SEC Filing | NRG Energy, Inc.

1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X Quarterly report pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934 Transition report pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934 For Quarter Ended March 31, 1999 Commission File Number 333-33397 -------------- --------- NRG Energy, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 41-1724239 - -------------------------------------------------------------------------------- (State or other jurisdiction of I.R.S. Employer Identification No.) incorporation or organization) 1221 Nicollet Mall, Minneapolis, Minnesota 55403 - -------------------------------------------------------------------------------- (Address of principal executive officers) (Zip Code) Registrant's telephone number, including area code (612) 373-5300 ----------------------------- None - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Indicated by check mark whether the registrant (1) has 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 (or for such 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 --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at May 12, 1999 ----------------------------- --------------------------- Common Stock, $1.00 par value 1,000 Shares All outstanding common stock of NRG Energy, Inc., is owned beneficially and of record by Northern States Power Company, a Minnesota corporation. The Registrant meets the conditions set forth in general instruction H (1) (a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format.

2 INDEX - -------------------------------------------------------------------------------- PAGE NO. -------- PART I Item 1 Consolidated Financial Statements and Notes Consolidated Statements of Income 1 Consolidated Balance Sheets 2-3 Consolidated Statements of Stockholder's Equity 4 Consolidated Statements of Cash Flows 5 Notes to Financial Statements 6-8 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 PART II Item 6 Exhibits, Financial Statement Schedules, and Reports 12 on Form 8-K SIGNATURES 13

3 PART I ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS AND NOTES - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF INCOME NRG ENERGY, INC. AND SUBSIDIARIES (UNAUDITED) THREE MONTHS ENDED MARCH 31, (Thousands of Dollars) 1999 1998 - --------------------------------------------------------------------------------------------------------- OPERATING REVENUES Revenues from wholly-owned operations $ 37,847 $ 24,522 Equity in earnings of unconsolidated affiliates 8,667 16,081 - --------------------------------------------------------------------------------------------------------- Total operating revenues 46,514 40,603 - --------------------------------------------------------------------------------------------------------- OPERATING COSTS AND EXPENSES Cost of wholly-owned operations 27,940 13,646 Depreciation and amortization 4,734 3,676 General, administrative, and development 15,985 13,170 - --------------------------------------------------------------------------------------------------------- Total operating costs and expenses 48,659 30,492 - --------------------------------------------------------------------------------------------------------- OPERATING (LOSS) INCOME (2,145) 10,111 - --------------------------------------------------------------------------------------------------------- OTHER INCOME (EXPENSE) Minority interest in earnings of consolidated subsidiary (464) (1,032) Other income, net 734 57 Interest expense (11,059) (11,453) - --------------------------------------------------------------------------------------------------------- Total other expense (10,789) (12,428) - --------------------------------------------------------------------------------------------------------- LOSS BEFORE INCOME TAXES (12,934) (2,317) INCOME TAXES - BENEFIT 11,994 8,406 - --------------------------------------------------------------------------------------------------------- NET (LOSS) INCOME $ (940) $ 6,089 ========================================================================================================= See notes to consolidated financial statements. 1

4 CONSOLIDATED BALANCE SHEETS NRG ENERGY, INC. AND SUBSIDIARIES (UNAUDITED) MARCH 31, DECEMBER 31, (Thousands of Dollars) 1999 1998 - ----------------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 12,468 $ 6,381 Restricted cash 2,137 4,021 Accounts receivable-trade, less allowance for doubtful accounts of $100 16,868 15,223 Accounts receivable-affiliates 18,606 7,324 Current portion of notes receivable - affiliates 2,959 4,460 Current portion of notes receivable - 26,200 Income taxes receivable 7,605 21,169 Inventory 4,286 2,647 Prepayments and other current assets 3,787 4,533 - ---------------------------------------------------------------------------------------------------------------------- Total current assets 68,716 91,958 - ---------------------------------------------------------------------------------------------------------------------- PROPERTY, PLANT AND EQUIPMENT, AT ORIGINAL COST In service 295,977 291,558 Under construction 7,264 5,352 - ---------------------------------------------------------------------------------------------------------------------- 303,241 296,910 Less accumulated depreciation (95,768) (92,181) - ---------------------------------------------------------------------------------------------------------------------- Net property, plant and equipment 207,473 204,729 - ---------------------------------------------------------------------------------------------------------------------- OTHER ASSETS Investments in projects 814,807 800,924 Capitalized project costs 15,171 13,685 Notes receivable, less current portion - affiliates 111,150 101,887 Notes receivable, less current portion 3,744 3,744 Intangible assets, net of accumulated amortization of $3,334 and $2,984 22,203 22,507 Debt issuance costs, net of accumulated amortization of $1,910 and $1,675 7,879 7,276 Other assets, net of accumulated amortization of $7,366 and $7,350 47,536 46,716 - ---------------------------------------------------------------------------------------------------------------------- Total other assets 1,022,490 996,739 - ---------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $ 1,298,679 $ 1,293,426 ====================================================================================================================== See notes to consolidated financial statements. 2

