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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Exact name of Registrants as specified in
their charters, State of Incorporation, IRS Employer
Commission address of principal executive offices and Identification
File Number Registrants' telephone number Number
- ----------- ------------------------------------------ --------------
33-87902 ESI Tractebel Funding Corp. 04-3255377
(a Delaware corporation)
33-87902-02 Northeast Energy Associates, 04-2955642
A Limited Partnership
(a Massachusetts limited partnership)
33-87902-01 North Jersey Energy Associates, 04-2955646
A Limited Partnership
(a New Jersey limited partnership)
333-52397 ESI Tractebel Acquisition Corp. 65-0827005
(a Delaware corporation)
333-52397-01 Northeast Energy, LP 65-0811248
(a Delaware limited partnership)
------------------------------------------
c/o FPL Energy, Inc.
700 Universe Boulevard
Juno Beach, Florida 33408-2683
(561) 691-7171
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) have been subject to such filing
requirements for the past 90 days. Yes X No ___
----------------------------------
This combined Form 10-Q represents separate filings by ESI Tractebel Funding
Corp., Northeast Energy Associates, A Limited Partnership, North Jersey
Energy Associates, A Limited Partnership, ESI Tractebel Acquisition Corp. and
Northeast Energy, LP. Information contained herein relating to an individual
registrant is filed by that registrant on its own behalf. Each registrant
makes representations only as to itself and makes no other representations
whatsoever as to any other registrant.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (Reform Act), ESI Tractebel Funding Corp. (the
Funding Corp.), Northeast Energy Associates, A Limited Partnership (NEA) and
North Jersey Energy Associates, A Limited Partnership (NJEA) (collectively,
the Partnerships), ESI Tractebel Acquisition Corp. (the Acquisition Corp.)
and Northeast Energy, LP (NE LP) (all five entities collectively, the
Registrants) are hereby filing cautionary statements identifying important
factors that could cause the Registrants' actual results to differ materially
from those projected in forward-looking statements (as such term is defined
in the Reform Act) of the Registrants made by or on behalf of the Registrants
which are made in this combined Form 10-Q, in presentations, in response to
questions or otherwise. Any statements that express, or involve discussions
as to, expectations, beliefs, plans, objectives, assumptions or future events
or performance (often, but not always, through the use of words or phrases
such as will likely result, are expected to, will continue, is anticipated,
estimated, projection, outlook) are not statements of historical facts and
may be forward-looking. Forward-looking statements involve estimates,
assumptions and uncertainties that could cause actual results to differ
materially from those expressed in the forward-looking statements.
Accordingly, any such statements are qualified in their entirety by reference
to, and are accompanied by, the following important factors that could cause
the Registrants' actual results to differ materially from those contained in
forward-looking statements of the Registrants made by or on behalf of the
Registrants.
Any forward-looking statement speaks only as of the date on which such
statement is made, and the Registrants undertake no obligation to update any
forward-looking statement or statements to reflect events or circumstances
after the date on which such statement is made or to reflect the occurrence
of unanticipated events. New factors emerge from time to time and it is not
possible for management to predict all of such factors, nor can it assess the
impact of each such factor on the business or the extent to which any factor,
or combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements.
Some important factors that could cause actual results or outcomes to differ
materially from those discussed in the forward-looking statements include
prevailing governmental policies and regulatory actions with respect to
allowed rates of return, industry and rate structure, acquisition and
disposal of assets and facilities, operation and construction of plant
facilities, recovery of fuel and purchased power costs, and present or
prospective competition.
The business and profitability of the Registrants are also influenced by
economic and geographic factors including political and economic risks,
changes in and compliance with environmental and safety laws and policies,
weather conditions, population growth rates and demographic patterns,
competition for retail and wholesale customers, pricing and transportation of
commodities, market demand for energy from plants or facilities, changes in
tax rates or policies or in rates of inflation, unanticipated development
project delays or changes in project costs, unanticipated changes in
operating expenses and capital expenditures, capital market conditions,
competition for new energy development opportunities, and legal and
administrative proceedings (whether civil, such as environmental, or
criminal) and settlements, and any unanticipated impact of the year 2000,
including delays or changes in costs of year 2000 compliance, or the failure
of major suppliers, customers and others with whom the Registrants do
business to resolve their own year 2000 issues on a timely basis.
All such factors are difficult to predict, contain uncertainties which may
materially affect actual results, and are beyond the control of the
Registrants.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ESI TRACTEBEL FUNDING CORP.
BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
<S> <C> <C>
ASSETS
Current assets:
Cash ........................................................................... $ 1 $ 1
Current portion of notes receivable from the Partnerships ...................... 22,537 21,563
Interest receivable from the Partnerships ...................................... 11,218 -
Total current assets ......................................................... 33,756 21,564
Notes receivable from the Partnerships ........................................... 456,968 468,724
TOTAL ASSETS ..................................................................... $ 490,724 $ 490,288
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of securities payable .......................................... $ 22,537 $ 21,563
Accrued interest ............................................................... 11,218 -
Total current liabilities .................................................... 33,755 21,563
Securities payable ............................................................... 456,968 468,724
Stockholders' equity:
Common stock, no par value, 10,000 shares authorized, issued and outstanding ... 1 1
COMMITMENTS AND CONTINGENCIES
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....................................... $ 490,724 $ 490,288
</table
The accompanying notes are an integral part of these financial statements.
ESI TRACTEBEL FUNDING CORP.
STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Interest income .............................................. $ 11,218 $ 11,699 $ 34,109 $ 35,604
Interest expense ............................................. (11,218) (11,699) (34,109) (35,604)
NET INCOME ................................................... $ - $ - $ - $ -
</table
The accompanying notes are an integral part of these financial statements.
ESI TRACTEBEL FUNDING CORP.
STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................ $ - $ -
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment received from the Partnerships.................................... 10,782 12,038
Principal payment on debt .......................................................... (10,782) (12,038)
Net cash provided by financing activities ........................................ - -
Net increase in cash ................................................................. - -
Cash at beginning of period .......................................................... 1 1
Cash at end of period ................................................................ $ 1 $ 1
Supplemental disclosures of cash flow information:
Cash paid for interest ............................................................. $ 22,891 $ 23,905
</table
The accompanying notes are an integral part of these financial statements.
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
December 31,
September 30, 1997
1998 (Prior Basis)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ...................................................... $ 45,642 $ 61,203
Accounts receivable ............................................................ 53,194 34,036
Due from related party ......................................................... - 114
Fuel inventories ............................................................... 6,562 4,752
Prepaid expenses and other current assets....................................... 510 3,052
Total current assets ......................................................... 105,908 103,157
Non-current assets:
Cogeneration facilities and carbon dioxide facility (net of accumulated
depreciation of $15,548 and $153,963, respectively) .......................... 496,538 349,365
Power purchase contracts (net of accumulated amortization of $35,970) .......... 852,786 -
Unamortized financing costs .................................................... - 15,674
Other assets ................................................................... 119 4,193
Restricted cash ................................................................ - 69,156
Total non-current assets ..................................................... 1,349,443 438,388
TOTAL ASSETS ..................................................................... $1,455,351 $ 541,545
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of notes payable - the Funding Corp. ........................... $ 22,537 $ 21,563
Accounts payable ............................................................... 15,300 15,450
Accrued interest payable ....................................................... 11,382 -
Due to related parties ......................................................... 3,172 71
Other accrued expenses ......................................................... 8,015 2,358
Total current liabilities .................................................... 60,406 39,442
Non-current liabilities:
Deferred credit - O&M and fuel contracts ....................................... 334,036 -
Notes payable - the Funding Corp. .............................................. 456,968 468,724
Amounts due utilities for energy bank balances ................................. 173,021 230,565
Total non-current liabilities ................................................ 964,025 699,289
Partners' equity (deficit):
General partner ................................................................ 4,309 (4,714)
Limited partners ............................................................... 426,611 (192,472)
Total partners' equity (deficit) ............................................. 430,920 (197,186)
COMMITMENTS AND CONTINGENCIES
TOTAL LIABILITIES AND PARTNERS' EQUITY ........................................... $1,455,351 $ 541,545
</table
The accompanying notes are an integral part of these financial statements.
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
Period from
Period from January 1,
Three Months Ended January 14, 1998 to
September 30, 1998 to January 13,
1997 September 30, 1998 1997
1998 (Prior Basis) 1998 (Prior Basis) (Prior Basis)
<S> <C> <C> <C> <C> <C>
REVENUES .................................. $83,916 $83,377 $225,113 $13,109 $237,805
COSTS AND EXPENSES:
Fuel .................................... 32,335 37,500 89,489 5,774 114,982
Operations and maintenance .............. 5,697 6,912 14,325 974 19,668
Depreciation and amortization ........... 17,997 6,254 51,529 894 18,757
General and administrative .............. 1,790 3,935 5,879 538 10,755
Total costs and expenses .............. 57,819 54,601 161,222 8,180 164,162
OPERATING INCOME .......................... 26,097 28,776 63,891 4,929 73,643
OTHER EXPENSE (INCOME):
Interest expense ........................ 14,286 16,718 43,950 2,422 50,511
Interest income ......................... (624) (2,512) (2,134) (402) (7,104)
Total other expense - net ............. 13,662 14,206 41,816 2,020 43,407
NET INCOME ................................ $ 12,435 $ 14,570 $ 22,075 $ 2,909 $ 30,236
</table
The accompanying notes are an integral part of these financial statements.
