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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For Quarter Ended MARCH 31, 2001 Commission File Number 333-42638
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NRG NORTHEAST GENERATING LLC
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(Exact name of registrant as specified in its charter)
Delaware 41-1937472
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
901 Marquette Avenue, Suite 2300 Minneapolis, MN 55402
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 373-5300
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Former name, former address and former fiscal year, if changed since last report
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 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 [X] No [ ]
The Registrant meets the conditions set forth in general instruction H (1)
(a) and (b) of Form 10-Q and is therefore filing this form with the reduced
disclosure format.
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INDEX
PAGE NO.
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PART I
Item 1 Consolidated Financial Statements and Notes
Consolidated Statements of Income 1
Consolidated Balance Sheets 2
Consolidated Statement of Member's Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3 Quantitative and Qualitative Disclosures About Market Risk
(Omitted per general instruction H 1 (a) and (b) of Form 10-Q) --
PART II
Item 1 Legal Proceedings 13
Item 6 Exhibits, Financial Statement Schedules, and Reports 14
on Form 8-K
SIGNATURES 15
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CONSOLIDATED STATEMENTS OF INCOME
NRG NORTHEAST GENERATING LLC
THREE MONTHS ENDED
MARCH 31,
------------------------
(In thousands) 2001 2000
- -------------- ----------- -----------
(UNAUDITED)
OPERATING REVENUES
Revenues $275,732 $243,500
OPERATING COSTS AND EXPENSES
Operating costs 195,389 160,710
Depreciation 11,983 12,052
General and administrative expenses 4,181 4,351
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OPERATING INCOME 64,179 66,387
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OTHER INCOME (EXPENSE)
Other income, net 590 327
Interest expense (15,291) (17,769)
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NET INCOME $ 49,478 $ 48,945
======== ========
See accompanying notes to consolidated financial statements.
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CONSOLIDATED BALANCE SHEETS
NRG NORTHEAST GENERATING LLC
MARCH 31, DECEMBER 31,
(In thousands) 2001 2000
- -------------- ----------- ------------
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents $ 48,567 $ 2,444
Accounts receivable, net of allowance for doubtful
accounts of $8,165 and $8,165 103,597 157,660
Inventory 124,359 107,859
Prepaid expenses and other current assets 21,790 20,697
Unrealized gains on energy contracts 23,636 -
---------- ----------
Total current assets 321,949 288,660
---------- ----------
Property, plant and equipment, net 1,417,793 1,427,078
Deferred finance costs, net of accumulated amortization of
$449 and $341 9,707 9,616
Other Assets, net of accumulated amortization of
$1,087 and $870 24,913 25,130
Unrealized gains on energy contracts - non-current 69,942 --
---------- ----------
TOTAL ASSETS $1,844,304 $1,750,484
========== ==========
See accompanying notes to consolidated financial statements.
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CONSOLIDATED BALANCE SHEETS
NRG NORTHEAST GENERATING LLC
MARCH 31, DECEMBER 31,
(In thousands) 2001 2000
- -------------- ----------- ------------
(UNAUDITED)
LIABILITIES AND MEMBER'S EQUITY
Current liabilities
Current portion of long-term debt $ 90,000 $ 90,000
Accounts payable - trade 2,960 3,914
Accounts payable - affiliates 208,834 146,894
Accrued interest 17,854 2,551
Accrued fuel and purchased power expenses 30,557 38,386
Other current accrued liabilities 49,271 49,607
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Total current liabilities 399,476 331,352
Long-term debt 610,000 610,000
Other long-term liabilities 20,647 20,817
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Total liabilities 1,030,123 962,169
Commitments and contingencies
Member's equity 814,181 788,315
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TOTAL LIABILITIES AND MEMBER'S EQUITY $1,844,304 $1,750,484
========== ==========
See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENT OF MEMBER'S EQUITY
NRG NORTHEAST GENERATING LLC
(UNAUDITED)
ACCUMULATED
MEMBER OTHER TOTAL
CONTRIBUTIONS/ ACCUMULATED COMPREHENSIVE MEMBER'S
(In thousands) DISTRIBUTIONS NET INCOME INCOME EQUITY
- -------------- ------------- ----------- ------------- ---------
BALANCES AT JANUARY 1, 2000 872,801 54,347 -- $ 927,148
Net income 48,945 48,945
Distributions to member, net (116,770) (116,770)
