##### 



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2004 Commission File Number 33-82034 INDIANTOWN COGENERATION, L.P.
(Exact name of co-registrant as specified in its charter) Delaware
    
    52-1722490(State or other jurisdiction of
    
    (I.R.S. Employer Identification Number)incorporation or organization)
 INDIANTOWN COGENERATION FUNDING CORPORATION
(Exact name of co-registrant as specified in its charter) Delaware
    
        52-1889595(State or other jurisdiction of
    
    (I.R.S. Employer Identification Number)incorporation or organization)
 7600 Wisconsin AvenueBethesda, Maryland 20814-6161
(Co-registrants address of principal executive offices) (301)-280-6800
(Co-registrants telephone number, including area code) Indicate by check mark whether the co-registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
co-registrants were required to file such reports), and (2) have been subject
to such filing requirements for the past 90 days. [ X ] Yes [ ] No Indicate by check mark whether the co-registrants are accelerated filers (as
defined in Rule 12b-2 of the Exchange Act) [ ] Yes [ X ] No As of May 11, 2004, there were 100 shares of common stock of Indiantown
Cogeneration Funding Corporation, $1 par value, outstanding.




---



##### 



Indiantown Cogeneration, L.P.
Indiantown Cogeneration Funding Corporation PART
            I
        
        FINANCIAL INFORMATION
        
        Page No.Item 1
        
        Financial Statements:Condensed Consolidated Balance Sheets as
          of March 31, 2004 (Unaudited) andDecember 31, 2003
        
        
        1Consolidated Statements of Operations for
          the Three MonthsEnded March 31, 2004 (Unaudited) and
          March 31, 2003 (Unaudited)
        
        
        3Consolidated Statements of Cash Flows for
          the Three Months Ended March 31,2004 (Unaudited) and March 31, 2003
          (Unaudited)
        
        
        4Notes to Consolidated Financial Statements
          (Unaudited)
        
        
        5Item 2
        
        Managements Discussion and Analysis
          of FinancialCondition and Results of Operations
        
        
        7Item 3
        
        Quantitative and Qualitative Disclosures
          About Market Risk
        
        
        15Item 4
        
        Controls and Procedures
        
        
        15PART
            II
        
        OTHER INFORMATIONItem 6
        
        Exhibits and Reports on Form 8-K
        
        
        16Signatures
        
        
        
        
        17




---



##### 



PART I
FINANCIAL INFORMATION Indiantown Cogeneration, L.P. and Subsidiary
Condensed Consolidated Balance Sheets
(in thousands) March 31,
    
    December 31,ASSETS
    
        2004
    
    2003(Unaudited)CURRENT ASSETS:Cash and cash equivalents
    
    $
    831
    
    
    $
    1,517Accounts receivable-trade
    
    
    16,081
    
    
    
    16,104Inventories
    
    
    392
    
    
    
    793Prepaids
    
    
    999
    
    
    
    1,088Investments held by trustee, including
restricted funds of $22,229 and $5,557,
respectively
    
    
    27,631
    
    
    
    8,107Total current assets
    
    
    45,934
    
    
    
    27,609INVESTMENTS HELD BY TRUSTEE,
restricted funds
    
    
    16,501
    
    
    
    16,501DEPOSITS
    
    
    247
    
    
    
    243NET PROPERTY, PLANT & EQUIPMENT
    
    
    581,013
    
    
    
    584,828FUEL RESERVE
    
    
    2,905
    
    
    
    1,991DEFERRED FINANCING COSTS, net of accumulated
amortization of $48,893 and $48,353,
respectively
    
    
    13,523
    
    
    
    14,063Total assets
    
    $
    660,123
    
    
    $
    645,235
 The accompanying notes are an integral part of these consolidated financial statements. 1




---



##### 



Indiantown Cogeneration, L. P. and Subsidiary
Condensed Consolidated Balance Sheets
(in thousands) March 31,
    
    December 31,LIABILITIES AND PARTNERS' CAPITAL
    
    2004
    
    2003(Unaudited)CURRENT LIABILITIES:Accounts payable and accrued liabilities
    
    $
    7,023
    
    
    $
    10,172Accounts payable and accrued liabilities to related
parties (Note 4)
    
    
    1,448
    
    
    
    1,044Accrued interest
    
    
    14,692
    
    
    
    2,218Current portion  First Mortgage Bonds
    
    
    16,785
    
    
    
    16,785Current portion lease payable  railcars
    
    
    419
    
    
    
    412Total current liabilities
    
    
    40,367
    
    
    
    30,631LONG TERM DEBT:First Mortgage Bonds
    
    
    400,757
    
    
    
    400,757Tax Exempt Facility Revenue Bonds
    
    
    125,010
    
    
    
    125,010Lease payable  railcars
    
    
    2,685
    
    
    
    2,792Total long term debt
    
    
    528,452
    
    
    
