<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2000
Commission File Numbers 333-84609 and 333-84609-01
LSP ENERGY LIMITED PARTNERSHIP
LSP BATESVILLE FUNDING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-3422042
Delaware 22-3615403
---------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two Tower Center, 20th Floor East Brunswick, N.J. 08816 (732) 249-6750
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
-----------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
LSP BATESVILLE FUNDING CORPORATION
FORM 10-Q INDEX
<TABLE>
<CAPTION>
PAGE
---
PART I
<S> <C> <C>
Item 1. Financial Statements 2
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 2
Item 3. Qualitative and Quantitative Disclosures about Market Risk 7
<CAPTION>
PART II
<S> <C> <C>
Item 1. Legal Proceedings 7
Item 2. Changes in Securities and Use of Proceeds 7
Item 3. Defaults Upon Senior Securities 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Item 5. Other Information 7
Item 6. Exhibits and Reports on Form 8-K 7
Signatures 8
Financial Statement Index F-1
Exhibits Index EI-1
</TABLE>
<PAGE>
PART I/ITEM 1. FINANCIAL STATEMENTS
See financial statements commencing at F-1. These unaudited financial
statements have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission (the "Commission"). Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. While LSP Energy Limited Partnership, (the "Partnership") and LSP
Batesville Funding Corporation ("Funding") believe that the disclosures made
are adequate to make the information presented not misleading, these financial
statements should be read in conjunction with the audited financial statements
included in the Form S-4 as of December 31, 1999 and 1998 and for each of the
three years in the three year period ended December 31, 1999, filed with the
Commission by the Partnership and Funding.
PART I/ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Partnership is a Delaware limited partnership formed in February
1996 to develop, construct, own and operate a gas-fired electric generating
facility with a design capacity of approximately 837 megawatts located in
Batesville, Mississippi (the "Facility"). The 1% general partner of the
Partnership is LSP Energy, Inc. ("Energy"). The 99% limited partner of the
Partnership is LSP Batesville Holding, LLC ("Holding"), a Delaware limited
liability company established on July 29, 1998. Granite II Holding, LLC
("Granite"), an affiliate of LS Power, LLC ("LS Power") and a Delaware limited
liability company, holds a 48.63% membership interest in Holding and
Cogentrix/Batesville, LLC ("Cogentrix"), an affiliate of Cogentrix Energy, Inc.
and a Delaware limited liability company, holds a 51.37% membership interest in
Holding.
LSP Batesville Funding Corporation ("Funding") was established on
August 3, 1998. Funding's business purpose is limited to maintaining its
organization and activities necessary to facilitate the acquisition of
financing by the Partnership from the institutional debt market and to offer
debt securities. Funding is wholly owned by Holding.
On November 3, 2000, LS Power, LLC, CB Capital Investors, LLC
(transferee of Chase Manhattan Capital, L.P.), and Cogen Grantor Trust, UA
entered into a purchase agreement for the sale (the "Sale") of all of the
partnership interests in Granite Power Partners II, L.P., the indirect owner of
the Partnership and Funding and all of the membership interests in LS Power
Management, LLC, the manager of the Facility, to NRG Energy, Inc and its
affiliates. The Sale is expected to close in the first quarter of 2001. Under
current circumstances, the Sale is not expected to result in a change of
control under the Trust Indenture dated as of May 21, 1999 among Funding, the
Partnership and The Bank of New York.
The Partnership expects that the total cost of developing,
constructing and financing the Facility and the Panola County gas and water
infrastructure that the Facility will use will be approximately $394,278,000.
The Partnership capitalized the costs pertaining to the construction of the
Facility and the Panola County gas and water infrastructure, net of the
Panola County gas and water infrastructure reimbursement funds of $14,278,000
received from the State of Mississippi as property, plant and equipment and
the costs pertaining to the financing of the Facility and the Panola County
gas and water infrastructure as debt issuance and financing costs, and the
Partnership has included these items as assets on its balance sheets.
RESULTS OF OPERATIONS
The Facility commenced commercial operations under the Power Purchase
Agreement ("Aquila PPA") with Aquila Energy Marketing Corporation ("Aquila")
and Utilicorp United, Inc. ("Utilicorp") on August 8, 2000 and under the Power
Purchase Agreement ("VEPCO PPA") with Virginia Electric and Power Company
("VEPCO") on August 9, 2000.
2
<PAGE>
Revenues for the three and nine months ended consisted of
approximately $7,200,000 of revenues earned under the VEPCO PPA and Aquila
PPA during the period from the commercial operations date under the VEPCO PPA
and the Aquila PPA through September 30, 2000. In addition, the Partnership
is entitled to receive system upgrade credits in the amount of incremental
revenue received by the Tennessee Valley Authority ("TVA") and Entergy
Mississippi, Inc. ("Entergy") for transmission services procured for the
delivery of energy from the Facility. For the three and nine months ended
September 30, 2000, the Partnership earned system upgrade credits of
approximately $1,605,000 and $1,507,000 from TVA and Entergy, respectively.
Approximately $1,549,000 of these credits have been capitalized as a
component of property, plant and equipment in the accompanying September 2000
financial statements.
For the three and nine months ended September 30, 2000 project
development expenses not directly related to the construction and financing
of the Facility approximated $194,000 and $530,000, respectively, which
amounts consisted primarily of approximately $100,000 and $300,000,
respectively, of management fees and approximately $94,000 and $230,000,
respectively, of labor charges, related benefits and taxes and other
management expenses incurred under the management services agreement with LS
Power Management, LLC ("LSP Management").
For the three and nine months ended September 30, 1999 project
development expenses not directly related to the construction and financing
of the Facility approximated $85,000 and $202,000, respectively, which
amounts consisted primarily of labor charges, related benefits and taxes and
other management expenses incurred under the management services agreement
with LSP Management.
For the three and nine months ended September 30, 2000 general and
administrative expenses approximated $104,000 and $153,000, respectively, which
amounts consisted primarily of legal and accounting fees and rating agency and
Trustee fees.
For the three and nine months ended September 30, 1999 general and
administrative expenses approximated $59,000 and $209,000, respectively, which
amounts consisted primarily of legal and accounting fees.
Operations and maintenance expenses for the three and nine months
ended September 30, 2000 approximated $1,412,000 and $2,437,000, respectively.
These costs consisted primarily of approximately $491,000 and $918,000,
respectively, of labor charges, related taxes and benefits and $73,000 and
$307,000, respectively, of services fees incurred under the operations and
maintenance agreement with Cogentrix Batesville Operations, LLC ("Cogentrix
Batesville Operations") and approximately $31,000 and $183,000, respectively,
of fuel pipeline management fees and water supply costs and approximately
$425,000 and $467,000, respectively, of utilities and chemicals.
For the three and nine months ended September 30, 1999 operations and
maintenance expenses approximated $393,000 which amounts consisted primarily of
costs incurred under the operations and maintenance agreement with Cogentrix
Batesville Operations.
The VEPCO PPA specifies an energy delivery milestone of June 1, 2000
for two of the three Combined Cycle Units ("Unit" or "Units") at the Facility,
which date may be extended by a force majeure event or a delivery excuse. As a
result of transportation delays in the delivery of one of the VEPCO Unit's
steam turbine generator to the Facility, the Partnership issued a force majeure
notice to VEPCO claiming delays of the energy delivery milestone date of
June 1, 2000, under the VEPCO PPA. The Partnership has claimed a 21-day delay
in the energy delivery milestone date for the first VEPCO Unit and a 9-day
delay in the energy delivery milestone date for the second VEPCO Unit. VEPCO
has initially rejected the Partnership's claim of a force majeure event. If it
is determined that any portion of the delay in the delivery of the steam
turbine generator constitutes a force majeure event under the VEPCO PPA, then
the date that the Partnership was required to deliver energy from the
respective VEPCO Units will be extended day for day for the number of days of
the force majeure event.
On August 9, 2000, the energy delivery milestone for the VEPCO Units
was achieved. As a result of this delay in achieving the energy delivery
milestone, the Partnership may be responsible for the incremental replacement
power during the period of delay, subject to a maximum of $20 per kilowatt
($5,660,000) of committed capacity from each VEPCO Unit. The Partnership had
issued two letters of credit each in the amount of $5,660,000 as security for
this obligation. VEPCO has claimed that the Partnership is responsible for an
aggregate of approximately $9,300,000 of incremental replacement power for the
period June 1, 2000 through July 19, 2000 and has drawn approximately
$4,650,000 on each of the two letters of credit. The draws on the letters of
credit each converted into 5-year loans ("LOC Loans"). The Partnership has
disputed the validity of the draws on the two letters of credit, the amount of
the incremental replacement power costs and the methodology used by VEPCO to
calculate the incremental replacement
3
<PAGE>
power costs, including the failure by VEPCO to acknowledge the force majeure
events described above. In connection with this dispute the Partnership issued
a notice of default to VEPCO. In response to this notice of default, on August
17, 2000, VEPCO repaid the Partnership an amount equal to the draws on the two
letters of credit plus accrued interest through August 31, 2000. Such amount
less accrued interest through August 31, 2000 is being held in escrow pursuant
to an escrow agreement dated August 17, 2000 among VEPCO, the Partnership and
the Chase Manhattan Bank, as escrow agent, pending final resolution of this
dispute. VEPCO has not waived its claim for incremental replacement power under
the VEPCO PPA. As of September 30, 2000, the Partnership has estimated its
potential liability for incremental replacement power to approximate $4,500,000
based on the information available to it. A final resolution of this dispute
has not occurred.
For the three and nine months ended September 30, 2000 replacement
energy of $5,835,000 consisted of accrued incremental replacement energy costs
of approximately $4,500,000 under the VEPCO PPA and delivery delay adjustments
of approximately $1,335,000 under the Aquila PPA as a result of delays in
achieving the energy delivery milestones under each PPA.