--------- --------- --------- ---------
BALANCES AT MARCH 31, 2000 $ 756,031 $ 103,292 $ -- $ 859,323
========= ========= ========= =========
BALANCES AT JANUARY 1, 2001 450,659 337,656 -- $ 788,315
Cumulative effect upon adoption of
SFAS No. 133 14,100 14,100
Impact of SFAS No. 133 for the period
ending March 31, 2001 78,286 78,286
Net income 49,478 49,478
Comprehensive income 141,864
Distributions to member, net (115,998) (115,998)
--------- --------- --------- ---------
BALANCES AT MARCH 31, 2001 $ 334,661 387,134 92,386 814,181
========= ========= ========= =========
See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
NRG NORTHEAST GENERATING LLC AND SUBSIDIARIES
THREE MONTHS ENDED MARCH 31,
--------------------------------
(In thousands) 2001 2000
- -------------- ----------- -----------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 49,478 $ 48,945
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 11,983 12,052
Amortization of deferred financing costs 108 3,201
Unrealized gains on energy contracts (1,192) --
Changes in assets and liabilities:
Accounts receivable, net 54,063 11,682
Inventory (16,500) 13,442
Prepayments and other current assets (1,093) (4,042)
Accounts payable, net (954) (1,047)
Accounts payable-affiliates 61,940 12,392
Accrued interest 15,303 5,829
Accrued fuel and purchased power expense (7,829) 10,691
Other current liabilities (336) 11,286
Other assets and liabilities 47 21,491
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NET CASH PROVIDED BY OPERATING ACTIVITIES 165,018 145,922
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (2,698) (7,317)
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NET CASH USED BY INVESTING ACTIVITIES (2,698) (7,317)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings -- 750,000
Repayment of short-term borrowings -- (682,330)
Distributions to member (115,998) (116,770)
Deferred financing costs (199) (7,779)
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NET CASH USED BY FINANCING ACTIVITIES (116,197) (56,879)
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NET INCREASE IN CASH AND CASH EQUIVALENTS 46,123 81,726
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,444 10,551
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 48,567 $ 92,277
========= =========
See accompanying notes to consolidated financial statements.
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NRG NORTHEAST GENERATING LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NRG Northeast Generating LLC (the Company) owns electric power generating plants
in the northeastern region of the United States. The Company was formed for the
purpose of financing, acquiring, owning, operating and maintaining, through its
subsidiaries, the facilities owned by Arthur Kill Power LLC, Astoria Gas Turbine
Power LLC, Connecticut Jet Power LLC, Devon Power LLC, Dunkirk Power LLC,
Huntley Power LLC, Middletown Power LLC, Montville Power LLC, Norwalk Harbor
Power LLC, Oswego Harbor Power LLC and Somerset Power LLC. The Company is an
indirect wholly owned subsidiary of NRG Energy, Inc. (NRG Energy), a Delaware
corporation. Additional information regarding the Company can be found in NRG
Energy's Form 10-Q for the three months ended March 31, 2001.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with SEC regulations for interim financial information and with
the instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The accounting policies followed by the
Company are set forth in Note 1 to the Company's financial statements in its
annual report on Form 10-k for the year ended December 31, 2000 (Form 10-K). The
following notes should be read in conjunction with such policies and other
disclosures in the Form 10-K. Interim results are not necessarily indicative of
results for a full year.
In the opinion of management, the accompanying unaudited interim financial
statements contain all material adjustments necessary to present fairly the
consolidated financial position of the Company as of March 31, 2001 and December
31, 2000, the results of its operations for the three months ended March 31,
2001 and 2000, and its cash flows and members' equity for the three months ended
March 31, 2001 and 2000.
Certain prior-year amounts have been reclassified for comparative purposes.
These reclassifications had no effect on net income or total member's equity as
previously reported.
1 - SHORT TERM BORROWINGS
On February 21, 2001, the Company renewed, for 90 days, its $50 million
floating rate working capital revolving facility. The proceeds of this
facility will be used to finance the Company's working capital needs. As of
March 31, 2001 the Company had available $50 million under this facility.
This facility will terminate on May 15, 2001.
