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 June 30, 1999
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 ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of June 30, 1999, there were issued and outstanding 10,000 shares of ESI
Tractebel Funding Corp. its common stock.
As of June 30, 1999, there were issued 20 shares of ESI Tractebel Acquisition
Corp.'s common stock.
----------------------------------
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.
(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. (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) 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 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 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 statement.
Some important factors that could cause actual results or outcomes to differ
materially from those discussed in the forward-looking statements include
changing governmental policies and regulatory actions with respect to the
Public Utility Regulatory Policies Act of 1978, as amended, 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, 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 readiness, 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
NORTHEAST ENERGY, LP
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................................................ $ 18,141 $ 36,038
Accounts receivable .............................................................. 38,169 29,746
Spare parts inventories .......................................................... 15,803 194
Fuel inventories ................................................................. 4,444 4,935
Prepaid expenses and other current assets ........................................ 1,134 212
Total current assets ........................................................... 77,691 71,125
Non-current assets:
Deferred debt issuance costs (net of accumulated
amortization of $865 and $548, respectively) ................................... 6,097 6,412
Cogeneration facilities and carbon dioxide facility (net of accumulated
depreciation of $31,892 and $20,987, respectively) ............................. 481,725 492,566
Power purchase contracts (net of accumulated
amortization of $74,178 and $48,545, respectively) ............................. 814,578 840,211
Other assets ..................................................................... 26 29
Total non-current assets ....................................................... 1,302,426 1,339,218
TOTAL ASSETS ....................................................................... $1,380,117 $1,410,343
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Current portion of notes payable - the Funding Corp. ............................. $ 24,922 $ 23,511
Accounts payable ................................................................. 19,866 12,338
Due to related parties ........................................................... 2,952 800
Other accrued expenses ........................................................... 10,595 9,384
Total current liabilities ...................................................... 58,335 46,033
Non-current liabilities:
Deferred credit - fuel contracts ................................................. 303,003 313,427
Notes payable - the Funding Corp. ................................................ 432,046 445,213
Note payable - the Acquisition Corp. ............................................. 220,000 220,000
Amounts due utilities for energy bank balances ................................... 171,043 173,356
Total non-current liabilities .................................................. 1,126,092 1,151,996
Partners' equity:
General partners ................................................................. 3,914 4,246
Limited partners ................................................................. 191,776 208,068
Total partners' equity ......................................................... 195,690 212,314
COMMITMENTS AND CONTINGENCIES
TOTAL LIABILITIES AND PARTNERS' EQUITY ............................................. $1,380,117 $1,410,343
</TABLE>
This report should be read in conjunction with the Notes to Consolidated
Financial Statements on page 11 herein and the Notes to Consolidated and
Combined Financial Statements appearing in the 1998 Form 10-K for NE LP.
NORTHEAST ENERGY, LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
REVENUES .................................. $79,179 $66,458 $169,511 $141,197
COSTS AND EXPENSES:
Fuel .................................... 28,283 27,637 63,823 57,154
Operations and maintenance .............. 3,205 3,890 7,133 8,628
Depreciation and amortization ........... 18,270 18,024 36,542 33,532
General and administrative .............. 2,157 2,194 4,492 4,362
Total costs and expenses .............. 51,915 51,745 111,990 103,676
OPERATING INCOME .......................... 27,264 14,713 57,521 37,521
OTHER EXPENSE (INCOME):
Amortization of debt issue costs......... 160 153 317 225
Interest expense ........................ 19,837 20,297 39,612 36,060
Interest income ......................... (643) (857) (1,107) (1,510)
Total other expense - net ............. 19,354 19,593 38,822 34,775
NET INCOME (LOSS) ......................... $ 7,910 $(4,880) $ 18,699 $ 2,746
</TABLE>
This report should be read in conjunction with the Notes to Consolidated
Financial Statements on page 11 herein and the Notes to Consolidated and
Combined Financial Statements appearing in the 1998 Form 10-K for NE LP.