The Aquila PPA specifies an energy delivery milestone deadline of June
1, 2000 for the Aquila Unit. On August 8, 2000, the energy delivery milestone
of the Aquila Unit was achieved. The Partnership had the option of electing to
incur an adjustment to the reservation payment to be received under the Aquila
PPA or to be responsible for incremental replacement power during the period of
delay. The Partnership elected to incur an adjustment to the reservation
payments to be received under the Aquila PPA. The adjustment to the future
reservation payments was determined by contract capacity, the duration of delay
and a percentage factor for the month in which the delay occurred. The
reduction in reservation payments received for the period from the commercial
operations date through September 30, 2000 approximated $1,335,000. The delay
which caused the aforementioned reduction in reservation payments will have no
impact on reservation payments to be earned under the Aquila PPA after
September 30, 2000.
Net interest expense for the three and nine months ended September 30,
2000 aggregated approximately $3,303,000.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership is using the net proceeds from the issuance of the two
series of Senior Secured Bonds (the "Bonds"), $54,000,000 of capital
contributions that the Partnership has received from Holding, test energy
revenues generated during the start-up and commissioning of the Facility and
the reimbursement payments that the Partnership has received from the State of
Mississippi to pay the costs of developing, constructing and financing the
Facility and the Panola County gas and water infrastructure.
As of September 30, 2000, the Partnership had approximately
$46,500,000 of remaining proceeds from the issuance of the Bonds, test energy
revenues generated during start-up and commissioning of the Facility and Panola
County gas and water infrastructure reimbursement funds received from the State
of Mississippi, plus investment earnings on such funds, and $54,000,000 of
capital contributions that the Partnership has received from Holding. During
April 2000, July 2000 and August 2000, Holding made capital contributions of
$5,000,000, $5,000,000 and $44,000,000, respectively, to the Partnership.
As of September 30, 2000, costs incurred on the Facility and the
Panola County infrastructure were approximately $370,565,000. Included in this
amount is approximately $338,684,000 (net of the Panola County infrastructure
reimbursement funds of approximately $14,278,000) of property, plant and
equipment, approximately $10,039,000 of debt issuance and financing costs and
approximately $3,728,000 of inventory and other current assets. In addition,
$3,836,000 of costs incurred have been expensed as of September 30, 2000. As of
September 30, 2000, the Partnership has expended approximately $347,778,000 of
cash.
The Partnership's original project budget included a line item, which
the Partnership refers to as "contingency", of approximately $10,649,000 that
is designed to cover things like change orders under the various construction
contracts, the cost of fuel consumed by the Facility during testing in excess
of the revenue received from the sale of test energy, other increased costs due
to force majeure and other events that may increase the Partnership's expenses.
As of October 31, 2000, the Partnership had reduced its available contingency
budget amount by approximately $2,311,000 for change orders under
4
<PAGE>
the Partnership's various construction contracts, by approximately $2,307,000
for the cost of the water pretreatment contract, by approximately $2,687,000
for fuel costs (net of test energy revenue received) consumed during testing
and commissioning of the Facility, approximately $536,000 for debt service on
LOC Loans, approximately $822,000 for initial working capital and by
approximately $9,304,000 for budget overruns. Offsetting these reductions is an
increase to the contingency budget amount of approximately $16,189,000 as a
result of (1) the Panola County infrastructure reimbursement payments of
approximately $14,278,000 that have been made to the Partnership by the State
of Mississippi and (2) the Partnership's reallocation of approximately
$1,911,000 that the Partnership had previously allocated to the cost of the
Panola County infrastructure and have not yet spent, because Panola County was
obligated to pay such amounts due under the Panola County infrastructure
construction contracts. The Partnership will further decrease the contingency
for additional costs to be incurred prior to completion of the Facility.
Under the terms of the Turnkey Engineering, Procurement and
Construction Contract ("Construction Agreement") with BVZ Power
Partners-Batesville ("BVZ"), BVZ has committed to develop and construct the
Facility subject to the terms, deadlines and conditions set forth in the
Construction Agreement. BVZ completed the construction and start-up of the
Aquila Unit and the VEPCO Units on August 8, 2000.
BVZ and the suppliers of the combustion turbines, steam turbines and
heat recovery steam generators are currently engaged in a dispute regarding
payment of delay liquidated damages to BVZ. BVZ claims that such suppliers owe
BVZ approximately $4,700,000 in delay liquidated damages. BVZ intends to set
off or withhold such amount owed by these suppliers from payments to such
suppliers. The equipment supplied to the Facility by each of these equipment
suppliers constitute direct purchases by the Partnership. Although the
Partnership has contracted directly with these suppliers for such equipment,
BVZ is responsible for the obligations and liabilities of such suppliers
pursuant to the terms of the Construction Agreement. Final resolution of this
dispute has not occurred.
As of September 30, 2000, engineering, procurement and construction
was estimated to be approximately 99% complete and total costs incurred to date
under the Construction Agreement were approximately $240,732,000, including
retainage. As of September 30, 2000, the Partnership had retained construction
contract payments under the Construction Agreement totaling approximately
$12,063,000, which amounts are payable upon completion of the Facility.
The Partnership received a technical advisory from the combustion
turbine manufacturer on September 18, 2000, which warned of the potential for
hot gas leakage from flanged connections within the turbine enclosure and
limits all three combustion turbines to 80% load. In response to this
technical advisory, the combustion turbine manufacturer has issued a product
modification that will upgrade the flange connections and will install
additional equipment monitors. Work on the product modifications is expected
to begin before the end of November 2000 with all work complete and the 80%
load restriction is expected to be removed by December 31, 2000. Based upon
the projected dispatch of the VEPCO and Aquila units, the adjustment factors
associated with unavailability during off peak months and the availability
margins provided for within the power purchase agreements, the Partnership
does not expect that the operational restrictions imposed by this technical
advisory will result in a reduction in the reservation payment due to
availability adjustments under the VEPCO PPA or Aquila PPA. However, because
of the 80% load restriction the units are not able to operate as efficiently
as they otherwise would, the Partnership is responsible for this mismatch in
efficiency as guaranteed heat rate payments to VEPCO and Aquila. Based upon
the projected dispatch of the VEPCO and Aquila units, the Partnership
estimates its additional obligation with respect to the guaranteed heat rate
payments will be between $15,000 to $20,000 per month for the months of
October, November and December.
The completion of the cooling tower performance test and declaration
of substantial completion of the Facility have been delayed pending completion
of modifications by the cooling tower manufacturer that will improve cooling
tower performance. Final acceptance tests cannot be completed and final
completion of the Facility cannot be declared until after implementation of the
combustion turbine product modifications and removal of the 80% load
restriction imposed by the combustion turbine manufacturer.
During an inspection of the second VEPCO Unit's combustion turbine on
May 9, 2000, damage to the compressor blades was discovered. The combustion
turbine manufacturer was notified and additional technical support was
dispatched
5
<PAGE>
to the Facility to determine the cause and extent of the damage and assist in
repairs. During the subsequent investigation and inspection to determine the
cause of the damage, impact and/or rubbing damage were identified in each of
the 16 stages of the second VEPCO Unit's compressor. All compressor and
combustion turbine repairs have been completed. The estimated cost of the
repairs is approximately $1,550,000. The Partnership expects this cost to be
substantially covered through insurance. The Partnership's property insurance
has a deductible of $250,000. The Partnership contends that the deductible is
the responsibility of the combustion turbine manufacturer.
The Partnership was required to maintain casualty risk insurance
during the construction period, including delayed opening insurance covering a
period of approximately 18 months with a 30-day deductible per occurrence. The
cost of this insurance was approximately $1,608,000. The Partnership
currently maintains casualty risk insurance, including business interruption
insurance covering a period of approximately 12 months with a 30 day
deductible per occurrence.
Subsequent to the completion of the Facility, the Partnership's
primary sources of liquidity will be the VEPCO PPA and Aquila PPA for the sale
of the capacity of and electric energy from the Facility. The VEPCO PPA covers
the sale of the capacity of and electrical energy from two of the Partnership's
generating Units for an initial term of 13 years, which VEPCO can extend at its
option for an additional 12 years. The Aquila PPA covers the sale of the
capacity of and electric energy from the Partnership's other generating Unit
for an initial term of 15 years and seven months, which Aquila can extend at
its option for an additional five years.
Both of these power purchase agreements allow the power purchasers to
dispatch the generating Units the Partnership has dedicated to them, meaning
that the power purchasers have the right to control how much electrical energy
they want their dedicated Units to produce. However, even if the Facility is
not dispatched at all by VEPCO and Aquila, they will still have to pay the
Partnership the reservation payment as provided under the power purchase
agreements.
As a result of the VEPCO draws on the letters of credit each draw
converted into a 5-year loan ("LOC Loans"). Principal amounts under each LOC
Loan are repayable in 20 equal quarterly installments of $232,487 commencing on
the commercial operations date of the VEPCO Units. On September 30, 2000, the
Partnership made principal payments under the LOC Loans aggregating
approximately $465,000. As of September 30, 2000, interest on each
outstanding LOC Loan was 8.22%. As noted above, on August 17, 2000, VEPCO
repaid the Partnership an amount equal to the draws on the two letters of
credit plus accrued interest through August 31, 2000. Such amount less
accrued interest through August 31, 2000 is being held in escrow pending
final resolution of the Partnership's dispute with VEPCO.
Upon the commercial operation date for the VEPCO dedicated Units, the
Partnership issued an additional letter of credit in the amount of $5,660,000
as security for the Partnership's obligations under the VEPCO PPA. This letter
of credit will be subject to replenishment if drawn and the Partnership will be
required to reimburse the issuing bank if this letter of credit is drawn.
