SEC Filing | NRG Energy, Inc.

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   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, 2000        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 4, 2000
       -----------------------------              --------------------------
       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                              6-10

Item 2       Management's Discussion and Analysis of Financial
             Condition and Results of Operations                       11-13


PART II

Item 1       Legal Proceedings                                            14


Item 6       Exhibits, Financial Statement Schedules, and Reports         15
             on Form 8-K



SIGNATURES                                                                16
   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 except per share amounts)                   2000          1999
- ---------------------------------------------------------------------------------------
                                                                        
OPERATING REVENUES
      Revenues from wholly-owned operations                      $ 332,671    $  37,847
      Equity (loss) in earnings of unconsolidated affiliates        (9,644)       8,667
- ---------------------------------------------------------------------------------------
            Total operating revenues                               323,027       46,514
=======================================================================================
OPERATING COSTS AND EXPENSES
      Cost of wholly-owned operations                              214,923       27,940
      Depreciation and amortization                                 19,987        4,734
      General, administrative and development                       25,180       15,985
- ---------------------------------------------------------------------------------------
            Total operating costs and expenses                     260,090       48,659
=======================================================================================
OPERATING INCOME (LOSS)                                             62,937       (2,145)
=======================================================================================
OTHER INCOME (EXPENSE)
      Minority interest in earnings of consolidated subsidiary      (1,798)        (464)
      Other income, net                                              1,531          734
      Interest expense                                             (52,317)     (11,059)
- ---------------------------------------------------------------------------------------
            Total other expense                                    (52,584)     (10,789)
=======================================================================================
INCOME (LOSS) BEFORE INCOME TAXES                                   10,353      (12,934)

INCOME TAXES - EXPENSE (BENEFIT)                                     1,607      (11,994)

- ---------------------------------------------------------------------------------------
NET INCOME (LOSS)                                                $   8,746    $    (940)
=======================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED            147,605      147,605

EARNINGS PER SHARE - BASIC AND DILUTED                           $     .06    $    (.01)


See notes to consolidated financial statements.
   4
CONSOLIDATED BALANCE SHEETS
NRG ENERGY, INC. AND SUBSIDIARIES
(UNAUDITED)



                                                                                     MARCH 31,        DECEMBER 31,
(Thousands of Dollars)                                                                 2000               1999
- -------------------------------------------------------------------------------------------------------------------
                                                                                            
ASSETS

CURRENT ASSETS
      Cash and cash equivalents                                                    $   137,923    $    31,483
      Restricted cash                                                                   14,985         17,441
      Accounts receivable-trade, less allowance
            for doubtful accounts of $1,392 and $186                                   146,030        126,376
      Income taxes receivable                                                            7,819           --
      Inventory                                                                        165,501        119,181
      Prepayments and other current assets                                              31,854         29,202
      Current portion of notes receivable - affiliates                                     287            287
- -------------------------------------------------------------------------------------------------------------------
            Total current assets                                                       504,399        323,970

===================================================================================================================
PROPERTY, PLANT AND EQUIPMENT, AT ORIGINAL COST
      In service                                                                     3,759,856      2,078,804
      Under construction                                                                86,681         53,448
- -------------------------------------------------------------------------------------------------------------------
                                                                                     3,846,537      2,132,252
      Less accumulated depreciation                                                   (176,883)      (156,849)
- -------------------------------------------------------------------------------------------------------------------
            Net property, plant and equipment                                        3,669,654      1,975,403

- -------------------------------------------------------------------------------------------------------------------
OTHER ASSETS

      Investments in projects                                                          893,303        932,591
      Capitalized project costs                                                         12,558          2,592
      Notes receivable, less current portion - affiliates                               65,193         65,494
      Notes receivable                                                                   5,795          5,787
      Intangible assets, net of accumulated amortization of $4,828 and $4,308           56,072         55,586
      Debt issuance costs, net of accumulated amortization of $10,093 and $6,640        36,260         20,081
      Other assets, net of accumulated amortization of $9,444 and $8,909                50,574         50,180
- -------------------------------------------------------------------------------------------------------------------
            Total other assets                                                       1,119,755      1,132,311

===================================================================================================================
TOTAL ASSETS                                                                       $ 5,293,808    $ 3,431,684

===================================================================================================================


See notes to consolidated financial statements.