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
Period from
Period from January 1,
January 14, 1998 to
1998 to January 13,
September 30, 1998 1997
1998 (Prior Basis) (Prior Basis)
<S> <C> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES .......................... $ 60,591 $ 1,432 $ 70,393
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................................. - - (436)
Net cash used in investing activities ............................ - - (436)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment on notes ....................................... (10,782) - (12,038)
Release of restricted cash collateral ............................ 69,156 - -
Distributions to partners ........................................ (135,958) - (32,636)
Net cash used in financing activities ............................ (77,584) - (44,674)
Net increase (decrease) in cash and cash equivalents ............... (16,993) 1,432 25,283
Cash and cash equivalents at beginning of period ................... 62,635 61,203 49,861
Cash and cash equivalents at end of period ......................... $ 45,642 $ 62,635 $ 75,144
Supplemental disclosures of cash flow information:
Cash paid for interest ........................................... $ 23,315 $ - $ 25,052
Supplemental schedule of noncash investing and financing activities:
See Note 1 and Note 2 - Basis of Presentation concerning new
basis of accounting subsequent to January 13, 1998
</table
The accompanying notes are an integral part of these financial statements.
ESI TRACTEBEL FUNDING CORP.,
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
The accompanying financial statements should be read in conjunction with the
1997 Form 10-K (as amended) for the Funding Corp. and the Partnerships. In
the opinion of management of the Funding Corp. and Partnerships, all
adjustments (consisting of normal recurring accruals) considered necessary
for fair financial statement presentation have been made. Certain amounts
included in the prior period's financial statements have been reclassified to
conform to the current year's presentation. The results of operations for an
interim period may not give a true indication of results for the year.
1. The Acquisition
On January 14, 1998, pursuant to a purchase agreement dated November 21, 1997,
the Partnerships were acquired by NE LP (a Delaware limited partnership) and
Northeast Energy, LLC (NE LLC) (a Delaware limited liability company)
(collectively, the Partners). The Partners purchased their interests from
Intercontinental Energy Corporation and from certain individuals. The Partners
are owned by direct subsidiaries of ESI Energy, Inc. (ESI Energy) and Tractebel
Power, Inc. (Tractebel Power). ESI Energy is wholly-owned by FPL Energy, Inc.
which is an indirect wholly-owned subsidiary of FPL Group, Inc., a New York
Stock Exchange company. Tractebel Power is a direct wholly-owned subsidiary of
Tractebel, Inc. which is a direct wholly-owned subsidiary of Tractebel, S.A., a
Belgian energy and environmental services business. Each of the Partnerships
was formed in 1986 to develop, construct, own, operate and manage a
300 megawatt gas-fired combined-cycle cogeneration facility.
The Funding Corp. is a Delaware special purpose funding corporation established
in 1994 solely for the purpose of issuing debt securities in connection with
the financing of the Partnerships. On January 14, 1998, the Funding Corp. was
acquired by a subsidiary of ESI Energy, a subsidiary of Tractebel Power and
Broad Street Contract Services, Inc. (Broad Street). Broad Street has no
economic interest in the Partnerships' distributions and participates for the
purpose of providing an independent director. The entities own a 37.5%, 37.5%
and 25.0% interest in the Funding Corp., respectively. Concurrent with and
related to the acquisition of the Funding Corp. and the Partnerships, the
Funding Corp. changed its name from IEC Funding Corp. to its current name.
The acquisition of the Partnerships was accounted for using the purchase method
of accounting and is subject to the provisions of the Securities and Exchange
Commission's Staff Accounting Bulletin No. 54 and the rules of pushdown
accounting, which gave rise to the new basis of accounting. The net amount paid
to acquire the interests in the Partnerships of approximately $545 million
including approximately $10 million of acquisition costs, was allocated to the
assets and liabilities acquired based on their fair values.
2. Summary of Significant Accounting Policies
Basis of Presentation - The Partnerships' combined balance sheet as of
September 30, 1998 and the combined statements of operations and cash flows
for the period from January 14, 1998 to September 30, 1998 and for the three
months ended September 30, 1998 are reported under the new basis of
accounting described above. The Partnerships' combined balance sheet as of
December 31, 1997 and the combined statements of operations and cash flows
for the period from January 1, 1998 to January 13, 1998 and for the three and
nine months ended September 30, 1997 represent historical financial data of
the Partnerships prior to the acquisition.
The following is a summary of the Partnerships' assets acquired and liabilities
assumed in the acquisition based on a preliminary allocation of the purchase
price (thousands of dollars):
Assets:
Current assets ......................................... $114,286
Restricted cash ........................................ $ 69,156
Cogeneration facilities and carbon dioxide facility .... $512,059
Power purchase contracts ............................... $888,756
Other assets ........................................... $ 127
Liabilities:
Current liabilities .................................... $ 47,031
Operations and maintenance (O&M) contracts ............. $ 18,749
Fuel contracts ......................................... $333,544
Energy bank balances ................................... $171,530
Notes payable .......................................... $468,724
Carrying values of current assets, restricted cash and current liabilities
were considered to closely approximate fair value and were not adjusted.
Power purchase contracts were assigned a value based on the estimated amount
to be received over the contract period in excess of an independent
appraiser's assessment of market rates for power, discounted to the date of
acquisition. The cogeneration facilities and carbon dioxide facility were
initially assigned value based on an assessment of current replacement cost
for similar capacity, without the acquired power purchase agreements. In
accordance with Accounting Principles Board Opinion No. 16, the values
assigned to these long-lived assets were reduced by the net excess of the
fair values of all assets acquired over the purchase price. O&M and fuel
contract obligations were determined based on expected cash flows during the
contract periods compared to estimated cash flows for similar services if
contracted for currently, discounted to the date of acquisition. Notes
payable include the previously existing debt of the Partnerships that was
considered to approximate market value. Energy bank balances were assigned a
value representing the estimated present value of future payments to
utilities in connection with certain existing power purchase agreements.
The following unaudited pro forma information has been prepared assuming that
the acquisition had occurred at the beginning of the periods presented
(thousands of dollars):
</TABLE>
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1998 1997
<S> <C> <C>
Revenues ...................................................................... $238,222 $237,805
Operating income .............................................................. $ 68,169 $ 62,019
Net income .................................................................... $ 24,146 $ 14,687
</table
Cogeneration Facilities, Carbon Dioxide Facility and Other Assets - Effective
January 14, 1998, all facilities were revalued as a result of applying the
purchase method of accounting mentioned above. The facilities and other fixed
assets are depreciated using the straight line method over the estimated useful
life of 34 years.
Power Purchase/O&M/Fuel Contracts - Effective January 14, 1998, power purchase
contracts, O&M contracts and fuel contracts which were determined to be in
excess of prevailing rates for similar contracts were adjusted as a result of
applying the purchase method of accounting mentioned above. These contracts are
amortized over the contract periods of the power purchase contracts of 14 to 24
years, the remaining terms of the O&M contracts of 4 years and the remaining
terms of the fuel contracts of 16 years.
Major Maintenance - Effective January 14, 1998, maintenance expenses are
accrued for certain identified major maintenance and repair items related to
the Partnerships' facilities. The expenses are accrued ratably over each major
maintenance cycle. The amounts accrued relate to maintenance costs required for
the equipment to operate over its depreciable life.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. Commitments and Contingencies
Subsequent to the acquisition on January 14, 1998, certain credit
arrangements were terminated and replaced with new letters of credit and a
guaranty to satisfy requirements in certain power purchase agreements.
Specifically, new energy bank letters of credit were issued in face amounts
of $12,656,000 and $54,000,000. The $12,656,000 letter of credit expires on
December 31, 1998 and can be drawn upon on one occasion in the event that a
certain power purchase agreement has terminated at a time when there was a
positive energy bank balance existing in favor of the power purchaser. The
$54,000,000 letter of credit expires on December 31, 1998 and can be drawn
upon in multiple drawings in the event that a certain power purchase
agreement has terminated at the time when there was a positive energy bank
balance existing in favor of the power purchaser. A guaranty was made by a
subsidiary of FPL Group, Inc. in favor of the Partnerships' trustee. The
guarantor unconditionally and irrevocably guarantees the payment of an amount
equal to 50% of the debt service reserve requirement with respect to the
Funding Corp.'s securities. The guaranty expires on December 31, 1998 but is
automatically extended for successive one-year periods unless the guarantor
gives notice that it will not renew. Once the new credit arrangements were in
place, cash of approximately $69.2 million (plus approximately $2.5 million
in accrued interest) was released and distributed to the Partners.
Additionally, new letters of credit were issued in substitution for cash on
deposit in Partnership trust accounts and approximately $33.2 million in cash
was released and distributed to the Partners.
Operations and Maintenance of the Cogeneration Facilities - In 1989, the
Partnerships entered into two separate ten year O&M agreements with an O&M
provider for an aggregate annual consideration of approximately $11,100,000,
subject to
changes in specified indices. Under these agreements, the Partnerships are
required to pay the O&M provider a bonus payable annually over the term of
the agreements based on operating performance. The Partnerships incurred
$4.9 million and $12.4 million for O&M and bonus expenses for the three and
nine month periods ended September 30, 1998, respectively. On November 15,
1997, the O&M provider's parent announced that it intended to sell certain of
its industrial businesses, including the business of the O&M provider. Each
of the Partnerships is a party to the New O&M Agreements mentioned above and
do not anticipate a material adverse effect related to this potential change
in service provider.
Operating Lease - NEA entered into a 26 year operating lease in 1986 for a
parcel of land. The lease may be extended for another 25 years at the option
of NEA. Lease payments under the operating lease are as follows:
Year ending December 31:
1998 .................................................. $ 189,000
1999 .................................................. $ 201,000
2000 .................................................. $ 213,000
2001 .................................................. $ 225,000
2002 .................................................. $ 237,000
Thereafter ............................................ $2,760,000
Lease expense under this agreement for the three and nine month periods ended
September 30, 1998 was $61,000 and $165,000, respectively.