The Partnership also may be required to provide security to support
the Partnership's obligations under the Aquila PPA. This security would be in
the form of cash, a surety bond, or a letter of credit or guarantee from an
investment grade entity. If the Partnership's debt service coverage ratio for
each of the previous four consecutive calendar quarters is less than 1.25 to
1.00 then the Partnership must provide Aquila, upon their request, reasonable
security for the Partnership's obligations. The security must be in an amount
equal to $5.00 per kilowatt of the contract capacity or approximately
$1,300,000. The Partnership must maintain this security until the earlier of
the date on which (1) the Partnership provides Aquila documentation that the
Partnership's debt service coverage ratio was 1.25 to 1.00 or greater for a
period of four consecutive calendar quarters and (2) the Aquila power purchase
agreement terminates, and the Partnership has paid in full to Aquila the
amounts that the Partnership owes Aquila.
The Partnership is dependent on the fixed reservation payments and
other fixed payments under the VEPCO and Aquila power purchase agreements to
meet the Partnership's fixed obligations, including debt service under the
exchange bonds and LOC Loans The Partnership's power purchasers' obligations to
pay the Partnership these fixed payments are dependent upon the Facility
operating at minimum capacity and availability levels. The Partnership expects
to achieve the minimum capacity and availability levels; however, any material
shortfall in tested capacity or availability over a significant period could
impact the Partnership's ability to make payments of principal and interest on
the exchange bonds, LOC Loans and the Partnership's other debt when due.
6
<PAGE>
As with any power generation facility, operation of the Facility will
involve risk, including performance of the Facility below expected levels of
output and efficiency, shut-downs due to the breakdown or failure of equipment
or processes, violations of permit requirements, operator error, labor
disputes, or catastrophic events such as fires, earthquakes, explosions, floods
or other similar occurrences affecting a power generation facility or its power
purchasers. The occurrence of any of these events could significantly reduce or
eliminate revenues generated by the Facility or significantly increase the
expenses of the Facility, adversely impacting the Partnership's ability to make
payments of principal and interest on the exchange bonds, LOC Loans and the
Partnership's other debt when due.
7
<PAGE>
PART I/ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership uses fixed rate debt as a source of capital. At
September 30, 2000 and December 31, 1999 the Partnership had $326,000,000 of
outstanding bonds at an average fixed interest rate of 7.70%.
PART II/ITEM 1. LEGAL PROCEEDINGS
During the first nine months of 2000, Funding and the Partnership have
not been parties to any material legal proceedings.
PART II/ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
PART II/ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
PART II/ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II/ITEM 5. OTHER INFORMATION
None.
PART II/ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
See the Exhibits Index at EI-1.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
8
<PAGE>
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 of
the undersigned thereunto duly authorized.
LSP ENERGY LIMITED PARTNERSHIP
By: LSP-Energy, Inc.
Its: General Partner
By: /s/ MIKHAIL SEGAL
-------------------------------
Name: Mikhail Segal
Title: President
Date: November 14, 2000
By: /s/ MARK BRENNAN
-------------------------------
Name: Mark Brennan
Title: Treasurer
Date: November 14, 2000
LSP BATESVILLE FUNDING CORPORATION
By: /s/ MIKHAIL SEGAL
-------------------------------
Name: Mikhail Segal
Title: President
Date: November 14, 2000
By: /s/ MARK BRENNAN
-------------------------------
Name: Mark Brennan
Title: Treasurer
Date: November 14, 2000
9
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
LSP BATESVILLE FUNDING CORPORATION
FINANCIAL STATEMENT INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
LSP ENERGY LIMITED PARTNERSHIP
Balance Sheets as of September 30, 2000 and December 31, 1999.........................................F-2
Statements of Operations for the three and nine months ended September 30, 2000
and 1999...........................................................................................F-3
Statements of Changes in Partner's Capital (Deficit) for the three and nine months
ended September 30, 2000 and 1999.................................................................F-4
Statements of Cash Flows for the three and nine months ended September 30, 2000
and 1999...........................................................................................F-5
Notes to financial statements.........................................................................F-6
<CAPTION>
LSP BATESVILLE FUNDING CORPORATION
<S> <C>
Balance Sheets as of September 30, 2000 and December 31, 1999........................................F-14
Statements of Operations for the three and nine months ended September 30, 2000 and 1999.............F-15
Statements of Changes in Stockholder's Equity (Deficit) for the three and nine months
ended September 30, 2000 and 1999.................................................................F-16
Statements of Cash Flows for the three and nine months ended September 30, 2000 and 1999.............F-17
Notes to financial statements........................................................................F-18
</TABLE>
F-1
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
ASSETS
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Current assets:
Cash $ 205,349 $ 202,924
Investments held by Trustee, at amortized cost
which approximates fair value 49,976,458 53,547,410
Cash held in escrow 9,321,261 ---
Accounts receivable 4,488,878 ---
Spare parts inventory 3,117,493 733,462
Other current assets 630,009 174,174
------------ -------------
Total Current Assets 67,739,448 54,657,970
PROPERTY, PLANT AND EQUIPMENT
Construction in progress --- 295,835,581
Land and easements 678,088 676,558
Electric generating facility 338,006,101 ---
------------- -------------
338,684,189 296,509,139
Accumulated depreciation (1,990,303) ---
------------- -------------
336,693,886 296,509,139
Debt issuance and financing costs, net of accumulated
amortization of $4,406,436 and $4,046,139 at September 30, 2000
and December 31, 1999, respectively 10,039,462 10,099,017
------------- -------------
Total Assets $414,472,796 $361,266,126
============ ============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current liabilities:
Accounts payable $ 11,321,477 $ 9,923,894
Contract retainage payable 12,085,805 11,944,208
Current portion of loans payable 1,859,897 ---
Current portion of bonds payable 4,125,000 ---
Accrued replacement power expense 4,500,000 ---
Accrued interest payable 5,230,750 15,345,443
------------- ------------
Total Current Liabilities 39,122,929 37,213,545
Loans payable 6,974,615 ---
Bonds payable 321,875,000 326,000,000
------------ ------------
Total Liabilities 367,972,544 363,213,545
Commitments and contingencies
PARTNERS' CAPITAL (DEFICIT) 46,500,252 (1,947,419)
------------- -------------
Total Liabilities and Partners' Capital (Deficit) $414,472,796 $361,266,126
============ ============
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Electric capacity revenues $6,930,576 $ --- $ 6,930,576 $ ---
Electric energy revenues 269,400 --- 269,400 ---
System upgrade credits 1,563,121 --- 1,563,121 ---
----------- --------- ----------- ---------
Total revenues 8,763,097 --- 8,763,097 ---
----------- --------- ----------- ---------
Expenses:
Operations and maintenance expenses 1,412,101 392,842 2,437,085 392,842
Replacement energy 5,835,000 --- 5,835,000 ---
Depreciation and amortization 2,057,455 --- 2,057,455 ---
Project management expenses 193,924 84,559 530,184 201,545
General and administrative expenses 103,789 58,580 153,197 209,338
----------- --------- ----------- ---------
Total operating expenses 9,602,269 535,981 11,012,921 803,725
----------- --------- ----------- ---------
Operating loss (839,172) (535,981) (2,249,824) (803,725)
Non-operating income (expenses):
Interest expense (3,662,063) --- (3,662,063) ---
Interest income 359,558 --- 359,558 ---
----------- --------- ----------- ---------
Net loss $(4,141,677) $(535,981) $(5,552,329) $(803,725)
=========== ========= =========== =========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
LIMITED PARTNER GENERAL PARTNER
--------------- ----------------
LSP BATESVILLE
HOLDING, LLC LSP ENERGY, INC. TOTAL
------------ ---------------- -----
<S> <C> <C> <C>
Balance at December 31, 1999 $ (1,927,945) $ (19,474) $(1,947,419)
Net loss (1,396,545) (14,107) (1,410,652)
Capital contributions 5,000,000 --- 5,000,000
------------ --------- -----------
Balance at June 30, 2000 $1,675,510 $ (33,581) $ 1,641,929
Net loss $ (4,100,260) $ (41,417) $(4,141,677)
Capital contributions 49,000,000 --- 49,000,000
------------ --------- -----------
Balance at September 30, 2000 $ 46,575,250 $ (74,998) $46,500,252
============ ========= ===========
Balance at December 31, 1998 $ (438,298) $ (4,427) $ (442,725)
Net loss (265,066) (2,678) (267,744)
------------ --------- -----------
Balance at June 30, 1999 $ (703,364) $ (7,105) $ (710,469)
Net loss $ (530,621) $ (5,360) $ (535,981)
------------ --------- -----------
Balance at September 30, 1999 $ (1,233,985) $ (12,465) $(1,246,450)
============ ========= ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (4,141,677) $ (535,981) $ (5,552,329) $ (803,725)
Adjustments to reconcile net loss to
cash provided by (used in) operating activities:
Depreciation and amortization 2,057,455 --- 2,057,455 ---
Interest earned on escrow funds (21,774) --- (21,774) ---
Increase in accounts receivable (4,488,878) --- (4,488,878) ---
Increase in spare parts inventory (93,265) --- (2,384,031) ---
Decrease (increase) in other current assets 236,133 20,238 (455,835) (10,495)
Increase (decrease) in accounts payable 2,756,796 12,599,544 1,432,293 14,983,449
Increase in accrued expenses 4,222,181 --- 4,500,000 ---
Decrease in accrued interest
on loans payable --- --- --- (154,898)
-------------- ------------- -------------- --------------
Cash provided by (used in) operating activities 526,971 12,083,801 (4,913,099) 14,014,331
-------------- ------------- -------------- --------------
Cash Flows from Investing Activities:
Investments held in escrow (9,299,487) --- (9,299,487) ---
Investments held by Trustee (49,000,000) --- (54,000,000) (183,598,081)
Investments drawn for project costs 20,005,023 53,352,345 68,340,766 106,764,462
Payments on property and
construction in progress (20,162,984) (65,230,412) (62,624,815) (182,112,201)
-------------- ------------- -------------- --------------
Cash used in investing activities (58,457,448) (11,878,067) (57,583,536) (258,945,820)
-------------- ------------- -------------- --------------
Cash Flows from Financing Activities:
Debt issuance and financing costs --- (301,518) (335,452) (3,043,421)
Proceeds from issuance of loans --- --- --- 58,600,000
Repayments of loans (464,975) --- (464,975) (136,600,000)
Proceeds from issuance of loans 9,299,487 --- 9,299,487 ---
Proceeds from issuance of bonds --- --- --- 326,000,000
Capital contributions 49,000,000 --- 54,000,000 ---
-------------- ------------- -------------- --------------
Cash provided by (used in) financing activities 57,834,512 (301,518) 62,499,060 244,956,579
-------------- ------------- -------------- --------------
Increase (decrease) in cash (95,965) (95,784) 2,425 25,090
Cash, beginning of period 301,314 204,740 202,924 83,866
-------------- ------------- -------------- --------------
Cash, end of period $ 205,349 $ 108,956 $ 205,349 $ 108,956
============== ============= ============== ==============
RECONCILIATION OF CHANGES IN PROPERTY
AND CONSTRUCTION IN PROGRESS:
Increase in property and construction in progress $ (5,810,564) $ (74,211,182) $ (42,175,050) $(202,471,359)
Increase (decrease) in contract retainage 557,178 4,028,706 141,597 10,275,516
Investment income on investments held by Trustee (455,143) (1,587,108) (1,259,447) (2,319,640)
Reimbursement received from the State of Mississippi --- --- --- ---
Test energy revenues and system upgrade credits (8,063,766) --- (9,510,367) ---
Amortization of debt issuance and financing costs 52,947 153,360 293,145 3,334,740
Increase (decrease) in accrued interest payable on bonds (6,443,636) 6,385,812 (10,114,693) 9,068,542
-------------- ------------- -------------- --------------
Payments on property and construction in progress $ (20,162,984) $ (65,230,412) $ (62,624,815) $(182,112,201)
============== ============= ============== ==============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BUSINESS
LSP Energy Limited Partnership (the "Partnership") is a Delaware
limited partnership formed in February 1996 to develop, construct, own and
operate a gas-fired electric generating facility with a design capacity of
approximately 837 megawatts located in Batesville, Mississippi (the
"Facility"). The 1% general partner of the Partnership is LSP Energy, Inc.
