SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 8-K/A1 CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 February 16, 2001 (December 5, 2000) Date of Report (Date of Earliest Event Reported) BLACK HILLS CORPORATION (Exact name of Registrant as specified in its charter) South Dakota 333-52664 46-0458824 (State of Incorporation) (Commission File No.) (IRS Employer Identification Number) 625 Ninth Street P. O. Box 1400 Rapid City, South Dakota 57709 (Address of principal executive offices) (605) 721-1700 (Registrant's telephone number, including area code) Not Applicable (Former name or former address if changed since last report) 1
Item 7. FINANCIAL STATEMENTS AND EXHIBITS. Page ---- (a) Financial statements of businesses acquired. 1. Indeck Capital, Inc. and Subsidiaries 11 a. Historical Audited Financial Statements Reports of Independent Accountants 12-22 Consolidated Balance Sheet as of December 31, 1999 23 Consolidated Statement of Operations for the year ended December 31, 1999 24 Consolidated Statement of Changes in Stockholders' Equity for the year ended December 31, 1999 25 Consolidated Statement of Cash Flows for the year ended December 31, 1999 26 Notes to Consolidated Financial Statements 27-35 b. Interim Financial Statements Consolidated Balance Sheet as of June 30, 2000 (unaudited) 36 Consolidated Statements of Income for the six months ended June 30, 2000 and 1999 (unaudited) 37 Consolidated Statements of Cash Flows for the six months ended June 30, 2000 and 1999 (unaudited) 38 2. Indeck North American Power Fund, L.P. 39 a. Historical Audited Financial Statements Report of Independent Accountants 40 Consolidated Balance Sheet as of December 31, 1999 41 Consolidated Statement of Income for the year ended December 31, 1999 42 2
Page ---- Consolidated Statement of Partners' Equity for the year ended December 31, 1999 43-44 Consolidated Statement of Cash Flows for the year ended December 31, 1999 45 Notes to Consolidated Financial Statements 46-49 b. Interim Financial Statements Consolidated Balance Sheet as of June 30, 2000 (unaudited) 50 Consolidated Statements of Income for the six months ended June 30, 2000 and 1999 (unaudited) 51 Consolidated Statements of Cash Flows for the six months ended June 30, 2000 and 1999 (unaudited) 52 3. Indeck North American Power Partners, L.P. 53 a. Historical Audited Financial Statements Report of Independent Accountants 54 Balance Sheet as of December 31, 1999 55 Statement of Operations for the year ended December 31, 1999 56 Statement of Partners' Equity for the year ended December 31, 1999 57-58 Statement of Cash Flows for the year ended December 31, 1999 59 Notes to Financial Statements 60-62 b. Interim Financial Statements Balance Sheet as of June 30, 2000 (unaudited) 63 Statements of Operations for the six months ended June 30, 2000 and 1999 (unaudited) 64 3
Page Statements of Cash Flows for the six ---- months ended June 30, 2000 and 1999 (unaudited) 65 4. Northern Electric Power Co., L.P. 66 a. Historical Audited Financial Statements Report of Independent Accountants 67 Balance Sheet as of December 31, 1999 68 Statement of Earnings for the year ended December 31, 1999 69 Statement of Partners' Equity for the year ended December 31, 1999 70 Statement of Cash Flows for the year ended December 31, 1999 71 Notes to Financial Statements 72-74 b. Interim Financial Statements Balance Sheet as of September 30, 2000 (unaudited) 75 Statements of Income for the nine months ended September 30, 2000 and 1999 (unaudited) 76 Statements of Cash Flows for the nine months ended September 30, 2000 and 1999 (unaudited) 77 5. South Glens Falls Limited Partnership 78 a. Historical Audited Financial Statements Report of Independent Accountants 79 Balance Sheet as of December 31, 1999 80 Statement of Earnings for the year ended December 31, 1999 81 Statement of Partners' Equity for the year ended December 31, 1999 82 4
Page ---- Statement of Cash Flows for the year ended December 31, 1999 83 Notes to Financial Statements 84-86 b. Interim Financial Statements Balance Sheet as of September 30, 2000 (unaudited) 87 Statements of Income for the nine months ended September 30, 2000 and 1999 (unaudited) 88 Statements of Cash Flows for the nine months ended September 30, 2000 and 1999 (unaudited) 89 (b) Pro forma financial information. 90 Black Hills Corporation and Subsidiaries: Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2000 91-92 Notes to Unaudited Pro Forma Consolidated Balance Sheet 93 Unaudited Pro Forma Consolidated Statement of Income for the year ended December 31, 1999 94-95 Unaudited Pro Forma Consolidated Statement of Income for the nine months ended September 30, 2000 96-97 Notes to Unaudited Pro Forma Consolidated Statements of Income 98 (c) Exhibits. *4.1 Statement of Designations, Preferences and Relative Rights and Limitations of No Par Preferred Stock, Series 2000-A of Black Hills Corporation (Exhibit 4.1 to Form 8-K dated December 22, 2000). *10.1 Agreement and Plan of Merger, dated as of January 1, 2000, among Black Hills Corporation, Black Hills Energy Capital, Inc., Indeck Capital, Inc., Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, 5
Page ---- Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr. (Exhibit 2 to Schedule 13D filed on behalf of the former shareholders of Indeck Capital, Inc. consisting of Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr., dated July 7, 2000). *10.2 Addendum to the Agreement and Plan of Merger, dated as of April 6, 2000, among Black Hills Corporation, Black Hills Energy Capital, Inc., Indeck Capital, Inc., Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr. (Exhibit 3 to Schedule 13D filed on behalf of the former shareholders of Indeck Capital, Inc. consisting of Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr., dated July 7, 2000). *10.3 Supplemental Agreement Regarding Contingent Merger Consideration, dated as of January 1, 2000, among Black Hills Corporation, Black Hills Energy Capital, Inc., Indeck Capital, Inc., Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr. (Exhibit 4 to Schedule 13D filed on behalf of the former shareholders of Indeck Capital, Inc. consisting of Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr., dated July 7, 2000). *10.4 Supplemental Agreement Regarding Restructuring of Certain Qualifying Facilities (Exhibit 5 to Schedule 13D filed on behalf of the former shareholders of Indeck Capital, Inc. consisting of Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr., dated July 7, 2000). *10.5 Addendum to the Agreement and Plan of Merger, dated as of June 30, 2000, among Black Hills Corporation, Black Hills Energy Capital, Inc., Indeck Capital, Inc., Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr. (Exhibit 6 to Schedule 13D filed on behalf of the former shareholders of Indeck Capital, Inc. consisting of Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr., dated July 7, 2000). *10.6 Registration Rights Agreement among Black Hills Corporation, Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, 6
PAGE ---- Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr. (Exhibit 7 to Schedule 13D filed on behalf of the former shareholders of Indeck Capital, Inc. consisting of Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr., dated July 7, 2000). *10.7 Shareholders Agreement among Black Hills Corporation, Gerald R. Forsythe, Michelle R.Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr. (Exhibit 8 to Schedule 13D filed on behalf of the former shareholders of Indeck Capital, Inc. consisting of Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr., dated July 7, 2000). **23.1 Consent of PricewaterhouseCoopers LLP 99 **23.2 Consent of Arthur Andersen LLP 100 * Exhibit incorporated by reference ** Filed herewith 7
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 hereunto duly authorized. BLACK HILLS CORPORATION By: /s/ Mark T. Thies -------------------- Mark T. Thies Sr. Vice President and CFO Date: February 16, 2001 8
EXHIBIT INDEX *4.1 Statement of Designations, Preferences and Relative Rights and Limitations of No Par Preferred Stock, Series 2000-A of Black Hills Corporation (Exhibit 4.1 to Form 8-K dated December 22, 2000). *10.1 Agreement and Plan of Merger, dated as of January 1, 2000, among Black Hills Corporation, Black Hills Energy Capital, Inc., Indeck Capital, Inc., Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr. (Exhibit 2 to Schedule 13D filed on behalf of the former shareholders of Indeck Capital, Inc. consisting of Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr., dated July 7, 2000). *10.2 Addendum to the Agreement and Plan of Merger, dated as of April 6, 2000, among Black Hills Corporation, Black Hills Energy Capital, Inc., Indeck Capital, Inc., Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. and John W. Salyer, Jr. (Exhibit 3 to Schedule 13D filed on behalf of the former shareholders of Indeck Capital, Inc. consisting of Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr., dated July 7, 2000). *10.3 Supplemental Agreement Regarding Contingent Merger Consideration, dated as of January 1, 2000, among Black Hills Corporation, Black Hills Energy Capital, Inc., Indeck Capital, Inc., Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr. (Exhibit 4 to Schedule 13D filed on behalf of the former shareholders of Indeck Capital, Inc. consisting of Gerald R. Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr., dated July 7, 2000). *10.4 Supplemental Agreement Regarding Restructuring of Certain Qualifying Facilities (Exhibit 5 to Schedule 13D filed on behalf of the former shareholders of Indeck Capital, Inc. consisting of Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr., dated July 7, 2000). 9
*10.5 Addendum to the Agreement and Plan of Merger, dated as of June 30, 2000, among Black Hills Corporation, Black Hills Energy Capital, Inc., Indeck Capital, Inc., Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr. (Exhibit 6 to Schedule 13D filed on behalf of the former shareholders of Indeck Capital, Inc. consisting of Gerald R. Forsythe, Michelle Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr., dated July 7, 2000). *10.6 Registration Rights Agreement among Black Hills Corporation, Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr. (Exhibit 7 to Schedule 13D filed on behalf of the former shareholders of Indeck Capital, Inc. consisting of Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsytheand John W. Salyer, Jr., dated July 7, 2000). *10.7 Shareholders Agreement among Black Hills Corporation, Gerald R. Forsythe, Michelle R.Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr. (Exhibit 8 to Schedule 13D filed on behalf of the former shareholders of Indeck Capital, nc. consisting of Gerald R. Forsythe, Michelle R. Fawcett, Marsha Fournier, Monica Breslow, Melissa S. Forsythe and John W. Salyer, Jr., dated July 7, 2000). *23.1 Consent of PricewaterhouseCoopers LLP **23.2 Consent of Arthur Andersen LLP * Exhibit incorporated by reference ** Filed herewith 10
INDECK CAPITAL, INC. AND SUBSIDIARIES REPORT ON AUDIT OF CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 11
REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Indeck Capital, Inc. and Subsidiaries In our opinion, based upon our audit and the report of other auditors, the accompanying consolidated balance sheet and the related consolidated statements of operations, changes in stockholders' equity and cash flows present fairly, in all material respects, the financial position of Indeck Capital, Inc. and Subsidiaries (the "Company") at December 31, 1999, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States. These consolidated financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these consolidated financial statements based on our audit. We did not audit the financial statements of EIF Investors, Inc., a wholly-owned subsidiary, which statements reflect total assets of approximately $5,884,000 at December 31, 1999, and total revenues of approximately $2,900,000 for the year ended December 31, 1999. Those statements were audited by other auditors whose report thereon has been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for EIF Investors, Inc., is based solely on the report of other auditors. We conducted our audit of the consolidated financial statements in accordance with auditing standards generally accepted in the United States which require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Milwaukee, Wisconsin June 9, 2000, except for information in Note 11, for which the date is August 30, 2000 12
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Members of EIF Management Holdings, LLC: We have audited the accompanying consolidated balance sheet of EIF Management Holdings, LLC (a Delaware limited liability company) and its subsidiaries as of December 31, 1999 and the related consolidated statements of operations and members' equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of EIF Management Holdings, LLC and its subsidiaries as of December 31, 1999 and the consolidated results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. Arthur Andersen LLP Boston, Massachusetts February 11, 2000 (except for Note 5, as to which the date is February 28, 2000) 13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of EIF Group Management Company: We have audited the accompanying balance sheets of EIF Group Management Company (a Massachusetts general partnership) as of December 31, 1999 and 1998 and the related statements of operations, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of EIF Group Management Company as of December 31, 1999 and 1998 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Arthur Andersen LLP Boston, Massachusetts February 11, 2000 14
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of Project Finance Partners, L.P.: We have audited the accompanying balance sheets of Project Finance Partners, L.P. (a Delaware limited partnership) as of December 31, 1999 and 1998 and the related statements of operations, partners' capital (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Project Finance Partners, L.P. as of December 31, 1999 and 1998 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Arthur Andersen LLP Boston, Massachusetts April 21, 2000 15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of Project Finance Fund III, L.P.: We have audited the accompanying balance sheets of Project Finance Fund III, L.P. (a Delaware limited partnership) as of December 31, 1999 and 1998 and the related statements of operations, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Project Finance Fund III, L.P. as of December 31, 1999 and 1998 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Arthur Andersen LLP Boston, Massachusetts April 21, 2000 16