4. Related Party Information
Administrative Services Agreement - NE LP and an entity related to ESI Energy
have entered into an Administrative Services Agreement (the Agreement) that
provides for management and administrative services to the Partnerships. The
Agreement expires in 2018, provides for fees of a minimum of $600,000 per
year and reimburses costs and expenses of performing services.
Operations and Maintenance Agreements - NE LP and an entity related to ESI
Energy have entered into operations and maintenance agreements (the New O&M
Agreements) that provide for the operation and maintenance of the
Partnerships on the day following the expiration or early termination of the
current O&M provider. The New O&M Agreements extend for an initial term until
January 14, 2016, subject to extension by mutual agreement of the parties
before six months preceding expiration. The New O&M Agreements reimburse
costs and expenses of performing services and provide for fees of $750,000 per
year, subject to certain adjustments, for each Partnership.
Fuel Management Agreements - NE LP and an entity related to ESI Energy have
entered into Fuel Management Agreements (the Fuel Agreements) that provide
for the management of all natural gas or fuel oil, transportation and storage
agreements, and the location and purchase of any additional required natural
gas or fuel oil for the Partnerships. The Fuel Agreements expire in 2023. The
Fuel Agreements provide for fees of a minimum of $450,000 per year for each
Partnership and reimburse all costs and expenses of performing services.
ESI TRACTEBEL ACQUISITION CORP.
BALANCE SHEET
(Thousands of Dollars)
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
September 30,
1998
<S> <C>
ASSETS
Current assets:
Interest receivable from NE LP .................................................................. $ 4,395
Due from NE LP .................................................................................... 152
Note receivable from NE LP ........................................................................ 220,000
TOTAL ASSETS ...................................................................................... $224,547
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Income taxes payable ............................................................................ $ 3
Accrued interest ................................................................................ 4,395
Total current liabilities ..................................................................... 4,398
Deferred credit - interest rate hedge ............................................................. 143
Securities payable ................................................................................ 220,000
Stockholders' equity:
Common stock, $.01 par value, 100 shares authorized, 20 shares issued ........................... -
Subscriptions receivable ........................................................................ -
Retained earnings ............................................................................... 6
COMMITMENTS AND CONTINGENCIES
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................................................ $224,547
</table
The accompanying notes are an integral part of these financial statements.
ESI TRACTEBEL ACQUISITION CORP.
STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
Period
Three From
Months January 12,
Ended 1998 to
September 30, September 30,
1998 1998
<S> <C> <C>
Interest income .................................................................... $ 4,395 $ 10,791
Interest expense ................................................................... (4,391) (10,782)
Income before income taxes ......................................................... 4 9
Income tax expense ................................................................. (1) (3)
NET INCOME ......................................................................... $ 3 $ 6
</table
The accompanying notes are an integral part of these financial statements.
ESI TRACTEBEL ACQUISITION CORP.
STATEMENT OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
Period
From
January 12,
1998 to
September 30,
1998
<S> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES .......................................................... $ -
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan to NE LP .................................................................................... (215,202)
Net cash used in investing activities .......................................................... (215,202)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt securities ...................................................................... 215,050
Proceeds from interest rate hedge ................................................................ 152
Net cash provided by financing activities ...................................................... 215,202
Net increase in cash ............................................................................... -
Cash at beginning of period ........................................................................ -
Cash at end of period .............................................................................. $ -
Supplemental disclosure of cash flow information:
Cash paid for interest ........................................................................... $ 6,396
</table
The accompanying notes are an integral part of these financial statements.
ESI TRACTEBEL ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
In the opinion of management of the Acquisition Corp., all adjustments
(consisting of normal recurring accruals) considered necessary for fair
financial statement presentation have been made. The results of operations
for an interim period may not give a true indication of results for the year.
1. Nature of Business
The Acquisition Corp., a Delaware corporation, was formed on January 12, 1998
as a special purpose funding corporation for the purpose of issuing the
securities described in Note 3. The Acquisition Corp.'s common stock is
jointly owned by ESI Northeast Energy Acquisition Funding, Inc., a wholly-
owned subsidiary of ESI Energy and Tractebel Power. The Acquisition Corp.
acts as agent of NE LP with respect to the securities and holds itself out as
agent of NE LP in all dealings with third parties relating to the securities.
NE LP, a Delaware limited partnership, was formed on November 21, 1997 for
the purpose of acquiring ownership interests in electric power generation
stations and is jointly owned by subsidiaries of ESI Energy and Tractebel
Power. ESI Energy is wholly-owned by FPL Energy, Inc. which is an indirect
wholly-owned subsidiary of FPL Group, Inc., a New York Stock Exchange
company. Tractebel Power is a direct wholly-owned subsidiary of Tractebel,
Inc. which is a direct wholly-owned subsidiary of Tractebel, S.A., a Belgian
energy and environmental services business. NE LP also formed a wholly-owned
entity, NE LLC to assist in such acquisitions.
On January 14, 1998, the Partners purchased all of the interests in the
Partnerships.
2. Summary of Significant Accounting Policies
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. The Securities
On February 12, 1998, the Acquisition Corp. issued $220,000,000 of 7.99%
Secured Bonds Due 2011 to qualified institutional buyers as defined in
Rule 144A of the Securities Act of 1933 (Rule 144A). Borrowings outstanding
at September 30, 1998 were $220,000,000.
During 1998, the Acquisition Corp. filed a Registration Statement on Form S-4
with the Securities and Exchange Commission for purposes of effecting a
public exchange offer whereby the securities (Old Securities) described above
were exchanged for a new issue of securities which are registered under the
Securities Act of 1933 (the New Securities, and together with the Old
Securities, the Securities). The New Securities have substantially identical
terms as the Old Securities.
Interest on the Securities is payable semiannually on each June 30 and
December 30. Principal repayments are made annually commencing on June 30,
2002 and are in amounts stipulated in the trust indenture. Future principal
payments are as follows:
Year ending December 31:
2002 .................................................. $ 8,800,000
Thereafter ............................................ $211,200,000
The Securities are subject to optional redemption after June 30, 2008 at the
redemption prices set forth in the trust indenture and are subject to
extraordinary mandatory redemption at a redemption price of 100% of the
principal amount thereof in certain limited circumstances as defined in the
trust indenture.
The proceeds from the sale of the Old Securities were loaned to NE LP,
evidenced by a promissory note (the Note) with substantially identical terms
as the Old Securities, for the purpose of reimbursing certain of the partners
of NE LP for a portion of the original $545 million equity contribution that
was used to finance the cost of the acquisitions. The Securities are
unconditionally guaranteed by NE LP.
The Securities are payable solely from payments to be made by NE LP under the
Note and bond guaranty. NE LP's obligations to make payments under the Note
are nonrecourse to the direct and indirect owners of NE LP (including ESI
Energy and Tractebel Power). Payments with respect to the Note and,
therefore, in respect of the Securities will be effectively subordinated to
payment of all indebtedness and other liabilities and commitments of the
Partnerships, including the guarantee by the Partnerships of its indebtedness.
Repayment of the Securities is guaranteed by all interest in the Partnerships.
The Securities will rank senior to all subordinated indebtedness and rank
evenly with all senior indebtedness that the Acquisition Corp. incurs in the
future.
4. Financial Instruments
In January 1998, the Acquisition Corp. entered into a fixed interest rate
financial instrument to hedge its exposure to fluctuations in the interest
rate associated with the placement of the Old Securities. The financial
instrument was settled on February 17, 1998. The gain resulting from the
hedge was $152,000 and is being amortized into income using the effective
interest method.
The Acquisition Corp. controls the credit risk arising from these instruments
through credit approvals, limits and monitoring. The Acquisition Corp. does
not normally require collateral or other security to support financial
instruments with credit risks.
NORTHEAST ENERGY, LP
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................................... $ 48,295 -
Accounts receivable .......................................................... 53,194 -
Fuel inventories ............................................................. 6,562 -
Prepaid expenses and other current assets..................................... 510 -
Total current assets ....................................................... 108,561 -
Non-current assets:
Deferred debt issuance costs - net ........................................... 6,290 -
Cogeneration facilities and carbon dioxide facility (net of accumulated
depreciation of $15,548) ................................................... 496,538 -
Power purchase contracts (net of accumulated amortization of $35,970) ........ 852,786 -
Other assets ................................................................. 119 -
Total non-current assets ................................................... 1,355,733 -
TOTAL ASSETS ................................................................... $1,464,294 -
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Current portion of notes payable - the Funding Corp. ......................... $ 22,537 -
Accounts payable ............................................................. 15,300 -
Accrued interest payable ..................................................... 15,777
Due to related parties ....................................................... 3,277 -
Other accrued expenses ....................................................... 8,015 -
Total current liabilities .................................................. 64,906 -
Non-current liabilities:
Deferred credit - O&M and fuel contracts ..................................... 334,036 -
Notes payable - the Funding Corp. ............................................ 456,968 -
Note payable - the Acquisition Corp. ......................................... 220,000 -
Amounts due utilities for energy bank balances ............................... 173,021 -
Total non-current liabilities .............................................. 1,184,025 -
Partners' equity:
General partners ............................................................. 4,307 -
Limited partners ............................................................. 211,056 -
Total partners' equity ..................................................... 215,363 -
COMMITMENTS AND CONTINGENCIES
TOTAL LIABILITIES AND PARTNERS' EQUITY ......................................... $1,464,294 -
</table
The accompanying notes are an integral part of these consolidated financial
statements.