    528,559ASSET RETIREMENT OBLIGATION
    
    
    94
    
    
    
    92Total liabilities
    
    
    568,913
    
    
    
    559,282PARTNERS CAPITAL:General Partners:Palm Power Corporation
    
    
    9,121
    
    
    
    8,595Indiantown Project Investment Partnership
    
    
    18,196
    
    
    
    17,147Limited Partners:Toyan Enterprises
    
    
    27,409
    
    
    
    25,829Thaleia, LLC
    
    
    36,484
    
    
    
    34,382Total partners capital
    
    
    91,210
    
    
    
    85,953Total liabilities and partners capital
    
    $
    660,123
    
    
    $
    645,235
 The accompanying notes are an integral part of these consolidated financial statements. 2




---



##### 



Indiantown Cogeneration, L.P. and Subsidiary
Consolidated Statements of Operations
(in thousands) Three Months Ended
    
    Three Months EndedMarch 31, 2004
    
    March 31, 2003Operating Revenues:
    
    (Unaudited)
    
    (Unaudited)Electric capacity and capacity
bonus revenue
    
    $
    31,392
    
    
    $
    31,194Electric energy revenue
    
    
    15,003
    
    
    
    13,589Steam revenue
    
    
    98
    
    
    
    69Total operating revenues
    
    
    46,493
    
    
    
    44,852Cost of Sales:Fuel and ash
    
    
    17,598
    
    
    
    16,874Operating and maintenance
    
    
    4,422
    
    
    
    3,641Depreciation
    
    
    3,796
    
    
    
    3,797Loss on disposal of assets
    
    
    7
    
    
    
    Total cost of sales
    
    
    25,823
    
    
    
    24,312Gross Profit
    
    
    20,670
    
    
    
    20,540Other Operating Expenses:General and administrative
    
    
    669
    
    
    
    1,055Insurance and taxes
    
    
    1,655
    
    
    
    1,601Total other operating expenses
    
    
    2,324
    
    
    
    2,656Operating Income
    
    
    18,346
    
    
    
    17,884Non-Operating Income (Expenses):Interest expense
    
    
    (13,336
    )
    
    
    (13,468
    )Interest/Other income (expense)
    
    
    247
    
    
    
    229Net non-operating expense
    
    
    (13,089
    )
    
    
    (13,239
    )Income before cumulative effect of change
in accounting principle
    
    
    5,257
    
    
    
    4,645Cumulative effect of a change in
accounting principle
    
    
    
    
    
    
    (49
    )Net Income
    
    $
    5,257
    
    
    $
    4,596
 The accompanying notes are an integral part of these consolidated financial statements. 3




---



##### 



Indiantown Cogeneration, L.P. and Subsidiary
Consolidated Statements of Cash Flows
(in thousands) Three Months
    
    Three MonthsEnded
    
    EndedMarch 31,
    
    March 31,2004
    
    2003(Unaudited)
    
    (Unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    5,257
    
    
    $
    4,596Adjustments to reconcile net income to net
cash provided by operating activities:Cumulative effect of a change in accounting
principle
    
    
    
    
    
    
    49Depreciation, amortization and accretion
    
    
    4,338
    
    
    
    4,031Loss on disposal of assets
    
    
    7
    
    
    
    Decrease in accounts receivable
    
    
    23
    
    
    
    931Increase in inventories and fuel reserves
    
    
    (513
    )
    
    
    (1,932
    )Decrease in deposits and prepaids
    
    
    
    
    
    
    88              261Increase in accounts payable, accrued
liabilities and accrued interest
    
    
    9,729
    
    
    
    8,795Net cash provided by operating activities
    
    
    18,929
    
    
    
    16,731CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property, plant & equipment
    
    
    
    
    
    
    (22
    )Proceeds from sale of assets
    
    
    9
    
    
    
    Increase in investment held by trustee
    
    
    (19,524
    )
    
    
    (16,627
    )Net cash used in investing activities
    
    
    (19,515
    )
    
    
    (16,649
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payment on capital lease obligation  railcars
    
    
    (100
    )
    
    
    (93
    )Net cash used in financing activities
    
    
    (100
    )
    
    
    (93
    )CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    (686
    )
    
    
    (11
    )CASH and CASH EQUIVALENTS, beginning of year
    
    
    1,517
    
    
    
    290CASH and CASH EQUIVALENTS, end of period
    
    $
    831
    
    
    $
    279
 The accompanying notes are an integral part of these consolidated financial statements. 4




