Limited Partnership and The Bank of New York, as Trustee, relating to $150,000,000 aggregate principal amount of 7.164% Series C Senior Secured Bonds due 2014. **4.5 Form of Fourth Supplemental Indenture among LSP Batesville Funding Corporation, LSP Energy Limited Partnership and The Bank of New York, as Trustee, relating to $176,000,000 aggregate principal amount of 8.160% Series D Senior Secured Bonds due 2025. **4.6 Specimen Certificate of 7.164% Series A Senior Secured Bonds due 2014. **4.7 Specimen Certificate of 8.160% Series B Senior Secured Bonds due 2025. **4.8 Form of Specimen Certificate of 7.164% Series C Senior Secured Bonds due 2014. **4.9 Form of Specimen Certificate of 8.160% Series D Senior Secured Bonds due 2025. **4.10 Registration Rights Agreement, dated as of May 21, 1999, among LSP Batesville Funding Corporation, LSP Energy Limited Partnership, Credit Suisse First Boston Corporation, Scotia Capital Markets (USA) Inc. and TD Securities (USA) Inc. **4.11 Second Amended and Restated Common Agreement, dated as of May 21, 1999, among LSP Batesville Funding Corporation, LSP Energy Limited Partnership and The Bank of New York, as Collateral Agent, Administrative Agent and Intercreditor Agent. **4.12 Intercreditor Agreement, dated as of May 21, 1999, among LSP Batesville Funding Corporation, LSP Energy Limited Partnership, Credit Suisse First Boston, as VEPCO L/C Agent, and The Bank of New York, as Collateral Agent, Trustee, Administrative Agent and Intercreditor Agent. **4.13 Second Amended and Restated Equity Contribution Agreement, dated as of May 21, 1999, among LSP Batesville Holding, LLC, LSP Energy Limited Partnership and The Bank of New York, as Collateral Agent. EI-1 EXHIBIT NO. DESCRIPTION OF EXHIBIT - ----------- --------------------------------------------------------------- **4.14 Second Amended and Restated Collateral Agency Agreement, dated as of May 21, 1999, among LSP Batesville Funding Corporation, LSP Energy Limited Partnership, the Senior Secured Parties party thereto from time to time, The Bank of New York, as Administrative Agent, Collateral Agent and Intercreditor Agent and Credit Suisse First Boston, as Additional Collateral Agent. **4.15 Pledge and Security Agreement, dated as of May 21, 1999 (Funding Corporation's Stock), between LSP Batesville Holding, LLC and The Bank of New York, as Collateral Agent. **4.16 Second Amendment and Restated Pledge and Security Agreement (LSP Energy, Inc.'s Stock), dated as of May 21, 1999, between LSP Batesville Holding, LLC and The Bank of New York, as Collateral Agent. **4.17 Second Amended and Restated Pledge and Security Agreement (Limited Partnership Interest in the Partnership), dated as of May 21, 1999, between LSP Batesville Holding, LLC and The Bank of New York, as Collateral Agent. **4.18 Second Amended and Restated Pledge and Security Agreement (General Partnership Interest in the Partnership), dated as of May 21, 1999, between LSP Energy, Inc. and The Bank of New York, as Collateral Agent. **4.19 Second Amended and Restated Security Agreement, dated as of May 21, 1999, between LSP Energy Limited Partnership and The Bank of New York, as Collateral Agent. **4.20 Security Agreement, dated as of May 21, 1999, between LSP Batesville Funding Corporation and The Bank of New York, as Collateral Agent. **4.21 Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing, dated as of May 21, 1999, by LSP Energy Limited Partnership, as trustor, to James W. O'Mara, as trustee, for the benefit of The Bank of New York, as Collateral Agent. **4.22 Second Amended and Restated Securities Account Control Agreement, dated as of May 21, 1999, among LSP Batesville Funding Corporation, LSP Energy Limited Partnership and The Bank of New York, as Collateral Agent and Securities Intermediary. **5.1 Opinion of Latham & Watkins regarding the validity of the exchange bonds. **10.1 Purchase Agreement, dated May 13, 1999, among LSP Energy Limited Partnership, LSP Batesville Funding Corporation, Credit Suisse First Boston Corporation, Scotia Capital Markets (USA) Inc. and TD Securities (USA) Inc. **10.2 Power Purchase Agreement and amendments thereto, dated May 18, 1998, July 22, 1998 and August 11, 1998, among LSP Energy Limited Partnership and Virginia Electric and Power Company. **10.3 Power Purchase Agreement and amendments thereto, dated May 21, 1998, July 14, 1998, July 16, 1998 and August 27, 1998, among LSP Energy Limited Partnership, Aquila Energy Marketing Corporation and Utilicorp United Inc. **10.4 Interconnection Agreement, dated July 22, 1998, between LSP Energy Limited Partnership and the Tennessee Valley Authority. **10.5 Interconnection and Operating Agreement and amendments thereto, dated May 18, 1998 and August 18, 1998, between LSP Energy Limited Partnership and Entergy Mississippi, Inc. EI-2 EXHIBIT NO. DESCRIPTION OF EXHIBIT - ----------- -------------------------------------------------------------- **10.6 Interconnection Agreement, dated July 28, 1998, between LSP Energy Limited Partnership and ANR Pipeline