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 September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Exact name of Registrants as specified in
their charters, State of Incorporation, IRS Employer
Commission address of principal executive offices and Identification
File Number Registrants' telephone number Number
- ----------- ------------------------------------------ --------------
33-87902 ESI Tractebel Funding Corp. 04-3255377
(a Delaware corporation)
33-87902-02 Northeast Energy Associates, 04-2955642
A Limited Partnership
(a Massachusetts limited partnership)
33-87902-01 North Jersey Energy Associates, 04-2955646
A Limited Partnership
(a New Jersey limited partnership)
333-52397 ESI Tractebel Acquisition Corp. 65-0827005
(a Delaware corporation)
333-52397-01 Northeast Energy, LP 65-0811248
(a Delaware limited partnership)
------------------------------------------
c/o FPL Energy, LLC
700 Universe Boulevard
Juno Beach, Florida 33408-2683
(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 X No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of September 30, 1999, there were issued and outstanding 10,000 shares
of ESI Tractebel Funding Corp.'s common stock.
As of September 30, 1999, there were issued 20 shares of ESI Tractebel
Acquisition Corp.'s common stock.
----------------------------------
This combined Form 10-Q represents separate filings by ESI Tractebel Funding
Corp., Northeast Energy Associates, A Limited Partnership, North Jersey
Energy Associates, A Limited Partnership, ESI Tractebel Acquisition Corp. and
Northeast Energy, 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 any other registrant.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (Reform Act), ESI Tractebel Funding Corp. (the
Funding Corp.), Northeast Energy Associates, A Limited Partnership (NEA) and
North Jersey Energy Associates, A Limited Partnership (NJEA) (collectively, the
Partnerships), ESI Tractebel Acquisition Corp. (the Acquisition Corp.) and
Northeast Energy, LP (NE LP) (all five entities collectively, the Registrants)
are hereby filing cautionary statements identifying important factors that
could cause the Registrants' actual results to differ materially from those
projected in forward-looking statements (as such term is defined in the Reform
Act) made by or on behalf of the Registrants which are made in this combined
Form 10-Q, in presentations, in response to questions or otherwise. Any
statements that express, or involve discussions as to expectations, beliefs,
plans, objectives, assumptions or future events or performance (often, but not
always, through the use of words or phrases such as will likely result, are
expected to, will continue, is anticipated, estimated, projection, outlook) are
not statements of historical facts and may be forward-looking. Forward-looking
statements involve estimates, assumptions and uncertainties that could cause
actual results to differ materially from those expressed in the forward-looking
statements. Accordingly, any such statements are qualified in their entirety by
reference to, and are accompanied by, the following important factors that
could cause the Registrants' actual results to differ materially from those
contained in forward-looking statements made by or on behalf of the
Registrants.
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 after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. 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
in any forward-looking statement.
Some important factors that could cause actual results or outcomes to differ
materially from those discussed in the forward-looking statements include
changing governmental policies and regulatory actions with respect to the
Public Utility Regulatory Policies Act of 1978, as amended, acquisition and
disposal of assets and facilities, operation and construction of plant
facilities, recovery of fuel and purchased power costs, and present or
prospective competition.
The business and profitability of the Registrants are also influenced by
economic and geographic factors including political and economic risks, changes
in and compliance with environmental and safety laws and policies, weather
conditions, population growth rates and demographic patterns, competition for
retail and wholesale customers, pricing and transportation of commodities,
market demand for energy from plants or facilities, changes in tax rates or
policies or in rates of inflation, unanticipated delays or changes in project
costs, unanticipated changes in operating expenses and capital expenditures,
capital market conditions, competition for new energy development
opportunities,legal and administrative proceedings (whether civil, such as
environmental, or criminal) and settlements, and any unanticipated impact of
the year 2000, including delays or changes in costs of year 2000 readiness, or
the failure of major suppliers, customers and others with whom the Registrants
do business to resolve their own year 2000 issues on a timely basis.