---



##### 



Indiantown Cogeneration, L.P. and Subsidiary
Notes to Consolidated Financial Statements
As of March 31, 2004
(Unaudited) 1. ORGANIZATION AND BASIS OF PRESENTATION: Indiantown Cogeneration, L.P. (the Partnership) is a special purpose Delaware
limited partnership formed on October 4, 1991. The Partnership was formed to
develop, construct, own and operate an approximately 330 megawatt (net)
pulverized coal-fired cogeneration facility (the Facility) located on an
approximately 240-acre site in southwestern Martin County, Florida. The
Facility produces electricity for sale to Florida Power & Light Company (FPL)
under a Power Purchase Agreement (PPA) and supplies steam to Louis Dreyfus
Citrus, Inc. (LDC), successor to Caulkins Indiantown Citrus Co., under an
Energy Services Agreement (ESA). In July 1994, the Partnership formed a
wholly owned subsidiary, Indiantown Cogeneration Funding Corporation, solely
for the purpose of issuing debt securities in connection with the financing of
the Facility. The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and do not include all the
information and notes required by accounting principles generally accepted in
the United States for complete statements. Management believes that the
accompanying unaudited consolidated financial statements, which have been
prepared in accordance with interim reporting requirements, reflect all
adjustments that are necessary to present a fair statement of the consolidated
financial position and results of operations for the interim periods for
Indiantown Cogeneration, L.P. and Indiantown Cogeneration Funding Corporation.
All material adjustments are of a normal recurring nature unless otherwise
disclosed in this report on Form 10-Q. Results of operations for interim
periods are not necessarily indicative of results to be expected for a full
year. This quarterly report should be read in conjunction with the Partnerships
consolidated financial statements and notes to consolidated financial
statements included in its December 31, 2003 Annual Report on Form 10-K filed
with the Securities and Exchange Commission (SEC). 2. RELATIONSHIP WITH NATIONAL ENERGY & GAS TRANSMISSION, INC.: The Partnership is managed by Power Services Company (PSC, formerly known as
PG&E National Energy Group Company), pursuant to a Management Services
Agreement (the MSA). The Facility is operated by U.S. Operating Services
Company (OSC, formerly known as PG&E Operating Services Company),pursuant to
an Operation and Maintenance Agreement (the O&M Agreement). PSC and OSC are
general partnerships indirectly wholly owned by National Energy & Gas
Transmission, Inc. (NEGT, formerly known as PG&E National Energy Group,
Inc.). NEGT is an indirect subsidiary of PG&E Corporation. On July 8, 2003, NEGT and certain subsidiaries voluntarily filed petitions for
relief under the provisions of Chapter 11 of the U.S. Bankruptcy Code
(collectively, the NEGT Bankruptcy) in 5




---



##### 



the Greenbelt Division of the United States Bankruptcy Court for the District
of Maryland (the Bankruptcy Court). Neither the Partnership nor any of its NEGT affiliated partners, including
Toyan Enterprises (Toyan) and Indiantown Project Investment, L.P. (IPILP),
or PSC and OSC, are parties to the filings by NEGT or other affiliates for
protection under the NEGT Bankruptcy. The Partnership believes that it will
not be substantively consolidated with NEGT in any bankruptcy proceeding
involving NEGT and the NEGT Bankruptcy does not result in an event of default
under the principal project contracts or the principal financing documents of
the Facility. On February 26, 2004, NEGT filed with the Bankruptcy Court its Third Amended
Plan of Reorganization and the related Disclosure Statement. A Modified Third
Amended Plan of Reorganization (POR) was confirmed by order of the Bankruptcy
Court on May 3, 2004. The POR contemplates that NEGT will retain and continue
to operate its power generation and pipeline businesses unless they are sold
(as described in the POR), separate from PG&E Corporation, and issue new debt
securities and common stock. NEGTs indirect ownership interest in the
Partnership is included within its power generation business. Any sale by NEGT
of its interest in the Partnership (a NEGT Interest Sale) may affect the MSA
and the O&M Agreement with the Partnership. There can be no certainty that a
NEGT Interest Sale will be completed. 3. SIGNIFICANT ACCOUNTING POLICIES: Except as disclosed herein, the Partnership is following the same accounting
principles discussed in the Partnerships December 31, 2003 Annual Report on
Form 10-K. Adoption of New Accounting Pronouncements On January 1, 2003, the Partnership adopted SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 provides accounting requirements for
costs associated with legal obligations to retire tangible, long-lived assets.
The statement requires that an asset retirement obligation be recorded at fair
value in the period in which it is incurred, if a reasonable estimate of fair
value can be made. In the same period, the associated asset retirement costs
are capitalized as part of the carrying amount of the related long-lived asset.
In each subsequent period, the liability is accreted to its present value and
the capitalized cost is depreciated over the useful life of the long-lived
asset. Upon implementation of this statement, the Partnership recorded approximately
$44,000 in property, plant and equipment to reflect the fair value of the asset
retirement costs as of the date the obligation was incurred, approximately
$9,000 of accumulated depreciation through December 31, 2002 and an asset
retirement obligation of approximately $84,000. The cumulative effect of the
change in accounting principle as a result of adopting this statement was a
loss of approximately $49,000. The Partnership recognized accretion of $2,000
in the three month period ended March 31, 2004 and $8,000 in the year ended
December 31, 2003. 6