5 CONSOLIDATED BALANCE SHEETS NRG ENERGY, INC. AND SUBSIDIARIES (UNAUDITED) MARCH 31, DECEMBER 31, 1999 1998 - --------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES Current portion of long-term debt $ 7,602 $ 8,258 Revolving line of credit 30,000 - Accounts payable-trade 12,746 7,371 Accrued property and sales taxes 5,049 3,251 Accrued salaries, benefits and related costs 5,111 7,551 Accrued interest 9,119 7,648 Other current liabilities 5,489 8,289 - ------------------------------------------------------------------------------------------------- Total current liabilities 75,116 42,368 - ------------------------------------------------------------------------------------------------- MINORITY INTEREST 12,982 13,516 CONSOLIDATED PROJECT-LEVEL, LONG TERM, NONRECOURSE DEBT 115,417 113,437 CORPORATE LEVEL LONG-TERM DEBT, LESS CURRENT PORTION 375,000 504,781 DEFERRED REVENUES 8,161 7,748 DEFERRED INCOME TAXES 20,368 19,841 DEFERRED INVESTMENT TAX CREDITS 1,279 1,343 POSTRETIREMENT AND OTHER BENEFIT OBLIGATIONS 10,339 11,060 - ------------------------------------------------------------------------------------------------- Total liabilities 618,662 714,094 - ------------------------------------------------------------------------------------------------- STOCKHOLDER'S EQUITY Common stock; $1 par value; 1,000 shares authorized; 1,000 shares issued and outstanding 1 1 Additional paid-in capital 631,913 531,913 Retained earnings 129,075 130,015 Accumulated other comprehensive income (80,972) (82,597) - ------------------------------------------------------------------------------------------------- Total Stockholder's Equity 680,017 579,332 - ------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,298,679 $ 1,293,426 ================================================================================================= See notes to consolidated financial statements. 3

6 CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY NRG ENERGY, INC. AND SUBSIDIARIES (UNAUDITED) Accumulated Additional Other Total Common Paid-in Retained Comprehensive Stockholder's (Thousands of Dollars) Stock Capital Earnings Income Equity - ------------------------------------------------------------------------------------------------------------------------ BALANCES AT JANUARY 1, 1998 $ 1 $431,913 $ 88,283 $(69,499) $ 450,698 Net Income 6,089 6,089 Foreign currency translation adjustments 3,451 3,451 --------------- Comprehensive income 9,540 ---------------------------------------------------------------------------------- BALANCES AT MARCH 31, 1998 $ 1 $431,913 $ 94,372 $(66,048) $ 460,238 ---------------------------------------------------------------------------------- BALANCES AT JANUARY 1, 1999 $ 1 $531,913 $ 130,015 $(82,597) $ 579,332 Net Loss (940) (940) Foreign currency translation adjustments 1,625 1,625 --------------- Comprehensive income 685 Capital Contribution from parent 100,000 100,000 - ------------------------------------------------------------------------------------------------------------------------ BALANCES AT MARCH 31, 1999 $ 1 $631,913 $ 129,075 $(80,972) $ 680,017 ---------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- See notes to consolidated financial statements. 4