("Energy"). The 99% limited partner of the Partnership is LSP Batesville
Holding, LLC ("Holding"), a Delaware limited liability company established on
July 29, 1998. Granite II Holding, LLC ("Granite"), an affiliate of LS Power,
LLC and a Delaware limited liability company, holds a 48.63% membership
interest in Holding and Cogentrix/Batesville, LLC ("Cogentrix"), an affiliate
of Cogentrix Energy, Inc. and a Delaware limited liability company holds a
51.37% membership interest in Holding.
During April 2000, July 2000 and August 2000 Cogentrix made capital
contributions to Holding of $5,000,000, $5,000,000 and $44,000,000
respectively, which contributions were contributed to the Partnership by
Holding.
On November 3, 2000, LS Power, LLC, CB Capital Investors, LLC
(transferee of Chase Manhattan Capital, L.P.), and Cogen Grantor Trust, UA
entered into a purchase agreement for the sale (the "Sale") of all of the
partnership interests in Granite Power Partners II, L.P., the indirect owner of
the Partnership and LSP Batesville Funding Corporation ("Funding"), and all of
the membership interests in LS Power Management, LLC, the manager of the
Facility, to NRG Energy, Inc and its affiliates. The Sale is expected to close
in the first quarter of 2001. Under current circumstances, the Sale is not
expected to result in a change of control under the Trust Indenture dated as of
May 21, 1999 among Funding, the Partnership and The Bank of New York.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The financial statements, included herein, have been prepared in
accordance with generally accepted accounting principles ("GAAP") for interim
financial information and the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and footnotes required by GAAP for complete
financial statements. In the opinion of management, the information contained
herein reflects all adjustments, including normal recurring accruals, necessary
to present fairly the financial condition, results of operations and cash flows
for the periods disclosed. Operating results for the three and nine months
ended September 30, 2000 are not necessarily indicative of the results
anticipated for the year ending December 31, 2000.
These financial statements should be read in conjunction with the
audited financial statements, and footnotes thereto, included in the Form S-4
for the year ending December 31, 1999.
BASIS OF PRESENTATION
The Facility commenced commercial operations under the Power Purchase
Agreement ("Aquila PPA") with Aquila Energy Marketing Corporation ("Aquila")
and Utilicorp United, Inc. ("Utilicorp") on August 8, 2000 and under the Power
Purchase Agreement ("VEPCO PPA") with Virginia Electric and Power Company
("VEPCO") on August 9, 2000. Prior to the achieving commercial operations under
the Aquila PPA and VEPCO PPA, the Partnership had been in the development stage
since its inception and had not generated any operating revenues.
REVENUE RECOGNITION
Revenues from the sale of electricity are recorded based on capacity
provided and output delivered at rates as specified under contract terms.
(continued)
F-6
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
PROPERTY, PLANT AND EQUIPMENT
All costs directly related to the acquisition and construction of
long-lived assets are capitalized. Interest costs (including amortization of
debt issuance and financing costs), net of interest income on excess proceeds
from loans and bonds, is capitalized during construction. As of September 30,
2000 and December 31, 1999, capitalized interest since inception including
amortization of debt issuance and financing costs was approximately $35,570,000
and $20,823,000, respectively, ($31,230,000 and $16,777,000, respectively,
before amortization). Cash paid for interest was approximately $29,157,000 and
$3,172,000 and $12,805,000 and $29,000 for the nine months ended September 30,
2000 and 1999, and for the three months ended September 30, 2000 and 1999,
respectively.
All costs not directly related to the acquisition or construction of
long-lived tangible assets are expensed as incurred.
Depreciation of the electric generating facility is computed primarily
using the straight-line method over 30-years. Certain components within the
plant will require replacement or overhaul at various times within the
estimated life of the plant. These components are being depreciated using the
straight-line method over their estimated service lives ranging from two to
twelve years. The cost of future replacements and overhaul of these components
will be capitalized and depreciated over their estimated service lives. Routine
maintenance and repairs are charged to expense as incurred.
3. FACILITY CONTRACTS
The VEPCO PPA specifies an energy delivery milestone of June 1, 2000
for two of the three Combined Cycle Units ("Unit" or "Units") at the Facility,
which date may be extended by a force majeure event or a delivery excuse. As a
result of transportation delays in the delivery of one of the VEPCO Unit's
steam turbine generator to the Facility, the Partnership issued a force majeure
notice to VEPCO claiming delays of the energy delivery milestone date of
June 1, 2000, under the VEPCO PPA. The Partnership has claimed a 21-day delay
in the energy delivery milestone date for the first VEPCO Unit and a 9-day
delay in the energy delivery milestone date for the second VEPCO Unit. VEPCO
has initially rejected the Partnership's claim of a force majeure event. If it
is determined that any portion of the delay in the delivery of the steam
turbine generator constitutes a force majeure event under the VEPCO PPA, then
the date that the Partnership was required to deliver energy from the
respective VEPCO Units will be extended day for day for the number of days of
the force majeure event.
On August 9, 2000, the energy delivery milestone for the VEPCO Units
was achieved. As a result of this delay in achieving the energy delivery
milestone, the Partnership may be responsible for the incremental replacement
power during the period of delay, subject to a maximum of $20 per kilowatt
($5,660,000) of committed capacity from each VEPCO Unit. The Partnership had
issued two letters of credit each in the amount of $5,660,000 as security for
this obligation (see Note 4). VEPCO has claimed that the Partnership is
responsible for an aggregate of approximately $9,300,000 of incremental
replacement power for the period June 1, 2000 through July 19, 2000 and has
drawn approximately $4,650,000 on each of the two letters of credit. The draws
on the letters of credit each converted into 5-year loans. The Partnership has
disputed the validity of the draws on the two letters of credit, the amount of
the incremental power costs and the methodology used by VEPCO to calculate the
incremental replacement power costs, including the failure by VEPCO to
acknowledge the force majeure events described above. In connection with this
dispute the Partnership issued a notice of default to VEPCO. In response to
this notice of default, on August 17, 2000, VEPCO repaid the Partnership an
amount equal to the draws on the two letters of credit plus accrued interest
through August 31, 2000. Such amount less accrued interest through August 31,
2000 is being held in escrow pursuant to an escrow agreement dated August 17,
2000 among VEPCO, the Partnership and the Chase Manhattan Bank, as escrow
agent, pending final resolution of this dispute. VEPCO has not waived its claim
for incremental replacement power under the VEPCO PPA. As of September 30,
2000, the Partnership has estimated its potential liability for incremental
replacement power to approximate $4,500,000 based on the information available
to it. A final resolution of this dispute has not occurred.
(continued)
F-7
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Under the terms of the VEPCO PPA, VEPCO provided natural gas for the
startup and commissioning of each of its Units. The Partnership was obligated
to reimburse VEPCO for the delivered cost of such natural gas. The Partnership
purchased approximately $7,375,000 of natural gas from VEPCO for the start-up
and commissioning of each of its Units. This amount has been recorded as a
component of property, plant and equipment in the accompanying September 30,
2000 balance sheet.
