CHI ENERGY INC
10-Q, 1999-11-15
ELECTRIC SERVICES
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================================================================================

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

   [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934

                    For the quarterly period ended SEPTEMBER 30, 1999

                                       OR

   [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934

                  For the transition period from _____ to _____

                        Commission File Number: 33-69762


                                CHI ENERGY, INC.
                                ----------------
             (Exact name of registrant as specified in its charter)


            Delaware                                         06-1138478
            --------                                         ----------
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                        Identification Number)


       680 Washington Boulevard, Stamford, Connecticut          06901
       -----------------------------------------------          -----
       (Address of principal executive office)                (Zip Code)


        Registrant's telephone number, including area code (203) 425-8850


                                      NONE
                                      ----
         (Former name or former address, if changed since last report.)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [ ]

Indicate the number of shares of each of the issuer's classes of common stock,
as of the latest practicable date:

              Class A                      Outstanding as of November 11, 1999
- ------------------------------------       -----------------------------------
Common stock, $.01 par value                             9,085,290


              Class B                      Outstanding as of November 11, 1999
- ------------------------------------       -----------------------------------
Common stock, $.01 par value                               914,710


================================================================================


38684.0003
<PAGE>
                                      INDEX
<TABLE>
<CAPTION>
                                                                                                                    Page No.
                                                                                                                    --------
<S>                                                                                                                 <C>
PART I.         FINANCIAL INFORMATION

      Item 1.        Financial Statements.........................................................................      2

                     Consolidated Statement of Operations for the three months and nine months
                        ended September 30, 1999 and 1998 (Unaudited).............................................      3

                     Consolidated Balance Sheet at September 30, 1999
                        and  December 31, 1998 (Unaudited)........................................................      4

                     Consolidated Statement of Stockholders' Equity
                        for the nine months ended September 30, 1999 (Unaudited)..................................      5

                     Consolidated Statement of Cash Flows for the nine months
                        ended September 30, 1999 and 1998 (Unaudited).............................................    6-7

                     Notes to Consolidated Financial Statements (Unaudited) ......................................    8-9

      Item 2.        Management's Discussion and Analysis of
                        Financial Condition and Results of Operations.............................................  10-18

      Item 3.        Quantitative and Qualitative Disclosures
                        About Market Risk.........................................................................     18

PART II.             OTHER INFORMATION

      Item 1.        Legal Proceedings............................................................................     19

      Item 6.        Exhibits and Reports on Form 8-K.............................................................     19

      Signature

</TABLE>


<PAGE>
                          PART I. FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS








                                CHI ENERGY, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                               SEPTEMBER 30, 1999










                                       2
<PAGE>
                                CHI ENERGY, INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS
            (Amounts in thousands except share and per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED                      NINE MONTHS ENDED
                                                                        SEPTEMBER 30,                           SEPTEMBER 30,
                                                                  1 9 9 9            1 9 9 8             1 9 9 9            1 9 9 8
                                                                  -------            -------             -------            -------
<S>                                                             <C>                <C>                <C>                <C>
OPERATING REVENUES:
    Power generation revenue                                      $ 6,382            $ 8,259            $ 30,618           $ 37,156
    Management fees and operations & maintenance revenues           1,262              2,134               3,616              5,291
    Equity (loss)/income in partnership interests and
      other partnership income                                         (2)               251               1,133              3,222
                                                               ----------         ----------          ----------         ----------
                                                                    7,642             10,644              35,367             45,669
                                                               ----------         ----------          ----------         ----------
COSTS AND EXPENSES:
    Operating                                                       3,963              4,706              11,486             13,613
    General and administrative                                      1,163              1,892               4,744              7,213
    Depreciation and amortization                                   1,868              1,823               5,538              5,514
    Lease expense                                                   1,529              1,576               4,344              4,513
                                                               ----------         ----------          ----------         ----------
                                                                    8,523              9,997              26,112             30,853
                                                               ----------         ----------          ----------         ----------

       (Loss)/Income from operations                                 (881)               647               9,255             14,816

INTEREST INCOME                                                       383                509               1,116              1,143
OTHER INCOME                                                           14                 23                 186                332
INTEREST EXPENSE                                                   (1,663)            (2,008)             (5,054)            (6,177)
                                                               ----------         ----------          ----------         ----------
          (Loss)/Income before benefit/(provision) for
             income taxes                                          (2,147)              (829)              5,503             10,114

BENEFIT/(PROVISION) FOR INCOME TAXES                                  863                373              (2,214)            (4,018)
                                                               ----------         ----------          ----------         ----------
             NET (LOSS)/INCOME                                   $ (1,284)            $ (456)            $ 3,289            $ 6,096
                                                               ==========         ==========          ==========         ==========


BASIC AND DILUTED NET (LOSS)/INCOME PER COMMON SHARE              $ (0.13)           $ (0.05)             $ 0.33             $ 0.61

WEIGHTED AVERAGE NUMBER OF COMMON SHARES                       10,000,000         10,000,000          10,000,000         10,000,000

</TABLE>

         The accompanying notes are an integral part of the consolidated
                             financial statements.


                                        3
<PAGE>
                                CHI ENERGY, INC.
                           CONSOLIDATED BALANCE SHEET
            (Amounts in thousands except share and per share amounts)


<TABLE>
<CAPTION>
                                                                                                     SEPT. 30,            DEC. 31,
                                                                                                      1 9 9 9             1 9 9 8
                                                                                                      -------             -------
                                                                                                    (UNAUDITED)          (AUDITED)
<S>                                                                                                 <C>                 <C>
                                           ASSETS
CURRENT ASSETS:
  Cash and cash equivalents unrestricted                                                               $ 6,638            $ 16,106
  Cash and cash equivalents restricted                                                                   5,369               5,672
  Accounts receivable, net of allowance for doubtful accounts of $444 and $443, respectively             5,612               4,728
  Prepaid expenses and other current assets                                                              3,831               2,029
                                                                                                 -------------       -------------
      Total current assets                                                                              21,450              28,535

PROPERTY, PLANT AND EQUIPMENT, NET                                                                      96,518              92,331

FACILITIES UNDER DEVELOPMENT                                                                             7,190                   -

REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO IDENTIFIABLE ASSETS, NET                          9,512              11,805

INTANGIBLE ASSETS, NET                                                                                  51,119              45,535

INVESTMENTS AND OTHER LONG-TERM ASSETS                                                                  38,245              41,665
                                                                                                 -------------       -------------
                                                                                                     $ 224,034           $ 219,871
                                                                                                 =============       =============
                                            LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable and accrued expenses                                                                $ 9,593             $ 9,816
  Current portion of long-term debt and obligations under capital leases                                 5,765               6,327
                                                                                                 -------------       -------------
      Total current liabilities                                                                         15,358              16,143

LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES                                                     70,466              74,486

DEFERRED CREDIT, STATE INCOME TAXES AND OTHER LONG-TERM LIABILITIES                                     45,028              39,349

COMMITMENTS AND CONTINGENCIES
                                                                                                 -------------       -------------
          Total liabilities                                                                            130,852             129,978
                                                                                                 -------------       -------------

STOCKHOLDERS' EQUITY:
  Preferred stock, $.01 par value, 10,000,000 shares authorized, no shares issued                            -                   -
  Common stock, $.01 par value, 20,000,000 shares authorized
    Class A common stock, 9,085,290 shares issued and outstanding                                           91                  91
    Class B common stock,  914,710 shares issued and outstanding                                             9                   9
  Additional paid-in capital, including $2,064 related to warrants                                      85,000              85,000
  Retained earnings                                                                                      8,082               4,793
                                                                                                 -------------       -------------
        Total stockholders' equity                                                                      93,182              89,893
                                                                                                 -------------       -------------
                                                                                                     $ 224,034           $ 219,871
                                                                                                 =============       =============
</TABLE>

               The accompanying notes are an integral part of the
                       consolidated financial statements.


                                        4
<PAGE>
                                CHI ENERGY, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
            (Amounts in thousands except share and per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                            PREFERRED STOCK                   COMMON STOCK
                         NUMBER                          NUMBER                      ADDITIONAL                         TOTAL
                       OF SHARES      REPORTED         OF SHARES         PAR          PAID-IN         RETAINED       STOCKHOLDERS'
                      OUTSTANDING      AMOUNT         OUTSTANDING       VALUE         CAPITAL         EARNINGS          EQUITY
                     -------------   -----------   ----------------  ------------  --------------   -------------  ----------------
<S>                  <C>             <C>           <C>               <C>           <C>              <C>            <C>
BALANCE
 DECEMBER 31, 1998              -             -         10,000,000         $ 100        $ 85,000         $ 4,793          $ 89,893

 Net income                                                                                                3,289             3,289
                     -------------   -----------   ----------------  ------------  --------------   -------------  ----------------
BALANCE
 SEPTEMBER 30, 1999             -             -         10,000,000         $ 100        $ 85,000         $ 8,082          $ 93,182
                     =============   ===========   ================  ============  ==============   =============  ================

</TABLE>

















               The accompanying notes are an integral part of the
                       consolidated financial statements.


                                        5
<PAGE>
                                CHI ENERGY, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
            (Amounts in thousands except share and per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                         NINE MONTHS ENDED
                                                                                                            SEPTEMBER 30,
                                                                                                   1 9 9 9              1 9 9 8
                                                                                                   -------              -------
<S>                                                                                            <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

    Net income                                                                                      $ 3,289               $ 6,096

    Adjustments to reconcile net income to net cash provided by operating
    activities before reorganization items:
      Non-cash interest and other charges                                                               539                   503
      Provision relating to deferred tax liabilities                                                  1,926                 3,525
      Depreciation and amortization                                                                   5,538                 5,514
      Undistributed earnings of affiliates                                                              (85)                  (43)
      Income from sale of partnership assets                                                              -                  (930)
      (Increase)/decrease in accounts receivable                                                       (412)                1,926
      Increase in prepaid expenses and other current assets                                            (628)                 (471)
      Decrease in accounts payable and accrued expenses                                                (347)                 (611)
                                                                                               ------------          ------------
          Net cash provided by operating activities before reorganization items                       9,820                15,509
                                                                                               ------------          ------------
    Operating cash flows used for reorganization items:
      Professional fees                                                                                   -                  (201)
                                                                                               ------------          ------------
          Net cash used for reorganization items                                                          -                  (201)
                                                                                               ------------          ------------
          Net cash provided by operating activities                                                   9,820                15,308
                                                                                               ------------          ------------
CASH FLOWS FROM INVESTING ACTIVITIES:

      Proceeds from sale of partnership assets                                                            -                   930
      Cost of development expenditures                                                               (7,190)                    -
      Capital expenditures                                                                           (2,333)               (1,772)
      Decrease in escrow deposits                                                                       664                 1,354
      Decrease in investments and other long-term assets                                                639                     1
      Purchase of partnership interests, net of cash acquired                                        (6,692)                    -
                                                                                               ------------          ------------
           Net cash (used in)/provided by investing activities                                      (14,912)                  513
                                                                                               ------------          ------------
CASH FLOWS FROM FINANCING ACTIVITIES:

      Payments on long-term borrowings                                                               (4,679)               (5,920)
      Increase in other long-term liabilities                                                             -                    13
                                                                                               ------------          ------------
          Net cash used in financing activities                                                      (4,679)               (5,907)
                                                                                               ------------          ------------

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS                                                 (9,771)                9,914
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD                                                    21,778                11,998
                                                                                               ------------          ------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD                                                        $ 12,007              $ 21,912
                                                                                               ============          ============

</TABLE>

         The accompanying notes are an integral part of the consolidated
                             financial statements.