                                       2
   5


CONSOLIDATED BALANCE SHEETS
NRG ENERGY, INC. AND SUBSIDIARIES
(UNAUDITED)



                                                                          MARCH 31,    DECEMBER 31,
                                                                             2000         1999
- ---------------------------------------------------------------------------------------------------
                                                                                  
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
      Current portion of long-term debt                                  $    24,789    $    30,462
      Revolving line of credit                                               304,000        340,000
      Consolidated project level, non-recourse debt                             --           35,766
      Corporate level, recourse debt                                         300,000           --
      Accounts payable-trade                                                 115,837         61,211
      Accounts payable-affiliate                                               3,202          6,404
      Accrued income taxes                                                      --            4,730
      Accrued property and sales taxes                                         7,173          4,998
      Accrued salaries, benefits and related costs                             5,542          9,648
      Accrued interest                                                        33,768         13,479
      Other current liabilities                                               12,996         17,657
- ---------------------------------------------------------------------------------------------------
            Total current liabilities                                        807,307        524,355

===================================================================================================
MINORITY INTEREST                                                             12,679         14,373

CONSOLIDATED PROJECT-LEVEL, LONG TERM, NON-RECOURSE DEBT                   2,300,888      1,026,398

CORPORATE LEVEL LONG-TERM, RECOURSE DEBT, LESS CURRENT PORTION             1,169,608        915,000

DEFERRED INCOME TAXES                                                         27,910         16,940

DEFERRED INVESTMENT TAX CREDITS                                                1,024          1,088

POSTRETIREMENT AND OTHER BENEFIT OBLIGATIONS                                  38,373         24,613

OTHER LONG-TERM OBLIGATIONS AND DEFERRED INCOME                               63,899         15,263

- ---------------------------------------------------------------------------------------------------
            Total liabilities                                              4,421,688      2,538,030

===================================================================================================
STOCKHOLDER'S EQUITY
      Class A common stock; $.01 par value; 250,000 shares authorized;
        147,605 shares issued and outstanding                                  1,476          1,476
      Additional paid-in capital                                             780,438        780,438
      Retained earnings                                                      195,956        187,210
      Accumulated other comprehensive income                                (105,750)       (75,470)
- ---------------------------------------------------------------------------------------------------
      Total Stockholder's Equity                                             872,120        893,654

===================================================================================================
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY                               $ 5,293,808    $ 3,431,684
===================================================================================================


See notes to consolidated financial statements.

                                       3
   6
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
NRG ENERGY, INC. AND SUBSIDIARIES
(UNAUDITED)



                                                                                                   Accumulated
                                                  Class A       Additional                          Other            Total
                                                  Common         Paid-in          Retained        Comprehensive    Stockholder's
(Thousands of Dollars)                             Stock         Capital          Earnings            Income           Equity
- ----------------------------------------------------------------------------------------------------------------------------------
                                                                                                    
BALANCES AT JANUARY 1, 1999                     $   1,476      $   530,438       $   130,015      $     (82,597)   $     579,332

Net (Loss) Income                                                                       (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                      $   1,476      $   630,438       $   129,075      $     (80,972)   $     680,017
                                                ----------------------------------------------------------------------------------

BALANCES AT JANUARY 1, 2000                     $   1,476      $   780,438       $   187,210      $     (75,470)   $     893,654

Net Income                                                                             8,746                               8,746
Foreign currency translation adjustments                                                                (30,280)         (30,280)
                                                                                                                   ---------------
Comprehensive income                                                                                                    (21,534)
                                                ----------------------------------------------------------------------------------
BALANCES AT MARCH 31, 2000                      $   1,476      $   780,438       $   195,956      $    (105,750)   $     872,120

                                                ----------------------------------------------------------------------------------


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)                                                        2000           1999
- -----------------------------------------------------------------------------------------------------
                                                                                   
CASH FLOWS FROM OPERATING ACTIVITIES

      Net income (loss)                                                   $     8,746    $      (940)

      Adjustments to reconcile net income (loss) to net cash
        provided by operating activities
            Undistributed equity earnings of unconsolidated affiliates         17,145          2,427
            Depreciation and amortization                                      19,987          4,734
            Deferred income taxes and investment tax credits                   10,906            463
            Minority interest                                                  (1,694)          (534)
      Cash provided (used) by changes in certain working capital items,
        net of acquisition effects
                Accounts receivable                                             4,401         (1,645)
                Accounts receivable-affiliates                                   --          (11,282)
                Accrued income taxes                                          (13,793)        13,564
                Inventory                                                      10,450         (1,639)
                Prepayments and other current assets                           (2,652)           746
                Accounts payable-trade                                         28,778          5,375
                Accounts payable-affililates                                   (3,202)          --
                Accrued property and sales tax                                  2,175          1,798
                Accrued salaries, benefits and related costs                   (4,106)        (2,440)
                Accrued interest                                               20,289          1,471
                Other current liabilities                                      (5,937)        (2,800)
            Cash provided by changes in other assets and liabilities           65,317         (1,641)
- ----------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                     156,810          7,657
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
      Acquisitions, net of liabilities assumed                             (1,723,158)          --
      Investments in projects                                                 (17,933)       (16,267)
      Changes in notes receivable (net)                                           293         18,438
      Capital expenditures                                                    (43,390)        (6,331)
      Decrease in restricted cash                                               2,456          1,884
- ----------------------------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES                                      (1,781,732)        (2,276)
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
      Capital contributions from parent                                          --          100,000
      Proceeds from issuance of long-term debt                              2,482,853           --
      Revolving line of credit                                                (36,000)          --
      Principal payments on long-term debt                                   (715,491)       (99,294)
- ----------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                   1,731,362            706
====================================================================================================
NET INCREASE IN CASH AND CASH EQUIVALENTS                                     106,440          6,087

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                               31,483          6,381
====================================================================================================
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                $   137,923    $    12,468
====================================================================================================


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, 2000.

