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

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2004

Commission File No. 333-89521

CE GENERATION, LLC
(Exact name of registrant as specified in its charter)
 
Delaware
 
47-0818523
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
302 South 36th Street, Suite 400
Omaha, Nebraska
 
 
68131
(Address of principal executive offices)
 
(Zip Code)

(402) 341-4500
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: N/A
Securities registered pursuant to Section 12(g) of the Act: N/A


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 o

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

The members’ equity accounts are held 50% by MidAmerican Energy Holdings Company and 50% by TransAlta USA Inc. as of April 30, 2004.

 
     
 

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

 
Financial Statements
 
3
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
10
 
Quantitative and Qualitative Disclosures About Market Risk
 
15
 
Controls and Procedures
 
15
 
 
 
 
 
PART II – OTHER INFORMATION
 
 
 
 
 
 
Legal Proceedings
 
16
Item 2.
 
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
 
16
Item 3.
 
Defaults Upon Senior Securities
 
16
Item 4.
 
Submission of Matters to a Vote of Security Holders
 
16
Item 5.
 
Other Information
 
16
Item 6.
 
Exhibits and Reports on Form 8-K
 
16
 
 
 
 
 
 
17
 
18

 
  2   
 
 
PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements.

INDEPENDENT ACCOUNTANTS' REPORT


Board of Directors and Members
CE Generation, LLC

We have reviewed the accompanying consolidated balance sheet of CE Generation, LLC and subsidiaries (collectively, the “Company”) as of March 31, 2004, and the related consolidated statements of operations and other comprehensive income and cash flows for the three-month periods ended March 31, 2004 and 2003. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of CE Generation, LLC and subsidiaries as of December 31, 2003, and the related consolidated statements of operations and other comprehensive income, members’ equity and cash flows for the year then ended (not presented herein); and in our report dated February 20, 2004 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2003 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Omaha, Nebraska
April 30, 2004

 
  3   
 
 
CE GENERATION, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)

 
  
As of
   
 		  
   
March 31, 
  
December 31,
  
   

2004 

  
2003 
  
   
 
 
   
(Unaudited)
    
ASSETS
Current assets:
    
 
    
 
  
Cash and cash equivalents
  
$
59,950
  
$
33,853
  
Restricted cash
    
7,123
    
7,297
  
Trade accounts receivable, net
   
47,833
    
49,434
  
Trade accounts receivable from affiliate
    
1,564
    
1,564
  
Prepaid expenses and other current assets
    
10,281
    
6,104
  
Inventories
    
25,682
    
25,265
  
Note receivable from related party and other due from affiliates
    
1,662
    
137,034
  
   
 
 
Total current assets
    
154,095
    
260,551
  
   
 
 
Restricted cash
    
6,621
    
6,419
  
Properties, plants, contracts and equipment, net
    
1,149,359
    
1,167,359
  
Goodwill
    
265,897
    
265,897
  
Deferred financing charges and other assets
    
8,172
    
8,516
  
   
 
 
Total assets
  
$
1,584,144
  
$
1,708,742
  
   
 
 
 
    
 
    
 
  
LIABILITIES AND MEMBERS’ EQUITY
Current liabilities:
    
 
    
 
  
Accounts payable
  
$
7,118
  
$
1,262
  
Accrued interest
    
15,702
    
3,156
  
Interest rate swap liability
    
14,842
    
13,873
  
Other accrued liabilities
    
27,675
    
31,893
  
Income tax payable
    
-
    
1,138
  
Current portion of long-term debt
    
66,555
    
201,915
  
   
 
 
Total current liabilities
    
131,892
    
253,237
  
   
 
 
Project loans
    
93,925
    
100,473
  
Salton Sea notes and bonds
    
298,377
    
298,377
  
Senior secured bonds
    
323,800
    
323,800
  
Deferred income taxes
    
259,283
    
257,045
  
Other long-term liabilities
    
8,045
    
8,039
  
   
 
