<PAGE> 1
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, 1999 Commission File Number 333-33397
-------------- ---------
NRG Energy, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 41-1724239
- --------------------------------------------------------------------------------
(State or other jurisdiction of I.R.S. Employer Identification No.)
incorporation or organization)
1221 Nicollet Mall, Minneapolis, Minnesota 55403
- --------------------------------------------------------------------------------
(Address of principal executive officers) (Zip Code)
Registrant's telephone number, including area code (612) 373-5300
-----------------------------
None
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicated 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
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 12, 1999
----------------------------- ---------------------------
Common Stock, $1.00 par value 1,000 Shares
All outstanding common stock of NRG Energy, Inc., is owned beneficially
and of record by Northern States Power Company, a Minnesota corporation.
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.
--------
PART I
Item 1 Consolidated Financial Statements and Notes
Consolidated Statements of Income 1
Consolidated Balance Sheets 2-3
Consolidated Statements of Stockholder's Equity 4
Consolidated Statements of Cash Flows 5
Notes to Financial Statements 6-8
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-11
PART II
Item 6 Exhibits, Financial Statement Schedules, and Reports 12
on Form 8-K
SIGNATURES 13
<PAGE> 3
PART I
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
NRG ENERGY, INC. AND SUBSIDIARIES
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
(Thousands of Dollars) 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING REVENUES
Revenues from wholly-owned operations $ 37,847 $ 24,522
Equity in earnings of unconsolidated affiliates 8,667 16,081
- ---------------------------------------------------------------------------------------------------------
Total operating revenues 46,514 40,603
- ---------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Cost of wholly-owned operations 27,940 13,646
Depreciation and amortization 4,734 3,676
General, administrative, and development 15,985 13,170
- ---------------------------------------------------------------------------------------------------------
Total operating costs and expenses 48,659 30,492
- ---------------------------------------------------------------------------------------------------------
OPERATING (LOSS) INCOME (2,145) 10,111
- ---------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Minority interest in earnings of consolidated subsidiary (464) (1,032)
Other income, net 734 57
Interest expense (11,059) (11,453)
- ---------------------------------------------------------------------------------------------------------
Total other expense (10,789) (12,428)
- ---------------------------------------------------------------------------------------------------------
LOSS BEFORE INCOME TAXES (12,934) (2,317)
INCOME TAXES - BENEFIT 11,994 8,406
- ---------------------------------------------------------------------------------------------------------
NET (LOSS) INCOME $ (940) $ 6,089
=========================================================================================================
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
CONSOLIDATED BALANCE SHEETS
NRG ENERGY, INC. AND SUBSIDIARIES
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
(Thousands of Dollars) 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 12,468 $ 6,381
Restricted cash 2,137 4,021
Accounts receivable-trade, less allowance
for doubtful accounts of $100 16,868 15,223
Accounts receivable-affiliates 18,606 7,324
Current portion of notes receivable - affiliates 2,959 4,460
Current portion of notes receivable - 26,200
Income taxes receivable 7,605 21,169
Inventory 4,286 2,647
Prepayments and other current assets 3,787 4,533
- ----------------------------------------------------------------------------------------------------------------------
Total current assets 68,716 91,958
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PROPERTY, PLANT AND EQUIPMENT, AT ORIGINAL COST
In service 295,977 291,558
Under construction 7,264 5,352
- ----------------------------------------------------------------------------------------------------------------------
303,241 296,910
Less accumulated depreciation (95,768) (92,181)
- ----------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 207,473 204,729
- ----------------------------------------------------------------------------------------------------------------------
OTHER ASSETS
Investments in projects 814,807 800,924
Capitalized project costs 15,171 13,685
Notes receivable, less current portion - affiliates 111,150 101,887
Notes receivable, less current portion 3,744 3,744
Intangible assets, net of accumulated amortization of $3,334 and $2,984 22,203 22,507
Debt issuance costs, net of accumulated amortization of $1,910 and $1,675 7,879 7,276
Other assets, net of accumulated amortization of $7,366 and $7,350 47,536 46,716
- ----------------------------------------------------------------------------------------------------------------------
Total other assets 1,022,490 996,739
- ----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,298,679 $ 1,293,426
======================================================================================================================