All such factors are difficult to predict, contain uncertainties which may
materially affect actual results, and are beyond the control of the Registrants.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NORTHEAST ENERGY, LP
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)
September 30, December 31,
1999 1998
ASSETS
Current assets:
Cash and cash equivalents ........................................................ $ 44,618 $ 36,038
Accounts receivable .............................................................. 53,509 29,746
Spare parts inventories .......................................................... 14,788 194
Fuel inventories ................................................................. 7,153 4,935
Prepaid expenses and other current assets ........................................ 473 212
Total current assets ........................................................... 120,541 71,125
Non-current assets:
Deferred debt issuance costs (net of accumulated
amortization of $1,021 and $548, respectively) ................................. 5,939 6,412
Cogeneration facilities and carbon dioxide facility (net of accumulated
depreciation of $37,342 and $20,987, respectively) ............................. 476,317 492,566
Power purchase contracts (net of accumulated
amortization of $86,995 and $48,545, respectively) ............................. 801,761 840,211
Other assets ..................................................................... 30 29
Total non-current assets ....................................................... 1,284,047 1,339,218
TOTAL ASSETS ....................................................................... $1,404,588 $1,410,343
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Current portion of notes payable to the Funding Corp. ............................ $ 24,922 $ 23,511
Accounts payable ................................................................. 19,392 12,338
Accrued interest payable ......................................................... 15,170 -
Due to related parties ........................................................... 6,944 800
Other accrued expenses ........................................................... 10,526 9,384
Total current liabilities ...................................................... 76,954 46,033
Non-current liabilities:
Deferred credit - fuel contracts ................................................. 297,792 313,427
Notes payable to the Funding Corp. ............................................... 432,046 445,213
Note payable to the Acquisition Corp. ............................................ 220,000 220,000
Amounts due utilities for energy bank balances ................................... 169,812 173,356
Total non-current liabilities .................................................. 1,119,650 1,151,996
Partners' equity:
General partners ................................................................. 4,160 4,246
Limited partners ................................................................. 203,824 208,068
Total partners' equity ......................................................... 207,984 212,314
COMMITMENTS AND CONTINGENCIES
TOTAL LIABILITIES AND PARTNERS' EQUITY ............................................. $1,404,588 $1,410,343
This report should be read in conjunction with the Notes to Consolidated
Financial Statements on page 11 herein and the Notes to Consolidated and
Combined Financial Statements appearing in the 1998 Form 10-K for NE LP.
NORTHEAST ENERGY, LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
1999 1998 1999 1998
REVENUES .................................. $88,305 $85,427 $257,816 $226,624
EXPENSES:
Fuel .................................... 32,841 32,335 96,664 89,489
Operations and maintenance .............. 3,506 5,697 10,639 14,325
Depreciation and amortization ........... 18,269 17,997 54,811 51,529
General and administrative .............. 2,059 1,790 6,551 6,151
Total expenses ........................ 56,675 57,819 168,665 161,494
OPERATING INCOME .......................... 31,630 27,608 89,151 65,130
OTHER EXPENSE (INCOME):
Amortization of debt issue costs......... 157 148 474 373
Interest expense ........................ 19,573 20,192 59,185 56,252
Interest income ......................... (394) (687) (1,501) (2,196)
Total other expense - net ............. 19,336 19,653 58,158 54,429
NET INCOME ................................ $12,294 $ 7,955 $ 30,993 $10,701
This report should be read in conjunction with the Notes to Consolidated
Financial Statements on page 11 herein and the Notes to Consolidated and
Combined Financial Statements appearing in the 1998 Form 10-K for NE LP.
NORTHEAST ENERGY, LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
Nine Months Ended September 30,
1999 1998
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................. $ 55,761 $ 52,220
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................................ (103) -
Release of restricted cash collateral ............................................... - 69,156
Acquisition purchase price, net of $62,635 cash acquired ............................ - (482,167)
Net cash used in investing activities ............................................. (103) (413,011)
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions from partners ......................................................... - 535,412
Principal payment on the Funding Corp. notes ........................................ (11,755) (10,782)
Net proceeds from loan by the Acquisition Corp. ..................................... - 215,202
Distributions to partners ........................................................... (35,323) (330,746)
Net cash provided by (used in) financing activities ............................... (47,078) 409,086
Net increase in cash and cash equivalents ............................................. 8,580 48,295
Cash and cash equivalents at beginning of period ...................................... 36,038 -
Cash and cash equivalents at end of period ............................................ $ 44,618 $ 48,295
Supplemental disclosure of cash flow information:
Cash paid for interest .............................................................. $ 30,933 $ 29,711
This report should be read in conjunction with the Notes to Consolidated
Financial Statements on page 11 herein and the Notes to Consolidated and
Combined Financial Statements appearing in the 1998 Form 10-K for NE LP.