---



##### 



4. RELATED PARTY TRANSACTIONS: The Partnership has an MSA with PSC for the day-to-day management and
administration of the Partnerships business relating to the Facility. The
agreement commenced on September 30, 1992, was amended and restated on November
1, 1994, and will continue through October 31, 2028. The cost of services is
included in general and administrative expenses in the accompanying
consolidated statements of operations. The total expense incurred for these
services for each of the three months ended March 31, 2004 and 2003 was
$194,000. The Partnership has an O&M Agreement with OSC for the operation and maintenance
of the Facility for a period of 30 years (starting September 30, 1992).
Compensation to OSC under the agreement includes an annual base fee of which a
portion is subordinate to debt service and certain other costs. The base fee
is included in operating and maintenance expenses in the accompanying
consolidated statements of operations. The total expense incurred for these
services for the three months ended March 31, 2004 and 2003 was $461,000 and
$452,000, respectively. 5. COMMITMENTS AND CONTINGENCIES: In 2003, a long-term
interruption of the delivery of coal to SJRPP meeting the criteria contained in
the PPA occurred. As a result of the interruption the PPA requires that the
Partnership and FPL agree upon a comparable replacement index (the Replacement
Index). Until the Replacement Index is agreed upon the quarterly escalation
for the coal component of the energy price paid by FPL to the Partnership is
based upon the indices in effect for long-term coal contracts at SJRPP that had
been in effect prior to the interruption in deliveries. The Partnership and FPL have been in discussions to resolve
both the energy price and the replacement index issues. The Partnership is including its coal
supplier, Massey Coal Sales Company, Inc. (Massey), in the process to achieve
a similar index, as contemplated in the First Amendment to the Coal Purchase and Sales Agreement.
Discussions have continued in the first quarter of 2004. The Partnership believes that the issues
can be resolved in the second quarter of 2004. Item 2
        Managements Discussion and Analysis
          of FinancialCondition and Results of Operations
 This Managements Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the consolidated financial
statements of the Partnership and the notes to the accompanying consolidated
financial statements included herein. Further, this Quarterly Report on Form
10-Q should be read in conjunction with the Partnerships December 31, 2003
Annual Report on Form 10-K. Cautionary Statement Regarding Forward-Looking Statements The information in this Quarterly Report on Form 10-Q includes forward-looking
statements about the future that are necessarily subject to various risks and
uncertainties. Use of words like anticipate, estimate, intend,
project, plan, expect, will, believe, could, and similar
expressions help identify forward-looking statements and constitute
forward-looking statements under the Private Securities Litigation Reform Act
of 1995. These statements are based on current expectations and assumptions
which the Partnership believes are reasonable and on information currently
available to the Partnership. Actual results could differ materially from
those contemplated by the forward-looking statements. Although the Partnership
believes that the expectations reflected in the forward-looking statements are
reasonable, future results, events, levels of activity, performance or
achievements cannot be guaranteed. Although the Partnership is not able to
predict all the factors that may affect future results, some of the factors
that could cause future results to differ materially from those expressed or
implied by the forward-looking statements include: Operational Risks The Partnerships future results of operations and financial condition may be
affected by the performance of equipment, levels of dispatch, the receipt of
certain capacity and other fixed 7




---



##### 



payments, electricity prices, fuel deliveries and fuel prices and any mismatch
between the actual energy costs and the energy revenue reimbursement of those
costs; unanticipated changes in operating expenses or capital expenditures or
other maintenance activities; variations in weather and natural disasters; and
the potential impacts of threatened or actual terrorism and war. Actions of Florida Power & Light and Other Counterparties The Partnerships future results of operations and financial condition may be
affected by the extent to which counterparties require additional assurances in
the form of letters of credit or cash collateral and the potential future
failure of the Partnership to maintain qualifying facility status, which
failure could cause a default under PPA. Accounting and Risk Management The Partnerships future results of operations and financial condition may be
affected by the effect of new accounting pronouncements, changes in critical
accounting policies or estimates, the effectiveness of the Partnerships risk
management policies and procedures, the ability of the Partnerships
counterparties to satisfy their financial commitments to the Partnership and
the impact of counterparties nonperformance on the Partnerships liquidity
position and heightened rating agency criteria and the impact of changes in the
Partnerships credit ratings. Legislative and Regulatory Matters The Partnerships business may be affected by legislative or regulatory changes
affecting the electric and natural gas industries in the United States,
including the pace and extent of efforts to restructure the electric and
natural gas industries; heightened regulatory and enforcement agency focus on
the energy business with the potential for changes in industry regulations and
in the treatment of the Partnership by state and federal agencies; and changes
in or application of federal, state, and local laws and regulations to which
the Partnership is subject including changes in corporate governance and
securities laws requirements. Litigation and Environmental Matters The Partnerships future results of operations and financial condition may be
affected by compliance with existing and future environmental and safety laws,
regulations, and policies, the cost of which could be significant, and the
outcome of any potential future litigation and environmental matters. Business Description The Partnership is primarily engaged in the ownership and operation of a
non-utility electric generating facility. From its inception and until
December 21, 1995, the Partnership was in the development stage and had no
operating revenues or expenses. On December 22, 1995 the Facility commenced
commercial operation. Revenues are derived primarily from capacity and bonus
payments, measured by the Capacity Billing Factor (CBF), and sales of
electricity. The 8




