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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

Commission File Number 000-24890

Edison Mission Energy
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)		   95-4031807
(I.R.S. Employer Identification No.)
     

18101 Von Karman Avenue
Irvine, California
(Address of principal executive offices)
 
92612
(Zip Code)

Registrant's telephone number, including area code: (949) 752-5588

Securities registered pursuant to Section 12(b) of the Act:

None
(Title of Class)
 
Not Applicable
(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act:

 
Common Stock, par value $0.01 per share
(Title of Class)
 

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES ý    NO  o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    YES ý

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    YES o    NO  ý

        Aggregate market value of the registrant's Common Stock held by non-affiliates of the registrant as of June 30, 2004: $0. Number of shares outstanding of the registrant's Common Stock as of March 10, 2005: 100 shares (all shares held by an affiliate of the registrant).


EXPLANATORY NOTE

        The annual report on Form 10-K/A for the fiscal year ended December 31, 2004 is being filed to include in Part IV, Item 15, financial statements with respect to PT Paiton Energy, which were omitted from the annual report on Form 10-K for the year ended December 31, 2004 filed on March 16, 2005.

        This Amendment No. 1 does not update any other disclosures to reflect developments since the original date of filing.

        The following item of the original filing is amended by this Amendment No. 1:

        Item 15. Exhibits and Financial Statement Schedules

        Unaffected items have not been repeated in this Amendment No. 1.

1


PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 
   Page
Investment in Unconsolidated Affiliates Financial Statements:    
  PT Paiton Energy Financial Statements as of December 31, 2004, 2003 and 2002   3

        The financial statements with respect to PT Paiton Energy are being filed in this report pursuant to Rule 3-09 of Regulation S-X.

2


Independent Auditors' Report

To the Shareholders,
Board of Commissioners and Board of Directors of
PT Paiton Energy

        We have audited the accompanying balance sheet of PT Paiton Energy (the "Company") as of 31 December 2004, and the related statement of income, comprehensive income, changes in shareholders' equity, and cash flows the year 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 audit. The financial statements of PT Paiton Energy as of 31 December 2003 and for the years ended 31 December 2003 and 2002 were audited by an other independent auditor whose report dated 23 January 2004 expressed an unqualified opinion.

        We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 financial statements referred to above present fairly, in all material respects, the financial position of PT Paiton Energy as of 31 December 2004, 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 of America.


JAKARTA
15 March 2005
 
 

KAP Haryanto Sahari & Rekan
(PricewaterhouseCoopers)
 
 

3


Independent Auditor's Report

No.: L.03 - 1694 - 04/US.

The Shareholders,
Board of Commissioners and Board of Directors

PT Paiton Energy:

We have audited the accompanying balance sheets of PT Paiton Energy as of 31 December 2003 and 2002, and the related statements of income, comprehensive income, changes in shareholders' equity, and cash flows for each of the years in the three-year period ended 31 December 2003. 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 auditing standards generally accepted in the United States of America. 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 PT Paiton Energy as of 31 December 2003 and 2002, and the results of its operations and its cash flows for each of the years in the three-year period ended 31 December 2003, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2j to the financial statements, the Company changed its method of accounting for derivative instruments and hedging activities effective 1 January 2001.

Siddharta Siddharta & Widjaja
Registered Public Accountants
License No. KEP-232/KM.6/2002

Drs. Istata T. Siddharta
 Public Accountant License No. 98.1.0192

Jakarta, 23 January 2004.

4


PT PAITON ENERGY
BALANCE SHEETS
31 DECEMBER 2004 AND 2003
(In thousands of US Dollars, except per share amounts)

 
   Notes
   2004
   2003
CURRENT ASSETS            
Cash and cash equivalents   2a,3   76,917   64,217
Restricted cash   9   32,512   27,358
Accounts receivable       92,385   81,860
Fuel inventory and supplies   2d,5   16,976   22,882
Prepayments and other       15,310   13,028
Deferred tax assets   2n,13   5,347   —
       
 

Total current assets
 
 
 
239,447
 
209,345
       
 

NON-CURRENT ASSETS
 
 
 
 
 
 
Plant and equipment, net   2e,6   1,828,783   1,870,750
Restricted cash   9   130,197   133,002
Long-term receivable   2l,4   443,962   447,378
Deferred charges, net   2g,7   235,791   242,341
Deferred financing costs, net   2h   11,016   13,407
Prepayments and other       2,219   2,917
       
 

Total non-current assets
 
 
 
2,651,968
 
2,709,795
       
 

TOTAL ASSETS
 
 
 
2,891,415
 
2,919,140
       
 

The accompanying notes form an integral part of these financial statements.

5


PT PAITON ENERGY
BALANCE SHEETS
31 DECEMBER 2004 AND 2003
(In thousands of US Dollars, except per share amounts)

 
   Notes
   2004
   2003
  
CURRENT LIABILITIES              
Accounts payable to related parties       36,409   111,296  
Taxes payable       10,239   6,368  
Accrued finance costs       124,026   68,286  
Other liabilities       21,347   19,438  
Current maturities of long-term loans   2i,9,15   140,851   140,851  
Current maturities of derivative financial instruments   2j,10   17,822   —  
       
 
 

Total current liabilities
 
 
 
350,694
 
346,239
 
       
 
 

NON-CURRENT LIABILITIES
 
 
 
 
 
 
 
Deferred tax liability, net   2n,13   78,736   42,705  
Long-term loans   2i,9,15   1,933,684   2,061,117  
Provision for employee benefits   2m   955   —  
Derivative financial instruments   2j,10   34,882   72,915  
       
 
 

Total non-current liabilities
 
 
 
2,048,257
 
2,176,737
 
       
 
 

SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
Share capital—authorized, issued and fully paid 30,600 common shares with par value of US$10,000 per share   12   306,000   306,000  
Share premium       7,000   7,000  
Retained earnings       216,357   134,205  
Accumulated other comprehensive loss   2k   (36,893 ) (51,041 )
       
 
 

Total shareholders' equity
 
 
 
492,464
 
396,164
 
       
 
 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
2,891,415
 
2,919,140
 
       
 
 

The accompanying notes form an integral part of these financial statements.

