-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MBEDwGpQr0lEhylRAPbd+2DIVvIn/rxny0pJMvA2nK3ErFQG4U9nvrc4cgpMZT+o oVAeXuiZ3/cKoLMnMXE/KA== 0001059025-01-500010.txt : 20010516 0001059025-01-500010.hdr.sgml : 20010516 ACCESSION NUMBER: 0001059025-01-500010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHEAST ENERGY LP CENTRAL INDEX KEY: 0001059025 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 650811248 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-52397-01 FILM NUMBER: 1638976 BUSINESS ADDRESS: STREET 1: C/O FPL ENERGY INC STREET 2: 700 UNIVERSE BLVD CITY: JUNO BEACH STATE: FL ZIP: 33408-2683 BUSINESS PHONE: 5616917171 MAIL ADDRESS: STREET 1: C/O FPL ENERGY INC STREET 2: 700 UNIVERSE BLVD CITY: JUNO BEACH STATE: FL ZIP: 33408-2683 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESI TRACTEBEL FUNDING CORP CENTRAL INDEX KEY: 0000934665 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 043255377 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-87902 FILM NUMBER: 1638977 BUSINESS ADDRESS: STREET 1: C/O FPL ENERGY INC STREET 2: 700 UNIVERSE BLVD CITY: JUNO BEACH STATE: FL ZIP: 33408-2683 BUSINESS PHONE: 5616917171 MAIL ADDRESS: STREET 1: C/O FPL ENERGY INC STREET 2: 700 UNIVERSE BLVD CITY: JUNO BEACH STATE: FL ZIP: 33408-2683 FORMER COMPANY: FORMER CONFORMED NAME: IEC FUNDING CORP DATE OF NAME CHANGE: 19941227 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH JERSEY ENERGY ASSOCIATES CENTRAL INDEX KEY: 0000934666 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 042955646 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-87902-01 FILM NUMBER: 1638978 BUSINESS ADDRESS: STREET 1: C/O FPL ENERGY INC STREET 2: 700 UNIVERSE BLVD CITY: JUNO BEACH STATE: FL ZIP: 33408-2683 BUSINESS PHONE: 5616917171 MAIL ADDRESS: STREET 1: C/O FPL ENERGY INC STREET 2: 700 UNIVERSE BLVD CITY: JUNO BEACH STATE: FL ZIP: 33408-2683 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHEAST ENERGY ASSOCIATES CENTRAL INDEX KEY: 0000934667 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 042955642 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-87902-02 FILM NUMBER: 1638979 BUSINESS ADDRESS: STREET 1: C/O FPL ENERGY INC STREET 2: 700 UNIVERSE BLVD CITY: JUNO BEACH STATE: FL ZIP: 33408-2683 BUSINESS PHONE: 5616917171 MAIL ADDRESS: STREET 1: C/O FPL ENERGY INC STREET 2: 700 UNIVERSE BLVD CITY: JUNO BEACH STATE: FL ZIP: 33408-2683 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESI TRACTEBEL ACQUISITION CORP CENTRAL INDEX KEY: 0001059027 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 650827005 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-52397 FILM NUMBER: 1638980 BUSINESS ADDRESS: STREET 1: C/O FPL ENERGY INC STREET 2: 700 UNIVERSE BLVD CITY: JUNO BEACH STATE: FL ZIP: 33408-2683 BUSINESS PHONE: 5616917171 MAIL ADDRESS: STREET 1: C/O FPL ENERGY INC STREET 2: 700 UNIVERSE BLVD CITY: JUNO BEACH STATE: FL ZIP: 33408-2683 10-Q 1 file10q.txt FIRST QUARTER 10-Q 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 March 31, 2001 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, LLC 700 Universe Boulevard Juno Beach, Florida 33408 (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 March 31, 2001, there were issued and outstanding 10,000 shares of ESI Tractebel Funding Corp.'s common stock. As of March 31, 2001, there were issued and outstanding 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 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 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. 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 changes in laws or regulations, changing governmental policies and regulatory actions, including those of the Federal Energy Regulatory Commission and the Public Utility Regulatory Policies Act of 1978, as amended, acquisition, disposal, depreciation and amortization 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, availability, pricing and transportation of fuel and other energy commodities, market demand for energy from plants or facilities, changes in tax rates or policies or in rates of inflation or in accounting standards, unanticipated delays or changes in costs for capital projects, 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. 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. Condensed Financial Statements NORTHEAST ENERGY, LP (A PARTNERSHIP) AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Thousands of Dollars) (Unaudited)
