<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 11, 2000
REGISTRATION NO. 333-48900
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NRG SOUTH CENTRAL GENERATING LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 4911 41-1963217
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
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901 MARQUETTE AVENUE, SUITE 2300
MINNEAPOLIS, MINNESOTA 55402-3265
(612) 373-5300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S AND CO-REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
------------------------
JAMES J. BENDER, ESQ.
NRG SOUTH CENTRAL GENERATING LLC
901 MARQUETTE AVENUE, SUITE 2300
MINNEAPOLIS, MINNESOTA 55402-3265
(612) 373-5300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
WITH A COPY TO:
STEVEN P. BUFFONE, ESQ.
GIBSON, DUNN & CRUTCHER LLP
200 PARK AVENUE
NEW YORK, NEW YORK 10166
(212) 351-4000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering: [ ]
THE REGISTRANT AND THE CO-REGISTRANT HEREBY AMEND THIS REGISTRATION
STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE
UNTIL THE REGISTRANT AND THE CO-REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE
AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
*OTHER REGISTRANTS
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EXACT NAME OF REGISTRANT STATE OR OTHER JURISDICTION OF PRIMARY STANDARD INDUSTRIAL I.R.S. EMPLOYER IDENTIFICATION
AS SPECIFIED IN ITS CHARTER INCORPORATION OR ORGANIZATION CLASSIFICATION CODE NUMBERS NUMBER
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<S> <C> <C> <C>
Louisiana Generating LLC** Delaware 4911 41-1870498
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** Address and telephone of principal executive offices are the same as those of
NRG South Central Generating LLC.
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<PAGE> 2
PROSPECTUS
[NRG LOGO]
NRG SOUTH CENTRAL GENERATING LLC
EXCHANGE OFFER FOR OUTSTANDING
$500,000,000 8.962% SERIES A SENIOR SECURED BONDS DUE 2016
$300,000,000 9.479% SERIES B SENIOR SECURED BONDS DUE 2024
IN EXCHANGE FOR
$500,000,000 8.962% SERIES A-1 SENIOR SECURED BONDS DUE 2016
$300,000,000 9.479% SERIES B-1 SENIOR SECURED BONDS DUE 2024
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON JANUARY 12, 2001, UNLESS EXTENDED.
TERMS OF THE EXCHANGE OFFER:
- We will exchange all outstanding bonds that are validly tendered and not
withdrawn prior to the expiration of the exchange offer.
- You may withdraw tendered outstanding bonds at any time prior to the
expiration of the exchange offer.
- The exchange of outstanding bonds will not be a taxable exchange for
United States federal income tax purposes.
- The terms of the bonds to be issued are substantially identical to the
terms of the outstanding bonds, except that transfer restrictions,
registration rights and liquidated damages provisions relating to the
outstanding bonds do not apply.
- Each broker-dealer that receives bonds for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of the bonds. The letter of transmittal
accompanying this prospectus states that by acknowledging this and by
delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of bonds received
in exchange for outstanding bonds where the outstanding bonds were
acquired by the broker-dealer as a result of marketmaking activities or
other trading activities. We have agreed that, for a period of 90 days
after the expiration of the exchange offer, we will make this prospectus
available to any broker-dealer for use in connection with any resale. See
"Plan of Distribution."
- We will not receive any proceeds from the exchange offer.
- There is no existing market for the bonds to be issued, and we do not
intend to apply for their listing on any securities exchange.
See the "Description of Bonds" section beginning on page 70 for more
information about the bonds to be issued in this exchange offer.
THIS INVESTMENT INVOLVES RISKS. SEE THE SECTION ENTITLED "RISK FACTORS"
BEGINNING ON PAGE 14 FOR A DISCUSSION OF THE RISKS THAT YOU SHOULD CONSIDER
PRIOR TO TENDERING YOUR OUTSTANDING BONDS FOR EXCHANGE.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES AND
EXCHANGE COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ADEQUACY OR THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated December 13, 2000.
<PAGE> 3
TABLE OF CONTENTS
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PAGE
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Prospectus Summary.......................................... 1
Risk Factors................................................ 14
Forward-Looking Statements.................................. 19
The Exchange Offer.......................................... 20
Use of Proceeds............................................. 28
Capitalization.............................................. 29
Selected Historical Financial Data.......................... 30
Pro Forma Financial Data.................................... 32
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 35
About Us.................................................... 40
Business of NRG South Central and Louisiana Generating...... 42
Management.................................................. 54
Certain Relationships and Related Transactions.............. 56
Summary of Certain Principal Agreements..................... 58
Description of the Bonds.................................... 70
Description of Principal Financing Documents................ 77
Plan of Distribution........................................ 101
Certain U.S. Federal Income Tax Considerations.............. 102
Legal Matters............................................... 102
Experts..................................................... 102
Where You Can Find More Information......................... 103
Index to Financial Statements............................... F-1
</TABLE>
Our principal executive offices are located at 901 Marquette Avenue, Suite
2300, Minneapolis, Minnesota 55402-3265 and our telephone number is (612)
373-5300.
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<PAGE> 4
PROSPECTUS SUMMARY
This summary contains basic information about us and this exchange offer
but may not contain all the information that is important to you. For a more
complete understanding of this exchange offer, we encourage you to read this
entire prospectus and the documents we refer you to. Unless otherwise specified,
the words "we," "our," "ours" and "us" refer to NRG South Central Generating LLC
and include its subsidiary, Louisiana Generating LLC, the guarantor, on a
consolidated basis, but exclude NRG Sterlington Power LLC, Big Cajun I Peaking
Power LLC and NRG New Roads Holdings LLC, its subsidiaries that are not
guarantors. The term "NRG South Central" refers to NRG South Central Generating
LLC in its individual capacity and the term "Louisiana Generating' refers to
Louisiana Generating LLC in its individual capacity. The terms "NRG Sterlington
Power," "NRG Sabine River Works LP," "NRG Sabine River Works GP," "Big Cajun I
Peaking Power" and "NRG New Roads Holdings" refer, respectively, to NRG
Sterlington Power LLC, NRG Sabine River Works LP LLC, NRG Sabine River Works GP
LLC, Big Cajun I Peaking Power LLC and NRG New Roads Holdings LLC, each in their
individual capacity. The term "outstanding bonds" refers, collectively, to the
8.962% Series A Senior Secured Bonds due 2016 and the 9.479% Series B Senior
Secured Bonds due 2024, issued on March 30, 2000. The term "bonds" refers,
collectively, to the 8.962% Series A Senior Secured Bonds due 2016 and the
9.479% Series B Senior Secured Bonds due 2024, issued on March 30, 2000, and the
8.962% Series A-1 Senior Secured Bonds due 2016 and the 9.479% Series B-1 Senior
Secured Bonds due 2024 offered in this prospectus. You should carefully consider
the information set forth under "Risk Factors." In addition, certain statements
are forward-looking statements which involve risks and uncertainties. See
"Forward-Looking Statements."
THE EXCHANGE OFFER
BONDS OFFERED................. $500.0 million aggregate principal amount of
new 8.962% Series A-1 Senior Secured Bonds due
2016; and
$300.0 million aggregate principal amount of
new 9.479% Series B-1 Senior Secured Bonds due
2024;
all of which have been registered under the
Securities Act.
The terms of the bonds offered in the exchange
offer are substantially identical to those of
the outstanding bonds, except that certain
transfer restrictions, registration rights and
liquidated damages provisions relating to the
outstanding bonds do not apply to the new
registered bonds.
OUTSTANDING BONDS............. $500.0 million aggregate principal amount of
8.962% Series A Senior Secured Bonds due 2016;
and
$300.0 million aggregate principal amount of
9.479% Series B Senior Secured Bonds due 2024;
all of which were issued on March 30, 2000.
THE EXCHANGE OFFER............ We are offering to issue registered bonds in
exchange for a like principal amount and like
denomination of our outstanding bonds. We are
offering to issue these registered bonds to
satisfy our obligations under a registration
rights agreement that we entered into with the
initial purchasers of the outstanding bonds
when we sold them in a transaction that was
exempt from the registration requirements of
the Securities Act. You may tender your
outstanding bonds for exchange by following the
procedures described under the caption "The
Exchange Offer".
TENDERS; EXPIRATION DATE;
WITHDRAWAL.................... The exchange offer will expire at 5:00 p.m.,
New York City time, on January 12, 2001, unless
we extend it. If you decide to exchange
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your outstanding bonds for new bonds, you must
acknowledge that you are not engaging in, and
do not intend to engage in, a distribution of
the new bonds. You may withdraw any bonds that
you tender for exchange at any time prior to
January 12, 2001. If we decide for any reason
not to accept any bonds you have tendered for
exchange, those bonds will be returned to you
without cost promptly after the expiration or
termination of the exchange offer. See "The
Exchange Offer -- Terms of the Exchange Offer"
for a more complete description of the tender
and withdrawal provisions.
CONDITIONS TO THE EXCHANGE
OFFER......................... The exchange offer is subject to customary
conditions, some of which we may waive.
U.S. FEDERAL INCOME TAX
CONSEQUENCES................ Your exchange of outstanding bonds for bonds to
be issued in the exchange offer will not result
in any gain or loss to you for U.S. federal
income tax purposes.
USE OF PROCEEDS............... We will not receive any cash proceeds from the
exchange offer.
EXCHANGE AGENT................ The Chase Manhattan Bank.
CONSEQUENCES OF FAILURE TO
EXCHANGE...................... Outstanding bonds that are not tendered or that
are tendered but not accepted will continue to
be subject to the restrictions on transfer that
are described in the legend on those bonds. In
general, you may offer or sell your outstanding
bonds only if they are registered under, or
offered or sold under an exemption from, the
Securities Act and applicable state securities
laws. We, however, will have no further
obligation to register the outstanding bonds.
If you do not participate in the exchange
offer, the liquidity of your bonds could be
adversely affected.
CONSEQUENCES OF EXCHANGING
YOUR BONDS.................... Based on interpretations of the staff of the
SEC, we believe that you may offer for resale,
resell or otherwise transfer the bonds that we
issue in the exchange offer without complying
with the registration and prospectus delivery
requirements of the Securities Act if you:
- acquire the bonds issued in the exchange
offer in the ordinary course of your
business;
- are not participating, do not intend to
participate, and have no arrangement or
undertaking with anyone to participate,
in the distribution of the bonds issued
to you in the exchange offer; and
- are not an "affiliate" of our company as
defined in Rule 405 of the Securities
Act.
If any of these conditions is not satisfied and
you transfer any bonds issued to you in the
exchange offer without delivering a proper
prospectus or without qualifying for a
registration exemption, you may incur liability
under the Securities Act. We will not be
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responsible for or indemnify you against any
liability you may incur.
Any broker-dealer that acquires bonds in the
exchange offer for its own account in exchange
for outstanding bonds which it acquired through
market-making or other trading activities, must
acknowledge that it will deliver a prospectus
when it resells or transfers any bonds issued
in the exchange offer. See "Plan of
Distribution" for a description of the
prospectus delivery obligations of
broker-dealers in the exchange offer.
THE BONDS
The terms of the bonds we are issuing in this exchange offer and the
outstanding bonds are identical in all material respects, except the bonds
offered in the exchange offer:
- will have been registered under the Securities Act;
- will not contain transfer restrictions and registration rights that
relate to the outstanding bonds; and
- will not contain provisions relating to the payment of liquidated damages
to be made to the holders of the outstanding bonds under circumstances
related to the timing of the exchange offer.
A brief description of the material terms of the bonds we are issuing in
this exchange offer follows:
THE ISSUER.................... NRG South Central Generating LLC
THE BONDS OFFERED............. $800.0 million in aggregate principal amount of
(a) $500.0 million 8.962% Series A-1 Senior
Secured Bonds due March 15, 2016 and (b) $300.0
million 9.479% Series B-1 Senior Secured Bonds
due September 15, 2024.
ISSUE PRICE................... The issue price of the bonds offered in this
exchange offer will be equal to and in the
denomination of the principal amount of the
surrendered outstanding bonds.
INTEREST PAYMENT DATES........ March 15 and September 15 of each year,
commencing September 15, 2000.
AMORTIZATION.................. Principal of the bonds will be repaid in
accordance with the schedule set forth under
"Description of the Bonds -- Amortization."
INITIAL AVERAGE LIFE.......... Series A-1 Senior Secured Bonds due 2016:
approximately 9.9 years; Series B-1 Senior
Secured Bonds due 2024: approximately 20.2
years.
DENOMINATIONS................. NRG South Central will issue the bonds in
minimum denominations of $100,000 or any
integral multiple of $1,000 in excess thereof.
RATINGS....................... "Baa2" from Moody's Investors Services, Inc.,
or Moody's, and "BBB-" from Standard & Poor's
Rating Services, or S&P.
GUARANTOR..................... Louisiana Generating will guarantee the bonds.
If NRG South Central or Louisiana Generating
acquires or creates additional subsidiaries as
permitted under the indenture or the guarantor
loan agreement, then those subsidiaries will
guarantee the bonds unless designated as
unrestricted subsidiaries. NRG New Roads
Holdings, NRG Sterlington Power, NRG Sabine
River Works LP,
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NRG Sabine River Works GP and Big Cajun I
Peaking Power are wholly-owned subsidiaries of
NRG South Central; however, they are not
guarantors of the bonds and their operations
are not restricted by the indenture.
NATURE OF OBLIGATIONS......... NRG South Central is obligated to make payments
on the bonds. Neither NRG Energy nor its
parent, Xcel Energy, nor any of their
affiliates (other than NRG South Central,
Louisiana Generating or any additional
guarantor) will guarantee payment of the bonds
nor will they have any obligation to make
payments on the bonds (other than NRG Energy's
or any affiliate's obligation under any debt
service reserve credit support).
OPTIONAL REDEMPTION........... NRG South Central may redeem the bonds in whole
or in part at any time at a redemption price
equal to:
- 100% of the principal amount of the
bonds being redeemed, plus
- interest on the bonds being redeemed,
accrued and unpaid to, but excluding,
the date of redemption, plus
- a make-whole premium based on an amount
equal to the excess, if any, of (a) the
discounted present value of all interest
and principal payments scheduled to
become due in respect to the bonds to be
redeemed (such discounted present value
to be determined on the basis of a
discount rate equal to the sum of (i)
the treasury rate and (ii) 50 basis
points), over (b) the outstanding
principal amount of the applicable bonds
to be redeemed.
MANDATORY REDEMPTION.......... The bonds will be subject to a mandatory
redemption in whole or in part in an aggregate
amount equal to the loss proceeds we receive in
respect of any loss or damage to or
condemnation or other governmental taking of or
title event regarding any of our facilities
owned by Louisiana Generating, which we refer
to as the Cajun facilities, or any of the other
assets of NRG South Central or Louisiana
Generating or any part thereof, in excess of
$10.0 million; provided that we will first be
permitted to replace, repair or rebuild such
facilities or assets, or parts thereof, where
there are sufficient funds (including such loss
proceeds) to do so and if we provide an
officer's certificate that certifies that no
material adverse effect would reasonably be
expected to result.
In the event that the Cajun facilities or our
other assets are replaced, repaired or rebuilt
and the loss proceeds are greater than the cost
of such replacement, repair or rebuilding and
if such excess amount is greater than $5.0
million, only the remaining loss proceeds over
$5.0 million will be used for a mandatory
redemption.
The bonds will be subject to a mandatory
redemption in whole or in part in the event we
receive proceeds from an involuntary or
voluntary buy-out of a power supply agreement
in excess of $5.0 million. However, there will
be no mandatory redemption if either (a) the
rating agencies provide confirmation that no
ratings downgrade will occur following such
involuntary or voluntary buy-out or
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(b) we enter into a replacement power supply
agreement containing substantially similar
terms to the terminated agreement and provide
an officer's certificate that certifies that no
material adverse effect would reasonably be
expected to result.
In the event of a mandatory redemption, the
redemption price for the bonds will be 100% of
the principal amount of the bonds being
redeemed plus interest accrued and unpaid to
but excluding the date of redemption plus, in
the event of a voluntary buy-out of a power
supply agreement only, a make-whole premium
equal to that paid in the case of any optional
redemption of the same bonds. Upon the
occurrence of any event requiring a redemption
of the bonds, we will be required to redeem the
bonds and repay other senior secured
indebtedness on a pro rata basis in an
aggregate amount equal to the proceeds to be
applied as described above.
CHANGE OF CONTROL............. Upon the occurrence of certain events involving
a change of control, NRG South Central will be
required to offer to repurchase all or any part
of the outstanding bonds held by any holder of
bonds on the immediately following payment date
at a cash price equal to 101% of the then
outstanding principal amount of the bonds plus
accrued and unpaid interest to but excluding
the date of payment.
A change of control means the acquisition of,
directly or indirectly, beneficially or of
record or otherwise, by any person or group
other than NRG Energy or its controlled
subsidiaries, the power to direct or cause the
direction of the management and policies of NRG
South Central through the ownership of voting
securities, by contract or otherwise.
However, there shall be no change of control if
either:
- NRG South Central receives a
confirmation from the rating agencies
that no ratings downgrade will occur
after such change of control; or
- such change of control is approved by
holders of at least 66 2/3% in aggregate
principal amount of the then-outstanding
bonds.
DEBT SERVICE RESERVE
ACCOUNT....................... NRG South Central established a debt service
reserve account for the benefit of the
bondholders. This account must constitute at
all times a sufficient fund to pay the
scheduled principal and interest on the bonds
due in the next six months. NRG South Central
may fund this account with cash or credit
support. NRG South Central has obtained credit
support and therefore need not fund this
account with cash. Credit support may be
either:
- an unconditional guarantee by NRG Energy
or one of its affiliates other than us
(so long as NRG Energy or such affiliate
maintains a long-term senior unsecured
debt rating of at least "Baa3" from
Moody's and at least "BBB-" with a
stable outlook from S&P); or
- a letter of credit provided by a
commercial bank or other financial
institution with a long-term senior
unsecured debt
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rating of at least "A2" from Moody's and
at least "A" from S&P.
Currently, the debt service reserve requirement
is being satisfied by a guarantee given by NRG
Energy.
RANKING....................... The bonds:
- are NRG South Central's senior
obligations;
- are equal in right of payment to all of
NRG South Central's existing and future
senior indebtedness; and
- rank senior in right of payment to all
of the future subordinated indebtedness
of NRG South Central.
The guarantee of the bonds:
- is Louisiana Generating's senior
obligation; and
- is equal in right of payment to all of
Louisiana Generating's existing and
future senior indebtedness.
COLLATERAL.................... The obligations of NRG South Central are
secured by a security interest in the
following:
- NRG Central U.S. LLC's and South Central
Generation Holding LLC's membership
interests in NRG South Central and NRG
South Central's membership interests in
Louisiana Generating;
- all of NRG South Central's assets
related to the Cajun facilities,
including its rights under a guarantor
loan agreement and all intercompany
notes between it and Louisiana
Generating; and
- a revenue account and the debt service
reserve account.
The obligations of Louisiana Generating under
the guarantee of the bonds and the guarantor
loan agreement are secured by a mortgage with
respect to the two power plants at the Cajun
facilities, which we refer to as Big Cajun I
and Big Cajun II, and a security interest in
the following:
- all of Louisiana Generating's ownership
rights in the Cajun facilities and
substantially all the personal property
associated with the Cajun facilities
except for fixtures not located on the
Cajun facilities and the assets
specifically held for resale;
- substantially all contracts associated
with the Cajun facilities to which
Louisiana Generating is a party and all
consents to the assignment of these
contracts that have been obtained;
- all licenses, permits and governmental
approvals associated with the Cajun
facilities;
- all insurance policies associated with
the Cajun facilities and all monies paid
to Louisiana Generating on these
policies;
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- all revenues of the Cajun facilities,
including revenues from power sales
contracts entered into by NRG Power
Marketing or any other entity which has
entered into a power marketing agreement
with Louisiana Generating associated
with the Cajun facilities; and
- the revenue account.
COVENANTS OF NRG SOUTH
CENTRAL....................... The terms of the indenture require NRG South
Central to, among other things:
- provide financial statements, default
notices and other notices to the bond
trustee and the rating agencies;
- maintain its property and existence;
- maintain certain insurance coverage;
- maintain certain agreements and comply
with certain regulatory requirements;
- comply with applicable laws;
- pay taxes and maintain books and
records;
- retain a controlling ownership interest
in Louisiana Generating and any
additional guarantor;
- maintain the revenue account and the
debt service reserve account;
- comply with the financial information
requirements under the indenture; and
- maintain registration under the Exchange
Act following issuance of the exchange
bonds issued in the exchange offer so
long as required by law.
The terms of the indenture restrict NRG South
Central's ability to, among other things:
- incur additional debt;
- incur liens on its property or pledge
its assets;
- engage in mergers, consolidations and
sales of assets;
- guarantee the obligations of others;
- make distributions;
- make investments and acquisitions;
- enter into specified transactions with
affiliates; and
- enter into businesses other than (a)
acquisition and ownership of Louisiana
Generating, any additional guarantor or
any unrestricted subsidiary and (b)
acquisition, development, construction,
operation and maintenance of any non-
nuclear electric generating or district
energy assets in the United States.
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These limitations are subject to a number of
important qualifications and exceptions which
are described under "Description of Principal
Financing Documents -- Indenture."
COVENANTS OF LOUISIANA
GENERATING.................... The terms of the guarantor loan agreement
require Louisiana Generating to, among other
things:
- provide notices of material litigation
related to the Cajun facilities and
copies of material notices received
under certain contracts to NRG South
Central;
- maintain its property and existence;
- maintain specified insurance coverage;
- maintain specified agreements and comply
with specified regulatory requirements;
- pay taxes and maintain books and
records;
- operate the Cajun facilities in
accordance with prudent independent
power industry practice;
- comply with applicable laws; and
- maintain the revenue account.
The terms of the guarantor loan agreement
restrict Louisiana Generating's ability to,
among other things:
- incur additional debt;
- incur liens on its property or pledge
its assets;
- engage in mergers, consolidations or
sales of assets;
- guarantee the obligations of others;
- make distributions;
- make investments and acquisitions;
- enter into certain transactions with
affiliates;
- enter into businesses other than (a) the
acquisition, ownership, operation and
maintenance of the Cajun facilities and
certain related assets and (b) the
acquisition and ownership of
subsidiaries which are additional
guarantors; and
- amend or assign its material contracts.
These limitations are subject to a number of
important qualifications and exceptions which
are described under the caption "Description of
Principal Financing Documents -- Guarantor Loan
Agreement."
ADDITIONAL GUARANTORS......... We may designate subsidiaries as additional
guarantors so long as prior to doing so, we
obtain a ratings affirmation from both rating
agencies and cause the additional guarantor to
(a) enter into a loan agreement with material
covenants similar to those made by Louisiana
Generating in the guarantor loan agreement and
(b) execute a guarantee with respect to the
bonds. NRG New
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Roads Holdings, NRG Sterlington Power, NRG
Sabine River Works LP, NRG Sabine River Works
GP and Big Cajun I Peaking Power are not
additional guarantors of the bonds.
GOVERNING LAW................. The bonds and the documents related to the
issuance of the bonds are governed by, and
construed in accordance with, the laws of the
State of New York, except for certain security
documents which are governed by the laws of the
State of Louisiana.
NRG SOUTH CENTRAL AND LOUISIANA GENERATING
NRG South Central is a Delaware limited liability company which, through
its wholly-owned subsidiary, Louisiana Generating acquired 1,708 capable MW of
electric power generation facilities located in New Roads, Louisiana. We refer
to these facilities as the Cajun facilities. We sell a significant amount of the
energy and capacity produced by the Cajun facilities under long-term,
all-requirements power supply agreements. NRG South Central is an indirect,
wholly-owned subsidiary of NRG Energy, Inc. In March 2000, NRG Energy made an
equity contribution of approximately $268.6 million to NRG South Central.
We purchased the Cajun facilities on March 31, 2000 for approximately
$1,055.9 million. The Cajun facilities were sold as part of a competitive
bidding process following a Chapter 11 bankruptcy filing by Cajun Electric Power
Cooperative, Inc., a non-profit Louisiana electric membership cooperative
corporation, which we refer to as Cajun Electric. Cajun Electric sold wholesale
energy and capacity generated by the Cajun facilities to its cooperative members
for more than 20 years under long-term, all-requirements power supply
agreements. We have continued to sell energy and capacity to all 11 of Cajun
Electric's former members, which we refer to collectively as the distribution
cooperatives, as well as to two municipal power authorities and one
investor-owned utility that were Cajun Electric's former contract power
purchasers.
The Cajun facilities consist of 100% of each of two gas-fired electric
power generation units, which we collectively refer to as Big Cajun I, and 100%
of each of two coal-fired electric power generation units and 58% of a third
coal-fired unit, which we collectively refer to as Big Cajun II. The remaining
42% of the third coal-fired unit is owned by Entergy Gulf States, Inc., a
subsidiary of Entergy Corporation. The following table summarizes the
characteristics of the Cajun facilities:
CHARACTERISTICS OF THE CAJUN FACILITIES
<TABLE>
<CAPTION>
CAPABLE
YEAR GENERATING
PLACED CAPACITY
GENERATING UNIT IN SERVICE (MW) FUEL DISPATCH TYPE
--------------- ---------- ---------- ---- --------------------
<S> <C> <C> <C> <C>
Big Cajun I
Unit 1 ........................ 1972 110 Gas Intermediate/Peaking
Unit 2 ........................ 1972 110 Gas Intermediate/Peaking
-----
Subtotal, Big Cajun
I.................... 220
Big Cajun II
Unit 1 ........................ 1981 577 Coal Base Load
Unit 2 ........................ 1981 577 Coal Base Load
Unit 3 (58% of 575 MW)......... 1983 334 Coal Base Load
-----
Subtotal, Big Cajun
II................... 1,488
-----
Total, Cajun
facilities........... 1,708
=====
</TABLE>
The distribution cooperatives have purchased energy and capacity generated
by the Cajun facilities for more than 20 years and have committed to do so with
us for varying time periods. In addition to being the primary source of energy
and capacity for the distribution cooperatives, we believe that we are well
positioned to operate as a competitive exempt wholesale generator in the
southeast power market, which consists of
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<PAGE> 13
Louisiana, Mississippi, Tennessee, Alabama, Georgia, Arkansas, northwest Florida
and east Texas. Here are some of the reasons why:
- the Cajun facilities are among the lowest production cost fossil fuel,
electricity generation assets in the southeast power market;
- we entered into 25-year, all-requirements power supply agreements with
seven of the distribution cooperatives and two- to four-year power supply
agreements with the remaining four distribution cooperatives. The
distribution cooperatives are permitted to pass on to their retail
customers the cost of their wholesale power purchases under these power
supply agreements;
- the Cajun facilities are modern and well maintained power generation
assets, having benefited from an extensive maintenance program over their
history and from capital expenditures totaling over $26.0 million from
1997 through 1999 while under the bankruptcy trustee's stewardship;
- we retained 313 former employees of Cajun Electric who have an average of
approximately 15 years of work experience with Cajun Electric and are
responsible for the day-to-day operation and maintenance of the Cajun
facilities;
- we benefit from recently negotiated and competitively priced coal supply
and transportation arrangements;
- we operate as a load control area under the auspices of the Southwest
Power Pool and the North American Electric Reliability Council, which
enables us to directly serve the needs of our customers without reliance
on third-party transmission scheduling;
- the Cajun facilities are in compliance with all existing environmental
requirements. Moreover, our power supply agreements allow Louisiana
Generating to pass through to the distribution cooperatives their share
of increased costs resulting from changes in environmental law; and
- our relationship with NRG Energy allows us to draw on its extensive
experience in the competitive power industry by contracting with it and
its affiliates for administrative, fuel supply, power marketing and
operational services.
In addition, we believe the Cajun facilities' sites and existing infrastructure
provide significant opportunities for expansion of our generation capacity. A
feasibility study has been completed and the permitting process has been
commenced with respect to an approximately 240 MW expansion of the Big Cajun I
site. We have formed Big Cajun I Peaking Power, a wholly-owned subsidiary, to
develop, construct and own the expansion project, which is targeted to begin
commercial operation in June 2001. Big Cajun I Peaking Power is not a guarantor
of the bonds.
NRG South Central and Louisiana Generating were formed for the purpose of
financing, acquiring, owning, operating and maintaining the Cajun facilities and
any other facilities that NRG South Central or its subsidiaries may acquire in
the future.
Our headquarters and principal executive offices are located at 901
Marquette Avenue, Suite 2300, Minneapolis, Minnesota 55402-3265. Our telephone
number is (612) 373-5300.
OUR CONTRACTUAL ARRANGEMENTS
We have entered into or assumed significant agreements for the wholesale
sale of energy and capacity and the supply and transportation of coal, as well
as agreements for marketing, operational and corporate services.
CONTRACT POWER SALES. The distribution cooperatives have all entered into
power supply agreements with Louisiana Generating. While the forms of the power
supply agreements differ with respect to certain terms, each agreement contains
the following:
- an obligation of the distribution cooperative to purchase all of its
energy and capacity from Louisiana Generating;
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<PAGE> 14
- a demand charge component which is determined by the amount of capacity
reserved by the distribution cooperative;
- an energy charge component which covers variable operation and
maintenance expenses and fuel costs;
- multiple fuel options within the energy charge component, including fixed
fuel, fuel pass through and/or formula escalation;
- multiple escalation mechanisms in the tariffs;
- a pass through mechanism for costs of transmission services incurred by
Louisiana Generating; and
- a pass through mechanism for costs incurred by Louisiana Generating
resulting from changes in environmental law.
In addition, we assumed four power supply agreements with two municipal
power authorities and one investor-owned utility that were Cajun Electric's
former customers.
OTHER POWER SALES. Our energy and capacity that is not contracted for is
marketed under a 30-year power sales and agency agreement between Louisiana
Generating and NRG Power Marketing. Under the agreement, NRG Power Marketing
provides all power marketing services for Louisiana Generating including
scheduling, power sales contract management, and bilateral sales of energy and
capacity. NRG Power Marketing has the exclusive right to market all energy and
capacity from Louisiana Generating that Louisiana Generating has not committed
under other contracts. All net revenues collected by NRG Power Marketing from
these activities flow to Louisiana Generating.
FUEL SUPPLY AND TRANSPORTATION. Louisiana Generating has entered into a
five-year coal supply agreement under which Triton Coal Company sells to
Louisiana Generating sufficient quantities of coal to satisfy the full coal
requirements of Big Cajun II. Louisiana Generating has entered into a five-year
coal transportation agreement with The Burlington Northern and Santa Fe Railway
Company and American Commercial Terminal LLC under which the railroad transports
coal from the Triton Coal mines in the Powder River Basin in Wyoming to St.
Louis, Missouri. American Commercial Terminal transports coal by barge down the
Mississippi River from St. Louis to the Cajun facilities.
The Cajun facilities include a 17.5 mile gas pipeline with interconnections
to Bridgeline Gas Distribution LLC, Acadian Gas Pipeline System and Texas
Eastern Transmission Corporation. Under the power sales and agency agreement,
NRG Power Marketing acquires natural gas and gas transportation rights for the
benefit of Louisiana Generating.
OPERATIONS AND MAINTENANCE. Louisiana Generating entered into an operation
and management services agreement with NRG Operating Services, Inc. under which,
upon the request of Louisiana Generating, NRG Operating Services manages,
oversees and supplements the operation and maintenance of the Cajun facilities.
NRG Operating Services is a direct, wholly-owned subsidiary of NRG Energy.
CORPORATE SERVICES. Louisiana Generating and NRG South Central each
entered into a corporate services agreement with NRG Energy pursuant to which
NRG Energy, upon request, provides services relating to any corporate business
function, including human resources, accounting, finance, treasury, tax, office
administration, information technology, engineering, construction management,
environmental, legal and safety.
OUR CUSTOMERS
Our primary customers, the distribution cooperatives, purchased their
requirements for energy and capacity from Cajun Electric for more than 20 years.
They continue to purchase their requirements from Louisiana Generating. As of
1998, these distribution cooperatives supplied power to over 319,000 metered
customers of which approximately 91% were residential customers, 8% were
industrial or commercial customers and 1% were public or other customers. When
compared to their power costs prior to Cajun Electric's Chapter 11 bankruptcy
filing, the new power supply agreements that the distribution cooperatives have
entered into with us provide for a significant reduction in their cost of energy
and capacity. The
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<PAGE> 15
distribution cooperatives are permitted to pass on to their retail customers the
reduced cost of their wholesale power purchases under these power supply
agreements.
In addition to sales to the distribution cooperatives, Louisiana Generating
sells capacity and energy to two municipal power authorities and one
investor-owned utility. Any remaining energy and capacity that is available
after Louisiana Generating's sales to the distribution cooperatives, the
municipal power authorities and the investor-owned utility is marketed by NRG
Power Marketing on behalf of Louisiana Generating.
OUR OWNERSHIP
Louisiana Generating is a wholly-owned subsidiary of NRG South Central. NRG
South Central is a subsidiary of NRG Energy, a leading global participant in the
independent electric power generation industry. Established in 1989, NRG Energy
is primarily engaged in the acquisition, development, ownership and operation of
power generation facilities and the sale of energy, capacity and related
products. In August 2000, the former parent company of NRG Energy, Northern
States Power Company, and New Centuries Energy, Inc. completed their merger. The
surviving company operates under the new name Xcel Energy, Inc. As a result of
the merger, the shares of NRG Energy previously owned by Northern States Power
are now indirectly owned by Xcel Energy. As of the date of this prospectus, Xcel
Energy, through its wholly-owned subsidiary Xcel Wholesale Energy Group, owns
approximately 82% of the common equity and 98% of the combined voting power of
NRG Energy's common stock and class A common stock.
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<PAGE> 16
ORGANIZATIONAL STRUCTURE
[ORGANIZATIONAL STRUCTURE FLOW CHART]
---------------
(1) Xcel Energy, Inc. indirectly owns approximately 82% of the common equity and
98% of the combined voting power of NRG Energy, Inc.'s common stock and
class A common stock.
(2) Formerly Koch Power Louisiana LLC, a Delaware limited liability company
acquired from Koch Power, Inc. and renamed NRG Sterlington Power LLC, formed
for the purpose of developing, constructing, owning and operating an
approximately 200 MW simple cycle gas peaking facility in Sterlington,
Louisiana.
(3) A Delaware limited liability company formed for the purpose of developing,
constructing, owning and operating an approximately 240 MW simple cycle gas
peaking facility at the Big Cajun I site in New Roads, Louisiana.
(4) A Delaware limited liability company formed for the purpose of holding
assets acquired by Louisiana Generating in conjunction with the purchase of
the Cajun facilities which are not necessary for the operation of the Cajun
facilities and, with respect to some of these assets, may not be held by
Louisiana Generating under applicable federal regulations.
(5) Delaware limited liability companies formed for the purpose of holding
partnership interests (NRG Sabine River Works LP LLC holding a 49% limited
partnership interest and NRG Sabine River Works GP LLC holding a 1% general
partnership interest) in SRW Cogeneration Limited Partnership, a Delaware
limited partnership that will own and operate an approximately 450 MW
natural gas-fired cogeneration plant now under construction at the DuPont
Company's Sabine River Works petrochemical facility near Orange, Texas. SRW
Cogeneration Limited Partnership is 50% owned by subsidiaries of Conoco Inc.
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<PAGE> 17
RISK FACTORS
In addition to the information contained elsewhere in this prospectus, you
should carefully consider the following risk factors in evaluating the exchange
offer and an investment in the bonds.
YOU MAY HAVE DIFFICULTY SELLING THE OUTSTANDING BONDS THAT YOU DO NOT EXCHANGE.
If you do not exchange your outstanding bonds for the bonds offered in this
exchange offer, you will continue to be subject to the restrictions on the
transfer of your bonds. Those transfer restrictions are described in the
indenture governing the outstanding bonds and in the legend contained on the
outstanding bonds, and arose because we originally issued the outstanding bonds
under exemptions from, and in transactions not subject to, the registration
requirements of the Securities Act.
In general, you may offer or sell your outstanding bonds only if they are
registered under the Securities Act and applicable state securities laws, or if
they are offered and sold under an exemption from those requirements. We do not
intend to register the outstanding bonds under the Securities Act.
If a large number of outstanding bonds are exchanged for bonds issued in
the exchange offer, it may be more difficult for you to sell your unexchanged
bonds. In addition, if you do not exchange your outstanding bonds in the
exchange offer, you will no longer be entitled to have those bonds registered
under the Securities Act.
See "The Exchange Offer -- Consequences of Failure to Exchange Outstanding
Bonds" for a discussion of the possible consequences of failing to exchange your
bonds.
A PORTION OF OUR REVENUE IS SUBJECT TO MARKET RISKS WHICH ARE BEYOND OUR CONTROL
AND WHICH MAY HAVE AN ADVERSE IMPACT ON OUR NET OPERATING REVENUE.
We are not guaranteed any rate of return on our capital investments through
tariff rates payable by purchasers of electricity. Currently, 11 distribution
cooperatives, two municipal power authorities and one investor-owned utility
purchase the majority of the energy and capacity we generate under 15 power
supply agreements. Only seven of these agreements, however, are 25-year,
all-requirements power supply agreements. The remaining eight agreements are for
shorter terms, four of which may be for as little as two years. The revenues
generated from bilateral contracts that we may enter into for the sale of any
future excess energy and capacity will be dependent upon prevailing market
prices for energy and capacity. In addition, the willingness of the distribution
cooperatives and our other power purchasers to enter into new power supply
agreements with us upon the termination of their initial power supply agreements
will be partially dependent on the prevailing market price for energy and
capacity at that time. Our failure to enter into agreements for our initial
excess energy and capacity with new customers or to enter into new agreements
with our primary customers upon termination of their initial agreements could
have an adverse impact on our operating revenues.
Among the factors that will influence the market prices for energy and
capacity in the southeast power market are:
- prevailing market prices for fuel, labor and equipment;
- the extent of additional supplies of energy and capacity from current
competitors or new market entrants, including the development of new
generation facilities or transmission lines, that may be able to produce
or deliver electricity less expensively;
- prevailing weather conditions from time to time; and
- the possibility of a reduction in the projected rate of growth in
electricity usage as a result of factors such as regional economic
conditions and the implementation of conservation programs.
Our industry is characterized by numerous strong and capable competitors,
some of which may have more experience, larger staffs, better contractual
arrangements or greater financial resources than are available to us. This
competition may adversely affect our ability to compete under various market
conditions. Should
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<PAGE> 18
additional competitors enter the southeast power market, their actions may also
adversely affect the market prices for energy and capacity.
WE CURRENTLY RELY ON A LIMITED NUMBER OF CUSTOMERS AND MAY BE ADVERSELY AFFECTED
IF ANY SIGNIFICANT CUSTOMER FAILS TO FULFILL ITS OBLIGATIONS.
Currently, 11 distribution cooperatives, two municipal power authorities
and one investor-owned utility purchase the majority of the energy and capacity
we generate under power supply agreements. The failure or inability of any
significant power purchaser to fulfill its obligations could adversely affect
the revenues we receive and, therefore, our ability to meet our debt service
obligations under the bonds.
The ability to amend or terminate our power supply agreements is limited.
However, it is possible that a court or a regulatory authority could order an
amendment to or early termination of any of our power supply agreements
following a change in law. In addition, the terms of our power supply agreements
do allow amendment or early termination under certain limited circumstances. The
amendment or early termination of any power supply agreement could adversely
affect the revenues we receive and, therefore, our ability to meet our debt
service obligations under the bonds.
WE FACE RISKS ASSOCIATED WITH OBTAINING FUEL FOR OUR ELECTRIC POWER GENERATION
FACILITIES WHICH MAY RESULT IN DECREASED NET OPERATING REVENUE.
Louisiana Generating's coal requirements are satisfied under a coal supply
agreement with a term of five years, beginning in March 2000. Transportation of
coal to the Cajun facilities is by means of a rail and barge transportation
agreement with a term of five years, beginning in March 2000. As a result of
these arrangements, we may be exposed to future changes in fuel and fuel
transportation costs and fuel supply interruptions which may result in decreased
net operating revenue. Louisiana Generating's natural gas requirements are
satisfied through purchases on the spot market. This arrangement exposes us to
changes in the market price of natural gas. Additionally, because we depend on a
limited number of companies to supply and transport our fuel requirements, the
failure of any fuel supplier or transporter to fulfill its contractual
obligations could decrease our revenues or increase our expenses, which would
decrease the funds available to meet our debt service obligations under the
bonds.
THE DAY-TO-DAY OPERATION OF POWER GENERATING FACILITIES INVOLVES OPERATIONAL
RISKS THAT COULD DECREASE OR ELIMINATE FUNDS AVAILABLE TO US TO MEET OUR DEBT
SERVICE OBLIGATIONS UNDER THE BONDS.
Operation of the Cajun facilities involves many operating risks common to
most power generating facilities, including:
- performance below expected levels of output or efficiency;
- interruptions in fuel supply;
- disruptions in the transmission of electricity;
- breakdown or failure of equipment or processes;
- violation of permit requirements; and
- operator error or catastrophic events such as fires, earthquakes,
explosions, floods, hurricanes or other similar occurrences.
A decrease or elimination of revenues generated by the Cajun facilities or
an increase in the costs of operating the Cajun facilities or performing under
our power supply agreements caused by the occurrence of any of the events listed
above could decrease or eliminate funds available to us to meet our debt service
obligations under the bonds.
In addition, we have a limited history of owning or operating the Cajun
facilities and they only recently have been operated in a competitive
environment. We cannot assure you that operational issues will not arise as a
result of these changes.
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<PAGE> 19
OUR BUSINESS IS SUBJECT TO SUBSTANTIAL REGULATION AND PERMITTING REQUIREMENTS
AND MAY BE ADVERSELY AFFECTED BY ANY FUTURE INABILITY TO COMPLY WITH EXISTING
REGULATIONS OR REQUIREMENTS OR CHANGES IN APPLICABLE REGULATIONS OR
REQUIREMENTS.
ENVIRONMENTAL REGULATION. Our business is subject to extensive
environmental regulation by federal, state and local authorities. We are
required to comply with numerous laws and regulations, and to obtain numerous
governmental permits, in operating the Cajun facilities. We may incur
significant additional costs because of our compliance with these requirements.
If we fail to comply with these requirements, then we could be subject to loss
of operating rights, civil or criminal liability and the imposition of liens or
fines. We cannot assure you that existing regulations will not be revised or
reinterpreted, that new laws and regulations will not be adopted or become
applicable to us or the Cajun facilities or that future changes in laws and
regulation will not have a detrimental effect on our business, including
potential regulatory developments related to emissions of greenhouse gases,
mercury, SO(2) and NO(x). We cannot guarantee you that we will at all times be
in compliance with all applicable environmental laws and regulations or that
steps to bring the Cajun facilities into compliance would not materially and
adversely affect our ability to meet our debt service obligations under the
bonds.
PUBLIC UTILITY REGULATION. We may be required to obtain additional
federal, state and local approvals concerning public utility regulation to
operate the Cajun facilities in the future due to a change in laws and
regulations, a change in our customers or for other reasons. We cannot guarantee
that we will be able to obtain all regulatory approvals that may be required in
the future, obtain any necessary modifications to existing regulatory approvals
or maintain all required regulatory approvals. If there is a delay in obtaining
any required regulatory approvals or if we fail to obtain or comply with any
required regulatory approvals, the operation of the Cajun facilities or the sale
of electricity to third parties could be prevented or subject to additional
costs.
WE FACE ONGOING CHANGES IN THE UNITED STATES POWER INDUSTRY WHICH COULD AFFECT
OUR COMPETITIVENESS.
The United States power industry is currently experiencing increasing
competitive pressures, primarily in wholesale markets, as a result of consumer
demands, technological advances, greater availability of natural gas-fired
generation, potential legislative and regulatory activity and other factors.
FERC has implemented and continues to propose regulatory changes to increase
access to the nationwide transmission grid by utility and non-utility purchasers
and sellers of electricity, which could increase the ability of low-cost
producers of electricity to transmit their electricity to areas which currently
have higher electricity costs, thereby generally driving down the cost of
electricity.
In addition a number of states are considering or implementing methods to
introduce and promote retail competition. In Louisiana, the Louisiana Public
Service Commission, or LPSC, has been reviewing the issue of whether retail
electric competition is in the public interest. In 1999, the LPSC staff
recommended that the LPSC find that it is not in the public interest if retail
access would not produce the opportunity for lower billings for electric service
to all rate payers in Louisiana. Although ongoing proceedings continue to focus
on the appropriateness of retail access in connection with electric industry
restructuring in Louisiana, the LPSC has not made any final decisions regarding
retail competition and it is uncertain when or if the LPSC will act on any
proposal regarding the allowance of, or continued prohibition against, retail
competition. If the current restrictions which prohibit competitors from
entering the retail market in Louisiana are eliminated, then our customers'
energy and capacity requirements may decline as a result of their loss of retail
customers. We have intervened in these proceedings, becoming parties thereto,
and are closely monitoring their status.
OUR COMPETITION IS INCREASING.
The independent power industry is characterized by numerous strong and
capable competitors, some of which may have more extensive operating experience,
more extensive experience in the acquisition and development of power generation
facilities, larger staffs or greater financial resources than we do.
In addition, regulatory changes have also been proposed to increase access
to transmission grids by utility and non-utility purchasers and sellers of
electricity. Industry deregulation may encourage the disaggregation of
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<PAGE> 20
vertically integrated utilities into separate generation, transmission and
distribution businesses. As a result, significant additional competitors could
become active in the generation segment of our industry.
WE ARE CONTROLLED BY NRG ENERGY AND XCEL ENERGY AND DEPEND ON THEM AND THEIR
AFFILIATES.
NRG Energy indirectly owns a 100% membership interest in us, and in turn
Xcel Energy indirectly owns approximately 82% of the common equity and 98% of
the combined voting power of NRG Energy's common stock and class A common stock.
In circumstances involving a conflict of interest between NRG Energy, Xcel
Energy or their affiliates, on the one hand, and our creditors, on the other, we
cannot guarantee that NRG Energy or Xcel Energy would not exercise their power
to control us in a manner that would benefit NRG Energy, Xcel Energy and their
affiliates to the detriment of the holders of the bonds. Moreover, we cannot
guarantee that NRG Energy or Xcel Energy will not in the future elect to compete
with us, directly or indirectly, including by acquiring electrical generation
assets which sell energy, capacity or ancillary services into the southeast
power market.
We rely on contractual arrangements with NRG Energy, NRG Power Marketing
and NRG Operating Services to perform certain services for the Cajun facilities.
We are not certain that we could easily replace any of these contractual
arrangements with a third party on substantially similar terms if any existing
arrangement were to be terminated. Furthermore, the risk of poor performance by
any of these contracting parties could be borne by us under certain
circumstances.
WE ARE UNCERTAIN ABOUT OUR FUTURE ACCESS TO CAPITAL AND MAY BE UNSUCCESSFUL IN
FUNDING ALL OF OUR FUTURE REQUIREMENTS.
The capital for the acquisition of the Cajun facilities was provided by an
equity contribution from NRG Energy and the offering of the outstanding bonds.
We cannot guarantee that we will be successful in obtaining sufficient
additional capital from NRG Energy or additional borrowings to enable us to fund
all of our future requirements.
WE MAY INCUR ADDITIONAL DEBT WHICH COULD ADVERSELY AFFECT OUR ABILITY TO MEET
OUR DEBT SERVICE OBLIGATIONS UNDER THE BONDS.
Subject to the terms of the indenture, we may incur additional debt and
certain types of this additional debt may rank equally with the bonds. The
requirement that we pay the debt service on any of this additional debt may
adversely affect our ability to meet our debt service obligations under the
bonds.
THE INSURANCE COVERAGE FOR OUR ELECTRIC POWER GENERATION FACILITIES MAY NOT BE
ADEQUATE TO COVER POTENTIAL LIABILITIES AND LOSSES.
We are required by the indenture to have insurance for the Cajun facilities
in amounts and against risks as are customarily maintained by companies engaged
in the same or similar operations and operating in the same or similar
locations. We cannot guarantee that such insurance coverage for the Cajun
facilities will be available in the future on commercially reasonable terms and
such insurance coverage may not be sufficient to cover some types of loss.
WE ARE THE ONLY ONES REQUIRED TO MAKE PAYMENTS ON THE BONDS AND OUR ABILITY TO
DO SO IS DEPENDENT ON CIRCUMSTANCES THAT MAY BE BEYOND OUR CONTROL.
Neither NRG Energy, Xcel Energy, nor any of their affiliates, other than us
or any additional guarantor, have guaranteed payment of the bonds nor do they
have any obligation to make payments on the bonds other than NRG Energy's or any
affiliate's obligation under any debt service reserve credit support.
NRG South Central's ability to make payments on the bonds, including
prepayment obligations triggered by specific kinds of change of control events
which we cannot necessarily control, is dependent on the ability of Louisiana
Generating to make current payments under the guarantor loan agreement or make
membership distributions to NRG South Central.
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<PAGE> 21
YOU MAY FIND IT DIFFICULT TO SELL YOUR BONDS BECAUSE THERE IS NO EXISTING
TRADING MARKET FOR THE BONDS.
There is no existing trading market for the bonds. You may find it
difficult to sell your bonds because an active trading market for the bonds may
not develop. We do not intend to apply for listing or quotation of the bonds on
any exchange. The bonds are being offered to the holders of the outstanding
bonds. The outstanding bonds were issued in March 2000 to a small number of
institutional investors. Therefore, we do not know the extent to which investor
interest will lead to the development of a trading market or how liquid that
market may be. Although we were informed by the initial purchasers of the
outstanding bonds that they intended to make a market in the bonds, they are not
required to do so and they may cease market-making at any time without notice.
Consequently, the market price of the bonds issued in this exchange offer could
be adversely effected and you may not be able to liquidate your investment
readily. Also, after the exchange offer, the trading market for the remaining
outstanding bonds could be adversely affected.
FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID
SUBSIDIARY GUARANTEES AND REQUIRE HOLDERS OF BONDS TO RETURN PAYMENTS RECEIVED
FROM GUARANTORS.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, Louisiana Generating's or an additional guarantor's
guarantee of the bonds could be voided, or claims in respect thereof could be
subordinated to all other debts of Louisiana Generating or any additional
guarantors, as the case may be, if, among other things, Louisiana Generating or
the pertinent additional guarantor, at the time it incurred the indebtedness
evidenced by the guarantee:
- received less than fair consideration or reasonably equivalent value for
the guarantee;
- was insolvent or rendered insolvent by reason of such issuance;
- was engaged in a business or transaction for which its remaining assets
constituted unreasonably small capital; or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by Louisiana Generating or any additional
guarantor pursuant to a guarantee could be voided and required to be returned to
Louisiana Generating or the pertinent additional guarantor, or to a fund for the
benefit of the creditors of Louisiana Generating or the pertinent additional
guarantor. The liabilities of Louisiana Generating or any additional guarantor
under the guarantee are contractually limited to the maximum amount they could
pay without the guarantee being deemed to be a fraudulent transfer. We cannot
guarantee, however, that this limitation would be effective and, if it were
effective, if the limited amount would be sufficient to meet our debt service
obligations under the bonds.
IT MAY BE DIFFICULT TO REALIZE THE VALUE OF THE COLLATERAL PLEDGED TO SECURE THE
BONDS, AND THE PROCEEDS RECEIVED FROM A SALE OF THE COLLATERAL MAY BE
INSUFFICIENT TO REPAY THE BONDS.
Our obligation to make payments on the bonds is secured only by the
collateral described in this prospectus. The collateral agent's ability to
foreclose on the collateral on your behalf may be subject to perfection and
priority issues and to practical problems associated with the realization of the
collateral agent's security interest in the collateral. For example, the
collateral agent may need to obtain the consent of a third party prior to
perfecting its security interest in, or transferring a, contract and without
such consent the collateral agent will have limited rights to cure any defaults
under a contract or transfer the contract to a substitute owner. We cannot
assure you that the collateral agent will be able to obtain such consent.
Further, we cannot assure you that enforcement of the security interest with
respect to the collateral would provide sufficient funds to repay all amounts
due on the bonds. In addition, senior debt that we are permitted to incur will
rank equally with the bonds and may share ratably in the collateral which
secures the bonds. This would reduce the benefits of the collateral to you and
your ability to control certain actions taken with respect to the collateral.
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FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, which give our current
expectations of future events. You will recognize these statements because they
do not strictly relate to historical or current facts. Such statements may use
words such as "anticipate," "estimate," "expect," "project," "intend," "think,"
"believe," "will," "should" and other words or terms of similar meaning in
connection with any discussion of our future performance. For example, these
include statements relating to future actions, future performance, expenses and
the impact of the capital markets on our liquidity. From time to time, we also
may provide oral or written forward-looking statements in other material
released to the public.
Any or all of our forward-looking statements in this prospectus and in any
other public statements we make may turn out to be incorrect. They can be
affected by inaccurate assumptions or by known or unknown risks and
uncertainties. Many factors, which cannot be predicted with certainty, will be
important in determining our future results. Among such factors are:
- you may have difficulty selling the outstanding bonds that you do not
exchange;
- a portion of our revenue is subject to market risks which are beyond our
control and which may have an adverse impact on our net operating
revenue;
- we currently rely on a limited number of customers and may be adversely
affected if any significant customer fails to fulfill its obligations;
- we face risks associated with obtaining fuel for our electric power
generation facilities which may result in decreased net operating
revenue;
- the day-to-day operation of power generating facilities involves
operational risks that could decrease or eliminate funds available to us
to meet our debt service obligations under the bonds;
- our business is subject to substantial regulation and permitting
requirements and may be adversely affected by any future inability to
comply with existing regulations or requirements or changes in applicable
regulations or requirements;
- we face ongoing changes in the United States power industry which could
affect our competitiveness;
- our competition is increasing;
- we are controlled by NRG Energy and Xcel Energy and depend on them and
their affiliates;
- we are uncertain about our future access to capital and may be
unsuccessful in funding all of our future requirements;
- we may incur additional debt which could adversely affect our ability to
meet our debt service obligations under the bonds;
- the insurance coverage for our electric power generation facilities may
not be adequate to cover potential liabilities and losses;
- we are the only ones required to make payments on the bonds and our
ability to do so is dependent on circumstances that may be beyond our
control;
- you may find it difficult to sell your bonds because there is no existing
trading market for the bonds;
- federal and state statutes allow courts, under specific circumstances, to
void subsidiary guarantees and require holders of bonds to return
payments received from guarantors; and
- it may be difficult to realize the value of the collateral pledged to
secure the bonds, and the proceeds received from a sale of the collateral
may be insufficient to repay the bonds.