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)
September 30, December 31,
1999 1998
ASSETS
Current assets:
Cash and cash equivalents ......................................................... $ 43,723 $ 35,152
Accounts receivable ............................................................... 53,509 29,746
Spare parts inventories ........................................................... 14,788 194
Fuel inventories .................................................................. 7,153 4,935
Prepaid expenses and other current assets ......................................... 473 212
Total current assets ............................................................ 119,646 70,239
Non-current assets:
Cogeneration facilities and carbon dioxide facility (net of accumulated
depreciation of $37,342 and $20,987, respectively) .............................. 476,317 492,566
Power purchase contracts (net of accumulated
amortization of $86,995 and $48,545, respectively) .............................. 801,761 840,211
Other assets ...................................................................... 30 29
Total non-current assets ........................................................ 1,278,108 1,332,806
TOTAL ASSETS ........................................................................ $1,397,754 $1,403,045
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Current portion of notes payable to the Funding Corp. ............................. $ 24,922 $ 23,511
Accounts payable .................................................................. 19,392 12,338
Accrued interest payable .......................................................... 10,776 -
Due to related parties ............................................................ 6,806 663
Other accrued expenses ............................................................ 10,524 9,384
Total current liabilities ....................................................... 72,420 45,896
Non-current liabilities:
Deferred credit - fuel contracts .................................................. 297,792 313,427
Notes payable to the Funding Corp. ................................................ 432,046 445,213
Amounts due utilities for energy bank balances .................................... 169,812 173,356
Total non-current liabilities ................................................... 899,650 931,996
Partners' equity:
General partner ................................................................... 4,256 4,252
Limited partners .................................................................. 421,428 420,901
Total partners' equity .......................................................... 425,684 425,153
COMMITMENTS AND CONTINGENCIES
TOTAL LIABILITIES AND PARTNERS' EQUITY .............................................. $1,397,754 $1,403,045
This report should be read in conjunction with the Notes to Combined
Financial Statements on page 11 herein and the Notes to Consolidated and
Combined Financial Statements appearing in the 1998 Form 10-K for NEA and NJEA.
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)
Period from
Period from January 1,
Three Months Ended Nine Months January 14, 1998 to
September 30, Ended 1998 to January 13,
September 30, September 30, 1998
1999 1998 1999 1998 (Prior Basis)
REVENUES .................................. $ 88,305 $ 85,427 $257,816 $226,624 $ 13,109
EXPENSES:
Fuel .................................... 32,841 32,335 96,664 89,489 5,774
Operations and maintenance .............. 3,506 5,697 10,639 14,325 974
Depreciation and amortization ........... 18,269 17,997 54,811 51,529 894
General and administrative .............. 2,059 1,790 6,546 5,879 538
Total expenses ........................ 56,675 57,819 168,660 161,222 8,180
OPERATING INCOME .......................... 31,630 27,608 89,156 65,402 4,929
OTHER EXPENSE (INCOME):
Interest expense ........................ 15,175 15,797 45,995 45,461 2,422
Interest income ......................... (325) (624) (1,386) (2,134) (402)
Total other expense - net ............. 14,850 15,173 44,609 43,327 2,020
NET INCOME ................................ $ 16,780 $ 12,435 $ 44,547 $ 22,075 $ 2,909
This report should be read in conjunction with the Notes to Combined Financial
Statements on page 11 herein and the Notes to Consolidated and Combined
Financial Statements appearing in the 1998 Form 10-K for NEA and NJEA.