NORTHEAST ENERGY, LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1999 1998
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................. $ 29,244 $ 32,250
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................................ (63) -
Release of restricted cash collateral ............................................... - 69,156
Acquisition purchase price, net of $62,635 cash acquired ............................ - (483,140)
Net cash used in investing activities ............................................. (63) (413,984)
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions from partners ......................................................... - 535,412
Principal payment on the Funding Corp. notes ........................................ (11,755) (10,782)
Net proceeds from loan by the Acquisition Corp. ..................................... - 215,202
Distributions to partners ........................................................... (35,323) (330,746)
Net cash provided by (used in) financing activities ............................... (47,078) 409,086
Net increase (decrease) in cash and cash equivalents .................................. (17,897) 27,352
Cash and cash equivalents at beginning of period ...................................... 36,038 -
Cash and cash equivalents at end of period ............................................ $ 18,141 $ 27,352
Supplemental disclosure of cash flow information:
Cash paid for interest .............................................................. $ 30,933 $ 29,711
</TABLE>
This report should be read in conjunction with the Notes to Consolidated
Financial Statements on page 11 herein and the Notes to Consolidated and
Combined Financial Statements appearing in the 1998 Form 10-K for NE LP.
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ......................................................... $ 17,313 $ 35,152
Accounts receivable ............................................................... 38,169 29,746
Spare parts inventories ........................................................... 15,803 194
Fuel inventories .................................................................. 4,444 4,935
Prepaid expenses and other current assets ......................................... 1,134 212
Total current assets ............................................................ 76,863 70,239
Non-current assets:
Cogeneration facilities and carbon dioxide facility (net of accumulated
depreciation of $31,892 and $20,987, respectively) .............................. 481,725 492,566
Power purchase contracts (net of accumulated
amortization of $74,178 and $48,545, respectively) .............................. 814,578 840,211
Other assets ...................................................................... 26 29
Total non-current assets ........................................................ 1,296,329 1,332,806
TOTAL ASSETS ........................................................................ $1,373,192 $1,403,045
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Current portion of notes payable - the Funding Corp. .............................. $ 24,922 $ 23,511
Accounts payable .................................................................. 19,866 12,338
Due to related parties ............................................................ 2,813 663
Other accrued expenses ............................................................ 10,595 9,384
Total current liabilities ....................................................... 58,196 45,896
Non-current liabilities:
Deferred credit - fuel contracts .................................................. 303,003 313,427
Notes payable - the Funding Corp. ................................................. 432,046 445,213
Amounts due utilities for energy bank balances .................................... 171,043 173,356
Total non-current liabilities ................................................... 906,092 931,996
Partners' equity:
General partner ................................................................... 4,089 4,252
Limited partners .................................................................. 404,815 420,901
Total partners' equity .......................................................... 408,904 425,153
COMMITMENTS AND CONTINGENCIES
TOTAL LIABILITIES AND PARTNERS' EQUITY .............................................. $1,373,192 $1,403,045
</TABLE>
This report should be read in conjunction with the Notes to Combined
Financial Statements on page 11 herein and the Notes to Consolidated and
Combined Financial Statements appearing in the 1998 Form 10-K for NEA and
NJEA.
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Period from
Period from January 1,
Six Months January 14, 1998 to
Three Months Ended Ended 1998 to January 13,
June 30, June 30, June 30, 1998
1999 1998 1999 1998 (Prior Basis)
<S> <C> <C> <C> <C> <C>
REVENUES .................................. $ 79,179 $ 66,458 $169,511 $141,197 $ 13,109
COSTS AND EXPENSES:
Fuel .................................... 28,283 27,637 63,823 57,154 5,774
Operations and maintenance .............. 3,205 3,890 7,133 8,628 974
Depreciation and amortization ........... 18,270 18,024 36,542 33,532 894
General and administrative .............. 2,152 2,194 4,487 4,089 538
Total costs and expenses .............. 51,910 51,745 111,985 103,403 8,180
OPERATING INCOME .......................... 27,269 14,713 57,526 37,794 4,929
OTHER EXPENSE (INCOME):
Interest expense ........................ 15,441 15,952 30,820 29,664 2,422
Interest income ......................... (633) (857) (1,061) (1,510) (402)
Total other expense - net ............. 14,808 15,095 29,759 28,154 2,020
NET INCOME (LOSS) ......................... $ 12,461 $ (382) $ 27,767 $ 9,640 $ 2,909
</TABLE>
This report should be read in conjunction with the Notes to Combined Financial
Statements on page 11 herein and the Notes to Consolidated and Combined
Financial Statements appearing in the 1998 Form 10-K for NEA and NJEA.