As a result of these factors, actual future results may vary materially.
Also, please note that the factors we discuss in this prospectus are those we
think could cause our actual results to differ materially from expected and
historical results. Other factors besides those listed above or under "Risk
Factors" could also adversely affect us.
SOME OF THESE FACTORS AND OTHERS ARE MORE FULLY DISCUSSED UNDER THE CAPTION
"RISK FACTORS."
19
<PAGE> 23
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
When we sold the outstanding bonds in March 2000, we entered into a
registration rights agreement with the initial purchasers of those bonds. Under
the registration rights agreement, we agreed to use our reasonable best efforts
to file the registration statement of which this prospectus forms a part
regarding the exchange of the outstanding bonds for bonds which are registered
under the Securities Act and cause this registration statement to be declared
effective by the SEC by December 25, 2000. We also agreed to conduct this
exchange offer for at least 30 days after the date notice of the exchange offer
is mailed to the holders of the outstanding bonds and to use our reasonable best
efforts to keep this registration statement effective until the exchange offer
is completed. The registration rights agreement provides that we are required to
pay liquidated damages to the holders of the outstanding bonds whose bonds are
subject to transfer restrictions if:
- the registration statement is not declared effective by December 25,
2000; or
- the exchange offer has not been consummated by February 8, 2001.
A copy of the registration rights agreement is filed as an exhibit to this
registration statement.
TERMS OF THE EXCHANGE OFFER
This prospectus and the accompanying letter of transmittal together
constitute the exchange offer. Upon the terms and subject to the conditions set
forth in this prospectus and in the letter of transmittal, we will accept for
exchange outstanding bonds which are properly tendered on or before the
expiration date and are not withdrawn as permitted below. The expiration date
for this exchange offer is 5:00 p.m., New York City time, on January 12, 2001,
or such later date and time to which we, in our sole discretion, extend the
exchange offer.
The form and terms of the bonds being issued in the exchange offer are the
same as the form and terms of the outstanding bonds, except that the bonds being
issued in the exchange offer:
- will have been registered under the Securities Act;
- will not bear the restrictive legends restricting their transfer under
the Securities Act; and
- will not contain the registration rights and liquidated damages
provisions contained in the outstanding bonds.
Bonds tendered in the exchange offer must be in denominations of the
principal amount of $100,000 and any integral multiples of $1,000 in excess
thereof.
We expressly reserve the right, in our sole discretion:
- to extend the expiration date;
- to delay accepting any outstanding bonds;
- if any of the conditions set forth below under "-- Conditions to the
Exchange Offer" have not been satisfied, to terminate the exchange offer
and not accept any bonds for exchange; and
- to amend the exchange offer in any manner.
We will give oral or written notice of any extension, delay,
non-acceptance, termination or amendment as promptly as practicable by a public
announcement, and in the case of an extension, no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
During an extension, all outstanding bonds previously tendered will remain
subject to the exchange offer and may be accepted for exchange by us. Any
outstanding bonds not accepted for exchange for any reason will be returned
without cost to the holder that tendered them as promptly as practicable after
the expiration or termination of the exchange offer.
20
<PAGE> 24
HOW TO TENDER OUTSTANDING BONDS FOR EXCHANGE
When the holder of outstanding bonds tenders and we accept bonds for
exchange, a binding agreement between us and the tendering holder is created,
subject to the terms and conditions set forth in this prospectus and the
accompanying letter of transmittal. Except as set forth below, a holder of
outstanding bonds who wishes to tender bonds for exchange must, on or prior to
the expiration date:
(1) transmit a properly completed and duly executed letter of transmittal,
including all other documents required by such letter of transmittal,
to The Chase Manhattan Bank, the exchange agent, at the address set
forth below under the heading "-- The Exchange Agent"; or
(2) if bonds are tendered pursuant to the book-entry procedures set forth
below, the tendering holder must transmit an agent's message to the
exchange agent at the address set forth below under the heading "-- The
Exchange Agent."
In addition, either:
(1) the exchange agent must receive the certificates for the outstanding
bonds and the letter of transmittal;
(2) the exchange agent must receive, prior to the expiration date, a timely
confirmation of the book-entry transfer of the bonds being tendered
into the exchange agent's account at the Depository Trust Company, or
DTC, along with the letter of transmittal or an agent's message; or
(3) the holder must comply with the guaranteed delivery procedures
described below.
The term "agent's message" means a message, transmitted to DTC and received by
the exchange agent and forming a part of a book-entry transfer, referred to as a
"book-entry confirmation", which states that DTC has received an express
acknowledgment that the tendering holder agrees to be bound by the letter of
transmittal and that we may enforce the letter of transmittal against such
holder.
The method of delivery of the outstanding bonds, the letters of transmittal
and all other required documents is at the election and risk of the holders. If
such delivery is by mail, we recommend registered mail, properly insured, with
return receipt requested. In all cases, you should allow sufficient time to
assure timely delivery. No letters of transmittal or bonds should be sent
directly to us.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the bonds surrendered for exchange are
tendered:
(1) by a holder of outstanding bonds who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on
the letter of transmittal; or
(2) for the account of an eligible institution.
An "eligible institution" is a firm which is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
If signatures on a letter of transmittal or notice of withdrawal are
required to be guaranteed, the guarantor must be an eligible institution. If
bonds are registered in the name of a person other than the signer of the letter
of transmittal, the bonds surrendered for exchange must be endorsed by, or
accompanied by a written instrument or instruments of transfer or exchange, in
satisfactory form as determined by us in our sole discretion, duly executed by
the registered holder with the holder's signature guaranteed by an eligible
institution.
21
<PAGE> 25
We will determine all questions as to the validity, form, eligibility
(including time of receipt) and acceptance of bonds tendered for exchange in our
sole discretion. Our determination will be final and binding. We reserve the
absolute right to:
(1) reject any and all tenders of any bond improperly tendered;
(2) refuse to accept any bond if, in our judgment or the judgment of our
counsel, acceptance of the bond may be deemed unlawful; and
(3) waive any defects or irregularities or conditions of the exchange offer
as to any particular bond either before or after the expiration date,
including the right to waive the ineligibility of any holder who seeks
to tender bonds in the exchange offer.
Our interpretation of the terms and conditions of the exchange offer as to
any particular bonds either before or after the expiration date, including the
letter of transmittal and the instructions to it, will be final and binding on
all parties. Holders must cure any defects and irregularities in connection with
tenders of bonds for exchange within such reasonable period of time as we will
determine, unless we waive such defects or irregularities. Neither we, the
exchange agent nor any other person will be under any duty to give notification
of any defect or irregularity with respect to any tender of bonds for exchange,
nor will any of us incur any liability for failure to give such notification.
If a person or persons other than the registered holder or holders of the
outstanding bonds tendered for exchange signs the letter of transmittal, the
tendered bonds must be endorsed or accompanied by appropriate powers of
attorney, in either case signed exactly as the name or names of the registered
holder or holders that appear on the outstanding bonds.
If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity sign the letter of transmittal or any bonds or any power of attorney,
such persons should so indicate when signing, and you must submit proper
evidence satisfactory to us of such person's authority to so act unless we waive
this requirement.
By tendering, each holder will represent to us that, among other things,
the person acquiring bonds in the exchange offer is obtaining them in the
ordinary course of its business, whether or not such person is the holder, and
that neither the holder nor such other person has any arrangement or
understanding with any person to participate in the distribution of the bonds
issued in the exchange offer. If any holder or any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of our company, or
is engaged in or intends to engage in or has an arrangement or understanding
with any person to participate in a distribution of such bonds to be acquired in
the exchange offer, such holder or any such other person:
(1) may not rely on the applicable interpretations of the staff of the SEC;
and
(2) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives bonds under this exchange offer for its
own account in exchange for outstanding bonds, where the outstanding bonds were
acquired by the broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such bonds issued in the exchange offer. The
letter of transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. See "Plan of
Distribution" for a discussion of the exchange and resale obligations of
broker-dealers in connection with the exchange offer.
ACCEPTANCE OF OUTSTANDING BONDS FOR EXCHANGE; DELIVERY OF BONDS ISSUED IN THE
EXCHANGE OFFER
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the expiration date, all outstanding bonds
properly tendered and will issue bonds registered under the Securities Act. For
purposes of the exchange offer, we will be deemed to have accepted properly
tendered outstanding bonds for exchange when, as and if we have given oral or
written notice to the exchange agent,
22
<PAGE> 26
with written confirmation of any oral notice to be given promptly thereafter.
See "-- Conditions to the Exchange Offer" for a discussion of the conditions
that must be satisfied before we accept any bonds for exchange.
For each outstanding bond accepted for exchange, the holder will receive a
bond registered under the Securities Act having a principal amount equal to, and
in the denomination of, that of the surrendered outstanding bond. Accordingly,
registered holders of bonds issued in the exchange offer on the relevant record
date for the first interest payment date following the consummation of the
exchange offer will receive interest accruing from the most recent date to which
interest has been paid. Outstanding bonds that we accept for exchange will cease
to accrue interest from and after the date of consummation of the exchange
offer. Under the registration rights agreement, we may be required to make
additional payments in the form of liquidated damages to the holders of the
outstanding bonds under circumstances relating to the timing of the exchange
offer.
In all cases, we will issue bonds in the exchange offer for outstanding
bonds that are accepted for exchange only after the exchange agent timely
receives:
(1) certificates for such outstanding bonds or a timely book-entry
confirmation of such outstanding bonds into the exchange agent's
account at DTC;
(2) a properly completed and duly executed letter of transmittal or an
agent's message; and
(3) all other required documents.
If for any reason set forth in the terms and conditions of the exchange
offer we do not accept any tendered outstanding bonds, or if a holder submits
outstanding bonds for a greater principal amount than the holder desires to
exchange, we will return such unaccepted or non-exchanged bonds without cost to
the tendering holder. In the case of bonds tendered by book-entry transfer into
the exchange agent's account at DTC, such non-exchanged bonds will be credited
to an account maintained with DTC. We will return the bonds or have them
credited to DTC as promptly as practicable after the expiration or termination
of the exchange offer.
BOOK ENTRY TRANSFERS
The exchange agent will make a request to establish an account at DTC for
purposes of the exchange offer within two business days after the date of this
prospectus. Any financial institution that is a participant in DTC's system must
make book-entry delivery of outstanding bonds denominated in dollars by causing
DTC to transfer the outstanding bonds into the exchange agent's account at DTC
in accordance with DTC's procedures for transfer. Such participant should
transmit its acceptance to DTC on or prior to the expiration date or comply with
the guaranteed delivery procedures described below. DTC will verify such
acceptance, execute a book-entry transfer of the tendered outstanding bonds into
the exchange agent's account at DTC and then send to the exchange agent
confirmation of such book-entry transfer. The confirmation of such book-entry
transfer will include an agent's message confirming that DTC has received an
express acknowledgment from such participant that such participant has received
and agrees to be bound by the letter of transmittal and that we may enforce the
letter of transmittal against such participant. Delivery of bonds issued in the
exchange offer may be effected through book-entry transfer at DTC as applicable.
However, the letter of transmittal or facsimile thereof or an agent's message,
with any required signature guarantees and any other required documents, must:
(1) be transmitted to and received by the exchange agent at the address set
forth below under "-- Exchange Agent" on or prior to the expiration
date; or
(2) comply with the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
If a holder of outstanding bonds desires to tender such bonds and the
holder's bonds are not immediately available, or time will not permit such
holder's bonds or other required documents to reach the exchange agent
23
<PAGE> 27
before the expiration date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if:
(1) the holder tenders the bonds through an eligible institution;
(2) prior to the expiration date, the exchange agent receives from such
eligible institution a properly completed and duly executed notice of
guaranteed delivery, substantially in the form we have provided, by
facsimile transmission, mail or hand delivery, setting forth the name
and address of the holder of the bonds being tendered and the amount of
the bonds being tendered. The notice of guaranteed delivery will state
that the tender is being made and guarantee that within three New York
Stock Exchange trading days after the date of execution of the notice
of guaranteed delivery, the certificates for all physically tendered
bonds, in proper form for transfer, or a book-entry confirmation, as
the case may be, together with a properly completed and duly executed
letter of transmittal or agent's message with any required signature
guarantees and any other documents required by the letter of
transmittal will be deposited by the eligible institution with the
exchange agent; and
(3) the exchange agent receives the certificates for all physically
tendered outstanding bonds, in proper form for transfer, or a
book-entry confirmation, as the case may be, together with a properly
completed and duly executed letter of transmittal or agent's message
with any required signature guarantees and any other documents required
by the letter of transmittal, within three New York Stock Exchange
trading days after the date of execution of the notice of guaranteed
delivery.
WITHDRAWAL RIGHTS
You may withdraw tenders of your outstanding bonds at any time prior to
5:00 p.m., New York City time, on the expiration date.
For a withdrawal to be effective, you must send a written notice of
withdrawal to the exchange agent at one of the addresses set forth below under
"-- Exchange Agent." Any such notice of withdrawal must:
(1) specify the name of the person having tendered the outstanding bonds to
be withdrawn;
(2) identify the outstanding bonds to be withdrawn, including the principal
amount of such outstanding bonds; and
(3) where certificates for outstanding bonds are transmitted, specify the
name in which outstanding bonds are registered, if different from that
of the withdrawing holder.
If certificates for outstanding bonds have been delivered or otherwise
identified to the exchange agent, then, prior to the release of such
certificates the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and signed notice of withdrawal with
signatures guaranteed by an eligible institution unless such holder is an
eligible institution. If bonds have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn bonds
and otherwise comply with the procedures of such facility. We will determine all
questions as to the validity, form and eligibility (including time of receipt)
of such notices and our determination will be final and binding on all parties.
Any tendered bonds so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the exchange offer. Any bonds which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder. In the case of bonds
tendered by book-entry transfer into the exchange agent's account at DTC, the
bonds withdrawn will be credited to an account maintained with DTC for the
outstanding bonds. The bonds will be returned or credited to this account as
soon as practicable after withdrawal, rejection of tender or termination of the
exchange offer. Properly withdrawn bonds may be re-tendered by following one of
the procedures described under "-- How to Tender Bonds for Exchange" above at
anytime on or prior to 5:00 p.m., New York City time, on the expiration date.
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<PAGE> 28
CONDITIONS TO THE EXCHANGE OFFER
We are not required to accept for exchange, or to issue bonds in the
exchange offer for, any outstanding bonds. We may terminate or amend the
exchange offer at any time before the acceptance of such outstanding bonds for
exchange if:
(1) any federal law, statute, rule or regulation is adopted or enacted
which, in our judgment, would reasonably be expected to impair our
ability to proceed with the exchange offer;
(2) any stop order is threatened or in effect with respect to the
registration statement of which this prospectus constitutes a part or
the qualification of the indenture under the Trust Indenture Act of
1939, as amended;
(3) there is a change in the current interpretation by staff of the SEC
which permits the bonds issued in the exchange offer in exchange for
the outstanding bonds to be offered for resale, resold and otherwise
transferred by such holders, other than broker-dealers and any such
holder which is an "affiliate" of our company within the meaning of
Rule 405 under the Securities Act, without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such bonds acquired in the exchange offer are acquired in
the ordinary course of such holder's business and such holder has no
arrangement or understanding with any person to participate in the
distribution of such bonds issued in the exchange offer;
(4) there is a general suspension of or general limitation on prices for,
or trading in, securities on any national exchange or in the
over-the-counter market;
(5) any governmental agency creates limits that adversely affect our
ability to complete the exchange offer;
(6) there is any declaration of war, armed hostilities or other similar
international calamity directly or indirectly involving the United
States, or the worsening of any such condition that existed at the time
that we commence the exchange offer;
(7) there is a change or a development involving a prospective change in
our and our subsidiaries' businesses, properties, assets, liabilities,
financial condition, operations, results of operations taken as a
whole, that is or may be adverse to us; or
(8) we become aware of facts that, in our reasonable judgment, have or may
have adverse significance with respect to the value of the outstanding
bonds or the bonds to be issued in the exchange offer.
The preceding conditions are for our sole benefit and we may assert them
regardless of the circumstances giving rise to any such condition. We may waive
the preceding conditions in whole or in part at any time and from time to time
in our sole discretion. If we do so, the exchange offer will remain open for at
least three business days following any waiver of the preceding conditions. Our
failure at any time to exercise the foregoing rights will not be deemed a waiver
of any such right and each such right will be deemed an ongoing right which we
may assert at any time and from time to time.
THE EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as our exchange agent for the
exchange offer. All executed letters of transmittal should be directed to our
exchange agent at the address set forth below. Questions and requests for
assistance, requests for additional copies of this prospectus or of the letter
of
25
<PAGE> 29
transmittal and requests for notices of guaranteed delivery should be directed
to the exchange agent addressed as follows:
Main Delivery To:
The Chase Manhattan Bank
By mail, hand delivery or overnight courier:
The Chase Manhattan Bank
55 Water Street, Room 234
New York, New York 10041
Attention: Carlos Esteves -- Confidential
By facsimile transmission:
(for eligible institutions only)
212-638-7380
Confirm by Telephone:
212-638-0828
Delivery of the letter of transmittal to an address other than as set forth
above or transmission of such letter of transmittal via facsimile other than as
set forth above does not constitute a valid delivery of such letter of
transmittal.
FEES AND EXPENSES
We will not make any payment to brokers, dealers, or others soliciting
acceptance of the exchange offer except for reimbursement of mailing expenses.
We will pay the cash expenses to be incurred in connection with the exchange
offer, including accounting, legal, printing, and related fees and expenses. The
estimated cash expenses to be incurred in connection with the exchange offer are
estimated in the aggregate to be approximately $400,000.
TRANSFER TAXES
Holders who tender their outstanding bonds for exchange will not be
obligated to pay any transfer taxes in connection with the exchange. If,
however, bonds issued in the exchange offer are to be delivered to, or are to be
issued in the name of, any person other than the holder of the bonds tendered,
or if a transfer tax is imposed for any reason other than the exchange of
outstanding bonds in connection with the exchange offer, then the holder must
pay any of these transfer taxes, whether imposed on the registered holder or on
any other person. If satisfactory evidence of payment of, or exemption from,
these taxes is not submitted with the letter of transmittal, the amount of these
transfer taxes will be billed directly to the tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE OUTSTANDING BONDS
Holders who desire to tender their outstanding bonds in exchange for bonds
registered under the Securities Act should allow sufficient time to ensure
timely delivery. Neither the exchange agent nor we are under any duty to give
notification of defects or irregularities with respect to the tenders of bonds
for exchange.
Outstanding bonds that are not tendered or are tendered but not accepted
will, following the consummation of the exchange offer, continue to be subject
to the provisions in the indenture regarding the transfer and exchange of the
outstanding bonds and the existing restrictions on transfer set forth in the
legend on the outstanding bonds and in the offering circular dated March 27,
2000, relating to the outstanding bonds. Except in limited circumstances with
respect to specific types of holders of outstanding bonds, we will have no
further obligation to provide for the registration under the Securities Act of
such outstanding bonds. In general, outstanding bonds, unless registered under
the Securities Act, may not be offered or sold except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. We
26
<PAGE> 30
do not currently anticipate that we will take any action to register the
outstanding bonds under the Securities Act or under any state securities laws.
Upon completion of the exchange offer, holders of the outstanding bonds
will not be entitled to any further registration rights under the registration
rights agreement, except under limited circumstances.
Holders of the bonds issued in the exchange offer and any outstanding bonds
which remain outstanding after consummation of the exchange offer will vote
together as a single class for purposes of determining whether holders of the
requisite percentage of the class have taken certain actions or exercised
certain rights under the indenture.
CONSEQUENCES OF EXCHANGING OUTSTANDING BONDS
Based on interpretations of the staff of the SEC, as set forth in no-action
letters to third parties, we believe that the bonds issued in the exchange offer
may be offered for resale, resold or otherwise transferred by holders of those
bonds, other than by any holder which is our "affiliate" within the meaning of
Rule 405 under the Securities Act. The bonds may be offered for resale, resold
or otherwise transferred without compliance with the registration and prospectus
delivery provisions of the Securities Act, if:
(1) the bonds issued in the exchange offer are acquired in the ordinary
course of the holder's business; and
(2) the holder, other than broker-dealers, has no arrangement or
understanding with any person to participate in the distribution of the
bonds issued in the exchange offer.
However, the SEC has not considered the exchange offer in the context of a
no-action letter and we cannot guarantee that the staff of the SEC would make a
similar determination with respect to the exchange offer as in such other
circumstances.
Each holder, other than a broker-dealer, must furnish a written
representation, at our request, that:
(1) it is not an affiliate of ours;
(2) it is not engaged in, and does not intend to engage in, a distribution
of the bonds issued in the exchange offer and has no arrangement or
understanding to participate in a distribution of bonds issued in the
exchange offer;
(3) it is acquiring the bonds issued in the exchange offer in the ordinary
course of its business; and
(4) it is not acting on behalf of a person who could not make
representations (1)-(3).
Each broker-dealer that receives bonds issued in the exchange offer for its
own account in exchange for outstanding bonds must acknowledge that:
(1) such outstanding bonds were acquired by such broker-dealer as a result
of market-making or other trading activities, and
(2) it must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale
transaction, including the delivery of a prospectus that contains
information with respect to any selling holder required by the
Securities Act in connection with any resale of such bonds issued in
the exchange offer.
Furthermore, any broker-dealer that acquired any of its outstanding bonds
directly from us:
(1) may not rely on the applicable interpretation of the SEC staff's
position contained in Exxon Capital Holdings Corp., SEC No-Action
Letter (April 13, 1989), Morgan, Stanley & Co., Inc., SEC No-Action
Letter (June 5, 1991) and Shearman & Sterling, SEC No-Action Letter
(July 2, 1983), and
(2) must also be named as a selling holder of the bonds in connection with
the registration and prospectus delivery requirements of the Securities
Act relating to any resale transaction.
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<PAGE> 31
See "Plan of Distribution" for a discussion of the exchange and resale
obligations of broker-dealers in connection with the exchange offer.
In addition, to comply with state securities laws of certain jurisdictions,
the bonds issued in the exchange offer may not be offered or sold in any state
unless they have been registered or qualified for sale in such state or an
exemption from registration or qualification is available and complied with by
the holders selling the bonds. We have agreed in the registration rights
agreement that, prior to any public offering of transfer restricted bonds, we
will register or qualify the transfer restricted bonds for offer or sale under
the securities laws of any jurisdiction requested by a holder. Unless a holder
requests, we currently do not intend to register or qualify the sale of the
bonds issued in the exchange offer in any state where an exemption from
registration or qualification is required and not available. "Transfer
restricted bonds" means each bond until the date on which it:
(1) has been exchanged for a freely transferable bond in the exchange
offer;
(2) has been effectively registered under the Securities Act and disposed
of in accordance with a shelf registration statement that we file in
accordance with the registration rights agreement; or
(3) is distributed to the public under Rule 144 of the Securities Act or is
saleable under Rule 144(k) under the Securities Act.
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer. The proceeds from
the sale of the outstanding bonds, together with an equity contribution from NRG
Energy, were used to fund the acquisition of the Cajun facilities and to pay
certain fees, costs, expenses and taxes in connection with the acquisition.
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<PAGE> 32
CAPITALIZATION
The following table sets forth the actual consolidated capitalization of
NRG South Central.
<TABLE>
<CAPTION>
CAPITALIZATION AT
SEPTEMBER 30, 2000
(IN THOUSANDS) ------------------
<S> <C>
SHORT TERM DEBT:
Revolving line of credit(2)................................. $ 40,000
Current portion of long term debt(1)........................ 25,250
LONG-TERM DEBT:
Bonds(1).................................................... 763,500
----------
TOTAL DEBT.................................................. 828,750
MEMBERS' EQUITY(1).......................................... 296,816
----------
TOTAL DEBT AND MEMBERS' EQUITY.............................. $1,125,566
==========
</TABLE>
---------------
(1) On March 30, 2000, NRG South Central issued $800.0 million of senior secured
bonds. The proceeds from the sale of the bonds, together with an equity
contribution from NRG Energy, were used to fund the acquisition of the Cajun
facilities. The Capitalization Structure presented for NRG South Central is
comprised primarily of that of Louisiana Generating which, as of the date of
this prospectus, is the only guarantor of the bonds.
(2) NRG South Central borrowed $40 million under a floating rate working capital
facility which was entered into in April 2000. The facility terminates in
March 2001.
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<PAGE> 33
SELECTED HISTORICAL FINANCIAL DATA
The table that follows sets forth historical financial data. The selected
financial data set forth below as of December 31, 1995, 1996, 1997, 1998 and
1999 and for the five years ended December 31, 1999 have been derived from the
Cajun Electric "carve-out" financial statements. The selected financial data set
forth below as of June 30, 2000 and September 30, 2000 and for the periods of
March 30, 2000 (Inception) through June 30, 2000 and March 30, 2000 (Inception)
through September 30, 2000 have been derived from the NRG South Central
financial statements. The following data should be read in conjunction with the
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this prospectus.
The following carve-out financial data for the periods prior to the
acquisition of the Cajun facilities are of extremely limited use in making an
investment decision. Our results of operations in the future will be different
from Cajun Electric's carve-out historical results for several reasons. Cajun
Electric operated as a non-profit electric power cooperative which for the years
shown below was operating pursuant to Chapter 11 of the United States Bankruptcy
Code. Cajun Electric sold energy and capacity under power supply agreements and
at rates which are materially different from our power supply agreements and
rates. In addition, the delivered cost of Cajun Electric's coal is materially
different from our delivered cost of coal. As a result, Cajun Electric's
historical financial data is not meaningful or indicative of our future results
and should not be relied on in making an investment decision.
<TABLE>
<CAPTION>
CARVE-OUT STATEMENTS OF CERTAIN REVENUE AND EXPENSES (PREDECESSOR)
----------------------------------------------------------------------
FOR THE FOR THE PERIOD
THREE OF MARCH 30,
MONTHS 2000
YEAR ENDED DECEMBER 31, ENDED (INCEPTION)
--------------------------------------------------------- MARCH 31, THROUGH
1995 1996 1997 1998 1999 2000 JUNE 30, 2000
--------- --------- --------- --------- --------- ---------- --------------
(IN THOUSANDS) (SUCCESSOR)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues:
Sales of electric energy........ $343,796 $359,686 $345,824 $356,197 $367,348 $79,724 $ 88,087
Other........................... 1,047 863 958 1,379 1,214 258 449
-------- -------- -------- -------- -------- ------- --------
Total operating
revenues............... 344,843 360,549 346,782 357,576 368,562 79,982 88,536
Operating costs and expenses:
Cost of operations.............. 217,996 251,907 255,014 242,117 251,137 58,628 55,637
Depreciation and
amortization(1)............... 38,604 38,933 39,537 38,117 37,930 9,647 6,827
General and administrative...... 11,499 9,386 9,437 9,122 9,711 2,423 1,841
-------- -------- -------- -------- -------- ------- --------
Total operating costs and
expenses............... 268,099 300,226 303,988 289,356 298,778 70,698 64,305
-------- -------- -------- -------- -------- ------- --------
Operating income.................. 76,744 60,323 42,794 68,220 69,784 9,284 24,231
Other income (expense):
Rents and leases................ 1,156 655 695 456 463 -- --
Other income (expense), net..... 451 470 730 787 545 -- 227
Gain (loss) on asset
dispositions.................. 191 (757) (481) (5,900) (2,878) 521 --
Litigation settlement............. 5,512 -- -- -- -- -- --
Interest Expense.................. -- -- -- -- -- -- (18,861)
-------- -------- -------- -------- -------- ------- --------
Total other income
(expense).............. 7,310 368 944 (4,657) (1,870) 521 (18,634)
-------- -------- -------- -------- -------- ------- --------
Excess of revenues over costs and
expenses........................ $ 84,054(2) $ 60,691 $ 43,738 $ 63,563 $ 67,914 $ 9,805
======== ======== ======== ======== ======== =======
Net Income........................ $ 5,597
========
<CAPTION>
FOR THE PERIOD
OF MARCH 30,
2000
(INCEPTION)
THROUGH
SEPTEMBER 30,
2000
--------------
(IN THOUSANDS) (SUCCESSOR)
<S> <C>
Operating revenues:
Sales of electric energy........ $201,915
Other........................... 803
--------
Total operating
revenues............... 202,718
Operating costs and expenses:
Cost of operations.............. 136,726
Depreciation and
amortization(1)............... 13,978
General and administrative...... 2,558
--------
Total operating costs and
expenses............... 153,262
--------
Operating income.................. 49,456
Other income (expense):
Rents and leases................ --
Other income (expense), net..... 657
Gain (loss) on asset
dispositions.................. --
Litigation settlement............. --
Interest Expense.................. (37,598)
--------
Total other income
(expense).............. (36,941)
--------
Excess of revenues over costs and
expenses........................
Net Income........................ $ 12,515
========
</TABLE>
---------------
(1) Depreciation and amortization expense is considered to be a cost of
operations.
(2) Excludes a recorded charge of $4.7 million representing the cumulative
effect of adopting Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Post-retirement Benefits Other Than Pensions."
30
<PAGE> 34
<TABLE>
<CAPTION>
CARVE-OUT STATEMENTS OF NET ASSETS (PREDECESSOR)
---------------------------------------------------- ACTUAL ACTUAL
AT DECEMBER 31, AS OF AS OF
---------------------------------------------------- JUNE 30, SEPTEMBER 30,
1995 1996 1997 1998 1999 2000 2000
-------- -------- -------- -------- -------- ------------- ------------------
(IN THOUSANDS) (SUCCESSOR) (SUCCESSOR)
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Current assets...................... $ 86,547 $ 71,077 $ 68,600 $ 72,166 $ 69,676 $ 84,473 $ 114,020
Net property, plant and equipment... 715,966 684,064 643,043 608,195 579,929 1,036,343 1,080,265
Other property and investments...... 3,079 3,336 3,607 3,895 4,188 21,342 21,281
-------- -------- -------- -------- -------- ---------- ----------
Total assets................. $805,592 $758,477 $715,250 $684,256 $653,793 $1,142,158 $1,215,566
======== ======== ======== ======== ======== ========== ==========
Liabilities:
Current liabilities................. $ 13,685 $ 20,821 $ 20,568 $ 16,233 $ 13,922 $ 83,978 $ 146,738
Decommissioning..................... 2,409 2,666 2,937 3,225 3,518 3,591 3,673
Long-term debt...................... -- -- -- -- -- 776,250 763,500
Other non-current liabilities....... -- -- -- -- -- 4,175 4,839
-------- -------- -------- -------- -------- ---------- ----------
Total liabilities..................... $ 16,094 $ 23,487 $ 23,505 $ 19,458 $ 17,440 867,994 918,750
-------- -------- -------- -------- -------- ---------- ----------
Net Assets................... $789,498 $734,990 $691,745 $664,798 $636,353 -- --
======== ======== ======== ======== ========
Members' equity.............. $ 274,164 $ 296,816
---------- ----------
Total liabilities and members'
equity.............................. $1,142,158 $1,215,566
========== ==========
</TABLE>
31
<PAGE> 35
PRO FORMA FINANCIAL DATA
The table that follows sets forth for the periods indicated:
- historical financial data that have been derived from the "carve-out"
financial statements of Cajun Electric solely for the Cajun facilities
and other assets that were included as part of our acquisition of the
Cajun facilities;
- historical financial data that have been derived from the consolidated
financial statements of NRG South Central; and
- pro forma financial data reflecting the pro forma adjustments to the
above historical operating results as if the establishment of NRG South
Central, the acquisition of the Cajun facilities and the offering of the
outstanding bonds occurred on January 1, 2000 and 1999 with respect to
income statement data.
The following financial data are only of extremely limited use in making an
investment decision. Our results of operations in the future will be different
from Cajun Electric's carve-out historical results for several reasons. Cajun
Electric operated as a non-profit electric power cooperative which for the
period shown on the following page was operating under to Chapter 11 of the
United States Bankruptcy Code. Cajun Electric sold energy and capacity under
power supply agreement and at rates which were materially different from our
power supply agreements and rates. In addition, the delivered cost of Cajun
Electric's coal was materially different from our delivered cost of coal. As a
result, Cajun Electric's historical financial data is not meaningful or
indicative of our future results and should not be relied on in making an
investment decision. The pro forma data is presented for information purposes
only and is not necessarily indicative of future earnings or financial position
or what the financial position would have been if these events had occurred on
January 1, 2000 and 1999. The following data should be read in conjunction with
the financial statements and "Management's Discussion And Analysis Of Financial
Condition And Results Of Operations" included elsewhere in this prospectus.
32
<PAGE> 36
<TABLE>
<CAPTION>
"CARVE-OUT
BASIS" CAJUN PRO FORMA
NRG SOUTH ELECTRIC (CAJUN NRG SOUTH
CENTRAL FACILITIES) CENTRAL
------------------ --------------- ------------------
FOR THE PERIOD
OF MARCH 30,
2000 (INCEPTION) FOR THE THREE FOR THE NINE
THROUGH MONTHS ENDED PRO FORMA MONTHS ENDED
SEPTEMBER 30, 2000 MARCH 31, 2000 ADJUSTMENTS SEPTEMBER 30, 2000
(IN THOUSANDS) ------------------ --------------- ----------- ------------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Operating revenues:
Sales of electric energy..... $201,915 $79,724 $ -- $281,639
Other........................ 803 258 -- 1,061
-------- ------- -------- --------
Total operating
revenues........... 202,718 79,982 -- 282,700
Operating costs and expenses:
Cost of operations........... 136,726 58,628 -- 195,354
Depreciation and
amortization.............. 13,978 9,647 (2,590)(1) 21,035
General and administrative... 2,558 2,423 -- 4,981
-------- ------- -------- --------
Total operating costs
and expenses....... 153,262 70,698 (2,590) 221,370
-------- ------- -------- --------
Operating Income............... 49,456 9,284 (2,590) 61,330
Other Income (expense):
Other income (expense) Net... 657 521 -- 1,178
Interest expense............. (37,598) -- (18,312)(2) (55,910)
-------- ------- -------- --------
Total other income
(expense).......... (36,941) 521 (18,312) (54,732)
-------- ------- -------- --------
Net income..................... $ 12,515 $ 9,805 $(15,722) $ 6,598
======== ======= ======== ========
</TABLE>
---------------
(1) Reflects lower net depreciation/amortization resulting from assets and
capitalized costs being depreciated over a longer estimated useful life.
(2) Reflects interest accrued at a rate of 9.156% per annum on $800.0 million
principal amount of bonds issued in connection with the acquisition.
33
<PAGE> 37
<TABLE>
<CAPTION>
"CARVE-OUT
BASIS" CAJUN
ELECTRIC
NRG SOUTH (CAJUN PRO FORMA NRG
CENTRAL FACILITIES) SOUTH CENTRAL
--------- ------------- -----------------
FOR THE
FOR THE YEAR ENDED PRO FORMA YEAR ENDED
DECEMBER 31, 1999 ADJUSTMENTS DECEMBER 31, 1999
-------------------------- ----------- -----------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
INCOME STATEMENT DATA
Operating revenues:
Sales of electric energy............. $ -- $367,348 $ -- $367,348
Other................................ -- 1,214 1,214
------- -------- -------- --------
Total operating revenues..... -- 368,562 -- 368,562
Operating costs and expenses:
Cost of operations................... -- 251,137 -- 251,137
Depreciation and amortization........ -- 37,930 (10,361)(1) 27,569
General and administrative........... -- 9,711 -- 9,711
------- -------- -------- --------
Total operating costs and
expenses................... -- 298,778 (10,361) 288,417
------- -------- -------- --------
Operating income....................... -- 69,784 10,361 80,145
Other income (expense):
Rents and leases..................... -- 463 -- 463
Interest expense..................... -- -- (73,248)(2) (73,248)
Other income (expense), net.......... -- 545 -- 545
Loss on asset dispositions........... -- (2,878) -- (2,878)
------- -------- -------- --------
Total other income
(expense).................. -- (1,870) (73,248) (75,118)
------- -------- -------- --------
Excess of revenues over costs and
expenses............................. $ -- $ 67,914 $(62,887) $ 5,027
======= ======== ======== ========
</TABLE>
---------------
(1) Reflects lower net depreciation/amortization resulting from assets and
capitalized costs being depreciated over a longer estimated useful life.
(2) Reflects interest accrued at a rate of 9.156% per annum on $800.0 million
principal amount of bonds issued in connection with the acquisition.
34
<PAGE> 38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements. These
statements are based on our current plans and expectations and involve risks and
uncertainties that could cause actual future activities and results of
operations to be materially different from those set forth in the
forward-looking statements. Important factors that could cause actual results to
differ include risks set forth in "Risk Factors."
NRG South Central, an indirect wholly-owned subsidiary of NRG Energy, was
formed for the purpose of financing, acquiring, owning, operating and
maintaining, through Louisiana Generating, the Cajun facilities and making other
potential acquisitions and developments in the region. NRG South Central has six
wholly-owned subsidiaries, Louisiana Generating, NRG New Roads Holdings, NRG
Sterlington Power, NRG Sabine River Works LP, NRG Sabine River Works GP and Big
Cajun I Peaking Power, each a Delaware limited liability company. Louisiana
Generating owns, operates and maintains the Cajun facilities. NRG New Roads
Holdings was formed to hold assets acquired in conjunction with the purchase of
the Cajun facilities which are not necessary for the operation of the Cajun
facilities and, with respect to some of these assets, may not be held by
Louisiana Generating under applicable federal regulations. NRG Sterlington Power
was formed for the purpose of developing, owning and operating an approximately
200 MW simple cycle gas peaking facility in Sterlington, Louisiana. Under the
terms of an agreement between Louisiana Generating and NRG Sterlington Power,
Louisiana Generating has a right of first refusal on any sale of capacity and
energy by NRG Sterlington Power. NRG Sabine River Works LP and NRG Sabine River
Works GP were formed for the purpose of owning, respectively, a 49% limited
partnership interest and a 1% general partnership interest in SRW Cogeneration
Limited Partnership, a Delaware limited partnership that will own and operate an
approximately 450 MW natural gas-fired cogeneration plant now under construction
at the DuPont Company's Sabine River Works petrochemical facility near Orange,
Texas. SRW Cogeneration Limited Partnership is 50% owned by subsidiaries of
Conoco Inc. Big Cajun I Peaking Power was formed for the purpose of developing,
owning and operating an approximately 240 MW simple cycle gas peaking facility
at the Big Cajun I site in New Roads, Louisiana. NRG New Roads Holdings, NRG
Sterlington Power, NRG Sabine River Works LP, NRG Sabine River Works GP and Big
Cajun I Peaking Power are not guarantors of the bonds and their operations are
not restricted by the indenture.
The Cajun facilities were acquired on March 31, 2000 for a purchase price
of approximately $1,055.9 million. This purchase price was funded by the
offering of the outstanding bonds and an equity contribution by NRG Energy. See
"Business of NRG South Central And Louisiana Generating -- Our Acquisition of
the Cajun Facilities."
Of our total revenues for the period of March 30, 2000 (Inception) through
September 30, 2000, approximately 74.2% was derived from sales to the
distribution cooperatives and approximately 8.9% was derived from agreements
with two municipal power authorities and one investor-owned utility. The
remainder was primarily derived from market sales arranged under a power sales
and agency agreement with our power marketing affiliate, NRG Power Marketing. Of
our total revenues during this period, approximately 35.1% were derived from
25-year, all-requirements power supply agreements.
The financial data of Cajun Electric for periods prior to the acquisition
of the Cajun facilities are of extremely limited use in making an investment
decision. Our results of operations are different from Cajun Electric's
carve-out historical results for several reasons. Cajun Electric was a
non-profit electric power cooperative which for the periods presented in this
prospectus was operating as a debtor in possession under Chapter 11 of the
United States Bankruptcy Code. Cajun Electric sold energy and capacity under
power supply agreements and at rates which are materially different from our
power supply agreements and rates. In addition, the delivered cost of Cajun
Electric's coal was materially different from our delivered cost of coal. As a
result, Cajun Electric's historical financial data, including the "Selected
Financial Data of Cajun Electric (Cajun Facilities)" and "Cajun Electric (Cajun
Facilities) Carve-Out Financial Statements" presented in this prospectus, are
not meaningful or indicative of our future results and should not be relied on
in making an investment decision.
35
<PAGE> 39
RESULTS OF OPERATIONS FOR THE PERIOD OF MARCH 30, 2000 (INCEPTION) THROUGH
SEPTEMBER 30, 2000
OPERATING REVENUES. Revenues for the period of March 30, 2000 (Inception)
through September 30, 2000 were $202.7 million. Approximately $168.5 million or
83.1% of our total revenues were derived from sales pursuant to long-term
contracts. The remainder of our revenues were derived from merchant sales
arranged under a power sales and agency agreement with our power marketing
affiliate, NGR Power Marketing. Approximately 74.2% of our total revenues were
derived from agreements with distribution cooperatives and approximately 8.9%
were derived from agreements with two municipal power authorities and one
investor owned utility. Approximately 35.1% of our total revenues were derived
from 25 year, all requirements power supply agreements.
OPERATING COSTS. Operating costs for the period of March 30, 2000
(Inception) through September 30, 2000 were $136.7 million. Operating costs
represent approximately 67.4% of revenues. Operating costs consisted primarily
of fuel costs, purchased power costs, transmission costs and operation and
maintenance and other costs.
FUEL COSTS. Fuel costs were $69.9 million for the period of March 30, 2000
(Inception) through September 30, 2000. Fuel costs consisted primarily of coal
costs of $61.3 million, natural gas costs of $8.1 million and other costs of
$0.5 million.
OPERATION AND MAINTENANCE COSTS. Operation and maintenance costs were
$20.0 million for the period of March 30, 2000 (Inception) through September 30,
2000.
PURCHASED POWER COSTS. Purchased power costs were $32.7 million for the
period of March 30, 2000 (Inception) through September 30, 2000.
TRANSMISSION COSTS. Transmission costs were $14.1 million for the period
of March 30, 2000 (Inception) through September 30, 2000.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was
$14 million for the period of March 30, 2000 (Inception) through September 30,
2000. Depreciation and amortization expense represents 6.9% of revenues.
GENERAL AND ADMINISTRATIVE COSTS. Administrative and general costs were
$2.6 million for the period of March 30, 2000 (Inception) through September 30,
2000. Administrative and general costs represent 1.3% of revenues.
INTEREST EXPENSE. Interest expense was $37.6 million for the period of
March 30, 2000 (Inception) through September 30, 2000. This interest expense
relates primarily to the accrued interest on the $800.0 million of bonds issued
in March 2000 the proceeds of which were used to acquire the Cajun facilities.
RESULTS OF OPERATIONS FOR THE PERIOD OF MARCH 30, 2000 (INCEPTION) THROUGH JUNE
30, 2000
OPERATING REVENUES. Revenues for the period of March 30, 2000 (Inception)
through June 30, 2000 were $88.5 million. Approximately $78.0 million or 88.1%
of our total revenues were derived from sales pursuant to long-term contracts.
Approximately 78% of our total revenues were derived from agreements with
distribution cooperatives and approximately 10.1% were derived from agreements
with two municipal power authorities and one investor owned utility. The
remainder of our revenues were derived from merchant sales arranged under a
power sales and agency agreement with our power marketing affiliate, NRG Power
Marketing. Approximately 37.4% of our total revenues were derived from 25 year,
all requirements power supply agreements.
OPERATING COSTS. Operating costs for the period of March 30, 2000
(Inception) through June 30, 2000 were $55.6 million. Operating costs represent
approximately 63% of revenues. Operating costs consisted primarily of fuel
costs, purchased power costs, transmission costs and operation and maintenance
and other costs.
36
<PAGE> 40
FUEL COSTS. Fuel costs were $29.8 million for the period of March 30, 2000
(Inception) through June 30, 2000. Fuel costs consisted primarily of coal costs
of $26.3 million, natural gas costs of $3.3 million and other costs of $0.2
million.
OPERATION AND MAINTENANCE COSTS. Operation and maintenance costs were
$11.6 million for the period of March 30, 2000 (Inception) through June 30,
2000.
PURCHASED POWER COSTS. Purchased power costs were $7.9 million for the
period of March 30, 2000 (Inception) through June 30, 2000.
TRANSMISSION COSTS. Transmission costs were $6.3 million for the period of
March 30, 2000 (Inception) through June 30, 2000.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was
$6.8 million for the period of March 30, 2000 (Inception) through June 30, 2000.
Depreciation and amortization expense represents 7.7% of revenues.
ADMINISTRATIVE AND GENERAL COSTS. Administrative and general costs were
$1.8 million for the period of March 30, 2000 (Inception) through June 30, 2000.
Administrative and general costs represent 2.1% of revenues.
INTEREST EXPENSE. Interest expense was $18.9 million for the period of
March 30, 2000 (Inception) through June 30, 2000. The $18.9 million of interest
expense relates primarily to the accrued interest on the $800.0 million of bonds
issued in March 2000 the proceeds of which were used to acquire the Cajun
facilities.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR
ENDED DECEMBER 31, 1998
NET MARGIN. Net margin for 1999 was $67.9 million, compared to $63.6
million for 1998. This increase in net margin of $4.3 million was due to
increased non-member sales, partially offset by increased operating expenses,
and a $3.0 million reduction in losses on asset dispositions.
OPERATING REVENUES. For 1999, total revenues were $368.6 million, compared
to $357.6 million for 1998, an increase of $11.0 million or 3%.
OPERATING EXPENSES.
Total operating expenses were $298.8 million for 1999, compared to $289.4
million for 1998, an increase of $9.4 million or 3%. As a percent of revenue,
operating expenses for 1999 and 1998 were 81%.
Fuel costs were $165.6 million for 1999, compared to $155.0 million for
1998. This increase in fuel costs resulted from higher output during 1999 and an
increase in overall fuel prices.
Operations and maintenance costs were $36.7 million for 1999, compared to
$37.4 million for 1998. This decrease is primarily due to the timing of repairs
and maintenance work.
Administrative and general costs were $9.7 million for 1999, compared to
$9.1 million for 1998. This increase was consistent with the overall increase in
revenues for the period.
Depreciation and amortization costs were $37.9 million for 1999, compared
to $38.1 million for 1998. This decrease was due to an overall reduction in
fixed assets.
OTHER INCOME (EXPENSE). Other expense was $1.9 million for 1999, compared
to $4.7 million for 1998, a decrease of $2.8 million or 60%. This decrease was
primarily due to a $4.2 million loss on 1998 asset disposals related to a
control system upgrade.
37
<PAGE> 41
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR
ENDED DECEMBER 31, 1997
NET MARGIN. Net margin for 1998 was $63.6 million, compared to $43.7
million for 1997, an increase of $19.9 million. This increase was due to
increased sales due to favorable weather conditions and a significant reduction
in transmission costs.
OPERATING REVENUES. Total revenues were $357.6 million in 1998, compared
to $346.8 million for 1997, an increase of $10.8 million or 3%. This increase
was primarily due to greater sales and favorable weather conditions.
OPERATING EXPENSES.
Total operating expenses for 1998 were $289.4 million, compared to $304.0
million for 1997, a decrease of $14.6 million or 5%. As a percent of revenue,
operating expenses for 1998 were 81% as compared to 88% for 1997.
Fuel costs were $155.0 million for 1998, compared to $154.3 million for
1997. This increase in fuel costs resulted from higher output during the year.
Operations and maintenance costs were $37.4 million for 1998, compared to
$37.2 million for 1997. This increase was due to the timing of repairs and
maintenance work.
Transmission costs were $29.9 million for 1998, compared to $41.7 million
for 1997, a decrease of $11.8 million. This decrease resulted from a
renegotiation of transmission contracts in 1998 resulting in lower ongoing
costs.
Depreciation and amortization costs were $38.1 million for 1998, compared
to $39.5 million for 1997. This decrease was due to an overall reduction in
fixed assets.
OTHER INCOME (EXPENSE). Other expense for 1998 was $4.7 million, compared
with income of $0.9 million for 1997. This decrease is primarily due to a $4.2
million loss on 1998 asset disposals related to control system upgrades.
LIQUIDITY AND CAPITAL RESOURCES
Through 2004, we plan to invest an average of approximately $5.0 million
per year in the Cajun facilities for capital improvements, which will allow us
to maintain environmental and regulatory compliance and to maintain existing
equipment. In order to maintain a high availability factor for the Cajun
facilities, we have implemented a maintenance philosophy utilizing standard
major overhaul cycles for critical equipment, supplemented by routine
maintenance for the balance of the Cajun facilities.
The use of the proceeds from the sale of the outstanding bonds, together
with an equity contribution by NRG Energy, were used to fund the purchase of the
Cajun facilities and pay certain fees, costs, expenses and taxes in connection
with the acquisition. Approximately $30.0 million of the assets that we acquired
in conjunction with the purchase of the Cajun facilities are not necessary for
the operation of the Cajun facilities and, with respect to some of these assets,
may not be held by Louisiana Generating under applicable federal regulations.
These assets were distributed to NRG New Roads Holdings, a wholly-owned
unrestricted subsidiary of NRG South Central. NRG New Roads Holdings may at any
time dividend these assets or the proceeds of a sale of these assets to NRG
Energy or one of its affiliates. With the exception of certain railcars, which
have been sold, NRG New Roads Holdings continues to hold these assets as of the
date of this prospectus.
In April 2000, we entered into a $40.0 million floating rate working
capital facility. The lenders under this facility were granted a security
interest in the same collateral (other than the debt service reserve account)
that secures the bonds and rank equally with the bonds. The interest rate on
this facility is at our choice of the lender's prime rate or LIBOR. The facility
contains covenants that are customary for facilities of this type, including
restrictions on the incurrence of indebtedness, mergers, sale of assets and
investments. The facility terminates in March 2001. As of September 30, 2000,
the facility had an outstanding balance of $40 million.
38
<PAGE> 42
In addition, the indenture permits certain additional borrowings as
described under "Description of Principal Financing Documents -- Indenture." We
expect that the funds from our operations, borrowings under our working capital
facility and other permitted borrowings will be sufficient for our cash needs
for at least the next twelve months.
Under the indenture, we were required to establish a debt service reserve
account for the benefit of the holders of the bonds. This account must be funded
at all times with a sufficient amount to meet our debt service obligations under
the bonds for the next six months. We have the option of funding the debt
service reserve account through cash or providing debt service reserve credit
support. NRG Energy currently provides debt service reserve credit support in
the form of a guarantee to satisfy our debt service reserve requirements with
respect to the bonds.
USE OF DERIVATIVES AND MARKET RISK
We may from time to time use derivative financial instruments and commodity
hedges to manage exposure to fluctuations in interest rates and commodity
prices. The use of these instruments may expose us to market and credit risks.
At September 30, 2000, there were no derivative financial instruments
outstanding.
39
<PAGE> 43
ABOUT US
NRG SOUTH CENTRAL, ITS MEMBERS AND ITS SUBSIDIARIES
NRG South Central is a Delaware limited liability company formed in January
2000 for the purpose of facilitating the financing of the acquisition of the
Cajun facilities and other future acquisitions in the region. NRG South Central
has six wholly-owned subsidiaries, Louisiana Generating, NRG New Roads Holdings,
NRG Sterlington Power, NRG Sabine River Works LP, NRG Sabine River Works GP and
Big Cajun I Peaking Power, each a Delaware limited liability company. Louisiana
Generating was formed in June 1996 for the purpose of facilitating the
acquisition of the Cajun facilities and owns, operates and maintains the Cajun
facilities. NRG New Roads Holdings was formed in March 2000 to hold assets that
we acquired in conjunction with the purchase of the Cajun facilities which are
not necessary for the operation of the Cajun facilities and, with respect to
some of these assets, may not be held by Louisiana Generating under applicable
federal regulations. NRG Sterlington Power, which NRG Energy acquired and
contributed to NRG South Central in August 2000, was formed for the purpose of
developing, owning and operating an approximately 200 MW simple cycle gas
peaking facility in Sterlington, Louisiana. Under the terms of an agreement
between Louisiana Generating and NRG Sterlington Power, Louisiana Generating has
a right of first refusal on any sale of capacity and energy by NRG Sterlington
Power. NRG Sabine River Works LP and NRG Sabine River Works GP were formed for
the purpose of owning, respectively, a 49% limited partnership interest and a 1%
general partnership interest in SRW Cogeneration Limited Partnership, a Delaware
limited partnership that will own and operate an approximately 450 MW natural
gas-fired cogeneration plant now under construction at the DuPont Company's
Sabine River Works petrochemical facility near Orange, Texas. SRW Cogeneration
Limited Partnership is 50% owned by subsidiaries of Conoco Inc. Big Cajun I
Peaking Power was formed in August 2000 for the purpose of developing, owning
and operating an approximately 240 MW simple cycle gas peaking facility at the
Big Cajun I site in New Roads, Louisiana. NRG New Roads Holdings, NRG
Sterlington Power, NRG Sabine River Works LP, NRG Sabine River Works GP and Big
Cajun I Peaking Power are not guarantors of the bonds and their operations are
not restricted by the indenture.
NRG South Central's members are NRG Central U.S. LLC and South Central
Generation Holding LLC, each of which holds a 50% interest in NRG South Central.
NRG Energy owns a 100% interest in each of NRG South Central's members. NRG
Energy, in turn, is indirectly majority owned by Xcel Energy.
Our headquarters and principal executive offices are located at 901
Marquette Avenue, Suite 2300, Minneapolis, Minnesota 55402-3265. Our telephone
number is (612) 373-5300.
NRG ENERGY
NRG Energy is a leading participant in the independent electric power
generation industry. Established in 1989, NRG Energy is primarily engaged in the
acquisition, development, ownership and operation of power generation facilities
and the sale of energy, capacity and related products. In August 2000, the
former parent company of NRG Energy, Northern States Power Company, and New
Centuries Energy, Inc. completed their merger. The surviving company operates
under the new name Xcel Energy, Inc. As a result of the merger, the shares of
NRG Energy previously owned by Northern States Power are now indirectly owned by
Xcel Energy. As of the date of this prospectus, Xcel Energy indirectly owns
approximately 82% of the common equity and 98% of the combined voting power of
NRG Energy's common stock and class A common stock.
Measured by net ownership in power generating facilities, NRG Energy is one
of the three largest independent power generation companies in the United States
and the fifth largest independent power generation company in the world. NRG
Energy owns all or a portion of 63 generation projects that have total
generating capacity of 24,533 MW. Its net ownership interest in those projects
is 14,476 MW of which 10,917 MW is in the United States. NRG Energy has
experienced significant growth in the last two years, having increased its net
ownership interests from 3,300 MW on December 31, 1998.