6


PT PAITON ENERGY
STATEMENTS OF INCOME
FOR THE YEARS ENDED 31 DECEMBER 2004, 2003 AND 2002
(In thousands of US Dollars, except per share amounts)

 
   Notes
   2004
   2003
   2002
  
Revenues:   2c              
Net dependable capacity       365,237   371,353   359,757  
Net electrical output       133,354   113,665   91,416  
       
 
 
 

 
 
 
 
498,591
 
485,018
 
451,173
 
       
 
 
 

Cost and expenses:
 
 
 
 
 
 
 
 
 
Fuel       (122,432 ) (99,162 ) (79,338 )
Plant operations       (43,211 ) (39,124 ) (27,173 )
Depreciation and amortization       (58,583 ) (58,340 ) (83,115 )
General and administrative       (12,697 ) (17,186 ) (59,936 )
       
 
 
 

 
 
 
 
(236,923
)
(213,812
)
(249,562
)
       
 
 
 

Operating income
 
 
 
261,668
 
271,206
 
201,611
 
       
 
 
 

Other income/(expenses):
 
 
 
 
 
 
 
 
 
Interest income       47,947   47,437   47,938  
(Loss)/gain on foreign currency exchange       (1,606 ) 645   (2,158 )
Interest expense and other financing costs       (190,463 ) (193,857 ) (154,607 )
Other income       —   61   40  
       
 
 
 

 
 
 
 
(144,122
)
(145,714
)
(108,787
)
       
 
 
 

Profit before income tax
 
 
 
117,546
 
125,492
 
92,824
 

Income tax expense
 
2n,13
 
(35,394
)
(39,293
)
(28,573
)
       
 
 
 

Net income
 
 
 
82,152
 
86,199
 
64,251
 
       
 
 
 

Weighted-average shares of common stock outstanding
 
 
 
30,600
 
27,624
 
25,000
 

Basic earnings per share
 
 
 
2,685
 
3,120
 
2,570
 

The accompanying notes form an integral part of these financial statements.

7


PT PAITON ENERGY
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED 31 DECEMBER 2004, 2003 AND 2002
(In thousands of US Dollars)

 
   2004
   2003
   2002
  
Net income   82,152   86,199   64,251  

Other comprehensive income/(loss), net of tax
 
 
 
 
 
 
 
Unrealized loss on derivative financial instruments, net of tax benefit of US$1,639, US$1,340 and US$15,421 for 2004, 2003 and 2002, respectively   (3,825 ) (3,126 ) (35,982 )

Reclassification adjustment for losses included in net income, net of tax of US$7,702, US$8,954 and US$9,244 for 2004, 2003 and 2002, respectively
 
17,973
 
20,892
 
21,570
 
   
 
 
 

 
 
14,148
 
17,766
 
(14,412
)
   
 
 
 

Comprehensive income
 
96,300
 
103,965
 
49,839
 
   
 
 
 

The accompanying notes form an integral part of these financial statements.

8


PT PAITON ENERGY
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED 31 DECEMBER 2004, 2003 AND 2002
(In thousands of US Dollars)

 
   Shares
capital
   Share
premium
   Accumulated
other
comprehensive
loss
   Retained
earnings/
(deficit)
   Total
shareholders'
equity
  
Balance at 31 December 2001   306,000   7,000   (54,395 ) (16,245 ) 242,360  

Net income for the year
 
—
 
—
 
—
 
64,251
 
64,251
 

Other comprehensive loss
 
—
 
—
 
(14,412
)
—
 
(14,412
)
   
 
 
 
 
 

Balance at 31 December 2002
 
306,000
 
7,000
 
(68,807
)
48,006
 
292,199
 

Net income for the year
 
—
 
—
 
—
 
86,199
 
86,199
 

Other comprehensive income
 
—
 
—
 
17,766
 
—
 
17,766
 
   
 
 
 
 
 

Balance at 31 December 2003
 
306,000
 
7,000
 
(51,041
)
134,205
 
396,164
 

Net income for the year
 
—
 
—
 
—
 
82,152
 
82,152
 

Other comprehensive income
 
—
 
—
 
14,148
 
—
 
14,148
 
   
 
 
 
 
 

Balance at 31 December 2004
 
306,000
 
7,000
 
(36,893
)
216,357
 
492,464
 
   
 
 
 
 
 

The accompanying notes form an integral part of these financial statements.