NORTHEAST ENERGY, LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
Three Nine
Months Months
Ended Ended
September 30, September 30,
1998 1998
<S> <C> <C>
REVENUES ......................................................................... $ 83,916 $225,113
COSTS AND EXPENSES:
Fuel ........................................................................... 32,335 89,489
Operations and maintenance ..................................................... 5,697 14,325
Depreciation and amortization .................................................. 17,997 51,529
General and administrative ..................................................... 1,790 6,151
Total costs and expenses ..................................................... 57,819 161,494
OPERATING INCOME ................................................................. 26,097 63,619
OTHER EXPENSE (INCOME):
Amortization of debt issue costs ............................................... 148 373
Interest expense ............................................................... 18,681 54,741
Interest income ................................................................ (687) (2,196)
Total other expense - net .................................................... 18,142 52,918
NET INCOME........................................................................ $ 7,955 $ 10,701
</table
The accompanying notes are an integral part of these consolidated financial
statements.
NORTHEAST ENERGY, LP
CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
Nine
Months
Ended
September 30,
1998
<S> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES ........................................................ $ 52,220
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition purchase price, net of $62,635 cash acquired ....................................... (482,167)
Net cash used in investing activities ........................................................ (482,167)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions from partners ............................................................ 535,412
Principal payment on the Funding Corp. notes ................................................... (10,782)
Release of restricted cash collateral .......................................................... 69,156
Proceeds from loan by the Acquisition Corp...................................................... 215,202
Distributions to partners ...................................................................... (330,746)
Net cash provided by financing activities .................................................... 478,242
Net increase in cash and cash equivalents ........................................................ 48,295
Cash and cash equivalents at beginning of period ................................................. -
Cash and cash equivalents at end of period ....................................................... $ 48,295
Supplemental disclosure of cash flow information:
Cash paid for interest ......................................................................... $ 29,711
</table
The accompanying notes are an integral part of these consolidated financial
statements.
NORTHEAST ENERGY, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In the opinion of management of NE LP, all adjustments (consisting of normal
recurring accruals) considered necessary for fair financial statement
presentation have been made. The results of operations for an interim period
may not give a true indication of results for the year.
1. Nature of Business
NE LP, a Delaware limited partnership, was formed on November 21, 1997 for
the purpose of acquiring ownership interests in electric power generation
stations and is jointly owned by subsidiaries of ESI Energy and Tractebel
Power. ESI Energy is wholly-owned by FPL Energy, Inc. which is an indirect
wholly-owned subsidiary of FPL Group, Inc., a New York Stock Exchange
company. Tractebel Power is a direct wholly-owned subsidiary of Tractebel,
Inc. which is a direct wholly-owned subsidiary of Tractebel, S.A., a Belgian
energy and environmental services business. NE LP also formed a wholly-owned
entity, NE LLC to assist in such acquisitions. NE LP had no financial
activity prior to December 31, 1997.
On January 14, 1998, the Partners purchased all of the interests in the
Partnerships. NE LP holds a one percent (1%) general partner and ninety-eight
percent (98%) limited partner interest in the Partnerships; NE LLC holds the
remaining one percent (1%) limited partner interest. See Note 2 -
Acquisitions for additional information relating to the acquisitions.
The Partnerships were formed in 1986 to develop, construct, own, operate and
manage two separate 300 megawatt (MW) natural gas-fired combined-cycle
cogeneration facilities. NEA's facility is located in Bellingham,
Massachusetts and NJEA's facility is located in Sayreville, New Jersey. NEA
commenced commercial operation in September 1991 and NJEA commenced
commercial operation in August 1991. The Partnerships operate in the
independent power industry and have been granted permission by the Federal
Energy Regulatory Commission to operate as qualifying facilities defined in
the Public Utility Regulatory Policies Act of 1978, as amended and as defined
in federal regulations.
In connection with the acquisition of the Partnerships' interests, an
existing special purpose funding corporation was acquired and its name
changed from IEC Funding Corp. to ESI Tractebel Funding Corp. This entity
previously issued debt which was registered with the Securities and Exchange
Commission in an exchange offer. Repayment of this debt is secured by the
assets of the Partnerships.
Additionally, as a means of funding portions of the purchase price of the
acquisition of the Partnerships, the Acquisition Corp. was formed. On
February 12, 1998 the Acquisition Corp. issued the Old Securities and loaned
the proceeds to NE LP. The proceeds were then distributed to ESI Energy and
Tractebel Power. Repayment of the Securities is expected from distributions
from the Partnerships and is guaranteed by all interests in the Partnerships.
See Note 4 for additional information.
The Partners share profits and losses and have interests in assets and
liabilities and cash flows in proportion to their tax basis capital accounts.
Distributions to the Partners may be made only after all funding requirements
of the Partnerships have been met, as described in the trust indenture.
2. Summary of Significant Accounting Policies
Basis of Presentation - The accompanying consolidated financial statements
include the accounts of the Partnerships subsequent to the acquisitions, as
they are indirectly wholly-owned by NE LP. All material intercompany
transactions have been eliminated in consolidation.
Acquisitions - On January 14, 1998, the Partners acquired all of the
interests in the Partnerships for approximately $545 million, including
approximately $10 million of acquisition costs (the Acquisitions). The
Acquisitions were accounted for using the purchase method of accounting. The
purchase price has been allocated to the assets and liabilities acquired
based on their fair values.
The following is a summary of the Partnerships' assets acquired and
liabilities assumed in the Acquisitions based on a preliminary allocation of
the purchase price (thousands of dollars):
Assets:
Current assets ........................................ $114,286
Restricted cash ....................................... $ 69,156
Cogeneration facilities and carbon dioxide facility.... $512,059
Power purchase contracts .............................. $888,756
Other assets .......................................... $ 127
Liabilities:
Current liabilities ................................... $ 47,031
Operations and maintenance contracts .................. $ 18,749
Fuel contracts ........................................ $333,544
Energy bank balances .................................. $171,530
Notes payable ......................................... $468,724
Carrying values of current assets, restricted cash and current liabilities
were considered to closely approximate fair value and were not adjusted.
Power purchase contracts were assigned a value based on the estimated amount
to be received over the contract period in excess of an independent
appraiser's assessment of market rates for power, discounted to the date of
acquisition. The cogeneration facilities and carbon dioxide facility were
initially assigned value based on an assessment of current replacement cost
for similar capacity, without the acquired power purchase agreements. In
accordance with Accounting Principles Board Opinion No. 16, the values
assigned to these long-lived assets were reduced by the net excess of the
fair values of all assets acquired over the purchase price. O&M and fuel
contract obligations were determined based on expected cash flows during
contract periods compared to estimated cash flows for similar services if
contracted for currently, discounted to the date of acquisition. Notes
payable include the previously existing debt of the Partnerships that was
considered to approximate market value. Energy bank balances were assigned a
value representing the estimated present value of future payments to
utilities in connection with certain existing power purchase agreements.
The following unaudited pro forma information has been prepared assuming that
the Acquisitions and the issuance of the Old Securities described in Note 1 had
occurred at the beginning of the period presented (thousands of dollars):
Nine
Months
Ended
September 30,
1998
Revenues .............................................. $238,222
Operating income ...................................... $ 67,896
Net income ............................................ $ 10,235
Cash and Cash Equivalents - Investments purchased with an original maturity
of three months or less are considered cash equivalents. Excess cash is
invested in high-grade money market accounts and commercial paper and is
subject to minimal credit and market risk. At September 30, 1998, the
recorded amount of cash approximates its fair value.
Accounts Receivable and Revenue - Accounts receivable primarily consist of
receivables from three Massachusetts utilities and one New Jersey utility for
electricity delivered and sold under six power purchase agreements. Prices
are based on initial floor prices per kilowatt hour (kwh), subject to
adjustment based on actual volumes of electricity purchased, escalation
factors and other conditions. Revenue is recognized in accordance with the
Emerging Issues Task Force Issue No. 91-6, Revenue Recognition of Long-Term
Power Sales Contracts. Revenue is recognized based on power delivered at
rates stipulated in power purchase agreements, except that revenue is
deferred to the extent that stipulated rates are in excess of amounts, either
scheduled or specified, in the agreements to the extent the Partnerships have
an obligation to repay such excess. The amount deferred is reflected as
amounts due utilities for energy bank balances on the consolidated balance
sheet. Revenue from steam sales is recognized upon delivery.
Cogeneration Facilities, Carbon Dioxide Facility and Other Assets - Effective
January 14, 1998, all facilities were revalued as a result of applying the
purchase method of accounting mentioned above. The facilities and other fixed
assets are depreciated using the straight-line method over the estimated
useful life of 34 years.
Major Maintenance - Effective January 14, 1998, maintenance expenses are
accrued for certain identified major maintenance and repair items related to
the Partnerships' facilities. The expenses are accrued ratably over each
major maintenance cycle. The amounts accrued relate to maintenance costs
required for the equipment to operate over its depreciable life.
Inventories - Inventories consist of natural gas and fuel oil and are stated
at the lower of cost, determined on a first in, first out (FIFO) basis, or
market.
Power Purchase Contracts - Effective January 14, 1998, power purchase
contracts which were determined to be in excess of prevailing rates for
similar contracts were adjusted as a result of applying the purchase method
of accounting mentioned above. These contracts are being amortized over
contract periods, ranging from 14 to 24 years, on a straight-line basis or
matched to scheduled fixed-price increases under the power purchase
agreements, as applicable.
O&M Contracts - Effective January 14, 1998, O&M contracts which were
determined to be in excess of prevailing rates for similar contracts were
adjusted as a result of applying the purchase method of accounting mentioned
above. The O&M contracts are being amortized on a straight-line basis over
the remaining terms of the contracts, 4 years.
Fuel Contracts - Effective January 14, 1998, fuel contracts which were
determined to be in excess of prevailing rates for similar contracts were
adjusted as a result of applying the purchase method of accounting mentioned
above. The fuel contracts are being amortized on a straight-line basis over
the remaining terms of the contracts, 16 years.
Amounts Due Utilities for Energy Bank Balances - Effective January 14, 1998,
amounts due utilities for energy bank balances were adjusted to the present
value of estimated future payments.