In addition to power generation projects, NRG Energy also has interests in
district heating and cooling systems and steam transmission operations. NRG
Energy's thermal and chilled water businesses have a steam
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and chilled water capacity equivalent to approximately 1,537 MW. NRG Energy,
through its subsidiary, NEO Corporation, is also one of the largest landfill gas
generation companies in the United States.
NRG Energy has historically endeavored to make capital for additional
investments available by allowing other companies to purchase a portion of NRG
Energy's interests in companies wholly-owned by NRG Energy. While such a
sell-down of NRG Energy's interest in NRG South Central is not currently
contemplated by NRG Energy, any potential holders of the bonds should consider
that such a sell-down is a possibility.
Additional and more detailed information concerning NRG Energy and its
business is set forth in its annual and periodic reports filed with the SEC. See
"Where You Can Find More Information."
NRG POWER MARKETING
NRG Power Marketing is a direct, wholly-owned subsidiary of NRG Energy
which was formed in August 1997 for the purpose of serving the power marketing,
fuel procurement and emissions credit management needs of NRG Energy and its
affiliates. It has entered into a 30-year power sales and agency agreement to
provide these services to Louisiana Generating and NRG Sterlington Power.
NRG OPERATING SERVICES
NRG Operating Services is a direct, wholly-owned subsidiary of NRG Energy
which was formed in October 1992 for the purpose of operating and maintaining
electric power generation facilities owned by NRG Energy and its affiliates. It
has entered into an operation and management services agreement with Louisiana
Generating. NRG Energy, through NRG Operating Services or other subsidiaries,
has total or shared operational responsibility for approximately 14,782 MW of
power generation at 45 facilities worldwide, excluding the Cajun facilities.
XCEL ENERGY
In August 2000, the former parent company of NRG Energy, Northern States
Power Company, and New Centuries Energy, Inc. completed their merger. The
surviving company operates under the new name Xcel Energy, Inc. As a result of
the merger the shares of NRG Energy previously owned by Northern States Power
are now indirectly owned by Xcel Energy. As of the date of this prospectus, Xcel
Energy, through its wholly-owned subsidiary Xcel Wholesale Energy Group, owns
approximately 82% of the common equity and 98% of the combined voting power of
NRG Energy's common stock and class A common stock.
Xcel Energy is one of the ten largest electricity and natural gas companies
in the United States. Xcel Energy has six public utility subsidiaries that
collectively serve approximately 3,080,000 electric customers and 1,500,000 gas
customers in 12 states. It also has numerous non-utility subsidiaries, including
NRG Energy, which are engaged in energy related businesses.
Additional and more detailed information concerning Xcel Energy and its
business is set forth in its annual and periodic reports filed with the SEC. See
"Where You Can Find More Information."
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BUSINESS OF NRG SOUTH CENTRAL AND LOUISIANA GENERATING
INDUSTRY OVERVIEW
Until recently, the demand for power in the United States has been met by
utilities which would construct large-scale electric generating plants under
cost-of-service based regulation. Under this regulatory regime, in exchange for
their status as the designated provider of electricity in a given area, the
traditional electric utility agreed to submit its decisions regarding operation
of its business (for example, construction and closure of plants) to state
public service commission scrutiny, and in exchange it received a moderate
guaranteed rate of return on the costs incurred in providing electric service.
Beginning in 1978, legislative changes designed to increase competition in
the electric industry spurred independent power producers to enter the power
market, beginning with an entrepreneurial group of cogenerators and small power
producers which was later joined by larger, better capitalized companies, such
as subsidiaries of fuel supply companies, electric utilities, engineering
companies, equipment manufacturers and affiliates of other industrial companies.
While these independent power producers are not subject to state public service
commission review and scrutiny with respect to decisions they make and costs
they incur, they also are not guaranteed any specified rate of return with
respect to their investments.
The United States electric industry, including companies engaged in
providing generation, transmission, distribution and ancillary services, has
undergone significant change over the last several years, leading to significant
deregulation and increased competition. Pursuant to Order No. 888 and Order No.
889, and as further refined and supplemented by Orders 888-A, -B and -C
(collectively, known as the Open Access Rules), FERC requires the owners and
operators of electric transmission facilities to make those facilities available
for transmission on a non-discriminatory basis to all wholesale generators,
sellers and buyers of electricity (this is referred to as wholesale wheeling).
FERC has proposed further regulatory changes to improve access to the
nationwide transmission grid by utility and non-utility purchasers and sellers
of electricity and to promote wholesale market efficiency. In December 1999,
FERC issued Order No. 2000, which set forth minimum requirements for the
establishment and operation of Regional Transmission Organizations, or RTOs.
Order No. 2000 also set forth a voluntary procedure by which RTOs would be
established. In February 2000, FERC issued Order No. 2000-A, which affirmed
Order No. 2000 on rehearing with a few minor modifications. Order No. 2000-A did
not alter in any material respect the basic framework for Order No. 2000 nor the
requirements for RTOs. In addition to wholesale wheeling, throughout the United
States there has been an increasing number of proposals at the state level to
allow retail customers to choose their electricity suppliers, with incumbent
utilities required to deliver such electricity over their transmission and
distribution systems (this is referred to as retail wheeling). Numerous electric
utilities nationwide are in the process of divesting all or a portion of their
generation business or are expected to commence such a process in the
foreseeable future, as legislative and regulatory developments drive the
industry to disaggregate.
OUR ACQUISITION OF THE CAJUN FACILITIES
Cajun Electric was a generation and transmission cooperative that was owned
by, and sold wholesale electric power produced by the Cajun facilities to the
distribution cooperatives under long-term, all-requirements power supply
agreements. Cajun Electric also sold wholesale electric power under power supply
agreements to two municipal power authorities and one investor-owned utility.
Previously, Cajun Electric owned nuclear and non-nuclear generation facilities
in Louisiana and was one of the largest generation and transmission cooperatives
in the nation. In December 1994, Cajun Electric filed for protection under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
Middle District of Louisiana.
We believe the bankruptcy was driven by Cajun Electric's inability to
service approximately $4.2 billion in secured debt provided by the Rural
Utilities Service of the United States Department of Agriculture, most of which
was incurred as a result of the purchase by Cajun Electric of a 30% interest in
the River Bend Nuclear Station Unit I, a nuclear electric generating facility
located in Saint Francisville, Louisiana. Cajun
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Electric's 30% interest in the River Bend nuclear facility was transferred to
Entergy Gulf States in December 1997. Louisiana Generating has no ownership
interest in the River Bend nuclear facility or responsibility for any of the
liabilities relating to that facility. Louisiana Generating also has no
responsibility for any indebtedness Cajun Electric incurred from the Rural
Utilities Service, all of which was extinguished on the March 31, 2000 closing
of the acquisition of the Cajun facilities and the consummation of the Cajun
Electric bankruptcy plan of reorganization.
In August 1995, the United States District Court for the Middle District of
Louisiana appointed Ralph R. Mabey as trustee to administer Cajun Electric and
to seek a resolution of its bankruptcy case. In January 1996, the trustee began
a competitive bidding process for Cajun Electric's non-nuclear assets. In April
1996, the trustee selected the bid of Louisiana Generating and incorporated this
bid into the trustee's proposed plan of reorganization. Louisiana Generating
entered into an asset purchase agreement with the trustee in June 1996. In
December 1996, the Bankruptcy Court commenced confirmation hearings on three
competing plans of reorganization for Cajun Electric, including the trustee's
plan proposing the asset sale to Louisiana Generating. The second plan of
reorganization was jointly submitted by Southwestern Electric Power Company,
also known as SWEPCO, and a committee of certain of the distribution
cooperatives. This second plan proposed an asset sale to SWEPCO. The third plan
of reorganization was jointly proposed by the Official Committee of Unsecured
Creditors of Cajun Electric and Enron Capital & Trade Resources Corp. and
proposed an asset sale to Enron. This third plan was subsequently withdrawn.
In August 1999, the parties to the Cajun Electric bankruptcy proceeding
reached a global settlement of the remaining issues in the case, which was
approved that same month in an order by the United States District Court for the
Middle District of Louisiana. Among other things, the settlement included the
withdrawal of the plan of reorganization proposed by SWEPCO and certain of the
distribution cooperatives. In October 1999, the bankruptcy court issued its
confirmation order confirming the plan of reorganization (which was then
proposed by the Official Committee of Unsecured Creditors of Cajun Electric
after the withdrawal of the trustee as a plan proponent) which included the sale
of the Cajun facilities to Louisiana Generating.
Approximately $30.0 million of the assets that we acquired in conjunction
with the purchase of the Cajun facilities are not necessary for the operation of
the Cajun facilities and, with respect to some of these assets, may not be held
by Louisiana Generating under applicable federal regulations. We refer to these
assets as the assets specifically held for resale. These assets were distributed
to NRG New Roads Holdings, a wholly-owned unrestricted subsidiary of NRG South
Central. NRG New Roads Holdings may at any time dividend these assets or the
proceeds of a sale of these assets to NRG Energy or one of its affiliates. These
assets consisted primarily of:
- a 4,157 acre parcel of land near Coushatta, Louisiana acquired by Cajun
Electric for the construction of a new facility but now used for timber
production, wildlife conservation and farming;
- a 2,466 acre segment of the Big Cajun II property that has been held by
Cajun Electric as a future ash disposal site but which is currently
leased for farming;
- mineral rights to a seven acre parcel of land in New Roads, Louisiana;
- a 540 MW General Electric steam turbine generator; and
- 848 steel rotary dump railcars (the railcars have subsequently been
sold).
We used the proceeds of the offering of the outstanding bonds, together
with a cash equity contribution of approximately $268.6 million from NRG Energy,
to fund the purchase of the Cajun facilities for approximately $1,055.9 million
and to pay certain fees, costs, expenses and taxes in connection with the
acquisition.
THE CAJUN FACILITIES
The Cajun facilities, located in New Roads, Louisiana, consist of two
plants referred to as Big Cajun I and Big Cajun II. As of the date of this
prospectus, the aggregate net capable capacity of the Cajun facilities is 1,708
MW.
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BIG CAJUN I. Big Cajun I, Units 1 and 2, both of which are 100% owned by
Louisiana Generating, are natural gas-fired generating facilities with a net
capable capacity of 110 MW each. Big Cajun I is used for intermediate/peaking
load seasonal operation and typically runs from May through September. As
currently configured, Big Cajun I produces approximately 2% of our annual
electric output (as measured in kWh) of the Cajun facilities.
BIG CAJUN II. Big Cajun II, Units 1, 2 and 3, are coal-fired generating
facilities. Units 1 and 2 are 100% owned by Louisiana Generating and each have a
net capable capacity of 577 MW. Unit 3 has a net capable capacity of 575 MW, of
which 58% is owned by Louisiana Generating and the remaining portion is owned by
Entergy Gulf States. Big Cajun II is a base load facility and runs throughout
the year. As currently configured, Big Cajun II produces approximately 98% of
our annual electric output (as measured by kWh) of the Cajun facilities.
Both Big Cajun I and II can accommodate additional generating units
facilitated by available space and existing infrastructure. A feasibility study
has been completed and the permitting process has been commenced with respect to
an approximately 240 MW expansion of the Cajun facilities. We have formed Big
Cajun I Peaking Power, a wholly-owned subsidiary, to develop, construct and own
the expansion project, which is targeted to begin commercial operation in June
2001. Big Cajun I Peaking Power is not a guarantor of the bonds. The energy and
capacity generated by the expansion project may be used to help meet our
obligations under the existing power purchase agreements, with any excess power
and capacity being marketed by NRG Power Marketing.
OUR TRANSMISSION AND INTERCONNECTION ARRANGEMENTS
Louisiana Generating has interconnection facilities consisting of one
switchyard at Big Cajun I, one switchyard at Big Cajun II and varying amounts of
equipment at approximately 115 points of delivery to the distribution
cooperatives, including metering equipment and in some cases transformation
equipment. One of the delivery points includes a 26 mile, 138kV transmission
line and a substation at the end of that line. Power is taken by Jefferson Davis
Electric Cooperative, Inc. at both ends of this line. These interconnection
facilities were used by Cajun Electric exclusively for the delivery of power to
its members from the transmission systems of wheeling utilities, and Louisiana
Generating's use is similarly limited. Because no entity is likely to seek
access to these interconnection facilities, Louisiana Generating requested a
waiver of FERC's requirement to file an open access transmission tariff. As part
of its waiver application, Louisiana Generating provided that if service is
requested on Louisiana Generating's transmission facilities by any entity that
would be eligible for access under FERC's pro forma tariff, Louisiana Generating
will file within 60 days an open access tariff that meets FERC's then applicable
standards. FERC has granted Louisiana Generating the waiver. To date, no other
entity has requested service on the pertinent transmission facilities.
Louisiana Generating assumed Cajun Electric's transmission agreements with
Entergy Services, Inc., acting as agent for Entergy Arkansas, Inc., Entergy Gulf
States, Entergy Louisiana, Inc., Entergy Mississippi, Inc., and Entergy New
Orleans, Inc., Central Louisiana Electric Company and SWEPCO. The Cajun
facilities are connected to the transmission system of Entergy Gulf States and
power is delivered to the distribution cooperatives at various delivery points
throughout Louisiana on the transmission systems of Entergy Gulf States, Entergy
Louisiana, Central Louisiana Electric Company and SWEPCO. Louisiana Generating
also assumed from Cajun Electric 20 interchange and sales agreements with
utilities and cooperatives, providing access to a 12 state area as far north as
Illinois and into North Carolina and Florida.
REGULATION
FEDERAL POWER ACT. The Federal Power Act gives FERC exclusive rate-making
jurisdiction over wholesale sales of electricity and the transmission of
electricity in interstate commerce. Pursuant to the Federal Power Act, all
public utilities subject to FERC's jurisdiction are required to file rate
schedules with FERC prior to commencement of wholesale sales or transmission of
electricity. Because Louisiana Generating sells energy and capacity in the
wholesale market, it is deemed to be a public utility for purposes of the
Federal Power Act and has been granted this authority by FERC. In its orders,
FERC also granted waivers of certain
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of the accounting, record-keeping and reporting requirements that are imposed on
public utilities with cost-based rate schedules.
In addition, FERC's orders, as is customary with market-based rate
schedules, reserve the right to suspend, upon complaint, market-based rate
authority on a prospective basis if it is subsequently determined that we
exercised market power. If FERC were to suspend market-based rate authority, it
would most likely be necessary to file, and obtain FERC acceptance of,
cost-based rate schedules. In addition, the loss of market-based rate authority
would likely subject us to the accounting, record-keeping and reporting
requirements that are imposed on public utilities with cost-based rate
schedules.
PUBLIC UTILITY HOLDING COMPANY ACT. PUHCA provides that any corporation,
partnership or other entity or organized group that owns, controls or holds
power to vote 10% or more of the outstanding voting securities of a
"public-utility company" or a company that is a "holding company" of a public
utility company is subject to registration and regulation under PUHCA as a
registered holding company, unless an exemption is obtained under applicable
rules or an order is issued by the SEC declaring it not to be a holding company.
Registered holding companies under PUHCA are required to limit their utility
operation to a single integrated utility system and additional systems that
cannot be operated independently without substantial losses of economies, and to
divest any other operations not functionally related to the operation of the
utility system. In addition, a public utility company that is a subsidiary of a
registered holding company under PUHCA is subject to financial and
organizational regulation, including approval by the SEC of certain of its
financing transactions. However, under the Energy Policy Act, a company engaged
exclusively in the business of owning and/or operating a facility used for the
generation of electric energy exclusively for sale at wholesale may be exempted
from PUHCA regulation by operation of its status as an EWG, as defined under
Section 32 of PUHCA. Louisiana Generating is an EWG and has received
confirmation from FERC of its EWG status.
If a "material change" occurs in facts which might affect Louisiana
Generating's continued eligibility for EWG status then we must, within 60 days
of such material change, (a) file a written explanation of why the material
change does not affect its EWG status, (b) file a new application for EWG status
or (c) notify FERC that Louisiana Generating no longer wishes to maintain EWG
status. If Louisiana Generating were to lose its EWG status, Louisiana
Generating would be subject to regulation as a public utility company and
certain of its affiliates would be subject to regulation under PUHCA as public
utility holding companies. Absent a substantial restructuring of our business,
it would be difficult for us to comply with PUHCA without a material adverse
effect on our business.
STATE LAW. With the exception of the provision of utility services by
certain utilities in New Orleans and certain municipal utilities, the Louisiana
Public Service Commission, or LPSC, regulates all public utilities within
Louisiana. The jurisdiction of the LPSC over these public utilities generally
includes authority to regulate the rates, services and securities of any entity
furnishing electric service in the state. However, Louisiana law does not
specifically address the status of entities providing electricity exclusively at
wholesale. The LPSC generally has assumed that FERC has jurisdiction over
wholesale rates. We do not believe that we are subject to regulation by the LPSC
as a public utility or electric public utility as long as we continue to sell
energy and capacity exclusively at wholesale. However, the 11 distribution
cooperatives to which Louisiana Generating sells a majority of the energy and
capacity generated by the Cajun facilities will continue to be regulated by the
LPSC.
In January 2000, the LPSC issued an order, which we refer to as the January
2000 order:
- determining that allowing the Cajun facilities to be sold to us will
benefit consumers, is in the public interest and does not violate
Louisiana law (these approvals were necessary under the mandate of
federal law, which required LPSC approval before the Cajun facilities may
become "eligible facilities" of an exempt wholesale generator under
PUHCA);
- approving the decision of three of the distribution cooperatives,
Southwest Louisiana Electric Membership Corporation, Pointe Coupee
Electric Membership Corporation and Concordia Electric Cooperative, Inc.
to enter into 25-year, all-requirements power supply agreements with
Louisiana Generating in the form that we refer to as Form A;
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- establishing a purchase power clause for these three distribution
cooperatives to pass through automatically at retail all costs under the
Form A power supply agreement; and
- declaring that the LPSC will not regulate any securities issued by
Louisiana Generating.
The remaining eight distribution cooperatives also have contracted with us.
In March 2000, the LPSC approved the decisions of the eight remaining
distribution cooperatives to enter into power purchase agreements with Louisiana
Generating. In accordance with the LPSC's directives, all eleven distribution
cooperatives have submitted their plans for (1) recovering the cost of power
purchased from Louisiana Generating through retail rates and (2) for insuring
that their retail rates no longer reflect the cost of purchasing power from
Cajun Electric. After review and hearings, the LPSC has approved each of these
cost recovery plans. As a result, the purchased power costs of each of the
distribution cooperatives are being recovered through retail rates and the LPSC
has authorized the methodology that permits them to continue to recover such
costs in the future. The LPSC has reserved the right to review the recovery
mechanism in order to prevent over-recovery and to adjust the mechanism in light
of changes in the market and electric industry.
The LPSC declared in its January 2000 order that it will not attempt to
regulate securities issued by Louisiana Generating. Although the LPSC has not
addressed the regulation of securities issued by NRG South Central, we know of
no authority that would allow the LPSC to regulate the securities of a holding
company the subsidiary of which is not subject to general LPSC regulation.
COMPETITION
FEDERAL. The Energy Policy Act laid the ground work for a competitive
wholesale market for electricity. Among other things, the Energy Policy Act
expanded FERC's authority to order wholesale wheeling, thus allowing qualifying
facilities under the Public Utility Regulatory Policies Act, power marketers and
EWGs to compete more effectively in the wholesale market.
In May 1996, FERC issued the first of the Open Access Rules, which requires
utilities to offer eligible wholesale transmission customers non-discriminatory
open access on utility transmission lines on a comparable basis to the
utilities' own use of the lines. In addition, the Open Access Rules direct the
regional power pools that control the major electric transmission networks to
file uniform, non-discriminatory open access tariffs. The Open Access Rules has
been the subject of rehearing at FERC and has been substantially affirmed by the
Court of Appeals for the District of Columbia.
Over the past few years, Congress and the administration of President
Clinton have considered various pieces of legislation to restructure the
electric industry that would require, among other things, customer choice and/or
repeal of PUHCA. The debate is likely to continue, and perhaps intensify. The
effect of enacting such legislation cannot be predicted with any degree of
certainty.
STATE. The Energy Policy Act did not preempt state authority to regulate
retail electric service. Historically, in most states, competition for retail
customers is limited by statutes or regulations granting existing electric
utilities exclusive retail franchises and service territories. Since the passage
of the Energy Policy Act, the advisability of retail competition has been the
subject of intense debate in federal and state legislative and regulatory
forums. Many states have taken steps to facilitate retail competition as a means
of stimulating competitive generation rates and economic development.
At the present time Louisiana does not allow retail competition. The LPSC
has solicited public comment, assembled data and conducted evidentiary hearings
on the issue of whether retail electric competition is in the public interest.
The LPSC staff has recommended that the LPSC find that retail competition is not
in the public interest unless it affords the opportunity for lower billings for
electric service to all customers, that retail competition is not in the public
interest at the present time and that the LPSC should engage in a comprehensive
analysis of the economic and other effects of the restructuring of the electric
industry. The staff has also proposed its own restructuring plan should the LPSC
determine that retail competition is in the public interest notwithstanding the
staff's recommendation. At present the LPSC has not
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made any decisions regarding retail competition. It is uncertain when or if the
LPSC will act on the staff's recommendation.
POWER MARKETS
Louisiana Generating sells energy and capacity generated by the Cajun
facilities in the southeast power market, primarily in Louisiana. In addition,
through NRG Power Marketing, Louisiana Generating sells excess energy and
capacity into the Southeast Energy Reliability Council, or SERC, region or into
other neighboring regions.
THE SOUTHEAST POWER MARKET. The southeast power market, which consists of
Louisiana, Mississippi, Tennessee, Alabama, Georgia, Arkansas, northwest Florida
and east Texas, had electricity rates approximately 17% below the national
average for 1999. State public utilities commissions and state assemblies within
the southeast power market have been slower than other parts of the country to
restructure the electricity industry. Most states in the southeast power market,
including Louisiana, have decided not to pursue retail competition immediately,
deciding instead to observe the impact of direct retail access on other states
that have taken a more aggressive approach towards restructuring. Arkansas and
Texas are the only states in the southeast power market which have approved
comprehensive industry restructuring legislation and only Arkansas, Texas and
Georgia have enacted legislation allowing implementation of any form of direct
retail access. Public utility commissions in Georgia and Mississippi have
presented recommendations regarding the restructuring of the electricity
industry to their respective state assemblies so that the state government may
begin drafting legislation. An industry group made a similar presentation in
Louisiana.
The southeast power market is currently a "bilateral market" functioning
without an independent system operator, a power pool or a price exchange.
Therefore, all scheduling, coordination, and market pricing are determined on a
control area basis by each market entity rather than by a single pool market
clearing house. SERC staff have indicated that the members of the council have
informally discussed the formation of a regional transmission organization.
THE SERC REGION. The SERC region is comprised of the southeast power
market plus Virginia, North Carolina, South Carolina and part of Kentucky. As of
January 1, 1999, this area consisted of more than 20.0 million retail customers.
In 1998, total generating capacity within the SERC region was 150 GW and total
peak summer demand was 143 GW. The SERC region imported 30,500 GWh and exported
62,200 GWh.
LOUISIANA. As of year-end 1998, the total generating capacity in Louisiana
was 16,123 MW with total demand of 14,884 MW. The Cajun facilities represent 11%
of Louisiana's total generating capacity. In 1998, Louisiana imported 18,450 GWh
and exported 10,170 GWh.
OUR OPERATIONS
STRATEGY. We intend to use the Cajun facilities, employees and customer
base, as well as the assets that were distributed to NRG New Roads Holdings, as
a platform for our growth. We plan to grow by expanding the customer base using
incentive rate structures as necessary, developing and acquiring additional
electric generation facilities and utilizing the expertise of NRG Power
Marketing to maximize profitability.
CONTRACT POWER SALES. Of our total revenues for the period of March 30,
2000 (Inception) through September 30, 2000, approximately 74.2% was derived
from agreements with the distribution cooperatives and approximately 8.9% was
derived from agreements with two municipal power authorities and one investor-
owned utility. The remainder was primarily derived from market sales arranged
under a power sales and agency agreement with our power marketing affiliate, NRG
Power Marketing. Of our total revenues during this period, approximately 35.1%
were derived from 25-year, all-requirements power supply agreements.
OTHER POWER SALES. Under a 30-year power sales and agency agreement, NRG
Power Marketing, acting as agent for Louisiana Generating, markets and sells any
energy and capacity that Louisiana Generating has not committed under other
contracts. NRG Power Marketing provides all power marketing services for
Louisiana Generating including scheduling, contract management and bilateral
sales of excess energy and capacity. NRG Power Marketing has the exclusive right
to market all of our excess energy, capacity and
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ancillary services and enters into forward sales of energy and capacity not sold
to the distribution cooperatives or the other contract power purchasers. All net
revenues due to Louisiana Generating from these activities flow to Louisiana
Generating. NRG Power Marketing is directed to use the Cajun facilities to
maximize net operating margins and uses the transmission and interconnection
rights of Louisiana Generating to provide energy and capacity to and from other
regions. See "Summary of Certain Principal Documents -- Power Sales and Agency
Agreement."
FUEL SUPPLY AND TRANSPORTATION. In March 2000, Louisiana Generating
entered into a five-year coal supply agreement under which Triton Coal sells
Louisiana Generating sufficient quantities of coal to satisfy the full coal
requirements of Big Cajun II. In March 2000, Louisiana Generating entered into a
five-year coal transportation agreement with Burlington Northern and Santa Fe
Railway, and American Commercial Terminal under which the railroad transports
coal from the Triton Coal mines in the Powder River Basin in Wyoming to St.
Louis, Missouri. The Cajun facilities have burned Powder River Basin coal from
these and neighboring mines since Big Cajun II commenced operations. American
Commercial Terminal transports the coal by barge down the Mississippi River from
St. Louis to the Cajun facilities.
The Cajun facilities include a 17.5 mile gas pipeline with interconnections
to Bridgeline Gas Distribution LLC, Acadian Gas Pipeline System and Texas
Eastern Transmission Corporation. Under the power sales and agency agreement,
NRG Power Marketing may acquire natural gas and gas transportation rights for
the benefit of Louisiana Generating.
The following table presents our current estimate of the price of the coal
to be delivered to the Cajun facilities during the five-year term of the coal
supply and transportation agreements. The actual prices, however, may be
different than we predict. For example, the pricing terms under our coal supply
and transportation agreements may be revised upon the occurrence of various
events. See "Summary of Certain Principal Agreements -- Coal Supply Agreement"
and "-- Coal Transportation Agreement."
<TABLE>
<CAPTION>
ESTIMATED
PRICE OF
DELIVERED
YEAR COAL
---- ------------------
($/mmBtu)
<S> <C>
2000................................................. 1.170
2001................................................. 1.195
2002................................................. 1.221
2003................................................. 1.247
2004................................................. 1.274
2005................................................. 1.292
</TABLE>
RISK MANAGEMENT. NRG Power Marketing utilizes certain risk management
policies and procedures to assist us with our objectives of maximizing net
operating margins while minimizing associated risks. Key risk management
guidelines adopted by NRG Power Marketing include:
- a general prohibition on speculative activities;
- mitigation of operational risk by not allowing more than 50% of available
energy and capacity not already contracted to be sold forward unless
approved by the NRG Power Marketing board of directors;
- approval of counter-parties and their trading limits by NRG Energy's
treasury; and
- fuel and emissions allowance requirements to be matched with future sales
commitments.
OPERATIONS AND MAINTENANCE. Louisiana Generating entered into an operation
and management services agreement with NRG Operating Services under which, at
the request of Louisiana Generating, NRG Operating Services manages, oversees
and supplements the operation and maintenance of the Cajun facilities. NRG
Operating Services is a direct, wholly-owned subsidiary of NRG Energy.
Big Cajun II, Unit 3 is operated by Louisiana Generating and Entergy Gulf
States pursuant to a joint operating agreement. Louisiana Generating has the
authority to control, manage, operate and maintain this
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<PAGE> 52
unit as if it were the sole owner of the unit. The fixed costs associated with
Big Cajun II, Unit 3 are recovered according to ownership level. Variable costs
associated with Big Cajun II, Unit 3 are borne in proportion to the energy
delivered to Louisiana Generating and Entergy Gulf States. For a summary of the
agreement, see the section entitled "Summary of Certain Principal Agreements."
CORPORATE SERVICES. Louisiana Generating and NRG South Central each
entered into a corporate services agreement with NRG Energy pursuant to which
NRG Energy, upon request, provides services relating to any corporate business
function, including human resources, accounting, finance, treasury, tax, office
administration, information technology, engineering, construction management,
environmental, legal and safety. NRG Sterington Power and Big Cajun I Peaking
Power each entered into a similar corporate services agreement with NRG Energy.
OUR CUSTOMERS
Cajun Electric was a rural electric generation and transmission cooperative
formed in 1962 and was wholly-owned by its members, the distribution
cooperatives. The distribution cooperatives purchased their electric energy
requirements from Cajun Electric for more than 20 years under long-term,
all-requirements power supply agreements. These purchases accounted for
approximately 79% of Cajun Electric's revenue in 1999. During the period of
March 30, 2000 (Inception) through September 30, 2000, approximately 83.1% of
our revenues were derived from long term all-requirements power supply
agreements. As of December 1998, the distribution cooperatives sold electricity
to over 319,000 metered customers. Of these metered customers, approximately 91%
were residential customers, 8% were industrial or commercial customers and 1%
were public or other customers. The distribution cooperatives had approximately
1,200 employees in the aggregate in 1998.
Following our acquisition of the Cajun facilities, all 11 of the
distribution cooperatives continued to purchase their electric energy
requirements from Louisiana Generating. For the period of March 30, 2000
(Inception) through September 30, 2000, revenues derived from agreements with
the distribution cooperatives accounted for approximately 74.2% of our revenues.
Electric distribution cooperatives developed under the Rural
Electrification Act of 1935 to promote the distribution of electricity to rural
areas of the United States. There are two types of electric cooperatives:
generation and transmission cooperatives, such as Cajun Electric, and
distribution cooperatives, such as the 11 distribution cooperatives that were
the former members of Cajun Electric. A generation and transmission cooperative
is typically a non-profit entity whose primary function is to provide energy and
capacity on a wholesale basis to its owners, who typically consist of a group of
distribution cooperatives. This power is typically sold by the generation and
transmission cooperative pursuant to long-term, all-requirements contracts with
the distribution cooperatives. The distribution cooperatives, which are also
typically non-profit entities, in turn sell electricity on a retail basis to
their customers. By virtue of purchasing electricity from the distribution
cooperatives, these customers are considered to be the owners of the
distribution cooperatives. These customer/owners vote to elect a board of
directors of the distribution cooperative, which in turn appoints the managers
who oversee the distribution cooperative's day-to-day operations.
The primary assets of the distribution cooperatives are distribution lines
and substation equipment, as well as the equipment necessary to maintain these
assets. The distribution cooperatives generate revenue through sales of power to
retail customers. The primary cost of the distribution cooperatives is that of
purchasing wholesale energy and capacity necessary to meet their customers'
requirements. The retail rates charged by the distribution cooperatives are set
by the LPSC and our wholesale rates to the distribution cooperatives is a
component used to determine these rates. The power supply agreements that we
entered into with the distribution cooperatives provide for a significant
reduction in the cost of wholesale energy and capacity to these distribution
cooperatives, when compared with their cost prior to Cajun Electric's Chapter 11
bankruptcy filing. These cost savings for the distribution cooperatives have
resulted in reduced electricity rates to their retail customers.
The Rural Utilities Service of the United States Department of Agriculture,
or RUS, provides loans or guarantees to both generation and transmission
cooperatives and to distribution cooperatives. The majority of
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<PAGE> 53
the electric cooperative industry continues to rely on RUS loans or guarantees
and other electric cooperative financial institutions for the bulk of its
capital needs.
Pursuant to the plan of reorganization in Cajun Electric's Chapter 11
bankruptcy, the distribution cooperatives were granted the option to elect to
enter into any of three forms of power supply agreements, which we refer to as
forms A, B or C, with Louisiana Generating, or to purchase their energy and
capacity requirements elsewhere. All 11 of the distribution cooperatives elected
to purchase their energy and capacity requirements from Louisiana Generating.
The following table sets forth selected information with respect to those
distribution cooperatives, including the form of power supply agreement
initially elected by each. See "Summary of Certain Principal Agreements -- Power
Supply Agreements with the Distribution Cooperatives."
<TABLE>
<CAPTION>
TOTAL %
CUSTOMERS CAJUN ANNUAL
FORM OF (RESIDENTIAL FACILITIES' GROWTH
POWER AND MILES OF 1999 MWh IN
SUPPLY COMMERCIAL) LINE PURCHASES PURCHASED PURCHASES
NAME AGREEMENT PARISHES SERVED 1998 1998 (MWh) 1999 1989-99
---- --------- --------------- ------------ -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Beauregard Electric Form A Allen, Beauregard, 32,668 4,956 711,806 7.26% 5.84%
Cooperative, Inc. (25-year) Calcasieu, Evangeline,
Jefferson Davis,
Rapides, Vernon
Claiborne Electric Form C Bienville, Claiborne, 16,008 3,842 510,036 5.20% 6.47%
Cooperative, Inc. (two- to Lincoln, Ouachita,
four-year) Union, Webster
Concordia Electric Form A Caldwell, Catahoula, 11,795 2,487 173,686 1.77% 0.73%
Cooperative, Inc. (25-year) Concordia, Franklin,
Grant, LaSalle, Tensas
Dixie Electric Form C Ascension, East Baton 70,892 7,555 1,416,831 14.44% 4.38%
Membership (two- to Rouge, East Feliciana,
Corporation four-year) Livingston, St. Helena,
Tangipahoa, West
Feliciana
Jefferson Davis Form A Allen, Calcasieu, 9,538 1,584 204,021 2.08% 1.07%
Electric Cooperative, (25-year) Cameron, Jefferson
Inc. Davis, Vermilion
Northeast Louisiana Form B East Carroll, West 14,396 2,390 240,652 2.45% 3.61%
Power Cooperative, (25-year) Carroll, Franklin,
Inc. Madison, Morehouse,
Richland, Tensas
Pointe Coupee Form A Iberville, Pointe 9,157 960 239,142 2.44% 7.79%
Electric Membership (25-year) Coupee, West Baton
Corporation Rouge
South Louisiana Form A Assumption, Lafourche, 16,999 1,263 451,664 4.60% 2.69%
Electric Cooperative (25-year) St. Martin, St. Mary,
Association Terrebonne
Southwest Louisiana Form A Acadia, Avoyelles, 73,879 8,119 1,685,986 17.19% 1.86%
Electric Membership (25-year) Evangeline, Iberia,
Corporation Lafayette, St. Landry,
St. Martin, Vermillion
Valley Electric Form C Caddo, DeSoto, Grant, 28,191 6,602 539,081 5.50% 3.06%
Membership (two- to Natchitoches, Red
Corporation four-year) River, Sabine, Vernon,
Winn
Washington -- Form C St. Tammany, 35,601 5,017 733,358 7.48% 3.65%
St. Tammany Electric (two- to Tangipahoa,
Cooperative, Inc. four-year) Washington
------- ------ --------- -------
Totals: 319,124 44,775 6,906,263 70.41%
</TABLE>
In addition to sales to the distribution cooperatives, Louisiana Generating
sells energy and capacity to two municipal power authorities and one
investor-owned utility under four power supply agreements for terms of from
seven to 26 years.
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<PAGE> 54
OUR COAL SUPPLIER AND TRANSPORTERS
Louisiana Generating has a coal supply agreement with Triton Coal for a
term of five years, beginning March 2000. Triton Coal, headquartered in
Gillette, Wyoming, operates two coal mines in the Powder River Basin in Wyoming.
See "Summary of Certain Principal Agreements."
Louisiana Generating has a coal transportation agreement with Burlington
Northern and Santa Fe Railway and American Commercial Terminal for a term of
five years, beginning in March 2000. Burlington Northern and Santa Fe Railway,
headquartered in Fort Worth, Texas, transports a variety of manufacturing,
agricultural and natural resource commodities, chemicals, consumer and food
products, and motor vehicles and automotive parts. American Commercial Terminal,
headquartered in Jeffersonville, Indiana, is a general cargo stevedore and
warehousing logistics specialist which operates a terminal offering barge, rail
and truck transloading for a variety of commodities including steel, paper,
lumber and coal. See "Summary of Certain Principal Agreements."
ENVIRONMENTAL MATTERS
We, like most industrial enterprises, are subject to regulation with
respect to the environmental impact of our operations, including air and water
quality control, limitations on land use, disposal of wastes, aesthetics and
other matters.
Environmental laws generally require air emissions and water discharges to
meet specified limits. They also impose potential joint and several liability,
without regard to fault, on the generators of various hazardous substances to
manage these materials properly and to clean up property affected by the
production and discharge of such substances. The long-term, all-requirements
power supply agreements under which we sell a majority of the energy and
capacity generated by the Cajun facilities contain clauses allowing Louisiana
Generating to pass through to the distribution cooperatives their share of
increased costs resulting from any changes in environmental law. We estimate
that we will expend approximately $20.0 million between 2000 and 2003 related to
the environmental compliance of the Cajun facilities, including expenditures for
construction of spill containment structures, installation of additional
monitoring wells, removal of asbestos and installation of equipment at Big Cajun
II which will allow for the use of gas as a start-up fuel.
Air Pollution Control.
SULFUR DIOXIDE. The Clean Air Act Amendments of 1990 provide for SO(2)
emission reductions to be achieved through a total cap on SO(2) emissions from
affected electrical generation units, and an allocation of SO(2) "allowances"
(each allowance authorizes the emission of one ton of SO(2)). Big Cajun II's
annual SO(2) emissions allocation is 44,153 tons commencing in 2000 regardless
of the burn level. Electrical generation units needing to cover emissions above
their allocations can buy allowances from sources that have excess allowances.
Under Phase II of the Clean Air Act, Big Cajun I, Units 1 and 2 each have 27
SO(2) annual allowances. These allowances will increase to 37 and 34 per year,
respectively, in 2010. Under Phase II of the Clean Air Act, Big Cajun II, Units
1, 2, and 3 have SO(2) annual allowances of 14,864, 14,636 and 14,653
respectively. These allowances will decrease to 14,322, 14,142 and 14,106 per
year, respectively, in years 2010 and beyond. Currently, the Cajun facilities
are in material compliance with existing laws. In the future, if necessary, we
intend to comply with existing laws limiting SO(2) emissions by purchasing
additional allowances and/or purchasing lower sulfur fuel. In addition to
federal regulation by the Environmental Protection Agency, or the EPA, the
Louisiana Department of Environmental Quality, or LDEQ, also regulates SO(2)
emissions and Big Cajun II is subject to these regulations. Because the SO(2)
emissions of Big Cajun I do not exceed 250 tons per year, both units are exempt
from certain LDEQ SO(2) emission limitations.
Louisiana Generating's coal supply agreement with Triton Coal guarantees
compliance with Big Cajun II's SO(2) emissions allocation. Assuming the Cajun
facilities' burn for the year is greater than 85 million mmBtu, then if actual
SO(2) emissions are greater than 43,804 tons, Louisiana Generating will receive
from Triton Coal that number of allowances in excess of 43,804 required to
enable it to be in compliance with the applicable regulatory requirements for
the previous calendar year or, if actual
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<PAGE> 55
SO(2) emissions are less than 43,804 tons, Louisiana Generating must provide
Triton Coal with two-thirds the number of allowances less than the 43,804
required. The remaining one-third of excess SO(2) allowances are retained by
Louisiana Generating.
NITROGEN OXIDES. Each of the Cajun facilities' power generation units
comply with the Clean Air Act's early election Phase I acid rain NO(x) limit of
0.5 lb/mmBtu. NO(x) data on the Cajun facilities is reported quarterly to LDEQ.
No violation actions or responses with respect to the Cajun facilities have been
initiated by LDEQ. Current NO(x) levels are generally less than 0.45 lb/mmBtu.
LDEQ is reconsidering the use of Reasonably Available Control Technology (RACT)
for NO(x) reduction in the Baton Rouge non-attainment area. Baton Rouge is
facing sanctions from the EPA, and modeling has shown a need for a 30% reduction
in NO(x). Big Cajun II may have to add additional pollution control equipment as
a result of this RACT application.
PARTICULATE MATTER. A new ambient air quality standard was also adopted by
the EPA in July 1997 to address emissions of fine particulate matter. It is
widely understood that attainment of the fine particulate matter standard may
require reductions in NO(x) and SO(2) emissions, although under the time
schedule announced by the EPA when the new standard was adopted, non-attainment
areas were not to have been designated until 2002 and control measures to meet
the standard were not to have been identified until 2005. However, in a May 14,
1999 decision, the D.C. Circuit remanded the standard to the EPA for further
justification. Accordingly, the impact, if any, of future revision to the fine
particulate matter ambient air quality standard on the Cajun facilities is
uncertain at this time.
HAZARDOUS AIR POLLUTANTS. The EPA is also evaluating whether to regulate
mercury emissions from coal-fired utility boilers. EPA is expected to publish
its decision on this matter by December 15, 2000. Until the EPA's decision is
published we will not know what the EPA may require with respect to this issue
and we are therefore unable to evaluate the impact of potential mercury
regulations on the Cajun facilities.
GREENHOUSE GASES. Since the adoption of the United Nations Framework on
Climate Change in 1992, there has been a worldwide effort to reduce greenhouse
gas, or GHG, emissions to 1990 levels or below. In December 1997, the
administration of President Clinton participated in the Kyoto, Japan
negotiations, where the basis of a climate change treaty was formulated. Under
the treaty, known as the Kyoto Protocols, the United States would have an
overall reduction target of 7% in GHG emissions from 1990 levels by 2008-2012.
In 1997, the United States Senate passed a resolution indicating that it would
not ratify a GHG emissions reduction treaty that did not involve commitments
from developing nations to limit GHG emissions or one that would damage the
United States economy. To date, the Senate has not ratified the Kyoto Protocols.
Water Pollution Control.
National Pollutant Discharge Elimination System sampling data for all of
the Cajun facilities' discharge points indicate current compliance with
wastewater discharge permit requirements. There are no outstanding water
pollution control violations or consent orders for the Cajun facilities with
LDEQ or the EPA. There are no reported or known compliance issues preventing
reissuance of necessary wastewater discharge permits from the Louisiana National
Pollutant Discharge Elimination System (the Louisiana arm of the National
Pollutant Discharge Elimination System).
With respect to existing cooling water intake structures, the EPA is
currently required under a modification of a consent decree to propose draft
regulations on or before May 2002 and promulgate final regulations by April
2004. These regulations will address, among other things, regulatory approaches
for determining what constitutes adverse environmental impact and what
constitutes the best technology available for minimizing adverse environmental
impact. It is not possible to determine at this time how the EPA will resolve
these issues. The EPA's regulations in general and these determinations in
particular may have a material adverse effect on the adequacy of our capital
budgets relating to water pollution control.
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<PAGE> 56
Remediation.
Under various federal, state and local environmental laws and regulations,
a current or previous owner or operator of any facility, including an electric
generating facility, may be required to investigate and remediate past releases
or threatened releases of hazardous or toxic substances or petroleum products
located at the facility, and may be held liable to a governmental entity or to
third parties for property damage, personal injury and investigation and
remediation costs incurred by the party in connection with any releases or
threatened releases. These laws, including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, impose liability without regard to
whether the owner knew of or caused the presence of the hazardous substances,
and courts have interpreted liability under such laws to be strict and joint and
several. The cost of investigation, remediation or removal of any hazardous or
toxic substances or petroleum products could be substantial. We believe,
however, that the risk of material remediation liability in connection with our
ownership and operation of the Cajun facilities is low because both Big Cajun I
and Big Cajun II were "greenfield" facilities when constructed and neither has a
history of large off-site shipments of hazardous waste from the facilities.
In connection with the sale of the Cajun facilities, the trustee in Cajun
Electric's Chapter 11 bankruptcy proceedings commissioned an environmental
consulting firm to conduct a "Phase I" environmental investigation to evaluate
the potential existence of contamination at the Cajun facilities and whether
remediation of such facilities would be required. A Phase I environmental
investigation typically involves a review of documents maintained by the
facility with respect to conditions at the facility; interviews with facility
personnel; review of governmental agency files; research into historical
operations at a facility; and a visual inspection of the facility. The Phase I
environmental investigation of the Cajun facilities showed no material risks
associated with the disposal of hazardous wastes and no material remedial
concerns with past spills or leaks of hazardous materials.
EMPLOYEES
As of June 30, 2000, Louisiana Generating had 313 union and non-union
employees with an average of approximately 15 years of work experience at the
Cajun facilities. Cajun Electric had approximately 470 union and non-union
employees as of February 1, 2000. With respect to union employees, all such
employees are covered by current labor agreements with either the United
Steelworkers of America or the International Brotherhood of Electrical Workers.
These agreements will need to be renewed in March 2001.
NRG South Central does not have any employees.
INSURANCE
We maintain insurance coverage that, in the opinion of an insurance
consultant, is sufficiently comprehensive in scope and consistent with, or
exceeds, that normally carried by companies engaged in the same or similar
businesses and owning similar properties and operating in the same or similar
locations. The insurance program includes all-risk property insurance that
provides replacement value cover for all real and personal property, losses from
boiler and machinery breakdowns, and business interruption. All of these
policies are subject to certain sub-limits. We also carry general liability
insurance covering liabilities to third parties for bodily injury or property
damages resulting from operations, automobile liability insurance and excess
liability insurance. Further, we have the benefit of title insurance and
workers' compensation insurance. We are also required under the indenture to
name the collateral agent and the bond trustee as loss payees and additional
insureds under certain of our insurance policies. Limits and deductibles in
respect of these insurance policies are comparable to those carried by other
electric generating enterprises with similar capital structures and owning and
operating facilities of like size and type as the Cajun facilities.
LEGAL PROCEEDINGS
We may become involved in or threatened with various legal proceedings from
time to time arising in the ordinary course of business. We do not believe that
any liability arising from any of these proceedings will have a material adverse
effect on the operation of our business or our financial position.
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<PAGE> 57
MANAGEMENT
MANAGEMENT COMMITTEE AND EXECUTIVE OFFICERS OF NRG SOUTH CENTRAL
NRG South Central is a member-managed limited liability company, which
means that its members are responsible for managing its affairs. NRG South
Central's two members, NRG Central U.S. LLC and South Central Generation Holding
LLC, act collectively through a committee known as the management committee,
which has full authority to manage the business and affairs of NRG South
Central. Each member selects three representatives to represent it at the
management committee meetings.
Members of NRG South Central's management committee (and their ages), as
selected by each of our members, are David Peterson (59), Leonard Bluhm (54) and
Craig Mataczynski (40).
DAVID H. PETERSON has been a member of NRG South Central's Management
Committee since January 2000. Mr. Peterson has been Chairman of the Board of NRG
Energy since January 1994, Chief Executive Officer since November 1993,
President since 1989 and a Director since 1989. Mr. Peterson was also Chief
Operating Officer of NRG Energy from June 1992 to November 1993. Prior to
joining NRG Energy, Mr. Peterson was Vice President, Non-Regulated Generation
for Northern States Power, and he served in various other management positions
with Northern States Power during the last 20 years.
LEONARD A. BLUHM has been a member of NRG South Central's Management
Committee since January 2000. Mr. Bluhm has been Executive Vice President and
Chief Financial Officer of NRG Energy since January 1997. Immediately prior to
that, he served as the first President and Chief Executive Officer, and
subsequently Chairman, of Cogeneration Corporation of America (formerly NRG
Generating (U.S.) Inc.) from May 1993. Mr. Bluhm has served in various
management positions with NRG Energy since joining NRG Energy in 1991. Mr. Bluhm
previously served for over 20 years in various financial positions with Northern
States Power.
CRAIG A. MATACZYNSKI has been a member of NRG South Central's Management
Committee since January 2000. Mr. Mataczynski has served as President of NRG
South Central since January 2000 and as Vice President of Louisiana Generating
since June 1999. He has been Senior Vice President of NRG Energy, and President
and Chief Executive Officer of NRG Energy, North America, since July 1998. From
December 1994 until July 1998, Mr. Mataczynski served as Vice President, U.S.
Business Development of NRG Energy. From May 1993 to January 1995, Mr.
Mataczynski served as President of NEO Corporation, NRG Energy's wholly-owned
subsidiary that develops small landfill gas electric generation projects within
the United States. Prior to joining NRG Energy, Mr. Mataczynski worked for
Northern States Power from 1982 in various positions, including Director,
Strategy and Business Development and Director, Power Supply Finance.
Set forth below are NRG South Central's executive officers, with their
respective positions.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------------
<S> <C> <C>
Craig A. Mataczynski................................... 40 President
Alan D. Williams....................................... 53 Vice-President
Brian B. Bird.......................................... 38 Treasurer
Michael J. Young....................................... 43 Secretary
</TABLE>
Set forth below are the principal occupations and business activities of
NRG South Central's executive officers (other than Mr. Mataczynski, whose other
principal occupations and business activities are set forth above) for the past
five years in addition to their positions described above.
ALAN D. WILLIAMS has served as Vice President of NRG South Central since
January 2000 and as President of Louisiana Generating since June 1999. Mr.
Williams is the Executive Director, Louisiana Assets, of NRG Energy and has been
employed by NRG Energy in this role since October 1999. Mr. Williams was
responsible for all aspects of the acquisition of the Cajun facilities and the
transition from Cajun Electric to Louisiana Generating. Mr. Williams was Vice
President of Marketing and Business Development at Zeigler Coal Holding Company,
previously one of NRG Energy's partners in the bidding for the Cajun facilities.
Prior
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<PAGE> 58
to his employment at Zeigler Coal, Mr. Williams worked for Shell Mining Company
for 19 years. During that time Mr. Williams served, among other positions, as
President of Triton Coal Company and President of Billiton Metals Company.
BRIAN B. BIRD has served as Treasurer of NRG South Central since January
2000 and as Treasurer of Louisiana Generating since June 1999. Mr. Bird is the
Vice President and Treasurer of NRG Energy, and has been employed by NRG Energy
since 1997. Mr. Bird was Director of Corporate Finance and Treasury for Deluxe
Corporation in Shoreview, Minnesota from September 1994 to May 1997. Prior to
that Mr. Bird was Manager of Finance for the Minnesota Vikings professional
football team from March 1993 to September 1994. Mr. Bird held several financial
management positions with Northwest Airlines in Minneapolis, Minnesota from 1988
to March 1993.
MICHAEL J. YOUNG has served as Secretary of NRG South Central since January
2000 and as Secretary of Louisiana Generating since June 1999. Mr. Young has
been Assistant General Counsel of NRG Energy since February 1998. Mr. Young
served as the NRG Energy attorney responsible for the acquisition of the Cajun
facilities. Prior to joining NRG Energy in May 1995, Mr. Young was an attorney
at Cargill Incorporated for five years and an associate with the law firm of
Lindquist & Vennum in Minneapolis, Minnesota for three years. Mr. Young has
resigned from NRG Energy effective as of December 31, 2000. His replacement as
Secretary of NRG South Central and Louisiana Generating has not yet been
selected.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF LOUISIANA GENERATING
Louisiana Generating has a board of directors whose members are the same as
NRG South Central's management committee.
Set forth below are Louisiana Generating's executive officers, with their
respective positions.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------------
<S> <C> <C>
Alan D. Williams....................................... 53 President
Craig A. Mataczynski................................... 40 Vice-President
Brian B. Bird.......................................... 38 Treasurer
Michael J. Young....................................... 43 Secretary
</TABLE>
The principal occupations and business activities of Louisiana Generating's
executive officers are set forth above.
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<PAGE> 59
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
OWNERSHIP OF OUR MEMBERSHIP INTERESTS
NRG South Central's members are NRG Central U.S. LLC and South Central
Generation Holding LLC, each of which owns a 50% interest in NRG South Central.
NRG Energy owns 100% of NRG Central U.S. LLC and South Central Generation
Holding LLC. NRG Energy, in turn, is indirectly majority owned by Xcel Energy.
See "About Us."
EQUITY CONTRIBUTION FROM NRG ENERGY
We received, indirectly through NRG Central U.S. LLC and South Central
Generation Holding LLC, equity from NRG Energy in the form of a cash equity
contribution of approximately $268.6 million. The cash equity contribution was
used, in addition to the amount raised by the offering of the outstanding bonds,
to purchase the Cajun facilities. Subsequently, NRG Energy contributed NRG
Sterlington Power to us as a non-cash equity contribution. In addition, we made
a $32.0 million distribution to members.
Approximately $30.0 million of the assets that we acquired in conjunction
with the purchase of the Cajun facilities are not necessary for the operation of
the Cajun facilities and, with respect to some of these assets, may not be held
by Louisiana Generating under applicable federal regulations. These assets were
distributed to NRG New Roads Holdings, a wholly-owned unrestricted subsidiary of
NRG South Central. NRG New Roads Holdings may at any time dividend these assets
or the proceeds of a sale of these assets to NRG Energy or one of its
affiliates. With the exception of certain railcars, which have been sold, NRG
New Roads Holdings continues to hold these assets as of the date of this
prospectus. See "Business of NRG South Central and Louisiana
Generating -- Acquisition of the Cajun Facilities."
POWER SALES AND AGENCY AGREEMENT
Louisiana Generating entered into a power sales and agency agreement with
NRG Power Marketing pursuant to which NRG Power Marketing provides power
marketing services, fuel procurement services and emissions credit management
services to Louisiana Generating. See "Summary of Certain Principal Agreements."
For the period March 30, 2000 (Inception) through September 30, 2000, we
recorded gross receipts less costs incurred from NRG Power Marketing totaling
approximately $85.7 million.
OPERATION AND MANAGEMENT SERVICES AGREEMENT
Louisiana Generating entered into an operation and management services
agreement with NRG Operating Services pursuant to which NRG Operating Services,
upon the request of Louisiana Generating, manages, oversees and supplements the
operations and maintenance work at the Cajun facilities. See "Summary of Certain
Principal Agreements."
For the period March 30, 2000 (Inception) through September 30, 2000, we
incurred operating and maintenance costs billed from NRG Operating Services
totaling $15.5 million.
