-----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, IFOL/lInMED+VyzeO+8XqsRB+X9CWDihJrVJ5MsjPSV/iycWB/b/wnVqE8UYNwMd h34zab5OLZTGzBSW/pef7Q== 0000912057-97-027542.txt : 19970814 0000912057-97-027542.hdr.sgml : 19970814 ACCESSION NUMBER: 0000912057-97-027542 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OGLETHORPE POWER CORP CENTRAL INDEX KEY: 0000788816 STANDARD INDUSTRIAL CLASSIFICATION: COGENERATION SERVICES & SMALL POWER PRODUCERS [4991] IRS NUMBER: 581211925 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-07591 FILM NUMBER: 97658499 BUSINESS ADDRESS: STREET 1: 2100 EAST EXCHANGE PL STREET 2: P O BOX 1349 CITY: TUCKER STATE: GA ZIP: 30085-1349 BUSINESS PHONE: 4042707600 10-Q 1 FORM 10-Q - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to _____________ Commission File No. 33-7591 ------------ Oglethorpe Power Corporation (An Electric Membership Corporation) (Exact name of registrant as specified in its charter) Georgia 58-1211925 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) Post Office Box 1349 2100 East Exchange Place Tucker, Georgia 30085-1349 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (770) 270-7600 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. The Registrant is a membership corporation and has no authorized or outstanding equity securities. - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- OGLETHORPE POWER CORPORATION INDEX TO QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997 Page No. -------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheets as of June 30, 1997 (Unaudited) and December 31, 1996...................................... 3 Condensed Statements of Revenues and Expenses (Unaudited) for the Three Months and Six Months Ended June 30, 1997 and 1996..................................... 5 Condensed Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 1997 and 1996............ 6 Notes to the Condensed Financial Statements................ 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......... 8 PART II - OTHER INFORMATION Item 1. Legal Proceedings..................................... 15 Item 6. Exhibits and Reports on Form 8-K...................... 15 SIGNATURES.......................................................... 16 2 PART I--FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS OGLETHORPE POWER CORPORATION CONDENSED BALANCE SHEETS June 30, 1997 and December 31, 1996 - ------------------------------------------------------------------------------ (DOLLARS IN THOUSANDS)
1997 1996 ASSETS (UNAUDITED) ------------ ----------- Electric plant, at original cost: In service............................................ $4,904,500 $5,742,597 Less: Accumulated provision for depreciation.......... (1,350,645) (1,488,272) ------------ ------------- 3,553,855 4,254,325 Nuclear fuel, at amortized cost....................... 86,793 86,722 Plant acquisition adjustments, at amortized cost...................................... -- 4,153 Construction work in progress......................... 13,928 31,181 ------------ ------------- 3,654,576 4,376,381 ------------ ------------- Investments and funds: Bond, reserve and construction funds, at market.............................................. 32,331 53,955 Decommissioning fund, at market....................... 94,782 86,269 Investment in associated organizations, at cost................................................ 15,395 15,379 Deposit on Rocky Mountain transactions, at cost................................................ 59,436 41,685 ------------ ------------- 201,944 197,288 ------------ ------------- Current assets: Cash and temporary cash investments, at cost................................................ 41,532 132,783 Other short-term investments, at market............... 93,682 91,499 Receivables........................................... 120,105 113,289 Inventories, at average cost.......................... 85,907 89,825 Prepayments and other current assets.................. 12,133 14,625 ------------ ------------- 353,359 442,021 ------------ ------------- Deferred charges: Premium and loss on reacquired debt, being amortized........................................... 191,153 201,007 Deferred amortization of Scherer leasehold........................................... 93,460 90,717 Deferred debt expense, being amortized................ 12,748 21,703 Other................................................. 36,795 33,058 ------------ ------------- 334,156 346,485 ------------ ------------- $4,544,035 $5,362,175 ------------ ------------- ------------ -------------
The accompanying notes are an integral part of these condensed statements. 3 OGLETHORPE POWER CORPORATION CONDENSED BALANCE SHEETS June 30, 1997 and December 31, 1996 - ------------------------------------------------------------------------------ (DOLLARS IN THOUSANDS)
1997 EQUITY AND LIABILITIES (UNAUDITED) 1996 ------------ ------------- Capitalization: Patronage capital and membership fees (including unrealized loss of ($1,302) at June 30, 1997 and ($844) at December 31, 1996 on available-for-sale securities.......................................... $ 321,855 $ 356,229 Long-term debt........................................ 3,279,702 4,052,470 Obligations under capital leases...................... 291,111 293,682 Obligation under Rocky Mountain transactions.......... 59,436 41,685 ------------ ------------- 3,952,104 4,744,066 ------------ ------------- Current liabilities: Long-term debt and capital leases due within one year..................................... 97,724 159,622 Accounts payable...................................... 49,733 42,891 Accrued interest...................................... 7,995 15,931 Accrued and withheld taxes............................ 14,160 4,940 Other current liabilities............................. 6,077 9,540 ------------ ------------- 175,689 232,924 ------------ ------------- Deferred credits and other liabilities: Gain on sale of plant, being amortized................ 61,993 58,527 Net benefit of sale of income tax benefits, being amortized..................................... 38,044 42,049 Net benefit of Rocky Mountain transactions, being amortized..................................... 93,967 70,701 Accumulated deferred income taxes..................... 60,325 61,985 Decommissioning reserve............................... 133,945 124,468 Other................................................. 27,968 27,455 ------------ ------------- 416,242 385,185 ------------ ------------- $4,544,035 $5,362,175 ------------ ------------- ------------ -------------
The accompanying notes are an integral part of these condensed statements. 4 OGLETHORPE POWER CORPORATION CONDENSED STATEMENTS OF REVENUES AND EXPENSES (UNAUDITED) For the Three and Six Months ended June 30, 1997 and 1996 - ----------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