March 31, December 31, 2001 2000 ASSETS Current assets: Cash and cash equivalents ........................................................ $ 75,112 $ 35,360 Accounts receivable .............................................................. 42,871 32,857 Due from related party ........................................................... 1,458 2,762 Spare parts inventories .......................................................... 12,020 11,251 Fuel inventories ................................................................. 642 3,793 Prepaid expenses and other current assets ........................................ 5,034 452 Total current assets ........................................................... 137,137 86,475 Non-current assets: Deferred debt issuance costs (net of accumulated amortization of $1,968 and $1,811, respectively) .......................................................... 4,991 5,149 Cogeneration facilities and carbon dioxide facility (net of accumulated depreciation of $70,416 and $64,866, respectively) ............................. 448,580 454,068 Power purchase agreements (net of accumulated amortization of $165,569 and $152,246, respectively) ........................................................ 723,187 736,510 Other assets ..................................................................... 85 107 Total non-current assets ....................................................... 1,176,843 1,195,834 TOTAL ASSETS ....................................................................... $1,313,980 $1,282,309 LIABILITIES AND PARTNERS' EQUITY Current liabilities: Current portion of notes payable - the Funding Corp. ............................. $ 20,160 $ 20,160 Accounts payable ................................................................. 28,903 17,457 Accrued interest payable ......................................................... 14,335 - Due to related parties ........................................................... 3,436 954 Other accrued expenses ........................................................... 16,363 12,811 Total current liabilities ...................................................... 83,197 51,382 Non-current liabilities: Deferred credit - fuel contracts ................................................. 266,523 271,735 Notes payable - the Funding Corp. ................................................ 398,720 398,720 Note payable - the Acquisition Corp. ............................................. 220,000 220,000 Amounts due utilities for energy bank balances ................................... 161,171 162,756 Lease payable .................................................................... 969 969 Total non-current liabilities .................................................. 1,047,383 1,054,180 COMMITMENTS AND CONTINGENCIES Partners' equity: General partners ................................................................. 3,598 3,534 Limited partners ................................................................. 176,333 173,213 Accumulated other comprehensive income ........................................... 3,469 - Total partners' equity ......................................................... 183,400 176,747 TOTAL LIABILITIES AND PARTNERS' EQUITY ............................................. $1,313,980 $1,282,309
This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated and Combined Financial Statements appearing in the combined Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (2000 Form 10-K) for NE LP. NORTHEAST ENERGY, LP (A PARTNERSHIP) AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Thousands of Dollars) (Unaudited)
Three Months Ended March 31, 2001 2000 REVENUES ............................................................................. $ 92,549 $ 90,102 COSTS AND EXPENSES: Fuel ............................................................................... 46,342 37,120 Operations and maintenance ......................................................... 3,630 3,516 Depreciation and amortization ...................................................... 18,873 18,573 General and administrative ......................................................... 2,364 2,286 Total costs and expenses ......................................................... 71,209 61,495 OPERATING INCOME ..................................................................... 21,340 28,607 OTHER EXPENSE (INCOME): Amortization of debt issuance costs ................................................ 157 157 Interest expense ................................................................... 18,616 19,239 Interest income .................................................................... (431) (330) Change in fair value of derivatives ................................................ 18,081 - Total other expense - net ........................................................ 36,423 19,066 Income (loss) before cumulative effect of a change in accounting principle ........... (15,083) 9,541 Cumulative effect of adopting FAS 133 - Accounting for Derivative Instruments and Hedging Activities ............................................................. 18,268 - NET INCOME............................................................................ $ 3,185 $ 9,541
This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated and Combined Financial Statements appearing in the 2000 Form 10-K for NE LP. NORTHEAST ENERGY, LP (A PARTNERSHIP) AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Thousands of Dollars) (Unaudited)