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, 1999 (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, 2000 and December
31, 1999, the results of its operations for the three months ended March 31,
2000 and 1999, and its cash flows and stockholders' equity for the three months
ended March 31, 2000 and 1999. Certain prior year amounts have been reclassified
for comparative purposes. These reclassifications had no effect on net income or
stockholders equity as previously reported.

1.   BUSINESS DEVELOPMENTS

     In February 2000, the Company executed a memorandum of understanding with
     GE Power Systems, a division of General Electric Company, to purchase 11
     gas turbine generators and five steam turbine generators, with an option to
     purchase additional units. The purchases will take place over the next five
     years with the first delivery scheduled to be made in 2002. The 16 turbines
     have an equivalent generation output of approximately 3,000 MW and an
     acquisition cost of approximately $500 million.

     In March 2000, the Company entered into an agreement with Great River
     Energy under which Great River assigned to the Company all of its rights
     and obligations with respect to two 135 MW turbines being built for it by
     Siemens Westinghouse. The Company's total cost for the turbines, which are
     scheduled for delivery in the first and second quarter of 2001, will be
     approximately $43 million.

     In March 2000, the Company acquired the Killingholme A generation facility
     from National Power plc for (pound)390 million (approximately $615 million
     at the time of acquisition), subject to post-closing adjustments.
     Killingholme is a combined cycle gas-fired baseload facility located in
     North Lincolnshire, England. The facility comprises three units with a
     total generating capacity of 680 MW. The Company owns and operates the
     facility, which sells its power into the wholesale electricity market of
     England and Wales.

     In March 2000, the Company acquired 1,708 MW of coal and gas-fired
     generation assets in Louisiana for approximately $1,026 million. These
     assets were formally owned by Cajun Electric Power Cooperative, Inc. The
     Company sells a significant amount of the energy and capacity of the Cajun
     facilities to 11 of Cajun Electric's former power cooperative members.
     Seven of these cooperatives have entered into 25-year power purchase
     agreements with the Company, and four have entered into two to four year
     power purchase agreements. In addition, the Company sells power under
     contract to two municipal power authorities and one investor-owned utility
     that were former customers of Cajun Electric. The Company estimates that
     payments under the contracts with the 11 cooperatives will account for
     approximately 72% of the Cajun facilities' projected 2001 revenues, and
     that payments under the contracts with the municipal power authorities and
     the investor-owned utility will account for approximately an additional 7%
     of such revenues.

                                       6
   9
2.       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)                            2000               1999
                                                    -------------------------------------
                                                                        
         Net sales                                            $ 185,771        $ 154,389
         Other income                                               696            2,056
         Costs and expenses:
            Cost of sales                                       169,521          129,846
            Interest expense                                      6,470              294
            General and administrative                            6,012            6,354
            Other                                                   195            1,422
                                                    -------------------------------------
                                                                182,198          137,916
                                                    -------------------------------------
         Income before income taxes                               4,269           18,529
         Income taxes                                             5,801            5,033
                                                    -------------------------------------
         Net (loss) income                                    $ (1,532)         $ 13,496
                                                    =====================================
         Company's share of net (loss) income                 $ (2,871)          $ 5,275
                                                    =====================================


3.   SHORT TERM DEBT

     The Company has a $500 million revolving credit facility under a commitment
     fee arrangement that matures in March 9, 2001. This facility provides
     short-term financing in the form of bank loans. At March 31, 2000 the
     Company had $304 million outstanding under this facility.

     In March 2000, the Company borrowed $300 million under a short-term bridge
     facility that expires on August 31, 2000 and bears interest at a floating
     rate, which was 6.43% at March 31, 2000. Proceeds from this loan were used
     to fund the acquisition of the Cajun facilities. In connection with the
     extension of this bridge facility, NSP provided a support agreement on the
     Company's behalf to the lender. The Company plans to refinance this
     short-term corporate level borrowing with more permanent equity financing
     later this year.