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
Period from
Period from January 1,
Nine Months January 14, 1998 to
Ended 1998 to January 13,
September 30, September 30, 1998
1999 1998 (Prior Basis)
NET CASH PROVIDED BY OPERATING ACTIVITIES ................... $ 64,446 $ 60,591 $ 1,432
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ...................................... (103) - -
Release of restricted cash collateral ..................... - 69,156 -
Net cash provided by (used in) investing activities ..... (103) 69,156 -
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment on notes ................................ (11,755) (10,782) -
Distributions to partners ................................. (44,017) (135,958) -
Net cash used in financing activities ................... (55,772) (146,740) -
Net increase (decrease) in cash and cash equivalents ........ 8,571 (16,993) 1,432
Cash and cash equivalents at beginning of period ............ 35,152 62,635 61,203
Cash and cash equivalents at end of period .................. $ 43,723 $ 45,642 $ 62,635
Supplemental disclosure of cash flow information:
Cash paid for interest .................................... $ 22,144 $ 23,315 $ -
Supplemental disclosure of noncash investing and
financing activities:
See Notes to Combined Financial Statements -
Basis of Presentation concerning new basis of
accounting subsequent to January 13, 1998
This report should be read in conjunction with the Notes to Combined Financial
Statements on page 11 herein and the Notes to Consolidated and Combined
Financial Statements appearing in the 1998 Form 10-K for NEA and NJEA.
ESI TRACTEBEL FUNDING CORP.
BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)
September 30, December 31,
1999 1998
ASSETS
Current assets:
Cash .............................................................................. $ 1 $ 1
Interest receivable from the Partnerships.......................................... 10,743 -
Current portion of notes receivable from the Partnerships ......................... 24,922 23,511
Total current assets ............................................................ 35,666 23,512
Notes receivable from the Partnerships .............................................. 432,046 445,213
TOTAL ASSETS ........................................................................ $ 467,712 $ 468,725
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of securities payable ............................................. $ 24,922 $ 23,511
Accrued interest .................................................................. 10,743 -
Total current liabilities ....................................................... 35,665 23,511
Securities payable .................................................................. 432,046 445,213
Stockholders' equity:
Common stock, no par value, 10,000 shares authorized, issued and outstanding ...... 1 1
COMMITMENTS AND CONTINGENCIES
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......................................... $ 467,712 $ 468,725
STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Interest income .......................................... $ 10,743 $ 11,218 $ 32,725 $ 34,109
Interest expense ......................................... 10,743 11,218 32,725 34,109
NET INCOME ............................................... $ - $ - $ - $ -
APTION>
STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
Nine Months Ended
September 30,
1999 1998
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................ $ - $ -
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment received from the Partnerships.................................... 11,755 10,782
Principal payment on debt .......................................................... (11,755) (10,782)
Net cash provided by financing activities ........................................ - -
Net increase 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 ............................................................. $ 21,981 $ 22,891
These reports should be read in conjunction with the Notes to Financial
Statements on page 11 herein and the Notes to Financial Statements appearing in
the 1998 Form 10-K for the Funding Corp.
ESI TRACTEBEL ACQUISITION CORP.
BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)
September 30, December 31,
1999 1998
ASSETS
Current assets:
Interest receivable from NE LP ..................................................... $ 4,394 $ -
Due from NE LP ....................................................................... 152 152
Note receivable from NE LP ........................................................... 220,000 220,000
TOTAL ASSETS ......................................................................... $224,546 $220,152
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Income taxes payable ............................................................... $ 8 $ 4
Accrued interest ................................................................... 4,394 -
Total current liabilities ........................................................ 4,402 4
Deferred credit - interest rate hedge ................................................ 129 140
Securities payable ................................................................... 220,000 220,000
Stockholders' equity:
Common stock, $.10 par value, 100 shares authorized, 20 shares issued .............. - -
Subscriptions receivable ........................................................... - -
Retained earnings .................................................................. 15 8
COMMITMENTS AND CONTINGENCIES
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................................... $224,546 $220,152
STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)
Period from
Nine January 12,
Months 1998 (Date of
Three Months Ended Ended Formation) to
September 30, September 30, September 30,
1999 1998 1999 1998
Interest income ........................................... $ 4,395 $ 4,395 $ 13,184 $ 10,791
Interest expense .......................................... 4,391 4,391 13,173 10,782
Income before income taxes................................. 4 4 11 9
Income tax expense ........................................ 1 1 4 3
NET INCOME ................................................ $ 3 $ 3 $ 7 $ 6
STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
Period From
Nine January 12,
Months 1998 (Date of
Ended Formation) to
September 30, September 30,
1999 1998
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................ $ - $ -
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan to NE LP ...................................................................... - (215,202)
Net cash used in investing activities ............................................ - (215,202)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt securities ........................................................ - 215,050
Proceeds from interest rate hedge .................................................. - 152
Net cash provided by financing activities ........................................ - 215,202
Net increase in cash ................................................................. - -
Cash at beginning of period .......................................................... - -
Cash at end of period ................................................................ $ - $ -
Supplemental disclosure of cash flow information:
Cash paid for interest ............................................................. $ 8,789 $ 6,396
These reports should be read in conjunction with the Notes to Financial
Statements on page 11 herein and the Notes to Financial Statements appearing
in the 1998 Form 10-K for the Acquisition Corp.
NORTHEAST ENERGY, LP
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
ESI TRACTEBEL FUNDING CORP.
ESI TRACTEBEL ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
The accompanying consolidated financial statements, combined financial
statements and financial statements should be read in conjunction with the 1998
Form 10-K for ESI Tractebel Funding Corp. (the Funding Corp.), Northeast Energy
Associates, A Limited Partnership (NEA) and North Jersey Energy Associates, A
Limited Partnership (NJEA) (collectively, the Partnerships), ESI Tractebel
Acquisition Corp. (the Acquisition Corp.) and Northeast Energy, LP (NE LP) (all
five entities collectively, the Registrants). In the opinion of the
Registrants' management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair financial statement presentation have
been made. Certain amounts included in the prior year's financial statements
have been reclassified to conform to the current year's presentation. The
results of operations for an interim period may not give a true indication of
results for the year.
1. Summary of Significant Accounting Policies (NE LP and the Partnerships)
Basis of Presentation - On January 14, 1998 NE LP acquired the Partnerships.
The acquisitions were accounted for using the purchase method of accounting and
were subject to pushdown accounting, which gave rise to a new basis of
accounting by the Partnerships. Consequently, the Partnerships' combined
balance sheets and the combined statements of operations and cash flows for the
period from January 14, 1998 to September 30, 1998, the three months ended
September 30, 1999 and 1998, and the nine months ended September 30, 1999 are
reported under the new basis of accounting described above. The Partnerships'
combined statements of operations and cash flows for the period from
January 1, 1998 to January 13, 1998 represent historical financial data of the
Partnerships prior to the acquisitions.
Inventories - During the first quarter of 1999, the Partnerships purchased
spare parts from the former operations and maintenance (O&M) provider. Spare
parts inventories are stated at cost and are determined by specific
identification.
2. Commitments and Contingencies
In June 1998, the Financial Accounting Standards Board (FASB) issued Financial
Accounting Standards No. (FAS) 133, "Accounting for Derivative Instruments and
Hedging Activities." The statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The
statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. The
Registrants are currently assessing the effect, if any, on their financial
statements of implementing FAS 133. In June 1999, the FASB issued FAS 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133," which delayed the adoption of
FAS 133 for one year. As a result of FAS 137, the Registrants will not be
required to adopt FAS 133 until 2001.
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 Consolidated
Financial Statements, Notes to Combined Financial Statements and Notes to
Financial Statements contained herein and Management's Discussion and Analysis
of Financial Condition and Results of Operations appearing in the 1998
Form 10-K for the Registrants. The results of operations for an interim period
may not give a true indication of results for the year.
RESULTS OF OPERATIONS
NE LP and the Partnerships - In the following discussion, comparisons for NE LP
are with the corresponding items in the prior year. Comparisons for the
Partnerships for the nine-month period ended September 30, 1999 are with the
period from January 14, 1998 to September 30, 1998. These periods are referred
to below as the period to date.
