NRG NORTHEAST GENERATING LLC - 10-Q Quarterly Report

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

o		Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934


For the Quarter Ended: September 30, 2003		Commission File No. 333-42638

NRG Northeast Generating LLC

(Exact name of Registrant as specified in its charter)


Delaware		41-1937472
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

901 Marquette Avenue, Suite 2300 Minneapolis, Minnesota		55402
(Address of principal executive offices)		(Zip Code)

(612) 373-5300

(Registrant’s telephone number, including area code)

None (Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)

Yes o No x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities and Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes x No o

TABLE OF CONTENTS


Part I — FINANCIAL INFORMATION
	Item I — Consolidated Financial Statements and Notes
		Consolidated Statements of Operations
		Consolidated Balance Sheets
		Consolidated Statements of Members’ Equity
		Consolidated Statements of Cash Flows
		Notes to Consolidated Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
Part II — OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 3. Defaults Upon Senior Securities
	Item 6. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
	Cautionary Statement Regarding Forward-Looking Statements
SIGNATURES
EX-31.1 Section 302 Certification
EX-31.2 Section 302 Certification
EX-31.3 Section 302 Certification
EX-32 Section 906 Certification

TABLE OF CONTENTS

INDEX


		Page No.

Part I
Item 1 Consolidated Financial Statements and Notes
	Consolidated Statements of Operations		3
	Consolidated Balance Sheets		4
	Consolidated Statements of Members’ Equity		5
	Consolidated Statements of Cash Flows		6
	Notes to Consolidated Financial Statements		7
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			31
Item 3 Quantitative and Qualitative Disclosures About Market Risk			31
Item 4 Controls and Procedures			31
Part II
Item 1 Legal Proceedings			32
Item 3 Defaults on Senior Securities			32
Item 6 Exhibits, Financial Statement Schedules, and Reports on Form 8-K			32
	Cautionary Statement Regarding Forward Looking Information		32
SIGNATURES			35

Part I — FINANCIAL INFORMATION

Item I — Consolidated Financial Statements and Notes

NRG Northeast Generating LLC and Subsidiaries
Consolidated Statements of Operations
(UNAUDITED)


		Three Months Ended						Nine Months Ended
		September 30,						September 30,

(In thousands)		2003			2002 (Restated)			2003			2002 (Restated)

Operating revenues
	Revenues	$	260,472		$	233,604		$	603,858		$	550,252
Operating costs and expenses
	Operating costs		145,400			182,104			500,601			390,657
	Depreciation		14,295			13,639			51,065			39,790
	General and administrative expenses		12,568			5,330			29,915			16,671
	Restructuring professional fees and expenses		515			—			1,081			—
	Restructuring and impairment charges		9,088			49,289			232,335			49,289

Operating (loss) income			78,606			(16,758	)		(211,139	)		53,845
Other income (expense)
	Other income, net		(27	)		133			(23	)		5,167
	Restructuring interest income		2			—			5			—
	Interest expense		(14,600	)		(12,877	)		(40,302	)		(39,621	)

Net (loss) income		$	63,981		$	(29,502	)	$	(251,459	)	$	19,391

See accompanying notes to consolidated financial statements.

NRG Northeast Generating LLC and Subsidiaries
Consolidated Balance Sheets (UNAUDITED)


					September 30,		December 31,
(In thousands)					2003		2002

Assets
Current Assets:
	Cash and cash equivalents				$	126	$	14,354
	Cash — restricted					3,555		—
	Accounts receivable, net of allowance for doubtful accounts of $0 and $1,344					285		118,153
	Accounts receivable — affiliate					622,893		—
	Inventory					130,175		123,963
	Derivative instruments valuation					253		23,039
	Prepaid expenses					39,489		38,309

		Total current assets				796,776		317,818
Property, plant and equipment, net of accumulated depreciation of $163,139 and $157,534						1,056,068		1,333,928
Deferred finance costs, net of accumulated amortization of $4,281 and $1,161						13,412		8,995
Derivative instruments valuation						—		9,601
Other assets, net of accumulated amortization of $4,359 and $2,605						28,996		23,395

		Total assets			$	1,895,252	$	1,693,737
Liabilities and Members’ Equity
Liabilities:
	Current portion of long-term debt				$	—	$	556,500
	Note payable — affiliate					—		30,000
	Accounts payable					—		14,607
	Accounts payable — affiliates					—		11,476
	Accrued fuel and purchased power expense					—		37,168
	Accrued interest					14,993		4,198
	Other accrued liabilities					6,341		11,713
	Derivative instruments valuation					646		13,017

		Total current liabilities				21,980		678,679
Derivative instruments valuation						—		7,559
Other long-term obligations						348		27,936

		Total liabilities not subject to compromise				22,328		714,174
Liabilities subject to compromise:
			Notes payable			586,500		—
			Accounts payable — trade			20		—
			Accounts payable — affiliate			522,278		—
			Accrued liabilities			46,586		—
			Other liabilities			18,271		—

				Total liabilities subject to compromise		1,173,655		—

Commitments and contingencies
Members’ equity						699,269		979,563

				Total liabilities and members’ equity	$	1,895,252	$	1,693,737

See accompanying notes to consolidated financial statements.