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of Energy Investors Management Company: We have audited the accompanying balance sheets of Energy Investors Management Company (a Massachusetts general partnership) as of December 31, 1999 and 1998 and the related statements of operations, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Energy Investors Management Company as of December 31, 1999 and 1998 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Arthur Andersen LLP Boston, Massachusetts February 11, 2000 17
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of Energy Investors Partners II, L.P.: We have audited the accompanying balance sheets of Energy Investors Partners II, L.P. (a Delaware limited partnership) as of December 31, 1999 and 1998 and the related statements of operations, comprehensive income, partners' capital (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Energy Investors Partners II, L.P. as of December 31, 1999 and 1998 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Arthur Andersen LLP Boston, Massachusetts April 21, 2000 18
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of Energy Investors Fund II, L.P.: We have audited the accompanying balance sheets of Energy Investors Fund II, L.P. (a Delaware limited partnership) as of December 31, 1999 and 1998 and the related statements of operations, comprehensive income, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Energy Investors Fund II, L.P. as of December 31, 1999 and 1998 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Arthur Andersen LLP Boston, Massachusetts April 21, 2000 19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of Energy Investors Management, Inc.: We have audited the accompanying balance sheets of Energy Investors Management, Inc. (a Delaware corporation) as of December 31, 1999 and 1998 and the related statements of operations and retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Energy Investors Management, Inc. as of December 31, 1999 and 1998 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Arthur Andersen LLP Boston, Massachusetts February 11, 2000 20
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of Energy Investors Partners, L.P.: We have audited the accompanying balance sheets of Energy Investors Partners, L.P. (a Delaware limited partnership) as of December 31, 1999 and 1998 and the related statements of operations, comprehensive income, partners' deficit and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Energy Investors Partners, L.P. as of December 31, 1999 and 1998 and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States. Arthur Andersen LLP Boston, Massachusetts April 21, 2000 21
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of Energy Investors Fund, L.P.: We have audited the accompanying consolidated balance sheets of Energy Investors Fund, L.P. (a Delaware limited partnership) and its subsidiary as of December 31, 1999 and 1998 and the related consolidated statements of operations, comprehensive income, partners' capital and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Energy Investors Fund, L.P. and its subsidiary as of December 31, 1999 and 1998 and the consolidated results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. Arthur Andersen LLP Boston, Massachusetts April 21, 2000 22
INDECK CAPITAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET DECEMBER 31, 1999 - ------------------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 1,552,886 Accounts receivable 1,222,144 Accounts receivable, related parties 188,928 Notes receivable, related parties 1,407,815 Inventory 233,379 Prepaid expenses and other 290,350 ----------------- Total current assets 4,895,502 Property and equipment, net 6,614,617 Construction in progress 52,690,392 Equity investments 38,821,406 Goodwill 423,678 Other 29,016 ----------------- Total assets $ 103,474,611 ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,536,370 Accounts payable, related parties 10,250 Deferred management fee income 717,750 Interest payable (including interest payable to related parties of $813,423) 994,911 Income taxes payable 134,580 Notes payable 22,439 Other 51,943 ----------------- Total current liabilities 3,468,243 Contracts payable 4,770,966 Power sales receipts in excess of avoided costs 6,133,856 Notes payable 88,001,408 Deferred income tax liability 110,800 Minority interest in subsidiaries 134,531 ----------------- Total liabilities 102,619,804 Stockholders' equity: Common stock, no par value, 200,000 shares authorized, 200,000 issued 40,080 Retained earnings 814,727 ----------------- Total stockholders' equity 854,807 ----------------- Total liabilities and stockholders' equity $ 103,474,611 ================= The accompanying notes are an integral part of these consolidated financial statements. 23
INDECK CAPITAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 - ------------------------------------------------------------------------------------------------------------------- Revenues and income from equity investments: Management fees $ 2,434,112 Project fees 1,761,459 Consulting fees 529,879 Income from equity investments 3,600,448 Reimbursable costs and other 2,134,413 ----------------- 10,460,311 Administrative and general expenses 10,140,500 ----------------- Income from operations 319,811 Other income (expense): Interest expense, related parties of $2,107,153 (4,522,988) Interest income, related parties 746,821 Financing fees (60,000) Other income, net 631,438 ----------------- Loss before income taxes (2,884,918) Income tax benefit (867,556) ----------------- Net loss $ (2,017,362) ================= The accompanying notes are an integral part of these consolidated financial statements. 24
INDECK CAPITAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 1999 - ------------------------------------------------------------------------------------------------------------------- COMMON STOCK RETAINED SHARES AMOUNT EARNINGS TOTAL --------------- ------------- --------------- ----------- Balances, December 31, 1998 160,000 $ 80 $ 1,817,953 $ 1,818,033 Net loss - - (2,017,362) (2,017,362) Issuance of common stock in conjunction with the acquisition of North American Funding, L.L.C. (Note 3) 40,000 40,000 1,014,136 1,054,136 --------------- ------------- --------------- ----------- Balances, December 31, 1999 200,000 $ 40,080 $ 814,727 $ 854,807 =============== ============= =============== =========== The accompanying notes are an integral part of these consolidated financial statements. 25
INDECK CAPITAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999 - ------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net loss $ (2,017,362) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 415,455 Loss on sale of property and equipment 6,313 Write-off of note receivable 227,505 Deferred income taxes (1,086,600) Income from equity investments (3,600,448) Distributions from equity investments 3,600,448 Changes in assets and liabilities, net of effects of business acquisitions: Accounts receivable (250,026) Income taxes 217,302 Accounts payable and accrued liabilities 729,812 Power sales receipts in excess of avoided costs 642,679 Other 164,935 ----------------- Net cash used in operating activities (949,987) ----------------- Cash flows from investing activities: Business acquisitions, net of cash acquired 245,894 Capital expenditures (52,771,891) Investments (672,593) Notes receivable (140,279) Payments on notes receivable 945,018 Distributions from equity investments in excess of earnings 2,847,711 Other 116,722 ----------------- Net cash used in investing activities (49,429,418) ----------------- Cash flows from financing activities: Payments under revolving credit agreement, net (1,800,000) Proceeds from notes payable 52,319,000 Payments on long-term debt (28,616) ----------------- Net cash provided by financing activities 50,490,384 ----------------- Net change in cash and cash equivalents 110,979 Cash and cash equivalents at beginning of year 1,441,907 ----------------- Cash and cash equivalents at end of year $ 1,552,886 ================= Cash paid during the year for interest $ 4,943,000 ================= Cash paid during the year for income taxes $ 142,000 ================= The accompanying notes are an integral part of these consolidated financial statements. 26
INDECK CAPITAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. ORGANIZATION OF INDECK CAPITAL, INC.: Indeck Capital, Inc. (the "Company") was incorporated in 1994 to participate in the rapidly changing power generation industry. The Company is engaged in the acquisition, development, ownership and operation of power generation facilities through direct investment and investment in various projects and funds. The Company has primarily focused on the North American market. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of Indeck Capital, Inc. and its majority-owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. Investments in partially-owned affiliates are accounted for by the equity method when the Company's interest exceeds 20%. ESTIMATES: Preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingencies at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. CASH EQUIVALENTS: The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost. Depreciation is provided using the straight line method over the lives of the related assets, ranging from 3-30 years. INVESTMENTS: As they represent interests in limited partnerships, the Company's investments are recorded under the equity method. The Company's investments are increased by its share of earnings and reduced by distributions received from or losses incurred by the investment. GOODWILL: Goodwill is amortized on the straight-line method over 37 years. The Company continually assesses the carrying value of goodwill for potential impairment using an undiscounted cash flow approach. POWER SALES RECEIPTS IN EXCESS OF AVOIDED COSTS: The Company's wholly-owned subsidiary, Adirondack Hydro Development Corporation ("AHDC"), entered into a 40-year power purchase agreement ("PPA") with Niagara Mohawk Power Company ("NMPC") between 1985 and 1992, committing the parties to sell and buy, respectively, the output of the Otter Creek facility. The Warrensburg Hydro Power facility, which is owned through subsidiaries of AHDC, also has a 40-year PPA with NMPC. The contracts establish a base rate per kilowatt hour of energy and an annual fixed escalator for the first 15-year period. The cumulative difference between the base payment and "avoided cost" (the greater of $0.06 per kwh or NMPC's actual cost of production avoided by reason of its agreement with AHDC for the Otter Creek facility, and NMPC's actual cost of production avoided by reason of its agreement for the Warrensburg Hydro Power facility), including interest at 125 percent of the 360-day Treasury bill rate, is tracked by NMPC and will be used to adjust the contractual rate over the second 15 years of the respective agreements. In addition, if the projected cumulative difference exceeds the cost of the facilities at any time 27
during years 6 through 15, the fixed escalation is suspended and the respective rates may be reduced. Revenue is recognized when the power is transmitted in accordance with the terms of the PPA and is included in project fees in the consolidated statement of operations. At December 31, 1999, the cumulative excess of the base payment over the avoided cost (power sales receipts in excess of avoided costs), plus interest, was $6,133,856. INCOME TAXES: Deferred income taxes are provided on a liability method whereby deferred income tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards, and deferred income tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred income tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. 3. ACQUISITIONS: INDECK COLORADO, L.L.C.: On November 23, 1999, the Company entered into an agreement with the Public Service Company of Colorado ("PSCC") to purchase PSCC's ownership interests in two power plants, the Arapahoe plant and the Valmont plant, and to operate these plants for PSCC. To execute this transaction, the Company formed Indeck Colorado, L.L.C. ("Indeck Colorado") with Black Hills Corporation ("Black Hills"). The Company and Black Hills are each 50% members in Indeck Colorado, although the Company is the managing member of the venture and has the exclusive authority to manage the operations and affairs of Indeck Colorado. Indeck Colorado obtained an $82,000,000 financing arrangement from Black Hills and borrowed $52,319,000 under this arrangement on December 22, 1999 to purchase the plant ownership interests from PSCC (Note 7). The acquisition was accounted for using the purchase method of accounting, with the entire purchase price allocated to the plant assets purchased, which consisted of construction in progress at December 31, 1999. NORTH AMERICAN FUNDING, L.L.C.: On December 10, 1999, the Company issued 40,000 shares of common stock to the members of North American Funding, L.L.C. ("NAF"), a related entity, in exchange for each member's ownership interest in NAF. The assets and liabilities of NAF were transferred to the Company at historical cost as NAF and the Company are under common ownership control. NAF's total assets and liabilities were approximately $7,100,000 and $6,200,000, respectively, at December 10, 1999, including $246,000 of cash acquired. The following unaudited information presents, on a pro forma basis, the results of operations as if the acquisitions had occurred at the beginning of 1999: Revenues and income from equity investments $11,600,000 Net loss (1,500,000) 28
4. NOTES RECEIVABLE: The Company has demand notes receivable with certain members of executive management and affiliated entities for approximately $1,408,000 at December 31, 1999. Notes receivable of approximately $1,408,000 at December 31, 1999, bear interest at prime rate plus 1% (9.50% at December 31, 1999). A $200,000 note receivable (including accrued interest of approximately $28,000) was written off during 1999. A $5,908,000 note receivable from a related party outstanding at December 31, 1998 was eliminated as part of the acquisition of NAF by the Company (Note 3). 29