 
Total liabilities
    
1,115,322
    
1,240,971
  
   
 
 
 
    
 
    
 
  
Minority interest
    
48,199
    
48,886
  
 
    
 
    
 
  
Commitments and contingencies (Note 5)
    
 
    
 
  
 
    
 
    
 
  
Members’ equity
    
427,422
    
425,122
  
Accumulated other comprehensive loss
    
(6,799
)
  
(6,237
)
   
 
 
Total members’ equity
    
420,623
    
418,885
  
   
 
 
Total liabilities and members’ equity
  
$
1,584,144
  
$
1,708,742
  
   
 
 

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

 
  4   
 
 
CE GENERATION, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND OTHER COMPREHENSIVE INCOME
(In thousands)

   

 Three Months

 

 

 

 Ended March 31,

  
   
 
 
  

2004

 

2003

  
   
 
 
 
    
(Unaudited)
  
Revenue:
    
 
    
 
  
Operating revenue
  
$
99,126
  
$
122,005
  
Interest and other income
    
802
    
723
  
   
 
 
Total revenue
    
99,928
    
122,728
  
   
 
 
Costs and expenses:
    
 
    
 
  
Fuel
    
20,364
    
33,463
  
Plant operations, general and administrative
    
32,894
    
33,523
  
Depreciation and amortization
    
20,748
    
21,157
  
Interest expense
    
15,809
    
18,024
  
   
 
 
Total costs and expenses
    
89,815
    
106,167
  
   
 
 
Income before provision for income taxes
    
10,113
    
16,561
  
Provision for income taxes
    
1,454
    
3,995
  
   
 
 
Income before minority interest
    
8,659
    
12,556
  
Minority interest
    
6,359
    
5,745
  
   
 
 
Income before cumulative effect of change in accounting principle
    
2,300
    
6,821
  
Cumulative effect of change in accounting principle, net of tax
    
-
    
(2,467
)
   
 
 
Net income
  
$
2,300
  
$
4,354
  
   
 
 
 
    
 
    
 
  
Other comprehensive income:
    
 
    
 
  
Unrealized gain (loss) on cash flow hedges, net of tax
    
(562
)
  
782
  
   
 
 
Comprehensive income
  
$
1,738
  
$
5,136
  
   
 
 

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

 
  5   
 
 
CE GENERATION, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

   

 Three Months

 

 

 

 Ended March 31,

  
   
 
 
  

2004

 

2003

  
   
 
 
 
  
(Unaudited) 
Cash flows from operating activities:
    
 
    
 
  
Net income
  
$
2,300
  
$
4,354
  
Adjustments to reconcile net income to net cash flows from operating activities:
    
 
    
 
  
Depreciation and amortization
    
20,748
    
21,157
  
Provision for deferred income taxes
    
2,550
    
1,569
  
Distributions to minority interest in excess of income
    
(590
)
  
(492
)
Cumulative effect of change in accounting principle, net of tax
    
-
    
2,467
  
Asset impairment
    
-
    
971
  
Amortization of deferred financing costs
    
312
    
372
  
Changes in other items:
    
 
    
 
  
Accounts receivable, net
    
1,601
    
2,781
  
Due from affiliates
    
(17
)
  
(1,303
)
Accounts payable and other accrued liabilities
    
13,052
    
19,458
  
Other assets
    
(4,562
)
  
4,856
  
   
 
 
Net cash flows from operating activities
    
35,394
    
56,190
  
   
 
 
 
    
 
    
 
  
Cash flows from investing activities:
    
 
    
 
  
Capital expenditures
    
(3,744
)
  
(10,263
)
Proceeds from related party note receivable
    
136,383
    
-
  
Increase in restricted cash
    
(202
)
  
(825
)
   
 
 
Net cash flows from investing activities
    
132,437
    
(11,088
)
   
 
 
 
    
 
    
 
  
Cash flows from financing activities: