SEC Company Response from MIDAMERICAN ENERGY CO (CIK 0000928576) — Sep 27, 2005
MIDAMERICAN ENERGY CO (CIK 0000928576)
Date: Sept. 27, 2005 · CIK: 0000928576 · Accession: 0001081316-05-000118
AI Filing Summary & Sentiment
File numbers found in text: 333-15387, 333-90553
Referenced dates: September 13, 2005
Letter
VIA EDGAR AND FACSIMILE Division of Corporation Finance Filed February 28, 2005 Forms 10-Q for Fiscal Quarters Ended March 31, 2005 and June 30, 2005 File No. 333-15387
Dear Mr. Ohsiek:
This correspondence is being filed in response to comments received from the staff of the U.S. Securities and Exchange Commission (the “Commission”) by letter dated September 13, 2005 (the “Comments”) with respect to MidAmerican Energy Holdings Company (“MEHC” or the “Company”), MidAmerican Funding LLC (“Funding”) and MidAmerican Energy Company (“MidAmerican Energy”) and their respective Forms 10-K for the fiscal year ended December 31, 2004 (the “Form 10-K”) and their respective Forms 10-Q for the fiscal quarters ended March 31, and June 30, 2005 (the “Form 10-Q”). The numbering below corresponds to the numbering of the Comments, which have been incorporated into this response letter in italics.
MidAmerican Energy Holdings Company
Form 10-K for Fiscal Year Ended December 31, 2004
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 36
1.
On page 14, you disclose that the Philippine power plants will be transferred to the power purchaser at no cost at the end of the respective contract cooperation periods. We note that three out of four of the cooperation periods will end by 2007, resulting in potentially significant reductions in your operating revenues, earnings and fixed asset balances. As MD&A should focus specifically on material events known to management that would cause reported financial information not to be necessarily indicative of future operating results or of future financial condition, please revise your MD&A to describe how the end of these projects is expected to affect your future operating results and financial condition. See Item 303 of Regulation S-K.
Response: In preparing management’s discussion and analysis of financial condition and results of operations to be included in the Form 10-K for the year ended December 31, 2004, and the Forms 10-Q for the quarters ended March 31, 2005 and June 30, 2005, the Company considered including a discussion regarding the expected effects on future operating results and financial condition due to the expiration of the contract cooperation periods for the Upper Mahiao, Mahanagdong and Malitbog projects (collectively, the “Leyte Projects”). Such a discussion was not included in the respective filings as the expiration dates exceeded the reporting dates of each filing by more than one year and the expected effects were not determined to be quantitatively or qualitatively material.
The Company respectfully acknowledges the comment and will include in future quarterly and annual filings a discussion of the expected effects on future operating results and financial condition due to the expiration of the contract cooperation periods similar to the following:
“The ten-year cooperation periods for the Upper Mahiao, Mahanagdong and Malitbog projects (collectively, the “Leyte Projects”) end in June 2006, July 2007 and July 2007, respectively, at which time each project will be transferred to the Philippine National Oil Company-Energy Development Corporation (“PNOC-EDC”) at no cost on an “as-is” basis. For the year ended December 31, 2004, the Upper Mahiao Project’s financial results represented 0.7%, 1.4% and 2.1%, respectively, and the Mahanagdong and Malitbog Projects’ combined financial results represented 2.2%, 7.7% and 8.0%, respectively, of MEHC’s total consolidated operating revenue, income from continuing operations and operating cash flows from continuing operations. Additionally, both the net properties, plants and equipment and the project debt of the Leyte Projects represented 1.4% of MEHC’s total consolidated net properties, plants and equipment and subsidiary and project debt, respectively, at December 31, 2004.”
Consolidated Balance Sheets, page 59
2.
Based on review of your Form 10-Q for the period ended March 31, 2005, we note that you reclassified $123.6 million in auction rate securities from cash equivalents to short term investments in the accompanying December 31, 2004 balance sheet. As this reclassification appears to materially impact previously reported cash and cash equivalents, please amend your Form 10-K for the fiscal year ended December 31, 2004 to restate your balance sheets and statements of cash flows to reflect the reclassification. Please similarly amend your Form 10-K for MidAmerican Funding LLC and MidAmerican Energy Company to reflect such reclassification.
Response: The Company determined that this change in classification was not quantitatively or qualitatively material to its financial condition at December 31, 2004 and 2003, or its cash flows for the years ended December 31, 2004, 2003 and 2002. The net cash outflow from purchases and sales of auction rate securities at MEHC represents 5.0%, 2.3% and 1.8%, respectively, of investing cash flows from continuing operations for the years ended December 31, 2004, 2003 and 2002. These percentages are 6.2%, 0.0% and 0.0%, respectively, for the same periods at Funding and MidAmerican Energy. Further, the change in classification had no effect on the Company's (a) financial covenants; (b) regulatory matters; (c) previously reported amounts of total current assets, total assets or operating cash flows; and (d) discussion of liquidity and capital resources.
Accordingly, while the Company respectfully acknowledges the comment, the Company does not believe that amending the respective Forms 10-K is necessary for the quantitative and qualitative reasons discussed above.
Consolidated Statements of Cash Flows, page 62
3.
Please either revise your statements of cash flows to separately present the cash inflows and outflows related to both affiliate notes and convertible preferred securities, or otherwise explain your basis under GAAP for netting these cash flows. See paragraphs 11-13 of SFAS 95.
Response: The amounts presented in the statements of cash flows for the years ended December 31, 2003 and 2002 in relation to investing cash flows for convertible preferred securities represent gross cash inflows and outflows as the Company purchased a convertible preferred security investment of The Williams Companies, Inc. in fiscal 2002 and sold that same investment in fiscal 2003. This is further described in Note 8 to the consolidated financial statements under the subheading “Williams Preferred Stock.”
For the year ended December 31, 2004, proceeds from affiliate notes totaled $14.1 million and there were no purchases of affiliate notes. For the year ended December 31, 2003, proceeds from affiliate notes totaled $2.6 million and purchases of affiliate notes totaled $(35.0) million. As the $2.6 million of proceeds received in fiscal 2003 was not quantitatively or qualitatively material to the Company’s overall cash flows statement presentation, it was netted with the purchases of affiliate notes.
The Company respectfully acknowledges the comment and in future quarterly and annual filings will continue to separately present the gross cash inflows and outflows related to affiliate notes, when material to the overall cash flows statement presentation, in accordance with paragraphs 11-13 of SFAS 95.
Note 2. Summary of Significant Accounting Policies, page 63
4.
Please revise to specifically address your revenue recognition policy for long-term power sales agreements in your CalEnergy Generation-Foreign segment. Tell us the pertinent terms of the agreements and related authoritative literature which supports your policy. Also tell us your consideration of the applicability of SFAS 13, EITF 01-8 and SFAS 133 to these arrangements, particularly as it relates to the take-or-pay terms of the agreements and the fact that you transfer the generation facilities to the purchaser at the end of the contracted cooperation period.
Response: Following is a summary of the pertinent terms of the agreements under which each of the Upper Mahiao, Mahanagdong and Malitbog projects (collectively, the “Leyte Projects”) and the Casecnan Project operates:
a.
The Leyte Projects - The Leyte Projects take geothermal steam and fluids, provided by the PNOC-EDC at no cost, and convert its thermal energy into electrical energy which is sold to the PNOC-EDC on a “take-or-pay” basis. PNOC-EDC pays the Company a fee based primarily on plant capacities. The ten-year cooperation periods end and the plants will be transferred to the PNOC-EDC at no cost on an “as-is” basis on June 18, 2006 for the Upper Mahiao Project and on July 25, 2007 for the Mahanagdong and Malitbog Projects.
The Upper Mahiao and Mahanagdong Projects’ primary source of revenue is from contractual plant capacity fees, which are flat over the cooperation periods, a portion of which is subject to semi-annual adjustment pursuant to changes in contractually specified price indices published periodically by the International Monetary Fund.
The Malitbog Project’s sole source of revenue is from contractual fees received for plant capacity. The majority of the fees are subject to a contractual declining fixed price schedule and the remaining fees are flat over the cooperation period subject to semi-annual adjustment similar to the Upper Mahiao and Mahanagdong Projects.
b.
