10-Q 1 a2029805z10-q.txt 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 September 30, 2000 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period ______ to ______ Commission File Number 333-96239 Tenaska Georgia Partners, L.P. (Exact Name of Registrant as Specified in Its Charter) Delaware 47-0812088 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 1044 N. 115 Street, Suite 400 Omaha, Nebraska 68154-4446 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (402) 691-9500 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 reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Tenaska Georgia Partners, L.P. Report on Form 10-Q For the Quarter Ended September 30, 2000

TENASKA GEORGIA PARTNERS, L.P. (A Development Stage Limited Partnership) BALANCE SHEETS

The accompanying notes are an integral part of these balance sheets. 2 TENASKA GEORGIA PARTNERS, L.P. (A Development Stage Limited Partnership) STATEMENTS OF OPERATIONS (Unaudited)

The accompanying notes are an integral part of these statements. 3 TENASKA GEORGIA PARTNERS, L.P. (A Development Stage Limited Partnership) STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited)

The accompanying notes are an integral part of this statement. 4 TENASKA GEORGIA PARTNERS, L.P. (A Development Stage Limited Partnership) STATEMENTS OF CASH FLOWS (Unaudited)

The accompanying notes are an integral part of these statements. 5 TENASKA GEORGIA PARTNERS, L.P. (A Development Stage Limited Partnership) Notes to Financial Statements September 30, 2000 (Unaudited) 1. GENERAL The financial statements included herein as of September 30, 2000 and for the three and nine months ended September 30, 2000 and 1999 have been prepared by Tenaska Georgia Partners, L.P. (the Limited Partnership) without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, the financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial results for the interim periods. Certain information and notes normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, the Limited Partnership believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Limited Partnership's audited financial statements and the notes thereto for the year ended December 31, 1999 included in the Limited Partnership's prospectus dated July 31, 2000. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. ORGANIZATION The Limited Partnership was formed on April 16, 1998 to develop, finance, construct, own or lease, operate and maintain a 936 megawatt, natural gas-fired electric generation peaking facility (the Facility) located in Heard County, Georgia. The Facility will generate electric power for sale and the Limited Partnership expects to incur costs of approximately $310,500,000 to complete the Facility. The Limited Partnership was inactive prior to calendar year 1999 and commenced development activities during such year. The Limited Partnership is scheduled to terminate December 31, 2050. The following are the partners and their respective ownership interests and their percentage share of net income or loss:

The partners have committed to fund up to $35,500,000 of equity and the Limited Partnership has issued senior secured bonds for $275,000,000 to fund construction of the Facility. 6 The day-to-day management of the affairs of the Limited Partnership, including preparation and maintenance of the financial and other records and books of account of the Limited Partnership and supervision of the ongoing operations of the facilities, loan administration and activities of the Limited Partnership, are the responsibility of the managing partner (Tenaska Georgia, Inc.), subject to the direction of the Executive Review Committee. Tenaska Georgia, Inc. does not have the authority to incur any obligations or liabilities on behalf of the Limited Partnership, except as approved by the Executive Review Committee. On April 20, 2000, Diamond Georgia, LLC, an indirect, wholly owned subsidiary of Mitsubishi Corporation (Mitsubishi), acquired 0.30 percent of Tenaska Georgia, Inc.'s original 1.0 percent ownership interest in the Limited Partnership. In addition, Mitsubishi acquired an indirect ownership interest of approximately 30 percent in Tenaska Georgia I, L.P., through subsidiaries of its U.S. affiliate, Diamond Generating Corporation. These acquisitions were effective January 1, 2000. In connection with these acquisitions, on April 24, 2000, the letters of credit issued on November 4, 1999 by The First National Bank of Omaha in the amounts of $35,145,000 and $355,000 on behalf of Tenaska Georgia I, L.P. and Tenaska Georgia, Inc., respectively, to support each partner's equity funding commitments, were amended and reduced in amount to $1,322,500 and $248,500, respectively. Mitsubishi issued a Guaranty in the amount of $33,929,000 to replace the amount by which the letters of credit were reduced. 3. DEVELOPMENT WORK IN PROGRESS In 1999, the Limited Partnership entered into an Engineering, Procurement and Construction Agreement (EPC Agreement) with Zachry Construction Corporation (Zachry) to design, engineer, procure, expedite and supply all labor, materials (including the gas turbines), supervision and tools for the construction of the Facility for a total guaranteed lump-sum price of $229,064,832. As of September 30, 2000, the Limited Partnership has incurred costs of $84,629,097 under the terms of the EPC Agreement. This amount has been capitalized and is included on the Balance Sheet as Development Work in Progress. In 1999, the Limited Partnership entered into a separate agreement with Willbros Engineers, Inc. to construct a natural gas pipeline from the Facility to an interconnection point with a regional natural gas pipeline. As of September 30, 2000, the Limited Partnership has incurred costs of $2,757,357 under the terms of this agreement. This amount has been capitalized and is included on the Balance Sheet as Gas Pipeline Costs. As of September 30, 2000, $3,633,141 of interest has been capitalized and included on the Balance Sheet as Development Work in Progress. 4. NEW ACCOUNTING PRONOUNCEMENTS The Limited Partnership continues to analyze the effects of the adoption of Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by SFAS Nos. 137 and 138. Provisions of SFAS No. 133, as amended, must be applied to fiscal periods beginning after June 15, 2000. The Limited Partnership intends to adopt the provisions of SFAS No. 133, as amended, within the timeframe and in accordance with the requirements provided by that statement. The Limited Partnership believes that SFAS No. 133, as amended, will not have a material impact on its financial condition or its results of operations. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED IN ITEM 1 OF THIS QUARTERLY REPORT, AND THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONTAINED IN OUR REGISTRATION STATEMENT ON FORM S-4 (FILE NO. 333-96239) RELATING TO OUR SENIOR SECURED BONDS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "REGISTRATION STATEMENT"). UNLESS OTHERWISE INDICATED OR THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES IN THIS QUARTERLY REPORT TO "WE," "US," "OUR" OR SIMILAR TERMS REFER TO TENASKA GEORGIA PARTNERS, L.P. GENERAL We were formed on April 16, 1998 to develop, finance, construct, own or lease, operate and maintain the Facility. Prior to calendar year 1999, we were inactive. We are in the development stage and have no operating revenues. We obtained $275,000,000 of project financing from the sale of the 9.50% Senior Secured Bonds due 2030 ("Bonds"). Our partners have committed to fund up to $35,500,000 in equity contributions. The total cost of the construction of the Facility is estimated to be approximately $310,500,000, which will be financed by the proceeds from the sale of the Bonds and the equity contributions. On August 31, 2000, we completed the bond exchange whereby the holders of the Bonds exchanged their Bonds for new Bonds registered under the Securities Act of 1933. The Facility is under construction and is currently scheduled to be completed on June 1, 2002, with three turbine-generators scheduled to be operational June 1, 2001 and the remaining three turbine generators scheduled to be operational June 2, 2002. As of September 30, 2000, construction of the Facility was on schedule and within budget. RESULTS OF OPERATIONS The results of operations for the three and nine month periods ended September 30, 1999 and 2000 may not be comparable with results of operations for future periods, especially when the Facility begins operations in 2001. For the three and nine month periods ended September 30, 1999, we were primarily in the start up phase without core contracts or bond financing and, as a result, substantially all costs incurred for management fees, professional and consulting fees, and other costs were expensed as start up costs. For the three and nine month periods ended September 30, 1999, costs in the amounts of $1,415,385 and $6,211,339, respectively, were expensed as start up costs. By the end of August 1999, the power purchase agreement with PECO Energy Company (the "Power Purchase Agreement") was signed. For the three and nine month periods ended September 30, 1999, costs incurred for management fees, professional and consulting fees and other costs, deemed to be direct costs associated with the contract to supply power, in the amount of $115,662, were capitalized as Contract Costs. By the end of November 1999, in addition to the Power Purchase Agreement, core contracts associated with the construction and financing of the Facility had been completed and, as