Company. **10.7 Facilities Agreement, dated June 23, 1998, between Tennessee Gas Pipeline Company and LSP Energy Limited Partnership. **10.8 Turnkey Engineering, Procurement and Construction Agreement and amendments thereto, dated July 22, 1998, October 22, 1998, November 2, 1998, November 5, 1998, December 10, 1998, February 1, 1999 and April 12, 1999, between LSP Energy Limited Partnership and BVZ Power Partners - Batesville. **10.9 Engineering Services Agreement, dated July 24, 1998, between LSP Limited Partnership and Black & Veatch, LLP. **10.10 Guaranty Agreement, dated July 22, 1998, by Black & Veatch, LLP in favor of LSP Energy Limited Partnership. **10.11 Management Services Agreement, dated August 24, 1998, between LSP Energy Limited Partnership and LS Power Management, LLC. **10.12 Operation and Maintenance Agreement, dated August 24, 1998, between LSP Energy Limited Partnership and Cogentrix Batesville Operations, LLC. **10.13 Water Supply Storage Agreement and amendments thereto, dated June 8, 1998 and March 15, 1999, between LSP Energy Limited Partnership and the United Sates of America. **10.14 Letter Agreement/Blanket Purchase Order, dated July 23, 1998, between LSP Energy Limited Partnership and Siemens Westinghouse Power Corporation. **10.15 Ad Valorem Tax Contract, dated August 24, 1998, among LSP Energy Limited Partnership, Panola County, Mississippi, the City of Batesville, Mississippi, the Department of Economic and Community Development and the Panola County Tax Assessor/Collector. **10.16 Letter of Credit Agreement, dated August 28, 1998, among LSP Energy Limited Partnership, Credit Suisse First Boston, as the VEPCO L/C Agent and the VEPCO L/C Issuer, and the VEPCO L/C Banks. **10.17 Infrastructure Use Agreement (Gasline Use), dated August 12, 1999, among LSP Energy Limited Partnership, the Industrial Development Authority of the Second Judicial District of Panola County, Mississippi, the Mississippi Major Economic Impact Authority, Panola County, Mississippi and the City of Batesville, Mississippi. **10.18 Inducement Agreement, dated August 12, 1999, among LSP Energy Limited Partnership, the Industrial Development Authority of the Second Judicial District of Panola County, Mississippi, the Mississippi Department of Economic and Community Development, the Mississippi Major Economic Impact Authority, Panola County, Mississippi and the City of Batesville, Mississippi. **10.19 Panola Partnership, dated August 12, 1999, among LSP Energy Limited Partnership and Panola Partnership, Inc. **10.20 Infrastructure Use Agreement (Water Use), dated August 12, 1999, among LSP Energy Limited Partnership, the Industrial Development Authority of the Second Judicial District of Panola County, Mississippi, the Mississippi Major Economic Impact Authority, Panola County, Mississippi EI-3 EXHIBIT NO. DESCRIPTION OF EXHIBIT - ----------- -------------------------------------------------------------- **10.21 Yalobusha County Agreement, dated February 16, 1999, among LSP Energy Limited Partnership, Yalobusha County, Mississippi and the Coffeeville School District. **10.22 Performance Bond and Payment Bond, dated August 13, 1998, of United States Fidelity and Guaranty Company, as surety. ***10.23 Power Purchase Agreement between Tennessee Valley Authority and LSP Energy Limited Partnership dated February 25, 2000. ***10.24 Facilities Interconnect, Construction, Ownership and Operation Agreement between Trunkline Gas Company and LSP Energy Limited Partnership for M&R Panola County, Mississippi dated January 28, 2000. ***10.25 First Amendment to Power Purchase Agreement, dated as of August 4, 2000, between LSP Energy Limited Partnership, Aquila Energy Marketing Corporation and UtiliCorp United Inc. ***10.26 Third Amendment to Power Purchase Agreement, dated August 9, 2000, between LSP Energy Limited Partnership and Virginia Electric and Power Company. 10.27 Escrow Agreement among Virginia Electric and Power Company, LSP Energy Limited Partnership and The Chase Manhattan Bank dated as of August 17, 2000. **25.1 Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of 1939 of The Bank of New York. 27.1 Financial Data Schedule (LSP Energy Limited Partnership). 27.2 Financial Data Schedule (LSP Batesville Funding Corporation). - ------------------------------------------------------------------------------- ** Incorporated herein by reference from the Registration Statement on Form S-4, File No.'s 333-84609 and 333-84609-01 filed with the Securities and Exchange Commission by LSP Energy Limited Partnership and LSP Batesville Funding Corporation on March 6, 2000. *** Incorporated herein by reference from the Quarterly Reports on Form 10-Q, File No.'s 333-84609 and 333-84609-01 filed with the Securities and Exchange Commission by LSP Energy Limited Partnership and LSP Batesville Funding Corporation on May 15, 2000 and August 14, 2000. EI-4 EX-10.27 2 a2030585zex-10_27.txt EXHIBIT 10.27 Exhibit 10.27 ================================================================================ ESCROW