Three Months Ended March 31, 2001 2000 NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................ $ 39,792 $ 34,130 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ............................................................... (40) - Net cash used in investing activities ............................................ (40) - CASH FLOWS FROM FINANCING ACTIVITIES ................................................. - - Net increase in cash and cash equivalents ............................................ 39,752 34,130 Cash and cash equivalents at beginning of period ..................................... 35,360 33,085 Cash and cash equivalents at end of period ........................................... $ 75,112 $ 67,215
This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated and Combined Financial Statements appearing in the 2000 Form 10-K for NE LP. NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP CONDENSED COMBINED BALANCE SHEETS (Thousands of Dollars) (Unaudited)
March 31, December 31, 2001 2000 ASSETS Current assets: Cash and cash equivalents ........................................................ $ 74,215 $ 34,471 Accounts receivable .............................................................. 42,871 32,857 Due from related party ........................................................... 1,458 2,762 Spare parts inventories .......................................................... 12,020 11,251 Fuel inventories ................................................................. 642 3,793 Prepaid expenses and other current assets ........................................ 5,034 452 Total current assets ........................................................... 136,240 85,586 Non-current assets: Cogeneration facilities and carbon dioxide facility (net of accumulated depreciation of $70,416 and $64,866, respectively) ............................. 448,580 454,068 Power purchase agreements (net of accumulated amortization of $165,569 and $152,246, respectively) ........................................................ 723,187 736,510 Other assets ..................................................................... 85 107 Total non-current assets ....................................................... 1,171,852 1,190,685 TOTAL ASSETS ....................................................................... $1,308,092 $1,276,271 LIABILITIES AND PARTNERS' EQUITY Current liabilities: Current portion of notes payable - the Funding Corp. ............................. $ 20,160 $ 20,160 Accounts payable ................................................................. 28,903 17,457 Accrued interest payable ......................................................... 9,940 - Due to related parties ........................................................... 3,436 842 Other accrued expenses ........................................................... 16,220 12,784 Total current liabilities ...................................................... 78,659 51,243 Non-current liabilities: Deferred credit - fuel contracts ................................................. 266,523 271,735 Notes payable - the Funding Corp. ................................................ 398,720 398,720 Amounts due utilities for energy bank balances ................................... 161,171 162,756 Lease payable .................................................................... 969 969 Total non-current liabilities .................................................. 827,383 834,180 COMMITMENTS AND CONTINGENCIES Partners' equity: General partner .................................................................. 3,987 3,909 Limited partners ................................................................. 394,594 386,939 Accumulated other comprehensive income ........................................... 3,469 - Total partners' equity ......................................................... 402,050 390,848 TOTAL LIABILITIES AND PARTNERS' EQUITY ............................................. $1,308,092 $1,276,271
This report should be read in conjunction with the Notes to Condensed Combined Financial Statements herein and the Notes to Consolidated and Combined Financial Statements appearing in the 2000 Form 10-K for NEA and NJEA. NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP CONDENSED COMBINED STATEMENTS OF OPERATIONS (Thousands of Dollars) (Unaudited)