NRG Northeast Generating LLC and Subsidiaries
Consolidated Statements of Members’ Equity (UNAUDITED)

For the three months ended September 30, 2003 and 2002


						Accumulated
	Member					Other		Total
	Contributions/		Accumulated			Comprehensive		Members '
(In thousands)	Distributions		Net Income (Loss)			Income (Loss)		Equity

Balances at June 30, 2002	$	788,315	$	207,421		$	66,772	$	1,062,508

Net loss				(29,502	)				(29,502	)
Deferred unrealized gains on derivatives, net							19,035		19,035

Comprehensive loss									(10,467	)

Balances at September 30, 2002, as restated	$	788,315	$	177,919		$	85,807	$	1,052,041

Balances at June 30, 2003	$	788,315	$	(153,027	)	$	—	$	635,288

Net income				63,981					63,981

Comprehensive income									63,981

Balances at September 30, 2003	$	788,315	$	(89,046	)	$	—	$	699,269

For the nine months ended September 30, 2003 and 2002


	Member					Accumulated Other			Total
	Contributions/		Accumulated			Comprehensive			Members '
(In thousands)	Distributions		Net Income (Loss)			Income (Loss)			Equity

Balances at December 31, 2001	$	788,315	$	158,528		$	107,741		$	1,054,584

Net income				19,391						19,391
Deferred unrealized loss on derivatives, net							(21,934	)		(21,934	)

Comprehensive loss										(2,543	)

Balances at September 30, 2002, as restated	$	788,315	$	177,919		$	85,807		$	1,052,041

Balances at December 31, 2002	$	788,315	$	162,413		$	28,835		$	979,563

Net loss				(251,459	)					(251,459	)
Deferred unrealized loss on derivatives, net							(28,835	)		(28,835	)

Comprehensive loss										(280,294	)

Balances at September 30, 2003	$	788,315	$	(89,046	)	$	—		$	699,269

See accompanying notes to consolidated financial statements.

NRG Northeast Generating LLC and Subsidiaries
Consolidated Statements of Cash Flows (UNAUDITED)


						Nine Months
			Nine Months			Ended
			Ended			September 30, 2002
(In thousands)			September 30, 2003			(Restated)

Cash flows from operating activities:
	Net (loss)/income		$	(251,459	)	$	19,391
	Adjustments to reconcile net (loss)/income to net cash provided (used) by operating activities
		Depreciation		51,883			37,990
		Unrealized (gain)loss on energy contracts		(16,377	)		8,614
		Amortization of other assets		—			651
		Amortization of deferred financing costs		3,120			310
		Asset and impairments		230,570			49,289
		Allowance for doubtful accounts		1,344			—
		(Gain) loss on disposal of property and equipment		(818	)		1,800
		Changes in assets and liabilities:
		Accounts receivable, net		116,524			(43,388	)
		Inventory		(6,212	)		57,418
		Prepaid expenses		(1,180	)		(15,099	)
		Accounts payable		(14,587	)		(1,410	)
		Accounts receivable/payable — affiliates, net		(112,091	)		(70,752	)
		Accrued interest		12,993			14,382
		Accrued fuel and purchased power expense		(3,841	)		(19,881	)
		Other accrued liabilities		23,960			7,939
		Other assets and liabilities		(33,383	)		(1,708	)

Net cash provided by operating activities				446			45,546

Cash flows from investing activities:
		Capital expenditures		(8,458	)		(21,788	)
		Investment in restricted funds		(3,555	)		(310	)
		Proceeds from disposition of property and equipment		4,876			—

Net cash used by investing activities				(7,137	)		(22,098	)

Cash flows from financing activities:
		Deferred financing costs		(7,537	)		—
		Proceeds from note payable — affiliate		—			30,000
		Principal payments on long-term debt		—			(53,500	)

Net cash used by financing activities				(7,537	)		(23,500	)

Net decrease in cash and cash equivalents				(14,228	)		(52	)
Cash and cash equivalents at beginning of period				14,354			370

Cash and cash equivalents at end of period			$	126		$	318

See accompanying notes to consolidated financial statements.

NRG Northeast Generating LLC and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NRG Northeast Generating LLC (the Company or NRG Northeast), a wholly-owned indirect subsidiary of NRG Energy, Inc. (NRG Energy), owns electric power genera

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