Under the terms of the VEPCO PPA, VEPCO acted as the Partnership's
agent for the purpose of marketing and selling test energy generated during
the start-up and commissioning of the VEPCO Units. In return for VEPCO's
services, the Partnership was obligated to pay VEPCO a marketing fee equal to
$1.00 per MW hour of test energy sold plus a reimbursement for any reasonable
costs related to the sale of such test energy. For the period May 23, 2000
through the commercial operations date under the VEPCO PPA, the Partnership
recorded approximately $2,978,000, net of related marketing fees, from the sale
of test energy under this arrangement with VEPCO. This amount has been recorded
as a component of property, plant and equipment in the accompanying September
30, 2000 balance sheet.
The terms of the VEPCO PPA require VEPCO to make payments to the
Partnership including a reservation payment, an energy payment, a start-up
payment, system upgrade payments and a guaranteed heat rate payment.
The reservation payment is a monthly payment based on the tested
capacity of each VEPCO Unit adjusted to specific ambient conditions and the
applicable reservation charge. The standard capacity reservation charge is
$5.00 per megawatt per month, $6.00 per megawatt per month, and $4.50 per
megawatt per month for contract years 1-5, 6-13, and 14-25, respectively. The
supplemental (or augmented) capacity reservation charge is $3.25 per megawatt
per month, $3.50 per megawatt per month, and $3.00 per megawatt per month for
contract years 1-5, 6-13, and 14-25, respectively. The reservation payment
may be adjusted downward due to low Unit reliability or availability.
However, in the event of an extended forced outage, the Partnership may elect
to pay for or provide VEPCO with replacement power and, thereby, avoid a
reduction in the reservation payment due to reduced availability. There were
no reductions in the reservation payments under the VEPCO PPA in August or
September due to low availability. The Partnership has invoiced VEPCO
approximately $4,598,000 for reservation payments for the period from the
commercial operations date through September 30, 2000.
The energy payment is a monthly payment based on the amount of energy
delivered to VEPCO and an energy rate. The energy rate is $1.00 per
megawatt-hour escalated by 3% per year. The Partnership has invoiced VEPCO
approximately $230,000 for energy payments for the period from the commercial
operations date through September 30, 2000.
The start-up payment is a monthly payment based on the number of
starts for a VEPCO Unit in excess of 250 per year and a start-up charge. The
start-up charge is equal to $5,000 per Unit per start in excess of 250 per
year. As of the end of September there has been a total of 37 and 28 starts for
the year for VEPCO's Units 1 and 2, respectively. There were no start-up
payments earned during the period from the commercial operations date through
September 30, 2000.
The system upgrade payment is a monthly payment based on VEPCO's
receipt of a credit or discount for transmission service from the Tennessee
Valley Authority ("TVA") and Entergy Mississippi, Inc. ("Entergy") due to the
Partnership's payment for system upgrades on TVA's or Entergy's transmission
systems. The system upgrade payment is due only to the extent that VEPCO
receives such transmission service credit or discount. As of the end of
September, VEPCO has received no credit or discount from TVA or Entergy for use
of the TVA and Entergy transmission system upgrades. TVA and Entergy have been
collecting the transmission service fees and have been providing the system
upgrade payments directly to the Partnership.
The guaranteed heat rate payment is a monthly payment based on the
difference between the actual operating efficiency of the VEPCO Units and the
operating efficiency that the Partnership has guaranteed. If the actual
operating efficiency of the VEPCO Units is higher than the operating efficiency
that the Partnership has guaranteed, VEPCO is required to pay the Partnership
the fuel cost savings that resulted from such higher efficiency. If the actual
operating efficiency of the VEPCO Units is lower than the operating efficiency
that the Partnership has guaranteed, the Partnership is required to pay VEPCO
the fuel cost expense that resulted from such lower efficiency. As of September
30, 2000, the Partnership has paid approximately $17,700 in guaranteed heat
rate payments to VEPCO.
(continued)
F-8
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Due to the unavailability of testing data at the time of commercial
operation of the VEPCO units, VEPCO and the Partnership agreed to fix the
standard and supplemental capacities of the VEPCO Units under the power
purchase agreement at 243 megawatts and 40 megawatts respectively. The
Partnership committed to retest for the standard capacity and supplemental
capacity of the VEPCO units by September 30, 2000 and November 30,
2000,respectively. However due to the combustion turbine manufacturer's 80%
load limitation, as described below, the retests will not be conducted until
after the removal of such advisory. The results of the standard capacity test
will be applied retroactively back to September 30, 2000. In the event that
the supplemental capacity test is completed after November 30, 2000, the
results of the test will be applied retroactively back to November 30, 2000.
The Aquila PPA specifies an energy delivery milestone deadline of June
1, 2000 for the Aquila Unit. On August 8, 2000, the energy delivery milestone
of the Aquila Unit was achieved. The Partnership had the option of electing
to incur an adjustment to the reservation payment to be received under the
Aquila PPA or to be responsible for incremental replacement power during the
period of delay. The Partnership elected to incur an adjustment to the
reservation payments to be received under the Aquila PPA. The adjustment to
the future reservation payments was determined by contract capacity, the
duration of delay and a percentage factor for the month in which the delay
occurred. The reduction in reservation payments received for the period from
the commercial operations date through September 30, 2000 approximated
$1,335,000. The delay which caused the aforementioned reduction in
reservation payments will have no impact on reservation payments to be earned
under the Aquila PPA after September 30, 2000.
Under the terms of the Aquila PPA, Aquila provided natural gas for the
startup and commissioning of its Unit. The Partnership was obligated to
reimburse Aquila for the delivered cost of such natural gas. The Partnership
purchased approximately $4,602,000 of natural gas from Aquila for the start-up
and commissioning of its Unit. This amount has been recorded as a component of
property, plant and equipment in the accompanying September 30, 2000 balance
sheet.
Under the terms of the Aquila PPA, Aquila acted as the Partnership's
agent for the purpose of marketing and selling test energy generated during the
start-up and commissioning of the Aquila Unit. In return for Aquila's services,
the Partnership was obligated to pay Aquila a marketing fee equal to $0.25 per
MW hour of test energy sold plus a reimbursement for any reasonable costs
related to the sale of such test energy. For the period May 23, 2000 through
the commercial operations date under the Aquila PPA, the Partnership recorded
approximately $2,940,000, net of related marketing fees, from the sale of test
energy under this arrangement with Aquila. This amount has been recorded as a
component of property, plant and equipment in the accompanying September 30,
2000 balance sheet.
The terms of the Aquila PPA require Aquila to make payments to the
Partnership including a reservation payment, an energy payment, a start-up
payment, system upgrade payments and a guaranteed heat rate payment
The reservation payment is a monthly payment based on the tested
capacity of each Aquila Unit adjusted to specific ambient conditions and the
applicable reservation charge. The capacity reservation charge for all capacity
up to 267-megawatts is $4.90 per megawatt per month for the first 60 months and
$5.00 per megawatt per month thereafter. The capacity reservation charge for
all capacity in excess of 267-megawatts is $2.50 per megawatt per month through
the term of the Aquila PPA. The reservation payment may be adjusted downward
due to low Unit reliability or availability. However, in the event of an
extended forced outage the Partnership may elect to pay for or provide Aquila
with replacement power and, thereby, avoid a reduction in the reservation
payment due to reduced availability. There were no reductions in the
reservation payments under the Aquila PPA in August or September due to low
availability. The Partnership has invoiced Aquila approximately $997,000 for
reservation payments, net of the delay adjustment of approximately $1,335,000,
for the period from the commercial operations date through September 30, 2000.
The energy payment is a monthly payment based on the amount of energy
delivered to Aquila and an energy rate. The energy rate is $1.00 per
megawatt-hour times the ratio of the current gross domestic product implicit
price deflator to the gross domestic product implicit price deflator from
January 1, 1997. The Partnership has invoiced Aquila approximately $136,000 for
energy payments for the period from the commercial operations date through
September 30, 2000.
The start-up payment is a monthly payment based on the number of
starts for the Aquila Unit in excess of 200 per year and a start charge. The
start charge is equal to $5,000 per Unit per start. As of the end of September
there has been a total of 41 starts for the year for Aquila's unit. There were
no start-up payments earned during the period from the commercial operations
date through September 30, 2000.
(continued)
F-9
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The system upgrade payment is a monthly payment based on Aquila's
receipt of a credit or discount for transmission service from TVA or Entergy
due to the Partnership's payment for system upgrades on TVA's or Entergy's
transmission systems. The system upgrade payment is due only to the extent that
Aquila receives such transmission service credit or discount. As of the end of
September, Aquila has received no credit or discount from TVA or Entergy for
use of the TVA and Entergy transmission system upgrades. TVA and Entergy have
been collecting the transmission service fees and have been providing the
system upgrade payment directly to the Partnership.
The guaranteed heat rate payment is a monthly payment based on the
difference between the actual operating efficiency of the Aquila Unit and the
operating efficiency that the Partnership has guaranteed. If the actual
operating efficiency of the Aquila Unit is higher than the operating efficiency
that the Partnership has guaranteed, Aquila is required to pay the Partnership
the fuel cost savings that resulted from such higher efficiency. If the actual
operating efficiency of the Aquila Unit is lower than the operating efficiency
that the Partnership has guaranteed, the Partnership is required to pay Aquila
the fuel cost expense that resulted from such lower efficiency. As of September
30, 2000, the Partnership has paid approximately $55,000 in guaranteed heat
rate payments to Aquila.
Due to the unavailability of testing data at the time of commercial
operation of the Aquila Unit, Aquila and the Partnership agreed to fix the
standard and supplemental capacities of the Aquila Unit under the power
purchase agreement at 243 megawatts and 38 megawatts, respectively. The
Partnership committed to retest for the standard and supplemental capacity of
the Aquila Unit by November 30, 2000. However, due to the combustion turbine
manufacturer's 80% load limitation, as described below, the Partnership may
not be able to perform the retests on or before November 30, 2000. In the
event these tests are completed after November 30, 2000, the results of such
tests will be applied retroactively back to November 30, 2000.