                                        6
<PAGE>
                                CHI ENERGY, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
            (Amounts in thousands except share and per share amounts)
                                   (Unaudited)
                                   (continued)

<TABLE>
<CAPTION>
                                                                        NINE MONTHS ENDED
                                                                          SEPTEMBER 30,
                                                                  1 9 9 9              1 9 9 8
                                                                  -------              -------
<S>                                                          <C>                   <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

  CASH PAID DURING THE PERIOD FOR:

            Interest                                               $ 4,730               $ 5,801
                                                              ============          ============
            Income taxes                                             $ 394                 $ 326
                                                              ============          ============

</TABLE>



  SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

            During the nine months ended September 30, 1999, the Company
            purchased additional partnership interests in two partnerships for
            $7,337, resulting in 100% ownership of both partnerships. In
            conjuction with the acquisitions, liabilities were assumed as
            follows:

                                                              PARTNERSHIP
                                                               INTERESTS

                    Fair value of assets acquired                $ 12,846
                    Prior ownership interests                      (5,385)
                    Cash paid                                      (7,337)
                                                              -----------
                    Liabilities assumed                             $ 124
                                                              ===========


            As a result of the settlement of certain pre-reorganization
            contingencies and the realization of net operating loss credits,
            during the nine months ended September 30, 1998, reorganization
            value in excess of amounts allocable to identifiable assets
            decreased by $4,022. In addition, accounts payable and accrued
            expense decreased by $392, long-term debt and obligations under
            capital leases decreased by $1,037 and deferred credit, state income
            taxes and other long-term liabilities decreased by $2,593.


            As a result of the settlement of certain pre-reorganization
            contingencies and the realization of net operating loss credits,
            during the nine months ended September 30, 1999, reorganization
            value in excess of amounts allocable to identifiable assets and
            deferred credit, state income taxes and other long term liabilities
            decreased by $1,683.







         The accompanying notes are an integral part of the consolidated
                             financial statements.


                                        7
<PAGE>
                                CHI ENERGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       (Amounts in thousands except per share amounts or otherwise noted)
                                   (Unaudited)

NOTE 1 - ORGANIZATION


      CHI Energy, Inc. ("CHI", and together with its consolidated subsidiaries,
the "Company"), has been engaged in the energy business since its founding in
1985. Its principal business is the development, acquisition, operation and
management of renewable energy and other energy-related assets. Renewable energy
generally includes hydroelectric, biomass, landfill gas, wind and solar
generating facilities. Currently, all of the Company's revenue is derived from
the ownership and operation of hydroelectric facilities. As of September 30,
1999 and 1998, the Company had ownership interests in, leased and/or operated
projects with a total operating capacity of 254 and 334 megawatts ("MW"),
respectively.


NOTE 2 - BASIS OF PRESENTATION

      The consolidated financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with Generally
Accepted Accounting Principles have been omitted pursuant to such rules and
regulations, although the Company believes that the disclosures herein are
adequate to make the information presented not misleading.

      The results of operations for the interim periods shown in this report are
not necessarily indicative of the results to be expected for the fiscal year. In
the opinion of the Company's management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly its financial position as of
September 30, 1999 and December 31, 1998 and the results of its operations and
changes in its financial position for the nine months ended September 30, 1999
and 1998. These financial statements should be read in conjunction with the
December 31, 1998 Audited Consolidated Financial Statements and Notes thereto.

      Certain prior period amounts have been reclassified to conform with
current period presentation.


NOTE 3 - ACQUISITIONS


      On May 25, 1999, the Company acquired an additional 50% ownership interest
in Pyrites Associates, a partnership which owns an 8.2 MW hydroelectric
facility, for $4.1 million and an additional 50% ownership interest in Hydro
Power Associates, a partnership which owns 25% of three hydroelectric facilities
aggregating 5.4 MW, for $3.2 million. The Company now has a 100% ownership
interest in both partnerships. The transactions were funded with unrestricted
cash. The Company has applied purchase accounting for the acquisitions on a
step-by-step basis, the results of which are preliminary. Accordingly, the
results of operations have been included in the Company's consolidated financial
statements since the date of acquisition.

      In addition, the Company has restated its prior period financial
statements to reflect a change from the cost to equity method of accounting for
the investment in Hydro Power Associates, in accordance with the provisions of
Accounting Principles Board Opinion No 18 "Equity Method of Accounting for
Investments in Common Stock". As a result of this restatement, Equity income in
partnership interests and other partnership income has been increased by $30,
$123 and $233 for the three months ended September 30, 1998 and the nine months
ended September 30, 1999 and 1998, respectively, and Investments and other
long-term assets and Retained earnings have been increased by $287 at December
31, 1998.

                                       8
<PAGE>
                                CHI ENERGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       (Amounts in thousands except per share amounts or otherwise noted)
                                   (Unaudited)


NOTE 3 - ACQUISITIONS (CONTINUED)


      The following unaudited pro forma consolidated results of operations for
the nine months ended September 30, 1999 and 1998 assume the acquisitions
occurred as of the beginning of the periods presented:

                                                     1999              1998
                                                     ----              ----

Operating revenues                                  $35,712           $46,602
Net income                                          $ 3,674           $ 6,895
Basic and diluted net income per common share       $  0.37           $  0.69


      The pro forma results are not necessarily indicative of the results that
would have been obtained if the acquisition had been completed as of the
beginning of each of the fiscal periods presented, nor are they necessarily
indicative of future consolidated results.


NOTE 4 - FACILITIES UNDER DEVELOPMENT


      During August 1999, the Company secured financing for the St. Felicien
project, a 23 MW biomass cogeneration facility located in Quebec, Canada. On
November 2, 1999, the Company entered into an agreement to sell an ownership
interest in the project which would reduce the Company's ownership interest to
60%. The project is now under construction and is expected to commence
commercial operation in the spring of 2001.


NOTE 5 - COMMITMENTS AND CONTINGENCIES

      On August 20, 1997, a former employee of the Company filed a civil action
against the Company in Connecticut Superior Court, District of New Haven
entitled Carol H. Cunningham v. Consolidated Hydro, Inc. alleging that the
Company breached its employment agreement with her. On or about October 13,
1997, the former employee filed a proof of claim in the Bankruptcy Court for
approximately $7.3 million plus unliquidated amounts based primarily on the
allegations in the civil action (the "Claim"). On November 25, 1997, the Company
filed an objection to the Claim on the grounds that, among other things, the
former employee failed to satisfy her obligations under her employment contract
with the Company. The Company is vigorously defending the Claim and Management
believes that the Company's liability with respect to the Claim, if any, will
not have a material adverse effect on the Company's financial position or
results of operations.


