OGLETHORPE POWER CORP - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
OR
o	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 (State or other jurisdiction of incorporation or organization)		58-1211925 (I.R.S. employer identification no.)
Post Office Box 1349 2100 East Exchange Place Tucker, Georgia (Address of principal executive offices)		30085-1349 (Zip Code)
Registrant's telephone number, including area code		(770) 270-7600

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

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

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 MARCH 31, 2005

			Page No.
PART I — FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Condensed Balance Sheets as of March 31, 2005 (Unaudited) and December 31, 2004	3
		Condensed Statements of Revenues and Expenses (Unaudited) for the Three Months ended March 31, 2005 and 2004	5
		Condensed Statements of Patronage Capital and Membership Fees and Accumulated Other Comprehensive Margin (Unaudited) for the Three Months ended March 31, 2005 and 2004	6
		Condensed Statements of Cash Flows (Unaudited) For the Three Months ended March 31, 2005 and 2004	7
		Notes to Condensed Financial Statements For the Three Months ended March 31, 2005 and 2004	8
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	11
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16
	Item 4.	Controls and Procedures	16
PART II — OTHER INFORMATION
	Item 1.	Legal Proceedings	17
	Item 6.	Exhibits	17
SIGNATURES			18

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements

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

			(dollars in thousands)
		2005			2004
			(Unaudited)
Assets
Electric plant:
	In service	$	5,782,434		$	5,784,529
	Less: Accumulated provision for depreciation		(2,270,206	)		(2,237,192	)

			3,512,228			3,547,337
	Nuclear fuel, at amortized cost		88,241			87,941
	Construction work in progress		25,272			22,830

			3,625,741			3,658,108

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

			367,156			390,794

Current assets:
	Cash and cash equivalents, at cost		99,047			133,669
	Restricted cash and cash equivalents, at cost		—			11,781
	Restricted short-term investments, at cost		239,854			81,104
	Other short-term investments, at market		6,593			6,663
	Receivables		125,033			129,221
	Inventories, at average cost		96,450			100,927
	Prepayments and other current assets		2,351			4,118

			569,328			467,483

Deferred charges:
	Premium and loss on reacquired debt, being amortized		131,726			134,575
	Deferred amortization of capital leases		110,002			110,422
	Deferred debt expense, being amortized		24,049			23,026
	Deferred nuclear outage costs, being amortized		18,744			10,880
	Deferred asset retirement obligations costs, being amortized		20,536			14,664
	Other		2,938			3,226

			307,995			296,793

		$	4,870,220		$	4,813,178

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

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

			(dollars in thousands)
		2005			2004
			(Unaudited)
Equity and Liabilities
Capitalization:
	Patronage capital and membership fees	$	472,881		$	461,655
	Accumulated other comprehensive loss		(49,326	)		(46,896	)

			423,555			414,759
	Long-term debt		3,131,397			3,180,915
	Obligation under capital leases		319,507			324,326
	Obligation under Rocky Mountain transactions		84,404			83,012

			3,958,863			4,003,012

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

			413,505			319,688

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

			497,852			490,478

		$	4,870,220		$	4,813,178

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

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

				(dollars in thousands)
			Three months
			2005			2004
Operating revenues:
	Sales to Members		$	287,893		$	296,687
	Sales to non-Members			9,391			8,157

		Total operating revenues		297,284			304,844

Operating expenses:
	Fuel			66,348			57,861
	Production			62,717			58,322
	Purchased power			71,361			87,697
	Depreciation and amortization			38,354			38,133
	Accretion			3,108			6,787

		Total operating expenses		241,888			248,800

Operating margin				55,396			56,044

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

		Total other income		10,427			12,192

Interest charges:
	Interest on long-term debt and capital leases			50,126			51,276
	Other interest			1,015			682
	Allowance for debt funds used during construction			(482	)		(612	)
	Amortization of debt discount and expense			3,938			4,172

		Net interest charges		54,597			55,518

Net margin			$	11,226		$	12,718

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

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

		Patronage Capital and Membership Fees		Accumulated Other Comprehensive Margin (Loss)			Total
			(dollars in thousands)
Balance at December 31, 2003		$	444,418	$	(49,814	)	$	394,604

Components of comprehensive margin:
	Net margin		12,718					12,718
	Unrealized loss on interest rate swap arrangements				(5,142	)		(5,142	)
	Unrealized gain on available-for-sale securities				237			237
	Unrealized gain on financial gas hedges				1,523			1,523

Total comprehensive margin								9,336


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

Balance at December 31, 2004		$	461,655	$	(46,896	)	$	414,759

Components of comprehensive margin:
	Net margin		11,226					11,226
	Unrealized loss on interest rate swap arrangements				(2,244	)		(2,244	)
	Unrealized loss on available-for-sale securities				(322	)		(322	)
	Unrealized gain on financial gas hedges				136			136

Total comprehensive margin								8,796


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

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

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

					(dollars in thousands)
				2005			2004
Cash flows from operating activities:
	Net margin			$	11,226		$	12,718

	Adjustments to reconcile net margin to net cash provided by operating activities:
		Depreciation and amortization, including nuclear fuel			55,688			57,042
		Net accretion cost			3,108			6,787
		Allowance for equity funds used during construction			(65	)		(84	)
		Amortization of deferred gains			(619	)		(619	)
		Amortization of net benefit of sale of income tax benefits			(796	)		(796	)
		Deferred nuclear outage costs			(12,619	)		(7,296	)
		Other			198			(1,072	)
	Change in operating assets and liabilities:
		Receivables			4,188			9,777
		Inventories			4,477			(1,290	)
		Prepayments and other current assets			1,767			1,995
		Accounts payable			(23,994	)		(28,776	)
		Accrued interest			(28,979	)		3,773
		Accrued and withheld taxes			6,300			(6,211	)
		Members' advances			158,672			—
		Other current liabilities			1,405			(2,319	)