CORPORATE SERVICES AGREEMENTS
Louisiana Generating and NRG South Central each entered into a corporate
services agreement with NRG Energy pursuant to which NRG Energy, upon request,
provides services relating to any corporate business function, including human
resources, accounting, finance, treasury, tax, office administration,
information technology, engineering, construction management, environmental,
legal and safety. See "Summary of Certain Principal Agreements." NRG Sterlington
Power and Big Cajun I Peaking Power each entered into a similar corporate
services agreement with NRG Energy.
For the period March 30, 2000 (Inception) through September 30, 2000, we
paid NRG Energy $0.2 million for corporate support and services.
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GUARANTOR LOAN AGREEMENT
NRG South Central loaned Louisiana Generating the net proceeds of the
offering of the outstanding bonds and amounts used for working capital purposes
under a guarantor loan agreement. This loan was evidenced by a promissory note
given to NRG South Central by Louisiana Generating. See "Description of
Principal Financing Documents -- Guarantor Loan Agreement."
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SUMMARY OF CERTAIN PRINCIPAL AGREEMENTS
The following is a summary of certain principal agreements related to the
Cajun facilities and our business. It is not a full statement of the terms of
such agreements. Accordingly, the following summaries of such agreements are
qualified by reference to each agreement and are subject to the terms of the
full text of each agreement. Unless otherwise stated, any reference in this
prospectus to any agreement shall mean such agreement and all schedules,
exhibits and attachments thereto as amended, supplemented or otherwise modified
and in effect as of the date hereof. Copies of all of these agreements have been
filed as exhibits to the registration statement of which this prospectus forms a
part.
POWER SUPPLY AGREEMENTS WITH THE DISTRIBUTION COOPERATIVES
Form A Power Supply Agreement.
This agreement is an all-requirements power supply agreement governed by
Louisiana law. Six of the distribution cooperatives entered into this form of
agreement.
TERM. The initial term of the agreement is 25 years, commencing on March
31, 2000. After the initial term, the agreement will continue on a year-to-year
basis unless either party gives the other five years' notice of its intent to
terminate the agreement.
ALL-REQUIREMENTS. Louisiana Generating is obligated to supply and the
distribution cooperative is required to purchase all of the energy and capacity
required by the distribution cooperative for service to its retail customers.
The distribution cooperative has the following limited rights to purchase energy
and capacity from third parties:
- The distribution cooperative receives from the Southwestern Power
Administration its pro rata share of 89 MW of firm hydroelectric peaking
power and 2.4 MW of supplemental peaking power which, prior to the
acquisition of the Cajun facilities, had been allocated to Cajun
Electric.
- Beginning in 2018, each distribution cooperative may purchase from a
third party or self-generate power for the portion of the distribution
cooperative's load in excess of its average load in the three prior years
or, if greater, 137% of its 1997 load.
- If required by law, the distribution cooperative may purchase energy from
a qualifying facility.
- The distribution cooperative may purchase energy and capacity from a
third party to supply a new load of at least 5 MW, but Louisiana
Generating has a right of first refusal to meet the terms offered by such
supplier.
- The distribution cooperative may purchase energy and capacity from a
third party in conjunction with acquiring new distribution facilities for
service to customers not previously served by the distribution
cooperative, to the extent the cooperative is required to assume a power
supply agreement to make such acquisition.
- If a political subdivision annexes territory which includes customers of
the distribution cooperative, the cooperative may have the right to
purchase up to 50 MW of power from the political subdivision to serve
these customers.
TRANSMISSION. Louisiana Generating contracts for all transmission service
required to serve the distribution cooperative and passes through the costs of
transmission service to the cooperative. Louisiana Generating is required to
supply at its cost, without pass through, control area services and ancillary
services which transmission providers are not required to provide.
SPECIFIC DELIVERY FACILITIES. Louisiana Generating owns and maintains the
substations and other facilities used to deliver energy and capacity to the
distribution cooperative and charges the cooperative a monthly specific delivery
facility charge for such facilities and additions to or new delivery facilities.
The initial monthly charge is 1% of the value of the distribution cooperative's
specific delivery facilities (allocated on the assumption that the aggregate
value of all of the distribution cooperative's specific delivery facilities is
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$35.0 million), and the cost of additional investment during the term of the
agreement will be added to the initial value of the delivery facilities to
calculate the monthly specific delivery facility charge.
PAYMENT. Louisiana Generating charges the distribution cooperative a
demand charge, a fuel charge and a variable operation and maintenance charge.
The demand charge consists of two components, each in $/kW-month: a capital
rate, which is $2.1667 through 2004, $1.00 in 2005 and $0.7786 thereafter, and a
fixed operation and maintenance rate, which is $4.6394 through 2004, thereafter
escalating at approximately 3% per annum.
The distribution cooperative may choose one of two fuel options. Under the
first option, the fuel charge will be $0.013995/kWh through 2004, and thereafter
will be determined by a formula based on gas prices and the cost of delivered
coal. The second fuel option consists of a pass-through of fuel costs, with a
guaranteed coal heat rate, and purchased energy costs, excluding the demand
component in purchased power. All six of the distribution cooperatives selected
the first fuel option. At the end of the fifteenth year of the contract, the
cooperatives may switch to the second fuel option. Additionally, Louisiana
Generating may offer fixed fuel rates from time to time which the cooperative
may elect to utilize.
The variable operation and maintenance charge is $0.00323/kWh through 2004,
thereafter escalating at either approximately 3% per annum or in accordance with
actual changes in specified indices as elected by the distribution cooperative.
Five of the distribution cooperatives elected the fixed escalation provision and
one elected the specified indices provision.
INCENTIVE RATES. Louisiana Generating honors existing incentive rates
established for specific customers of the distribution cooperative and offers
new incentive rates for high load factor customers. The Form A agreement also
has provisions for special rates for certain customers based on the economic
development benefits the customer will provide and other rates to improve the
distribution cooperative's ability to compete with service offered by political
subdivisions.
TAXES. Louisiana Generating has the right to pass through additional taxes
that are imposed on it other than income taxes and ad valorem taxes. Liability
for these taxes are allocated based on energy delivered to its customers.
CHANGE OF ENVIRONMENTAL LAW. Louisiana Generating has the right to pass
through increased costs resulting from changes in environmental law. The
distribution cooperative's proportionate share of these increased costs are
allocated in a reasonable manner based on either energy delivered by Louisiana
Generating to all of its customers or the maximum coincident demand of all of
Louisiana Generating's customers with firm contracts to purchase capacity from
Louisiana Generating.
CONTINUITY OF SERVICE. Louisiana Generating is required to use reasonable
diligence in accordance with prudent utility practice to provide the
distribution cooperative with a constant uninterrupted supply of energy and
capacity. Louisiana Generating is not liable for interruptions due to force
majeure, transmission outages other than those resulting from the failure to
perform its obligations under the power supply agreement, or insufficient
transmission capacity.
If an outage of the Cajun facilities, a transmission outage or a force
majeure event interrupts, prevents or reduces Louisiana Generating's ability to
provide continuous service from its plants, Louisiana Generating must use
reasonable diligence to arrange for substitute energy. The costs of this
substitute energy are borne by Louisiana Generating and, except as provided in
the second fuel option, may not be passed to the distribution cooperative.
However, Louisiana Generating may charge the cooperative for its share of the
incremental cost incurred to purchase substitute energy for outages of both of
the transmission lines which connect Big Cajun II to Entergy's transmission
system to the extent such outages exceed 24 consecutive hours.
RIGHT OF FIRST REFUSAL REGARDING ELECTRICITY MEMBERSHIP COOPERATIVE'S
ASSETS. In the event of a proposed merger, consolidation or sale of the assets
of a distribution cooperative, Louisiana Generating has a right of first refusal
to purchase the cooperative's assets, which may be exercised if the other
distribution cooperatives do not elect to purchase the assets.
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SECURITY INTEREST IN ELECTRICITY MEMBERSHIP COOPERATIVE'S ACCOUNTS
RECEIVABLE. Each distribution cooperative is required to grant Louisiana
Generating a security interest in the cooperative's accounts receivable, which
is subordinate to any other security interest granted by the distribution
cooperative to the RUS or third-party lenders. The grant of this security
interest is subject to the consent of the RUS and other third party lenders with
security interests in the distribution cooperative's accounts receivable and the
distribution cooperative is obligated to use reasonable efforts to obtain such
consents.
ASSIGNMENT. Either party may assign the power supply agreement to its
lenders. Louisiana Generating may assign the power supply agreement to a
successor in connection with the sale of all or substantially all of its assets.
FORCE MAJEURE. No party is liable to the other party for failure to
perform an obligation under the power supply agreement if the failure is due to
an event beyond the party's control or due to events that the party could not
expect to overcome or avoid by acting diligently. Force majeure includes:
failure or imminent threat of failure of facilities or equipment, flood, freeze,
earthquake and similar natural disasters as well as war, riots, civil or
industrial disturbances (e.g. strikes or lockouts), labor or material shortage,
sabotage, restraint by court order or other public authority, and failure to
obtain governmental approvals. A party is not required to settle any industrial
disturbance or pursue a review of any administrative or judicial action. Lack of
funds or a government authority disallowing or limiting recovery of charges
imposed by the power supply agreement through rates is not a force majeure
event.
DEFAULT. The following are events of default under the agreement:
- failure by the distribution cooperative to pay amounts due within five
days after Louisiana Generating has notified it that payment has not been
made on time;
- a material representation or warranty made by either party is materially
false or misleading and is not cured within 30 days from the date the
other party notified the party in default;
- failure by either party to perform a material obligation (other than the
obligation of the distribution cooperative to make payments due under the
agreement) and the failure to perform is not due to the occurrence of a
force majeure event;
- failure by either party to perform an obligation (other than Louisiana
Generating failing to provide continuous service) if such failure is not
cured within 30 days from the date notice of such default is given by the
other party, or, if more time is needed, the party may have up to 180
days to cure such default;
- failure by Louisiana Generating to provide continuous service if such
failure is not cured within 30 days; and
- the occurrence of a bankruptcy or similar event or preceding with respect
to either party.
REMEDIES UPON DEFAULT. If a party is in default, the other party has the
right to enforce any remedies it is provided under the law or in equity
including termination of service, specific enforcement and recovery of damages.
However, the party may not collect incidental, punitive or consequential
damages. If one party must resort to legal proceedings or retain a lawyer to
collect an invoice, the other party must pay for interest, costs and expenses
incurred by the collecting party.
Form B Power Supply Agreement.
This agreement is an all-requirements power supply agreement governed by
Louisiana law. One of the distribution cooperatives entered into this form of
power supply agreement. The material differences between this form and the Form
A power supply agreement are described below.
TERM. The term of the agreement commenced on March 31, 2000 and ends on
December 31, 2024.
OPTION FOR ALL-REQUIREMENTS OR PARTIAL REQUIREMENTS. When selecting the
form of power supply agreement, the distribution cooperative that chose Form B
had the right to elect to limit its purchase
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obligations to "base supply" or also to purchase "supplemental supply." Base
supply is the distribution cooperative's ratable share of the generating
capacity purchased by Louisiana Generating from Cajun Electric, and supplemental
supply is the cooperative's requirements in excess of the base supply amount.
The distribution cooperative which entered into the Form B agreement elected to
purchase base supply and supplemental supply.
SPECIFIC AND COMMON DELIVERY FACILITIES. Louisiana Generating charges the
cooperative a monthly specific delivery facility charge of approximately 1.75%
of the depreciated net book value of the specific delivery facilities, including
additional investment. The distribution cooperative may assume the right to
maintain the specific delivery facilities and reduce the charge to 1.25% of the
depreciated net book value of the specific delivery facilities.
Louisiana Generating also charges the distribution cooperative its ratable
share of 1.75% of the depreciated book value of common delivery facilities,
which include communications, transmission and metering facilities owned by
Louisiana Generating to provide supervisory control and data acquisition, and
automatic control for its customers.
DEMAND AND ENERGY RATES. For base supply, Louisiana Generating charges the
cooperative a demand charge, an energy charge and a fuel charge.
The demand charge for each contract year during the term of the power
supply agreement is set forth in the agreement and is subject to increase for
environmental legislation or occupational safety and health laws enacted after
the effective date of the agreement. Louisiana Generating has the right to
increase the demand charge to the extent its cost of providing supplemental
supply exceeds $400/kW.
The energy charge is $0.0038/kWh through 2004 and $0.0035/kWh thereafter.
The fuel charge is a pass through of fuel and purchased energy costs, and
the distribution cooperative may elect to be charged based on a guaranteed coal
fired heat rate of 10,600 Btu/kWh, and it may also select fixed fuel factors as
set forth in the agreement for each year through 2008. The one distribution
cooperative which entered into this form of agreement elected to utilize the
fixed fuel factors. For years after 2008, Louisiana Generating will offer
additional fixed fuel factors for five-year periods that the distribution
cooperative may elect to utilize. For years after 2008, the cooperative may also
elect to have its charges computed under the pass through provisions with or
without the guaranteed coal fired heat rate.
At the beginning of year six, Louisiana Generating will establish a rate
fund, in an interest bearing account, equal to the ratable share (based on the
ratio that the aggregate 1998 demand of the distribution cooperatives who choose
the Form B power supply agreement bears to the demand of all of the
cooperatives) of $18.0 million. The amount of the fund will be approximately
$720,000. This fund will be used to offset the energy costs of the Form B
distribution cooperative which elected the fuel pass through provisions of the
fuel charge, to the extent the cost of power exceeds $0.04/kWh. The fund will be
utilized until it is depleted. Any funds remaining at the end of the term of the
power supply agreement will be returned to Louisiana Generating.
EXTENDED OUTAGE. Unless the distribution cooperative has elected the fixed
fuel factors, Louisiana Generating can pass through the cost of replacement
power for any outage of up to 60 days. After 60 days, Louisiana Generating may
only pass through the increased capacity charges for replacement power to the
extent it must do so to cover its debt service, calculated on the assumption
that all cooperatives are taking power under the Form B power supply agreement.
If the outage exceeds 60 days, Louisiana Generating also has the right to reduce
its obligation to serve the distribution cooperative's base supply by
approximately 118% of the cooperative's share of the capacity that was subject
to the outage.
TAXES. Louisiana Generating may pass through increases in taxes, including
ad valorem taxes, other than income taxes and increases in ad valorem taxes
resulting from the change in ownership from Cajun Electric to Louisiana
Generating.
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DEFAULT. A party is in default if it fails to make any payment or perform
an obligation under the agreement or otherwise breaches a covenant or warranty,
except where the failure to perform is due to a force majeure event.
REMEDIES UPON DEFAULT. If a party is in default, the other party has the
right to enforce any remedies it is provided under law or in equity, including
initiation of a proceeding at the FERC to terminate service. If one party must
resort to legal proceedings or retain a lawyer to collect an invoice, the other
party must pay for interest, costs and expenses incurred by the collecting
party.
Form C Power Supply Agreement.
This agreement is an all-requirements power supply agreement governed by
Louisiana law. Four distribution cooperatives entered into this form of power
supply agreement. Except for the following, the terms of the Form C power supply
agreement are virtually identical to the Form A power supply agreement
summarized above:
TERM. The term of the power supply agreement is four years following the
March 31, 2000 closing of the acquisition of the Cajun facilities, but the
distribution cooperative may terminate the power supply agreement at any time on
12 months' prior written notice given at any time after March 31, 2001.
RATES. The rates consist of a demand rate of $6.8061/kW-month, a variable
operations and maintenance charge of $0.00439/kWh, and a fuel charge of
$0.013995/kWh. Louisiana Generating will not offer new incentive rates to the
distribution cooperatives which have elected the Form C power supply agreement,
but will continue to honor existing incentive rates.
SPECIFIC DELIVERY FACILITIES. At the end of the term of the agreement, the
distribution cooperative is obligated to purchase the specific delivery
facilities for a purchase price equal to their depreciated book value.
OTHER POWER SUPPLY AGREEMENTS
Louisiana Generating assumed Cajun Electric's rights and obligations under
two consecutive long-term power supply agreements with SWEPCO, one agreement
with South Mississippi Electric Power Association, or SMEPA, and one agreement
with Municipal Energy Agency of Mississippi, or MEAM. The material terms of
these agreements are summarized below.
SWEPCO Operating Reserves and Off-Peak Power Sale Agreement.
TERM. The agreement is effective through December 31, 2007.
POWER COMMITMENT. 100 MW of off-peak energy during the hours of 10:01 PM
and 6:00 AM to a maximum of 292,000 MWh per year and an additional 100 MW of
operating reserve capacity and the associated energy within ten minutes of a
phone request by SWEPCO during the hours of 6:01 AM and 10:00 PM to a maximum of
43,800 MWh of operating reserve energy per year. The obligation to purchase the
100 MW of off-peak energy is contingent on Louisiana Generating's ability to
deliver operating reserve capacity and the energy associated with the operating
reserve capacity. At Louisiana Generating's request it will supply up to 100 MW
of non-firm, on-peak capacity and the associated energy.
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PRICING. Pricing, including transmission costs to the delivery point, is
set forth on following table:
<TABLE>
<CAPTION>
OPERATING RESERVE OPERATING RESERVE NON-FIRM NON-FIRM
YEAR OFF-PEAK ENERGY CAPACITY ENERGY ON-PEAK CAPACITY ON-PEAK ENERGY
---- --------------- ----------------- ----------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
2000 Off-peak incremental $5.00/kW-month Average fuel cost $2.00/kW-month Average fuel cost
2001 fuel cost plus plus variable plus variable costs
2002 variable costs of costs of of $0.50/MWh, plus
$0.50/MWh, plus $0.50/MWh, plus $2.75/MWh
$2.75/MWh $5.75/MWh
2003 Off-peak incremental $6.00/kW-month Average fuel cost $2.00/kW-month Average fuel cost
2004 fuel cost plus plus variable plus variable costs
2005 variable costs of costs of of $0.50/MWh, plus
2006 $0.50/MWh, plus $0.50/MWh, plus $2.75/MWh
2007 $2.75/MWh $5.75/MWh
2008 Not applicable $7.00/kW-month Average fuel cost Not applicable Not applicable
through plus variable
2026 costs of
$0.50/MWh, plus
$6.00/MWh
</TABLE>
SWEPCO Operating Reserves Capacity and Energy Power Sale Agreement.
TERM. The agreement will be effective from January 1, 2008 through
December 31, 2026.
POWER COMMITMENT. 50 MW of operating reserve capacity within 10 minutes of
a phone request by SWEPCO. SWEPCO also is granted the right to purchase up to
21,900 MWh/year of operating reserve energy.
PRICING. Pricing for operating reserve energy, including transmission
costs to the delivery point, is set forth on the table above under the SWEPCO
Operating Reserves and Off-Peak Power Sale Agreement.
SMEPA Unit Power Sale Agreement.
TERM. The agreement is effective through May 31, 2009, unless terminated
earlier following certain regulatory changes, changes in fuel costs or the
destruction of the Cajun facilities.
POWER COMMITMENT. 75 MW of capacity and the associated energy from Big
Cajun II, Unit 1 and a option for SMEPA to purchase additional capacity and
associated energy, if Louisiana Generating determines that it is available, in
10 MW increments, up to a total of 200 MW. SMEPA is required to schedule a
minimum of 25 MW plus 37% of any additional capacity that is purchased.
PRICING. The capacity charge is $7.25/kW-month through May 31, 2004 and
$8.00/kW-month from June 1, 2004 through May 31, 2009 including transmission
costs to the delivery point and any escalation of expenses. The energy charge is
110% of the incremental fuel cost for Big Cajun II, Unit 1.
MEAM Power Sale Agreement.
TERM. The agreement is effective through May 31, 2010 with an option for
MEAM to extend through September 30, 2015 upon five years advance notice.
POWER COMMITMENT. 20 MW of firm capacity and associated energy with an
option for MEAM to increase the capacity purchased to a total of 30 MW of firm
capacity upon five years advance notice.
PRICING. The capacity charge is $5.80/kW-month. The operation and
maintenance charge is $1.97/kW-month plus a 3.5% increase per year from May 31,
1996. There is also a transmission charge which varies depending on the delivery
point. The price for the energy associated with the firm capacity is 110% of the
incremental generating cost to Louisiana Generating and is adjusted to include
transmission losses to the delivery point.
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COAL SUPPLY AGREEMENT
Louisiana Generating has entered into a coal supply agreement with Triton
Coal. The coal is primarily sourced from Triton Coal's Buckskin and North
Rochelle mines located in Powder River Basin, Wyoming. The coal supply agreement
provides as follows:
TERM. The term is for five years, beginning March 31, 2000.
VOLUME. The agreement is for the full coal requirements of Big Cajun II.
PRICING. The agreement establishes a base price per ton for coal supplied
by Triton Coal. The base prices are subject to adjustment for changes in:
- the level of taxes or other government fees and charges;
- variations from the governing actual "as received" calorific value of the
coal shipped as compared to 8,450 Btu per pound; or
- changes in the price of SO(2) emission allowances.
QUALITY GUARANTEE. The base prices are based on certain annual weighted
average quality specifications, subject to suspension and rejection limits.
SO(2) EMISSIONS. Triton Coal's base price and quality of coal
specifications guarantee compliance with Big Cajun II's annual SO(2) emissions
allocation of 44,153 tons commencing in 2000 regardless of the burn level.
Assuming Big Cajun II's consumption for the year is greater than 85 million
mmBtu, then:
- if actual SO(2) emissions are greater than 43,804 tons during any year,
Triton Coal must provide Louisiana Generating by January 20th of the
following calendar year with the number of allowances in excess of 43,804
required to enable it to be in compliance with the applicable regulatory
requirements for the previous calendar year; or
- if actual SO(2) emissions are less than 43,804 tons during any year,
Louisiana Generating must provide Triton Coal by January 20th of the
following calendar year with two-thirds the number of allowances less
than 43,804 required. The remaining one-third of excess SO(2) allowances
are retained by Louisiana Generating.
CHANGES IN ENVIRONMENTAL RELATED REQUIREMENTS. The agreement may be
reopened and renegotiated if Big Cajun II is required to comply with new
environmental-related requirements that may be mandated during the term of the
contract. If a change is imminent, then Louisiana Generating and Triton Coal
have agreed to negotiate in good faith to develop a mutually reasonable plan of
mitigation. If the new laws require a change in coal source, Triton Coal may
find a substitute at no difference in cost to Louisiana Generating. If Triton
Coal cannot locate a suitable substitute, Louisiana Generating may terminate the
agreement.
FORCE MAJEURE. Triton Coal and Louisiana Generating are allowed relief
from events beyond their control that prevent either from carrying out normal
day-to-day operations.
ASSIGNMENT. The agreement is not assignable without the consent of Triton
Coal.
COAL TRANSPORTATION AGREEMENT
Louisiana Generating has entered into a coal transportation agreement with
Burlington Northern and Santa Fe Railway and American Commercial Terminal. The
term of the agreement is five years, beginning March 31, 2000. This agreement
provides for the transport of all of the coal requirements of Big Cajun II from
the mines in Wyoming to Big Cajun II. Burlington Northern and Santa Fe Railway
transports the coal from Triton Coal's Powder River Basin mines by railcar to
the American Commercial Terminal dock in St. Louis, Missouri, where it is
unloaded from the railcars and loaded into barges for delivery to Big Cajun II.
Once at Big Cajun II, the barges are unloaded by employees of Louisiana
Generating. Louisiana Generating is required to furnish all of the necessary
railcars.
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The agreement is not assignable without the consent of Burlington Northern
and Santa Fe Railway and American Commercial Terminal.
TRANSMISSION AND INTERCONNECTION AGREEMENTS
Louisiana Generating assumed Cajun Electric's existing transmission
agreements with Central Louisiana Electric Company; SWEPCO; and Entergy
Services, Inc., acting as agent for Entergy Arkansas, Inc., Entergy Gulf States,
Entergy Louisiana, Inc., Entergy Mississippi, Inc., and Entergy New Orleans,
Inc. The Cajun facilities are connected to the transmission system of Entergy
Gulf States and power is delivered to the distribution cooperatives at various
delivery points throughout Louisiana on the transmission systems of Entergy Gulf
States, Entergy Louisiana, Central Louisiana Electric Company and SWEPCO.
Louisiana Generating also assumed from Cajun Electric 20 interchange and sales
agreements with utilities and cooperatives, providing access to a 12 state area
as far north as Illinois and into North Carolina and Florida.
POWER SALES AND AGENCY AGREEMENT
NRG Power Marketing and Louisiana Generating entered into a power sales and
agency agreement.
SCOPE. NRG Power Marketing:
- has the exclusive right to sell or trade in the capacity, energy and
ancillary services not sold under the agreements with the distribution
cooperatives, SWEPCO, SMEPA or MEAM;
- has the exclusive right to buy or trade all capacity, energy and
ancillary services purchased by it on behalf of Louisiana Generating;
- has the exclusive right and obligation to set the level of the capacity
and energy output of the Cajun facilities and is responsible for
negotiating agreements for the provision of capacity, energy and
ancillary services to the Cajun facilities for auxiliary load and
start-up as required;
- assists Louisiana Generating in performing all of its obligations under
power supply agreements;
- procures natural gas and fuel oil required for operation of Big Cajun I;
- upon the request of Louisiana Generating, provides oversight and advice
to Louisiana Generating regarding the coal supply agreement with Triton
Coal and the coal transportation agreement with Burlington Northern and
Santa Fe Railway and American Commercial Terminal;
- upon the request of Louisiana Generating, assists Louisiana Generating in
the procurement of new or additional coal supply or transportation
agreements;
- provides emissions management services to Louisiana Generating for the
tracking, procurement, sales and allocation of emission allowances;
- assists Louisiana Generating in fulfilling its load management
obligations; and
- implements appropriate risk management practices and develop a hedging
strategy for the benefit of Louisiana Generating.
TERM. The term of the agreement commenced on March 31, 2000 and continues
until December 31, 2030.
STRATEGIC INPUT. Louisiana Generating has the ability to influence the
strategy of NRG Power Marketing with respect to the purchase and sales of
energy, capacity and ancillary services and the level of risk undertaken by NRG
Power Marketing on behalf of Louisiana Generating.
PAYMENT. NRG Power Marketing pays to Louisiana Generating the gross
receipts from sales of energy, capacity and ancillary services from the Cajun
facilities by NRG Power Marketing less (a) the cost of any energy, capacity and
ancillary services purchased by NRG Power Marketing on behalf of Louisiana
Generating; (b) transmission and other delivery costs incurred by NRG Power
Marketing in connection with the sale; (c) any taxes paid by NRG Power Marketing
in connection with the sale or the performance of its
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obligations under the agreement; and (d) any other costs incurred by NRG Power
Marketing in connection with the sale, including an arms-length, commercially
reasonable allocation of overhead and administrative costs. Louisiana Generating
pays NRG Power Marketing the amount expended by NRG Power Marketing in providing
energy, capacity and ancillary services from sources other than the Cajun
facilities required to fulfill Louisiana Generating's contractual obligations
increased by the following costs incurred by NRG Power Marketing in connection
with providing the energy, capacity and ancillary services: (a) transmission or
other similar costs; (b) any taxes incurred; and (c) any other costs paid,
including an arms-length, commercially reasonable allocation of overhead and
administrative costs.
Louisiana Generating pays to NRG Power Marketing the cost of any fuel
provided to Louisiana Generating by NRG Power Marketing which is not invoiced
directly to Louisiana Generating. In addition, NRG Power Marketing pays to
Louisiana Generating any amounts derived upon the sale by NRG Power Marketing of
available Louisiana Generating emissions credits and Louisiana Generating pays
directly to NRG Power Marketing any amounts due for the purchase of emissions
credits, negotiated for the benefit of Louisiana Generating by NRG Power
Marketing.
Louisiana Generating pays NRG Power Marketing at agreed rates for the
personnel time expended in performing the agreement.
If either party fails to make a payment when due, such overdue payment
shall accrue interest at the prime rate plus 2% from the due date until the date
of payment. In addition, if NRG Power Marketing is in default on a payment for
energy, capacity and ancillary services for 30 days after notice of such
default, then Louisiana Generating may: (a) terminate the agreement or (b)
exercise any other remedy it has available in law or equity with respect to such
default.
TITLE AND RISK OF LOSS. Title to and risk of loss related to the energy,
capacity and ancillary services procured by NRG Power Marketing transfers from
the third party seller to Louisiana Generating at the designated delivery point.
Title to and risk of loss related to energy, capacity and ancillary services
sold by NRG Power Marketing transfers from Louisiana Generating to the third
party at the designated delivery point.
ASSIGNMENT. The agreement may not be assigned without the prior written
consent of the other party. However, either party may, without the consent of
the other party:
- transfer, sell, pledge, encumber or assign the agreement or the accounts,
revenues or proceeds thereof in connection with any financing or other
financial arrangements;
- transfer or assign to an affiliate whose creditworthiness and technical
ability to perform its obligations is not materially different from the
transferring or assigning party;
- transfer or assign to a person succeeding to all, or substantially all,
the assets of a party; or
- in the case of Louisiana Generating, transfer or assign to a person
acquiring the Cajun facilities.
In the case of each permitted assignment, except an assignment pursuant to
a financing permitted as set forth in the first "bullet point" above, the
assignee must agree in writing to be bound by the terms and conditions of the
agreement and such assignee's creditworthiness and technical ability to perform
its obligations must not be materially different than that of the assignor.
OPERATION AND MANAGEMENT SERVICES AGREEMENT
NRG Operating Services and Louisiana Generating entered into an operation
and management services agreement.
SCOPE. At the request of Louisiana Generating, NRG Operating Services
performs operation and maintenance services, including:
- providing operation and management budget tracking, analysis and
recommendations, and effecting any approved adjustments;
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- administering the coal supply, coal transportation and power supply
agreements and such other contracts and agreements as Louisiana
Generating may from time to time deem appropriate to be administered by
NRG Operating Services;
- providing annual, quarterly and monthly budget analysis with
recommendations for improvements;
- obtaining property and excess liability insurance for Louisiana
Generating in the amounts and in the manner as directed by Louisiana
Generating;
- measuring employee training program performance for operations and
maintenance personnel;
- reviewing safety rules, including industrial hygiene practices, for the
Cajun facilities to ensure that they are in compliance with all
applicable laws, other regulatory requirements and prudent engineering
and operating practices;
- reviewing operating practices and rules to ensure compliance with all
applicable environmental laws and permits;
- ensuring that key component technical risk assessment is performed and,
based on this assessment, making recommendations concerning the
operational reliability, availability and maintainability of the Cajun
facilities;
- reviewing and making recommendations regarding the supply and stock of
strategic spare parts;
- providing special support services as requested;
- providing technical support services as requested;
- ensuring Louisiana Generating's compliance with prudent independent power
industry standards; and
- monitoring Louisiana Generating's compliance with the terms and
conditions of the Joint Ownership Participation and Operating Agreement
for Big Cajun II, Unit 3.
TERM. The term of the agreement commenced on March 31, 2000 and continues
until terminated in writing by Louisiana Generating or until earlier terminated
upon an event of default under the agreement.
PAYMENT. Louisiana Generating pays NRG Operating Services for the
personnel time and other costs associated with performing the services,
including the costs incurred in engaging third party consultants; transportation
and relocation costs of personnel; miscellaneous expenses; the cost of any
labor, patent or commercial litigation or claim that arises out of performance
of the services; and the cost of any sales, use or similar taxes or fees imposed
by federal, state or municipal law, regulation or agency.
INDEMNIFICATION AND LIMITATION OF LIABILITY. NRG Operating Services
indemnifies and holds harmless Louisiana Generating for any damages incurred as
a result of its willful misconduct or gross negligence. Louisiana Generating
indemnifies and holds harmless NRG Operating Services for any damages incurred
as a result of the engagement of NRG Operating Services under, and performance
by it of the services under, the agreement. If an indemnifiable loss is caused
in part by the negligence of the indemnified party, the indemnification will be
in proportion to the comparative degree of such party's negligence. The
liability of NRG Operating Services under the indemnification provisions of the
agreement is limited to the amount of compensation and reimbursed costs and
expenses received by NRG Operating Services pursuant to the agreement.
ASSIGNMENT. The agreement may not be assigned without the prior written
consent of the other party, except that Louisiana Generating may assign its
rights under the agreement as security for its obligations to an entity
providing financing to the Cajun facilities, or an agent of such entity, and the
agreement shall continue in full force and effect in favor of the assignee as a
successor to Louisiana Generating.
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CORPORATE SERVICES AGREEMENTS
Louisiana Generating and NRG South Central each entered into a corporate
services agreement with NRG Energy pursuant to which NRG Energy, upon request,
provides services relating to any corporate business function.
SCOPE. NRG Energy provides administrative services in support of the
operations of the Cajun facilities or NRG South Central, as applicable. NRG
Energy agrees to provide, on an as requested basis, any work, direction of work,
technical or commercial information, data, consulting, staff augmentation or any
other corporate business function performed for or on behalf of Louisiana
Generating or NRG South Central, as applicable, by NRG Energy in functional
areas such as, but not limited to: human resources, accounting, finance,
treasury, tax, office administration, information technology, engineering,
construction management, environmental, legal and safety. The standard of
performance for the services is reasonable diligence and dispatch, in a prudent,
cost effective and efficient manner, in accordance with all applicable laws. NRG
Energy may provide the personnel to perform such services, in its sole
discretion, or may elect to have these services performed by a third party, but
NRG Energy is primarily responsible for the services.
TERM. The term of these agreements commenced on March 31, 2000 and
continues until terminated in writing by Louisiana Generating or NRG South
Central, as applicable, or until earlier terminated upon an event of default
under the agreements.
PAYMENT. NRG Energy is paid for the personnel time and other costs
associated with performing the services, including transportation or relocation
costs of personnel; miscellaneous expenses; reproduction costs; cost of any
permits, fees, licenses or royalties; the cost of any labor, patent or other
commercial litigation or claim that arises out of performance of the services;
and premiums and brokerage fees on all bonds and insurance policies required.
WARRANTY AND LIMITATION OF LIABILITY. NRG Energy warrants that the
services performed under the agreement will be in accordance with accepted
professional standards and practices. The sole and exclusive remedy for breach
of warranty will be for NRG Energy to re-perform the defective portion of the
service. All costs of any re-performance will be reimbursed by Louisiana
Generating or NRG South Central, as applicable, to NRG Energy, but NRG Energy
will receive no additional profit thereon. NRG Energy's legal liability under
the agreement will not exceed the value of its services performed during the
calendar year prior to the cause giving rise to or creating any such liability.
ASSIGNMENT. Neither agreement may be assigned without the prior written
consent of the other party to that agreement, except that Louisiana Generating
or NRG South Central, as applicable, may assign its rights under the agreement
to which it is a party as security for any loans or obligations of Louisiana
Generating or NRG South Central and the agreement shall continue in full force
and effect in favor of the assignee as a successor to Louisiana Generating or
NRG South Central, as applicable. NRG Energy also may cause an affiliate or
third-party provider to perform any of the services it is required to perform
under either agreement.
JOINT OWNERSHIP PARTICIPATION AND OPERATING AGREEMENT FOR BIG CAJUN II,
UNIT 3
Big Cajun II, Unit 3 is jointly owned by Louisiana Generating (58%) and
Entergy Gulf States (42%). Big Cajun II, Unit 3 is operated by Louisiana
Generating pursuant to a Joint Ownership Participation and Operating Agreement.
The material terms are as follows:
OWNERSHIP OF OUTPUT. Louisiana Generating and Entergy Gulf States are each
entitled to their ownership percentage of the hourly net electrical output of
Big Cajun II, Unit 3. If Louisiana Generating or Entergy Gulf States takes
output in excess of their respective entitlements, then this excess generation
is treated as a purchase and sale of power between the co-owners.
DIVISION OF COSTS. All fixed costs of operating Big Cajun II, Unit 3 are
shared in proportion to the ownership interests of Louisiana Generating and
Entergy Gulf States. Fixed costs include the cost of operating common
facilities. All variable costs are borne in proportion to the energy delivered
to Louisiana Generating and Entergy Gulf States from Big Cajun II, Unit 3.
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CONTROL OF BIG CAJUN II, UNIT 3. Louisiana Generating has the authority to
control, manage, operate and maintain Big Cajun II, Unit 3 as if it were the
sole owner of the unit. Louisiana Generating is to operate Big Cajun II, Unit 3
as a separate economic unit and is not required to run the unit when energy and
capacity is available from an alternate source. Louisiana Generating has the
authority for hourly scheduling and dispatch of Big Cajun II, Unit 3 generation.
If Entergy Gulf States requests generation from Big Cajun II, Unit 3 when it has
not been scheduled by Louisiana Generating, Entergy Gulf States must give
Louisiana Generating reasonable advance notice. If no generation is scheduled by
Louisiana Generating and Entergy Gulf States requests generation, then Entergy
Gulf States must pay the variable cost of the generation and the start-up and
shutdown costs.
TERM. The agreement is effective until the earliest of:
- cancellation by mutual consent;
- expiration of the operating licenses for Big Cajun II, Unit 3; or
- retirement and decommissioning of Big Cajun II, Unit 3.
TRANSFER/ASSIGNMENT. Neither owner may transfer or assign its interest in
Big Cajun II, Unit 3 without first offering it to the other owner on the same
terms as proposed to a third party unless the transfer is to an entity acquiring
substantially all of the transferring owner's assets or to an entity into which
it is merging. Each owner may assign for financing purposes its interest in Big
Cajun II, Unit 3 without the prior consent of the other party.
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DESCRIPTION OF THE BONDS
The terms of the bonds NRG South Central is issuing in this exchange offer
and the outstanding bonds are identical in all material respects, except:
- the bonds issued in the exchange offer will have been registered under
the Securities Act;
- the bonds issued in the exchange offer will not contain transfer
restrictions and registration rights that relate to the outstanding
bonds; and
- the bonds issued in the exchange offer will not contain provisions
relating to the payment of liquidated damages to be made to the holders
of the outstanding bonds under circumstances related to the timing of the
exchange offer.
Any outstanding bonds that remain outstanding after the exchange offer,
together with bonds issued in the exchange offer, will be treated as a single
class of securities under the indenture for voting purposes. The terms "bond' or
"bonds", refer to both outstanding bonds and the bonds to be issued in the
exchange offer. The term "holders" of the bonds, refers to those persons who are
the registered holders of bonds on the books of the registrar appointed under
the indenture.
The following is a description of certain provisions of the bonds offered
hereby. The following information does not purport to be a complete description
of the bonds and is subject to, and qualified in its entirety by, reference to
the bonds and the indenture. Unless otherwise specified, the following
description applies to all of the bonds.
GENERAL
The outstanding bonds were issued and the bonds in this exchange offering
will be issued pursuant to an indenture, dated as of March 30, 2000, between NRG
South Central, Louisiana Generating (with respect to certain sections) and The
Chase Manhattan Bank, as bond trustee, in the United States. The terms of the
bonds include those stated in the indenture and those made part of the indenture
by reference to the Trust Indenture Act. The bonds are senior secured
obligations and rank senior in right of payment to all of NRG South Central's
existing and future indebtedness that is designated as subordinate or junior in
right of payment to the bonds.
PRINCIPAL, MATURITY AND INTEREST
The Series A Senior Secured Bonds and the Series A-1 Senior Secured Bonds
are limited in aggregate principal amount to $500.0 million and will mature on
March 15, 2016. The Series B Senior Secured Bonds and the Series B-1 Senior
Secured Bonds are limited in aggregate principal amount to $300.0 million and
will mature on September 15, 2024. Interest on the bonds is payable in arrears
on each March 15 and September 15, commencing on September 15, 2000 to holders
of record on each March 1 or September 1, respectively, immediately preceding
such scheduled payment date. Interest accrues on the basis of a 360-day year
consisting of 12 months of 30 days each at a rate of 8.962% in the case of the
Series A Senior Secured Bonds and the Series A-1 Senior Secured Bonds and 9.479%
in the case of the Series B Senior Secured Bonds and the Series B-1 Senior
Secured Bonds. Principal, premium, if any, and interest on the bonds will be
payable at NRG South Central's office or agency maintained for such purpose
within New York City. Until otherwise designated by NRG South Central, its
office or agency in New York will be the office of the bond trustee maintained
for that purpose. The bonds will be issued in denominations of $100,000 or any
multiple of $1,000 in excess of that amount.
AMORTIZATION
The principal of the bonds is payable in installments on each March 15 and
September 15 occurring on or after September 15, 2000 to the registered
bondholder thereof on the immediately preceding regular record date, such that
the initial average life is approximately 9.9 years for the Series A Senior
Secured Bonds and the Series A-1 Senior Secured Bonds and approximately 20.2
years for the Series B Senior Secured Bonds and
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the Series B-1 Senior Secured Bonds. The following table shows the principal of
the bonds which is payable on each principal payment date.
<TABLE>
<CAPTION>
SERIES A SENIOR SECURED SERIES B SENIOR SECURED
BONDS OR A-1 SENIOR SECURED BONDS OR SERIES B-1 SENIOR
PRINCIPAL PAYMENT DATE BONDS, AS APPLICABLE SECURED BONDS, AS APPLICABLE
---------------------- --------------------------- ----------------------------
<S> <C> <C>
September 15, 2000................... $ 11,250,000 $ --
March 15, 2001....................... $ 12,500,000 $ --
September 15, 2001................... $ 12,750,000 $ --
March 15, 2002....................... $ 12,750,000 $ --
September 15, 2002................... $ 12,750,000 $ --
March 15, 2003....................... $ 12,750,000 $ --
September 15, 2003................... $ 12,750,000 $ --
March 15, 2004....................... $ 7,500,000 $ --
September 15, 2004................... $ 7,500,000 $ --
March 15, 2005....................... $ 7,500,000 $ --
September 15, 2005................... $ 7,500,000 $ --
March 15, 2006....................... $ 7,500,000 $ --
September 15, 2006................... $ 7,500,000 $ --
March 15, 2007....................... $ 7,500,000 $ --
September 15, 2007................... $ 7,500,000 $ --
March 15, 2008....................... $ 12,500,000 $ --
September 15, 2008................... $ 12,500,000 $ --
March 15, 2009....................... $ 13,750,000 $ --
September 15, 2009................... $ 13,750,000 $ --
March 15, 2010....................... $ 17,500,000 $ --
September 15, 2010................... $ 17,500,000 $ --
March 15, 2011....................... $ 21,250,000 $ --
September 15, 2011................... $ 21,250,000 $ --
March 15, 2012....................... $ 22,500,000 $ --
September 15, 2012................... $ 22,500,000 $ --
March 15, 2013....................... $ 22,500,000 $ --
September 15, 2013................... $ 23,750,000 $ --
March 15, 2014....................... $ 23,750,000 $ --
September 15, 2014................... $ 26,250,000 $ --
March 15, 2015....................... $ 26,250,000 $ --
September 15, 2015................... $ 27,500,000 $ --
March 15, 2016....................... $ 27,500,000 $ --
September 15, 2016................... $ -- $ 22,500,000
March 15, 2017....................... $ -- $ 22,500,000
September 15, 2017................... $ -- $ 21,000,000
March 15, 2018....................... $ -- $ 19,500,000
September 15, 2018................... $ -- $ 19,500,000
March 15, 2019....................... $ -- $ 18,000,000
September 15, 2019................... $ -- $ 18,000,000
March 15, 2020....................... $ -- $ 16,500,000
September 15, 2020................... $ -- $ 16,500,000
March 15, 2021....................... $ -- $ 16,500,000
September 15, 2021................... $ -- $ 16,500,000
March 15, 2022....................... $ -- $ 16,500,000
</TABLE>
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<TABLE>
<CAPTION>
SERIES A SENIOR SECURED SERIES B SENIOR SECURED
BONDS OR A-1 SENIOR SECURED BONDS OR SERIES B-1 SENIOR
PRINCIPAL PAYMENT DATE BONDS, AS APPLICABLE SECURED BONDS, AS APPLICABLE
---------------------- --------------------------- ----------------------------
<S> <C> <C>
September 15, 2022................... $ -- $ 16,500,000
March 15, 2023....................... $ -- $ 15,000,000
September 15, 2023................... $ -- $ 15,000,000
March 15, 2024....................... $ -- $ 15,000,000
September 15, 2024................... $ -- $ 15,000,000
------------ ------------
$500,000,000 $300,000,000
</TABLE>
NATURE OF RECOURSE
Recourse for payment or performance of any of NRG South Central's
obligations in respect of the bonds will be limited solely to NRG South Central,
Louisiana Generating and any additional guarantors. None of NRG South Central's
affiliates (other than Louisiana Generating or any additional guarantor) nor any
of NRG South Central's or its affiliate's officers, directors and stockholders
will be liable for the payment of the principal of, premium, if any, or interest
on the bonds, and bondholder will have no claim against or recourse to (whether
by operation of law or otherwise) those entities or persons or their affiliates
(other than to the extent NRG Energy or an affiliate provides debt service
reserve credit support).
RANKING
The bonds constitute NRG South Central's senior secured obligations and
rank equally in right of payment to all of NRG South Central's future senior
indebtedness and senior in right of payment to all of NRG South Central's future
subordinated indebtedness.
The bonds are fully and unconditionally guaranteed by Louisiana Generating
and will be fully and unconditionally guaranteed by any subsidiary acquired by
NRG South Central and designated an additional guarantor. NRG New Roads
Holdings, NRG Sterlington Power and Big Cajun I Peaking Power are not additional
guarantors of the bonds. The obligations of Louisiana Generating and any
additional guarantors under the guarantee constitute senior secured debt of
Louisiana Generating or such additional guarantors and rank equally in right of
payment to all of Louisiana Generating's or such additional guarantor's existing
and future senior indebtedness.
COLLATERAL
NRG South Central's obligations in respect of the bonds are secured by a
security interest in the following:
- NRG Central U.S. LLC's and South Central Generation Holding LLC's
membership interests in NRG South Central and NRG South Central's
membership interests in Louisiana Generating;
- all of NRG South Central's assets related to the Cajun facilities,
including NRG South Central's rights under all intercompany notes between
NRG South Central and Louisiana Generating but excluding the assets
specifically held for resale; and
- the revenue account and the debt service reserve account.
The obligations of Louisiana Generating and any additional guarantors in
respect of the guarantee and the intercompany loan are secured by a mortgage
with respect to Big Cajun I and Big Cajun II and a security interest in the
following:
- all of Louisiana Generating's interest in the Cajun facilities and
substantially all personal property associated with the Cajun facilities
except for fixtures not located on the Cajun facilities and the assets
specifically held for resale;
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- substantially all contracts, including the project documents, associated
with the Cajun facilities to which Louisiana Generating is a party to the
extent assignable and all consents to the assignment of these contracts
that have been obtained;
- all licenses, permits and governmental approvals associated with the
Cajun facilities;
- all insurance policies associated with the Cajun facilities and all
monies paid to Louisiana Generating on these policies;
- all revenues of the Cajun facilities, including revenues from power sales
contracts entered into by NRG Power Marketing or any other entity which
has entered into a power marketing agreement with Louisiana Generating
associated with the Cajun facilities; and
- the revenue account.
RATINGS
The bonds have received a rating of "Baa2" from Moody's and "BBB-" from
S&P. The ratings reflect only the views of Moody's and S&P at the time the
ratings were issued, and any explanation of the significance of such ratings may
be obtained only from the respective rating agency. There is no assurance that
these ratings will remain in effect for any given period of time or that these
ratings will not be lowered, suspended or withdrawn entirely by Moody's or S&P
if, in each rating agency's judgment, circumstances so warrant. Any lowering,
suspension or withdrawal of ratings may have an adverse effect on the market
price or marketability of the bonds.
REDEMPTION AND REPURCHASE
Mandatory Redemption
The bonds will be subject to mandatory redemption in whole or in part, on a
pro rata basis, in an aggregate amount equal to:
- the loss proceeds received by NRG South Central or Louisiana Generating
in respect of any loss or damage to or condemnation or other governmental
taking of or title event regarding the Cajun facilities or any of NRG
South Central's other assets, or any part thereof, in excess of $10.0
million. NRG South Central or Louisiana Generating are permitted to
replace, repair or rebuild the Cajun facilities or such other assets, or
the affected parts, if there are sufficient funds (including loss
proceeds) to do so and if no material adverse effect would reasonably be
expected to result. If NRG South Central or Louisiana Generating replace,
repair or rebuild all or any part of the Cajun facilities or such other
assets and the loss proceeds are greater than the cost of this
replacement, repair or rebuilding and if the excess amount is greater
than $5.0 million, then only the remaining loss proceeds over $5.0
million will be used for a mandatory redemption; and
- the proceeds received by NRG South Central or Louisiana Generating
resulting from an involuntary or voluntary buy-out of a power supply
agreement in excess of $5.0 million. However, there will be no mandatory
redemption if either (a) the rating agencies provide confirmation that no
ratings downgrade of the bonds will occur following such involuntary or
voluntary buy-out or (b) NRG South Central or Louisiana Generating enters
into a replacement power supply agreement containing substantially
similar terms to the terminated agreement, and NRG South Central or
Louisiana Generating, as the case may be, certifies that no material
adverse effect would reasonably be expected to result.
Upon the occurrence of any event requiring a mandatory redemption of the
bonds, NRG South Central will be required to redeem the bonds and repay other
senior secured indebtedness on a pro rata basis in an aggregate amount equal to
the proceeds to be applied as described above. In the event of a mandatory
redemption, the redemption price for the bonds will be 100% of the principal
amount of the outstanding bonds being redeemed plus interest accrued and unpaid
to but excluding the date of redemption plus, in the event of a voluntary
buy-out of a power supply agreement only, a make-whole premium equal to that
paid in the case of any optional redemption of the bonds.
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Optional Redemption
The bonds will be subject to optional redemption, in whole or in part, on a
pro rata basis from that series, at any time, at a redemption price equal to
100% of the principal amount of the bonds being redeemed plus interest on the
outstanding bonds being redeemed through, but excluding, the redemption date
plus a make-whole premium.
The "make-whole premium" will be an amount equal to the excess, if any, of
(a) the discounted present value of all interest and principal payments
scheduled to become due after the date of the optional redemption by NRG South
Central in respect of the bonds being redeemed (this discounted present value
will be determined on the basis of a discount rate equal to the sum of (i) the
Treasury Rate and (ii) 50 basis points) over (b) the outstanding principal
amount of the bonds to be redeemed. "Treasury Rate" means the yield to maturity
of the treasury security having an average life equal to the remaining average
life of the bond being redeemed and trading in the secondary market at the price
closest to par. If there is no United States treasury security having an average
life within one month of the remaining average life of the bonds being redeemed,
the Treasury Rate will be calculated using a yield to maturity interpolated on a
straight-line basis from the yield to maturity for two United States treasury
securities having average lives closest to the remaining average life of the
bonds being redeemed and trading in the secondary market at the price closest to
par.
Selection and Notice
If less than all of the bonds are to be redeemed at any time, selection of
bonds for redemption will be made by the bond trustee on a pro rata basis.
Notices of redemption will be mailed by first class mail at least 30 days but
not more than 60 days before the redemption date (unless a shorter period is
satisfactory to the bond trustee) to each bondholder at its registered address
unless such redemption is due to the failure of the acquisition to close, or the
inability of the acquisition to close due to material loss or damage to Big
Cajun II, in which case the notice will be mailed at least five business days
before the redemption date. If any bond is to be redeemed in part only, the
notice of redemption that relates to that bond will state the portion of the
principal amount of that bond to be redeemed; a new bond in principal amount
equal to the unredeemed portion of the original bond will be issued in the name
of the bondholder upon cancellation of the original bond. Bonds called for
redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on bonds or portions of them called
for redemption.
CHANGE OF CONTROL
Upon the occurrence of a change of control, NRG South Central will be
required to offer to repurchase all or any part of the outstanding bonds held by
any holder of bonds on the immediately following payment date at a cash price
equal to 101% of the then outstanding principal amount of the bonds plus accrued
and unpaid interest to but excluding the date of payment.
A "change of control" means the acquisition of control, directly or
indirectly, beneficially or of record or otherwise, by any person or group
(within the meaning of the Exchange Act and the rules of the SEC thereunder as
in effect on March 27, 2000) other than NRG Energy or its controlled
subsidiaries, of NRG South Central. The term "control" means the power to direct
or cause the direction of NRG South Central's management and policies through
the ownership of voting securities, by contract or otherwise. However, there
will be no change of control if either: (a) NRG South Central receives a
confirmation from the rating agencies that no ratings downgrade of the bonds
will occur after the change of control or (b) the change of control is approved
by holders of the bonds holding at least 66 2/3% in aggregate principal amount
of the outstanding bonds.
BOOK-ENTRY, DELIVERY AND FORM
The certificates representing the bonds will be issued in fully registered
form. Except as described below, the bonds will initially be represented by one
or more global bonds in fully registered form without interest coupons. The
global bonds will be deposited with, or on behalf of, The Depository Trust
Company, or DTC,
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and registered in the name of Cede & Co., as nominee of DTC, or will remain in
the custody of the trustee pursuant to the FAST Balance Certificate Agreement
between DTC and the trustee.
Certain Book-Entry Procedures for the Global Bonds
The descriptions of the operations and procedures of DTC set forth below
are provided solely as a matter of convenience. These operations and procedures
are solely within the control of the respective settlement systems and are
subject to change by them from time to time. Neither NRG South Central nor any
of the initial purchasers takes any responsibility for these operations or
procedures, and investors are urged to contact the relevant system or its
participants directly to discuss these matters.
DTC has advised us that it is (a) a limited-purpose trust company organized
under the laws of the State of New York, (b) a "banking organization" within the
meaning of the New York Banking Law, (c) a member of the Federal Reserve System,
(d) a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and (e) a "clearing agency" registered pursuant to Section 17A
of the Exchange Act. DTC was created to hold securities for its participants and
facilitates the clearance and settlement of securities transactions between
participants through electronic book-entry changes to the accounts of its
participants, thereby eliminating the need for physical transfer and delivery of
certificates. DTC's participants include securities brokers and dealers
(including the initial purchasers), banks and trust companies, clearing
corporations and certain other organizations. Indirect access to DTC's system is
also available to indirect participants, including banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. Investors who are not participants
may beneficially own securities held by or on behalf of DTC only through
participants or indirect participants.
We expect that pursuant to procedures established by DTC (a) upon issuance
of the global bonds, DTC will credit the respective principal amounts of the
bonds represented by the global bonds to the accounts of persons who have
accounts with DTC. Ownership of beneficial interest in the global bonds will be
limited to persons who have accounts with DTC, who are referred to as
participants, or persons who hold interests through participants. Ownership of
the beneficial interests in the bonds will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by DTC (with
respect to the interests of participants) and the records of participants and
the indirect participants (with respect to the interests of persons other than
participants).