2 - COMMITMENTS AND CONTINGENCIES
As of March 31, 2001, the Company had approximately $10.5 million of
disputed revenues. The Company is actively pursuing resolution and/or
collection of these amounts. The contingent revenues relate to the
interpretation of certain transmission power sales agreements and certain
sales to the New York Power Pool and New England Power Pool, conflicting
meter readings, pricing of firm sales and other power pool reporting issues.
These amounts have not been recorded in the financial statements and will
not be recognized as income until disputes are resolved and collection is
assured. At December 31, 2000, $13.1 million of disputed revenues were
recorded. During the quarter ended March 31, 2001, $3.1 million of disputed
revenues were resolved and $0.5 million of new disputed revenues were added.
3 - INVENTORY
Inventory, which is stated at the lower of weighted average cost or
market, consisted of:
(IN THOUSANDS) MARCH 31, 2001 DECEMBER 31, 2000
-------------- -------------- -----------------
Fuel oil $ 55,596 $ 47,616
Spare parts 55,387 55,277
Coal 12,080 3,435
Kerosene 1,285 1,523
Other 11 8
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TOTAL $124,359 $107,859
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4 - PROPERTY, PLANT AND EQUIPMENT, NET
Property, Plant and Equipment consisted of:
(IN THOUSANDS) MARCH 31, 2001 DECEMBER 31, 2000
-------------- -------------- -----------------
Facilities, machinery and $1,427,365 $1,425,274
equipment
Land 51,920 51,917
Construction in progress 13,829 13,234
Office furnishings and equipment 1,450 1,441
Accumulated depreciation (76,771) (64,788)
---------- ----------
Property, Plant and Equipment, net $1,417,793 $1,427,078
========== ==========
5 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
On January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities (SFAS No. 133), as amended by SFAS No. 137 and SFAS No. 138. SFAS No.
133 requires the Company to record all derivatives on the balance sheet at fair
value. Changes in the fair value of non-hedge derivatives will be immediately
recognized in earnings. Changes in fair values of derivatives accounted for as
hedges will either be recognized in earnings as offsets to the changes in fair
value of related hedged assets, liabilities and firm commitments or, for
forecasted transactions, deferred and recorded as a component of other
accumulated comprehensive income until the hedged transactions occur and are
recognized in earnings. The ineffective portion of a hedging derivative's change
in fair value will be immediately recognized in earnings. The Company also
formally assesses both at inception and at least quarterly thereafter, whether
the derivatives that are used in hedging transactions are highly effective in
offsetting the changes in either the fair value or cash flows of the hedged
item. When it is determined that a derivative ceases to be a highly effective
hedge, the Company discontinues hedge accounting.
The adoption of SFAS No. 133 on January 1, 2001, resulted in an
unrealized gain of $14.1 million recorded to other accumulated
comprehensive income (OCI). The impact to OCI is related to previously deferred
net gains on derivatives designated as cash flow hedges. During the first
quarter of 2001, the Company recorded a gain of approximately $73.0 million in
OCI. This gain related to favorable changes in the fair value of a long-term
derivative instrument accounted for as a hedge recorded on January 1, 2001.
Also during the first quarter of 2001, the Company reclassified from OCI into
earnings $5.2 million of accumulated derivative losses. The net balance in OCI
relating to SFAS No. 133 as of March 31, 2001 was a gain of approximately $92.3
million. Unrealized gains and losses on derivatives are recorded in other
current and long-term assets and liabilities.
The Company's earnings for the first quarter of 2001 were increased by
an unrealized gain of $1.2 million relating to derivative instruments not
accounted for as hedges in accordance with SFAS No. 133.
SFAS No. 133 applies to the Company's energy and energy related
commodities financial instruments and one long-term power sales contract used to
mitigate variability in earnings due to fluctuations in spot market prices,
hedge fuel requirements at generation facilities and protect investment in fuel
inventories.