4.   LONG TERM DEBT

     In February 2000, NRG Northeast Generating LLC issued $750 million of
     senior secured bonds to refinance short-term project borrowings and for
     certain other purposes. The bond offering included three tranches: $320
     million with an interest rate of 8.065 percent due in 2004, $130 million
     with an interest rate of 8.842 percent due in 2015 and $300 million with an
     interest rate of 9.292 percent due in 2024.

     In March 2000, the Company issued (pound)160 million (approximately $250
     million at the time of issuance) of 7.97% reset senior notes due 2020,
     principally to finance our equity investment in the Killingholme facility.
     On March 15, 2005, these senior notes may be remarketed by Bank of America,
     N.A. at a fixed rate of interest through the maturity date or, at a
     floating rate of interest for up to one year and then at a fixed rate of
     interest through 2020. Interest is payable semi-annually on these
     securities beginning September 15, 2000 through March 15, 2005, and then at
     intervals and interest rates established in the remarketing process.

     In March 2000, NRG South Central Generating LLC, a subsidiary of the
     Company, issued $800 million of senior secured bonds in a two-part
     offering. The first tranche was for $500 million with a coupon of 8.962
     percent and a maturity of 2016. The second tranche was for $300 million
     with a coupon of 9.479 percent and a maturity of 2024. During March 2000,
     the proceeds were used to finance the Company's investment in the Cajun
     generating facilities.

                                       7
   10
     In March 2000, three of the Company's foreign subsidiaries entered into a
     (pound)335 million ($533 million at March 31, 2000) secured borrowing
     facility agreement with Bank of America International Limited, as arranger.
     Under this facility, the financial institutions have made available to our
     subsidiaries various term loans totaling (pound)235 million ($374 million
     at March 31, 2000) for the purpose of financing the acquisition of the
     Killingholme facility and (pound)100 million ($159 million at March 31,
     2000) of revolving credit and letter of credit facilities to provide
     working capital for operating the Killingholme facility. The final maturity
     date of the facility is the earlier of June 30, 2019, or the date on which
     all borrowings and commitments under the largest tranche of the term
     facility have been repaid or cancelled.

     GUARANTEES

     The Company may be directly liable for the obligations of certain of its
     project affiliates and other subsidiaries pursuant to guarantees relating
     to certain of their indebtedness, equity and operating obligations. As of
     March 31, 2000, the Company's obligations pursuant to its guarantees of the
     performance, equity and indebtedness obligations of its subsidiaries
     totaled approximately $504 million.

5.   FINANCIAL INSTRUMENTS

     As of March 31, 2000, the Company had four-interest rate swap agreements
     with notional amounts totaling approximately $692 million. If the swaps had
     been discontinued on March 31, 2000, the Company could have owed the
     counter-parties approximately $2 million. Based on the investment grade
     rating of the counter-parties, the Company believes that its exposure to
     credit risk due to nonperformance by the counter-parties to our hedging
     contracts is insignificant.

         -   The Company entered into a swap agreement effectively converting
             the 7.5% fixed rate on $200 million of our Senior Notes due 2007 to
             a variable rate based on the London Interbank Offered Rate. The
             swap expires on June 1, 2009.

         -   A second swap effectively converts a $16 million issue of
             non-recourse variable rate debt into a fixed rate debt. The swap
             expires on September 30, 2002 and is secured by the Camas Power
             Boiler assets.

         -   A third swap converts $177 million of non-recourse variable rate
             debt into fixed rate debt. The swap expires on December 17, 2014
             and is secured by the Crockett Cogeneration assets.

         -   A fourth swap converts (pound)188 million of non-recourse variable
             rate debt into fixed rate debt. The swap expires on June 30, 2019
             and is secured by the Killingholme assets.

6.   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 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,
     2000 and 1999 is as follows:



     THREE MONTHS ENDED
     MARCH 31, 2000                                         INDEPENDENT
     (Thousands of Dollars)                                    POWER      ALTERNATIVE
                                                            GENERATION      ENERGY      THERMAL      OTHER       TOTAL
                                                            ------------------------------------------------------------
                                                                                                
     OPERATING REVENUES
          Revenues from wholly-owned operations             $ 300,063    $   7,017    $  21,575   $   3,716    $ 332,371
          Intersegment revenues                                  --            300         --          --            300
          Equity in earnings of unconsolidated affiliates      (7,151)      (2,498)           5        --         (9,644)
                                                            ------------------------------------------------------------
               Total operating revenues                       292,912        4,819       21,580       3,716      323,027
                                                            ------------------------------------------------------------
          NET INCOME (LOSS)                                 $  25,680    $   3,373    $   2,003   $ (22,310)   $   8,746


                                       8
   11


     THREE MONTHS ENDED
     MARCH 31, 1999                                         INDEPENDENT
     (Thousands of Dollars)                                   POWER      ALTERNATIVE
                                                            GENERATION     ENERGY      THERMAL    OTHER       TOTAL
                                                            ---------------------------------------------------------
                                                                                              