NOTE 6 - SUBSEQUENT EVENT

      On November 4, 1999, the Company amended its $15 million secured revolving
working capital and letter of credit facility with an initial expiration date of
December 31, 1999 (the "Facility") to provide for a $35 million total facility,
subject to a certain coverage ratio, with an initial expiration date of December
31, 2001 (the "Amended Facility"). The terms and conditions of the Amended
Facility are substantially the same as those of the Facility. Upon expiration of
the Amended Facility, any outstanding revolving loans will, at the Company's
option, be converted into a five year term loan. The interest rate on revolving
loans is prime +1.5%. As of November 11, 1999, remaining availability is
approximately $27.9 million.

                                       9
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

GENERAL

      CHI Energy, Inc. ("CHI", and together with its consolidated subsidiaries,
the "Company"), has been engaged in the energy business since its founding in
1985 and is currently principally engaged in the development, acquisition,
operation and management of renewable energy and other energy-related assets.
Renewable energy generally includes hydroelectric, biomass, landfill gas, wind
and solar generating facilities. Currently, all of the Company's revenue is
derived from the ownership and operation of hydroelectric facilities (the
Company's "hydroelectric business"). The Company's operating hydroelectric
projects are located in 14 states and one Canadian province. In addition, the
Company has commenced construction of a 23 megawatt ("MW") biomass cogeneration
facility, the St. Felicien project, in Quebec.


      The Company's existing U.S. hydroelectric projects are clustered in four
regions: the Northeast, Southeast, Northwest and West, with a concentration in
the Northeast. CHI has developed what it believes to be an efficient "hub"
system of project management designed to maximize the efficiency of each
facility's operations. The economies of scale created by this system include
reduced costs related to centralized administration, operations, maintenance,
engineering, insurance, finance and environmental and regulatory compliance. The
hub system and the Company's operating expertise have enabled the Company to
successfully integrate acquisitions into its current portfolio and increase the
efficiency and productivity of its projects.


      Since its inception, the Company has expanded primarily by acquiring
existing hydroelectric facilities in the United States. As of September 30,
1999, the Company had a 100% ownership or long-term lease interest in 51
projects (146 MW), a partial ownership interest in 10 projects (91 MW), and
operations and maintenance ("O&M") contracts with 18 projects (17 MW).


      CHI sells substantially all of the electric energy and capacity from its
projects to public utility companies pursuant to take or pay power purchase
agreements. These contracts vary in their terms but typically provide scheduled
rates throughout the life of the contracts, which are generally for a term of 15
to 40 years from inception.


      The electric power industry in the United States is undergoing significant
structural changes, evolving from a highly regulated industry dominated by
monopoly utilities to a deregulated, competitive industry providing energy
customers with an increasing degree of choice among sources of electric power
supply. The Company believes that it is well positioned to take advantage of new
business opportunities, particularly in the renewable energy sector, occasioned
by electric industry restructuring in the U.S. and other countries. The Company
will seek to capitalize on these new opportunities in energy-related products
and services by taking advantage of its existing technical and financial
expertise and using its geographic presence in most U.S. regions and Eastern
Canada to realize economies of scale in the development, acquisition,
administration, operation and maintenance of facilities.


      The performance of the Company in the future will be affected by a number
of factors, in addition to the structural changes to the electric power industry
described above. The Company competes for hydroelectric and other renewable
energy projects with a broad range of electric power producers including other
independent power producers of various sizes and many well-capitalized domestic
and foreign industry participants such as utilities, equipment manufacturers and
affiliates of industrial companies, many of whom are aggressively pursuing power
development programs and have relatively low return-on-capital objectives.


      Federal regulators and a number of states, including some in which the
Company operates, have opened access to the transmission grid and are exploring
ways in which to further increase competition in electricity markets, most
notably by instituting customer choice of power suppliers at the retail level.
Although the character and extent of this deregulation are as yet unclear, the
Company expects that these efforts will increase uncertainty with respect to
future power prices and make it more difficult to obtain long-term power
purchase contracts. At the same time, certain proposals related to electric
industry restructuring have included provisions for enhancing the value of
so-called "green", or environmentally friendly, generation resources. Such
enhancements, if implemented, could have a beneficial effect on the Company.


                                       10
<PAGE>
Power Generation Revenue

      The Company's revenues are derived principally from selling electrical
energy and capacity to utilities under long-term power purchase agreements which
require the contracting utilities to purchase energy generated by the Company.
The Company's present power purchase agreements have remaining terms of up to 27
years. After the expiration of such power purchase agreements, rates generally
are expected to change to the purchasing utility's avoided cost for delivered
energy or to market rates, which are likely to be lower than expiring power
purchase agreement rates. Fluctuations in revenues and related cash flows are
generally attributable to changes in production mix, coupled with variations in
water flows and the effect of escalating and declining contract rates in the
Company's power purchase agreements.


Management Fees and Operations & Maintenance Revenues

      O&M contracts, from which management fees and operations and maintenance
revenues are derived, generally enable the Company to maximize the use of its
available resources and to generate additional income.


Equity Income In Partnership Interests and Other Partnership Income

      In accordance with generally accepted accounting principles, certain of
the Company's partnership interests are accounted for under the equity and the
cost methods of accounting. Fluctuations in equity income and other partnership
income are generally attributable to variations in results of operations and
timing of cash distributions of certain partnerships.


Operating Expenses

      Operating expenses consist primarily of project-related costs such as
labor, repairs and maintenance, supplies, insurance and real estate taxes.
Operating expenses include direct expenses related to the production of power
generation revenue as well as direct costs associated with O&M contracts which
are either rebillable to applicable third party owners directly or not
rebillable since they are covered through an established management fee.


Lease Expense

      Lease expense includes operating leases associated with some of the
hydroelectric projects as well as leases for the corporate and regional
administrative offices. Certain leases provide for payments that are based upon
power sales revenue or cash flow for specific projects. Hence, varying project
revenues will impact overall lease expense, year-to-year.