Casecnan Project - The Casecnan Project is a combined irrigation and hydroelectric power generation project that collects water and transfers that water through a 23 kilometer transbasin tunnel. During the water transfer, the elevation difference between the two watersheds allows electrical energy to be generated. A tailrace discharge tunnel then delivers water to an existing underutilized water storage reservoir. The electric energy and water are sold to the Philippine National Irrigation Administration (“NIA”). NIA pays the Company a fee for the delivery of water and a fee for the generation of electricity. The guaranteed water delivery fee is a fixed monthly payment based upon a contractually specified minimum annual water delivery amount multiplied by the applicable per cubic meter rate, which increases 7.5% annually for the first five years of operations and then remains fixed for the remainder of the cooperation period. For each contract year from 2004-2008, a water delivery credit is computed equal to 801.9 million cubic meters minus the greater of actual water deliveries or 700.0 million cubic meters multiplied by the applicable water delivery rate. The water delivery credit at the end of each contract year is available to be earned in the succeeding contract years ending in 2008. The cumulative water delivery credit at the end of 2008, if any, shall be amortized from 2009-2013. After 2008, water delivered in excess of the contractual minimum amount is subject to a variable water delivery fee equal to the water deliveries in excess of the annual contractual minimum multiplied by the applicable water delivery rate. With respect to electricity, the Company is paid a guaranteed energy delivery fee, which
Show Raw Text
CORRESP
1
filename1.htm
MidAmerican Energy Holdings - SEC Correspondence
September
27, 2005
VIA
EDGAR
AND FACSIMILE
Mr.
George F. Ohsiek, Jr.
Branch
Chief
Division
of Corporation Finance
U.S.
Securities and Exchange Commission
450
Fifth
Street, N.W.
Mail
Stop
3561
Washington,
D.C. 20549
RE:
MidAmerican
Energy Holdings Company
Form
10-K for Fiscal Year Ended December 31,
2004
Filed
March 1, 2005
Forms
10-Q for Fiscal Quarters Ended
March
31, 2005 and June 30, 2005
File
No. 1-14881
MidAmerican
Funding LLC
Form
10-K for Fiscal Year Ended December 31,
2004
Filed
February 28, 2005
Forms
10-Q for Fiscal Quarters Ended
March
31, 2005 and June 30, 2005
File
No. 333-90553
MidAmerican
Energy Company
Form
10-K for Fiscal Year Ended December 31,
2004
Filed
February 28, 2005
Forms
10-Q for Fiscal Quarters Ended
March
31, 2005 and June 30, 2005
File
No. 333-15387
Dear
Mr.
Ohsiek:
This
correspondence is being filed in response to comments received from the staff
of
the U.S. Securities and Exchange Commission (the “Commission”) by letter dated
September 13, 2005 (the “Comments”) with respect to MidAmerican Energy
Holdings Company (“MEHC” or the “Company”), MidAmerican Funding LLC (“Funding”)
and MidAmerican Energy Company (“MidAmerican Energy”) and their respective Forms
10-K for the fiscal year ended December 31, 2004 (the “Form 10-K”) and
their respective Forms 10-Q for the fiscal quarters ended March 31,
2005
and June 30, 2005 (the “Form 10-Q”). The numbering below corresponds to the
numbering of the Comments, which have been incorporated into this response
letter in italics.
MidAmerican
Energy Holdings Company
Form
10-K for Fiscal Year Ended December 31, 2004
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations, page 36
1.
On
page 14, you disclose that the Philippine power plants will be
transferred
to the power purchaser at no cost at the end of the respective
contract
cooperation periods. We note that three out of four of the cooperation
periods will end by 2007, resulting in potentially significant
reductions
in your operating revenues, earnings and fixed asset balances.
As MD&A
should focus specifically on material events known to management
that
would cause reported financial information not to be necessarily
indicative of future operating results or of future financial condition,
please revise your MD&A to describe how the end of these projects is
expected to affect your future operating results and financial
condition.