---



##### 



facility is dispatched for electric energy by FPL on an economic basis. Each
agreement year the facility is entitled to four weeks of outages to perform
scheduled maintenance, and each fifth agreement year, a total of ten weeks of
outage time to perform major maintenance. Differences in the timing and scope
of scheduled and major maintenance can have a significant impact on the
revenues and operational costs. Executive Summary During the quarter ended March 31, 2004, the Facilitys operating performance
continued to be solid in a challenging business environment. The Partnership
received the maximum amount for its capacity bonus payments from FPL. The
electric energy payments received in the quarter ended March 31, 2004 were not
sufficient to cover the Partnerships variable costs of electric energy
production. Currently, the energy price paid by FPL for the coal cost
component of the energy payment is not matched to the price of base coal in the
amended coal purchase agreement. Also, the PPA provides for a quarterly
indexing of the coal component of the energy price. This indexing involved the
computation each quarter of the percent change in St. Johns River Power Parks
(SJRPP) domestic Appalachian coal purchases, contract and spot, as reported
to the Florida Public Service Commission (FPSC). In 2003, a long-term
interruption of the delivery of coal to SJRPP meeting the criteria contained in
the PPA occurred. As a result of the interruption the PPA requires that the
Partnership and FPL agree upon a comparable replacement index (the Replacement
Index). Until the Replacement Index is agreed upon the quarterly escalation
for the coal component of the energy price paid by FPL to the Partnership is
based upon the indices in effect for long-term coal contracts at SJRPP that had
been in effect prior to the interruption in deliveries. The Partnership and FPL have been in discussions to resolve both the energy
price and the replacement index issues. The Partnership is including its coal
supplier, Massey Coal Sales Company, Inc. (Massey), in the process to achieve
a similar index, as contemplated in the First Amendment to the Coal
Purchase and Sales Agreement.
Discussions have continued in the first quarter of 2004. The Partnership believes that the issues can be resolved
in the second quarter of 2004. In accordance with the terms of the PPA, the Partnership has scheduled the
Facility for four weeks of maintenance outages during 2004, which is for the
same duration experienced during 2003. Since the scope and duration of the
scheduled maintenance outages for 2004 is comparable to those experienced
during 2003, the Partnership expects maintenance expenses to be approximately
the same in 2004 as compared to 2003. The Partnership has obtained all material environmental permits and approvals
required as of March 31, 2004, in order to continue the operation of the
Facility. Certain of these permits and approvals are subject to periodic
renewal. Certain additional permits and approvals will be required in the
future for the continued operation of the Facility. The Partnership is not
aware of any technical circumstances that would prevent the issuance of such
permits and approvals or the renewal of currently existing permits. 9




---



##### 



Relationship with NEGT On July 8, 2003, NEGT and certain subsidiaries voluntarily filed petitions for
relief under the provisions of Chapter 11 of the U.S. Bankruptcy Code
(collectively, the NEGT Bankruptcy) in the Greenbelt Division of the United
States Bankruptcy Court for the District of Maryland (the Bankruptcy Court). Neither the Partnership nor any of its NEGT affiliated partners, Toyan and
IPILP, or PSC and OSC, are parties to the NEGT Bankruptcy. The Partnership
believes that it will not be substantively consolidated with NEGT in any
bankruptcy proceeding involving NEGT and the NEGT Bankruptcy does not result in
an event of default under the principal project contracts or the principal
financing documents of the Facility. On February 26, 2004, NEGT filed with the Bankruptcy Court its Third Amended
Plan of Reorganization and the related Disclosure Statement. A Modified Third
Amended Plan of Reorganization (POR) was confirmed by order of the Bankruptcy
Court on May 3, 2004. The POR contemplates that NEGT will retain and continue
to operate its power generation and pipeline businesses unless they are sold
(as described in the POR), separate from PG&E Corporation, and issue new debt
securities and common stock. NEGTs indirect ownership interest in the
Partnership is included within its power generation business. Any sale by NEGT
of its interest in the Partnership (a NEGT Interest Sale) may affect the MSA
and the O&M Agreement with the Partnership. There can be no certainty that a
NEGT Interest Sale will be completed. Results of Operations The following table sets forth operating revenue and related data for the three
months ended March 31, 2004 and 2003 (dollars and volumes in millions). For the three months ended March 31,2004
    
    
    
    
    
    2003Factor
    
    
    
    
    
    FactorAverage Capacity Billing Factor
    
    
    99.64
    %
    
    
    