For the period between February 25, 2000 and May 23, 2000, the
Partnership was a party to a power purchase agreement with Tennessee Valley
Authority ("TVA") for the sale of test energy generated during startup and
commissioning of the Facility ("Test Energy Agreement"). As of September 30,
2000, the Partnership has recorded approximately $2,007,000 from the sale of
test energy to TVA. This amount has been recorded as a component of property,
plant and equipment in the accompanying September 30, 2000 balance sheet.
On July 22, 1998, the Partnership entered into a $240 million fixed
price Turnkey Engineering, Procurement and Construction Contract ("Construction
Agreement") with BVZ Power Partners-Batesville ("BVZ"), a joint venture formed
by H.B. Zachary Company and a subsidiary of Black & Veatch, LLP. The
obligations of BVZ are guaranteed by Black & Veatch, LLP and the entire
Construction Agreement is backed by a performance bond. Under the terms of the
Construction Agreement, BVZ has committed to develop and construct the Facility
subject to the terms, deadlines and conditions set forth in the Construction
Agreement. BVZ completed the construction and start-up of the Aquila Unit and
the VEPCO Units on August 8, 2000.
BVZ and the suppliers of the combustion turbines, steam turbines and
heat recovery steam generators are currently engaged in a dispute regarding
payment of delay liquidated damages to BVZ. BVZ claims that such suppliers owe
BVZ approximately $4,700,000 in delay liquidated damages. BVZ intends to set
off or withhold such amount owed by these suppliers from payments to such
suppliers. The equipment supplied to the Facility by each of these equipment
suppliers constitute direct purchases by the Partnership. Although the
Partnership has contracted directly with these suppliers for such equipment,
BVZ is responsible for the obligations and liabilities of such suppliers
pursuant to the terms of the Construction Agreement. Final resolution of this
dispute has not occurred.
As of September 30, 2000, engineering, procurement and construction
was estimated to be approximately 99% complete and total costs incurred to date
under the Construction Agreement were approximately $240,732,000, including
retainage. As of September 30, 2000, the Partnership had retained construction
contract payments under the Construction Agreement totaling approximately
$12,062,000, which amounts are payable upon completion of the facility.
(continued)
F-10
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The Partnership received a technical advisory from the combustion turbine
manufacturer on September 18, 2000, which warned of the potential for hot gas
leakage from flanged connections within the turbine enclosure and limits all
three combustion turbines to 80% load. In response to this technical advisory,
the combustion turbine manufacturer has issued a product modification that will
upgrade the flange connections and will install additional equipment monitors.
Work on the product modifications is expected to begin before the end of
November 2000 with all work complete and the 80% load restriction is expected
to be removed by December 31, 2000. Based upon the projected dispatch of the
VEPCO and Aquila units, the adjustment factors associated with unavailability
during off peak months and the availability margins provided for within the
power purchase agreements, the Partnership does not expect that the operational
restrictions imposed by this technical advisory will result in a reduction in
the reservation payment due to availability adjustments under the VEPCO PPA or
Aquila PPA. However, because of the 80% load restriction the units are not able
to operate as efficiently as they otherwise would, the Partnership is
responsible for this mismatch in efficiency as guaranteed heat rate payments to
VEPCO and Aquila. Based upon the projected dispatch of the VEPCO and Aquila
units, the Partnership estimates its additional obligation with respect to the
guaranteed heat rate payments will be between $15,000 to $20,000 per month for
the months of October, November and December.
The completion of the cooling tower performance test and declaration
of substantial completion of the Facility have been delayed pending completion
of modifications by the cooling tower manufacturer that will improve cooling
tower performance. Final acceptance tests cannot be completed and final
completion of the Facility cannot be declared until after implementation of the
combustion turbine product modifications and removal of the 80% load
restriction imposed by the combustion turbine manufacturer.
During an inspection of the second VEPCO Unit's combustion turbine on
May 9, 2000, damage to the compressor blades was discovered. The combustion
turbine manufacturer was notified and additional technical support was
dispatched to the Facility to determine the cause and extent of the damage and
assist in repairs. During the subsequent investigation and inspection to
determine the cause of the damage, impact and/or rubbing damage were identified
in each of the 16 stages of the second VEPCO Unit's compressor. All compressor
and combustion turbine repairs were completed and the Unit resumed testing on
June 12, 2000. The estimated cost of the repairs is approximately $1,550,000.
The Partnership expects this cost to be substantially covered through
insurance. The Partnership's property insurance has a deductible of $250,000.
The Partnership contends that the deductible is the responsibility of the
combustion turbine manufacturer.
The Partnership is entitled to receive system upgrade credits in the
amount of incremental revenue received by the TVA and Entergy for
transmission services procured for the delivery of energy from the Facility.
As of September 30, 2000, the Partnership earned system upgrade credits of
approximately $1,605,000 and $1,508,000 from TVA and Entergy, respectively.
Approximately $1,549,000 of these credits have been capitalized as a
component of property, plant and equipment in the accompanying September 2000
financial statements.
4. FINANCING
On May 21, 1999, the Partnership and Funding issued two series of
Senior Secured Bonds (the "Bonds") in the following total principal amounts:
$150,000,000 7.164% Series A Senior Secured Bonds due 2014 and $176,000,000
8.160% Series B Senior Secured Bonds due 2025. Effective March 7, 2000, the
Partnership and Funding filed a registration statement with the Securities and
Exchange Commission (the "SEC") for a registered offer to exchange the Bonds
for two series of debt securities (the "Exchange Bonds") which are in all
material respects substantially identical to the Bonds. Interest is payable
semiannually on each January 15 and July 15, commencing January 15, 2000, to
the holders of record on the immediately preceding January 1 and July 1.
On July 15, 2000, the Partnership made interest payments aggregating
approximately $12,649,000. Principal payments are payable on each January 15
and July 15, commencing on July 15, 2001.
The Exchange Bonds are secured by substantially all of the personal
property and contract rights of the Partnership and Funding. In addition,
Holding and Energy have pledged all of their interests in the Partnership, and
Holding has pledged all of the common stock of Energy and all of the common
stock of Funding.
(continued)
F-11
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The Exchange Bonds are senior secured obligations of the Partnership
and Funding, rank equivalent in right of payment to all other senior secured
obligations of the Partnership and Funding and rank senior in right of payment
to all existing and future subordinated debt of the Partnership and Funding.
The Letter of Credit and Reimbursement Agreement
(the "LOC Agreement"), entered into by the Partnership with a bank provides
for letter of credit commitments aggregating $16,980,000. The LOC Agreement
provides for the bank to issue three separate letters of credit ("Letter of
Credit A", "Letter of Credit B" and "Letter of Credit C"). The Bank had
issued Letter of Credit A and Letter of Credit B each in the amount of
$5,660,000 as security for the Partnership's incremental replacement power
obligation under the VEPCO PPA until the commercial operations date. On July
21, 2000, VEPCO issued a draw of approximately $4,650,000 on each of Letter
of Credit A and Letter of Credit B (see Note 3).
The draws on Letter of Credit A and Letter of Credit B each converted
into 5-year loans ("LOC Loans"). Principal amounts under each LOC Loan are
repayable in 20 equal quarterly installments of approximately $232,487 on each
March 31, June 30, September 30, and December 31 commencing on the first such
date subsequent to the commercial operations date of the VEPCO Units. On
September 30, 2000, the Partnership made principal payments under the LOC Loans
aggregating approximately $464,974. As of September 30, 2000, interest on each
outstanding LOC Loan was 8.26%. Letter of Credit C was issued in the amount of
$5,660,000 on the commercial operations date of the VEPCO Units as security
for the Partnership's obligations under the VEPCO PPA.
5. RELATED PARTY TRANSACTIONS
LS Power Management, LLC ("LSP Management"), a wholly owned subsidiary
of LS Power, LLC provides certain management services to the Partnership
pursuant to a management services agreement. Under this management services
agreement, LSP Management manages the business affairs of the Partnership
during construction and operation of the Facility. LSP Management is
reimbursed for its reasonable and necessary expenses incurred in performing
its services, including salaries of its personnel, other than executive
officers, to the extent related to services provided under the management
services agreement. LSP Management also receives a monthly management fee of
approximately $33,300 during the construction and operation of the Facility.
This management fee will be adjusted annually based on published indices.
Management fee payments began during the third quarter of 1999. For the three
and nine months ended September 30, 2000, LSP Management billed the
Partnership approximately $290,000 and $838,000, respectively, under the
management services agreement. For the three and nine months ended September
30, 1999 LSP Management billed the Partnership approximately $237,000 and
$809,000, respectively, under the management services agreement.
The Facility is operated and maintained under a long-term operations
and maintenance agreement with Cogentrix Batesville Operations, LLC (the
"Operator"). The initial term of the operations and maintenance agreement is
twenty-seven years. The Partnership has the option of extending the term of the
agreement for successive two-year terms with one hundred and eighty days
notice. Under the terms of the agreement the Partnership paid the Operator a
fixed fee of $390,000, in ten monthly installments, for services provided
during construction of the Facility. During operation of the Facility the
Partnership will pay the Operator a fixed monthly fee of approximately $42,000.
The Partnership is also required to reimburse the Operator for all labor costs,
including payroll and taxes, subcontractor costs and other costs deemed
reimbursable by the Partnership. The management fee will be adjusted annually
based on published indices. For the three and nine months ended September 30,
2000, Cogentrix billed the Partnership approximately $680,000 and $2,080,000,
respectively, under the operations and maintenance agreement. For the three and
nine months ended September 30, 1999 Cogentrix billed the Partnership
approximately $386,000, under the operations and maintenance agreement.
