Esi Tractebel Acquisition 10-Q 2009 Q2 Quarterly report

UNITED STATES 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 June 30, 2009

OR

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number Exact name of registrants as specified in their charters, State of organization, address of principal executive offices and registrants' telephone number IRS Employer Identification Number

333-52397	ESI TRACTEBEL ACQUISITION CORP. (a Delaware corporation)	65-0827005
333-52397-01	NORTHEAST ENERGY, LP (a Delaware limited partnership)	65-0811248

c/o NextEra Energy Resources, LLC

700 Universe Boulevard

Juno Beach, Florida 33408

(561) 691-7171

Indicate by check mark whether the 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 and (2) have been subject to such filing requirements for the past 90 days.

Yes ¨No þ

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ¨No ��

Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, non-accelerated filers, or smaller reporting companies.  See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Securities Exchange Act of 1934.  (Check one):

Large accelerated filers  [   ] Accelerated filers  [   ] Non-accelerated filers  þ (Do not check if a smaller reporting company) Smaller reporting companies  [   ]

Indicate by check mark whether the registrants are shell companies as defined in Rule 12b-2 of the Securities Exchange Act of 1934.

Yes ¨No þ

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of July 31, 2009, there were issued and outstanding 20 shares of ESI Tractebel Acquisition Corp.'s common stock.

——————————————————————

This combined Form 10-Q represents separate filings by ESI Tractebel Acquisition Corp. (Acquisition Corp.) and Northeast Energy, LP (NE LP).  Information contained herein relating to an individual registrant is filed by that registrant on its own behalf.  Each registrant makes representations only as to itself and makes no representations whatsoever as to the other registrant.  The registrants make no representations whatsoever as to ESI Tractebel Funding Corp. (Funding Corp.), and Acquisition Corp. makes no representations whatsoever as to Northeast Energy Associates, a limited partnership (NEA) or North Jersey Energy Associates, a limited partnership (NJEA, and collectively with NEA, the Partnerships).

FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Any statements that express, or involve discussions as to expectations, beliefs, plans, objectives, assumptions, future events or performance, climate change strategy or growth strategies (often, but not always, through the use of words or phrases such as "will," "will likely result," "are expected to," "will continue," "is anticipated," "aim," "believe," "could," "should," "would," "estimated," "may," "plan," "potential," "projection," "target," "outlook," "predict" and "intend" or words of similar meaning) are not statements of historical facts and may be forward-looking.  Forward-looking statements involve estimates, assumptions and uncertainties.  Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors (in addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements) that could have a significant impact on the Acquisition Corp.'s and/or NE LP's (together the registrants) operations and financial results, and that could cause the Acquisition Corp.'s and/or NE LP's actual results to differ materially from those contained or implied in forward-looking statements made by or on behalf of either or both of the registrants in this combined Form 10-Q, in presentations, in response to questions or otherwise.

·   The registrants are subject to complex laws and regulations and to changes in laws and regulations as well as changing governmental policies and regulatory actions, with respect to, among other things, initiatives regarding deregulation and restructuring of the energy industry and environmental matters, including matters related to the effects of climate change, operation of generation facilities, and present or prospective competition.  This substantial and complex framework exposes the registrants to increased compliance costs and potentially significant monetary penalties for non-compliance.

·   A substantial portion of the output from the Partnerships' power generation facilities is sold to two regulated utilities under five power purchase agreements, two of which terminate in 2011 and the other three in 2016.  The limited number of power purchasers creates a concentration of counterparty risk.  The remaining output from the power generation facilities is sold, from time to time, in the merchant markets.  Economic factors, such as the current downturn, could adversely affect energy consumption and could adversely affect the results of operations of the registrants.

·   The operation and maintenance of power generation facilities involve significant risks that could adversely affect the results of operations and financial condition of the registrants.

·   The use of derivative contracts by NE LP and the Partnerships in the normal course of business could result in financial losses that adversely impact the results of operations of the registrants.

·   The competitive energy business is subject to risks, many of which are beyond the control of the registrants, including, but not limited to, the ability to efficiently operate generating assets, the successful and timely completion of project restructuring activities, the price and supply of fuel (including transportation) and equipment, transmission constraints, competition from other and new sources of generation, excess generation capacity and shifting demand for power, that may reduce the revenues and adversely impact the results of operations and financial condition of the registrants.

·   The registrants rely on contracts with vendors for the supply of fuel and equipment required for the operation of their facilities.  If vendors fail to fulfill their contractual obligations, the registrants may need to make arrangements with other suppliers, which could result in higher costs and/or a disruption to their operations.

·   Weather affects the registrants' results of operations, as can the impact of severe weather.  Weather conditions directly influence the demand for electricity and natural gas, affect the price of energy commodities, and can affect the production of electricity at power generation facilities.

·   The registrants are subject to costs and other potentially adverse effects of legal and regulatory proceedings, settlements, investigations and claims, as well as regulatory compliance and the effect of new, or changes in, tax laws, rates or policies, rates of inflation, accounting standards, securities laws and corporate governance requirements.