    
    
    
    96.09
    %Average Dispatch Rate
    
    
    87.21
    %
    
    
    
    
    
    
    82.76
    %Operating Revenues:
    
    Volume
    
    Dollars
    
    Volume
    
    DollarsCapacity and bonus
    
    
    
    
    
    $
    31.4
    
    
    
    
    
    
    $
    31.2Electric (Kwh)
    
    
    628.5
    
    
    
    15.0
    
    
    
    589.9
    
    
    
    13.6Steam (lbs)
    
    
    263.7
    
    
    
    0.1
    
    
    
    231.3
    
    
    
    0.1Total operating revenues
    
    
    
    
    
    $
    46.5
    
    
    
    
    
    
    $
    44.9
 The Average Capacity Billing Factor (CBF) measures the overall availability
of the Facility, but gives a heavier weighting to on-peak availability. 10




---



##### 



The Average Dispatch Rate is the amount of electric energy produced in a given
period expressed as a percentage of the total contract capability amount of
potential electric energy production in that time period. Three Months Ended March 31, 2004 Compared to the Three Months Ended March 31,
2003 Overall Results Net income for the three months ended March 31, 2004 was approximately $5.3
million compared to net income of approximately $4.6 million for the
corresponding period in the prior year. Operating Revenues For the three months ended March 31, 2004, the Partnership had total operating
revenues of approximately $46.5 million as compared to $44.9 million for the
corresponding period in the prior year. The $1.6 million increase in operating
revenue is primarily due to increased capacity payments of $0.2 million
resulting from the escalation of fixed operation and maintenance component, an
increase of $0.5 million for the escalation of the unit energy cost paid by FPL
and an increase of $0.9 million due to an increase in mega-watt generation
resulting from a higher dispatch from FPL for the first quarter. Cost of Sales Costs of sales for the three months ended March 31, 2004 were approximately
$25.8 million as compared to $24.3 million for the corresponding period in the
prior year. The overall cost of fuel and ash increased $0.7 million resulting
from the increase in ash disposal costs of $0.5 million for an alternate method
of pugging, which is a process of adding water to the ash to make it
transportable by truck. Lime costs also increased by $0.4 million primarily
due to a temporary interruption of deliveries in March 2004 from the supplier,
Chemical Lime, caused by the shut-down of their processing facility for a
two-week maintenance outage. This resulted in a higher transportation price
paid by the Partnership for replacement lime. The Partnership intends to seek
cover costs from Chemical Lime for the replacement lime purchases. These
increases in costs are offset by a decrease in the fuel costs of $0.2 million
primarily due to a lower price paid for coal in the first quarter of 2004 as
compared to the first quarter of 2003. Operating and maintenance costs have increased by $0.8 million primarily for
repairs to the pulverizers, steam generator, atomizers and condensate and
feedwater systems, and for costs related to corrosion protection painting. Other Operating Expenses Other operating expenses decreased by $0.3 million primarily due to the absence
of legal and consulting costs incurred in the first quarter of 2003 associated
with the termination of the Coal Purchase Agreement with Lodestar Energy, Inc.
and the execution of the replacement Coal Purchase and Sales Agreement with
Massey. 11




---



##### 



Non-Operating Income (Expense) Net interest expense for the three months ended March 31, 2004 and 2003 was
approximately $13.1 million and $13.2 million, respectively. June 2003 and
December 2003 principal payments of Series A-9 of the first mortgage bonds
decreased interest expense by approximately $0.3 million. This was offset by
an increase of $0.2 million related to the amortization of deferred financing
costs on the replacement letters of credit. Liquidity and Capital Resources Net cash provided by operating activities for the three months ended March 31,
2004 was approximately $18.9 million as compared to $16.7 million for the
corresponding period in 2003. Net cash provided by operating activities
represents net income, adjusted by non-cash expenses and income, which
primarily consist of depreciation, amortization and accretion, plus the net
effect of changes within the Partnerships operating assets and liability
accounts. Net income for the first quarter of 2004 increased by $0.7 million
from the first quarter of 2003. Depreciation, amortization and accretion
increased in the first quarter of 2004 by $0.3 million from the first quarter
of 2003 due to the deferred financing costs for the replacement letters of
credit. Inventories and fuel reserves decreased in the first quarter of 2004
by $1.4 million from the first quarter of 2003 due to the timing of coal
shipments. Accounts receivable decreased in the first quarter of 2004 by $0.9
million from the first quarter of 2003 primarily due to an increase in energy
revenue in the first quarter of 2003 caused by an increase in unit energy cost
adjustment for the fourth quarter of 2002. Deposits and prepaids decreased in
the first quarter of 2004 by $0.2 million from the first quarter of 2003 and
accounts payable, accrued liabilities and accrued interest increased in the
first quarter of 2004 by $1.0 million from the first quarter of 2003. The Partnership believes that it will have adequate cash flows from operations
in 2004 to timely fund future working capital requirements and to cover debt
repayment obligations. For 2004, the Partnership has identified possible capital improvements of
approximately $2.4 million that will enhance the reliability of the facility
and, if approved by the Board of Control, will be funded through cash expected
to be generated from operations that would otherwise be distributed to the
partners. These include additional upper aquifer wells, water system upgrades
and distributed controls system modifications. Net cash used in investing activities for the three months ended March 31, 2004
was approximately $19.5 million as compared to $16.6 million for the three
months ended March 31, 2003. Net cash used in investing activities increased
due to the regular increase in investments held by trustee during the first
quarter of 2004 for the build-up of accrued interest. Net cash used in financing activities for the three months ended March 31, 2004
and 2003 was $0.1 million. 12