See Item 303 of Regulation
S-K.
Response:
In
preparing management’s discussion and analysis of financial condition and
results of operations to be included in the Form 10-K for the year ended
December 31, 2004, and the Forms 10-Q for the quarters ended March 31,
2005 and June 30, 2005, the Company considered including a discussion
regarding the expected effects on future operating results and financial
condition due to the expiration of the contract cooperation periods for the
Upper Mahiao, Mahanagdong and Malitbog projects (collectively, the “Leyte
Projects”). Such a discussion was not included in the respective filings as the
expiration dates exceeded the reporting dates of each filing by more than
one
year and the expected effects were not determined to be quantitatively or
qualitatively material.
The
Company respectfully acknowledges the comment and will include in future
quarterly and annual filings a discussion of the expected effects on future
operating results and financial condition due to the expiration of the contract
cooperation periods similar to the following:
“The
ten-year cooperation periods for the Upper Mahiao, Mahanagdong and Malitbog
projects (collectively, the “Leyte Projects”) end in June 2006, July 2007 and
July 2007, respectively, at which time each project will be transferred to
the
Philippine National Oil Company-Energy Development Corporation (“PNOC-EDC”) at
no cost on an “as-is” basis. For the year ended December 31, 2004, the
Upper Mahiao Project’s financial results represented 0.7%, 1.4% and 2.1%,
respectively, and the Mahanagdong and Malitbog Projects’ combined financial
results represented 2.2%, 7.7% and 8.0%, respectively, of MEHC’s total
consolidated operating revenue, income from continuing operations and operating
cash flows from continuing operations. Additionally, both the net properties,
plants and equipment and the project debt of the Leyte Projects represented
1.4%
of MEHC’s total consolidated net properties, plants and equipment and subsidiary
and project debt, respectively, at December 31, 2004.”
2
Consolidated
Balance Sheets, page 59
2.
Based
on review of your Form 10-Q for the period ended March 31,
2005, we
note that you reclassified $123.6 million in auction rate
securities
from cash equivalents to short term investments in the accompanying
December 31, 2004 balance sheet. As this reclassification
appears to
materially impact previously reported cash and cash equivalents,
please
amend your Form 10-K for the fiscal year ended December 31,
2004 to
restate your balance sheets and statements of cash flows to reflect
the
reclassification. Please similarly amend your Form 10-K for MidAmerican
Funding LLC and MidAmerican Energy Company to reflect such
reclassification.
Response:
The
Company determined that this change in classification was not quantitatively
or
qualitatively material to its financial condition at December 31,
2004 and
2003, or its cash flows for the years ended December 31, 2004, 2003
and
2002. The net cash outflow from purchases and sales of auction rate securities
at MEHC represents 5.0%, 2.3% and 1.8%, respectively, of investing cash flows
from continuing operations for the years ended December 31, 2004,
2003 and
2002. These percentages are 6.2%, 0.0% and 0.0%, respectively, for the same
periods at Funding and MidAmerican Energy. Further, the change in classification
had no effect on the Company's (a) financial covenants; (b) regulatory
matters; (c) previously reported amounts of total current assets, total assets
or operating cash flows; and (d) discussion of liquidity and capital
resources.
Accordingly,
while the Company respectfully acknowledges the comment, the Company does
not
believe that amending the respective Forms 10-K is necessary for the
quantitative and qualitative reasons discussed above.
Consolidated
Statements of Cash Flows, page 62
3.
Please
either revise your statements of cash flows to separately present
the cash
inflows and outflows related to both affiliate notes and convertible
preferred securities, or otherwise explain your basis under GAAP
for
netting these cash flows. See paragraphs 11-13 of SFAS
95.
Response:
The
amounts presented in the statements of cash flows for the years ended
December 31, 2003 and 2002 in relation to investing cash flows for
convertible preferred securities represent gross cash inflows and outflows
as
the Company purchased a convertible preferred security investment of The
Williams Companies, Inc. in fiscal 2002 and sold that same investment in
fiscal
2003. This is further described in Note 8 to the consolidated financial
statements under the subheading “Williams Preferred Stock.”