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
COMBINED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Period from
Period from January 1,
Six Months January 14, 1998 to
Ended 1998 to January 13,
June 30, June 30, 1998
1999 1998 (Prior Basis)
<S> <C> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES ................... $ 37,996 $ 39,624 $ 1,432
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ...................................... (63) - -
Release of restricted cash collateral ..................... - 69,156 -
Net cash provided by (used in) investing activities ..... (63) 69,156 -
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment on notes ................................ (11,755) (10,782) -
Distributions to partners ................................. (44,017) (135,958) -
Net cash used in financing activities ................... (55,772) (146,740) -
Net increase (decrease) in cash and cash equivalents ........ (17,839) (37,960) 1,432
Cash and cash equivalents at beginning of period ............ 35,152 62,635 61,203
Cash and cash equivalents at end of period .................. $ 17,313 $ 24,675 $ 62,635
Supplemental disclosure of cash flow information:
Cash paid for interest .................................... $ 22,144 $ 23,315 $ -
Supplemental disclosure of noncash investing and
financing activities:
See Notes to Combined Financial Statements -
Basis of Presentation concerning new basis of
accounting subsequent to January 13, 1998
</TABLE>
This report should be read in conjunction with the Notes to Combined
Financial Statements on page 11 herein and the Notes to Consolidated and
Combined Financial Statements appearing in the 1998 Form 10-K for NEA and
NJEA.
ESI TRACTEBEL FUNDING CORP.
BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
<S> <C> <C>
ASSETS
Current assets:
Cash .............................................................................. $ 1 $ 1
Current portion of notes receivable from the Partnerships ......................... 24,922 23,511
Total current assets ............................................................ 24,923 23,512
Notes receivable from the Partnerships .............................................. 432,046 445,213
TOTAL ASSETS ........................................................................ $ 456,969 $ 468,725
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of securities payable ............................................. $ 24,922 $ 23,511
Securities payable .................................................................. 432,046 445,213
Stockholders' equity:
Common stock, no par value, 10,000 shares authorized, issued and outstanding ...... 1 1
COMMITMENTS AND CONTINGENCIES
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......................................... $ 456,969 $ 468,725
</TABLE>
STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Interest income .......................................... $ 10,990 $ 11,446 $ 21,981 $ 22,891
Interest expense ......................................... (10,990) (11,446) (21,981) (22,891)
NET INCOME ............................................... $ - $ - $ - $ -
</TABLE>
STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999 1998
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................ $ - $ -
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment received from the Partnerships.................................... 11,755 10,782
Principal payment on debt .......................................................... (11,755) (10,782)
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 disclosure of cash flow information:
Cash paid for interest ............................................................. $ 21,981 $ 22,891
</TABLE>
These reports should be read in conjunction with the Notes to Financial
Statements on page 11 herein and the Notes to Financial Statements appearing in
the 1998 Form 10-K for the Funding Corp.
ESI TRACTEBEL ACQUISITION CORP.
BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
<S> <C> <C>
ASSETS
Due from NE LP ....................................................................... $ 152 $ 152
Note receivable from NE LP ........................................................... 220,000 220,000
TOTAL ASSETS ......................................................................... $220,152 $220,152
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Income taxes payable ............................................................... $ 7 $ 4
Deferred credit - interest rate hedge ................................................ 133 140
Securities payable ................................................................... 220,000 220,000
Stockholders' equity:
Common stock, $.10 par value, 100 shares authorized, 20 shares issued .............. - -
Subscriptions receivable ........................................................... - -
Retained earnings .................................................................. 12 8
COMMITMENTS AND CONTINGENCIES
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................................... $220,152 $220,152
</TABLE>
STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Period from
Six January 12,
Months 1998 (Date of
Three Months Ended Ended Formation) to
June 30, June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Interest income ........................................... $ 4,393 $ 4,342 $ 8,789 $ 6,396
Interest expense .......................................... (4,390) (4,340) (8,783) (6,391)
Income before income taxes................................. 3 2 6 5
Income tax expense ........................................ (1) - (2) (2)
NET INCOME ................................................ $ 2 $ 2 $ 4 $ 3
</TABLE>
STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Period From
Six January 12,
Months 1998 (Date of
Ended Formation) to
June 30, June 30,
1999 1998
<S> <C> <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 ............................................................. $ 8,789 $ 6,396
</TABLE>
These reports should be read in conjunction with the Notes to Financial
Statements on page 11 herein and the Notes to Financial Statements appearing in
the 1998 Form 10-K for the Acquisition Corp.
NORTHEAST ENERGY, LP
NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND
NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP
ESI TRACTEBEL FUNDING CORP.
ESI TRACTEBEL ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
The accompanying consolidated financial statements, combined financial
statements and financial statements should be read in conjunction with the 1998
Form 10-K for ESI Tractebel Funding Corp. (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. (Acquisition Corp.) and Northeast Energy, LP (NE LP) (all
five entities collectively, the Registrants). In the opinion of the
Registrants management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair financial statement presentation have
been made. Certain amounts included in the prior years financial statements
have been reclassified to conform to the current years presentation. The
results of operations for an interim period may not give a true indication of
results for the year.
1. Summary of Significant Accounting Policies (NE LP and the Partnerships)
Basis of Presentation - On January 14, 1998 NE LP acquired the Partnerships.
The acquisitions were accounted for using the purchase method of accounting and
were subject to pushdown accounting, which gave rise to a new basis of
accounting by the Partnerships. Consequently, the Partnerships' combined
balance sheets and the combined statements of operations and cash flows for the
period from January 14, 1998 to June 30, 1998, the three months ended June 30,
1999 and 1998, and the six months ended June 30, 1999 are reported under the
new basis of accounting described above. The Partnerships combined statements
of operations and cash flows for the period from January 1, 1998 to January 13,
1998 represent historical financial data of the Partnerships prior to the
acquisitions.
Inventories - During the first quarter of 1999, the Partnerships purchased
spare parts from the former operations and maintenance (O&M) provider. Spare
parts inventories are stated at cost and are determined by specific
identification.
2. Commitments and Contingencies
In June 1998, the Financial Accounting Standards Board (FASB) issued Financial
Accounting Standards No. (FAS) 133, "Accounting for Derivative Instruments and
Hedging Activities". The statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The
statement requires that changes in the derivatives fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. The
Registrants are currently assessing the effect, if any, on their financial
statements of implementing FAS 133. In June 1999, the FASB issued FAS 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133", which delayed the adoption of FAS 133
for one year. As a result of FAS 137, the Registrants will not be required to
adopt FAS 133 until 2001.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This discussion should be read in conjunction with the Notes to Consolidated
Financial Statements, Notes to Combined Financial Statements and Notes to
Financial Statements contained herein and Managements Discussion and Analysis
of Financial Condition and Results of Operations appearing in the 1998 Form
10-K for the Registrants. The results of operations for an interim period may
not give a true indication of results for the year.
RESULTS OF OPERATIONS
NE LP and the Partnerships - In the following discussion, comparisons for
NE LP are with the corresponding items in the prior year. Comparisons for the
Partnerships are with the corresponding items for the prior period beginning
January 14, 1998.
Revenues for the second quarter and period to date increased $12.7 million and
$28.3 million, respectively. Increased revenues for the quarter are primarily
the result of increased energy production and increased power sales to
utilities at both the Bellingham, MA and Sayreville, NJ facilities. Increased
revenues period to date are primarily the result of increased energy
production and power sales and recognizing power sales for a full six months
in 1999 versus 1998 when power sales were recognized subsequent to the
acquisition of the Partnerships on January 14, 1998. Power sales to utilities
reflect changes in utility energy bank balances (which increased reported
revenues) that are determined in accordance with scheduled or specified rates
under certain power purchase agreements. Additionally, revenues for the
quarter and period to date for 1999 and 1998 reflect scheduled inspection and
maintenance outages at the Bellingham facility.