                                       11
<PAGE>
CERTAIN KEY OPERATING RESULTS AND TRENDS

      The information in the tables below provides an overview of certain key
operating results and trends which, when read in conjunction with the narrative
discussion that follows, is intended to provide an enhanced understanding of the
Company's results of operations. These tables include information regarding the
Company's ownership of projects by region as well as information on regional
water flows. As presented, the Company's project portfolio is concentrated in
the Northeastern United States, a region characterized by relatively consistent
long-term water flow and power purchase contract rates which are higher than in
most other regions of the country.

      This information should be read in conjunction with the December 31, 1998
Audited Consolidated Financial Statements and related Notes thereto.


Power Producing Facilities

<TABLE>
<CAPTION>
                                            AS OF                             AS OF                               AS OF
                                     SEPTEMBER 30, 1999                  DECEMBER 31, 1998                 SEPTEMBER 30, 1998
                                     ------------------                  -----------------                 ------------------
                                     MWS       #PROJECTS                MWS        #PROJECTS               MWS       #PROJECTS
                                     ---       ---------                ---        ---------               ---       ---------
<S>                               <C>                                 <C>                                 <C>
Northeast:
100% Ownership (1)                   99.08(4)        30(4)               90.88           29                  90.88          29
Partial Ownership (2)                62.57(4)         8(4)               70.77(5)         9(5)               52.37           8
O&M Contracts (3)                    11.32           15                  12.02(6)        16(6)               92.16          19
                                  ---------        ----               ---------        ----               ---------       ----
Total                               172.97           53                 173.67           54                 235.41          56
                                  =========        ====               =========        ====               =========       ====
Southeast:
100% Ownership (1)                   27.42           13                  27.42           13                  27.42          13
Partial Ownership (2)                  --            --                    --            --                   --           --
O&M Contracts (3)                     --             --                    --            --                   --           --
                                  ---------        ----               ---------        ----               ---------       ----
Total                                27.42           13                  27.42           13                  27.42          13
                                  =========        ====               =========        ====               =========       ====
West:
100% Ownership (1)                    5.38            3                   5.38            3                   5.38           3
Partial Ownership (2)                 4.20            1                   4.20            1                   4.20           1
O&M Contracts (3)                     1.80(7)         2(7)               18.80            3                  18.80           3
                                  ---------        ----               ---------        ----              ----------       ----
Total                                11.38            6                  28.38            7                  28.38           7
                                  =========        ====               =========        ====               =========       ====
Northwest:
100% Ownership (1)                   14.61            5                  14.61(8)         5(8)               14.71           6
Partial Ownership (2)                24.00            1                  24.00            1                  24.00           1
O&M Contracts (3)                     4.34            1                   4.34            1                   4.34           1
                                  ---------        ----               ---------        ----              ----------       ----
Total                                42.95            7                  42.95            7                  43.05           8
                                  =========        ====               =========        ====               =========       ====
Total:
100% Ownership (1)                  146.49           51                 138.29           50                 138.39          51
Partial Ownership (2)                90.77           10                  98.97           11                  80.57          10
O&M Contracts (3)                    17.46           18                  35.16           20                 115.30          23
                                  ---------        ----               ---------        ----              ----------       ----
Total                               254.72           79                 272.42           81                 334.26          84
                                  =========        ====               =========        ====               =========       ====
- ------------

</TABLE>

(1)   Defined as projects in which the Company has 100% of the economic
      interest.
(2)   Defined as projects in which the Company's economic interest is less than
      100%.
(3)   Defined as projects in which the Company is an operator pursuant to O&M
      contracts with the project's owner or owners. The Company does not have
      any ownership interest in such projects.
(4)   Reflects the purchase of the remaining ownership of interest of one
      project (8.20 megawatts) on May 25, 1999.
(5)   Reflects the addition of one project (18.40 megawatts) on November 11,
      1998.
(6)   Reflects the termination of three O&M contracts (80.14 megawatts) on
      October 31, 1998.
(7)   Reflects the termination of one O&M contract (17.00 megawatts) on January
      31, 1999.
(8)   Reflects the sale of one project (0.10 megawatts) on December 31, 1998.


                                       12
<PAGE>
Selected Operating Information (1):

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED SEPTEMBER 30,                NINE MONTHS ENDED SEPTEMBER 30,
                                              1999               1998                     1999                    1998
                                          -------------     ----------------        ------------------      ------------------
<S>                                       <C>               <C>                     <C>                     <C>
Power generation revenues (thousands)        $ 6,382          $    8,259                 $ 30,618              $     37,156
Kilowatt hours produced (thousands)           84,707             108,649                  405,384                   492,973
Average rate per kilowatt hour                   7.5(cent)           7.6(cent)                7.6(cent)                 7.5(cent)

</TABLE>

- ---------
(1)   Limited to projects included in consolidated revenues.


      As the above tables indicate, the Company's portfolio of operating
projects may fluctuate from year to year in terms of total operating megawatts.
The Company expects to develop, acquire, sell or discontinue operations of
certain projects, as it has in the past, if it perceives such actions to be
beneficial. In the case of O&M contracts, such contracts are subject to
termination for a variety of reasons. The total number of operating megawatts in
the Company's portfolio is not necessarily indicative of overall financial
results.


Precipitation, Water Flow and Seasonality

      The amount of hydroelectric energy generated at any particular facility
depends upon the quantity of water flow at the site of the facility. Dry periods
tend to reduce water flow at particular sites below historical averages,
especially if the facility has low storage capacity. Excessive water flow may
result from prolonged periods of higher than normal precipitation, or sudden
melting of snow packs, possibly causing flooding of facilities and/or a
reduction of generation until water flows return to normal.

      Water flow is generally consistent with precipitation. However, snow and
other forms of frozen precipitation will not necessarily increase water flow in
the same period of such precipitation if temperatures remain at or below
freezing. "Average," as it relates to water flow, refers to the actual long-term
average of historical water flows at the Company's facilities for any given
year. Typically, these averages are based upon hydrologic studies done by
qualified engineers for periods of 20 to 50 years or more, depending on the flow
data available with respect to a particular site. Over an extended period (e.g.,
10 to 15 years) water flows would be expected to be average, whereas for shorter
periods (e.g., three months to three years) variation from average is likely.
Each of the regions in which the Company operates has distinctive precipitation
and water flow characteristics, including the degree of deviation from average.
Geographic diversity helps to minimize short-term variations.

