<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO________.
COMMISSION FILE NO. 333-33397
NRG ENERGY, INC.
----------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 41-1724239
-------- ----------
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1221 NICOLLET MALL, SUITE 700
MINNEAPOLIS, MINNESOTA 55403
---------------------- -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(612) 373-5300
--------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicated by check mark whether the Registrant (1) has filed all reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulations S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K/A or any amendment to this Form 10-K/A. Yes X No
--- ---
As of June 29, 1998, there were 1,000 shares of common stock, $1.00 par
value, outstanding, all of which were owned by Northern States Power
Company. No other voting or non-voting common equity is held by
non-affiliates of the Registrant.
The Registrant meets the conditions set forth in General Instruction I (1)
(a) and (b) of Form 10-K and is therefore filing this Form with the reduced
disclosure format.
Documents Incorporated by Reference: None
<PAGE> 2
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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, on June 29, 1998.
NRG ENERGY, INC.
By: /s/ Leonard A. Bluhm
----------------------------------
Leonard A. Bluhm
Executive Vice President and
Chief Financial Officer
<PAGE> 3
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15 (d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
An annual report has been sent to security holders and was supplementally filed
with the Commission. Such annual report to security holders shall not be
deemed "filed" with the Commission or otherwise subject to the liabilities of
Section 18 of the Securities Exchange Act of 1934. No proxy material will be
sent to security holders.
52
<PAGE> 1
Halle, May 14, 1998
Saale Energie GmbH,
Schkopau
Report on the audit of
the financial
statements for the years
ended December 31, 1997
and 1996 in accordance
with German GAAP and on
the audit of the
respective US GAAP
reconciliation
Copy no. (7)
<PAGE> 2
SAALE ENERGIE GmbH
INDEX TO THE FINANCIAL STATEMENTS
Page
Report of the Independent Auditors 1
Annual Financial Statements
Statement of Income for the year 1997 and 1996 2
Balance Sheet as of December 31, 1997 and 1996 3
Statement of Cash Flows for the year 1997 and 1996 4
Notes to the Financial Statements 5
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Saale Energie GmbH
Schkopau, Germany
We have audited the accompanying balance sheet of Saale Energie GmbH (SEG) as of
December 31, 1997 and 1996, and the related statements of income and cash flows
for the years in the two-year period then ended. These financial statements are
the responsibility of SEG's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in Germany and the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above fairly present, in
all material respects, the financial position of Saale Energie GmbH as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the two-year period then ended, in conformity with accounting principles
generally accepted in Germany.
Generally accepted accounting principles in Germany vary in certain significant
respects from generally accepted accounting principles in the United States of
America. Application of generally accepted accounting principles in the United
States of America would have affected the results of operations for the two-year
period ended December 31, 1997 and shareholders' equity as of December 31, 1997
and 1996 to the extent summarized in Note C to the financial statements.
Halle, Germany
May 14, 1998
1
<PAGE> 4
SAALE ENERGIE GmbH
STATEMENT OF INCOME
(In Thousands DM)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
NOTES 1997 1996
--------------- ---------------- ----------------
<S> <C> <C> <C>
Sales D 224,502 161,309
Other operating income 21 3
---------------- ----------------
Total revenue 224,523 161,312
Cost of materials D/K 225,669 170,897
Depreciation of tangible fixed assets 1 1
Other operating expenses 1,122 1,060
---------------- ----------------
Total operating expenses 226,792 171,958
---------------- ----------------
Result of operations -2,269 -10,646
Income from companies in which
participations are held 7,162 6,581
Interest expense (net) I -3,152 -3,845
---------------- ----------------
Results of ordinary activities 1,741 -7,910
Taxes on income 0 -40
---------------- ----------------
Net profit for the year 1,741 -7,870
================ ================
</TABLE>
See accompanying Notes to the Financial Statements
2
<PAGE> 5
SAALE ENERGIE GmbH
BALANCE SHEET
(In Thousands DM)
<TABLE>
<CAPTION>
AT AT
DECEMBER 31, DECEMBER 31,
NOTES 1997 1996
----------- ---------------- -----------------
<S> <C> <C> <C>
ASSETS
Outstanding contributions 713 713
NON-CURRENT ASSETS
Fixed assets
Tangible assets
Factory and office equipment B 1 2
Financial assets
1. Shares in affiliated companies B, E 49 49
2. Participations B, E 200,677 200,677
3. Loans to participations B, F 82,200 82,200
--------------- ---------------
TOTAL NON-CURRENT ASSETS 282,927 282,928
CURRENT ASSETS
Inventories
Raw materials and supplies B 714 325
Receivables and other assets
1. Trade receivables B, D, G 18,860 24,764
2. Other assets B, G 3,541 14,549
Bank balances B 16,522 28,748
--------------- ---------------
TOTAL CURRENT ASSETS 39,637 68,386
--------------- ---------------
TOTAL ASSETS 323,277 352,027
=============== ===============
SHAREHOLDERS' EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY H
Subscribed capital 1,000 1,000
Capital reserve 48,041 48,041
Net income for the year -11,383 -7,870
Accumulated losses brought forward 1,741 -3,513
--------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 39,399 37,658
Accruals
Other accruals B 80 40
Liabilities
1. Trade payables B, I 3,541 8,836
2. Payables to shareholding companies B, I 69 92,084
3. Payables to affiliated companies B, I 3,140 4,375
4. Payables to participations B, I 234,837 174,884
5. Other payables B, I 42,211 34,150
--------------- ---------------
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 323,277 352,027
=============== ===============
</TABLE>
See accompanying Notes to the Financial Statements
3
<PAGE> 6
SAALE ENERGIE GmbH
STATEMENT OF CASH FLOWS
(In Thousands DM)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
---------------------- --------------------
<S> <C> <C>
Cash generated by operations:
Net income for the year 1,741 -7,870
Adjustments to reconcile the net profit to
the cash generated by operations:
Depreciation on tangible assets and
current asset write-offs 1 4
Change in assets and liabilities:
Inventories -389 384
Short-term trade receivables 5,904 -24,647
Other assets 11,009 -14,415
Accruals 40 -1,535
Short-term trade payables -5,295 8,218
Interest payable 0 3,583
Other liabilities 65,579 114,597
----------------- -----------------
CASH RETAINED FROM OPERATING ACTIVITIES 78,590 78,319
----------------- -----------------
Cash flows from investing activities:
Capital expenditures 0 -82,658
----------------- -----------------
CASH UTILIZED IN INVESTING ACTIVITIES 0 -82,658
----------------- -----------------
Cash flows from financing activities:
Repayment of loans 0 34,568
Proceeds from loans -90,816 -3,368
----------------- -----------------
CASH UTILIZED IN FINANCING ACTIVITIES -90,816 31,200
----------------- -----------------
NET DECREASE IN CASH -12,226 26,861
CASH AT BEGINNING OF YEAR 28,748 1,887
----------------- -----------------
CASH AT END OF YEAR 16,522 28,748
================= =================
</TABLE>
4
<PAGE> 7
SAALE ENERGIE GMBH
NOTES TO THE FINANCIAL STATEMENTS
(IN THOUSANDS DM)
NOTE A ORIGINATION AND NATURE OF BUSINESS
ORIGINATION: According to the Articles of Association, Saale Energie GmbH
("SEG") was established on November 11, 1993. The Company's shares are held at
50 % by NRGenerating International B.V., Amsterdam and at 50 % by PowerGen
Holdings B.V., Rotterdam.
NATURE OF BUSINESS: The operations of SEG include all activities relating to the
direct and indirect acquisition, ownership, administration and operation of
power generating facilities located in Schkopau, including the purchase of fuel
and the sale of energy produced in the facilities. The business of the Company
further constitutes all activities relating to the supply of management,
maintenance and consulting services in respect of power stations and related
plants. The Company is authorized to take all other actions and engage in all
other businesses which appear to be necessary and useful in order to carry into
effect the purpose of the Company. In particular it is authorized to hold,
acquire and create subsidiaries, branches, companies and interests in other
enterprises.
NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of SEG have been prepared in accordance with the German
Commercial Code, which represents accounting principles generally accepted in
Germany ("German GAAP"). German GAAP vary in certain significant respects from
accounting principles generally accepted in the United States of America ("US
GAAP"). Application of US GAAP would have affected the results of operations for
the year ended December 31, 1997 to the extent summarized in Note C to the
financial statements. All amounts herein are shown in thousands of Deutsche Mark
("TDM") unless otherwise stated.