     OPERATING REVENUES
          Revenues from wholly-owned operations             $ 13,064     $  6,280     $ 15,145   $  3,034    $ 37,523
          Intersegment revenues                                 --            324         --         --           324
          Equity in earnings of unconsolidated affiliates      7,830          249        1,162       (574)      8,667
                                                            ---------------------------------------------------------
               Total operating revenues                       20,894        6,853       16,307      2,460      46,514
                                                            ---------------------------------------------------------
          NET INCOME (LOSS)                                 $    949     $  3,513     $  2,163   $ (7,565)   $   (940)




7.   COMMITMENTS AND CONTINGENCIES

     In March 2000, the Company entered into an agreement with Great River
     Energy under which Great River assigned to the Company, all of its rights
     and obligations with respect to two 135 MW turbines being built for it by
     Siemens Westinghouse. The Company's total cost for the turbines, which are
     scheduled for delivery in the first or second quarter of 2001, will be $43
     million. The Company expects to install these turbines at either existing
     plant sites in the United States or new greenfield sites.

     In April 2000, the Company announced an agreement with Statoil Energy, Inc.
     to acquire Harrisburg Steam Works and Statoil Energy Power/Paxton L.P.
     (Statoil) located in Harrisburg, Pennsylvania for approximately $11
     million. Harrisburg Steam Works provides steam to more then 300
     residential, commercial and industrial customers, including the City of
     Harrisburg and the Commonwealth of Pennsylvania. Statoil is a cogeneration
     facility capable of supplying nearly 30 percent of the steam requirements
     for Harrisburg Steam Works and a chiller plant that serves the Harrisburg
     hospital. Statoil also operates a nationwide diesel engine service
     business.

     On March 30, 2000 the Company received notification from the New York
     Independent System Operator (NYISO) of their petition to the Federal Energy
     Regulatory Commission (FERC) to place a $2.52 per megawatt hour market cap
     on ancillary service revenues. The NYISO also requested authority to impose
     this cap on a retroactive basis to March 1, 2000.

     Noting that FERC orders have not, to date, adjusted rates retroactively to
     address market operations or market power concerns, in the context of an
     independent system operator or otherwise, our internal legal counsel have
     no reason to believe that the Company will not ultimately collect all of
     the amounts due from the NYISO for ancillary services provided in March
     2000.

     If the FERC authorizes the NYISO to impose the market cap on a retroactive
     basis, the Company would record an $8.2 million pretax reduction in
     earnings.

8.   EARNINGS PER SHARE

     On April 19, 2000, the Company filed a registration statement with the
     Securities and Exchange Commission for an initial public offering of up to
     18 percent of its common stock. Since the Company expects to complete the
     public offering it has included earnings per share data on the Consolidated
     Statements of Income. Earnings per share is calculated by dividing Net
     Income (Loss) by the Weighted average shares outstanding.

                                       9
   12
9.   PRO FORMA RESULTS OF OPERATIONS - CAJUN ACQUISITION

     During March 2000, the Company completed the acquisition of two fossil
     fueled generating plants from Cajun Electric Power Cooperative, Inc. for
     approximately $1.026 billion. The following information summarizes the pro
     forma results of operations as if the acquisition had occurred as of the
     beginning of the three-month period ended March 31, 2000 and 1999. The pro
     forma information presented is for informational purposes only and is not
     necessarily indicative of future earnings or financial position or of what
     the earnings and financial position would have been had the acquisition of
     the Cajun Electric Facilities been consummated at the beginning of the
     respective periods or as of the date for which pro forma financial
     information is presented.



                                                              Pro Forma            Pro Forma
                                                           3 Months Ended        3 Months Ended
    (In Thousands)                                         March 31, 2000        March 31, 1999
                                                           ------------------------------------
                                                                          
    OPERATING REVENUES
         Revenues from wholly-owned operations             $ 412,653            $   116,450
         Equity in earnings of unconsolidated affiliates      (9,644)                 8,667
                                                           ------------------------------------
    TOTAL OPERATING REVENUES                                 403,009                125,117
    Total operating costs and expenses                       328,198                114,729
                                                           ------------------------------------
    OPERATING INCOME                                          74,811                 10,388
    Other income (expense)                                   (70,375)               (28,885)
                                                           ------------------------------------
    INCOME (LOSS) BEFORE INCOME TAXES                          4,436                (18,497)
    Income tax (benefit) expense                                (841)               (14,296)
                                                           ------------------------------------
    NET INCOME (LOSS)                                      $   5,277            $    (4,201)
                                                           ------------------------------------


10.  INVENTORY

     At March 31, 2000, inventory, which is stated at the lower of weighted
     average cost or market, consisted of:



                               (IN THOUSANDS)
                              ------------------
                           
    Fuel oil                           $ 40,342
    Spare parts                          86,274
    Coal                                 37,486
    Kerosene                                841
    Other                                   558
                              ------------------
        TOTAL                          $165,501
                              ==================




11.  SUBSEQUENT EVENT

     On May 5, 2000, the Board of Directors approved a conversion of the 1,000
     shares of common stock outstanding into 147,604,500 shares of Class A
     common stock, par value $.01. In addition, the Board of Directors approved
     the amendment of the Company's certificate of incorporation to include,
     among other things, the authorization of 250,000,000 shares of Class A
     common stock, par value $.01, 550,000,000 shares of common stock, par value
     $.01, and 200,000,000 shares of preferred stock. Shares of Class A common
     stock have identical rights to common stock except they have ten votes per
     share. All share and per share data included in the financial statements
     have been restated to reflect the exchange and reclassification.

                                       10
   13
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, 2000 with the three
months ended March 31, 1999.

                              RESULTS OF OPERATIONS
                              ---------------------

                      FOR THE QUARTER ENDED MARCH 31, 2000
                  COMPARED TO THE QUARTER ENDED MARCH 31, 1999

         Net income for the quarter ended March 31, 2000, was $8.7 million, an
increase of $9.7 million compared to a net loss of $0.9 million in the same
period in 1999. This increase was due to the factors described below.

         The independent system operator for the New York Power Pool has
recently sought authority from FERC to adjust the market clearing prices for
certain ancillary services on a retroactive basis beginning January 29, 2000.
The Company and several other independent power producers are challenging this
action. If the independent system operator prevails, the Company's revenues from
ancillary services sold in the New York Power Pool could be substantially
reduced. Although the Company would attempt to adjust its business operations to
mitigate the future impacts of such a ruling, the potential negative impacts on
the Company's revenues for the first quarter of 2000 would include the potential
refund of approximately $8.0 million of revenues collected in February 2000 and
the inability to collect approximately $8.2 million included in revenues, but
not yet collected, for March 2000. At this time the Company cannot predict the
outcome of this action.

OPERATING REVENUES

         For the quarter ended March 31, 2000, the Company had total revenues of
$323.0 million, which includes operating revenues and equity in earnings of
unconsolidated affiliates, compared to $46.5 million for the quarter ended March
31, 1999, an increase of $276.5 million or 594.5%. The Company's operating
revenues from wholly-owned operations were $332.7 million, an increase of $294.8
million or 780%, over the same period in 1999. Revenues from the Company's
Northeast assets that were acquired during 1999 accounted for approximately
$228.0 million of this increase. Approximately $35.8 million of the increase was
due to a tolling agreement related to the Killingholme facility, which was in
effect from January 1, 2000 to the date of the Company's acquisition of this
facility, March 29, 2000. Also, the acquisition of additional ownership
interests in, and the resulting consolidation of, the Company's Pittsburgh and
San Francisco thermal operations together with the consolidation of Crockett
Cogeneration accounted for approximately $25.5 million of the increase in
revenues. For the quarter ended March 31, 2000, revenues from wholly owned
operations consisted of revenue from electrical generation (92.4%), heating,
cooling and thermal activities (6.5%) and technical services (1.1%).

         Equity in losses of unconsolidated project affiliates was $9.6 million
for the quarter ended March 31, 2000, compared to earnings of $8.7 million for
the quarter ended March 31, 1999, a decrease of 211%. Reduced earnings from the
Company's investment in West Coast Power LLC accounted for $11.1 million of the
decrease. The West Coast Power LLC results were down due to interest on project
level debt that was issued in June 1999, a favorable business interruption
insurance settlement that was recorded in the first quarter of 1999, and costs
associated with the Encina facility and the San Diego combustion turbines which
are summer peaking facilities that were acquired in May 1999. In addition,
equity earnings from NEO decreased by $2.4 million primarily due to operating
losses from a project that was acquired in October 1999. This project produces a
net profit for the Company after consideration of Section 29 credits, which are
included in income taxes. Equity earnings from the Loy Yang project decreased by
$2.4 million due to a change in accounting for tax benefits associated with the
project. Equity earnings were also reduced by the

                                       11
   14

consolidation of the Company's Pittsburgh and San Francisco thermal operations
and Crockett Cogeneration subsidiaries during 1999.

OPERATING COSTS AND EXPENSES

         Cost of wholly owned operations was $214.9 million for the quarter, an
increase of $187.0 million, or 669.2%, over the same period in 1999.
Approximately $146 million of the increase was due to the acquisition of the
Northeast assets during 1999. The remaining increase was primarily due to the
consolidation of Crockett Cogeneration and the Pittsburgh and San Francisco
thermal operations. Cost of operations, as a percentage of revenues from
wholly-owned operations for the period, was 64.6% which is 12.6% less then the
prior year period.