			Total adjustments		168,731			30,911

Net cash provided by operating activities					179,957			43,629

Cash flows from investing activities:
	Property additions				(12,675	)		(13,077	)
	Net proceeds from bond, reserve and construction funds				878			13,618
	Decrease (increase) in investment in associated organizations				503			(1,187	)
	Decrease in restricted cash and cash equivalents				11,781			133,343
	Increase in restricted and other short-term investments				(158,750	)		(926	)
	Decrease (increase) in other long-term investments				21,830			(28,005	)
	Increase in decommissioning fund				(3,115	)		(6,960	)

Net cash (used in) provided by investing activities					(139,548	)		96,806

Cash flows from financing activities:
	Long-term debt proceeds				—			—
	Long-term debt payments				(73,789	)		(146,520	)
	Issuance costs and loss on reacquired debt				(2,111	)		(9,092	)
	Increase in deferred credit for major overhaul				870			1,577

Net cash used in financing activities					(75,030	)		(154,035	)

Net decrease in cash and cash equivalents					(34,621	)		(13,600	)
Cash and cash equivalents at beginning of period					133,668			66,485

Cash and cash equivalents at end of period				$	99,047		$	52,885

Cash paid for:
	Interest (net of amounts capitalized)			$	79,638		$	47,573
	Income taxes				—			—

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

Oglethorpe Power Corporation
Notes to Condensed Financial Statements
March 31, 2005 and 2004

(A): General. The condensed financial statements included in this report have been prepared by Oglethorpe Power Corporation (Oglethorpe), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). In the opinion of management, the information furnished in this report reflects all adjustments (which include only normal recurring adjustments) and estimates necessary to present fairly, in all material respects, the results for the periods ended March 31, 2005 and 2004. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to SEC rules and regulations, although Oglethorpe believes that the disclosures are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in Oglethorpe's latest Annual Report on Form 10-K, as filed with the SEC. Certain amounts for 2004 have been reclassified to conform to the current period presentation. The results of operations for the three-month period ended March 31, 2005 are not necessarily indicative of results to be expected for the full year.
(B): New Accounting Pronouncements. In March 2005, the Financial Accounting Standards Board (FASB) issued Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations". This interpretation clarifies that the term conditional asset retirement obligation as used in FASB No. 143, "Accounting for Asset Retirement Obligations", refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of Oglethorpe. The obligation to perform the asset retirement activity is unconditional even though uncertainty may exist about the timing and/or method of settlement. Thus, the timing and/or method of settlement may be conditional on a future event. Accordingly, Oglethorpe is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. This Interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. Interpretation No. 47 will be effective for Oglethorpe by no later than by the end of the current fiscal year ending December 31, 2005. Retroactive application for interim financial information is permitted but not required. Oglethorpe is assessing the impact of this Interpretation and currently believes that Interpretation No. 47 will not have a material impact on its financial statements.
(C): Proposed Accounting Interpretation. A current FASB project, "Uncertain Tax Positions (Recognition of Tax Benefits)", objective is to clarify the criteria for recognition of tax benefits in accordance with Statement No. 109, "Accounting for Income Taxes". The project seeks to clarify that an entity's tax benefits recognized in tax returns must be probable of being sustained prior to recording the related tax benefit in the financial statements. Oglethorpe is monitoring developments of the proposed Interpretation and is assessing the impact this Interpretation may have on its financial statements. Oglethorpe cannot predict what actions the FASB will take or how such actions might ultimately affect Oglethorpe's financial position or results of operations.
(D): Accumulated Comprehensive Margin or (Loss). The table below provides a detail of the beginning and ending balance for each classification of other comprehensive margin (loss) along with the amount of any reclassification adjustments included in margin for each of the periods presented in the Statement of Patronage Capital and Membership Fees and Accumulated Other Comprehensive Margin. There were no material changes in the nature, timing or amounts of expected reclassification adjustments from the amounts disclosed in Oglethorpe's Annual Report on Form 10-K for the year ended December 31, 2004. Oglethorpe's effective tax rate is zero; therefore, all amounts below are presented net of tax.

Accumulated Other Comprehensive Margin (Loss)

(dollars in thousands)
Interest Rate Swap Arrangements	Available-for-sale Securities	Financial Gas Hedges	Total

Balance at December 31, 2003	($49,916	)	($618	)	$720		($49,814	)

Unrealized gain/(loss)	(5,142	)	245		1,393		(3,504	)
Reclassification adjustments	—		(8	)	130		122

Balance at March 31, 2004	($55,058	)	($381	)	$2,243		($53,196	)


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

Unrealized gain/(loss)	(2,244	)	(322	)	—		(2,566	)
Reclassification adjustments	—		—		136		136

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

(E): Environmental matters:
: Set forth below are environmental matters that could have an effect on Oglethorpe. At this time, the resolution of these matters is uncertain, and Oglethorpe has made no accruals for such contingencies and cannot reasonably estimate the possible loss or range of loss with respect to these matters.
: 1. General. As is typical for electric utilities, Oglethorpe is subject to various federal, state and local air and water quality requirements which, among other things, regulate emissions of pollutants, such as particulate matter, sulfur dioxide and nitrogen oxides into the air and discharges of other pollutants, including heat, into waters of the United States. Oglethorpe is also subject to federal, state and local waste disposal requirements that regulate the manner of transportation, storage and disposal of various types of waste.