5. INVESTMENTS: INDECK NORTH AMERICAN POWER FUND, L.P.: The Company has a 17.1% limited partnership interest in Indeck North American Power Fund, L.P. at December 31, 1999. The investment balance as of December 31, 1999 was approximately $8,028,000. INDECK NORTH AMERICAN POWER PARTNERS, L.P.: The Company has a 13.3% limited partnership interest in Indeck North American Power Partners, L.P. The investment balance as of December 31, 1999 was approximately $62,000. EIF FUNDS: The Company's wholly-owned subsidiary, EIF Investors, Inc., has general and limited partnership interests in various entities as follows: OWNERSHIP BALANCE OF INVESTMENT INVESTMENT % 12/31/99 ---------- --- -------- Energy Investors Fund, L.P. 5 $ 1,861,062 Energy Investors Partners, L.P. 50 (1,530,467) Energy Investors Mgmt. Inc. 50 121,427 Energy Investors Fund II, L.P. 6 1,694,850 Energy Investors Partners II, L.P. 38 (98,608) Energy Investors Mgmt. Company 50 242,716 Project Finance Fund III, L.P. 5 2,930,714 Project Finance Partners 50 105,552 EIF Group Management Company 50 303,693 EIF Management Holdings, LLC 50 253,255 Goodwill - 1,732,384 ------------- Total $ 7,616,578 ============= During 1999, EIF Investors, Inc. purchased a 50% interest in EIF Management Holdings, LLC, a limited liability company that was organized on March 17, 1998 and commenced operations on January 1, 1999. NORTHERN ELECTRIC POWER CO., L.P.: The Company's wholly-owned subsidiary, AHDC, has general and limited partnership interests of 1.0% and 19.8%, respectively, in Northern Electric Power Co., L.P. The investment balance as of December 31, 1999 was approximately $11,626,000. SOUTH GLENS FALLS LIMITED PARTNERSHIP: The Company's wholly-owned subsidiary, AHDC, has general and limited partnership interests of 1.0% and 19.8%, respectively, in South Glens Falls Limited Partnership. The investment balance as of December 31, 1999 was approximately $3,661,000. 30
INDECK IDAHO PARTNERSHIPS: The Company's wholly-owned subsidiary, Indeck Idaho, has general and limited partnership interests in two entities as follows: OWNERSHIP BALANCE OF INVESTMENT INVESTMENT % 12/31/99 ---------- --- -------- Rupert Cogeneration Partners, Ltd. 50 $ 1,807,849 Glenns Ferry Cogeneration Partners, Ltd. 50 1,512,934 Operating and Maintenance Agreements - 1,791,013 Goodwill - 1,694,414 -------------- Total $ 6,806,210 ============= CARIBBEAN BASIN POWER FUND, LTD.: During 1999, the Company purchased a 3.3% interest in Caribbean Basin Power Fund, Ltd. The investment balance at December 31, 1999 was approximately $555,000. INDECK HARBOR, L.L.C.: As part of the acquisition of NAF (Note 3), the Company acquired a 1% limited partnership interest in Indeck Harbor, L.L.C. The investment balance at December 31, 1999 was approximately $406,000. INDECK PEPPERELL POWER ASSOCIATES, INC.: As part of the acquisition of NAF (Note 3), the Company acquired a 1% ownership interest in Indeck Pepperell Power Associates, Inc. The investment balance at December 31, 1999 was approximately $56,000. Summarized financial information of the Company's significant investments is as follows: INDECK ENERGY ENERGY ENERGY PROJECT NORTH AMERICAN INVESTORS INVESTORS INVESTORS FINANCE POWER FUND, L.P. PARTNERS, L.P. FUND, L.P. FUND II, L.P. FUND III, L.P. ---------------- -------------- ---------- ------------- -------------- 1999 Assets $ 48,577,035 $ 37,075 $60,408,170 $58,225,746 $59,588,473 Liabilities 1,536,388 3,074,150 19,007,824 253,116 316,242 Minority interest 461,982 - - - - Equity 46,578,665 (3,037,075) 41,400,346 57,972,630 59,272,231 Total revenues 16,742,881 3,634,537 27,282,383 9,730,477 5,701,157 Net income (loss) 2,155,503 2,205,035 22,508,907 6,328,379 (428,339) Equity investment 8,028,235 (1,530,467) 1,861,062 1,694,850 2,930,714 Company's share of net income (loss) 219,778 1,096,898 925,470 472,152 70,368 Company's percentage ownership 17% 50% 5% 6% 5% CONTINUED ON NEXT PAGE 31
CONTINUED SOUTH NORTHERN GLENS FALLS RUPERT GLENNS FERRY ELECTRIC LIMITED COGENERATION COGENERATION POWER CO., L.P. PARTNERSHIP PARTNERS, LTD. PARTNERS, LTD. --------------- ----------- -------------- -------------- 1999 Assets $ 94,565,394 $ 35,993,255 $ 13,868,875 $ 13,954,925 Liabilities 78,796,269 28,577,111 10,216,655 10,898,491 Minority interest - - - - Equity 15,769,125 7,416,144 3,652,220 3,056,434 Total revenues 14,630,540 5,401,474 5,561,875 5,479,366 Net income (loss) 1,708,777 879,698 615,626 524,946 Equity investment 11,626,387 3,660,725 1,807,849 1,512,934 Company's share of net income (loss) 355,426 182,977 304,735 259,848 Company's percentage ownership 21% 21% 50% 50% 6. PROPERTY AND EQUIPMENT: Property and equipment at December 31, 1999 consists of: Land $ 308,015 Power generation facilities 7,080,959 Leasehold improvements 322,333 Furniture and fixtures 264,202 Equipment 1,293,377 Vehicles 46,902 ------------------ 9,315,788 Accumulated depreciation 2,701,171 ------------------ $ 6,614,617 ================== 32
7. NOTES PAYABLE: Notes payable at December 31, 1999 consists of: Note payable to Black Hills Corporation, due June 30, 2000 with interest at LIBOR plus 2% (8.00% at December 31, 1999), collateralized by property and equipment of Indeck Colorado L.L.C. (Note 3). This note was refinanced subsequent to December 31, 1999 (Note 11). $ 52,319,000 Note payable with a bank under a $25 million revolving credit agreement dated June 30, 1998 with interest at the corporate base rate (9.00% at December 31, 1999), collateralized by pledge agreements and guarantees by current stockholders of the Company; includes covenants that require, among other things, the Company to maintain positive levels of tangible net worth. The bank has extended the due date for repayment of the note to June 30, 2000. The Company's contract payable is guaranteed by the available credit under the revolving credit agreement, therefore the amount available under revolving credit agreement at December 31, 1999 is further reduced by the contract payable amount of $4,770,966 at December 31, 1999. This note was refinanced subsequent to December 31, 1999 (Note 11). 18,433,693 Note payable to Indeck Energy Services, Inc. (a related entity), due on demand with interest at 11.22%, guaranteed by current stockholder of the Company. Indeck Energy Services, Inc. did not intend to demand payment before December 31, 1999. This note was refinanced subsequent to December 31, 1999 (Note 11). 17,002,902 Note payable to a bank, due August 8, 2001 with interest at the prime rate plus .50% (9.00% at December 31, 1999), collateralized by property and equipment. This note was paid in full in June 2000. 268,252 ------------- 88,023,847 Less current portion 22,439 ------------- Notes payable, non-current $ 88,001,408 ============= 33
8. RELATED PARTY TRANSACTIONS: Management fees, project fees, consulting fees and reimbursable costs are earned by the Company as services are performed under management agreements for related entities that are not consolidated in the Company's consolidated financial statements. 9. INCOME TAXES: The provision for income taxes is comprised of the following: Current provision: Federal $ - State 219,044 ------------- 219,044 Deferred benefit: (855,100) Federal (231,500) State ------------- (1,086,600) ------------- $ (867,556) ============= The components of the deferred income tax assets and liabilities as of December 31, 1999 were as follows: Deferred income tax assets: Management fees/other $ 286,700 Investments 515,600 Net operating loss carryforwards - federal 2,124,000 Net operating loss carryforwards - state 633,000 Power sales receipts in excess of avoided costs 200,600 Alternative minimum tax credits 359,100 Note receivable 90,900 Deferred income tax liabilities: Investments (4,311,900) Property and equipment (8,800) -------------- Deferred income taxes, net $ (110,800) ============== 34
The following is a reconciliation of the statutory income tax rate to the effective tax rates reflected in the statement of income: Statutory federal income tax rate 34.0% Increase (reduction) in tax rate resulting from: Non-deductible goodwill amortization (3.2) State taxes 0.3 Other (1.0) ----------- 30.1% =========== At December 31, 1999, federal net operating loss carryforwards of approximately $6,247,000 expiring in 2013-2020, were available for the reduction of future taxable income. If certain substantial changes in the Company's ownership should occur, there may be an annual limitation on the amount of carryforwards which can be utilized. 10. COMMITMENTS: The Company may be required to make additional portfolio investments, pursuant to capital call provisions of certain investment agreements, of up to $7,900,000 at December 31, 1999. These commitments expire at various times through 2001. 11. SUBSEQUENT EVENTS: In January 2000, the Company and its stockholders entered into a definitive agreement to sell all of the outstanding stock of the Company to Black Hills Corporation ("Black Hills). The sale of the Company was completed July 7, 2000. In conjunction with the sale of the Company to Black Hills, a new debt arrangement (the "Arrangement") with various financial institutions was negotiated by the Company on June 30, 2000. Under the terms of the Arrangement, the Company may borrow up to $115,000,000 under a credit revolver. The Arrangement expires July 6, 2003 with interest at various rates based on the conditions of the Arrangement and includes covenants, the most restrictive of which require the Company to maintain certain debt ratios and levels of net worth. Proceeds from this Arrangement were used to pay the $18,433,693 note payable to a bank and the $17,002,902 note payable to Indeck Energy (Note 7). An additional debt arrangement (the "Credit Facility") with a bank was negotiated by the Company on August 30, 2000. Under the terms of the Credit Facility, the Company may borrow up to $60,000,000 under a term loan arrangement. The Credit Facility expires May 31, 2007, but may be extended to May 31, 2010 provided certain conditions are met. The Credit Facility bears interest at various rates based on the conditions of the Credit Facility and includes covenants, the most restrictive of which require the Company to maintain certain debt ratios and levels of net worth. Proceeds from this Credit Facility were used to pay the $52,319,000 note payable to Black Hills Corporation (Note 7). 35
INDECK CAPITAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET JUNE 30, 2000 (UNAUDITED) - ------------------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 3,339,140 Accounts receivable 3,094,299 Inventory 680,985 Prepaid expenses and other 337,256 ----------------- Total current assets 7,451,680 Property and equipment, net of accumulated depreciation of $1,439,346 85,781,912 Equity in investments 40,578,710 Goodwill 417,551 Deferred tax assets 286,700 Other 88,105 ----------------- Total assets $ 134,604,658 ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 113,030,183 Accounts payable 1,079,570 Deferred management fee income 332,006 Accrued liabilities 4,917,723 ----------------- Total current liabilities 119,359,482 Long term liabilities: Contracts payable 4,770,966 Power sales receipts in excess of avoided costs 6,524,224 Capital lease obligation 12,389 Deferred income tax liability 1,229,287 Minority interest 602,921 ----------------- Total long term liabilities 13,139,787 Total liabilities 132,499,269 Stockholders' equity: Common stock 40,080 Retained earnings 2,065,309 ----------------- Total stockholders' equity 2,105,389 ----------------- Total liabilities and equity $ 134,604,658 ================= 36
INDECK CAPITAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED) - ------------------------------------------------------------------------------------------------------------------- 2000 1999 ---- ---- Revenues: Operating revenue $ 4,314,065 $ 371,459 Management fees 1,027,450 1,216,759 Project fees 670,807 613,356 Consulting fees revenue 71,840 236,266 Income from equity investments 4,543,163 2,526,534 Reimbursable costs and other 1,266,835 991,807 ------------------ ----------------- Total revenues 11,894,160 5,956,181 Administrative and general expenses 6,845,328 3,353,111 ------------------ ----------------- Income from operations 5,048,832 2,603,070 Other income: Interest expense (2,923,917) (2,237,422) Interest income 72,446 433,749 Financing fees (95,000) (50,000) Other income 28,750 5,153 ----------------- ----------------- Income before income taxes 2,131,111 754,550 Income tax provision (880,540) (304,333) ----------------- ----------------- Net income $ 1,250,571 $ 450,217 ================= ================= 37
INDECK CAPITAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED) - ------------------------------------------------------------------------------------------------------------------- 2000 1999 ---- ---- Cash flows from operating activities: Net income $ 1,250,571 $ 450,217 Adjustments to reconcile net income to net cash used in operating activities: Equity income from investments (4,543,163) (2,526,534) Cash distributions from investments 2,785,859 2,124,731 Depreciation and amortization 535,166 204,510 Deferred income taxes 1,119,702 (70,118) Increase in accounts receivable and other current assets (769,923) (258,098) Increase in accounts payable and other current liabilities 2,882,295 (115,290) Other 531,480 366,872 --------------- --------------- 3,791,987 176,290 --------------- --------------- Cash flows from investing activities: Property and investment additions (27,012,069) (21,078) --------------- --------------- Cash flows from financing activities: Increase in short-term borrowings 25,006,336 485,837 --------------- --------------- Increase in cash and cash equivalents 1,786,254 641,049 Cash and cash equivalents: Beginning of six month period 1,552,886 1,441,907 --------------- --------------- End of six month period $ 3,339,140 $ 2,082,956 =============== =============== 38
INDECK NORTH AMERICAN POWER FUND, L.P. REPORT ON AUDIT OF CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 39
REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Indeck North American Power Fund, L.P. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, partners' equity and cash flows present fairly, in all material respects, the financial position of Indeck North American Power Fund, L.P. (the "Partnership") at December 31, 1999, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Partnership's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Milwaukee, Wisconsin February 25, 2000 40
INDECK NORTH AMERICAN POWER FUND, L.P. CONSOLIDATED BALANCE SHEET DECEMBER 31, 1999 - -------------------------------------------------------------------------------------------------------------- ASSETS Cash and cash equivalents $ 509,208 Accounts receivable 1,266,166 Prepaid management fee 717,750 Investment in Harbor Cogeneration Company 40,335,958 Plant and equipment, less accumulated depreciation of $1,335,000 5,625,140 Other assets 122,813 ----------------- Total assets $ 48,577,035 ================= LIABILITIES AND PARTNERS' EQUITY Accounts payable $ 1,536,388 Minority interest 461,982 Partners' equity 46,578,665 ----------------- Total liabilities and partners' equity $ 48,577,035 ================= The accompanying notes are an integral part of these financial statements 41