AGREEMENT among VIRGINIA ELECTRIC AND POWER COMPANY, ("Virginia Power") LSP ENERGY LIMITED PARTNERSHIP, ("Partnership") AND THE CHASE MANHATTAN BANK, ("Escrow Agent") DATED AS OF AUGUST 17, 2000 ================================================================================ TABLE OF CONTENTS Page ---- ARTICLE I. ESCROW ACCOUNT......................................................2 Section 1.1 Initial Deposit of Escrow Amount.............................2 Section 1.2 Investment of Escrow Amount..................................2 Section 1.3 Release of Escrow Amount.....................................3 Section 1.4 Payment of Amounts in Reimbursement of Improper Draws........3 Section 1.5 Interest on LOC Loans........................................3 ARTICLE II. ESCROW AGENT.......................................................4 Section 2.1 Duties.......................................................4 Section 2.2 Duties Uncertain.............................................4 Section 2.3 Liability....................................................5 Section 2.4 Legal Counsel................................................5 Section 2.5 Dispute......................................................5 Section 2.6 Indemnification..............................................5 Section 2.7 Survival.....................................................6 Section 2.8 Resignation..................................................6 Section 2.9 Expenses.....................................................6 ARTICLE III. MISCELLANEOUS.....................................................6 Section 3.1 Notices......................................................6 Section 3.2 Termination..................................................8 Section 3.3 Governing Law................................................8 Section 3.4 Consent to Jurisdiction......................................8 Section 3.5 Waiver of Jury Trial.........................................8 Section 3.6 Reliance.....................................................9 Section 3.7 Entire Agreement; Waivers....................................9 Section 3.8 Amendment or Modification, etc...............................9 Section 3.9 Headings, etc................................................9 Section 3.10 Severability.................................................9 Section 3.11 Counterparts................................................10 Section 3.12 Successors and Assigns......................................10 ESCROW AGREEMENT THIS ESCROW AGREEMENT (the "Agreement") is made and entered into as of August 17, 2000, by and among Virginia Electric and Power Company ("Virginia Power"), a Virginia public service corporation, LSP Energy Limited Partnership, a Delaware limited partnership (the "Partnership"), and Chase Manhattan Bank, a New York State chartered bank, in its capacity as escrow agent (the "Escrow Agent"). RECITALS A. Virginia Power and the Partnership have entered into that certain Power Purchase Agreement dated May 18, 1998 (as the same has been amended, modified and supplemented from time to time, the "Power Purchase Agreement"). B. As required by the Power Purchase Agreement, the Partnership caused Credit Suisse First Boston (in such capacity, the "LOC Issuer") to issue two letters of credit (collectively, the "Letters of Credit") to and for the benefit of Virginia Power in an aggregate stated amount of $11,320,000. The Letters of Credit bear Reference Numbers 75-07001497 and 75-06001015 and, in general, were intended to secure, among other things, the Partnership's obligation to reimburse Virginia Power for Incremental Replacement Power Costs (as defined in the Power Purchase Agreement) in the event of the Partnership's failure to achieve the Commercial Operation Date (as defined in the Power Purchase Agreement) by a specified date (which date was to be subject to adjustment under certain circumstances). C. On July 21, 2000, Virginia Power, believing itself to be entitled to do so under the Power Purchase Agreement, drew $4,649,743.47 under each Letter of Credit for an aggregate amount of $9,299,486.94. The Partnership's reimbursement obligation with respect to such Letters of Credit converted into a five year amortizing loan ("LOC Loans") provided by the LOC Issuer. D. The Partnership believes that the method and amount of such drawings on the Letters of Credit violated the terms and conditions of the Power Purchase Agreement. Virginia Power believes that the method and amount of such drawings on the Letter of Credit complied with the terms and conditions of the Power Purchase Agreement. E. In order to resolve their dispute concerning the method and amount of such drawings pending resolution of such dispute, Virginia Power and the Partnership have agreed to enter into this Escrow Agreement whereunder, among other things, Virginia Power will deliver to the Escrow Agent cash in the amount of $9,299,486.94 (as the same may be increased or decreased from time to time due to investment earnings or losses as provided