Interest Rate Swaps - Interest rate swaps that do not qualify for hedge
accounting are recorded at fair value, with changes in the fair value
recognized currently in income. See Note 4 and Note 6 for further disclosure
regarding interest rate swap agreements.
Natural Gas Hedging Instrument - Premiums paid for natural gas call options
are deferred and recognized in income in conjunction with the underlying
natural gas purchases. Gains and losses on natural gas purchase swap
agreements are recognized as adjustments to fuel costs at monthly settlement
dates. Purchases of natural gas under forward purchase agreements are
accounted for as fuel costs at their contract price at delivery. The net gain
included in fuel costs resulting from the gas purchase options, swap
agreements and forward purchases was $996,000 for the three month period and
$2.2 million for the nine month period ended September 30, 1998. See Note 6
for further disclosure regarding natural gas hedging instruments.
Deferred Debt Issuance Costs - Deferred debt issuance costs are being
amortized over the approximate 14-year term of the note payable using the
interest method.
Income Taxes - Partnerships are not taxable entities for Federal and state
income tax purposes. As such, no provision has been made for income taxes
since such taxes, if any, are the responsibilities of the individual
partners.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. Cogeneration Facilities, Power Purchase Agreements and Carbon Dioxide
Facility
Cogeneration Facilities - The cogeneration facilities have maximum output
capacities of any combination of electricity and steam equivalent to
approximately 600 MW in the aggregate.
Power Purchase Agreements - In 1986, NEA entered into five power purchase
agreements with three Massachusetts utilities to sell approximately 290 MW at
initial floor prices per kwh subject to adjustment based on actual volumes
purchased, escalation factors, and other conditions. Performance under
certain of these agreements is secured by a second mortgage on the NEA
facility. In 1987, NJEA entered into an agreement with a New Jersey utility
to sell 250 MW at an initial fixed price per kwh subject to adjustments, as
defined in the agreement. These power purchase agreements have initial terms
ranging from 20 to 30 years. The majority of the Partnerships' power sales to
utilities are generated through these arrangements. As such, the Partnerships
are directly affected by changes in the power generation industry.
Substantially all of the Partnerships' accounts receivable are with utilities
located in the Northeast portion of the United States. The Partnerships do
not require collateral or other security to support their receivables.
However, management does not believe significant credit risk exists at
September 30, 1998. During the nine month period ended September 30, 1998,
revenue from two different utilities accounted for approximately 49.4% and
37.9% of power sales to utilities. The NEA power purchase agreements are
secured by the NEA second mortgage.
On November 25, 1997, the Massachusetts legislature passed a comprehensive
electric deregulation bill to establish a comprehensive framework for the
restructuring of the electric utility industry. Industry efforts are also
underway in New Jersey. While the Partnerships do not expect electric utility
industry restructuring to result in material adverse changes to the
Partnerships' power purchase agreements, the impact of electric utility
industry restructuring on the companies that purchase power from the
Partnerships is uncertain.
Energy Bank Balances - Certain agreements require the establishment of energy
banks to record cumulative payments made by the utilities in excess of
avoided cost rates scheduled or specified in such agreements. The energy
banks bear interest at various rates specified in the agreements. Remaining
amounts recorded in the energy banks will be required to be repaid to the
extent that, in later periods, power purchase agreement avoided costs are
above the contract rate. The balances of the remaining energy banks are
partially secured by letters of credit (see Note 7 - Energy Bank and Loan
Collateral).
Steam Sales Agreements and Carbon Dioxide Facility - In order for the
Partnerships' facilities to maintain qualifying facility status, the
facilities are required to generate five percent of total energy output as
steam for sale to unrelated third parties. In 1990, NEA entered into an
amended and restated NEA steam sales agreement with a processor and seller of
carbon dioxide. The amended and restated NEA steam sales agreement extends
for the same terms as the carbon dioxide facility's lease, with automatic
extension for any renewal period under the carbon dioxide facility's lease.
Pursuant to the steam sales agreement, NEA sells all the steam generated by
the NEA facility at a price that fluctuates based on changes in the price of
a specified grade of fuel oil.
In conjunction with this contract, NEA constructed the carbon dioxide
facility and, in 1989, entered into a 16-year agreement to lease the facility
to the steam user. Base rent under the lease is $100,000 per month, adjusted
by the operating results of the facility as outlined in the lease agreement.
Additionally, NEA pays the steam user $100,000 annually for administrative
services rendered related to the operation of the carbon dioxide facility.
In 1989, NJEA entered into a 20-year steam sales contract with a steam user
adjacent to the NJEA facility. Under this agreement, NJEA sells a specified
maximum quantity of steam at a floor price that can increase based on changes
in prices of coal. This agreement automatically renews for two consecutive
five-year terms unless either party gives notice not to renew two years
before the expiration of each of the prior terms.
Fuel Supply, Transportation and Storage Agreements - Natural gas is provided
to the NEA and NJEA facilities primarily under long-term contracts for
supply, transportation and storage. The remaining fuel requirements are
provided under short-term spot arrangements. The long-term natural gas supply
is provided under contracts with ProGas Limited (ProGas) and Public Service
Electric and Gas Company (PSE&G). Various pipeline companies provide
transportation of the natural gas. Gas storage agreements provide contractual
arrangements for the storage of limited volumes of natural gas with third
parties for future delivery to the Partnerships.
The ProGas contracts commenced in 1991, and the initial 15-year terms were
extended an additional seven years effective in 1994. The maximum total
volumes of gas to be delivered under the ProGas contracts are approximately
48,800 and 22,000 millions of British thermal units (MMBtu) per day for NEA
and NJEA, respectively. The contract price, including transportation, of the
ProGas supply delivered to the import point is determined with reference to a
base price in 1990, re-determined annually thereafter based on specified
inflation indices. The PSE&G contract commenced in 1991, and provides for the
sale and delivery to NJEA of up to 25,000 MMBtu per day of gas for a term of
20 years. The contract price of the PSE&G gas is established monthly using a
contractually specified mechanism.
With the exception of the PSE&G arrangement, all of the Partnerships' long-
term contractual arrangements call for monthly demand charge payments. These
demand charge payments reserve certain pipeline transportation capacity and
are made regardless of the Partnerships' specified fuel requirements in any
month and regardless of whether the Partnerships utilize the capacity
reserved. These demand charges totaled approximately $12.3 million and $33.9
million for the three and nine month periods ended September 30, 1998,
respectively. In the event the available capacity under these agreements is
not utilized by the operations of the facilities, the Partnerships have the
opportunity under certain of these contractual agreements to sell unused
capacity to third parties, but have not yet done so.
NEA's facility also has the capability to burn No. 2 fuel oil. Fuel oil is
stored on site for contingency supply.
4. Loans Payable
In 1994, the Partnerships refinanced their existing borrowings by means of a
placement of securities to qualified institutional buyers as defined in Rule
144A (the Funding Corp. Old Securities). In 1995, the Funding Corp. filed a
Registration Statement on Form S-4 with the Securities and Exchange
Commission for purposes of effecting a public exchange offer whereby the
securities mentioned above were exchanged for a new issue of securities (the
Funding Corp. New Securities and together with the Funding Corp. Old
Securities, the Funding Corp. Securities). The Funding Corp. New Securities
have terms identical to the Funding Corp. Old Securities. Interest rates on
the Funding Corp. Securities range from 8.43% to 9.77% with final maturity
dates ranging from 2000 to 2010.
Interest on the Funding Corp. Securities is payable semiannually on each June
30 and December 30. Principal repayments are made semiannually in amounts
stipulated in the trust indenture. Future principal payments are as follows:
Year ending December 31:
1998 ......... ........................................ $ 10,781,000
1999 .................................................. $ 23,511,000
2000 .................................................. $ 26,333,000
2001 .................................................. $ 20,160,000
2002 .................................................. $ 22,688,000
Thereafter ............................................ $376,032,000
The Funding Corp. Securities are not subject to optional redemption but are
subject to mandatory redemption in certain limited circumstances involving
the occurrence of an event of loss, as defined in the trust indenture, for
which the Partnerships fail to or are unable to restore a facility. The
Funding Corp. Securities are unconditionally guaranteed, jointly and
severally, by the Partnerships.
The proceeds from the sale of the Funding Corp. Securities were used to
purchase the notes outstanding under the original loan and credit agreements
and to make loans to the Partnerships. In connection with these two
transactions, the notes outstanding under the loan and credit agreements were
surrendered and new notes of the Partnership were issued to the Funding Corp.
in an aggregate principal amount equal to the aggregate principal amount of
the Funding Corp. Securities (the Funding Corp. Notes). The loan and credit
agreement was assigned to the Funding Corp. and amended and restated (the
Amended and Restated Credit Agreement).
Borrowings are secured by a lien on, and a security interest in,
substantially all of the assets of the Partnerships. Under the Amended and
Restated Credit Agreement, the Partnerships are jointly and severally
required to make scheduled payments on the Funding Corp. Notes on dates and
in amounts identical to the scheduled payments of principal and interest on
the Funding Corp. Securities. The Funding Corp. Securities, the guarantees
thereon provided by the Partnerships and the Funding Corp. Notes are
nonrecourse to the Partners and are payable solely by the Partnerships and
from the collateral pledged as security.
Under the terms of the trust indenture governing the Funding Corp.
Securities, the Partnerships are required to establish certain funds and
subfunds which must be fully funded before any partner distributions can be
made. Cash within these funds can be drawn currently if funds in the
Partnerships' other cash accounts are insufficient to meet operational cash
requirements.
The trust indenture also contains certain restrictions on activities of the
Partnerships, including incurring additional indebtedness or liens,
partnership distributions, cancellation of certain agreements, the execution
of mergers, consolidations and asset sales.