SEG is exempt from the to duty prepare consolidated financial statements in
terms of section 291 of the German Commercial Code. SEG owns a 98 % share of its
affiliated company (subsidiary) Saale Energie Service GmbH ("SES"). The
investment in SES is included at cost in SEG's financial statements.
Furthermore, SEG holds a 41.1 % share in the Kraftwerk Schkopau GbR ("GbR") and
a 44.4 % share in the Kraftwerk Schkopau Betriebsgesellschaft mbH. These
companies are included at cost and referred to as participations in these
financial statements.
5
<PAGE> 8
SAALE ENERGIE GMBH
NOTES TO THE FINANCIAL STATEMENTS
(IN THOUSANDS DM)
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles necessarily requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the balance sheet date
and the reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates.
TOTAL COST METHOD: The statement of operations is presented according to the
total cost (or type of expenditure) format as commonly used in Germany.
According to this format, production and all other expenses incurred during the
period are classified by type of expenses.
REVENUE RECOGNITION: Revenue is recognized when title passes or services
are rendered, net of discounts, customer bonuses and rebates granted.
FIXED ASSETS: Fixed tangible assets are recorded on the basis of acquisition or
manufacturing cost and subsequently reduced by scheduled depreciation charges
over the assets' useful lives.
FINANCIAL ASSETS: The long-term loans and investments are recorded at cost.
INVENTORIES: Inventories are accounted for at historical purchase cost.
RECEIVABLES AND OTHER ASSETS: All receivables are recorded at nominal
value. No provision for doubtful accounts has been recorded.
BANK BALANCES: Bank balances include current accounts and fixed deposits.
ACCRUALS AND LIABILITIES: Accruals have been recorded for known obligations
at the balance sheet date at the amounts of the estimated liabilities.
Liabilities are valued at the amounts outstanding.
6
<PAGE> 9
SAALE ENERGIE GMBH
NOTES TO THE FINANCIAL STATEMENTS
(IN THOUSANDS DM)
NOTE C SIGNIFICANT DIFFERENCES BETWEEN GERMAN AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
SEG's financial statements comply with German GAAP, which differs in certain
significant respects from US GAAP. The differences that would have a significant
effect on net income and shareholders' equity are set out below.
1. Consolidation
SEG is not required to prepare consolidated financial statements in terms of
section 291 of the German Commercial Code. If US GAAP is applied, SEG would be
required to prepare consolidated financial statements, which would include the
financial statements of SES.
US GAAP financial statements would therefore include the current year's
operating results of SES, net of minority interests, and would exclude the
dividend income received by SEG.
2. Accounting for long term service and supply agreements
For German GAAP purposes the amounts billed to SEG resulting from the use and
benefit agreement between SEG and GbR were recorded as expenses of the period.
Parallel, the amounts attributable to the long-term electricity supply contract
with the Company's sole customer were recorded as revenue in the period they
were invoiced. See Note D.
In accordance with US GAAP, these agreements would be considered as leasing
agreements. The use and benefit agreement would be considered a capital lease
and the long-term sales agreement, as it relates to capacity availability, would
be treated as a direct financing lease arrangement. The revenues and expenses
recorded based upon current billings would be replaced by the amortization of
unearned direct finance lease income and interest expense on lease obligations
in accordance with US GAAP.
The net present value of the minimum lease payments to be received by SEG under
the terms of the agreement amounts to TDM 850,722, whereas the net present value
of the lease obligation payable by SEG over the minimum period of 25 years is
TDM 635,541 as of December 31, 1997.
7
<PAGE> 10
SAALE ENERGIE GMBH
NOTES TO THE FINANCIAL STATEMENTS
(IN THOUSANDS DM)
3. Outstanding contributions from the shareholders
As of December 31, 1997 outstanding contributions from shareholders amounted to
TDM 713, which were not deducted from shareholders' equity in the German
financial statements. The shareholders' equity for US GAAP purposes has to be
reduced by the outstanding contributions.
4. Deferred taxes
Under German GAAP, SEG did not accrue for income tax, because the accumulated
tax losses of prior years exceed the net profit for the 1997 financial year.
Deferred tax assets and liabilities have not been recorded, because under German
GAAP, they are only required to be recognized to the extent that the deferred
tax liabilities exceed the deferred tax assets. Deferred tax assets are not
recorded for accumulated tax losses brought forward.
For purposes of US GAAP accounting the financial values differ significantly
from the tax basis mainly due to the application of lease accounting.
Significant components of SEG's deferred tax liabilities and assets as of
December 31, 1997, that would have resulted from accumulated tax losses and
temporary differences between the US GAAP financial statement basis and tax
basis of assets and liabilities are summarized as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
----------- ------------
<S> <C> <C>
Deferred tax liability
lease accounting 109,539 82,155
----------- ------------
Total deferred liability 109,539 82,155
----------- ------------
Deferred tax assets
accumulated tax losses 51,457 54,787
investment in GbR 4,443 14,282
----------- ------------
Total deferred asset 55,900 69,069
=========== ============
Net deferred tax liability 53,639 13,087
=========== ============
</TABLE>
8
<PAGE> 11
SAALE ENERGIE GMBH
NOTES TO THE FINANCIAL STATEMENTS
(IN THOUSANDS DM)
RECONCILIATION TO US GAAP
The following is a summary of the significant adjustments to net income for the
year which would have been be required if US GAAP had been applied instead of
German GAAP.
<TABLE>
<CAPTION>
Year ended Year ended
December 31, December 31,
Notes 1997 1996
-------- ------------ ------------
<S> <C> <C> <C>
Net income as reported in the statement of
income under German GAAP 1,741 -7,870
Adjustments required to conform with US GAAP:
Consolidation of SES (1) -1,578 -40
Lease adjustment (2) 71,766 31,536
Deferred taxes (4) -40,552 -14,101
----------- -----------
Net profit in accordance
with US GAAP 31,377 9,525
=========== ===========
</TABLE>
9
<PAGE> 12
SAALE ENERGIE GMBH
NOTES TO THE FINANCIAL STATEMENTS
(IN THOUSANDS DM)
The following is a summary of the significant adjustments to shareholders'
equity as of December 31, 1997 which would have been required if US GAAP had
been applied instead of German GAAP.
<TABLE>
<CAPTION>
December 31, December 31,
Notes 1997 1996
-------- ------------ ------------
<S> <C> <C> <C>
Shareholders' equity as reported in
the balance sheet under German
GAAP 39,399 37,659
Adjustments required to conform with US GAAP:
Consolidation of SES (1) 1,699 3,277
Lease adjustment (2) 103,302 31,536
Outstanding contributions (3) -713 -713
Deferred taxes (4) -53,639 -13,087
----------- -----------
Shareholders' equity in
accordance with US GAAP 90,048 58,672
=========== ===========
</TABLE>
NOTE D LONG-TERM SALES AND SERVICE AGREEMENTS
According to the long-term electricity supply contract between SEG and its major
customer, SEG supplies its total available electricity capacity to this
customer. The contract has a term of 25 years starting at the date of
commissioning of the power plant. The customer is obliged to pay on a monthly
basis a price that covers (1) the availability of power supply capacity and (2)
the operating costs incurred to produce the electricity. The customer has agreed
to make minimum payments of DM 2,142.7 million over the period of the agreement
(25 years). In 1997, SEG's sales of TDM 224,502 solely relate to sales made to
this customer.
SEG closed a use and benefit agreement with Kraftwerk Schkopau GbR under which
GbR grants SEG a notional share of 400 MW (power share) in the total net
capacity of the power station for its sole use. The SEG power share encompasses
all plant and equipment of the power station. In return SEG is obliged to pay
all costs of the GbR related to the SEG-power share as stipulated in the
agreement plus a profit margin plus value added tax. During 1997, SEG was
billed TDM 139,294 by GbR.
10
<PAGE> 13
SAALE ENERGIE GMBH
NOTES TO THE FINANCIAL STATEMENTS
(IN THOUSANDS DM)
In order to manage and operate its share in the power plant SEG closed a
contract with Kraftwerk Schkopau Betriebsgesellschaft mbH (KSB) on December 10,
1993. SEG commissions KSB with the conversion of coal using its power share of
400 MW of the Schkopau power plant, and KSB accepts responsibility for all costs
of operating and maintaining the power plant. In terms of the contract SEG is
obliged to pay for KSB's services. The management fees levied by the KSB for
1997 amounted to TDM 54,713.
NOTE E INVESTMENTS IN SUBSIDIARIES AND PARTICIPATIONS
SEG holds a 98 % share in Saale Energie Services GmbH (SES). The investment is
accounted for at its historical acquisition cost of TDM 49. The business of the
company consists of all activities relating to the supply of management,
maintenance and consulting services in respect of power stations and related
plants, especially for the power stations of the Mitteldeutsche
Braunkohlengesellschaft mbH (MIBRAG) and its affiliated companies.