Fuel expense (excluding $5.2 million of deferred credit amortization for fuel
contracts for the quarters ended June 30, 1999 and 1998 and excluding $10.4
million and $9.7 million of deferred credit amortization for fuel contracts
for the periods ended June 30, 1999 and 1998, respectively) for the second
quarter and period to date increased $646,000 and $7.4 million, respectively.
The increase for the quarter is primarily the result of fuel purchased for the
facilities as a result of the increased energy production mentioned above
partially offset by favorable natural gas contract price adjustments and
refunds from natural gas transportation providers. The increase period to date
is primarily the result of the quarterly fuel items mentioned above and from
recognizing fuel expense for a full six months in 1999 versus 1998 when fuel
expense was recognized subsequent to the acquisition of the Partnerships on
January 14, 1998.
O&M expense (excluding $1.2 million and $2.2 million of deferred credit
amortization for O&M contracts for the quarter and period ended June 30, 1998,
respectively) for the second quarter and period to date decreased $1.9 million
and $3.7 million, respectively. The decrease for the quarter is primarily the
result of reduced O&M costs incurred by the new operator of the facilities and
the elimination of a performance bonus paid to the previous operator. The
decrease period to date is the result of reduced O&M costs incurred by the new
operator and the elimination of the performance bonus partially offset by
recognizing O&M costs for a full six months in 1999 versus 1998 when O&M costs
were recognized subsequent to the acquisition of the Partnerships on
January 14, 1998.
Depreciation and amortization for the second quarter and period to date
increased $246,000 and $3.0 million respectively. The increase for the quarter
is due to scheduled changes in amortization rates. The increase period to
date is primarily the result of recognizing depreciation and amortization on
the facilities and power purchase agreements, respectively, for a full six
months in 1999 versus 1998 when depreciation and amortization was recognized
subsequent to the acquisition of the Partnerships on January 14, 1998.
Interest expense of NE LP decreased $460,000 for the second quarter and
increased $3.6 million period to date. The quarterly decrease is primarily the
result of decreasing principal balances on the notes payable to the Funding
Corp. The period to date increase is primarily the result of recognizing
interest expense on notes payable to the Funding Corp. for a full six months in
1999 versus 1998 when interest expense was recognized subsequent to the
acquisition of the Partnerships on January 14, 1998, partially offset by
decreasing principal balances on the notes payable. Additionally, NE LP
recognized interest expense on the note payable to the Acquisition Corp. for a
full six months in 1999 versus 1998 when interest expense was recognized
subsequent to the issuance of $220 million of debt in February 1998. Interest
expense of the Partnerships decreased $511,000 for the second quarter and
increased $1.2 million period to date. The quarterly decrease is primarily the
result of decreasing principal balances on the notes payable to the Funding
Corp. The period to date increase is primarily the result of recognizing
interest expense on notes payable to the Funding Corp. for a full six months in
1999 versus 1998 when interest expense was recognized subsequent to the
acquisition of the Partnerships on January 14, 1998, partially offset by
decreasing principal balances on the notes payable.
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 $200,000 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 agreements.
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 Funding Corp. and the Acquisition Corp. - The Funding Corp. made semi-
annual debt principal payments and debt interest payments of $11.8 million and
$22.0 million, respectively, in June 1999. The Acquisition Corp. made a semi-
annual debt interest payment of $8.8 million in June 1999. Interest expense
for the Funding Corp. for the second quarter and period to date decreased
$456,000 and $910,000, respectively. The decrease for the quarter and period
to date is due to decreasing principal balances on the securities payable.