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of the securities in definitive form.
Accordingly, the ability to transfer interests in the bonds represented by a
global bond to these persons may be limited. In addition, because DTC can act
only on behalf of its participants, who in turn act on behalf of persons who
hold interests through participants, the ability of a person having an interest
in bonds represented by a global bond to pledge or transfer its interest to
persons or entities that do not participate in DTC's system, or to otherwise
take actions in respect of this interest, may be affected by the lack of a
physical definitive security in respect of this interest.
So long as DTC or its nominee is the registered owner of a global bond, DTC
or its nominee, as the case may be, will be considered the sole owner or
bondholder represented by the global bond for all purposes under the indenture.
Except as provided below, owners of beneficial interests in a global bond will
not be entitled to have bonds represented by a global bond registered in their
names, will not receive or be entitled to receive physical delivery of
certificated bonds, and will not be considered the owners or holders of the
bonds under the indenture for any purpose, including with respect to the giving
of any direction, instruction or approval to the bond trustee under the
indenture. Accordingly, each bondholder owning a beneficial interest in a global
bond must rely on the procedures of DTC and, if this bondholder is not a
participant or an indirect participant, on the procedures of the participant
through which this bondholder owns its interest, to exercise any rights of a
bondholder under the indenture or the global bond. We understand that under
existing industry practice, in the event that NRG South Central requests any
action of holders of bonds, or a bondholder that is an owner of a beneficial
interest in a global bond desires to take any action that DTC, as the holder of
the global bond, is entitled to take, DTC would authorize the participants to
take the action and the participants would authorize holders of the bonds owning
through the participants to take the action or would otherwise act upon the
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instruction of the holders of the bonds. Neither NRG South Central nor the bond
trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of bonds by DTC, or for maintaining,
supervising or reviewing any records of DTC relating to the bonds.
Payments with respect to the principal of, and premium, if any, and
interest on, any bonds represented by a global bond registered in the name of
DTC or its nominee on the applicable record date will be payable by the bond
trustee to or at the direction of DTC or its nominee in its capacity as the
registered holder of the global bond representing the bonds under the indenture.
Under the terms of the indenture, NRG South Central and the bond trustee may
treat the persons in whose names the bonds, including the global bonds, are
registered as the owners of the bonds for the purpose of receiving payment on
the bonds and for any and all other purposes whatsoever. Accordingly, neither
NRG South Central nor the bond trustee has or will have any responsibility or
liability for the payment of these amounts to owners of beneficial interests in
a global bond (including principal, premium, if any, and interest). Payments by
the participants and the indirect participants to the owners of beneficial
interests in a global bond will be governed by standing instructions and
customary industry practice and will be the responsibility of the participants
or the indirect participants and DTC.
Transfers between participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds.
Certificated bonds
If (a) NRG South Central notifies the bond trustee in writing that DTC is
no longer willing or able to act as a depositary or DTC ceases to be registered
as a clearing agency under the Exchange Act and a successor depositary is not
appointed within 90 days of the notice or cessation, (b) NRG South Central, at
its option, notifies the bond trustee in writing that NRG South Central elects
to cause the issuance of bonds in certificated form under the indenture or (c)
upon the occurrence of certain other events as provided in the indenture, then,
upon surrender by DTC of the global bonds, certificated bonds will be issued to
each person that DTC identifies as the beneficial owner of the bonds represented
by the global bonds. Upon any such issuance, the bond trustee is required to
register the certificated bonds in the name of the person or persons (or the
nominee of the person or persons) and cause the same to be delivered to that
person or persons (or nominee).
Neither NRG South Central nor the bond trustee will be liable for any delay
by DTC or any participant or indirect participant in identifying the beneficial
owners of the related bonds and each such person may conclusively rely on, and
shall be protected in relying on, instructions from DTC for all purposes
(including with respect to the registration and delivery, and the respective
principal amounts, of the bonds to be issued).
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DESCRIPTION OF PRINCIPAL FINANCING DOCUMENTS
The following summaries of certain provisions of the financing documents do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all of the provisions thereof, including definitions
therein of certain terms. Copies of the financing documents will be provided for
inspection upon written request of any potential investor to NRG South Central,
subject to appropriate confidentiality restrictions. See "Where You Can Find
More Information." Capitalized terms used herein and not otherwise defined in
this prospectus have the meanings ascribed to such terms in the respective
financing documents.
WORKING CAPITAL FACILITY
In April 2000, NRG South Central entered into a $40.0 million floating rate
working capital facility. The lenders under this facility were granted a
security interest in the same collateral (other than the debt service reserve
account) that secures the bonds and rank equally with the bonds. The interest
rate on this facility is at NRG South Central's choice of the lender's prime
rate or LIBOR. The facility contains covenants that are customary for facilities
of this type, including restrictions on the incurrence of indebtedness, mergers,
sale of assets and investments. The facility terminates in March 2001. As of
September 30, 2000, this facility had a $40.0 million balance.
INDENTURE
The outstanding bonds were issued and the bonds in this exchange offering
will be issued pursuant to an indenture, dated as of March 30, 2000, between NRG
South Central, Louisiana Generating (with respect to certain sections) and The
Chase Manhattan Bank, as bond trustee, in the United States. The terms of the
bonds include those stated in the indenture and those made part of the indenture
by reference to the Trust Indenture Act. The bonds are senior secured
obligations and rank senior in right of payment to all of NRG South Central's
existing and future indebtedness that is designated as subordinate or junior in
right of payment to the bonds.
Covenants of NRG South Central
The following is a description of certain covenants with which NRG South
Central is obligated to comply under the indenture so long as any bonds remain
outstanding.
Information Requirements
NRG South Central will furnish or cause to be furnished to the bond trustee
and the rating agencies:
- within 60 days after the end of the first three quarters of each of NRG
South Central's respective fiscal years (commencing with the quarter
ended June 30, 2000), (a) consolidated balance sheets for NRG South
Central and each of its subsidiaries and related statements of income and
cash flows as of the end of, and for, that fiscal quarter and the then
elapsed portion of the fiscal year and (b) consolidated balance sheets
for NRG South Central, Louisiana Generating and any additional guarantor
and related statements of income and cash flows as of the end of and for
that fiscal quarter and the then elapsed portion of the fiscal year, in
each case setting forth in comparative form the figures for (or, in the
case of the balance sheet, as of the end of) the corresponding period or
periods of the previous fiscal year, all certified by NRG South Central's
authorized representative as presenting fairly NRG South Central's
consolidated financial condition and results of operations on the dates
and for the periods indicated, in accordance with GAAP consistently
applied, other than with respect to the notes and normally recurring
year-end adjustments, and setting forth management's discussion and
analysis of the financial condition and results of operations described
therein and the quarterly debt service coverage ratio for such fiscal
quarter;
- within 105 days after the end of each of NRG South Central's fiscal years
(commencing with the fiscal year ended December 31, 2000), (a)
consolidated annual audited financial statements for NRG South Central
and each of its subsidiaries for that year and (b) consolidated annual
audited financial
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statements for NRG South Central, Louisiana Generating and any additional
guarantor for that year, each accompanied by an audit opinion by a
nationally recognized firm of independent certified public accountants to
the effect that the financial statements present fairly NRG South
Central's consolidated financial position, results of operations and cash
flows at the end of, and for, the previous fiscal year, in accordance
with GAAP consistently applied, that nothing has come to the auditor's
attention that any default or event of default under the indenture
related to restricted payments has occurred and is continuing, or if it
has occurred and is continuing, a statement as to its nature, and the
annual debt service coverage ratio for the fiscal year;
- concurrently with any delivery of financial statements under the
immediately preceding two "bullet points", an officer's certificate from
one of NRG South Central's authorized representatives (a) certifying to
the best knowledge of that representative as to the occurrence of any
event or condition which constitutes a default, and if a default has
occurred, specifying the details of the default and any action taken or
proposed to be taken with respect to the default and (b) describing any
change in GAAP or in the application of GAAP that has occurred since the
date of the most recent prior annual audited financial statements
delivered pursuant to the second "bullet point" above and, if any change
has occurred, specifying the effect of the change on the financial
statements accompanying the certificate; and
- within 10 days of receiving notice of the occurrence of any litigation,
claim, proceeding or controversy pending, or the receipt by NRG South
Central or Louisiana Generating of a written threat of the same involving
or affecting either NRG South Central, Louisiana Generating or the Cajun
facilities that would reasonably be expected to result in a material
adverse effect, notice of the same.
The term "material adverse effect" means a material adverse effect on:
- the financial condition, operations, business or prospects of NRG South
Central, Louisiana Generating and any additional guarantors, taken as a
whole;
- the validity or priority of the liens on the collateral;
- the ability of NRG South Central, Louisiana Generating or any additional
guarantor to perform its material obligations under the finance
documents; or
- the ability of the collateral agent to enforce any of the payment
obligations of NRG South Central, Louisiana Generating or any additional
guarantor under the indenture, the guarantee or the bonds.
Maintenance of Existence
NRG South Central will at all times preserve and maintain in full force and
effect its legal existence as a limited liability company in good standing under
the laws of the State of Delaware and its qualification to do business in each
other jurisdiction, as necessary, except where a failure to be so qualified
would not reasonably be expected to result in a material adverse effect. The
foregoing will not prohibit any merger, consolidation, liquidation or
dissolution permitted under the indenture nor prohibit NRG South Central from
changing its status as a limited liability company if the rating agencies
confirm the change will not result in a downgrade of the then current rating of
the bonds. NRG South Central will only amend its certificate of formation or any
other organizational document to authorize the issuance of additional bonds, in
connection with permitted changes described above or in connection with a name
change.
Compliance with Laws and Governmental Approvals
NRG South Central will comply with all laws, rules, regulations and orders
of any governmental authority (including environmental laws) and obtain all
governmental approvals relating to the issuance of the bonds and performance of
its obligations under the indenture, except where the failure to do so would not
reasonably be expected to result in a material adverse effect.
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Performance under Transaction Documents
NRG South Central will perform all its material covenants and agreements
contained in any transaction document to which it is a party, except where
nonperformance would not reasonably be expected to result in a material adverse
effect.
Maintenance of Property/Title to Assets/Limitation on Sale of Assets
NRG South Central will maintain and operate its assets (not including those
of its subsidiaries) in accordance with prudent independent power industry
practice. NRG South Central will preserve and maintain good, valid and
marketable title or leasehold rights to its mortgaged properties and assets
constituting part of the collateral, which will be subject only to the liens
permitted in the indenture, except where the failure to do so would not
reasonably be expected to result in a material adverse effect. NRG South Central
will only sell, lease, transfer, assign or otherwise dispose of any of its
assets in a transaction permitted under the indenture.
Insurance
NRG South Central will at all times maintain with financially sound,
responsible and reputable insurance companies, and provide satisfactory evidence
of, customary insurance in amounts (subject to reasonable and customary
deductibles and sublimits) and with terms and conditions in accordance with
prudent independent power industry practice. All policies (other than workers'
compensation) will name the collateral agent and the bond trustee as loss payee
or additional insured.
Revenue Account
NRG South Central established a revenue account with the depositary bank
and will cause each of the following to be deposited into the revenue account:
- all revenues related to the Cajun facilities;
- all proceeds received from the sale of assets related to the Cajun
facilities (other than proceeds of sales of the assets specifically held
for resale and sales of assets owned by, or membership interests in,
unrestricted subsidiaries);
- all loss proceeds, proceeds received in connection with a title event and
proceeds received in connection with the buy-out of a power supply
agreement each as related to the Cajun facilities; and
- any income from the investment of monies on deposit in or credited to the
revenue account or the debt service reserve account.
Debt Service Reserve Account
NRG South Central established a debt service reserve account with the
depositary bank for the benefit of the bondholders. The debt service reserve
account will be funded in a sufficient amount at all times to pay the scheduled
payment of principal and interest on the outstanding bonds due in the next six
months. NRG South Central may fund this account with cash or debt service
reserve credit support. NRG South Central has obtained debt service reserve
credit support and therefore need not fund this account with cash. Credit
support may be either an unconditional guarantee by NRG Energy or its affiliates
(excluding NRG South Central, Louisiana Generating and any additional guarantor)
(so long as NRG Energy or the affiliate maintains a long-term senior unsecured
debt rating of at least "Baa3" from Moody's and at least "BBB-" with a stable
outlook from S&P) or a letter of credit provided by a commercial bank or other
financial institution with a long-term senior unsecured debt rating of at least
"A2" from Moody's and at least "A" from S&P. Currently, the debt service reserve
requirement is being satisfied by a guarantee given by NRG Energy.
The depositary bank may transfer funds from the debt service reserve
account to the revenue account to the extent that funds in the revenue account
are insufficient to pay principal or interest on the bonds of any series that is
due on the date of the withdrawal.
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If, on any scheduled payment date, the bond trustee receives funds that are
insufficient to pay the aggregate amount of principal and interest on the
outstanding bonds in full, then the depositary bank will transfer from the debt
service reserve account, to the extent funds are available therein, to the
accounts of the bondholders an amount equal to the insufficiency. If, on any
date on which the depositary bank is required to make withdrawals from the debt
service reserve account, the funds on deposit are insufficient to make the
withdrawals, the depositary bank will draw on a demand payment under any debt
service reserve credit support.
LIMITATION ON INCURRENCE OF INDEBTEDNESS
NRG South Central will not create, incur, or suffer to exist any
indebtedness, except permitted issuer indebtedness.
The term "permitted issuer indebtedness" means any of the following items
of indebtedness:
- the bonds and any additional bonds NRG South Central may issue under the
indenture;
- any other indebtedness, provided, that (a) NRG South Central provides an
officer's certificate certifying that no default or event of default has
occurred and is continuing or will occur as a result; (b) NRG South
Central provides an officer's certificate certifying that, after giving
effect to the incurrence of the indebtedness and the application of the
net proceeds thereof, the minimum projected debt service coverage ratio
for each fiscal year through the final maturity date of the bonds
(starting in the fiscal year in which the indebtedness is incurred) is no
less than 1.50; and (c) each of the rating agencies confirms that the
incurrence of the indebtedness will not result in a ratings downgrade
from the then-current rating of the bonds;
- indebtedness for working capital purposes not to exceed, at any one time
outstanding, the sum of $40.0 million (escalated in accordance with the
consumer price index) plus, upon NRG South Central's acquisition of an
additional guarantor or additional non-nuclear electric generating or
district energy assets, 5% of the indebtedness incurred by NRG South
Central in connection with the acquisition;
- indebtedness related to permitted liens (as described below);
- indebtedness owed to Louisiana Generating or any additional guarantor;
- indebtedness represented by interest rate protection agreements with
respect to NRG South Central's indebtedness permitted by the indenture;
and
- subordinated indebtedness.
The term "debt service coverage ratio" means for any period the ratio of
(a)(i) revenues of NRG South Central, Louisiana Generating and each additional
guarantor for that period and any payments received under hedging agreements
(other than interest rate protection agreements) for that period minus (ii)
operating, maintenance, general and administrative expenses for that period
(other than nonrecurring expenses in connection with the issuance of permitted
indebtedness), all capital expenditures (unless funded with permitted issuer
indebtedness or permitted guarantor indebtedness (other than the working capital
facility), equity contributions made explicitly for this purpose, or other
amounts available for distribution under the indenture) and any payments made
under hedging agreements (other than interest rate protection agreements), in
each case for NRG South Central, Louisiana Generating and each additional
guarantor on a consolidated basis to (b) the aggregate of principal, interest,
premium (if any) and fees payable on the bonds and other permitted indebtedness
due for such period (other than subordinated indebtedness, fees payable in
connection with the issuance of permitted indebtedness and principal payments
under the working capital facility, provided that such amounts remain available
to be drawn under the working capital facility or are refinanced under a
replacement working capital facility) plus payments required to be made under
any interest rate protection agreement for such period less payments to be
received under any interest rate protection agreement for such period.
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The term "hedging agreement" means any interest rate protection agreement,
foreign currency exchange agreement, power or fuel price protection agreement or
other interest, currency exchange rate or commodity price hedging arrangement
entered into in the ordinary course of business and not for speculative
purposes.
The term "projected debt service coverage ratio" means for any period a
projection of the debt service coverage ratio over the period specified,
prepared by NRG South Central in good faith based upon assumptions consistent in
all material respects with the transaction documents, historical operating
results, if any, and NRG South Central's good faith projections of future
revenues and projections of operating and maintenance expenses for NRG South
Central, Louisiana Generating and any additional guarantor in light of the then
existing or reasonably expected regulatory and market environments in the
markets in which the Cajun facilities or other assets owned by such person is or
will be operated and upon the assumption that no early redemption or prepayment
of the bonds of any series will be made prior to the stated maturity of such
series of bonds.
Limitation on Restricted Payments
NRG South Central will not declare nor make any restricted payments unless
the following conditions are met:
- NRG South Central certifies that no default or event of default has
occurred and is continuing;
- the balance in the debt service reserve account, including any debt
service reserve credit support, equals or exceeds the required amount;
and
- if, as of such date, 50% or more of NRG South Central's projected
revenues for the next four fiscal quarters will be derived from power
supply agreements which have a remaining term of at least two years, NRG
South Central certifies that the debt service coverage ratio for the most
recently completed historical four fiscal quarters (in the case of the
first four fiscal quarters following the March 31, 2000 closing date of
the acquisition of the Cajun facilities, projected debt service coverage
ratios will be used as necessary)(taken as a whole) equals or exceeds
1.40 and the projected debt service coverage ratio for the next
succeeding four fiscal quarters (commencing with the quarter in which the
debt is incurred) (taken as a whole) equals or exceeds 1.40;
- if, as of such date, 25% or more, but less than 50%, of NRG South
Central's projected revenues for the next four fiscal quarters will be
derived from power supply agreements which have a remaining term of at
least two years, NRG South Central certifies that the debt service
coverage ratio for the most recently completed historical four fiscal
quarters (in the case of the first four fiscal quarters following the
March 31, 2000 closing date of the acquisition of the Cajun facilities,
projected debt service coverage ratios will be used as necessary)(taken
as a whole) equals or exceeds 1.55 and the projected debt service
coverage ratio for the next succeeding six fiscal quarters (commencing
with the quarter in which the debt is incurred) (taken as a whole) each
equals or exceeds 1.55; and
- if, as of such date, less than 25% of NRG South Central's projected
revenues for the next four fiscal quarters will be earned under power
supply agreements which have a remaining term of at least two years, NRG
South Central certifies that the debt service coverage ratio for the most
recently completed historical four fiscal quarters (in the case of the
first four fiscal quarters following the March 31, 2000 closing date of
the acquisition of the Cajun facilities, projected debt service coverage
ratios will be used as necessary)(taken as a whole) equals or exceeds
1.70 and the projected debt service coverage ratio for the next
succeeding eight fiscal quarters (commencing with the quarter in which
the debt is incurred) (taken as a whole) equals or exceeds 1.70.
The term "NRG South Central's projected revenues" means, for the relevant
period, the revenues of NRG South Central, Louisiana Generating and each
additional guarantor for that period and any payments received under hedging
agreements (other than interest rate protection agreements) for that period.
If there are withdrawals from the debt service reserve account (or debt
service reserve credit support available for this account) on any scheduled
payment date and restricted payments were made during the six-
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month period prior to such date, then, immediately following such scheduled
payment date, an amount equal to the lesser of (a) any restricted payments made
during the prior six-month period or (b) the amount withdrawn from the debt
service reserve account (or debt service reserve credit support available for
this account) on such date, will be refunded to the debt service reserve account
by means of a cash deposit or increase in the debt service reserve credit
support available under this account; provided, that the amount of such refund
will not exceed the amount required to be deposited so that the balance in the
debt service reserve account (taking into account any debt service reserve
credit support) equals the debt service reserve required balance.
The term "restricted payments" means (a) declarations and payments of
distributions, dividends or any other similar payments made in cash, property,
obligations or other securities, (b) payments of the principal of or interest on
any subordinated indebtedness or (c) the making of any loans or advances to any
affiliate (other than permitted indebtedness). However, distributions or other
payments by Louisiana Generating or any additional guarantor to NRG South
Central or by NRG South Central to Louisiana Generating or any additional
guarantor do not constitute restricted payments. Distributions of proceeds from
the sale of assets specifically held for resale also do not constitute
restricted payments nor are payments by NRG South Central to NRG Energy of any
proceeds from treasury locks entered into by NRG South Central or Louisiana
Generating on or prior to March 30, 2000. In addition, refunds from NRG South
Central to NRG Energy may have been made from the first draw under its working
capital facility in an amount equal to the amount of equity contributions made
solely to fund NRG South Central's working capital requirements or those of
Louisiana Generating during the period following March 30, 2000 through the
earlier of the date that is three months after March 30, 2000 or the date on
which the first draw is made under the working capital facility. As of June 30,
2000, the working capital facility was undrawn. This amount, however, will only
be equal to the amount of equity contributions made in excess of the equity
contributions contemplated in the section entitled "Capitalization."
Limitation on Liens
NRG South Central will not create or suffer to exist any lien upon or with
respect to any of its properties, other than permitted liens.
A "permitted lien" is any of the following:
- liens existing on March 31, 2000;
- liens in favor of NRG South Central, Louisiana Generating or any
additional guarantor;
- liens imposed by law for taxes, assessments or governmental charges that
are not yet delinquent or which are the subject of a good faith contest
and for which adequate reserves have been established;
- carriers', warehousemen's, mechanics', materialmen's, repairmen's and
other like liens imposed by law, arising in the ordinary course of
business and securing obligations that are not overdue by more than 45
days or are being contested in good faith by appropriate proceedings;
- cash deposits or rights of set-off to secure the performance of bids,
lenders, trade contracts, leases, statutory obligations, surety and
appeal bonds, performance bonds, government contracts and other
obligations of a like nature (other than for payment obligations of
borrowed money), in each case in the ordinary course of business;
- certain encumbrances and other easements, zoning restrictions,
rights-of-way and similar charges or encumbrances on real property
imposed by law or arising in the ordinary course of business that do not
secure any monetary obligations and do not materially detract from the
value of the affected property or interfere with NRG South Central's
ordinary conduct of business or the ordinary conduct of its business or
the business of Louisiana Generating or any additional guarantor;
- liens securing permitted indebtedness other than subordinated
indebtedness and indebtedness constituting hedging agreements (other than
hedging agreements which relate to indebtedness that is secured by liens
otherwise permitted under the finance documents) and letters of credit
(other than
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commercial letters of credit), surety bonds or performance bonds, so long
as the bonds are secured on an equal and ratable basis with the
obligation so secured until such obligation is no longer secured;
- liens that are incidental to NRG South Central's business or the business
of Louisiana Generating or any additional guarantor, are not for
borrowing money and are not material, taken as a whole to NRG South
Central business and the business of Louisiana Generating and any
additional guarantor;
- liens arising by action of law;
- liens related to workers' compensation, unemployment insurance and other
social security laws or regulations or other statutory regulations;
- judgment liens in respect of judgments that do not give rise to an event
of default under the indenture or guarantor loan agreement; and
- liens created by the security documents.
Certain Obligations Respecting Subsidiaries
In the event that NRG South Central acquires or creates any new subsidiary
that constitutes a subsidiary under the indenture, NRG South Central must
designate whether the new subsidiary is or is not an "unrestricted subsidiary."
An "unrestricted subsidiary" is any of NRG South Central's subsidiaries
designated by its management committee as an unrestricted subsidiary by
resolution if the following conditions are met:
- the subsidiary has no indebtedness or other liabilities or obligations
other than non-recourse obligations;
- the subsidiary is not party to any agreement, contract, arrangement or
understanding with NRG South Central, Louisiana Generating or with any
additional guarantor. Unless the terms are no less favorable to NRG South
Central, Louisiana Generating or the additional guarantor than those that
might be obtained at the time from persons who are not affiliates of NRG
South Central; and
- neither NRG South Central nor Louisiana Generating nor any additional
guarantor has any direct or indirect obligation to subscribe for
additional equity interests in the subsidiary, to maintain or preserve
the subsidiary's financial condition or to cause the subsidiary to
achieve any specified levels of operating results.
The term "non-recourse obligations" means any indebtedness, obligations or
liabilities as to which none of NRG South Central, Louisiana Generating or any
additional guarantor:
- provides credit support of any kind (including any undertaking, agreement
or instrument that would constitute indebtedness);
- are directly or indirectly liable (as a guarantor or otherwise) other
than pursuant to pledge by NRG South Central of an equity interest in an
unrestricted subsidiary; or
- constitutes the lender.
In addition, no default in such non-recourse obligation may give any holder
of NRG South Central's indebtedness or indebtedness of Louisiana Generating or
any additional guarantor a right to declare a default or accelerate the stated
maturity of such indebtedness.
If, at any time, any unrestricted subsidiary would fail to meet the
requirements above, it will cease to be an unrestricted subsidiary, and for all
other purposes, that subsidiary will be an additional guarantor and any
indebtedness of the subsidiary will be deemed to be incurred by an additional
guarantor as of such date. If that indebtedness is not permitted to be incurred
as of such date under the loan agreement applicable to the additional guarantor,
NRG South Central will be in default under the indenture. NRG South Central's
management committee may at any time designate any unrestricted subsidiary to be
an additional guarantor. This designation will be deemed to be an incurrence of
indebtedness by an additional guarantor of any outstanding indebtedness of the
unrestricted subsidiary, and the designation will only be permitted if the
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indebtedness is permitted under the loan agreement applicable to the additional
guarantor, the requirements of the indenture are complied with and no default or
event of default would occur or be in existence following the designation.
NRG South Central will, or will cause each new subsidiary which is not
designated as an unrestricted subsidiary to do, the following:
- prior to acquiring the subsidiary, NRG South Central will obtain
confirmation from each rating agency that this acquisition will not
result in a ratings downgrade of the bonds;
- the subsidiary will enter into a loan agreement which will contain
material covenants substantially similar to the covenants in the
guarantor loan agreement which restrict the incurrence of indebtedness,
liens, the entry into guarantees, fundamental changes and sales of
assets, restricted payments, certain actions which may violate the
investment company act and certain actions regarding taxation; and
- the subsidiary will enter into a guarantee of payments due on the bonds
that is substantially similar to the guarantee agreement to which
Louisiana Generating is a party.
The term "additional guarantor" means a subsidiary that owns, acquires,
operates, maintains, develops or constructs non-nuclear electric generating or
district energy assets located in the United States which has not been
designated as an unrestricted subsidiary.
Limitation on Fundamental Changes
NRG South Central will not, nor will it permit Louisiana Generating or any
additional guarantor to, enter into any transaction of merger or consolidation,
change its form of organization or business, liquidate, wind-up or dissolve (or
suffer any liquidation or dissolution). However, if at that time, no default
exists or is caused by the transaction, the following is permitted:
- Louisiana Generating, any additional guarantor or any unrestricted
subsidiary may merge into NRG South Central in a transaction in which NRG
South Central is the surviving corporation provided that any debt NRG
South Central assumes in such transaction is permitted under the
indenture;
- Louisiana Generating, any additional guarantor or any unrestricted
subsidiary may merge into Louisiana Generating or an additional guarantor
in a transaction in which the surviving entity is Louisiana Generating or
an additional guarantor and NRG South Central's economic interest in each
merging subsidiary's assets will not be diminished as a result of the
merger; and
- Louisiana Generating or any additional guarantor may liquidate or
dissolve if the assets of that entity are transferred to Louisiana
Generating or an additional guarantor (but only if NRG South Central's
economic interest in these assets would not be diminished as a result)
and if NRG South Central determines in good faith that the liquidation or
dissolution is in its best interests and would not reasonably be expected
to result in a material adverse effect.
Limitation on Sales of Assets
NRG South Central will not sell or otherwise dispose of any assets other
than pursuant to a permitted asset sale.
The term "permitted asset sale" means any of the following transactions:
- disposition of the assets specifically held for resale;
- transfers of assets among NRG South Central, Louisiana Generating and any
additional guarantor;
- sales and dispositions in the ordinary course of business not in excess
of $15.0 million (escalated in accordance with the consumer price index)
in aggregate for NRG South Central, Louisiana Generating and any
additional guarantor in any fiscal year;
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- any sales or dispositions of surplus, obsolete or worn-out equipment or
inventory in the ordinary course of business;
- any sales or dispositions required for compliance with applicable law or
necessary governmental approvals;
- solely when referring to NRG South Central, sales or dispositions of
non-controlling ownership interests in Louisiana Generating and any
additional guarantor so long as the guarantee and the guarantor loan
agreement or other loan agreement with regard to such guarantor stays in
effect;
- solely when referring to NRG South Central, sales or dispositions of
ownership interests in unrestricted subsidiaries;
- any sales or dispositions of assets permitted under the indenture or
guarantor loan agreement as a permitted fundamental change; and
- any other sale or other disposition so long as after giving effect to
such events, the rating agencies confirm their respective ratings of the
bonds in effect immediately prior to such sale or other disposition.
Limitation on Business Activities
NRG South Central will not engage in any activities other than (a) the
acquisition and ownership of Louisiana Generating, any additional guarantor or
any unrestricted subsidiary as permitted by the indenture, provided that prior
to acquiring or creating any such additional guarantor, NRG South Central will
obtain a confirmation from each rating agency that such acquisition will not
result in a ratings downgrade of the bonds, and (b) the development,
acquisition, construction, operation and maintenance of any non-nuclear electric
generating or district energy assets in the United States provided that prior to
acquiring or constructing any such additional assets, NRG South Central will
obtain a confirmation from each rating agency that such acquisition or
construction will not result in a ratings downgrade of the bonds and (c)
activities contemplated by the indenture and the other finance documents and
activities incidental thereto.
Limitation on Transactions with Affiliates
NRG South Central will not enter into any transaction or series of related
transactions with any of its affiliates except:
- transactions in the ordinary course of business at prices and on terms
and conditions not less favorable than a comparable transaction entered
into on an arm's length basis;
- transactions between or among NRG South Central, Louisiana Generating and
any additional guarantor not involving any other affiliate;
- any restricted payment permitted under the indenture; and
- entering into the transaction documents or any extension, renewal or
replacement thereof that would not reasonably be expected to have a
material adverse effect.
Limitation on Investments
NRG South Central will not, directly or indirectly, make investments, loans
or advances or acquire the stock, obligations or securities of any person except
that it may:
- make operating deposits with banks;
- invest in cash equivalents;
- make loans to Louisiana Generating with the funds borrowed in accordance
with the indenture or otherwise on deposit in the revenue account;
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- make investments in unrestricted subsidiaries with funds that NRG South
Central could otherwise distribute in accordance with the indenture or
otherwise with the proceeds of additional equity contributions to NRG
South Central made explicitly for this purpose;
- make investments in Louisiana Generating or any additional guarantor;
- make investments in another person, if as a result of such investment (a)
such other person becomes an additional guarantor or (b) such other
person is merged or consolidated with or into, or transfers or conveys
all or substantially all of its assets to NRG South Central, Louisiana
Generating or any additional guarantor;
- make investments representing capital stock or obligations issued to NRG
South Central in settlement of claims against any other person by reason
of a composition or readjustment of debt or a reorganization of any
debtor of ours;
- keep investments that were outstanding on March 31, 2000;
- hold as investments cash proceeds acquired by NRG South Central in
connection with any asset sale permitted under the indenture;
- make any investment to the extent that the consideration therefore is NRG
South Central's capital stock (other than redeemable capital stock);
- use amounts constituting restricted payments which NRG South Central
would otherwise be permitted to make under the indenture; and
- make additional investments up to but not exceeding $10.0 million
(escalated in accordance with the consumer price index) in the aggregate
outstanding at any one time among NRG South Central, Louisiana Generating
and any additional guarantor.
For purposes of the immediately preceding "bullet-point" above, the
aggregate amount of an investment at any time will be deemed to be equal to (a)
the aggregate amount of cash, together with the aggregate fair market value of
property, including any securities, loaned, advanced, contributed, transferred
or otherwise invested that gives rise to such investment minus (b) the aggregate
amount of dividends, distributions or other payments received in cash or other
property in respect of such investment; the amount of an investment shall not in
any event be reduced by reason of any write-off of such investment nor increased
by any increase in the amount of earnings retained in the person in which such
investment is made that have not been dividended, distributed or otherwise paid
out.
The term "cash equivalents" means investments in securities or other
instruments that are: (a) direct obligations of the United States, or any agency
thereof; (b) obligations fully guaranteed by the United States or any agency
thereof; (c) certificates of deposit or bankers acceptances issued by commercial
banks (including the bond trustee or any of its affiliates) organized under the
laws of the United States or any political subdivision thereof or under the laws
of Canada, Japan or Switzerland or any country that is a member of the European
Economic Community having a combined capital and surplus of at least $250.0
million and having long-term unsecured debt securities rated "A" or better by
S&P and "A2" or better by Moody's (but at the time of investment not more than
$25.0 million may be invested in these certificates of deposit from any one
bank); (d) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (a) and (b) above,
entered into with any financial institution meeting the qualifications specified
in clause (c) above; (e) open market commercial paper of any corporation
incorporated or doing business under the laws of the United States or of any
political subdivision thereof having a rating of at least "A-1" from S&P and
"P-1" from Moody's (but at the time of investment not more than $25.0 million
may be invested in commercial paper from any one company); (f) auction rate
securities or money market preferred stock having one of the two highest ratings
obtainable from S&P and Moody's (or, if at any time neither S&P or Moody's may
be rating such obligations, then from another nationally recognized rating
service acceptable to the bond trustee); or (g) investments in money market
funds or money market mutual funds sponsored by any securities broker dealer of
recognized national standing (or an affiliate thereof), having an investment
policy that requires substantially all the invested assets of the
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fund to be invested in investments described in any one or more of the foregoing
clauses and having a rating of "A" or better by S&P and "A2" or better by
Moody's (including money market funds for which the depositary bank in its
individual capacity or any of its affiliates is investment manager or adviser).
Restrictions on Guarantees
NRG South Central will not, contingently or otherwise, be or become liable,
directly or indirectly, in connection with any obligation guaranteeing in any
manner any indebtedness or similar obligation of any other person, except for:
- endorsements and similar obligations in the ordinary course of business;
- guarantees existing on March 31, 2000; and
- guarantees to NRG Power Marketing, Louisiana Generating, any additional
guarantor or any other entity which has entered into a power marketing
agreement with NRG South Central, Louisiana Generating or any additional
guarantor provided that, solely with respect to such other entity, both
rating agencies confirm that such guarantee will not result in a
downgrade of the then current rating of the bonds, entered into by NRG
South Central in the ordinary course of business in connection with fuel
procurement, sales or purchases of power and emissions credits directly
related to the Cajun facilities, NRG South Central's generating assets or
the generating assets of any additional guarantor, so long as these
activities are not for speculative purposes.
Limitations on the Modification of Certain Documents
NRG South Central will not enter into or grant any amendment, waiver,
consent or change or modification, or permit the cancellation or termination of,
any project document, unless this action would not reasonably be expected to
result in a material adverse effect or is otherwise permitted under the
indenture. NRG South Central will not consent to, enter into or grant any
amendment, waiver, consent, change or modification to the finance documents, or
assign any of its obligations under the documents, except as permitted in the
indenture.
Limitations on Assignment of Obligations and Additional Agreements
NRG South Central will not assign any of its rights or obligations under
any material project document or enter into any material additional project
document, other than assignments to the collateral agent, unless:
- NRG South Central provides an officer's certificate certifying that the
transactions contemplated by the assignment or additional project
document would not reasonably be expected to result in a material adverse
effect; or
- each rating agency confirms in writing that the assignment of or entering
into this additional project document would not result in a ratings
downgrade of the bonds.
Other Covenants
The indenture also contains other covenants, including NRG South Central's
obligations to:
- pay all taxes and claims;
- maintain books and records;
- permit inspection of its properties and books of record and account;
- cause Louisiana Generating to maintain its EWG status; and
- comply with requests for information from the rating agencies and not
request that the rating agencies stop rating the bonds.
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Indenture Events of Default
The indenture provides that each of the following constitutes an event of
default, whatever the reason for the event, whether it is voluntary or
involuntary or comes about by operation of law, or is pursuant to or in
compliance with any applicable law:
- NRG South Central defaults in the payment of any principal of, premium
(if any) or interest on any bond when that amount becomes due and
payable, whether by scheduled maturity or required repayment or
redemption or by acceleration or otherwise, for 15 days or more;
- an event of default has occurred and is continuing under the guarantor
loan agreement or any other loan agreement between NRG South Central or
Louisiana Generating and an additional guarantor;
- NRG South Central defaults in the performance or observance of any of its
covenants or agreements under the indenture with respect to maintenance
of existence, payment of taxes, permitted indebtedness, permitted liens,
guarantees, business activities, fundamental changes, sales of assets,
changes to finance documents or project documents, restricted payments
and compliance with the investment company act and such default shall
continue uncured for at least 30 days from the earliest of: (a) the date
that one of NRG South Central's executive officers obtains actual
knowledge of the default and (b) the date on which the executive officer
receives written notice from the bond trustee, the collateral agent or
any bondholder of the default;
- NRG South Central defaults in the performance or observance of any of its
covenants or material obligations under the indenture, which default is
not otherwise expressly defined as an event of default, and the default
continues uncured for more than 30 days from the earliest of: (a) the
date that one of NRG South Central's executive officers obtains actual
knowledge of the default and (b) the date on which the officer receives
written notice from the bond trustee, the collateral agent or any
bondholder of the default. However, if NRG South Central commences and
diligently pursues efforts to cure the default within the 30 day period
and delivers written notice of the default, NRG South Central will be
given 60 days following the end of the initial 30 day period to cure the
default, so long as NRG South Central is diligently pursuing a cure;
- NRG South Central (a) applies for, authorizes, approves or consents to
the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of NRG South Central or all or a
substantial part of its property, (b) admit in writing its inability or
be generally unable to pay its debts as they become due, (c) make a
general assignment for the benefit of its creditors, (d) commence a
voluntary case under the federal bankruptcy code, (e) file a petition
seeking to take advantage of any other debtor relief law, (f) fail to
controvert in a timely and appropriate manner, or acquiesce in writing
to, any petition filed against it in an involuntary case under the
federal bankruptcy code or any other debtor relief law or (g) take any
action for the purpose of effecting any of the foregoing including,
without limitation, commencing a shareholder vote in connection with any
of the foregoing;
- a proceeding or case is commenced without application or consent in a
court of competent jurisdiction, seeking (a) NRG South Central's
liquidation, reorganization, dissolution, winding-up or the composition
or readjustment of debts or (b) the appointment of a trustee, receiver,
custodian, liquidator or similar official for NRG South Central on all or
a substantial part of its property under any debtor relief law, and such
proceeding or case continues undismissed or an order, judgment or decree
approving any of the foregoing is entered and continues unstayed and in
effect for 60 or more consecutive days, or any order for relief against
NRG South Central is entered in any involuntary case under the federal
bankruptcy code or any other debtor relief law;
- an event described in the preceding two "bullet points" occurs with
respect to NRG Energy, NRG Power Marketing, NRG Operating Services, a
material power purchaser or a material fuel supplier, in each case to the
extent such person is a party to any material project document, and
remains uncured for the grace periods provided in those clauses. However,
such an event shall not be an event of default if within the following 60
day period, either NRG South Central or Louisiana Generating enters into
a replacement agreement substantially similar to the original agreement.
Further, such an event with
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respect to any such entity will not constitute an event of default if
each rating agency confirms that such event will not result in a
downgrade of the then current rating of the bonds;
- any security document to which NRG South Central is a party ceases to be
in full force and effect or, except to the extent permitted by the terms
of any security document, any lien purported to be granted by the
document with respect to any collateral described in the document shall
cease to be a valid and perfected lien in favor of the collateral agent
with the priority purported to be created by the document, and such
cessation has resulted in a material adverse effect. However, NRG South
Central will have 30 days from the earliest to occur of: (a) the date
that one of its authorized officers obtains actual knowledge of the
cessation and (b) the officer receives written notice from the bond
trustee, the collateral agent or any bondholder of such default, to cure
the cessation or to furnish to the collateral agent all documents or
instruments required to cure the cessation;
- any of NRG South Central's indebtedness for borrowed money in an amount
exceeding $15.0 million (escalated in accordance with the consumer price
index) (other than any amount due under or pursuant to the finance
documents) is required to be prepaid, or is declared to be due and
payable, other than by scheduled required payment, prior to the stated
maturity of the indebtedness, as the result of the acceleration of the
stated maturity of the indebtedness following an event of default under
the terms of the indebtedness. However, such default and acceleration
shall only constitute an event of default under the indenture if it has
not been annulled or rescinded within 30 days and remains in effect with
respect to such indebtedness;
- the entry of one or more final and non-appealable judgments for the
payment of money in an aggregate amount in excess of $25.0 million
(escalated in accordance with the consumer price index) (exclusive of
amounts fully covered by insurance or indemnity) is rendered against NRG
South Central and the same shall remain unstayed or unpaid for a period
of 60 or more consecutive days;
- any material finance document to which NRG South Central is a party is
declared in a final non-appealable judgment to be unenforceable against
NRG South Central, or NRG South Central shall have expressly repudiated
its obligations under the document and ceased to perform the obligations,
or defaulted in the performance or observance of any of its material
obligations under the document and this default has continued unremedied
for five business days or more;
- any material project document to which NRG South Central is a party
ceases to be valid and binding and in full force and effect (other than
as permitted or contemplated under the indenture), any third party
thereto denies that it has any liability or obligation under any such
material project document and the third party ceases performance under
the document, or any third party is in default under any such material
project document, and in each case such cessation or default has resulted
or would reasonably be expected to result in a material adverse effect.
However, no such event will be an indenture event of default if (a)
within 180 days from the occurrence of such event NRG South Central
causes the third party to reaffirm the disaffirmed provisions or resume
performance (as the case may be) or NRG South Central enters into a
replacement document substantially similar to the original document or
(b) each rating agency confirms that such event will not result in a
downgrade of the then current rating of the bonds;
- either Louisiana Generating shall voluntarily abandon all the Cajun
facilities for 60 consecutive days or any event occurs that causes all of
the Cajun facilities to be damaged, destroyed or rendered unfit for
normal use, or any compulsory transfer or taking of all the Cajun
facilities by any governmental authority for which neither NRG South
Central nor Louisiana Generating receives loss proceeds and, in each
case, such event has or would reasonably be expected to result in a
material adverse effect. However, the occurrence of such an event
(excluding abandonment by Louisiana Generating) will not be an event of
default if, within 30 days of the event, there exists an approved
restoration plan for the remediation of such damage, loss or taking; and
- any governmental approval required for the operation of the Cajun
facilities is revoked, terminated, withdrawn or ceases to be in full
force and effect if such revocation, termination, withdrawal or
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cessation would reasonably be expected to have a material adverse effect.
However, no such event will be an event of default if within 60 days from
its occurrence NRG South Central or Louisiana Generating diligently
pursues in good faith and (a) obtains an additional governmental approval
in substitution or replacement or (b) causes such governmental approval
to be reissued. Such event also shall not be an event of default for an
additional 30 days following the expiration of the initial 60 day period
if within the original 60 day period the default has not been cured but
NRG South Central or Louisiana Generating, as the case may be, continue
to diligently pursue in good faith the items set forth in clauses (a) and
(b) above during such additional 30 day period.
Enforcement
If any event of default under the indenture occurs and is continuing, upon
written direction of bondholders holding not less than 33 1/3% (in the case of
the event of default specified in the first "bullet-point" under "-- Indenture
Events of Default" above) or greater than 50% (in the case of all other events
of default under "-- Indenture Events of Default" above) of the aggregate
principal amount of the bonds outstanding, will (a) declare, by written notice
to NRG South Central, the entire outstanding principal amount of all premiums
(if any) and accrued interest and all other amounts due on the bonds to be due
and payable immediately and (b) proceed to enforce all remedies available to the
bond trustee and collateral agent under the indenture and the other documents to
which the bond trustee or collateral agent is a party or available under
applicable law. The bondholders may not enforce the indenture or the bonds
except as provided in the indenture.
No bondholder shall have any right to institute any proceeding for a remedy
under the indenture unless:
- the bondholder has previously given to the bond trustee written notice of
the occurrence and continuance of an event of default;
- bondholders holding the percentage of the aggregate principal amount of
outstanding bonds needed to initiate the exercise of remedies have a made
written request to the bond trustee to institute the proceeding;
- the bond trustee has failed to institute the proceeding within 60 days
after the receipt of the notice; and
- no direction inconsistent with the written request has been given to the
bond trustee during the 60 day period by the bondholders holding a
majority in aggregate principal amount of the outstanding bonds.
The right of any bondholder, which is absolute and unconditional, to
receive payment of the principal of, premium (if any) and interest on its bonds
on or after the due date therein expressed, or to institute suit for the
enforcement of the payment on or after the due date, or NRG South Central's
obligation, which is also absolute and unconditional, to pay the principal of,
premium (if any) and interest on each of the bonds to the bondholder at the time
and place set forth in the bonds, will not be impaired or affected without the
consent of the bondholder.
Legal Defeasance and Covenant Defeasance
Legal and covenant defeasance are permitted upon terms and conditions
customary for transactions of this nature.
Satisfaction and Discharge
NRG South Central may terminate the indenture by delivering all outstanding
bonds to the bond trustee for cancellation and by paying all other sums payable
under the indenture.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, with the consent
of the bondholders holding greater than 50% in aggregate principal amount of the
bonds of all series then outstanding, considered as one class, NRG South Central
and the bond trustee may amend or supplement the indenture for the purpose of
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adding any mutually agreeable provisions to, or changing in any manner or
eliminating any of the provisions of, the indenture.
However, if there are bonds of more than one series outstanding and if a
proposed supplemental indenture directly affects the rights of the holders of
one or more, but less than all, of such series, then the consent of only the
holders of not less than a majority in aggregate principal amount of the
outstanding bonds of any series so directly affected will be required.
Without the consent of each bondholder affected, no supplemental indenture
shall (with respect to any bonds held by a non-consenting bondholder):
- reduce the principal amount of bonds whose holders must consent to a
supplement or waiver;
- change the principal of or change the fixed maturity of any bond or alter
certain provisions with respect to the redemption of the bonds;
- change the rate of or change the time for payment of interest on any
bond;
- waive a default or an event of default in the payment of principal of,
premium, if any, or interest on the bonds;
- permit the creation of any lien prior to or, except as permitted by the
indenture, pari passu with the lien of the collateral documents with
respect to any collateral or deprive any holder of the security afforded
by the lien of the collateral documents;
- waive a redemption payment with respect to any bond; or
- make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of the bondholders, NRG
South Central may enter into one or more supplemental indentures in form
satisfactory to the bond trustee for the following purposes:
- establishing the form and terms of bonds of any series permitted under
the indenture;
- evidencing the succession of another entity to NRG South Central and the
assumption by any such successor to NRG South Central's covenants in the
indenture;
- evidencing the succession of a new bond trustee pursuant to the
indenture;
- adding further covenants, restrictions, conditions or provisions as the
board of directors shall consider to be for the protection of the
holders, and to make the occurrence, or the occurrence and continuance of
a default in any such additional covenants, restrictions, conditions or
provisions an event of default permitting the enforcement of all or any
of the several remedies provided in the indenture;
- conveying, transferring and assigning to the bond trustee properties or
assets to secure the bonds, and to correct or amplify the description of
any property at any time subject to the indenture or the security
documents or to assure, convey and confirm unto the bond trustee any
property subject or required to be subject to the indenture or the
security documents;
- modifying, eliminating or adding to the provisions of the indenture to
such extent as shall be necessary to qualify, requalify or continue the
qualification of the indenture (including any supplemental indenture)
under the Trust Indenture Act, or under any similar United States federal
statute hereafter enacted, and to add to the indenture such other
provisions as may be expressly permitted by the Trust Indenture Act,
excluding, however, the provisions referred to in Section 316(a)(2) of
the Trust Indenture Act as in effect at the date as of which this
instrument was executed or any corresponding provision in any similar
United States federal statute hereafter enacted;
- permitting or facilitating the issuance of bonds in uncertificated form;
- changing or eliminating any provision of the indenture or the security
documents. However, if such change or elimination will adversely affect
the interests of the holders of the bonds of any series, such change or
elimination will not become effective with respect to such series;
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- curing any ambiguity, correcting or supplementing any provision in the
indenture or the security documents that may be defective or inconsistent
with any other provision, or making any other provisions with respect to
matters or questions arising under the indenture or the security
documents. Such action must not adversely affect the interest of the
bondholders of any series in any material respect; or
- providing for the issuance of exchange securities, as contemplated by the
registration rights agreement, and to make such other changes to the
indenture or the security documents as NRG South Central's board of
directors determines are necessary or appropriate in connection
therewith. Such actions must not adversely affect the interests of the
bondholder of any series in any material respect.
Transfer and Exchange
A bondholder may transfer or exchange bonds in accordance with the
indenture. The registrar and the bond trustee may require a bondholder, among
other things, to furnish appropriate endorsements and transfer documents and the
registrar may require a bondholder to pay any taxes and fees required by law or
permitted by the indenture.
The registered bondholder will be treated as the owner of the bonds for all
purposes.
GUARANTEE
Pursuant to a guarantee issued by Louisiana Generating in favor of the
bondholders, Louisiana Generating unconditionally and irrevocably guarantees the
payment of principal of, premium (if any) and interest on the bonds. The
guarantee is a guarantee of payment and the bond trustee will be entitled to
make demands for payment under the guarantee any time that amounts due and
payable on the bonds have not been paid. The guarantee is secured by the
collateral described under "Description of the Bonds -- Collateral."
GUARANTOR LOAN AGREEMENT
General
Pursuant to the guarantor loan agreement, Louisiana Generating issued a
promissory note payable to NRG South Central. Payment on this note will be made
in amounts which are sufficient to enable NRG South Central to pay scheduled
principal of, and interest on, the bonds.
Mandatory Prepayment
Louisiana Generating is required to prepay its note if it receives loss
proceeds, proceeds from a title event or proceeds of power contract buy-outs to
the extent that NRG South Central is required to redeem the bonds in connection
with the receipt of such proceeds as required under the indenture. See
"Description of the Bonds -- Redemption and Repurchase -- Mandatory Redemption."
Covenants
The guarantor loan agreement contains various covenants, including the
following:
Information Requirements
Louisiana Generating will furnish or cause to be furnished to NRG South
Central:
- within 10 days of receiving notice of the occurrence of any litigation,
claim, proceeding or controversy pending, or the receipt by Louisiana
Generating of a written threat of the same involving or affecting
Louisiana Generating or the Cajun facilities that would reasonably be
expected to result in a material adverse effect, notice of the same;
- copies of all material notices delivered in connection with any project
document or otherwise in connection with the Cajun facilities; and
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- all other information reasonably requested by NRG South Central to enable
it to satisfy its obligations under the indenture.
Maintenance of Existence
Louisiana Generating will at all times preserve and maintain in full force
and effect its legal existence as a limited liability company in good standing
under the laws of the State of Delaware and its qualification to do business in
each other jurisdiction, as necessary, except where a failure to be so qualified
would not reasonably be expected to result in a material adverse effect. The
foregoing will not prohibit any merger, consolidation, liquidation or
dissolution permitted under the guarantor loan agreement, nor prohibit Louisiana
Generating from changing its status as a limited liability company if the rating
agencies confirm the change will not result in a downgrade of the then current
rating of the bonds. Louisiana Generating will not amend its certificate of
formation or any other organizational document unless the change is in
connection with permitted changes described above or in connection with a name
change.
Compliance with Laws and Governmental Approvals
Louisiana Generating will comply with all laws, rules, regulations and
orders of any governmental authority (including environmental laws) and any
governmental approvals and obtain all governmental approvals necessary for the
transaction of its business, except where the failure to do so would not
reasonably be expected to result in a material adverse effect.
Performance under Transaction Documents
Louisiana Generating will perform all its material covenants and agreements
contained in any transaction document to which it is a party, except where
nonperformance would not reasonably be expected to result in a material adverse
effect.
Maintenance of Project/Title to Assets/Limitation on Sale of Assets
Louisiana Generating will maintain and operate the Cajun facilities in
accordance with prudent independent power industry practice. Louisiana
Generating will preserve and maintain good, valid and marketable title or
leasehold rights to its mortgaged properties and assets constituting part of the
collateral, which shall be subject only to the liens as permitted under the
guarantor loan agreement, except where the failure to do so would not reasonably
be expected to result in a material adverse effect. (See "-- Limitation on
Liens" below.) Louisiana Generating will only sell, lease, transfer, assign or
otherwise dispose of any of its assets in a permitted asset sale.
Insurance
Louisiana Generating will at all times maintain, with financially sound,
responsible and reputable insurance companies, and provide satisfactory evidence
of, insurance in such amounts (subject to reasonable and customary deductibles
and sublimits) and with terms and conditions in accordance with prudent
independent power industry practice. All policies (other than workers'
compensation) will name the collateral agent and the bond trustee as loss payee
or additional insured.
Revenue Account
Louisiana Generating will cause each of the following amounts to be
deposited into the revenue account:
- all revenues related to the Cajun facilities;
- all proceeds received from the sale of assets related to the Cajun
facilities (other than proceeds of sales of the assets specifically held
for resale); and
- all loss proceeds, proceeds received in connection with a title event or
proceeds in connection with a buy-out of a power supply agreement in each
case received by it.
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Limitation on Incurrence of Indebtedness
Louisiana Generating will not create, incur, or suffer to exist any
indebtedness, except permitted guarantor indebtedness.
The term "permitted guarantor indebtedness" means any of the following
items of indebtedness:
- any indebtedness that Louisiana Generating may incur under the guarantor
loan agreement;
- indebtedness outstanding on March 31, 2000;
- indebtedness related to permitted liens;
- indebtedness owed to NRG South Central pursuant to any intercompany notes
that have been pledged to the collateral agent;
- indebtedness to any additional guarantor;
- indebtedness represented by hedging agreements permitted by the guarantor
loan agreement which are entered into in the ordinary course of business
and not for speculative purposes;
- indebtedness in respect of letters of credit, surety bonds or performance
bonds issued in the ordinary course of business;
- trade or other similar indebtedness incurred in the ordinary course of
business (but not in any case for borrowed money);
- other senior indebtedness, not to exceed $15.0 million outstanding at any
one time (escalated in accordance with the consumer price index); and
- indebtedness related to Louisiana Generating's obligations to establish
certain funds under power supply agreements with the distribution
cooperatives.