A 41.1 % participation in the GbR, which owns the Schkopau power plant, is held
by SEG at the historical cost value of TDM 200,655.
SEG's 44.4 % share in the Kraftwerk Schkopau Betriebsgesellschaft mbH (KSB) has
been recorded at the historical acquisition cost of TDM 22 (p.y. TDM 22). SEG
has assigned its share in KSB to C & L Deutschland Revision AG in security for
the other partner in the GbR.
NOTE F LOAN TO KRAFTWERK SCHKOPAU GBR
In terms of the loan agreement between the participants of the GbR, SEG has
granted a loan of DM 98 million to GbR. The balance outstanding at December 31,
1997 was TDM 82,200. The loan is unsecured and bears interest at a fixed rate of
7 % p.a.. The interest on the loan for 1997 of TDM 5,754 was set-off from the
payables to the GbR (see NOTE I). The loan has been granted for an indefinite
period and the repayment terms are not fixed.
11
<PAGE> 14
SAALE ENERGIE GMBH
NOTES TO THE FINANCIAL STATEMENTS
(IN THOUSANDS DM)
NOTE G RECEIVABLES AND OTHER ASSETS
The trade receivables of TDM 18,860, as reported on December 31, 1997, relates
to power supplied to the Company's sole customer. The other assets are mainly
receivables from tax authorities. Included in the receivables from the tax
authorties are receivables relating to the refundable corporation tax of TDM
1,260 arising from the dividends paid by SES.
NOTE H CHANGE IN SHAREHOLDERS' EQUITY
Shareholders' equity of SEG changed in 1997 solely by the net profit for
1997 of TDM 1,741 from TDM 37,658 to TDM 39,399.
NOTE I LIABILITIES
The maturity periods of the liabilities are as follows (in TDM):
<TABLE>
<CAPTION>
Total balance as Maturity period Maturity Maturity Total balance
of of less than period between period more as of
Dec. 31, 1997 1 year 1 and 5 years than 5 years Dec. 31, 1996
------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1) Trade payables 3,541 3,541 - - 8,836
2) Payables to
shareholding
companies 69 69 - - 92,084
3) Payables to
affiliated
companies 3,140 - 3,140 - 4,375
4) Payables to
companies in
which participa-
tions are held 234,837 63,473 162,408 8,956 174,884
5) Other liabilities 42,211 - 42,211 - 34,150
------------- ----------- ----------- ----------- -----------
283,798 67,083 207,759 8,956 314,329
============= =========== =========== =========== ===========
</TABLE>
12
<PAGE> 15
SAALE ENERGIE GMBH
NOTES TO THE FINANCIAL STATEMENTS
(IN THOUSANDS DM)
2) PowerGen plc., London and NRGenerating B.V., Amsterdam granted loans to SEG
for the partial funding of its financial requirements for a total amount of TDM
148,054. The loans were not collateralized and bore interest at a fixed rate of
7.5 % p.a.. The loans were repaid during 1997 except for sundry interest free
credits remaining of TDM 69 in total. TDM 5,412 interest was charged by the
shareholding companies during 1997.
The loans from shareholding companies comprise of the following (in TDM):
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
NRGenerating B.V. 59 46,088
PowerGen plc. 10 45,996
------------ ------------
69 92,084
============ ============
</TABLE>
3) In terms of the loan agreements dated February 7, 1996 and September 25, 1996
SES granted to SEG loans amounting TDM 6,500 and TDM 1,000 respectively. The
unsecured loans bear interest at a variable rate equal to the German Central
Bank's discount rate plus 2 % p.a.. Included in the balance as of December 31,
1997 is interest payable of TDM 215. The net dividend paid by SES to SEG during
1997 of TDM 2,150 (after withholding taxes of TDM 790) was deducted from the
oustanding loan balance. The loans can be called up at any time.
4) The liability as of December 31, 1997 comprises of the following (in TDM):
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
a) Kraftwerk Schkopau GbR (GbR) 230,111 168,912
b) Kraftwerk Schkopau Betriebsgesellschaft mbH
(KSB) 4,726 5,972
----------- -------------
234,837 174,884
=========== =============
</TABLE>
13
<PAGE> 16
SAALE ENERGIE GMBH
NOTES TO THE FINANCIAL STATEMENTS
(IN THOUSANDS DM)
a) The payables to GbR comprise of two components:
TDM 188,275 refer to the fees due for the current year relate to the use and
benefit agreement dated December 10, 1993 and represent SEG's share in the power
plant's expenses. The gross fee payable of TDM 160,188 (including value added
taxation) was reduced by the interest on the GbR loans (TDM 5,754), the share in
the 1996 profit of the GbR (TDM 2,959) as well as cash calls by the GbR (TDM
73,309).
TDM 41,837 results from SEG's obligation to reimburse its share in the shortfall
achieved in the 1995 financial statement of the GbR as well as the shortfall
achieved in 1996 up to the commissioning date of the power plant (March 31). TDM
16,966 was repaid during 1997.
The payables to the GbR are interest free.
b) The liability mainly arises from the coal conversion contract, closed on
December 10, 1993 between SEG and KSB. In terms of this contract SEG commissions
KSB with the conversion of coal using its power share of 400 MW of the Schkopau
power plant, and KSB accepts responsibility for all costs of operating and
maintaining the power plant. In terms of the contract, SEG is obliged to pay for
KSB's services.
5) The other owner of the GbR, granted a loan of up to TDM 50 million to SEG for
purposes of funding the interest due during the construction period of the power
plant. TDM 6,061, TDM 8,682 and TDM 25,468 were drawn by SEG during 1995, 1996
and 1997 respectively. A variable interest rate of 3 months LIBOR plus 2 % p.a.
was charged during 1997.
NOTE J OTHER FINANCIAL COMMITMENTS
For financial commitments relating to the leased assets and lease commitments
see note C.
14
<PAGE> 17
SAALE ENERGIE GMBH
NOTES TO THE FINANCIAL STATEMENTS
(IN THOUSANDS DM)
NOTE K RELATED PARTY TRANSACTIONS
SEG and MIBRAG, a related company with common shareholders NRG Energy Inc. and
PowerGen plc., closed a long-term coal supply agreement. Under the terms of
this agreement MIBRAG delivers lignite to the power station in Schkopau until
2010 at market price. The annual volume of coal to be delivered by MIBRAG
was not fixed in the agreement. The lignite purchased by SEG from MIBRAG during
the financial year amounted to TDM 32,052.
In addition, SES and MIBRAG entered into a consulting and management agreement.
This agreement determines certain consultancy services to be provided by SES. In
1997 MIBRAG was billed TDM 4,548 by SES.
15
<PAGE> 1
EXHIBIT 99.3
TO THE SHAREHOLDERS OF SUNSHINE STATE POWER BV
AUDITORS' REPORT
We have audited the accompanying balance sheet of Sunshine State Power BV as of
December 31, 1997, 1996 and 1995, and the related statements of income and of
cash flows for each of the three years ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements give a true and fair view of the
financial position of the Company as of December 31, 1997, 1996 and 1995 and of
the results for the years then ended in accordance with accounting principles
generally accepted in the Netherlands and comply with the financial reporting
requirements included in Part 9, Book 2 of the Netherlands Civil Code.
PRICE WATERHOUSE NEDERLAND BV
March 27, 1998
Amsterdam, Netherlands
1
<PAGE> 2
SUNSHINE STATE POWER BV
BALANCE SHEET AT DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
AUD'000 AUD'000 AUD'000
------- ------- -------
<S> <C> <C> <C>
ASSETS
FIXED ASSETS
Intangible fixed assets ..................... 7,926 8,397 8,868
Tangible fixed assets ....................... 161,545 165,173 161,355
------- ------- -------
169,471 173,570 170,223
CURRENT ASSETS
Stocks ...................................... 2,254 3,536 1,851
Receivables ................................. 4,470 4,877 5,835
Cash and bank balances ...................... 10,885 11,898 11,460
------- ------- -------
17,609 20,311 19,146
------- ------- -------
TOTAL ASSETS ................................ 187,080 193,881 189,369
------- ------- -------
SHAREHOLDERS' EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY
Issued share capital ........................ 30 30 30
Retained earnings ........................... 24,147 15,014 7,712
Result for the year ......................... 2,433 9,133 7,302
------- ------- -------
26,610 24,177 15,044
------- ------- -------
Provisions .................................. 16,195 14,618 9,309
Long-term liabilities ....................... 135,435 146,817 156,097
Current liabilities ......................... 8,840 8,269 8,919
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES .. 187,080 193,881 189,369
------- ------- -------
</TABLE>
The accompanying notes form an integral part of the annual accounts.