---



##### 



Credit Ratings As previously reported, on March 19, 2004 S&P placed its BBB- rating on the
debt of ICL Funding on Credit Watch with negative implications. The credit
watch reflects the risk of a downgrade if the PPA negotiations with FPL
regarding a new energy payment index are not resolved to mitigate the current
mismatch between energy revenues and fuel expenses. Bonds The Partnerships total borrowings from inception through March 31, 2004 were
$769 million. An equity loan of $139 million was repaid on December 26, 1995.
As of March 31, 2004, the borrowings included $125 million from the 1994 Tax
Exempt Bonds and all of the available First Mortgage Bonds. The weighted average interest rates paid by the Partnership on its debt for the
three months ended March 31, 2004 and 2003 were 9.199% and 9.201%,
respectively. Credit Agreements As previously reported, on October 10, 2003, the Partnership closed a
transaction with Credit Lyonnais New York Branch (CL), as agent and arranger,
to replace certain letters of credit. The facilities include a Debt Service
Reserve Letter of Credit up to $29.9 million, which has a term of seven years;
Performance Letters of Credit up to $15.0 million, which have a term of five
years; and a Working Capital Revolving Facility up to $10.0 million, which has
a term of three years and is presently capped at $3.0 million. The interest
rate on loans made on the Working Capital Revolving Credit is the London
Interbank Offered Rates (LIBOR) plus an applicable margin. Under the Performance Letters of Credit, the ESA Letter of Credit for $10.0
million was issued in favor of LDC. Under the provisions of the financing documents above, since the Partnership
did not agree on a Replacement Index with FPL and a coal price index with
Massey by January 31, 2004, cash normally available to be distributed to the
Partners is currently trapped. Upon execution of the documents for these
indices and the satisfaction of the applicable conditions set forth in the
financing documents, the cash currently trapped will be released. Significant Contractual Payment Obligations Since December 31, 2003 the Partnership has not committed to any new
significant contractual payment obligations of the types described under the
caption Liquidity and Capital Resources contained in Item 7, Managements
Discussion and Analysis of Financial Condition and Results of Operations of
the Partnerships December 31, 2003 Annual Report on Form 10-K. 13




---



##### 



Critical Accounting Policies There have been no changes to the Partnerships critical accounting policies
since December 31, 2003. See Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations, of the Partnerships December
31, 2003 Annual Report on Form 10-K for further discussion. Accounting Principles Issued But Not Yet Adopted In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities(FIN 46). FIN 46, as subsequently revised in
December 2003 (FIN 46R), is an interpretation of Accounting Research Bulletin
No. 51, Consolidated Financial Statements(ARB 51), and supersedes Emerging
Issues Task Force (EITF) Issues No. 90-15 and 96-21, which prescribe accounting
for lease arrangements with nonsubstantive lessors. This Interpretation
clarifies the application of ARB 51 to certain entities, defined as variable
interest entities (VIEs), in which equity investors do not have a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance it activities without additional subordinated financial
support. FIN 46R requires that a VIE is to be consolidated by a company if
that company is subject to a majority of the risk of loss from the VIEs
activities or is entitled to receive a majority of the VIEs residual returns,
or both. The consolidation requirements of FIN No. 46 apply immediately to VIEs created
after January 31, 2003. There were no new VIEs created by the Partnership
between February 1, 2003 and March 31, 2004. The Partnership is non-public
entity as defined by the interpretation. As a non-public entity, the
consolidation requirements related to entities or arrangements existing before
February 1, 2003 are effective January 1, 2005. The Partnership has not
identified any arrangements with other potential VIEs. The Partnership will
continue to evaluate its arrangements for potential FIN 46R application
effective January 1, 2005. The Partnership does not expect that implementation
of this interpretation will have a significant impact its consolidated
financial statements. Legal Matters From time to time the Partnership may, in the ordinary course of its business,
become a party in various legal proceedings or may become subject to potential
claims. Management does not believe that the resolution of these matters will
have a material adverse effect on the Partnerships consolidated financial
position or results of operations. See Part I, Item 3 of the Partnerships
December 31, 2003 Annual Report on Form 10-K for further discussion of
significant pending litigation. Regulations and Environmental Matters The Partnership has obtained all material environmental permits and approvals
required, as of March 31, 2004, in order to continue commercial operation of
the Facility. Certain of these permits and approvals are subject to periodic
renewal. The Partnership is not aware of any 14