7 CONSOLIDATED STATEMENTS OF CASH FLOWS NRG ENERGY, INC. AND SUBSIDIARIES (UNAUDITED) THREE MONTHS ENDED MARCH 31, (Thousands of Dollars) 1999 1998 - -------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) income $ (940) $ 6,089 Adjustments to reconcile net (loss) income to net cash provided by operating activities Undistributed equity earnings of unconsolidated affiliates 2,427 (12,541) Depreciation and amortization 4,734 3,676 Deferred income taxes and investment tax credits 463 (3,042) Minority interest (534) 218 Cash provided (used) by changes in certain working capital items, net of acquisition effects Accounts receivable (1,645) 1,521 Accounts receivable-affiliates (11,282) 13,598 Accrued income taxes 13,564 (6,355) Prepayments and other current assets (893) 1,954 Accounts payable-trade 5,375 (3,496) Accrued property and sales tax 1,798 901 Accrued salaries, benefits and related costs (2,440) (456) Accrued interest 1,471 3,293 Other current liabilities (2,800) (1,128) Cash provided by changes in other assets and liabilities (1,641) (335) - ---------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 7,657 3,897 - ---------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Investments in projects (16,267) (38,952) Changes in notes receivable (net) 18,438 24,733 Purchase of plant, property and equipment (6,331) (3,534) Decrease (increase) in restricted cash 1,884 (195) - ---------------------------------------------------------------------------------------------------------- NET CASH USED BY INVESTING ACTIVITIES (2,276) (17,948) - ---------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Capital contributions from parent 100,000 - Proceeds from issuance of long-term debt - 10,670 Principal payments on long-term debt (99,294) (2,209) - ---------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 706 8,461 - ---------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,087 (5,590) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,381 11,986 - ---------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 12,468 $ 6,396 - ---------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- See notes to consolidated financial statements. 5

8 NRG ENERGY, INC. NOTES TO FINANCIAL STATEMENTS The Company is a wholly owned subsidiary of Northern States Power Company (NSP), a Minnesota corporation. Additional information regarding the Company can be found in NSP's Form 10-Q for the three months ended March 31, 1999. The accompanying unaudited consolidated financial statements have been prepared in accordance with SEC regulations for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accounting policies followed by the Company are set forth in Note 1 to the Company's financial statements in its Annual Report on Form 10-K for the year ended December 31, 1998 (Form 10-K). The following notes should be read in conjunction with such policies and other disclosures in the Form 10-K. Interim results are not necessarily indicative of results for a full year. In the opinion of management, the accompanying unaudited interim financial statements contain all material adjustments necessary to present fairly the consolidated financial position of the Company as of March 31, 1999 and December 31, 1998, the results of its operations for the three months ended March 31, 1999 and 1998, and its cash flows and stockholders' equity for the three months ended March 31, 1999 and 1998. 1. BUSINESS DEVELOPMENTS In October 1998, the Company executed a binding agreement to purchase the Somerset power station for approximately $55 million from the Eastern Utilities Association (EUA). The Somerset station, located in Somerset, Massachusetts, includes two coal-fired generating facilities and two aeroderivative combustion turbine peaking units supplying 229 MW in aggregate, of which 69 MW is on deactivated reserve. The project reached financial close in April 1999. In December 1998, NRG and Dynegy signed agreements with San Diego Gas & Electric Company to jointly acquire 1,218 MW of power generation facilities located near Carlsbad and San Diego California for $356 million. NRG and Dynegy will each own a 50% interest in these facilities. These transactions are expected to close in the second quarter of 1999, pending regulatory approval. In December 1998, NRG signed agreements with Niagara Mohawk Power to purchase two coal fired power generation facilities located near Buffalo with a combined summer capacity rating of 1,360 MW for $355 million. This transaction is expected to close in the second quarter of 1999 pending regulatory approval. In January 1999, NRG reached agreement to purchase the Arthur Kill generating station and the Astoria gas turbine site for $505 million from Consolidated Edison Company. These facilities, which are located in New York, have a combined summer capacity rating of 1,456 MW. The acquisition is expected to close in the second quarter of 1999, pending regulatory approvals. In February 1999, NRG purchased from Thermal Ventures, Inc. (TVI) the remaining 50.1% limited partnership interests held by TVI in San Francisco Thermal Limited Partnership and Pittsburgh Thermal Limited Partnership for $12.3 million. In April 1999, NRG acquired TVI's 50% member interest in North American Thermal Systems LLC (the entity holding the general partnership interest in the San Francisco and Pittsburgh partnerships) for $500,000. In April 1999, NRG reached agreement to purchase the 1,700 MW oil/gas-fired Oswego generating station for $91 million from Niagara Mohawk Power and Rochester Gas and Electric. This facility is located in New York. The acquisition is expected to close in the fourth quarter of 1999, pending regulatory approvals. NRG, together with two other parties and the Chapter 11 trustees, filed a plan with the United States Bankruptcy Court for the Middle District of Louisiana to acquire 1,706 MW of fossil generating assets from Cajun electric Power Cooperative of Baton Rouge, La., (Cajun) for approximately $1.0 billion. In addition to the NRG plan, the 6