2
<PAGE> 3
SUNSHINE STATE POWER BV
STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
AUD'000 AUD'000 AUD'000
------- ------- -------
<S> <C> <C> <C>
Net turnover
Queensland Transmission & Supply Corporation .... 24,105 31,245 33,250
Boyne Smelters Limited .......................... 31,386 21,548 21,378
------- ------- -------
TOTAL ............................................ 55,491 52,793 54,628
Cost of turnover
Non-fuel ........................................ 8,864 9,179 8,163
Fuel ............................................ 19,972 14,562 14,851
------- ------- -------
TOTAL ............................................ 28,836 23,741 23,014
GROSS PROFIT ON TURNOVER ......................... 26,655 29,052 31,614
------- ------- -------
Operating expenses .............................. 2,484 1,719 3,000
Depreciation and amortization expense ........... 6,328 6,041 5,539
------- ------- -------
TOTAL EXPENSES ................................... 8,812 7,760 8,539
------- ------- -------
NET PROFIT ON TURNOVER ........................... 17,843 21,292 23,075
------- ------- -------
Interest expense ................................. 7,831 10,233 11,100
Interest income .................................. (667) (770) (718)
Foreign exchange (gain)/loss ..................... 6,951 (2,527) 744
Disposal of assets (gain)/loss ................... (73) 86 -
------- ------- -------
NET FINANCIAL EXPENSE ............................ 14,042 7,022 11,126
------- ------- -------
Result from ordinary operations before taxation .. 3,801 14,270 11,949
Taxation ......................................... 1,368 5,137 4,647
------- ------- -------
NET RESULT ....................................... 2,433 9,133 7,302
-------- ------- -------
</TABLE>
The accompanying notes form an integral part of the annual accounts.
3
<PAGE> 4
SUNSHINE STATE POWER BV
STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
AUD'000 AUD'000 AUD'000
-------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities
Net result ....................................... 2,433 9,133 7,302
Adjustments to reconcile net result to net cash
provided by operating activities:
Depreciation and amortization ................... 6,328 6,041 5,539
Deferred income taxes ........................... 1,368 5,137 4,647
Foreign exchange loss/(gain) .................... 6,951 (2,527) 744
(Gain)/Loss on sale of fixed assets ............. (73) 86 -
Changes in operating assets and liabilities:
Stocks .......................................... 1,282 (1,685) (6)
Receivables ..................................... 407 958 (1,469)
Provisions ...................................... 209 172 166
Current liabilities ............................. 48 (1,088) (102)
-------- ------- --------
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES .. 18,953 16,227 16,821
-------- ------- --------
Cash flows from investing activities
Purchases of tangible fixed assets .............. (2,251) (9,495) (12,762)
Proceeds from sale of fixed assets .............. 94 21 -
-------- ------- --------
NET CASH FLOWS USED BY INVESTING ACTIVITIES ...... (2,157) (9,474) (12,762)
-------- ------- --------
Cash flows from financing activities
Proceeds (repayments) of notes payable .......... (12,896) (1,840) 1,014
Repayments of long-term debt .................... (4,913) (4,475) (4,038)
-------- ------- --------
NET CASH FLOWS (USED) PROVIDED BY FINANCING
ACTIVITIES ....................................... (17,809) (6,315) (3,024)
-------- ------- --------
NET (DECREASE)/INCREASE IN CASH AND BANK
BALANCES ......................................... (1,013) 438 1,035
-------- ------- --------
Cash and bank balances
Beginning of year ............................... 11,898 11,460 10,425
-------- ------- --------
End of year ..................................... 10,885 11,898 11,460
-------- ------- --------
SUPPLEMENTAL DISCLOSURE OF CASH PAID
FOR INTEREST ..................................... 8,072 10,382 11,043
-------- ------- --------
</TABLE>
The accompanying notes form an integral part of the annual accounts.
4
<PAGE> 5
SUNSHINE STATE POWER BV
NOTES TO THE ANNUAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. GENERAL
ACTIVITIES
Sunshine State Power BV (the Company) was incorporated on November 11,
1993. The Company's principal operating activity is the ownership of 20% of
the Gladstone Power Station Joint Venture. The Gladstone Power Station Joint
Venture owns and operates the Gladstone Power Station located in Queensland,
Australia which it acquired on March 30, 1994. The Gladstone Power Station
Joint Venture is an unincorporated joint venture and therefore not a separate
legal entity. Accordingly, the Gladstone Power Station Joint Venture owners
act as tenants in common owning their proportionate shares of the
unincorporated joint venture's assets, liabilities and results, of operations.
The accounts have been prepared for the years ended December 31, 1997, 1996 and
1995.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Unless otherwise stated assets and liabilities are carried at nominal
value.
BASIS OF PREPARATION
The Company's financial statements have been prepared in accordance with
generally accepted accounting principles in the Netherlands (Netherland GAAP)
which may differ in certain respects from generally accepted accounting
principles in the United States (US GAAP). With regard to the Company's
balance sheet and statement of income, there are no material differences
between Netherlands GAAP and US GAAP. With regard to the Company's statement
of cash flows, under US GAAP the foreign exchange loss/(gain) would be
classified under the cash flows from financing activities section as US GAAP
requires that such items be netted with the related cash flow item.
FOREIGN CURRENCIES
Assets and liabilities at year-end and transactions during the period
denominated in a foreign currency are translated into the Company's local
currency (Australian $) at the exchange rates ruling at year-end and at the
time of the transaction, respectively. Exchange adjustments are taken to the
statement of income.
INTANGIBLE FIXED ASSETS
Project Development Expenditures - Project development expenditures
represent the Company's share of project development expenditures incurred by
the Gladstone Power Station Joint Venture to organize the acquisition of the
Gladstone Power Station and operate it subsequent to the acquisition.
Capitalized development expenditures are being amortized over the term of
the Gladstone Power Station Power sales agreements (35 years), commencing from
the date the investment in the project was consummated. The carrying values of
capitalized development expenditures and the amortization periods are reviewed
annually and any necessary write down is charged against income. Research
expenditures and expenditures on development of existing projects are charged
against income in the year in which they are incurred.
5
<PAGE> 6
SUNSHINE STATE POWER BV
NOTES TO THE ANNUAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- (CONTINUED)
Financing Costs - Financing costs represent the Company's share of the
costs incurred by the Gladstone Power Station Joint Venture to acquire the
long-term debt used to finance the acquisition of the Gladstone Power Station.
Capitalized financing costs are being amortized over a ten year period, which
represents the timeframe until the Company expects the long-term debt will be
refinanced.
TANGIBLE FIXED ASSETS
All tangible fixed assets are stated at cost. The Company has not had any
reevaluations performed on its tangible fixed assets. Tangible fixed assets,
with the exception of land, are depreciated over their estimated useful lives
or over the life of the power purchase agreement by the straight line method.
Ordinary maintenance and repairs are expensed as incurred; replacements and
improvements are capitalized.
The estimated useful lives are:
<TABLE>
<S> <C>
Site roads and preparation ............... 35 years
Generators, systems, stacks, etc. ........ 35 years
Coal handling plant ...................... 10-35 years
Other operating fixed assets ............. 3-10 years
</TABLE>
STOCKS
Stocks are carried at the lower of cost (principally by the FIFO method or
another method which approximates FIFO) and net realizable value. In valuing
stocks, appropriate allowance is made for obsolete or slow-moving items.
TRADE DEBTORS
Trade debtors are stated at nominal value.
PROVISIONS
Employee Provisions - Provisions are made for amounts expected to be paid
to the operator of the Gladstone Power Station in respect of its employees for
the pro rata entitlements for long service and annual leave. These amounts are
accrued at actual pay rates having regard to experience of employee's departure
and period of service. The provisions are divided into current (expected to be
paid in the ensuing twelve months) and non-current portions.
Deferred Tax - Provisions for deferred taxes have been set up where items
entering into the determination of accounting profit for one period are
recognized for taxation purposes in another. The principal difference arises
in connection with the depreciation of fixed assets. In calculating the
provision, current tax rates are applied. During 1995, Australian income tax
rates increased from 33% to 36%. In 1995, the prior year deferred tax balance
was increased to reflect the increase in tax rates with the adjustment being
recorded in taxation in the statement of income.
COMPANY INCOME TAX
Company income tax is based upon the results reported in the statement of
income as adjusted for permanent differences. Current Australian tax rates are
applied.