herein, the "Escrow Amount") to be maintained and disbursed by the Escrow Agent as further provided herein. AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained and for other good valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: ARTICLE I. ESCROW ACCOUNT Section 1.1 Initial Deposit of Escrow Amount. On the date hereof, concurrently with the execution and delivery of this Agreement, Virginia Power shall deliver, in cash, to the Escrow Agent, an amount equal to the Escrow Amount, for deposit by the Escrow Agent in an account (the "Escrow Account") to be maintained by and in the name of the Escrow Agent, having Account No. 910-2-758829, ABA Routing No. 021000021 and being referred to as the "Virginia Power and LSP Energy Escrow Account". The Escrow Agent shall maintain the Escrow Account, and all amounts on deposit therein or credited thereto, only as provided herein and shall have no other rights or obligations with respect to the Escrow Account. Section 1.2 Investment of Escrow Amount. (a) During the term of this Agreement, the Escrow Agent shall invest the Escrow Amount, at the direction of the Partnership, in (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (ii) time deposits and certificates of deposit of any domestic commercial bank of recognized standing having capital and surplus in excess of $100,000,000; (iii) commercial paper issued by the parent corporation of any domestic commercial bank of recognized standing having capital and surplus in excess of $100,000,000 and commercial paper of any domestic corporation rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's; (iv) Chase Trust Deposit Account, which account the Escrow Amount is to be invested unless otherwise instructed in writing by the Partnership, and (iv) money market funds having a rating in the highest investment category granted thereby by a rating agency at the time of acquisition, including any fund for which the Escrow Agent or an affiliate of the Escrow Agent serves as an investment advisor, administrator, shareholder, servicing agent, custodian or subcustodian, notwithstanding that (a) Escrow Agent or an affiliate of the Escrow Agent charges and collects fees and expenses from such funds for services rendered (provided that such charges, fees and expenses are on terms consistent with terms negotiated at arm's length) and (b) the Escrow Agent charges and collects fees and expenses for services rendered pursuant to this Escrow Agreement, unless otherwise jointly instructed in writing by the Partnership and Virginia Power. Each of the securities described in clauses (i), (ii) and (iii) above shall have maturities not to exceed thirty (30) days. (b) Interest and other earnings derived from the investments made in accordance with Section 1.2.(a) hereof shall be added to the Escrow Amount and shall become a part thereof subject to the terms hereof. The allocation of any such interest and earnings to the Partnership and/or Virginia Power pursuant to a Judgement or the Instructions, as applicable, shall be in lieu of any default interest owed to the other party as a result of the dispute described herein, whether at law or pursuant to the Power Purchase Agreement, for the period from the date of the draw on the Letters of Credit and until the date of the termination of the Agreement. 2 (c) At least on a monthly basis, the Escrow Agent shall provide the Partnership and Virginia Power with a statement regarding the following: (i) the Escrow Amount at such time, and (ii) all interest accrued and any other earnings added to the Escrow Amount since the previous statement issued pursuant to this Section 1.2(c). In addition, the Escrow Agent shall provide to the Partnership and Virginia Power with any other customary information as they may reasonably request. Section 1.3 Release of Escrow Amount. The Escrow Agent shall hold the Escrow Amount in escrow pursuant to this Agreement until such time as any one of the following shall have occurred: (a) the Escrow Agent shall have received a copy of a judgement issued by a court of competent jurisdiction (the "Judgment") stating (i) to whom the Escrow Amount is to be delivered in whole or in part, (ii) the manner and all pertinent instructions pursuant to which the Escrow Amount is to be delivered and (iii) when the Escrow Amount is to be delivered. Upon receipt of such Judgment, the Escrow Agent shall deliver the Escrow Amount as directed in the Judgment; or (b) the Escrow Agent shall have received written instructions executed by both the Partnership and Virginia Power (the "Instructions") stating (i) to whom the Escrow Amount is to be delivered in whole or in part, (ii) the manner and all pertinent instructions pursuant to which the Escrow Amount is to be delivered and (iii) when the Escrow Amount is to be delivered. Upon receipt of a writing that the Escrow Agent reasonably believes to constitute such Instructions, the Escrow Agent shall deliver the Escrow Amount as directed by the Instructions. Section 1.4 Payment of Amounts in Reimbursement of