Energy and energy related commodities
The Company is exposed to commodity price variability in electricity,
emission allowances and natural gas, oil and coal used to meet fuel
requirements. In order to manage these commodity price risks, the Company enters
into financial instruments, which may take the form of fixed price, floating
price or indexed sales or purchases, and options, such as puts, calls, basis
transactions and swaps. Derivatives designated to be hedges by the Company are
accounted for as cash flow hedges. The effective portion of the cumulative gain
or loss on the derivative instrument is reported as a component of OCI in
shareholder's equity and recognized into earnings in the same period or periods
during which the hedged transaction affects earnings i.e., when electricity is
generated and fuel is consumed. No ineffectiveness was recognized on commodity
cash flow hedges during the first quarter of 2001. No gains or losses were
recognized related to derivative instruments excluded from the assessment of
effectiveness. At March 31, 2001, the Company had various commodity related
contracts extending through December 2003 and one long-term fixed-price
electricity sales contract extending through 2003. The Company expects to
reclassify into earnings in operating costs during the next twelve months net
gains from OCI of approximately $5.4 million.
The Company generally attempts to balance its fixed-price physical and
financial purchase and sales commitments in terms of contract volumes, and the
timing of performance and delivery obligations. However, within guidelines
established by the board of directors and its Financial Risk Management
Committee, the Company does take certain market positions. These derivatives do
not qualify for hedge accounting and, accordingly, changes in the fair value are
reported in earnings in revenues and operating costs. Furthermore, for various
commodity derivatives considered to be economic hedges, the Company has elected
not to designate them as accounting hedges due to the burdensome documentation
requirements under SFAS 133. The changes in fair value of these derivatives are
also reported in earnings in revenues and operating costs.
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5 - REGULATORY ISSUES
On May 31, 2000, FERC approved a request of the NYISO, to impose price
limitations on one ancillary service, Ten Minute Non-synchronized Reserves, on a
prospective basis only, effective March 28, 2000, the date the NY ISO began
capping bids for that service. FERC rejected the NY ISO's request for authority
to adjust the market-clearing prices for that service on a retroactive basis.
The NYISO has sought reconsideration of the FERC Order.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition is omitted
per conditions as set forth in General Instructions H (1) (a) and (b) of Form
10-Q for wholly owned subsidiaries. It is replaced with management's narrative
analysis of the results of operations as permitted by General Instructions H (2)
(a) of Form 10-Q for wholly owned subsidiaries (reduced disclosure format). This
analysis will primarily compare the Company's revenue and expense items for the
quarter ended March 31, 2001 with the quarter ended March 31, 2000.
RESULTS OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 2001 COMPARED TO THE QUARTER ENDED MARCH 31,
2000
OPERATING REVENUES
For the quarter ended March 31, 2001, the Company had total revenues of
$275.7 million, compared to $243.5 million for the quarter ended March 31, 2000.
This represents an increase of $32.2 million or 13.2%. The increase is due to
slightly higher generation levels in the first quarter of 2001, combined with
higher per megawatt prices realized as compared with first quarter 2000.
OPERATING COSTS AND EXPENSES
Operating costs were $195.4 million for the quarter ended March 31,
2001, which is an increase of $34.7 million, or 21.6% over the same period in
2000. Operating costs consisted of expenses for fuel, and plant operations and
maintenance, and additionally $1.2 million of unrealized gains on energy
contracts. The increase in operating costs is due to a general market increase
in fuel procurement costs combined with slightly higher generating levels and
its associated fuel cost as compared to the first quarter of 2000.
Fuel expense for the quarter ended March 31, 2001 was $139.5 million,
compared to $107.1 million for the quarter ended March 31, 2000. Fuel expense
for the quarter ended March 31, 2001 represents 50.6% of revenues compared to
44.0% for the quarter ended March 31, 2000. This includes $36.4 million of coal,
$22.0 million of natural gas and $81.1 million of fuel oil, diesel and other
related costs for the quarter ended March 31, 2001.
Plant operations and maintenance expense for the quarter ended March 31,
2001 was $57.1 million, compared to $53.4 million for the quarter ended March
31, 2000. Plant operations and maintenance expense for the quarter ended March
31, 2001 represents 20.7% of revenues and includes labor and benefits under
operating service agreements of $18.1 million, maintenance parts, supplies and
services of $21.6 million and property taxes and other expenses of $17.4
million, for the quarter ended March 31, 2001.
DEPRECIATION
Depreciation costs were $12.0 million for the quarter ended March 31,
2001, which is a decrease of $0.1 million, or 0.6% from the same period in 2000.
The depreciation expense was primarily related to the acquisition costs of the
facilities, which are being depreciated over twenty-five to thirty years.