6
<PAGE> 7
SUNSHINE STATE POWER BV
NOTES TO THE ANNUAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- (CONTINUED)
3. INTANGIBLE FIXED ASSETS
The movements in the intangible fixed assets are summarized as follows:
<TABLE>
<CAPTION>
PROJECT
DEVELOPMENT FINANCING
EXPENDITURES COSTS TOTAL
------------ --------- ------
AUD'000 AUD'000 AUD'000
<S> <C> <C> <C>
COST
Balance at December 31, 1994 ....................... 6,984 2,707 9,691
Additions for the year ended December 31, 1995 ..... - - -
------------ --------- -------
Balance at December 31, 1995 ....................... 6,984 2,707 9,691
Additions for the year ended December 31, 1996 ..... - - -
------------ --------- -------
Balance at December 31, 1996 ....................... 6,984 2,707 9,691
Additions for the year ended December 31, 1997 ..... - - -
------------ --------- -------
Balance at December 31, 1997 ....................... 6,984 2,707 9,691
ACCUMULATED AMORTIZATION
Balance at December 31, 1994 ....................... (150) (203) (353)
Amortization for the year ended December 31, 1995 .. (199) (271) (470)
Amortization for the year ended December 31, 1996 .. (200) (271) (471)
Amortization for the year ended December 31, 1997 .. (200) (271) (471)
------------ --------- -------
Balance at December 31, 1997 ....................... (749) (1,016) (1,765)
------------ --------- -------
Net book value at December 31, 1997 ................ 6,235 1,691 7,926
------------ --------- -------
</TABLE>
4. TANGIBLE FIXED ASSETS
The movements in the tangible fixed assets are summarized as follows:
<TABLE>
<CAPTION>
OTHER
SITE ROADS GENERATORS COAL OPERATING
AND SYSTEMS, HANDLING FIXED
LAND PREPARATION STACKS PLANT ASSETS TOTAL
---- ----------- ---------- -------- --------- -----
AUD'000 AUD'000 AUD'000 AUD'000 AUD'000 AUD'000
<S> <C> <C> <C> <C> <C> <C>
COST
Balance at December 31, 1994 ...... 211 2,443 141,125 6,294 1,912 151,985
Additions ......................... - 146 8,943 2,036 721 11,846
Disposals ......................... - - (1) - (10) (11)
------- ------- ------- -------- -------- -------
Balance at December 31, 1995 ...... 211 2,589 150,067 8,330 2,623 163,820
Additions ......................... 5 209 11,988 1,334 111 13,647
Disposals ......................... - - (88) - (19) (107)
------- ------- ------- -------- -------- -------
Balance at December 31, 1996 ...... 216 2,798 161,967 9,664 2,715 177,360
Additions ......................... - 48 3,810 44 263 4,165
Disposals ......................... - (12) (3) - (6) (21)
------- ------- ------- -------- -------- -------
Balance at December 31, 1997 ...... 216 2,834 165,774 9,708 2,972 181,504
------- ------- ------- -------- -------- -------
</TABLE>
7
<PAGE> 8
SUNSHINE STATE POWER BV
NOTES TO THE ANNUAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995-- (CONTINUED)
<TABLE>
<CAPTION>
OTHER
SITE ROADS GENERATORS COAL OPERATING
AND SYSTEMS, HANDLING FIXED
LAND PREPARATION STACKS PLANT ASSETS TOTAL
-------------- ------------ ------------- -------------- ------------- --------------
AUD'000 AUD'000 AUD'000 AUD'000 AUD'000 AUD'000
<S> <C> <C> <C> <C> <C> <C>
ACCUMULATED DEPRECIATION
Balance at December 31, 1994 ...... - (53) (2,940) (331) (177) (3,501)
Charge for the year ............... - (72) (4,304) (452) (353) (5,181)
-------------- ------------- ------------- ------------- ------------- -------------
Balance at December 31, 1995 ...... - (125) (7,244) (783) (530) (8,682)
Charge for the year ............... - (79) (4,497) (601) (393) (5,570)
-------------- ------------- ------------- ------------- ------------- -------------
Balance at December 31, 1996 ...... - (204) (11,741) (1,384) (923) (14,252)
Charge for the year ............... - (129) (4,795) (676) (258) (5,858)
-------------- ------------- ------------- ------------- ------------- -------------
Balance at December 31, 1997 ...... - (333) (16,536) (2,060) (1,181) (20,110)
Net book value at December 31,
1997 ............................. 216 2,501 149,238 7,648 1,791 161,394
-------------- ------------- ------------- ------------- ------------- -------------
Construction in progress at
December 31, 1997 (construction in
progress at December 31, 1996 and
1995 was $2,065 and $6,217,
respectively) .................... 151
-------------
Net tangible fixed assets at
December 31, 1997 ................ 161,545
-------------
</TABLE>
5. STOCKS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
AUD'000 AUD'000 AUD'000
Coal .................... 1,046 2,318 656
Fuel oils ............... 146 154 202
Chemicals ............... 5 12 13
Spares and consumables .. 1,057 1,052 980
--------- --------- ---------
2,254 3,536 1,851
--------- --------- ---------
</TABLE>
6. RECEIVABLES
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
AUD'000 AUD'000 AUD'000
Trade debtors ........... 4,249 4,605 5,501
Prepayments ............. 221 272 334
--------- --------- ---------
4,470 4,877 5,835
--------- --------- ---------
</TABLE>
All receivables are due in less than one year.
8
<PAGE> 9
SUNSHINE STATE POWER BV
NOTES TO THE ANNUAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995-- (CONTINUED)
7. CASH AND BANK BALANCES
All cash and bank balances are held by banks and include investments with
maturities of three months or less which are readily convertible to cash. The
Company's long-term debt agreement places restrictions on the amount of cash
and bank balances which must be maintained. At December 31, 1997, 1996 and
1995, the restricted cash and bank balances totaled $6,200,000, $7,000,000 and
$7,500,000, respectively.
8. ISSUED SHARE CAPITAL
The authorized share capital consists of 2,000 shares each having a
nominal value of 30 Australian dollars (40 Dutch Guilders), of which 1,000
shares have been issued and fully paid up at December 31, 1997 and 1996. The
Company's shares are owned by NRGenerating International BV (990) and Gunwale
BV (10). Both NRGenerating International BV and Gunwale BV are wholly owned by
NRG Energy, Inc., which is incorporated in the United States of America.
9. RETAINED EARNINGS
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
AUD'000 AUD'000
Balance at January 1 ............................ 15,014 7,712
Appropriation of prior years result ............. 9,133 7,302
------- -------
Balance at December 31 .......................... 24,147 15,014
------- -------
</TABLE>
10. RESULT FOR THE PERIOD
<TABLE>
<CAPTION>
AUD'000
-------
<S> <C>
Balance at December 31, 1994 ................................ 7,712
1994 net result appropriated to retained earnings ........... (7,712)
Net result for the year ended December 31, 1995 ............. 7,302
1995 net result appropriated to retained earnings ........... (7,302)
Net result for the year ended December 31, 1996 ............. 9,133
1996 net result appropriated to retained earnings ........... (9,133)
Net result for the year ended December 31, 1997 ............. 2,433
-------
Balance at December 31, 1997 ................................ 2,433
-------
</TABLE>
9
<PAGE> 10
SUNSHINE STATE POWER BV
NOTES TO THE ANNUAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995-- (CONTINUED)
11. PROVISIONS
<TABLE>
<CAPTION>
EMPLOYEE DEFERRED
PROVISIONS TAX TOTAL
---------- --- -----
<S> <C> <C> <C>
AUD'000 AUD'000 AUD'000
Balance at December 31, 1994 ............. 697 3,799 4,496
Charged/(released) to income ............. 166 4,647 4,813
------- ------- -------
Balance at December 31, 1995 ............. 863 8,446 9,309
Charged/(released) to income ............. 172 5,137 5,309
------- ------- -------
Balance at December 31, 1996 ............. 1,035 13,583 14,618
Charged/(released) to income ............. 209 1,368 1,577
------- ------- -------
Balance at December 31, 1997 ............. 1,244 14,951 16,195
------- ------- -------
</TABLE>
Approximately $710 (AUD'000) of the employee provisions are current and
expected to be paid during 1998.
12. LONG-TERM LIABILITIES
Secured long-term debt due to third parties
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
AUD'000 AUD'000 AUD'000
Secured - with banks ........ 103,383 108,821 113,733
</TABLE>
Current installments of bank long-term debt are included under current
liabilities. The interest rate for long-term debt is variable based on an
average of the bid rates quoted by the banks plus a margin of 1.4% at December
31, 1997.