9


PT PAITON ENERGY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED 31 DECEMBER 2004, 2003 AND 2002
(In thousands of US Dollars)

 
   2004
   2003
   2002
  
CASH FLOWS FROM OPERATING ACTIVITIES              
Net income   82,152   86,199   64,251  
Adjustment to reconcile net income to net cash flows provided by operating activities:              
  Depreciation and amortization   58,583   58,339   83,115  
  (Gain)/loss on retirement or disposal of plant and equipment   (41 ) (26 ) 3,553  
  Provision for deferred income taxes   24,622   39,293   28,573  
  Provision for employee benefits   955   —   —  
  Amortization of deferred financing costs   2,391   —   —  
Changes in assets and liabilities:              
  Accounts receivable   (7,109 ) 7,236   (53,940 )
  Fuel inventory and supplies   5,906   1,684   (16,123 )
  Prepayments and other   (1,584 ) (2,048 ) (618 )
  Taxes payable and other liabilities   5,780   (46,842 ) 32,705  
  Accounts payable to related parties   (74,887 ) (68,947 ) 7,071  
  Accrued finance costs   69,157   45,457   (910 )
   
 
 
 
Net cash flows provided by operating activities   165,925   120,345   147,677  
   
 
 
 

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
Additions to restricted cash   (2,349 ) (160,360 ) —  
Acquisition of plant and equipment   (10,764 ) (3,837 ) (2,046 )
Proceeds from sale of plant and equipment   739   2,571   50  
   
 
 
 

Net cash flows used in investing activities
 
(12,374
)
(161,626
)
(1,996
)
   
 
 
 

CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
 
 
Repayment of long-term loans   (140,851 ) (126,989 ) (20,000 )
Proceeds from subordinated loans   —   15,882   —  
Repayment of subordinated loans   —   (8,790 ) —  
Payment of financing costs   —   (8,316 ) —  
   
 
 
 

Net cash flows used in financing activities
 
(140,851
)
(128,213
)
(20,000
)
   
 
 
 

Net increase/(decrease) in cash and cash equivalents
 
12,700
 
(169,494
)
125,681
 
Cash and cash equivalents at the beginning of the year   64,217   233,711   108,030  
   
 
 
 

Cash and cash equivalents at the end of the year
 
76,917
 
64,217
 
233,711
 
   
 
 
 

Supplemental cash flow disclosures:
 
 
 
 
 
 
 
Cash paid for interest   113,682   135,963   155,517  
Cash paid for income taxes   4,982   4,025   —  
Conversion of accounts payable to related parties to long term loans   —   —   2,974  

The accompanying notes form an integral part of these financial statements.

10


PT PAITON ENERGY
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2004, 2003 AND 2002
(In thousands of US Dollars, except per share amounts)

1.     General

        PT Paiton Energy (the "Company") is an Indonesian domiciled company located at Menara Batavia 8th floor, Jalan K.H. Mas Mansyur Kav.126, Jakarta, which was established within the framework of Foreign Capital Investment Laws No. 1 year 1967 as amended by Law No. 11 year 1970 based on deed of notary public Sutjipto SH No. 64 dated 11 February 1994 with the amendments effected by deed of the same notary public No. 56 dated 11 January 1995. These deeds were approved by the Minister of Justice under decision letter No. C2-1-682.HT.01.01.Th.95 dated 6 February 1995. The Company's Articles of Association were most recently amended by deed of the same notary public No. 50 dated 20 November 1998; this amendment changed the name of the Company and increased authorized capital. This deed was approved by the Minister of Justice under decision letter No. C-2340.HT.01.04.Th.99 dated 3 February 1999 and published in Supplement No. 4853 to State Gazette No. 64 dated 10 August 1999.

        In accordance with Article 3 of the Articles of Association, approval by the Capital Investment Coordination Board and the Power Purchase Agreement (the "PPA"), as amended, the Company's objective and purpose is to engage in any business and activity in the sector of electric power supply, and to build, own and operate a coal-fired power generating facility (the "Project") consisting of two units located in East Java.

2.     Summary of Significant Accounting Policies

        Presented below are the significant accounting policies adopted in preparing the financial statements of the Company, which are in conformity with accounting principles generally accepted in the United States of America.

11

 
   2004 and 2003
   2002

Plant assets and facilities
 
38 years
 
30 years
Furniture and equipment   4 years   4 years

12

13

14

15

3.     Cash and Cash Equivalents

 
   2004
   2003
Cash on hand   4   4
Cash in banks   65,046   51,172
Call deposits   11,867   13,041
   
 
    76,917   64,217
   
 

16

4.     Long-term Receivable

        As discussed in Note 14a, the Company and PLN entered into the amendments to the PPA, which among other matters provides for restructuring settlement payments for the settlement of arrearages of amounts billed by the Company to PLN. The Company has reflected the present value of the restructuring settlement payments, based on a discount rate of 10%, as a long-term receivable totaling US$443,962 (net of current maturities of US$3,416) and US$447,378 (net of current maturities of US$3,092) at 31 December 2004 and 2003, respectively. The Company billed restructuring settlement payments aggregating US$48,000 in both 2004 and 2003. Interest income recognized on this long-term receivable totaled US$44,908 and US$45,200 in 2004 and 2003, respectively.

 
   2004
   2003
  
Total restructuring settlement payments   1,296,000   1,344,000  
Less: unamortized discount   (848,622 ) (893,530 )
   
 
 

Restructuring settlement receivable
 
447,378
 
450,470
 
Less: current maturities   (3,416 ) (3,092 )
   
 
 

Long-term receivable
 
443,962
 
447,378
 
   
 
 

5.     Fuel Inventory and Supplies

 
   2004
   2003
Coal inventory   7,006   15,106
Fuel oil inventory   284   111
Supplies   9,686   7,665
   
 
    16,976   22,882
   
 

17

6.     Plant and Equipment

        Plant and equipment comprised of the following:

 
   2 0 0 4
  
 
   Beginning
balance
   Additions
   Retirements and
disposals
   Ending
balance
  
Cost                  
Plant assets and facilities   2,168,258   9,001   (776 ) 2,176,483  
Furniture and equipment   8,951   1,763   (265 ) 10,449  
   
 
 
 
 

 
 
2,177,209
 
10,764
 
(1,041
)
2,186,932
 
   
 