Improper Draws. Notwithstanding anything herein to the contrary, in the event any Judgment or Instruction directs that all or part of the Escrow Amount is to be disbursed to or for the benefit of the Partnership, the Escrow Agent shall disburse such amount directly to the LOC Issuer in reimbursement of amounts drawn on the Letters of Credit, unless either (i) to disburse the funds as such would violate the terms of any such Judgment in the reasonable judgment of the Escrow Agent or (ii) the Escrow Agent shall have received written notice from the Partnership certifying that no amounts remain unreimbursed by the Partnership to the LOC Issuer in respect of the Letters of Credit. Section 1.5 Interest on LOC Loans. (a) Subject to Section 1.5(b) below, on or before the fifth (5th) day of each Month beginning in September 2000 and until termination of this Agreement in accordance with its terms, the Partnership shall submit an invoice to Virginia Power which sets forth one-half of the Partnership's interest obligation with respect to the LOC Loans for such Month (the 3 "Monthly Interest Amount"). On or before the twentieth (20th) Day of such Month, Virginia Power shall remit to the Partnership's Revenue Account # 220776 the Monthly Interest Amount. (b) On or before August 31, 2000, Virginia Power shall remit to the Partnership's Revenue Account # 220776 $88,059.28, which amount represents the Partnership's interest obligation with respect to the LOC Loans from the date of the Virginia Power draw until and including August 31, 2000. (c) Upon the termination of this Agreement, Virginia Power and the Partnership shall allocate between themselves responsibility for the Partnership's interest obligation with respect to the LOC Loans for the period September 2000 through termination of this Agreement (the "LOC Interest Period") in the same proportion as the Escrow Amount is distributed to the parties pursuant to Section 1.3 of this Agreement (the "LOC Interest Allocation"). Virginia Power and the Partnership shall then reconcile the LOC Interest Allocation with the interest payments actually made by the parties on account of the LOC Loans during the LOC Interest Period and determine the amount, if any, owed by one party to the other in order to make the interest actually paid by each of Virginia Power and the Partnership equivalent to the amount owed by such party under the LOC Interest Allocation. The amount so owed shall then be paid by the party owing said amount to the other party. The LOC Interest Allocation, the reconciliation and payment described in this subsection shall be completed as soon as practicable following the termination of this Agreement and in all events no later than thirty (30) calendar days following the termination of this Agreement. All payments owed to the Partnership pursuant to this subsection shall be made to the Partnership's Revenue Account # 220776. (d) The Escrow Agent shall have no duties, responsibilities or obligations of any nature whatsoever with respect to the provisions of this Section 1.5. ARTICLE II. ESCROW AGENT Section 2.1 Duties. The Escrow Agent shall have no duties or responsibilities, including, without limitation, a duty to review or interpret the Power Purchase Agreement, except those expressly set forth herein. Except for this Agreement, the Escrow Agent, in its capacity as such, is not a party to, or bound by, any agreements that may be required under, evidenced by, or arise out of the Power Purchase Agreement. Section 2.2 Duties Uncertain. If the Escrow Agent shall be uncertain as to its duties or rights hereunder or shall receive instructions from any of the undersigned with respect to the Escrow Amount, which, in its opinion, are in conflict with any of the provisions of this Agreement, it shall be entitled to refrain from taking any action until it shall be directed otherwise in writing by the Partnership or Virginia Power or by order of a court of competent jurisdiction. The Escrow Agent shall be 4 protected in acting upon any notice, request, waiver, consent, receipt or other document reasonably believed by the Escrow Agent to be signed by the proper party or parties. Section 2.3 Liability. The Escrow Agent shall not be liable for any error or judgment or for any act done or step taken or omitted by it in good faith or for any mistake of fact or law, or for anything that it may do or refrain from doing in connection herewith, except for its own gross negligence or willful misconduct, and the Escrow Agent shall have no duties to anyone except the Partnership and Virginia Power and their respective successors and permitted assigns. Section 2.4 Legal Counsel. The Escrow Agent may consult legal counsel in the event of any dispute or question as to the construction of this Agreement, or the Escrow Agent's duties hereunder, and the Escrow Agent shall incur no liability and shall be fully protected with respect to any action taken or omitted in good faith in accordance with the opinion and instructions of counsel. Section 2.5 Dispute. In