THREE MONTHS SIX MONTHS ---------------------- ---------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Operating revenues: Sales to Members...................................... $230,180 $255,981 $487,211 $502,439 Sales to non-Members.................................. 12,696 19,247 27,150 43,478 ---------- ---------- ---------- ---------- Total operating revenues................................ 242,876 275,228 514,361 545,917 ---------- ---------- ---------- ---------- Operating expenses: Fuel.................................................. 46,704 55,418 91,593 103,658 Production............................................ 33,948 31,628 69,544 61,997 Purchased power....................................... 62,321 58,162 120,311 122,226 Power delivery........................................ 101 4,206 3,979 7,864 Depreciation and amortization......................... 30,142 36,564 66,381 73,090 Taxes other than income taxes......................... 5,595 7,342 13,215 14,726 Other operating expenses.............................. 2,642 9,394 10,098 16,274 ---------- ---------- ---------- ---------- Total operating expenses................................ 181,453 202,714 375,121 399,835 ---------- ---------- ---------- ---------- Operating margin........................................ 61,423 72,514 139,240 146,082 ---------- ---------- ---------- ---------- Other income (expense): Interest income....................................... 6,320 4,680 13,755 8,740 Amortization of net benefit of sale of income tax benefits........................................ 2,799 2,008 5,597 4,015 Amortization of deferred margins...................... -- 6,966 -- 17,154 Allowance for equity funds used during construction... (35) 43 49 90 Other................................................. 2,061 386 3,569 1,021 ---------- ---------- ---------- ---------- Total other income...................................... 11,145 14,083 22,970 31,020 ---------- ---------- ---------- ---------- Interest charges: Interest on long-term debt and other obligations...... 67,251 82,329 147,808 164,360 Allowance for debt funds used during construction..... (193) (464) (545) (978) ---------- ---------- ---------- ---------- Net interest charges.................................... 67,058 81,865 147,263 163,382 ---------- ---------- ---------- ---------- Net margin.............................................. $ 5,510 $ 4,732 $ 14,947 $ 13,720 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes are an integral part of these condensed statements. 5 OGLETHORPE POWER CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Six Months Ended June 30, 1997 and 1996 - ----------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
1997 1996 ---------- ---------- Cash flows from operating activities: Net margin.................................................................................. $ 14,947 $ 13,720 ---------- ---------- Adjustments to reconcile net margin to net cash provided by operating activities: Depreciation and amortization............................................................. 99,558 88,441 Net benefit of Rocky Mountain transactions................................................ 23,266 -- Deferred gain from Corporate Restructuring................................................ 4,670 -- Allowance for equity funds used during construction....................................... (49) (90) Amortization of deferred margins.......................................................... -- (17,154) Amortization of net benefit of sale of income tax benefits................................ (5,597) (4,015) Other..................................................................................... (1,556) 2,783 Change in net current assets, excluding long-term debt due within one year and deferred margins to be refunded within one year: Receivables............................................................................... (6,815) (10,157) Inventories............................................................................... (5,063) (5,113) Prepayments and other current assets...................................................... 2,062 (189) Accounts payable.......................................................................... 7,495 (14,616) Accrued interest.......................................................................... (7,816) (3,907) Accrued and withheld taxes................................................................ 9,220 13,686 Other current liabilities................................................................. 2,869 (5,142) ---------- ---------- Total adjustments....................................................................... 122,244 44,527 ---------- ---------- Net cash provided by operating activities................................................. 137,191 58,247 ---------- ---------- Cash flows from investing activities: Property additions.......................................................................... (39,386) (51,727) Net proceeds from bond, reserve and construction funds...................................... 21,378 2,664 Decrease in investment in associated organizations.......................................... (16) 389 Increase in other short-term investments.................................................... (2,395) (9,984) Increase in decommissioning fund............................................................ (4,521) (3,245) Net assets sold in Corporate Restructuring.................................................. 717,907 -- Net liabilities extinguished in Corporate Restructuring..................................... (694,412) -- ---------- ---------- Net cash used in investing activities..................................................... (1,445) (61,903) ---------- ---------- Cash flows from financing activities: Debt proceeds, net.......................................................................... 111,306 397 Debt payments............................................................................... (286,397) (42,430) Retirement of patronage capital............................................................. (48,863) -- Other....................................................................................... (3,043) (3,091) ---------- ---------- Net cash used in financing activities..................................................... (226,997) (45,124) ---------- ---------- Net decrease in cash and temporary cash investments........................................... (91,251) (48,780) Cash and temporary cash investments at beginning of period.................................... 132,783 201,151 ---------- ---------- Cash and temporary cash investments at end of period.......................................... $ 41,532 $ 152,371 ---------- ---------- ---------- ---------- Cash paid for: Interest (net of amounts capitalized)....................................................... $ 145,392 $ 157,883 Income taxes................................................................................ $ 830 $ --