9 bankruptcy court was considering one other plan submitted by Southwestern Electric Power Co. In February 1999, the bankruptcy court refused to confirm either of the proposed plans. NRG, its partner and the Trustee, have submitted a revised plan and a confirmation hearing has been scheduled for June of 1999. 2. CONTINGENT REVENUES NRG and its partner Dynegy each own a 50% interest in the Long Beach and El Segundo generating stations ("California Projects"). During 1998, the first year of deregulation of the state of California power industry, the California Projects accrued certain receivables related to contingent revenues. These revenues have been deferred pending resolution of the contingency. Such amounts relate to items that are subject to contract interpretations, compliance with processes and filed market disputes. The California Projects are actively pursuing resolution and/or collection of these amounts, which totaled approximately $60 million (NRG's share approximates $30 million) as of March 31, 1999. Upon any final resolution and/or collection of these amounts, such deferred revenues will be recognized in NRG's equity income. 3. SUMMARIZED INCOME STATEMENT INFORMATION OF AFFILIATES The Company has 20-50% investments in four companies that are considered significant subsidiaries, as defined by applicable SEC regulations, and accounts for those investments using the equity method. The following summarizes the income statements of these unconsolidated entities: THREE MONTHS ENDED MARCH 31, (Thousands of Dollars) 1999 1998 ------------------------ Net sales $154,345 $137,831 Other income 124 8,946 Costs and expenses: Cost of sales 127,116 117,824 General and administrative 7,677 4,738 ------------------------ 134,793 122,562 ------------------------ Income before income taxes 19,676 24,215 Income taxes 5,705 3,846 ------------------------ Net income $ 13,971 $ 20,369 ======================== Company's share of net income $ 5,511 $ 7,566 ======================== 4. LONG TERM DEBT In March 1999, NRG filed a shelf registration with the SEC for up to $500 million in debt securities. The net proceeds will be used to finance our equity investment in connection with pending acquisitions and for general corporate purposes which may include financing the development and construction of new facilities, working capital, debt reduction, capital expenditures and potential acquisitions. NRG plans to issue approximately $300 million in debt securities during the second quarter of 1999. In anticipation of this transaction, NRG executed $100 million in 10-year treasury locks at 5.10% interest with an effective yield of 5.19%. 5. SEGMENT REPORTING NRG conducts its business within three segments: Independent Power Generation, Alternative Energy (Resource Recovery and Landfill Gas) and Thermal projects. These segments are distinct components of NRG with separate operating results and management structures in place. The "Other" category includes operations that do not meet 7