·   The Partnerships are subject to mandatory reliability standards promulgated by the North American Electric Reliability Corporation and enforced by the Federal Energy Regulatory Commission.  Noncompliance with these mandatory reliability standards could result in sanctions, including substantial monetary penalties.

·   Threats of terrorism and catastrophic events that could result from terrorism, cyber attacks, or individuals and/or groups attempting to disrupt NE LP’s and the Partnerships’ business may impact the operations of the registrants in unpredictable ways.

·   The registrants' ability to obtain insurance, and the cost of and coverage provided by such insurance, could be adversely affected by international, national, state or local events as well as registrant-specific events.

·   The registrants, the Partnerships and the Funding Corp. are substantially leveraged and subject to restrictive covenants under their debt agreements that will limit their ability to borrow or otherwise have access to additional funds.

·   All obligations of the Partnerships are non-recourse to the direct and indirect owners of the registrants.

These and other risk factors are included in Part I, Item 1A. Risk Factors of the registrants' Annual Report on Form 10-K for the year ended December 31, 2008 (2008 Form 10-K).

Any forward-looking statement speaks only as of the date on which such statement is made, and the registrants undertake no obligation to update any forward-looking statement to reflect events or circumstances, including unanticipated events, after the date on which such statement is made, unless otherwise required by law.  New factors emerge from time to time, and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained or implied in any forward-looking statement.

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

NORTHEAST ENERGY, LP (A PARTNERSHIP) AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Thousands of Dollars)

(Unaudited)

	June 30, 2009		December 31, 2008
ASSETS
Current assets:
Cash and cash equivalents	$	36,925	$	48,186
Accounts receivable		49,960		85,495
Spare parts inventories		8,784		5,943
Fuel inventories		6,740		10,877
Prepaid expenses and other current assets		1,059		1,299
Total current assets		103,468		151,800
Non-current assets:
Deferred debt issuance costs (net of accumulated amortization of $6,364 and $6,191, respectively)		596		769
Land		4,712		4,712
Cogeneration facilities (net of accumulated depreciation of $210,446 and $201,140, respectively)		323,482		319,420
Power purchase agreements (net of accumulated amortization of $738,889 and $697,324, respectively)		202,467		244,032
Other assets		3,894		3,578
Total non-current assets		535,151		572,511
TOTAL ASSETS	$	638,619	$	724,311
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Current portion of notes payable – the Funding Corp.	$	59,920	$	54,616
Current portion of note payable – the Acquisition Corp.		30,800		26,400
Current portion of note payable – affiliate		4,134		3,971
Accounts payable		3,197		1,100
Due to related parties		11,502		30,616
Other accrued expenses		10,349		17,025
Total current liabilities		119,902		133,728
Non-current liabilities:
Deferred revenue		73,911		66,944
Notes payable – the Funding Corp.		32,612		65,223
Note payable – the Acquisition Corp.		83,600		101,200
Note payable – affiliate		4,484		6,595
Other liabilities		195		151
Lease payable		443		319
Total non-current liabilities		195,245		240,432
COMMITMENTS AND CONTINGENCIES
Partners' equity:
General partners		6,469		7,003
Limited partners		317,003		343,148
Total partners' equity		323,472		350,151
TOTAL LIABILITIES AND PARTNERS' EQUITY	$	638,619	$	724,311

This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated and Combined Financial Statements appearing in the 2008 Form 10-K for NE LP and Subsidiaries.

NORTHEAST ENERGY, LP (A PARTNERSHIP) AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Thousands of Dollars)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
REVENUES	$	60,043		$	103,839		$	122,306		$	220,510
COSTS AND EXPENSES:
Fuel (net of fuel sales)		11,022			35,304			10,666			77,774
Operations and maintenance		5,590			4,181			10,234			8,876
Depreciation and amortization		26,357			26,396			51,897			51,985
General and administrative		2,277			2,580			4,496			4,943
Total costs and expenses		45,246			68,461			77,293			143,578
OPERATING INCOME		14,797			35,378			45,013			76,932
OTHER EXPENSE (INCOME):
Amortization of debt issuance costs		86			103			172			206
Interest expense		5,695			7,473			11,386			14,997
Interest income		(29	)		(429	)		(98	)		(950	)
Other expense (income)		-			22			-			(1,795	)
Total other expense – net		5,752			7,169			11,460			12,458
NET INCOME	$	9,045		$	28,209		$	33,553		$	64,474

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of Dollars)

(Unaudited)

	Six Months Ended June 30,
	2009			2008
NET CASH PROVIDED BY OPERATING ACTIVITIES	$	104,290		$	120,456
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(13,074	)		(3,090	)
Proceeds from insurance claim		211			-
Net cash used in investing activities		(12,863	)		(3,090	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on the Funding Corp. notes		(27,308	)		(25,901	)
Principal payments on the Acquisition Corp. note		(13,200	)		(11,000	)
Principal payments on the affiliate note		(1,948	)		(1,799	)
Distributions to partners		(60,232	)		(61,670	)
Net cash used in financing activities		(102,688	)		(100,370	)
Net (decrease) increase in cash and cash equivalents		(11,261	)		16,996
Cash and cash equivalents at beginning of period		48,186			45,257
Cash and cash equivalents at end of period	$	36,925		$	62,253
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	11,386		$	14,946
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Additions to cogeneration facilities	$	4,106		$	722
Transfer of cogeneration facilities to spare parts inventories	$	2,400		$	-
Transfer of cogeneration facilities to accounts receivable under warranty claim	$	167		$	-

This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated and Combined Financial Statements appearing in the 2008 Form 10-K for NE LP and Subsidiaries.

NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND

NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP

CONDENSED COMBINED BALANCE SHEETS

(Thousands of Dollars)

(Unaudited)

	June 30, 2009		December 31, 2008
ASSETS
Current assets:
Cash and cash equivalents	$	36,923	$	48,184
Accounts receivable		49,960		85,495
Spare parts inventories		8,784		5,943
Fuel inventories		6,740		10,877
Prepaid expenses and other current assets		1,057		1,298
Total current assets		103,464		151,797
Non-current assets:
Land		4,712		4,712
Cogeneration facilities (net of accumulated depreciation of $210,446 and $201,140, respectively)		323,482		319,420
Power purchase agreements (net of accumulated amortization of $738,889 and $697,324, respectively)		202,467		244,032
Other assets		3,894		3,578
Total non-current assets		534,555		571,742
TOTAL ASSETS	$	638,019	$	723,539
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Current portion of notes payable – the Funding Corp.	$	59,920	$	54,616
Accounts payable		3,197		1,100
Due to related parties		11,502		30,616
Other accrued expenses		10,349		17,025
Total current liabilities		84,968		103,357
Non-current liabilities:
Deferred revenue		73,911		66,944
Notes payable – the Funding Corp.		32,612		65,223
Lease payable		443		319
Other liabilities		44		-
Total non-current liabilities		107,010		132,486
COMMITMENTS AND CONTINGENCIES
Partners' equity:
General partners		4,460		4,877
Limited partners		441,581		482,819
Total partners' equity		446,041		487,696
TOTAL LIABILITIES AND PARTNERS' EQUITY	$	638,019	$	723,539

This report should be read in conjunction with the Notes to Condensed Combined Financial Statements herein and the Notes to Consolidated and Combined Financial Statements appearing in the 2008 Form 10-K for NEA and NJEA.

NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND

NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP

CONDENSED COMBINED STATEMENTS OF OPERATIONS

(Thousands of Dollars)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
REVENUES	$	60,043		$	103,839		$	122,306		$	220,510
COSTS AND EXPENSES:
Fuel (net of fuel sales)		11,022			35,304			10,666			77,774
Operations and maintenance		5,590			4,181			10,234			8,876
Depreciation and amortization		26,357			26,396			51,897			51,985
General and administrative		2,277			2,580			4,496			4,943
Total costs and expenses		45,246			68,461			77,293			143,578
OPERATING INCOME		14,797			35,378			45,013			76,932
OTHER EXPENSE (INCOME):
Interest expense		2,927			4,193			5,854			8,436
Interest income		(22	)		(405	)		(90	)		(925	)
Other expense (income)		-			22			-			(1,795	)
Total other expense – net		2,905			3,810			5,764			5,716
NET INCOME	$	11,892		$	31,568		$	39,249		$	71,216

CONDENSED COMBINED STATEMENTS OF CASH FLOWS

(Thousands of Dollars)

(Unaudited)

	Six Months Ended June 30,
	2009			2008
NET CASH PROVIDED BY OPERATING ACTIVITIES	$	109,814		$	126,991
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(13,074	)		(3,090	)
Proceeds from insurance claim		211			-
Net cash used in investing activities		(12,863	)		(3,090	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment on the Funding Corp. notes		(27,308	)		(25,901	)
Distributions to partners		(80,904	)		(81,001	)
Net cash used in financing activities		(108,212	)		(106,902	)
Net (decrease) increase in cash and cash equivalents		(11,261	)		16,999
Cash and cash equivalents at beginning of period		48,184			45,246
Cash and cash equivalents at end of period	$	36,923		$	62,245
SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION:
Cash paid for interest	$	5,854		$	8,385
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Additions to cogeneration facilities	$	4,106		$	722
Transfer of cogeneration facilities to spare parts inventories	$	2,400		$	-
Transfer of cogeneration facilities to accounts receivable under warranty claim	$	167		$	-

This report should be read in conjunction with the Notes to Condensed Combined Financial Statements herein and the Notes to Consolidated and Combined Financial Statements appearing in the 2008 Form 10-K for NEA and NJEA.

ESI TRACTEBEL FUNDING CORP.