---



##### 



technical circumstances that would prevent the issuance of such permits and
approvals or the renewal of currently issued permits. Item 3 Quantitative and Qualitative Disclosures About Market Risk For quantitative and qualitative disclosures about market risk, see Item 7A,
Quantitative and Qualitative Disclosures About Market Risk, of the
Partnerships December 31, 2003 Annual Report on Form 10-K. The Partnerships
exposures to market risk have not changed materially since December 31, 2003. Item 4 Controls
and Procedures Evaluation of Disclosure Controls and Procedures An evaluation of the disclosure controls and procedures of the Partnership and
ICL Funding as of March 31, 2004 has been conducted under the supervision and
with the participation of the principal executive officer and principal
financial officer of both the Partnership and ICL Funding. Based on that
evaluation, such officers have concluded that, as of such date, the disclosure
controls and procedures of the Partnership and ICL Funding are effective, in
that they provide reasonable assurance that such officers are alerted on a
timely basis to material information that is required to be included in the
Partnerships and ICL Fundings periodic filings under the Securities Exchange
Act of 1934, as amended. During the quarter ended March 31, 2004, no changes
occurred in the Partnerships or ICL Fundings internal control over financial
reporting that have materially affected, or are reasonably likely to materially
affect, the Partnerships or ICL Fundings internal control over financial
reporting. 15




---



##### 



PART II
OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K a) Exhibits: Exhibit No.
        
        Exhibit Description31.1
        
        Certification of Principal Executive Officer
          of Indiantown Cogeneration, L.P., pursuant to Section 302 of the
          Sarbanes  Oxley Act of 2002 dated May 11, 200431.2
        
        Certification of Principal Financial Officer
          of Indiantown Cogeneration, L.P., pursuant to Section 302 of the
          Sarbanes  Oxley Act of 2002 dated May 11, 200431.3
        
        Certification of Principal Executive Officer
          of Indiantown Cogeneration Funding Corporation, pursuant to Section 302
          of the Sarbanes  Oxley Act of 2002 dated May 11, 200431.4
        
        Certification of Principal Financial Officer
          of Indiantown Cogeneration Funding Corporation, pursuant to Section 302
          of the Sarbanes  Oxley Act of 2002 dated May 11, 200432.1
        
        Certification of Principal Executive Officer
          of Indiantown Cogeneration, L.P., pursuant to Section 906 of the
          Sarbanes  Oxley Act of 2002 dated May 11, 200432.2
        
        Certification of Principal Financial Officer
          of Indiantown Cogeneration, L.P., pursuant to Section 906 of the
          Sarbanes  Oxley Act of 2002 dated May 11, 200432.3
        
        Certification of Principal Executive Officer
          of Indiantown Cogeneration Funding Corporation, pursuant to Section 906
          of the Sarbanes  Oxley Act of 2002 dated May 11, 200432.4
        
        Certification of Principal Financial Officer
          of Indiantown Cogeneration Funding Corporation, pursuant to Section 906
          of the Sarbanes  Oxley Act of 2002 dated May 11, 2004
 b) Reports on Form 8-K: None 16




---



##### 



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
co-registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized. INDIANTOWN COGENERATION, L.P.(Co-Registrant)Date: May 11, 2004
    
    /s/ THOMAS E. LEGROThomas E. LegroVice President, Controller and ChiefAccounting OfficerINDIANTOWN COGENERATION FUNDINGCORPORATION(Co-Registrant)Date: May 11, 2004
    
    /s/ THOMAS E. LEGROThomas E. LegroVice President, Controller and Chief AccountingOfficer
 17




---



##### 



EXHIBIT INDEX Exhibit No.
    
    Exhibit Description31.1
    
    Certification of Principal Executive Officer of Indiantown Cogeneration, L.P., pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 dated May 11, 200431.2
    
    Certification of Principal Financial Officer of Indiantown Cogeneration, L.P., pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 dated May 11, 200431.3
    
    Certification of Principal Executive Officer of Indiantown Cogeneration Funding Corporation, pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 dated May 11, 200431.4
    
    Certification of Principal Financial Officer of Indiantown Cogeneration Funding Corporation, pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 dated May 11, 200432.1
    
    Certification of Principal Executive Officer of Indiantown Cogeneration, L.P., pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 dated May 11, 200432.2
    
    Certification of Principal Financial Officer of Indiantown Cogeneration, L.P., pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 dated May 11, 200432.3
    
    Certification of Principal Executive Officer of Indiantown Cogeneration Funding Corporation, pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 dated May 11, 200432.4
    
    Certification of Principal Financial Officer of Indiantown Cogeneration Funding Corporation, pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 dated May 11, 2004