Under the terms of the original loan and credit agreement, the Partnerships
were required to enter into interest rate swap agreements providing for the
payments on a notional principal amount to be made by the Partnerships at
fixed interest rates, in exchange for payments to be made by such financial
institutions at floating interest rates. The original specified notional
principal amount declines periodically until the scheduled expiration of the
swaps in 1999. The Partnerships are jointly and severally liable under these
agreements. As a result of the refinancing described above, the original
interest swap agreements no longer qualify for hedge accounting and are
recorded at fair value. Changes in fair value are recognized in the
consolidated statement of operations. See Note 6 for information regarding
fair value of financial instruments.
On February 12, 1998, the Acquisition Corp. issued $220,000,000 of 7.99%
Secured Bonds Due 2011 (the Old Securities). The proceeds were loaned to NE
LP and are evidenced by the Note with substantially identical terms as the
Old Securities. The loan was used to reimburse certain ESI Energy and
Tractebel Power subsidiaries for a portion of the original $545 million
equity contribution that was used to finance the cost of the Acquisitions.
During 1998, the Acquisition Corp. filed a Registration Statement on Form S-4
with the Securities and Exchange Commission for purposes of effecting a
public exchange offer whereby the Old Securities were exchanged for New
Securities which are registered under the Securities Act of 1933. The New
Securities have substantially identical terms as the Old Securities.
Interest on the Securities is payable semiannually on each June 30 and
December 30. Principal repayments are made annually commencing on June 30,
2002 and are in amounts stipulated in the trust indenture. Future principal
payments are as follows:
Year ending December 31:
2002 .................................................. $ 8,800,000
Thereafter ............................................ $211,200,000
The Securities are unconditionally guaranteed by NE LP.
The Securities are payable solely from payments to be made by NE LP under the
Note and bond guaranty. NE LP's obligations to make payments under the Note
are non-recourse to the direct and indirect owners of NE LP (including ESI
Energy and Tractebel Power). Payments with respect to the Note and,
therefore, in respect of the Securities will be effectively subordinated to
payment of all indebtedness and other liabilities and commitments of the
Partnerships, including the guarantee by the Partnerships of the Funding
Corp. Securities. Repayment of the Securities is guaranteed by all interest
in the Partnerships. The Securities will rank senior to all subordinated
indebtedness and rank evenly with all senior indebtedness that the
Acquisition Corp. incurs in the future.
5. Related Party Information
Administrative Services Agreement - NE LP and an entity related to ESI Energy
have entered into an Administrative Services Agreement (the Agreement) that
provides for management and administrative services to the Partnerships. The
Agreement expires in 2018, provides for fees of a minimum of $600,000 per
year and reimburses costs and expenses of performing services.
Operations and Maintenance Agreements - NE LP and an entity related to ESI
Energy have entered into operations and maintenance agreements (the New O&M
Agreements) that provide for the operations and maintenance of the
Partnerships on the day following the expiration or early termination of the
current O&M provider. The New O&M Agreements extend for an initial term until
January 14, 2016, subject to extension by mutual agreement of the parties
before six months preceding expiration. The New O&M Agreements reimburse
costs and expenses of performing services and provide for fees of $750,000
per year, subject to certain adjustments, for each Partnership.
Fuel Management Agreements - NE LP and an entity related to ESI Energy have
entered into Fuel Management Agreements (the Fuel Agreements) that provide
for the management of all natural gas and fuel oil, transportation and
storage agreements, and the location and purchase of any additional required
natural gas or fuel oil for the Partnerships. The Fuel Agreements expire in
2023. The Fuel Agreements provide for fees of a minimum of $450,000 per year
for each Partnership and reimburse all costs and expenses of performing
services.
Accrued expenses under the Agreement, the New O&M Agreements, and the Fuel
Agreements were $.8 million and $2.3 million for the three and nine month
periods ended September 30, 1998, respectively. Additionally, power sales to
an entity related to ESI Energy were $28,000 and $123,000 for the three and
nine month periods ended September 30, 1998, respectively.
Amounts due to general partners and other related parties were $533,000 and
$2.7 million at September 30, 1998, respectively. The average balances due to
related parties did not vary materially from these amounts. During the nine
month period ended September 30, 1998, NE LP received $535.4 million of
contributions from its partners. During the nine month period ended September
30, 1998, distributions to partners were $330.7 million.
6. Financial Instruments
The Partnerships have made use of derivative financial instruments to hedge
their exposure to fluctuations in both interest rates and the price of
natural gas.
Under the terms of the original loan and credit agreement, the Partnerships
were required to enter into fixed interest rate swap agreements as a means of
managing exposure to the variable rate of interest of the original
Partnerships' borrowings. In conjunction with the refinancing, the
Partnerships entered into counter-swap agreements so that the Partnerships
would no longer be exposed to changes in interest rates.
The prices received by the Partnerships for power sales under their long-term
contracts do not move precisely in tandem with the prices paid by the
Partnerships for natural gas. To mitigate the price risk associated with
purchases of natural gas, the Partnerships may, from time to time, enter into
certain hedging transactions either through public exchanges or by means of
over-the-counter transactions with specific counterparties. The Partnerships
hedge purchases of natural gas through the use of natural gas call options,
natural gas purchase swap agreements that require the Partnerships to pay a
fixed price (absolutely or within a specified range) in return for a variable
price on specified notional quantities of natural gas, and forward purchases
of natural gas.
The Partnerships control the credit risk arising from these instruments
through credit approvals, limits, and monitoring. The Partnerships do not
normally require collateral or other security to support financial
instruments with credit risks.
7. Commitments and Contingencies
Energy Bank and Loan Collateral - Subsequent to the Acquisitions on January
14, 1998, certain credit arrangements were terminated and replaced with new
letters of credit and a guaranty to satisfy requirements in certain power
purchase agreements. Specifically, new energy bank letters of credit were
issued in face amounts of $12,656,000 and $54,000,000. The $12,656,000 letter
of credit expires on December 31, 1998 and can be drawn upon on one occasion
in the event that a certain power purchase agreement has terminated at a time
when there was a positive energy bank balance existing in favor of the power
purchaser. The $54,000,000 letter of credit expires on December 31, 1998 and
can be drawn upon in multiple drawings in the event that a certain power
purchase agreement has terminated at the time when there was a positive
energy bank balance existing in favor of the power purchaser. A guaranty was
made by a subsidiary of FPL Group, Inc. in favor of the Partnerships'
trustee. The guarantor unconditionally and irrevocably guarantees the payment
of an amount equal to 50% of the debt service reserve requirement with
respect to the Funding Corp. Securities. The guaranty expires on December 31,
1998 but is automatically extended for successive one-year periods unless the
guarantor gives notice that it will not renew. Once the new credit
arrangements were in place, cash of approximately $69.2 million (plus
approximately $2.5 million in accrued interest) was released and distributed
to the Partners. Additionally, new letters of credit were issued in
substitution for cash on deposit in Partnership trust accounts and
approximately $33.2 million in cash was released and distributed to the
Partners.
Operations and Maintenance of the Cogeneration Facilities - In 1989, the
Partnerships entered into two separate ten year O&M agreements with an O&M
provider for an aggregate annual consideration of approximately $11,100,000,
subject to changes in specified indices. Under these agreements, the
Partnerships are required to pay the O&M provider a bonus payable annually
over the term of the agreements based on operating performance. The
Partnerships incurred $4.9 million and $12.4 million for O&M and bonus
expenses for the three and nine month periods ended September 30, 1998,
respectively. On November 15, 1997, the O&M provider's parent announced that
it intended to sell certain of its industrial businesses, including the
business of the O&M provider. Each of the Partnerships is a party to the New
O&M Agreements mentioned above and do not anticipate a material adverse
effect related to this potential change in service provider.
Operating Lease - NEA entered into a 26 year operating lease in 1986 for a
parcel of land. The lease may be extended for another 25 years at the option
of NEA. Lease payments under the operating lease are as follows:
Year ending December 31:
1998 ......... ........................................ $ 189,000
1999 .................................................. $ 201,000
2000 .................................................. $ 213,000
2001 .................................................. $ 225,000
2002 .................................................. $ 237,000
Thereafter ............................................ $2,760,000
Lease expense under this agreement for the three and nine month periods ended
September 30, 1998 was $61,000 and $165,000, respectively.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations for the Registrants
This discussion should be read in conjunction with the Notes to Financial
Statements and Notes to Consolidated Financial Statements contained herein
and with the 1997 Form 10-K (as amended) for the Funding Corp. and the
Partnerships. The results of operations for an interim period may not give a
true indication of results for the year.
RESULTS OF OPERATIONS
The Funding Corp. - Semi-annual debt principal payments and debt interest
payments of $10.8 million and $22.9 million, respectively, were made by the
Funding Corp. in June 1998.
The Partnerships for the three and nine months ended September 30, 1997 -
Revenues for the third quarter and year to date totaled $83.4 million and
$237.8 million, respectively, and were comprised of $82.2 million and $234.2
million, respectively, of power sales to utilities and $1.2 million and $3.6
million, respectively, of steam sales. Power sales to utilities reflect
changes in utility energy bank balances which are determined in accordance
with scheduled or specified rates under certain power purchase contracts.
Fuel expense of $37.5 million and $115.0 million, respectively, includes fuel
purchased for the Partnerships and fixed and variable costs associated with
delivery and use of the fuel for operations.
O&M expenses of $6.9 million and $19.7 million, respectively, are comprised
of O&M provider fees and site utility expenses, as well as performance
bonuses and heat rate bonuses payable under the O&M agreements.
Depreciation and amortization of $6.3 million and $18.8 million,
respectively, is comprised of depreciation for the cogeneration and carbon
dioxide facilities.