Interest expense for the Acquisition Corp. for the second quarter and period to
date increased $50,000 and $2.4 million, respectively. The increase period to
date is primarily the result of recognizing interest expense on the
Acquisition Corp. securities payable for a full six months in 1999 versus 1998
when interest expense was recognized subsequent to the issuance of $220 million
of debt in February 1998.
Year 2000 - As of June 30, 1999, the Registrants are essentially complete with
their plan to address the potential impact of the year 2000 on their technology
systems, except for NJEAs plan which will be completed during a scheduled
outage in October 1999. The Registrants have also prepared their year 2000
contingency plans, which are based upon certain hypothetical year 2000
scenarios at the operating level (such as generation and transmission), as
well as at the business level (such as customer service, procurement and
accounting). These plans are intended to mitigate both internal risks and
potential risks in the Registrants supply chain. During the second half of
1999, the Registrants will continue to conduct training and drills, as well as
evaluate and update their contingency plans. In addition, the Registrants have
retained independent engineering and hardware/software remediation firms to
validate and verify mission critical and other important aspects of their year
2000 program. The estimated cost of addressing year 2000 issues is expected to
be approximately $500,000, of which approximately 50% had been spent through
June 30, 1999. The remainder is a cost estimate for completing NJEAs plan and
for verification, mitigation, training and rollover staffing. The Registrants
believe that the most reasonably likely worst case scenarios relating to the
year 2000 could include a temporary disruption of service to purchasing
utilities, caused by a potential disruption in fuel supply, water supply and
telecommunications.
LIQUIDITY AND CAPITAL RESOURCES
The Registrants - Cash flow generated by the Partnerships year to date has been
and is expected to remain sufficient to fund operating expenses of the
Registrants as well as fund the debt service requirements of the Funding Corp.
and the Acquisition Corp.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
27.1 Financial Data Schedule - ESI Tractebel Funding Corp.
27.2 Financial Data Schedule - Northeast Energy Associates, A Limited Partnership
27.3 Financial Data Schedule - North Jersey Energy Associates, A Limited Partnership
27.4 Financial Data Schedule - ESI Tractebel Acquisition Corp.
27.5 Financial Data Schedule - Northeast Energy, LP
(b) Reports On Form 8-K
None.
</TABLE>
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.
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)
NORTHEAST ENERGY, LP
(ESI Northeast Energy GP, Inc. as Administrative General Partner)
ESI TRACTEBEL FUNDING CORP.
ESI TRACTEBEL ACQUISITION CORP.
(Registrants)
Date: August 5, 1999
DILEK L. SAMIL
--------------
Dilek L. Samil
Treasurer of ESI Northeast Energy GP, Inc.
Treasurer of ESI Tractebel Funding Corp.
Treasurer of ESI Tractebel Acquisition Corp.
(Principal Financial and Principal Accounting Officer of the Registrants)
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from ESI
Tractebel Funding Corp.'s balance sheet as of June 30, 1999 and statement
of operations for the period ended June 30, 1999 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-1-1999
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> $1
<SECURITIES> $0
<RECEIVABLES> $24,922
<ALLOWANCES> $0
<INVENTORY> $0
<CURRENT-ASSETS> $24,923
<PP&E> $0
<DEPRECIATION> $0
<TOTAL-ASSETS> $456,969
<CURRENT-LIABILITIES> $24,922
<BONDS> $432,046
$0
$0
<COMMON> $1
<OTHER-SE> $0
<TOTAL-LIABILITY-AND-EQUITY> $456,969
<SALES> $0
<TOTAL-REVENUES> $21,981
<CGS> $0
<TOTAL-COSTS> $0
<OTHER-EXPENSES> $0
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $21,981
<INCOME-PRETAX> $0
<INCOME-TAX> $0
<INCOME-CONTINUING> $0
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $0
<EPS-BASIC> $0
<EPS-DILUTED> $0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Northeast Energy Associates, A Limited Partnership and North Jersey Energy
Associates, A Limited Partnership combined balance sheet as of June 30, 1999
and combined statement of operations for the period ended June 30, 1999 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-01-1999
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> $17,313
<SECURITIES> $0
<RECEIVABLES> $38,169
<ALLOWANCES> $0
<INVENTORY> $20,247
<CURRENT-ASSETS> $76,863
<PP&E> $513,617
<DEPRECIATION> $31,892
<TOTAL-ASSETS> $1,373,192
<CURRENT-LIABILITIES> $58,196
<BONDS> $432,046
$0
$0
<COMMON> $0
<OTHER-SE> $408,904
<TOTAL-LIABILITY-AND-EQUITY>$1,373,192
<SALES> $169,511
<TOTAL-REVENUES> $169,511
<CGS> $0
<TOTAL-COSTS> $107,498
<OTHER-EXPENSES> $3,426
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $30,820
<INCOME-PRETAX> $27,767
<INCOME-TAX> $0
<INCOME-CONTINUING> $27,767
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $27,767
<EPS-BASIC> $0
<EPS-DILUTED> $0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Northeast Energy Associates, A Limited Partnership and North Jersey Energy
Associates, A Limited Partnership combined balance sheet as of June 30, 1999
and combined statement of operations for the period ended June 30, 1999 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-01-1999
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> $17,313
<SECURITIES> $0
<RECEIVABLES> $38,169
<ALLOWANCES> $0
<INVENTORY> $20,247
<CURRENT-ASSETS> $76,863
<PP&E> $513,617
<DEPRECIATION> $31,892
<TOTAL-ASSETS> $1,373,192
<CURRENT-LIABILITIES> $58,196
<BONDS> $432,046
$0
$0
<COMMON> $0
<OTHER-SE> $408,904
<TOTAL-LIABILITY-AND-EQUITY>$1,373,192
<SALES> $169,511
<TOTAL-REVENUES> $169,511
<CGS> $0
<TOTAL-COSTS> $107,498
<OTHER-EXPENSES> $3,426
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $30,820
<INCOME-PRETAX> $27,767
<INCOME-TAX> $0
<INCOME-CONTINUING> $27,767
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $27,767
<EPS-BASIC> $0
<EPS-DILUTED> $0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from ESI
Tractebel Acquisition Corp.'s balance sheet as of June 30, 1999 and
statement of operations for the period ended June 30, 1999 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-01-1999
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> $0
<SECURITIES> $0
<RECEIVABLES> $0
<ALLOWANCES> $0
<INVENTORY> $0
<CURRENT-ASSETS> $0
<PP&E> $0
<DEPRECIATION> $0
<TOTAL-ASSETS> $220,152
<CURRENT-LIABILITIES> $7
<BONDS> $220,000
$0
$0
<COMMON> $0
<OTHER-SE> $12
<TOTAL-LIABILITY-AND-EQUITY> $220,152
<SALES> $0
<TOTAL-REVENUES> $8,789
<CGS> $0
<TOTAL-COSTS> $0
<OTHER-EXPENSES> $0
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $8,783
<INCOME-PRETAX> $6
<INCOME-TAX> $2
<INCOME-CONTINUING> $4
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $4
<EPS-BASIC> $0
<EPS-DILUTED> $0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet as of June 30, 1999 and the consolidated
statement of operations for the period ended June 30, 1999 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-01-1999
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> $18,141
<SECURITIES> $0
<RECEIVABLES> $38,169
<ALLOWANCES> $0
<INVENTORY> $20,247
<CURRENT-ASSETS> $77,691
<PP&E> $513,617
<DEPRECIATION> $31,892
<TOTAL-ASSETS> $1,380,117
<CURRENT-LIABILITIES> $58,335
<BONDS> $652,046
$0
$0
<COMMON> $0
<OTHER-SE> $195,690
<TOTAL-LIABILITY-AND-EQUITY> $1,380,117
<SALES> $169,511
<TOTAL-REVENUES> $169,511
<CGS> $0
<TOTAL-COSTS> $107,498
<OTHER-EXPENSES> $3,385
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $39,929
<INCOME-PRETAX> $18,699
<INCOME-TAX> $0
<INCOME-CONTINUING> $18,699
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $18,699
<EPS-BASIC> $0
<EPS-DILUTED> $0
</TABLE>