the event of any disagreement between the undersigned or any of them, and/or any other person, resulting in adverse claims and demands being made in connection with or for the Escrow Amount, the Escrow Agent shall be entitled at its option to refuse to comply with any such claim or demand, so long as such disagreement shall continue, and in so doing the Escrow Agent shall not be or become liable for damages or interest to the undersigned or any of them or to any person named herein for its failure or refusal to comply with such conflicting or adverse demands. The Escrow Agent shall be entitled to continue so to refrain and refuse so to act until all differences shall have been resolved by agreement and the Escrow Agent shall have been notified thereof in writing signed by the Partnership and Virginia Power. In the event of such disagreement which continues for 90 days or more, the Escrow Agent in its discretion may, but shall be under no obligation to, file a suit in interpleader for the purpose of having the respective rights of the claimants adjudicated and may deposit with the court all documents and property held hereunder. Each of the Partnership and Virginia Power agree to each pay 50% of all reasonable out-of-pocket costs and expenses incurred by the Escrow Agent in such action, including reasonable attorney's fees and disbursements. Section 2.6 Indemnification. The Escrow Agent is hereby indemnified by the Partnership and Virginia Power from all losses, costs and expenses of any nature incurred by the Escrow Agent arising out of or in connection with this Agreement or with the administration of its duties hereunder, unless such losses, costs or expenses shall have been caused by the Escrow Agent's willful misconduct or gross negligence. Such indemnification shall survive termination of this Agreement until extinguished by any applicable statute of limitations. In the event that either the Partnership or Virginia Power fully indemnifies the Escrow Agent, such indemnifying party shall have the right to recover from the non-indemnifying party 50% of the full amount paid to the Escrow Agent as indemnification. Anything in this agreement to the contrary notwithstanding, in no event shall 5 the Escrow Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to loss profits), even if the Escrow Agent has been advised of the likelihood of such loss or damage and regardless of the form of the action. Section 2.7 Survival. The Escrow Agent, in its capacity as Escrow Agent, does not have any interest in the Escrow Amount deposited hereunder but is serving as escrow holder only and having only possession thereof. This paragraph shall survive notwithstanding any termination of this Agreement or the resignation of the Escrow Agent. Section 2.8 Resignation. The Escrow Agent (and any successor Escrow Agent) may at any time resign as such by giving written notice of its resignation to the parties hereto at least 30 days prior to the date specified for such resignation to take effect. Upon the effective date of such resignation, the Escrow Amount shall be delivered by it to such successor Escrow Agent or as otherwise shall be instructed in writing by the Partnership and Virginia Power, whereupon the Escrow Agent shall be discharged of and from any and all further obligations arising in connection with this Agreement. If at that time the Escrow Agent has not received such instruction, the Escrow Agent's sole responsibility after that time shall be to safekeep the Escrow Amount until receipt of a designation of successor Escrow Agent or joint written instruction as to disposition of the Escrow Amount by the Partnership and Virginia Power or a final order of a court of competent jurisdiction mandating disposition of the Escrow Amount. Section 2.9 Expenses. The Escrow Agent hereby accepts its appointment and agrees to act as escrow agent under the terms and conditions of this Agreement and acknowledges receipt of the Escrow Amount. Each of the Partnership and Virginia Power further agree to jointly and severally reimburse the Escrow Agent for 50% of all reasonable out-of-pocket expenses, disbursements and advances incurred or made by the Escrow Agent in the performance of its duties hereunder (including reasonable fees, and out-of-pocket expenses and disbursements, of its counsel). The Escrow's Agent's fees are set forth on Schedule I attached hereto. ARTICLE III. MISCELLANEOUS Section 3.1 Notices. Any notices or other communications required or permitted hereunder shall be effective if in writing and delivered personally or sent by overnight courier, addressed as follows: If to the Partnership, at: LSP ENERGY LIMITED PARTNERSHIP c/o LS Power Management, LLC 6 Two Tower Center, 20th Floor East Brunswick, NJ 08816 Attention: Treasurer Telephone: (732) 249-6750 Facsimile: (732) 249-7290 And LSP ENERGY LIMITED PARTNERSHIP c/o LS Power Management, LLC Two Tower Center, 20th Floor East Brunswick, NJ 08816 Attention: General Counsel Telephone: (732) 249-6750 Facsimile: (732) 249-7290 If to Virginia