Revenues for the third quarter and period to date increased $2.9 million and
$31.2 million, respectively. Increased revenues for the quarter are primarily
the result of increased energy production and increased power sales to
utilities at both the Bellingham, MA and Sayreville, NJ facilities. Increased
revenues period to date are primarily the result of increased energy production
and power sales and recognizing power sales for a full nine months in 1999
versus 1998 when power sales were recognized subsequent to the acquisition of
the Partnerships on January 14, 1998. Power sales to utilities reflect changes
in utility energy bank balances (which increased reported revenues) that are
determined in accordance with scheduled or specified rates under certain power
purchase agreements. Additionally, revenues period to date reflect increased
energy production and power sales as a result of a shortened scheduled
inspection and maintenance outage at the Bellingham facility.
Fuel expense (excluding $5.2 million of deferred credit amortization for fuel
contracts for the quarters ended September 30, 1999 and 1998 and excluding
$15.6 million and $14.9 million of deferred credit amortization for fuel
contracts for the periods ended September 30, 1999 and 1998, respectively) for
the third quarter and period to date increased $506,000 and $7.8 million,
respectively. The increase for the quarter is primarily the result of fuel
purchased for the facilities as a result of the increased energy production
mentioned above partially offset by favorable natural gas contract price
adjustments. The increase for the period to date is primarily the result of
the quarterly fuel items mentioned above and the impact of recognizing fuel
expense for a full nine months in 1999 versus 1998 when fuel expense was
recognized subsequent to the acquisition of the Partnerships on January 14,
1998.
O&M expense (excluding $1.2 million and $3.4 million of deferred credit
amortization for O&M contracts for the quarter and period ended September 30,
1998, respectively) for the third quarter and period to date decreased $3.4
million and $7.1 million, respectively. The decrease for the quarter is
primarily the result of reduced O&M costs incurred by the new operator of the
facilities and the elimination of a performance bonus paid to the previous
operator. The decrease for the period to date is the result of reduced O&M
costs incurred by the new operator and the elimination of the performance
bonus partially offset by recognizing O&M costs for a full nine months in 1999
versus 1998 when O&M costs were recognized subsequent to the acquisition of
the Partnerships on January 14, 1998.
Depreciation and amortization for the third quarter and period to date
increased $272,000 and $3.3 million, respectively. The increase for the
quarter is due to scheduled changes in amortization rates. The increase
period to date is primarily the result of recognizing depreciation and
amortization on the facilities and power purchase agreements, respectively,
for a full nine months in 1999 versus 1998 when depreciation and amortization
was recognized subsequent to the acquisition of the Partnerships on
January 14, 1998.
Interest expense of NE LP decreased $619,000 for the third quarter and
increased $2.9 million period to date. The quarterly decrease is primarily the
result of decreasing principal balances on the notes payable to the Funding
Corp. The period to date increase is primarily the result of recognizing
interest expense on notes payable to the Funding Corp. for a full nine months
in 1999 versus 1998 when interest expense was recognized subsequent to the
acquisition of the Partnerships on January 14, 1998, partially offset by
decreasing principal balances on the notes payable. Additionally, NE LP
recognized interest expense on the note payable to the Acquisition Corp. for a
full nine months in 1999 versus 1998 when interest expense was recognized
subsequent to the issuance of $220 million of debt in February 1998. Interest
expense of the Partnerships decreased $622,000 for the third quarter and
increased $534,000 period to date. The quarterly decrease is primarily the
result of decreasing principal balances on the notes payable to the Funding
Corp. The period to date increase is primarily the result of recognizing
interest expense on notes payable to the Funding Corp. for a full nine months
in 1999 versus 1998 when interest expense was recognized subsequent to the
acquisition of the Partnerships on January 14, 1998, partially offset by
decreasing principal balances on the notes payable.