Three Months Ended March 31, 2001 2000 REVENUES ............................................................................. $ 92,549 $ 90,102 COSTS AND EXPENSES: Fuel ............................................................................... 46,342 37,120 Operations and maintenance ......................................................... 3,630 3,516 Depreciation and amortization ...................................................... 18,873 18,573 General and administrative ......................................................... 2,364 2,286 Total costs and expenses ......................................................... 71,209 61,495 OPERATING INCOME ..................................................................... 21,340 28,607 OTHER EXPENSE (INCOME): Interest expense ................................................................... 14,221 14,843 Interest income .................................................................... (427) (323) Change in fair value of derivatives ................................................ 18,081 - Total other expense - net ........................................................ 31,875 14,520 Income (loss) before cumulative effect of a change in accounting principle ........... (10,535) 14,087 Cumulative effect of adopting FAS 133 - Accounting for Derivative Instruments and Hedging Activities ............................................................. 18,268 - NET INCOME............................................................................ $ 7,733 $ 14,087
This report should be read in conjunction with the Notes to Condensed Combined Financial Statements herein and the Notes to Consolidated and Combined Financial Statements appearing in the 2000 Form 10-K for NEA and NJEA. NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP CONDENSED COMBINED STATEMENTS OF CASH FLOWS (Thousands of Dollars) (Unaudited)
Three Months Ended March 31, 2001 2000 NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................ $ 39,784 $ 34,089 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ............................................................... (40) - Net cash used in investing activities ............................................ (40) - CASH FLOWS FROM FINANCING ACTIVITIES ................................................. - - Net increase in cash and cash equivalents ............................................ 39,744 34,089 Cash and cash equivalents at beginning of period ..................................... 34,471 32,144 Cash and cash equivalents at end of period ........................................... $ 74,215 $ 66,233
This report should be read in conjunction with the Notes to Condensed Combined Financial Statements herein and the Notes to Consolidated and Combined Financial Statements appearing in the 2000 Form 10-K for NEA and NJEA. ESI TRACTEBEL FUNDING CORP. CONDENSED BALANCE SHEETS (Thousands of Dollars) (Unaudited)
March 31, December 31, 2001 2000 ASSETS Current assets: Cash ............................................................................. $ 1 $ 1 Interest receivable from the Partnerships ........................................ 9,940 - Current portion of notes receivable from the Partnerships ........................ 20,160 20,160 Total current assets ........................................................... 30,101 20,161 Notes receivable from the Partnerships ............................................. 398,720 398,720 TOTAL ASSETS ....................................................................... $ 428,821 $ 418,881 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of debt securities payable ....................................... $ 20,160 $ 20,160 Accrued interest ................................................................. 9,940 - Total current liabilities ...................................................... 30,100 20,160 Debt securities payable ............................................................ 398,720 398,720 COMMITMENTS AND CONTINGENCIES Stockholders' equity: Common stock, no par value, 10,000 shares authorized, issued and outstanding ..... 1 1 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......................................... $ 428,821 $ 418,881
CONDENSED STATEMENTS OF OPERATIONS (Thousands of Dollars) (Unaudited)
Three Months Ended March 31, 2001 2000 Interest income .................................................................... $ 9,940 $ 10,496 Interest expense ................................................................... (9,940) (10,496) NET INCOME.......................................................................... $ - $ -
These reports should be read in conjunction with the Notes to Condensed Financial Statements herein and the Notes to Financial Statements appearing in the 2000 Form 10-K for the Funding Corp. ESI TRACTEBEL ACQUISITION CORP. CONDENSED BALANCE SHEETS (Thousands of Dollars) (Unaudited)
March 31, December 31, 2001 2000 ASSETS Interest receivable from NE LP ..................................................... $ 4,395 $ - Non-current assets: Due from NE LP ................................................................... 152 152 Note receivable from NE LP ....................................................... 220,000 220,000 Total non-current assets ....................................................... 220,152 220,152 TOTAL ASSETS ....................................................................... $ 224,547 $ 220,152 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Income taxes payable ............................................................. $ 15 $ 14 Accrued interest ................................................................. 4,395 - Total current liabilities ...................................................... 4,410 14 Deferred credit - interest rate hedge .............................................. 108 112 Debt securities payable ............................................................ 220,000 220,000 COMMITMENTS AND CONTINGENCIES Stockholders' equity: Common stock, $.10 par value, 100 shares authorized, 20 shares issued and outstanding ................................................................ - - Retained earnings ................................................................ 29 26 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......................................... $ 224,547 $ 220,152
CONDENSED STATEMENTS OF OPERATIONS (Thousands of Dollars) (Unaudited)
Three Months Ended March 31, 2001 2000 Interest income .................................................................... $ 4,395 $ 4,396 Interest expense ................................................................... 4,391 (4,393) Income before income taxes ......................................................... 4 3 Income tax expense ................................................................. (1) (1) NET INCOME.......................................................................... $ 3 $ 2
These reports should be read in conjunction with the Notes to Condensed Financial Statements herein and the Notes to Financial Statements appearing in the 2000 Form 10-K for the Acquisition Corp. NORTHEAST ENERGY, LP (A PARTNERSHIP) AND SUBSIDIARIES NORTHEAST ENERGY ASSOCIATES, A LIMITED PARTNERSHIP AND NORTH JERSEY ENERGY ASSOCIATES, A LIMITED PARTNERSHIP ESI TRACTEBEL FUNDING CORP. ESI TRACTEBEL ACQUISITION CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) The accompanying condensed consolidated financial statements, condensed combined financial statements and condensed financial statements should be read in conjunction with the 2000 Form 10-K for 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. The Funding Corp. and the Acquisition Corp. had no cash transactions for the three months ended March 31, 2001 and 2000 and therefore have not presented a statement of cash flows. The results of operations for an interim period may not give a true indication of results for the year. 1. Combined Statement of Partners' Equity The Combined Statement of Partners' Equity of NEA's and NJEA's general partner (GP) and limited partner (LP) equity balances are comprised of the following:
NEA NJEA Consolidated GP LP Total GP LP Total GP LP Total (Thousands of Dollars) Balances, December 31, 2000 .. $ 1,447 $ 143,336 $ 144,783 $ 2,462 $ 243,603 $ 246,065 $ 3,909 $ 386,939 $ 390,848 Balances, March 31, 2001 ..... $ 1,517 $ 150,309 $ 151,826 $ 2,503 $ 247,721 $ 250,224 $ 4,020 $ 398,030 $ 402,050
2. Accounting for Derivative Instruments and Hedging Activities Effective January 1, 2001, NE LP and the Partnerships adopted Statement of Financial Accounting Standards No. (FAS) 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by FAS 137 and 138 (collectively, FAS 133). As a result, beginning in January 2001, derivative instruments are recorded on NE LP's and the Partnerships' balance sheets as an asset (in prepaid expenses and other current assets), measured at fair value. NE LP and the Partnerships use derivative instruments (primarily swaps) to manage the commodity price risk inherent in fuel purchases. For NE LP and the Partnerships, changes in the derivatives' fair values are recognized currently in earnings (in change in fair value derivatives) unless hedge accounting is applied. While substantially all of NE LP's and the Partnerships' derivative transactions are entered into for the purposes described above, hedge accounting is only applied where specific criteria are met and it is practicable to do so. In order to apply hedge accounting, the transaction must be designated as a hedge, and it must be highly effective. The hedging instrument's effectiveness is assessed utilizing regression analysis at the inception of the hedge and on at least a quarterly basis throughout its life. Hedges are considered highly effective when a correlation coefficient of .8 or higher is achieved. Substantially all of the transactions that NE LP and the Partnerships have designated as hedges are cash flow hedges. The effective portion of the gain or loss on a derivative instrument designated as a cash flow hedge is reported as a component of other comprehensive income and is reclassified into earnings in the period(s) during which the transaction being hedged affects earnings. The ineffective portion of these hedges flows through earnings in the current period. Settlement gains and losses are passed through fuel expense. In January 2001, NE LP and the Partnerships recorded an $18.3 million gain as the cumulative effect of adopting FAS 133, representing the effect of those derivative instruments for which hedge accounting was not applied. For the three months ended March 31, 2001, NE LP and the Partnerships recorded a net mark-to-market loss of $18.1 million representing the change in fair value of derivative instruments. For those contracts where hedge accounting was applied, the adoption of the new rules resulted in a credit of approximately $4.3 million to other comprehensive income for NE LP and the Partnerships. Comprehensive income of NE LP and the Partnerships, totaling $6.7 million and $11.2 million, respectively, for the three months ended March 31, 2001, includes net income and approximately $3.5 million of net unrealized gains on qualifying cash flow hedges of forecasted fuel purchases through October 2001. Accumulated other comprehensive income is separately displayed in NE LP's and the Partnerships' balance sheets. All of the accumulated other comprehensive income at March 31, 2001 will be reclassified into earnings within the next twelve months as the hedged fuel is consumed. Comprehensive income of NE LP and the Partnerships, totaling $9.5 million and $14.1 million, respectively, for the three months ended March 31, 2000, includes net income. In April 2001, the Financial Accounting Standards Board (FASB) reached tentative conclusions on several issues related to the power generation industry. After considering comments on the tentative conclusions, the FASB will issue final guidance that would be applied in the quarter following final resolution of the issues. The ultimate resolution of these issues could result in a requirement to mark certain of NE LP's and the Partnerships' power and fuel agreements to their fair values each reporting period. At this time, management is unable to estimate the effects on the financial statements of the tentative conclusions or any future decisions of the FASB. 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 Condensed Consolidated Financial Statements, Notes to Condensed Combined Financial Statements and Notes to Condensed Financial Statements contained herein and Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in the 2000 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. In the following discussion, all comparisons are with the corresponding items in the prior year. Results of Operations NE LP and the Partnerships - Net income declined in 2001 primarily due to increased fuel costs, partly offset by slightly higher revenues and the adoption of FAS 133. Revenues increased primarily as a result of increased electricity sales prices. Revenues in 2001 were comprised of $91.3 million of power sales to utilities and $1.2 million of steam sales. In 2000, revenues were comprised of $88.8 million of power sales to utilities and $1.3 million of steam sales. Power sales to utilities reflect changes in utility energy bank balances of $6.0 million and $6.4 million in 2001 and 2000, respectively. The changes in the energy bank balances, which increased reported revenues, are determined in accordance with scheduled or specified rates under certain power purchase agreements. Fuel expense increased primarily as a result of the increased price of natural gas required to fuel the facilities. These fuel costs were partly offset in 2001 and 2000 by $5.2 million of deferred credit amortization for fuel contracts. In January 2001, NE LP and the Partnerships recorded an $18.3 million gain as the cumulative effect of adopting FAS 133, representing the effect of those derivative instruments for which hedge accounting was not applied. In addition, for the three months ended March 31, 2001, NE LP and the Partnerships recorded a net mark-to-market loss of $18.1 million representing the change in fair value of derivative instruments. (See Note 2.) The Funding Corp. and the Acquisition Corp. - Both the Funding Corp. and the Acquisition Corp. use interest income and/or principal payments received from the notes receivable from the Partnerships and NE LP, respectively, to make scheduled interest and/or principal payments on their outstanding debt. Both are scheduled to make semi-annual debt and/or interest payments on June 30 and December 30, 2001. Interest expense for the Funding Corp. decreased as a result of decreasing principal balances on the securities payable. Liquidity and Capital Resources The Registrants - Cash flow generated by the Partnerships year to date has been and is expected to remain sufficient for at least the next twelve months 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 - None (b) Reports on Form 8-K - None 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: May 15, 2001 ROBERT L. MCGRATH Robert L. McGrath Vice President and 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) -----END PRIVACY-ENHANCED MESSAGE-----