Power, at: VIRGINIA ELECTRIC AND POWER COMPANY 5000 Dominion Boulevard Glen Allen, VA 23060 Attention: Richard Thatcher Telephone: (804) 273-4410 Facsimile: (804) 273-4501 If to the Escrow Agent, at: The Chase Manhattan Bank 450 West 33rd St New York, NY 10001 Attention: Audrey Mohan Telecopy: (212)-946-3751 Facsimile: (212)-946-8156 Unless otherwise specified herein, such notices or other communications shall be deemed effective (a) on the date delivered, if delivered personally, (b) one Business Day after being delivered, if delivered by telecopier with confirmation of good transmission, (c) one Business Day after being sent by overnight courier, if sent by overnight courier, (d) two Business Days after being sent by Federal Express or United Parcel Service, if sent by Federal Express or United Parcel Service, or (e) three Business Days after being sent, if sent by registered or certified mail. Each of the parties hereto shall be entitled to specify a different address by giving notice as aforesaid to each of the other parties hereto. 7 Section 3.2 Termination. This Agreement shall automatically terminate upon the final distribution of the Escrow Amount in accordance with the terms hereof, provided that the provisions of Sections 2.6, 2.7 and 2.9 shall survive the termination of this Agreement. Section 3.3 Governing Law. This Agreement shall be governed by the laws of the State of New York of the United States of America and shall for all purposes be governed by and construed in accordance with the laws of such state without regard to the conflict of law rules thereof other than Section 5-1401 of the New York General Obligations Law. Section 3.4 Consent to Jurisdiction. Each of the parties agrees that all actions, suits or proceedings arising out of or based upon this Agreement or the subject matter hereof may be brought and maintained in the federal district court in the Southern District of New York. Each of the parties hereby by execution hereof (i) hereby irrevocably submits to the non-exclusive jurisdiction of such court in New York, New York, for the purpose of any action, suit or proceeding arising out of or based upon this Agreement or the subject matter hereof and (ii) hereby waives to the extent not prohibited by applicable law, and agrees not to assert, by way of motion, as a defense or otherwise, in any such action, suit or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named court, that it is immune from extraterritorial injunctive relief or other injunctive relief, that its property is exempt or immune from attachment or execution, that any such action, suit or proceeding may not be brought or maintained in the above-named court should be dismissed on the grounds of forum non conveniens, should be transferred to any court other than the above-named court, should be stayed by virtue of the pendency of any other action, suit or proceeding in any court other than the above-named court, or that this Agreement or the subject matter hereof may not be enforced in or by the above-named court. Each of the parties hereto hereby consents to service of process in any such suit, action or proceeding in any manner permitted by the laws of the State of New York, agrees that service of process by registered or certified mail, return receipt requested, at the address specified in or pursuant to Section 3.1 hereof is reasonably calculated to give actual notice and waives and agrees not to assert by way of motion, as a defense or otherwise, in any such action, suit or proceeding any claim that service of process made in accordance with Section 3.1 hereof does not constitute good and sufficient service of process. The provisions of this Section 3.4 shall not restrict the ability of any party to enforce in any court any judgment obtained in the federal district court in the Southern District of New York. Section 3.5 Waiver of Jury Trial. To the extent not prohibited by applicable law which cannot be waived, each of the parties hereto hereby waives, and covenants that it will not assert (whether as plaintiff, defendant, or otherwise), any right to trial by jury in any forum in any respect of any issue, claim, demand, cause of action, action, suit or proceeding arising out of or based upon this Agreement or the subject matter hereof, in each case whether now existing or hereafter arising and whether in 8 contract or tort or otherwise. Any of the parties hereto may file an original counterpart or a copy of this Section 3.5 with any court as written evidence of the consent of each of the parties hereto to the waiver of his or its right to trial by jury. Section 3.6 Reliance. Each of the parties hereto acknowledges that it has been informed by each other party that the provisions of this Section constitute a material inducement upon which such party is relying and will rely in entering into this Agreement and the transactions contemplated hereby. Section 3.7 Entire Agreement; Waivers. This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written, of the parties with respect to such