The bank long-term debt is repayable as follows (in AUD'000):
<TABLE>
<S> <C>
1998 ....................................................... 5,437
1999 ....................................................... 5,975
2000 ....................................................... 6,600
2001 ....................................................... 7,275
2002 ....................................................... 8,012
Thereafter ................................................. 75,522
------
108,821
-------
</TABLE>
The bank long-term debt is secured by the Company's ownership interest in
the Gladstone Power Station Joint Venture.
10
<PAGE> 11
SUNSHINE STATE POWER BV
NOTES TO THE ANNUAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995-- (CONTINUED)
Unsecured Subordinated Notes Payable (AUD'000)
On March 25,1994 the Company received loans from NRGenerating International BV
and Gunwale BV, the primary shareholders of the Company, in the amounts of
$48,312 and $488 respectively. The notes payable are subordinated to all other
liabilities of the Company, bear no interest and are to be repaid in U.S.
dollars. The Company repaid $12,767 and $129 to NRGenerating International BV
and Gunwale BV, respectively, during 1997 and repaid $1,822 and $18 to
NRGenerating International BV and Gunwale BV respectively during 1996. There
were no repayments made during 1995. Repayments on the notes payable are at
the discretion of the Company, unless certain events of termination occur, as
defined, and then the entire balance of the notes becomes due. The note
balances, as adjusted for current period activity and foreign exchange
fluctuations, were $31,733 and $319 to NRGenerating International BV and
Gunwale BV at December 31, 1997, respectively, $37,616 and $380 to NRGenerating
International BV and Gunwale BV at December 31, 1996, respectively, and $41,940
and $424 to NRGenerating International BV and Gunwale BV at December 31, 1995,
respectively.
13. CURRENT LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
AUD'000 AUD'000 AUD'000
Current installments of bank long-term debt .. 5,437 4,913 4,475
Trade creditors/suppliers .................... 945 776 1,579
Accrued coal/rail costs ...................... 1,633 1,152 1,712
Accrued interest ............................. 559 800 959
Other accrued expenses ....................... 266 628 194
--------- --------- ---------
8,840 8,269 8,919
--------- --------- ---------
</TABLE>
14. RELATED PARTIES
An affiliate of the Company, Sunshine State Power (No. 2) BV owns 17.5% of
the Gladstone Power Station Joint Venture. Sunshine State Power (No. 2) BV is
owned by the owners of the Company.
The Gladstone Power Station is operated by NRG Gladstone Operating
Services Pty Ltd, which is ultimately a wholly-owned subsidiary of NRG Energy
Inc. NRG Gladstone Operating Services Pty Ltd operates the Gladstone Power
Station under the terms of the Operation and Maintenance Agreement with the
Gladstone Power Station Joint Venture. During the periods ended December 31,
1997, 1996 and 1995, the Company paid NRG Gladstone Operating Services Pty Ltd
approximately $298, $288 and $331 (AUD'000) respectively in operators fees
under the terms of the Operation and Maintenance Agreement.
11
<PAGE> 12
SUNSHINE STATE POWER BV
NOTES TO THE ANNUAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995-- (CONTINUED)
15. NUMBER OF EMPLOYEES
The average number of persons employed at the Gladstone Power Station
during 1997 was approximately 453. These individuals are primarily employed in
the operations and maintenance areas of the station. The Company is
responsible for 20% of the related costs for these employees. The Company
itself has no employees.
16. REMUNERATION OF DIRECTORS
During the periods ended December 31, 1997, 1996 and 1995, none of the
directors received remuneration for their services as directors of the Company.
12
<PAGE> 13
TO THE SHAREHOLDERS OF SUNSHINE STATE POWER (NO. 2) BV
AUDITORS' REPORT
We have audited the accompanying balance sheet of Sunshine State Power (No. 2)
BV as of December 31, 1997, 1996 and 1995, and the related statements of income
and of cash flows for each of the three years ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements give a true and fair view of the
financial position of the Company as of December 31, 1997, 1996 and 1995 and of
the results for the years then ended in accordance with accounting principles
generally accepted in the Netherlands and comply with the financial reporting
requirements included in Part 9, Book 2 of the Netherlands Civil Code.
PRICE WATERHOUSE NEDERLAND BV
March 27, 1998
Amsterdam, Netherlands
13
<PAGE> 14
SUNSHINE STATE POWER (NO. 2) BV
BALANCE SHEET AT DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
AUD'000 AUD'000 AUD'000
------- ------- -------
<S> <C> <C> <C>
ASSETS
FIXED ASSETS
Intangible fixed assets ..................... 6,937 7,348 7,759
Tangible fixed assets ....................... 141,349 144,524 141,183
------- ------- -------
148,286 151,872 148,942
CURRENT ASSETS
Stocks ...................................... 1,972 3,093 1,620
Receivables ................................. 3,910 4,267 5,106
Cash and bank balances ...................... 9,535 10,416 9,953
------- ------- -------
15,417 17,776 16,679
------- ------- -------
TOTAL ASSETS ................................ 163,703 169,648 165,621
------- ------- -------
SHAREHOLDERS' EOUITY AND LIABILITIES
SHAREHOLDERS' EQUITY
Issued share capital ........................ 30 30 30
Retained earnings ........................... 21,108 13,158 6,748
Result for the year ......................... 2,139 7,950 6,410
------- ------- -------
23,277 21,138 13,188
------- ------- -------
Provisions .................................. 14,164 12,779 8,155
Long-term liabilities ....................... 118,545 128,472 136,515
Current liabilities ......................... 7,717 7,259 7,763
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES .. 163,703 169,648 165,621
======= ======= =======
</TABLE>
The accompanying notes form an integral part of the annual accounts.
14
<PAGE> 15
SUNSHINE STATE POWER (NO. 2) BV
STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
AUD'000 AUD'000 AUD'000
------- ------- -------
<S> <C> <C> <C>
Net turnover
Queensland Electricity Commission ............... 21,092 27,340 29,094
Boyne Smelters Limited .......................... 27,462 18,854 18,706
------ ------ ------
TOTAL ............................................ 48,554 46,194 47,800
Cost of turnover
Non-fuel ........................................ 7,756 8,031 7,143
Fuel ............................................ 17,475 12,742 12,995
------ ------ ------
TOTAL ............................................ 25,231 20,773 20,138
------ ------ ------
GROSS PROFIT ON TURNOVER ......................... 23,323 25,421 27,662
Operating expenses .............................. 2,144 1,509 2,632
Depreciation and amortization expense ........... 5,537 5,285 4,846
------ ------ ------
TOTAL EXPENSES ................................... 7,681 6,794 7,478
------ ------ ------
NET PROFIT ON TURNOVER ........................... 15,642 18,627 20,184
------ ------ ------
Interest expense ................................. 6,852 8,954 9,713
Interest income .................................. (584) (668) (626)
Foreign exchange (gain)/loss ..................... 6,096 (2,157) 609
Disposal of assets (gain)/loss ................... (64) 76 -
------ ------ ------
NET FINANCIAL EXPENSE ............................ 12,300 6,205 9,696
------ ------ ------
Result from ordinary operations before taxation .. 3,342 12,422 10,488
Taxation ......................................... 1,203 4,472 4,078
------ ------ ------
NET RESULT ....................................... 2,139 7,950 6,410
------ ------ ------
</TABLE>
The accompanying notes form an integral part of the annual accounts.
15
<PAGE> 16
SUNSHINE STATE POWER (NO. 2) BV
STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
AUD'000 AUD'000 AUD'000
-------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities
Net result ................................................ 2,139 7,950 6,410
Adjustments to reconcile net result to net cash provided by
operating activities:
Depreciation and amortization ............................ 5,537 5,285 4,846
Deferred income taxes .................................... 1,203 4,472 4,078
Foreign exchange loss/(gain) ............................. 6,096 (2,157) 609
Gain/loss on sale of fixed assets ........................ (64) 76 -
Changes in operating assets and liabilities:
Stocks ................................................... 1,121 (1,473) (6)
Receivables .............................................. 357 839 (1,237)
Provisions ............................................... 182 152 144
Current liabilities ...................................... (3) (886) (131)
-------- ------- --------
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES ........... 16,568 14,258 14,713
-------- ------- --------
Cash flows from investing activities:
Purchases of tangible fixed assets ....................... (1,969) (8,308) (11,165)
Proceeds from sale of fixed assets ....................... 83 17 -
-------- ------- --------
NET CASH FLOWS USED BY INVESTING ACTIVITIES ............... (1,886) (8,291) (11,165)
-------- ------- --------
Cash flows from financing activities:
Proceeds (repayments) of notes payable ................... (11,265) (1,588) 883
Repayments of long-term debt ............................. (4,298) (3,916) (3,533)
-------- ------- --------
NET CASH FLOWS (USED) BY FINANCING ACTIVITIES ............. (15,563) (5,504) (2,650)
-------- ------- --------
NET INCREASE IN CASH AND BANK BALANCES .................... (881) 463 898
-------- ------- --------
Cash and bank balances
Beginning of year ........................................ 10,416 9,953 9,055
-------- ------- --------
End of year .............................................. 9,535 10,416 9,953
-------- ------- --------
SUPPLEMENTAL DISCLOSURE OF CASH PAID FOR
INTEREST ................................................. 7,063 9,084 9,667
-------- ------- --------
</TABLE>
The accompanying notes form an integral part of the annual accounts.