         Depreciation and amortization costs were $20.0 million for the quarter
ended March 31, 2000, compared to $4.7 million for the quarter ended March 31,
1999. The increase resulted primarily from the addition of the Northeast assets
during 1999 and the acquisition of additional ownership interests in and the
resulting consolidation of the Company's Pittsburgh and San Francisco thermal
operations, together with the consolidation of Crockett Cogeneration, which
contributed to the increase in depreciation and amortization.

         General, administrative and development costs were $25.2 million for
the quarter ended March 31, 2000, compared to $16.0 million for the quarter
ended March 31, 1999. The $9.2 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 acquisitions that took place in 1999 and during the first quarter of
2000. As a percent of total revenues, administrative and general expenses
declined to 7.8% from 34.4% during the same period one-year earlier.

OTHER (EXPENSE) INCOME

         Other expense was $52.6 million for the quarter, compared with $10.8
million for the same period in 1999. The increase in other expense was primarily
due to an increase in interest expense, which was $52.3 million for the quarter,
compared to $11.0 million for the quarter ended March 31, 1999. The Company
added $750 million of project level debt related to the Northeast asset
acquisitions resulting in $18.2 million of incremental interest expense. In
addition, the Company issued $300 million of senior notes in June 1999 and $240
million of senior notes in November 1999. Also, a higher average outstanding
balance of the Company's revolving line of credit and the consolidation of
Crockett Cogeneration and the Company's Pittsburgh and San Francisco thermal
operations contributed to higher interest expense.

INCOME TAX

         Because the Company is included in the consolidated federal income tax
return of Northern States Power (NSP), the Company pays to and is paid by NSP on
a dollar-for-dollar basis for the increase or reduction, respectively, of NSP's
taxes attributable to the respective tax liabilities or benefits the Company
creates. Income tax expense was $1.6 million for the quarter ended March 31,
2000 compared to an income tax benefit of $12.0 million for the quarter ended
March 31, 1999. The increase in income tax expense was primarily due to higher
United States taxable income versus foreign taxable income. In addition, the
Company no longer recognized the tax benefits related to the losses generated by
the Loy Yang facility. This increase in tax expense was partially offset by
additional Section 29 tax credits generated by growth in NEO's portfolio of
landfill gas projects.

YEAR 2000 (Y2K) READINESS

         Although it appears that the Company successfully transitioned into the
year 2000 with no Y2K disruptions to customers or to internal operations, there
are no guarantees that a Y2K related problem will not surface at a later date.
The Company is not presently aware of any such situations; however, occurences
of this type could adversely affect the Company's business, operating results or
financial condition.

                                       12
   15
ACCOUNTING CHANGE

         In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard 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 all changes in fair value be
recognized currently in earnings or deferred as a component of other
comprehensive income, depending on the intended use of the derivative, its
resulting designation and its effectiveness. The Company plans to adopt this
Statement in 2001, as required. The Company has not determined the potential
impact of implementing this Statement.

FILING OF REGISTRATION STATEMENT

          On April 19, 2000, the Company filed a registration statement with the
Securities and Exchange Commission for an initial public offering of up to 18
percent of its common stock. The Company will receive all proceeds from the
offering. Approximately $300 million of the proceeds are expected to be used to
repay the short-term bridge loan, which matures in August 2000 and was used to
finance the acquisition of the Cajun facilities. Any remaining net proceeds are
expected to be used for general corporate purposes, which may include funding of
capital expenditures and potential acquisitions, the development and
construction of new facilities and additions to working capital. Funds not
immediately required for such purposes may be used to temporarily reduce any
outstanding balances under the Company's revolving credit facility.

                                       13
   16
     PART II

     ITEM 1.  LEGAL PROCEEDINGS

     On or about July 12, 1999, Fortistar Capital, Inc., a Delaware Corporation,
     filed a complaint in the Fourth Judicial District, Hennepin County,
     Minnesota against the Company, asserting claims for injunctive relief and
     for damages as a result of our alleged breach of a confidentiality letter
     agreement with Fortistar relating to the Oswego facility. The Company
     disputed Fortistar's allegations and has asserted numerous counterclaims.
     The Company has counterclaimed against Fortistar for breach of contract,
     fraud and negligent misrepresentations and omissions, tortuous interference
     with contract, prospective business opportunities and prospective
     contractual relationships, unfair competition and breach of covenant of
     good faith and fair dealing. The Company seeks, among other things,
     dismissal of Fortistar's complaint with prejudice and rescission of the
     letter agreement.