10 the threshold for separate disclosure and corporate charges that have not been allocated to the operating segments. Segment information for the quarter ended March 31, 1999 and 1998 is as follows: THREE MONTHS ENDED MARCH 31, 1999 INDEPENDENT (Thousands of Dollars) POWER ALTERNATIVE GENERATION ENERGY THERMAL OTHER TOTAL ---------------------------------------------------------------------- OPERATING REVENUES Revenues from wholly-owned operations $13,063 $6,280 $15,145 $ 3,035 $ 37,523 Intersegment revenues - 324 - - 324 Equity in earnings of unconsolidated affiliates 7,830 249 1,162 (574) 8,667 -------------------------------------------------------------------- Total operating revenues 20,893 6,853 16,307 2,461 46,514 -------------------------------------------------------------------- NET INCOME $ 949 $3,513 $ 2,162 $(7,564) $ (940) THREE MONTHS ENDED MARCH 31, 1998 INDEPENDENT (Thousands of Dollars) POWER ALTERNATIVE GENERATION ENERGY THERMAL OTHER TOTAL ---------------------------------------------------------------------- OPERATING REVENUES Revenues from wholly-owned operations $ 400 $6,809 $14,417 $ 2,544 $24,170 Intersegment revenues - 353 - - 353 Equity in earnings of unconsolidated affiliates 15,659 387 153 (119) 16,080 -------------------------------------------------------------------- Total operating revenues 16,059 7,549 14,570 2,425 40,603 -------------------------------------------------------------------- NET INCOME $12,462 $3,724 $ 1,716 $(11,813) $ 6,089 6. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement requires that all derivatives be recognized at fair value in the Balance Sheet, and that changes in fair value be recognized either currently in earnings or deferred as a component of Other Comprehensive Income, depending on the intended use of derivative and the resulting designation (e.g., as a qualifying hedge). The Company will be required to adopt this statement in 2000, but can elect to adopt it in 1999. The Company has not yet determined the potential impacts of implementing this statement or the expected adoption date. 8

11 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS - -------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations is omitted per conditions as set forth in General Instructions H (1) (a) and (b) of Form 10-Q for wholly owned subsidiaries. It is replaced with management's narrative analysis of the results of operations set forth in General Instructions H (2) (a) of Form 10-Q for wholly owned subsidiaries (reduced disclosure format). This analysis will primarily compare NRG's revenue and expense items for the three months ended March 31, 1999 with the three months ended March 31, 1998. RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999 COMPARED TO THE QUARTER ENDED MARCH 31, 1998 Net loss for the quarter ended March 31, 1999, was $.9 million, a decrease of $7 million compared to net income of $6.1 million in the same period in 1998. This decrease was due to the factors described below. OPERATING REVENUES For the quarter ended March 31, 1999, revenues from wholly-owned operations were $37.8 million, compared to $24.5 million for the quarter ended March 31, 1998, an increase of $13.3 million or 54%. The increase resulted from energy sales to Eastern Utilities Association (EUA) under an agreement that went into effect on January 1, 1999 in anticipation of NRG's acquisition of the Somerset facility, which was completed in April 1999. Under the terms of the agreement, NRG will provide various entities within EUA with a fixed percentage of their energy needs for a period of 6.2 to 11 years. For the quarter ended March 31, 1999, revenues from wholly owned operations consisted primarily of revenue from heating, cooling and thermal activities (38%), electrical generation (56%) and technical services (6%). Equity in earnings of unconsolidated project affiliates was $8.7 million for the quarter ended March 31, 1999, compared to $16.1 million for the quarter ended March 31, 1998, an decrease of 46%. Approximately $4.5 million of the decrease is due to transaction adjustment related to the Kladno Project. A portion of the Kladno project's debt is denominated in U.S. dollars and German deutsche marks, which strengthened against the Czech koruna in the first quarter of 1999. Under the provisions of SFAS No. 52, the Kladno project records foreign currency gains and losses through the income statement. If the value of the Czech koruna increases, Kladno will record a corresponding gain in future periods. In addition to the currency transaction loss, NRG experienced lower earnings from the MIBRAG project. OPERATING COSTS AND EXPENSES Cost of wholly owned operations was $27.9 million for the first quarter ended March 31, 1999, an increase of $14.2 million, or 104.7%, over the same period in 1998. The increase is primarily due to energy purchases made to satisfy the EUA power sales agreement. In addition, there were approximately $1.1 million of additional fixed costs at NEO and the Thermal projects. Depreciation and amortization costs were $4.7 million for the quarter ended March 31, 1999 compared to $3.7 million for the quarter ended March 31, 1998. The depreciation and amortization increase was due primarily to new NEO projects. General, administrative and development costs were $16.0 million for the first quarter ended March 31, 1999, compared to $13.2 million for the quarter ended March 31, 1998. The $2.8 million increase is due primarily to increased business development, associated legal, technical, and accounting expenses, employees and equipment resulting from expanded operations and preparation for several pending acquisitions later in 1999. 9