CONDENSED BALANCE SHEETS

(Thousands of Dollars)

(Unaudited)

	June 30, 2009			December 31, 2008
ASSETS
Current assets:
Cash	$	1	$	1
Current portion of notes receivable from the Partnerships		59,920		54,616
Total current assets		59,921		54,617
Notes receivable from the Partnerships		32,612		65,223
TOTAL ASSETS	$	92,533	$	119,840
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of debt securities payable	$	59,920	$	54,616
Total current liabilities		59,920		54,616
Debt securities payable		32,612		65,223
COMMITMENTS AND CONTINGENCIES
Stockholders’ equity:
Common stock, no par value, 10,000 shares authorized, issued and outstanding		1		1
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	92,533	$	119,840

CONDENSED STATEMENTS OF OPERATIONS

(Thousands of Dollars)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Interest income – affiliate	$	2,927		$	4,192		$	5,854		$	8,385
Interest expense		(2,927	)		(4,192	)		(5,854	)		(8,385	)
NET INCOME	$	-		$	-		$	-		$	-

This report should be read in conjunction with the Notes to Condensed Financial Statements herein and the Notes to Financial Statements appearing in the 2008 Form 10-K for the Funding Corp.

ESI TRACTEBEL FUNDING CORP.

CONDENSED STATEMENTS OF CASH FLOWS

(Thousands of Dollars)

(Unaudited)

	Six Months Ended June 30,
	2009			2008
NET CASH PROVIDED BY OPERATING ACTIVITIES	$	-		$	-
CASH FLOWS FROM INVESTING ACTIVITIES
Principal payment received from the Partnerships		27,308			25,901
Net cash provided by investing activities		27,308			25,901
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payment on debt		(27,308	)		(25,901	)
Net cash used in financing activities		(27,308	)		(25,901	)
Net change in cash		-			-
Cash at beginning of period		1			1
Cash at end of period	$	1		$	1
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest	$	5,854		$	8,385

This report should be read in conjunction with the Notes to Condensed Financial Statements herein and the Notes to Financial Statements appearing in the 2008 Form 10-K for the Funding Corp.

ESI TRACTEBEL ACQUISITION CORP.

CONDENSED BALANCE SHEETS

(Thousands of Dollars)

(Unaudited)

	June 30, 2009		December 31, 2008
ASSETS
Current assets:
Current portion of note receivable from NE LP	$	30,800	$	26,400
Total current assets		30,800		26,400
Non-current assets:
Due from NE LP		152		152
Note receivable from NE LP		83,600		101,200
Total non-current assets		83,752		101,352
TOTAL ASSETS	$	114,552	$	127,752
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Income taxes payable	$	50	$	48
Current portion of debt securities payable		30,800		26,400
Total current liabilities		30,850		26,448
Non-current liabilities:
Debt securities payable		83,600		101,200
Other		13		17
Total non-current liabilities		83,613		101,217
TOTAL LIABILITIES				127,665
COMMITMENTS AND CONTINGENCIES
Stockholders’ equity:
Common stock, $.10 par value, 100 shares authorized, 20 shares issued and outstanding		-		-
Retained earnings		89		87
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	114,552	$	127,752

CONDENSED STATEMENTS OF OPERATIONS

(Thousands of Dollars)

(Unaudited)

Three Months Ended June 30, Six Months Ended June 30,

	2009			2008			2009			2008
Interest income – affiliate	$	2,548		$	2,988		$	5,097		$	5,977
Interest expense		(2,546	)		(2,986	)		(5,093	)		(5,972	)
Income before income taxes		2			2			4			5
Income tax expense		(1	)		(1	)		(2	)		(2	)
NET INCOME	$	1		$	1		$	2		$	3

This report should be read in conjunction with the Notes to Condensed Financial Statements herein and the Notes to Financial Statements appearing in the 2008 Form 10-K for the Acquisition Corp.

ESI TRACTEBEL ACQUISITION CORP.

CONDENSED STATEMENTS OF CASH FLOWS

(Thousands of Dollars)

(Unaudited)

	Six Months Ended June 30,
	2009			2008
NET CASH PROVIDED BY OPERATING ACTIVITIES	$	-		$	-
CASH FLOWS FROM INVESTING ACTIVITIES
Principal payment received from NE LP		13,200			11,000
Net cash provided by investing activities		13,200			11,000
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payment on debt		(13,200	)		(11,000	)
Net cash used in financing activities		(13,200	)		(11,000	)
Net change in cash		-			-
Cash at beginning of period		-			-
Cash at end of period	$	-		$	-
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest	$	5,097		$	5,977

This report should be read in conjunction with the Notes to Condensed Financial Statements herein and the Notes to Financial Statements appearing in the 2008 Form 10-K for the Acquisition Corp.

NORTHEAST ENERGY, LP (A PARTNERSHIP) AND SUBSIDIARIES

NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND

NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP

ESI TRACTEBEL FUNDING CORP.

ESI TRACTEBEL ACQUISITION CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

The accompanying Condensed Consolidated Financial Statements, Condensed Combined Financial Statements and Condensed Financial Statements should be read in conjunction with the 2008 Form 10-K for the registrants.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair financial statement presentation have been made.  The results of operations for an interim period generally will not give a true indication of results for the year.  The registrants have evaluated subsequent events through August 11, 2009.

