The attached financial statements fairly represent the financial condition and results of operations for INDIANTOWN COGENERATION, LP AND SUBSIDIARY

Transcription

1 The attached financial statements fairly represent the financial condition and results of operations for INDIANTOWN COGENERATION, LP AND SUBSIDIARY and have been prepared in accordance with GAAP (subject to normal recurring adjustments) for the period ending March 31, 2017 INDIANTOWN COGENERATION, LP AND SUBSIDIARY

2 Indiantown Cogeneration LP Quarterly Financial Statements as of March 31, 2017 Management of Indiantown Cogeneration LP ("ICL" or the "Company") has prepared the attached financial statements in accordance with 5.3 of the Trust Indenture and 6.8 (d) of the Loan Agreement requiring that "as soon as practicable and in any event within 60 days after the end of the first, second and third quarterly accounting periods of each fiscal year of the Partnership (commencing with the quarter ending March 31, 2013), an unaudited balance sheet of the Partnership as of the last day of such quarterly period and the related statements of income, cash flows, and partners' capital of the Partnership for such quarterly period and (in the case of second and third quarterly periods) for the portion of the fiscal year ending with the last day of such quarterly period, setting forth in each case in comparative form corresponding unaudited figures from the preceding fisca l year and accompanied by a written statement of an Authorized Representative of the Partnership to the effect that such financial statements fairly represent the Partnership's financial condition and results of operations at and as of their respective dates". On May 18, 2016, Calypso Energy Holdings, LLC ("Calypso") entered into a purchase and sale agreement ("PSA") with Florida Power & Light Company ("FPL"). Under the PSA, Calypso agreed to sell 100% of their membership interests in Palm Power LLC ("Palm"), Indiantown Project Investment L.P. ("IPILP"), Thaleia, LLC ("Thaleia") and Toyan Enterprises, LLC ("Toyan") to FPL. On January 5, 2017, FPL assumed ownership of the 330 MW coal-fired generation facility and recorded the transaction in accordance with Generally Accepted Accounting Principles ("GAAP") Accounting Standard Codification ("ASC") 805, Business Combinations. Prior to assuming ownership of this facility, FPL had a long-term purchased power agreement ("PPA") with this facility for substantially all of its capacity and energy. This PPA remains in effect subsequent to the acquisition. As a result of the acquisition, FPL is contemplating various alternatives regarding the future operations of ICL. FPL's petition to the Florida Public Service Commission ("FPSC") Docket No EI filed on June 20, 2016 stated the following: " FPL intends to maintain for its customers the capacity of the Facility and the option of continued fuel reliability and diversity by keeping the Facility capable of operating through While FPL currently anticipates that it will no longer need to dispatch the Facility after 2018, it will be maintained in a condition capable of operating until the debt is retired." These quarterly financial statements are presented in accordance with GAAP and reflect adjustments for FPL's plan to reduce the plant's operations with the intention of eventually phasing the plant out of service by 2020.

3 The following sets forth the accounting impacts to the Company's Quarterly Financial Statements as of March 31, 2017 financial statements as a result of the acquisition: The estimated useful life of Property, Plant and Equipment {"PP&E") has been adjusted to reflect FPL intent to phase the plant out of service by Depreciation expense is approximately 8.8 million per month using this new estimated useful life. An Asset Retirement Obligation and its related PP&E asset of 10.7 million have been recorded to reflect the plan to commence decommissioning of the plant in Accretion expense included in Operations and Maintenance expense is 17,000 per month and depreciation expense includes 222,000 per month relating to the asset. As of December 31, 2016, assets included Deferred Financing Costs of approximately 1.3 million, related to the issuance of tax-exempt revenue bonds, previously amortized through These costs are now being amortized through 2020 to coincide with the planned defeasance of these bonds. The financial statements reflect additional interest expense of approximately 25,000 per month compared to The Management Services Agreement and the Operations and Maintenance Agreements were assigned to FPL at the acquisition. The fees associated with these agreements have decreased due to the plan to phase out operations at the plant and a change in ownership. Partners' Capital was impacted by acquisition related items specifically, accounts receivable PPA related charges paid by FPL directly to Calypso rather than to ICL for approximately 6.7 million. FPL's intent to retire the facility in 2020 may result in an impairment and a full write down in the value of the Company's long-lived assets under GAAP. A potential long-lived asset impairment will not impact FPL's ability to pay off and retire all of ICL's outstanding debt nor would it impact the PPA which will remain in place for the expected term of ICL's outstanding debt obligations. These quarterly financial statements shou ld be read in conjunction with the Company's financial statements and notes to the financial statements included in its December 31, 2016 Annual Report.