General and administrative expenses of $3.9 million and $10.8 million,
respectively, are comprised primarily of management and professional fees.
Interest expense is comprised primarily of interest on notes payable to the
Funding Corp. ($11.7 million and $35.6 million, respectively) and interest on
energy bank balances ($4.4 million and $13.0 million, respectively).
Interest income of $2.5 million and $7.1 million, respectively, reflects cash
balances earning investment income.
The Partnerships for the period from January 1, 1998 to January 13, 1998
(pre-acquisition) - Revenues for the thirteen-day period totaled $13.1
million and were comprised of $12.9 million of power sales to utilities and
$200 thousand of steam sales. Power sales to utilities reflect changes in
utility energy bank balances which are determined in accordance with
scheduled or specified rates under certain power purchase contracts.
Fuel expense of $5.8 million includes fuel purchased for the Partnerships and
the fixed and variable costs associated with the delivery and use of the fuel
for operations.
O&M expenses of $974,000 are comprised of O&M provider fees and site utility
expenses.
Depreciation and amortization of $894,000 is comprised of depreciation for
the cogeneration and carbon dioxide facilities.
General and administrative expenses of $538,000 are comprised primarily of
management fees.
Interest expense is comprised primarily of interest on notes payable to the
Funding Corp. ($1.7 million) and interest on energy bank balances ($630,000).
Interest income reflects cash balances earning investment income.
The Partnerships for the three month period ended September 30, 1998 and for
the period from January 14, 1998 to September 30, 1998 (post-acquisition) -
Subsequent to January 13, 1998 the basis of presentation of the results of
operations for the Partnerships on a going forward basis was changed to
reflect the new basis of accounting discussed in Note 1 and Note 2 of the
Partnerships.
Revenues for the third quarter and period to date totaled $83.9 million and
$225.1 million, respectively, and were comprised of $82.8 million and $221.8
million, respectively, of power sales to utilities and $1.1 million and $3.3
million, respectively, of steam sales. Power sales to utilities reflect
changes in utility energy bank balances (which increased reported revenues)
of $2.7 million and $10.0 million, respectively, which are determined in
accordance with scheduled or specified rates under certain power purchase
contracts. Revenues for the period ended September 30, 1998 reflect lower
generation and availability resulting from a May scheduled inspection and
maintenance outage at the NEA facility.
Fuel expense of $32.3 million and $89.5 million, respectively, is comprised
of $37.5 million and $104.4 million, respectively, of fuel purchased for the
Partnerships and the fixed and variable costs associated with the delivery
and use of the fuel for operations. These fuel costs are offset by $5.2
million and $14.9 million, respectively, of deferred credit amortization for
fuel contracts as a result of the purchase price allocation of the
Acquisitions. Fuel expense for the period ended September 30, 1998 reflects
decreased fuel consumption as a result of the May scheduled inspection and
maintenance outage mentioned above.
O&M expenses of $5.7 million and $14.3 million, respectively, are comprised
of O&M provider fees and site expenses of $6.8 million and $17.7 million,
respectively, offset by $1.1 million and $3.4 million, respectively, of
deferred credit amortization for O&M contracts as a result of the purchase
price allocation of the Acquisitions. Included in O&M expenses is the major
maintenance accrual described in Note 2 of the Partnerships.
Depreciation and amortization of $18.0 million and $51.5 million,
respectively, is comprised of depreciation for the cogeneration and carbon
dioxide facilities of $5.5 million and $15.5 million, respectively, and $12.5
million and $36.0 million, respectively, of amortization of the power
purchase contracts as a result of the purchase price allocation of the
Acquisitions.
General and administrative expenses of $1.8 million and $5.9 million,
respectively, are comprised primarily of management and professional fees and
site expenses.
Interest expense of $14.3 million and $44.0 million, respectively, is
comprised primarily of interest on notes payable to the Funding Corp. ($11.2
million and $32.5 million, respectively) and interest on energy bank balances
($3.1 million and $11.5 million, respectively).
Interest income reflects cash balances earning investment income and reflects
the impact of the release and distribution of debt service reserve cash on
January 21, 1998 and energy bank collateral restricted cash on February 3,
1998.
The Acquisition Corp. - A semi-annual debt interest payment of $6.4 million
was made by the Acquisition Corp. in June 1998.
NE LP - NE LP's operations for the nine months ended September 30, 1998
primarily reflect the operations of the Partnerships subsequent to the
Acquisitions on January 14, 1998 and the related allocation of the purchase
price. Revenues for the third quarter and year to date totaled $83.9 million
and $225.1 million, respectively, and were comprised of $82.8 million and
$221.8 million, respectively, of power sales to utilities and $1.1 million
and $3.3 million, respectively, of steam sales. Power sales to utilities
reflect changes in utility energy bank balances (which increased reported
revenues) of $2.7 million and $10.0 million, respectively, which are
determined in accordance with scheduled or specified rates under certain
power purchase contracts. Revenues year to date reflect lower generation and
availability resulting from a May scheduled inspection and maintenance outage
at the NEA facility.
Fuel expense for the third quarter and year to date is comprised of $37.5
million and $104.4 million, respectively, of fuel purchased for the
Partnerships and the fixed and variable costs associated with the delivery
and use of the fuel for operations. These fuel costs are offset by $5.2
million and $14.9 million, respectively, of deferred credit amortization for
fuel contracts as a result of the purchase price allocation of the
Acquisitions. Fuel expense year to date reflects decreased fuel consumption
as a result of the May scheduled inspection and maintenance outage mentioned
above.
O&M expenses for the third quarter and year to date are comprised of O&M
provider fees and site expenses of $6.8 million and $17.7 million,
respectively, offset by $1.1 million and $3.4 million, respectively, of
deferred credit amortization for O&M contracts as a result of the purchase
price allocation of the Acquisitions. Included in O&M expenses is the major
maintenance accrual described in Note 2 of NE LP.
Depreciation and amortization for the third quarter and year to date is
comprised of depreciation for the cogeneration and carbon dioxide facilities
of $5.5 million and $15.5 million, respectively, and $12.5 million and $36.0
million, respectively, of amortization of the power purchase contracts as a
result of the purchase price allocation of the Acquisitions.
General and administrative expenses are comprised primarily of management and
professional fees and site expenses.
Interest expense for the third quarter and year to date is comprised
primarily of interest on notes payable to the Funding Corp. ($11.2 million
and $32.5 million, respectively), interest on notes payable to the
Acquisition Corp. subsequent to February 19, 1998 ($4.4 million and $10.8
million, respectively) and interest on energy bank balances ($3.0 million and
$11.4 million, respectively).
Interest income reflects cash balances earning investment income and reflects
the impact of the release and distribution of debt service reserve cash on
January 21, 1998 and energy bank collateral restricted cash on February 3,
1998.
Year 2000 - NE LP is continuing to work to resolve the potential impact of
the year 2000 on the processing of information by its computer systems. A
multi-phase plan has been developed consisting of inventorying potential
problems, assessing what will be required to address each potential problem,
taking the necessary action to fix each problem, testing to see that the
action taken did result in year 2000 readiness and implementing the required
solution. The inventory and assessment of the information technology
infrastructure, computer applications and computerized processes embedded in
operating equipment has been substantially completed. NE LP's efforts to
assess the year 2000 readiness of third parties are ongoing. These
communications will help ensure that critical supplies are not interrupted,
that large customers are able to receive power and that transactions with or
processed by financial institutions will occur as intended. NE LP is on
schedule with its multi-phase plan and all phases are expected to be
completed by mid-1999. The cost of addressing year 2000 issues is estimated
to be approximately $500,000.
At this time, NE LP believes that the most reasonably likely worst case
scenarios relating to the year 2000 could include a temporary disruption of
service to power purchasers, caused by a potential disruption in fuel supply,
water supply and telecommunications. A contingency planning team has been
established to identify the risks associated with the year 2000. A
preliminary contingency plan is expected to be developed by the end of the
first quarter of 1999, and will be continually updated as additional
information becomes available.
LIQUIDITY AND CAPITAL RESOURCES
The Funding Corp. and the Partnerships - Cash flow generated by the
Partnerships during the nine month period ended September 30, 1998 was
sufficient to fund operating expenses as well as fund the debt service
requirements of the Funding Corp. For the period ended September 30, 1998,
there have been $136.0 million in distributions to partners.
The Acquisition Corp. and NE LP - Cash flow generated by NE LP during the nine
month period ended September 30, 1998 was sufficient to fund operating expenses
as well as fund the debt service requirements of the Acquisition Corp. For the
nine months ended September 30, 1998, there have been $535.4 million of
contributions from partners and $330.7 million in distributions to partners.
During the nine months ended September 30, 1998 NE LP expended net cash of
$482.2 million for acquisition of the Partnerships, received $69.2 million from
release of restricted cash collateral and received $215.2 million of cash
proceeds from the loan from the Acquisition Corp.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
</TABLE>
<TABLE>
<CAPTION>
(a) Exhibits
Exhibit
Number Description
<S> <C>
27.1 Financial Data Schedule - ESI Tractebel Funding Corp.
27.2 Financial Data Schedule for the period January 1, 1998 to January 13, 1998 -
Northeast Energy Associates, A Limited Partnership
27.3 Financial Data Schedule for the period January 1, 1998 to January 13, 1998 -
North Jersey Energy Associates, A Limited Partnership
27.4 Financial Data Schedule for the period January 14, 1998 to September 30, 1998 -
Northeast Energy Associates, A Limited Partnership
27.5 Financial Data Schedule for the period January 14, 1998 to September 30, 1998 -
North Jersey Energy Associates, A Limited Partnership
27.6 Financial Data Schedule - ESI Tractebel Acquisition Corp.
27.7 Financial Data Schedule - Northeast Energy, LP
</table
(b) Reports on Form 8-K
(1) A current report on Form 8-K dated September 4, 1998 was filed by
ESI Tractebel Funding Corp., Northeast Energy Associates, A Limited
Partnership and North Jersey Energy Associates, A Limited Partnership on
September 4, 1998 reporting two events under Item 4 - Changes in Registrant's
Certifying Accountant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned, thereunto duly authorized.