1.  Combined Statement of Partners' Equity

Equity balances of the general partner (GP) and limited partner (LP) of Northeast Energy Associates, a limited partnership (NEA) and North Jersey Energy Associates, a limited partnership (NJEA) are comprised of the following:

	NEA						NJEA						Combined
	GP		LP		Total		GP		LP		Total		GP		LP		Total
	(Thousands of Dollars)
Balances, December 31, 2008	$	1,331	$	131,767	$	133,098	$	3,546	$	351,052	$	354,598	$	4,877	$	482,819	$	487,696
Balances, June 30, 2009	$	1,136	$	112,412	$	113,548	$	3,324	$	329,169	$	332,493	$	4,460	$	441,581	$	446,041

NEA and NJEA, (the Partnerships) paid distributions to Northeast Energy, LP (NE LP) totaling $80.9 million and $81.0 million for the six months ended June 30, 2009 and 2008, respectively.  NE LP paid distributions totaling $60.2 million and $61.7 million to its partners for the six months ended June 30, 2009 and 2008, respectively.

2.  Financial Instruments and Hedging Activities

Derivative instruments are recorded on NE LP's and the Partnerships' condensed consolidated and combined balance sheets as either an asset or liability (in prepaid expenses and other current assets, other assets and other accrued expenses) measured at fair value.  NE LP and the Partnerships use derivative instruments (primarily swaps, options, futures and forwards) to manage the commodity price risk inherent in the purchase and sale of fuel and electricity and to optimize the value of power generation assets and related contracts.  To a lesser extent, NE LP and the Partnerships also engage in limited trading activities to take advantage of expected favorable price movements.

Essentially all changes in the derivatives' fair value (unrealized mark-to-market gains and losses) for power purchases and sales and trading activities are recognized on a net basis in revenues, and fuel purchases and sales are recognized on a net basis in fuel expense unless hedge accounting is applied.  While substantially all of NE LP's and the Partnerships' derivative transactions are entered into for the purposes described above, hedge accounting is only applied where specific criteria are met and it is practicable to do so.  In order to apply hedge accounting, the transaction must be designated as a hedge and it must be highly effective in offsetting the hedged risk.  Additionally, for hedges of commodity price risk, physical delivery for forecasted commodity transactions must be probable.  NE LP and the Partnerships believe that where offsetting positions exist at the same location for the same time, the transactions are considered to have been netted and therefore physical delivery has been deemed not to have occurred for financial reporting purposes.  Transactions for which physical delivery is deemed not to have occurred are presented on a net basis.  Generally, the hedging instrument's effectiveness is assessed using regression analysis at the inception of the hedge and on at least a quarterly basis throughout its life.  At June 30, 2009, no cash flow hedges existed at NE LP and the Partnerships.  The effective portion of the gain or loss on a derivative instrument designated as a cash flow hedge is reported as a component of other comprehensive income (OCI) and is reclassified into earnings in the period(s) during which the transaction being hedged affects earnings.  The ineffective portion of net unrealized gains (losses) on these hedges is reported in earnings in the current period.  Settlement gains and losses are included within the line items in the statements of operations to which they relate.  There were no net gains/losses on cash flow hedges in comprehensive income for the three and six months ended June 30, 2009 and 2008.  As a result, there were no differences between comprehensive income and net income for the three and six months ended June 30, 2009 and 2008, respectively.

Unrealized mark-to-market losses on derivative transactions were $0.5 million and $2.9 million for the quarters ended June 30, 2009 and 2008, respectively, and are included in fuel expense (net of fuel sales) on the condensed consolidated and combined statements of operations.  Unrealized mark-to-market losses on derivative transactions were $1.1 million and $5.7 million for the six months ended June 30, 2009 and 2008, respectively, and are included in fuel expense (net of fuel sales) on the condensed consolidated and combined statements of operations.  The current portion of the derivative liability was approximately $49,000 at June 30, 2009 and is included in the condensed consolidated and combined balance sheets under other accrued expenses.  The non-current portion of the derivative liabilities at June 30, 2009 was approximately $43,000 and is included in the condensed consolidated and combined balance sheets under long-term other liabilities.  The current portion of the derivative assets at June 30, 2009 was $0.4 million and is included in the condensed consolidated and combined balance sheets under other current assets.

NE LP and the Partnerships have adopted new disclosure provisions related to the fair value of financial instruments effective for the quarter ended June 30, 2009.

Accordingly, the following estimates of the fair value of financial instruments have been made using available market information and other valuation methodologies.  However, the use of different market assumptions or methods of valuation could result in different estimated fair values.

	June 30, 2009				December 31, 2008
	Carrying Amount(b)		Estimated Fair Value(c)		Carrying Amount(b)		Estimated Fair Value(c)
	(Thousands of Dollars)
Long-term debt, including current maturities, of NE LP/Acquisition Corp. (a)	$	123,018	$	123,108	$	138,166	$	138,682
Long-term debt, including current maturities, of Partnerships/Funding Corp.	$	92,532	$	95,843	$	119,839	$	125,396

——————————

(a) Includes affiliate note for NE LP and Acquisition Corp. secured notes (Acquisition Corp. Securities).