The accompanying notes are an integral part of these condensed statements. 6 Oglethorpe Power Corporation Notes to Condensed Financial Statements June 30, 1997 and 1996 (A) The condensed financial statements included herein have been prepared by Oglethorpe Power Corporation (Oglethorpe), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). In the opinion of management, the information furnished herein reflects all adjustments (which include only normal recurring adjustments) necessary to present fairly, in all material respects, the results for the periods ended June 30, 1997 and 1996. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations, although Oglethorpe believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in Oglethorpe's latest Annual Report on Form 10-K, as filed with the SEC. Certain amounts for 1996 have been reclassified to conform with the current period presentation. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations GENERAL CORPORATE RESTRUCTURING As reported in its Annual Report on Form 10-K for the fiscal year ended December 31, 1996, Oglethorpe and its 39 retail electric distribution cooperative members (the Members) completed a corporate restructuring (the Corporate Restructuring) on March 11, 1997. Pursuant to the Corporate Restructuring, Oglethorpe was divided into three specialized operating companies to respond to increasing competition and regulatory changes in the electric industry. Oglethorpe's transmission business was transferred to, and is now owned and operated by, Georgia Transmission Corporation (An Electric Membership Corporation) (GTC), a recently formed Georgia electric membership corporation. Oglethorpe's system operations business was transferred to, and is now owned and operated by, Georgia System Operations Corporation (GSOC), a recently formed Georgia nonprofit corporation. Oglethorpe continues to operate its power supply business. Oglethorpe retained all of its owned and leased generation assets. Oglethorpe also continues to administer its power purchase contracts and provide marketing support functions to the Members. Immediately after the Corporate Restructuring, Oglethorpe's corporate name was changed from "Oglethorpe Power Corporation (An Electric Membership Generation & Transmission Corporation)" to "Oglethorpe Power Corporation (An Electric Membership Corporation)". POWER MARKETER ARRANGEMENTS Oglethorpe is utilizing long-term power marketer arrangements to reduce the cost of power to the Members. Oglethorpe has entered into power marketer agreements with LG&E Power Marketing Inc. (LPM) effective January 1, 1997, for approximately 50% of the load requirements of the Members and with Morgan Stanley Capital Group Inc. (Morgan Stanley) effective May 1, 1997, with respect to 50% of the forecasted load requirements of the Members. Under these power marketer agreements, Oglethorpe purchases energy at fixed prices covering a portion of the costs of energy to its Members. LPM and Morgan Stanley, in turn, have certain rights to market excess energy from the Oglethorpe system. All of Oglethorpe's existing generating facilities and power purchase arrangements are available for use by LPM and Morgan Stanley for the term of the respective agreements. Oglethorpe continues to be responsible for all the costs of its system resources but receives revenue from LPM and Morgan Stanley for the use of the resources. 8 Separate Dispatch of Plant Wansley As discussed in its Annual Report on Form 10-K for the fiscal year ended December 31, 1996, the Plant Wansley ownership and operating agreements were amended to allow each co-owner to dispatch separately its respective ownership interest in conjunction with contracting separately for long-term coal purchases procured by Georgia Power Company (GPC) and to procure separately long-term coal purchases. Pursuant to the amendments, Oglethorpe began separately dispatching Wansley Units No. 1 and No. 2 on May 1, 1997. Oglethorpe continues to use GPC as its agent for fuel procurement. Results of Operations Corporate Restructuring Oglethorpe and the Members completed the Corporate Restructuring on March 11, 1997. As of that date, Oglethorpe transferred its transmission business and assets to GTC and reflected the transfer of its system operations assets to GSOC. However, the Boards of Directors of Oglethorpe, GTC and GSOC determined that for ratemaking purposes all revenues and expenses related to operations of GTC and GSOC would remain with Oglethorpe until April 1, 1997. Pursuant to this approach, all transmission-related and systems operations-related revenues were assigned to Oglethorpe, and all transmission-related and systems operations-related costs were paid or reimbursed by Oglethorpe during the period March 11, 1997 through March 31, 1997. As a result, the Condensed Statements of Revenues and Expenses for the six months ended June 30, 1997 reflect operations as a combined power supply, transmission and system operations company through March 31, 1997, and operations solely as a power supply company thereafter. Therefore, decreases in operating revenues, power delivery expenses, depreciation and amortization, taxes other than income taxes, operating margin, other operating income and net interest charges from 1996 to 1997 are primarily attributable to the Corporate Restructuring. See Oglethorpe's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 for a pro forma presentation of the Statement of Revenues and Expenses reflecting the exclusion of the transmission and system operations businesses, as though the Corporate Restructuring had occurred at the beginning of 1996, for the year ended December 31, 1996 (Note 11 of Notes to Financial Statements). For the Three Months and Six Months Ended March 31, 1997 and 1996 Oglethorpe's net margin for the three months and six months ended June 30, 1997 was $5.5 million and $14.9 million, respectively, compared to $4.7 million and $13.7 million for the same periods of 1996. Operating Revenues Revenues from sales to Members for the three months and six months ended June 30, 1997 were 10.1% and 3.0% lower compared to the same period of 1996. The decrease in revenues from Members was attributable to reduced capacity revenues relating to the transmission business, however, this decrease was offset somewhat by an increase in energy revenues from sales to Members for the three