16
<PAGE> 17
SUNSHINE STATE POWER (NO. 2) BV
NOTES TO THE ANNUAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. GENERAL
ACTIVITIES
Sunshine State Power (No. 2) BV (the Company) was incorporated on February
24, 1994. The Company's principal operating activity is the ownership of 17.5%
of the Gladstone Power Station Joint Venture. The Gladstone Power Station
Joint Venture owns and operates the Gladstone Power Station located in
Queensland, Australia, which it acquired on March 30, 1994. The Gladstone
Power Station Joint Venture is an unincorporated joint venture and therefore
not a separate legal entity. Accordingly, the Gladstone Power Station Joint
Venture owners act as tenants in common owning their proportionate shares of
the unincorporated joint venture's assets, liabilities and results of
operations. The accounts have been prepared for the years ended December 31,
1997, 1996 and 1995.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Unless otherwise stated assets and liabilities are carried at nominal
value.
BASIS OF PREPARATION
The Company's financial statements have been prepared in accordance with
generally accepted accounting principles in the Netherlands (Netherland GAAP)
which may differ in certain respects from generally accepted accounting
principles in the United States (US GAAP). With regard to the Company's
balance sheet and statement of income, there are no material differences
between Netherlands GAAP and US GAAP. With regard to the Company's statement
of cash flows, under US GAAP the foreign exchange loss/(gain) would be
classified under the cash flows from financing activities section as US GAAP
requires that such items be netted with the related cash flow item.
FOREIGN CURRENCIES
Assets and liabilities at year-end and transactions during the period
denominated in a foreign currency are translated into the Company's local
currency (Australian $) at the exchange rates ruling at year-end and at the
time of the transaction, respectively. Exchange adjustments are taken to the
statement of income.
INTANGIBLE FIXED ASSETS
Project Development Expenditures - Project development expenditures
represent the Company's share of project development expenditures incurred by
the Gladstone Power Station Joint Venture to organize the acquisition of the
Gladstone Power Station and operate it subsequent to the acquisition.
Capitalized development expenditures are being amortized over the term of
the Gladstone Power Station Power sales agreements (35 years), commencing from
the date the investment in the project was consummated. The carrying values of
capitalized development expenditures and the amortization periods are reviewed
annually and any necessary write down is charged against income. Research
expenditures and expenditures on development of existing projects are charged
against income in the year in which they are incurred.
17
<PAGE> 18
SUNSHINE STATE POWER (NO. 2) BV
NOTES TO THE ANNUAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995-- (CONTINUED)
Financing Costs - Financing costs represent the Company's share of the
costs incurred by the Gladstone Power Station Joint Venture to acquire the
long-term debt used to finance the acquisition of the Gladstone Power Station.
Capitalized financing costs are being amortized over a ten year period, which
represents the timeframe until the Company expects the long-term debt will be
refinanced.
TANGIBLE FIXED ASSETS
All tangible fixed assets are stated at cost. The Company has not had any
revaluations performed on its tangible fixed assets. Tangible fixed assets,
with the exception of land, are depreciated over their estimated useful lives
by the straight line method. Ordinary maintenance and repairs are expensed as
incurred; replacements and improvements are capitalized.
The estimated useful lives are:
<TABLE>
<S> <C>
Site roads and preparation ................ 35 years
Generators, systems, stacks, etc. ......... 35 years
Coal handling plant ....................... 10-35 years
Other operating fixed assets .............. 3-10 years
</TABLE>
STOCKS
Stocks are carried at the lower of cost (principally by the FIFO method or
another method which approximates FIFO) and net realizable value. In valuing
stocks, appropriate allowance is made for obsolete or slow-moving items.
TRADE DEBTORS
Trade debtors are stated at nominal value.
PROVISIONS
Employee Provisions - Provisions are made for amounts expected to be paid
to the operator of the Gladstone Power Station in respect of its employees for
the pro rata entitlements for long service and annual leave. These amounts are
accrued at actual pay rates having regard to experience of employee's departure
and period of service. The provisions are divided into current (expected to be
paid in the ensuing twelve months) and non-current portions.
Deferred Tax - Provisions for deferred taxes have been set up where items
entering into the determination of accounting profit for one period are
recognized for taxation purposes in another. The principal difference arises
in connection with the depreciation of fixed assets. In calculating the
provision, current tax rates are applied. During 1995 Australian income tax
rates increased from 33% to 36%. In 1995 the prior year deferred tax balance
was increased to reflect the increase in tax rates with the adjustment being
recorded in taxation in the statement of income.
COMPANY INCOME TAX
Company income tax is based upon the results reported in the statement of
income as adjusted for permanent differences. Current Australian tax rates are
applied.
18
<PAGE> 19
SUNSHINE STATE POWER (NO. 2) BV
NOTES TO THE ANNUAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995-- (CONTINUED)
3. INTANGIBLE FIXED ASSETS
The movements in the intangible fixed assets are summarized as follows:
<TABLE>
<CAPTION>
PROJECT
DEVELOPMENT FINANCING
EXPENDITURES COSTS TOTAL
------------ ---------- --------
AUD'000 AUD'000 AUD'000
<S> <C> <C> <C>
COST
Balance at December 31, 1994 ....................... 6,111 2,369 8,480
Additions for the year ended December 31, 1995 ..... - - -
---------- ---------- ----------
Balance at December 31, 1995 ....................... 6,111 2,369 8,480
Additions for the year ended December 31, 1996 ..... - - -
---------- ---------- ----------
Balance at December 31, 1996 ....................... 6,111 2,369 8,480
Additions for the year ended December 31, 1997 ..... - - -
---------- ---------- ----------
Balance at December 31, 1997 ....................... 6,111 2,369 8,480
ACCUMULATED AMORTIZATION
Balance at December 31, 1994 ....................... (131) (178) (309)
Amortization for the year ended December 31, 1995 .. (175) (237) (412)
Amortization for the year ended December 31, 1996 .. (174) (237) (411)
Amortization for the year ended December 31, 1997 .. (175) (236) (411)
---------- ---------- ----------
Balance at December 31, 1997 ....................... (655) (888) (1,543)
---------- ---------- ----------
Net book value at December 31, 1997 ................ 5,456 1,481 6,937
---------- ---------- ----------
</TABLE>
19
<PAGE> 20
SUNSHINE STATE POWER (NO. 2) BV
NOTES TO THE ANNUAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995-- (CONTINUED)
4. TANGIBLE FIXED ASSETS
The movements in the tangible fixed assets are summarized as follows:
<TABLE>
<CAPTION>
OTHER
SITE ROADS GENERATORS COAL OPERATING
AND SYSTEMS, HANDLING FIXED
LAND PREPARATION STACKS PLANT ASSETS TOTAL
------- ------------ -------- --------- --------- --------
AUD'000 AUD'000 AUD'000 AUD'000 AUD'000 AUD'000
<S> <C> <C> <C> <C> <C> <C>
COST
Balance at December 31, 1994 .... 184 2,138 123,482 5,508 1,673 132,985
Additions ....................... - 128 7,827 1,781 631 10,367
Disposals ....................... - - (1) - (9) (10)
---------- ---------- ---------- ------- ------- --------
Balance at December 31, 1995 .... 184 2,266 131,308 7,289 2,295 143,342
Additions ....................... 5 182 10,489 1,168 97 11,941
Disposals ....................... - - (77) - (16) (93)
---------- ---------- ---------- ------- ------- --------
Balance at December 31, 1996 .... 189 2,448 141,720 8,457 2,376 155,190
Additions ....................... - 42 3,334 38 230 3,644
Disposals ....................... - (10) (3) - (6) (19)
---------- ---------- ---------- ------- ------- --------
Balance at December 31, 1997 .... 189 2,480 145,051 8,495 2,600 158,815
---------- ---------- ---------- ------- ------- --------
ACCUMULATED DEPRECIATION
Balance at December 31, 1994 .... - (46) (2,571) (292) (155) (3,064)
Charge for the year ............. - (63) (3,767) (396) (309) (4,535)
---------- ---------- ---------- ------- ------- --------
Balance at December 31, 1995 .... - (109) (6,338) (688) (464) (7,599)
Charge for the year ............. - (69) (3,935) (526) (344) (4,874)
---------- ---------- ---------- ------- ------- --------
Balance at December 31, 1996 .... - (178) (10,273) (1,214) (808) (12,473)
Charge for the year ............. - (114) (4,195) (591) (225) (5,125)
---------- ---------- ---------- ------- ------- --------
Balance at December 31, 1997 .... - (292) (14,468) (1,805) (1,033) (17,598)
Net book value at December 31,
1997 ........................... 189 2,188 130,583 6,690 1,567 141,217
---------- ---------- ---------- ------- ------- --------
Construction in progress at
December 31, 1997 (construction
in progress at December 31, 1996
and 1995 was $1,807 and $5,440,
respectively) .................. 132
--------
Net tangible fixed assets at
December 31, 1997 .............. 141,349
--------
</TABLE>
20
<PAGE> 21
SUNSHINE STATE POWER (NO. 2) BV
NOTES TO THE ANNUAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995-- (CONTINUED)
5. STOCKS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
AUD'000 AUD'000 AUD'000
Coal .................... 915 2,028 574
Fuel oils ............... 128 135 177
Chemicals ............... 4 10 11
Spares and consumables .. 925 920 858
-------- --------- ---------
1,972 3,093 1,620
-------- --------- ---------
</TABLE>
6. RECEIVABLES
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
AUD'000 AUD'000 AUD'000
Trade debtors ........... 3,717 4,030 4,814
Prepayments ............. 193 237 292
-------- ------- -------
3,910 4,267 5,106
-------- ------- -------
</TABLE>
All receivables are due in less than one year.