Limitation on Restricted Payments
Louisiana Generating will not declare nor make any restricted payments
unless the conditions for the declaration or payment of restricted payments
under the indenture have been satisfied.
Limitation on Liens
Louisiana Generating will not create or suffer to exist any lien with
respect to any of its properties, other than permitted liens.
Limitation on Fundamental Changes
Louisiana Generating will not enter into any transaction of merger or
consolidation, change its form of business, liquidate, wind-up or dissolve (or
suffer any liquidation or dissolution) except that, if, at that time, no default
shall have occurred and be continuing or will be caused by the transaction, the
following will be permitted:
- Louisiana Generating may merge into NRG South Central in a transaction in
which NRG South Central is the surviving entity;
- Louisiana Generating may merge into an additional guarantor in a
transaction in which the surviving entity is an additional guarantor and
NRG South Central's economic interest in Louisiana Generating's assets
will not be diminished as a result of such merger; and
- Louisiana Generating may liquidate or dissolve if its assets are
transferred to an additional guarantor (but only if NRG South Central's
economic interest in these assets is not diminished as a result) and if
Louisiana Generating determines in good faith that the liquidation or
dissolution is in its best interests and is not materially
disadvantageous to the bondholders.
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Limitation on Sales of Assets
Louisiana Generating will not sell or otherwise dispose of any assets other
than pursuant to a permitted asset sale.
Limitation on Business Activities
Louisiana Generating will not engage in any activities other than (a) the
acquisition, ownership, operation and maintenance of the Cajun facilities and
the acquisition of the balance of the assets governed by the joint ownership and
operating agreement for Big Cajun II, Unit 3 (and in each case activities
incidental or related thereto), (b) the acquisition and ownership of any
additional guarantors as permitted by the guarantor loan agreement provided
that, prior to acquiring or creating any such additional guarantor, Louisiana
Generating obtains a confirmation from each rating agency that such acquisition
will not result in a ratings downgrade of the bonds and (c) those activities
contemplated by the guarantor loan agreement and the other finance documents and
activities incidental to these documents.
Limitation on Transactions with Affiliates
Louisiana Generating will not enter into any transaction or series of
related transactions with any of its affiliates except:
- transactions in the ordinary course of business on prices and on terms
and conditions not less favorable than a comparable transaction entered
into on an arms' length basis;
- transactions between or among NRG South Central and any additional
guarantor not involving any other affiliate;
- any restricted payment permitted under the indenture; and
- entering into the transaction documents or any extension, renewal or
replacement thereof that would not reasonably be expected to result in a
material adverse effect.
Limitation on Investments
Louisiana Generating will not, directly or indirectly, make investments,
loans or advances or acquire the stock, obligations or securities of any person,
except that Louisiana Generating may:
- maintain investments outstanding on March 31, 2000;
- make operating deposits with banks;
- invest in permitted cash equivalents;
- make loans to any additional guarantor with funds borrowed by NRG South
Central in accordance with the indenture that NRG South Central loans to
Louisiana Generating or otherwise on deposit in the revenue account;
- make investments in any additional guarantor;
- make investments in another person, if as a result of such investment (a)
such other person becomes an additional guarantor or (b) such other
person is merged or consolidated with or into, or transfers or conveys
all or substantially all of its assets to Louisiana Generating or an
additional guarantor;
- make investments representing capital stock or obligations issued to
Louisiana Generating in settlement of claims against any other person by
reason of a composition or readjustment of debt or a reorganization of
any debtor of Louisiana Generating;
- hold as investments any non-cash proceeds acquired by Louisiana
Generating in connection with any asset sale permitted under the
guarantor loan agreement;
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- make any investment to the extent that the consideration therefor is
capital stock (other than redeemable capital stock) of Louisiana
Generating;
- make investments consisting of security deposits with utilities and other
persons made in the ordinary course of business;
- enter into hedging agreements in the ordinary course of business and not
for speculative purposes;
- invest amounts constituting restricted payments which Louisiana
Generating would otherwise be permitted to make under the indenture; and
- make additional investments up to but not exceeding $10.0 million
(escalated in accordance with the consumer price index) in the aggregate
outstanding at any one time among NRG South Central, Louisiana Generating
and any additional guarantor.
For purposes of the immediately preceding "bullet-point" above, the
aggregate amount of an investment at any time will be deemed to be equal to (a)
the aggregate amount of cash, together with the aggregate fair market value of
property, including any securities, loaned, advanced, contributed, transferred
or otherwise invested that gives rise to such investment minus (b) the aggregate
amount of dividends, distributions or other payments received in cash or other
property in respect of such investment; the amount of an investment shall not in
any event be reduced by reason of any write-off of such investment nor increased
by any increase in the amount of earnings retained in the person in which such
investment is made that have not been dividended, distributed or otherwise paid
out.
Restrictions on Guarantees
Louisiana Generating will not, contingently or otherwise, be or become
liable, directly or indirectly, in connection with any obligation guaranteeing
in any manner any indebtedness or similar obligation of any other person, except
for:
- endorsements and similar obligations in the ordinary course of business;
- the guarantee in favor of the bonds; and
- guarantees or contingent obligations existing on March 31, 2000.
Limitations on the Modification of Certain Documents
Louisiana Generating will not consent to, enter into or grant any
amendment, waiver, consent or change or modification, or permit the cancellation
or termination of, any project document, unless such action would not reasonably
be expected to result in a material adverse effect or is otherwise permitted
under the guarantor loan agreement. Louisiana Generating will not consent to,
enter into or grant any amendment, waiver, consent, change or modification to
the finance documents, or assign any of its obligations under the finance
documents, except as permitted in the guarantor loan agreement.
Limitations on Assignment of Obligations and Additional Agreements
Louisiana Generating will not assign any of its rights or obligations under
any material project document, other than assignments to the collateral agent,
or enter into any additional material project document unless:
- Louisiana Generating certifies that the transactions contemplated by the
assignment or additional project document would not reasonably be
expected to result in a material adverse effect; or
- each rating agency confirms in writing that the assignment or entering
into the additional project document would not result in a ratings
downgrade of the bonds.
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Other Covenants
The guarantor loan agreement also contains certain other covenants,
including Louisiana Generating's obligations to:
- pay all taxes and claims;
- maintain books and records;
- permit inspection of its properties and books of record and account; and
- maintain its EWG status.
Guarantor Events of Default
Each of the following events, whatever the reason for the event and whether
it is voluntary or involuntary or shall come about or be affected by operation
of law, or be pursuant to or in compliance with any applicable law, is an event
of default under the guarantor loan agreement:
- Louisiana Generating defaults in the payment of any principal of, premium
(if any) or interest on any intercompany loan when that amount becomes
due and payable, whether by scheduled maturity or required redemption or
by acceleration or otherwise, for 15 days or more;
- an event of default under the indenture shall have occurred and be
continuing;
- Louisiana Generating defaults in the performance or observance of any
covenant or agreement under the guarantor loan agreement with respect to
maintenance of existence, payment of taxes, permitted indebtedness,
permitted liens, guarantees, business activities, fundamental changes,
sales of assets, changes to finance documents or project documents,
restricted payments and compliance with the investment company act and
such default shall continue uncured for at least 30 days from the
earliest to occur of: (a) the date on which one of Louisiana Generating's
executive officers obtains actual knowledge of the failure and (b) the
date on which the officer receives written notice from the bond trustee,
collateral agent or bondholder of the default;
- Louisiana Generating defaults in the performance or observance of any of
its covenants or material obligations under the guarantor loan agreement,
which default is not otherwise expressly defined as an event of default,
and the default continues uncured for at least 30 days from the earliest
of: (a) the date on which one of Louisiana Generating's executive
officers obtains actual knowledge of such failure and (b) the date on
which the officer receives written notice from the bond trustee,
collateral agent or bondholder of the default. However, if Louisiana
Generating commences and diligently pursues efforts to cure the default
within the 30 day period and delivers written notice of the default to
the bond trustee, Louisiana Generating will be given 60 days following
the end of the initial 30 day period to cure the default, so long as it
is diligently pursuing a cure;
- Louisiana Generating (a) applies for or authorizes or approves or
consents to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or all or a
substantial part of its property, (b) admits in writing its inability or
is generally unable to pay its debts as such debts become due, (c) makes
a general assignment for the benefit of its creditors, (d) commences a
voluntary case under the federal bankruptcy code, (e) files a petition
seeking to take advantage of any other debtor relief law, (f) fails to
controvert in a timely and appropriate manner, or acquiesce in writing
to, any petition filed against it in an involuntary case under the
federal bankruptcy code or any other debtor relief law or (g) takes any
action for the purpose of effecting any of the foregoing including,
without limitation, commencing a shareholder vote in connection with any
of the foregoing;
- a proceeding or case is commenced without the application or consent of
Louisiana Generating in any court of competent jurisdiction, seeking (a)
its liquidation, reorganization, dissolution, winding-up or the
composition or readjustment of its debts or (b) the appointment of a
trustee, receiver, custodian, liquidator or similar official for
Louisiana Generating or all or a substantial part of its property under
any debtor relief law and such proceeding or case continues undismissed
or any order, judgment or
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decree approving any of the foregoing is entered and continues unstayed
and in effect for 60 or more consecutive days, or any order for relief
against Louisiana Generating is entered in any involuntary case under the
federal bankruptcy code or any other debtor relief law;
- any security document to which Louisiana Generating is a party ceases to
be in full force and effect or, except to the extent permitted by the
terms of any security document, any lien purported to be granted thereby
with respect to any guarantor collateral described therein shall cease to
be a valid and perfected lien in favor of the collateral agent with the
priority purported to be created by the document and such cessation has
resulted in a material adverse effect. However, Louisiana Generating will
have 30 days from the earliest to occur of: (a) the date on which one of
Louisiana Generating's executive officers obtains actual knowledge of the
default and (b) the date on which the officer receives written notice
from the bond trustee, collateral agent or bondholder of the default, to
cure the cessation or to furnish to the collateral agent all documents or
instruments required to cure the cessation;
- indebtedness of Louisiana Generating for borrowed money in an amount
exceeding $15.0 million (escalated in accordance with the consumer price
index) (other than any amount due under or pursuant to the finance
documents) is required to be prepaid, or shall be declared to be due and
payable, other than by scheduled required payment, prior to the stated
maturity of the indebtedness, as the result of the acceleration of the
stated maturity of the indebtedness following an event of default under
the terms of the indebtedness. However, such default and acceleration
will only constitute an event of default under the guarantor loan
agreement if it has not been annulled or rescinded within 30 days and
remains in effect with respect to the indebtedness;
- the entry of one or more final and non-appealable judgments for the
payment of money in an aggregate amount in excess of $25.0 million
(escalated in accordance with the consumer price index) (exclusive of
amounts fully covered by insurance or indemnity) against Louisiana
Generating and the same remains unstayed or unpaid for a period of 60 or
more consecutive days;
- any material finance document to which Louisiana Generating is a party is
declared in a final non-appealable judgment to be unenforceable against
Louisiana Generating, or Louisiana Generating has expressly repudiated
its obligations thereunder and ceased to perform such obligations, or
defaulted in the performance of any of its material obligations
thereunder and this default has continued for at least five business
days;
- any material project document to which Louisiana Generating is a party
ceases to be valid and binding (other than as permitted or contemplated
under the guarantor loan agreement), any third party thereto denies that
it has any liability or obligation under any such material project
document, or any third party is in default under any such document and in
each case such cessation or default has resulted or would reasonably be
expected to result in a material adverse effect. However, no such event
will be a guarantor event of default if (a) within 180 days from the
occurrence of such event Louisiana Generating causes the third party to
reaffirm the disaffirmed provisions or resume performance (as the case
may be) or enters into a replacement document substantially similar to
the original document or (b) each rating agency confirms that such event
will not result in a downgrade of the then current rating of the bonds;
- either Louisiana Generating voluntarily abandons all the Cajun facilities
for 60 consecutive days or any event occurs that causes all the Cajun
facilities to be damaged, destroyed or rendered unfit for normal use, or
any compulsory transfer or taking of any material part of the Cajun
facilities by any governmental authority occurs for which neither NRG
South Central nor Louisiana Generating receive loss proceeds and, in each
case, such event has or would reasonably be expected to result in a
material adverse effect. However, the occurrence of such an event
(excluding abandonment by Louisiana Generating) will not be a guarantor
event of default if there exists an approved restoration plan for the
remediation of such damage, loss or taking within 30 days of the event;
- any governmental approval required for the operation of the Cajun
facilities is revoked, terminated, withdrawn or ceases to be in full
force and effect if such revocation, termination, withdrawal or
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cessation would reasonably be expected to result in a material adverse
effect. However, no such event will be a guarantor event of default if
within 60 days Louisiana Generating diligently pursues in good faith and
(a) obtains an additional governmental approval in substitution therefore
or replacement thereof or (b) causes such governmental approval to be
reissued. Such an event also will not be a guarantor event of default for
an additional 30 days following the expiration of the initial 60 day
period if within the original 60 day period the default has not been
cured but Louisiana Generating continues to diligently pursue in good
faith the items set forth in clauses (a) and (b) above during such
additional 30 day period; and
- Louisiana Generating fails to satisfy its payment obligations under the
guarantee.
Enforcement
If any event of default under the guarantor loan agreement occurs and is
continuing, upon (a) written direction of bondholders holding not less than
33 1/3% of the aggregate principal amount of the outstanding bonds or of the
bond trustee, notwithstanding the absence of direction from such bondholders
(each in the case of any event of default specified in the first, second or last
"bullet points" under "-- Guarantor Events of Default" above) or (b) upon
written direction of bondholders holding greater than 50% (in the case of an
event of default specified in all other "bullet points" under "-- Guarantor
Events of Default" above) of the aggregate principal amount of the outstanding
bonds, Louisiana Generating must declare that portion of the outstanding
principal amount of the guarantor notes, all interest accrued and unpaid
thereon, all premium (if any), all other amounts payable in respect thereof and
all other amounts payable under the guarantor loan agreement to be due and
payable, whereupon the same shall become immediately due and payable without
presentment, demand, protest or further notice of any kind, all of which
Louisiana Generating will waive in accordance with the guarantor loan agreement.
SECURITY AGREEMENTS
Pursuant to a security agreement and pledge agreements, NRG South Central's
obligations are secured by a security interest in the following:
- NRG Central U.S. LLC's and South Central Generation Holding LLC's
membership interests in NRG South Central and NRG South Central's
membership interests in Louisiana Generating;
- all of NRG South Central's assets related to the Cajun facilities,
including NRG South Central rights under all intercompany notes between
it and Louisiana Generating but excluding the assets specifically held
for resale; and
- the revenue account and the debt service reserve account.
Pursuant to a mortgage and a security agreement, the obligations of
Louisiana Generating under the guarantee and the guarantor loan agreement are
secured by a mortgage with respect to Big Cajun I and Big Cajun II and a
security interest in the following:
- all of Louisiana Generating's interest in the Cajun facilities and
substantially all the personal property associated with the Cajun
facilities except for fixtures not located on the Cajun facilities and
the assets specifically held for resale;
- substantially all contracts, including the project documents, associated
with the Cajun facilities to which Louisiana Generating is a party to the
extent assignable and all consents to the assignment of these contracts
that have been obtained;
- all licenses, permits and governmental approvals associated with the
Cajun facilities;
- all insurance policies associated with the Cajun facilities and all
monies paid to Louisiana Generating on these policies;
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- all revenues of the Cajun facilities, including revenues from power sales
contracts entered into by NRG Power Marketing or any other entity which
has entered into a power marketing agreement with Louisiana Generating
associated with the Cajun facilities; and
- the revenue account.
COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT
Pursuant to the collateral agency and intercreditor agreement, NRG South
Central, Louisiana Generating, any additional guarantor, the bond trustee, the
agent under the new working capital facility, and any trustee or agent under any
other senior secured debt document agree to appoint The Chase Manhattan Bank as
the collateral agent and depositary bank.
Authority of Collateral Agent
The collateral agent has the authority to administer the intercreditor
collateral in accordance with the security documents, and upon the occurrence
and continuance of an event where 66 2/3% of the combined exposure shall have
been declared to be, or shall automatically have become, due and payable under
the financing documents, as determined by the collateral agent based upon
written notices provided to the collateral agent by the secured parties, which
event is referred to as a trigger event, shall exercise upon written instruction
of persons that at such time hold at least 33 1/3% of the combined exposure (in
the case of a payment default) or greater than 50% of the combined exposure (in
the case of other defaults), which persons are referred to as the required
creditors, such rights and remedies with respect to the intercreditor collateral
as are granted to it under the security documents and applicable law.
The term "combined exposure" means, as of any date of calculation, the sum
(calculated without duplication) of the following to the extent the same is held
by or represented by a secured party (a) the aggregate principal amount of all
bonds outstanding as of the calculation date, (b) the aggregate principal amount
of all loans (if any) outstanding as of such calculation date under the working
capital facility, (c) the aggregate amount of all undrawn financing commitments
as of such calculation date under the working capital facility which, as of such
calculation date, the lenders party to the working capital agreement have no
right to terminate, (d) the aggregate principal amount of all other senior
secured debt (if any) outstanding as of such calculation date and (e) the
aggregate amount of all undrawn financing commitments under any senior secured
debt documents as of such calculation date which, as of such calculation date,
the creditors party to such other senior secured debt documents have no right to
terminate.
The term "intercreditor collateral" means any collateral in which there is
a security interest purported to be granted to a secured party other than the
debt service reserve account.
Actions by Secured Parties
No secured party had any right to (a) sell, exchange, release or otherwise
deal with any property pledged, assigned or mortgaged to secure the financing
liabilities, (b) exercise or refrain from exercising any rights to direct the
collateral agent to take any action in respect of the intercreditor collateral
or (c) take any other action with respect to the intercreditor collateral (i)
independently of the collateral agent or (ii) other than to direct the
collateral agent to take action in accordance with the collateral agency and
intercreditor agreement.
Priority of Payments
Following the occurrence of a trigger event or upon the exercise of
remedies by the secured parties after an event of default, the proceeds of any
collection, sale or other realization of any part of the intercreditor
collateral will be applied by the collateral agent in the following order of
priority:
- first, to the payment of all reasonable costs and expenses relating to
the sale of the intercreditor collateral plus costs of the collateral
agent in enforcing the indemnity payment due to the collateral agent;
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- second, to the payment to the bond trustee, the working capital agent and
each senior secured debt agent for all fees and expenses due and owing
under the applicable finance document;
- third, to the payment of accrued and unpaid interest on the bonds, the
working capital facility and any other senior secured debt, pro rata;
- fourth, to the payment of principal, make-whole premiums, if any, and
breakage costs, if any, pro rata;
- fifth, to the payment of other secured obligations owed to the bond
trustee, the working capital agent and the senior secured debt agent, pro
rata; and
- finally, to the payment of the relevant obligor, or its successor or
assignees, or as a court of competent jurisdiction may direct, of any
surplus remaining.
Event of Loss/Title Event
If an event of loss or title event occurs and the determination is made
that the affected property cannot be rebuilt, repaired or restored or NRG South
Central elects not to rebuild, repair or restore, and loss proceeds exceed $10.0
million, then any loss proceeds over $10.0 million will be distributed pro rata
among the secured parties. If an event of loss occurs and NRG South Central
rebuilds, repairs or restores the affected property and the loss proceeds exceed
the actual cost of such rebuilding, repair or restoration by more than $5.0
million, then any loss proceeds over $5.0 million will be distributed pro rata
among the secured parties. The pro rata share of loss proceeds owing to the bond
trustee for the benefit of the bondholders will be applied to the pro rata
redemption of the bonds in accordance with the indenture.
Notice
Each secured party will give each other secured party and the collateral
agent written notice of the occurrence of an event of default under such secured
party's financing documents of which it has written notice and of the occurrence
of an acceleration of the maturity of such secured party's financing
liabilities.
PLAN OF DISTRIBUTION
Each broker-dealer that receives bonds for its own account in the exchange
offer must acknowledge that it will deliver a prospectus in connection with any
resale of the bonds. This prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of bonds
received in exchange for outstanding bonds where the outstanding bonds acquired
as a result of market-making activities or other trading activities. We have
agreed that, for a period of 90 days after the expiration date of the exchange
offer, we will make this prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any resale. In addition, until
January 12, 2001, all dealers effecting transactions in the bonds may be
required to deliver a prospectus.
We will not receive any proceeds from any sale of bonds by broker-dealers.
Bonds received by broker-dealers for their own account in the exchange offer may
be sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the bonds
or a combination of these methods of resale, at market prices prevailing at the
time of resale, at prices related to these prevailing market prices or at
negotiated prices. Any resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any broker-dealer or the purchasers of any of
the bonds. Any broker-dealer that resells bonds that were received by it for its
own account in the exchange offer and any broker or dealer that participates in
a distribution of these bonds may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any resale of bonds and any
commission or concessions received any these persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
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Furthermore, any broker dealer that acquired any of its outstanding bonds
directly from us:
- may not rely on the applicable interpretation of the staff of the SEC's
position contained in Exxon Capital Holdings Corp., SEC No-Action Letter
(April 13, 1989), Morgan Stanley & Co., Inc., SEC No-Action Letter (June
5, 1991) and Shearman & Sterling, SEC No-Action Letter (July 2, 1983),
and
- must also be named a selling noteholder in connection with the
registration and prospectus delivery requirements of the Securities Act
relating to any resale transaction.
For a period of 90 days after the expiration date of the exchange offer NRG
South Central will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer that requests
these documents in the letter of transmittal. NRG South Central has agreed to
pay all expenses incident to the exchange offer (including the expenses of one
counsel for the holders of the bonds) other than commissions or concessions of
any broker-dealers and will indemnify the holders of the bonds (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain U.S. federal income tax
considerations relating to the exchange of the outstanding bonds for the bonds
issued in this exchange offer. This discussion is based on laws, regulations,
rulings and decisions now in effect, all of which are subject to change,
possibly with retroactive effect. We have not obtained, nor do we intend to
obtain, a ruling from the IRS as to any U.S. federal income tax consequences
discussed below and there can be no assurances that the IRS will not take
contrary positions. This discussion does not address all aspects of U.S. federal
income tax that may be relevant to particular holders of outstanding bonds and
bonds issued in this exchange offer. This discussion deals only with holders of
bonds who hold the bonds as capital assets and exchange outstanding bonds for
bonds issued in this exchange offer. This discussion does not address the tax
consequences arising under the laws of any foreign, state or local jurisdiction.
Prospective investors are urged to consult their tax advisors regarding the U.S.
federal tax consequences of acquiring, holding and disposing of the bonds, as
well as any tax consequences that may arise under the laws of any foreign,
state, local or other taxing jurisdiction.
An exchange of the outstanding bonds for the bonds pursuant to the exchange
offer will not be treated as an "exchange" for U.S. federal income tax purposes
because the terms of the bonds issued in the exchange offer are substantially
identical to the terms of the outstanding bonds. Consequently, a holder of the
outstanding bonds will not recognize taxable gain or loss as a result of
exchanging bonds pursuant to the exchange offer. The holding period of the bonds
issued in the exchange offer will be the same as the holding period of the
outstanding bonds and the tax basis of the bonds will be the same as the basis
in the outstanding bonds immediately before the exchange.
LEGAL MATTERS
Certain legal matters with respect to the bonds offered in this exchange
offer will be passed upon for us by Gibson, Dunn & Crutcher LLP, New York, New
York.
EXPERTS
The consolidated financial statements for NRG South Central at June 30,
2000 and for the period from March 30, 2000 (Inception) through June 30, 2000,
the financial statements for Louisiana Generating at June 30, 2000 and for the
period from March 30, 2000 (Inception) through June 30, 2000 and the carve-out
financial statements for Cajun Electric (Cajun facilities) at December 31, 1999
and 1998 for each of the three years in the period ended December 31, 1999 have
been so included in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-4 under the Securities Act with respect to the bonds offered
in this prospectus. This prospectus, which forms part of the registration
statement, does not contain all of the information that is included in the
registration statement. You will find additional information about our company
and the bonds in the registration statement. Any statements made in this
prospectus concerning the provisions of legal documents are not necessarily
complete and you should read the documents that are filed as exhibits to the
registration statement for a more complete understanding of the document or
matter.
After the registration statement becomes effective, we will be subject to
the informational requirements of the Exchange Act of 1934, and will file
periodic reports, registration statements and other information with the SEC.
You may read and copy the registration statement and any of the other documents
we file with the SEC at the public reference facilities maintained by the SEC at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the SEC's regional offices located at 7 World Trade Center, New York, New
York 10048 and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Please call the SEC at 1-800-SEC-0330 for more information on
the public reference rooms. In addition, reports and other filings are available
to the public on the SEC's web site at http://www.sec.gov.
If for any reason we are not subject to the reporting requirements of the
Securities Exchange Act of 1934 in the future, we will still be required under
the indenture governing the bonds to furnish the holders of the bonds with
certain financial and reporting information. See "Description of Principal
Financing Documents -- Indenture -- Covenants of NRG South
Central -- Information Requirements" for a description of the information we are
required to provide.
NRG ENERGY
NRG Energy files annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any document NRG
Energy files at the SEC's public reference rooms in Washington, D.C., New York,
New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. NRG Energy's SEC filings are
also available to the public from the SEC's web site at http://www.sec.gov.
You should rely only on the information provided in this prospectus or any
supplement. NRG Energy has not authorized anyone else to provide you with
different information. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of this
prospectus. NRG Energy's SEC filings are also available at the offices of the
New York Stock Exchange. For further information on obtaining copies of NRG
Energy's public filings at the New York Stock Exchange, you should call (212)
656-5060.
XCEL ENERGY
Xcel Energy, formerly Northern States Power Company, files annual,
quarterly and special reports, proxy statements and other information with the
SEC. You may read and copy any document Xcel Energy files at the SEC's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Xcel Energy's SEC filings are also available to the public from
the SEC's web site at http://www.sec.gov. Xcel Energy's SEC filings are also
available at the offices of the New York Stock Exchange. For further information
on obtaining copies of Xcel Energy's public filings at the New York Stock
Exchange, you should call (212) 656-5060.
You should rely only on the information provided in this prospectus or any
supplement. Xcel Energy has not authorized anyone else to provide you with
different information. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of this
prospectus.
103
<PAGE> 107
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
NRG SOUTH CENTRAL GENERATING LLC
Report of Independent Accountants........................... F-3
Consolidated Balance Sheet.................................. F-4
Consolidated Statement of Operations........................ F-5
Consolidated Statement of Cash Flows........................ F-6
Consolidated Statement of Members' Equity................... F-7
Notes to Consolidated Financial Statements.................. F-8
LOUISIANA GENERATING LLC
Report of Independent Accountants........................... F-25
Balance Sheet............................................... F-26
Statement of Operations..................................... F-27
Statement of Cash Flows..................................... F-28
Statement of Member's Equity................................ F-29
Notes to Financial Statements............................... F-30
CAJUN ELECTRIC (CAJUN FACILITIES)
Report of Independent Accountants........................... F-43
Carve-Out Statement of Net Assets........................... F-44
Carve-Out Statement of Certain Revenue and Expenses......... F-45
Notes to Carve-Out Financial Statements..................... F-46
</TABLE>
F-1
<PAGE> 108
NRG SOUTH CENTRAL GENERATING LLC
CONSOLIDATED FINANCIAL STATEMENTS
F-2
<PAGE> 109
REPORT OF INDEPENDENT ACCOUNTANTS
To the Management Committee of
NRG South Central Generating LLC:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of members' equity and of cash flows
present fairly, in all material respects, the financial position of NRG South
Central Generating LLC and its subsidiaries at June 30, 2000, and the results of
their operations and their cash flows for the period March 30, 2000 (Inception)
through June 30, 2000 in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
October 17, 2000
F-3
<PAGE> 110
NRG SOUTH CENTRAL GENERATING LLC
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, 2000 SEPTEMBER 30, 2000
-------------- ------------------
(UNAUDITED)
<S> <C> <C>
(IN THOUSANDS)
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 10,319 $ 25,989
Accounts receivable....................................... 35,869 54,408
Inventory................................................. 37,425 30,329
Prepaid expenses.......................................... 860 3,294
---------- ----------
Total current assets.............................. 84,473 114,020
NON-CURRENT ASSETS:
Property, plant & equipment, net.......................... 1,036,343 1,080,265
Decommissioning fund investments.......................... 3,591 3,673
Deferred financing costs, net of accumulated amortization
of $103 and $193....................................... 9,757 9,792
Other assets.............................................. 7,994 7,816
---------- ----------
Total assets...................................... $1,142,158 $1,215,566
========== ==========
LIABILITIES AND MEMBERS' EQUITY
LIABILITIES:
Current liabilities:
Current portion of long-term debt......................... $ 23,750 $ 25,250
Revolving line of credit.................................. -- 40,000
Accounts payable.......................................... 758 961
Accounts payable -- affiliates............................ 28,702 44,357
Accrued fuel and purchased power expense.................. 11,131 31,696
Accrued interest.......................................... 18,704 3,631
Other current liabilities................................. 4,524 4,516
---------- ----------
Total current liabilities......................... 87,569 150,411
Long-term debt.............................................. 776,250 763,500
Other non-current liabilities............................... 4,175 4,839
---------- ----------
Total Liabilities................................. 867,994 918,750
MEMBERS' EQUITY............................................. 274,164 296,816
---------- ----------
Total liabilities and members' equity............. $1,142,158 $1,215,566
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 111
NRG SOUTH CENTRAL GENERATING LLC
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
(SUCCESSOR) (SUCCESSOR)
(PREDECESSOR) FOR THE PERIOD FOR THE PERIOD
CARVE-OUT FOR THE THREE MARCH 30, 2000 MARCH 30, 2000
MONTHS ENDED (INCEPTION) (INCEPTION)
-------------------------------- THROUGH JUNE 30, THROUGH SEPTEMBER
MARCH 31, 1999 MARCH 31, 2000 2000 30, 2000
-------------- -------------- ----------------- -----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
NOTE 12 NOTE 12
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Revenues...................... $78,603 $79,982 $88,536 $202,718
Operating Costs............... 56,417 58,628 55,637 136,726
------- ------- ------- --------
Operating margin............ 22,186 21,354 32,899 65,992
Depreciation and
Amortization(1)............. 9,466 9,647 6,827 13,978
General and Administrative
Expenses.................... 2,427 2,423 1,841 2,558
------- ------- ------- --------
Income from operations...... 10,293 9,284 24,231 49,456
Other Expense (Income), net... 775 (521) (227) (657)
Interest Expense.............. -- -- 18,861 37,598
------- ------- ------- --------
Excess of revenues over
costs and expenses....... $ 9,518 $ 9,805
======= =======
Net Income.................. $ 5,597 $ 12,515
======= ========
</TABLE>
---------------
(1) Depreciation and amortization expense is considered to be a cost of
operations.
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 112
NRG SOUTH CENTRAL GENERATING LLC
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
MARCH 30, 2000 MARCH 30, 2000
(INCEPTION) (INCEPTION)
THROUGH JUNE 30, THROUGH SEPTEMBER 30,
2000 2000
(IN THOUSANDS) ---------------- ---------------------
(UNAUDITED)
<S> <C> <C>
Cash Flow from operating activities:
Net income................................................. $ 5,597 $ 12,515
Adjustments to reconcile net income to net cash provided
from operating activities:
Depreciation and amortization............................ 6,827 13,978
Amortization of deferred financing costs................. 103 193
Changes in assets and liabilities:
Accounts receivable................................... (35,869) (54,408)
Inventories........................................... (4,339) 2,757
Prepaid expenses...................................... (661) (3,094)
Accounts payable...................................... 758 961
Accounts payable -- affiliates........................ 679 16,333
Accrued fuel and purchased power expense.............. 11,131 31,696
Accrued interest...................................... 18,704 3,631
Other current liabilities............................. 3,247 3,239
Cash used by changes in other assets and liabilities..... (4,801) (4,047)
----------- -----------
Net cash provided by operating activities........... 1,376 23,754
Cash flows from investing activities:
Business acquisition, net of liabilities assumed......... (1,055,927) (1,055,927)
Proceeds from disposition of property and equipment...... 8,975 9,017
Investment in decommissioning fund....................... -- (116)
Capital expenditures..................................... (2,812) (6,071)
----------- -----------
Net cash used in investing activities............... (1,049,764) (1,053,097)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt................. 800,000 800,000
Deferred financing costs................................. (9,860) (9,985)
Contributions by members................................. 268,567 268,567
Distributions to members................................. -- (32,000)
Proceeds from short-term borrowings...................... -- 40,000
Repayments of long-term borrowings....................... -- (11,250)
----------- -----------
Net cash flows provided by financing activities..... 1,058,707 1,055,332
----------- -----------
Net increase in cash and cash equivalents.................. 10,319 25,989
Cash and cash equivalents at beginning of period........... -- --
----------- -----------
Cash and cash equivalents at end of period................. $ 10,319 $ 25,989
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid.............................................. $ -- $ 33,571
SUPPLEMENTAL DISCLOSURES OF NON-CASH INFORMATION
Assets of NRG Sterlington Power contributed to NRG South
Central in the amount of................................. $ -- $ 47,734
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 113
NRG SOUTH CENTRAL GENERATING LLC
CONSOLIDATED STATEMENT OF MEMBERS' EQUITY
<TABLE>
<S> <C>
(IN THOUSANDS)
Balance, March 30, 2000 (Inception)......................... $ --
Contributions............................................. 268,567
Net Income................................................ 5,597
---------
Balance, June 30, 2000...................................... $ 274,164
=========
Contributions (Unaudited)................................. 47,734
Distributions (Unaudited)................................. (32,000)
Net Income (Unaudited).................................... 6,918
---------
Balance, September 30, 2000 (Unaudited)..................... $ 296,816
=========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 114
NRG SOUTH CENTRAL GENERATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NRG South Central Generating LLC (NRG South Central or the Company) is an
indirect wholly owned subsidiary of NRG Energy, Inc. (NRG). NRG South Central
owns 100% of Louisiana Generating LLC (Louisiana Generating), NRG New Roads
Holding LLC (New Roads), NRG Sterlington Power LLC (NRG Sterlington) and Big
Cajun I Peaking Power LLC (Big Cajun Peaking) unrestricted subsidiaries. NRG
South Central's members are NRG Central U.S. LLC (NRG Central) and South Central
Generation Holding LLC (South Central Generation). NRG Central and South Central
Generation are wholly owned subsidiaries of NRG, each of which own a 50%
interest in NRG South Central.
NRG South Central was formed for the purpose of financing, acquiring,
owning, operating and maintaining through its subsidiaries and affiliates the
facilities owned by Louisiana Generating and any other facilities that it or its
subsidiaries may acquire in the future.
Pursuant to a competitive bidding process, following the Chapter 11
bankruptcy proceeding of Cajun Electric Power Cooperative, Inc. (Cajun
Electric), Louisiana Generating acquired the non-nuclear electric power
generating assets of Cajun Electric. New Roads was formed for the purpose of
holding assets that Louisiana Generating acquired in conjunction with the
purchase of the generating assets from Cajun Electric which are not necessary
for the operation of the newly acquired generating facilities and, with respect
to some of these assets, may not be held by Louisiana Generating under
applicable federal regulations.
NOTE 1 -- BUSINESS DEVELOPMENTS
On March 31, 2000, for approximately $1,055.9 million, Louisiana Generating
acquired 1,708 MW of electric power generation facilities located in New Roads,
Louisiana (Cajun facilities). The acquisition was financed through a combination
of project level non-recourse debt and equity from NRG South Central.
The acquisition was accounted for by the purchase method. The aggregate
purchase price was allocated on a preliminary basis among the assets acquired
and liabilities assumed based on an appraisal prepared in April 2000,
adjustments are to be expected.
In August 2000, Big Cajun Peaking and NRG Sterlington became wholly owned
subsidiaries of the Company. NRG Sterlington was contributed to the Company by
NRG.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries: Louisiana Generating LLC and NRG New Roads Holding LLC,
NRG Sterlington Power LLC, and Big Cajun I Peaking Power LLC. The consolidated
financial statements of the Company consist primarily of the results of
operations and assets and liabilities of Louisiana Generating. Louisiana
Generating is a guarantor of the bonds issued on March 30, 2000 to acquire the
Cajun facilities. NRG New Roads Holding holds certain assets that were acquired
by Louisiana Generating but not necessary for the operation of the Cajun
facilities. NRG Sterlington Power was acquired by NRG from Koch Power and
contributed to the Company for the purpose of developing, constructing, owning,
and operating an approximately 200 NW simple cycle gas peaking facility in
Sterlington, Louisiana. Big Cajun I Peaking Power was formed for the purpose of
developing, constructing, owning, and operating an approximately 240 MW simple
cycle gas peaking facility at the Big Cajun I site in New Roads, Louisiana. As
of June 30, 2000, the total assets of NRG New Roads Holding represent
approximately 2% of the total consolidated assets of the Company. All
significant intercompany transactions have been eliminated in consolidation.
Accounting policies for all of the Company's operations are in accordance with
accounting principles generally accepted in the United States.
F-8
<PAGE> 115
NRG SOUTH CENTRAL GENERATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Use of Estimates in Financial Statements
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect reported amounts of assets and liabilities
at the date of the financial statements and reported amounts of revenue and
expenses during the reporting period. Actual results may differ from those
estimates.
In recording transactions and balances resulting from business operations,
the Company uses estimates based on the best information available. Estimates
are used for such items as plant depreciable lives, uncollectible accounts and
actuarially determined benefit costs, among others. As better information
becomes available (or actual amounts are determinable), the recorded estimates
are revised. Consequently, operating results can be affected by revisions to
prior accounting estimates.
Cash and Cash Equivalents
The Company considers cash and cash equivalents to include cash and
short-term investments with original maturities of three months or less.
Inventory
Inventory consists of coal, spare parts and fuel oil and is stated at the
lower of weighted average cost or market (Note 6).
Prepaid Expenses
Prepaid expenses include insurance, taxes and other prepayments.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computed
on a straight-line basis over the following estimated useful lives:
<TABLE>
<S> <C>
Facilities, machinery and equipment................... 25 to 40 years
Office furnishings and equipment...................... 3 to 10 years
</TABLE>
Deferred Financing Costs
Deferred financing costs consist of legal and other costs incurred to
obtain debt financing. These costs are being amortized over the terms of the
related debt.
Revenue Recognition
Revenue and related costs are recorded as electricity is generated or
services are provided.
Power Marketing Activities
The Company has entered into a contract with a marketing affiliate for the
sale of energy, capacity and ancillary services produced, which enables the
affiliate to engage in forward sales and hedging transactions to manage the
Company's electricity price exposure. Net gains or losses on hedges by the
marketing affiliate, which are physically settled, are recognized in the same
manner as the hedged item. The Company receives the net transaction price on all
contracts that are physically settled by its marketing affiliate.
F-9
<PAGE> 116
NRG SOUTH CENTRAL GENERATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
The net income or loss of the Company for income tax purposes, along with
any associated tax credits, is included in the tax returns of NRG. Accordingly,
no provision has been made for federal or state income taxes in the accompanying
financial statements.
As of June 30, 2000, the accompanying financial statements report a balance
of $1,036,343 for net property, plant and equipment. The tax basis of this
property is estimated to be $1,032,917. The primary difference is due to
accelerated tax depreciation.
Summary of Cash Flows
Summarized cash flows from operating and investing activities for Cajun
Electric for the three months ended March 30, 2000 and 1999 were as follows:
<TABLE>
<CAPTION>
1999 2000
------- -------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Excess of revenues over costs and expenses............... $ 9,518 $ 9,805
Adjustments to reconcile net margins to net cash:
Depreciation and amortization.......................... 9,466 9,647
Asset dispositions..................................... 991 15
Changes in accounts receivable......................... 2,735 2,133
Changes in fuel and prepayments........................ (1,194) (4,153)
Changes in accounts payable and accrued expenses....... 3,947 6,058
------- -------
Net cash provided by operating activities........... 25,463 23,505
Cash flows for investing activities
Capital expenditures................................... (5,212) (1,142)
------- -------
$20,251 $22,363
======= =======
</TABLE>
New Accounting Pronouncements
In June 1998, the Financial Accounting Standard Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement, as amended by
SFAS 138, 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 the derivative, its resulting designation and its
effectiveness. The Company plans to adopt this standard effective January 1,
2001, as required. The potential impact of implementing this statement has not
yet been determined.
Interim Results (Unaudited)
Information as of and for the period from March 30, 2000 (Inception)
through September 30, 2000 is unaudited. The information as of and furnished in
the unaudited September 30, 2000 Balance Sheet, Statement of Operations, Cash
Flows, and Members' Equity include all material adjustments consisting only of
normal recurring accruals, which are, in the opinion of management, necessary
for a fair presentation of such financial statements. The data disclosed in the
Notes to the Financial Statements for this period is also unaudited.
F-10
<PAGE> 117
NRG SOUTH CENTRAL GENERATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- PRO FORMA RESULTS OF OPERATIONS (UNAUDITED)
On March 31, 2000, the Company completed the acquisition of two fossil
fueled generating plants from Cajun Electric Power Cooperative, Inc. for
approximately $1,055.9 million. The following information summarizes the pro
forma results of operations for the three and six months ending June 30, 2000
and 1999 as if the acquisition had occurred as of the beginning of the three and
six months ending June 30, 2000 and 1999. In addition, the following information
summarizes the pro forma results of operations for the three and nine months
ending September 30, 2000 and 1999 as if the acquisition had occurred as of the
beginning of the three and nine months ending September 30, 2000 and 1999. The
pro forma information presented is for informational purposes only and is not
necessarily indicative of future earnings or financial position or of what the
earnings and financial position would have been had the acquisition of the Cajun
facilities been consummated at the beginning of the respective periods or as of
the date for which pro forma financial information is presented.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA ACTUAL PRO FORMA
THREE MONTHS ENDED THREE MONTHS ENDED THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999 SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
(IN THOUSANDS) ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues.................... $88,536 $94,791 $114,182 $114,454
Operating Costs............. 55,637 65,365 81,089 71,148
------- ------- -------- --------
Operating margin.......... 32,899 29,426 33,093 43,306
Depreciation and
Amortization.............. 6,827 6,875 7,151 6,872
General and Administrative
Expenses.................. 1,841 2,438 717 2,307
------- ------- -------- --------
Income from operations.... 24,231 20,113 25,225 34,127
Other Expense (Income),
net....................... (68) 771 (430) (226)
Interest Expense............ 18,461 18,312 18,737 18,312
------- ------- -------- --------
Net Income.................. $ 5,838 $ 1,030 $ 6,918 $ 16,041
======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
SIX MONTHS ENDED SIX MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999 SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
(IN THOUSANDS) ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues.................... $168,518 $173,394 $282,700 $287,848
Operating Costs............. 114,265 121,783 195,354 192,931
-------- -------- -------- --------
Operating margin.......... 54,253 51,611 87,346 94,917
Depreciation and
Amortization.............. 13,884 13,751 21,035 20,623
General and Administrative
Expenses.................. 4,264 4,866 4,981 7,173
-------- -------- -------- --------
Income from operations.... 36,105 32,994 61,330 67,121
Other Expense (Income),
net....................... (748) 1,544 (1,178) 1,318
Interest Expense............ 37,173 36,624 55,910 54,936
-------- -------- -------- --------
Net Loss.................... $ (320) $ (5,174) $ 6,598 $ 10,867
======== ======== ======== ========
</TABLE>
F-11
<PAGE> 118
NRG SOUTH CENTRAL GENERATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
JUNE 30, 2000 SEPTEMBER 30, 2000
-------------- ------------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C>
Land........................................................ $ 14,308 $ 14,308
Facilities, machinery and equipment......................... 1,021,547 1,057,547
Construction in progress.................................... 5,933 20,871
Office furnishings and equipment............................ 1,251 1,253
Accumulated depreciation.................................... (6,696) (13,714)
---------- ----------
Property, plant and equipment (net)......................... $1,036,343 $1,080,265
========== ==========
</TABLE>
Property, plant and equipment consist primarily of the electric generating
facilities acquired from Cajun Electric. The assets are comprised of Units 1 and
2 of Big Cajun I and 100% of Units 1 and 2 and 58% of Unit 3 of Big Cajun II; an
energy control center and headquarters building; 4,175 acres of land near
Coushatta, Louisiana; a 540 MW General Electric Steam turbine generator; a 17.5
mile gas pipeline system; and certain transmission assets and all other
substations.
Certain of the acquired assets are not necessary for the operation of the
electric generating facilities, and with respect to some of the assets, may not
be held by Louisiana Generating under applicable federal regulations. These
assets were transferred to and are being held by New Roads for resale. As of
June 30, 2000, the assets are carried at $25.4 million which represents the
lower of the assets cost or fair value less cost to sell. These assets consist
primarily of: a 4,175 acre parcel of land near Coushatta, Louisiana currently
used for timber production, wildlife conservation and farming; a 2,466 acre
segment of the Big Cajun II property that was held by Cajun Electric as a future
ash disposal site currently being leased for farming; mineral rights to a seven
acre parcel of land in New Roads, Louisiana; and a 540 MW General Electric steam
turbine generator.
NOTE 5 -- LONG TERM DEBT
On March 30, 2000, NRG South Central issued $800 million of senior secured
bonds in two tranches. The first tranche was for $500 million with a coupon of
8.962% and a maturity of 2016. The second tranche was for $300 million with a
coupon of 9.479% and a maturity of 2024. Interest on the bonds will be payable
in arrears on each March 15 and September 15, commencing on September 15, 2000.
Principal payments will be made semi-annually commencing on September 15, 2000
with $11,250,000 due, $25,250,000 due in 2001, $25,500,000 due in 2002 and 2003,
$15,000,000 due in 2004 and 2005, with the remaining $682,500,000 due between
March 15, 2006 and September 15, 2024. The proceeds of the bonds were used to
finance the Company's acquisition of the Cajun generating facilities on March
31, 2000.
The Company's obligations in respect to the bonds are secured by a security
interest in NRG Central's and South Central's interests in the Company and the
Company's membership interest in Louisiana Generating; all of the assets related
to the Cajun facilities including the Company's rights under all intercompany
notes between the Company and Louisiana Generating but excluding those assets
specifically held for resale; the revenue account and the debt service reserve
account.
Louisiana Generating issued a guarantee in favor of the bondholders, which
unconditionally and irrevocably guarantees the payment of principal, of premium
(if any) and interest on the bonds. The guarantee is a guarantee of payment and
the bond trustee is entitled to make demands for payment under the guarantee any
time that amounts due and payable on the bonds have not been paid.
F-12
<PAGE> 119
NRG SOUTH CENTRAL GENERATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The obligations of Louisiana Generating are secured by a mortgage with
respect to Big Cajun I and II and an interest in:
- All of Louisiana Generating's interest in the Cajun facilities and
substantially all personal property associated with the Cajun facilities
except for fixtures not located on the Cajun facilities and the assets
specifically held for resale;
- Substantially all contracts, associated with the Cajun facilities to
which Louisiana Generating is a party and all consents to the assignment
of these contracts that have been obtained;
- All licenses, permits and governmental approvals associated with the
Cajun facilities;
- All insurance policies associated with the Cajun facilities and all
monies paid to Louisiana Generating on these policies;
- All revenues of the Cajun facilities, including revenues from power sales
contracts entered into by NRG Power Marketing or any other entity which
has entered into a power marketing agreement with Louisiana Generating
associated with the Cajun facilities; and the revenue account.
Optional Redemption
NRG South Central may redeem the bonds in whole or in part at any time at a
redemption price equal to:
- 100% of the principal amount of the bonds being redeemed, plus
- interest on the bonds being redeemed, accrued and unpaid to, but
excluding, the date of redemption, plus
- a make whole premium based on an amount equal to the excess, if any, of
(a) the discounted present value of all interest and principal payments
scheduled to become due in respect to the bonds to be redeemed (such
discounted present value to be determined on the basis of a discount rate
equal to (i) the treasury rate and (ii) 50 basis points), over (b) the
outstanding principal amount of the applicable bonds to be redeemed.
Debt Service Reserve Account
NRG South Central established a debt service reserve account for the
benefit of the bondholders. This account must constitute at all times a
sufficient fund to pay the scheduled principal and interest on the bonds due in
the next six months. NRG South Central may fund this account with cash or credit
support. NRG South Central has obtained credit support and therefore need not
fund this account with cash. Currently the debt service reserve requirement is
being satisfied by a guarantee given by NRG.
NOTE 6 -- INVENTORY
Inventory, which is stated at the lower of weighted average cost or market,
consists of:
<TABLE>
<CAPTION>
JUNE 30, 2000 SEPTEMBER 30, 2000
-------------- ------------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C>
Coal................................... $25,862 $18,581
Spare Parts............................ 11,013 11,136
Fuel oil............................... 550 612
------- -------
Total.................................. $37,425 $30,329
======= =======
</TABLE>
F-13
<PAGE> 120
NRG SOUTH CENTRAL GENERATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- RELATED PARTY TRANSACTIONS
Louisiana Generating entered into a power sales and agency agreement with
NRG Power Marketing Inc., a wholly-owned subsidiary of NRG. The agreement is
effective until December 31, 2030. Under the agreement, NRG Power Marketing Inc.
will (i) have the exclusive right to manage, market and sell all power not
otherwise sold or committed to or by Louisiana Generating, (ii) procure and
provide to Louisiana Generating all fuel required to operate its respective
facilities and (iii) market, sell and purchase all emission credits owned,
earned or acquired by Louisiana Generating. In addition, NRG Power Marketing
Inc. will have the exclusive right and obligation to effect the direction of the
power output from the facilities.
Under the agreement, NRG Power Marketing, Inc. pays to Louisiana Generating
gross receipts generated through sales, less costs incurred by NRG Power
Marketing, Inc. relative to its providing services (e.g. transmission and
delivery costs, fuel cost, taxes, employee labor, contract services, etc.).
During the periods March 30, 2000 (Inception) through June 30, 2000, and
March 30, 2000 (Inception) through September 30, 2000, Louisiana Generating
recorded gross receipts less costs incurred from NRG Power Marketing Inc.
totaling $44.2 million, and $85.7 million (Unaudited), respectively.
Louisiana Generating entered into an operation and maintenance agreement
with NRG Operating Services, Inc., (NRG Operating Services) a wholly-owned
subsidiary of NRG. The agreement is perpetual in term until terminated in
writing by Louisiana Generating or until earlier terminated upon an event of
default. Under the agreement, at the request of Louisiana Generating, NRG
Operating Services manages, oversees and supplements the operation and
maintenance of the Cajun facilities.
During the periods March 30, 2000 (Inception) through June 30, 2000, and
March 30, 2000 (Inception) through September 30, 2000, Louisiana Generating
incurred operating and maintenance costs billed from NRG Operating Services
totaling $11.1 million, and $15.5 million (Unaudited), respectively.
Louisiana Generating and the Company each entered into an agreement with
NRG for corporate support and services. The agreement is perpetual in term until
terminated in writing by Louisiana Generating or NRG South Central or until
earlier terminated upon an event of default. Under the agreement, NRG will
provide services, as requested, in areas such as human resources, accounting,
finance, treasury, tax, office administration, information technology,
engineering, construction management, environmental, legal and safety. Under the
agreement, NRG is paid for personnel time as well as out-of-pocket costs.
During the periods March 30, 2000 (Inception) through June 30, 2000, and
March 30, 2000 (Inception) through September 30, 2000 (Unaudited), Louisiana
Generating and the Company paid NRG approximately $0.2 million during both
periods for corporate support and services.
As of June 30, 2000, and September 30, 2000 the Company has an accounts
payable-affiliates balance of approximately $28.7 million and $44.4 million
(Unaudited), respectively, which consisted primarily of a payable to NRG for
capitalized development costs incurred prior to the acquisition of the Cajun
facilities and other expenses paid on behalf of the Company.
NOTE 8 -- BENEFITS DISCLOSURES
Louisiana Generating retained a number of the administrative and operating
personnel of Cajun Electric upon acquisition of Cajun Electric's generating
facilities. Prior to March 31, 2000 these employees were participants in the
National Rural Electric Cooperative Association's Retirement and Security
Program, a master multiple-employer defined benefit plan. Effective March 31,
2000, the Cooperative's defined benefit and 401-K plans were terminated, no
pension obligation was assumed by Louisiana Generating or NRG. Louisiana
Generating sponsors a cash balance pension plan arrangement whereby the
employees are entitled to a pension benefit of approximately 7% of total
payroll. The employees are also eligible to participate in a 401-K plan that
provides for the matching of specified amounts of employee contributions to the
plan.
F-14
<PAGE> 121
NRG SOUTH CENTRAL GENERATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For the periods March 30, 2000 (Inception) through June 30, 2000, and March
30, 2000 (Inception) through September 30, 2000, the Company recorded
approximately $333,000 and $667,000 (Unaudited), respectively, of pension
expense and approximately $9,000 and $21,000 (Unaudited), respectively, of 401-K
matching funds.
NOTE 9 -- SALES TO SIGNIFICANT CUSTOMERS
During the period March 30, 2000 (Inception) through June 30, 2000, sales
to two customers accounted for 18.2% and 17.1%, respectively of the Company's
total revenues. During the period March 30, 2000 (Inception) through September
30, 2000, sales to these two customers were 17.1% (Unaudited) and 16.4%
(Unaudited), respectively, of the Company's total revenues. During March 2000,
the Company entered into certain power sales agreements with eleven distribution
cooperatives that were customers of Cajun Electric prior to the Company's
acquisition of the Cajun facilities. The initial terms of these agreements
provide for the sale of energy, capacity and ancillary services for the periods
ranging from four to 25 years. In addition, the Company assumed Cajun Electric's
obligations under four long-term power supply agreements. The terms of these
agreements range from 10 to 26 years. These power sales agreements accounted for
the majority (88.1%) of the Company's total revenues during the period March 30,
2000 (Inception) through June 30, 2000 (Note 10).
NOTE 10 -- COMMITMENTS AND CONTINGENCIES
Contractual Commitments
Power Supply Agreements with the Distribution Cooperatives
During March 2000, Louisiana Generating entered into certain power supply
agreements with eleven distribution cooperatives to provide energy, capacity and
transmission services. The agreements are standardized into three types, Form A,
B and C.
Form A Agreements
Six of the distribution cooperatives entered into Form A power supply
agreements. The Form A agreement is an all-requirements power supply agreement
which has an initial term of 25 years, commencing on March 31, 2000. After the
initial term, the agreement continues on a year-to-year basis, unless terminated
by either party giving five years advanced notice.