months and six months ended June 30, 1997 of 9.7% and 14.6% compared to the same periods of 1996, respectively. Megawatt-hour (MWh) sales to the Members were 6.1% and 9 3.5% lower in the current three-month and six-month periods compared to the same periods of 1996. As a result, Oglethorpe's average energy revenue per MWh from sales to Members for the three-month and six-month periods were 16.8% and 19.0% higher in 1997 compared to 1996, respectively, primarily due to the expiration of the short-term power marketer arrangement with Enron Power Marketing Inc. (EPMI) that had allowed Oglethorpe to passthrough significant savings in the first six months of 1996. During the first eight months of 1996, Oglethorpe had a power marketer arrangement with EPMI to supply 100% of the load requirements of the Members. As noted under "General--Power Marketer Arrangements" above, Oglethorpe has entered into power marketer arrangements with LPM effective January 1, 1997 for approximately 50% of the load requirements of the Members and with Morgan Stanley effective May 1, 1997 with respect to 50% of the forecasted load requirement of the Members. Sales to non-Members were primarily made pursuant to contractual arrangements with GPC and from energy sales to other non-Member utilities and power marketers. The following table summarizes the amounts of non-Member revenues from these sources for the three months and six months ended June 30, 1997 and 1996: Three Months Six Months Ended June 30, Ended June 30, ----------------- ------------------- 1997 1996 1997 1996 ------ ------ ------- ------- (dollars in thousands) GPC-Power supply arrangements $4,763 $3,208 $12,565 $ 7,925 Sales to other utilities 5,629 10,517 9,663 22,799 Sales to power marketers 2,304 3,837 2,736 7,697 ITS transmission agreements -- 1,685 2,186 5,057 ------ ------ ------- ------- Total $12,696 $19,247 $27,150 $43,478 ------ ------ ------- ------- ------ ------ ------- ------- The revenues from power supply arrangements with GPC were derived from energy sales arising from dispatch situations whereby GPC caused Plant Wansley to be operated when Oglethorpe's system did not require all of its contractual entitlement to the generation. These revenues compensated Oglethorpe for its costs because, under the operating agreement (before it was recently amended), Oglethorpe was responsible for its share of fuel costs any time a unit operated. Such sales to GPC were higher in 1997 compared to the same periods of 1996. As noted under "General--Separate Dispatch of Plant Wansley" above, with the commencement of the separate dispatch of Plant Wansley as of May 1, 1997, this type of sale to GPC has ended. Sales to other non-Member utilities in 1997 represent sales made directly by Oglethorpe. Oglethorpe sells for its own account any energy available from the portion of its resources dedicated to Morgan Stanley that is not scheduled by Morgan Stanley pursuant to its power marketer arrangement. Such sales during the first six months of 1996 were initiated by EPMI. Where EPMI did not have a 10 contractual relationship with the purchaser and Oglethorpe did, Oglethorpe recorded the sale and credited the revenues to EPMI in its monthly billing. Under the current LPM and Morgan Stanley power marketer arrangements, and previously, under the EPMI power marketer arrangement, sales to the power marketers represented the net energy transmitted on behalf of LPM, Morgan Stanley and EPMI off-system on a daily basis from Oglethorpe's total resources. Such energy was sold to LPM, Morgan Stanley and EPMI at Oglethorpe's cost, subject to certain limitations. The volume of sales to power marketers depends primarily on the power marketers' decisions for servicing their load requirements. Another source of non-Member revenues was payments received from GPC for use of the Integrated Transmission System (ITS) and related transmission interfaces. GPC compensated Oglethorpe to the extent that Oglethorpe's percentage of investment in the ITS exceeded its percentage use of the system. In such case, Oglethorpe was entitled to income as compensation for the use of its investment by the other ITS participants. As a result of the Corporate Restructuring, all of the revenues in this category have accrued to GTC since April 1, 1997. Operating Expenses The overall decrease in operating expenses for the three months and six months ended June 30, 1997 compared to the same periods of 1996 was primarily attributable to the elimination of expenses relating to the transmission business assumed by GTC in connection with the Corporate Restructuring. However, the decrease in fuel expense and the increase in production operations and maintenance costs were unaffected by the Corporate Restructuring. Fuel costs decreased 15.7% and 11.6% from the same periods of the prior year, respectively, even though total generation decreased only 9.1% and 5.7%, respectively. Such savings in average fuel costs resulted from the difference in the mix of generation, with more nuclear and less fossil generation in 1997. The decrease in fossil generation resulted primarily from a maintenance outage during February and March 1997 at Plant Scherer Unit No. 1. The higher nuclear generation during 1997 compared to 1996 was achieved as a result of having two refueling outages in the first six months of 1996 compared to one in 1997. Conversely, the increase in production operations and maintenance costs was primarily attributable to the maintenance outage at Plant Scherer Unit No. 1. Effective January 1, 1996, the costs of nuclear refueling outages are deferred and amortized over the 18-month period following the outage. Purchased power cost for the six months ended June 30, 1997 compared to the same period of 1996 was virtually unchanged. A total of 16.8% fewer MWhs were purchased in 1997 compared to 1996, but average purchased power expense increased by 18.4%. As noted under "Operating Revenues" above, significant energy cost savings were derived in the first six months of 1996 from the EPMI power supply arrangement. The decrease in other operating expenses for 1997 compared to the same periods of the prior year was due primarily to transfer of administrative and general expenses relating to the transmission and system operations businesses in connection with the Corporate Restructuring. 