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 5
CONSOLIDATED BALANCE SHEETS
NRG ENERGY, INC. AND SUBSIDIARIES
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 7,602 $ 8,258
Revolving line of credit 30,000 -
Accounts payable-trade 12,746 7,371
Accrued property and sales taxes 5,049 3,251
Accrued salaries, benefits and related costs 5,111 7,551
Accrued interest 9,119 7,648
Other current liabilities 5,489 8,289
- -------------------------------------------------------------------------------------------------
Total current liabilities 75,116 42,368
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MINORITY INTEREST 12,982 13,516
CONSOLIDATED PROJECT-LEVEL, LONG TERM, NONRECOURSE DEBT 115,417 113,437
CORPORATE LEVEL LONG-TERM DEBT, LESS CURRENT PORTION 375,000 504,781
DEFERRED REVENUES 8,161 7,748
DEFERRED INCOME TAXES 20,368 19,841
DEFERRED INVESTMENT TAX CREDITS 1,279 1,343
POSTRETIREMENT AND OTHER BENEFIT OBLIGATIONS 10,339 11,060
- -------------------------------------------------------------------------------------------------
Total liabilities 618,662 714,094
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STOCKHOLDER'S EQUITY
Common stock; $1 par value; 1,000 shares authorized;
1,000 shares issued and outstanding 1 1
Additional paid-in capital 631,913 531,913
Retained earnings 129,075 130,015
Accumulated other comprehensive income (80,972) (82,597)
- -------------------------------------------------------------------------------------------------
Total Stockholder's Equity 680,017 579,332
- -------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,298,679 $ 1,293,426
=================================================================================================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 6
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
NRG ENERGY, INC. AND SUBSIDIARIES
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Common Paid-in Retained Comprehensive Stockholder's
(Thousands of Dollars) Stock Capital Earnings Income Equity
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1998 $ 1 $431,913 $ 88,283 $(69,499) $ 450,698
Net Income 6,089 6,089
Foreign currency translation adjustments 3,451 3,451
---------------
Comprehensive income 9,540
----------------------------------------------------------------------------------
BALANCES AT MARCH 31, 1998 $ 1 $431,913 $ 94,372 $(66,048) $ 460,238
----------------------------------------------------------------------------------
BALANCES AT JANUARY 1, 1999 $ 1 $531,913 $ 130,015 $(82,597) $ 579,332
Net Loss (940) (940)
Foreign currency translation adjustments 1,625 1,625
---------------
Comprehensive income 685
Capital Contribution from parent 100,000 100,000
- ------------------------------------------------------------------------------------------------------------------------
BALANCES AT MARCH 31, 1999 $ 1 $631,913 $ 129,075 $(80,972) $ 680,017
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
NRG ENERGY, INC. AND SUBSIDIARIES
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
(Thousands of Dollars) 1999 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (940) $ 6,089
Adjustments to reconcile net (loss) income to net cash
provided by operating activities
Undistributed equity earnings of unconsolidated affiliates 2,427 (12,541)
Depreciation and amortization 4,734 3,676
Deferred income taxes and investment tax credits 463 (3,042)
Minority interest (534) 218
Cash provided (used) by changes in certain working capital items,
net of acquisition effects
Accounts receivable (1,645) 1,521
Accounts receivable-affiliates (11,282) 13,598
Accrued income taxes 13,564 (6,355)
Prepayments and other current assets (893) 1,954
Accounts payable-trade 5,375 (3,496)
Accrued property and sales tax 1,798 901
Accrued salaries, benefits and related costs (2,440) (456)
Accrued interest 1,471 3,293
Other current liabilities (2,800) (1,128)
Cash provided by changes in other assets and liabilities (1,641) (335)
- ----------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,657 3,897
- ----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in projects (16,267) (38,952)
Changes in notes receivable (net) 18,438 24,733
Purchase of plant, property and equipment (6,331) (3,534)
Decrease (increase) in restricted cash 1,884 (195)
- ----------------------------------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (2,276) (17,948)
- ----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions from parent 100,000 -
Proceeds from issuance of long-term debt - 10,670
Principal payments on long-term debt (99,294) (2,209)
- ----------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 706 8,461
- ----------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,087 (5,590)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,381 11,986
- ----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 12,468 $ 6,396
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 8
NRG ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS
The Company is a wholly owned subsidiary of Northern States Power Company (NSP),
a Minnesota corporation. Additional information regarding the Company can be
found in NSP's Form 10-Q for the three months ended March 31, 1999.
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, 1998 (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, 1999 and December
31, 1998, the results of its operations for the three months ended March 31,
1999 and 1998, and its cash flows and stockholders' equity for the three months
ended March 31, 1999 and 1998.