Water Flow by Region (1)

<TABLE>
<CAPTION>
                             THREE MONTHS ENDED SEPTEMBER 30,                        NINE MONTHS ENDED SEPTEMBER 30,
                             1999                       1998                        1999                        1998
                     ----------------------     ----------------------     ------------------------      -------------------
<S>                  <C>                        <C>                        <C>                           <C>
  Northeast              Below Average              Above Average               Below Average              Above Average
  Southeast              Below Average              Below Average               Below Average                 Average
  West                      Average                    Average                     Average                 Above Average
  Northwest                 Average                    Average                  Above Average              Above Average

</TABLE>

- ---------
(1)   These determinations were made by management based upon water flow in
      areas where the Company's projects are located and may not be applicable
      to the entire region.


      Production of energy by the Company is typically greatest from January
through June, when water flow is at its highest at most of the Company's
projects, and lowest from July through September. The amount of water flow in
any given period will have a direct effect on the Company's production, revenues
and cash flow.

      The following tables, which show revenues from power sales and kilowatt
hour production by quarter, respectively, highlight the seasonality of the
Company's revenue stream. These tables should be reviewed in conjunction with
the water flow information included above.


                                       13
<PAGE>
Power Generation Revenues (in thousands) (1)

<TABLE>
<CAPTION>
                                              TWELVE MONTHS ENDED           TWELVE MONTHS ENDED
                                               DECEMBER 31, 1999             DECEMBER 31, 1998
                                            ------------------------     ---------------------------
                                                 $            %                 $             %
                                                 -            -                 -             -
<S>                                        <C>                           <C>
    First Quarter                           $     14,016     45.8          $   14,712        33.6
    Second Quarter                                10,220(2)  33.4              14,185        32.3
    Third Quarter                                 6,382      20.8               8,259        18.8
    Fourth Quarter                                                              6,712        15.3
                                            -----------     -----          ----------       -----
    Total                                   $    30,618     100.0          $   43,868       100.0
                                            ===========     =====          ==========       =====
</TABLE>

- -----------------
(1)   Limited to projects included in consolidated revenues.
(2)   Includes business interruption revenue of $754 for the three months ended
      June 30, 1999.

Kilowatt Hours (kWh) Produced (in thousands) (1)

<TABLE>
<CAPTION>
                                            TWELVE MONTHS ENDED              TWELVE MONTHS ENDED
                                             DECEMBER 31, 1999               DECEMBER 31, 1998
                                         --------------------------       -------------------------
                                             KWH             %                 KWH            %
                                             ---             -                 ---            -
<S>                                      <C>             <C>              <C>            <C>
   First Quarter                             175,172       43.2               192,355       32.9
   Second Quarter                            145,505(2)    35.9               191,969       32.8
   Third Quarter                              84,707       20.9               108,649       18.6
   Fourth Quarter                                                              92,139       15.7
                                          ----------     ------           -----------    -------
   Total                                     405,384      100.0               585,112      100.0
                                          ==========     ======           ===========    =======
</TABLE>

- -------------
(1)   Limited to projects included in consolidated revenues.
(2)   Includes the business interruption production equivalent of 14,259 kWh for
      the three months ended June 30, 1999.


THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998

Operating Revenues

      Power Generation Revenue. The Company's power generation revenue decreased
by $1.9 million (22.9%), from $8.3 million to $6.4 million for the three months
ended September 30, 1998 and 1999, respectively.

      The Northeast region experienced decreased revenues of $1.5 million
primarily as a result of below average water flows throughout the region.

      The Southeast region experienced decreased revenues of $0.3 million
primarily as a result of decreased water flows throughout the region and the
expiration and renegotiation, at reduced rates, of some of the power purchase
agreements.

      The West and Northwest regions (combined) experienced decreased revenues
of $0.1 million.

      The Company as a whole experienced decreased revenue per kilowatt hour of
0.1(cent) (1.3%) from 7.6(cent) to 7.5(cent) in the three months ended September
30, 1998 and 1999, respectively, primarily as a result of variations in the
production mix and contract rates among various projects.

      Management Fees and Operations & Maintenance Revenues. Management fees and
operations & maintenance revenues decreased by $0.8 million (38.1%) from $2.1
million to $1.3 million for the three months ended September 30, 1998 and 1999,
respectively, primarily due to decreased levels of rebillable work performed
during the three months ended September 30, 1999 versus the comparable period in
1998.

       Equity Income in Partnership Interests and Other Partnership Income.
Equity income in partnership interests and other partnership income decreased by
$0.3 million (100%) from $0.3 million to $0.0 million for the three months ended
September 30, 1998 and 1999, respectively, primarily due to decreased water
flows in the Northeast region which resulted in decreased equity income in the
Northeast Partnerships, and the second quarter 1999 purchase and subsequent
consolidation of Pyrites Associates which was previously accounted for under the
equity method.

                                       14
<PAGE>
Costs and Expenses

      Operating Expenses. Operating expenses decreased by $0.7 million (14.9%)
from $4.7 million to $4.0 million for the three months ended September 30, 1998
and 1999, respectively, primarily due to decreased O&M costs due to lower levels
of rebillable work performed during the three months ended September 30, 1999
versus the comparable period in 1998.

      General and Administrative Expenses. General and administrative expenses
decreased by $0.7 million (36.8%) from $1.9 million to $1.2 million for the
three months ended September 30, 1998 and 1999, respectively, primarily due to
decreased expenditures for business development.

  Interest Expense

      Interest expense decreased by $0.3 million (15.0%) from $2.0 million to
$1.7 million for the three months ended September 30, 1998 and 1999,
respectively. The decrease was primarily due to lower principal balances on
outstanding debt, lower interest rates and the modification of terms of a note
payable which resulted in an effective rate of 0% during the three months ended
September 30, 1999.

  Income Taxes

      For the three months ended September 30, 1999, the Company's effective
income tax rate of 40.2% differed from the federal statutory rate primarily due
to current state and federal alternative minimum tax liability.

NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998

Operating Revenues

      Power Generation Revenue. The Company's power generation revenue decreased
by $6.6 million (17.7%), from $37.2 million to $30.6 million for the nine months
ended September 30, 1998 and 1999, respectively.

      The Northeast region experienced decreased revenues of $4.3 million
primarily as a result of below average water flows throughout the region.

      The Southeast region experienced decreased revenues of $1.8 million
primarily as a result of decreased water flows throughout the region and the
expiration and renegotiation, at reduced rates, of some of the power purchase
agreements.

      The West and Northwest regions (combined) experienced decreased revenues
of $0.5 million due to decreased water flows in the West.

      The Company as a whole experienced increased revenue per kilowatt hour of
0.1(cent) (1.3%) from 7.5(cent) to 7.6(cent) in the nine months ended September
30, 1998 and 1999, respectively, primarily as a result of variations in the
production mix and contract rates among various projects.

      Management Fees and Operations & Maintenance Revenues. Management fees and
operations & maintenance revenues decreased by $1.7 million (32.1%) from $5.3
million to $3.6 million for the nine months ended September 30, 1998 and 1999,
respectively, primarily due to decreased levels of rebillable work performed
during the nine months ended September 30, 1999 versus the comparable period in
1998 and a performance-based incentive fee earned during 1998.

      Equity Income in Partnership Interests and Other Partnership Income.
Equity income in partnership interests and other partnership income decreased by
$2.1 million (65.6%) from $3.2 million to $1.1 million for the nine months ended
September 30, 1998 and 1999, respectively, primarily due to (i) an increased
distribution received during 1998 from a minority owned partnership which owns a
hydroelectric project located in the Northeast, (ii) a $0.9 million one-time
cash distribution received during 1998 from the sale of assets in connection
with the dissolution of a partnership in the West, in which the Company had
general and limited partnership interests, and (iii) the second quarter 1999
purchase and subsequent consolidation of Pyrites Associates which was previously
accounted for under the equity method.


                                       15
<PAGE>
  Costs and Expenses

      Operating Expenses. Operating expenses decreased by $2.1 million (15.4%)
from $13.6 million to $11.5 million for the nine months ended September 30, 1998
and 1999, respectively, primarily due to (i) decreased salaries and benefits
expenses resulting from personnel reductions, (ii) decreased O&M costs due to
lower levels of rebillable work performed, and (iii) decreased repair and
maintenance expenses resulting from increased expenses during the nine months
ended September 30, 1998 as a result of a severe ice storm during January 1998.

      General and Administrative Expenses. General and Administrative expenses
decreased by $2.5 million (34.7%) from $7.2 million to $4.7 million for the nine
months ended September 30, 1998 and 1999, respectively, primarily due to
decreased expenditures for business development during the nine months ended
September 30, 1999 and a decrease in net worth taxes due to the timing of
recognition of net worth tax liabilities.

  Interest Expense

      Interest expense decreased by $1.1 million (17.7%) from $6.2 million to
$5.1 million for the nine months ended September 30, 1998 and 1999,
respectively. The decrease was primarily due to lower principal balances on
outstanding debt, lower interest rates and the modification of terms of a note
payable which resulted in an effective interest rate of 0% during the nine
months ended September 30, 1999.

  Income Taxes

      For the nine months ended September 30, 1999, the Company's effective
income tax rate of 40.2% differed from the federal statutory rate primarily due
to current state and federal alternative minimum tax liability.

LIQUIDITY AND CAPITAL RESOURCES

      As more fully described in the September 30, 1999 Unaudited Consolidated
Financial Statements and related Notes thereto included herein, the cash flow of
the Company was comprised of the following:

<TABLE>
<CAPTION>
                                                                                    NINE MONTHS ENDED
                                                                     SEPTEMBER 30, 1999            SEPTEMBER 30, 1998
                                                                  --------------------------     ------------------------
                                                                                 (AMOUNTS IN THOUSANDS)
<S>                                                               <C>                              <C>
        Cash provided by/(used in):
             Operating activities                                    $      9,820                      $   15,308
             Investing activities                                         (14,912)                            513
             Financing activities                                          (4,679)                         (5,907)
                                                                       -------------                 ------------
        Net (decrease)/increase in cash                              $     (9,771)                    $     9,914
                                                                       =============                 ============
</TABLE>

      The Company's primary source of liquidity is internally generated cash
from operations. Management believes that cash provided by operations will be
sufficient to satisfy all of the Company's working capital, capital expenditure
and debt service requirements during 1999. Available external sources of
liquidity include a $35.0 million secured revolving working capital and letter
of credit facility (see - "Summary of Indebtedness"). This facility provides
additional liquidity to support the Company's existing operations as well as its
future growth. As of November 11, 1999, $27.9 million was available for working
capital purposes or letter of credit issuances. In addition, should growth
opportunities warrant significant additional cash requirements, the Company may
pursue other external sources of funds through debt and/or equity offerings.

      For the nine months ended September 30, 1999, the cash flow provided by
operating activities was principally the result of the $11.2 million of net
income adjusted for non-cash items. Significant non-cash items include $5.5
million of depreciation and amortization, a $1.9 million provision relating to
deferred tax liabilities and $0.5 million of non-cash interest and other
charges. The cash flow used in investing activities was primarily attributable
to $6.7 million used for the purchase of an additional 50% interest in Pyrites
Associates and Hydro Power Associates, net of cash acquired, $7.2 million of
development expenditures and $2.3 million of capital expenditures. The cash flow
used in financing activities was primarily due to the repayment of $4.7 million
of project debt.

                                       16
<PAGE>
      Cash provided by operating activities decreased by $5.5 million for the
nine months ended September 30, 1999 as compared to the nine months ended
September 30, 1998. The decrease resulted from a $3.5 million decrease in income
adjusted for non-cash items and a $2.2 million difference in cash utilized by a
change in operating assets and liabilities, offset by a $0.2 million difference
in cash used for reorganization items. The difference in income adjusted for
non-cash items is mainly attributed to unfavorable operating conditions during
the second and third quarters of 1999.