Depreciation represents 4.3% of revenues for the quarter ended March 31, 2001.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $4.2 million for the quarter
ended March 31, 2001, which is a decrease of $0.2 million compared to the amount
recorded in the quarter ending March 31, 2000. General and administrative
expenses include costs for
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outside legal and other contract services, payments to NRG Energy for corporate
services, expenses related to office administration, as well as costs for
certain employee benefits incurred under operating service agreements. General
and administrative expenses represent 1.5% of revenues for the quarter ended
March 31, 2001.
INTEREST EXPENSE
Interest expense for the quarter ended March 31, 2001 was $15.3 million,
which is a decrease of $2.5 million, or 14.0% from the same period in 2000. The
interest expense relates to amortization of deferred finance costs and interest
on the senior secured bonds issued on February 22, 2000. The decrease in
interest expense is due primarily to the write-off, in February 2000, of the
remaining unamortized deferred finance costs on short-term project borrowings
coupled with a decline in average outstanding debt in the quarter ended March
31, 2001 versus the quarter ended March 31, 2000.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
On January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities (SFAS No. 133), as amended by SFAS No. 137 and SFAS No. 138. SFAS No.
133 requires the Company to record all derivatives on the balance sheet at fair
value. Changes in the fair value of non-hedge derivatives will be immediately
recognized in earnings. Changes in fair values of derivatives accounted for as
hedges will either be recognized in earnings as offsets to the changes in fair
value of related hedged assets, liabilities and firm commitments or, for
forecasted transactions, deferred and recorded as a component of other
accumulated comprehensive income until the hedged transactions occur and are
recognized in earnings. The ineffective portion of a hedging derivative's change
in fair value will be immediately recognized in earnings. The Company also
formally assesses both at inception and at least quarterly thereafter, whether
the derivatives that are used in hedging transactions are highly effective in
offsetting the changes in either the fair value or cash flows of the hedged
item. When it is determined that a derivative ceases to be a highly effective
hedge, the Company discontinues hedge accounting.
The adoption of SFAS No. 133 on January 1, 2001, resulted in an
unrealized gain of $14.1 million recorded to other accumulated
comprehensive income (OCI). The impact to OCI is related to previously deferred
net gains on derivatives designated as cash flow hedges. During the first
quarter of 2001, the Company recorded a gain of approximately $73.0 million in
OCI. This gain related to favorable changes in the fair value of a long-term
derivative instrument accounted for as a hedge recorded on January 1, 2001.
Also during the first quarter of 2001, the Company reclassified from OCI into
earnings $5.2 million of accumulated derivative losses. The net balance in OCI
relating to SFAS No. 133 as of March 31, 2001 was a gain of approximately $92.3
million. Unrealized gains and losses on derivatives are recorded in other
current and long-term assets and liabilities.
The Company's earnings for the first quarter of 2001 were increased by
an unrealized gain of $1.2 million relating to derivative instruments not
accounted for as hedges in accordance with SFAS No. 133.
SFAS No. 133 applies to the Company's energy and energy related
commodities financial instruments and one long-term power sales contract used to
mitigate variability in earnings due to fluctuations in spot market prices,
hedge fuel requirements at generation facilities and protect investment in fuel
inventories.
Energy and energy related commodities
The Company is exposed to commodity price variability in electricity,
emission allowances and natural gas, oil and coal used to meet fuel
requirements. In order to manage these commodity price risks, the Company enters
into financial instruments, which may take the form of fixed price, floating
price or indexed sales or purchases, and options, such as puts, calls, basis
transactions and swaps. Derivatives designated to be hedges by the Company are
accounted for as cash flow hedges. The effective portion of the cumulative gain
or loss on the derivative instrument is reported as a component of OCI in
shareholder's equity and recognized into earnings in the same period or periods
during which the hedged transaction affects earnings i.e., when electricity is
generated and fuel is consumed. No ineffectiveness was recognized on commodity
cash flow hedges during the first quarter of 2001. No gains or losses were
recognized related to derivative instruments excluded from the assessment of
effectiveness. At March 31, 2001, the Company had various commodity related
contracts extending through December 2003 and one long-term fixed-price
electricity sales contract extending through 2003. The Company expects to
reclassify into earnings in operating costs during the next twelve months net
gains from OCI of approximately $5.4 million.