1. BUSINESS DEVELOPMENTS
In October 1998, the Company executed a binding agreement to purchase the
Somerset power station for approximately $55 million from the Eastern
Utilities Association (EUA). The Somerset station, located in Somerset,
Massachusetts, includes two coal-fired generating facilities and two
aeroderivative combustion turbine peaking units supplying 229 MW in
aggregate, of which 69 MW is on deactivated reserve. The project reached
financial close in April 1999.
In December 1998, NRG and Dynegy signed agreements with San Diego Gas &
Electric Company to jointly acquire 1,218 MW of power generation facilities
located near Carlsbad and San Diego California for $356 million. NRG and
Dynegy will each own a 50% interest in these facilities. These transactions
are expected to close in the second quarter of 1999, pending regulatory
approval.
In December 1998, NRG signed agreements with Niagara Mohawk Power to
purchase two coal fired power generation facilities located near Buffalo
with a combined summer capacity rating of 1,360 MW for $355 million. This
transaction is expected to close in the second quarter of 1999 pending
regulatory approval.
In January 1999, NRG reached agreement to purchase the Arthur Kill
generating station and the Astoria gas turbine site for $505 million from
Consolidated Edison Company. These facilities, which are located in New
York, have a combined summer capacity rating of 1,456 MW. The acquisition
is expected to close in the second quarter of 1999, pending regulatory
approvals.
In February 1999, NRG purchased from Thermal Ventures, Inc. (TVI) the
remaining 50.1% limited partnership interests held by TVI in San Francisco
Thermal Limited Partnership and Pittsburgh Thermal Limited Partnership for
$12.3 million. In April 1999, NRG acquired TVI's 50% member interest in
North American Thermal Systems LLC (the entity holding the general
partnership interest in the San Francisco and Pittsburgh partnerships) for
$500,000.
In April 1999, NRG reached agreement to purchase the 1,700 MW oil/gas-fired
Oswego generating station for $91 million from Niagara Mohawk Power and
Rochester Gas and Electric. This facility is located in New York. The
acquisition is expected to close in the fourth quarter of 1999, pending
regulatory approvals.
NRG, together with two other parties and the Chapter 11 trustees, filed a
plan with the United States Bankruptcy Court for the Middle District of
Louisiana to acquire 1,706 MW of fossil generating assets from Cajun
electric Power Cooperative of Baton Rouge, La., (Cajun) for approximately
$1.0 billion. In addition to the NRG plan, the
6
<PAGE> 9
bankruptcy court was considering one other plan submitted by Southwestern
Electric Power Co. In February 1999, the bankruptcy court refused to
confirm either of the proposed plans. NRG, its partner and the Trustee,
have submitted a revised plan and a confirmation hearing has been scheduled
for June of 1999.
2. CONTINGENT REVENUES
NRG and its partner Dynegy each own a 50% interest in the Long Beach and El
Segundo generating stations ("California Projects"). During 1998, the first
year of deregulation of the state of California power industry, the
California Projects accrued certain receivables related to contingent
revenues. These revenues have been deferred pending resolution of the
contingency. Such amounts relate to items that are subject to contract
interpretations, compliance with processes and filed market disputes. The
California Projects are actively pursuing resolution and/or collection of
these amounts, which totaled approximately $60 million (NRG's share
approximates $30 million) as of March 31, 1999. Upon any final resolution
and/or collection of these amounts, such deferred revenues will be
recognized in NRG's equity income.
3. SUMMARIZED INCOME STATEMENT INFORMATION OF AFFILIATES
The Company has 20-50% investments in four companies that are considered
significant subsidiaries, as defined by applicable SEC regulations, and
accounts for those investments using the equity method. The following
summarizes the income statements of these unconsolidated entities:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
(Thousands of Dollars) 1999 1998
------------------------
<S> <C> <C>
Net sales $154,345 $137,831
Other income 124 8,946
Costs and expenses:
Cost of sales 127,116 117,824
General and administrative 7,677 4,738
------------------------
134,793 122,562
------------------------
Income before income taxes 19,676 24,215
Income taxes 5,705 3,846
------------------------
Net income $ 13,971 $ 20,369
========================
Company's share of net income $ 5,511 $ 7,566
========================
</TABLE>
4. LONG TERM DEBT
In March 1999, NRG filed a shelf registration with the SEC for up to $500
million in debt securities. The net proceeds will be used to finance our
equity investment in connection with pending acquisitions and for general
corporate purposes which may include financing the development and
construction of new facilities, working capital, debt reduction, capital
expenditures and potential acquisitions. NRG plans to issue approximately
$300 million in debt securities during the second quarter of 1999. In
anticipation of this transaction, NRG executed $100 million in 10-year
treasury locks at 5.10% interest with an effective yield of 5.19%.