     A temporary injunction hearing was held on September 27, 1999. The
     acquisition of the Oswego facility was closed on October 22, 1999,
     following notification to the court of the Company's and Niagara Mohawk
     Power Corporation's intention to close on that date. On January 14, 2000,
     the court denied Fortistar's request for a temporary injunction. The
     Company intends to continue to vigorously defend the suit and believe
     Fortistar's complaint to be without merit. No trial date has been set.

     On October 12, 1999, the Company received a letter from the Office of the
     Attorney General of the State of New York alleging that based on a
     preliminary analysis, it believes that major modifications were made to the
     Company's Huntley and Dunkirk facilities during prior ownership of those
     facilities without the required permits having been obtained. The Company
     believes that the Attorney General sent identical letters to the owners and
     operators of all of the coal-fired utility plants in New York. On January
     12, 2000, the Company received a formal request from the New York
     Department of Environmental Conservation seeking documents relating to the
     matters covered by the Attorney General's letter. The Company understands
     that this request supersedes the Attorney General's request. While the
     Company does not have knowledge at this time that the previous owner of the
     Huntley and Dunkirk facilities did not comply with the preconstruction
     permit requirement, the Company cannot predict the outcome of the state's
     investigation, as the Company has only owned these facilities since June
     1999. Although, the Company has a right to indemnification by the previous
     owner for penalties resulting from the previous owner's failure to comply
     with environmental laws and regulations, if these facilities did not comply
     with the applicable permit requirements, the Company could be required,
     among other things, to install specified pollution control technology to
     further reduce pollutant emissions from the Dunkirk and Huntley facilities,
     and the Company could become subject to fines and penalties associated with
     the period of time it has operated the facilities.

     The independent system operator for the New York Power Pool has recently
     imposed price limitations on certain ancillary services sold in this
     market, and, together with several New York utilities, has sought authority
     from FERC to adjust the market clearing prices for 10 minute reserve
     services on a retroactive basis. The Company has joined several other
     independent power producers in New York in filing a claim with FERC
     challenging these actions. If the independent system operator prevails, the
     Company's revenues for ancillary services sold in the New York Power Pool
     could be substantially reduced. Although the Company would attempt to
     adjust its business operations to mitigate the future impact of such a
     ruling, the potential negative impact on the Company's revenues for the
     first quarter of 2000 would include the potential refund of approximately
     $8.0 million collected in February 2000 and the inability to collect
     approximately $8.2 million included in revenues, but not collected, for
     March 2000. At this time the Company cannot predict the outcome of this
     action.

     There are no other material legal proceedings pending, other than ordinary
     routine litigation incidental to the Company's business, to which the
     Company is a party. There are no material legal proceedings to which an
     officer or director is a party or has a material interest adverse to the
     Company or its subsidiaries. There are no material administrative or
     judicial proceedings arising under environmental quality or civil rights
     statutes pending or known to be contemplated by governmental agencies to
     which the Company is or would be a party.

                                       14
   17
     PART II

     ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (A)  EXHIBITS

     27   Financial Data Schedule for the period ended March 31, 2000.

     (B)  REPORTS ON FORM 8-K:

         On April 8, 2000, the Company filed a Form 8-K reporting under Item 5 -
         Other Events.

             The Company announced that on March 29, 2000, it completed the
             acquisition, from National Power plc, of the 680 MW gas-fired
             Killingholme A combined-cycle, gas-turbine power station.

         On April 8, 2000, the Company filed a Form 8-K reporting under Item 5 -
         Other Events.

             The Company announced that on March 31, 2000, it completed the
             acquisition of two fossil fueled generating plants from Cajun
             Electric Power Cooperative, Inc.

         On April 19, 2000, the Company filed a Form 8-K reporting under Item 5
         - Other Events.

             The Company announced that on April 19, 2000, it filed a
             registration statement with the Securities and Exchange Commission
             for an initial public offering of up to 18 percent of its common
             stock.

                                       15
   18
                                   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. Bluhm
                               ---------------------
                            Leonard A. Bluhm
                            Executive Vice President and Chief Financial Officer
                            (Principal Financial Officer)


                            /s/    David E. Ripka
                               ---------------------
                            David E. Ripka
                            Vice President and Controller
                            (Principal Accounting Officer)

Date:  May 11, 2000
      -------------
                                       16

  

 5

THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 2000 FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.

 1000

                             
                   3-MOS
                          DEC-31-2000
                             JAN-01-2000
                               MAR-31-2000
                                          137923
                                         0
                                   146030
                                      1392
                                     165501
                                504399
                                         3846537
                                  176883
                                 5293808
                           807307
                                        3795061
                                0
                                          0
                                          1476
                                      870644
                   5293808
                                         332671
                                323027
                                           214923
                                   260090
                                 52584
                                     0
                               52317
                                  10353
                                      1607
                               8746
                                       0
                                      0
                                            0
                                      8746
                                          0
                                        0