(b) Based on the book value of the Acquisition Corp. Securities ($114,400 and $127,600) and the affiliate note ($8,618 and $10,566) as of June 30, 2009 and December 31, 2008, respectively.  Based on the book value of the Funding Corp.’s secured notes (Funding Corp. Securities) as of June 30, 2009 and December 31, 2008, respectively.

(c) Based on an internally developed model for the Acquisition Corp. Securities ($114,490 and $128,116) and the book value of the affiliate note ($8,618 and $10,566) as of June 30, 2009 and December 31, 2008, respectively.  Based on an internally developed model for the Funding Corp. Securities as of June 30, 2009 and December 31, 2008, respectively.  Bid prices were not available for 2009 and 2008 due to recent changes in the market.

3.  Fair Value Measurements

As of June 30, 2009, NE LP and the Partnerships had cash equivalents with a fair value of $35.1 million.  As of December 31, 2008, NE LP and the Partnerships had cash equivalents with a fair value of $30 million.  The value of these assets is based upon quoted prices in active markets for identical assets and equals the carrying value.  As of June 30, 2009, all other financial assets, liabilities and other fair value measurements made on a recurring basis at NE LP and the Partnerships were deemed to be immaterial.

4.  Commitments and Contingencies

The long-term contractual obligations of NE LP and the Partnerships at June 30, 2009 are as follows:

NE LP AND THE PARTNERSHIPS

June 30, 2009

(Thousands of Dollars)

	Total		2009		2010 – 11		2012 – 13		Thereafter
CONTRACTUAL OBLIGATIONS
The Partnerships:
Funding Corp. debt(a)	$	101,830	$	31,828	$	70,002	$	-	$	-
Operating leases		927		162		678		87		-
Other long-term obligations:
Administrative agreement(b)		5,100		300		1,200		1,200		2,400
Operations and maintenance agreement(b)		9,750		750		3,000		3,000		3,000
Fuel management agreement(b)		12,150		450		1,800		1,800		8,100
Natural gas, including transportation and storage		27,468		4,166		18,319		2,319		2,664
Total Partnerships		157,225		37,656		94,999		8,406		16,164
NE LP:
Acquisition Corp. debt(a)		130,308		17,770		112,538		-		-
Affiliate debt(a)		9,531		2,384		7,147		-		-
Total NE LP		139,839		20,154		119,685		-		-
Total contractual obligations	$	297,064	$	57,810	$	214,684	$	8,406	$	16,164

——————————

(a) Includes principal and interest.

(b) Represents the minimum obligation under the terms of the agreement.  The minimum obligation is subject to an annual inflation factor adjustment, which is excluded from the minimum obligation included in the table.

The Northeast Power Coordinating Council, Inc. (NPCC), the regional entity responsible for compliance with the North American Electric Reliability Corporation (NERC) standards, is investigating certain operating subsidiaries and affiliates of NextEra Energy Resources, LLC (NextEra Energy Resources), including NEA, operating in New England for potential noncompliance with certain NERC standards self-reported by NextEra Energy Resources.  NextEra Energy Resources owns subsidiaries that own 50% of NE LP.  NEA has not been notified of a formal claim, but a similar claim regarding this matter has been filed by NPCC with a NextEra Energy Resources’ power plant station located in New England.  Any penalty ultimately determined or accepted by NextEra Energy Resources pursuant to a settlement would be shared among its operating subsidiaries and affiliates in the New England region that the NPCC found to be in noncompliance with certain NERC standards.  Although NEA is unable to predict with certainty the outcome of this matter, it is expected that the ultimate resolution will not have a material adverse effect on NE LP's and the Partnerships' results of operations or financial condition.

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

This discussion should be read in conjunction with the Notes to Condensed Consolidated Financial Statements, Notes to Condensed Combined Financial Statements and Notes to Condensed Financial Statements contained herein (the Notes) and Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in the 2008 Form 10-K for the registrants.  The results of operations for an interim period generally will not give a true indication of results for the year.  In the following discussion, all comparisons are with the corresponding items in the prior year.

Results of Operations

NE LP and the Partnerships – NE LP's consolidated net income for the three months ended June 30, 2009 was $9.0 million compared to $28.2 million for the same period in 2008, and the Partnerships' net income for the three months ended June 30, 2009 was $11.9 million compared to $31.6 million for the same period in 2008.  The decrease in net income was primarily due to a decrease in revenues of $43.8 million partially offset by a decrease in fuel expense (net of fuel sales) of $24.3 million both driven primarily by market conditions.

Revenues for the three months ended June 30, 2009 and 2008 were comprised of $60.0 million and $103.8 million of power sales to utilities, net of purchased power, respectively.  The $43.8 million decrease in revenues was primarily the result of decreased pricing of $39.2 million as well as decreased generation of power at the two generating facilities of $4.6 million.

Fuel expense (net of fuel sales) decreased $24.3 million for the three months ended June 30, 2009 compared to the same period in 2008 primarily due to lower fuel prices coupled with decreased generation of power at the NEA facility.

Interest income decreased for the second quarter of 2009 compared to the same period in 2008 primarily due to decreased rates of return on lower cash balances.