5. SEGMENT REPORTING
NRG conducts its business within three segments: Independent Power
Generation, Alternative Energy (Resource Recovery and Landfill Gas) and
Thermal projects. These segments are distinct components of NRG with
separate operating results and management structures in place. The "Other"
category includes operations that do not meet
7
<PAGE> 10
the threshold for separate disclosure and corporate charges that have not
been allocated to the operating segments. Segment information for the
quarter ended March 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1999 INDEPENDENT
(Thousands of Dollars) POWER ALTERNATIVE
GENERATION ENERGY THERMAL OTHER TOTAL
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES
Revenues from wholly-owned operations $13,063 $6,280 $15,145 $ 3,035 $ 37,523
Intersegment revenues - 324 - - 324
Equity in earnings of unconsolidated affiliates 7,830 249 1,162 (574) 8,667
--------------------------------------------------------------------
Total operating revenues 20,893 6,853 16,307 2,461 46,514
--------------------------------------------------------------------
NET INCOME $ 949 $3,513 $ 2,162 $(7,564) $ (940)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1998 INDEPENDENT
(Thousands of Dollars) POWER ALTERNATIVE
GENERATION ENERGY THERMAL OTHER TOTAL
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES
Revenues from wholly-owned operations $ 400 $6,809 $14,417 $ 2,544 $24,170
Intersegment revenues - 353 - - 353
Equity in earnings of unconsolidated affiliates 15,659 387 153 (119) 16,080
--------------------------------------------------------------------
Total operating revenues 16,059 7,549 14,570 2,425 40,603
--------------------------------------------------------------------
NET INCOME $12,462 $3,724 $ 1,716 $(11,813) $ 6,089
</TABLE>
6. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement requires that all
derivatives be recognized at fair value in the Balance Sheet, and that
changes in fair value be recognized either currently in earnings or
deferred as a component of Other Comprehensive Income, depending on the
intended use of derivative and the resulting designation (e.g., as a
qualifying hedge). The Company will be required to adopt this statement in
2000, but can elect to adopt it in 1999. The Company has not yet determined
the potential impacts of implementing this statement or the expected
adoption date.
8
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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 and Results
of Operations 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 set forth in
General Instructions H (2) (a) of Form 10-Q for wholly owned subsidiaries
(reduced disclosure format). This analysis will primarily compare NRG's revenue
and expense items for the three months ended March 31, 1999 with the three
months ended March 31, 1998.
RESULTS OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1999 COMPARED TO THE
QUARTER ENDED MARCH 31, 1998
Net loss for the quarter ended March 31, 1999, was $.9 million, a
decrease of $7 million compared to net income of $6.1 million in the same period
in 1998. This decrease was due to the factors described below.
OPERATING REVENUES
For the quarter ended March 31, 1999, revenues from wholly-owned
operations were $37.8 million, compared to $24.5 million for the quarter ended
March 31, 1998, an increase of $13.3 million or 54%. The increase resulted from
energy sales to Eastern Utilities Association (EUA) under an agreement that went
into effect on January 1, 1999 in anticipation of NRG's acquisition of the
Somerset facility, which was completed in April 1999. Under the terms of the
agreement, NRG will provide various entities within EUA with a fixed percentage
of their energy needs for a period of 6.2 to 11 years. For the quarter ended
March 31, 1999, revenues from wholly owned operations consisted primarily of
revenue from heating, cooling and thermal activities (38%), electrical
generation (56%) and technical services (6%).
Equity in earnings of unconsolidated project affiliates was $8.7
million for the quarter ended March 31, 1999, compared to $16.1 million for the
quarter ended March 31, 1998, an decrease of 46%. Approximately $4.5 million of
the decrease is due to transaction adjustment related to the Kladno Project. A
portion of the Kladno project's debt is denominated in U.S. dollars and German
deutsche marks, which strengthened against the Czech koruna in the first quarter
of 1999. Under the provisions of SFAS No. 52, the Kladno project records foreign
currency gains and losses through the income statement. If the value of the
Czech koruna increases, Kladno will record a corresponding gain in future
periods. In addition to the currency transaction loss, NRG experienced lower
earnings from the MIBRAG project.
