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Commission
File Number |
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Exact name of registrants as specified in their charters,
State of Organization, address of principal executive offices
and registrants' telephone number |
IRS Employer
Identification
Number |
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33-87902
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ESI TRACTEBEL FUNDING CORP.
(a Delaware corporation) |
04-3255377
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33-87902-02 |
NORTHEAST ENERGY ASSOCIATES,
A LIMITED PARTNERSHIP
(a Massachusetts limited partnership) |
04-2955642 |
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33-87902-01 |
NORTH JERSEY ENERGY ASSOCIATES,
A LIMITED PARTNERSHIP
(a New Jersey limited partnership) |
04-2955646 |
|
333-52397 |
ESI TRACTEBEL ACQUISITION CORP.
(a Delaware corporation) |
65-0827005 |
|
333-52397-01 |
NORTHEAST ENERGY, LP
(a Delaware limited partnership) |
65-0811248 |
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c/o FPL Energy, LLC
700 Universe Boulevard
Juno Beach, Florida 33408
(561) 691-7171
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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 [ ]
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Indicate by check mark whether the registrants are accelerated filers as defined in Rule 12b-2 of the Securities Exchange Act of 1934. Yes [ ] No [X]
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APPLICABLE ONLY TO CORPORATE ISSUERS: |
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As of October 31, 2004, there were issued and outstanding 10,000 shares of ESI Tractebel Funding Corp.'s common stock.
As of October 31, 2004, there were issued and outstanding 20 shares of ESI Tractebel Acquisition Corp.'s common stock.
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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 representations whatsoever as to any other registrant.
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CAUTIONARY STATEMENTS AND RISK FACTORS THAT MAY AFFECT FUTURE RESULTS |
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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 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 su
ch as "will likely result," "are expected to," "will continue," "is anticipated," "believe," "could," "estimated," "may," "plan," "potential," "projection," "target," "outlook") are not statements of historical facts and may be forward-looking. Forward-looking statements involve estimates, assumptions and uncertainties. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors (in addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements) that could cause the registrants' actual results to differ materially from those contained in forward-looking statements made by or on behalf of any of the registrants.
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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.
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The following are some important factors that could have a significant impact on the registrants' operations and financial results, and could cause the registrants' actual results or outcomes to differ materially from those discussed in the forward-looking statements:
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·
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The registrants are subject to changes in laws or regulations, including the Public Utility Regulatory Policies Act of 1978, as amended (PURPA), changing governmental policies and regulatory actions, including those of the Federal Energy Regulatory Commission (FERC), with respect to, but not limited to, acquisition and disposal of assets and facilities, and present or prospective competition.
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·
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The registrants are subject to extensive federal, state and local environmental statutes, rules and regulations relating to air quality, water quality, waste management, natural resources and health and safety that could, among other things, restrict or limit the output of certain facilities or the use of certain fuels required for the production of electricity and/or increase costs. There are significant capital, operating and other costs associated with compliance with these environmental statutes, rules and regulations, and those costs could be even more significant in the future.
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·
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The registrants operate in a changing market environment influenced by various legislative and regulatory initiatives regarding deregulation, regulation or restructuring of the energy industry, including deregulation of the production and sale of electricity. The registrants will need to adapt to these changes and may face increasing competitive pressure.
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·
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The Partnerships were developed and operated as qualifying facilities (QFs) under PURPA and the regulations promulgated thereunder by the FERC. However, in December 2003, an amended and restated power purchase agreement of NJEA became effective and NJEA no longer operates as a QF. NEA continues to operate as a QF. FERC regulations require that at least 5% of a QF's total energy output be useful thermal energy. To meet the QF requirement, NEA sells steam under a long-term sales agreement to an unrelated third party for use in a gas and chemical processing facility to maintain NEA's QF status. NEA is dependent upon the on-going operations of this facility. Loss of QF status would entitle one power purchaser to renegotiate the price provisions of its power purchase agreement.
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·
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A substantial portion of the output from the Partnerships' power generation facilities is sold under long-term power purchase agreements to four regulated utilities, two of which are under common control. The limited number of power purchasers creates a concentration of counterparty risk. The remaining output from the power generation facilities is sold, from time to time, in the merchant markets. In addition, it is expected that upon expiration of the power purchase agreements, the residual portion of the electrical output will be sold in the merchant market. Merchant plants sell power based on market conditions at the time of sale. The amount and timing of revenues to be received from the merchant markets in the future is uncertain. In December 2003, an amended and restated power purchase agreement between NJEA and a New Jersey utility became effective. The agreement provides for, among other things, the ability to deliver electricity to the New Jersey utility from sources other than the NJEA facility.
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·
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The operation of power generation facilities involves many risks, including start up risks, breakdown or failure of equipment, transmission lines or pipelines, use of new technology, the dependence on a specific fuel source or the impact of unusual or adverse weather conditions (including natural disasters), as well as the risk of performance below expected or contracted levels of output or efficiency. This could result in lost revenues and/or increased expenses. Insurance, warranties or performance guarantees may not cover any or all of the lost revenues or increased expenses, including the cost of replacement power. Breakdown or failure of an operating facility may prevent the facility from performing under applicable power sales agreements which, in certain situations, could result in termination of the agreement or payment of liquidated damages.
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·
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The registrants use derivative instruments, such as swaps and options, to manage their commodity and financial market risks. The registrants could recognize financial losses as a result of volatility in the market values of these contracts, or if a counterparty fails to perform. In the absence of actively quoted market prices and pricing information from external sources, the valuation of these derivative instruments involves management's judgment or use of estimates. As a result, changes in the underlying assumptions or use of alternative valuation methods could affect the value of the reported fair value of these contracts.
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·
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In addition to risks discussed elsewhere, risk factors specifically affecting the registrants' success include the ability to efficiently operate generating assets, the successful and timely completion of project restructuring activities, the price and supply of fuel, transmission constraints, competition from new sources of generation, excess generation capacity and demand for power. There can be significant volatility in market prices for fuel, and there are other financial, counterparty and market risks that are beyond the control of the registrants. The registrants' inability or failure to effectively hedge their assets or positions against changes in commodity prices, interest rates, counterparty credit risk or other risk measures could significantly impair their future financial results.
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·
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The registrants' results of operations can be affected by changes in the weather. Severe weather can be destructive, causing outages and/or property damage, which could require additional costs to be incurred.
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The registrants are subject to costs and other effects of legal and administrative proceedings, settlements, investigations and claims, as well as the effect of new, or changes in, tax laws, rates or policies, rates of inflation, accounting standards, securities laws or corporate governance requirements.
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·
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The registrants are subject to direct and indirect effects of terrorist threats and activities. Generation and transmission facilities, in general, have been identified as potential targets. The effects of terrorist threats and activities include, among other things, terrorist actions or responses to such actions or threats, the inability to generate, purchase or transmit power, the risk of a significant slowdown in growth or a decline in the U.S. economy, delay in economic recovery in the U.S., and the increased cost and adequacy of security and insurance.
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·
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The registrants' ability to obtain insurance, and the cost of and coverage provided by such insurance, could be affected by national events as well as registrant-specific events.
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·
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The registrants are substantially leveraged. The ability of the registrants to make interest and principal payments and fund capital expenditures is dependent on the future performance of the Partnerships. Future performance is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond the control of the registrants. The registrants are also subject to restrictive covenants under their debt agreements that will limit the ability to borrow additional funds.
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·
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All obligations of the Partnerships are non-recourse to the direct and indirect owners of the registrants. Following any default by the Partnerships, security is limited to the owners' economic interests in the Partnerships. The owners have no meaningful revenues other than the distributions they receive from the Partnerships. In the event of default, the ability of the owners to satisfy any obligations will be limited to amounts payable by the Partnerships as distributions.
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The issues and associated risks and uncertainties described above are not the only ones the registrants may face. Additional issues may arise or become material as the energy industry evolves. The risks and uncertainties associated with these additional issues could impair the registrants' businesses in the future.
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September 30,
2004 |
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December 31,
2003 |
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ASSETS
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Current assets: |
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Cash and cash equivalents |
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$ |
75,667 |
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$ |
58,907 |
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Accounts receivable |
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36,265 |
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33,957 |
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Due from related party |
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4,226 |
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3,237 |
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Spare parts inventories |
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4,605 |
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3,055 |
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Fuel inventories |
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9,059 |
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10,362 |
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Prepaid expenses and other current assets |
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12,255 |
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2,784 |
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Total current assets |
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142,077 |
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112,302 |
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Non-current assets: |
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Deferred debt issuance costs (net of accumulated amortization of $4,096 and $3,666, respectively) |
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2,864
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3,294 |
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Land |
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4,712 |
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4,712 |
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Cogeneration facilities and carbon dioxide facility (net of accumulated depreciation of $141,296 and $128,494, respectively) |
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378,775
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391,047 |
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Power purchase agreements (net of accumulated amortization of $366,891 and $318,743, respectively) |
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548,053
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596,201 |
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Other assets |
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52,090 |
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9,663 |
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Total non-current assets |
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986,494 |
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1,004,917 |
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TOTAL ASSETS |
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$ |
1,128,571 |
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$ |
1,117,219 |
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LIABILITIES AND PARTNERS' EQUITY |
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Current liabilities: |
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Current portion of notes payable - the Funding Corp. |
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$ |
36,956 |
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$ |
28,564 |
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Current portion of notes payable - the Acquisition Corp. |
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8,800 |
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8,800 |
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Current portion of note payable - affiliate |
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2,754 |
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2,605 |
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Accrued interest payable |
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12,543 |
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|
48 |
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Accounts payable |
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6,420 |
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13,356 |
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Due to related parties |
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25,251 |
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13,958 |
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Other accrued expenses |
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14,896 |
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10,890 |
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Total current liabilities |
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107,620 |
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78,221 |
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Non-current liabilities: |
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Deferred credit - fuel contracts |
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- |
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108,274 |
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Notes payable - the Funding Corp. |
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300,976 |
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323,650 |
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Notes payable - the Acquisition Corp. |
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189,200 |
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193,600 |
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Note payable - affiliate |
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22,170 |
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23,583 |
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Energy bank and other liabilities |
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96,599 |
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|
108,582 |
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Lease payable |
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|
740 |
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|
815 |
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Total non-current liabilities |
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609,685 |
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758,504 |
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COMMITMENTS AND CONTINGENCIES |
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Partners' equity: |
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General partners |
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8,077 |
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|
5,431 |
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Limited partners |
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402,683 |
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|
|
273,044 |
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Accumulated other comprehensive income |
|
|
506 |
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|
|
2,019 |
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Total partners' equity |
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411,266 |
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|
|
280,494 |
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TOTAL LIABILITIES AND PARTNERS' EQUITY |
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$ |
1,128,571 |
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$ |
1,117,219 |
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