 
 
 

Accumulated depreciation
 
 
 
 
 
 
 
 
 
Plant assets and facilities   (300,035 ) (50,591 ) 121   (350,505 )
Furniture and equipment   (6,424 ) (1,442 ) 222   (7,644 )
   
 
 
 
 

 
 
(306,459
)
(52,033
)
343
 
(358,149
)
   
 
 
 
 

Net book value
 
1,870,750
 
 
 
 
 
1,828,783
 
   
         
 
 
   2 0 0 3
  
 
   Beginning
balance
   Additions
   Retirements and
disposals
   Ending
balance
  
Cost                  
Plant assets and facilities   2,168,798   2,334   (2,874 ) 2,168,258  
Furniture and equipment   7,603   1,503   (155 ) 8,951  
   
 
 
 
 

 
 
2,176,401
 
3,837
 
(3,029
)
2,177,209
 
   
 
 
 
 

Accumulated depreciation
 
 
 
 
 
 
 
 
 
Plant assets and facilities   (249,835 ) (50,530 ) 330   (300,035 )
Furniture and equipment   (5,318 ) (1,260 ) 154   (6,424 )
   
 
 
 
 

 
 
(255,153
)
(51,790
)
484
 
(306,459
)
   
 
 
 
 
Net book value   1,921,248           1,870,750  
   
         
 

        Depreciation charged to operating expenses amounted to US$52,033, US$51,790 and US$73,721 in 2004, 2003 and 2002, respectively.

        Effective 1 January 2003, the Company changed its accounting estimates relating to depreciation of plant assets and facilities as disclosed in Note 2e.

        Substantially all of the Company's assets have been pledged as collateral for the repayment of long-term loans as disclosed in Note 9.

7.     Deferred Charges

 
   2004
   2003
  
Special facilities costs deferred   281,814   281,814  
Less: accumulated amortization   (46,023 ) (39,473 )
   
 
 
Net deferred charges   235,791   242,341  
   
 
 

18

        Deferred charges represent costs incurred for the design, construction and installation of the Special Facilities in accordance with the terms of the PPA. The Special Facilities constitute electrical interconnection facilities at the Paiton Complex, the expansion of the Paiton Complex's water intake and discharge canals and site preparation work at the Paiton Complex. The Company had the care, custody and control, and bore the risk of loss with respect to the Special Facilities until they were accepted by PLN in 1999. The Special Facilities recorded in these financial statements are owned by PLN; however, the Company has the right to use the Special Facilities throughout the term of the PPA, as amended.

        Effective 1 January 2003, the Company changed its accounting estimates relating to amortization of the Special Facilities as disclosed in Note 2g. Amortization charged to operating expenses amounted to US$6,550, US$6,549 and US$9,394 in 2004, 2003 and 2002, respectively.

8.     Related Party Transactions

19

9.     Long Term Loans

 
   2004
   2003
  
Senior debt facilities          
USEXIM facility—tranche A   310,010   339,265  
USEXIM facility—tranche B   88,894   101,907  
JBIC facility—tranche A   495,272   496,300  
JBIC facility—tranche B   188,177   253,308  
OPIC facility—tranche A   44,638   49,717  
OPIC facility—tranche B   120,476   134,403  
   
 
 

 
 
1,247,467
 
1,374,900
 
   
 
 
Senior debt funding loan   180,000   180,000  
   
 
 

Subordinated loans
 
 
 
 
 
Edison Mission Energy Asia Pte., Ltd.   176,004   176,004  
Paiton Power Financing B.V.   143,018   143,018  
Capital Indonesia Power I C.V.   54,978   54,978  
   
 
 

 
 
374,000
 
374,000
 
   
 
 

Series B subordinated loans
 
 
 
 
 
Edison Mission Energy Asia Pte., Ltd.   128,506   128,506  
Paiton Power Financing B.V.   104,421   104,421  
Capital Indonesia Power I C.V.     40,141   40,141  
   
 
 

 
 
273,068
 
273,068
 
   
 
 

Total
 
2,074,535
 
2,201,968
 

Current maturities of long-term loans
 
(140,851
)
(140,851
)
   
 
 

Non-current portion
 
1,933,684
 
2,061,117
 
   
 
 

Senior debt facilities

        On 14 February 2003, the Company entered into a certain second amended and restated common agreement (the "Common Agreement"), with the following lenders: The Export-Import Bank of the United States ("USEXIM"), Japan Bank for International Cooperation ("JBIC"), as successors in interest to the Export-Import Bank of Japan ("JEXIM") and Overseas Private Investment Corporation ("OPIC"), Wells Fargo Bank Minnesota, N.A. (as the Commercial Bank Tranche A Facility Agent and Indenture Trustee), ING Capital LLC (as the USEXIM Construction Facility Agent), JP Morgan Chase Bank (as the Trustee), Mizuho Corporate Bank, Ltd. (as the Collateral Agent) and JP Morgan Chase Bank (as Intercreditor Agent).

        The principal effect of the Common Agreement is to establish certain uniform terms which are applicable to all senior debt facilities provided such as funding, payments and prepayments, conditions precedent, representations and warranties, affirmative and negative covenants, and events of default. Separate financing agreements for the senior debt facilities have been entered into with each of the lenders who were to provide an aggregate of US$1,820,000. The senior debt facilities are comprised of variable-rate-based loans and fixed-rate-based loans. The Company has entered into interest rate swap agreements on a portion of its debt to reduce the impact of changes in interest rates on its floating rate long-term debt as disclosed in Note 10.