The Company generally attempts to balance its fixed-price physical and
financial purchase and sales commitments in terms of contract volumes, and the
timing of performance and delivery obligations. However, within guidelines
established by the board of directors and its Financial Risk Management
Committee, the Company does take certain market positions. These derivatives do
not qualify for hedge accounting and, accordingly, changes in the fair value are
reported in earnings in revenues and operating costs. Furthermore, for various
commodity derivatives considered to be economic hedges, the Company has elected
not to designate them as accounting hedges due to the burdensome documentation
requirements under SFAS 133. The changes in fair value of these derivatives are
also reported in earnings in revenues and operating costs.
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CONTINGENT REVENUES
As of March 31, 2001, the Company had approximately $10.5 million of
disputed revenues. The Company is actively pursuing resolution and/or collection
of these amounts. These disputed revenues relate to the interpretation of
certain transmission power sales agreements and certain sales to the New York
Power Pool and New England Power Pool, conflicting meter readings, pricing of
firm sales and other power pool reporting issues. These amounts have not been
recorded in the financial statements and will not be recognized as income until
disputes are resolved and collection is assured. At December 31, 2000, $13.1
million of disputed revenues were recorded. During the quarter ended March 31,
2001, $3.1 million of disputed revenues were resolved, and $0.5 million of new
disputed revenues were added.
FORWARD-LOOKING STATEMENTS
Certain statements included in this quarterly report are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities and Exchange Act of 1934. While NRG Northeast
believes that the expectations expressed in such forward-looking statements are
reasonable, it can give no assurances that these expectations will prove to have
been correct. In addition to any assumptions and other factors referred to
specifically in connection with such forward-looking statements, factors that
could cause the actual results to differ materially from those contemplated in
any forward-looking statements include, among others, the following:
o Economic conditions including inflation rates;
o Trade, monetary, fiscal, taxation, and environmental policies of
governments, agencies and similar organizations in geographic areas where
the Company has a financial interest;
o Customer business conditions including demand for their products or
services and supply of labor and materials used in creating their products
and services;
o Financial or regulatory accounting principles or policies imposed by the
Financial Accounting Standards Board, the Securities and Exchange
Commission, the Federal Energy Regulatory Commission and similar entities
with regulatory oversight;
o Availability or cost of capital such as changes in: interest rates; market
perceptions of the power generation industry, the Company or any of its
subsidiaries; or security ratings;
o Factors affecting power generation operations such as unusual weather
conditions; catastrophic weather-related damage; unscheduled generation
outages, maintenance or repairs; unanticipated changes to fossil fuel, or
gas supply costs or availability due to higher demand, shortages,
transportation problems or other developments; environmental incidents; or
electric transmission or gas pipeline system constraints;
o Employee workforce factors including loss or retirement of key executives,
collective bargaining agreements with union employees, or work stoppages;
o Volatility of energy prices in a deregulated market environment;
o Increased competition in the power generation industry;
o Cost and other effects of legal and administrative proceedings,
settlements, investigations and claims;
o Technological developments that result in competitive disadvantages and
create the potential for impairment of existing assets;
o Factors associated with various investments including competition,
operating risks, dependence on certain suppliers and customers, and
environmental and energy regulations;
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o Limitations on the Company's ability to control the development or
operation of projects in which the Company has less than 100% interest;
o The lack of operating history at development projects, the lack of the
Company's operating history at the projects not yet owned and the limited
operating history at the remaining projects provide only a limited basis for
management to project the results of future operations;
o Risks associated with timely completion of projects under construction,
including obtaining competitive contracts, obtaining regulatory and
permitting approvals, local opposition, construction delays and other
factors beyond the Company's control;
o The failures to timely satisfy the closing conditions contained in the
definitive agreements for the acquisitions of projects subject to definitive
agreements but not yet closed, many of which are beyond the Company's
control;
o Factors challenging the successful integration of projects not previously
owned or operated by NRG Northeast, including the ability to obtain
operating synergies;
o Changes in governmental regulation or the implementation of government
regulations, including pending changes within or outside of California as a
result of the California energy crisis, which could adversely affect the
continued deregulation of the electric industry;
o Other business or investment considerations that may be disclosed from time
to time in our Securities and Exchange Commission filings or in other
publically disseminated written documents.