11 Other Income Other income for the three months and six months ended June 30, 1997 decreased compared to the same periods of 1996 primarily as a result of Oglethorpe utilizing, as planned, all remaining amounts available under its deferred margin rate mechanism during 1996. (For a discussion of deferred margins, see Note 1 of Notes to Financial Statements in Oglethorpe's Annual Report on Form 10-K for the fiscal year ended December 31, 1996.) Interest income was higher in the three-month and six-month periods of 1997 compared to the same periods of 1996 partly due to higher earnings from the decommissioning fund and partly due to income from the deposits from the Rocky Mountain transactions. The deposits were made in December 1996 and January 1997. Financial Condition Corporate Restructuring As of March 11, 1997, Oglethorpe transferred its transmission business and assets to GTC. Thereafter, the assets, liabilities and equity of GTC were no longer a part of Oglethorpe. The purchase price for the transmission business was based on an appraisal of the fair market value of such business, as determined by an independent appraiser, and was approximately $708 million. The purchase price was paid primarily by GTC's assumption of a portion (approximately 16.86%) of Oglethorpe's long-term secured debt in an amount equal to approximately $686 million. Approximately $541 million of this debt (payable to RUS, Federal Financing Bank (FFB) and CoBank, ABC (CoBank)) became the sole obligation of GTC, and Oglethorpe was released from all liability with regard to this indebtedness. The remaining debt assumed by GTC in connection with the Corporate Restructuring, approximately $145 million, relates to Oglethorpe's pollution control revenue bonds (PCBs). While GTC assumed and agreed to pay this $145 million of debt, Oglethorpe is not legally released from its liability for this debt. The remainder of the purchase price was paid by GTC from cash obtained through a borrowing from National Rural Utilities Cooperative Finance Corporation (CFC) and the assumption of approximately $1 million of other Oglethorpe liabilities. Oglethorpe also made a special patronage capital distribution of approximately $49 million to the Members which was used by the Members to establish equity in and to provide initial working capital to GTC. On October 1, 1996, Oglethorpe transferred to GSOC its system operations assets, consisting of its system control center and related energy control and revenue metering systems equipment. The purchase price of these assets totaled approximately $9.4 million and was funded by GSOC's assumption of Oglethorpe's obligations under an existing note held by the Rural Utilities Service (RUS), by delivery of a purchase money note payable to Oglethorpe and by the assumption of certain other liabilities of Oglethorpe. From October 1, 1996 to March 11, 1997, Oglethorpe was the sole member of GSOC; therefore, the assets transferred to GSOC remained in the consolidated balance sheet of Oglethorpe. The Members and GTC became members of GSOC on March 11, 1997; and thereafter the assets, liabilities and equity of GSOC were no longer a part of Oglethorpe. Most of the remaining comparisons of the balance sheets as of June 30, 1997 and December 31, 1996 are in addition to the effects of the Corporate Restructuring described above. See Oglethorpe's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 for a pro forma 12 presentation of the Balance Sheet of the post-restructuring Oglethorpe as of December 31, 1996 (Note 11 of Notes to Financial Statements). Total assets and total equity plus liabilities as of June 30, 1997 were $4.5 billion which, after adjustment for the Corporate Restructuring, was $85 million less than the comparable total at December 31, 1996 due to depreciation of plant and due to the decrease in cash and temporary cash investments. Assets Property additions for the six months ended June 30, 1997 totaled $39.4 million and included additions, replacements and improvements to transmission and distribution facilities (subsequently sold to GTC) for the first three months of 1997 and existing generation facilities. All plant acquisition adjustments were related to transmission plant. As a result of the Corporate Restructuring discussed above, Oglethorpe no longer has any plant acquisition adjustments. The decrease in construction work in progress resulted from the projects sold to GTC and GSOC in the Corporate Restructuring. The decrease in the bond, reserve and construction funds was attributable to the utilization of available excess debt service reserve funds for debt service payments. The increase in the deposit on, the obligation under and net benefit of the Rocky Mountain transactions resulted from the completion of the lease transactions for the remainder of Oglethorpe's interest in Rocky Mountain in January 1997. For a discussion of the Rocky Mountain transactions, see Notes 1 and 2 of Notes to Financial Statements in Oglethorpe's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. The decrease in cash and temporary cash investments was partly due to the payment of the $49 million special patronage capital distribution made in connection with the Corporate Restructuring discussed above and partly due to a prepayment in 1997 of Federal Financing Bank (FFB) debt made from the proceeds of the December 1996 and January 1997 Rocky Mountain transactions. Prepayments and other current assets decreased due to a $1.1 million decrease in the estimated payment made to GPC for Plant Hatch and Plant Wansley operations and maintenance costs for July 1997 compared to the estimate paid for January 1997. The change in premium and loss on reacquired debt resulted partly from premiums paid in connection with FFB debt prepayment and the Pollution Control Bond (PCB) refunding, excluding the effect of the portion of these costs assumed by GTC in the Corporate Restructuring. The decrease in deferred debt expense resulted partly from unamortized issuance cost related to the PCB refunding being converted to premium and loss on reacquired debt and partly from the portion of these costs assumed by GTC in the Corporate Restructuring. 13 Equity and Liabilities The decrease in patronage capital and membership fees is the result of the $49 million special patronage capital distribution made in connection with the Corporate Restructuring, discussed above. The decrease in long-term debt due within one year resulted primarily from the prepayment of FFB debt, discussed above. In addition, the balance reflects the impact of the Corporate Restructuring. Accounts payable increased due to normal variations in the timing of payables activity. The decrease in accrued interest resulted partly from the portion of debt assumed by GTC in the Corporate Restructuring and partly from other factors. Accrued and withheld taxes increased as a result of the normal monthly accruals of property taxes, which are generally paid in the fourth quarter of the year. Other current liabilities decreased partly due to the year-end accrual for employee incentive pay (subsequently paid in March 1997) and partly due to the Corporate Restructuring. 