ESI TRACTEBEL FUNDING CORP.
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
(ESI Northeast Energy GP, Inc. as Administrative General Partner)
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
(ESI Northeast Energy GP, Inc. as Administrative General Partner)
ESI TRACTEBEL ACQUISITION CORP.
NORTHEAST ENERGY, LP
(ESI Northeast Energy GP, Inc. as Administrative General Partner)
(Registrants)
Date: November 10, 1998
PETER D. BOYLAN
Peter D. Boylan
Treasurer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from ESI
Tractebel Funding Corp.'s balance sheet as of September 30, 1998 and
statement of operations for the nine months ended September 30, 1998 and is
qualified in its entirety by reference to such financial statements.
<CIK> 0000934665
<NAME> ESI Tractebel Funding Corp.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<PERIOD-START> JAN-1-1998
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> $1
<SECURITIES> $0
<RECEIVABLES> $33,755
<ALLOWANCES> $0
<INVENTORY> $0
<CURRENT-ASSETS> $33,756
<PP&E> $0
<DEPRECIATION> $0
<TOTAL-ASSETS> $490,724
<CURRENT-LIABILITIES> $33,755
<BONDS> $456,968
$0
$0
<COMMON> $1
<OTHER-SE> $0
<TOTAL-LIABILITY-AND-EQUITY> $490,724
<SALES> $34,109
<TOTAL-REVENUES> $34,109
<CGS> $0
<TOTAL-COSTS> $0
<OTHER-EXPENSES> $0
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $34,109
<INCOME-PRETAX> $0
<INCOME-TAX> $0
<INCOME-CONTINUING> $0
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $0
<EPS-PRIMARY> $0
<EPS-DILUTED> $0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
combined statements of operations for the period January 1, 1998 to January 13,
1998 of Northeast Energy Associates, A Limited Partnership and North Jersey
Energy Associates, A Limited Partnership and is qualified in its entirety by
reference to such financial statements.
<CIK> 0000934667
<NAME> Northeast Energy Associates,
A Limited Partnership
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<PERIOD-START> JAN-01-1998
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JAN-13-1998
<EXCHANGE-RATE> 1
<CASH> $0
<SECURITIES> $0
<RECEIVABLES> $0
<ALLOWANCES> $0
<INVENTORY> $0
<CURRENT-ASSETS> $0
<PP&E> $0
<DEPRECIATION> $0
<TOTAL-ASSETS> $0
<CURRENT-LIABILITIES> $0
<BONDS> $0
$0
$0
<COMMON> $0
<OTHER-SE> $0
<TOTAL-LIABILITY-AND-EQUITY> $0
<SALES> $13,109
<TOTAL-REVENUES> $13,109
<CGS> $0
<TOTAL-COSTS> $7,642
<OTHER-EXPENSES> $538
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $2,422
<INCOME-PRETAX> $2,909
<INCOME-TAX> $0
<INCOME-CONTINUING> $2,909
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $2,909
<EPS-PRIMARY> $0
<EPS-DILUTED> $0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
combined statements of operations for the period January 1, 1998 to
January 13, 1998 of Northeast Energy Associates, A Limited Partnership and
North Jersey Energy Associates, A Limited Partnership and is qualified in its
entirety by reference to such financial statements.
<CIK> 0000934666
<NAME> North Jersey Energy Associates
A Limited Partnership
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<PERIOD-START> JAN-01-1998
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JAN-13-1998
<EXCHANGE-RATE> 1
<CASH> $0
<SECURITIES> $0
<RECEIVABLES> $0
<ALLOWANCES> $0
<INVENTORY> $0
<CURRENT-ASSETS> $0
<PP&E> $0
<DEPRECIATION> $0
<TOTAL-ASSETS> $0
<CURRENT-LIABILITIES> $0
<BONDS> $0
$0
$0
<COMMON> $0
<OTHER-SE> $0
<TOTAL-LIABILITY-AND-EQUITY> $0
<SALES> $13,109
<TOTAL-REVENUES> $13,109
<CGS> $0
<TOTAL-COSTS> $7,642
<OTHER-EXPENSES> $538
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $2,422
<INCOME-PRETAX> $2,909
<INCOME-TAX> $0
<INCOME-CONTINUING> $2,909
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $2,909
<EPS-PRIMARY> $0
<EPS-DILUTED> $0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
combined balance sheet as of September 30, 1998 and the combined statements
of operations for the period January 14, 1998 to September 30, 1998 of
Northeast Energy Associates, A Limited Partnership and North Jersey Energy
Associates, A Limited Partnership and is qualified in its entirety by reference
to such financial statements.
<CIK> 0000934667
<NAME> Northeast Energy Associates,
A Limited Partnership
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<PERIOD-START> JAN-14-1998
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> $45,642
<SECURITIES> $0
<RECEIVABLES> $53,194
<ALLOWANCES> $0
<INVENTORY> $6,562
<CURRENT-ASSETS> $105,908
<PP&E> $512,086
<DEPRECIATION> $15,548
<TOTAL-ASSETS> $1,455,351
<CURRENT-LIABILITIES> $60,406
<BONDS> $456,968
$0
$0
<COMMON> $0
<OTHER-SE> $430,920
<TOTAL-LIABILITY-AND-EQUITY> $1,455,351
<SALES> $225,113
<TOTAL-REVENUES> $225,113
<CGS> $0
<TOTAL-COSTS> $155,343
<OTHER-EXPENSES> $5,879
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $43,950
<INCOME-PRETAX> $22,075
<INCOME-TAX> $0
<INCOME-CONTINUING> $22,075
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $22,075
<EPS-PRIMARY> $0
<EPS-DILUTED> $0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
combined balance sheet as of September 30, 1998 and the combined statements
of operations for the period January 14, 1998 to September 30, 1998 of
Northeast Energy Associates, A Limited Partnership and North Jersey Energy
Associates, A Limited Partnership and is qualified in its entirety by reference
to such financial statements.
<CIK> 0000934666
<NAME> North Jersey Energy Associates,
A Limited Partnership
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<PERIOD-START> JAN-14-1998
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> $45,642
<SECURITIES> $0
<RECEIVABLES> $53,194
<ALLOWANCES> $0
<INVENTORY> $6,562
<CURRENT-ASSETS> $105,908
<PP&E> $512,086
<DEPRECIATION> $15,548
<TOTAL-ASSETS> $1,455,351
<CURRENT-LIABILITIES> $60,406
<BONDS> $456,968
$0
$0
<COMMON> $0
<OTHER-SE> $430,920
<TOTAL-LIABILITY-AND-EQUITY> $1,455,351
<SALES> $225,113
<TOTAL-REVENUES> $225,113
<CGS> $0
<TOTAL-COSTS> $155,343
<OTHER-EXPENSES> $5,879
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $43,950
<INCOME-PRETAX> $22,075
<INCOME-TAX> $0
<INCOME-CONTINUING> $22,075
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $22,075
<EPS-PRIMARY> $0
<EPS-DILUTED> $0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from ESI
Tractebel Acquisition Corp.'s balance sheet as of September 30, 1998 and statement
of operations for the period January 12, 1998 to September 30, 1998 and is
qualified in its entirety by reference to such financial statements.
<CIK> 0001059027
<NAME> ESI Tractebel Acquisition Corp.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<PERIOD-START> JAN-12-1998
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-12-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> $0
<SECURITIES> $0
<RECEIVABLES> $4,395
<ALLOWANCES> $0
<INVENTORY> $0
<CURRENT-ASSETS> $4,395
<PP&E> $0
<DEPRECIATION> $0
<TOTAL-ASSETS> $224,547
<CURRENT-LIABILITIES> $4,398
<BONDS> $220,000
$0
$0
<COMMON> $6
<OTHER-SE> $0
<TOTAL-LIABILITY-AND-EQUITY> $224,547
<SALES> $10,791
<TOTAL-REVENUES> $10,791
<CGS> $0
<TOTAL-COSTS> $0
<OTHER-EXPENSES> $0
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $10,782
<INCOME-PRETAX> $9
<INCOME-TAX> $3
<INCOME-CONTINUING> $6
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $6
<EPS-PRIMARY> $0
<EPS-DILUTED> $0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet as of September 30, 1998 and the consolidated statement
of operations for the nine months ended September 30, 1998 of Northeast Energy, LP
and is qualified in its entirety by reference to such financial statements.
<CIK> 0001059025
<NAME> Northeast Energy, LP
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<PERIOD-START> JAN-01-1998
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> $48,295
<SECURITIES> $0
<RECEIVABLES> $53,194
<ALLOWANCES> $0
<INVENTORY> $6,562
<CURRENT-ASSETS> $108,561
<PP&E> $512,086
<DEPRECIATION> $15,548
<TOTAL-ASSETS> $1,464,294
<CURRENT-LIABILITIES> $64,906
<BONDS> $676,968
$0
$0
<COMMON> $0
<OTHER-SE> $215,363
<TOTAL-LIABILITY-AND-EQUITY> $1,464,294
<SALES> $225,113
<TOTAL-REVENUES> $225,113
<CGS> $0
<TOTAL-COSTS> $155,343
<OTHER-EXPENSES> $6,151
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $54,741
<INCOME-PRETAX> $10,701
<INCOME-TAX> $0
<INCOME-CONTINUING> $10,701
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $10,701
<EPS-PRIMARY> $0
<EPS-DILUTED> $0
</TABLE>