The Company undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. The foregoing review of factors that could cause NRG
Northeast's actual results to differ materially from those contemplated in any
forward-looking statements included in this Form 10-Q should not be construed as
exhaustive.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS (PENDING FURTHER LEGAL UPDATE)
FORTISTAR CAPITAL V. NRG ENERGY
In July, 1999, Fortistar Capital Inc., a Delaware corporation, filed a
complaint in District Court (Fourth Judicial District, Hennepin County) in
Minnesota against NRG Energy, asserting claims for injunctive relief and for
damages as a result of NRG Energy's alleged breach of a confidentiality letter
agreement with Fortistar relating to the purchase of the Oswego facility from
Niagra Mohawk Power Corporation (NiMo) and Rochester Gas and Electric Company.
NRG Energy disputed Fortistar's allegations and has asserted numerous
counterclaims. NRG Energy has counterclaimed against Fortistar for breach of
contract, fraud and negligent misrepresentations and omissions, tortious
interference with contract, prospective business opportunities and prospective
contractual relationships, unfair competition and breach of the covenant of good
faith and fair dealing. NRG Energy seeks, among other things, dismissal of
Fortistar's complaint with prejudice and rescission of the letter agreement.
A temporary injunction hearing was held in September 1999. The
acquisition of the Oswego facility was closed in October 1999, following
notification to the court of Oswego Power's and NiMo's intention to close on
that date. In January 2000, the court denied Fortistar's request for a temporary
injunction. In April and December, 2000, NRG Energy filed summary judgment
motions to dispose of the litigation. A hearing on these motions was held in
January 2001, and in April 2001, A number of Fortistar's claims were dismissed.
No trial date has been set in respect of the remaining claims. NRG Energy
intends to continue to vigorously defend the suit and believes Fortistar's
complaint to be without merit.
NEW YORK DEPARTMENT OF ENVIRONMENTAL CONSERVATION NOTICE OF VIOLATION
On May 25, 2000, the New York Department of Environmental Conservation
issued a Notice of Violation to NRG Energy and the prior owner of the Huntley
and Dunkirk facilities relating to physical changes made at those facilities
prior to NRG Energy's assumption of ownership. The Notice of Violation alleges
that these changes represent major modifications undertaken without obtaining
the required permits. Although NRG Energy has a right to indemnification by the
previous owner for fines, penalties, assessments, and related losses resulting
from the previous owner's failure to comply with environmental laws and
regulations, if these facilities did not comply with the applicable permit
requirements, NRG Energy could be required, among other things, to install
specified pollution control technology to further reduce air emissions from the
Dunkirk and Huntley facilities and NRG Energy could become subject to fines and
penalties after assuming ownership. NRG Energy is currently in settlement
discussions with the Department of Environmental Conservation and the States
Attorney General's office.
STATION USE POWER
On September 21, 2000, Dunkirk Power LLC (Dunkirk), Huntley Power LLC
(Huntley) and Oswego Harbor Power LLC (Oswego) filed an action before FERC
seeking its declaration that they are entitled to pay NiMo wholesale prices for
the power consumed at their respective generating facilities, rather than paying
for such station power at retail rates, as NiMo alleges is required. On
September 28, 2000, NiMo filed separate actions against Dunkirk, Huntley and
Oswego in the State Supreme Court of New York, seeking in total, payment of
approximately $7.0 million, which NiMo asserts is due under such retail tariff.
The FERC rendered a decision on March 14, 2001, determining that certain types
of station use power are not subject to retail tariffs and granting some relief
sought by Dunkirk, Huntley and Oswego. Legal counsel is evaluating the impact of
the ruling on the merits of the NiMo litigation.
There are no other material legal proceedings pending, to which the
Company or any of its subsidiaries is a party. There are no legal proceedings
to which an officer or director is a party in which an officer or director or
has a material interest adverse to the Company. There are no other material
administrative or judicial proceedings arising under environmental quality
statutes pending or known to be contemplated by governmental agencies to which
the Company is or would be a party.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
None
(B) REPORTS ON FORM 8-K:
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NRG Northeast Generating LLC
-----------------------------------------
(Registrant)
/s/ Craig A. Mataczynski
-----------------------------------------
Craig A. Mataczynski, President
/s/ Brian B. Bird
-----------------------------------------
Brian B. Bird, Treasurer
(Principal Financial Officer)
Date: May 14, 2001
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