14 PART II - OTHER INFORMATION Item 1. Legal Proceedings On June 17, 1997, PECO Energy Company--Power Team ("PECO") filed an application with the Federal Energy Regulatory Commission ("FERC") pursuant to Section 211 of the Federal Power Act requesting FERC to compel Oglethorpe and/or GTC to provide PECO with 250 MW of firm point-to-point transmission service from the Tennessee Valley Authority ("TVA")-Integrated Transmission System ("ITS") interface to the Florida-ITS interface for an initial three-year period, with an automatic roll-over provision. PECO also seeks $10,000 per day in penalties from Oglethorpe and/or GTC, alleging bad faith and delays in negotiations. In their FERC response, GTC and Oglethorpe contend that they negotiated with PECO in good faith, and thus there is no reasonable basis for imposing the penalties sought by PECO. GTC also responded that it does not have firm "available transfer capability" at the TVA-ITS interface to fulfill PECO's request, after taking into account the need to protect system reliability, existing firm commitments, and use of the TVA-ITS interface to serve "native load," in accordance with North American Electric Reliability Council guidelines. In the event GTC is ordered by FERC to provide the requested service, PECO would be required to compensate GTC at rates set by FERC in the order. As a consequence of any such order, power purchased by Oglethorpe for delivery through the TVA-ITS interface would probably be curtailed, and could result in higher purchased power cost than would otherwise be the case. Although FERC transmission pricing policy is designed to ensure that a transmission provider is fully compensated for the cost of providing transmission service, potentially including opportunity cost, there can be no assurance that rates ordered by FERC for service to PECO would fully compensate GTC, Oglethorpe and the Members for the use of the transmission system and for any resulting increase in the cost of power. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Number Description - ----------- ----------- 10.8.6 Supplemental Agreement to the Amended and Restated Wholesale Power Contract, dated as of May 1, 1997 by and between Oglethorpe and Altamaha Electric Membership Corporation, together with a Schedule identifying 38 other substantially identical Supplemental Agreements. 27.1 Financial Data Schedule (for SEC use only). - ---------------------------- (b) Reports on Form 8-K No reports on Form 8-K were filed by Oglethorpe for the quarter ended June 30, 1997. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Oglethorpe Power Corporation (An Electric Membership Corporation) Date: August 11, 1997 By: /s/ T. D. Kilgore ---------------------------------- T. D. Kilgore President and Chief Executive Officer (Principal Executive Officer) Date: August 11, 1997 /s/ Mac F. Oglesby ---------------------------------- Mac F. Oglesby Treasurer and Director (Principal Financial Officer) Date: August 11, 1997 /s/ Robert D. Steele ---------------------------------- Robert D. Steele Controller (Chief Accounting Officer) 16 EX-10.8-6 2 EXHIBIT 10.8.6 Exhibit 10.8.6 SUPPLEMENTAL AGREEMENT TO THE AMENDED AND RESTATED WHOLESALE POWER CONTRACT THIS SUPPLEMENTAL AGREEMENT TO THE AMENDED AND RESTATED WHOLESALE POWER CONTRACT, dated as of May 1, 1997 (together with permitted amendments hereto, this "Supplement"), is entered into by and between OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP CORPORATION), an electric membership corporation organized and existing under the laws of the State of Georgia (the "Seller"), and ALTAMAHA ELECTRIC MEMBERSHIP CORPORATION, an electric membership corporation organized and existing under the laws of the State of Georgia (the "Member"). R E C I T A L S: WHEREAS, the Seller and the Member have entered into that certain Amended and Restated Wholesale Power Contract, dated as of August 1, 1996 (together with permitted amendments thereto, the "Wholesale Power Contract"), under which the Seller agrees to sell and the Member agrees to purchase certain quantities of electric capacity and energy; WHEREAS, for the benefit of the Member and the Participating Members, the Seller has entered into that certain Power Purchase and Sale Agreement, dated as of April 7, 1997, between Morgan Stanley Capital Group, Inc. ("MS") and the Seller and amended by a letter agreement dated April 8, 1997 (as supplemented by any arbitration, mediation, amendment, administrative procedure or other method of implementing and administering such contract permitted under the provisions of such contract, the "MS Contract"); WHEREAS, under the MS Contract the Seller will purchase electric capacity and energy from MS for resale to the Participating Members for various terms as set forth in Exhibit 1.62 to the MS Contract and has agreed to sell to MS certain electric energy that MS schedules or is obligated to take; and WHEREAS, to receive the benefits of the MS Contract, the Member wishes during the Supplement Term to agree to certain terms and conditions as provided herein. NOW THEREFORE, in consideration of the premises and the mutual promises herein contained, the Seller and the Member hereby agree as follows: 1. DEFINITIONS. All capitalized terms used herein that are defined in the Wholesale Power Contract, as well as the term "member," shall have their respective meanings set forth in the Wholesale Power Contract, unless the context in which such term is used clearly requires otherwise. All other capitalized terms used herein shall have the respective meanings set forth below. "Confidential Information" shall have the meaning set forth in the MS Contract. "Customer Choice Customer" shall have the meaning set forth in the MS Contract. "Customer Choice Load" shall have the meaning set forth in the MS Contract. "Electric Energy" shall have the meaning set forth in the MS Contract. "Exhibit 5" is as defined in Section 3.1 (b). "Exhibit 6" is as defined in Section 3.1 (b). "Interval" shall have the meaning set forth in the MS Contract. "Member's Supplement Term" has the meaning set forth in Section 2. "MS" means Morgan Stanley Capital Group, Inc. "MS Contract" is as defined in the Second Recital. "MS Future Resource" is the Future Resource in which the Member is allocated a PCR in Exhibit 6. "MS Power Sale Resource" is the Power Sale Resource in which an allocation is made to the Member in Exhibit 5. "MS Schedule" shall have the meaning set forth in the MS Contract. "Nominate" shall have the meaning set forth in the MS Contract. "Participating Members" means those Members of Seller identified in Exhibits 5 and 6, each of which has executed a Supplemental Agreement substantially identical to this Agreement. "Rate Schedule A" means Rate Schedule A to the Wholesale Power Contract. "Schedule" shall have the meaning set forth in the MS Contract. "Supplemental Agreement(s)," when used in reference to other Participating Member(s), means that Supplemental Agreement(s) substantially identical to this Supplement entered into between Seller and such other Participating Member(s). "Supplement Schedule A" means Schedule A, Morgan Stanley Power Marketer Supplement Formulary Rate Application, attached hereto. 