OPERATING COSTS AND EXPENSES
Cost of wholly owned operations was $27.9 million for the first quarter
ended March 31, 1999, an increase of $14.2 million, or 104.7%, over the same
period in 1998. The increase is primarily due to energy purchases made to
satisfy the EUA power sales agreement. In addition, there were approximately
$1.1 million of additional fixed costs at NEO and the Thermal projects.
Depreciation and amortization costs were $4.7 million for the quarter
ended March 31, 1999 compared to $3.7 million for the quarter ended March 31,
1998. The depreciation and amortization increase was due primarily to new NEO
projects.
General, administrative and development costs were $16.0 million for
the first quarter ended March 31, 1999, compared to $13.2 million for the
quarter ended March 31, 1998. The $2.8 million increase is due primarily to
increased business development, associated legal, technical, and accounting
expenses, employees and equipment resulting from expanded operations and
preparation for several pending acquisitions later in 1999.
9
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OTHER INCOME (EXPENSE)
Other expense was $10.8 million for the first quarter ended March 31,
1999, compared with $12.4 million for the quarter ended March 31, 1998. The
decrease is due to a reduction in interest expense from lower outstanding
balances on the Company's revolving line of credit and increased interest income
from loans to affiliates.
INCOME TAX
We recognized an income tax benefit due to tax losses from domestic
operations and due to the recognition of certain tax credits. The net income tax
benefit for the first quarter ended March 31, 1999, increased by $3.6 million to
$12.0 million as compared to $8.4 million for the same quarter one year earlier
primarily due to an increase in Section 29 tax credits from NEO operations and
higher domestic losses.
YEAR 2000 (Y2K) READINESS
To the extent allowed, the information in the following section is
designated as a "Year 2000 Readiness Disclosure." NRG is incurring costs to
modify or replace existing technology, including computer software, for
uninterrupted operation in the year 2000 and beyond. A committee made up of
senior management is leading NRG's initiatives to identify Y2K related issues
and remediate business processes as necessary. NRG is also partnering with its
parent, NSP, to ensure a consistent overall company process in addressing the
Y2K issue, as discussed in NRG's 1998 Form 10-K.
NRG's is on schedule for completion of its Y2K project based on the following
timetable:
- Assessment/discovery - Completed November 1, 1998
- Analysis/testing - Completed May 1, 1999
- Y2K Ready - July 1, 1999
NRG is currently updating contingency plans for all material Y2K risk
and is on track to meet the contingency planning schedule set forth by NSP.
Among the areas contingency planning will address are delays in completion of
NRG's remediation plans, failure or incomplete remediation results and failure
of key third party contracts to be Y2K compliant.
FORWARD-LOOKING STATEMENTS
In addition to any assumptions and other factors referred to
specifically in connection with such forward-looking statements, factors that
could cause the Company's actual results to differ materially from those
contemplated in any forward-looking statements include, among others, the
following:
- Economic conditions including inflation rates and monetary
fluctuations;
- Trade, monetary, fiscal, taxation, and environmental policies of
governments, agencies and similar organizations in geographic
areas where the Company has a financial interest;
- Customer business conditions including demand for their products
or services and supply of labor and materials used in creating
their products and services;
- 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;
- 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;
- 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;
10
<PAGE> 13
- Employee workforce factors including loss or retirement of key
executives, collective bargaining agreements with union
employees, or work stoppages;
- Increased competition in the power generation industry;
- Cost and other effects of legal and administrative proceedings,
settlements, investigations and claims;
- Technological developments that result in competitive
disadvantages and create the potential for impairment of existing
assets;
- Factors associated with various investments including conditions
of final legal closing, foreign government actions, foreign
economic and currency risks, political instability in foreign
countries, partnership actions, competition, operating risks,
dependence on certain suppliers and customers, domestic and
foreign environmental and energy regulations;
- Limitations on the Company's ability to control the development
or operation of projects in which the Company has less than 100%
interest;
- Other business or investment considerations that may be disclosed
from time to time in the Company's Securities and Exchange
Commission filings or in other publicly disseminated written
documents, including the Company's Registration Statement No.
333-33397, as amended.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. The foregoing review of factors pursuant to the Act should
not be construed as exhaustive.
11
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PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27 Financial Data Schedule for the period ended March 31, 1999.
(b) REPORTS ON FORM 8-K:
None
12
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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 ENERGY, INC.
------------------------------------
(Registrant)
/s/ Leonard A. Blum
------------------------------------
Leonard A. Blum
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
/s/ David E. Ripka
------------------------------------
David E. Ripka
Controller
(Principal Accounting Officer)
Date: May 12, 1999
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1999 FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
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0
0
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</TABLE>