INDECK NORTH AMERICAN POWER FUND, L.P. CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1999 - ------------------------------------------------------------------------------------------------------------------- Revenues and income from equity investments: Equity income from investment $ 5,646,341 Operating revenues 10,672,645 Other 423,895 ----------------- 16,742,881 Expenses: Operating expenses 11,819,558 Selling, general and administrative expenses 2,722,838 ----------------- Total expenses 14,542,396 ----------------- Income before minority interest 2,200,485 Minority interest 44,982 ----------------- Net income $ 2,155,503 ================= The accompanying notes are an integral part of these financial statements 42
INDECK NORTH AMERICAN POWER FUND, L.P. CONSOLIDATED STATEMENT OF PARTNERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 1999 - ----------------------------------------------------------------------------------------------------------------------------- Indeck North North Chase Dynegy American Indeck American Manhattan Marketing Miami Power Capital, Funding, Investment and Trade Valley Partners, L.P. Inc. L.L.C. Holdings, Inc. Capital Corp. Leasing, Inc. -------------- ---- ------ -------------- ------------- ------------- Balances at December 31, 1998 $ 530,888 $ 3,665,003 $ 5,606,679 $ 3,701,395 $ 3,665,003 $ 3,722,912 Capital contributions 5,750 41,708 63,889 42,150 41,708 41,708 Capital distributions (121,117) (672,041) (1,027,934) (678,665) (672,041) (672,041) Net income 43,088 219,778 131,153 140,110 138,804 138,804 Partner ownership transaction - 4,773,787 (4,773,787) - - - ------------ ------------- ------------ ------------- ------------- ------------ Balances at December 31, 1999 $ 458,609 $ 8,028,235 $ - $ 3,204,990 $ 3,173,474 $ 3,231,383 ============ ============= ============= ============= ============= ============ CONTINUED ON NEXT PAGE The accompanying notes are an integral part of these financial statements 43
INDECK NORTH AMERICAN POWER FUND, L.P. CONSOLIDATED STATEMENT OF PARTNERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 1999 - ----------------------------------------------------------------------------------------------------------------------------- CONTINUED Dresdner Paribas ABB Bank, A.G., PSEG IGC North Energy Grand Global, Acquisitions, American, Ventures, Cayman Inc. Inc. Inc. Inc. Branch Total ---- ---- ---- ---- ------ ----- Balances at December 31, 1998 $ 3,230,796 $ 3,665,003 $11,140,574 $ 9,271,681 $ 5,606,678 $53,806,612 Capital Contributions - 41,708 126,893 105,597 63,889 575,000 Capital Distributions (672,041) (672,041) (2,042,620) (1,699,975) (1,027,934) (9,958,450) Net income 220,264 138,804 421,640 350,931 212,127 2,155,503 Partner ownership transaction - - - - - - ------------ ------------- ------------ ------------- ------------- ------------ Balances at December 31, 1999 $ 2,779,019 $ 3,173,474 $ 9,646,487 $ 8,028,234 $ 4,854,760 $ 46,578,665 ============ ============= =========== ============= ============= ============ The accompanying notes are an integral part of these financial statements 44
INDECK NORTH AMERICAN POWER FUND, L.P. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999 - ------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 2,155,503 Adjustments to reconcile net income to net cash provided by operating activities: Equity income from investment (5,646,341) Cash distributions from investment 5,646,341 Minority interest 44,982 Amortization and depreciation 736,941 Changes in assets and liabilities: Account receivable (772,996) Accounts payable 1,049,593 Other 12,721 ------------------ Net cash provided by operating activities 3,226,744 ------------------ Cash flows from investing activities: Capital expenditures for plant and equipment (75,898) Return of capital from investment 6,183,659 ------------------ Net cash provided by investing activities 6,107,761 ------------------ Cash flows from financing activities: Capital contributions from partners 575,000 Capital distributions to partners (9,958,450) Capital contributions from minority interests 5,808 Capital distributions to minority interests (118,300) ------------------ Net cash used in financing activities (9,495,942) ------------------ Decrease in cash and cash equivalents (161,437) Cash and cash equivalents, beginning of year 670,645 ------------------ Cash and cash equivalents, end of year $ 509,208 ================== The accompanying notes are an integral part of these financial statements 45
INDECK NORTH AMERICAN POWER FUND, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 1. ORGANIZATION AND OPERATIONS Indeck North American Power Fund, L.P. (the "Partnership") is a limited partnership whose operations commenced May 16, 1995. The Partnership terminates in 2005. The purpose and business of the Partnership is to invest in established utility and non-utility generating assets in the United States and Canada. Indeck North American Power Partners, L.P. (the "General Partner") serves as the general partner and has the exclusive authority for the management, operation and policy of the Partnership. The General Partner has a 1% interest in the Partnership. Profits and losses are generally allocated in a manner such that the capital accounts of partners, immediately after making such allocation, are proportionate to the distributions that would have been made pursuant to the agreement if the partnership were dissolved. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Indeck North American Power Fund, L.P. and its subsidiaries, Indeck Harbor, L.L.C. ("Indeck Harbor") and Indeck Pepperell Power Associates, Inc. ("Indeck Pepperell"), both of which are 99% owned. All significant intercompany transactions have been eliminated. ESTIMATES The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies 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. CASH EQUIVALENTS The Partnership considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. INCOME TAXES The profits and losses of the Partnership are subject to income taxes directly at the partner level. Accordingly, the Partnership's financial statements do not reflect a provision for income taxes at the Partnership level. Deferred income taxes at Indeck Pepperell are provided on a liability method whereby deferred income tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards, and deferred income tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred income tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. 46
PLANT AND EQUIPMENT Plant and equipment are stated at cost. Depreciation is provided for using the straight-line method over the estimated lives of the related assets, ranging from 5-25 years. The majority of these assets relate to the generation facility. Depreciation expense was $556,000 for 1999. REVENUE RECOGNITION Operating revenue is recognized when steam is transmitted. 3. EQUITY INVESTMENT IN HARBOR COGENERATION COMPANY Under the terms of the general partnership agreement, Indeck Harbor, L.L.C. cannot exercise effective control over the investment in Harbor Cogeneration Company (the "Venture"). Accordingly, Indeck Harbor records its investment in the Venture under the equity method, whereby the investment is increased by its share of the Venture's earnings and reduced by distributions received from the Venture. The Venture entered into a power sales agreement (the "Agreement") with Southern California Edison ("Edison") for the sale of energy produced by the cogeneration facility operated by the Venture. The Agreement has a term of 30 years from April 12, 1989. The Venture is paid energy prices based on 20% of the stated marginal cost of energy and 80% of avoided cost for a period of 10 years, both as defined in the Agreement. For the remaining term of the Agreement, energy prices will equal 100% of avoided cost. In addition to the above energy prices, the Venture is paid capacity revenues over the term of the Agreement based on a stated amount per kilowatt hour as adjusted by a performance bonus factor. Effective February 15, 1999, the Venture entered into a Contract Termination Agreement with Edison which terminated the Agreement. Upon termination, the Venture may continue to sell power, which it did during certain months in 1999, but operations are presently suspended while management explores available options for the Venture, which may include entering into new power sales arrangements that would terminate the Contract Termination Agreement. The Contract Termination Agreement requires Edison to pay the Venture $126.5 million, in quarterly payments ranging from $4.6 million to $2.1 million from the effective date through October 1, 2008 for early termination of the Agreement. During 1999, the Venture recorded approximately $16.4 million related to the Contract Termination Agreement, which is included in operating revenues in the Venture's Statement of Income. 47
The summarized balance sheet of Harbor Cogeneration Company at December 31, 1999 is as follows: Assets: Cash and cash equivalents $ 4,202,215 Accounts receivable 16,746 Other 1,652,161 Plant and equipment, net 31,634,894 ------------------ Total assets $ 37,506,016 ================== Liabilities: Accounts payable $ 1,250,440 Partners' equity 36,255,576 ------------------ Total liabilities and partners' equity $ 37,506,016 ================== The summarized statement of income of Harbor Cogeneration Company for the year ended December 31, 1999 is as follows: Operating and contract termination revenues $ 18,733,612 Operating expenses 11,141,525 ------------------ Operating income 7,592,087 Other income 2,562,147 Interest expense (3,991) ------------------ Net income $ 10,150,243 ================== 4. OTHER INCOME In 1999, other income is primarily comprised of a settlement payment received related to a breach of contract dispute. 48
5. RELATED PARTY TRANSACTIONS In accordance with the Limited Partnership Agreement, the General Partner receives an annual management fee equal to 1.5% of the Limited Partners' aggregate capital commitments as defined. In 1999, the Partnership paid a management fee of $2,153,000, as well as reimbursement of certain expenditures of $376,000. On December 10, 1999, Indeck Capital, Inc. ("Indeck"), a limited partner, acquired North American Funding, L.L.C. ("NAF"), also a limited partner. As a result of this transaction, Indeck assumed NAF's partnership interest in the Partnership. 6. INCOME TAXES The components of the deferred tax assets and liabilities at Indeck Pepperell are as follows at December 31, 1999: Deferred tax asset: Net operating loss carryforward $ 2,274,000 Deferred tax liability: Plant and equipment 304,000 ----------------- 1,970,000 Valuation allowance 1,970,000 ----------------- Net deferred income taxes $ - ================= Indeck Pepperell has net operating loss carryforwards of approximately $5,647,000 expiring in 2011-2014, available to offset future taxable income. A valuation allowance has been established for the deferred tax assets due to the uncertainty regarding their ultimate realization. 7. SUBSEQUENT EVENT On January 28, 2000, Dynegy Marketing and Trade Capital Corp. ("DMTCC") was acquired by Black Hills Energy Capital, Inc. ("Black Hills"). As a result of this transaction, Black Hills assumed DMTCC's partnership interest in the Partnership. 49
INDECK NORTH AMERICAN POWER FUND, L.P. CONSOLIDATED BALANCE SHEET JUNE 30, 2000 (UNAUDITED) - ------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 1,197,276 Accounts receivable 1,049,114 Prepaid management fee 332,006 Other 96,038 ----------------- Total current assets 2,674,434 Investment in Harbor Cogeneration Company 39,207,389 Plant and equipment, net of $1,508,427 of accumulated depreciation 5,607,319 Other assets 964 ----------------- Total assets $ 47,490,106 ================= LIABILITIES AND PARTNERS' EQUITY Current liabilities: Accounts payable $ 719,017 Minority interest 462,166 Partners' equity 46,308,923 ----------------- Total liabilities and partners' equity $ 47,490,106 ================= 50
INDECK NORTH AMERICAN POWER FUND, L.P. CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED) - ------------------------------------------------------------------------------- 2000 1999 ---- ---- Revenues: Equity income from investment $ 3,631,430 $ 1,758,781 Operating revenues 2,613,605 4,497,821 Other 88,090 414,022 ----------------- ----------------- Total revenues 6,333,125 6,670,624 Expenses: Operating expenses 2,045,404 5,006,460 Selling, general and administrative expenses 950,337 1,488,660 ----------------- ----------------- Total expenses 2,995,741 6,495,120 ----------------- ----------------- Income before minority interest 3,337,384 175,504 Minority interest 42,733 12,439 ----------------- ----------------- Net income $ 3,294,651 $ 163,065 ================= ================= 51
INDECK NORTH AMERICAN POWER FUND, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED) - ------------------------------------------------------------------------------- 2000 1999 ---- ---- Cash flows from operating activities: Net income $ 3,294,651 $ 163,065 Adjustments to reconcile net income to net cash provided by operating activities: Equity income from investments (3,631,430) (1,758,781) Cash distribution from investment 3,631,430 1,758,781 Minority interest 42,733 4,989 Amortization and depreciation 173,646 365,860 Changes in assets and liabilities: Accounts receivable 217,052 (655,641) Prepaid management fee 385,744 0 Accounts payable (817,372) 435,648 Other 25,811 14,506 --------------- --------------- Net cash provided by operating activities 3,322,265 328,427 --------------- --------------- Cash flows from investing activities: Return of capital from investment 1,128,570 5,661,219 Capital expenditures for plant and equipment (155,826) (19,950) --------------- --------------- Net cash provided by investing activities 972,744 5,641,269 --------------- --------------- Cash flows from financing activities: Capital contributions 650,000 575,000 Capital distributions to partners (4,214,391) (6,669,176) Capital contributions from minority interest 5,050 5,750 Capital distributions to minority interest (47,600) (66,692) --------------- --------------- Net cash used in financing activities (3,606,941) (6,155,118) --------------- --------------- Increase (decrease) in cash 688,068 (185,422) Cash, beginning of period 509,208 670,645 --------------- --------------- Cash, end of period $ 1,197,276 $ 485,223 =============== =============== 52
INDECK NORTH AMERICAN POWER PARTNERS, L.P. REPORT ON AUDIT OF FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 53
REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Indeck North American Power Partners, L.P. In our opinion, the accompanying balance sheet and the related statements of operations, partners' equity and cash flows present fairly, in all material respects, the financial position of Indeck North American Power Partners, L.P. (the "Partnership") at December 31, 1999, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Partnership's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Milwaukee, Wisconsin February 25, 2000 54
INDECK NORTH AMERICAN POWER PARTNERS, L.P. BALANCE SHEET DECEMBER 31, 1999 - ------------------------------------------------------------------------------ ASSETS Cash $ 3,535 Accounts receivable, affiliates 38,405 Prepaid management fee 717,750 Investment in Indeck North American Power Fund, L.P. 458,609 ----------------- Total assets $ 1,218,299 ================= LIABILITIES AND PARTNERS' EQUITY Accounts payable, affiliates $ 39,627 Unearned management fee revenue 717,750 ----------------- Total liabilities 757,377 Partners' equity 460,922 ----------------- Total liabilities and partners' equity $ 1,218,299 ================= The accompanying notes are an integral part of these financial statements. 55
INDECK NORTH AMERICAN POWER PARTNERS, L.P. STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 - ------------------------------------------------------------------------------ Revenues and income from equity investments: Fees and reimbursable expenses $ 2,529,062 Equity income from investment 43,088 ----------------- 2,572,150 Expenses: Selling, general and administrative expenses 3,088,000 ----------------- Net loss $ (515,850) ================= The accompanying notes are an integral part of these financial statements. 56
INDECK NORTH AMERICAN POWER PARTNERS, L.P. STATEMENT OF PARTNERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 1999 - ------------------------------------------------------------------------------ Indeck Chase Dynegy North Indeck Manhattan Marketing Miami America, Capital, Investment and Trade Valley Inc. Inc. Holdings, Inc. Capital Corp. Leasing, Inc. ------------ -------------- -------------- --------------- ------------- Balances at December 31, 1998 $ 10,824 $ 134,503 $ 72,661 $ 145,316 $ 146,662 Capital contributions 57 826 442 885 885 Capital distributions (1,111) (13,702) (7,407) (14,816) (14,816) Net loss (5,158) (63,854) (34,505) (69,010) (69,010) ------------ -------------- -------------- --------------- ------------ Balances at December 31, 1999 $ 4,612 $ 57,773 $ 31,191 $ 62,375 $ 63,721 ============ ============== ============== =============== ============ The accompanying notes are an integral part of these financial statements. 57
CONTINUED Paribas ABB IGC North Energy PSEG Acquisitions, American Ventures, Global, Inc. Inc. Inc. Inc. Total ------------ -------------- -------------- --------------- ------------ Balances at December 31, 1998 $ 136,224 $ 145,316 $ 145,316 $ 145,316 $ 1,082,138 Capital contributions - 885 885 885 5,750 Capital distributions (14,816) (14,816) (14,816) (14,816) (111,116) Net loss (67,283) (69,010) (69,010) (69,010) (515,850) ------------ -------------- -------------- --------------- ------------ Balances at December 31, 1999 $ 54,125 $ 62,375 $ 62,375 $ 62,375 $ 460,922 ============ ============== ============== =============== ============ The accompanying notes are an integral part of these financial statements. 58
INDECK NORTH AMERICAN POWER PARTNERS, L.P. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999 - ------------------------------------------------------------------------------ Cash flows from operating activities: Net loss $ (515,850) Adjustments to reconcile net loss to net cash provided by operating activities: Amortization 545,417 Equity income from investment (43,088) Cash distributions from investment 43,088 Changes in operating assets and liabilities: Account receivable, affiliates (2,410) Accounts payable, affiliates 3,882 ------------------ Net cash provided by operating activities 31,039 ------------------ Cash flows from investing activities: Contributions to Indeck North American Power Fund, L.P. (5,750) Return of capital from investment 78,029 ------------------ Net cash provided by investing activities 72,279 ------------------ Cash flows from financing activities: Capital contributions from partners 5,750 Capital distributions to partners (111,116) ------------------ Net cash used in financing activities (105,366) ------------------ Decrease in cash (2,048) Cash, beginning of year 5,583 ------------------- Cash, end of year $ 3,535 ================== The accompanying notes are an integral part of these financial statements. 59
INDECK NORTH AMERICAN POWER PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 1. ORGANIZATION AND OPERATIONS Indeck North American Power Partners, L.P. (the "Partnership") is a limited partnership whose operations commenced May 16, 1995. The partnership terminates in 2005. The purpose and business of the Partnership is to own a 1% interest in Indeck North American Power Fund, L.P. ("INAPF") and act as its General Partner. The Partnership received $2,153,000 in 1999 for management fees, which are recognized as management services are performed, and $376,000 for reimbursable expenditures in 1999, from INAPF and incurred expenses of the same amount to Indeck North America, Inc., the General Partner of the Partnership. Profits and losses are generally to be allocated based on the partners' respective percentage interests, except for amortization costs which are not to be allocated to the General Partner. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ESTIMATES Preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingencies 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. INCOME TAXES The profits and losses of the Partnership are subject to income taxes directly at the partner level. Accordingly, the Partnership's financial statements do not reflect a provision for income taxes. INVESTMENTS As it represents an interest in a limited partnership, the investment in INAPF is recorded under the equity method. The Partnership's investment is increased by its share of INAPF's earnings and reduced by distributions received from INAPF. 60
3. EQUITY INVESTMENT IN INAPF The summarized balance sheet of INAPF at December 31, 1999 is as follows: Assets: Cash and cash equivalents $ 509,208 Accounts receivable 1,266,166 Prepaid management fee 717,750 Investment in Harbor Cogeneration Company 40,335,958 Plant and equipment, net 5,625,140 Other assets, net 122,813 ----------- Total assets $48,577,035 =========== Liabilities: Accounts payable $ 1,536,388 Minority interest 461,982 Partners' equity 46,578,665 ----------- Total liabilities and partners' equity $48,577,035 =========== The summarized statement of income for INAPF for the year ended December 31, 1999 is as follows: Revenues and income from equity investments: Equity income from investment $ 5,646,341 Operating expenses 10,672,645 Other 423,895 ----------- 16,742,881 ----------- Expenses: Operating 11,819,558 Selling, general and administrative 2,722,838 Minority interest 44,982 ----------- Total expenses and minority interest 14,587,378 ----------- Net income $ 2,155,503 =========== 61
4. COMMITMENTS The Partnership has an unfunded capital commitment to INAPF of $878,992 at December 31, 1999. Funding is required as INAPF makes additional portfolio investments. The commitment expires in 2000. 5. SUBSEQUENT EVENT On January 28, 2000, Dynegy Marketing and Trade Capital Corp. ("DMTCC") was acquired by Black Hills Energy Capital, Inc. ("Black Hills"). As a result of this transaction, Black Hills assumed DMTCC's partnership interest in the Partnership. 62
INDECK NORTH AMERICAN POWER PARTNERS, L.P. BALANCE SHEET JUNE 30, 2000 (UNAUDITED) - ------------------------------------------------------------------------------- ASSETS Current assets: Cash $ 12 Accounts receivable, affiliates 6,834 Prepaid management fee 332,006 --------- Total current assets 338,852 Other assets Investment in INAPF 464,749 --------- Total assets $ 803,601 ========= LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable, affiliates 17,964 Accrued management fee 332,005 --------- Total current liabilities 349,969 Partners' capital: Beginning capital 460,921 Contributions 6,500 Distributions (42,144) Net income 28,355 --------- Total partners' capital 453,632 --------- Total liabilities and partners' capital $ 803,601 ========= 63
INDECK NORTH AMERICAN POWER PARTNERS, L.P. STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED) - ------------------------------------------------------------------------------- 2000 1999 ---- ---- Revenues $ 896,154 $ 1,353,133 Equity in income on investment 41,784 12,397 ----------- ----------- Total revenues 937,938 1,365,530 Selling, general and administrative expenses 909,583 1,638,022 ----------- ----------- Net income (loss) $ 28,355 $ (272,492) =========== =========== 64
INDECK NORTH AMERICAN POWER PARTNERS, L.P. STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED) - ------------------------------------------------------------------------------- 2000 1999 ---- ---- Cash flows from operating activities: Net income $ 28,355 $(272,492) Adjustments to reconcile net income to net cash provided by operating activities: Equity income from investment (41,784) (12,397) Cash distributions from investment 41,784 12,397 Amortization 0 272,709 Changes in assets and liabilities: Accounts receivable 56,369 12,619 Accounts payable (46,463) (5,896) --------- --------- Net cash provided by operating activities 38,261 6,940 --------- --------- Cash flows from investing activities: Contribution to Indeck North American Power Fund, L.P. (6,500) (5,750) Return of capital from investment 360 65,061 --------- --------- Net cash used in (provided by) investing activities (6,140) 59,311 --------- --------- Cash flows from financing activities: Contributions 6,500 5,750 Distributions to partners (42,144) (77,458) --------- --------- Net cash used in financing activities (35,644) (71,708) --------- --------- Decrease in cash (3,523) (5,457) Cash, beginning of period 3,535 5,583 --------- --------- Cash, end of period $ 12 $ 126 ========= ========= 65
NORTHERN ELECTRIC POWER CO., L.P. FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1999 AND REPORT OF INDEPENDENT ACCOUNTANTS 66
REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Northern Electric Power Co., L.P. In our opinion, the accompanying balance sheet and the related statements of earnings, of partners' equity and of cash flows present fairly, in all material respects, the financial position of Northern Electric Power Co., L.P. (the "Partnership") at December 31, 1999, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Partnership's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Milwaukee, Wisconsin February 25, 2000 67
NORTHERN ELECTRIC POWER CO., L.P. BALANCE SHEET DECEMBER 31, 1999 - ------------------------------------------------------------------------------- Assets: Cash and cash equivalents (Note 1) $ 75,906 Accounts receivable - power sales 1,049,813 Prepaid expenses and supplies 427,325 Property and equipment: Hydroelectric facilities (Notes 1 and 2) 99,037,055 Less accumulated depreciation (10,284,710) ------------ Property and equipment, net 88,752,345 Deferred financing costs, net of accumulated amortization of $1,638,464 (Note 1) 4,260,005 ------------ Total assets $ 94,565,394 ============ Liabilities and Partners' Equity: Accounts payable (Note 3) $ 52,085 Accrued expenses (Note 3) 575,137 Operating loan (Note 2) 200,000 Long-term debt (Note 2) 77,969,047 ------------ Total liabilities 78,796,269 Partners' equity 15,769,125 ------------ Total liabilities and partners' equity $ 94,565,394 ============ SEE NOTES TO FINANCIAL STATEMENTS. 68
NORTHERN ELECTRIC POWER CO., L.P. STATEMENT OF EARNINGS FOR THE YEAR ENDED DECEMBER 31, 1999 - ------------------------------------------------------------------------------- Revenues: Power sales $14,557,815 Other income 72,725 ----------- Total revenues 14,630,540 ----------- Expenses: General and administrative 1,309,829 Operations 401,367 Insurance 220,683 Property taxes 304,549 Depreciation and amortization 2,891,003 Interest 7,794,332 ----------- Total expenses 12,921,763 ----------- Net earnings $ 1,708,777 =========== SEE NOTES TO FINANCIAL STATEMENTS. 69
NORTHERN ELECTRIC POWER CO., L.P. STATEMENT OF PARTNERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 1999 - ------------------------------------------------------------------------------- General Limited Partner Partners Total ------- -------- ----- Balance at December 31, 1998 $ (6,286) $ 15,066,634 $ 15,060,348 Partner distributions (10,000) (990,000) (1,000,000) Net earnings 17,088 1,691,689 1,708,777 ------------ ------------ ------------ Balance at December 31, 1999 $ 802 $ 15,768,323 $ 15,769,125 ============ ============ ============ SEE NOTES TO FINANCIAL STATEMENTS. 70
NORTHERN ELECTRIC POWER CO., L.P. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999 - ------------------------------------------------------------------------------- Cash flows from operating activities: Net earnings $ 1,708,777 ----------- Adjustments to reconcile net earnings to cash provided by operating activities: Depreciation and amortization 2,891,003 Changes in operating assets and liabilities: Accounts receivable (88,929) Prepaid expenses and supplies (4,082) Accounts payable (4,316) Accrued expenses 21,444 ----------- Total adjustments 2,815,120 ----------- Cash provided by operating activities 4,523,897 ----------- Cash flows from investing activities: Purchases of property and equipment (59,301) ----------- Cash used in investing activities (59,301) ----------- Cash flows from financing activities: Repayment of long-term debt (3,467,267) Partner distributions (1,000,000) ----------- Cash used in financing activities (4,467,267) ----------- Net change in cash (2,671) Cash and cash equivalents, beginning of year 78,577 ----------- Cash and cash equivalents, end of year $ 75,906 =========== Supplemental disclosure of cash flow information: Cash paid during the year for interest $ 7,794,332 =========== SEE NOTES TO FINANCIAL STATEMENTS. 71