2 "Wholesale Power Contract" is as defined in the First Recital. 2. MEMBER'S SUPPLEMENT TERM. This Supplement shall be effective as of the date on which the Administrator's approval of this Supplement is effective and shall continue in effect until the termination of the MS Contract, whether as the result of expiration, early termination, cancellation in the event of default prior to the end of the fixed term, or otherwise (such period, the "Member's Supplement Term"); provided, however, that (i) any Party's cost or liability to the other Party hereunder, or as the result of the MS Contract, that arises prior to such termination or results, in whole or in part, from events or circumstances occurring prior to such termination, and (ii) the representations and warranties made in Section 5 of this Supplement and the provisions of 6.3 shall survive the Supplement Term. 3. FUTURE RESOURCE AND POWER SALES RESOURCE OBLIGATIONS. 3.1. New PCRs. (a) The MS Contract shall be a Future Resource for purposes of the Seller's purchases thereunder and a Power Sales Resource for purposes of the Seller's sales thereunder. All Participating Members, including the Member, receive allocations in the MS Contract Power Sale Resource, as set forth in Exhibit 5, and are assigned a PCR in the MS Future Resource, as set forth in Exhibit 6. (b) The Member hereby approves the MS Contract and confirms that the requirements of Sections 3.2.1 and 3.4.2 of the Wholesale Power Contract have been met with respect to the allocations to the Member set forth in Exhibits 5 and 6 to Appendix 1 to "Rate Schedule A" to the Wholesale Power Contract ("Exhibit 5" and "Exhibit 6" respectively). (c) The Member hereby acknowledges that neither the MS Contract nor this Supplement affects the Member's PCR with respect to any of the Existing Resources or its allocation with respect to Power Sales Resources listed on Exhibit 1 to Appendix 1 to "Rate Schedule A". 3.2 Cost Responsibility. The Member hereby approves the MS Contract, including additional quantities purchased by Seller under the MS Contract pursuant to Section 2.5(a) of the MS Contract, but excluding Customer Choice Loads with an intitial connected demand exceeding ten (10) MW, for the purpose of the requirement that it be approved by seventy-five percent (75%) of the members of the Seller and acknowledges that the MS Contract constitutes a Future Resource with respect to which all members of the Seller shall become liable for a pro rata share upon a Payment Default as provided in Section 3.5.3 of the Wholesale Power Contract. The Member acknowledges that "Rate Schedule A" shall provide for recovery of net costs incurred by the Seller as the result of the sales made under the MS Contract. 3 4. RATES. 4.1 Application of Formula. Supplement Schedule A attached hereto and incorporated herein by reference defines how the formulae contained in "Rate Schedule A" are to be applied to the costs incurred and revenues received under the MS Contract. 4.2 Limit on Changes. The Seller may modify the definitions in Supplement Schedule A, but only to the extent necessary to ensure that all costs and revenues under the MS Contract are recovered by and credited to those Participating Members that are Participating Members at the time such costs and revenues are incurred; provided, however, that during the Member's Supplement Term, the Seller shall not enter into an amendment of the MS Contract which modifies the Member's individual rates established under the MS Contract and set forth in Supplement Schedule A unless any such amendment of the MS Contract is negotiated to comply with the provisions of Sections 16.1 or 16.3 of the MS Contract or is approved by seventy-five percent (75%) of the Participating Members. 4.3 No Unilateral Filings. Notwithstanding Section 11.3.1 of the Wholesale Power Contract, during the Member's Supplement Term, (i) the Seller shall not unilaterally file an application for a change in any part of "Rate Schedule A" that is expressly prohibited by Section 4.2 of this Supplement and (ii) the Member shall not protest or make any unilateral filing complaining of a change expressly permitted by Section 4.2 of this Supplement. 4.4 Continued Justness and Reasonableness of Rate. The Seller has provided the Member with a copy of "Rate Schedule A", as amended through February 24, 1997. The Member confirms that the rates, terms and conditions established under the Wholesale Power Contract, including "Rate Schedule A" are just and reasonable and not unduly discriminatory and remain fully consistent with the provisions of Section 11.1 of the Wholesale Power Contract. 5. MEMBER'S REPRESENTATIONS AND WARRANTIES. The Member makes the following representations and warranties to Seller and agrees to indemnify Seller against all losses and damages resulting from a breach of same: 5.1 The Member warrants and represents that it will not, during the term of the MS Contract, take any action, enter into any contracts or otherwise incur obligations that could reasonably be anticipated to interfere with or adversely affect Seller's ability to perform its obligations under the MS Contract; and 5.2 The Member warrants and represents that it will not, during the term of the MS Contract, take any action that could reasonably be anticipated to cause either Seller or MS to lose their authority to sell power as contemplated under the MS Contract. 4 6. SCHEDULING MEMBER. 6.1 The Member hereby waives the right to become a Scheduling Member with respect to its PCR share of the MS Future Resource, its allocation in the MS Power Sale Resource, and the fifty percent (50%) of its allocation in the underlying Existing Resources committed to the MS Power Sale Resource prior to May 1, 1998. 6.2 In addition to the terms and conditions of the Wholesale Power Contract, the Member's right to become and to act as a Scheduling Member after May 1, 1998 shall be subject to (i) the terms and conditions of the MS Contract, including the consent of MS pursuant to Section 3.11 of the MS Contract, (ii) the Member's and its agents' agreement to abide by the terms of the MS Contract governing the treatment of Confidential Information, and (iii) Member's acknowledgment that no special consideration as to the timing for submittal of schedules by the Member can be given due to the timing of Schedules submitted by MS pursuant to the MS Contract. 