Under the Form A power supply agreement, Louisiana Generating is obligated
to supply the distribution cooperative and is required to purchase all of the
energy and capacity required by the distribution cooperative for service to its
retail customers although the distribution cooperative has certain limited
rights under which it can purchase energy and capacity from third parties.
Louisiana Generating must contract for all transmission service required to
serve the distribution cooperative and will pass through the costs of
transmission service to the cooperative. Louisiana Generating is required to
supply at its cost, without pass through, control area services and ancillary
services which transmission providers are not required to provide.
Louisiana Generating owns and maintains the substations and other
facilities used to deliver energy and capacity to the distribution cooperative
and charges the cooperative a monthly specific delivery facility charge for such
facilities; any additions to, or new delivery facilities. The initial monthly
charge is 1% of the value of all of the distribution cooperative's specific
delivery facilities. The cost of additional investment during the term of the
agreement will be added to the initial value of the delivery facilities to
calculate the monthly specific delivery facility charge.
F-15
<PAGE> 122
NRG SOUTH CENTRAL GENERATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Louisiana Generating charges the distribution cooperative a demand charge,
a fuel charge and a variable operation and maintenance charge. The demand charge
consists of two components, a capital rate and a fixed operation and maintenance
rate. The distribution cooperatives have an option to choose one of two fuel
options, all six have selected the first option which is a fixed fee through
2004 and determined using a formula which is based on gas prices and the cost of
delivered coal for the period thereafter. At the end of the fifteenth year of
the contract, the cooperatives may switch to the second fuel option. The second
fuel option consists of a pass-through of fuel costs, with a guaranteed coal
heat rate and purchased energy costs, excluding the demand component in
purchased power. From time to time Louisiana Generating may offer fixed fuel
rates which the cooperative may elect to utilize. The variable operation and
maintenance charge is fixed through 2004 and escalates at either approximately
3% per annum or in accordance with actual changes in specified indices as
selected by the distribution cooperative. Five of the distribution cooperatives
elected the fixed escalation provision and one elected the specified indices
provision.
The Form A agreement also contains provisions for special rates for certain
customers based on the economic development benefits the customer will provide
and other rates to improve the distribution cooperative's ability to compete
with service offered by political subdivisions.
Form B Agreements
One distribution cooperative selected the Form B Power Supply Agreement.
The term of the Form B power supply agreement commences on March 31, 2000 and
ends on December 31, 2024. The Form B power supply agreement allows the
distribution cooperative the right to elect to limit its purchase obligations to
"base supply" or also to purchase "supplemental supply." Base supply is the
distribution cooperative's ratable share of the generating capacity purchased by
Louisiana Generating from Cajun Electric. Supplemental supply is the
cooperative's requirements in excess of the base supply amount. The distribution
cooperative which selected the Form B agreement also elected to purchase
supplemental supply.
Louisiana Generating charges the distribution cooperative a monthly
specific delivery facility charge of approximately 1.75% of the depreciated net
book value of the specific delivery facilities, including additional investment.
The distribution cooperative may assume the right to maintain the specific
delivery facilities and reduce the charge to 1.25% of the depreciated net book
value of the specific delivery facilities. Louisiana Generating also charges the
distribution cooperative its ratable share of 1.75% of the depreciated book
value of common delivery facilities, which include communications, transmission
and metering facilities owned by Louisiana Generating to provide supervisory
control and data acquisition, and automatic control for its customers.
For base supply, Louisiana Generating charges the distribution cooperative
a demand charge, an energy charge and a fuel charge. The demand charge for each
contract year is set forth in the agreement and is subject to increase for
environmental legislation or occupational safety and health laws enacted after
the effective date of the agreement. Louisiana Generating can increase the
demand charge to the extent its cost of providing supplemental supply exceeds
$400/kW. The energy charge is fixed through 2004, and deceased slightly for the
remainder of the contract term. The fuel charge is a pass through of fuel and
purchased energy costs, the distribution cooperative may elect to be charged
based on a guaranteed coal fired heat rate of 10,600 Btu/kWh, and it may also
select fixed fuel factors as set forth in the agreement for each year through
2008. The one distribution cooperative which selected this form of agreement
elected to utilize the fixed fuel factors. For the years after 2008, Louisiana
Generating will offer additional fixed fuel factors for five-year periods that
may be elected to utilize. For the years after 2008, the distribution
cooperative may also elect to have its charges computed under the pass through
provisions with or without the guaranteed coal fired heat rate.
At the beginning of year six, Louisiana Generating will establish a rate
fund equal to the ratable share of $18 million. The amount of the fund will be
approximately $720,000. This fund will be used to offset the energy costs of the
Form B distribution cooperatives which elected the fuel pass through provision
of the fuel
F-16
<PAGE> 123
NRG SOUTH CENTRAL GENERATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
charge, to the extent the cost of power exceeds $0.04/kWh. Any funds remaining
at the end of the term of the power supply agreement will be returned to
Louisiana Generating.
Form C Agreements
Four distribution cooperatives selected the Form C power supply agreement.
The Form C power supply agreement is identical to the Form A power supply
agreement, except for the following.
The term of the Form C power supply agreement is for four years following
the closing date of the acquisition of the Cajun facilities. The agreement can
be terminated by the distribution cooperative at any time with 12 months prior
notice given after the first anniversary of the acquisition closing date.
Louisiana Generating will charge the distribution cooperative a demand
rate, a variable operation and maintenance charge and a fuel charge. Louisiana
Generating will not offer the distribution cooperatives which select the Form C
agreement any new incentive rates, but will continue to honor existing incentive
rates. At the end of the term of the agreement, the distribution cooperative is
obligated to purchase the specific delivery facilities for a purchase price
equal to the depreciated book value.
Other Power Supply Agreements
Louisiana Generating assumed Cajun Electric's rights and obligations under
two consecutive long-term power supply agreements with South Western Electric
Power Company (SWEPCO), one agreement with South Mississippi Electric Power
Association (SMEPA) and one agreement with Municipal Energy Agency of
Mississippi (MEAM).
The SWEPCO Operating Reserves and Off-Peak Power Sale Agreement, terminates
on December 31, 2007. The agreement requires Louisiana Generating to supply 100
MW of off-peak energy during certain hours of the day to a maximum of 292,000
MWh per year and an additional 100 MW of operating reserve capacity and the
associated energy within ten minutes of a phone request during certain hours to
a maximum of 43,800 MWh of operating reserve energy per year. The obligation to
purchase the 100 MW of off-peak energy is contingent on Louisiana Generating's
ability to deliver operating reserve capacity and energy associated with
operating reserve capacity. At Louisiana Generating's request it will supply up
to 100 MW of non-firm, on peak capacity and associated energy.
The SWEPCO Operating Reserves Capacity and Energy Power Sale Agreement, is
effective January 1, 2008 through December 31, 2026. The agreement requires
Louisiana Generating to provide 50 MW of operating reserve capacity within 10
minutes of a phone request. In addition, SWEPCO is granted the right to purchase
up to 21,900 MWh/year of operating reserve energy.
The SMEPA Unit Power Sale Agreement is effective through May 31, 2009,
unless terminated following certain regulatory changes, changes in fuel costs or
destruction of the Cajun facilities. The agreement requires Louisiana Generating
to provide 75 MW of capacity and the associated energy from Big Cajun II, Unit 1
and an option for SMEPA to purchase additional capacity and associated energy if
Louisiana Generating determines that it is available, in 10 MW increments, up to
a total of 200 MW. SMEPA is required to schedule a minimum of 25 MW plus 37% of
any additional capacity that is purchased. The capacity charge is fixed through
May 31, 2004, and increases for the period June 1, 2004 through May 31, 2009
including transmission costs to the delivery point and any escalation of
expenses. The energy charge is 110% of the incremental fuel cost for Big Cajun
II, Unit 1.
The MEAM Power Sale Agreement is effective through May 31, 2010 with an
option for MEAM to extend through September 30, 2015 upon five years advance
notice. The agreement requires Louisiana Generating to provide 20 MW of firm
capacity and associated energy with an option for MEAM to increase the capacity
purchased to a total of 30 MW upon five years advance notice. The capacity
charge is fixed. The
F-17
<PAGE> 124
NRG SOUTH CENTRAL GENERATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
operation and maintenance charge is a fixed amount which escalates at 3.5% per
year. There is a transmission charge which varies depending upon the delivery
point. The price for energy associated with the firm capacity is 110% of the
incremental generating cost to Louisiana Generating and is adjusted to include
transmission losses to the delivery point.
Coal Supply Agreement
Louisiana Generating has entered into a coal supply agreement with Triton
Coal. The coal is primarily sourced from Triton Coal's Buckskin and North
Rochelle mines located in Powder River Basin, Wyoming. The Coal supply agreement
has a term of five years from March 31, 2000. The agreement is for the full coal
requirements of Big Cajun II. The agreement establishes a base price per ton for
coal supplied by Triton Coal. The base price is subject to adjustment for
changes in, the level of taxes or other government fees and charges, variations
in the caloric value of the coal shipped and changes in the price of SO(2)
emission allowances. The base price is based on certain annual weighted average
quality specifications, subject to suspension and rejection limits. The base
price and quality of coal specifications guarantee compliance with Big Cajun
II's annual SO(2) emissions allocation of 44,153 tons commencing in 2000
regardless of the burn level.
Coal Transportation Agreement
Louisiana Generating entered into a coal transportation agreement with
Burlington Northern and Santa Fe Railway and American Commercial Terminal. The
term of the agreement is five years from March 31, 2000. This agreement provides
for the transport of all of the coal requirements of Big Cajun II from the mines
in Wyoming to Big Cajun II.
Transmission and Interconnection Agreements
Louisiana Generating assumed Cajun Electric's existing transmission
agreements with Central Louisiana Electric Company, SWEPCO; and Entergy
Services, Inc., acting as agent for Entergy Arkansas, Inc., Entergy Gulf States,
Entergy Louisiana, Inc., Entergy Mississippi, Inc., and Entergy New Orleans,
Inc. The Cajun facilities are connected to the transmission system of Entergy
Gulf States and power is delivered to the distribution cooperatives at various
delivery points on the transmission systems of Entergy Gulf States, Entergy
Louisiana, Central Louisiana Electric Company and SWEPCO. Louisiana Generating
also assumed from Cajun Electric 20 interchange and sales agreements with
utilities and cooperatives, providing access to a 12 state area.
Joint Ownership Participation and Operating Agreement for Big Cajun II,
Unit 3
On March 31, 2000, Louisiana Generating acquired a 58% interest in the Big
Cajun II, Unit 3 generation plant, Entergy Gulf States owns the remaining 42%.
Big Cajun II, Unit 3 is operated and maintained by Louisiana Generating pursuant
to a joint ownership participation and operating agreement. Under this
agreement, Louisiana Generating and Entergy Gulf States are each entitled to
their ownership percentage of the hourly net electrical output of Big Cajun II,
Unit 3. All fixed costs are shared in proportion to the ownership interests.
Fixed costs include the cost of operating common facilities. All variable costs
are borne in proportion to the energy delivered to the owners.
NOTE 11 -- PREDECESSOR REVENUES AND EXPENSES
The accompanying Statement of Operations contain a statement of certain
revenues and expenses of Cajun Electric on a carve-out basis for the three
months ended March 31, 2000 and 1999. These results have been separated by a
"black line" due to the change in basis of the assets of Cajun Electric on the
date of acquisition by the Company. These results represent certain revenues and
expenses of Cajun Electric's non-nuclear electric generating business which the
Company acquired on March 31, 2000. The carve-out revenues
F-18
<PAGE> 125
NRG SOUTH CENTRAL GENERATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and expenses exclude Cajun Electric's investment earnings, interest expense,
bankruptcy reorganization costs and income taxes.
NOTE 12 -- JOINTLY OWNED PLANT
On March 31, 2000 Louisiana Generating acquired a 58% interest in the Big
Cajun II, Unit 3 generation plant. Entergy Gulf States owns the remaining 42%.
Big Cajun II, Unit 3 is operated and maintained by Louisiana Generating pursuant
to a joint ownership participation and operating agreement. Under this
agreement, Louisiana Generating and Entergy Gulf States are each entitled to
their ownership percentage of the hourly net electrical output of Big Cajun II,
Unit 3. All fixed costs are shared in proportion to the ownership interests.
Fixed costs include the cost of operating common facilities. All variable costs
are borne in proportion to the energy delivered to the owners. The Company's
income statement includes the Company's share of all fixed and variable costs of
operating the unit. The Company's 58% share of the original cost included in
Plant, Property and Equipment at June 30, 2000 and September 30, 2000 was $214.3
million and $215.1 million (Unaudited), respectively. The corresponding
accumulated depreciation and amortization was $1.3 million and $2.7 million
(Unaudited), respectively.
NOTE 13 -- SUBSEQUENT EVENTS
Pursuant to a project development agreement between NRG Energy and Koch
Power, Inc., NRG Energy agreed in April 1999 to participate in the development
of an approximately 200 MW simple cycle gas peaking facility in Sterlington,
Louisiana. Development of the facility had been commenced by a Koch Power
affiliate, Koch Power Louisiana, LLC, a Delaware limited liability company. In
August 2000, NRG Energy acquired 100% of Koch Power Louisiana from Koch Power,
and renamed it NRG Sterlington Power LLC. In August 2000, NRG Sterlington Power
was designated as an unrestricted subsidiary of NRG South Central. As such it is
not a guarantor of the bonds and its operations are not restricted by the
indenture.
Big Cajun I Peaking Power LLC was formed in July 2000 for the purpose of
developing, owning and operating an approximately 240 MW simple cycle gas
peaking facility expansion project at the Big Cajun I site in New Roads,
Louisiana. Big Cajun I Peaking Power has commenced the permitting process in
respect of the expansion project. The energy and capacity generated by the
expansion project may be used to help meet Louisiana Generating's obligations
under the Cajun facilities' power purchase agreements, with any excess power and
capacity being marketed by NRG Power Marketing. The expansion project is
targeted to begin commercial operation in June 2001. Big Cajun I Peaking Power
has been designated as an unrestricted subsidiary of NRG South Central, and as
such it is not a guarantor of the bonds and its operations are not restricted by
the indenture.
NRG Sabine River Works LP and NRG Sabine River Works GP were formed in
November 2000 for the purpose of owning, respectively, a limited partner and
general partner interest in SRW Cogeneration Limited Partnership, which owns and
will operate an approximately 450 MW natural gas-fired cogeneration plant now
under construction at the DuPont Company's Sabine River Works petro-chemical
facility near Orange, Texas. SRW Cogeneration Limited Partnership is 50% owned
by subsidiaries of Conoco Inc.
NOTE 14 -- DECOMMISSIONING FUND
Decommissioning
The Company is required by the State of Louisiana Department of
Environmental Quality ("DEQ") to rehabilitate its Big Cajun II ash and
wastewater impoundment areas upon removal from service of the Big Cajun II
facilities. On July 1, 1989, a guarantor trust fund (the "Solid Waste Disposal
Trust Fund") was established to accumulate the estimated funds necessary for
such purpose. The Company's predecessor deposited $1.06 million in the Solid
Waste Disposal Trust Fund in 1989, and funded $116,000 annually
F-19
<PAGE> 126
NRG SOUTH CENTRAL GENERATING LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
thereafter, based upon an estimated future rehabilitation cost (in 1989 dollars)
of approximately $3.5 million and the remaining estimated useful life of the Big
Cajun II facilities. Cumulative contributions to the Solid Waste Disposal Trust
Fund and earnings on the investments therein are accrued as a decommissioning
liability. At June 30, 2000 and September 30, 2000, the carrying value of the
trust fund investments and the related accrued decommissioning liability was
approximately $3.6 million and $3.7 million (Unaudited), respectively. The trust
fund investments are comprised of various debt securities of the United States
and are carried at amortized cost, which approximates their fair value.
NOTE 15 -- CONDENSED CONSOLIDATING FINANCIAL INFORMATION (UNAUDITED)
The following tables set forth the consolidating interim financial
statements of NRG South Central Generating LLC (Bond Issuer); Louisiana
Generating LLC (Bond Guarantor); NRG New Roads Holding LLC, NRG Sterlington
Power LLC and Big Cajun I Peaking Power LLC (Unrestricted, Non-guarantor
subsidiaries). The condensed consolidating financial statements present the
unrestricted non-guarantor subsidiaries on a combined basis. The consolidating
financial statements as of and for the period March 30, 2000 (Inception) through
September 30, 2000 have been derived from the unaudited historical consolidated
interim financial statements of NRG South Central.
F-20
<PAGE> 127
NRG SOUTH CENTRAL GENERATING LLC
AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
LOUISIANA
UNRESTRICTED GENERATING LLC SOUTH CENTRAL
NON-GUARANTOR (BOND GENERATING LLC CONSOLIDATED
SUBSIDIARIES GUARANTOR) (BOND ISSUER) ELIMINATIONS(1) BALANCE
(IN THOUSANDS) ------------- -------------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents........... $ -- $ 25,989 $ -- $ -- $ 25,989
Accounts receivable................. -- 54,408 -- -- 54,408
Inventory........................... -- 30,329 -- -- 30,329
Prepaid expenses.................... 28 3,266 -- -- 3,294
------- ---------- ---------- ----------- ----------
Total current assets.......... 28 113,992 -- -- 114,020
Investment in Subsidiaries............ -- -- 284,160 (284,160) --
Intercompany note receivable.......... -- -- 788,750 (788,750) --
Property, plant & equipment, net...... 74,448 1,005,817 -- -- 1,080,265
Deferred financing costs, net......... -- 9,663 129 -- 9,792
Decommissioning fund investments...... -- 3,673 -- -- 3,673
Other assets.......................... -- 2,495 5,321 -- 7,816
------- ---------- ---------- ----------- ----------
Total assets.................. $74,476 $1,135,640 $1,078,360 $(1,072,910) $1,215,566
======= ========== ========== =========== ==========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt... $ -- $ -- $ 25,250 $ -- $ 25,250
Revolving line of credit............ -- -- 40,000 -- 40,000
Intercompany note payable........... -- 25,250 -- (25,250) --
Accounts payable.................... 215 746 -- -- 961
Accounts payable-affiliates, net.... (2,303) 93,869 (47,209) -- 44,357
Accrued interest.................... -- 3,628 3 -- 3,631
Accrued fuel, purchased power and
transmission expense.............. 371 31,325 -- -- 31,696
Accrued liabilities................. 75 4,441 -- -- 4,516
------- ---------- ---------- ----------- ----------
Total current liabilities..... (1,642) 159,259 18,044 (25,250) 150,411
Long-term debt........................ -- -- 763,500 763,500
Intercompany note payable............. -- 763,500 -- (763,500) --
Other long-term liabilities........... -- 4,839 -- -- 4,839
------- ---------- ---------- ----------- ----------
Total liabilities............. (1,642) 927,598 781,544 (788,750) 918,750
MEMBERS' EQUITY....................... 76,118 208,042 296,816 (284,160) 296,816
------- ---------- ---------- ----------- ----------
Total liabilities and members'
equity...................... $74,476 $1,135,640 $1,078,360 $(1,072,910) $1,215,566
======= ========== ========== =========== ==========
</TABLE>
-------------------------
(1)All significant intercompany transactions have been eliminated in
consolidation.
F-21
<PAGE> 128
NRG SOUTH CENTRAL GENERATING LLC
AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 30, 2000 (INCEPTION) THROUGH SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
UNRESTRICTED, LOUISIANA SOUTH CENTRAL
NON-GUARANTOR GENERATING LLC GENERATING LLC CONSOLIDATED
SUBSIDIARIES (BOND GUARANTOR) (BOND ISSUER) ELIMINATIONS(1) BALANCE
(IN THOUSANDS) ------------- ---------------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues............... $3,911 $202,665 $ -- $ (3,858) $202,718
Operating costs........ 586 139,998 -- (3,858) 136,726
------ -------- ------- -------- --------
Operating margin..... 3,325 62,667 -- -- 65,992
Depreciation expense... 448 13,530 -- -- 13,978
General and
administrative
expense.............. 86 2,329 143 -- 2,558
------ -------- ------- -------- --------
Income from
operations........ 2,791 46,808 (143) -- 49,456
Other (income)/expense,
net.................. (19) (479) (159) -- (657)
Equity earnings in
subsidiaries......... -- -- 12,499 (12,499) --
Interest expense....... -- 37,598 -- -- 37,598
------ -------- ------- -------- --------
Net income........... $2,810 $ 9,689 $12,515 $(12,499) $ 12,515
====== ======== ======= ======== ========
</TABLE>
-------------------------
(1)All significant intercompany transactions have been eliminated in
consolidation.
F-22
<PAGE> 129
NRG SOUTH CENTRAL GENERATING LLC
AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE PERIOD MARCH 30, 2000 (INCEPTION) THROUGH SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SOUTH CENTRAL
UNRESTRICTED LOUISIANA GENERATING
NON-GUARANTOR GENERATING LLC LLC CONSOLIDATED
SUBSIDIARIES (BOND GUARANTOR) (BOND ISSUER) ELIMINATIONS(1) BALANCE
(IN THOUSANDS) ------------- ---------------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Cash Flows from operating
activities:
Net income.......................... $ 2,810 $ 9,689 $ 12,515 $ (12,499) $ 12,515
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization..... 448 13,530 -- -- 13,978
Amortization of deferred financing
costs........................... -- 193 -- -- 193
Changes in assets and liabilities:
Accounts receivable, net........ -- (54,408) -- -- (54,408)
Accounts
receivable -- affiliates...... -- -- (788,750) 788,750 --
Inventories..................... -- 2,757 -- -- 2,757
Prepaid expenses................ (28) (3,066) -- -- (3,094)
Accounts payable................ 215 746 -- -- 961
Accounts
payable -- affiliates......... (2,303) 55,989 (37,353) -- 16,333
Accrued interest................ -- 3,628 3 -- 3,631
Accrued fuel, purchased power
and transmission expense...... 371 31,325 -- -- 31,696
Other accrued liabilities....... 75 3,164 -- -- 3,239
Cash (used in) provided by changes
in other assets and
liabilities..................... -- 1,274 (5,321) -- (4,047)
-------- ----------- ---------- ----------- -----------
Net cash provided by (used in)
operating activities........ 1,588 64,821 (818,906) 776,251 23,754
-------- ----------- ---------- ----------- -----------
Cash flows from investing
activities:
Business acquisition, net of
liabilities assumed............. (25,574) (1,030,353) (268,426) 268,426 (1,055,927)
Capital expenditures.............. (1,588) (4,483) -- -- (6,071)
Proceeds from disposition of
property and equipment.......... -- 9,017 -- -- 9,017
Investment in decommissioning
fund............................ -- (116) -- -- (116)
-------- ----------- ---------- ----------- -----------
Net cash (used in) provided by
investing activities........ (27,162) (1,025,935) (268,426) 268,426 (1,053,097)
-------- ----------- ---------- ----------- -----------
Cash flows from financing
activities:
Proceeds from short-term
borrowings...................... -- -- 40,000 -- 40,000
Repayment of long-term
borrowings...................... -- (11,250) -- -- (11,250)
Proceeds from long-term
borrowings...................... -- 800,000 788,750 (788,750) 800,000
Contributions by members.......... 25,574 230,353 300,567 (287,927) 268,567
Distributions to members.......... -- (32,000) (32,000) 32,000 (32,000)
Deferred financing costs.......... -- -- (9,985) -- (9,985)
-------- ----------- ---------- ----------- -----------
Net cash provided by (used in)
financing activities........ 25,574 987,103 1,087,332 (1,044,677) 1,055,332
-------- ----------- ---------- ----------- -----------
Net (decrease) increase in cash and
cash equivalents.................. -- 25,989 -- -- 25,989
Cash and cash equivalents, beginning
of period......................... -- -- -- -- --
-------- ----------- ---------- ----------- -----------
Cash and cash equivalents, end of
period............................ $ -- $ 25,989 $ -- $ -- $ 25,989
======== =========== ========== =========== ===========
</TABLE>
-------------------------
(1)All significant intercompany transactions have been eliminated in
consolidation.
F-23
<PAGE> 130
LOUISIANA GENERATING LLC
FINANCIAL STATEMENTS
F-24
<PAGE> 131
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Louisiana Generating LLC:
In our opinion, the accompanying balance sheet and the related statements
of operations, of member's equity and of cash flows present fairly, in all
material respects, the financial position of Louisiana Generating LLC at June
30, 2000, and the results of its operations and its cash flows for the period
from March 30, 2000 (Inception) through June 30, 2000 in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management, our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
October 17, 2000
F-25
<PAGE> 132
LOUISIANA GENERATING LLC
BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, 2000 SEPTEMBER 30, 2000
-------------- ------------------
(UNAUDITED)
<S> <C> <C>
(IN THOUSANDS)
ASSETS:
CURRENT ASSETS:
Cash...................................................... $ 10,319 $ 25,989
Accounts receivable....................................... 35,869 54,408
Inventory................................................. 37,425 30,329
Prepaid expenses.......................................... 860 3,266
---------- ----------
Total current assets.............................. 84,473 113,992
NON CURRENT ASSETS:
Property, plant & equipment, net.......................... 1,010,894 1,005,817
Deferred financing costs, net of accumulated amortization
of $103 and $193....................................... 9,757 9,663
Decommissioning fund investments.......................... 3,591 3,673
Other assets.............................................. 2,618 2,495
---------- ----------
Total assets...................................... $1,111,333 $1,135,640
========== ==========
LIABILITIES AND MEMBER'S EQUITY
LIABILITIES:
Current liabilities:
Current portion of long-term debt......................... $ 23,750 $ 25,250
Accounts payable.......................................... 758 746
Accounts payable -- affiliates............................ 35,922 93,869
Accrued fuel and purchased power expense.................. 11,131 31,325
Accrued interest.......................................... 18,704 3,628
Other current liabilities................................. 4,524 4,441
---------- ----------
Total current liabilities................................. 94,789 159,259
Long-term debt............................................ 776,250 763,500
Other non-current liabilities............................. 4,175 4,839
---------- ----------
Total Liabilities................................. 875,214 927,598
MEMBER'S EQUITY............................................. 236,119 208,042
---------- ----------
Total liabilities and member's equity............. $1,111,333 $1,135,640
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-26
<PAGE> 133
LOUISIANA GENERATING LLC
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
MARCH 30, 2000 MARCH 30, 2000
(INCEPTION) (INCEPTION)
THROUGH JUNE 30, THROUGH SEPTEMBER 30,
2000 2000
---------------- ---------------------
(UNAUDITED)
<S> <C> <C>
(IN THOUSANDS)
Revenues................................................... $88,536 $202,665
Operating Costs............................................ 55,637 139,998
------- --------
Operating margin......................................... 32,899 62,667
Depreciation and Amortization(1)........................... 6,702 13,530
General and Administrative Expenses........................ 1,626 2,329
------- --------
Income from operations................................... 24,571 46,808
Other Income............................................... (56) (479)
Interest Expense........................................... 18,861 37,598
------- --------
Net Income............................................... $ 5,766 $ 9,689
======= ========
</TABLE>
-------------------------
(1) Depreciation and amortization expense is considered to be a cost of
operations.
See accompanying notes to financial statements.
F-27
<PAGE> 134
LOUISIANA GENERATING LLC
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
MARCH 30, 2000 MARCH 30, 2000
(INCEPTION) (INCEPTION)
THROUGH JUNE 30, THROUGH SEPTEMBER 30,
2000 2000
---------------- ---------------------
(UNAUDITED)
<S> <C> <C>
(IN THOUSANDS)
Cash Flow from operating activities:
Net income................................................. $ 5,766 $ 9,689
Adjustments to reconcile net income to net cash provided
from operating activities:
Depreciation and amortization............................ 6,702 13,530
Amortization of deferred financing costs................. 103 193
Changes in assets and liabilities:
Accounts receivable, net.............................. (35,869) (54,408)
Inventories........................................... (4,339) 2,757
Prepaid expenses...................................... (661) (3,066)
Accounts payable...................................... 758 746
Accounts payable -- affiliates........................ (1,961) 55,989
Accrued fuel and purchased power expense.............. 11,131 31,325
Accrued interest...................................... 18,704 3,628
Other current liabilities............................. 3,247 3,164
Cash used by changes in other assets and liabilities..... 575 1,274
----------- -----------
Net cash provided by operating activities........... 4,156 64,821
Cash flows from investing activities:
Business acquisition, net of liabilities assumed......... (1,030,353) (1,030,353)
Proceeds from disposition of property and equipment...... 8,975 9,017
Capital expenditures..................................... (2,812) (4,483)
Investment in decommissioning fund....................... -- (116)
----------- -----------
Net cash used in investing activities............... (1,024,190) (1,025,935)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt................. 800,000 800,000
Payment of long-term borrowings.......................... -- (11,250)
Contributions by members................................. 230,353 230,353
Distribution to members.................................. -- (32,000)
----------- -----------
Net cash flows provided by financing activities..... 1,030,353 987,103
----------- -----------
Net increase in cash and cash equivalents.................. 10,319 25,989
Cash and cash equivalents at beginning of period........... -- --
----------- -----------
Cash and cash equivalents at end of period................. $ 10,319 $ 25,989
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid (net of amount capitalized).................. $ -- $ 33,571
</TABLE>
See accompanying notes to financial statements.
F-28
<PAGE> 135
LOUISIANA GENERATING LLC
STATEMENT OF MEMBER'S EQUITY
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Balance, March 30, 2000 (Inception)......................... $ --
Contributions............................................. 230,353
Net Income................................................ 5,766
--------
Balance, June 30, 2000...................................... $236,119
========
Distributions (Unaudited)................................. (32,000)
Net Income (Unaudited).................................... 3,923
--------
Balance, September 30, 2000 (Unaudited)..................... $208,042
========
</TABLE>
See accompanying notes to financial statements.
F-29
<PAGE> 136
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS
Louisiana Generating LLC (Louisiana Generating or the Company) is an
indirect wholly owned subsidiary of NRG Energy, Inc. (NRG). NRG South Central
owns 100% of Louisiana Generating LLC. NRG South Central's members are NRG
Central U.S. LLC (NRG Central) and South Central Generation Holding LLC (South
Central Generation). NRG Central and South Central Generation are wholly owned
subsidiaries of NRG, each of which own a 50% interest in NRG South Central.
Louisiana Generating was formed for the purpose of acquiring, owning,
operating and maintaining the electric generating facilities acquired from Cajun
Electric Power Cooperative, Inc. (Cajun Electric).
Pursuant to a competitive bidding process, following the Chapter 11
bankruptcy proceeding of Cajun Electric, Louisiana Generating acquired the
non-nuclear electric power generating assets of Cajun Electric.
NOTE 1 -- BUSINESS DEVELOPMENTS
On March 31, 2000, for approximately $1,030.4 million, the Company acquired
1,708 MW of electric power generation facilities located in New Roads, Louisiana
(Cajun facilities). The acquisition was financed through a combination of
project level non-recourse debt and equity from NRG South Central.
The acquisition was accounted for by the purchase method. The aggregate
purchase price was allocated among the assets acquired and liabilities assumed
based on an appraisal prepared in April 2000.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates in Financial Statements
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect reported amounts of assets and liabilities
at the date of the financial statements and reported amounts of revenue and
expenses during the reporting period. Actual results may differ from those
estimates.
In recording transactions and balances resulting from business operations,
the Company uses estimates based on the best information available. Estimates
are used for such items as plant depreciable lives, uncollectible accounts and
actuarially determined benefit costs, among others. As better information
becomes available (or actual amounts are determinable), the recorded estimates
are revised. Consequently, operating results can be affected by revisions to
prior accounting estimates.
Cash and Cash Equivalents
The Company considers cash and cash equivalents to include cash and
short-term investments with original maturities of three months or less.
Inventory
Inventory consists of coal, spare parts and fuel oil and is stated at the
lower of weighted average cost or market (Note 6).
Prepaid Expenses
Prepaid expenses include insurance, taxes and other prepayments.
F-30
<PAGE> 137
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computed
on a straight-line basis over the following estimated useful lives:
<TABLE>
<S> <C>
Facilities, machinery and equipment................... 25 to 40 years
Office furnishings and equipment...................... 3 to 10 years
</TABLE>
Deferred Financing Costs
Deferred financing costs consist of legal and other costs incurred to
obtain debt financing. These costs are being amortized over the terms of the
related debt.
Revenue Recognition
Revenue and related costs are recorded as electricity is generated or
services are provided.
Power Marketing Activities
The Company has entered into a contract with a marketing affiliate for the
sale of energy, capacity and ancillary services produced, which enables the
affiliate to engage in forward sales and hedging transactions to manage the
Company's electricity price exposure. Net gains or losses on hedges by the
marketing affiliate, which are physically settled, are recognized in the same
manner as the hedged item. The Company receives the net transaction price on all
contracts that are physically settled by its marketing affiliate.
Income Taxes
The net income or loss of the Company for income tax purposes, along with
any associated tax credits, is included in the tax returns of NRG. Accordingly,
no provision has been made for federal or state income taxes in the accompanying
financial statements.
As of June 30, 2000, the accompanying financial statements report a balance
of $1,010,894 for net property, plant and equipment. The tax basis of this
property is estimated to be $1,007,123. The primary difference is due to
accelerated tax depreciation.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standard Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement, as amended by
SFAS 138, 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 the derivative, its resulting designation and its
effectiveness. The Company plans to adopt this standard effective January 1,
2001, as required. The potential impact of implementing this statement has not
yet been determined.
Interim Results (Unaudited)
Information as of and for the period from March 30, 2000 (Inception)
through September 30, 2000 is unaudited. The information as of and furnished in
the unaudited September 30, 2000 Balance Sheet, Statement of Operations, Cash
Flows, and Members' Equity include all material adjustments consisting only of
normal recurring accruals, which are, in the opinion of management, necessary
for a fair presentation of such financial statements. The data disclosed in the
Notes to the Financial Statements for this period is also unaudited.
F-31
<PAGE> 138
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- PRO FORMA RESULTS OF OPERATIONS (UNAUDITED)
On March 31, 2000, the Company completed the acquisition of two fossil
fueled generating plants from Cajun Electric Power Cooperative, Inc. for
approximately $1,030.4 million. The following information summarizes the pro
forma results of operations for the three and six months ending June 30, 2000
and 1999 as if the acquisition had occurred as of the beginning of the three and
six months ending June 30, 2000 and 1999. In addition, the following information
summarizes the pro forma results of operations for the three and nine months
ending September 30, 2000 and 1999 as if the acquisition had occurred as of the
beginning of the three and nine months ending September 30, 2000 and 1999. The
pro forma information presented is for informational purposes only and is not
necessarily indicative of future earnings or financial position or of what the
earnings and financial position would have been had the acquisition of the Cajun
facilities been consummated at the beginning of the respective periods or as of
the date for which pro forma financial information is presented.
<TABLE>
<CAPTION>
ACTUAL ACTUAL
THREE MONTHS PRO FORMA THREE MONTHS PRO FORMA
ENDED THREE MONTHS ENDED ENDED THREE MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999 SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
(IN THOUSANDS) ---------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues....................... $88,536 $94,791 $114,129 $114,454
Operating Costs................ 55,637 65,365 84,361 71,148
------- ------- -------- --------
Operating margin............. 32,899 29,426 29,768 43,306
Depreciation and
Amortization................. 6,702 6,875 6,828 6,872
General and Administrative
Expenses..................... 1,626 2,438 703 2,307
------- ------- -------- --------
Income from operations....... 24,571 20,113 22,237 34,127
Other Expense (Income), net.... (56) 771 (423) (226)
Interest Expense............... 18,461 18,312 18,737 18,312
------- ------- -------- --------
Net Income..................... $ 6,166 $ 1,030 $ 3,923 $ 16,041
======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
SIX MONTHS ENDED SIX MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999 SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
(IN THOUSANDS) ---------------- ---------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues......................... $168,518 $173,394 $282,647 $287,848
Operating Costs.................. 114,265 121,783 198,626 192,931
-------- -------- -------- --------
Operating margin............... 54,253 51,611 84,021 94,917
Depreciation and Amortization.... 13,759 13,751 20,587 20,623
General and Administrative
Expenses....................... 4,049 4,866 4,752 7,173
-------- -------- -------- --------
Income from operations......... 36,445 32,994 58,682 67,121
Other Expense (Income), net...... (577) 1,544 (1,000) 1,318
Interest Expense................. 37,173 36,624 55,910 54,936
-------- -------- -------- --------
Net (Loss) Income................ $ (151) $ (5,174) $ 3,772 $ 10,867
======== ======== ======== ========
</TABLE>
F-32
<PAGE> 139
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
JUNE 30, 2000 SEPTEMBER 30, 2000
-------------- ------------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C>
Land............................................ $ 3,734 $ 3,734
Facilities, machinery and equipment............. 1,006,547 1,006,814
Construction in progress........................ 5,933 7,061
Office furnishings and equipment................ 1,251 1,474
Accumulated depreciation........................ (6,571) (13,266)
---------- ----------
Property, plant and equipment (net)............. $1,010,894 $1,005,817
========== ==========
</TABLE>
Property, plant and equipment consist primarily of the electric generating
facilities acquired from Cajun Electric. The assets are comprised of Units 1 and
2 of Big Cajun I and 100% of Units 1 and 2 and 58% of Unit 3 of Big Cajun II; an
energy control center and headquarters building; a 17.5 mile gas pipeline
system; and certain transmission assets and all other substations.
Certain of the acquired assets are not necessary for the operation of the
electric generating facilities, and with respect to some of the assets, may not
be held by the Company under applicable federal regulations. These assets were
transferred to and are being held by New Roads Holding LLC, an affiliate of the
Company, for resale. These assets consist primarily of: a 4,175 acre parcel of
land near Coushatta, Louisiana currently used for timber production, wildlife
conservation and farming; a 2,466 acre segment of the Big Cajun II property that
was held by Cajun Electric as a future ash disposal site currently being leased
for farming; mineral rights to a seven acre parcel of land in New Roads,
Louisiana; and a 540 MW General Electric steam turbine generator.
NOTE 5 -- LONG TERM DEBT
On March 30, 2000, NRG South Central issued $800 million of senior secured
bonds in two tranches. The first tranche was for $500 million with a coupon of
8.962% and a maturity of 2016. The second tranche was for $300 million with a
coupon of 9.479% and a maturity of 2024. Interest on the bonds will be payable
in arrears on each March 15 and September 15, commencing on September 15, 2000.
Principal payments will be made semi-annually commencing on September 15, 2000
with $11,250,000 due, $25,250,000 due in 2001, $25,500,000 due in 2002 and 2003,
$15,000,000 due in 2004 and 2005, with the remaining $682,500,000 due between
March 15, 2006 and September 15, 2024. The proceeds of the bonds were used to
finance the Company's acquisition of the Cajun generating facilities on March
31, 2000. Effective March 30, 2000 NRG South Central and the Company entered
into a Guarantor loan agreement that provides for substantially the same terms
and conditions of the bonds.
NRG South Central's obligations in respect to the bonds are secured by a
security interest in NRG Central's and South Central's interests in NRG South
Central and NRG South Central's membership interest in the Company; all of the
assets related to the Cajun facilities including NRG South Central's rights
under all intercompany notes between NRG South Central and the Company but
excluding those assets specifically held for resale; the revenue account and the
debt service reserve account.
The Company issued a guarantee in favor of the bondholders, which
unconditionally and irrevocably guarantee the payment of principal, of premium
(if any) and interest on the bonds. The guarantee is a guarantee of payment and
the bond trustee is entitled to make demands for payment under the guarantee any
time that amounts due and payable on the bonds have not been paid.
F-33
<PAGE> 140
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company's obligations with respect to the guarantee and the
intercompany loan are secured by a mortgage with respect to Big Cajun I and II
and an interest in:
- All of the Company's interest in the Cajun facilities and substantially
all personal property associated with the Cajun facilities except for
fixtures not located on the Cajun facilities and the assets specifically
held for resale;
- Substantially all contracts, associated with the Cajun facilities to
which the Company is a party and all consents to the assignment of these
contracts that have been obtained;
- All licenses, permits and governmental approvals associated with the
Cajun facilities;
- All insurance policies associated with the Cajun facilities and all
monies paid to the Company on these policies;
- All revenues of the Cajun facilities, including revenues from power sales
contracts entered into by NRG Power Marketing or any other entity which
has entered into a power marketing agreement with the Company associated
with the Cajun facilities; and the revenue account.
Optional Redemption
NRG South Central may redeem the bonds in whole or in part at any time at a
redemption price equal to:
- 100% of the principal amount of the bonds being redeemed, plus
- interest on the bonds being redeemed, accrued and unpaid to, but
excluding, the date of redemption, plus
- a make whole premium based on an amount equal to the excess, if any, of
(a) the discounted present value of all interest and principal payments
scheduled to become due in respect to the bonds to be redeemed (such
discounted present value to be determined on the basis of a discount rate
equal to (i) the treasury rate and (ii) 50 basis points), over (b) the
outstanding principal amount of the applicable bonds to be redeemed.
Debt Service Reserve Account
NRG South Central established a debt service reserve account for the
benefit of the bondholders. This account must constitute at all times a
sufficient fund to pay the scheduled principal and interest on the bonds due in
the next six months. NRG South Central may fund this account with cash or credit
support. NRG South Central has obtained credit support and therefore need not
fund this account with cash. Currently the debt service reserve requirement is
being satisfied by a guarantee given by NRG.
NOTE 6 -- INVENTORY
Inventory, which is stated at the lower of weighted average cost or market,
consists of:
<TABLE>
<CAPTION>
JUNE 30, 2000 SEPTEMBER 30, 2000
-------------- ------------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C>
Coal.................................... $25,862 $18,581
Spare Parts............................. 11,013 11,136
Fuel oil................................ 550 612
------- -------
Total................................... $37,425 $30,329
======= =======
</TABLE>
F-34
<PAGE> 141
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- RELATED PARTY TRANSACTIONS
The Company entered into a power sales and agency agreement with NRG Power
Marketing Inc., a wholly-owned subsidiary of NRG. The agreement is effective
until December 31, 2030. Under the agreement, NRG Power Marketing Inc. will (i)
have the exclusive right to manage, market and sell all power not otherwise sold
or committed to or by the Company, (ii) procure and provide to the Company all
fuel required to operate its respective facilities and (iii) market, sell and
purchase all emission credits owned, earned or acquired by the Company. In
addition, NRG Power Marketing Inc. will have the exclusive right and obligation
to effect the direction of the power output from the facilities.
Under the agreement, NRG Power Marketing, Inc. pays to the Company gross
receipts generated through sales, less costs incurred by NRG Power Marketing,
Inc. relative to its providing services (e.g. transmission and delivery costs,
fuel cost, taxes, employee labor, contract services, etc.).
During the period March 30, 2000 (Inception) through June 30, 2000, and
March 30, 2000 (Inception) through September 30, 2000, the Company recorded
gross receipts less costs incurred from NRG Power Marketing Inc. totaling $44.2
million and $82.1 million (Unaudited), respectively.
The Company entered into an operation and maintenance agreement with NRG
Operating Services, Inc., (NRG Operating Services) a wholly-owned subsidiary of
NRG. The agreement is perpetual in term until terminated in writing by the
Company or until earlier terminated upon an event of default. Under the
agreement, at the Company's request NRG Operating Services manages, oversees and
supplements the operation and maintenance of the Cajun facilities.
During the period March 30, 2000 (Inception) through June 30, 2000, and
March 30, 2000 (Inception) through September 30, 2000, the Company incurred
operating and maintenance costs billed from NRG Operating Services totaling
$11.1 million and $15.2 million (Unaudited), respectively.
The Company and NRG South Central each entered into an agreement with NRG
for corporate support and services. The agreement is perpetual in term until
terminated in writing by the Company or NRG South Central or until earlier
terminated upon an event of default. Under the agreement, NRG will provide
services, as requested, in areas such as human resources, accounting, finance,
treasury, tax, office administration, information technology, engineering,
construction management, environmental, legal and safety. Under the agreement,
NRG is paid for personnel time as well as out-of-pocket costs.
During the period March 30, 2000 (Inception) through June 30, 2000, and
March 30, 2000 (Inception) through September 30, 2000 (Unaudited), the Company
and NRG South Central paid NRG approximately $0.2 million for both periods for
corporate support and services.
As of June 30, 2000 and September 30, 2000, the Company has an accounts
payable-affiliate balance of approximately $35.9 million and $93.9 million,
respectively; approximately $28 million of this amount represents a payable to
NRG for capitalized development costs transferred to the Company upon completion
of the acquisition of the Cajun facilities and the remainder represent a payable
to NRG South Central for financing costs incurred to issue the bonds and other
expenses paid on behalf of the Company.
NOTE 8 -- BENEFITS DISCLOSURES
The Company retained a number of the administrative and operating personnel
of Cajun Electric upon acquisition of Cajun Electric's generating facilities.
Prior to March 31, 2000 these employees were participants in the National Rural
Electric Cooperative Association's Retirement and Security Program, a master
multiple-employer defined benefit plan. Effective March 31, 2000, the
Cooperative's defined benefit and 401-K plans were terminated, no on-going
pension obligation was assumed by the Company or NRG. The Company sponsors a
cash balance pension plan arrangement whereby the employees are entitled to a
pension benefit of approximately 7% of total payroll. The employees are also
eligible to participate in a 401-K plan that provides for the matching of
specified amounts of employee contributions to the plan.
F-35
<PAGE> 142
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
For the period March 30, 2000 (Inception) through June 30, 2000, and March
30, 2000 (Inception) through September 30, 2000, the Company recorded
approximately $333,000 and $667,000, respectively of pension expense and
approximately $9,000 and $21,000, respectively, of 401-K matching funds.
NOTE 9 -- SALES TO SIGNIFICANT CUSTOMERS
During the period March 30, 2000 (Inception) through June 30, 2000, sales
to two customers accounted for 18.2% and 17.1%, respectively of the Company's
total revenues. During the period March 30, 2000 (Inception) through September
30, 2000, sales to these two customers were 17.1% (Unaudited) and 16.4%
(Unaudited), respectively, of the Company's total revenues. During March 2000,
the Company entered into certain power sales agreements with eleven distribution
cooperatives that were customers of Cajun Electric prior to the Company's
acquisition of the Cajun facilities. The initial terms of these agreements
provide for the sale of energy, capacity and ancillary services for the periods
ranging from four to 25 years. In addition, the Company assumed Cajun Electric's
obligations under four long-term power supply agreements. The terms of these
agreements range from 10 to 26 years. These power sales agreements accounted for
the majority (88.1%) of the Company's total revenues during the period March 30,
2000 (Inception) through June 30, 2000 (Note 10).
NOTE 10 -- COMMITMENTS AND CONTINGENCIES
Contractual Commitments
Power Supply Agreements with the Distribution Cooperatives
During March 2000, the Company entered into certain power supply agreements
with eleven distribution cooperatives to provide energy, capacity and
transmission services. The agreements are standardized into three types, Form A,
B and C.
Form A Agreements
Six of the distribution cooperatives entered into Form A power supply
agreements. The Form A agreement is an all-requirements power supply agreement
which has an initial term of 25 years, commencing on March 31, 2000. After the
initial term, the agreement continues on a year-to-year basis, unless terminated
by either party giving five years advanced notice.
Under the Form A power supply agreement, the Company is obligated to supply
the distribution cooperative and is required to purchase all of the energy and
capacity required by the distribution cooperative for service to its retail
customers although the distribution cooperative has certain limited rights under
which it can purchase energy and capacity from third parties.
The Company must contract for all transmission service required to serve
the distribution cooperative and will pass through the costs of transmission
service to the cooperative. The Company is required to supply at its cost,
without pass through, control area services and ancillary services which
transmission providers are not required to provide.
The Company owns and maintains the substations and other facilities used to
deliver energy and capacity to the distribution cooperative and charges the
cooperative a monthly specific delivery facility charge for such facilities any
additions to, or new delivery facilities. The initial monthly charge is 1% of
the value of all of the distribution cooperative's specific delivery facilities.
The cost of additional investment during the term of the agreement will be added
to the initial value of the delivery facilities to calculate the monthly
specific delivery facility charge.
The Company charges the distribution cooperative a demand charge, a fuel
charge and a variable operation and maintenance charge. The demand charge
consists of two components, a capital rate and a fixed operation and maintenance
rate. The distribution cooperatives have an option to choose one of two fuel
F-36
<PAGE> 143
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
options, all six have selected the first option which is a fixed fee through
2004 and determined using a formula which is based on gas prices and the cost of
delivered coal for the period thereafter. At the end of the fifteenth year of
the contract, the cooperatives may switch to the second fuel option. The second
fuel option consists of a pass-through of fuel costs, with a guaranteed coal
heat rate and purchased energy costs, excluding the demand component in
purchased power. From time to time the Company may offer fixed fuel rates which
the cooperative may elect to utilize. The variable operation and maintenance
charge is fixed through 2004 and escalates at either approximately 3% per annum
or in accordance with actual changes in specified indices as selected by the
distribution cooperative. Five of the distribution cooperatives elected the
fixed escalation provision and one elected the specified indices provision.
The Form A agreement also contains provisions for special rates for certain
customers based on the economic development benefits the customer will provide
and other rates to improve the distribution cooperative's ability to compete
with service offered by political subdivisions.
Form B Agreements
One distribution cooperative selected the Form B Power Supply Agreement.
The term of the Form B power supply agreement commences on March 31, 2000 and
ends on December 31, 2024. The Form B power supply agreement allows the
distribution cooperative the right to elect to limit its purchase obligations to
"base supply" or also to purchase "supplemental supply." Base supply is the
distribution cooperative's ratable share of the generating capacity purchased by
the company from Cajun Electric. Supplemental supply is the cooperative's
requirements in excess of the base supply amount. The distribution cooperative
which selected the Form B agreement also elected to purchase supplemental
supply.
The Company charges the distribution cooperative a monthly specific
delivery facility charge of approximately 1.75% of the depreciated net book
value of the specific delivery facilities, including additional investment. The
distribution cooperative may assume the right to maintain the specific delivery
facilities and reduce the charge to 1.25% of the depreciated net book value of
the specific delivery facilities. The Company also charges the distribution
cooperative its ratable share of 1.75% of the depreciated book value of common
delivery facilities, which include communications, transmission and metering
facilities owned by the Company to provide supervisory control and data
acquisition, and automatic control for its customers.
For base supply, the Company charges the distribution cooperative a demand
charge, an energy charge and a fuel charge. The demand charge for each contract
year is set forth in the agreement and is subject to increase for environmental
legislation or occupational safety and health laws enacted after the effective
date of the agreement. The Company can increase the demand charge to the extent
its cost of providing supplemental supply exceeds $400/kW. The energy charge is
fixed through 2004, and deceased slightly for the remainder of the contract
term. The fuel charge is a pass through of fuel and purchased energy costs, the
distribution cooperative may elect to be charged based on a guaranteed coal
fired heat rate of 10,600 Btu/kWh, and it may also select fixed fuel factors as
set forth in the agreement for each year through 2008. The one distribution
cooperative which selected this form of agreement elected to utilize the fixed
fuel factors. For the years after 2008, the Company will offer additional fixed
fuel factors for five-year periods that may be elected to utilize. For the years
after 2008, the distribution cooperative may also elect to have its charges
computed under the pass through provisions with or without the guaranteed coal
fired heat rate.
At the beginning of year six, the Company will establish a rate fund equal
to the ratable share of $18 million. The amount of the fund will be
approximately $720,000. This fund will be used to offset the energy costs of the
Form B distribution cooperatives which elected the fuel pass through provision
of the fuel charge, to the extent the cost of power exceeds $0.04/kWh. Any funds
remaining at the end of the term of the power supply agreement will be returned
to the Company.
F-37
<PAGE> 144
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Form C Agreements
Four distribution cooperatives selected the Form C power supply agreement.
The Form C power supply agreement is identical to the Form A power supply
agreement, except for the following.
The term of the Form C power supply agreement is for four years following
the closing date of the acquisition of the Cajun facilities. The agreement can
be terminated by the distribution cooperative at any time with 12 months prior
notice given after the first anniversary of the acquisition closing date.
The Company will charge the distribution cooperative a demand rate, a
variable operation and maintenance charge and a fuel charge. The Company will
not offer the distribution cooperatives which select the Form C agreement any
new incentive rates, but will continue to honor existing incentive rates. At the
end of the term of the agreement, the distribution cooperative is obligated to
purchase the specific delivery facilities for a purchase price equal to the
depreciated book value.
Other Power Supply Agreements
The Company assumed Cajun Electric's rights and obligations under two
consecutive long-term power supply agreements with South Western Electric Power
Company (SWEPCO), one agreement with South Mississippi Electric Power
Association (SMEPA) and one agreement with Municipal Energy Agency of
Mississippi (MEAM).
The SWEPCO Operating Reserves and Off-Peak Power Sale Agreement, terminates
on December 31, 2007. The agreement requires the Company to supply 100 MW of
off-peak energy during certain hours of the day to a maximum of 292,000 MWh per
year and an additional 100 MW of operating reserve capacity and the associated
energy within ten minutes of a phone request during certain hours to a maximum
of 43,800 MWh of operating reserve energy per year. The obligation to purchase
the 100 MW of off-peak energy is contingent on the Company's ability to deliver
operating reserve capacity and energy associated with operating reserve
capacity. At the Company's request it will supply up to 100 MW of non-firm, on
peak capacity and associated energy.
The SWEPCO Operating Reserves Capacity and Energy Power Sale Agreement, is
effective January 1, 2008 through December 31, 2026. The agreement requires the
Company to provide 50 MW of operating reserve capacity within 10 minutes of a
phone request. In addition, SWEPCO is granted the right to purchase up to 21,900
MWh/year of operating reserve energy.
The SMEPA Unit Power Sale Agreement is effective through May 31, 2009,
unless terminated following certain regulatory changes, changes in fuel costs or
destruction of the Cajun facilities. The agreement requires the Company to
provide 75 MW of capacity and the associated energy from Big Cajun II, Unit 1
and an option for SMEPA to purchase additional capacity and associated energy if
the Company determines that it is available, in 10 MW increments, up to a total
of 200 MW. SMEPA is required to schedule a minimum of 25 MW plus 37% of any
additional capacity that is purchased. The capacity charge is fixed through May
31, 2004, and increases for the period June 1, 2004 through May 31, 2009
including transmission costs to the delivery point and any escalation of
expenses. The energy charge is 110% of the incremental fuel cost for Big Cajun
II, Unit 1.