NORTHERN ELECTRIC POWER CO., L.P. NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: a. ORGANIZATION: Northern Electric Power Co., L.P. ( the "Partnership") was formed as a limited partnership under the laws of the State of New York on March 11, 1992; it organized and began business on March 1, 1994 for the purpose of developing, rehabilitating, and operating a hydroelectric facility located on the Hudson River, Town of Moreau, Saratoga County, New York. The facility began generating power on November 22, 1995. The financial statements include only the assets and liabilities which relate to the Partnership and do not include any items attributable to the partners' individual activity. b. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions (e.g., depreciable lives) 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. c. CASH AND CASH EQUIVALENTS: Cash includes all cash equivalents that are highly liquid investments with a maturity of three months or less when purchased. d. PROPERTY AND EQUIPMENT: Property and equipment are carried at cost. Cost includes expenditures for construction, capitalized interest, on-site and title insurance, and attorney's costs of acquisition. The hydroelectric facilities are being depreciated on a straight-line basis over 40 years. The Partnership evaluates the recoverability of the net carrying amount of the hydroelectric facilities on an ongoing basis by reference to the anticipated future undiscounted cash flows from the operations of the project. Depreciation expense was $2,475,918 for the year ended December 31, 1999. e. DEFERRED FINANCING COSTS: Deferred financing costs are amortized over the term of the related debt agreement (15 years). f. INCOME TAXES: No provision has been made for federal and state income taxes because these taxes are the responsibility of the partners. 2. LONG-TERM DEBT: Long-term debt consists of the following at December 31, 1999: Term loan, Toronto-Dominion Bank, floating interest (7.625% at December 31, 1999), quarterly principal and interest payments of varying amounts, final maturity December 31, 2010 $77,969,047 =========== 72
Collateral for the term loan and the operating line of credit discussed below includes a mortgage on all facilities, leases and rights, including the right to receive payments from Niagara Mohawk Power Corporation ("NMPC") pursuant to a Power Purchase Agreement ("PPA") with a 40-year term. The loan agreement contains various restrictive covenants including the maintenance of a minimum debt service coverage ratio. Minimum principal payments under the existing term loan agreement for the five years following December 31, 1999 and thereafter are as follows: 2000 $ 3,822,883 2001 4,667,474 2002 5,200,900 2003 5,689,873 2004 6,490,011 Thereafter 52,097,906 ----------- $77,969,047 =========== The Partnership also has a $5 million operating line of credit with the Toronto-Dominion Bank ("Bank") through April 2000, which automatically renews every three years through December 31, 2010. The Partnership had borrowings of $200,000 outstanding under this agreement at December 31, 1999. Borrowings under the agreement bear interest at LIBOR plus 1.875% (LIBOR was 6.44% at December 31, 1999). To provide some degree of protection against the potential impact of rising interest rates, effective March 29, 1996, the Partnership entered into an amortizing interest rate swap agreement that expires June 29, 2006. This agreement effectively changes the Partnership's interest rate exposure on approximately 75% of the future floating rate term loan to a fixed rate. Under the agreement, each quarter the Partnership pays a fixed rate of 8.835% on the notional amount to the Bank (notional amount was $58,785,814 at December 31, 1999), and receives a variable rate from the Bank (6.18125% at December 31, 1999). The net amount payable or receivable is recorded as interest expense. At December 31, 1999, the carrying amount of all debt obligations approximate their fair values, and the fair value of the interest rate swap agreement was $4,797,300, representing the cost the Partnership would incur to terminate the agreement. 3. RELATED PARTY TRANSACTIONS: Fees to Adirondack Hydro Development Corporation ("Adirondack"), a limited partner, during 1999 were $750,000, of which $324,144 is included in accrued expenses at December 31, 1999. Included in accounts payable at December 31, 1999 are amounts payable to affiliated companies of $37,377. 73
4. POWER PURCHASE AGREEMENT: The Partnership has entered into a 40-year power purchase agreement with NMPC, committing the parties to sell and buy, respectively, the output of the hydroelectric facility. The PPA establishes contract energy payment rates for each of the 40 years. The contract energy payment rate was $0.09002 per kilowatt hour at December 31, 1999. Revenue is recognized when the power is transmitted in accordance with the terms of the PPA. On August 1, 1996, NMPC submitted a proposal to nineteen Independent Power Producers ("IPPs") to restructure 44 of the IPPs' PPAs with NMPC concurrent with an internal restructuring of NMPC. Adirondack's projects, including the Partnership, made up seven of the 44 PPAs subject to NMPC's proposal. However, in June 1997, NMPC withdrew its proposal for all hydroelectric projects included in the original group of 44 PPAs. As of December 31, 1997, agreements had been reached with sixteen of the nineteen IPPs on the restructuring of 29 of the PPAs. As of March 20, 1998, the New York State Public Service Commission approved NMPC's restructuring plan. The plan included the restructuring of 29 PPAs which represent over 80% of NMPC's "out-of-market" PPAs. Adirondack initiated separate discussions with NMPC in November 1997 regarding the restructuring of its seven PPAs. Discussions are ongoing. A term sheet was signed for two of the seven PPAs (Warrensburg Hydro Power Limited Partnership and Sissonville Limited Partnership) in 1999. Adirondack management anticipates that a final settlement for the restructuring of the remaining PPAs will be reached in 2000. 5. LEASES The Partnership leases the land upon which its hydroelectric facilities are situated from NMPC and the adjacent riverbed from the State of New York. These lease agreements extend through the end of the PPA with NMPC. Total rental expense in 1999 was $60,349. 74
NORTHERN ELECTRIC POWER CO., L.P. BALANCE SHEET SEPTEMBER 30, 2000 (UNAUDITED) - -------------------------------------------------------------------------------- Assets: Cash $ 2,382,160 Accounts receivable 1,175,127 Prepaid expenses and supplies 233,559 ------------ Total current assets 3,790,846 Property and equipment: Hydroelectric facilities 99,037,055 Less accumulated depreciation (12,142,317) ------------ Property and equipment, net 86,894,738 Deferred financing costs 3,965,082 ------------ Total assets $ 94,650,666 ============ Liabilities and Equity: Accounts payable $ 1,707 Accrued expenses 2,099,741 ------------ Total current liabilities 2,101,448 Term debt - Toronto Dominion 75,101,885 Partners' equity 17,447,333 ------------ Total liabilities and equity $ 94,650,666 ============ 75
NORTHERN ELECTRIC POWER CO., L.P. STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED) - -------------------------------------------------------------------------------- 2000 1999 ---- ---- Revenue: Electricity sales $16,504,955 $11,309,072 ----------- ----------- Expenses: Operations 1,393,350 1,278,130 Administrative and general 198,299 267,111 Depreciation/amortization 2,152,531 2,168,612 Taxes other than income 348,954 217,411 ----------- ----------- Total expenses 4,093,134 3,931,264 Miscellaneous non-operating income 100,554 60,367 Interest expense 5,734,167 5,862,561 ----------- ----------- Net earnings $ 6,778,208 $ 1,575,614 =========== =========== 76
NORTHERN ELECTRIC POWER CO., L.P. STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED) - -------------------------------------------------------------------------------- 2000 1999 ---- ---- Cash flows from operating activities: Net earnings $ 6,778,208 $ 1,575,614 ----------- ----------- Adjustments to reconcile net earnings to cash provided by (used in) operating activities: Depreciation and amortization 2,152,531 2,168,612 Changes in operating assets and liabilities: Accounts receivable (125,314) 89,218 Prepaid expenses and supplies 193,766 197,763 Accounts payable (50,378) 20,302 Accrued partner distribution payable (1,500,000) -- Accrued expenses 1,524,603 (156,733) ----------- ----------- Total adjustments 2,195,208 2,319,162 ----------- ----------- Cash provided by operating activities 8,973,416 3,894,776 ----------- ----------- Cash flows from investing activities: Purchases of property and equipment -- (60,660) ----------- ----------- Cash used in investing activities -- (60,660) ----------- ----------- Cash flows from financing activities: Repayment of operating loan (200,000) (200,000) Repayment of long-term debt (2,867,162) (2,600,450) Partner distributions (3,600,000) (1,000,000) ----------- ----------- Cash used in financing activities (6,667,162) (3,800,450) ----------- ----------- Net change in cash 2,306,254 33,666 Cash and cash equivalents, beginning of period 75,906 78,577 ----------- ----------- Cash and cash equivalents, end of period $ 2,382,160 $ 112,243 =========== =========== 77
SOUTH GLENS FALLS LIMITED PARTNERSHIP FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 AND REPORT OF INDEPENDENT ACCOUNTANTS 78
REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of South Glens Falls Limited Partnership In our opinion, the accompanying balance sheet and the related statements of earnings, of partners' equity and of cash flows present fairly, in all material respects, the financial position of South Glens Falls Limited Partnership (the "Partnership") at December 31, 1999, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Partnership's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Milwaukee, Wisconsin February 25, 2000 79
SOUTH GLENS FALLS LIMITED PARTNERSHIP BALANCE SHEET DECEMBER 31, 1999 - -------------------------------------------------------------------------------- Assets: Cash and cash equivalents (Note 1) $ 76,870 Accounts receivable - power sales 388,237 Prepaid expenses and supplies 180,734 Property and equipment: Hydroelectric facilities (Notes 1 and 2) 39,428,866 Less accumulated depreciation (5,338,783) ------------ Property and equipment, net 34,090,083 Deferred financing costs, net of accumulated amortization of $710,666 (Note 1) 1,257,331 ------------ Total assets $ 35,993,255 ============ Liabilities and Partners' Equity: Accounts payable (Note 3) $ 43,426 Accrued expenses (Note 3) 369,158 Operating loan (Note 2) 100,000 Long-term debt (Note 2) 28,064,527 ------------ Total liabilities 28,577,111 Partners' equity 7,416,144 ------------ Total liabilities and partners' equity $ 35,993,255 ============ SEE NOTES TO FINANCIAL STATEMENTS. 80
SOUTH GLENS FALLS LIMITED PARTNERSHIP STATEMENT OF EARNINGS FOR THE YEAR ENDED DECEMBER 31, 1999 - -------------------------------------------------------------------------------- Revenues: Power sales $5,372,443 Other income 29,031 ---------- Total revenues 5,401,474 ---------- Expenses: General and administrative 658,607 Operations 201,096 Insurance 101,496 Property taxes 158,351 Depreciation and amortization 1,121,800 Interest 2,280,426 ---------- Total expenses 4,521,776 ---------- Net earnings $ 879,698 ========== SEE NOTES TO FINANCIAL STATEMENTS. 81
SOUTH GLENS FALLS LIMITED PARTNERSHIP STATEMENT OF PARTNERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 1999 - -------------------------------------------------------------------------------- General Limited PARTNER PARTNERS TOTAL Balance at December 31, 1998 $ 5,108 $ 6,731,338 $ 6,736,446 Partner distributions (2,000) (198,000) (200,000) Net earnings 8,797 870,901 879,698 -------- ----------- ----------- Balance at December 31, 1999 $ 11,905 $ 7,404,239 $ 7,416,144 ======== =========== =========== SEE NOTES TO FINANCIAL STATEMENTS. 82
SOUTH GLENS FALLS LIMITED PARTNERSHIP STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999 - -------------------------------------------------------------------------------- Cash flows from operating activities: Net earnings $ 879,698 ----------- Adjustments to reconcile net earnings to cash provided by operating activities: Depreciation and amortization 1,121,800 Changes in operating assets and liabilities: Accounts receivable (41,472) Prepaid expenses and supplies (644) Accounts payable 19,155 Accrued expenses 190,714 ----------- Total adjustments 1,289,553 ----------- Cash provided by operating activities 2,169,251 ----------- Cash flows from financing activities: Repayment of long-term debt (2,010,908) Partner distributions (200,000) Net proceeds from operating loans 100,000 ----------- Cash used in financing activities (2,110,908) ----------- Net change in cash 58,343 Cash and cash equivalents, beginning of year 18,527 ----------- Cash and cash equivalents, end of year $ 76,870 =========== Supplemental disclosure of cash flow information: Cash paid during the year for interest $ 2,280,426 =========== SEE NOTES TO FINANCIAL STATEMENTS. 83
SOUTH GLENS FALLS LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: a. ORGANIZATION: South Glens Falls Limited Partnership ( the "Partnership") was formed as a limited partnership under the laws of the State of New York on March 11, 1992; it organized and began business on August 24, 1993 for the purpose of developing, rehabilitating, and operating a hydroelectric facility located on the Hudson River in the Village of South Glens Falls, Saratoga County, New York. The Partnership began generating power on August 11, 1994. The financial statements include only the assets and liabilities which relate to the Partnership and do not include any items attributable to the partners' individual activity. b. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions (e.g., depreciable lives) 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. c. CASH AND CASH EQUIVALENTS: Cash includes all cash equivalents that are highly liquid investments with a maturity of three months or less when purchased. d. PROPERTY AND EQUIPMENT: Property and equipment are carried at cost. Cost includes expenditures for construction, capitalized interest, on-site and title insurance, and attorney's costs of acquisition. The hydroelectric facilities are being depreciated on a straight-line basis over 40 years. The Partnership evaluates the recoverability of the net carrying amount of the hydroelectric facilities on an ongoing basis by reference to the anticipated future undiscounted cash flows from the operations of the project. Depreciation expense was $985,722 for the year ended December 31, 1999. e. DEFERRED FINANCING COSTS: Deferred financing costs are amortized over the term of the related debt agreement (15 years). f. INCOME TAXES: No provision has been made for federal and state income taxes because these taxes are the responsibility of the partners. 2. LONG-TERM DEBT: Long-term debt consists of the following at December 31, 1999: Term loan, Toronto-Dominion Bank, floating interest (7.625% at December 31, 1999), quarterly principal and interest payments of varying amounts, final maturity December 31, 2009 $28,064,527 =========== Collateral for the term loan and the operating line of credit discussed below includes a mortgage on all land and facilities, leases and rights, including the right to receive payments from Niagara Mohawk Power Corporation ("NMPC") pursuant to a Power Purchase Agreement ("PPA") with a 40-year term. The loan agreement contains various restrictive covenants including the maintenance of a minimum debt service coverage ratio. 84