NE LP's consolidated net income for the six months ended June 30, 2009 was $33.6 million compared to $64.4 million for the same period in 2008, and the Partnerships' net income for the six months ended June 30, 2009 was $39.2 million compared to $71.2 million for the same period in 2008.  The decrease in net income was primarily due to a decrease in revenues of $98.2 million partially offset by a decrease in fuel expense (net of fuel sales) of $67.1 million both driven primarily by market conditions.

Revenues for the six months ended June 30, 2009 and 2008 were comprised of $122.3 million and $220.5 million of power sales to utilities, net of purchased power, respectively.  The $98.2 million decrease in revenues was primarily the result of decreased pricing of $64.1 million as well as decreased generation of power at the two generating facilities of $34.1 million.

Fuel expense (net of fuel sales) decreased $67.1 million for the six months ended June 30, 2009 compared to the same period in 2008 primarily due to lower fuel prices coupled with decreased generation of power at both the NJEA and NEA facilities.

Operations and maintenance expense increased for the three and six months ended June 30, 2009 compared to the same periods in 2008 primarily resulting from a scheduled maintenance outage at the NEA facility during the second quarter of 2009.

Depreciation and amortization expense decreased slightly for the three and six months ended June 30, 2009 compared to the same periods in 2008 due primarily to decreased depreciation on assets, measured on a unit of production basis, resulting from decreased generation at the NEA and NJEA facilities.

NE LP and the Partnerships make scheduled interest and principal payments on their outstanding debt semiannually on June 30 and December 30.  Interest expense for NE LP and the Partnerships decreased in the first three and six months of 2009 due to decreasing principal balances on their outstanding debt.

Interest income decreased for the three and six months ended June 30, 2009 compared to the same periods in 2008 due primarily to decreased rates of return on lower cash balances.

In connection with repair work performed on one of NEA's combustion turbines in November 2007, NE LP and the Partnerships recognized a loss on disposal of assets of $2.8 million in 2007.  In March 2008 NEA entered into an agreement with a supplier (the Replacement Parts Agreement) under which NEA would recover up to $2.1 million of the losses recognized on the disposed assets as credits against the future purchase of replacement turbine parts.  In March 2008 NEA placed orders with the supplier for $3.6 million of replacement turbine parts, which used all of the credits under the Replacement Parts Agreement, and a $1.8 million recovery under that agreement was recorded in other expense (income) for the six months ended June 30, 2008.

The Funding Corp. and the Acquisition Corp. – Both the Funding Corp. and the Acquisition Corp. use interest income and principal payments received from the notes receivable from the Partnerships and NE LP, respectively, to make scheduled interest and principal payments on their outstanding debt.  Both entities are scheduled to make semi-annual principal and interest payments on June 30 and December 30.  Interest expense for both the Funding Corp. and Acquisition Corp. decreased in the three and six months ended June 30, 2008 as a result of decreasing principal balances on their outstanding debt.

Liquidity and Capital Resources

NE LP and the Partnerships – Net cash provided by operating activities for NE LP and the Partnerships for the six months ended June 30, 2009 and 2008 was $104.3 million and $120.5 million, respectively.  The $16.2 million decrease resulted from a reduction in net income of $30.9 million, offset in part by $14.7 million in working capital changes, primarily, collections of accounts receivable in excess of payments on accounts payable.

Capital expenditures for NE LP and the Partnerships were $13.1 million and $3.1 million for the six months ended June 30, 2009 and 2008, respectively.  The increase relates to various upgrades of equipment at the two generating facilities.  Noncash additions to cogeneration facilities were $4.1 million for the six months ended June 30, 2009, and the Partnerships anticipate making cash payments for these additions in the third quarter of 2009.  The increase from the prior period related primarily to capital spare parts and various upgrades of equipment at the two generating facilities.

NE LP and each of the Partnerships make scheduled interest and principal payments on their outstanding debt semiannually on June 30 and December 30.

The Funding Corp. and the Acquisition Corp. – Both the Funding Corp. and the Acquisition Corp. use interest income and principal payments received from the notes receivable from the Partnerships and NE LP, respectively, to make scheduled interest and principal payments on their outstanding debt semiannually on June 30 and December 30.

Market Risk Sensitivity

Commodity Price Risk – The prices received by the Partnerships for power sales under their long-term contracts do not move precisely in tandem with the prices paid by the Partnerships for natural gas.  To manage the price risk associated with purchases of natural gas and purchases of power, the Partnerships may, from time to time, enter into certain transactions either through public exchanges or by means of over-the-counter transactions with specific counterparties.  The Partnerships manage their risk associated with purchases of natural gas and power through the use of natural gas and power swap agreements.  The swap agreements require the Partnerships to pay a fixed price (absolutely or within a specified range) in return for a variable price on specified notional quantities of natural gas and power.