subject matter. No waiver of any provision of this Agreement (a) shall be deemed to or shall constitute a waiver of any other provision hereof (whether or not similar), (b) shall constitute a continuing waiver unless otherwise expressly provided therein or (c) shall be effective unless in writing and executed by each party hereto. Section 3.8 Amendment or Modification, etc. The parties hereto may not amend or modify this Agreement except in such manner as may be agreed upon by a written instrument executed by all of the parties hereto. Any written amendment, modification or waiver executed by all of the parties hereto shall be binding upon all such parties and their respective successors and assigns. Section 3.9 Headings, etc. Section and subsection headings are not to be considered part of this Agreement, are included solely for convenience, are not intended to be full or accurate descriptions of the content thereof and shall not affect the construction hereof. This Agreement shall be deemed to express the mutual intent of the parties, and no rule of strict construction shall be applied against any party. Section 3.10 Severability. In the event that any provision hereof would, under applicable law, be invalid or unenforceable in any respect, such provision shall (to the extent permitted by applicable law) be construed by modifying or limiting it so as to be valid and enforceable to the maximum extent compatible with, and possible under, applicable law. The provisions hereof are severable, and in the event any provision hereof should be held invalid or unenforceable in any respect, it shall not invalidate, render unenforceable or otherwise affect any other provision hereof. 9 Section 3.11 Counterparts. This Agreement and any amendments, waivers, consents, or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but one and the same instrument. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto. Delivery of an executed counterpart of a signature page to this Agreement or to any amendments, waivers, consents or supplements hereof by telecopier shall be as effective as delivery of a manually executed counterpart thereof. Section 3.12 Successors and Assigns. All of the terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted transferees, successors and assigns (each of which shall be deemed to be a party hereto for all purposes hereof). The Partnership and Virginia Power may not assign its obligations hereunder without the prior written consent of the non-assigning party. Except as expressly provided herein, this Agreement shall not confer any right or remedy upon any person other than the parties and their respective transferees, successors and assigns; provided, however, that the rights and obligations of the Partnership under this Agreement shall be subject to the rights of The Bank Of New York in its capacity as collateral agent under the Second Amended and Restated Security Agreement dated as of May 21, 1999 between the Partnership and The Bank of New York. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 10 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. VIRGINIA ELECTRIC AND POWER COMPANY, as Virginia Power By: /s/ R.T. THATCHER ------------------------------------ Name: R.T. Thatcher Title: Vice President LSP ENERGY LIMITED PARTNERSHIP, as the Partnership By: LSP Energy, Inc., as general partner By: /s/ MARK BRENNAN ------------------------------------ Name: Mark Brennan Title: Treasurer THE CHASE MANHATTAN BANK, as the Escrow Agent By: /s/ SAVERIO A. LUNETTA ------------------------------------ Name: Saverio A. Lunetta Title: Vice President 11 SCHEDULE 1 Option 1: 15 basis points of the highest value of collateral held on deposit per annum or any part thereof without proration for partial years, subject to a minimum of $7,500. $75 per investment (excludes Money Market, Trust Deposit Account or Chase Vista Money Market Fund investments) Option 2: Annual Fee: $7,500 Escrow proceeds invested in the Chase Trust Deposit account (30 day LIBOR less 50 bps). Above options include initial legal review and set-up of appropriate accounts. 12 EX-27.1 3 a2030585zex-27_1.txt EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEETS AND STATEMENTS OF OPERATIONS OF LSP ENERGY LIMITED PARTNERSHIP AS OF AND FOR THE PERIOD ENDED SEPTEMBER 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001092436 LSP ENERGY LIMITED PARTNERSHIP 1,000 9-MOS DEC-31-2000 SEP-30-2000 9,526 49,977 4,449 0 3,117 67,739 338,684 1,990 414,473 39,123 328,850 0 0 0 46,500 414,473 8,763 0 0 11,013 0 0 3,662 (5,552) 0 (5,552) 0 0 0 (5,552) 0 0
EX-27.2 4 a2030585zex-27_2.txt EXHIBIT 27.2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEETS AND STATEMENTS OF OPERATIONS OF LSP BATESVILLE FUNDING CORPORATION AS OF AND FOR THE PERIOD ENDED SEPTEMBER 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001092435 LSP BATESVILLE FUNDING CORP. 1000 9-MOS DEC-31-2000 SEP-30-2000 1 0 0 0 0 1 0 0 0 10 0 0 0 0 (9) 1 0 0 0 4 0 0 0 (4) 0 (4) 0 0 0 (4) 0 0
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