Minimum principal payments under the existing term loan agreement for the five years following December 31, 1999 and thereafter are as follows: 2000 $ 1,940,351 2001 2,116,746 2002 2,257,863 2003 2,434,258 2004 2,628,293 Thereafter 16,687,016 ----------- $28,064,527 =========== The Partnership also has a $2.5 million operating line of credit with the Toronto-Dominion Bank ("Bank") through March 7, 2001, which can be renewed each year through December 31, 2009. The Partnership had borrowings of $100,000 outstanding under this agreement at December 31, 1999. Borrowings under the agreement bear interest at LIBOR plus 1.875% (LIBOR was 6.44% at December 31, 1999). To provide some degree of protection against the potential impact of rising interest rates, effective February 3, 1995, the Partnership entered into an amortizing interest rate swap agreement with the Bank that expires December 31, 2004. This agreement effectively changes the Partnership's interest rate exposure on approximately 70% of the future floating rate term loan to a fixed rate. Under the agreement, each quarter the Partnership pays a fixed rate of 6.375% on the notional amount to the Bank (notional amount was $19,887,500 at December 31, 1999), and receives a variable rate from the Bank (6.18375% at December 31,1999). The net amount payable or receivable is recorded as interest expense. At December 31, 1999, the carrying amount of all debt obligations approximate their fair values, and the fair value of the interest rate swap agreement was $339,093, representing the amount the Partnership would receive if the agreement was terminated. 3. RELATED PARTY TRANSACTIONS: Fees to Adirondack Hydro Development Corporation ("Adirondack"), a limited partner, during 1999 were $375,000, of which $187,500 is included in accrued expenses at December 31, 1999. Included in accounts payable at December 31, 1999 is $18,070, payable to affiliated companies. 4. POWER PURCHASE AGREEMENT: The Partnership has entered into a 40-year power purchase agreement with NMPC, committing the parties to sell and buy, respectively, the output of the hydroelectric facility. The PPA establishes contract energy payment rates for each of the 40 years. The contract payment rate was $0.09182 per kilowatt hour at December 31, 1999. Revenue is recognized when the power is transmitted in accordance with the terms of the PPA. On August 1, 1996, NMPC submitted a proposal to nineteen Independent Power Producers ("IPPs") to restructure 44 of the IPPs' PPAs with NMPC concurrent with an internal restructuring of NMPC. Adirondack's projects, including the Partnership, made up seven of the 44 PPAs subject to NMPC's proposal. However, in June 1997, NMPC withdrew its proposal for all hydroelectric projects included in the original group of 44 PPAs. As of December 31, 1997, agreements had been reached with sixteen of the nineteen IPPs on the restructuring of 29 of the PPAs. As of March 20, 1998, the New York State Public Service Commission approved NMPC's restructuring plan. The plan included the restructuring of 29 PPAs which represent over 80% of NMPC's "out-of-market" PPAs. 85
Adirondack initiated separate discussions with NMPC in November 1997 regarding the restructuring of its seven PPAs. Discussions are ongoing. A term sheet was signed for two of the seven PPAs (Warrensburg Hydro Power Limited Partnership and Sissonville Limited Partnership) in 1999. Adirondack management anticipates that a final settlement for the restructuring of the remaining PPAs will be reached in 2000. 5. LEASES The Partnership leases the land upon which its hydroelectric facilities are situated from NMPC and the adjacent riverbed from the State of New York. These lease agreements extend through the end of the PPA with NMPC. Total rental expense in 1999 was $98,746. 86
SOUTH GLENS FALLS LIMITED PARTNERSHIP BALANCE SHEET SEPTEMBER 30, 2000 (UNAUDITED) - -------------------------------------------------------------------------------- Assets: Cash $ 941,921 Accounts receivable 415,103 Prepaid expenses and supplies 137,182 ------------ Total current assets 1,494,206 Property and equipment: Hydroelectric facilities 39,428,866 Less accumulated depreciation (6,078,074) ------------ Property and equipment, net 33,350,792 Deferred financing costs 1,158,931 ------------ Total assets $ 36,003,929 ============ Liabilities and Equity: Accounts payable $ 3,350 Accrued expenses 665,025 Term debt - Toronto Dominion 26,609,263 ------------ Total liabilities 27,277,638 Partners' equity 8,726,291 ------------ Total liabilities and partners' equity $ 36,003,929 ============ 87
SOUTH GLENS FALLS LIMITED PARTNERSHIP STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED) - -------------------------------------------------------------------------------- 2000 1999 ---- ---- Revenue: Electricity sales $5,868,821 $4,172,908 ---------- ---------- Expenses: Operations 603,758 572,430 Administrative and general 99,634 138,568 Depreciation/amortization 837,691 841,350 Taxes other than income 123,931 118,752 ---------- ---------- Total expenses 1,665,014 1,671,100 Miscellaneous non-operating income 38,977 24,230 Interest expense 1,682,637 1,717,396 ---------- ---------- Net earnings $2,560,147 $ 808,642 ========== ========== 88
SOUTH GLENS FALLS LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED) - -------------------------------------------------------------------------------- 2000 1999 ---- ---- Cash flows from operating activities: Net earnings $ 2,560,147 $ 808,642 ----------- ----------- Adjustments to reconcile net earnings to cash provided by operating activities: Depreciation and amortization 837,691 841,350 Changes in operating assets and liabilities: Accounts receivable (26,866) 19,617 Prepaid expenses and supplies 43,552 43,134 Accounts payable (40,076) (5,075) Accrued partner distribution payable (450,000) -- Accrued expenses 295,867 32,081 ----------- ----------- Total adjustments 660,168 931,107 ----------- ----------- Cash provided by operating activities 3,220,315 1,739,749 ----------- ----------- Cash flows from financing activities: Repayment of operating loan (100,000) -- Repayment of long-term debt (1,455,264) (1,508,181) Partner distributions (800,000) (200,000) ----------- ----------- Cash used in financing activities (2,355,264) (1,708,181) ----------- ----------- Net change in cash 865,051 31,568 Cash and cash equivalents, beginning of period 76,870 18,527 ----------- ----------- Cash and cash equivalents, end of period $ 941,921 $ 50,095 =========== =========== 89
BLACK HILLS CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS The Unaudited Pro Forma Consolidated Statements of Income of Black Hills Corporation (the Registrant) for the fiscal year ended December 31, 1999 and the nine-month period ended September 30, 2000, and the Unaudited Pro Forma Consolidated Balance Sheet of the Registrant as of September 30, 2000, have been prepared to illustrate the estimated effect of the Indeck Capital, Inc. (Indeck), Indeck North American Power Fund, L.P (INAPF), Indeck North American Power Partners, L.P (INAPP), Northern Electric Power Company, L.P (NEPCO), and South Glens Falls, L.P (SGF) transactions described in the Registrant's Form 8-K dated December 5, 2000 (collectively "the Transactions"). The Pro Forma Statements of Income give pro forma effect to the Transactions as if they had occurred on January 1, 1999. The Pro Forma Balance Sheet gives pro forma effect to the November 6, 2000 INAPF and INAPP transactions and the December 5, 2000 NEPCO and SGF transactions as if they had occurred on September 30, 2000. All Transactions effected September 30, 2000 or earlier, including the July 7, 2000 acquisition of Indeck and its subsidiaries, were reflected in the September 30, 2000 consolidated balance sheet of the Registrant. The accompanying pro forma information is presented for illustrative purposes only and is not necessarily indicative of the financial position or results of operations which would actually have been reported had the Transactions been in effect during the periods presented, or which may be reported in the future. The accompanying Unaudited Pro Forma Consolidated Financial Statements should be read in conjunction with the historical financial statements and related notes thereto for Indeck, INAPF, INAPP, NEPCO and SGF included elsewhere in this Amendment to Form 8-K. 90
BLACK HILLS CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 2000 - -------------------------------------------------------------------------------- 9/30/00 COMPANY 9/30/00 9/30/00 CONSOLIDATED NEPCO SGF --------------- ------------ ------------- ASSETS CURRENT ASSETS: Cash $ 12,102,000 $ 2,382,160 $ 941,921 Securities available for sale 3,493,000 -- -- Accounts receivable 185,752,000 1,175,127 415,103 Prepaid expenses and other 6,570,000 233,558 137,182 Inventory 13,816,000 -- -- --------------- ------------ ------------ Total current assets 221,733,000 3,790,845 1,494,206 --------------- ------------ ------------ PROPERTY AND INVESTMENTS 992,248,000 99,037,056 39,428,866 Less: accumulated depreciation (265,226,000) (12,142,317) (6,078,074) --------------- ------------ ------------ Net property and investments 727,022,000 86,894,739 33,350,792 --------------- ------------ ------------ OTHER ASSETS: Deferred financing costs, net -- 3,965,082 1,158,931 Goodwill 32,827,000 -- -- Regulatory assets 3,944,000 -- -- Deferred tax assets 18,095,000 -- -- --------------- ------------ ------------ 54,866,000 3,965,082 1,158,931 --------------- ------------ ------------ Total assets $ 1,003,621,000 $ 94,650,666 $ 36,003,929 =============== ============ ============ LIABILITIES AND EQUITY CURRENT LIABILITIES: Accounts payable $ 161,712,000 $ 1,707 $ 3,349 Accrued liabilities 19,298,000 2,099,741 665,025 Income tax payable 10,438,000 -- -- Notes payable 170,775,000 -- -- Current maturities on L-T debt 7,052,000 -- -- --------------- ------------ ------------ Total current liabilities 369,275,000 2,101,448 668,374 --------------- ------------ ------------ LONG TERM LIABILITIES: Other 12,583,000 -- -- Regulatory liability 4,796,000 -- -- Reclamation costs 17,792,000 -- -- Investment tax credits 2,653,000 -- -- Deferred income tax liability 75,056,000 -- -- Long-term debt (net of current) 214,714,000 75,101,885 26,609,264 Minority interest 35,463,000 -- -- --------------- ------------ ------------ Total long term liabilities 363,057,000 75,101,885 26,609,264 --------------- ------------ ------------ Total liabilities 732,332,000 77,203,333 27,277,638 STOCKHOLDERS' EQUITY: Common stock 23,294,000 -- -- Preferred stock 4,000,000 -- -- Partners' equity -- 17,447,333 8,726,291 Additional paid in capital 73,276,000 -- -- Retained earnings 177,610,000 -- -- Treasury stock (7,460,000) -- -- Accumulated other comp. income 569,000 -- -- --------------- ------------ ------------ Total stockholders' equity 271,289,000 17,447,333 8,726,291 --------------- ------------ ------------ Total liabilities and equity $ 1,003,621,000 $ 94,650,666 $ 36,003,929 =============== ============ ============ 91
BLACK HILLS CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET, CONTINUED SEPTEMBER 30, 2000 - -------------------------------------------------------------------------------- 9/30/00 PRO FORMA PRO FORMA COMPANY ADJUSTMENTS CONSOLIDATED ASSETS CURRENT ASSETS: Cash $ -- $ 15,426,081 Securities available for sale -- 3,493,000 Accounts receivable -- 187,342,230 Prepaid expenses and other -- 6,940,740 Inventory -- 13,816,000 ------------ --------------- Total current assets -- 227,018,051 ------------ --------------- PROPERTY AND INVESTMENTS (b), (d) (11,521,209) 1,119,192,713 Less: accumulated depreciation -- (283,446,391) ------------ --------------- Net property and investments (11,521,209) 835,746,322 ------------ --------------- OTHER ASSETS: Deferred financing costs, net -- 5,124,013 Goodwill (a), (e) (4,104,930) 28,722,070 Regulatory assets -- 3,944,000 Deferred tax assets (e) 2,804,930 20,899,930 ------------ --------------- (1,300,000) 58,690,013 ------------ --------------- Total assets $(12,821,209) $ 1,121,454,386 ============ =============== LIABILITIES AND EQUITY CURRENT LIABILITIES: Accounts payable $ -- $ 161,717,056 Accrued liabilities -- 22,062,766 Income tax payable -- 10,438,000 Notes payable (a), (b) 6,900,000 177,675,000 Current maturities on L-T debt -- 7,052,000 ------------ --------------- Total current liabilities 6,900,000 378,944,822 ------------ --------------- LONG TERM LIABILITIES: Other -- 12,583,000 Regulatory liability -- 4,796,000 Reclamation costs -- 17,792,000 Investment tax credits -- 2,653,000 Deferred income tax liability -- 75,056,000 Long-term debt (net of current) -- 316,425,149 Minority interest (a), (c) 6,452,415 41,915,415 ------------ --------------- Total long term liabilities 6,452,415 471,220,564 ------------ --------------- Total liabilities 13,352,415 850,165,386 STOCKHOLDERS' EQUITY: Common stock -- 23,294,000 Preferred stock -- 4,000,000 Partners' equity (b), (c), (d) (26,173,624) -- Additional paid in capital -- 73,276,000 Retained earnings -- 177,610,000 Treasury stock -- (7,460,000) Accumulated other comp. income -- 569,000 ------------ --------------- Total stockholders' equity (26,173,624) 271,289,000 ------------ --------------- Total liabilities and equity $(12,821,209) $ 1,121,454,386 ============ =============== 92
BLACK HILLS CORPORATION AND SUBSIDIARIES NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 2000 - -------------------------------------------------------------------------------- NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET NOTE 1: The September 30, 2000 balance sheets of Indeck, INAPF and INAPP were consolidated into the Registrant's September 30, 2000 consolidated balance sheet and therefore are not stated separately on the September 30, 2000 Unaudited Pro Forma Consolidated Balance Sheet. NOTE 2: The following is a description of each of the pro forma adjustments: (a) November 6, 2000 acquisition of additional partnership interest in INAPF and INAPP for $2.7 million, funded through the Registrant's subsidiaries' revolving credit facility. Minority interest was decreased by the $4.0 million of underlying partnership equity and goodwill was reduced by the $1.3 million difference. (b) December 5, 2000 acquisition of additional partnership interest in NEPCO and SGF for $4.2 million, funded through the Registrant's subsidiaries' revolving credit facility. Partners' equity was decreased by the $11.2 million of underlying equity acquired and fixed assets were reduced by the $7 million difference. (c) To record the $10.5 million pro forma minority interest in the equity of NEPCO and SGF. (d) Elimination of NEPCO and SGF partnership equity for consolidation. (e) Deferred taxes related to adjustment (b). 93