a result, we moved from the start up phase to the development phase. For the three and nine month periods ended September 30, 2000, costs incurred for management fees, professional and consulting fees and other costs, deemed to be direct costs associated with the contract to supply power, in the amount of $1,065,279 and $2,700,812, respectively, have been capitalized as Contract Costs. For the three and nine month periods ended September 30, 2000, total costs in the amount of $27,455.104 and $70,094,949, respectively, have been capitalized as Development Work in Progress. For the three and nine month periods ended September 30, 2000, interest capitalized as Development Work in Progress was $1,684,897 and $3,414,082, respectively. For the three and nine month periods ended September 30, 2000, costs in the amount of $1,267,984 and $2,757,357, respectively, have been capitalized as Gas Pipeline Costs. A portion of the proceeds from the sale of the Bonds has not yet been expended on construction and is invested in cash and cash equivalents and short-term investments. The interest earned on these invested funds is included as interest income. The interest expense incurred on the portion of the Bond proceeds expended to construct the Facility and gas pipeline is capitalized as Development Work in Progress. Interest expense incurred on the Bond proceeds not spent on construction is included as interest expense. For the three and nine month periods ended September 30, 2000, interest, net of amounts capitalized, of $4,918,922 and $16,252,237, respectively, has been expensed. For the three and nine month periods ended September 30, 2000, interest in the amount of $3,159,498 and $10,120,689, respectively, has been recorded as income. 8 LIQUIDITY AND CAPITAL RESOURCES We believe that the net proceeds from the sale of the Bonds, interest income on the unspent portion thereof during the construction period, anticipated revenues from the operation of the initial units and proceeds from the equity contributions will be sufficient to (1) fund the engineering, procurement, construction, testing and commissioning of the Facility, (2) pay certain fees and expenses in connection with the financing and development of our project, and (3) pay the costs of developing, financing and initially operating our project, including interest on the Bonds. After the Facility is placed in commercial operation, we expect that our revenues under the Power Purchase Agreement will be adequate to support our costs of operations. In order to provide liquidity in the event of temporary cash flow shortfalls, we are required to maintain an account that will contain an amount equal to the principal and interest due on the Bonds on the next scheduled payment date. Our obligation to fund this account begins on June 1, 2002. The maintenance of this balance will be done through cash funding, the issuance of a letter of credit or a combination of both. BUSINESS STRATEGY AND OUTLOOK Our overall business strategy is to perform as agreed under our 29-year Power Purchase Agreement and to maximize our revenues under the Power Purchase Agreement by earning incentive payments available through achieving certain availability and efficiency levels. We intend to cause the Facility to be managed, operated and maintained in compliance with all applicable documents relating to our project and all applicable legal requirements. FORWARD LOOKING STATEMENTS Various statements contained in this quarterly report are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which speak only as of the date hereof, can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "intends," "will," "should," or "anticipates," or by the negative forms or other variations of these terms or comparable terminology, or by the discussions of strategy. Although these statements are based on assumptions that we believe are reasonable, no assurance can be given that the future results covered by these statements will be achieved. These statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by these statements. The most significant of these risks, uncertainties and other factors are discussed under the heading "RISK FACTORS" in the Registration Statement, and you are urged to read this section and carefully consider these factors. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Bonds were issued at a 9.50% fixed rate of interest and as a result we are not exposed to market risk associated with an increase in interest rates. The unspent proceeds from the Bonds are invested in cash and cash equivalents and short-term securities (collectively "short-term investments") with fixed rates of interest for periods of up to six months. As these short-term investments mature, the proceeds are either spent on construction of the Facility or reinvested in other short-term investments. If short-term interest rates decrease, the interest we earn on these short-term investments would decrease accordingly. However, we would not expect any such decrease in the interest earned on short-term investments to have a material adverse effect on our results of operations. 9 PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION. In July 2000, we received notice that two groups are considering filing a lawsuit against us and another defendant claiming violations of the Clean Air Act and local zoning requirements. These notices, one of which was sent on behalf of the Coweta County Rural Preservation Society and the other of which was sent on behalf of Coweta County, Georgia, are pursuant to a provision in the Clean Air Act requiring 60 days' written notice prior to commencement of a citizen suit with respect to certain environmental matters. The principal claims in the notices are that the regulatory bodies responsible for issuing the air permit and for re-zoning our project did not follow applicable law and procedures. The 60 day notice period has expired and no suit has yet been filed. We do not expect legal proceedings that may be commenced by the claimants to have a material adverse effect on us. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits -- See Exhibit Index. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter. 10 SIGNATURE 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. November 9, 2000 Tenaska Georgia Partners, L.P. By: /s/ Michael F. Lawler ------------------------ Name: Michael F. Lawler Title: Vice President of Finance and Treasurer 11 EXHIBIT INDEX EXHIBIT NO. ----------- 27 Financial Data Schedule 12

TENASKA GEORGIA PARTNERS LP 10-Q