20


        The obligations of the Company are collateralized by pledges of all of the Company's capital stock and liens on and security interests in substantially all of the Company's assets (including plant assets), its rights under various agreements, all of the Company's revenues and all insurance proceeds payable to the Company. The financing agreements contain restrictions, which, among other items, require the Company to comply with various administrative requirements. The agreements with lenders also require the Company to pay certain fees.

        Interest on loans is due on a quarterly basis, in arrears, and payments coincide with the scheduled principal payments dates. Repayment of the loan principal was originally due over a period of twelve years commencing from 1999. None of the scheduled repayments of principal totaling approximately US$453,761 as of 31 December 2002 were made during 1999, 2000 and 2001, and only US$20,000 was repaid in 2002.

        In response to PLN's failure to pay invoices submitted to it under the PPA (see Note 14a), on 15 October 1999, the Company entered into an Interim Arrangement Agreement (the "Interim Arrangement"), as amended on 30 December 2002 with the senior lenders. Under this agreement, the parties agreed to enter into certain waivers pursuant to the Financing Agreements, and amendments to the Common Agreement, in order to establish an interim arrangement under the Financing Agreements. These waivers included events of default that may exist solely as a result of the failure of the Company to repay principal amounts on the scheduled dates therefore which occur during the term of the Interim Arrangement. Interest and fees continued to be paid on a timely basis. This Interim Arrangement terminated on 13 February 2003, when the Company and all the lenders reached an agreement on restructuring the terms of the senior debt facilities as disclosed in Note 15.

        In addition, pursuant to the terms of section 8.3 of the Common Agreement, the lenders waived all defaults, Events of Default and Potential Events of Default existing under the Financing Documents as of 13 February 2003. No interest was incurred in 2003 and 2002.

        As discussed in Note 15, on 14 February 2003, the Company and its lenders executed the Second Amended and Restated Common Agreement. The terms and conditions of the Company's senior debt facilities pursuant to the provisions of the Second Amended Restated Common Agreement can be summarized as follows:


 
   USEXIM A
   USEXIM B
Principal outstanding   US$380,911   US$126,971
Period   15 February 2003 - 15 November 2013   15 February 2003 - 15 November 2011
Interest   Fixed rate 7.5% p.a.   Fixed rate 7.5% p.a.

 
   JBIC A
   JBIC B
Principal outstanding   US$506,398   US$337,603
Period   15 February 2003 - 15 November 2013   15 February 2003 - 15 November 2011
Interest   LIBOR plus margin   LIBOR plus margin

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   OPIC A
   OPIC B
Principal outstanding   US$52,799   US$144,681
Period   15 February 2003 - 15 November 2013   15 February 2003 - 15 November 2013
Interest   Fixed rate 7.5% p.a.   Three-month Treasury Bill-based OPIC-guaranteed paper plus margin

        Pursuant to the debt restructuring, the Company is required to allocate funds into restricted bank accounts for which use is restricted. The accounts are restricted as to use for taxes, plant maintenance, debt service and settlement of fuel supply and EPC liabilities (the "Restructuring Settlements Account"). The balances of these respective accounts as of 31 December 2004 were as follows:

Tax payment account   52
Debt service account   31,328
Restructuring settlements account   1,132
   

Current
 
32,512
   

Major maintenance reserve account
 
6,810
Debt service reserve account   123,387
   

Non-current
 
130,197
   

Total
 
162,709
   

Senior debt funding loan

        On 28 March 1996, Paiton Energy Funding B.V., a Netherlands corporation (the "Issuer") issued US$180,000 of senior secured bonds (the "Bonds") to certain institutional investors. The net proceeds from the sale of the bonds were used by the Issuer to acquire certain senior indebtedness which consisted of loans made to the Company by various commercial banks and financial institutions under the Commercial Banks Facility—Tranche A in place as of 31 March 1996. Upon closing of the offering for the Bonds, such senior indebtedness was replaced by the Senior Debt Funding Loan and the payment terms and the interest rate which applied to such indebtedness were amended to contain terms which are identical to the Bonds. The Bonds bear interest at 9.34% per annum with interest payable on a quarterly basis commencing in May 1996. Principal payments on the Bonds commence in 2008, and the Bonds mature in 2014.

        The Company has unconditionally guaranteed the payment obligations of the Issuer in respect of the Bonds. The Senior Debt Funding Loan and the guarantee will be secured, on a pari passu basis with the other senior debt, by pledges of the Company's capital shares and liens on, and security interests in, substantially all of the assets of the Company. The maximum potential amount of undiscounted future payments that the Company could be required to make under the guarantee is US$180,000, which is the current carrying amount of the Senior Debt Funding Loan reflected in these financial statements.

Subordinated loans

        On 31 March 1995, the Company entered into a subordinated loan agreement with Edison Mission Energy Asia Pte., Ltd., Paiton Power Financing B.V., and Capital Indonesia Power I C.V. (the "Subordinated Lenders"). Each of the Subordinated Lenders is affiliated with shareholders of the Company. Under this agreement, the Subordinated Lender or their affiliates are obligated to make

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subordinated loans to the Company in a maximum aggregate amount of US$487,438. The subordinated loans bear no interest prior to the last day of the availability period (such day has been established as 15 October 1999). After the availability period, interest on the outstanding principal amount is determined at 15%, per annum. The repayment of any outstanding principal will not commence until 27 years after the completion of the Project. The Company incurred interest of US$61,095 and US$47,609 for the year 2004 and the period from 1 April to 31 December 2003, respectively. The Subordinated Lenders cancelled the Company's interest obligation for the three-month period ended 31 March 2003 and for the years ended 31 December 2002 and 2001 on or before the commencement of each of the respective periods.