BLACK HILLS CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1999 - ----------------------------------------------------------------------------------------------------------------------------------- 12/31/99 YTD THRU YTD THRU YTD THRU COMPANY 12/31/99 12/31/99 12/31/99 CONSOLIDATED INDECK INAPF INAPP Revenues: Operating revenues $ 791,875,000 $ 6,859,863 $ 11,096,540 $ 2,529,062 Equity in income of unconsolidated affiliates -- 3,600,448 5,646,342 43,088 ------------- ------------ ------------ ------------ Total revenues 791,875,000 10,460,311 16,742,882 2,572,150 ------------- ------------ ------------ ------------ Operating expenses: Fuel and purchased power expense 637,302,000 -- -- -- Operations and maintenance 36,463,000 659,085 11,819,558 -- Administrative and general 18,272,000 8,521,719 2,722,838 3,088,000 Depreciation, depletion and amortization 25,067,000 611,747 -- -- Taxes other than income 12,880,000 347,949 -- -- ------------- ------------ ------------ ------------ Total operating expenses 729,984,000 10,140,500 14,542,396 3,088,000 ------------- ------------ ------------ ------------ Income from operations 61,891,000 319,811 2,200,486 (515,850) Other income/(expenses) Other income 2,811,000 631,438 -- -- Interest income 3,614,000 746,821 -- -- Interest expense (15,460,000) (4,582,988) -- -- ------------- ------------ ------------ ------------ Total other income/(expenses) (9,035,000) (3,204,729) -- -- ------------- ------------ ------------ ------------ Income/(loss) before income taxes and minority interest 52,856,000 (2,884,918) 2,200,486 (515,850) Minority interest -- -- (44,982) -- Income tax (expense) benefit (15,789,000) 867,556 -- -- ------------- ------------ ------------ ------------ Net income (loss) 37,067,000 (2,017,362) 2,155,504 (515,850) Preferred stock dividends -- -- -- -- ------------- ------------ ------------ ------------ Net income (loss) available for common stock $ 37,067,000 $ (2,017,362) $ 2,155,504 $ (515,850) ============= ============ ============ ============ Earnings per share: basic $ 1.73 ============ Earnings per share: diluted $ 1.73 ============ Weighted average common share outstanding: Basic 21,445,000 Weighted average common share outstanding: Diluted 21,482,000 CONTINUED ON NEXT PAGE 94
BLACK HILLS CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1999 - ---------------------------------------------------------------------------------------------------------------------------- YTD THRU YTD THRU YTD 12/31/99 12/31/99 PRO FORMA NEPCO SGF ADJUSTMENTS 12/31/99 Revenues: Operating revenues $ 14,557,815 $ 5,372,443 $ -- $832,290,723 Equity in income of unconsolidated affiliates -- -- (a) (689,170) 8,600,708 ------------ ----------- ----------- ------------- Total revenues 14,557,815 5,372,443 (689,170) 840,891,431 ------------ ----------- ----------- ------------- Operating expenses: Fuel and purchased power expense -- -- -- 637,302,000 Operations and maintenance 1,603,772 772,961 -- 51,318,376 Administrative and general 328,108 188,239 -- 33,120,904 Depreciation, depletion and amortization 2,891,003 1,121,800 (c) 1,868,028 31,559,578 Taxes other than income 304,549 158,350 -- 13,690,848 ------------ ----------- ----------- ------------- Total operating expenses 5,127,432 2,241,350 1,868,028 766,991,706 ------------ ----------- ----------- ------------- Income from operations 9,430,383 3,131,093 (2,557,198) 73,899,725 Other income/(expenses) Other income 72,725 29,031 -- 3,544,194 Interest income -- -- (d) (100,901) 4,259,920 Interest expense (7,794,331) (2,280,426) (d) 100,901 (30,016,844) ------------ ----------- ----------- ------------- Total other income/(expenses) (7,721,606) (2,251,395) -- (22,212,730) ------------ ----------- ----------- ------------- Income/(loss) before income taxes and minority interest 1,708,777 879,698 (2,557,198) 51,686,995 Minority interest -- -- (b) (2,024,696) (2,069,678) Income tax (expense) benefit -- -- (e) (226,966) (15,148,410) ------------ ----------- ----------- ------------- Net income (loss) 1,708,777 879,698 (4,808,860) 34,468,907 Preferred stock dividends -- -- (g) (158,857) (158,857) ------------ ----------- ----------- ------------- Net income (loss) available for common stock $ 1,708,777 $ 879,698 $(4,967,717) $ 34,310,050 ============ =========== =========== ============= Earnings per share: basic $1.49 ============= Earnings per share: diluted $1.49 ============= Weighted average common share outstanding: Basic (f) 1,537,000 22,982,000 Weighted average common share outstanding: Diluted (f), (h) 1,651,286 23,133,286 95
BLACK HILLS CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 - ------------------------------------------------------------------------------------------------------------------------ 9/30/00 YTD THRU YTD THRU YTD THRU COMPANY 6/30/00 6/30/00 6/30/00 CONSOLIDATED INDECK INAPF INAPP Revenues: Operating revenues $ 1,038,191,000 $ 7,350,997 $ 2,102,534 $ 896,154 Equity in income of unconsolidated affiliates -- 4,642,511 4,230,591 41,784 --------------- ------------ ----------- ----------- Total revenues 1,038,191,000 11,993,508 6,333,125 937,938 --------------- ------------ ----------- ----------- Operating expenses: Fuel and purchased power expense 878,660,000 -- -- -- Operations and maintenance 31,483,000 3,828,248 2,045,404 -- Administrative and general 20,231,000 2,606,313 950,337 909,583 Depreciation, depletion and amortization 22,465,000 279,841 -- -- Taxes other than income 10,678,000 230,274 -- -- --------------- ------------ ----------- ----------- Total operating expenses 963,517,000 6,944,676 2,995,741 909,583 --------------- ------------ ----------- ----------- Income from operations 74,674,000 5,048,832 3,337,384 28,355 Other income/(expenses) Other, net (524,000) 35,131 -- -- Interest income 5,685,000 72,446 -- -- Interest expense (19,886,000) (3,018,917) -- -- --------------- ------------ ----------- ----------- Total other income/(expenses) (14,725,000) (2,911,340) -- -- --------------- ------------ ----------- ----------- Income/(loss) before income taxes and minority interest 59,949,000 2,137,492 3,337,384 28,355 Minority interest (10,211,000) (6,381) (42,733) -- Income tax (expense) benefit (16,294,000) (880,540) -- -- --------------- ------------ ----------- ----------- Net income (loss) 33,444,000 1,250,571 3,294,651 28,355 Preferred stock dividends (37,000) -- -- -- --------------- ------------ ----------- ----------- Net income (loss) available for common stock $ 33,407,000 $ 1,250,571 $ 3,294,651 $ 28,355 =============== ============ =========== =========== Earnings per share: basic $ 1.53 =========== Earnings per share: diluted $ 1.52 =========== Weighted average common share outstanding: Basic 21,872,000 Weighted average common share outstanding: Diluted 21,977,000 CONTINUED ON NEXT PAGE 96
BLACK HILLS CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 - ------------------------------------------------------------------------------------------------------------------------ YTD THRU YTD THRU YTD 9/30/00 9/30/00 PRO FORMA NEPCO SGF ADJUSTMENTS 9/30/00 Revenues: Operating revenues $ 16,504,955 $ 5,868,820 $ -- $ 1,070,914,460 Equity in income of unconsolidated affiliates -- -- (a) (2,558,303) 6,356,583 ------------ ----------- --------------- --------------- Total revenues 16,504,955 5,868,820 (2,558,303) 1,077,271,043 ------------ ----------- --------------- --------------- Operating expenses: Fuel and purchased power expense -- -- -- 878,660,000 Operations and maintenance 1,228,632 501,830 -- 39,087,114 Administrative and general 363,017 201,561 -- 25,261,811 Depreciation, depletion and amortization 2,152,531 837,691 (c) 1,401,021 27,136,084 Taxes other than income 348,954 123,931 -- 11,381,159 ------------ ----------- --------------- --------------- Total operating expenses 4,093,134 1,665,013 1,401,021 981,526,168 ------------ ----------- --------------- --------------- Income from operations 12,411,821 4,203,807 (3,959,324) 95,744,875 Other income/(expenses) Other, net 100,554 38,977 -- (349,338) Interest income -- -- (d) (2,922,040) 2,835,406 Interest expense (5,734,167) (1,682,637) (d) 2,922,040 (27,399,681) ------------ ----------- --------------- --------------- Total other income/(expenses) (5,633,613) (1,643,660) -- (24,913,613) ------------ ----------- --------------- --------------- Income/(loss) before income taxes and minority interest 6,778,208 2,560,147 (3,959,324) 70,831,262 Minority interest -- -- (b) (2,695,884) (12,955,998) Income tax (expense) benefit -- -- (e) (2,678,815) (19,853,355) ------------ ----------- --------------- --------------- Net income (loss) 6,778,208 2,560,147 (9,334,023) 38,021,909 Preferred stock dividends -- -- (g) (85,571) (122,571) ------------ ----------- --------------- --------------- Net income (loss) available for common stock $ 6,778,208 $ 2,560,147 $ (9,419,594) $ 37,899,338 ============ =========== =============== =============== Earnings per share: basic $1.65 =============== Earnings per share: diluted $1.65 =============== Weighted average common share outstanding: Basic (f) 1,054,584 22,926,584 Weighted average common share outstanding: Diluted (f), (h) 1,132,999 23,109,999 97
BLACK HILLS CORPORATION AND SUBSIDIARIES NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1999 AND THE NINE MONTHS ENDED SEPTEMBER 30, 2000 - ------------------------------------------------------------------------------- NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME NOTE 1: For the purpose of the Pro Forma Consolidated Statement of Income for the nine month period ended September 30, 2000, Statements of Income for the six month period ended June 30, 2000 have been included for Indeck, INAPF and INAPP. The six month period for these companies combined with their results of operations for the quarter ended September 30, 2000, as consolidated into the Registrant's September 30, 2000 Consolidated Income Statement, give effect to the nine month period ended September 30, 2000 for pro forma presentation. NOTE 2: The following is a description of each of the pro forma adjustments: (a) Eliminate the earnings in INAPF, INAPP, NEPCO and SGF recorded under the equity method of accounting by Indeck. (b) Adjust the minority interest in earnings on a pro forma basis. (c) Excess depreciation and amortization taken over lives ranging from 8 to 25 years resulting from fair value adjustments and goodwill related to allocations made under the purchase method of accounting. The purchase accounting allocations are subject to change, generally within one year of the acquisition date. (d) Elimination of interest on loans between the Registrant and Indeck. (e) Related tax effect of adjustments (a), (b), (c). (f) Additional weighted-average shares outstanding for common stock issued in the Indeck acquisition. (g) Additional preferred stock dividends on the shares issued in the Indeck acquisition. (h) Effect on the diluted weighted average shares for the conversion of preferred shares issued in the Indeck acquisition. 98
Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 33-71130) and Forms S-8 (No. 33-63059, No. 333-61969, No. 333-17451, No. 333-82787 and No. 333-30272) of Black Hills Corporation of our reports relating to the financial statements listed below, which appear in the Current Report on Form 8-KA1 of Black Hills Corporation dated February 16, 2001. Our reports referred to above are as follows: - - Report dated June 9, 2000, except for information in Note 11, for which the date is August 30, 2000, relating to the consolidated financial statements of Indeck Capital, Inc. and Subsidiaries - - Report dated February 25, 2000, relating to the consolidated financial statements of Indeck North American Power Fund, L.P. - - Report dated February 25, 2000, relating to the financial statements of Indeck North American Power Partners, L.P. - - Report dated February 25, 2000, relating to the financial statements of Northern Electric Power Co., L.P. - - Report dated February 25, 2000, relating to the financial statements of South Glens Falls Limited Partnership PricewaterhouseCoopers LLP Milwaukee, Wisconsin February 16, 2001 99
Exhibit 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in the registration statements of Black Hills Corporation on Form S-3 (No. 33 -71130) and Forms S-8 (No. 33-63059, No. 333-61969, No. 333-17451, No. 333-82787 and No. 333-30272) of our following reports: Report dated February 11, 2000 (except for Note 5, as to which the date is February 28, 2000), on our audit of the consolidated financial statements of EIF Management Holdings, LLC and its subsidiaries as of and for the year ended December 31, 1999; Report dated February 11, 2000, on our audit of the financial statements of EIF Group Management Company as of and for the years ended December 31, 1999 and 1998; Report dated April 21, 2000, on our audit of the financial statements of Project Finance Partners, L.P. as of and for the years ended December 31, 1999 and 1998; Report dated April 21, 2000, on our audit of the financial statements of Project Finance Fund III, L.P. as of and for the years ended December 31, 1999 and 1998; Report dated February 11, 2000, on our audit of the financial statements of Energy Investors Management Company as of and for the years ended December 31, 1999 and 1998; Report dated April 21, 2000, on our audit of the financial statements of Energy Investors Partners II, L.P. as of and for the years ended December 31, 1999 and 1998; Report dated April 21, 2000, on our audit of the financial statements of Energy Investors Fund II, L.P. as of and for the years ended December 31, 1999 and 1998; Report dated February 11, 2000, on our audit of the financial statements of Energy Investors Management, Inc. as of and for the years ended December 31, 1999 and 1998; Report dated April 21, 2000, on our audit of the financial statements of Energy Investors Partners, L.P. as of and for the years ended December 31, 1999 and 1998; and Report dated April 21, 2000, on our audit of the financial statements of Energy Investors Fund, L.P. as of and for the years ended December 31, 1999 and 1998; which reports are included in the Current Report on Form 8-KA1 of Black Hills Corporation. Arthur Andersen LLP Boston, Massachusetts February 16, 2001 100