6.3 Subject to Sections 6.1 and 6.2, until six (6) months following expiration of the Supplement Term, the Member shall have the right to elect to become a Scheduling Member with respect to the fifty percent (50%) of the Member's allocation in the underlying Existing Resources committed to the MS Power Sale Resource and to the Member's total energy requirements not subject to separate scheduling pursuant to the LPM Supplemental Agreement without regard to whether the Member is a Scheduling Member with respect to the remainder of the Member's total energy requirements. 6.4 If a Member is a Scheduling Member pursuant to both this Section 6 and pursuant to Section 3.3 of the LPM Supplemental Agreement, Member shall be a Scheduling Member with respect to one hundred percent (100%) of its resources and energy requirements. 7. NO THIRD PARTY BENEFICIARIES. Subject to the provisions of Section 10 below, the Seller and the Member agree that no other Member of the Seller or any other third party is an intended third-party beneficiary of this Supplement, except as may be provided in a separate instrument executed by each of the Seller and the Member. 8. RULES OF CONSTRUCTION. 8.1 Headings. The descriptive headings of the various articles, sections and subsections of this Supplement and the Schedules attached hereto have been inserted for convenience of reference only and shall not be construed as to define, expand, or restrict the rights and obligations of the parties. 8.2 Including. Wherever the term "including" is used in this Supplement and the Schedules attached hereto, such term shall not be construed as limiting the generality of any statement, clause, phrase or term. 5 8.3 Plural and Singular. The terms defined in this Agreement and the Schedule attached hereto shall include the plural as well as the singular and the singular as well as the plural. 9. ASSIGNMENT. This Supplement and the rights and obligations hereunder are not assignable except when assigned by either Party (i) in an Assignment for Security along with the Wholesale Power Contract or (ii) to any assignee or transferee that succeeds to its rights and obligations under the Wholesale Power Contract. In each such case, this Supplement shall be assigned with the Wholesale Power Contract and such assignee or transferee shall agree in writing to be bound by the terms hereof. Any attempted assignment other than to the assignee of a Party's rights and obligations under the Wholesale Power Contract shall be void and unenforceable. This Supplement shall be binding on and inure to the benefit of the permitted successors and permitted assigns of the Parties. 10. RUS. This Supplement shall not be effective unless and until approved in writing by the Administrator. This Supplement is subject to the rights and obligations of the Parties under that certain Amended and Restated Supplemental Agreement, dated as of August 1, 1996, among the Seller, the Member, and the Government, acting through the Administrator, in the same manner and to the same extent as the Wholesale Power Contract. 11. GOVERNING LAW. Except to the extent governed by applicable federal law, this Supplement shall be governed by, and construed in accordance with, the law of the State of Georgia. 12. WAIVER. No Party shall be deemed to waive any provisions of this Supplement unless such waiver shall be in writing and signed by the Party charged with the waiver. No waiver shall be deemed to be a continuing waiver unless those stated in writing. 13. AMENDMENTS. Except as permitted in Section 4.2 of this Supplement, no change, amendment or modification of this Supplement shall be valid or binding upon the Parties unless such change, amendment or modification shall be in writing and duly executed by the Parties. 14. SEVERABILITY. If any provisions of this Supplement is void or enforceable, the remainder of this Supplement shall not be affected thereby. [Signatures on the following page] 6 IN WITNESS WHEREOF, the Seller and the Member have caused this Supplement to be executed, attested, sealed and delivered by their respective duly authorized officers as of the day and year first written above. SELLER: OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP CORPORATION) [CORPORATE SEAL] By: /s/ T. D. Kilgore --------------------------------- T.D. Kilgore, President and Chief Executive Officer ATTEST: /s/ Patricia N. Nash - -------------------------- Patricia N. Nash Secretary MEMBER: ALTAMAHA ELECTRIC MEMBERSHIP CORPORATION [CORPORATE SEAL] By: /s/ Jmon Warnock ------------------------ Name: Jmon Warnock -------------------- Title: President -------------------- ATTEST: /s/ Bernard Hart ----------------------- 7 SCHEDULE TO EXHIBIT 10.8.6 SUPPLEMENTAL AGREEMENT TO THE AMENDED AND RESTATED WHOLESALE POWER CONTRACT (MS) The following is a list of substantially identical Supplemental Agreements to the Amended and Restated Wholesale Power Contracts for the Electric Membership Corporations, dated as of May 1, 1997: 1. Amicalola EMC 20. Middle Georgia EMC 2. Canoochee EMC 21. Mitchell EMC 3. Carroll EMC 22. Ocmulgee EMC 4. Central Georgia EMC 23. Oconee EMC 5. Coastal EMC 24. Okefenoke Rural EMC 6. Cobb EMC 25. Pataula EMC 7. Colquitt EMC 26. Planters EMC 8. Coweta-Fayette EMC 27. Rayle EMC 9. Excelsior EMC 28. Satilla Rural EMC 10. Flint EMC 29. Sawnee EMC 11. Grady EMC 30. Slash Pine EMC 12. Greystone Power Corporation, 31. Snapping Shoals EMC an EMC 32. Sumter EMC 13. Habersham EMC 33. Three Notch EMC 14. Hart EMC 34. Tri-County EMC 15. Irwin EMC 35. Troup EMC 16. Jackson EMC 36. Upson EMC 17. Jefferson EMC 37. Walton EMC 18. Lamar EMC 38. Washington EMC 19. Little Ocmulgee EMC The schedule to the Altamaha EMC Supplemental Agreement and certain amendments to the Cobb EMC Supplemental Agreement and the Snapping Shoals EMC Supplemental Agreement are not filed herewith; however, the Registrant hereby agrees that such documents will be provided to the Commission upon request. 8 EX-27.1 3 FINANCIAL DATA SCHEDULE (FDS)
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OGLETHORPE POWER CORPORATION'S CONDENSED BALANCE SHEET AS OF JUNE 30, 1997 AND RELATED STATEMENTS OF REVENUES AND EXPENSES AND CASH FLOWS FOR THE PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 1 PER-BOOK 3,654,576 201,944 353,359 334,156 0 4,544,035 0 0 321,855 0 0 0 3,279,702 0 0 10,003 82,460 0 291,111 5,261 553,643 4,544,035 514,361 0 375,121 375,121 139,240 22,970 162,210 147,263 14,947 0 0 0 41,484 122,244 0 0 $321,855 REPRESENTS TOTAL RETAINED PATRONAGE CAPITAL. THE REGISTRANT IS A MEMBERSHIP CORPORATION AND HAS NO AUTHORIZED OR OUTSTANDING EQUITY SECURITIES.
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