The Partnerships for the period from January 1, 1998 to January 13, 1998
(pre-acquisition) - Revenues for the thirteen-day period totaled $13.1 million
and were comprised of $12.9 million of power sales to utilities and $200,000
of steam sales. Power sales to utilities reflect changes in utility energy
bank balances which are determined in accordance with scheduled or specified
rates under certain power purchase agreements.
Fuel expense of $5.8 million includes fuel purchased for the Partnerships and
the fixed and variable costs associated with the delivery and use of the fuel
for operations.
O&M expenses of $974,000 are comprised of O&M provider fees and site utility
expenses.
Depreciation and amortization of $894,000 is comprised of depreciation for the
cogeneration and carbon dioxide facilities.
General and administrative expenses of $538,000 are comprised primarily of
management fees.
Interest expense is comprised primarily of interest on notes payable to the
Funding Corp. ($1.7 million) and interest on energy bank balances ($630,000).
Interest income reflects cash balances earning investment income.
The Funding Corp. and the Acquisition Corp. - The Funding Corp. made semi-
annual debt principal payments and debt interest payments of $11.8 million and
$22.0 million, respectively, in June 1999. The Acquisition Corp. made a semi-
annual debt interest payment of $8.8 million in June 1999. Interest expense
for the Funding Corp. for the third quarter and period to date decreased
$475,000 and $1.4 million, respectively. The decrease for the quarter and
period to date is due to decreasing principal balances on the securities
payable. Interest expense for the Acquisition Corp. period to date increased
$2.4 million. The increase period to date is primarily the result of
recognizing interest expense on the Acquisition Corp. securities payable for a
full nine months in 1999 versus 1998 when interest expense was recognized
subsequent to the issuance of $220 million of debt in February 1998.
Year 2000 - The Registrants are essentially complete with their plan to address
the potential impact of the year 2000 on their technology systems. The
Registrants have prepared their year 2000 contingency plans, which are based
upon certain hypothetical year 2000 scenarios at the operating level (such as
generation and transmission), as well as at the business level (such as
customer service, procurement and accounting). These plans are intended to
mitigate both internal risks and potential risks in the Registrants' supply
chain. During the remainder of 1999, the Registrants will continue to conduct
training and drills, as well as evaluate and update their contingency plans.
In addition, the Registrants have retained independent engineering and
hardware/software remediation firms to validate and verify mission critical and
other important aspects of their year 2000 program. The cost of addressing
year 2000 issues was approximately $500,000. The Registrants believe that the
most reasonably likely worst case scenarios relating to the year 2000 could
include a temporary disruption of service to purchasing utilities, caused by a
potential disruption in fuel supply, water supply and telecommunications.
LIQUIDITY AND CAPITAL RESOURCES
The Registrants - Cash flow generated by the Partnerships year to date has been
and is expected to remain sufficient for at least the next twelve months to
fund operating expenses of the Registrants as well as fund the debt service
requirements of the Funding Corp. and the Acquisition Corp.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
[C]
(a) Exhibits
Exhibit No. Description
27.1 Financial Data Schedule - ESI Tractebel Funding Corp.
27.2 Financial Data Schedule - Northeast Energy Associates, A Limited Partnership
27.3 Financial Data Schedule - North Jersey Energy Associates, A Limited Partnership
27.4 Financial Data Schedule - ESI Tractebel Acquisition Corp.
27.5 Financial Data Schedule - Northeast Energy, LP
(b) Reports On Form 8-K
None.
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 ASSOCIATES, A LIMITED PARTNERSHIP
(ESI Northeast Energy GP, Inc. as Administrative General Partner)
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
(ESI Northeast Energy GP, Inc. as Administrative General Partner)
NORTHEAST ENERGY, LP
(ESI Northeast Energy GP, Inc. as Administrative General Partner)
ESI TRACTEBEL FUNDING CORP.
ESI TRACTEBEL ACQUISITION CORP.
(Registrants)
Date: November 4, 1999
DILEK L. SAMIL
Treasurer of ESI Northeast Energy GP, Inc.
Treasurer of ESI Tractebel Funding Corp.
Treasurer of ESI Tractebel Acquisition Corp.
(Principal Financial and Principal Accounting Officer of the
Registrants)