7. CASH AND BANK BALANCES
All cash and bank balances are held by banks and include investments with
maturities of three months or less which are readily convertible to cash. The
Company's long-term debt agreement places restrictions on the amount of cash
and bank balances which must be maintained. At December 31, 1997, 1996 and
1995, the restricted cash and bank balances totaled $5,425,000, $6,100,000 and
$6,500,000, respectively.
8. ISSUED SHARE CAPITAL
The authorized share capital consists of 2,000 shares each having a
nominal value of 75 Australian dollars (100 Dutch Guilders), of which 400
shares have been issued and fully paid up at December 31, 1997 and 1996. The
Company's shares are owned by NRGenerating International BV (396) and Gunwale
BV (4). Both NRGenerating International BV and Gunwale BV are wholly owned by
NRG Energy, Inc., which is incorporated in the United States of America.
9. RETAINED EARNINGS
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
---- ----
AUD'000 AUD'000
Balance at January 1 ......................... 13,158 6,748
Appropriation of prior years result .......... 7,950 6,410
------- -------
Balance at December 31 ....................... 21,108 13,158
------- -------
</TABLE>
21
<PAGE> 22
SUNSHINE STATE POWER (NO. 2) BV
NOTES TO THE ANNUAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995-- (CONTINUED)
10. RESULT FOR THE PERIOD
<TABLE>
<CAPTION>
<S> <C>
AUD'000
-------
Balance at December 31, 1994 ............................... 6,748
1994 net result appropriated to retained earnings .......... (6,748)
Net result for the year ended December 31, 1995 ............ 6,410
1995 net result appropriated to retained earnings .......... (6,410)
Net result for the year ended December 31, 1996 ............ 7,950
1996 net result appropriated to retained earnings .......... (7,950)
Net result for the year ended December 31, 1997 ............ 2,139
-------
Balance at December 31, 1997 ............................... 2,139
-------
</TABLE>
11. PROVISIONS
<TABLE>
<CAPTION>
EMPLOYEE DEFERRED
PROVISIONS TAX TOTAL
---------- -------- -------
<S> <C> <C> <C>
AUD'000 AUD'000 AUD'000
Balance at December 31, 1994 ............ 610 3,323 3,933
Charged/(released) to income ............ 144 4,078 4,222
--------- --------- -------
Balance at December 31, 1995 ............ 754 7,401 8,155
Charged/(released) to income ............ 152 4,472 4,624
--------- --------- -------
Balance at December 31, 1996 ............ 906 11,873 12,779
Charged/(released) to income ............ 182 1,203 1,385
--------- --------- -------
Balance at December 31, 1997 ............ 1,088 13,076 14,164
--------- --------- -------
</TABLE>
Approximately $621 (AUD'000) of the employee provisions are current and
expected to be paid during 1998.
12. LONG-TERM LIABILITIES
Secured long-term debt due to third parties
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
AUD'000 AUD'000 AUD'000
Secured - with banks .... 90,460 95,218 99,516
</TABLE>
Current installments of bank long-term debt are included under current
liabilities. The interest rate for long-term debt is variable based on an
average of the bid rates quoted by the banks plus a margin of 1.4% at December
31, 1997.
22
<PAGE> 23
SUNSHINE STATE POWER (NO. 2) BV
NOTES TO THE ANNUAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995-- (CONTINUED)
The bank long-term debt is repayable as follows (in AUD'000):
<TABLE>
<S> <C>
1998 ............................................ 4,758
1999 ............................................ 5,228
2000 ............................................ 5,775
2001 ............................................ 6,366
2002 ............................................ 7,011
Thereafter ...................................... 66,080
------
95,218
======
</TABLE>
The bank long-term debt is secured by the Company's ownership interest in
the Gladstone Power Station Joint Venture.
Unsecured Subordinated Note Payable (AUD'000)
On March 25,1994 the Company received loans from NRGenerating
International BV and Gunwale BV, the primary shareholders of the Company, in
the amount of $42,273 and $427, respectively. The notes payable are
subordinated to all other liabilities of the Company, bear no interest and are
to be repaid in US dollars. The Company repaid $11,152 and $113 to
NRGenerating International BV and Gunwale BV, respectively during 1997 and
$1,572 and $16 to NRGenerating International BV and Gunwale BV respectively
during 1996. There were no repayments made during 1995. Repayments on the
notes payable are at the discretion of the Company, unless certain events of
termination occur, as defined, and then the entire balance of the notes becomes
due. The note balances, as adjusted for current period activity and foreign
exchange fluctuations, were $27,806 and $279 to NRGenerating International BV
and Gunwale BV at December 31, 1997 respectively, $32,922 and $332 to
NRGenerating International BV and Gunwale BV at December 31, 1996,
respectively, and $36,629 and $370 to NRGenerating International BV and Gunwale
BV at December 31, 1995, respectively.
13. CURRENT LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
AUD'000 AUD'000 AUD'000
Current installments of bank long-term debt .. 4,758 4,298 3,916
Trade creditors/suppliers .................... 826 696 1,345
Accrued coal/rail costs ...................... 1,429 1,008 1,498
Accrued interest ............................. 489 700 834
Other accrued expenses ....................... 215 557 170
-------- -------- --------
7,717 7,259 7,763
-------- -------- --------
</TABLE>
23
<PAGE> 24
SUNSHINE STATE POWER (NO. 2) BV
NOTES TO THE ANNUAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995-- (CONTINUED)
14. RELATED PARTIES
An affiliate of the Company, Sunshine State Power BV owns 20% of the
Gladstone Power Station Joint Venture. Sunshine State Power BV is owned by the
owners of the Company.
The Gladstone Power Station is operated by NRG Gladstone Operating
Services Pty Ltd, which is ultimately a wholly-owned subsidiary of NRG Energy
Inc. NRG Gladstone Operating Services Pty Ltd operates the Gladstone Power
Station under the terms of the Operation and Maintenance Agreement with the
Gladstone Power Station Joint Venture. During the periods ended December
31,1997,1996 and 1995, the Company paid NRG Gladstone Operating Services Pty
Ltd approximately $260, $252 and $289 (A$S'000) respectively in operators fees
under the terms of the Operation and Maintenance Agreement.
15. NUMBER OF EMPLOYEES
The average number of persons employed at the Gladstone Power Station
during 1997 was approximately 453. These individuals are primarily employed in
the operations and maintenance areas of the station. The Company is
responsible for 17.5% of the related costs for these employees. The Company
itself has no employees.
16. REMUNERATION OF DIRECTORS
During the periods ended December 31, 1997, 1996 and 1995, none of the
directors received remuneration for their services as directors of the Company.
24