For
the
year ended December 31, 2004, proceeds from affiliate notes totaled
$14.1 million and there were no purchases of affiliate notes. For
the year
ended December 31, 2003, proceeds from affiliate notes totaled
$2.6 million and purchases of affiliate notes totaled $(35.0) million.
As the $2.6 million of proceeds received in fiscal 2003 was not
quantitatively or qualitatively material to the Company’s overall cash flows
statement presentation, it was netted with the purchases of affiliate
notes.
3
The
Company respectfully acknowledges the comment and in future quarterly and
annual
filings will continue to separately present the gross cash inflows and outflows
related to affiliate notes, when material to the overall cash flows statement
presentation, in accordance with paragraphs 11-13 of SFAS 95.
Note
2. Summary of Significant Accounting Policies, page 63
4.
Please
revise to specifically address your revenue recognition policy
for
long-term power sales agreements in your CalEnergy Generation-Foreign
segment. Tell us the pertinent terms of the agreements and related
authoritative literature which supports your policy. Also tell
us your
consideration of the applicability of SFAS 13, EITF 01-8 and SFAS
133 to
these arrangements, particularly as it relates to the take-or-pay
terms of
the agreements and the fact that you transfer the generation facilities
to
the purchaser at the end of the contracted cooperation
period.
Response:
Following is a summary of the pertinent terms of the agreements under which
each
of the Upper Mahiao, Mahanagdong and Malitbog projects (collectively, the
“Leyte
Projects”) and the Casecnan Project operates:
a.
The
Leyte Projects
-
The Leyte Projects take geothermal steam and fluids, provided by
the
PNOC-EDC at no cost, and convert its thermal energy into electrical
energy
which is sold to the PNOC-EDC on a “take-or-pay” basis. PNOC-EDC pays the
Company a fee based primarily on plant capacities. The ten-year
cooperation periods end and the plants will be transferred to the
PNOC-EDC
at no cost on an “as-is” basis on June 18, 2006 for the Upper Mahiao
Project and on July 25, 2007 for the Mahanagdong and Malitbog
Projects.
The
Upper
Mahiao and Mahanagdong Projects’ primary source of revenue is from contractual
plant capacity fees, which are flat over the cooperation periods, a portion
of
which is subject to semi-annual adjustment pursuant to changes in contractually
specified price indices published periodically by the International Monetary
Fund.
The
Malitbog Project’s sole source of revenue is from contractual fees received for
plant capacity. The majority of the fees are subject to a contractual declining
fixed price schedule and the remaining fees are flat over the cooperation
period
subject to semi-annual adjustment similar to the Upper Mahiao and Mahanagdong
Projects.
4
b.
Casecnan
Project
-
The Casecnan Project is a combined irrigation and hydroelectric
power
generation project that collects water and transfers that water
through a
23 kilometer transbasin tunnel. During the water transfer, the
elevation
difference between the two watersheds allows electrical energy
to be
generated. A tailrace discharge tunnel then delivers water to an
existing
underutilized water storage reservoir. The electric energy and
water are
sold to the Philippine National Irrigation Administration (“NIA”). NIA
pays the Company a fee for the delivery of water and a fee for
the
generation of electricity. The guaranteed water delivery fee is
a fixed
monthly payment based upon a contractually specified minimum annual
water
delivery amount multiplied by the applicable per cubic meter rate,
which
increases 7.5% annually for the first five years of operations
and then
remains fixed for the remainder of the cooperation period. For
each
contract year from 2004-2008, a water delivery credit is computed
equal to
801.9 million cubic meters minus the greater of actual water
deliveries or 700.0 million cubic meters multiplied by the
applicable
water delivery rate. The water delivery credit at the end of each
contract
year is available to be earned in the succeeding contract years
ending in
2008. The cumulative water delivery credit at the end of 2008,
if any,
shall be amortized from 2009-2013. After 2008, water delivered
in excess
of the contractual minimum amount is subject to a variable water
delivery
fee equal to the water deliveries in excess of the annual contractual
minimum multiplied by the applicable water delivery rate. With
respect to
electricity, the Company is paid a guaranteed energy delivery fee,
which