NE LP and the Partnerships use a value-at-risk (VaR) model to measure market risk in their trading and mark-to-market portfolios.  The VaR is the estimated nominal loss of market value based on a one-day holding period at a 95% confidence level using historical simulation methodology.  As of June 30, 2009 and December 31, 2008, the VaR figures (in thousands) are as follows:

	Trading and Managed Hedges(a)		Non-Qualifying Hedges (b)		Total
December 31, 2008	$	-	$	3	$	3
June 30, 2009	$	-	$	97	$	97
Average for the period ended June 30, 2009	$	-	$	24	$	24

——————————

(a) Trading and managed hedges are essentially all changes in the derivatives' fair value for power purchases and sales and trading activities, which are recognized on a net basis in operating revenues and for fuel purchases and sales which are recognized on a net basis in fuel expense.

(b) Non-qualifying hedges are employed to reduce the market risk exposure to physical assets which are not marked to market.  The VaR figures for the non-qualifying hedges do not represent the economic exposure to commodity price movements.

Concentration of Credit Risk – At June 30, 2009 and December 31, 2008, a majority of NE LP's and the Partnerships' trade receivables were derived from electricity sales to two utilities under long-term power purchase agreements.  If one or both of these customers' receivable balances should be deemed uncollectible, it could have a material adverse effect on NE LP's and the Partnerships' results of operations and financial condition.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

See Management's Discussion and Analysis of Financial Condition and Results of Operations – Market Risk Sensitivity.

Item 4T.  Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

As of June 30, 2009, each of the Acquisition Corp. and NE LP had performed an evaluation, under the supervision and with the participation of its management, including the chief executive officer and chief financial officer of each of the Acquisition Corp. and NE LP or their equivalent (Principal Officers), of the effectiveness of the design and operation of each of the Acquisition Corp.'s and NE LP's disclosure controls and procedures (as defined in Securities Exchange Act of 1934 (“Exchange Act”) Rule 13a-15(e) or 15d-15(e)).  Based upon that evaluation, the Principal Officers of each of the Acquisition Corp. and NE LP concluded that the Acquisition Corp.'s and NE LP's disclosure controls and procedures are effective in timely alerting them to material information relating to the Acquisition Corp. and NE LP and its consolidated subsidiaries required to be included in the Acquisition Corp.'s and NE LP's reports filed or submitted under the Exchange Act and ensuring that information required to be disclosed in the Acquisition Corp.'s and NE LP's reports filed or submitted under the Exchange Act is accumulated and communicated to management, including its Principal Officers, to allow timely decisions regarding required disclosure.  The Acquisition Corp. and NE LP each have a Disclosure Committee, which is made up of several key management employees of NextEra Energy Resources involved in the management of the Acquisition Corp. and NE LP and reports directly to the Principal Officers of each of the Acquisition Corp. and NE LP, to monitor and evaluate these disclosure controls and procedures.  Due to the inherent limitations of the effectiveness of any established disclosure controls and procedures, management of the Acquisition Corp. and NE LP cannot provide absolute assurance that the objectives of their disclosure controls and procedures will be met.

(b) Changes in Internal Control over Financial Reporting

The Acquisition Corp. and NE LP are continuously seeking to improve the efficiency and effectiveness of their operations and of their internal controls.  This results in refinements to processes.  However, there has been no change in the Acquisition Corp.'s or NE LP's internal control over financial reporting that occurred during the Acquisition Corp.'s and NE LP's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Acquisition Corp.'s or NE LP's internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1A.  Risk Factors

There were no material changes from the risk factors disclosed in the registrants' 2008 Form 10-K.  The factors discussed in Part 1, Item 1A. Risk Factors in the Acquisition Corp.'s and NE LP's 2008 Form 10-K, as well as other information set forth in this report, which could materially adversely affect the Acquisition Corp.'s and NE LP's business, financial condition and/or future operating results should be carefully considered.  The risks described in the registrants' 2008 Form 10-K are not the only risks facing the registrants.  Additional risks and uncertainties not currently known to the registrants, or that are currently deemed to be immaterial, also may materially adversely affect the registrants' business, financial condition and/or future operating results.

Item 6.  Exhibits

Exhibit Number Description

31(a) Rule 13a-14(a)/15d-14(a) Certification of President (equivalent to the Chief Executive Officer) of Acquisition Corp.

31(b) Rule 13a-14(a)/15d-14(a) Certification of Treasurer (equivalent to the Chief Financial Officer) of Acquisition Corp.

31(c) Rule 13a-14(a)/15d-14(a) Certification of President (equivalent to the Chief Executive Officer) of ESI Northeast Energy GP, Inc. as Administrative General Partner of NE LP

31(d) Rule 13a-14(a)/15d-14(a) Certification of Vice President and Treasurer (equivalent to the Chief Financial Officer) of ESI Northeast Energy GP, Inc. as Administrative General Partner of NE LP

32(a) Section 1350 Certification of Acquisition Corp.

32(b) Section 1350 Certification of NE LP

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.

NORTHEAST ENERGY, LP

(ESI Northeast Energy GP, Inc. as Administrative General Partner)

ESI TRACTEBEL ACQUISITION CORP.

(Registrants)

Date:  August 12, 2009

MARK R. SORENSEN

Mark R. Sorensen

Vice President and Treasurer of ESI Northeast Energy GP, Inc.

Treasurer of ESI Tractebel Acquisition Corp.

(Principal Financial and Principal Accounting Officer of the Registrants)