Series B subordinated loans

        In 2001, the Company entered into the 1999 Series B Subordinated Loan Agreement with the Subordinated Lenders. Under this agreement, the Subordinated Lenders shall make loans to the Company in a maximum aggregate amount of US$300,000. The 1999 Series B Subordinated Loans bear no interest until such time as the Company and Subordinated Lenders agree otherwise in writing. The repayment of any outstanding principal is not required to commence until 27 years after the completion of the Project. No interest was incurred in 2004, 2003 and 2002.

        The subordinated loans referred to in the two preceding paragraphs are subordinated to the senior debt facilities provided under the Common Agreement and the Senior Debt Funding Loan.

        The following table presents the approximate annual maturities of long-term debt for the five years after 31 December 2004:

2005   140,851  
2006   140,851  
2007   140,851  
2008   153,001  
2009   166,051  
Thereafter   1,353,123  
   
 

 
 
2,094,728
 
Deferred financing costs prior to debt restructuring   (38,569 )
Accrued financing costs relating to interest rate levelization   18,376  
   
 

 
 
2,074,535
 
   
 

10.   Derivative Financial Instruments

        The Company has entered into interest rate swap agreements on a portion of its debt to reduce the impact of changes in interest rates on its floating rate long-term debt. Under the agreements, the Company will receive or pay interest on the differential of notional amounts based on the London Interbank Offering Rate ("LIBOR") and the same notional amounts based on a weighted average fixed interest rate of 7.3% from July 1995 until August 1999 and 9% from August 1999 through August 2011. At 31 December 2004, LIBOR was 2.29% per annum. Payments are made at the end of calculation periods (scheduled three-month periods) which commence primarily in 1995 and 1999 and end in 1999 and 2011. The notional amounts vary over the calculation periods; however, they were intended to correspond with anticipated borrowing levels over the period of the long-term financing. All interest rate swap agreements continue to be fully effective after the restructuring of debt discussed in Note 15.

        In accordance with SFAS No. 133, as amended, the Company recorded a liability for the loss on these interest rate swap agreements of US$52,704 and US$72,915, before income taxes, as of 31 December 2004 and 2003, respectively. This amount has been reflected in other comprehensive loss

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as the Company has designated these agreements as cash flow hedges. The estimated unrealized losses of US$52,704 at 31 December 2004 include approximately US$17,822 that is expected to be reclassified into earnings in 2005.

        Under the agreements, the aggregate notional amount was at its highest level (approximately US$1,100,000) in 1999. As of 31 December 2004, the total notional amount subject to the swap agreements totaled approximately US$315,000, bearing fixed interest at a weighted average rate of approximately 9%.

        By using derivative financial instruments to hedge exposures to changes in interest rates, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, it does not possess credit risk. The Company minimizes the credit risk in derivative instruments by entering into transactions with creditworthy counterparties whose credit quality are reviewed regularly.

        Market risk is the adverse effect on the value of financial instruments that results from a change in interest rates. The market risk associated with interest-rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

        The following table represents the derivatives in place as of 31 December 2004:

 
   Notional
amount
   Maturity
date
   Pay swap
rate
   Fair market
value at
31 December 2004
  
Interest rate swap   56,250   15 August 2011   8.980%   (9,383 )
Interest rate swap   56,250   15 August 2011   8.995%   (9,410 )
Interest rate swap   101,250   15 August 2011   9.035%   (16,841 )
Interest rate swap   101,250   15 August 2011   8.965%   (17,070 )
   
         
 
    315,000           (52,704 )
   
             
Less: current maturities               17,822  
               
 
Long-term portion               (34,882 )
               
 

11.   Fair Value Of Financial Instruments

        The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107, "Disclosures about Fair Value of Financial Instruments". The estimated fair value amounts have been determined by the Company, using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required in interpreting market data to develop the estimates indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

        The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

        Cash and cash equivalents, restricted cash, accounts receivable and accounts payable to related parties — the carrying amounts approximate fair value because of the short duration of these instruments.

        Long-term receivable — the fair value of the long-term receivable is estimated based on discounting the future cash flows using the interest rate at which a similar restructuring settlement payment would be agreed with a customer with a similar credit rating similar remaining maturity.

        Long-term loans — the fair value of long-term loans is estimated by discounting the future cash flows of each instrument at rates currently offered to the Company for similar debt instruments of comparable maturities by the Company's bankers.

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        Interest rate swap contracts — the fair value of interest rate swaps (used for hedging purposes) is the estimated amount the Company would receive (or pay) to terminate the swap agreements at the reporting date, taking into account current interest rates and the current creditworthiness of the swap counterparties.

 
   2004
   2003
  
 
   Carrying
Amount
   Estimated
fair value
   Carrying
amount
   Estimated
fair value
  
Financial assets:                  
Cash and equivalents   76,917   76,917   64,217   64,217  
Restricted cash   162,709   162,709   160,360   160,360  
Accounts receivable   92,385   92,385   81,860   81,860  
Long-term receivable   443,962   443,962   447,378   447,378  

Financial liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable to related parties   (36,409 ) (36,409 ) (111,296 ) (111,296 )
Long-term loans   (2,074,535 ) (2,043,918 ) (2,201,968 ) (2,190,768 )
Derivative financial instruments   (52,704 ) (52,704 ) (72,915 ) (72,915 )

12.   Share Capital

        The Company's authorized, issued and paid up share capital as of 31 December 2004 and 2003 were US$306,000 (30,600 common shares at par value of US$10,000 per share). The composition of shareholders as of 31 December 2004 and 2003 was as follows:

 
   31 December 2004
Shareholders
   Number of
shares
   Par value
   Percentage of
ownership
(%)
MEC Indonesia, B.V.   13,680   136,800   44.71
Paiton Power Investment Co. Ltd.   11,115   111,150   36.32
Capital Indonesia Power I C.V.   4,275   42,750   13.97
PT Batu Hitam Perkasa   1,530   15,300   5.00
   
 
 

 
 
30,600
 
306,000
 
100.00
   
 
 
 
   31 December 2003
Shareholders
   Number of
shares
   Par value
   Percentage of
ownership
(%)
MEC Indonesia, B.V.   12,240   122,400   40.00
Paiton Power Investment Co. Ltd.   9,945   99,450   32.50
Capital Indonesia Power I C.V.   3,825   38,250   12.50
PT Batu Hitam Perkasa   4,590   45,900   15.00
   
 
 

 
 
30,600
 
306,000
 
100.00
   
 
 

        A circular resolution of the shareholders of the Company dated 10 April 2003 approved the increase of issued and paid-up share capital of the Company from US$250,000 to US$306,000. The circular resolution was effected by deed of notary public Popie Savitri Martosuhardjo Pharmanto SH No. 78 dated 23 May 2003.

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        A circular resolution of the shareholders of the Company dated 4 June 2003 approved the transfer of 3,060 shares owned by PT Batu Hitam Perkasa to MEC Indonesia, B.V. (1,440 shares), Paiton Power Investment Co. Ltd. (1,170 shares) and Capital Indonesia Power I C.V. (450 shares). The circular resolution was effected by deed of notary public Popie Savitri Martosuhardjo Pharmanto SH No.12 dated 4 July 2003. The deed was approved by the Capital Investment Coordination Board under No. 29/III/PMA2004 on 14 January 2004 and the contemplated transfers were effected on 21 January 2004.

        On 17 December 2004, Edison Mission Energy, a sponsor of the Company, sold its interests in the Company to IPM Eagle LLP, a United Kingdom partnership between International Power (Impala) Limited (a wholly owned subsidiary of International Power plc of the United Kingdom) and Mitsui Power Ventures limited (a wholly owned subsidiary of Mitsui of Japan). The transfer was at an intermediate holding company level and thus has not affected the shareholder entity, which remains MEC Indonesia, B.V., nor the subordinated debt issuer, which remains as Edison Mission Energy Asia Pte., Ltd. Such transfer also resulted in a transfer of ownership of the Operator at the power plant, PT Edison Mission Operation and Maintenance Indonesia.

13.   Income Tax

        Income tax expense attributable to income from operations consists of:

 
   2004
   2003
   2002
  
Current   (10,772 ) —   —  
Deferred   (24,622 ) (39,293 ) (28,573 )
   
 
 
 

 
 
(35,394
)
(39,293
)
(28,573
)
   
 
 
 

        The Company's income tax expenses differed from the amount computed by applying the Indonesian tax rate of 30% to profit before income tax as follows:

 
   2004
   2003
   2002
  
Indonesian income tax expense at statutory rate   (35,262 ) (37,648 ) (27,847 )
Items not deductible for tax purposes   (349 ) (1,645 ) (726 )
Adjustment relating to prior year   217   —   —  
   
 
 
 

 
 
(35,394
)
(39,293
)
(28,573
)
   
 
 
 

        Accumulated other comprehensive loss for the years ended 31 December 2004 and 2003 is net of US$15,811 and US$21,874 tax expense, respectively, of deferred income taxes which is not reflected above.

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        The items that give rise to significant portions of the deferred tax assets and deferred tax liability as of 31 December 2004 and 2003 are presented below:

 
   2004
   2003
  
Deferred tax assets:          
Derivative financial instruments   15,811   21,874  
Deferred financing costs   8,506   4,934  
Provision for employee benefits   356   —  
Accrued liabilities   —   2,143  
Net operating loss carryforwards   —   6,118  
   
 
 

 
 
24,673
 
35,069
 
Less: current portion of deferred tax assets   (5,347 ) —  
   
 
 
    19,326   35,069  

Deferred tax liability:
 
 
 
 
 
Plant and equipment, and deferred charges, principally due to differences in depreciation and capitalized interest   (98,062 ) (77,774 )
   
 
 

Deferred tax liability, net
 
(78,736
)
(42,705
)
   
 
 

        Realization of the Company's deferred tax assets is dependent upon its profitable operations. Although realization is not assured, the Company believes that it is more probable that these deferred tax assets will be realized through the offset of future taxable income. Despite all the amount of deferred tax assets is considered realizable, however, it could be reduced if actual future taxable income is lower than estimated.

        Under the Indonesian tax laws, the Company submits its tax returns on the basis of self-assessment. The taxation authorities may assess or amend taxes within ten years after the date the tax became payable. The Company is, and may in the future be, under examination by the Indonesian tax authority with respect to positions taken in connection with the filing of tax returns. Matters raised upon audit may involve substantial amounts, which, if resolved unfavorably, an event not currently anticipated, could possibly be material. However, in the Company's opinion, it is remote that the resolution of any such matters will have a material adverse effect upon the Company's financial condition or results of operations.