The MEAM Power Sale Agreement is effective through May 31, 2010 with an
option for MEAM to extend through September 30, 2015 upon five years advance
notice. The agreement requires the Company to provide 20 MW of firm capacity and
associated energy with an option for MEAM to increase the capacity purchased to
a total of 30 MW upon five years advance notice. The capacity charge is fixed.
The operation and maintenance charge is a fixed amount which escalates at 3.5%
per year. There is a transmission charge which varies depending upon the
delivery point. The price for energy associated with the firm capacity is 110%
of the
F-38
<PAGE> 145
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
incremental generating cost to the Company and is adjusted to include
transmission losses to the delivery point.
Coal Supply Agreement
The Company has entered into a coal supply agreement with Triton Coal. The
coal is primarily sourced from Triton Coal's Buckskin and North Rochelle mines
located in Powder River Basin, Wyoming. The Coal supply agreement has a term of
five years from March 31, 2000. The agreement is for the full coal requirements
of Big Cajun II. The agreement establishes a base price per ton for coal
supplied by Triton Coal. The base price is subject to adjustment for changes in,
the level of taxes or other government fees and charges, variations in the
caloric value of the coal shipped, changes in the price of SO(2) emission
allowances. The base price is based on certain annual weighted average quality
specifications, subject to suspension and rejection limits. The base price and
quality of coal specifications guarantee compliance with Big Cajun II's annual
SO(2) emissions allocation of 44,153 tons commencing in 2000 regardless of the
burn level.
Coal Transportation Agreement
The Company entered into a coal transportation agreement with Burlington
Northern and Santa Fe Railway and American Commercial Terminal. The term of the
agreement is five years from March 31, 2000. This agreement provides for the
transport of all of the coal requirements of Big Cajun II from the mines in
Wyoming to Big Cajun II.
Transmission and Interconnection Agreements
The Company assumed Cajun Electric's existing transmission agreements with
Central Louisiana Electric Company, SWEPCO; and Entergy Services, Inc., acting
as agent for Entergy Arkansas, Inc., Entergy Gulf States, Entergy Louisiana,
Inc., Entergy Mississippi, Inc., and Entergy New Orleans, Inc. The Cajun
facilities are connected to the transmission system of Entergy Gulf States and
power is delivered to the distribution cooperatives at various delivery points
on the transmission systems of Entergy Gulf States, Entergy Louisiana, Central
Louisiana Electric Company and SWEPCO. The Company also assumed from Cajun
Electric 20 interchange and sales agreements with utilities and cooperatives,
providing access to a 12 state area.
Joint Ownership Participation and Operating Agreement for Big Cajun II,
Unit 3
On March 31, 2000, the Company acquired a 58% interest in the Big Cajun II,
Unit 3 generation plant, Entergy Gulf States owns the remaining 42%. Big Cajun
II, Unit 3 is operated and maintained by the Company pursuant to a joint
ownership participation and operating agreement. Under this agreement, the
Company and Entergy Gulf States are each entitled to their ownership percentage
of the hourly net electrical output of Big Cajun II, Unit 3. All fixed costs are
shared in proportion to the ownership interests. Fixed costs include the cost of
operating common facilities. All variable costs are borne in proportion to the
energy delivered to the owners.
NOTE 11 -- JOINTLY OWNED PLANT
On March 31, 2000 Louisiana Generating acquired a 58% interest in the Big
Cajun II, Unit 3 generation plant. Entergy Gulf States owns the remaining 42%.
Big Cajun II, Unit 3 is operated and maintained by Louisiana Generating pursuant
to a joint ownership participation and operating agreement. Under this
agreement, Louisiana Generating and Entergy Gulf States are each entitled to
their ownership percentage of the hourly net electrical output of Big Cajun II,
Unit 3. All fixed costs are shared in proportion to the ownership interests.
Fixed costs include the cost of operating common facilities. All variable costs
are borne in proportion to the energy delivered to the owners. The Company's
income statement includes the Company's
F-39
<PAGE> 146
LOUISIANA GENERATING LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
share of all fixed and variable costs of operating the unit. The Company's 58%
share of the original cost included in Plant, Property and Equipment at June 30,
2000 and September 30, 2000 was $214.3 million and $215.1 million (Unaudited),
respectively. The corresponding accumulated depreciation and amortization was
$1.3 million and $2.7 million (Unaudited), respectively.
NOTE 12 -- DECOMMISSIONING FUND
Decommissioning
The Company is required by the State of Louisiana Department of
Environmental Quality ("DEQ") to rehabilitate its Big Cajun II ash and
wastewater impoundment areas upon removal from service of the Big Cajun II
facilities. On July 1, 1989, a guarantor trust fund (the "Solid Waste Disposal
Trust Fund") was established to accumulate the estimated funds necessary for
such purpose. The Company's predecessor deposited $1.06 million in the Solid
Waste Disposal Trust Fund in 1989, and funded $116,000 annually thereafter,
based upon an estimated future rehabilitation cost (in 1989 dollars) of
approximately $3.5 million and the remaining estimated useful life of the Big
Cajun II facilities. Cumulative contributions to the Solid Waste Disposal Trust
Fund and earnings on the investments therein are accrued as a decommissioning
liability. At June 30, 2000 and September 30, 2000, the carrying value of the
trust fund investments and the related accrued decommissioning liability was
approximately $3.6 million and $3.7 million (Unaudited), respectively. The trust
fund investments are comprised of various debt securities of the United States
and are carried at amortized cost, which approximates their fair value.
F-40
<PAGE> 147
CAJUN ELECTRIC (CAJUN FACILITIES)
CARVE-OUT FINANCIAL STATEMENT
FOR THE YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1999
F-41
<PAGE> 148
CAJUN ELECTRIC (CAJUN FACILITIES)
INDEX TO CARVE-OUT FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Accountants........................... F-43
Carve-Out Statement of Net Assets........................... F-44
Carve-Out Statement of Certain Revenue and Expenses......... F-45
Notes to Carve-Out Financial Statements..................... F-46
</TABLE>
F-42
<PAGE> 149
REPORT OF INDEPENDENT ACCOUNTANTS
To the Management of
NRG South Central Generating LLC:
In our opinion, the accompanying carve-out statement of net assets and the
related carve-out statement of certain revenue and expenses present fairly, in
all material respects, the net assets of the Cajun Electric (Cajun Facilities)
business to be acquired by Louisiana Generating LLC at December 31, 1999 and
1998, and certain revenue and expenses of its operations for each of the three
years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of NRG South Central Generating LLC's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. Our audit included
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
As described in Note 3, the accompanying carve-out financial statements
were prepared to present the net assets of the Cajun Electric (Cajun Facilities)
business to be acquired by Louisiana Generating LLC and the certain revenue and
expenses related to such business and are not intended to be a complete
presentation of the assets, liabilities, revenue, expenses and cash flows of
Cajun Electric Power Cooperative, Inc.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
March 7, 2000
F-43
<PAGE> 150
CAJUN ELECTRIC (CAJUN FACILITIES)
CARVE-OUT STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1999 1998
(IN THOUSANDS) ---------- ----------
<S> <C> <C>
ASSETS
Utility plant
Electric plant in service................................. $1,198,928 $1,191,375
Less: Accumulated depreciation and amortization........... 632,899 594,539
---------- ----------
566,029 596,836
Construction work in progress............................. 3,996 1,455
Electric plant held for future use........................ 9,904 9,904
---------- ----------
579,929 608,195
---------- ----------
Other property and investments
Non-utility property...................................... 670 670
Decommissioning reserve fund.............................. 3,518 3,225
---------- ----------
4,188 3,895
---------- ----------
Current assets
Accounts receivable -- electric customers
Members................................................ 25,944 23,504
Nonmembers............................................. 6,220 4,725
Accounts receivable -- other.............................. 1,678 2,043
Fuel and supplies inventories............................. 34,234 40,578
Prepaids.................................................. 1,600 1,316
---------- ----------
69,676 72,166
---------- ----------
Total assets...................................... 653,793 684,256
---------- ----------
LIABILITIES
Current liabilities
Accounts payable.......................................... 4,806 2,114
Taxes other than income tax............................... 150 215
Other accrued expenses.................................... 8,966 13,904
---------- ----------
13,922 16,233
---------- ----------
Decommissioning............................................. 3,518 3,225
---------- ----------
Total liabilities................................. 17,440 19,458
---------- ----------
Net assets........................................ $ 636,353 $ 664,798
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-44
<PAGE> 151
CAJUN ELECTRIC (CAJUN FACILITIES)
CARVE-OUT STATEMENT OF CERTAIN REVENUE AND EXPENSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
(IN THOUSANDS)
Operating revenue
Sales of electric energy
Members............................................... $292,090 $289,856 $280,109
Nonmembers............................................ 75,258 66,341 65,715
Other.................................................... 1,214 1,379 958
-------- -------- --------
368,562 357,576 346,782
-------- -------- --------
Operating expenses
Power production
Fuel.................................................. 165,597 154,964 154,257
Operations and maintenance............................ 36,673 37,405 37,236
Purchased power.......................................... 10,951 11,645 12,681
Other power supply expenses.............................. 577 592 578
Transmission............................................. 30,246 29,882 41,687
Administrative and general............................... 9,711 9,122 9,437
Depreciation and amortization............................ 37,930 38,117 39,537
Taxes, other than income................................. 7,093 7,629 8,575
-------- -------- --------
298,778 289,356 303,988
-------- -------- --------
Operating income........................................... 69,784 68,220 42,794
-------- -------- --------
Other income and expenses
Interest, rents and leases............................... 463 456 695
Other income............................................. 545 787 730
Loss on asset dispositions............................... (2,878) (5,900) (481)
-------- -------- --------
(1,870) (4,657) 944
-------- -------- --------
Revenues in excess of expenses............................. $ 67,914 $ 63,563 $ 43,738
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-45
<PAGE> 152
CAJUN ELECTRIC (CAJUN FACILITIES)
NOTES TO CARVE-OUT FINANCIAL STATEMENTS
1. BUSINESS DESCRIPTION
The accompanying "carve-out" financial statements present the net assets
and certain revenue and expenses of the non-nuclear electric power generating
business (herein named "Cajun Electric (Cajun Facilities)") of Cajun Electric
Power Cooperative, Inc. (the "Cooperative"). The Cooperative is a rural electric
generation and transmission cooperative wholly owned by 11 distribution
cooperatives (the "Members"). Pursuant to a competitive bidding process
following the Cooperative's Chapter 11 bankruptcy proceeding, Louisiana
Generating LLC has agreed to acquire the Cooperative's non-nuclear electric
power generating facilities (see Notes 2 and 3). Louisiana Generating LLC is a
wholly owned subsidiary of NRG South Central Generating LLC, which in turn is an
indirect wholly owned subsidiary of NRG Energy, Inc. NRG Energy, Inc. is a
wholly owned subsidiary of Northern States Power Company.
2. BANKRUPTCY PROCEEDING
Bankruptcy Filing
On December 21, 1994 (the "Petition Date"), the Cooperative filed a
Petition for Reorganization under Chapter 11 of the United States Bankruptcy
Code and began operating as debtor-in-possession under the supervision of the
United States Bankruptcy Court for the Middle District of Louisiana (the
"Bankruptcy Court"). In August 1995, the United States District Court for the
Middle District of Louisiana (the "Court") ordered the appointment of a trustee
(the "Trustee") to oversee the Cooperative's operations for the benefit of claim
holders and interest holders. All debts of the Cooperative as of the Petition
Date were stayed by the bankruptcy petition and subject to compromise pursuant
to such proceedings. The Cooperative operated its business and managed its
assets in the ordinary course as debtor-in-possession, and was required to
obtain Trustee approval for transactions outside the ordinary course of
business.
Plan of Reorganization and Acquisition
On January 22, 1996, the Court approved the Trustee's motion to establish
procedures for submission of proposals to purchase the Cooperative's assets. The
Trustee ultimately selected a bid by NRG Energy, Inc. to create a new limited
liability company (Louisiana Generating LLC) to purchase certain non-nuclear
assets of the Cooperative. In September 1999, the Bankruptcy Court approved the
Plan of Reorganization (the "Plan"), which incorporates the Acquisition
Agreement (see Note 3). The purchase price of the assets to be acquired by
Louisiana Generating LLC is $1,026 million, subject to adjustment for interest
rate fluctuations beyond specific levels. In addition, Louisiana Generating LLC
has agreed to reimburse the Members for up $14 million of the expenses that the
Members incurred in connection with the bankruptcy of the Cooperative. The
transaction is scheduled to close on March 31, 2000, subject to various
conditions.
The assets to be acquired by Louisiana Generating LLC include all
non-nuclear assets owned by the Cooperative, other than enumerated excluded
assets defined in the Acquisition Agreement. Generally, the assets to be
acquired consist of:
- Big Cajun I and Big Cajun II, Units 1 and 2;
- the Cooperative's 58% interest in Big Cajun II, Unit 3;
- an energy control center and headquarters building;
- approximately 4,200 acres of agricultural land near Coushatta, Louisiana;
- a 540 MW General Electric steam turbine generator;
- a 17.5 mile gas pipeline system;
- 848 steel rotary dump railcars;
F-46
<PAGE> 153
CAJUN ELECTRIC (CAJUN FACILITIES)
NOTES TO CARVE-OUT FINANCIAL STATEMENTS -- (CONTINUED)
- approximately 38,000 annual sulfur dioxide allowances;
- all coal inventory, oil in storage, materials and supplies;
- the Big Cajun II solid waste closure investment fund; and
- certain transmission assets and all other substations.
Louisiana Generating LLC will not assume any liabilities of the
Cooperative, other than (i) obligations under any of the contracts that
Louisiana Generating LLC assumes in connection with the acquisition and which
arise on or after the closing date of the acquisition, (ii) contingent
liabilities related to certain tax benefit transfer agreements to which the
Cooperative was a party and (iii) environmental liabilities that may exist
related to the transferred property, including the obligation to rehabilitate
the Big Cajun II ash and wastewater impoundment areas (see Note 8).
3. BASIS OF PRESENTATION
The accompanying carve-out financial statements have been presented in
accordance with generally accepted accounting principles and were derived from
the historical accounting records of the Cooperative. The statements are
intended to present the net assets and certain revenue and expenses of the Cajun
Electric (Cajun Facilities) business to be acquired by Louisiana Generating LLC
pursuant to the Fifth Amended and Restated Asset Purchase and Reorganization
Agreement among Louisiana Generating LLC, Ralph R. Mabey, as Chapter 11 Trustee
of Cajun Electric Power Cooperative, Inc., and NRG Energy, Inc. (as to Sections
7.4, 9.13 and 9.14 of the agreement only) (the "Acquisition Agreement") and the
Cooperative's bankruptcy proceedings (see Note 2). Louisiana Generating LLC has
agreed to purchase substantially all of the Cooperative's non-nuclear electric
power generating facilities and related transmission assets, inventory and other
real and personal property. Louisiana Generating LLC will not acquire the
"Excluded Assets", as defined in the Acquisition Agreement, which generally
consist of the Cooperative's cash, receivables and investments, nor will it
assume any liabilities of the Cooperative, except as described in Note 2.
Accordingly, the carve-out financial statements do not include all assets,
liabilities, revenue and costs and expenses of the Cooperative as of and for the
periods presented.
Generally, the statements of net assets exclude the Cooperative's cash,
investments (except decommissioning trust fund investments), employee
post-retirement benefit obligation, liabilities subject to compromise in the
bankruptcy proceeding, income taxes and equity and margin accounts. The
statements of certain revenue and expenses exclude the Cooperative's investment
earnings (except earnings from the decommissioning trust fund investments),
bankruptcy reorganization costs, income taxes, and revenue, expenses and losses
related to the ownership, operation and disposal of its 30% interest in the
River Bend Nuclear Station in 1997. All long-term debt of the Cooperative is
subject to compromise in the bankruptcy proceeding and during the three years
ended December 31, 1999 the Cooperative did not record any interest expense
thereon in accordance with American Institute of Certified Public Accountants
Statement of Position No. 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code." Therefore, the carve-out financial
statements do not include any long-term debt of the Cooperative or interest
expense thereon.
Although Louisiana Generating LLC will not purchase any receivables or
assume any liabilities of the Cooperative, except as described in Note 2, the
statements of net assets include receivables, accounts payable and accrued
expenses in order to present the historical net assets of the business operation
that will be acquired.
The carve-out financial statements do not include a statement of cash flows
due to exclusion of cash from the statements of net assets. However, see Note 4
for a summary of cash provided by and used in Cajun Electric's (Cajun
Facilities) operating and investing activities.
F-47
<PAGE> 154
CAJUN ELECTRIC (CAJUN FACILITIES)
NOTES TO CARVE-OUT FINANCIAL STATEMENTS -- (CONTINUED)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Significant Customers and Concentrations of Credit Risk
During 1999 sales to two customers totaled 16.7% and 18.9%, respectively,
of total operating revenue (1998: 16.7% and 19.2%, respectively; 1997: 16.2% and
19.0%, respectively). No other customer accounted for more than 10% of total
operating revenue during the years ended December 31, 1999, 1998 and 1997.
Electric Plant in Service and Construction Work in Progress
Electric plant in service and construction work in progress are stated on
the basis of cost. Depreciation is computed using the straight-line method over
the expected useful lives of the related component assets. The net book value of
units of property replaced or retired, including costs of removal net of any
salvage value, is charged to operations.
Fuel and Supplies Inventories
Fuel and supplies inventories are stated on the basis of cost utilizing the
weighted-average cost method of inventory valuation.
Fair Values of Financial Instruments
Investments held in the decommissioning reserve fund are comprised of U.S.
government debt securities carried at amortized cost, which approximates fair
value.
Summary of Cash Flows
Summarized cash flows from operating and investing activities were as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Revenues in excess of expenses.................... $ 67,914 $ 63,563 $43,738
Adjustments to reconcile net margins to net cash:
Depreciation and amortization.................. 37,930 38,117 39,537
Asset dispositions............................. 2,878 5,900 481
Changes in accounts receivable................. (4,939) 5,988 (2,838)
Changes in fuel and prepayments................ 6,060 (8,184) 5,315
Changes in accounts payable and accrued
expenses..................................... (2,313) (4,333) (254)
-------- -------- -------
Net cash provided by operating activities.... 107,530 101,051 85,979
-------- -------- -------
Cash flows from (for) investing activities:
Capital expenditures.............................. (11,631) (9,999) (7,074)
-------- -------- -------
$ 95,899 $ 91,052 $78,905
======== ======== =======
</TABLE>
F-48
<PAGE> 155
CAJUN ELECTRIC (CAJUN FACILITIES)
NOTES TO CARVE-OUT FINANCIAL STATEMENTS -- (CONTINUED)
5. UTILITY PLANT
Electric plant in service is comprised of the following generating
facilities:
<TABLE>
<CAPTION>
CAPABLE LOUISIANA GENERATING
GENERATING -------------------------
GENERATING UNIT CAPACITY PERCENTAGE MEGAWATTS
--------------- ----------- ---------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Big Cajun II, Unit 1............................. 575 100% 575
Big Cajun II, Unit 2............................. 575 100% 575
Big Cajun II, Unit 3............................. 575 58% 334
Big Cajun I, Unit 1.............................. 110 100% 110
Big Cajun I, Unit 2.............................. 110 100% 110
----- -----
1,945 1,704
===== =====
</TABLE>
Big Cajun II, Unit 3 is jointly owned by the Cooperative (58%) and Gulf
States Utilities (42%). The unit is operated by the Cooperative pursuant to a
Joint Ownership Participation and Operating Agreement, which governs the rights
and obligations to the ownership of the facility. Each owner is entitled to
their ownership percentage of the hourly net electrical output of the unit. All
fixed costs of operating the unit are shared in proportion to the respective
ownership interests and all variable costs are borne in proportion to the energy
delivered to either co-owner. The statements of certain revenue and expenses
include the Cooperative's share of all fixed and variable costs of operating the
unit. The Cooperative's 58% share of the original cost included in electric
plant in service at December 31, 1999 was $291.1 million ($290.9 million at
December 31, 1998). The corresponding accumulated depreciation and amortization
was $151.1 million ($141.9 million at December 31, 1998).
The Cooperative will assign the Joint Ownership Participation and Operating
Agreement to Louisiana Generating LLC upon closing of the acquisition.
Electric plant in service balances at December 31 consisted of the
following:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Production:
Coal.............................................. $1,048,012 $1,041,741
Gas............................................... 35,368 34,749
Transmission........................................ 94,393 94,320
General............................................. 21,155 20,565
---------- ----------
$1,198,928 $1,191,375
========== ==========
</TABLE>
Construction work in progress consists of improvements and additions to
existing plants. The estimated cost to complete these projects at December 31,
1999 was approximately $10.8 million.
Electric plant held for future use of approximately $9.9 million at
December 31, 1999 and 1998 consists primarily of land, carried at its original
cost of $9.5 million, related to an abandoned lignite project that has been
retained as a possible site for a future generating facility.
F-49
<PAGE> 156
CAJUN ELECTRIC (CAJUN FACILITIES)
NOTES TO CARVE-OUT FINANCIAL STATEMENTS -- (CONTINUED)
The net change in accumulated depreciation and amortization for the years
ended December 31 was:
<TABLE>
<CAPTION>
1999 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
Charged to operating expenses............................ $37,930 $38,117
Charged to fuel inventories and other assets............. 1,192 1,197
------- -------
$39,122 $39,314
Less: Disposals and other adjustments.................... 762 1,435
------- -------
$38,360 $37,879
======= =======
</TABLE>
Substantially all of the assets included in the carve-out statements of net
assets are pledged as collateral to the Cooperative's long-term debt payable to
the Rural Utilities Service. In addition, certain office facilities have been
separately pledged as collateral to the Cooperative's industrial revenue bonds.
These obligations are included in the Cooperative's pre-petition liabilities
subject to compromise, which have been excluded from the carve-out statement of
net assets. Upon execution of the Plan and closing of the acquisition, Louisiana
Generating LLC will acquire the assets free of such encumbrances.
6. EMPLOYEE BENEFIT PLANS
All of the Cooperative's employees participate in the National Rural
Electric Cooperatives Association (NRECA) Retirement and Security Program once
they have met minimum service requirements. The Cooperative makes annual
contributions to the plan equal to the amounts accrued for pension expense. In
this master multiple-employer defined benefit plan, which is available to all
member cooperatives of the NRECA, the accumulated benefits and plan assets are
not determined or allocated separately by individual employer. The Cooperative's
contributions to the plan and amounts included in the accompanying statements of
certain revenue and expenses of Cajun Electric (Cajun Facilities) totaled
approximately $1.7 million, $1.7 million and $1.3 million in 1999, 1998 and
1997, respectively.
The Cooperative also maintains a defined contribution pension plan, which
constitutes a cash or deferred arrangement under section 401(k) of the Internal
Revenue Code of 1986 (as amended). Once minimum service requirements are met,
all of the employees of the Cooperative are eligible to participate in the plan.
Under the terms of the plan, which is administered by the NRECA, the Cooperative
matches 50% of employee contributions up to a maximum of 4% of each
participating employee's base compensation. The Cooperative's contributions to
the plan and amounts included in the accompanying statement of certain revenue
and expenses of Cajun Electric (Cajun Facilities) totaled approximately $0.4
million, $0.3 million and $0.4 million in 1999, 1998 and 1997, respectively.
The Cooperative also makes medical benefits available to all retirees. For
those nonbargaining employees who retire at age 62 or thereafter and who have at
least 10 years of service, the Cooperative will pay a portion of the cost. All
other retirees are required to pay the full cost of benefits. Net periodic
postretirement benefit expense of approximately $0.8 million, $0.8 million and
$0.8 million in 1999, 1998 and 1997, respectively, is included in the
accompanying statement of certain revenue and expenses.
Upon the closing of the acquisition, all of the Cooperative's employee
benefit plans will be terminated, including the defined benefit pension plan,
the defined contribution (401(k)) pension plan and the post-retirement
healthcare plan and no liabilities related thereto will be assumed by Louisiana
Generating LLC.
F-50
<PAGE> 157
CAJUN ELECTRIC (CAJUN FACILITIES)
NOTES TO CARVE-OUT FINANCIAL STATEMENTS -- (CONTINUED)
7. RATES AND REGULATION
The electric rates charged by the Cooperative to its Members have been
subject to the jurisdiction of the Louisiana Public Service Commission ("LPSC").
For the three years ended December 31, 1999, the Cooperative provided capacity
and energy to its 11 Members pursuant to "all requirements" power supply
agreements. Generally, the all requirements power supply agreements obligated
the Cooperative to supply and required the Members to purchase all of the energy
and capacity required by the Members for service to its retail customers, with
limited exceptions. The Cooperative also provided capacity and energy to three
other customers under long-term power agreements and sold excess capacity and
energy on a merchant basis to other power suppliers and marketers.
Pursuant to the Acquisition Agreement and the Plan, all 11 Members have
elected to terminate, effective on the closing date, their existing all
requirements supply agreements with the Cooperative. Each of the 11 Members has
selected one of three alternative supply options offered by Louisiana Generating
LLC, to be effective immediately after the acquisition closes. Seven of the
Members have agreed to purchase power from Louisiana Generating LLC under
long-term "all requirements" power supply agreements with terms of 25 years
commencing on the acquisition closing. After the initial term, each agreement
will continue on a year to year basis unless either party gives the other five
years' notice of its intent to terminate the agreement. The remaining four
Members have agreed to purchase power from Louisiana Generating LLC under
short-term four-year transition power supply agreements. A Member may terminate
a short-term agreement upon two years advance notice.
The underlying terms and provisions of the long- and short-term power
supply agreements offered by Louisiana Generating LLC and selected by the
Members have been approved by the LPSC, which has regulatory authority over the
Members. Although the form of the agreements have been approved by the LPSC,
each Member must obtain approval from the LPSC of the supply alternative
selected. Such approval has been obtained by three of the Members that have
elected the long-term agreement. The remaining eight Members are expected to
request and receive LPSC approval of their decisions prior to the closing of the
acquisition.
Electric Utility Deregulation
On December 17, 1997, the LPSC accepted a staff report finding that
deregulation, or retail wheeling, may be in the public interest contingent upon
numerous issues being individually and adequately researched. During January
1998, the LPSC investigated the issues of tax implications; unbundling; market
structure; market power, reliability, Independent System Operators; stranded
costs and benefits; consumer protection, public policy programs and
environmental issues; and future regulatory structure and affiliate
relationships. In February of 1999, LPSC staff issued a report finding that
restructuring is not in the public interest and recommending that the LPSC defer
making a final determination. At its March 1999 Open Session, the LPSC adopted a
new procedural schedule to continue its investigation of competitive
implications through August of 2000. The effect of deregulation upon Cajun
Electric (Cajun Facilities) cannot be determined at this time.
8. OTHER COMMITMENTS AND CONTINGENCIES
Coal Supply and Transportation Agreements
Purchases under the terms of contracts for the acquisition and related
transportation of coal during 1999, 1998 and 1997 were approximately $129
million, $136 million and $127 million, respectively. Louisiana Generating LLC
will not assume any liabilities incurred by the Cooperative prior to the closing
of the acquisition related to the existing coal supply and transportation
agreements.
F-51
<PAGE> 158
CAJUN ELECTRIC (CAJUN FACILITIES)
NOTES TO CARVE-OUT FINANCIAL STATEMENTS -- (CONTINUED)
Louisiana Generating LLC has entered into a five-year coal supply agreement
under which Triton Coal Company will sell to Louisiana Generating LLC sufficient
quantities of coal to satisfy the full coal requirements of the Cajun
facilities.
Louisiana Generating LLC has entered into a five-year coal transportation
agreement with Burlington Northern and Santa Fe Railway Company and American
Commercial Terminal LLC which agreement will be effective on the closing date of
the acquisition. Pursuant to the agreement, the railroad will transport the coal
from the Triton mines in Wyoming to St. Louis, Missouri, and American Commercial
Terminal will transport the coal down the Mississippi River from St. Louis to
the Cajun facilities.
Decommissioning
The Cooperative is required by the State of Louisiana Department of
Environmental Quality ("DEQ") to rehabilitate its Big Cajun II ash and
wastewater impoundment areas upon removal from service of the Big Cajun II
facilities. On July 1, 1989, the Cooperative established a guarantor trust (the
"Solid Waste Disposal Trust Fund") to accumulate the estimated funds necessary
for such purpose. The Cooperative deposited $1.06 million in the Solid Waste
Disposal Trust Fund in 1989, and has funded $116,000 annually thereafter, based
upon the Cooperative's estimated future rehabilitation cost (in 1989 dollars) of
approximately $3.5 million and the remaining estimated useful life of the Big
Cajun II facilities. Cumulative contributions to the Solid Waste Disposal Trust
Fund and earnings on the investments therein are accrued as a decommissioning
liability. At December 31, 1999 the carrying value of the trust fund investments
and the related accrued decommissioning liability was approximately $3.5
million. The trust fund investments are comprised of various debt securities of
the United States and are carried at amortized cost, which approximates their
fair value.
The Solid Waste Trust Fund is included in assets to be acquired by
Louisiana Generating LLC, which will also assume the obligation to rehabilitate
the Big Cajun II ash and wastewater impoundment areas.
Letters of Credit
The Cooperative has outstanding two letters of credit in the aggregate
amount of approximately $15 million as of December 31, 1999 supporting potential
indemnity payments related to certain tax benefit transfer agreements to which
the Cooperative was a party. The letters of credit will be terminated upon the
closing of the acquisition. However, as of the closing date, Louisiana
Generating LLC will assume the contingent liability related to the potential
indemnity payments.
Member Class Action Rate Litigation
On September 20, 1989, a class action petition was filed in the Tenth
Judicial District State Court in Natchitoches Parish, Louisiana, naming the
Cooperative's Members as defendants. The plaintiffs in this action seek a refund
of all rate increases enacted by the Cooperative's Members from 1978 until the
respective Member voted to be subject to the jurisdiction of the LPSC or was
placed under the jurisdiction of the LPSC by action of the State Supreme Court.
On October 17, 1989, the case was moved to the federal courts. On August 28,
1992, the District Court abstained from this matter in favor of proceedings at
the LPSC.
F-52
<PAGE> 159
CAJUN ELECTRIC (CAJUN FACILITIES)
NOTES TO CARVE-OUT FINANCIAL STATEMENTS -- (CONTINUED)
The LPSC currently has an open docket associated with this matter. On
August 19, 1994, the LPSC adopted the standards recommended by its Special
Counsel. Based on those standards, Special Counsel issued a report in August
1996 recommending that 23 of the 29 rate increases implemented during the period
of nonregulation be found presumptively not unreasonable and be eliminated from
further review. Special Counsel recommended that the remaining six rate
increases be further reviewed for reasonableness. On November 18, 1997, the LPSC
issued Order U-19943-B dismissing two more rate increases, finding all but the
four remaining increases presumptively not unreasonable. On August 19, 1998, the
LPSC dismissed two rate increases for Southwest Louisiana Electric Membership
Corporation leaving the final two rate increases to be reviewed for
reasonableness. A hearing was held on October 12, 1999, on the last two rate
increases. The LPSC staff is expected to issue a final report in time for the
LPSC to vote on the matter at its March 2000 Open Session. The timing or outcome
of this matter is uncertain and no provision for any liability that may result
has been made in the financial statements. However, each Member has entered into
a stipulation with the Trustee which releases the Bankruptcy Estate from claims
by the Members that might arise as a result of any refunds which the LPSC may
order. Further, Louisiana Generating LLC will not assume any liability that may
result from the outcome of this matter.
F-53
<PAGE> 160
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS
DOES NOT OFFER TO SELL OR ASK FOR OFFERS TO BUY ANY SECURITIES OTHER THAN THOSE
TO WHICH THIS PROSPECTUS RELATES AND IT DOES NOT CONSTITUTE AN OFFER TO SELL OR
ASK FOR OFFERS TO BUY ANY OF THE SECURITIES IN ANY JURISDICTION WHERE IT IS
UNLAWFUL, WHERE THE PERSON MAKING THE OFFER IS NOT QUALIFIED TO DO SO, OR TO ANY
PERSON WHO CANNOT LEGALLY BE OFFERED THE SECURITIES. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS CURRENT ONLY AS OF ITS DATE.
UNTIL JANUARY 12, 2001, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS EXCHANGE OFFER, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. EACH BROKER-DEALER THAT RECEIVES BONDS FOR ITS OWN
ACCOUNT PURSUANT TO THE EXCHANGE OFFER MUST ACKNOWLEDGE THAT IT WILL DELIVER A
PROSPECTUS IN CONNECTION WITH ANY RESALE OF SUCH BONDS. FOR A PERIOD OF 90 DAYS
AFTER THE EXPIRATION DATE OF THE EXCHANGE OFFER THIS PROSPECTUS WILL BE MADE
AVAILABLE TO ANY BROKER-DEALER FOR USE IN CONNECTION WITH ANY SUCH RESALE.
------------------------
PROSPECTUS
------------------------
NRG SOUTH CENTRAL GENERATING LLC
EXCHANGE OFFER FOR OUTSTANDING
$500,000,000 8.962% SERIES A SENIOR SECURED BONDS DUE 2016
$300,000,000 9.479% SERIES B SENIOR SECURED BONDS DUE 2024
IN EXCHANGE FOR
$500,000,000 8.962% SERIES A-1 SENIOR SECURED BONDS DUE 2016
$300,000,000 9.479% SERIES B-1 SENIOR SECURED BONDS DUE 2024
------------------------
[NRG LOGO]
------------------------
December 13, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 161
PART II
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
NRG South Central Generating LLC and the Louisiana Generating LLC are
empowered by Section 18-108 of the Delaware Limited Liability Company Act,
subject to the procedures and limitations therein, to indemnify and hold
harmless any member or manger or other person of each of the companies or other
person from and against any and all claims and demands whatsoever, subject to
such standards and restrictions, if any, as are set forth in each of their
limited liability company agreements.
Section 4.4(a) of the limited liability company agreement of Louisiana
Generating LLC provides that no member, officer, director, employee or agent of
the Company and no employee, representative, agent or affiliate of the member
shall be liable to the Company or any other person who has an interest in or
claim against the Company for any loss, damage or claim incurred by reason of
any act or omission performed or omitted by such person in good faith on behalf
of the Company and in a manner reasonably believed to be within the scope of the
authority conferred on such person by the limited liability company agreement,
except that a such person shall be liable for any such loss, damage or claim
incurred by reason of such person's gross negligence or willful misconduct.
Section 4.4(b) of the limited liability company agreement of Louisiana
Generating LLC provides that members, officers, directors, employees and agents
of the Company and employees, representatives, agents, and affiliates of the
members shall be entitled to indemnification from the Company for any loss,
damage or claim incurred by such person by reason of any act or omission
performed or omitted by such person in good faith on behalf of the Company and
in a manner reasonably believed to be within the scope of the authority
conferred on such person by the limited liability company agreement, except that
no such person shall be entitled to be indemnified in respect of any loss,
damage or claim incurred by such person by reason of such person's gross
negligence or willful misconduct with respect to such acts or omissions;
provided, however, that any indemnity under Section 4.4 shall be provided out of
and to the extent of Company assets only, and no member shall have personal
liability on account thereof.
Section 4.4(c) of the limited liability company agreement of Louisiana
Generating LLC provides that expenses (including legal fees) incurred by
members, officers, directors, employees and agents of the Company and employees,
representatives, agents and affiliates of the members defending any claim,
demand, action, suit or proceeding shall, from time to time, be advanced by the
Company prior to the final disposition of such claim, demand, action suit or
proceeding upon receipt by the Company of an undertaking by or on behalf of such
person to repay such amount if it shall be determined that such person is not
entitled to be indemnified as authorized in Section 4.4.
Section 4.4(d) of the limited liability company agreement of Louisiana
Generating LLC provides that members, officers, directors, employees and agents
of the Company and employees, representatives, agents and affiliates of the
members shall be fully protected in relying in good faith upon the records of
the Company and upon such information, opinions, reports or statements presented
to the Company as to matters such person reasonably believes are within the
presenter's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Company, including information, opinions,
reports or statements as to the value and amount of the assets, liabilities, or
any other facts pertinent to the existence and amount of assets from which
distributions to the member might properly be paid.
Section 4.4(e) of the limited liability company agreement of Louisiana
Generating LLC provides that, to the extent that, at law or in equity, members,
officers, directors, employees and agents of the Company and employees,
representatives, agents and affiliates of the members have duties (including
fiduciary duties) and liabilities relating thereto to the Company or to any
other such person, a member, officer, director, employee or agent of the Company
or an employee, representative, agent or affiliate of a member acting under the
Limited Liability Company Agreement shall not be liable to the Company or to any
other such person for its good faith reliance on the provisions of the limited
liability company agreement or any approval or authorization granted by the
Company or any other member, officer, director, employee or agent of the Company
or an employee, representative, agent or affiliate of a member.
II-1
<PAGE> 162
Section 6.08 of the limited liability company agreement of NRG South
Central Generating LLC provides that each member of the company shall indemnify,
protect, defend, release and hold harmless each other member, and such other
member's representatives, affiliates and their respective directors, officers,
employees and agents from and against any claims asserted by or on behalf of any
person (including another member), that arise out of, relate to or are otherwise
attributable to, directly or indirectly, a breach by the indemnifying member of
the agreement, or the negligence, gross negligence or willful misconduct of the
indemnifying member in connection with the agreement; provided however, that the
foregoing indemnification provision shall not apply to any claim or other matter
for which a member (or its representative) has no liability or duty pursuant to
Section 6.07 of the agreement or is indemnified or released pursuant to Section
6.02(a)(iii) of the agreement.
Section 6.02(a)(iii) of the limited liability company agreement of NRG
South Central Generating LLC provides that the company shall indemnify, protect,
defend, release and hold harmless each representative of a member of the company
on the Management Committee from and against any claims asserted by or on behalf
of any person (including another member), other than the member that designated
such Representative, that arise out of, relate to or are otherwise attributable
to, directly or indirectly, such representative's service on the Management
Committee, other than such claims arising out of the fraud or willful misconduct
of such representative.
Section 6.07 of the limited liability company agreement of NRG South
Central Generating LLC includes the following disclaimers of duties and
liabilities of the company's members.
(1) No member owes any duty (including any fiduciary duty ) to the
other members or to the company, other than the duties expressly set forth
in the agreement.
(2) No member shall be liable (whether in contract, tort or otherwise)
for special, indirect, incidental or consequential damages).
(3) The obligations of the member under the agreement are obligations
of the members only, and no recourse shall be available against any
officer, director or affiliate of any member, except as permitted under
applicable law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1* Purchase Agreement, dated as of March 30, 2000, among NRG
South Central Generating LLC, and Chase Securities, Inc.,
Lehman Brothers Inc., Credit Suisse First Boston Corporation
and Salomon Smith Barney Inc. as representatives of the
Initial Purchasers
3.1* Certificate of Formation of NRG South Central Generating LLC
3.2* Limited Liability Company Agreement of NRG South Central
Generating LLC
3.3* Certificate of Formation of Louisiana Generating LLC
3.4* Limited Liability Company Agreement of Louisiana Generating
LLC
3.5* Certificate of Formation of NRG New Roads Holdings LLC
3.6* Limited Liability Company Agreement of NRG New Roads
Holdings LLC
3.7* Certificate of Formation of NRG Sterlington Power LLC
3.8* Limited Liability Company Agreement of NRG Sterlington Power
LLC
3.9* Certificate of Formation of Big Cajun I Peaking Power LLC
3.10* Limited Liability Company Agreement of Big Cajun I Peaking
Power LLC
3.11** Certificate of Formation of NRG Sabine River Works LP LLC
3.12** Limited Liability Company Agreement of NRG Sabine River
Works LP LLC
3.13** Certificate of Formation of NRG Sabine River Works GP LLC
3.14** Limited Liability Company Agreement of NRG Sabine River
Works GP LLC
</TABLE>
II-2
<PAGE> 163
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
4.1* Trust Indenture, dated as of March 30, 2000, among NRG South
Central Generating LLC, Louisiana Generating LLC and The
Chase Manhattan Bank, as bond trustee, The Chase Manhattan
Bank, as depository bank, relating to the Senior Secured
Bonds
4.2* Form of certificate of 8.962% Series A Senior Secured Bonds
due 2016 (included in Exhibit 4.1)
4.3* Form of certificate of 9.479% Series B Senior Secured Bonds
due 2024 (included in Exhibit 4.1)
4.4# Form of certificate of 8.962% Series A-1 Senior Secured
Bonds due 2016
4.5# Form of certificate of 9.479% Series B-1 Senior Secured
Bonds due 2024
4.6* Exchange and Registration Rights Agreement, dated as of
March 30, 2000, by and among NRG South Central Generating
LLC, Louisiana Generating LLC, Chase Securities Inc. and
Lehman Brothers Inc., on behalf of the Initial Purchasers
4.7* Collateral Agency and Intercreditor Agreement, dated as of
March 30, 2000, among NRG South Central Generating LLC,
Louisiana Generating LLC, The Chase Manhattan Bank, as bond
trustee, The Chase Manhattan Bank, as depositary bank and
The Chase Manhattan Bank, as collateral agent
4.8* Assignment and Security Agreement, dated as of March 30,
2000, between NRG South Central Generating LLC and The Chase
Manhattan Bank, as collateral agent
4.9* Guarantor Note, dated as of March 30, 2000, by Louisiana
Generating LLC in favor of NRG South Central Generating LLC
4.10* Guarantor Loan Agreement, dated as of March 30, 2000 among
Louisiana Generating LLC and NRG South Central Generating
LLC
4.11* Guarantee, dated as of March 30, 2000, by Louisiana
Generating LLC in favor of The Chase Manhattan Bank
4.12* Debt Reserve Guarantee Agreement, dated as of March 30,
2000, between NRG Energy, Inc. and The Chase Manhattan Bank,
as trustee, on behalf of the Holders of the Bonds
4.13* Assignment and Security Agreement, dated as of March 30,
2000, between Louisiana Generating LLC and The Chase
Manhattan Bank, as collateral agent
4.14* Assignment and Security Agreement, dated as of March 30,
2000, among NRG Power Marketing Inc. and The Chase Manhattan
Bank, as collateral agent
4.15* Pledge and Security Agreement, dated as of March 30, 2000,
among NRG South Central Generating LLC and The Chase
Manhattan Bank, as collateral agent
5.1* Form of opinion and consent of Gibson, Dunn & Crutcher LLP
as to the legality of the securities to be issued in this
exchange offer
10.1* Working Capital Agreement, dated as of April 30, 2000, by
NRG South Central Generating LLC, the Guarantors, the
Lenders and The Bank of Tokyo-Mitsubishi, Ltd., New York
Branch, as administrative agent
10.2* NRG South Central Generating LLC Secured Revolving Note,
dated as of April 30, 2000, by NRG South Central Generating
LLC to The Bank of Tokyo-Mitsubishi, Ltd., New York Branch
10.3* Power Sales and Agency Agreement, dated March 24, 2000 among
NRG Power Marketing Inc. and Louisiana Generating LLC
10.4* Operation and Management Services Agreement, dated March 24,
2000, among NRG Operating Services, Inc. and Louisiana
Generating LLC
10.5* Corporate Services Agreement, dated March 24, 2000, among
NRG Energy, Inc. and NRG South Central Generating
10.6* Corporate Services Agreement, dated March 24, 2000, among
NRG Energy, Inc. and Agreement Louisiana Generating
</TABLE>
II-3
<PAGE> 164
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.7* Corporate Services Agreement, dated August 17, 2000, among
NRG Energy, Inc. and NRG Sterlington Power LLC
10.8* Corporate Services Agreement, dated August 4, 2000, among
NRG Energy, Inc. and Big Cajun I Peaking Power LLC
10.9*+ Coal Transportation Agreement between Louisiana Generating,
LLC and The Burlington Northern and Santa Fe Railway Company
and American Commercial Marine Service Company
10.10*+ Agreement between Louisiana Generating, LLC and Triton Coal
Company for the Sale and Purchase of Coal
12.1# Consolidated Ratio of Earnings to Fixed Charges for NRG
South Central Generating LLC
12.2** Consolidated Ratio of Earnings to Fixed Charges for
Louisiana Generating LLC
21.1# Subsidiaries of NRG South Central Generating LLC
23.1# Consent of PricewaterhouseCoopers LLP
23.2* Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit
5.1)
24.1* Powers of Attorney (included as part of signature page to
this registration statement)
25.1* Form T-1 Statement of Eligibility of The Chase Manhattan
Bank to act as Trustee under the indenture
27.1# Financial Data Schedule for NRG South Central Generating LLC
for June 30, 2000 (for SEC use only)
27.2# Financial Data Schedule for Louisiana Generating LLC for
June 30, 2000 (for SEC use only)
27.3** Financial Data Schedule for NRG South Central Generating LLC
for September 30, 2000 (for SEC use only)
27.4** Financial Data Schedule for Louisiana Generating LLC for
September 30, 2000 (for SEC use only)
99.1# Form of Letter of Transmittal
99.2# Form of Notice of Guaranteed Delivery
99.3# Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees
99.4# Letter to Clients
</TABLE>
---------------
+ Confidential treatment is being requested for portions of these exhibits.
Omitted material is being filed separately with the Commission.
*Previously Filed
**Filed herewith
#Replaces previously filed exhibit
ITEM 22. UNDERTAKINGS
The undersigned registrants hereby undertake:
(1) To file during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities would not exceed that which was registered)
and any deviation
II-4
<PAGE> 165
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liabilities under the
Securities Act of 1933, each post-effective amendment will be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time will be deemed to be the
initial bona fide offering thereof.
(3) To remove from the registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of the receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrants hereby undertake to supply by means of
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrants pursuant to the provisions described in Item 20 above, or otherwise,
the registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrants will, unless in
the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-5
<PAGE> 166
SIGNATURES
Pursuant to the requirements of the Securities Act, NRG South Central
Generating LLC has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Minneapolis, State of Minnesota, on the 11th day of December, 2000.
NRG South Central Generating LLC
By: /s/ BRIAN B. BIRD
------------------------------------
Name: Brian B. Bird
Title: Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of December, 2000:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Representative of NRG December 11, 2000
--------------------------------------------------- Central U.S. LLC and South
David H. Petersen Central Generation Holding
* Representative of NRG December 11, 2000
--------------------------------------------------- Central U.S. LLC and South
Leonard A. Bluhm Central Generation Holding
* Representative of NRG December 11, 2000
--------------------------------------------------- Central U.S. LLC and South
Craig A. Mataczynski Central Generation Holding
and President
* President December 11, 2000
---------------------------------------------------
Craig A. Mataczynski
* Vice President December 11, 2000
---------------------------------------------------
Alan D. Williams
/s/ BRIAN B. BIRD Treasurer December 11, 2000
---------------------------------------------------
Brian B. Bird
* Secretary December 11, 2000
---------------------------------------------------
Michael J. Young
*By: /s/ BRIAN B. BIRD
---------------------------------------------
Brian B. Bird
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 167
SIGNATURES
Pursuant to the requirements of the Securities Act, Louisiana Generating
LLC has duly caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Minneapolis, State of
Minnesota, on the 11th day of December, 2000.
Louisiana Generating LLC
By: /s/ BRIAN B. BIRD
------------------------------------
Name: Brian B. Bird
Title: Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 11th day of December, 2000:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
NRG South Central LLC
By: * Sole Member of Louisiana December 11, 2000
---------------------------------------------- Generating LLC
Name: Craig A. Mataczynski
Title: President
* President December 11, 2000
---------------------------------------------------
Alan D. Williams
* Vice President December 11, 2000
---------------------------------------------------
Craig A. Mataczynski
/s/ BRIAN B. BIRD Treasurer December 11, 2000
---------------------------------------------------
Brian B. Bird
* Secretary December 11, 2000
---------------------------------------------------
Michael J. Young
*By: /s/ BRIAN B. BIRD
---------------------------------------------
Brian B. Bird
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 168
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1* Purchase Agreement, dated as of March 30, 2000, among NRG
South Central Generating LLC, and Chase Securities, Inc.,
Lehman Brothers Inc., Credit Suisse First Boston Corporation
and Salomon Smith Barney Inc. as representatives of the
Initial Purchasers
3.1* Certificate of Formation of NRG South Central Generating LLC
3.2* Limited Liability Company Agreement of NRG South Central
Generating LLC
3.3* Certificate of Formation of Louisiana Generating LLC
3.4* Limited Liability Company Agreement of Louisiana Generating
LLC
3.5* Certificate of Formation of NRG New Roads Holdings LLC
3.6* Limited Liability Company Agreement of NRG New Roads
Holdings LLC
3.7* Certificate of Formation of NRG Sterlington Power LLC
3.8* Limited Liability Company Agreement of NRG Sterlington Power
LLC
3.9* Certificate of Formation of Big Cajun I Peaking Power LLC
3.10* Limited Liability Company Agreement of Big Cajun I Peaking
Power LLC
3.11** Certificate of Formation of NRG Sabine River Works LP LLC
3.12** Limited Liability Company Agreement of NRG Sabine River
Works LP LLC
3.13** Certificate of Formation of NRG Sabine River Works GP LLC
3.14** Limited Liability Company Agreement of NRG Sabine River
Works GP LLC
4.1* Trust Indenture, dated as of March 30, 2000, among NRG South
Central Generating LLC, Louisiana Generating LLC and The
Chase Manhattan Bank, as bond trustee, The Chase Manhattan
Bank, as depository bank, relating to the Senior Secured
Bonds
4.2* Form of certificate of 8.962% Series A Senior Secured Bonds
due 2016 (included in Exhibit 4.1)
4.3* Form of certificate of 9.479% Series B Senior Secured Bonds
due 2024 (included in Exhibit 4.1)
4.4# Form of certificate of 8.962% Series A-1 Senior Secured
Bonds due 2016
4.5# Form of certificate of 9.479% Series B-1 Senior Secured
Bonds due 2024
4.6* Exchange and Registration Rights Agreement, dated as of
March 30, 2000, by and among NRG South Central Generating
LLC, Louisiana Generating LLC, Chase Securities Inc. and
Lehman Brothers Inc., on behalf of the Initial Purchasers
4.7* Collateral Agency and Intercreditor Agreement, dated as of
March 30, 2000, among NRG South Central Generating LLC,
Louisiana Generating LLC, The Chase Manhattan Bank, as bond
trustee, The Chase Manhattan Bank, as depositary bank and
The Chase Manhattan Bank, as collateral agent
4.8* Assignment and Security Agreement, dated as of March 30,
2000, between NRG South Central Generating LLC and The Chase
Manhattan Bank, as collateral agent
4.9* Guarantor Note, dated as of March 30, 2000, by Louisiana
Generating LLC in favor of NRG South Central Generating LLC
4.10* Guarantor Loan Agreement, dated as of March 30, 2000 among
Louisiana Generating LLC and NRG South Central Generating
LLC
4.11* Guarantee, dated as of March 30, 2000, by Louisiana
Generating LLC in favor of The Chase Manhattan Bank
4.12* Debt Reserve Guarantee Agreement, dated as of March 30,
2000, between NRG Energy, Inc. and The Chase Manhattan Bank,
as trustee, on behalf of the Holders of the Bonds
4.13* Assignment and Security Agreement, dated as of March 30,
2000, between Louisiana Generating LLC and The Chase
Manhattan Bank, as collateral agent
4.14* Assignment and Security Agreement, dated as of March 30,
2000, among NRG Power Marketing Inc. and The Chase Manhattan
Bank, as collateral agent
4.15* Pledge and Security Agreement, dated as of March 30, 2000,
among NRG South Central Generating LLC and The Chase
Manhattan Bank, as collateral agent
</TABLE>
<PAGE> 169
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
5.1* Form of opinion and consent of Gibson, Dunn & Crutcher LLP
as to the legality of the securities to be issued in this
exchange offer
10.1* Working Capital Agreement, dated as of April 30, 2000, by
NRG South Central Generating LLC, the Guarantors, the
Lenders and The Bank of Tokyo-Mitsubishi, Ltd., New York
Branch, as administrative agent
10.2* NRG South Central Generating LLC Secured Revolving Note,
dated as of April 30, 2000, by NRG South Central Generating
LLC to The Bank of Tokyo-Mitsubishi, Ltd., New York Branch
10.3* Power Sales and Agency Agreement, dated March 24, 2000 among
NRG Power Marketing Inc. and Louisiana Generating LLC
10.4* Operation and Management Services Agreement, dated March 24,
2000, among NRG Operating Services, Inc. and Louisiana
Generating LLC
10.5* Corporate Services Agreement, dated March 24, 2000, among
NRG Energy, Inc. and NRG South Central Generating
10.6* Corporate Services Agreement, dated March 24, 2000, among
NRG Energy, Inc. and Agreement Louisiana Generating
10.7* Corporate Services Agreement, dated August 17, 2000, among
NRG Energy, Inc. and NRG Sterlington Power LLC
10.8* Corporate Services Agreement, dated August 4, 2000, among
NRG Energy, Inc. and Big Cajun I Peaking Power LLC
10.9*+ Coal Transportation Agreement between Louisiana Generating,
LLC and The Burlington Northern and Santa Fe Railway Company
and American Commercial Marine Service Company
10.10*+ Agreement between Louisiana Generating, LLC and Triton Coal
Company for the Sale and Purchase of Coal
12.1# Consolidated Ratio of Earnings to Fixed Charges for NRG
South Central Generating LLC
12.2** Consolidated Ratio of Earnings to Fixed Charges for
Louisiana Generating LLC
21.1# Subsidiaries of NRG South Central Generating LLC
23.1# Consent of PricewaterhouseCoopers LLP
23.2* Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit
5.1)
24.1* Powers of Attorney (included as part of signature page to
this registration statement)
25.1* Form T-1 Statement of Eligibility of The Chase Manhattan
Bank to act as Trustee under the indenture
27.1# Financial Data Schedule for NRG South Central Generating LLC
(for SEC use only)
27.2# Financial Data Schedule for Louisiana Generating LLC (for
SEC use only)
27.3** Financial Data Schedule for NRG South Central Generating LLC
for September 30, 2000 (for SEC use only)
27.4** Financial Data Schedule for Louisiana Generating LLC for
September 30, 2000 (for SEC use only)
99.1# Form of Letter of Transmittal
99.2# Form of Notice of Guaranteed Delivery
99.3# Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees
99.4# Letter to Clients
</TABLE>
---------------
+ Confidential treatment is being requested for portions of these exhibits.
Omitted material is being filed separately with the Commission.
* Previously filed.
** Filed herewith.
# Replaces previously filed exhibit.