(continued)
F-12
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
6. DEPENDENCE ON THIRD PARTIES
The Partnership is highly dependent on BVZ for the construction of the
Facility and the Operator for the operation and maintenance of the Facility.
During the terms of the VEPCO PPA and Aquila PPA, the Partnership will be
highly dependent on two utilities for the purchase of electric generating
capacity and dispatchable energy from their respective Units at the Facility.
Any material breach by any one of these parties of their respective obligations
to the Partnership could affect the ability of the Partnership to make payments
under the various financing agreements. In addition, bankruptcy or insolvency
of other parties or default by such parties relative to their contractual or
regulatory obligations could adversely affect the ability of the Partnership to
make payments under the various financing agreements. If an agreement were to
be terminated due to a breach of such agreement, the Partnership's ability to
enter into a substitute agreement having substantially equivalent terms and
conditions, or with an equally creditworthy third party, is uncertain and there
can be no assurance that the Partnership will be able to make payments under
the various financing agreements.
F-13
<PAGE>
LSP BATESVILLE FUNDING CORPORATION
BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
ASSETS
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Current asset-Cash $1,000 $1,000
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Due to LS Power Management, LLC $1,321 $ ---
Due to LSP Energy Limited Partnership 8,510 5,960
------ -------
Total Current Liabilities 9,831 5,960
------ -------
Commitments and contingencies
Common stock, $.01 par value, 1,000 shares authorized, 100 shares
Issued and outstanding 1 1
Additional paid-in-capital 999 999
Accumulated deficit (9,831) (5,960)
------ -------
Total Stockholder's Equity (Deficit) (8,831) (4,960)
------ -------
Total Liability and Stockholder's Equity (Deficit) $1,000 $1,000
====== ======
</TABLE>
See accompanying notes to financial statements.
F-14
<PAGE>
LSP BATESVILLE FUNDING CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ --- $ --- $ --- $ ---
General and administrative expenses 421 --- 3,871 ---
------ ------ ------- ----------
Total expenses 421 --- 3,871 ---
------ ------ ------- ----------
Net income (loss) $ (421) $ --- $(3,871) $ ---
====== ====== ======= ==========
</TABLE>
See accompanying notes to financial statements.
F-15
<PAGE>
LSP BATESVILLE FUNDING CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON ADDITIONAL ACCUMULATED
STOCK PAID-IN-CAPITAL DEFICIT TOTAL
----- --------------- ------- -----
<S> <C> <C> <C> <C>
Balance at December 31, 1999 $ 1 $999 $(5,960) $(4,960)
Net loss --- --- (3,450) (3,450)
----- ---- ------- -------
Balance at June 30, 2000 $ 1 $999 $(9,410) $(8,410)
Net loss --- --- (421) (421)
----- ---- ------- -------
Balance at September 30, 2000 $ 1 $999 $(9,831) $(8,831)
===== ==== ======= =======
Balance at December 31, 1998 $ 1 $999 $ --- $ 1,000
Net loss --- --- --- ---
----- ---- ------- -------
Balance at June 30, 1999 $ 1 $999 $ --- $ 1,000
Net loss --- --- --- ---
----- ---- ------- -------
Balance at September 30, 1999 $ 1 $999 $ --- $ 1,000
===== ==== ======= =======
</TABLE>
See accompanying notes to financial statements.
F-16
<PAGE>
LSP BATESVILLE FUNDING CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities
Net loss $(421) $ --- $(3,871) $ ---
Adjustments to reconcile net loss to
cash provided by operating activities:
Increase in due to LS Power Management, LLC 421 --- 1,321 ---
Increase in due to LSP Energy Limited Partnership --- --- 2,550 ---
------ ------ ------- ------
Cash provided by (used in) operating activities --- --- --- ---
------ ------ ------- ------
Cash Flows from Investing Activities --- --- --- ---
------ ------ ------- ------
Cash Flows from Financing Activities --- --- --- ---
------ ------ ------- ------
Increase in cash --- --- --- ---
Cash, beginning of period 1,000 1,000 1,000 1,000
------ ------ ------- ------
Cash, end of period $1,000 $1,000 $ 1,000 $1,000
====== ====== ======= ======
</TABLE>
See accompanying notes to financial statements.
F-17
<PAGE>
LSP BATESVILLE FUNDING CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
LSP Batesville Funding Corporation ("Funding") was established on
August 3, 1998. Funding's business purpose is limited to maintaining its
organization and activities necessary to facilitate the acquisition of
financing by LSP Energy Limited Partnership ("the Partnership") from the
institutional debt market and to offering debt securities. Funding is wholly
owned by LSP Batesville Holding, LLC ("Holding"), a Delaware limited liability
company.
Holding was established on July 29, 1998 for the purpose of owning and
managing the limited partnership interests of the Partnership, the common stock
of LSP Energy, Inc., the general partner of the Partnership, and the common
stock of Funding.
The Partnership is a Delaware limited partnership formed in February
1996 to develop, finance, construct, own and operate a gas-fired electric
generating facility with a design capacity of approximately 837 megawatts
located in Batesville, Mississippi (the "Facility"). The Facility commenced
commercial operations under the Power Purchase Agreement ("Aquila PPA") with
Aquila Energy Marketing Corporation ("Aquila") and Utilicorp United, Inc.
("Utilicorp") on August 8, 2000 and under the Power Purchase Agreement ("VEPCO
PPA") with Virginia Electric and Power Company ("VEPCO") on August 9, 2000.
Prior to the achieving commercial operations under the Aquila PPA and the VEPCO
PPA, the Partnership had been in the development stage since its inception and
had not generated any operating revenues.
Due to the insignificance of income tax effects applicable to Funding,
the accompanying financial statements do not reflect any income tax effects.
The financial statements, included herein, have been prepared in
accordance with generally accepted accounting principles ("GAAP") for interim
financial information and the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and footnotes required by GAAP for complete
financial statements. In the opinion of management, the information contained
herein reflects all adjustments, including normal recurring accruals,
necessary to present fairly the financial condition, results of operations and
cash flows for the periods disclosed. Operating results for the three and nine
months ended September 30, 2000 are not necessarily indicative of the results
anticipated for the year ending December 31, 2000.
These financial statements should be read in conjunction with the
audited financial statements, and footnotes thereto, included in the Form S-4
for the year ending December 31, 1999.
2. FINANCING
On May 21, 1999, the Partnership and Funding issued two series of
Senior Secured Bonds (the "Bonds") in the following total principal amounts:
$150,000,000 7.164% Series A Senior Secured Bonds due 2014 and $176,000,000
8.160% Series B Senior Secured Bonds due 2025. Effective March 7, 2000, the
Partnership and Funding filed a registration statement with the Securities and
Exchange Commission (the "SEC") for a registered offer to exchange the Bonds
for two series of debt securities (the "Exchange Bonds") which are in all
material respects substantially identical to the Bonds. Interest is payable
semiannually on each January 15 and July 15, commencing January 15, 2000, to
the holders of record on the immediately preceding January 1 and July 1. On
July15, 2000, the Partnership made interest payments aggregating approximately
$12,649,000.
Principal payments are payable on each January 15 and July 15,
commencing on July 15, 2001.
The Exchange Bonds are secured by substantially all of the personal
property and contract rights of the Partnership and Funding. In addition,
Holding and Energy have pledged all of their interests in the Partnership, and
Holding has pledged all of the common stock of Energy and all of the common
stock of Funding.
The Exchange Bonds are senior secured obligations of the Partnership
and Funding, rank equivalent in right of payment to all other senior secured
obligations of the Partnership and Funding and rank senior in right of payment
to all existing and future subordinated debt of the Partnership and Funding.
F-18
<PAGE>
LSP ENERGY LIMITED PARTNERSHIP
LSP BATESVILLE FUNDING CORPORATION
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------------------------------------------------
**3.1 Amended and Restated Certificate of Incorporation of LSP
Batesville Funding Corporation.
**3.2 Amended and Restated Limited Partnership Agreement of LSP
Energy Limited Partnership.
**3.3 By-Laws of LSP Batesville Funding Corporation.
**4.1 Indenture, dated as of May 21, 1999, among LSP Batesville
Funding Corporation, LSP Energy Limited Partnership and The
Bank of New York, as Trustee.
**4.2 First Supplemental Indenture, dated May 21, 1999 among LSP
Batesville Funding Corporation, LSP Energy Limited Partnership
and The Bank of New York, as Trustee, relating to $150,000,000
aggregate principal amount of 7.164% Series A Senior Secured
Bonds due 2014.
**4.3 Second Supplemental Indenture, dated May 21, 1999 among LSP
Batesville Funding Corporation, LSP Energy Limited Partnership
and The Bank of New York, as Trustee, relating to $176,000,000
aggregate principal amount of 8.160% Series B Senior Secured
Bonds due 2025.
**4.4 Form of Third Supplemental Indenture among LSP Batesville
Funding Corporation, LSP Energy Limited Partnership and The
Bank of New York, as Trustee, relating to $150,000,000
aggregate principal amount of 7.164% Series C Senior Secured
Bonds due 2014.
**4.5 Form of Fourth Supplemental Indenture among LSP Batesville
Funding Corporation, LSP Energy Limited Partnership and The
Bank of New York, as Trustee, relating to $176,000,000
aggregate principal amount of 8.160% Series D Senior Secured
Bonds due 2025.
**4.6 Specimen Certificate of 7.164% Series A Senior Secured Bonds
due 2014.
**4.7 Specimen Certificate of 8.160% Series B Senior Secured Bonds
due 2025.