14.   Commitments And Contingencies

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28

29

30

31

15.   Debt Restructuring

        As discussed in Note 9, the Company had violated certain covenants on its loans and the Company was in default under the terms of financing agreements with Senior Lenders and the Common Agreement. On 14 February 2003, the Company completed its debt restructuring negotiations with its lenders. In connection with the successful completion of these negotiations, the Company executed the Common Agreement between the Company and its lenders. The Company has accounted for the debt restructuring as a troubled debt restructuring in accordance will SFAS No. 15 on the basis that the Company was experiencing financial difficulty through PLN's failure to pay according to the original terms of the PPA, and the Senior Lenders granted a concession to the Company. This concession is in the form of the effective borrowing rate on the restructured debt being less than the effective rate on the debt immediately prior to restructuring. Further, under the Common Agreement and the related Facility Credit Agreements, the original maturities of each of the senior debt facilities were lengthened. The carrying amount of the senior debt facilities at the time of restructuring amounted to approximately US$1,501,889. The Company did not recognize a gain on the debt restructuring as the total payments of principal and interest over the remaining term of the debt exceeded the carrying amount of the senior debt facilities.

        In accordance with the provisions of SFAS No. 15, the deferred financing costs of US$75,225 and accrued finance costs of US$27,751 relating to levelizing of interest rates under the term of the Common Agreement at the time of the restructuring were adjusted to the outstanding loan balances for purposes of financial statement presentation. The effective interest rates applicable to each facility are the discount rate that equates the present value of the future cash payments specified by the new terms with the carrying amount of the payable. Certain debt restructuring costs qualified for deferral totaling US$8,316. All other costs were expensed in the period incurred.

16.   Concentrations of Risk

        The Company's operations are currently conducted in Indonesia, and it is accordingly subject to special considerations and significant risks not typically associated with companies incorporated in the United States of America and Western European countries.

        The Company's results may be adversely affected by changes in the political and social condition in Indonesia and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and method taxation, among other things.

        Indonesia has been experiencing a prolonged period of economic difficulty. Indonesia's return to economic stability is dependant to a large extent on the effectiveness of measures taken by the government, decisions of international lending organisations, changes in global economic conditions and other factors including regulatory and political developments, which are beyond the Company's control. These circumstances give rise to continued economic and political uncertainties.

        The economic crisis in Indonesia during 1998 necessitated a restructuring of the PPA with PLN Company's sole customer. PLN's inability pay to the Company a portion of the amounts due the PPA resulted in the Company not being able to make repayments of the senior debt in accordance with the original debt amortization schedules which was an event of default under the senior debt agreements. In

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December 2002, the PPA was amended as discussed in Note 14a. PLN has paid all invoices and all Restructuring Settlement Payments for 2004 and 2003, on time, as required and in the amended PPA.

        As discussed in Note 9 and 15, the senior debt was restructured in February 2003. In connection with the restructuring of the senior debt, amortization schedule for repayment of the Company's loans was extended to take into account the effect upon the Company of the lower cash flow resulting from the restructured electricity tariff set forth in the PPA as amended. The Company believes that it will have sufficient cash flows to meet its obligations for repayment of debt, interest and other liabilities as and when they come due in 2005.

        The generation of electricity by the plant requires the use of coal for fuel that must meet a certain quality standard. The Company purchases coal from a limited number of suppliers, however, the Company believes that other suppliers could provide similar quality coal on comparable terms. The time required to locate and qualify other coal suppliers, however, could cause a delay in electricity generation that may be disruptive to the Company.

17.   LIQUIDITY

        The Company's management has undertaken a detailed analysis of the cash flows of the Company for the twelve months ended 31 December 2005. Based on the forecast for the new twelve months, management has determined that sufficient liquidity exist to fund the operations of the business during that period. In preparing the forecast, management has reviewed historic cash requirements of the Company as well as key factors which may impact the operations of the Company during next twelve-month period, and are of the opinions that the assumptions and sensitivities which are included in the cash flow forecast are reasonable. However, as with all assumptions in regard to future events, these are subject to inherent limitations and uncertainties and some or all of these assumptions may not be realized.

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SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 on Form 10-K/A to its annual report on Form 10-K for the year ended December 31, 2004 to be signed on its behalf by the undersigned, thereunto duly authorized.

    EDISON MISSION ENERGY
(REGISTRANT)
       
    By: /s/  W. JAMES SCILACCI      
W. James Scilacci
 Senior Vice President and Chief Financial Officer
       
    Date: March 29, 2005

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature
   Title
   Date
         
/s/  THEODORE F. CRAVER, JR.      
Theodore F. Craver, Jr.		   Director, Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)   March 29, 2005

/s/  MARK C. CLARKE      
Mark C. Clarke
 
Vice President and Controller (Controller or Principal Accounting Officer)
 
March 29, 2005

/s/  THOMAS R. MCDANIEL      
Thomas R. McDaniel
 
Director
 
March 29, 2005

/s/  BRYANT C. DANNER      
Bryant C. Danner
 
Director
 
March 29, 2005

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QuickLinks

EXPLANATORY NOTE
PART IV
Independent Auditors' Report
Independent Auditor's Report
PT PAITON ENERGY BALANCE SHEETS 31 DECEMBER 2004 AND 2003 (In thousands of US Dollars, except per share amounts)
PT PAITON ENERGY BALANCE SHEETS 31 DECEMBER 2004 AND 2003 (In thousands of US Dollars, except per share amounts)
PT PAITON ENERGY STATEMENTS OF INCOME FOR THE YEARS ENDED 31 DECEMBER 2004, 2003 AND 2002 (In thousands of US Dollars, except per share amounts)
PT PAITON ENERGY STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED 31 DECEMBER 2004, 2003 AND 2002 (In thousands of US Dollars)
PT PAITON ENERGY STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED 31 DECEMBER 2004, 2003 AND 2002 (In thousands of US Dollars)
PT PAITON ENERGY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2004, 2003 AND 2002 (In thousands of US Dollars)
PT PAITON ENERGY NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2004, 2003 AND 2002 (In thousands of US Dollars, except per share amounts)
SIGNATURES