Summary of Indebtedness

<TABLE>
<CAPTION>
                                                                                PRINCIPAL AMOUNT OUTSTANDING AS OF
                                                                          SEPTEMBER 30, 1999                DECEMBER 31, 1998
                                                                        ------------------------         ------------------------
                                                                                          (AMOUNTS IN THOUSANDS)
<S>                                                                     <C>                              <C>
           Non-recourse debt of subsidiaries                                     $76,231                          $80,813
           Current portion of long-term debt                                      (5,765)                          (6,327)
                                                                            ------------                     ------------

           Total long-term debt obligations                                      $70,466                          $74,486
                                                                            ============                     ============
</TABLE>

      In November 1999, the Company amended its $15.0 million secured revolving
working capital and letter of credit facility with an initial expiration date of
December 31, 1999 (the "Facility") to provide for a $35.0 million total facility
with an initial expiration date of December 31, 2001 (the "Amended Facility").
The Company may use proceeds from the Amended Facility to support its
development, acquisition and operating activities. Upon expiration of the
Amended Facility, any outstanding revolving loans will, at the Company's option,
be converted into a five year term loan. The interest rate on revolving loans is
prime +1.5%. As of November 11, 1999, no revolving loans were outstanding under
the Amended Facility and $5.9 million of letters of credit have been issued and
are outstanding.

YEAR 2000 ISSUE

      The year 2000 issue is the result of computer software programs that were
written using two digits rather than four to define the applicable year. If the
Company's computer software programs with date-sensitive functions are not year
2000 compliant, they may recognize a date using "00" as the year 1900 rather
than the year 2000. If not corrected, many computer applications could fail or
create erroneous results.

      The Company's year 2000 plan addresses all information technology ("IT")
systems, including proprietary and third party software, as well as non-IT
systems, including the embedded technology in various devices operated by the
Company. Testing of hardware and software systems is complete and has revealed
that all of the Company's vendors are currently year 2000 compliant and that the
Company's current systems are either compliant or are scheduled to be upgraded
by November 30, 1999. In the event any of the Company's customers are not year
2000 compliant, there is a possibility that the Company would not be able to
deliver power to such customers. However, substantially all of the Company's
customers are contractually obligated to purchase generated power pursuant to
take or pay power purchase agreements, and the Company has adequate systems to
measure any generation the customer's system may not have recorded, so there is
minimal risk of lost revenues to the Company. Testing of automated operational
systems is also complete and has revealed that the logic controller embedded in
the automated operational systems is not date sensitive.

      The costs incurred to date in relation to the Company's year 2000 plan are
approximately fifty thousand dollars and additional costs are estimated at ten
thousand dollars. These costs consist entirely of software and labor related
expenditures. Management does not expect any significant exposure in the event
of year 2000 non-compliance by third party vendors or customers; therefore, a
formal contingency plan is not required.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

      Certain statements contained herein that are not related to historical
facts may contain "forward looking" information, as that term is defined in the
Private Securities Litigation Reform Act of 1995. Such statements are based on
the Company's current beliefs as to the outcome and timing of future events, and
actual results may differ materially from those projected or implied in the
forward looking statements. Further, certain forward looking statements are
based upon assumptions of future events which may not prove to be accurate. The
forward looking statements involve risks and uncertainties including, but not
limited to, the uncertainties relating to industry trends; risks related to
renewable energy and other acquisition and development projects; risks related
to the Company's power purchase contracts; risks and uncertainties related to


                                       17
<PAGE>
weather conditions; and other risk factors detailed herein and in other of the
Company's Securities and Exchange Commission filings.


ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      Not Applicable






















                                       18
<PAGE>
                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

      CHI is involved in various legal proceedings which are routine and
incidental to the conduct of its business. CHI's management currently believes
that none of the pending claims against the Company will have a material adverse
effect on the Company.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K


(a) Exhibits

           Exhibit   27.1      Financial Data Schedule


(b) Reports on Form 8-K

           NONE
















                                       19
<PAGE>
                                    SIGNATURE


      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Date: November 15, 1999                CHI ENERGY, INC.

                                       By: /s/ Neil A. Manna
                                           ------------------------------------
                                           Neil A. Manna
                                           Vice President of Finance,
                                           Controller and Treasurer

                                           signing on behalf of the registrant
                                           and as Principal Accounting Officer



















                                       20

<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SEPTEMBER
30, 1999 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S>                                         <C>                  <C>
<PERIOD-TYPE>                               3-MOS                9-MOS
<FISCAL-YEAR-END>                           DEC-31-1999          DEC-31-1999
<PERIOD-END>                                SEP-30-1999          SEP-30-1999
<CASH>                                           12,007               12,007
<SECURITIES>                                          0                    0
<RECEIVABLES>                                     6,056                6,056
<ALLOWANCES>                                       (444)                (444)
<INVENTORY>                                           0                    0
<CURRENT-ASSETS>                                 21,450               21,450
<PP&E>                                          104,399              104,399
<DEPRECIATION>                                   (7,881)              (7,881)
<TOTAL-ASSETS>                                  224,034              224,034
<CURRENT-LIABILITIES>                            15,358               15,358
<BONDS>                                          76,231               76,231
                                 0                    0
                                           0                    0
<COMMON>                                            100                  100
<OTHER-SE>                                       93,082               93,082
<TOTAL-LIABILITY-AND-EQUITY>                    224,034              224,034
<SALES>                                               0                    0
<TOTAL-REVENUES>                                  7,642               35,367
<CGS>                                                 0                    0
<TOTAL-COSTS>                                     7,360               21,368
<OTHER-EXPENSES>                                  1,163                4,744
<LOSS-PROVISION>                                      0                    1
<INTEREST-EXPENSE>                                    0                    0
<INCOME-PRETAX>                                  (2,147)               5,503
<INCOME-TAX>                                        863               (2,214)
<INCOME-CONTINUING>                              (1,284)               3,289
<DISCONTINUED>                                        0                    0
<EXTRAORDINARY>                                       0                    0
<CHANGES>                                             0                    0
<NET-INCOME>                                     (1,284)               3,289
<EPS-BASIC>                                     (0.13)                0.33
<EPS-DILUTED>                                     (0.13)                0.33


</TABLE>


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