**4.8 Form of Specimen Certificate of 7.164% Series C Senior
Secured Bonds due 2014.
**4.9 Form of Specimen Certificate of 8.160% Series D Senior Secured
Bonds due 2025.
**4.10 Registration Rights Agreement, dated as of May 21, 1999, among
LSP Batesville Funding Corporation, LSP Energy Limited
Partnership, Credit Suisse First Boston Corporation, Scotia
Capital Markets (USA) Inc. and TD Securities (USA) Inc.
**4.11 Second Amended and Restated Common Agreement, dated as of May
21, 1999, among LSP Batesville Funding Corporation, LSP Energy
Limited Partnership and The Bank of New York, as Collateral
Agent, Administrative Agent and Intercreditor Agent.
**4.12 Intercreditor Agreement, dated as of May 21, 1999, among LSP
Batesville Funding Corporation, LSP Energy Limited
Partnership, Credit Suisse First Boston, as VEPCO L/C Agent,
and The Bank of New York, as Collateral Agent, Trustee,
Administrative Agent and Intercreditor Agent.
**4.13 Second Amended and Restated Equity Contribution Agreement,
dated as of May 21, 1999, among LSP Batesville Holding, LLC,
LSP Energy Limited Partnership and The Bank of New York, as
Collateral Agent.
EI-1
<PAGE>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ---------------------------------------------------------------
**4.14 Second Amended and Restated Collateral Agency Agreement, dated
as of May 21, 1999, among LSP Batesville Funding Corporation,
LSP Energy Limited Partnership, the Senior Secured Parties
party thereto from time to time, The Bank of New York, as
Administrative Agent, Collateral Agent and Intercreditor Agent
and Credit Suisse First Boston, as Additional Collateral
Agent.
**4.15 Pledge and Security Agreement, dated as of May 21, 1999
(Funding Corporation's Stock), between LSP Batesville Holding,
LLC and The Bank of New York, as Collateral Agent.
**4.16 Second Amendment and Restated Pledge and Security Agreement
(LSP Energy, Inc.'s Stock), dated as of May 21, 1999, between
LSP Batesville Holding, LLC and The Bank of New York, as
Collateral Agent.
**4.17 Second Amended and Restated Pledge and Security Agreement
(Limited Partnership Interest in the Partnership), dated as of
May 21, 1999, between LSP Batesville Holding, LLC and The Bank
of New York, as Collateral Agent.
**4.18 Second Amended and Restated Pledge and Security Agreement
(General Partnership Interest in the Partnership), dated as of
May 21, 1999, between LSP Energy, Inc. and The Bank of New
York, as Collateral Agent.
**4.19 Second Amended and Restated Security Agreement, dated as of
May 21, 1999, between LSP Energy Limited Partnership and The
Bank of New York, as Collateral Agent.
**4.20 Security Agreement, dated as of May 21, 1999, between LSP
Batesville Funding Corporation and The Bank of New York, as
Collateral Agent.
**4.21 Deed of Trust, Security Agreement, Assignment of Leases and
Rents and Fixture Filing, dated as of May 21, 1999, by LSP
Energy Limited Partnership, as trustor, to James W. O'Mara, as
trustee, for the benefit of The Bank of New York, as
Collateral Agent.
**4.22 Second Amended and Restated Securities Account Control
Agreement, dated as of May 21, 1999, among LSP Batesville
Funding Corporation, LSP Energy Limited Partnership and The
Bank of New York, as Collateral Agent and Securities
Intermediary.
**5.1 Opinion of Latham & Watkins regarding the validity of the
exchange bonds.
**10.1 Purchase Agreement, dated May 13, 1999, among LSP Energy
Limited Partnership, LSP Batesville Funding Corporation,
Credit Suisse First Boston Corporation, Scotia Capital Markets
(USA) Inc. and TD Securities (USA) Inc.
**10.2 Power Purchase Agreement and amendments thereto, dated May 18,
1998, July 22, 1998 and August 11, 1998, among LSP Energy
Limited Partnership and Virginia Electric and Power Company.
**10.3 Power Purchase Agreement and amendments thereto, dated May 21,
1998, July 14, 1998, July 16, 1998 and August 27, 1998, among
LSP Energy Limited Partnership, Aquila Energy Marketing
Corporation and Utilicorp United Inc.
**10.4 Interconnection Agreement, dated July 22, 1998, between LSP
Energy Limited Partnership and the Tennessee Valley Authority.
**10.5 Interconnection and Operating Agreement and amendments
thereto, dated May 18, 1998 and August 18, 1998, between LSP
Energy Limited Partnership and Entergy Mississippi, Inc.
EI-2
<PAGE>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- --------------------------------------------------------------
**10.6 Interconnection Agreement, dated July 28, 1998, between LSP
Energy Limited Partnership and ANR Pipeline Company.
**10.7 Facilities Agreement, dated June 23, 1998, between Tennessee
Gas Pipeline Company and LSP Energy Limited Partnership.
**10.8 Turnkey Engineering, Procurement and Construction Agreement
and amendments thereto, dated July 22, 1998, October 22, 1998,
November 2, 1998, November 5, 1998, December 10, 1998,
February 1, 1999 and April 12, 1999, between LSP Energy
Limited Partnership and BVZ Power Partners - Batesville.
**10.9 Engineering Services Agreement, dated July 24, 1998, between
LSP Limited Partnership and Black & Veatch, LLP.
**10.10 Guaranty Agreement, dated July 22, 1998, by Black & Veatch,
LLP in favor of LSP Energy Limited Partnership.
**10.11 Management Services Agreement, dated August 24, 1998, between
LSP Energy Limited Partnership and LS Power Management, LLC.
**10.12 Operation and Maintenance Agreement, dated August 24, 1998,
between LSP Energy Limited Partnership and Cogentrix
Batesville Operations, LLC.
**10.13 Water Supply Storage Agreement and amendments thereto, dated
June 8, 1998 and March 15, 1999, between LSP Energy Limited
Partnership and the United Sates of America.
**10.14 Letter Agreement/Blanket Purchase Order, dated July 23, 1998,
between LSP Energy Limited Partnership and Siemens
Westinghouse Power Corporation.
**10.15 Ad Valorem Tax Contract, dated August 24, 1998, among LSP
Energy Limited Partnership, Panola County, Mississippi, the
City of Batesville, Mississippi, the Department of Economic
and Community Development and the Panola County Tax
Assessor/Collector.
**10.16 Letter of Credit Agreement, dated August 28, 1998, among LSP
Energy Limited Partnership, Credit Suisse First Boston, as the
VEPCO L/C Agent and the VEPCO L/C Issuer, and the VEPCO L/C
Banks.
**10.17 Infrastructure Use Agreement (Gasline Use), dated August 12,
1999, among LSP Energy Limited Partnership, the Industrial
Development Authority of the Second Judicial District of
Panola County, Mississippi, the Mississippi Major Economic
Impact Authority, Panola County, Mississippi and the City of
Batesville, Mississippi.
**10.18 Inducement Agreement, dated August 12, 1999, among LSP Energy
Limited Partnership, the Industrial Development Authority of
the Second Judicial District of Panola County, Mississippi,
the Mississippi Department of Economic and Community
Development, the Mississippi Major Economic Impact Authority,
Panola County, Mississippi and the City of Batesville,
Mississippi.
**10.19 Panola Partnership, dated August 12, 1999, among LSP Energy
Limited Partnership and Panola Partnership, Inc.
**10.20 Infrastructure Use Agreement (Water Use), dated August 12,
1999, among LSP Energy Limited Partnership, the Industrial
Development Authority of the Second Judicial District of
Panola County, Mississippi, the Mississippi Major Economic
Impact Authority, Panola County, Mississippi
EI-3
<PAGE>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- --------------------------------------------------------------
**10.21 Yalobusha County Agreement, dated February 16, 1999, among LSP
Energy Limited Partnership, Yalobusha County, Mississippi and
the Coffeeville School District.
**10.22 Performance Bond and Payment Bond, dated August 13, 1998, of
United States Fidelity and Guaranty Company, as surety.
***10.23 Power Purchase Agreement between Tennessee Valley Authority
and LSP Energy Limited Partnership dated February 25, 2000.
***10.24 Facilities Interconnect, Construction, Ownership and Operation
Agreement between Trunkline Gas Company and LSP Energy Limited
Partnership for M&R Panola County, Mississippi dated January
28, 2000.
***10.25 First Amendment to Power Purchase Agreement, dated as of
August 4, 2000, between LSP Energy Limited Partnership, Aquila
Energy Marketing Corporation and UtiliCorp United Inc.
***10.26 Third Amendment to Power Purchase Agreement, dated August
9, 2000, between LSP Energy Limited Partnership and Virginia
Electric and Power Company.
10.27 Escrow Agreement among Virginia Electric and Power Company,
LSP Energy Limited Partnership and The Chase Manhattan Bank
dated as of August 17, 2000.
**25.1 Statement of Eligibility and Qualification (Form T-1) under
the Trust Indenture Act of 1939 of The Bank of New York.
27.1 Financial Data Schedule (LSP Energy Limited Partnership).
27.2 Financial Data Schedule (LSP Batesville Funding Corporation).
-------------------------------------------------------------------------------
** Incorporated herein by reference from the Registration Statement on Form
S-4, File No.'s 333-84609 and 333-84609-01 filed with the Securities and
Exchange Commission by LSP Energy Limited Partnership and LSP Batesville
Funding Corporation on March 6, 2000.
*** Incorporated herein by reference from the Quarterly Reports on Form 10-Q,
File No.'s 333-84609 and 333-84609-01 filed with the Securities and Exchange
Commission by LSP Energy Limited Partnership and LSP Batesville Funding
Corporation on May 15, 2000 and August 14, 2000.
EI-4