4 Consolidated Balance Sheets (Unaudited) March 31, 2017 and December 31, 2016 March 31, December 31, (in thousands of doflars) Assets Current assets Cash and cash equivalents Restricted cash 14,544 2,292 Accounts receivable 7,661 5,505 Inventory 7,988 7,139 Other current assets Total current assets 30,916 15,753 Deposits 1,000 1,044 Restricted cash 12,820 12,820 Property and equipment, net of accumulated depreciation of 308,978 and 282,221 in 2017 and 2016, respectively 410, ,274 Total assets 454, ,891 Liabilities and Partners' Capital Current liabilities Current portion of long-term debt 14,744 14,744 Accounts payable Due to affiliates 7,791 1,862 Accrued interest 3, Accrued property taxes 240 1,565 Other accrued liabilities Total current liabilities 26,761 19,816 Long-term debt, net 179, ,225 Asset retirement obligation 10, Total liabilities 216, ,289 Partners' capital General partners 71,269 76,853 Limited partners 166, ,749 Total partners' capital 237, ,602 Total liabilities and partners' capital 454, ,891 Page 1

5 Consolidated Statements of Operations (Unaudited ) Three Months Ended March 31, 2017 and 2016 (in thousands of dollars) Operating revenues Energy Capacity Steam Total operating revenues Operating expenses Fuel Operations and maintenance General and administrative Depreciation and amortization Total operating expenses Operating (loss) income Other income (expense) Other income Interest expense and fees, net Total other expenses Net (loss) income Three Months Ended March 31, ,547 22,987 23, ,987 24,81 7 1,068 2,097 3,328 5, ,436 26,784 2,684 31,472 11,584 (8,485) 13,233 2 {3,380} {3,872} {3,380} {3,870} (11,865) 9,363 Indiantown Cogeneration LP cfs Fourth Draft

6 Consolidated Statements of Changes in Partners' Capital (Unaudited) For the Three Months Ended March 31, 2017 General Limited (in thousands of dollars) Partners Partners Partners' capital at December 31, , ,749 Net loss (3,554) (8,311) Other (2,030} (4,747} Partners' capital at March 31, , ,691 Total Partners' Capital 256,602 (11,865) (6,777} 237,960 Page 1

7 Consolidated Statements of Changes in Partners' Capital (Unaudited) For the Three Months Ended March 31, 2017 and March 31, 2016 (in thousands of dollars) Cash flows from (used in) operating activities Net (loss) income (11,865) 9,363 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 26,784 2,684 Amortization of deferred financing costs Accretion of asset retirement obligations (214) 5 Other non-cash adjustments (10) Changes in operating assets and liabilities: Accounts receivable (8,889) 4,192 Inventory (838) (741) Other assets Accounts payable (157) (1,386) Due to affiliates 5,929 (1,749) Accrued interest 3,014 3,480 Accrued property taxes (1,325) (1,265) Other accrued liabilites (516) (2,328) Net cash provided by operating activities 12,573 12,917 Cash flows used in investing activities Capital expenditures (2) Increase in restricted cash (12,252) (12,898) Net cash used in investing activities (12,252) (12,900) Cash flows from (used in) financing activities Borrowings under revolving credit agreement 2,200 3,000 Repayments of revolving credit agreement (2,200) (3,000) Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents Beginning of period End of period Supplemental Disclosures of Cash Flow Information Cash (paid) refunded during the period for continuing operations: Interest Non-cash investing and financing activities: Increase in capitalized assets associated with asset retirement obligations 10,696 Non-cash adjustment to Accounts Recievable and Deposits due to acquisition 6,777