12 OTHER INCOME (EXPENSE) Other expense was $10.8 million for the first quarter ended March 31, 1999, compared with $12.4 million for the quarter ended March 31, 1998. The decrease is due to a reduction in interest expense from lower outstanding balances on the Company's revolving line of credit and increased interest income from loans to affiliates. INCOME TAX We recognized an income tax benefit due to tax losses from domestic operations and due to the recognition of certain tax credits. The net income tax benefit for the first quarter ended March 31, 1999, increased by $3.6 million to $12.0 million as compared to $8.4 million for the same quarter one year earlier primarily due to an increase in Section 29 tax credits from NEO operations and higher domestic losses. YEAR 2000 (Y2K) READINESS To the extent allowed, the information in the following section is designated as a "Year 2000 Readiness Disclosure." NRG is incurring costs to modify or replace existing technology, including computer software, for uninterrupted operation in the year 2000 and beyond. A committee made up of senior management is leading NRG's initiatives to identify Y2K related issues and remediate business processes as necessary. NRG is also partnering with its parent, NSP, to ensure a consistent overall company process in addressing the Y2K issue, as discussed in NRG's 1998 Form 10-K. NRG's is on schedule for completion of its Y2K project based on the following timetable: - Assessment/discovery - Completed November 1, 1998 - Analysis/testing - Completed May 1, 1999 - Y2K Ready - July 1, 1999 NRG is currently updating contingency plans for all material Y2K risk and is on track to meet the contingency planning schedule set forth by NSP. Among the areas contingency planning will address are delays in completion of NRG's remediation plans, failure or incomplete remediation results and failure of key third party contracts to be Y2K compliant. FORWARD-LOOKING STATEMENTS In addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements, factors that could cause the Company's actual results to differ materially from those contemplated in any forward-looking statements include, among others, the following: - Economic conditions including inflation rates and monetary fluctuations; - Trade, monetary, fiscal, taxation, and environmental policies of governments, agencies and similar organizations in geographic areas where the Company has a financial interest; - Customer business conditions including demand for their products or services and supply of labor and materials used in creating their products and services; - Financial or regulatory accounting principles or policies imposed by the Financial Accounting Standards Board, the Securities and Exchange Commission, the Federal Energy Regulatory Commission and similar entities with regulatory oversight; - Availability or cost of capital such as changes in: interest rates; market perceptions of the power generation industry, the Company or any of its subsidiaries; or security ratings; - Factors affecting power generation operations such as unusual weather conditions; catastrophic weather-related damage; unscheduled generation outages, maintenance or repairs; unanticipated changes to fossil fuel, or gas supply costs or availability due to higher demand, shortages, transportation problems or other developments; environmental incidents; or electric transmission or gas pipeline system constraints; 10

13 - Employee workforce factors including loss or retirement of key executives, collective bargaining agreements with union employees, or work stoppages; - Increased competition in the power generation industry; - Cost and other effects of legal and administrative proceedings, settlements, investigations and claims; - Technological developments that result in competitive disadvantages and create the potential for impairment of existing assets; - Factors associated with various investments including conditions of final legal closing, foreign government actions, foreign economic and currency risks, political instability in foreign countries, partnership actions, competition, operating risks, dependence on certain suppliers and customers, domestic and foreign environmental and energy regulations; - Limitations on the Company's ability to control the development or operation of projects in which the Company has less than 100% interest; - Other business or investment considerations that may be disclosed from time to time in the Company's Securities and Exchange Commission filings or in other publicly disseminated written documents, including the Company's Registration Statement No. 333-33397, as amended. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors pursuant to the Act should not be construed as exhaustive. 11

14 PART II ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS 27 Financial Data Schedule for the period ended March 31, 1999. (b) REPORTS ON FORM 8-K: None 12

15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NRG ENERGY, INC. ------------------------------------ (Registrant) /s/ Leonard A. Blum ------------------------------------ Leonard A. Blum Executive Vice President and Chief Financial Officer (Principal Financial Officer) /s/ David E. Ripka ------------------------------------ David E. Ripka Controller (Principal Accounting Officer) Date: May 12, 1999 13

5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH 31, 1999 FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 12,468 0 16,968 100 4,286 68,716 303,241 95,768 1,298,679 75,116 528,019 0 0 1 680,016 1,298,679 37,847 46,514 27,940 48,659 10,789 0 11,059 (12,934) (11,994) (940) 0 0 0 (940) 0 0